| Wed 27 Mar 2002, 0:00 | | Intervid Limited - Interim Report For The Six Mon |
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31, 2001
Intervid Limited
Share code ITV; ISIN ZAE000025615
Abridged Group Income Statement
6 months ended 6 months ended 16 months ended
31.12.2001 31.8.2000 30.6.2001
unaudited unaudited audited
000'S R R R
Revenue 43 850 40 341 107 397
Turnover 33 322 39 558 100 459
Interest received 10 528 619 6 694
Other - 164 244
Operating (loss)/profit before depreciation,
amortisation,
interest paid and
taxation (35 883) 11 143 17 107
Foreign exchange
(losses)/gains (5 837) - 15 443
Depreciation (2 105) (667) (2 399)
Amortisation (3 315) - (796)
(Loss)/Profit
before interest
paid and taxation (47 140) 10 476 29 355
Interest paid (1 434) (32) (1 336)
(Loss)/Profit
before taxation (48 574) 10 444 28 019
Taxation 13 089 (3 421) (3 551)
(Loss)/Profit after
taxation (35 485) 7 023 24 468
Net loss/(profit) attributable to minority
shareholders' of
subsidiaries 6 075 (1) (5 258)
Net (loss)/profit
for the period (29 410) 7 022 19 210
Weighted average
number of shares
in issue (000) 91 575 87 500 87 976
(Loss)/earnings per
share - cents (32.1) 8.0 21.8
Headline (loss)/
earnings per
share - cents (29.1) 7.9 22.1
Diluted (loss)/
earnings per
share - cents (30.5) 7.6 20.9
Reconciliation of headline (loss)/earnings:
Net (loss)/profit
for the period (29 410) 7 022 19 210
Adjusted for:
Loss/(profit) on
sale of fixed assets 28 (70) (95)
Goodwill amortisation 2 718 - 311
(26 664) 6 952 19 426
Abridged Group Balance Sheet
31.12.2001 31.8.2000 30.6.2001
unaudited unaudited audited
000'S R R R
ASSETS
Non Current Assets 104 922 7 903 57 188
Property, plant and
Equipment 27 098 6 204 11 613
Loans 13 544 - 11 011
Long term receivables 483 475 527
Goodwill 31 396 - 21 081
Intangibles 16 919 1 224 8 874
Deferred tax asset 15 482 - 4 082
Current Assets 623 259 49 677 446 890
TOTAL ASSETS 728 181 57 580 504 078
EQUITY AND LIABILITIES
Capital and reserves 566 439 35 237 447 032
Share capital and
Premium 25 277 7 143 22 498
Non-distributable
Reserves 497 330 330
Translation reserves 136 640 - (9 747)
Equity portion of
convertible loan 394 121 - 394 121
Accumulated profit 9 904 27 764 39 830
Minority shareholders'
Interest 59 734 73 888
Non current
Liabilities 24 504 1 168 18 507
Deferred tax liability - 855 3 579
Long term liabilities :
non interest bearing 17 956 - 12 986
Long term liabilities :
interest bearing 6 548 313 1 942
Current liabilities 77 504 21 102 37 651
TOTAL EQUITY AND
LIABILITIES 728 181 57 580 504 078
Number of ordinary shares in issue at end
of period (000) 91 774 87 500 91 219
Net asset value per
ordinary share - cents 617 40 490
Abridged Statement of Changes in Group Equity
6 months ended 6 months ended 16 months ended
31.12.2001 31.8.2000 30.6.2001
unaudited unaudited audited
000'S R R R
Share Capital and Premium 25 277 7 143 22 498
Balance at beginning of
Period 22 498 7 095 7 095
Issue of share capital - - -
Share premium on shares
Issued 2 779 - 15 588
Re-imbursement/
(write-off) of share issue
expenses - 48 (185)
Non distributable reserve 497 330 330
Balance at beginning of
Period 330 330 330
Transfer into non
distributable reserve 167 - -
Translation reserves 136 640 - (9 747)
Balance at beginning of
Period (9 747) - -
Currency translation
Reserve 146 387 - (9 747)
Equity portion of
convertible loan 394 121 - 394 121
Balance at beginning
of period 394 121 - -
Equity portion of
convertible loan - - 394 121
Accumulated profit 9 904 27 764 39 830
Balance at beginning of
Period 39 830 20 742 20 742
Reversal of retained
profit of subsidiaries - - (122)
Net (loss)/profit for
the period (29 410) 7 022 19 210
Transfer to non
distributable reserve (167) - -
Currency translation (349) - -
Balance at June 30, 2001 566 439 35 237 447 032
Abridged Group Cash Flow Statement
6 months ended 6 months ended 16 months ended
31.12.2001 31.8.2000 30.6.2001
unaudited unaudited audited
000'S R R R
NET CASH FLOWS FROM
OPERATING ACTIVITIES (22 159) 2 550 (8 273)
NET CASH FLOWS FROM
INVESTING ACTIVITIES (28 195) (4 869) (45 915)
NET CASH FLOWS FROM
FINANCING ACTIVITIES 1 116 523 431 783
EFFECT OF EXCHANGE
RATE MOVEMENT 194 643 - (3 734)
NET MOVEMENT in cash and cash
equivalents for the
period (49 238) (1 796) 377 595
CASH AND CASH EQUIVALENTS
At beginning of period 388 510 14 649 14 649
At end of period 533 915 12 853 388 510
Segmental Report
Inter segment
Consolidation United
Six Months Ended Consolidated Adjustments Africa Australasia Kingdom
31 December 2001 R R R R R
000's
Revenue 43 850 (14 921) 20 658 5 880 -
Operating
Results (35 883) (6 661) (21 457) (2 386) (10 246)
Segment assets 712 698 30 569 88 771 3 186 22 882
Segment
Liabilities (102 007) 8 761 (54 730) (4 435) (789)
Capital commitments
- contracted
for - - - - -
- not contracted
for 95 812 - - - -
Sixteen Months Ended
30 June 2001
000's
Revenue 107 397 - 94 406 1 364 -
Operating
results 17 107 - 12 458 (136) (326)
Segment assets 499 996 - 74 556 10 477 22 724
Segment
Liabilities (52 580) - (25 131) (6 751) (86)
Capital commitment
- contracted
for 4 500 - 4 500 - -
- not contracted
for 18 302 - 1 610 - -
Segmental Report
North Middle
Six Months Ended America East Switzerland
31 December 2001 R R R
000's
Revenue 15 310 165 16 758
Operating results (4 360) (3 036) 12 263
Segment assets 111 172 3 690 452 428
Segment liabilities (34 266) (6 855) (9 693)
Capital commitments
- contracted for - - -
- not contracted for - - 95 812
Sixteen Months Ended
30 June 2001
000's
Revenue 4 934 - 6 693
Operating results 716 (481) 4 876
Segment assets 34 425 974 356 840
Segment liabilities (18 455) (267) (1 890)
Capital commitment
- contracted for - - -
- not contracted for - - 16 692
Comparative segmental information has not been given for the six month
period ended 31 August 2000 as the Group's international expansion occurred
after this period. Comparatives would therefore not be meaningful.
Commentary
This interim report must be read in conjunction with the profit warning
statement issued on 8 March 2002.
Comparatives
Comparatives for the sixteen months ended 30 June 2001 have been amended to
reflect the impact of the change in accounting policy detailed below. The
change in accounting policy had no impact on financial periods ended prior
to 30 June 2001.
Due to the change in year end of the company from 28 February to 30 June,
comparatives for the first six months of the previous financial year are
given i.e. for the six months ended 31 August 2000.
Operating and Trading Review
Intervid has made progress with its strategy of becoming a leading global
player in the digital visual technology market. The period under review has
proved to be challenging. Operations have been established in the USA,
Europe, Middle East, Australia and Malaysia, either by way of acquisition or
by organic growth. Currently, the most challenging aspect of the
internationalisation strategy is the need for strong management in the
operating regions and building the administrative and support infrastructure
to manage the growing international business. This is a top priority, but
is taking longer than anticipated.
The contribution to revenues in the past six months by international
operations, whilst below our ambitious expectations, is satisfactory,
although the U.K. operation has yet to make a contribution. We have been
disappointed with the impact of the internationalisation programme on the
South African operation. With the focus on international operations,
management and sales infrastructure were weakened, with the consequent
impact on revenue and earnings. We believe this to be a temporary set back.
Our focus is on building a business with a sound international
infrastructure and sustainable earnings. As regards the sustainable
earnings, Intervid's business model is being converted to a rental based
model, as opposed to capital sales. It is expected that this move will
happen over a period of time, with the initial impact being a drop in
revenue and earnings. This will give the company more predictable and
sustainable revenues in the longer term.
Financial Results of Group Operations
o Revenue increased by 8,7% over the corresponding interim period in the
previous financial year.
o An operating loss of R 35,883 million was incurred.
o The maintenance division of the SA operation remains a focus area due
to it not trading profitably. We are reviewing maintenance contracts with a
view to identifying unprofitable contracts and taking the necessary action.
o Foreign exchange losses of R 5,837 million were incurred largely on
restatement of US Dollar investments in Intervid International AG into Euro
at period end.
o Amortisation includes intangibles amortisation of R 597 000 and
goodwill amortisation of R 2,718 million. The amortisation periods have
been reduced as set out in the change of estimates detailed below.
o Taxation credit to the income statement includes an increase in debit
deferred tax carried in the balance sheet of R 14,979 million. Most of the
debit deferred tax balance relates to assessable losses which have arisen in
the various operating entities throughout the world.
o A net loss for the period of R 29,410 million was incurred.
o Current assets include cash and cash equivalents amounting to R 560,554
million and current liabilities include short term borowings of R 26,639
million.
o Translation reserves have arisen from the revaluation of international
assets and liabilities at a Rand/Euro spot rate of R 10.66 at 31 December
2001.
Conversion rights
Minority shareholders' interest remains at 30% of Intervid International AG.
Refer to note 22 of the annual financial statements of Intervid Ltd at 30
June 2001.
Change in Business Model
A strategic objective of Intervid is to mature and stabilise the business
model (which has typically earned most of its revenue from capital sales) to
one where sustainable, recurring revenue predominates. In this regard
certain rental contracts concluded in the current period have been partially
discounted. The accounting treatment of this is to recognise rentals over
the term of the rental contract and raise the amount discounted as a
liability.
Current year rental contracts partially discounted have had the impact of
reducing turnover for the six months ended 31 December 2001 by R 2,1 million
and profit after tax by R 766 000. Turnover and profits deferred for
recognition in future years are as follows:
R 000's Second
Total half 2002 2003 2004 2005 2006 2007
Turnover 2 926 307 555 588 626 668 182
Interest (766) (131) (234) (190) (136) (69) (6)
Profit
after tax 766 45 69 123 187 264 78
Accounting Policies
With the exception of the change in accounting policy referred to in the
next paragraph, all other accounting policies used in the preparation of the
interim report are consistent with those applied in the annual financial
statements dated 30 June 2001. This interim financial report complies in all
material respects with AC127 Interim Financial Reporting.
Change in Accounting Policy
During the period the Group changed its accounting policy with respect to
the treatment of prepaid contract costs. Prepaid contract costs relate to
fibre cables installed during the initial phases of specific contracts for
use in subsequent installation phases. In previous financial periods
prepaid contract costs were capitalised until used in subsequent
installation phases. Prepaid contract costs are now expensed when incurred.
The effect of this change is as follows:
R 000's Outside
Share-holders'
Gross Taxation Interest Net
Reduction in net profit
31 December 2001 - - - -
30 June 2001 (9,911) 2,973 - (6,938)
Restatement of opening
retained earnings in
respect of prior year
adjustment
31 December 2001 (9,911) 2,973 - (6,938)
30 June 2001 - - - -
Change in Estimates
o Intangibles
The maximum period over which intangibles are amortised has been reduced to
five years from ten years. We are of the opinion that the reduced period
more accurately reflects the useful life of intangibles. The charge for the
current period amounted to R 597 000 which includes an insignificant catch
up charge for prior periods.
o Goodwill
The maximum period over which goodwill is amortised has been reduced to
seven years from twenty years. Again we are of the opinion that the reduced
period more accurately reflects the maximum period over which economic
benefits will flow from the purchase price of goodwill arising on
acquisition of subsidiaries. The charge for the current period amounted to R
1,853 million with a further catch up charge of R 606 000.
o Work in Progress
The percentage of completion calculation has changed to the lower of project
managers estimate and costs incurred to date as a percentage of estimated
total costs. Previously percentage of completion was based solely on
project managers estimates.
Intervid Executive Share Trust
At 31 December 2001 the Intervid Executive Share Trust owed Intervid Ltd R
13,541 million on loan account for the purchase of shares. The market value
at 22 March 2002 of the shares sold to the Share Trust was R 9,201 million
below the carrying value of the shares based on a share price of 175 cents.
No impairment charge has been made against the loan as the net asset value
per share at 31 December 2001 was 617 cents and the cash value per share 611
cents.
Contingent Liabilities
There has been no material change in the level of contingent liabilities
since 30 June 2001.
Capital Commitments
Capital commitments approved by the directors but not contracted for amount
to R 95,812 million. R 89,112 million relates to the minimum purchase price
of ID Technology Group PLC, a company incorporated in the United Kingdom.
This acquisition must still be approved by Intervid Ltd shareholders in
general meeting. No material capital commitments approved by the directors
were contracted for at period end.
Directorate
On 29 January 2002 Mr G.R. Howard resigned as CEO, but remains on the Board
as non executive Deputy Chairman. Mr R.A. le Sueur was appointed CEO. On
the same date, Mr J.M. Hancock (alt ne director) resigned and was replaced
by Mr M.J.G. Taylor.
Independent Audit Review
The financial information set out in the interim report has been reviewed,
but not audited, by the group's auditors, Ernst & Young. Their unqualified
review report is available at the registered office of the company.
Outlook
We are satisfied that the strategy to internationalise is the correct one
and believe the group has an exciting future. The acquisition of ID
Technology Group PLC in the UK, which is expected to be approved at a
shareholders meeting on 5 April 2002, is the most significant acquisition to
date. ID Technology will more than double current Group turnover. Intervid
is quickly transforming itself into a truly international player in the
digital visual information system environment, and once the ID Technology
acquisition is finalised, up to 70% of future turnover is expected to be
earned offshore.
Although it is expected that a loss will be incurred for the full year to 30
June 2002, we believe that with the significant cash reserves, technology
base and business model, the Group is well positioned for the future.
For and on belhalf of the board:
R.A. le Sueur (CEO) K.A. Pitout (CFO)
Kloof
27 March 2002
Registration Number : 1999/011483/06
Registered Office : 6 Charles Way, Kloof, 3610. P.O. Box 1218, Kloof, 3640
Transfer Secretaries : Mercantile Registrars Limited 11 Diagonal Street,
Johannesburg, 2001. P.O. Box 1053, Johannesburg, 2000
Directors : W.F. Lambert* (Chairman), G.R. Howard* (Deputy Chaiman), R.A. le
Sueur (CEO), G.J. Bazley* (Alt.), J.P. Clucas*, J.J. Durand*, G. Hough(Dr),
J.R. Howard, I.R. Jones*, C.R. le Sueur, K.A. Pitout, R.R. Stainton*, M.J.G.
Taylor* (Alt.). * Non-Executive
This announcement is available on Intervid's website at www.intervid.com
