| Tue 14 May 2002, 0:00 | | Ast Group Limited - Quarterly Update 14 May 2002 |
|
AST Group Limited - Quarterly update 14 May 2002
AST Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/021790/06)
(Share code: AAA)
(ISIN: ZAE000027397)
Quarterly update 14 May 2002
AST has provided investors with quarterly updates for the past two years.
Business update for the third quarter of the 2002 financial year:
* The core South African AST businesses, comprising more than 90% of the
Group`s revenue base, are performing well, meeting or exceeding expectations
and maintaining margins, despite market conditions. The recent realignment
of the successful core SA business units and better working capital
management resulted in operational and liquidity benefits.
* The performance of our e-Ventures has been significantly below
expectations and action has been taken to limit the impact to this financial
year only.
* Australian market conditions remain difficult, and action has been taken
to limit the impact of the under-performance of our Australian operations.
* The Group has an increasing focus on core operations and organic growth,
which is expected to yield continuing gains.
Core South African businesses
AST`s core South African businesses continue to perform well, generating
cash at expected levels while turnover and margins are meeting or exceeding
expectations. Our businesses are growing faster than the South African ICT
industry, which indicates increased market share.
* AST started by building an integrated service and solutions business when
we listed on the JSE in 1998. In a period of less than two years we achieved
critical mass in all areas of our core business. BMI places AST as the
leader in the provision of network & desktop managed services as well as in
consulting. In application outsource, network and system integration
services and solutions, AST is rated in the top three providers. In
outsourcing we are rated amongst the top five providers.
* In early 2001 we built competencies in selected industries. We are well
positioned with in-depth understanding of our customers` worlds. In
Financial Services, Mining, Manufacturing & Telecommunications we do
significant business with the top five corporations in each industry. In
Health we have found solid traction to expand our customer base. We have
also significantly increased our successes in the Government market, which
is now our third largest segment.
* During 2001 we started to leverage the synergies between these
investments and we now have the critical mass to be the preferred supplier
to corporate South Africa.
In the first nine months of this financial year, our infrastructure
divisions achieved revenues in excess of R750 million and our IT Solutions
divisions had revenues of more than R550 million. They have also maintained
their operating margins. The traditional segmentation analysis of revenue
will continue and AST will in future results announcements also provide
margins on Infrastructure, IT Solutions and international operations. The
revenue contribution from our international operations was in excess of R150
million for the first nine months of the financial year.
Cash conversion has improved to more than 90% of EBITDA during the last
quarter and management believe this is sustainable going forward. AST`s
debtor days improved to 55 days, which was the target set at the interim
results announced in February 2002.
e-Ventures
AST`s initial strategy was to exploit the Internet by providing start-up
capital to promising new businesses. This strategy has delivered mixed
results, with some of these investments taking longer to realise because of
slower adoption rates in South Africa. As a result, AST has reviewed the
performance of these e-Ventures against its required pay-back period. Some
of these businesses have been absorbed into AST`s core operations, some have
been closed and others with longer payback periods are being sold.
Operating losses and closure costs will result in a once-off expense for the
current financial year not exceeding R20 million.
Australian operations
After a very difficult period, Australian market conditions for AST have
recently turned positive. However, during the last quarter, the performance
of our Australian businesses did not meet our expectations. Action has been
taken, including the announced reversal of the Red Rock Consulting
acquisition, and the closure of the Australian head office in Sydney. The
Australian units now report into South Africa. Although both Australian
units remain profitable with net positive cash flows, their contribution
this year will be sharply lower than expected.
Associates
AST has exercised its rights for effective control of the smart card
solutions business and AST now holds 51% of this business. Consolidation of
this business unit will not negatively affect the AST Group performance. The
revenue flow on this start-up business is as predicted with the announcement
of our interim results in February 2002. AST remains invested through Joint
Ventures with our three BEE partners with AST holding between 20% and 40%.
They are all profitable.
Conclusion
The AST Group`s core businesses are performing well and we are now focusing
predominantly on organic growth from these operations. AST has achieved
critical mass in all strategic areas of its business model. In the core
business units, revenues have met or exceeded our expectations. The Group`s
delivery reputation and customer partnerships within our targeted industry
segments, position us well to increase revenues whilst maintaining our
margins going forward.
AST has taken decisive action in e-Ventures as well as Australia to resolve
and contain the profitability issues, which arose. As a result, there will
be a once-off impact on headline earnings for the current financial year.
Full details of the Group performance for the financial year to 30 June 2002
will be provided with the announcement of the year-end results on 13 August
2002.
Sponsor
Cazenove
