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Connection Group Holdings Limited - Disposal of Ultimate Connection
(Proprietary) Limited ("Ultimate Connection")
CONNECTION GROUP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/005390/06)
Share code: CCT
ISIN code : ZAE000016630
("Connection Group")
Disposal of Ultimate Connection (Proprietary) Limited ("Ultimate
Connection")
1. Introduction
Rand Merchant Bank is authorised to announce that Connection Group has
disposed of its 83.667% shareholding in Ultimate Connection to UCS Group
Limited ("UCS") ("the disposal").
2. The disposal
2.1 Rationale
Ultimate Connection has been sold in order to strengthen Connection Group`s
cash position and to enable management to focus their efforts on the
businesses of Incredible Connection and Enterprise Connection.
Incredible Connection, the country`s leading IT retailer, currently
generates in excess of 80% of Connection Group`s revenues. In view of this,
the directors of Connection Group believe it appropriate to consider a
change of sector for Connection Group`s listing on the JSE Securities
Exchange SA. Shareholders will be updated in this regard at the time
Connection Group`s financial results are published.
2.2 Details of the disposal
Connection Group has disposed of its 83.667% shareholding in Ultimate
Connection, as well as all shareholders loans against Ultimate Connection,
to UCS with effect from the close of business on 30 April 2002.
The disposal consideration comprises:
R1 570 000 in cash, payable immediately; and
a deferred payment, being 50% of the amount by which Ultimate Connection`s
gross profit for the 12 month period ended 30 April 2003 exceeds R22 464
000. The deferred payment shall not exceed R4 000 000 and is payable within
14 days of delivery of the 2003 gross profit certificate.
Furthermore, UCS has taken over Connection Group`s obligations in respect of
Ultimate Connection`s overdraft, amounting to R16 702 000 at the effective
date.
2.3 Nature of the business conducted by Ultimate Connection
Ultimate Connection develops and sells a range of retail software solutions
under the ActiveRetail brand name. Its customers extend from single store
retailers to large multi-nationals.
3. Financial effects
The table below sets out the financial effects of the disposal on the
earnings and headline earnings per Connection Group share for the six months
ended 30 November 2001, as well as the net asset value and net tangible
asset value per Connection Group share at 30 November 2001, had the disposal
become effective on 1 June 2001:
Actual Pro forma Increase/ Increase/
before the after the (decrease) (decrease)
disposal disposal (cents) (%)
(cents) (cents)
Earnings per
Connection Group
share 2.64 2.58 (0.06) (2.27)
Headline earnings
per Connection
Group share 2.79 2.59 (0.20) (7.17)
Net asset value
per Connection
Group share 22.27 18.00 (4.27) (19.17)
Net tangible
asset value per
Connection Group
share 12.45 18.00 5.55 44.58
The pro forma financial effects were calculated on the following basis:
as regards the earnings and headline earnings per Connection Group share,
an after tax profit of R633 000 being attributable to Ultimate Connection
and the net cash being invested at a pre-tax rate of 10%;
as regards the net asset value per Connection Group share, an amount of
R10.0 million being attributable to the net asset value of Ultimate
Connection;
as regards the net tangible asset value per Connection Group share, an
amount of R13.0 million being the impact of the disposal on the net tangible
asset value of Connection Group; and
the actual earnings, actual headline earnings and actual net asset value
per Connection Group share, as extracted from Connection Group`s interim
results published in the press on 28 January 2002.
4. Publication of Connection Group`s financial results
Shareholders are advised that Connection Group`s financial results for the
year ended 31 May 2002 will be published on 10 July 2002.
Johannesburg
18 June 2002
Merchant bank and sponsor
RAND MERCHANT BANK
A division of FirstRand Bank Limited
CORPORATE FINANCE
Attorneys
Paul Both Inc.
Date: 18/06/2002 10:26:00 AM Produced by the SENS Department
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