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AST Group Limited - Profit warning and business improvement programme
AST Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/021790/06)
(Share code: AAA)
("AST")
(ISIN : ZAE000027397)
Profit warning and business improvement programme
Further to the announcement of the Board changes made on 5 December 2002, the
new Board of the AST Group met on 10 December. This announcement serves to
update the market on the results of this Board meeting.
PROFIT WARNING
It is anticipated that the Group will record an attributable loss for the six
months ended 31 December 2002, but the new management believes the Group will be
profitable for the full year before the amortisation of goodwill. Headline
earnings per share for the twelve months ended 30 June 2003 are expected to be
lower than in 2002.
* The operating environment continues to be highly competitive. As a result,
cost inflation is running ahead of price increases and is putting continued
pressure on operating margins.
* Since the quarterly update in October, a number of once-off costs related to
the business improvement programme have been incurred and have been greater than
initially anticipated. In addition, the new management has regarded it as
prudent to review the level of provisions on the balance sheet and has made
adjustments and write offs which have resulted in additional costs being
incurred for the six months to December 2002. The expected impact on the income
statement will not be more than R 45 million for the period July to December
2002.
* Debt levels remain high, which coupled with the high interest rate
environment, has resulted in a higher interest cost to the company than in
comparable periods.
FUNDING
The historic aggressive growth strategy resulted in pressure on the balance
sheet.
Since the beginning of the current financial year, AST has settled 96% of vendor
claims relating to historic acquisitions due in the current year, of which
R53.6m was settled in cash and R24m through the issue of approximately 90
million shares. The remainder of the short-term vendor liabilities will be
settled by March 2003. Consequently, the fully diluted number of shares will
total approximately 675m.
The new management, under instruction of the Board, will focus on organic growth
and has accelerated the implementation of the cost cutting programme. As
inefficiencies are eliminated, cashflows will benefit. A number of initiatives
are being evaluated to improve liquidity and the strength of the balance sheet.
PROSPECTS
In addition to the changes in the executive management team and a more
conservative approach to business, the Board has approved several other measures
to improve the business.
Furthermore, the Board has appointed advisors to assist management in the
developing and implementation of a comprehensive improvement programme. This
programme will lead to a reduction in costs, improved profitability and
liquidity by the end of the 2003 financial year. Progress of the improvement
programme will be reported at the interim results announcement in March 2003.
AST continues to generate positive cash flows from operations month on month.
The Board remains confident that in the medium term prospects are good. This
confidence is based on the market leadership of the company, and the extent of
the strategic solution and service delivery capability of the AST Group. This is
evidenced by the fact that Iscor and AST have recently completed negotiations
concerning the extension of the ICT Outsource contract for a further two years.
The current annual value of the agreement is in excess of
R 240m.
Sponsor
Cazenove
ENDS
Date: 12/12/2002 07:00:04 AM Produced by the JSE SENS Department
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