| Mon 17 Feb 2003, 8:36 | | CS Computer Services Holdings Limited - Financial |
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CS Computer Services Holdings Limited
Interim Results December 2002
* Revenue growth 61%
* Operating profit growth 63%
* Headline earnings growth 46%
* Fully diluted headline earnings per share growth 11%
GROUP INCOME STATEMENT
Unaudited Change Unaudited Audited
6 months 2001 6 months 12 months
ended 31 Dec to ended 31 Dec ended 30 June
2002 2002 2001 2002
R`000 % R`000 R`000
Revenue 240 430 61.07 149 273 403 161
Cost of sales 158 527 59.46 99 412 263 648
Gross profit 81 903 64.26 49 861 139 513
Operating costs 51 344 71.69 29 905 84 823
Operating profit before
depreciation 30 559 53.13 19 956 54 690
Depreciation and
amortisation 6 198 23.84 5 005 10 533
Profit before exceptional
items 24 361 62.94 14 951 44 157
Exceptional items - - 2 393
Profit before interest 24 361 62.94 14 951 41 764
Net interest (paid)/received (3 326) 305 (1 621)
Share of results of associate 437 - 68
Profit before loss on
discontinued
operation and goodwill 21 472 40.74 15 256 40 211
Goodwill amortisation 6 763 4 882 13 724
Loss on discontinued operation - 2 611 6 956
Profit before tax 14 709 89.48 7 763 19 531
Income tax 2 577 35.85 1 897 (3 122)
Net profit for the period 12 132 106.82 5 866 22 653
Minority interest - 44 -
Attributable profit for
the period 12 132 108.38 5 822 22 653
Reconciliation of headline
earnings
Attributable profit for
the period 12 132 5 822 22 653
Adjusted for:
Goodwill amortisation 6 763 4 882 13 724
Loss on discontinued
operation - 2 219 2 219 4 869
Headline earnings 18 895 46.21 12 923 41 246
Weighted average number
of shares
in issue (thousand) 225 663 163 231 189 753
Fully diluted number of
shares (thousand) 230 129 174 663 207 902
Earnings per share (cents)
Basic 5.38 50.73 3.57 11.94
Fully diluted 5.27 58.16 3.33 10.90
Headline earnings per share (cents)
Basic 8.37 5.76 7.92 21.74
Fully diluted 8.21 10.97 7.40 19.84
ABBREVIATED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 December 31 December 30 June
2002 2001 2002
R`000 R`000 R`000
Cash (outflow)/inflow from
operating activities (10 062) 14 454 50 436
Cash outflow from investing
activities (16 700) (28 484) (53 198)
Cash inflow from financing
activities 16 806 326 538
Net decrease in cash and
cash equivalents (9 956) (13 704) (2 223)
Cash and cash equivalents
at beginning of the period 11 237 13 460 13 460
Cash and cash equivalents at
the end of the period 1 281 (244) 11 237
- - -
Cash generated by operations as
percentage of EBITDA(%) (17) 78 123
Cash flow from operating activities
per share - Basic (cents) (4.46) 8.85 26.58
- Fully diluted (cents) (4.37) 8.28 24.26
GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 December 31 December 30 June
2002 2001 2002
R`000 R`000 R`000
ASSETS
Non-current assets 127 404 122 105 132 349
Fixed assets 24 125 26 276 22 918
Deferred tax asset 17 283 10 758 19 860
Intangible assets 79 180 80 980 82 837
Investment in associate 512 - 3 786
Other investments 4 165 - 1 350
Loan to share incentive trust 1 406 1 411 1 406
Loans 733 2 680 192
Current assets 182 632 173 089 170 744
Trade receivables 108 893 117 514 92 932
Inventory 32 805 26 043 26 485
Work in progress 19 666 9 648 14 342
Cash and cash equivalents 13 370 16 696 31 209
Other receivables and pre-payments 7 898 3 188 5 776
TOTAL ASSETS 310 036 295 194 303 093
EQUITY AND LIABILITIES
Share capital and premium 115 494 68 245 81 943
Shares to be issued 2 667 37 898 19 730
Accumulated profits 76,756 47 793 64 624
Ordinary shareholders` interest 194 917 153 936 166 297
Non-current liabilities 12 990 16 237 14 984
Interest bearing borrowings 10 833 11 302 11 030
Amounts due to vendors 2 157 4 853 3 954
Minority interest - 82 -
Current liabilities 102 129 125 021 121 812
Trade and other liabilities 80 483 95 256 88 190
Short-term portion of long-term
liabilities 2 115 1 380 1 997
Short-term portion of amounts due
to vendors 6 862 7 018 9 363
South African Revenue Services 580 4 427 2 290
Bank overdraft 12 089 16 940 19 972
TOTAL EQUITY AND LIABILITIES 310 036 295 194 303 093
Number of shares issued (thousand) 245 444 193 968 208 245
Net tangible asset value
per share (cents) 47.15 37.61 40.08
Net asset value per share (cents) 79.41 79.36 79.86
STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months 12 months
31 December 31 December 30 June
2002 2001 2002
R`000 R`000 R`000
Share capital 2 454 1 940 2 082
Balance at the beginning
of the year 2 082 1 527 1 527
New shares issued during the period 372 413 555
Share premium 113 040 66 305 79 861
Balance at the beginning
of the year 79 861 27 326 27 326
Premium of new shares issued during
the period 33 294 39 050 52 740
Share issue expenses written off (115) (71) (205)
Shares to be issued for acquisitions 2 667 37 898 19 730
Balance at the beginning of the year 19 730 7 790 7 790
New shares to be issued 18 403 69 571 69 570
New shares issued during
the period (33 666) (39 463) (53 295)
Treasury shares available
to vendors (1 742) - (3 292)
Transfers (58) - (1 043)
Distributable reserves 76 756 47 793 64 624
Balance at the beginning of the year 64 624 41 971 41 971
Net profit for the period 12 132 5 822 22 653
TOTAL EQUITY 194 917 153 936 166 297
Commentary
Introduction
The directors of CS Holdings are pleased to present the interim results of
the Group for the six months ended 31 December 2002. Despite the difficulties
and challenges experienced in the global IT sector during the past three to four
years, CS Holdings has performed consistently well. The group continues to
maintain solid business fundamentals - a healthy pipeline, strong client
retention and tight fiscal controls.
Highlights
* The completion of the share transaction between CS Holdings and Worldwide
African Investment Holdings ("WAIH"), as a result of which WAIH now has a 25.8%
shareholding in CS Holdings.
* The appointment of Thuli Zuma (CEO of WAIH) as non-executive Chairman of the
CS Holdings board, adding significant expertise and leadership to the Group
while satisfying the corporate governance requirement of King II to separate the
roles of CEO and Chairman.
* The appointment of Makhuperetja Nyama as an executive director of CS
Holdings.
* The appointment of Litha Nyhonyha (CEO of NBC) as a non-executive director
of CS Holdings.
* The validation of the transformation efforts of the Group in the form of the
BMI-T African Achievers Award for the Most Progressive ICT Company for 2002.
* The formation of a strategic alliance with Telkom T-BIS. The Group has begun
to leverage off this relationship and a number of announcements with respect to
successful joint gains are imminent.
CS Holdings has converted the difficult prevailing conditions in the IT industry
into opportunities for growth. This has been facilitated, in part, by its
positioning as a strong, growing South African IT player with proven credentials
and a solid track record.
Strategic Review
CS Holdings has completed the integration of the acquisitions it has made in
the last few years to create a single, integrated company. This growth has
effectively positioned the CS Holdings Group as a leading outsourcing service
provider. The process has also facilitated the growth of CS Holdings` market
share, and will enable the Group to achieve its objective of becoming one of the
top three IT companies in the South African ICT market. This has also resulted
in a strong platform for sustainable growth, which will be mainly organic in the
long term.
Vertical Industry Alignment
Significant progress has been made in terms of centralising the business
development team as a core function of the CS Holdings Group. All six vertical
sector leaders have been appointed. The group`s sales force has been realigned
to support the industry expertise now on board.
The areas of vertical specialisation are mining and metals, manufacturing,
public sector and parastatals, financial and insurance, telecommunications and
IT, and retail. CS Holdings has begun to realise the benefits of this
strengthened and consolidated business development approach. This has positioned
the Company to attract substantially larger annuity-based outsourcing deals. CS
Holdings` pipeline of potential business has doubled in value and improved in
quality compared to the same period of the previous financial year - and the
company is excited with the huge organic growth prospects this represents.
Regional Realignment
The Cape Town and KwaZulu-Natal regional offices have been elevated from
operationally driven to strategically driven businesses. Regional directors have
been appointed for each region to drive sales and business development in line
with the vertical industry sectors and accelerate growth in the coming year.
Transformation Drive
On the back of the company`s strong transformation drive to establish CS
Holdings as a truly new South African company, significant progress has been
made with respect to employment equity - with several key appointments being
made. Nonie Mokose joined CS Holdings as Group Marketing Director and Leba
Mashao joined as Group Human Resources Director. These appointments, amongst
others, have further strengthened the company`s strategy to have a balanced
representative complement of first and second line management. Employment equity
targets continue to be achieved at all levels.
Training and Development of ICT Skills
CS Holdings is committed to the development of the South African ICT sector.
A number of partnerships with government in this regard are already in place.
Following intensive best practice research in the IT training arena, CS Holdings
was selected by the DTI as one of its pilot partners to address the severe lack
of ICT skilled individuals in South Africa. Additionally, the company provides
industry representation on the ISETT SETA board.
Operational Review
Cost Reduction and Shared Services Model
The key driver of cost rationalisation has been effected through a number of
operational changes. CS Holdings has centralised its corporate support functions
in terms of a shared services model. It is the company`s belief that this move
will extract greater value from a reduced cost base - a rationalised and
consolidated structure is now eliminating duplication of both cost and function.
At the same time, a more effective, streamlined corporate support function will
result in improved service delivery to the business. This involves group
finance, human resources, marketing, facilities management, legal services and
internal IT. A Chief Operations Officer for shared services has been appointed.
Infrastructure Consolidation
* As part of the Phase II development in Midrand, approximately 10 000m2 of
space, incorporating the Group`s warehouse and break fix facilities, has been
reduced to 6 000m2 by the relocation and consolidation of four centres into one.
This has led to significant cost reductions.
* The consolidation of previously fragmented operations and office
infrastructure in KZN and Cape Town has been completed.
* The market trend towards blended training solutions delivered by electronic
means as well as through traditional classrooms, has resulted in the further
rationalisation of the Group`s IT training division. This has resulted in a
reduced requirement for branch infrastructure.
Financial Performance and Ratios
Item 31 December 2002 31 December 2001 Growth (%)
Revenue R240 m R149 m +61
Operating profit R24.4 m R14.9 m +63
Operating profit margin 10.13% 10.02%
Headline earnings R18.9 m R12.9 m +46
Fully diluted HEPS 8.2 c 7.4 c +11
31 December 2002 30 June 2002 Growth (%)
Number of shares issued (`000) 245,444 208,245 +18
Net tangible asset value per share 47,15c 40,08c +18
Current ratio 1,79 1,40 +28
Quick ratio 1,47 1,18 +25
Margins
Operating margins were maintained at the same levels as the corresponding
period of the previous financial year. Margins are traditionally lower in the
first half of the financial year and are expected to improve slightly in the
second half.
New Shares Issued for Cash during this Period
In terms of the agreement with WAIH, whereby WAIH had to increase its
shareholding in CS Holdings to a minimum of 25%, CS Holdings issued WAIH with 20
000 000 new shares at 85 cents per share for cash. Full details of the
transaction were published on SENS on 24 December 2002 and in the press
thereafter.
Balance Sheet
The group has maintained a healthy balance sheet. The current ratio
improvement is a result of the higher levels of working capital due to strong
revenue growth as well as from cash received as a result of the issue of shares
for cash to WAIH.
Cash Utilised in Operating Activities
The Group continued to experience strong growth in revenue, 61% over the same
period last year. This was a result of both organic and acquisitive growth.
Working capital increased in line with this growth. The additional investment in
working capital was funded from cash resources generated from operations.
It is expected that, as increased growth and profitability convert into cash
flow, cash generated from operations will return to normal levels. In addition,
a concerted effort is being made to reduce inventory levels, minimise debtor
collection days and accelerate work in progress turnaround.
Investment activities
Investment activities during the period relate to:
* Activities to maintain operations R3.5 m
* Idion acquisition R3.4 m
* Payments to vendors for past acquisitions R4.5 m
* Investment in capital base and infrastructure R5.3 m
These activities were planned and budgeted for. Further investment activities
budgeted for during the next six moths include additional payments to vendors of
R6.8 million for past acquisitions - as disclosed under current assets.
Dividends
The current policy is not to pay dividends and all retained earnings are used
to fund growth. The directors will periodically review this policy.
Accounting policies
The financial statements are prepared on an historical cost basis in
accordance with South African Statements of Generally Accepted Accounting
Practice, and incorporate the accounting policies of the group - which are
consistent in all material respect with those adopted in the previous financial
year.
Prospects
The board of directors is confident that the Group strategy is focused and
managed in terms of an appropriately integrated business model. This model is
geared to perform consistently well in a market where no significant upswing in
IT spending is expected over the short term. As an emerging BEE company, CS
Holdings is confident that it is strongly positioned to gain market share in a
consolidating IT market. Traditionally, the Group`s financial results are lower
in the first half of the financial year. The directors expect this trend to
continue and believe that results in the second half of the financial year will
exceed those achieved in the first half.
On behalf of the board of directors:
Annette van der Laan Johan Goosen
Chief Executive Officer Group Financial Director
13 February 2003
Midrand
Registered Office: Transfer Secretaries:
CS Holdings Office Compushare Investor Services Limited
241 Third Road Ground Floor
Halfway Gardens 70 Marshall Street
Midrand Johannesburg
Board of Directors:
T Zuma* (Chairman), A van der Laan (CEO), T R T Bohlmann*, A D Botha*, A
Davernport*, J G Goosen, S H Mller*, N Qangule (Alt)*, D L Vink, M P Nyama, L
Nyhonyha*,
*Non-executive
Company Secretary:
JG Goosen
Registration number 1996/015131/06
Incorporated in the Republic of South Africa
Share Code: CSH and ISIN Code: ZAE000022034
This financial report can also be viewed at www.cs.co.za
Date: 17/02/2003 07:10:51 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
