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IST GROUP LIMITED -
IST GROUP LIMITED
Reg no. 1998/011521/06
ISIN: ZAE000015798
Share code: IST
AUDITED ANNUAL RESULTS
for the year ended 28 February 2003
* Headline EPS (fully diluted) increased by 13.4% to 16.1c
* Operating profit increased by 54% to R36.1 million
* Tangible NAV increased from 84.8c to 101.5c per share
* Net operating cash flow up from R36 million to R42 million
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
28 Feb 2003 % 28 Feb 2002
R000 Audited Change Audited
Revenue 300 323 7.5 279 257
* From continuing
operations 294 558 276 277
* From discontinued
operations - 2 403
* Other operating income 5 765 577
Cost of sales 154 190 143 284
Gross profit 146 133 135 973
Selling, administration
expenses and
salaries 103 879 106 191
Earnings before financing
costs, taxation,
depreciation and
amortisation ("EBITDA") 42 254 41.9 29 782
Depreciation and
amortisation expenses 6 110 6 350
Operating profit 36 144 54.3 23 432
Interest received 5 236 3 829
Profit before financing costs 41 380 27 261
Financing costs (3 417) 5 218
Share of results of associates - 350
Profit before taxation 37 963 15.6 32 829
Taxation (12 588) (9 621)
Profit after taxation 25 375 23 208
Attributable to outside
shareholders (1 731) (1 753)
Group profit 23 644 21 454
Exceptional item (1 351) -
Earnings 22 293 21 454
Calculation of Headline
Earnings
Earnings 22 293 21 454
Foreign debt written-off 1 351 -
Amortisation of goodwill 20 60
23 664 21 514
Earnings per consolidated
share (cents)
* Basic 18.6 9.4 17.0
* Diluted 15.1 6.3 14.2
Headline earnings per consoli-
dated share (cents)
* Basic 19.8 16.5 17.0
* Diluted 16.1 13.4 14.2
Dividends per consolidated
share 7.5 21.0 6.2
Consolidated issued shares
(000) 119 584 126 286
Fully diluted shares (000) 147 159 151 545
Net asset value per
consolidated share
(cents) 103.5 85.8
Tangible net asset value
per consolidated share
(cents) 101.5 84.8
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
28 Feb 2003 28 Feb 2002
R000 Audited Audited
Cash flows from operating
activities
Cash receipts from
customers 294 361 278 975
Cash paid to suppliers and
employees (234 897) (236 470)
Net cash inflow from
operating activities 59 464 42 505
Interest received 5 853 4 898
Interest paid (1 298) (1 659)
Dividends paid to group
shareholders (7 472) (2 894)
Tax paid (14 483) (6 812)
Net cash flow from operating
activities 42 064 36 038
Cash flows from investing
activities
Purchase of property, plant
and equipment (6 802) (5 007)
Purchase of investment
properties (353) (1 265)
Acquisition of MST, net of
cash acquired (445) -
Purchase of intangible assets (207) -
Purchase of non-current
investments 351 (13)
Disposal of property, plant
and equipment 446 190
Repayment from associate - 4 228
Net cash (outflow)/inflow
from investing activities (7 010) (1 867)
Cash flows from financing
activities
Purchase of treasury shares (1 679) (11 877)
Cancellation of right to
options (2 020) -
Proceeds from staff share
options 1 102 -
Proceeds from long-term
borrowings (2 799) (208)
Net cash outflow from
financing activities (5 396) (12 085)
Net increase/(decrease) in
cash and cash equivalents 29 658 22 086
Cash and cash equivalents
at beginning of year 53 851 27 997
Effects of exchange rate
changes (3 846) 3 768
Cash and cash equivalents at
end of year 79 663 53 851
REMUNERATION
Year ended Year ended
R000 2003 2002
DIRECTORS
Executives
Salaries 3 520 3 170
Performance bonuses 2 360 2 744
Non-executives 274 178
AUDITORS
Audit fees 523 291
Management consulting fees 360 91
Taxation and secretarial fees 21 28
CONSOLIDATED BALANCE SHEET
At At
28 Feb 2003 28 Feb 2002
R000 Audited Audited
ASSETS
Non-current assets 50 761 44 327
Property, plant and equipment 36 227 30 039
Investment property 6 881 4 330
Intangible assets 2 321 1 366
Non-current receivables 5 332 8 592
Current assets 157 475 133 284
Inventories 27 427 29 027
Trade and other receivables 50 385 50 406
Cash and cash equivalents 79 663 53 851
Total Assets 208 236 177 611
EQUITY AND LIABILITIES
Capital and reserves 123 715 108 396
Share capital 1 198 1 181
Share premium 73 005 73 598
Non-distributable reserves 3 095 -
Retained earnings 46 417 33 617
Minority interest 3 829 2 098
Non-current liabilities 5 605 6 066
Interest-bearing borrowings 1 107 3 394
Deferred tax liabilities 4 498 2 672
Current liabilities 75 087 61 051
Trade payables and other
liabilities 43 097 27 743
Advance payments 9 008 7 946
Provisions for liabilities 18 692 17 541
Current tax liabilities 1 859 4 878
Shareholders for dividend 2 1
Current portion of interest-
bearing borrowings 2 429 2 942
Total equity and
liabilities 208 236 177 611
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended Year ended
28 Feb 2003 28 Feb 2002
R000 Audited Audited
Share capital 1 198 1 181
Balance at beginning of year 1 181 1 313
Issue of share capital -
capitalisation issue - 13
Exercise of staff share options 31 -
Shares repurchased and cancelled
i.t.o. general authority - (110)
Shares repurchased not cancelled (14) (35)
Share premium 73 005 73 598
Balance at beginning of year 73 598 84 298
Exercise of staff share options 1 071 -
Issue of share capital -
capitalisation issue - 1 032
Repurchase and cancellation
of shares (1 664) (11 732)
Non-distributable reserves 3 095 -
Balance at beginning of year - 499
Currency translation differences 109 150
Revaluation reserve 4 266 -
Deferred tax on revaluation (1 280) -
Disposal of associate - (533)
Transfer to retained earnings - (116)
Retained earnings 46 417 33 617
Balance at beginning of year 33 617 11 514
Net profit 22 293 21 454
Ordinary dividends (7 473) -
Cancellation of options (2 020) -
Profit of associate - 533
Transfer to non-distributable
reserves - 116
Ordinary shareholders" equity
at end of year 123 715 108 396
SEGMENTAL REPORT
Revenue Segment Results
Year ended Year ended
28 February 28 February
R000 2003 2002 2003 2002
Mechanical 141 460 95 480 20 737 9 356
Electronics 152 726 180 566 16 897 27 018
Head office and
other 372 2 634 (1 490) (12 943)
Revenue
Year ended
28 February
Geographic 2003 2002
South Africa 222 582 215 141
Europe, North Africa and Middle East 45 191 30 102
Sub-Saharan Africa 26 785 33 437
COMMENTS
Review of results
In spite of a challenging trading environment, notably in the telecoms sector,
the group produced creditable results in line with its forecasts. Reflecting
the prevailing market conditions, turnover rose by 7.5% to R300.3 million, but
earnings before financing costs, taxation, depreciation and amortisation
(EBITDA) were nevertheless increased by 42% to R42.2 million and operating
profit by 54.3% to R36.1 million. Headline earnings per consolidated share,
fully diluted, grew by 13.4% to 16.1 cents.
The strong recovery of the rand in the latter half of the year resulted in a net
loss of R2.7 million on exchange rates against a profit of R5.8 million in 2002.
The R1.35 million foreign debt write-off is related to debts owed to IST by its
former subsidiaries in North America, as was detailed in the interim report for
this review period.
The group"s balance sheet remains strong and cash reserves had increased to
R79.7 million at the year-end (2002: R53.9 million). Net cash flow from
operating activities grew from R36 million to R42 million and the tangible net
asset value per consolidated share rose from 84.8 cents to 101.5 cents.
These results have been audited by the group"s auditors, PricewaterhouseCoopers
Inc., and a copy of their unqualified audit report is available for inspection
at the company"s registered office.
Review of operations
The Mechanical group produced a particularly strong performance, with IST
Dynamics, IST Industrial and IST Nuclear all exceeding their targets by
substantial margins. In the Electronics group, IST Energy and the BEE joint
venture Tswelopele Engineering both did very well. IST Telecom and IST Data
were affected by the softness of the telecoms market generally and specifically
by Telkom SA"s continued spending curb. Through cost control and
diversification they nevertheless managed to generate creditable profits. IST
Otokon was dealt a temporary setback by the delayed implementation of Eskom"s
Demand Side Management initiative, on which this business had largely focused
its efforts during the review period.
Notable highlights of the year included
* the establishment of a formal alliance between IST Energy and GE Power
Systems, a global leader in the field of power engineering;
* the successful repositioning of IST Industrial around its traditional
business as a multi-disciplinary engineering contractor;
* the acquisition of MST and its subsequent merger with IST Data; and
* IST Nuclear"s continued close involvement in the Pebble Bed Modular Reactor
project, now nearing detailed design stage.
Dividend
A dividend of 7.5 cents (2002: 6.2 cents) has been declared for the reporting
period, giving a dividend cover of 2.6 times. The dividend is payable to
holders of ordinary shares recorded in the register of the company at the close
of business on Friday 9 May 2003 and will be paid on Monday 12 May 2003. The
last day to trade cum dividend will be Friday 2 May 2003. The shares will
commence trading ex dividend from the start of business on Monday 5 May 2003.
Share certificates may not be dematerialised or rematerialised between Monday 5
May 2003 and Friday 9 May 2003, both days inclusive.
Accounting policies
The accounting policies and methods of computation applied are consistent with
those applied in the financial statements for the year ended 28 February 2002
and are in compliance with Statements of Generally Accepted Accounting Practice
of SA and in the manner required by the South African Companies Act 1973.
In terms of the requirements of AC130 (provisions, contingent liabilities and
contingent assets) dividends proposed or declared after the balance sheet date,
and related secondary tax on companies (STC), are not recognised as a liability
at the balance sheet date. The dividend of R9.2 million (7.5 cents per share)
declared on 9 April 2003 will give rise to an estimated STC charge of R1.15
million. Similarly, no provision has been made for the balance of the audit
fees.
Annual general meeting
The fifth annual general meeting for shareholders will be held at 14h00 on
Wednesday 11 June 2003 at the offices of the company at 221 Garstfontein Road,
Menlyn, Pretoria.
Corporate governance
The directors of IST Group Limited and its subsidiaries confirm their commitment
to the principles of openness, integrity and accountability as advocated in the
second King Report on Corporate Governance.
Prospects
It is likely that market conditions will remain unsettled in the year ahead.
The strengthening of the rand against the dollar should not affect the group"s
export prospects but will limit the exchange rate gains it enjoyed from its
dollar-denominated sales in recent years. The war against Iraq could have an as
yet unpredictable knock-on effect on IST"s Middle Eastern activities and
markets. The group"s businesses nonetheless all have realistic expectations of
achieving further growth, and IST should therefore be capable of posting an
earnings increase in 2004 of a similar order to that of the past year, provided
there is not a material deterioration in its operating environment.
Gary Morolo Harry Coetzee
Chairman Chief Executive
Pretoria 10 April 2003
Directors
G Morolo* (Chairman), L Robertson* (Deputy Chairman), H Coetzee (Group CEO),
J Blignaut*, N Kuper-Cohen*, A Moffat*, T Steyn, E Toerien, J Visagie
(* Non-executive director, Independent)
Transfer secretaries
Computershare Investor Services Limited, 70 Marshall Street, Johannesburg 2001
Registered office
IST Building, 221 Garstfontein Road, Menlyn, Pretoria, 0145
Tel: +27 12 426 7200 * Fax: +27 12 348 9472 * E-mail: ist@ist.co.za
www.istltd.com
Stakeholder and media relations
For further information contact Kathy du Plessis at Tel: +27 11 728 4701, Fax:
+27 11 728 2547, E-mail: ist@dpapr.com
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