| Tue 15 Apr 2003, 16:23 | | Set Point Technology Holdings Limited - Interim re |
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Set Point Technology Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/014334/06)
Share code: STO ISIN: ZAE000013629
("Sethold")
Interim results for the six months ended 28 February 2003
* Operating income +20%
* Headline earnings per share +23%
* Net debt : equity 29%
* Acquisition of Flowmax
Consolidated income statements
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
28 February 28 February 31 August
2003 2002 2002
R"000 R"000 R"000
Revenue 100 650 89 390 189 603
Cost of sales (59 670) (55 213) (116 457)
Gross margin 40 980 34 177 73 146
Operating expenses (30 732) (25 637) (53 387)
Operating income 10 248 8 540 19 759
Exceptional items - 5 602 5 884
Income before finance costs 10 248 14 142 25 643
Finance charges (2 523) (2 411) (4 473)
Income before taxation 7 725 11 731 21 170
Taxation (2 289) (1 839) (4 262)
Income attributable to shareholders 5 436 9 892 16 908
Headline earnings adjustments (see below) (74) (5 403) (5 498)
Headline earnings 5 362 4 489 11 410
Weighted average number of shares
in issue ("000) 175 377 179 955 174 876
Fully diluted weighted average
number of shares in issue ("000) 176 096 179 955 175 491
Headline earnings per share (cents) 3,1 2,5 6,5
Fully diluted headline earnings
per share (cents) 3,0 2,5 6,5
Earnings per share (cents) 3,1 5,5 9,7
Fully diluted earnings per share
(cents) 3,1 5,5 9,6
Headline earnings 5 362 4 489 11 410
Net income for the period 5 436 9 892 16 908
Goodwill amortisation 200 200 400
Adjustment for profit on disposal
of fixed assets (274) (1) (14)
Exceptional items (net profit on
disposal of operations) - (5 602) (5 884)
Consolidated cash flow statements
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
28 February 28 February 31 August
2003 2002 2002
R"000 R"000 R"000
Cash inflow from operating activities 18 336 10 465 10 497
Cash (outflow)/inflow from
investing activities (5 232) 24 916 23 296
Cash outflow from financing activities (4 149) (35 944) (36 973)
Movement in cash resources 8 955 (563) (3 180)
Cash resources at beginning of period 210 3 390 3 390
Cash resources at end of period 9 165 2 827 210
Consolidated balance sheets
Unaudited at Unaudited at Audited at
28 February 28 February 31 August
2003 2002 2002
R"000 R"000 R"000
ASSETS
Non-current assets 30 290 32 651 29 006
Property, plant and equipment 17 982 12 758 14 209
Intangible assets 4 450 4 850 4 650
Investments - 2 030 -
Deferred taxation 7 858 13 013 10 147
Current assets 81 555 71 572 73 684
Inventories 26 147 24 868 27 415
Trade and other receivables 46 243 43 877 46 059
Cash and cash equivalents 9 165 2 827 210
Total assets 111 845 104 223 102 690
EQUITY AND LIABILITIES
Capital and reserves
Shareholders" funds 44 209 32 254 38 772
Non-current liabilities 14 772 14 579 14 190
Interest bearing liabilities 14 772 13 873 14 190
Non-interest bearing liabilities - 706 -
Current liabilities 52 864 57 390 49 728
Interest bearing liabilities 7 117 14 982 11 848
Non-interest bearing liabilities 45 747 42 408 37 880
Total equity and liabilities 111 845 104 223 102 690
Shares in issue ("000) 175 377 179 955 174 876
Total net asset value per share (cents) 25,2 17,9 22,2
Tangible net asset value per share (cents) 22,7 15,2 19,5
1. Borrowings
Cash balances have been set-off against short-term borrowings where allowed
in terms of bank facility arrangements. Comparative figures at 28 February and
31 August 2002 have been restated accordingly.
2. Contingent liabilities
Performance guarantees 6 653 18 655 11 204
Other guarantees 7 152 6 422 5 170
13 805 25 077 16 374
3. Capital commitments
There are no material capital commitments at 28 February 2003.
Consolidated changes in equity statement
Deferred
Share Share purchase Retained
capital premium consideration income Total
R"000 R"000 R"000 R"000 R"000
At 31 August 2002 1 754 21 272 450 15 296 38 772
Change in accounting
policy1 - - - 1 1
Restated balance at
31 August 2002 1 754 21 272 450 15 297 38 773
Income attributable
to shareholders - - - 5 436 5 436
At 28 February 2003 1 754 21 272 450 20 733 44 209
Note:
The change in accounting policy is in accordance with AC 133 - Financial
Instruments.
Commentary
PROFILE
Set Point is a manufacturer, supplier and operator of specialised industrial,
analytical and allied technological equipment used in a wide range of major
industries.
FINANCIAL RESULTS
The group has again produced positive results and real growth in the six months
to 28 February 2003. Revenue improved by 12,6% to over R100 million with gross
margins expanding to 40,7% from 38,2%. Operating income increased by 20% and
income before taxation (excluding exceptional items) by 23%. Headline earnings
per share grew by 23% to 3,1 cents.
Particularly pleasing has been the positive cash flow arising from careful cash
management during the period under review. Notwithstanding capital expenditure
of R6,0 million, including a state of the art XRF machine at Set Point
Laboratories, positive cash flow of R13,1 million enabled the group to reduce
borrowings net of cash to R12,7 million compared to R25,8 million at 31 August
2002. The net debt : equity ratio reduced to 29% compared to 67% at August 2002
and 260% at August 2001, enabling the group to pursue growth through acquisition
as detailed below.
Although interest rates firmed, interest cover improved to four times during the
period under review. All operations are cash positive and further improvements
in cash flow can be expected.
BASIS OF PREPARATION
The unaudited interim results have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. The accounting
policies used in the preparation of these unaudited interim results are
consistent with those used in the annual financial statements for the year ended
31 August 2002.
FLOWMAX
On 4 March 2003 Set Point announced that it had, subject to the fulfilment of
the normal conditions precedent, acquired the entire issued share capital of
Flowmax Investments (Pty) Ltd. The transaction is effective from 1 March 2003
and does not therefore impact on the interim results for the six months ended 28
February 2003. The purchase consideration is R18 million and will be discharged
by Set Point through the allotment and issue of 60 million ordinary shares.
Flowmax is an industrial holding company that imports, manufactures and
distributes products to the flow and fluid handling industries of Southern
Africa. It also provides service backup to the petrochemical, mining and general
industries.
The transaction was approved by Set Point shareholders on 15 April 2003 and is
now unconditional. Graham Nel, the Chief Executive Officer of Flowmax, has been
appointed to the Set Point Board. Management in Flowmax subsidiaries will
continue to retain their present minority interests.
All operations within Flowmax are profitable and backed up by strong positive
cash flows.
PROSPECTS
Set Point"s earnings do not accrue evenly throughout the year and in line with
the previous year a stronger second half is anticipated. Growth in the second
half is expected to continue to reflect continued improvement as a result of
management"s actions and the restructuring of the group. In addition, headline
earnings should be enhanced through the contribution from Flowmax in this
period.
The Board will consider the resumption of dividend payments based on the results
achieved in the current financial year.
DIRECTORATE
On 5 November 2002, Errol Gregor, and on 15 April 2003, Graham Nel, were
appointed as executive directors to the Board.
For and on behalf of the Board
B H Kent (Chairman) M J Smith (Chief Executive Officer)
Johannesburg
15 April 2003
Directors: B H Kent (Chairman)*, M J Smith (Chief Executive Officer),
Dr D E Baloyi*, E G Gregor, G J Horsfield, J M Judin*,
N D Kennelly, H Levin*, G Nel, V T L Ngubeni*,
C S Seabrooke*, M F Saunders (alternate) (*non-executive)
Registered Office: Pin Mill Farm
Block F
164 Katherine Street
Sandton, 2196
(PO Box 787646, Sandton, 2146)
Transfer Secretaries: Computershare Investor Services Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 1053, Johannesburg 2000)
Sponsor: Standard Corporate and Merchant Bank
(a division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
www.setpoint.co.za
