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Softline Limited - Group Audited Results For The Year Ended 31 March 2003
Release Date: 20/06/2003 07:17:30 Code(s): SFT
Softline Limited - Group audited results for the year ended 31 March 2003
SOFTLINE LIMITED
REGISTRATION NUMBER: 1977/002304/06
JSE Code: SFT ISIN: ZAE000012316
Group audited results for the year ended 31 March 2003
Highlights:
FY03 FY02 Change
Revenue R636 million R487 million 31%
Headline earnings R90 million R82 million 10%
Headline earnings per share 23,0 cents 21,3 cents 8%
Group income statement
for the year ended 31 March 2003
12 months 12 months 6 months
ended ended ended
31 March 31 March 30 Sept
2003 2002 2002
(audited) (audited) (unaudited)
R"000 R"000 R"000
Revenue 636 283 486 829 337 540
Software sales 186 564 167 398 95 715
Maintenance and services 449 719 319 431 241 825
Cost of sales 102 202 73 099 58 300
Gross profit 534 081 413 730 279 240
Selling, general and administration 387 328 292 849 194 699
Research and development 59 799 36 683 21 591
Operating profit before non-
operating expenses 86 954 84 198 62 950
Impairment of share trust loan - 20 426 -
Amortisation of intellectual
property and goodwill 30 337 24 025 24 270
Impairment of Integrity investment 51 398 - 51 398
Impairment of SVI investment - - 103 273
Profit/(Loss) before finance income 5 219 39 747 (115 991)
Net finance income 7 217 15 500 2 494
Profit on sale of operations 515 - -
Profit/(Loss) before taxation 12 951 55 247 (113 497)
Income tax expense 3 870 17 551 13 780
Profit/(Loss) after taxation 9 081 37 696 (127 277)
Determination of headlineearnings
Profit/(Loss) after taxation 9 081 37 696 (127 277)
Adjustments for:
Amortisation of intellectual
property and goodwill 30 337 24 025 20 227
Impairment of investments 51 398 - 154 671
Impairment of share trust loan - 20 426 -
Profit on sale of operations (515) - -
Headline earnings 90 301 82 147 47 621
Group earnings per share
for the year ended 31 March 2003
12 months 12 months 6 months
ended ended ended
31 March 31 March 30 Sept
2003 2002 2002
(audited) (audited) (unaudited)
Basic earnings/(loss) per share (cents) 2,3 9,8 (32,4)
Adjustments for:
Amortisation of intellectual
property and goodwill 7,7 6,2 5,1
Impairment of investments 13,1 - -
Impairment of share trust loan - 5,3 39,4
Profit on sale of operations (0,1) - -
Headline earnings per share (cents) 23,0 21,3 12,1
Fully diluted basic earnings/(loss)
per share (cents) 2,3 9,8 (32,4)
Weighted average number of
ordinary shares in issue ("000) 392 415 387 151 392 415
Fully diluted number of ordinary
shares in issue ("000) 392 415 387 151 392 415
Group balance sheet
as at 31 March 2003
2003 2002
R"000 R"000
Assets
Non-current assets 433 714 477 893
Fixed assets 21 076 21 222
Intellectual property and goodwill 144 304 128 057
Capitalised development costs 22 453 37 092
Share incentive trust 20 392 17 195
Investments in integrity 56 161 107 559
Investments in SVI 124 809 124 333
Deferred taxation 44 519 42 435
Current assets 220 498 188 161
Inventories 9 059 8 925
Trade and other receivables 60 330 71 033
Taxation 3 248 -
Cash and cash equivalents 147 861 108 203
Total assets 654 212 666 054
Equity and liabilities
Capital and reserves 525 523 543 201
Non-current liabilities 8 950 36
Non-interest bearing debt 8 950 -
Interest bearing debt - 36
Current liabilities 119 739 122 817
Trade and other payables 113 314 98 498
Taxation - 23 676
Interest-bearing debt - 643
Non-interest-bearing debt 6 425 -
Total equity and liabilities 654 212 666 054
Total number of ordinary shares in issue ("000) 392 415 387 151
Net asset value per share (cents) 133,9 140,3
Group cash flow statement
for the year ended 31 March 2003
2003 2002
R"000 R"000
Cash flows from operating activities 124 330 113 132
Taxation paid (28 391) (25 732)
Cash flows from investing activities (40 669) (18 123)
Cash flows from financing activities (15 612) 117
Net movement in cash and cash equivalents 39 658 69 394
Cash and cash equivalents at beginning of year 108 203 38 809
Cash and cash equivalents at end of year 147 861 108 203
Group statement of changes in equity
for the year ended 31 March 2003
2003 2002
R"000 R"000
Balance at beginning of year 543 201 461 679
Net profit for year 9 081 37 696
Transfer (from)/to translation reserves (30 436) 39 358
Issue of share capital 3 677 4 468
Balance at end of year 525 523 543 201
Other group information
Depreciation 10 591 9 606
Capital expenditure commitments 1 000 -
Commentary
Trading performance
* The Softline group achieved headline earnings of R90 million compared with
R82 million in the prior period.
* Headline earnings per share increased 8% from 21,3 cents to 23,0 cents.
* Headline earnings were achieved on revenues of R636 million, an increase of
31% from the R487 million reported in the prior period. This increase is mainly
attributable to the acquisition of MicrOpay (Australia) and organic growth
achieved primarily through the growth of revenues derived from maintenance and
services. Revenues from maintenance and services grew 41% from the prior period
and revenues derived from software sales increased 11%.
* Operating profit (before non-operating expenses, finance income and
taxation), of R87 million was achieved compared with R84 million in the prior
period. The operating margin decreased to 13,7% from 17,3%.
South Africa and Australia
* The group"s key operations, being those located in South Africa and
Australia, performed in line with expectations.
* South Africa contributed 46% to revenues and Australia 32% (FY02: South
Africa 58%, Australia 13%).
* South Africa accounted for 45% of operating profits and Australia 55%,
reflecting the sustained strength and consistency in the performance of
operations in these regions.
* Operating margins were negatively impacted by an increase in research and
development (R&D) expenditure. R&D is an integral component of Softline"s
business and key to maintaining and growing market share. The increase in R&D
spend, from R37 million to R60 million, is primarily attributable to increased
investment due to the highly competitive global software environment and
accelerated amortisation of capitalised R&D as new products have come to market,
superseding older technology. The group has centralised a large proportion of
global R&D programs in South Africa in order to benefit from the cost
efficiencies South Africa provides.
North America
* Although operations in the North American region contributed 22% of
revenues, these operations made no contribution to group operating profits. On
aggregate the operations in the North American region broke even for the period
under review.
* The combination of depressed economic conditions, poor sentiment and a
highly competitive environment contributed to challenging trading conditions and
resultant poor performance from operations in this region.
* The disappointing performance has had a negative impact on the group"s
operating margin and overall results.
Investments
* In respect of investments carried on the balance sheet, the Board had
considered it prudent at the interim period to 30 September 2002 to impair the
value of these investments by R155 million. The impairment was in respect of
both the SVI and Integrity investments held by Softline, based on the
information available at that time.
SVI
* Subsequent to the interim period, taking account of the recent significant
upward movement in SVI"s share price and SVI"s year-end results (published in
June 2003), the value of the SVI investment has been restated to its full cost
of R124 million in the results for the year ended 31 March 2003.
* Following the appointment of new SVI management, negotiations commenced
whereby Softline would grant SVI management a call option to acquire the bulk of
Softline"s ordinary and preferential share investments in SVI, at prices
commencing at 80 US cents per share. An "in principal" agreement was recently
reached; however a formal agreement is still to be signed.
* There has been no indication when SVI management intend exercising this
option and accordingly shareholders are reminded that should the option not be
exercised there are selling restrictions placed on Softline that will
significantly restrict its ability to realise this asset.
Integrity Software
* The Board of Softline has considered it prudent to maintain the impairment,
effected at the interim reporting period, of R51 million, as there has been no
material change in this investement since that date.
Net Asset Value
* The group"s net asset value per share is 133,9 cents compared with 140,3
cents at 31 March 2002 and 104,3 cents at the interim period to 30 September
2002.
* Its tangible net asset value per share, excluding capitalised R&D and
goodwill and intellectual property, is 91,4 cents compared with 97,6 cents in
the prior period.
Cash Position
* Softline"s cash position increased from R108 million in the prior year to
R148 million.
* During the period the group paid a net R42 million in respect of the
acquisition of Micropay and a further R15,6 million in respect of non-interest
bearing debt relating to source code acquired by MicrOpay prior to the
acquisition, for a high-end payroll product.
* The cash conversion ratio exceeded the group"s target of 100%. Cash
generated by operations remained strong reflecting improved working capital
management and the increased proportion of revenues derived from annual license
fees.
Accounting Policies
* The accounting policies applied in this report comply in all material
respects with South African Statements of Generally Accepted Accounting Practice
and are consistent with the policies applied by the group in the previous year.
* Charles Orbach & Company has audited these results. Their unqualified audit
opinion is available for inspection at the company"s registered office.
Post-Balance Sheet Events
* Shareholders attention is drawn to the recent press and Securities Exchange
News Service (SENS) announcements in respect of an offer and/or the further
potential offer to shareholders to acquire the entire undertaking of Softline.
20 June 2003
For and behalf of the Board
Ivan Epstein Steven Cohen Rob Wilkie
Chief executive officer Chief operating officer Chief financial officer
DIRECTORATE: I M Epstein - Chief executive officer,
S M Cohen - Chief operating officer,
R P Wilkie - Chief financial officer,
M J A Golding* - Chairman,
J A Copelyn*,
C S dos Santos*,
E Ellerine*,
S R Maharaj*,
G B Rubenstein*
(*Non-executive)
BUSINESS ADDRESS AND REGISTERED OFFICE: Softline Technology Park,
151 Katherine Street,
Atholl Ext 12,
Sandton, 2031,
PO Box 76182,
Wendywood, 2144
CONTACT NUMBERS: Tel: +27 11 292 8200,
Fax: +27 11 292 8202
REGISTRATION NUMBER: 1977/002304/06
INTERNATIONAL SECURITY IDENTIFICATION NUMBER (ISIN): ZAE000012316
INVESTOR RELATIONS: Please e-mail Lara Jawitz - ljawitz@softline.co.za
TRANSFER SECRETARIES: Computershare Investor Services Limited,
70 Marshall Street,
Johannesburg, 2001,
Tel: +27 11 370 5000
SPONSOR: Brait Sponsors (Proprietary) Limited
