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CPX
Comparex Holdings - Audited Group Results for the year ended 31 May 2003
Comparex Holdings
(Incorporated in the Republic of South Africa)
(Registration number 1994/002506/06)
(Share code: CPX ISIN: ZAE000016812)
Audited Group Results for the year ended 31 May 2003
Continuing businesses:
Headline earnings per share up 37%
Strong balance sheet
Positive cashflow of R306 million 3
Group balance sheet
31 May 2003 31 May 2002 31 May 2002
Statutory/ Continuing Statutory
Continuing businesses
R million businesses
ASSETS
Non-current assets
Furniture and fittings,
equipment and vehicles 97,6 73,5 153,2
Capitalised leased
assets 185,7 191,3 191,3
Rental assets 0,3 0,1 71,3
Long-term loans,
investments and
associate companies 51,2 452,0 460,4
Deferred taxation asset 2,4 9,5 10,6
337,2 726,4 886,8
Current assets
Inventories 52,8 91,1 220,5
Trade accounts
receivable 409,0 497,5 698,3
Other accounts
receivable and
prepayments 130,5 101,7 251,2
Cash and bank balances 2 193,6 1 772,8 2 587,1
2 785,9 2 463,1 3 757,1
TOTAL ASSETS 3 123,1 3 189,5 4 643,9
EQUITY AND LIABILITIES
Ordinary shareholders"
funds 2 232,3 1 836,2 2 094,6
Minority interests 4,3 3,7 3,7
2 236,6 1 839,9 2 098,3
Non-current liabilities
Interest bearing
liabilities 240,0 247,0 247,0
Interest free
liabilities 18,4 393,7 393,7
Post retirement
obligations 181,8
Deferred taxation
liability 0,4 1,9 1,9
258,8 642,6 824,4
Current liabilities
Bank overdrafts 2,6 3,0
Other short-term
liabilities 627,7 704,4 1 718,2
627,7 707,0 1 721,2
TOTAL EQUITY AND
LIABILITIES 3 123,1 3 189,5 4 643,9
Group income statement
31 May 31 May 31 May 31 May
2003 2002 2003 2002
Statutory Statutory Continuin Continuing
g
R million businesse businesses
s
Revenue 3 814,5 5 406,8 2 749,5 2 703,5
Cost of sales 2 688,9 3 580,9 1 935,4 1 838,7
Margin 1 125,6 1 825,9 814,1 864,8
Expenses 1 028,2 1 670,7 597,4 643,6
Operating profit
before 97,4 155,2 216,7 221,2
depreciation
Depreciation 97,8 204,8 50,2 63,4
Operating
(loss)/profit (0,4) (49,6) 166,5 157,8
Net investment
income 199,5 212,4 190,6 183,2
Foreign exchange
gains/(losses) 65,8 197,5 (3,3) (0,6)
Associate
companies" share
profit 9,7 1,9 9,7 5,6
Profit before
exceptional items 274,6 362,2 363,5 346,0
Exceptional items 111,5 588,9 12,6 380,5
Profit/(Loss)
before taxation 163,1 (226,7) 350,9 (34,5)
Taxation 91,3 273,9 89,5 91,5
Profit/(Loss)
after taxation 71,8 (500,6) 261,4 (126,0)
Minorities 1,1 26,2 1,1 26,2
Profit/(Loss)
attributable to
shareholders 70,7 (526,8) 260,3 (152,2)
Weighted average
number of shares
in issue (000"s) 262 637 295 311 262 637 295 311
Earnings/(Loss)
per share (cents) 26,9 (178,4) 99,1 (51,6)
Calculation of
headline earnings
31 May 31 May 31 May 31 May
2003 2002 2003 2002
Statutory Statutory Continuin Continuing
g
R million businesse businesses
s
Profit/(Loss)
attributable to
shareholders 70,7 (526,8) 260,3 (152,2)
Impairments 21,4 38,3 21,4 38,3
Impairment of
assets as a result
of management
buy out of
European 125,6
operations
Impairment of
goodwill 2,7 350,6 2,7 350,6
Loss/(Profit) on
sale of businesses 68,3 (31,7) (0,9) (8,8)
Reversal of over-
provisions (14,3) (15,3) (11,0) (7,0)
Headline
earnings/(loss)
per AC306 148,8 (59,3) 272,5 220,9
Application of
circular 7/2002
Impairments (21,4) (38,3) (21,4) (38,3)
Reversal of over-
provisions 14,3 15,3 11,0 7,0
Headline
earnings/(loss)
per circular 141,7 (82,3) 262,1 189,6
7/2002
Application of
revised circular
7/2002
Loss/(Profit) on
disposal of
furniture and
fittings,
equipment
and
vehicles/rental 0,5 11,0 (0,9) 3,2
assets
Impairments 21,4 38,3 21,4 38,3
Headline
earnings/(loss)
per revised
circular 7/2002 163,6 (33,0) 282,6 231,1
Weighted average
number of shares
in issue (000"s) 262 637 295 311 262 637 295 311
Headline
earnings/(loss)
per share (cents) 62,3 (11,2) 107,6 78,3
Group statement of changes in equity
R million 31 May 2003 31 May 2002
Opening balance 2 094,6 3 365,4
Attributable profit (loss) per the
income statement 70,7 (526,8)
Foreign exchange loss arising on
consolidation (0,8) (59,6)
Applied against goodwill on purchase
of remaining portion of Comparex
Africa (200,0)
Transfer in respect of deferred
taxation 30,9 32,4
Costs of shares repurchased and
cancelled (363,1)
Costs of shares purchased by a
subsidiary (153,7)
Discontinued operations 36,9
Closing balance 2 232,3 2 094,6
Group cash flow statement
31 May 2003 31 May 2002
R million Statutory Statutory
Cash flows from operating activities
Profit/(Loss) before taxation 163,1 (226,7)
Net investment income (199,5) (212,4)
Items not affecting flow of funds:
Depreciation 97,8 204,8
Loss on disposal of assets 72,0 10,9
Associate companies" share of profit (9,7) (1,9)
Impairments and foreign exchange (1,5) 437,9
Movement in provisions (56,7) (21,9)
Working capital changes 25,0 (58,1)
Cash generated from operations 90,5 132,6
Net investment income 199,5 212,4
Dividends paid (0,5) (0,2)
Taxation paid (78,3) (114,8)
Net cash flow from operating
activities 211,2 230,0
Cash flows from investing activities
Net movement in investments (489,1) (181,1)
Net movement in furniture and
fittings, equipment and
vehicles, intangible, rental and
leased assets (106,8) (690,0)
Net cash flow from investing
activities (595,9) (871,1)
Cash flows from financing activities
Shares repurchased (516,8)
Movement in loans and advances (5,8) 6,2
Net cash flow from financing
activities (5,8) (510,6)
Net changes in cash (390,5) (1 151,7)
Cash at beginning of year 2 584,1 3 735,8
Cash at end of year 2 193,6 2 584,1
Summarised continuing business cash
flow
Net cash flow from operating
activities 376,1 128,9
Net cash flow from investing
activities 56,7 (727,8)
Net cash flow from financing
activities (9,4) (509,7)
Net changes in cash 423,4 (1 108,6)
Cash at beginning of year 1 770,2 2 878,8
Cash at end of year 2 193,6 1 770,2
Group segmental analysis
31 May 31 May 2002
2003
R million Statutory Statutory
The business groupings have been
revised during the current period to
provide more meaningful information
on the operations of the group and as
such the business groupings have been
reclassified.
BUSINESS GROUPINGS
Revenue
Technology infrastructure* 749,5 933,9
Services 1 782,0 1 712,1
Business applications 218,0 57,5
Continuing businesses 2 749,5 2 703,5
Discontinued operations 1 065,0 2 703,3
3 814,5 5 406,8
Operating profit/(loss)
Technology infrastructure* 30,2 59,6
Services 118,9 108,2
Business applications 28,4 1,9
Central functions (11,0) (11,9)
Continuing businesses 166,5 157,8
Discontinued operations (166,9) (207,4)
(0,4) (49,6)
GEOGRAPHICAL GROUPINGS
Revenue
Africa (principally South Africa) 2 643,4 2 566,0
Europe 55,2 62,7
United States of America 50,9 74,8
Continuing businesses 2 749,5 2 703,5
Discontinued operations 1 065,0 2 703,3
3 814,5 5 406,8
Operating profit/(loss)
Africa (principally South Africa) 180,3 167,5
Europe (0,4) 0,9
United States of America (2,4) 1,3
Central functions (11,0) (11,9)
Continuing businesses 166,5 157,8
Discontinued operations (166,9) (207,4)
(0,4) (49,6)
Includes enterprise servers, system
storage and networks.
Details of exceptional items
31 May 31 May 31 May 31 May
2003 2002 2003 2002
Statutory Statutory Continuing Continuing
R million businesses businesses
Loss/(Profit) on
sale of businesses 68,3 (31,7) (0,9) (8,8)
Impairment of
assets and
investments 22,4 38,3 22,4 38,3
Restructuring 32,4 121,4 (0,6) 7,4
costs
Reversal of over-
provisions (14,3) (15,3) (11,0) (7,0)
Impairment of
assets as a result
of management
buy out of
European 125,6
operations
Impairment of
goodwill 2,7 350,6 2,7 350,6
111,5 588,9 12,6 380,5
Accounting policies
These group results are prepared in accordance with the South African Statement
of Generally Accepted Accounting Practice applicable to interim financial
reporting. The accounting policies used in the preparation of these group
results are consistent with those used in the annual financial statements for
the year ended 31 May 2002.
The group"s annual financial statements have been audited by the group"s
auditors Deloitte & Touche and a copy of their unqualified report is available
for inspection at the company"s registered office.
Other group salient information
31 May 31 May
2003 2002
Balance sheet ratios
Shares in issue 294 545 294 545
Less shares held by a subsidiary 31 908 31 908
262 637 262 637
Uncovered options 12 674
Fully diluted number of shares (000"s) 262 637 275 311
Net asset value per share (cents) 851,6 798,9
Debt-equity ratio (%) 12,2 13,5
R million
Contingent liabilities
Guarantees issued to third parties 14,6 9,9
Other 1,6 6,4
Commitments
Capital 1,8
Unutilised forward exchange contracts 57,9 62,1
Lease commitments 319,8 598,9
Comments
The state of the global and South African Information, Communication and
Technology (ICT) markets has tested the survival abilities of many companies in
the South African market during the past two years, and the board of directors
is pleased to report that the Comparex Group is satisfactorily weathering this
difficult period. The composition of the group changed during the year under
review. After obtaining the shareholders" approval, the group sold Comparex
Europe to the management of the European operations with effect from 1 November
2002. The purchase consideration comprised of Euro 12,7 million while the
shareholding of Mosaic Software Holdings was retained by the group. The results
of the European operations are included in the results to the date of sale in
terms of the group"s accounting policies. "Continuing business" income and cash
flow statements have been presented to reflect the performance during the
period.
Discontinued operations
The results of Europe are included in the statutory results for the five months
of the reporting period. Market conditions in Europe were extremely difficult
with the result that the revenue reduced to R1,07 billion with an operating loss
of R166 million. A loss before exceptional items of R89 million was recorded.
The headline loss was R119 million for the period.
The loss recognised in the current year on the sale of Comparex Europe was R69
million.
Continuing businesses
Revenue from continuing businesses increased from R2,704 billion to R2,750
billion, with operating profits growing by 5,5% to R166,5 million in spite of
the difficult trading conditions. The services and annuity businesses continued
to represent greater than 70% of total revenue, with the contribution of the
product businesses declining. The operating margin increased to 6,1% compared to
5,8% in the previous financial year. Headline earnings per share, when
calculated in terms of SAICA"s revised circular 7/2002, increased by 37% to
107,6 cents from 78,3 cents in the 2002 financial year. Investment income was
approximately the same as the previous year despite the increase in interest
rates in this year, as R878 million of the group"s cash was used in the second
half of the previous year in the share buyback programme and the purchase of the
remaining 50% plus 1 share in Comparex Africa. The exceptional losses primarily
represent the impairment of the value of preference shares held in a Nitac
company, the underlying investment being Comparex and Dimension Data shares.
The group presents a strong balance sheet with cash reserves of R2,2 billion and
a positive cash flow for the continuing businesses. Since year end the group has
concluded negotiations for the sale of its USA subsidiary to it"s management.
This has not been shown as a discontinued operation as the sale is still subject
to the fulfillment of the suspensive conditions and the transaction is not
material to the group.
Taxation issue
The dispute with South African Revenue Services regarding the Persetel trademark
deduction by a subsidiary company, as mentioned in previous reports, remains
unresolved. The company has been advised that the special court will hear the
matter in February 2004. The group"s Senior Counsel is of the opinion that the
deduction will ultimately be allowed by South African Revenue Services.
The subsidiary company involved has claimed deductions totalling R786,5 million
(May 2002: R683,7 million) resulting in a reduction of tax of R246,0 million to
May 2003 (May 2002: R215,2 million).
Black Economic Empowerment (BEE) initiative
The process of introducing BEE shareholders continues and satisfactory progress
is being made in this regard. Shareholders will be kept updated on developments
in regard to this initiative.
Securities Regulation Panel (SRP) investigation
Certain minorities, including the trustees of the group"s share incentive
trusts, have approached the SRP, claiming that certain institutional investors
have acted in concert and that they should be instructed to make an offer to
minorities. The process is with the SRP and the Executive Committee of the
Panel, and it is hoped that the SRP will make a ruling in the near future.
Prospects
The strategic focus of the group continues to be the growth of its services
business relating to the outsourcing/annuity income sector, and its expansion
into Africa. Further gains were made in this regard during the 12 months,
despite the low level of activity in the ICT sector. Management is confident
that there will be an upturn in ICT spending in the near future and the group is
well positioned to take advantage of this when it comes.
In order to better reflect the operational requirements of the group and to
accommodate black economic empowerment, a restructuring of the group is
envisaged. A cash distribution will be forthcoming thereafter.
On behalf of the board
RS Berkowitz PA Watt AC Farthing
Chairman Chief Executive Officer Financial Director
Midrand, 7 August 2003
Directors: RS Berkowitz (Chairman)#, DM Nurek (Deputy Chairman)#, PA Watt
(Chief Executive Officer),JF Buchanan#, AC Farthing (British), WJC Mitchell#, FJ
van der Merwe#
#Non-executive Director
Registered
office: PQ Park Postal: Private Bag X48
789 16th Road Halfway House
Randjespark 1685
Midrand
1685
Transfer
secretaries: Computershare Investor Postal: PO Box 61051
Services Limited Marshalltown
9th Floor, 70 Marshall 2107
Street
Johannesburg
2001
Internet
address: www.comparexafrica.co.za
Date: 12/08/2003 07:16:53 AM Produced by the JSE SENS Department
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