| Mon 8 Sep 2003, 8:43 | | Preliminary Results for the year ended 30 June 200 |
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Intervid Limited - Preliminary Results for the year ended 30 June 2003 and
further cautionary announcement
Intervid Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1999/011483/06)
Share Code: ITV
ISIN: ZAE000025615
Preliminary Results for the year ended 30 June 2003 and further cautionary
announcement
Abridged Group Balance Sheet
2003 2002
Reviewed Restated
R"000 R"000
ASSETS
Non current assets 114 459 177 133
Property, plant and equipment 33 878 37 558
Loans 1 854 4 914
Long term receivables 2 111 557
Goodwill 52 172 101 341
Intangibles 9 602 18 267
Deferred tax asset 14 842 14 496
Current assets 286 657 594 035
TOTAL ASSETS 401 116 771 168
EQUITY AND LIABILITIES
Capital and Reserves 236 077 518 323
Share capital and premium 28 883 27 189
Non distributable reserve 454 454
Translation reserve (6 624) 101 857
Equity portion of convertible loan 394 121 394 121
Accumulated loss (180 757) (5 298)
Minority shareholders" interest 57 57
Non current liabilities 25 635 24 850
Deferred tax liability 3 294 2 102
Long term non interest bearing debt 3 162 17 039
Long term interest bearing debt 19 179 5 709
Current liabilities 139 347 227 938
TOTAL EQUITY AND LIABILITIES 401 116 771 168
Number of ordinary shares in issue ("000) 93 000 92 222
Net asset value per share (before taking into
account the possible significant dilutionary impact
of the convertible loan) - cents 254 562
Adjusted net asset value per share for illustrative
purposes only (assuming that RFS Holdings Ltd
took up its rights to shares in Intervid Limited at
current exchange rates and at a 30 day
weighted average traded value up to
30 June 2003 of 59 cents per share - note
that the convertible loan may not convert
until June 2005) - cents 26 57
Abridged Group Income Statement
2003 2002
Reviewed Restated
R"000 R"000
Revenue 454 753 161 323
Turnover 446 181 141 321
Interest received 8 572 18 217
Other - 1 785
Operating loss before foreign exchange
gains, depreciation, amortisation, interest
and taxation (107 238) (89 235)
Foreign exchange gains 24 788 30 433
Depreciation (12 025) (6 596)
Property, plant and equipment impairments (9 424) -
Intangible assets amortisation (5 376) (6 707)
Intangible assets impairment (8 710) -
Goodwill amortisation (17 732) (7 321)
Goodwill impairment (43 358) -
Loss before interest and taxation (179 075) (79 426)
Interest received 8 572 18 217
Interest paid (3 948) (3 585)
Loss before taxation (174 451) (64 794)
Taxation (1 008) 16 253
Loss after taxation (175 459) (48 541)
Net loss attributable to minority
shareholders of subsidiaries - 10
Net loss for the year (175 459) (48 531)
Weighted average number of
shares in issue (000"s) 92 711 91 728
Loss per share - cents (189.3) (52.9)
Headline loss per share - cents (123.5) (44.8)
Diluted loss per share - cents (189.3) (52.9)
Reconciliation of headline loss:
Net loss for the period (175 459) (48 531)
Adjusted for:
Impairment of assets 12 694 -
Impairment of goodwill 43 358 -
Goodwill amortisation 17 732 7 321
(Profit)/Loss on sale of plant and equipment (12 822) 115
Headline loss (114 497) (41 095)
Abridged Group Cash Flow Statement
2003 2002
Reviewed Restated
R"000 R"000
Cash flows from operating activities (144 734) (6 209)
Cash flows from investing activities (41 892) (56 123)
Cash flows from financing activities (35 460) 971
Effect of exchange rate movement (72 278) 117 361
Net movements in cash and cash equivalents (294 364) 56 000
Cash and cash equivalents at beginning of the year 444 510 388 510
Cash and cash equivalents at end of the year 150 146 444 510
Abridged Statement of Changes in Group Equity
2003 2002
Reviewed Restated
R"000 R"000
Opening balance 518 323 447 852
Issue of shares 1 694 4 731
Share issue expenses written off - (40)
Currency translation reserve (108 481) 116 046
Transfer to non distributable reserves - 125
Net loss for the period (175 459) (50 391)
Closing balance 236 077 518 323
Segmental Report
Intersegment
Consolidated consolidation adjustments Africa
2003 Reviewed R"000 R"000 R"000
Turnover 446 181 (73 894) 132 321
Turnover external 446 181 - 114 561
EBITDA (82 450) (8 147) 10 350
Operating results (179 073) 5 799 (7 805)
Segment assets 385 162 (169 731) 67 189
Segment liabilities (160 781) 60 (45 141)
Capital commitments
- contracted for - - -
2002 Restated
Turnover 143 107 (52 885) 60 342
Turnover external 143 107 - 35 005
EBITDA (58 802) (14 443) (20 477)
Operating results (72 106) (14 737) (28 458)
Segment assets 756 670 (382 564) 107 878
Segment liabilities (250 687) 153 301 (87 005)
Capital commitments
- contracted for 1 451 - 1 451
North Middle
Australasia Europe America East
2003 Reviewed R"000 R"000 R"000 R"000
Turnover 20 023 317 946 45 239 4 546
Turnover external 20 023 261 812 45 239 4 546
EBITDA (5 574) (32 938) (42 505) (3 636)
Operating results (9 466) (107 408) (55 243) (4 950)
Segment assets 13 211 439 129 24 316 11 048
Segment liabilities (3 262) (97 623) (13 627) (1 188)
Capital commitments
- contracted for - - - -
2002 Restated
Turnover 10 742 79 940 44 284 684
Turnover external 10 742 52 392 44 284 684
EBITDA (7 819) 1 496 (10 636) (6 923)
Operating results (8 111) (1 914) (11 663) (7 223)
Segment assets 13 713 894 015 117 219 6 409
Segment liabilities (11 744) (268 967) (23 285) (12 987)
Capital commitments
- contracted for - - - -
Notes
1. Basis of Preparation
This report has been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice.
2. Accounting Policies
With the exception of the change in accounting policy referred to in note 3, all
accounting policies used in the preparation of this report are consistent with
those applied in the annual financial statements dated 30 June 2002, and the
interim report for the period ended 31 December 2002.
3. Change in Accounting Policy
During the period the group changed its accounting policy with respect to the
treatment of outside shareholders to comply with Statement AC433 which is
effective for all financial years commencing on or after 1 January 2002. This
Statement requires that because Intervid International"s major funder, RFS
Holdings Limited, does not yet own shares in Intervid International no outside
shareholders" interest should be accounted for. In previous financial periods
RFS Holdings Limited qualified as a minority shareholder and their share (30%)
of the net profit and losses of Intervid International group was allocated to
outside shareholders" interest on the balance sheet. Group net profit and losses
now include 100% of Intervid International group"s profit and losses.
The effect of this change is as follows:
Outside
Shareholders"
R"000s Gross Taxation Interest Net
Income statement effect
Increase in net loss
30 June 2003 - - - -
30 June 2002 - - (3 788) (3 788)
Balance sheet effect
Restatement of opening
retained earnings in respect
of prior year adjustment
30 June 2003 - - 1 474 1 474
30 June 2002 - - 5 262 5 262
4. Headline Earnings
Headline earnings have been calculated in accordance with Circular 7 issued by
SAICA in December 2002. This has the impact of removing the add-back of the
impairment of loans (R8,576 million) for the 12 months ended 30 June 2002,
thereby increasing the headline loss per share for that period by 9,3c.
5. Dividends
No dividend has been recommended or declared for the year ended 30 June 2003.
6. Contingent Liabilities
Changes to contingent liabilities since 30 June 2002 are reflected below.
The guarantee relating to repurchases should the customer default on payment has
been reduced from R1 711 000 as at June 2002 to R1 575 406.
Intervid International"s tax status has been confirmed as that of a holding
company and thus the contingency of R2 552 000 that existed at 30 June 2002 no
longer exists.
The group has issued guarantees of R6 373 415 (down from R8 520 736) as security
for work performed in terms of contracts with customers.
COMMENTARY
INTRODUCTION
Intervid operates in the UK, USA, Africa, Australia and the Middle East as a
provider of integrated solutions in the electronic security and business process
monitoring industry.
During the year, Intervid Limited ("the group") was restructured into two
businesses:
* Technologies, and
* Regional Systems Integrators (RSIs).
Technologies specialises in developing integrated solutions for electronic
security and business process monitoring, as well as distributing its
proprietary hardware and software products. The RSIs are located in major global
markets and specialise in the installation and maintenance of systems for
electronic security and business process monitoring such as video surveillance,
access control, monitoring and electronic article surveillance.
PERIOD UNDER REVIEW
During the year under review, revenue increased by 216% from R161,3 million in
2002 to R454,8 million in 2003. This was due to an acquisition in the UK which
was effected late in the prior financial year and regional expansion in Africa,
North America, Middle East and Australia. The vast majority of turnover
continues to be generated from outside of South Africa, depicting the true
international nature of the group.
Turnover in the two major markets, United Kingdom and Africa, increased in the
period under review. UK revenue increased five-fold to R262 million (2002: R52,4
million) due to the prior year"s acquisition of ID Technology Group PLC, while
revenue in Africa doubled to R132 million as it began to establish a firm market
presence.
Despite this significant increase in turnover, the operating loss before
exchange gains, depreciation, amortisation, impairments, interest and taxation
has increased from a loss of R89,2 million in 2002 to a loss of R107,2 million
in 2003. This was primarily due to a significant overhead burden resulting from
increased globalisation of the group.
During the year the original European head office in Duns, Scotland, was closed
as part of a rationalisation process. The management of ID Technology Group PLC
now has responsibility for the UK region. This rationalisation has materially
reduced the overheads in this region and, with a new management team at ID
Technology, significant operating improvements have started to take effect
towards the end of the financial year.
Operating losses in North America grew as the initial regional expansion was
completed. This expansion saw expenses being incurred as staff was employed and
infrastructure developed. Sales only began to flow once the necessary training
of employees had taken place. By the year end a stronger sales pipeline of
proposals and orders existed.
The African operations had a strong year with turnover improving from R60,3
million to R132,3 million and the net loss reducing from R20,5 million to R5,8
million. Certain unrelated group head office costs have been included in the
African operations and are not used to measure the operating performance of this
region. Excluding these costs, the African operations achieved a net profit of
R3,8 million.
During the last six months, numerous steps have been taken in all regions to
reduce overhead levels to ensure the cost-effective utilisation of resources. A
decentralised management model has been adopted, giving greater accountability
and operational responsibility to the operating units and allowing the
rationalisation of resources at the centre.
Operating costs in certain areas have also been significantly reduced through
head count reduction and the outsourcing of non-core processes, such as the
installation of systems. Wherever possible, fixed costs have been changed to
variable costs, thereby reducing the high operating leverage.
Foreign exchange gains of R24,8 million were realised during the year, largely
due to the restatement of Euro denominated investments in Intervid International
AG to its measurement currency of US Dollars.
The cumulative losses suffered during the current and prior financial year have
led to a review of potential impairments of intangibles and goodwill. Following
an assessment of the recoverable amount of these losses, it has been decided to
impair a considerable amount of capitalised development cost (intangibles) in
the balance sheet.
In a similar vein, goodwill relating to certain investments has been impaired.
The recoverable amounts for each investment have been calculated using
appropriate discounted cash flow projections as required by Statement AC128
"Impairment of Assets". Impairments to tangible assets, intangible assets and
goodwill of R61,5 million has been recorded and the board is satisfied that the
remaining capitalised development cost is a fair value of the group"s
intellectual property. These impairment losses have had no cash flow effect.
The above operating losses have given rise to a headline loss per share of
123,5c, which is 276% worse than the previous year"s headline loss per share of
44,8c.
The translation reserve has decreased by R108,5 million to end the year at a
debit value of R6,6 million, drastically reducing capital and reserves. This
movement is primarily due to the stronger rand impacting upon the conversion of
the net assets to year-end closing rates.
Current liabilities have decreased, because of the payment of sums owing to
previous owners of certain companies purchased in prior financial periods.
The cash outflow from operating activities amounted to R144,7 million compared
with a R6,2 million cash outflow in the 2002 financial year. R15,8 million has
been paid in consideration of past acquisitions, while exchange rate movements
have had a significant impact in reducing the value of cash and cash equivalents
by R72,3 million. However, R150,1 million of cash or cash equivalents was on
hand at the year-end (2002: R444,5 million).
OUTLOOK
Intervid faces a challenging year ahead and the turnaround of the current loss
situation is likely to take an extended period of time. To this end, the board
anticipates a further loss in 2004, although this should be significantly less
than the loss incurred in the current year. The board is confident that it has
set up the mechanisms and processes needed to take corrective action. It
believes that the benefits of the recent strategic review and resultant
restructure will flow into the 2004 financial year.
The key focus during the forthcoming financial year will be on cash
preservation. Each business within the group will be monitored on an individual
basis to ensure that its cash position is tracking according to budget. Several
lead indicators will be monitored and managed accordingly.
Further focus during the next financial year will be on developing teams through
appropriate training and incentives. A significant sum of overheads has been
removed from the business as a result of the rationalisation and
decentralisation programme. Some of the cost rationalisation has been achieved
through the adoption of a decentralised management model whereby greater
accountability and operational responsibility has been devolved upon the
operating units with a rationalisation of resources at the centre. Furthermore,
operating costs in certain areas have been significantly reduced to levels
reflective of short-term sales potential. This does not mean that growth will no
longer be pursued but it will be done in a measured manner.
COMPULSORILY CONVERTIBLE LOAN
In terms of Statement AC433, RFS Holdings Limited, an associate of VenFin
Limited, no longer qualifies as a minority shareholder. Note 24 of Intervid
Limited"s annual financial statements at 30 June 2002 details the rights and
obligations attached to the convertible loan. Upon conversion, RFS Holdings
Limited will qualify as a shareholder of Intervid International AG (with a
holding of between 30% to 50% depending on the performance of the group"s
international businesses held by Intervid International AG). In this event, the
related outside shareholders" interests will again be accounted for.
Alternatively, RFS Holdings Limited could elect to convert the loan to shares in
Intervid Limited and thereby become a significant shareholder in Intervid
Limited. In terms of the current option agreement between Intervid Limited and
RFS Holdings Limited the possible dilution in net asset value per share in
Intervid Limited would only arise subsequent to 30 June 2005. If a full
conversion was permissible at 30 June 2003 and it was effected, then RFS
Holdings Limited would hold approximately 90% of the shares of Intervid Limited
after additional shares were issued, thereby significantly diluting existing
shareholders" interests.
FURTHER CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement of 8 August 2003, negotiations between
Intervid and its principal loan creditor, RFS Holdings Limited, regarding the
possible restructure of the terms and conditions of this compulsorily
convertible loan advanced to Intervid International AG are ongoing. Shareholders
should continue to exercise caution when dealing in the company"s securities
until a full announcement is made.
REPORT OF THE INDEPENDENT AUDITORS
The financial information set out in this report has been reviewed by the
group"s auditors,
Ernst & Young. Their modified review report is available for inspection at the
registered office of the company. The modification relates to the ability of the
company and the group to remain as a going concern is dependent on the continued
support of its bankers and financiers and its ability to meet its budgeted cash
flows for the 2004 financial year.
DIRECTORATE
On 28 August 2002, Mr Rod Stainton resigned as a non-executive director.
On 31 October 2002, Dr Gavin Hough resigned as an executive director.
At the annual general meeting held on 15 November 2002, Messrs James Clucas and
Ivor Jones retired from the board and did not make themselves available for re-
election.
On 5 March 2003, Messrs Mark Taylor and Alan Grieve were appointed to the board
as non-executive directors.
On 24 April 2003, Mr Rob le Sueur was removed as an executive director.
On 25 April 2003, Messrs Chris le Sueur and Keith Pitout resigned as executive
directors.
Mr Mark Taylor was appointed Caretaker CEO with effect from 2 May 2003. Post
year-end, Taylor was appointed as permanent CEO with effect from 1 September
2003.
Mr Johann Pieterse was appointed to the board as non-executive director on 13
August 2003. Mr Wayne Jaggard was appointed to the board as executive CFO on 13
August 2003.
For and on behalf of the board
M.J.G. Taylor (CEO) W.D. Jaggard (CFO)
Kloof
8 September 2003
Registration Number: 1999/011483/06 Share Code: ITV ISIN: ZAE000025615
Registered Office:
6 Charles Way, Kloof, 3610.
PO Box 1218, Kloof, 3640
Transfer Secretaries:
Computershare Limited,
70 Marshall Street,
Johannesburg, 2001,
PO Box 1053,
Johannesburg, 2000
Sponsor
RAND MERCHANT BANK
Corporate Finance
(A division of FirstRand Bank Limited)
Directors:
W.F. Lambert * (Chairman), G.R. Howard* (Deputy Chairman), J.J. Durand*,
J.A. Grieve *+, J.R. Howard, W.D. Jaggard (CFO), J.M. Pieterse*, M.J.G Taylor
(CEO) * Non-Executive, + British
http://intervid.ince.co.za
Date: 08/09/2003 07:30:13 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
