| Fri 10 Oct 2003, 17:19 | | Global Technology Limited - Reviewed Interim Resul |
|
Global Technology Limited - Reviewed Interim Results For The Six Months Ended
Release Date: 10/10/2003 17:05:01 Code(s): GLT
GLOBAL TECHNOLOGY LIMITED - REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 JUNE 2003 AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
GLOBAL TECHNOLOGY LIMITED
("the Company")
(Incorporated in the Republic of South Africa)
(Registration number 1996/009809/06)
Share code: GLT
ISIN No: ZAE000016820
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
COMMENTARY
Introduction
During the period under review, Global Technology (Glotec) initiated a
restructuring process, after the Board made the decision to reposition and re-
align the Group. The ongoing restructuring will see the Group"s focus changing
to the provision of business information solutions, including business
intelligence (BI), business process outsourcing (BPO) and enterprise resource
planning (ERP).
Review Opinion
Glotec"s external auditors, Deloitte & Touche, have reviewed these results. The
qualified review opinion is available for inspection at Glotec"s registered
office. The auditors have issued a qualified audit opinion based on AC 133 and
headline earnings.
Due to cost and timing implications, the Group has not complied with AC 133:
Financial instruments, recognition and measurement. The entities that remain
after the restructuring will, however, comply with AC 133 for the year-end
results.
As a result of the liquidation of Global Technology EBS (Pty) Ltd, Temenos
Southern Africa (Pty) Ltd and the proposed sale of Global Technology Australasia
Limited, the auditors were unable to ensure the accurate classification between
operating losses and exceptional items. They were also unable to determine
whether the losses consolidated to the date of disposal are accurate and whether
the headline earnings are fairly stated. The modification is thus due to
classification and the bottom line loss is fairly stated.
The auditors have raised an emphasis of matter with regard to the ability of the
Group to continue as a going concern. The directors have included a statement
below regarding the going concern of the Group.
Going Concern
Over the past six months, the Glotec directors have implemented a restructuring
process in order to restore the operations to profitability and to strengthen
the Group"s financial position. The effects of the restructuring process
continue to yield positive results.
Based on the results to date and the continued support of the Group"s financiers
and customers, the directors believe that the Group has adequate resources to
continue as a going concern during the year. The directors are in negotiations
with the Group"s financiers regarding the restructuring and strengthening of the
balance sheet. The negotiations are well advanced, however there are several
conditions concerning the conversion. The directors are of the opinion that the
conditions are reasonable and could be met within an acceptable period.
Accordingly, the directors have adopted the going concern basis in preparing the
interim results.
Accounting Policies
These interim results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice applicable to interim
financial reporting, with the exception of AC 133.The accounting policies used
in its preparation are consistent with those adopted for the audited financial
statements to 31 December 2002.
Results
Independent auditors did not review the prior year"s interim figures.
For the period under review, Glotec reported a decrease in revenue of 41% to
R131 million (2002: R220 million). Headline earnings per share declined to a
loss of 24,1 cents (2002: Profit of 0,9 cents), while earnings per share was
reduced to a loss of 7,8 cents (2002: Loss of 1,9 cents). The Group reported an
operating loss of R30,4 million (2002: Profit of R17,5 million).
Despite the poor results for the period, the Board is pleased to announce that
the subsidiaries, which remain at this stage of the restructuring, all operated
profitably during the period under review.
As reflected in the abridged segmental analysis, GBI (Business Intelligence),
Brolink (Insurance) and ACS (Manufacturing and Distribution Software)
respectively reported operating profits of R7,5 million, R1,6 million and R4,1
million.
Significant And Other Events During The Period Under Review
* Before the disposal of Global Technology Services (Pty) Ltd (Services), the
Group also reduced its shareholding in Rocketseed (Pty) Ltd held via
Services, from 45% to 10%.
* Glotec disposed of Investment Technology Solutions (Pty) Ltd, a wholly-
owned subsidiary, as well as the payroll, outsourcing and development
business of Services.
* Glotec disposed of its entire shareholding in Temenos Group AG, in order to
reduce due and payable debt. The Glotec shareholders ratified and approved
the disposal at a general meeting held on 26 August 2003.
* The disposal of Glotec"s interest in Admerex Limited (formerly Global
Technology Australasia) is the subject matter of litigation. The
directors of Admerex Limited have placed the company into voluntary
administration. The Glotec Board is of the opinion that the claim will
be successfully defended. The matter is sub judicae.
Events Subsequent To 30 June 2003
Details of the subsequent events can be found in note 8 to the interim accounts.
Operational Review
GBI, which has been a part of Glotec since the Group"s inception, provides best-
of-breed solutions in the traditional BI and business performance management
(BPM) arenas. It is the local distributor of Hyperion, Business Objects and
Armstrong Laing. Currently, its solutions are utilised by 85 leading South
African companies, including 20 of the country"s top 25 public companies. Not
only has Hyperion (the leading BPM solution in the world) recommitted to Glotec
by signing a three-year contract, confirming its confidence in the company, but
it has also recently named GBI as its Top Distributor for the Year 2002/3.
ACS has established itself as one of the leading software houses in providing
innovative and flexible solutions, in the areas of interactive financial,
distribution and manufacturing systems. ACS boasts a loyal client base of 80
companies, some of whom have been utilising its services for the past 20 years.
Going forward, Glotec will focus on promoting ACS"s full service offering, which
includes software solutions that provide companies with the agility of structure
and control needed in the manufacturing, distribution and accounting business
environments. ACS was incorporated into Glotec in 2001.
Brolink forms an integral link between insurance companies and insurance
brokers, by performing insurance administration of personal lines portfolios on
behalf of insurance companies, and portfolio and administrative management to
insurance brokers. Brolink has been part of the Group since 1999.
Board Changes
* On 3 February 2003, PA Landey resigned as non-executive director and from
the board committees on which he served.
* On 28 March 2003, JM Hughes, RC Johnson and G Leonard resigned as executive
directors and from the board committees on which they served.
* On 28 March 2003, DC McWilliam resigned as non-executive director and from
the board committee on which he served.
* On 28 March 2003, L Matuson and his alternate, RS Gordon, were appointed as
non-executive directors. L Matuson serves on the Glotec audit and
remuneration committees.
* On 1 April 2003, G Koukis and his alternate, A Andreades, resigned as non-
executive directors.
* On 22 June 2003, R Leonard resigned as Chief Executive Officer of the
Group, however he remains a non-executive director. GA Victor was
subsequently appointed as his successor.
* Subsequent to the period under review, PJ Moffett resigned as executive
director on 2 July 2003 and PM Marsden was appointed as Financial Director
of the Group on 12 August 2003. On 8 October 2003, ME Tshivhase resigned as
non-executive director and from the board committee on which he served.
Prospects
The restructuring process has resulted in a more stable Group. The Board is
confident that Glotec"s remaining focus areas provide the Group with a solid
foundation for future growth.
However, the Glotec Board is committed to taking further steps, if required, to
assist with the ongoing restructuring process of the Group.
Renewal Of Cautionary Announcement
Further to the cautionary announcement dated 26 August 2003, shareholders are
advised that the company is still in discussions, which may have a material
effect on Glotec"s securities. Accordingly, shareholders are advised to continue
exercising caution when dealing in the company"s securities until a full
announcement is made.
Dividends
No interim dividend has been declared.
By order of the Board
Div Geeringh
(Chairman)
Graeme Victor
(Chief Executive Officer)
10 October 2003
SUMMARISED CONSOLIDATED INCOME STATEMENT
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
Notes R"000 R"000 R"000
Revenue 130 614 219 590 611 120
Operating (loss)/profit (30 437) 17 504 (85 655)
Exchange loss (517) (4 980) (22 838)
Depreciation - assets (1 489) (2 668) (4 068)
Amortisation - development
costs (5 983) (506) (16 781)
Amortisation - goodwill (2 347) (4 974) (9 583)
(Loss)/Profit from
operations (40 773) 4 376 (138 925)
Net interest paid (7 438) (4 614) (15 011)
(Loss)/Income
from associates (209) 692 (167 591)
Net (loss)/profit
before taxation (48 420) 454 (321 527)
Exceptional items 2 12 716 (6 302) (75 423)
Taxation 1 328 (1 744) (5 887)
Loss after taxation (34 376) (7 592) (402 837)
Minority interest - (153) 23 454
Loss for the period (34 376) (7 745) (379 383)
Number of shares in issue
(thousands) 438 805 438 805 438 805
Weighted average number of
shares in issue (thousands) 438 805 415 415 427 930
Headline (loss)/earnings
per ordinary share (cents) (24,1) 0,9 (55,6)
Loss per ordinary share
(cents) (7,8) (1,9) (88,7)
Fully diluted headline
(loss)/earnings per share (24,0) 0,9 (55,3)
Dividends per ordinary
share (cents) - - -
Reconciliation of headline
(loss) earnings per share
Loss per share (7,8) (1,9) (88,7)
adjusted for:
Exceptional items (16,8) 1,6 29,2
Amortisation - goodwill 0,5 1,2 3,9
Headline (loss)/earnings
per share (24,1) 0,9 (55,6)
SUMMARISED CONSOLIDATED BALANCE SHEET
Assets
Non-current assets 51 506 425 763 163 122
Property, plant and equipment 4 041 11 406 7 191
Loans receivable 2 918 14 106 3 645
Development costs 13 080 49 133 17 182
Goodwill 18 221 52 467 26 595
Investment in associate - 240 227 77 895
Investment in joint venture 1 181 - 3 153
Investments - unlisted 3 128 12 998 128
Deferred tax assets 11 937 45 426 27 333
Current assets 53 224 171 537 124 834
Trade and other receivables 37 064 153 003 74 320
Deferred expenses 10 832 17 918 20 614
Tax assets 1 148 - 9 080
Bank balances and cash 4 180 616 20 820
Total assets 104 730 597 300 287 956
Equity and liabilities
Capital and reserves
Ordinary shareholders"
interest (29 350) 409 062 36 655
Minority interest - 28 758 -
Non-current liabilities 2 237 40 947 5 923
Interest-bearing long-term
borrowings 4 1 915 37 218 5 602
Deferred tax liabilities 322 3 729 321
Current liabilities 131 843 118 533 245 378
Trade and other payables 65 408 44 086 80 798
Deferred revenue 21 056 35 540 44 343
Current portion of long-
term borrowings 28 286 1 120 30 395
Short-term loan - interest-
Bearing - - 8 580
Tax liabilities 7 580 6 883 9 286
Bank overdraft - interest-
bearing 9 513 30 904 71 976
Total equity and liabilities 104 730 597 300 287 956
Net asset value per share:
cents per share (6,7) 93,2 8,4
ABRIDGED CASH FLOW STATEMENT
Cash (utilised in)/generated
from operations (30 673) 16 600 (90 029)
Working capital changes 18 724 (31 005) 70 301
Net interest paid (7 265) (4 978) (14 196)
Taxation paid (1 344) (5 209) (5 852)
Cash flow from operating
activities (20 558) (24 592) (39 776)
Cash flow from investing
activities 78 842 (10 927) (16 327)
Cash flow from financing
activities (12 540) 9 850 10 778
Net increase/(decrease) in
cash and cash equivalents 45 744 (25 669) (45 325)
Cash and cash equivalents at
beginning of period (51 156) (4 619) (4 619)
Foreign currency translation
reserve on cash balance 79 - (1 212)
Cash and cash equivalents at
end of period (5 333) (30 288) (51 156)
ABRIDGED STATEMENT OF CHANGES IN SHAREHOLDERS" EQUITY
Foreign
currency
Non-distri trans- Accumu-
Share Share butable lation lated
capital premium reserve reserve loss Total
R"000 R"000 R"000 R"000 R"000 R"000
Balance
at beginning
of 31
December
2002 438 209 033 5 651 26 404 (204 871) 36 655
Loss for
the period (34 376) (34 376)
Foreign
exchange
difference
arising on
translation
and disposal
of foreign
subsidiary
and
associate (5 651) (25 978) (31 629)
Balance
at end
of 30 June
2003 438 209 033 - 426 (239 247) (29 350)
ABRIDGED SEGMENTAL ANALYSIS
Manufacturing
and
Business Distribution
Intelligence Insurance Software Banking Total
R"000 R"000 R"000 R"000 R"000
Segment revenue 41 720 20 983 11 988 56 163 130 854
Intercompany - - (240) - (240)
41 720 20 983 11 748 56 163 130 614
Segment result 7 562 1 630 4 143 (51 760) (38 425)
Amortisation -
Goodwill - (1 470) (647) (230) (2 347)
7 562 160 3 496 (51 990) (40 772)
30 June 30 June
2003 2002
Reviewed Unaudited
R"000 R"000
Notes
1. These results are in accordance with Statements of South African Generally
Accepted Accounting Practice applicable to interim financial reporting,
with the exception of AC 133. Policies are consistent with those used in
the prior period.
2. Exceptional Items
Profit/(Loss) on the sale
of investments 85 437 (6 302)
Loss on realisation of loans (62 424) -
Loss on disposal of business (402) -
Anticipated gain on
liquidation 654 -
Impairment - share incentive
loan (459) -
Impairment - goodwill (6 026) -
Impairment - development
costs (4 064) -
12 716 (6 302)
3. Directors" valuation of
unlisted investments 128 12 988
4. Interest-bearing
long-term borrowings
CommerzBank Aktiengesellschaft - 27 237
Standard Bank of South Africa
Limited 23 000 -
Preference shares subsidiary 5 152 5 152
Global Technology Investment
Holdings - 240
Commercial bills - 1 814
Finance leases 2 049 3 895
Less: Current portion
included in current
liabilities (28 286) (1 120)
1 915 37 218
Security
Pledge and cession of the shares in Brolink (Pty) Ltd, Associated Computer
Solutions (Pty) Ltd and Global Technology Business Intelligence (Pty) Ltd was
given as security to the Standard Bank of South Africa Limited for additional
funding.
Trade receivables to the value of R30,5 million have been ceded as security for
the Nedbank and Standard Bank overdraft facilities.
5. Operating Lease Commitments
Within one year 2-5 years Thereafter
R"000 R"000
Computer equipment 9 402 2 355 -
Buildings 5 117 10 151 -
6. Contingent Liabilities
A potential contingent liability of AUS$1 million against Glotec arose out
of a dispute regarding negotiations concerning the disposal of Global
Technology Australasia Limited. The potential liability arises as a result
of disputes as regards the terms and conditions of the sale. The results
presented include the consolidation of the entity until the disposal date.
The directors of Glotec remain of the opinion that any claim in this regard
will be successfully defended. Indemnity has been received from Ray Leonard
in respect of any possible losses. This includes a cession over the
Services debtors book.
Various employees have institued legal action against Glotec in terms of
alleged unfair dismissal. The estimate of possible loss in respect of these
claims is R2 080 000.
The International Finance Corporation (IFC) subscribed for redeemable,
cumulative, convertible preference shares in a wholly-owned subsidiary DBS
Consult (Pty) Ltd (DBS) with a face value of R5 152 000. This was used to
develop a banking product called Emerge. DBS did not meet the required
sales levels and, as such, a put option against Glotec became exercisable.
The right to exercise the option was effective from 30 June 2003 and
extends to 30 June 2004. To date the option has not been called. The option
is payable in cash.
7. Guarantees
Bank guarantees issued:
* R371 508 guarantees for tenders placed
* R401 897 to lessors of office buildings
* R2 361 666 intermediary guarantee facility
* R250 000 to Total SA (Pty) Ltd
* R1 500 000 to IBM South Africa (Pty) Ltd
* R62 000 to Eskom
* R128 000 to Tresso
8. Subsequent Events
The directors of Admerex Limited (formerly Global Technology Australasia
Limited) have placed the company into voluntary administration to enable a
financial re-organisation of the company to be effected.
On 4 July 2003, the directors of Global Technology EBS (Pty) Ltd and
Temenos Southern Africa (Pty) Ltd applied to have the companies placed into
voluntary liquidation. Glotec has entered into an agreement with Lexshell
577 Investments (Pty) Ltd and Raymond Leonard (Lexshell and Leonard)
pursuant to which Glotec will sell all its shares and claims in Global
Technology Services (Pty) Ltd, AJS Software Developments (Pty) Ltd, Xpertek
Risk Management Products (Pty) Ltd and Sagacious Systems (Pty) Ltd to
Lexshell and Leonard.
The transaction is subject to the fulfilment or waiver of a number of
suspensive conditions. The period for the fulfilment of these suspensive
conditions is staggered over 21, 45 and 90-day periods calculated with
effect from 14 July 2003. All conditions to date have been fulfilled or
waived. The purchase consideration of the transaction amounts to R1. A
circular pertaining to the transaction has been posted to shareholders.
The banking consortium and the Group are in the advanced stages of
negotiations to convert its debt to equity, subject to certain conditions
being met.
9. Other
There were no material capital commitments existing at the end of the year.
Registered office:
Arcay House II
Number 3 Anerley Road
2193 Parktown
PO Box 62397
2107 Marshalltown
Transfer secretaries:
Computershare Limited
70 Marshall Street
2001 Johannesburg
Directors:
DR Geeringh* (Chairman) GA Victor (Chief Executive Officer) RA den Besten*
RS Gordon** R Leonard* PM Marsden L Matuson* AM Mhlongo*
*Non-executive ** Alternative director
Company secretary:
Arcay Client Support (Pty) Ltd
Registration number 1998/025284/07
Sponsor
