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COMPAREX HOLDINGS LIMITED - THE REVIEWED GROUP RESULTS FOR THE SIX MONTHS
ENDED 30 NOVEMBER 2003 AND DIVIDEND DECLARATION OF COMPAREX HOLDINGS LIMITED
COMPAREX HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1994/002506/06)
Share code: CPX ISIN: ZAE000016812
The reviewed group results for the six months ended 30 November 2003 and
dividend declaration of Comparex Holdings limited
* Cash distribution R1,62 billion
* BEE Deal concluded
* Margins under pressure
Group Balance Sheet
30 30 31
November November May
Reviewed Reviewed Audited
R million 2003 2002 2003
ASSETS
Non-current assets
Furniture and fittings, equipment and 107,5 75,8 97,6
vehicles
Capitalised leased assets 183,5 188,4 185,7
Rental assets 0,2 0,2 0,3
Long term loans, investments and associate 69,1 56,1 51,2
companies
Deferred taxation assets 1,4 8,2 2,4
361,7 328,7 337,2
Current assets
Inventories 55,7 73,0 52,8
Trade accounts receivable 502,6 490,1 409,0
Other accounts receivable and prepayments 191,8 303,7 130,5
Cash and bank balances 2 179,1 1 796,0 2 193,6
2 929,2 2 662,8 2 785,9
TOTAL ASSETS 3 290,9 2 991,5 3 123,1
EQUITY AND LIABILITIES
Ordinary shareholders" funds 2 361,3 2 062,1 2 232,3
Minority interests 4,5 4,2 4,3
2 365,8 2 066,3 2 236,6
Non-current liabilities
Interest bearing liabilities 234,2 242,4 240,0
Interest free liabilities 28,8 15,7 18,4
Deferred taxation liabilities 0,4 1,7 0,4
263,4 259,8 258,8
Current liabilities
Short term borrowings 33,0 32,1 34,0
Trade and other payables 599,7 583,1 560,3
Provisions 26,8 45,2 31,5
Taxation 2,2 5,0 1,9
661,7 665,4 627,7
TOTAL EQUITY AND LIABILITIES 3 290,9 2 991,5 3 123,1
Group Income Statement
Six months Year ended Six months Year
ended ended ended
30 November 31 May 30 November 31 May
Continuing Continuing Statutory Statutory
2003 2002 2003 2003 2002 2003
R million Reviewed Reviewed Audited Reviewed Reviewed Audited
Revenue 1 431,9 1 397,7 2 749,5 1 431,9 2 463,7 3 814,5
Revenue 1 401,7 1 397,7 2 749,5 1 401,7 2 463,7 3 814,5
AC133 30,2 30,2
adjust-
ment
Cost of 1 005,8 976,0 1 935,4 1 005,8 1 729,4 2 688,9
sales
Cost of 999,5 976,0 1 935,4 999,5 1 729,4 2 688,9
sales
AC133 6,3 6,3
adjust-
ment
Margin 426,1 421,7 814,1 426,1 734,3 1 125,6
Admini- 316,1 313,9 597,4 316,1 744,7 1 028,2
strative
expenses
Opera- 110,0 107,8 216,7 110,0 (10,4) 97,4
ting
profit/(l
oss)
before
depre-
ciation
Depre- 28,1 25,7 50,2 28,1 73,4 97,8
ciation
Opera- 81,9 82,1 166,5 81,9 (83,8) (0,4)
ting
profit/(l
oss)
Net 99,8 82,3 190,6 99,8 91,2 199,5
invest-
ment
income
Income 122,3 104,3 234,1 122,3 113,5 243,3
from
invest-
ments
Finance (22,5) (22,0) (43,5) (22,5) (22,3) (43,8)
charges
Foreign (35,9) (1,5) (3,3) (35,9) 67,5 65,8
exchange
(losses)/
gains
Foreign 0,3 (1,5) (3,3) 0,3 67,5 65,8
exchange
gains/
(losses)
AC133 (36,2) (36,2)
deriva-
tive
adjust-
ment
Asso- 1,7 4,3 9,7 1,7 4,3 9,7
ciate
compa-
nies"
share of
profits
Profit 147,5 167,2 363,5 147,5 79,2 274,6
before
excep-
tional
items
Excep- 18,3 (19,1) (12,6) 18,3 (117,3) (111,5)
tional
items
Profit/- 165,8 148,1 350,9 165,8 (38,1) 163,1
(Loss)
before
taxation
Taxation 48,5 43,5 89,5 48,5 45,3 91,3
Profit/- 117,3 104,6 261,4 117,3 (83,4) 71,8
(Loss)
after
taxation
Minori- 0,2 0,9 1,1 0,2 0,9 1,1
ties
Profit/- 117,1 103,7 260,3 117,1 (84,3) 70,7
(Loss)
attribu-
table to
share-
holders
Weighted 262 637 262 637 262 637 262 637 262 637 262 637
average
number of
shares in
issue
(000"s)
Earnings/ 44,6 39,5 99,1 44,6 (32,1) 26,9
(Loss)
per share
(cents)
Fully
diluted
weighted
average
number of
shares 263 381 263 381
in issue
(000"s)
Fully 44,5 44,5
diluted
earnings
per share
(cents)
Calcula-
tion of
headline
earnings:
R million
Profit/- 117,1 103,7 260,3 117,1 (84,3) 70,7
(Loss)
attribu-
table to
share-
holders
Impair- 19,3 21,4 44,2 21,4
ment of
assets,
loans and
invest-
ments
Impair- 2,7 2,7
ment of
goodwill
Adjust- 1,1 1,1
ments
from
associa-
tes
(Profit)/ (2,0) 0,4 (0,9) (2,0) 68,9 68,3
Loss on
sale of
busi-
nessses
(Profit)/
Loss on
disposal
of furni-
ture and
fittings,
Equip- (0,9) 0,5
ment and
vehicles/
rental
assets
Headline 116,2 123,4 282,6 116,2 28,8 163,6
earnings
Weighted 262 637 262 637 262 637 262 637 262 637 262 637
average
number of
shares in
issue
(000"s)
Headline 44,2 47,0 107,6 44,2 11,0 62,3
earnings
per share
(cents)
Fully
diluted
weighted
average
number of
shares 263 381 263 381
in issue
(000"s)
Fully 44,1 44,1
diluted
headline
earnings
per share
(cents)
Excep-
tional
items
Profit/(L
oss) on
sale of
busi-
nesses -
Discon- 2,0 2,0 (68,9) (69,2)
tinued
opera-
tions
(Loss)/- (0,4) 0,9 0,9
Profit on
sale of
busi-
nesses -
conti-
nuing
busi-
nesses
Reversal 4,2 11,0 4,2 11,0
of over
provi-
sion -
conti-
nuing
busi-
nesses
Reversal 1,2 3,3
of over
provi-
sion -
discon-
tinued
opera-
tions
Impair- 12,2 (19,3) (22,4) 12,2 (44,2) (22,4)
ment of
assets,
loans and
invest-
ments
Res- (0,1) 0,6 0,6 (0,1) (5,4) (32,4)
tructure
costs
Impair- (2,7) (2,7)
ment of
goodwill
18,3 (19,1) (12,6) 18,3 (117,3) (111,5)
Group Cash Flow Statement
Six months Year Six Year
ended ended months ended
ended
30 31 May 30 31 May
November November
Continuing Continuing Statutory Statutory
2003 2002 2003 2003 2002 2003
R million Reviewed Reviewed Audited Reviewed Reviewed Audited
Cash (38,3) 9,8 254,9 (38,3) (270,5) 90,5
(utilised
in)/generated
from
operations
Net 99,8 82,3 190,6 99,8 91,2 199,5
investment
income
Dividends (0,5) (0,5) (0,5)
paid
Taxation paid (33,2) (31,5) (69,0) (33,.2) (40,8) (78,3)
Net cash flow 28,3 60,6 376,0 28,3 (220,6) 211,2
from
operating
activities
Cash flows
from
investing
activities
Net movement (2,2) 4,8 130,5 (2,2) (495,7) (489,1)
in
investments
Net movement
in furniture
and fittings,
equipment and
vehicles, (38,7) (25,0) (73,8) (38,7) (64,5) (106,8)
intangibles,
rental and
leased assets
Net cash flow (40,9) (20,2) 56,7 (40,9) (560,2) (595,9)
from
investing
activities
Net cash flow (1,9) (14,6) (9,3) (1,9) (7,3) (5,8)
from
financing
activities
Net changes (14,5) 25,8 423,4 (14,5) (788,1) (390,5)
in cash and
cash
equivalents
Cash at 2 193,6 1 770,2 1 770,2 2 193,6 2 584,1 2 584,1
beginning of
year
Cash at end 2 179,1 1 796,0 2 193,6 2 179,1 1 796,0 2 193,6
of year
Group Statement of Changes in Equity
Share Non- Foreign Distri-
capital distri- exchange butable
butable
R million and premium reserves reserve reserves Total
Balance at 31 May 184,8 51,8 (52,9) 1 910,9 2 094,6
2002 - Audited
Foreign exchange loss
arising
on consolidation (0,3) (0,3)
Attributable loss per (84,3) (84,3)
the income statement
Transfer in respect 15,4 15,4
of deferred taxation
Discontinued (19,4) 56,1 36,7
operations
Balance at 30 184,8 47,8 2,9 1 826,6 2 062,1
November 2002-
Reviewed
Foreign exchange loss
arising
on consolidation (0,5) (0,5)
Attributable profit 155,0 155,0
per the income
statement
Transfer in respect 15,5 15,5
of deferred taxation
Discontinued 0,2 0,2
operations
Balance at 31 May 184,8 63,3 2,6 1 981,6 2
2003 - Audited 232,3
AC133 adjustment to (0,4) (0,4)
opening balance
Foreign exchange loss
arising
on consolidation (3,1) (3,1)
Attributable profit 117,1 117,1
per the income
statement
Transfer in respect 15,4 15,4
of deferred taxation
Balance at 30 184,8 78,7 (0,5) 2 098,3 2
November 2003 - 361,3
Reviewed
Group Segmental Analysis
Six months Year ended
ended
30 November 31 May
2003 2002 2003
R million Reviewed Reviewed Audited
Revenue
Technology 457,6 423,8 749,5
infrastructure
Services 867,2 884,0 1 782,0
Business 107,1 89,9 218,0
applications
Continuing 1 431,9 1 397,7 2 749,5
businesses
Discontinued 1 066,0 1 065,0
operations
1 431,9 2 463,7 3 814,5
Operating
profit/(loss)
Technology 32,7 10,1 30,2
infrastructure
Services 64,7 74,2 118,9
Business (7,0) 9,5 28,4
applications
Central (8,5) (11,7) (11,0)
functions
Continuing 81,9 82,1 166,5
businesses
Discontinued (165,9) (166,9)
operations
81,9 (83,8 ) (0,4)
Revenue
geographically
South Africa 1 206,5 1 276,1 2 474,1
Rest of Africa 193,6 62,8 169,3
Rest of the 31,8 58,8 106,1
world
principally
United Kingdom
Discontinued 1 066,0 1 065,0
operations
1 431,9 2 463,7 3 814,5
Other Salient Group Information
30 November 30 November 31 May
2003 2002 2003
Shares in 294 545 294 545 294 545
issue
Less shares 31 908 31 908 31 908
held by a
subsidiary
262 637 262 637 262 637
Net asset 900,8 786,8 851,6
value per
share (cents)
Debt equity 11,3 13,3 12,3
ratio (%)
Contingent
liabilities
Guarantees 80,1 6,6 14,6
issued to
third parties
Other 1,6
Commitments
Capital 1,2
Lease 248,3 307,7 319,8
commitments
These group results are prepared in accordance with the South African
Statements 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 2003, with the exception of the adoption
of AC 133 Financial Instruments: Recognition and measurement, by the group.
The adoption of this accounting standard has resulted in the following
adjustments being made to the 30 November 2003 results:
Opening adjustment Current period effect
Other receivables 8,8
Other payables (0,4) (21,2)
Inventory 0,1
Derivative losses 0,4 36,2
Revenue (30,2)
Cost of sales 6,3
Headline earnings prior 115,2
to adopting AC133
Adjustments required by
adopting AC133 in current
year
Revaluation of 13,3
investment
Other AC133 adjustments (12,3)
Headline earnings after 116,2
adopting AC133
Weighted average number 262 637
of shares in issue
(000"s)
Headline earnings per 44,2
share (cents)
The above results have been reviewed by the group"s auditors Deloitte &
Touche and a copy of their unqualified review report is available for
inspection at the company"s registered offices
GENERAL COMMENT
The group continues to operate in a depressed and highly competitive market
and this is reflected in the operating results for the Comparex group which
has recorded depressed margins during the six-month period ("the period").
Notwithstanding the aforesaid, the general sentiment in the Information
Communication and Technology ("ICT") sector is positive and a turnaround is
on the horizon. The merger of Comparex Africa and Business Connexion has been
positively received and the group is well placed to benefit from the
anticipated upturn in the ICT sector.
SECURITIES REGULATION PANEL ("SRP") INVESTIGATION
During this reporting period, the SRP investigation regarding alleged concert
party action was concluded, with the SRP ruling that no affected transaction
took place.
CORPORATE ACTIVITY
The most significant event during the period was the negotiation of the
merger of Comparex Africa with Business Connexion. The conditions precedent
to this transaction were fulfilled during December 2003, including
unconditional approval for the proposed merger from the Competition
Authorities. The effective date of the transaction was 2 January 2004.
The disposal of the group"s interest in The Smartshed and Q Data USA were
concluded during the period; the effective date of the disposal of the USA
operation was 31 July 2003. These transactions were insignificant to the
group"s results.
Subsequent to the date of these results, the group has disposed of its 50%
interest in Phambili Information Technologies (Proprietary) Limited, subject
to certain suspensive conditions.
OPERATING RESULTS
Revenue for the period excluding the AC 133 adjustment showed no overall
growth. The group"s strategy of developing its business in Africa has been
successful with the Africa business growing by 208% during the period. This
was due largely to contracts secured in Ethiopia for the supply and
installation of equipment. The revenue from the Africa business assisted in
offsetting reduced revenue in the South African market. The Ethiopian
contracts had a dilutionary effect on the group"s gross margin, as the normal
margin was shared with the Ethiopian local partner. The group continued to
maintain tight control over operating expenses recording only a minimal
increase of less than 1% compared to the previous period. The operating
profit of R81,9 million includes an
AC 133 adjustment of R23,9 million; elimination of this adjustment to enable
comparison to the prior period, results in a decrease in operating profit
from R82,1 million to R58,0 million. On the basis
of excluding the AC 133 adjustments, the operating margin decreased from 5,9%
to 4,1%. This decrease was offset by an increase in interest received,
despite the lower interest rates in the current period, and the reversal of
impairments in Corp Invest 40, which has been treated as an exceptional item.
Headline earnings per share decreased from 47,0 cents per share at November
2002 to 44,2 cents per share at November 2003.
The group"s balance sheet has remained strong with R2,2 billion of cash
resources. The overall cash-flow for the period is effectively neutral,
notwithstanding the funding of the Ethiopian contracts over the half-year
end.
During the period under review, the group adopted the South African Statement
of Generally Accepted Accounting Practice,
AC 133. The impact of this has been to reduce profit before tax by R12,3
million. This adjustment is primarily related to embedded derivatives on
foreign currency contracts relating to the Ethiopian business, which will
reverse in the second half of the year upon receipt of payment from the
clients.
TAXATION ISSUES
The significant matter relating to the claiming of trademark deductions has
still not been resolved and the hearing of the appeal in respect of the
Persetel trademark has been postponed to September 2004. Based on the opinion
of Senior Counsel the directors continue to believe that all the deductions
will ultimately be allowed. The subsidiary involved has claimed deductions of
R838,1 million resulting in a tax reduction of R261,0 million to 30 November
2003. If any amount is required to be paid to SARS it will be interest
bearing.
DIVIDEND DECLARATION
Notice is hereby given that a dividend (number 11) of R5,50 per share, in
anticipation of the members" voluntary winding-up, has been declared by the
directors.
The salient dates are as follows:
Last day to trade Friday, 5 March 2004
Securities start trading
ex-dividend Monday, 8 March 2004
Record date Friday, 12 March 2004
Payment date Monday, 15 March 2004
Share certificates may not be dematerialised or rematerialised between
Monday, 8 March 2004 and Friday, 12 March 2004, both days inclusive.
A further distribution will be considered as part of the restructure outlined
below.
RESTRUCTURE
With the conclusion of the empowerment deal and the SRP enquiry the group is
able to finalise its restructure for the future. In this regard a circular
will shortly be posted to shareholders setting out the directors"
recommendations in respect of:
- The rationalisation of the structure of the Comparex group to eliminate
unnecessary consolidation layers, retaining only those entities required for
the future growth of the Comparex Africa group,
- The de-listing of Comparex Holdings Limited,
- The listing of Comparex Africa Group (Proprietary) Limited,
- The unbundling of Comparex Africa Group (Proprietary) Limited to
shareholders,
- The return to shareholders of any remaining surplus cash, which will
involve the voluntary liquidation of Comparex Holdings Limited and certain of
the non-essential entities.
PROSPECTS
The merger with Business Connexion transforms Comparex into a true African
ICT group, which is well positioned to grow within the South African
environment. The group has already benefited by securing new business with
clients because of the transformed status of the group coupled with an
ability to deliver exceptional services. While market conditions continue to
be depressed, in the absence of further deterioration of the market, the
group is confident it can maintain its current level of operating
performance.
On behalf of the board
RS Berkowitz PA Watt
Chairman
Midrand, 12 February 2004
Directors: RS Berkowitz (Chairman), DM Nurek (Deputy Chairman), PA Watt
(Chief Executive Officer), JF Buchanan, AC Farthing and FJ van der Merwe
Registered office: PQ Park, 789 16th Road, Randjespark, Midrand 1685
(Private Bag X48, Halfway House 1685)
Internet address: http://www.comparexafrica.co.za
Transfer secretaries: Computershare Limited
9th Floor, 70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Sponsor: Rand Merchant Bank, a division of First Rand Bank Limited,
Corporate Finance
1 Merchant Place, Cnr Fredman Drive and Rivonia Road, Sandton 2196
(PO Box 786273, Sandton 2146)
Date: 23/02/2004 07:44:21 AM Produced by the JSE SENS Department
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