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Ist Group Limited - Audited Annual Results For The Year Ended 29 February 2004
Release Date: 21/04/2004 12:15:01 Code(s): IST
IST Group Limited - Audited Annual Results for the year ended 29 February 2004
IST GROUP LIMITED
Reg. no. 1998/011521/06
ISIN: ZAE000015798
Share code: IST
AUDITED ANNUAL RESULTS
for the year ended 29 February 2004
* Attributable income increased by 17.2%
* Dividend increased to 8 cents per share
* R62 million invested in future growth from own reserves
* All operations contributed positively to satisfactory performance
CONSOLIDATED INCOME STATEMENT
Year ended % Year ended
R000 29 Feb 2004 Change 28 Feb 2003
Revenue 323 491 7.7 300 323
From continuing
operations 320 207 294 558
Other operating
income 3 284 5 765
Cost of sales 262 214 248 788
Gross profit 61 277 51 535
Selling and
administration
expenses (10 849) (9 281)
Restructuring costs (3 550) -
Earnings before
financing costs,
taxation,
depreciation and
amortisation ("EBITDA") 46 878 10.9 42 254
Depreciation and
amortisation expenses (7 569) (6 110)
Operating profit 39 309 36 144
Interest received 3 768 5 336
Profit before
financing costs 43 077 41 480
Forex loss (3 006) (3 517)
Profit before
taxation 40 071 37 963
Taxation (13 490) (12 588)
Profit after
taxation 26 581 25 375
Attributable to
outside
shareholders (1 014) (1 731)
Group profit 25 567 23 644
Exceptional item 560 (1 351)
Earnings 26 127 17.2 22 293
Calculation of
Headline Earnings
Earnings 26 127 22 293
Foreign debt written
off (560) 1 351
Fair value gains on
investment property (731) (1 538)
Amortisation of Goodwill 31 20
24 867 12.4 22 126
Earnings per consolidated
share (cents)
Basic 19.3 3.8 18.6
Diluted 17.2 13.9 15.1
Headline earnings per
consolidated share
(cents)
Basic 18.4 18.5
Diluted 16.4 9.3 15.0
Dividends per
consolidated share 8.0 7.5
Consolidated Issued
Shares (000) 135 326 119 584
Fully Diluted
Shares (000) 151 639 147 159
Net Asset Value per
Share (cents) 103.6 103.5
Tangible Net Asset
Value per Share (cents) 70.4 101.5
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
R000 29 Feb 2004 28 Feb 2003
Cash flows from operating
activities
Cash receipts from
customers 322 117 294 361
Cash paid to suppliers
and employees (282 899) (237 095)
Net cash inflow from
operating activities 39 218 57 266
Interest received 3 768 5 853
Interest paid (1 366) (1 298)
Dividends paid to group
shareholders (10 058) (7 472)
Tax paid (14 750) (14 483)
Net cash flow from operating
activities 16 812 39 866
Cash flows from investing
activities
Purchase of property,
plant and equipment (8 781) (6 802)
Purchase of investment
properties (1 989) (353)
Acquisitions net of cash
acquired (27 811) (445)
Purchase of intangible
assets (28 110) (207)
Purchase of non-current
investments 151 351
Disposal of property,
plant and equipment 1 438 446
Net cash flow from
investing activities (65 102) (7 010)
Cash flows from financing
activities
Purchase of treasury
shares (37) (1 679)
Purchase and cancellation
of options (3 061) (2 020)
Proceeds from share options
scheme 7 250 1 102
Repayment of long-term
borrowings (2 033) (2 799)
Net cash flow from
financing activities 2 119 (5 396)
Net increase/(decrease) in
cash and cash equivalents (46 171) 27 460
Cash and cash equivalents
at beginning of year 79 663 53 851
Effects of exchange rate
changes (1 228) (1 648)
Cash and cash equivalents
at end of year 32 264 79 663
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended Year ended
R000 29 Feb 2004 28 Feb 2003
Share capital 1 411 1 198
Balance at beginning of year 1 198 1 181
Issue of share capital -
share option scheme 213 31
Shares repurchased not
cancelled i.t.o. general
authority - (14)
Share premium 80 005 73 005
Balance at beginning of
year 73 005 73 598
Issue of share capital -
capitalisation issue 7 037 1 071
Shares repurchased not
cancelled i.t.o. general
authority (37) (1 664)
Non-distributable reserves 3 198 3 095
Balance at beginning of year 3 095 -
Currency translation
differences 68 109
Revaluation reserve - 4 266
Deferred tax on revaluation 35 (1 280)
Retained earnings 59 024 46 417
Balance at beginning of
year 46 417 33 617
Net profit 26 127 22 293
Ordinary dividends (9 991) (7 473)
AC133- Financial instruments
restated (468) -
Cancellation of options (3 061) (2 020)
Ordinary shareholders" equity
at end of year 143 638 123 715
SEGMENTAL REPORT
Operating profit Revenue
Year ended Year ended
29 Feb 28 Feb 29 Feb 28 Feb
R000 2004 2003 2004 2003
Electronics 25 315 16 897 185 387 152 726
Mechanical 20 944 20 737 134 794 141 460
Other (6 950) (1 490) 26 372
39 309 36 144 320 207 294 558
GEOGRAPHIC
South Africa 286 029 222 582
Europe, North Africa,
Middle East, Australia
and the Americas 18 131 45 191
Sub-Saharan Africa 16 047 26 785
320 207 294 558
CONSOLIDATED BALANCE SHEET
At At
R000 29 Feb 2004 28 Feb 2003
ASSETS
Non-current assets 102 008 50 761
Property, plant and
equipment 40 353 36 227
Investment property 9 914 6 881
Intangible assets 46 345 2 321
Non-current receivables 5 396 5 332
Current assets 133 731 157 475
Inventories 25 417 27 427
Trade and other receivables 73 444 50 385
Current tax asset 2 606 -
Cash and cash equivalents 32 264 79 663
TOTAL ASSETS 235 739 208 236
EQUITY AND LIABILITIES
Capital and Reserves 143 638 123 716
Share capital 1 411 1 198
Share premium 80 005 73 005
Non-distributable reserves 3 198 3 095
Retained earnings 59 024 46 417
Minority interest 4 843 3 829
Non-current liabilities 7 982 5 605
Interest-bearing borrowings 314 1 107
Deferred tax liabilities 7 668 4 498
Current liabilities 79 276 75 087
Trade payables and other
liabilities 40 027 43 099
Advance payments 13 473 9 008
Provisions for liabilities 24 587 18 692
Current tax liabilities - 1 859
Current portion of interest-
bearing borrowings 1 189 2 429
TOTAL EQUITY AND
LIABILITIES 235 739 208 236
COMMENTS
In the face of continued difficult trading conditions and delays in some major
contracts, the group succeeded in producing a satisfactory financial performance
to which all its operations made a positive contribution.
The year was characterised by substantial strategic investments in the future
growth of IST. These included two synergistic acquisitions as well as a major
new product development drive with active customer participation, totalling more
than R62 million and funded from the group"s own cash reserves.
OPERATIONS REVIEW
* Electronics Group
IST Energy had an excellent year, taking in orders to the value of some R73
million. These included the first order from Eskom for GE remote terminal units
assembled locally in terms of IST Energy"s partnership agreement with GE Power
Systems. The division"s partnership with GE was strengthened and its market
presence extended
through the acquisition of Sherlyn and the GE Multilin range of protection
products.
The positioning of IST Otokon as an energy service company (ESCO) in terms of
Eskom"s Demand Side Management initiative (DSM) continued to bear fruit with two
additional DSM appointments, and the division has had the best year in its
history.
IST Data continued to do very well on the back of good products and its
substantial footprint. It is making rapid progress with the development of
middleware products on the GE Smallworld platform and is also negotiating
significant new GE Smallworld licences.
IST Telecom produced a creditable performance in circumstances which continued
to be difficult. It is awaiting adjudication of the Telkom IMAX tender and
meanwhile is working with its principal supplier to push the ADSL rollout
programme.
* Mechanical Group
IST Industrial also had a very good year, successfully completing the very
substantial Hillside Aluminium projects. It is currently progressing a number
of smaller assignments and actively pursuing new prospects, including those
opened up through our recent acquisition of Delkor Technik, with which it has
been merged.
The focus at IST Dynamics this year has been on major new product developments
and, as expected, the division"s revenues were consequently reduced. It
nevertheless secured a R37 million order for the upgrade of the SA National
Defence Force"s Olifant tank.
IST Nuclear was awarded a R260 million contract - the single largest in the
group"s history - for the detailed design of three key systems for the Pebble
Bed Modular Reactor"s proposed demonstration plant at Koeberg. Continued
funding delays at the PBMR Company have, however, considerably reduced and
delayed the anticipated revenue stream from this source.
FINANCIAL REVIEW
Income Statement
Revenues: These were largely in line with expectations with the exception of
Nuclear as a result of funding restrictions experienced by the PBMR project.
The effects of a stronger rand were felt in those divisions where imported goods
are on-sold and similar exchange levels to the previous year would have resulted
in a higher percentage revenue growth. The Delkor results were only
incorporated for a three month period as a result of delays in receiving
approval from the Competition Commission.
Margins: Remained in line with budget
Balance Sheet
Cash: R31 million was invested in acquisitions made and R28 million in product
development. Cash reserves have once again started to climb.
Intangible assets: The investments made are reflected in the changes in the
intangible assets, which now include product development costs of R28 million
and Delkor"s IP of R16 million.
Debtors: Improved second half revenues as well as the consolidation of Delkor"s
debtors resulted in an increase in the debtor"s book.
Share capital: The changes reflect the exercising of the 19.5 million options
held by Coronation FRM.
INDEPENDENT AUDITOR"S REPORT
The annual financial statements of the group have been audited by the company"s
auditors, PricewaterhouseCoopers Inc. Their unqualified report is available for
inspection at the registered office of the company.
ACCOUNTING POLICIES
The accounting policies of the group comply with South African Statements of
Generally Accepted Accounting Practice, and in the manner required by the South
African Companies Act 1973 and are, except for the adoption of AC133, (Financial
Instruments: Recognition and Measurement) consistent with those applied for the
previous financial year.
As a result of adopting AC133, embedded forward exchange derivatives in
purchases and sales contracts, which were previously not recognised in the
financial statements, are now accounted for on the balance sheet at fair value,
with all changes in fair value being recognised in the income statement in the
period to which they relate.
In terms of the requirements of AC130 (provisions, contingent liabilities and
contingent assets) dividends proposed or declared after the balance sheet date,
and related secondary tax on companies (STC), are not recognised as a liability
at the balance sheet date. The dividend of R11.5 million (8.0 cents per share)
declared on 20 April 2004 will give rise to an estimated STC charge of R1.4
million. Similarly, no provision has been made for the balance of audit fees
amounting to R226 000.
The headline earnings calculation of 2003 has been restated to exclude the Fair
Value Gains on Investment Property amounting to R1 538 347.
RESTRUCTURING COSTS
Profit before taxation is arrived at after taking into account restructuring
costs to the amount of R3.55 million. These are once-off costs as a result of
the integration of Delkor into IST and the move of IST Otokon from Potchefstroom
to Pretoria.
The effect of these on earnings per share is:
Included Excluded
Earnings per share (diluted) 17.2 19.6
Headline earnings per share (diluted) 16.4 18.7
DIVIDEND
A dividend of 8.0 cents (2003 7.5 cents) has been declared for the reporting
period, giving a dividend cover of 2.2 times. The dividend is payable to
holders of ordinary shares recorded in the register of the company at the close
of business on Friday 25 June 2004 and will be paid on Monday 28 June 2004. The
last day to trade cum dividend will be Friday 18 June 2004. The shares will
commence trading ex dividend from the start of business on Monday 17 May 2004.
Share certificates may not be dematerialised or rematerialised between Monday 21
June 2004 and Friday 25 June 2004 both days inclusive.
CORPORATE GOVERNANCE
The directors of IST Group Limited and its subsidiaries confirm their commitment
to the principles of openness, integrity and accountability as advocated in the
second King Report of Corporate Governance.
ANNUAL GENERAL MEETING
The sixth annual general meeting for shareholders will be held at 14:00 on
Thursday 17 June 2004 at the offices of the company at 221 Garstfontein Road,
Menlyn, Pretoria.
PROSPECTS
In the year ahead there will be a strong focus on maximising the past year"s
investment in growth by bedding down the acquisitions, harvesting the
opportunities they have brought to the group, and extracting full value from the
new products.
All our divisions are budgeting for further growth and the board is confident
that, barring a major deterioration in its operating environment, IST will again
be able to deliver value to its stakeholders in the year to February 2005.
Gary Morolo Harry Coetzee
Chairman Chief Executive
Pretoria 21 April 2004
Directors
G Morolo* (Chairman), L Robertson* (Deputy Chairman), H Coetzee (Group CEO), J
Blignaut*, A Moffat*, T Steyn, E Toerien, J Visagie (* Non-executive director,
Independent)
Transfer secretaries
Computershare Limited, 70 Marshall Street, Johannesburg 2001
Registered office
IST Building, 221 Garstfontein Road, Menlyn, Pretoria, 0145 * Tel: +27 12 426
7200, Fax: +27 12 348 9472, E-mail: ist@ist.co.za
www.istltd.com
Stakeholder and media relations
For further information contact Kathy du Plessis at
Tel: +27 11 728 4701, Fax: +27 11 728 2547, E-mail: ist@dpapr.com
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