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BYTES TECHNOLOGY GROUP LIMITED - UNAUDITED CONSOLIDATED INTERIM FINANCIAL
RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004
Bytes Technology Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1911/003874/06)
Share code: BTG
ISIN: ZAE000029526
UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2004
- REVENUE UP 7%
- OPERATING INCOME UP 26%
- HEADLINE EARNINGS PER SHARE UP 48%
- OPERATING CASH GENERATED R158 MILLION
- GOODWILL IMPAIRED BY R100 MILLION
INCOME STATEMENT
Six months Six months Year
ended ended ended
% 31.8.04 31.8.03 29.2.04
Figures in R Change (Unaudited) (Unaudited) (Audited)
million
Revenue 7 1,418 1,323 2,608
Operating income 97 77 185
before goodwill
amortisation and 26
capital items
Net finance costs (27) (8) (11) (25)
Income from 4 3 7
associates
Goodwill (167) (66) (134)
amortisation and
impairment
Capital items 27 - (8)
(Loss)/income (47) 3 25
before taxation
Taxation (33) (20) (50)
Loss after (80) (17) (25)
taxation
Attributable to (4) (11) (13)
outside
shareholders
Attributable to (84) (28) (38)
ordinary
shareholders
Weighted number of 153 152 152
shares in issue
(million)
Loss per share - (54) (19) (25)
Basic (cents)
Loss per share - (51) (19) (23)
Fully diluted
(cents)
Headline earnings 37 25 68
per share - Basic
(cents)
Headline earnings 34 25 64
per share - Fully
diluted (cents)
Dividends per 22 16 16
share paid (cents)
Notes:
1 Headline
earnings per share
Attributable
earnings is
reconciled to
headline
earnings as
follows:
Attributable to (84) (28) (38)
ordinary
shareholders
Goodwill 167 66 134
amortisation and
impairment
Capital items (27) - 8
Headline earnings 56 38 104
2 The unaudited interim financial results have been prepared in accordance with
South African statements of Generally Accepted Accounting Practice. The
accounting policies used in the preparation of the unaudited interim financial
results are consistent with those used in the annual financial statements for
the year ended 29 February 2004.
BALANCE SHEET
31.8.04 31.8.03 29.2.04
Figures in R million (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 450 714 628
Plant and equipment 93 86 87
Investments & loans 28 35 27
Goodwill 265 493 431
Finance lease assets 24 47 34
Deferred taxation 40 53 49
Current assets 826 829 670
Inventory 146 160 160
Accounts receivable 468 478 412
Taxation recoverable - - 7
Bank & cash 212 191 91
TOTAL ASSETS 1,276 1,543 1,298
Equity and liabilities
Ordinary shareholders` 352 480 465
equity
Outside shareholders` 7 2 2
interest
Long-term liabilities 216 349 145
Finance lease liabilities 24 47 34
Current liabilities 677 665 652
Accounts payable 606 517 492
Short-term loans 36 128 118
Bank overdraft - - 8
Taxation 35 20 34
TOTAL EQUITY & LIABILITIES 1,276 1,543 1,298
Shares in issue at end of 153 152 153
period (million)
Net asset value per share 229 315 303
(cents)
Net tangible asset value 57 (9) 22
per share (cents)
RECONCILIATION OF NET DEBT
31.8.04 31.8.03 29.2.04
Figures in R million (Unaudited) (Unaudited) (Audited)
Long-term liabilities 216 349 145
Finance lease liabilities 24 47 34
Short-term loans 36 128 118
Total debt per balance 276 524 297
sheet
Less related financed lease (54) (87) (68)
assets
Total debt 222 437 229
Bank & cash 212 191 83
Total net debt 10 246 146
ABRIDGED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31.8.04 31.8.03 29.2.04
Figures in R million (Unaudited) (Unaudited) (Audited)
Operating activities 124 56 171
Cash generated by 117 101 208
operations
Changes in working capital 65 14 55
Net finance costs (8) (11) (25)
Taxation paid (16) (24) (43)
Cash generated by operating 158 80 195
activities
Dividend paid (34) (24) (24)
Net investing activities 22 (252) (246)
Financing activities (16) 127 (103)
Net funds 130 (69) (178)
generated/(utilised)
Cash and cash equivalents
- at beginning of period 82 260 260
- at end of period 212 191 82
STATEMENT OF CHANGES IN EQUITY
Non-
Figures in Distribu- Deferred Accumu-
R million Share table Hedging lated Total
capital reserve reserve deficit
Balance at
28 February 2003 649 81 - (203) 527
(audited)
Adjustment to
opening
reserves due to
adoption
of AC133 (see (8) (8)
note 2)
Loss attributable
to shareholders (28) (28)
Dividend paid (24) (24)
Foreign currency
translation 13 - 13
reserve
Balance at
31 August 2003 649 94 - (263) 480
(unaudited)
Loss attributable
to shareholders (10) (10)
Foreign currency
translation
reserve (6) (6)
Issue of share 4 4
capital
Fair value
adjustment to
cash flow hedge (3) (3)
after tax
Balance at
29 February 2004 653 88 (3) (273) 465
(audited)
Loss attributable
to shareholders (84) (84)
Dividend paid (34) (34)
Issue of share 1 1
capital
Deferred hedging 4 4
reserve
Fair value
adjustment to
cash flow hedge 1 1
after tax
Release of fair
value
adjustment 3 3
Balance at
31 August 2004 654 88 1 (391) 352
(unaudited)
ABRIDGED SEGMENTAL ANALYSIS
Six months Six months Year
ended ended ended
31.8.04 31.8.03 29.2.04
Figures in R million (Unaudited) (Unaudited) (Audited)
Revenue
ICT Infrastructure & 595 623 1,202
Services
Software, Consulting and 566 568 1,062
Document Services
Specialised Equipment & 320 224 478
Services
Total all operations 1,481 1,415 2,742
Less equity accounted (63) (92) (134)
operations
1,418 1,323 2,608
Operating profit before
goodwill
amortisation and capital
items
ICT Infrastructure & 8 11 40
Services
Software, Consulting and 55 40 91
Document Services
Specialised Equipment & 49 37 82
Services
112 88 213
Corporate and Other (10) (6) (19)
Total all operations 102 82 194
Less equity accounted (5) (5) (9)
operations
97 77 185
GEOGRAPHICAL SEGMENTS
Revenue by market
South Africa 1,144 1,059 2,050
United Kingdom 309 326 632
Rest of Africa 28 30 60
Total all operations 1,481 1,415 2,742
Operating profit before
goodwill
amortisation and capital
items by market
South Africa 97 90 198
United Kingdom 5 (9) (5)
Rest of Africa - 1 1
Total all operations 102 82 194
Includes 100% of revenue from associates and our proportionate share of their
operating profit.
SUPPLEMENTARY INFORMATION
Six months Six months Year
ended ended ended
31.8.04 31.8.03 29.2.04
Figures in R million (Unaudited) (Unaudited) (Audited)
Depreciation 14 15 29
Foreign exchange losses (1) (2) (6)
Capital expenditure 22 15 70
Contingent liabilities 1 1 1
Operating lease commitments
Payable within the next 12
months:
- property 29 29 29
- plant, equipment and 20 20 19
vehicles
Payable thereafter:
- property 75 81 73
- plant, equipment and 27 33 26
vehicles
OVERVIEW
The improvement in headline earnings per share which was forecast for the first
six months of this financial year, over the comparable period for the previous
year, was achieved. As advised to shareholders in the last Annual Report the
directors anticipated two major factors which would materially affect the period
under review, those being the effect of the acquisition last year of the
remaining 50% shareholding in our Xerox operation and a turnaround in our
results in the United Kingdom. Both of these events transpired although the
improvements in the United Kingdom operations continue to be slower than
expected.
In general, IT markets remain somewhat challenging with the hoped for upturn
being slow to materialise. The relatively strong rand during the period under
review continues to depress revenue levels and accordingly the 8% improvement in
South African revenues is very satisfactory.
RESULTS
Operating income improved by 26% to R97 million (R77 million) which, coupled
with a reduction of 27% in finance costs to R8 million (R11 million), enabled
the group to post headline earnings per share of 37 cents, an improvement of 48%
over the corresponding period last year. The effect of the goodwill impairment
and amortisation (referred to below) resulted in the group recording an
attributable loss of R84 million (R28 million), but for which an attributable
income of R83 million (R38 million) would have been posted.
Cash generation continues to be strongly positive with interest bearing debt,
net of cash on hand, having reduced to a negligible level by the end of the
period. Excluding the effects of acquisitions and significant structural changes
(refer comments on the acquisition of CS Holdings) the group will be cash
positive by year end.
GOODWILL IMPAIRMENT
In the light of the continuing slower than anticipated rate of improvement in
the results at the group`s Plato operation in the United Kingdom, the directors,
acting on the recommendations of the group`s Audit and Risk Committee, and
bearing in mind the impending change in the accounting standard relating to
goodwill, reviewed the carrying value of the goodwill relating to this
investment. Resulting from the aforementioned review, the directors have
considered it prudent to impair the carrying value of the goodwill relating to
Plato by R100 million. This has had the effect of reducing the group`s aggregate
goodwill to R265 million, of which R94 million relates to Plato. Nevertheless
the group`s operations in the United Kingdom, including Plato, have produced a
much better performance than that recorded for the corresponding period last
year and it is anticipated that this trend will continue, albeit at a slower
pace than that previously expected.
ACQUISITIONS
At this stage last year your directors commented that further consolidation in
the South African IT industry was inevitable. As announced to shareholders
recently, the group is in the process of acquiring the entire issued share
capital in CS Holdings, a provider of a broad range of IT services. Subject to
the approval of the Competition authorities and final acceptance of the offer by
CS Holdings shareholders, it is hoped that the transaction will be completed by
the end of October. Your directors are confident that this acquisition will be
beneficial not only to BTG shareholders and customers but also for all of CS
Holdings` stakeholders. The recent publication of CS Holdings` results for the
year to June 2004 reflects a number of extraordinary and once off charges
necessitated by certain events which have plagued that company in the recent
past. Your directors are satisfied that the business of CS Holdings is
sustainable under normal operating conditions and anticipate that the
acquisition will, in due course, generate benefits for BTG.
BLACK EMPOWERMENT AND DIRECTOR APPOINTMENTS
Strong relationships have been formed and continue to develop with our black
empowerment partner, Kagiso, whose contributions are already at a meaningful
level.
It is with regret that we announce the resignation of Thozamile Botha as a non
executive director of the company. However, it gives us great pleasure to
welcome Sipho Pityana as a non executive director on the BTG board and we look
forward to a mutually rewarding association with him. We are also delighted to
welcome to the board of our subsidiary company, Bytes Technology Group South
Africa (Pty) Limited, as non executive directors, Roger Jardine and Afzal Patel
as representatives of Kagiso, together with their alternates, Sanjay Bhika and
David Bloch. We are also pleased that Dali Mpofu of Altron has accepted an
invitation to join the aforementioned board as have two of our operational
executives, Martin Baak and Auret Kernick.
PROSPECTS
Your board remains confident that meaningful headline earnings growth will be
achieved for the full year, albeit at a lower rate than was achieved during the
period under review. It is anticipated that second half headline earnings will
exceed those for the comparable period last year.
DIVIDEND
In keeping with the group`s policy of declaring an annual dividend, no dividend
has been proposed at interim stage.
ACKNOWLEDGEMENTS
The directors wish to pay tribute to all of BTG`s staff for the contribution
they have made during the challenging environment in the IT industry. They also
particularly wish to thank all of their customers and other stakeholders for
their ongoing and increasing support. This support is especially rewarding and
confirms the stability of our group.
On behalf of the board
Dr Bill Venter David Redshaw Peter Riskowitz
Chairman Chief Executive Officer Group Financial Director
7 October 2004
This report is available on the company website at www.btgroup.co.za and the JSE
News Service - SENS
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