| Thu 10 Mar 2005, 17:49 | | Metrofile Holdings - Reviewed Group Results For Th |
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Metrofile Holdings - Reviewed Group Results For The Six Months Ended 31 December
2004
METROFILE HOLDINGS LIMITED
(Formerly MGX Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
Share code: MFL ISIN: ZAE000061727
(`Metrofile Holdings` or `the company` or `the group`)
paper records to digital assets
REVIEWED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004
SUMMARISED CONSOLIDATED INCOME STATEMENT
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
R`000 2004 2003 2004
Revenue 117 302 293 242 473 803
Operating income before foreign
exchange gains 30 730 22 222 44 969
Foreign exchange gains 28 149 226
Operating income before
depreciation and goodwill
amortisation (EBITDA) 30 758 22 371 45 195
Depreciation (7 619) (20 709) (33 405)
Goodwill amortisation - (11 353) (14 688)
Goodwill impairment - (7 500) (7 500)
Exceptional items 377 (1 875) 16 492
Operating profit/(loss) before
finance costs 23 516 (19 066) 6 094
Net finance costs (27 290) (37 849) (68 972)
Loss before taxation (3 774) (56 915) (62 878)
Normal taxation (51) (6 695) (20 227)
Secondary Tax on Companies (420) - -
Deferred taxation 185 (1 377) (3 279)
Loss after taxation (4 060) (64 987) (86 384)
Outside shareholders` share of
(profits)/losses - 128 (826)
Attributable loss (4 060) (64 859) (87 210)
Number of ordinary shares in issue
(thousands) 74 077 74 077 74 077
Number of ordinary shares in
treasury
(thousands) 6 877 6 877 6 877
Number of ordinary shares excluded
(thousands) - 602 -
Number of ordinary shares in issue
after deducting treasury and other
excluded shares (thousands) 67 200 66 598 67 200
Weighted average number of
ordinary shares in issue
(thousands) 67 200 66 589 67 200
Headline loss per ordinary share
(cents) (6,6) (73,3) (132,3)
Loss per ordinary share (cents) (6,0) (97,4) (129,8)
Reconciliation of headline loss:
Attributable loss (4 060) (64 859) (87 210)
(Profit)/loss on sale of
property, plant
and equipment 7 242 (301)
Capital (profit)/loss on
deconsolidation
of subsidiaries 3 003 (6 264) (27 017)
Amortisation and impairment of
goodwill - 18 853 22 188
Impairment of property, plant and
equipment - 1 549 1 718
Impairment of associate - 1 700 1 700
Reversal of impairment (3 380) - -
Headline loss (4 430) (48 780) (88 923)
SEGMENTAL ANALYSIS
Unaudited Audited
6 months 12 months
Dis- ended ended
Continuing continuing 31 December 30 June
R`000 operations operations 2004 2004
Revenue by segment 115 024 2 278 117 302 473 803
Enterprise solutions - - - 9 560
Business continuity - - - 33 150
Content management 115 024 - 115 024 374 403
Storage solutions - - - 11 373
Software development - 2 278 2 278 45 317
Central Services et al - - - -
Revenue by region 115 024 2 278 117 303 473 803
South Africa 115 024 2 278 117 302 334 142
United Kingdom - - - 139 661
EBITDA by segment 30 582 176 30 758 45 195
Enterprise solutions - - - (3 408)
Business continuity - - - 6 324
Content management 36 092 - 36 092 80 966
Storage solutions - - - (3 598)
Software development - 176 176 (6 320)
Central Services et al (5 510) - (5 510) (28 769)
EBITDA by region 30 582 176 30 758 45 195
South Africa 30 603 176 30 779 24 979
United Kingdom (21) - (21) 20 216
EC-Hold is also disclosed under discontinued operations. The final liquidation
of EC-Hold was made on order of Court on 25 January 2005, but is effective from
16 November 2004.
SUMMARISED CONSOLIDATED BALANCE SHEET
Reviewed Unaudited Audited
at at at
31 December 31 December 30 June
R`000 Notes 2004 2003 2004
ASSETS
Non-current assets 140 821 292 469 141 264
Property, plant and
equipment 140 821 287 373 141 264
Goodwill - 4 998 -
Intangibles - 98 -
Deferred taxation asset - 679 -
Current assets 89 948 105 161 101 248
Inventories 8 981 10 874 8 309
Trade receivables 36 962 65 875 39 572
Other receivables 942 18 337 5 375
Property in process of
sale 35 000 - 35 000
Taxation - - 719
Bank balances 8 063 10 075 12 273
Total assets 230 769 398 309 242 512
EQUITY AND LIABILITIES
Equity capital and
reserves (332 572) (273 882) (327 360)
Ordinary shareholders`
interest (332 572) (304 071) (327 801)
Outside shareholders`
interest - 1 756 441
Outside shareholders`
preference
shares in subsidiary - 28 433 -
Deferred taxation
liability 2 103 1 627 2 134
Non-current liabilities 455 522 458 511 466 156
Provisions 1 53 867 47 867 47 867
Interest-bearing
subordinated
redeemable convertible
loans 2 179 600 - 167 155
Interest-bearing
liabilities 3 222 055 458 511 251 134
Current liabilities 105 716 212 053 101 582
Trade payables 7 920 28 960 6 735
Other payables 18 993 42 643 26 562
Deferred revenue 2 774 5 618 2 715
Provisions 12 158 12 504 10 469
Taxation 7 332 46 799 18 469
Bank overdrafts 426 27 207 589
Interest-bearing
liabilities 30 502 48 322 10 432
Interest-bearing
liabilities - mortgage
bond related to
property in process of
sale 25 611 - 25 611
Total equity and
liabilities 230 769 398 309 242 512
Notes:
1. Long term non interest-bearing provisions comprise claims against
subsidiaries which may become claims against the holding company, and R6
million of potential claims against the holding company which have not been
proved.
2. Interest bearing convertible loan notes comprise the Metrofile C loans and
Metrofile Holdings loan notes that are subordinated and compulsorily
convertible if not redeemed.
3. Long term interest-bearing liabilities consist mostly of the Metrofile A and
Metrofile B loan note obligations.
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
R`000 2004 2003 2004
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash generated from operations
before net working capital changes 25 495 18 198 49 640
Decrease in net working capital 5 750 28 415 11 762
Cash generated from operations 31 245 46 613 61 402
Net finance costs (27 290) (37 849) (68 972)
Normal taxation paid (4 000) (931) (3 978)
Net cash outflow from operating
activities (45) 7 833 (11 548)
Net cash (outflow)/inflow from
investing activities (7 438) 9 945 19 118
Net cash inflow from financing
activities 3 436 41 779 80 965
Net (decrease)/increase in cash
and
cash equivalents (4 047) 59 557 88 535
Cash and cash equivalents at the
beginning of the year 11 684 (76 851) (76 851)
Translation difference on opening
cash position - 162 -
Cash and cash equivalents at the
end of the year 7 637 (17 132) 11 684
Bank balances 8 063 10 075 12 273
Bank overdrafts (426) (27 207) (589)
Note:
The net finance costs included R7,4 million paid on the Metrofile (Proprietary)
Limited A loans and on mortgage loans and R20,4 million accrued on the
Metrofile (Proprietary) Limited B and C loans and the Metrofile Holdings loan
notes held by third parties.
STATEMENT OF CHANGES IN EQUITY
Non- Distri-
Share Share distributable butable
R`000 capital premium reserves reserves Total
Balance at
31 December 2003 408 195 662 6 146 (506 287) (304 071)
Attributable loss (22 351) (22 351)
Transfer
of Reserves (7 600) 7600
Offset of
treasury shares (6) (6)
Foreign
currency reserve (1 373) (1 373)
Balance at
30 June 2004 408 195 656 (2 827) (521 038) (327 801)
Attributable loss (4 060) (4 060)
Foreign
currency reserve (711) (711)
Balance at
31 December 2004 408 195 656 (3 538) (525 098) (332 572)
COMMENTARY ON RESULTS
Metrofile Holdings profile
Metrofile Holdings has 67,2 million ordinary shares (net of treasury shares)
quoted in the `Information Technology: Software and Computer Services` sector of
the JSE Securities Exchange South Africa (`JSE`). It also has unlisted loan note
obligations which may be convertible to ordinary shares at a future date.
The business of Metrofile Holdings is its investment of 65% in Metrofile
(Proprietary) Limited. The balance of 35% was sold subsequent to the interim
reporting date. The transactions are not reflected in the reviewed results as
they are subsequent events.
The other shareholders in Metrofile (Proprietary) Limited now are:
- 25% MIC Industrial Investments (Proprietary) Limited (a subsidiary of
Mineworkers Investment Company (Proprietary) Limited);
- 5% Metrofile Employees Trust; and
- 5% Sabvest Investments (Proprietary) Limited.
Metrofile (Proprietary) Limited is the South African market leader in the
management of business records through its 16 storage centres at locations
throughout South Africa. It provides full life cycle paper and electronic
records management on or offsite, including collation, scanning, digital
conversions, physical or electronic preservation and destruction services that
satisfy legislation and corporate governance requirements.
Metrofile (Proprietary) Limited also has three classes of unlisted loan
liabilities some of which may become convertible into ordinary shares in
Metrofile (Proprietary) Limited, as detailed in the 2004 Annual Financial
Statements.
Financial review
The results for the period were good with EBITDA of R30,8 million being
achieved. The headline loss per ordinary share reduced from 73,3 cents to
6,6 cents. Cash flows for the repayment of debt were stronger than budgeted and
the group is ahead of schedule in its payments to SARS and to the `A` loan
creditors of Metrofile (Proprietary) Limited.
The implementation of the sale of the Midrand property is expected to be
completed before the end of the financial year. This will reduce interest-
bearing liabilities by R35 million in addition to the scheduled repayment
programme.
The consolidated balance sheet reflects an excess of liabilities over assets. It
should however be noted that the assets on the consolidated balance sheet are
reflected at historical cost. The board regards the group as a going concern for
the following reasons:
* The total of the compulsory convertible subordinated loans, the provisions
that may become subordinated loans and the estimated value of goodwill and
trademarks in Metrofile not reflected in the consolidated balance sheet,
are together sufficient to restore commercial solvency.
* The group`s cash requirements for debt servicing and capital repayments are
satisfactorily covered by the group`s current and projected cash flows and
the group has unutilised working capital facilities of R10 million.
* Payments to SARS and all trade creditors are up to date.
* Balance sheet assets have been tested for impairments and none is over
valued.
* The group is trading in line with budgets.
* Key management is in place with appropriate incentives.
Post-balance sheet events
The company sold 35% of Metrofile (Proprietary) Limited on terms set out in the
circular dated 17 December 2004 and which were approved by shareholders at the
general meeting on 27 January 2005.
Metrofile`s long running legal case relating to a labour dispute was settled out
of Court. Sufficient provision for the settlement has been raised in prior
periods. The settlement will accordingly have no effect on the current years
results.
The final liquidation of EC-Hold was made on order of Court on Friday 25 January
2005, but is effective from 16 November 2004.
Accounting policies
The accounting policies and methods of computation are in compliance with the
South African Statements of Generally Accepted Accounting Practice and are the
same as those used for the prior year interim results and for the 30 June 2004
annual financial statements. The group results are presented in terms of the
Statement of South African Generally Accepted Accounting Practice applicable to
interim reporting.
Auditors` review opinion
The results have been reviewed by Deloitte & Touche whose review report is
available for inspection at the company`s registered office. The report contains
a matter of emphasis with respect to going concern.
Directorate and Corporate Governance
The board currently comprises two executive and two non-executive directors. The
group CEO function is fulfilled by the group CFO and the CEO of Metrofile
(Proprietary) Limited, assisted by the group Chairman.
The board has resolved to appoint at least one additional independent non-
executive director in due course.
Dividends
No dividends have been declared for the current period and it is not the
intention that any dividends will be declared or paid in the foreseeable future.
Contingencies
There have been no material changes to the contingent liabilities recorded in
the annual report at 30 June 2004, other than the effective release of the
letter of financial support to EC-Hold Limited pursuant to its liquidation.
Metrofile Holdings loan notes
Shareholders and claim creditors are referred to the circular dated 17 December
2003, the scheme of arrangement and definitions contained therein and the recent
announcement dated 4 March 2005.
Metrofile Holdings has the following creditors or potential creditors who are or
may become holders of subordinated redeemable compulsorily convertible loan
notes in Metrofile Holdings:
1. R71,6 million held by third party creditors (reflected in the consolidated
and company balance sheets of Metrofile Holdings).
2. R243 million of inter-company claims (reflected in the company balance
sheet of Metrofile Holdings) which are ceded as security to third party
creditors of Metrofile (Proprietary) Limited and of Metrofile Holdings and
which may become convertible if the security is exercised or if creditors
in subsidiaries (referred to in 3. below) become the owners of the notes.
3. R47,8 million in provisions for creditors in subsidiaries (reflected in the
consolidated balance sheet) who may have residual claims against the loan
notes referred to in 2 above, and R6 million in provision for creditors in
the holding company whose claims have not yet been proved.
4. R9,1 million of contingent liabilities for potential claims by a group
pension fund and for lease rentals guaranteed which, if crystallised, may
become convertible loan notes.
If any or all of these loan notes convert to ordinary shares, existing ordinary
shareholders will be diluted accordingly.
Prospects
The Metrofile Holdings Group expects to generate improved EBITDA and free cash
flow. Although some of the cash flow has been earmarked for servicing a portion
of the group`s debt obligations, sufficient funds are being retained to ensure
the continued growth of Metrofile`s business. In addition, the introduction of
the highly rated empowerment group, Mineworkers Investment Company (Proprietary)
Limited as shareholders, is already facilitating the retention and expansion of
the group`s business.
The board is of the view that changes to existing agreements will need to be
proposed to the group`s lenders, shareholders and the holding company`s loan
note holders. The intention of these changes will be to enable the exact quantum
of convertible loan notes in the holding company to be determined. This will in
turn facilitate proposals for a recapitalisation or refinancing of the group.
CHRISTOPHER SEABROOKE ROY MIDLANE
NON-EXECUTIVE CHAIRMAN CHIEF FINANCIAL OFFICER
10 March 2005
Johannesburg
Registered office: 22 Milkyway Avenue,
Linbro Business Park
Registration number: 1983/012697/06
www.metrofile.com
Sponsor: The Standard Bank of South Africa Limited
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street,
Johannesburg, 2001
Directors: CS Seabrooke*(Non-Executive Chairman), DE Baloyi*, SR Midlane,
GD Wackrill (*Non-executive) * Company Secretary: CD du Plessis
Date: 10/03/2005 04:44:10 PM
Produced by the JSE SENS Department
