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Bytes Technologies Group Limited - Reviewed Consolidated Financial
Release Date: 28/04/2005 08:47:39 Code(s): BTG
Bytes Technologies Group Limited - Reviewed Consolidated Financial
Results For The Year Ended 28 February 2005
Bytes Technologies Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1911/003874/06)
Share code: BTG
ISIN: ZAE000029526
REVIEWED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED
28 FEBRUARY 2005
- REVENUE UP 11%
- HEADLINE EARNINGS PER SHARE UP 32%
- STRONG CASH GENERATION
- DIVIDEND UP 45%
- OPERATING INCOME UP 22%
- IMPROVED OPERATING MARGIN
INCOME STATEMENT
% 2005 2004
Figures in R million Increase (Reviewed) (Audited)
Revenue 11% 2 905.9 2 607.4
Operating income before 22% 226.0 184.6
goodwill amortisation and
capital items
Net finance costs (15.1) (25.0)
Income from associates 7.6 6.7
Goodwill amortisation and (253.8) (134.1)
impairment
Capital items 27.0 (7.5)
(Loss)/income before taxation (8.3) 24.7
Normal taxation (72.0) (49.6)
Loss after taxation (80.3) (24.9)
Attributable to outside (6.9) (12.7)
shareholders
Attributable to ordinary (87.2) (37.6)
shareholders
Weighted number of shares in 155.3 152.4
issue (million)
Loss per share - Basic (cents) (56.1) (24.7)
Loss per share - Fully diluted (63.8) (23.1)
(cents)
Headline earnings per share - 32% 89.7 67.9
Basic (cents)
Headline earnings per share - 72.0 63.6
Fully diluted (cents)
Declared dividend per share in 45% 32.0 22.0
that year (cents)
Notes:
1. Headline earnings
The attributable loss is
reconciled to headline earnings
as follows:
Attributable to ordinary (87.2) (37.6)
shareholders
Goodwill amortisation and 253.8 134.1
impairment
Capital items (27.0) 7.5
Outside shareholders` portion (0.4) (0.4)
of capital items, goodwill
amortisation and impairment
Headline earnings 139.2 103.6
2. The reviewed 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 reviewed
financial results are
consistent with those used in
the annual financial statements
for the year ended 29 February
2004, except for the adoption
of AC140 (Business
combinations), AC128
(Impairment of assets) and
AC129 (Intangible assets).
The group has applied the
requirements of AC140, AC128
and AC129 on a prospective
basis on business combinations
with agreement dates on or
after 31 March 2004. Hence the
group`s acquisition of CS
Holdings Ltd on 17 November
2004 has been accounted for by
applying the new statements.
The accounting treatment
applied to business
combinations with agreement
dates prior to 31 March 2004
has been consistently applied
in respect of the group`s
previous accounting policies in
this regard.
3. Fully diluted earnings and
headline earnings have been
calculated on the basis that
Kagiso Strategic Investments
(Pty) Ltd exercised its full
option on 22% of the shares in
Bytes Technology Group South
Africa (Pty) Ltd effective 1
March 2004. It is assumed that
the proceeds on the issue of
these shares of R198,0 million
would have attracted interest
at 6.65% after tax for the full
year under review.
Earnings attributable to
ordinary shareholders are
reconciled to fully diluted
earnings as follows:
Attributable to ordinary (87.2) (37.6)
shareholders
Interest earned on proceeds 13.2
Additional 22% outside (31.6)
shareholders interest
Fully diluted earnings (105.6) (37.6)
Headline earnings are
reconciled to fully diluted
headline earnings as follows:
Headline earnings 139.2 103.6
Interest earned on proceeds 13.2
Additional 22% outside (33.4)
shareholders interest
Fully diluted headline earnings 119.0 103.6
Weighted average number of 155.3 152.4
shares in issue
Unexercised employee share 10.0 10.5
options
Number of shares in issue for 165.3 162.9
calculation of fully diluted
earnings
BALANCE SHEET
2005 2004
Figures in R million (Reviewed) (Audited)
Assets
Non-current assets 475.3 627.9
Property, plant and equipment 107.7 86.5
Investments & loans 22.5 27.2
Goodwill 284.9 431.2
Finance lease assets 24.2 34.1
Deferred taxation 36.0 48.9
Current assets 929.9 662.8
Inventory 139.3 159.7
Accounts receivable 498.1 412.5
Bank & cash 292.5 90.6
TOTAL ASSETS 1 405.2 1 290.7
Ordinary shareholders` equity 395.5 465.0
Outside shareholders` interest 10.3 1.8
Long term liabilities 216.6 145.4
Finance lease liabilities 24.2 34.1
Current liabilities 758.6 644.4
Accounts payable 674.2 491.7
Short-term loans 43.0 118.4
Taxation 40.7 25.9
Bank overdraft 0.7 8.4
TOTAL EQUITY & LIABILITIES 1 405.2 1 290.7
Shares in issue at end of year (million) 161.8 153.3
Net asset value per share (cents) 244.5 303.4
Net tangible asset value per share (cents) 68.4 22.0
ABRIDGED CASH FLOW STATEMENT
2005 2004
Figures in R million (Reviewed) (Audited)
Operating activities 284.7 171.2
Cash generated by operations 234.0 207.1
Changes in working capital 145.6 57.3
Net finance costs (15.1) (25.0)
Taxation paid (46.1) (43.8)
Cash generated by operating activities 318.4 195.6
Dividend paid (33.7) (24.4)
Net investing activities (68.5) (269.8)
Financing activities (6.6) (79.4)
Net funds generated/(utilised) 209.6 (178.0)
Cash and cash equivalents
- at beginning of year 82.2 260.2
- at end of year 291.8 82.2
STATEMENT OF CHANGES IN EQUITY
Non- Accumu-
Figures in Share distributable Deferred lated
R million capital reserve equity deficit Total
Balance at 648.9 81.5 0.0 (202.8) 527.6
28 February
2003
(audited)
Adjustment (8.3) (8.3)
to opening
reserves due
to adoption
of AC133
Loss (37.6) (37.6)
attributable
to
shareholders
Dividend (24.4) (24.4)
paid
Foreign 6.8 6.8
currency
translation
reserve
Issue of 3.6 3.6
share
capital
Cashflow (2.7) (2.7)
hedge
accounting
Balance at 652.5 88.3 (2.7) (273.1) 465.0
29 February
2004
(audited)
Loss (87.2) (87.2)
attributable
to
shareholders
Dividend (33.7) (33.7)
paid
Foreign (1.3) (1.3)
currency
translation
reserve
Issue of 51.1 51.1
share
capital
Cashflow 1.8 1.8
hedge
accounting
Treasury (0.2) (0.2)
shares
Balance at 703.4 87.0 (0.9) (394.0) 395.5
28 February
2005
(reviewed)
ABRIDGED SEGMENTAL ANALYSIS
2005 2004
Figures in R million (Reviewed) (Audited)
Revenue
ICT Infrastructure & Services 921.2 1 201.7
Software, Consulting and Document Services 1 111.3 1 062.1
Specialised Equipment & Services 844.7 477.8
CS Holdings (note 1) 143.4 -
3 020.6 2 741.6
Corporate and Other 0.4 0.1
Total all operations 3 021.0 2 741.7
Less equity accounted operations (115.1) (134.3)
2 905.9 2 607.4
Operating income
ICT Infrastructure & Services 25.0 39.8
Software, Consulting and Document Services 116.9 91.2
Specialised Equipment & Services 102.1 82.0
CS Holdings (note 1) 3.9 -
247.9 213.0
Corporate and Other (12.0) (19.3)
Total all operations 235.9 193.7
Less equity accounted operations (9.9) (9.1)
226.0 184.6
GEOGRAPHICAL SEGMENTS
Revenue by market
South Africa 2 374.3 2 049.4
United Kingdom 571.4 632.3
Rest of Africa 75.3 60.0
3 021.0 2 741.7
Operating income by market
South Africa 226.6 197.4
United Kingdom 0.7 (5.1)
Rest of Africa 8.6 1.4
235.9 193.7
Notes:
1. CS Holdings is reflected separately for the four-month post
acquisition period but once fully integrated, will be included in
its relevant segments.
2. The above segmental information includes 100% of revenue from
associates and our proportionate share of their operating profit.
SUPPLEMENTARY INFORMATION
2005 2004
Figures in R million (Reviewed) (Audited)
Capital commitments 11.0 -
Depreciation 36.5 29.3
Net foreign exchange (losses)/gains (1.3) 2.7
Capital expenditure 98.0 70.4
Contingent liabilities 0.1 0.9
Operating lease commitments
Payable within the next 12 months:
- property 54.0 29 7
- plant, equipment and vehicles 19.4 19.1
Payable thereafter:
- property 211.3 73.0
- plant, equipment and vehicles 17.9 26.5
MESSAGE TO STAKEHOLDERS
OVERVIEW
Your directors are pleased to report a further improved
performance by the group for the year under review with headline
earnings per share increasing by 32% to 89,7 cents following on
comparable increases of 27% and 33% in the 2004 and 2003 financial
years respectively. Of equal significance is the fact that net
interest bearing debt moved from R147 million to an in funds
position of R61 million during the period under review - an
improvement of R208 million. Notwithstanding the cash outflows
post year-end associated with the acquisitions and the increased
level of dividend distribution referred to later, we nevertheless
anticipate returning to a positive cash position by the third
quarter of the current financial year.
All of our South African operations produced acceptable results in
a market that continues to produce many challenges. We again
experienced a disappointing year in our United Kingdom operations
despite the fact that we moved from an operating loss of R5
million the previous year to a small operating profit. At the risk
of appearing overly optimistic your directors have reasonable
grounds to believe that the year ahead will produce a marked
improvement in those operations. Our offshore operations will
continue to form an important part of the group`s longer term
strategy.
FINANCIAL RESULTS
Revenue grew by 11%, approximately half of which related to the
inclusion of CS Computer Services Holdings Limited (`CS Holdings`)
for the period November 2004 to February 2005. In the light of
lower inflation and a relatively firm rand we consider this a
creditable performance.
Operating income rose by 22% to R226 million (R185 million) while
net financing costs reduced by 40% to R15 million (R25 million).
Headline earnings rose by 34% to
R139 million (R104 million), producing a 32% improvement in
headline earnings per share as reported above.
The accounting policies adopted for the purposes of this report
continue to comply with South African Statements of GAAP (refer
note 2 to income statement).
GOODWILL
As reported and accounted for at the half year, your directors, in
the light of the poor performance of the group`s Plato operation
in the United Kingdom, impaired the goodwill associated with that
company by R100 million. Your directors are disappointed that such
a step was deemed necessary but is in line with the group`s
conservative financial policies. Aggregate goodwill impairment and
amortisation reduced the earnings attributable to ordinary
shareholders by R254 million (2004: R134 million) resulting in
negative attributable earnings for the year of R87 million
(2004: R38 million). The change in accounting standards in terms
of which goodwill amortisation will no longer be permitted from
the commencement of the 2006 financial year, will ensure that
attributable earnings and earnings per share improve noticeably in
the future. Headline earnings, a much more meaningful measure of
performance, will be unaffected by this accounting change.
It should be noted that acquisitions in the IT sector inevitably
result in the recognition of substantial amounts of goodwill as
knowledge and know-how are not usually recognised as assets in
terms of accounting standards. This is equally true in respect of
the acquisitions referred to below.
OPERATIONAL PROGRESS
Improved efficiencies in most operations enabled the group to
improve its operating profit margin from 7.1% to 7.7%.
Particularly good performances were achieved by our Document
Solutions, Specialised Solutions and Communication Systems
businesses. Our Networking and Software operations produced
acceptable performances in what remain difficult markets. Our
healthcare IT company, Digital Healthcare Solutions, had another
very successful year.
In the latter part of the year, and following the approval of the
Competition authorities, we merged the operations of CS Holdings
into our group. This process, which will be ongoing for some time,
has thus far proved to be satisfactory as we go through various
physical relocations and structural changes. A positive
contribution to the group`s earnings both at operating and
attributable levels was achieved during the four month post
acquisition period.
Over the next year or so we anticipate that substantial
synergistic savings will be achieved over and above those already
attained.
ACQUISITIONS
BTG has reached agreement to purchase the shareholdings which
Business Connexion Limited and Netcare Holdings Limited hold in
Digital Healthcare Solutions (Pty) Limited (`DHS`). The approval
of the Competition authorities in regard hereto was received on
Tuesday, 26 April 2005. The acquisition of a remaining minority
interest is currently being finalised, following which DHS will
become a wholly owned operation within Bytes Technology Group
South Africa (Pty) Ltd.
Additionally, agreement was reached with the group`s controlling
shareholder, Altron, to purchase that company`s interest in the
lease financing business relating to product marketed by
operations within BTG. As announced in the SENS release on Friday,
22 April 2005, this acquisition was effective on 1 March 2005.
These transactions, which entail in aggregate a cash outflow to
the group of some R130 million, are expected to progressively add
value to the group`s operational performance.
BLACK EMPOWERMENT AND TRANSFORMATION
The group`s involvement with Kagiso, which holds a 27% interest in
BTG`s South African operations as announced at the beginning of
the year under review, has been a resounding success with their
providing multi-faceted assistance to all of our operations. We
look forward to even closer involvement at all levels over the
coming years.
Your group, which subscribes to and fully supports the Altron
Transformation Vision 2010, has been recognised and accredited by
various bodies as well as customers for its achievements in the
transformation arena. Substantial progress continues to be made by
the group in all aspects in its endeavours to ensure that it is
the industry leader in this area.
PROSPECTS
Given the expected improvement in our United Kingdom operations,
benefits from the acquisition of CS Holdings, an increased
shareholding in our healthcare IT operation and the advantages to
be gained from re-involvement in asset financing, your directors
have a high level of confidence that the group is well positioned
to continue to produce acceptable results for the future. The
strong and continuously improving balance sheet coupled with
excellent cash flows, ensures that the group will also be ready to
take advantage of any business opportunities which may arise.
ACKNOWLEDGEMENTS
We are pleased that Mr Sipho Pityana, a prominent businessman and
former Director General of the Departments of Foreign Affairs and
Labour, agreed to join the board as an independent non-executive
director in October 2004. Mr Tozamile Botha, a non-executive
director, resigned from the BTG board in October 2004, while
Mr Jack Horton, a long serving executive director, retired at the
end of February 2005. We thank them for their valued contribution
to the group.
The board remains indebted to all of the stakeholders of the group
- staff, customers, business partners and shareholders - for their
support, which has enabled the group to become one of the more
successful IT organisations in South Africa.
DIVIDENDS
In the light of the group`s strong cash generation during the year
under review and the expectation that the coming year will produce
similar flows from operations, the directors are pleased to
declare a dividend per ordinary share of 32 cents which represents
an increase of 45% over that of the previous year.
The board believes that this level of distribution, which
nonetheless remains conservatively covered at 2.8x, is sustainable
for the foreseeable future whilst at the same time will not
inhibit the group`s growth.
In accordance with STRATE`s settlement procedures, the following
dates will apply to the dividend:
2005
Last date to trade ordinary shares `cum` dividend Friday 13 May
Ordinary shares trade `ex` dividend Monday 16 May
Record date Friday 20 May
Payment date Monday 23 May
Dividend cheques in payment of this dividend to certificated
shareholders will be posted to shareholders on or about Monday 23
May 2005. Electronic payment to certificated shareholders will be
undertaken simultaneously.
Shareholders who have dematerialised their share certificates will
have their accounts at their CSDP or broker credited on Monday 23
May 2005.
In the case of certificated shareholders, notice of any change of
address of shareholders must reach the transfer secretaries,
Computershare Investor Services 2004 (Pty) Limited, on or before
Friday 13 May 2005.
Share certificates may not be dematerialised and/or rematerialised
between Monday, 16 May 2005 and Friday 20 May 2005, both days
inclusive.
REVIEW BY INDEPENDENT AUDITORS
The group`s auditors, KPMG Inc., have reviewed these year-end
results. The unqualified review report is available for inspection
at the company`s registered office during normal office hours.
ANNUAL REPORT
The Annual Report and financial statements for the year ended 28
February 2005 will be posted to shareholders on or about 31 May
2005.
On behalf of the board
Dr Bill Venter David Redshaw Peter Riskowitz
Chairman Chief Executive Officer Group Financial Director
26 April 2005
Directors: Dr W P Venter* (Chairman) P D Redshaw (Chief Executive
Officer) (British) R J Abraham R J Griggs (British) S M Pityana*
D C Radley* P R Riskowitz Dr H A Serebro* R E Venter*
P L Wilmot* (*Non-executive)
Company Secretary: BTG Management Services (Pty) Limited
This report is available on the company website at
www.btgroup.co.za and the JSE News Service - SENS
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