| Wed 28 Sep 2005, 17:19 | | Metrofile - Audited Group Results For The Year End |
|
Metrofile - Audited Group Results For The Year Ended 30 June 2005
METROFILE HOLDINGS LIMITED
(Previously 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`)
AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2005
Summarised consolidated income statement
Audited Audited
12 months 12 months
ended ended
R`000 Notes 30 June 30 June
2005 2004
Revenue 254 437 473 803
Operating income before foreign 76 897 44 969
exchange gains
Foreign exchange gains 33 226
Operating income before 1 76 930 45 195
depreciation and goodwill
amortisation (EBITDA)
Depreciation (14 455) (33 405)
Goodwill amortisation and - (22 188)
impairment
Exceptional gains 4 033 16 492
Operating profit before finance 66 508 6 094
costs
Net finance costs (52 515) (68 972)
Profit/(loss) before taxation 13 993 (62 878)
Taxation 5 169 (23 506)
Profit/(loss) after taxation 19 162 (86 384)
Outside shareholders` share of - (826)
profits
Attributable profit/(loss) 19 162 (87 210)
Number of ordinary shares in 74 077 74 077
issue (thousands)
Number of ordinary shares in (6 877) (6 877)
treasury (thousands)
Number of ordinary shares in 67 200 67 200
issue after deducting treasury
shares (thousands)
Weighted average number of 67 200 67 200
ordinary shares in issue
(thousands)
Headline earnings/(loss) per 29,6 (132,3)
ordinary share (cents)
Fully diluted headline 2 7,9 -
earnings/(loss) per ordinary
share (cents)
Earnings/(loss) per ordinary 28,5 (129,8)
share (cents)
Fully diluted earnings/(loss) 2 7,7 -
per ordinary share (cents)
Reconciliation of headline
earnings/(loss)
Attributable profit/(loss) 19 162 (87 210)
Profit on sale of property, (2 536) (302)
plant and equipment
Capital loss/(profit) on sale 3 195 (27 018)
of subsidiaries
Amortisation and impairment of - 22 188
goodwill
Impairment of property, plant 88 1 718
and equipment
Impairment of associate - 1 700
Headline earnings/(loss) 19 909 (88 923)
Summarised consolidated balance sheet
Audited Audited
as at as at
R`000 Notes 30 June 30 June 2004
2005
ASSETS
Non-current assets
Property, plant and equipment 134 400 141 264
Long-term receivables 1 126 -
Deferred tax asset - 57
Current assets 67 104 101 248
Inventories 8 029 8 309
Trade receivables 38 911 39 572
Other receivables 3 10 793 40 375
Taxation - 719
Bank balances 9 371 12 273
Total assets 202 630 242 569
EQUITY AND LIABILITIES
Equity capital and deficits (308 730) (327 360)
Ordinary shareholders` (308 730) (327 801)
interest
Outside shareholders` interest - 441
Non-current liabilities 436 216 468 347
Provisions 4 36 899 47 867
Deferred taxation liability 3 298 2 191
Interest-bearing subordinated 5 190 682 167 155
redeemable convertible loans
Interest-bearing liabilities 6 205 337 251 134
Current liabilities 75 144 101 582
Trade payables 7 056 6 735
Other payables 24 503 26 562
Deferred revenue 3 317 2 715
Provisions 6 353 10 469
Taxation 13 600 18 469
Bank overdrafts - 589
Interest-bearing liabilities 20 315 36 043
Total equity and liabilities 202 630 242 569
Net liability per ordinary (459,4) (487,8)
share (cent)
Note:
1. The current year EBITDA includes R2,3 million reversal of provision no longer
required at Central and non-recurring rent of R4,0 million related to a Midrand
property. EBITDA also includes R3,2 million reversal of provisions no longer
required by Metrofile (Pty) Ltd. EBITDA before reversal of the provisions and
non-recurring rental income is R67,4 million.
2. The adjustment to determine the diluted headline earnings per share and
diluted earnings per share is directly attributable to an interest saving of
R9,6 million should the Metrofile Holdings loan notes convert into ordinary
shares. The increase in number of ordinary shares in issue is calculated by
dividing the outstanding capital amount (excluding any accrued interest) of the
Metrofile Holdings loan notes held by third parties (includes notes held by
third party creditors and excludes any inter-company loan notes, share options
and any other payables) by the average market price per share during the period
and then adding the calculated increase in shares to the existing weighted
average number of ordinary shares in issue. Prior year diluted earnings per
share and headline earnings per share are nil as it was anti-dilutive.
3. Included in other receivables is R5,5 million for an outstanding insurance
claim.
4. Long-term non-interest-bearing provisions include anticipated claims in terms
of the S311 arrangement. The provisions also include creditors that may become
owners of interest-bearing redeemable convertible loans.
5. Interest-bearing convertible loan notes include the Metrofile C and MGX loan
notes that have been subordinated by the financiers.
6. Long-term interest-bearing liabilities include the Metrofile A and B loan
notes.
7. As intangibles are not revalued, no balances are reflected on the
consolidated balance sheet. In Metrofile (Pty) Ltd goodwill and trademarks in
the amount of R194,3 million are reflected at the values arising from the inter-
group transactions arising in 2004.
Summarised consolidated cash flow statement
Audited Audited
12 months 12 months
ended ended
R`000 30 June 2005 30 June 2004
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash generated from operations 92 754 49 640
before net working capital
changes
(Increase)/decrease in net (9 544) 11 762
working capital
Cash generated from operations 83 210 61 402
Net finance costs (52 515) (68 972)
Normal taxation paid (10 594) (3 978)
Net cash inflow/(outflow) from 20 101 (11 548)
operating activities
Net cash inflow from investing 26 552 19 118
activities
Net cash (outflow)/inflow from (48 966) 80 965
financing activities
Net (decrease)/increase in cash (2 313) 88 535
and cash equivalents
Cash and cash equivalents at the 11 684 (76 851)
beginning of the year
Cash and cash equivalents at the 9 371 11 684
end of the year
Bank balances 9 371 12 273
Bank overdrafts - (589)
Segmental analysis
Continuing Discontinued
R`000 operations operations
Revenue by segment 252 159 2 278
Enterprise solutions - -
Business continuity - -
Content management 252 159 -
Storage solutions - -
Software development - 2 278
Central Services et al - -
Revenue by region 252 159 2 278
South Africa 252 159 2 278
United Kingdom - -
EBITDA by segment 74 310 2 620
Enterprise solutions - -
Business continuity - -
Content management 69 849 -
Storage solutions - -
Software development - 336
Central Services et al 4 461 2 284
EBITDA by region 74 310 2 620
South Africa 74 310 2 642
United Kingdom - (22)
Segmental analysis
Audited Audited
12 months 12 months
ended ended
R`000 30 June 2005 30 June 2004
Revenue by segment 254 437 473 803
Enterprise solutions - 9 560
Business continuity - 33 150
Content management 252 159 374 403
Storage solutions - 11 373
Software development 2 278 45 317
Central Services et al - -
Revenue by region 254 437 473 803
South Africa 254 437 334 142
United Kingdom - 139 661
EBITDA by segment 76 930 45 195
Enterprise solutions - (3 408)
Business continuity - 6 324
Content management 69 849 80 966
Storage solutions - (3 598)
Software development 336 (6 320)
Central Services et al 6 745 (28 769)
EBITDA by region 76 930 45 195
South Africa 76 952 24 979
United Kingdom (22) 20 216
EC-Hold is disclosed under discontinued operations as result of its liquidation.
MGX Property (Pty) Ltd, which forms part of Central Services is reported under
discontinued operations after disposal of its only asset, being a Midrand
building.
Statement of changes in equity
Foreign
currency
Share Share translation
capital premium reserve
R`000 R`000 R`000
Balance at
30 June 2003 408 195 662 4 667
Attributable loss - - -
Transfer of reserves - - (7 600)
Offset of treasury shares - (6) -
Foreign currency reserve - - 106
Balance at
30 June 2004 408 195 656 (2 827)
Attributable profit - - -
Foreign currency reserve - - (91)
Balance at
30 June 2005 408 195 656 (2 918)
Statement of changes in equity
Attributable
loss Total
R`000 R`000
Balance at
30 June 2003 (441 428) (240 691)
Attributable loss (87 210) (87 210)
Transfer of reserves 7 600 -
Offset of treasury shares - (6)
Foreign currency reserve - 106
Balance at
30 June 2004 (521 038) (327 801)
Attributable profit 19 162 19 162
Foreign currency reserve - (91)
Balance at
30 June 2005 (501 876) (308 730)
Commentary on results
Metrofile Holdings` profile
Metrofile Holdings is quoted in the `Support Services - Business Support
Services` sector of the JSE Limited (`JSE`). The company was previously quoted
in the `Information Technology - Software and Computer Services - Software
sector`.
The business of Metrofile Holdings is its investment of 65% in Metrofile (Pty)
Limited. The balance of 35% was sold during the period as approved by
shareholders at a general meeting held on 27 January 2005 as follows:
- 25% MIC Industrial Investments (Pty) Limited (a subsidiary of Mineworkers
Investment Company (Pty) Limited);
- 5% Metrofile Employees` Share Incentive Trust; and
- 5% Sabvest Investments (Pty) Limited.
Metrofile (Pty) Limited is the South African market leader in the management of
business records through its 16 storage centres and 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.
Loan notes in Metrofile Holdings and Metrofile (Pty) Limited
Shareholders and claim creditors are referred to the circular dated 17 December
2003, the scheme of arrangement and definitions contained therein and the
announcement of 4 March 2005 and 29 June 2005.
Metrofile (Pty) Limited has the following loan obligations:
1. R80,0 million of A loan obligations bearing interest at prime - 1% per annum
payable monthly in arrear due 4 March 2009.
2. R132,7 million of B loan obligations bearing interest at prime capitalised
quarterly in arrear. Capital and interest are now being paid monthly and the
full amount is required to be paid on or before 4 March 2009. If not paid by
this date, the holders may elect to convert the obligations to shares in
Metrofile (Pty) Limited.
3. R115,0 million of C loan obligations bearing interest at prime +2% compounded
quarterly in arrear and due for payment by 4 March 2009. The loans are
subordinated to other creditors and if not repaid by Metrofile (Pty) Limited,
are compulsorily convertible into ordinary shares in Metrofile (Pty) Limited.
In the event that either or both of the B or C loans convert to shares,
Metrofile Holdings will cease to be a shareholder in Metrofile (Pty) Limited and
the Metrofile Holdings loan notes referred to below will convert to shares in
Metrofile Holdings simultaneously.
Metrofile Holdings has the following creditors or potential creditors:
1. R75,7 million in Metrofile Holdings loan notes (reflected in the consolidated
and company balance sheets of Metrofile Holdings) which are subordinated and
compulsorily convertible into Metrofile Holdings shares if not repaid before 4
March 2009. They bear interest at prime +3% compounded quarterly in arrear.
2. R261,1 million of subordinated Metrofile Holdings loan notes issued to
subsidiaries of Metrofile Holdings for inter-company claims (reflected only in
the company balance sheet of Metrofile Holdings). They bear interest at prime
+3% compounded quarterly in arrear. These loan notes are ceded as security to
third party creditors of Metrofile (Pty) Limited and of Metrofile Holdings and
which may become creditors in the consolidated accounts of Metrofile Holdings if
the security is exercised or if creditors in subsidiaries become owners of the
notes. If this occurs, and subject to the provisions of the Company`s Act, these
loan notes will convert to ordinary shares of Metrofile Holdings if they are not
repaid by 4 March 2009.
3. R36,9 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.
If any of the Metrofile Holdings loan notes referred to above convert to
ordinary shares, existing ordinary shareholders will be diluted accordingly.
Financial review
The results for the period reflect a substantial improvement on the prior year
and were ahead of budget. EBITDA of R76,9 million was achieved and the prior
year`s headline loss of 132,3 cents per share improved to headline earnings of
29,6 cents per share. Fully diluted HEPS improved to 7,9 cents. However, it
should be noted that the prior year`s figures are not strictly comparable as
they contain figures from businesses and assets sold or discontinued. In
addition, provisions reversed improved EBITDA and reduced taxation payable by
the equivalent of 17,9 cents per share.
Revenue was ahead of budget due to improved market penetration and the securing
of new government business now that the group has a highly rated broad based
empowerment partner in Mineworkers Investment Company (Pty) Limited.
Cash flows were stronger than budgeted. The group is ahead of schedule in its
payments to SARS. Payments on the A and B loans in Metrofile (Pty) Limited are
also ahead of schedule. The A loans have been reduced to the target of R80
million and repayment of the B loans commenced before the year end. Working
capital management has improved and the group`s working capital facilities
remain largely unutilised.
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 sheets, 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.
- Payments to SARS and all trade creditors are up to date.
- Balance sheet assets have been tested for impairment and none is over valued.
- The group is trading in line with budgets.
- Key management is in place with appropriate incentives.
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, with the exception of goodwill which is
now capitalised and tested for impairment annually in terms of AC 140. The group
has considered the effect of accounting for leases on a straight line basis in
terms of JSE circular # 7/2005 and the effect is immaterial as the group owns
most of the properties it occupies.
Auditors` opinion
The results have been audited by Deloitte & Touche whose audit report is
available for inspection at the company`s offices. The report contains a matter
of emphasis with respect to going concern at group level. An unqualified and
unmodified audit report has been issued for Metrofile (Pty) Limited.
Audited financial statements are expected to be dispatched to shareholders by
the end of October 2005.
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 assisted by the group
Chairman. The board has resolved to appoint at least one additional 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.
Contingent liabilities
SRP/EC-HOLD
In March 2002, the Securities Regulation Panel (`SRP`) ruled that the company
and the Trustees of The Mandy Rebecca Price Trust (`the Trustees`) had acted in
concert in an affected transaction and ordered them to make an unconditional
offer of 240 cents per share to all EC-HOLD shareholders at 11 October 1999. The
company and the Trustees disagreed and, together with other parties, are
presently defending a court action brought by the SRP to require them to comply
with the ruling. The company has taken steps to procure that the costs of
defending this matter and any adverse court decision or commercial settlement
will be funded and settled by third parties. However, it remains a contingent
liability of the company until settled.
MGX/Eureka Pension Fund
The company continues to have a contingent liability of up to R9,1 million which
will fall away once the approval of the Financial Services Board (`FSB`) has
been received for the transfer of the Fund`s assets to another retirement fund.
The company anticipates positive confirmation from the FSB shortly.
Motswedi
In February 2002, Motswedi Technology Group (Pty) Limited (`Motswedi`) initiated
a claim for damages against the company through arbitration proceedings. Group
companies in turn initiated actions against Motswedi which were ruled in favour
of the company by SITA. A court action is currently in progress. The company`s
legal advisors do not expect the company to incur any liability in these
matters. In addition the company has taken steps to procure that costs and any
adverse rulings will be settled by third parties. However, a contingent
liability remains until these matters are concluded.
Commitments
- Rental commitments for the next three years amount to R9,8 million.
- Metrofile (Pty) Limited has an expected capital expansion and replacement
programme of R26,3 million in 2005/06. R4,7 million of this will be funded from
the proceeds of an insurance claim.
Post-balance sheet events
Subsequent to the reporting date, Metrofile (Pty) Limited has entered into an
interest rate swap agreement for R150 million on R150 million of its loan notes
over four years to mitigate the risk of increased borrowing costs on its
variable rate loans during this period.
Prospects
- The group expects improved revenue and operating results from Metrofile (Pty)
Limited in the year ahead.
- Metrofile Holdings expects to resolve most outstanding legacy issues from the
MGX period over the next twelve months. However, the SRP/EC-Hold matter is
likely to continue for a number of years.
- Actions have been initiated which may lead to resolution or final
quantification of the claims of creditors currently reflected by Metrofile
Holdings as provisions for liabilities.
- Discussions have commenced which may lead to their refinancing of Metrofile
(Pty) Limited to reduce or eliminate the risk of Metrofile Holdings losing its
investment in Metrofile (Pty) Limited if any of its loan obligations become
compulsory convertible to shares.
- If the discussions with Metrofile Holdings` creditors are successfully
concluded and the subsidiary can be re-financed, proposals may be made to the
note holders, creditors and shareholders of Metrofile Holdings to initiate a
final restructure of the group.
By order of the board
CHRISTOPHER SEABROOKE
Chairman
ROY MIDLANE
Chief financial officer
28 September 2005
Cleveland
Gauteng
Registered office: 3 Gowie Road, The Gables, Cleveland, Johannesburg
Registration number: 1983/012697/06
www.metrofileholdings.com
Sponsor: Standard Bank
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg, 2001
Directors: CS Seabrooke* (Chairman), DE Baloyi*, SR Midlane, GD Wackrill
Company Secretary: CD du Plessis
* Non-executive
Date: 28/09/2005 05:16:21 PM
Produced by the JSE SENS Department
