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Spescom Limited - Preliminary Reviewed Results For The Year Ended 30 September
2005
Spescom Limited
(Registration number 1987/001083/06)
Share code: SPS ISIN: ZAE000017919
PRELIMINARY REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005
INCOME STATEMENT
Audited
Reviewed Restated
12 months ended 12 months ended
30/09/05 30/09/04
R"000 R"000
Turnover 223 467 356 517
From continuing operations 212 824 316 268
From discontinued operations 10 643 40 249
Cost of sales 103 468 139 125
From continuing operations 95 647 113 585
From discontinued operations 7 821 25 540
Operating (loss)/profit (17 094) 41 730
From continuing operations (17 234) 40 919
From discontinued operations 140 811
Amortisation of goodwill - (6 485)
Finance charges (4 728) (5 880)
Investment income 3 071 3 143
Net (loss)/profit before
non-trading items (18 751) 32 508
Non-trading items (29 533) (1 523)
Net (loss)/profit before tax,
after non-trading items (48 284) 30 985
Taxation (2 462) (1 682)
Net (loss)/profit after tax (50 746) 29 303
Loss from associate (6 214) -
Minority interests 53 513 100
(Loss)/profit for the year (3 447) 29 403
HEPS (cents) 36.1 63.5
EPS (cents) (4.8) 49.4
Fully diluted EPS (cents) (4.8) 49.4
Number of weighted shares in issue 72 590 276 59 529 071
Number of shares in issue 78 768 054 78 768 054
Notes to the income statement
1. Accounting policies
These results have been compiled in accordance with the South African
Statements of Generally Accepted Accounting Practice AC 127: Interim Financial
Reporting, the Listings Requirements of the JSE Limited and Schedule 4 of the
South African Companies Act, 1973.
The accounting policies adopted are consistent in all material respects with
those of the previous financial year, except for the effect of the statements
below:
1.1 Adoption of new standards
The group adopted AC 140/IFRS 3: Business Combinations, AC 128/IAS 36:
Impairment of Assets and AC 129/IAS 38: Intangible Assets during the current
financial reporting period. The adoption of these statements resulted in a
change in the accounting policy for goodwill. An entity shall apply AC 140
prospectively, from the beginning of the first financial period on or after
31 March 2004.
In accordance with the provisions of these statements:
- effective 1 October 2004, the group discontinued amortising goodwill;
- effective 1 October 2004, the group eliminated the carrying amount of the
related accumulated amortisation with the corresponding decrease in
goodwill; and
- effective 1 October 2004, introduced an annual test for the impairment in
accordance with AC 128.
The adoption of this accounting policy resulted in goodwill amortisation of
R6,5 million ceasing.
1.2 AC 105/IAS 17: Leases
In prior years, operating lease payments were recognised to the income
statement in the year incurred. Circular 7/2005 issued in August 2005, by The
South African Institute of Chartered Accountants, highlighted the requirement
in AC 105 for minimum lease payments that are subject to fixed escalations to
be spread evenly over the life of the lease instead of as incurred. This
resulted in the prior year audited results being restated.
1.3 Adoption of International Financial Reporting Standards (IFRS)
In terms of the revised JSE Listings Requirements, the group is required to
prepare its annual financial statements in accordance with IFRS from 1 October
2005. The adoption of IFRS will therefore be reflected in the consolidated
financial statements for the six months to 31 March 2006 and the year ending
30 September 2006. SA GAAP differs in some areas from IFRS. The group"s IFRS
transition date is 1 October 2004.
Entities complying with IFRS for the first time will be required to restate
their comparative financial statements to amounts reflecting the application
of IFRS to the IFRS transition date. Most adjustments required on transition
to IFRS will be made, retrospectively, against opening accumulated profit as
at 1 October 2004. In some cases choices of accounting policies are available,
including elective exceptions under IFRS 1: First-time Adoption of IFRS. These
choices have been analysed to determine the most appropriate accounting policy
for the group. The group is still in the process of quantifying all the
impacts of the adoption of IFRS on the financial statements. This process is
continuing and will be completed during the period ending 31 March 2006.
These results have been reviewed by Ernst & Young and the review opinion is
available on request from the Company Secretary at Spescom Limited"s registered
office.
The group"s annual report will be available in February 2006.
2. Information per share
2.1 Headline earnings per share
Based on net (loss)/profit after taxation adjusted for capital items included
in non-trading items and 72 590 276 weighted average shares in issue (September
2004: 59 529 071).
Net (loss)/profit for year (3 447) 29 403
Non-trading items 29 533 1 523
Amortisation of goodwill - 6 485
Loss on sale of fixed assets 102 383
26 188 37 794
2.2 Earnings per share
Based on a net loss for the year of R3,447 million (September 2004: net profit
of R29,403 million) and weighted average shares in issue of 72 590 276
(September 2004: 59 529 071).
3. Non-trading items
Disposal of interest in subsidiary - (308)
Write down in investment (19 484) -
Impairment in goodwill (10 049) -
Loss on discontinuance of businesses - (1 215)
(29 533) (1 523)
4. Contingent liabilities
Spescom Limited has issued a letter of support in favour of Spescom Limited UK
(Proprietary) Limited. This letter of support is valid until October 2006.
There are no further known material contingent liabilities which require
separate disclosure at this time.
BALANCE SHEET
Audited
Reviewed Restated
As at As at
30/09/05 30/09/04
R"000 R"000
ASSETS
Non-current assets
Property, vehicles and equipment 25 564 29 635
Intangible assets 20 390 19 898
Goodwill - 27 064
Investments and loans 35 386 17 977
Deferred taxation 12 120 11 266
93 460 105 840
Current assets 79 080 109 511
Inventories 13 461 9 462
Taxation prepaid 365 560
Accounts receivable 35 527 57 187
Cash resources 29 727 42 302
Total Assets 172 540 215 351
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 45 284 46 661
Non-distributable reserves 15 033 14 965
Distributable reserves 11 399 14 846
Ordinary shareholders" equity 71 716 76 472
Outside shareholders" interest
in subsidiary companies - 862
Interest of all shareholders 71 716 77 334
Non-current liabilities 12 242 39 474
Contract advances and deferred
maintenance revenue - 1 153
Deferred taxation 17 -
Interest bearing liabilities 12 225 38 321
Current liabilities 88 582 98 543
Current portion of interest
bearing liabilities 26 066 1 873
Bank finance 1 260 1
Taxation 3 093 992
Trade payables 31 640 42 199
Provisions, contract advances
and deferred maintenance
revenue 26 523 53 478
Total equity and liabilities 172 540 215 351
Net asset value (cents) 91.1 98.2
CASH FLOW STATEMENT
Audited
Reviewed Restated
12 months ended 12 months ended
30/09/05 30/09/04
R"000 R"000
OPERATING ACTIVITIES
Cash generated by operations 9 966 56 000
Working capital changes (10 593) (47 708)
Cash (utilised)/generated by
operating activities (627) 8 292
Net finance income (1 657) (2 737)
Taxation paid (1 003) (4 077)
Net cash flow from operating activities (3 287) 1 478
INVESTING ACTIVITIES
Investment to expand and
maintain operations (5 670) (10 265)
(5 670) (10 265)
FINANCING ACTIVITIES
Proceeds from fresh issue of shares - 22 714
Repurchase of treasury shares (1 378) -
Bank financing and facilities (2 632) (68 354)
(4 010) (45 640)
Net change in cash and cash equivalents (12 967) (54 427)
Effects of foreign exchange 392 1 092
Cash and cash equivalents:
- At beginning of year 42 302 95 637
- At end of year 29 727 42 302
Equity Statement
Distributable Share Share
reserves capital premium
R"000 R"000 R"000
Balance at 30
September 2003 (13 296) 492 23 455
Prior year
lease adjustment (1 261)
Foreign currency
translation
profit arising
on consolidation
Reserve
transferred to
minority
interests
Issue of shares
by Spescom Share
Trust 83
Fresh issue
of shares 201 23 938
Share issue expenses (1 508)
Net profit for
the year as restated 29 403
Balance at
30 September 2004 14 846 693 45 968
Foreign currency
translation profit
arising on
consolidation
Treasury shares
purchases by
Spescom Share Trust (8) (1 369)
Net loss for
the year (3 447)
Balance at 30
September 2005 11 399 685 44 599
Non-
distributable
reserves Total
R"000 R"000
Balance at 30
September 2003 14 534 25 185
Prior year
lease adjustment (1 261)
Foreign currency
translation
profit arising
on consolidation 791 791
Reserve
transferred to
minority
interests (360) (360)
Issue of shares
by Spescom Share
Trust 83
Fresh issue
of shares 24 139
Share issue expenses (1 508)
Net profit for
the year as restated 29 403
Balance at
30 September 2004 14 965 76 472
Foreign currency
translation profit
arising on
consolidation 68 68
Treasury shares
purchases by
Spescom Share Trust (1 377)
Net loss for
the year (3 447)
Balance at 30
September 2005 15 033 71 716
Segmental analysis
Audited
Reviewed Restated
12 months ended 12 months ended
30/09/05 30/09/04
R"000 R"000
Sector turnover
Enterprise content management solutions 159 053 213 168
Communication integration activities 23 204 76 571
Services and other 41 210 66 778
223 467 356 517
Operating (loss)/profit
Enterprise content management solutions (7 934) 13 032
Communication integration activities (9 622) 26 560
Services and other 462 2 138
(17 094) 41 730
Geographic turnover
Africa 189 070 220 447
Europe 22 140 104 367
USA 10 450 31 703
Other 1 807 -
223 467 356 517
Proprietary technology
Own intellectual property 86 263 186 916
3rd Party intellectual property 137 204 169 601
223 467 356 517
COMMENTARY
Review of operations
Spescom reflects a headline earnings profit of R26,2 million which translates
into 36,1 cents per share (cps) for the year as compared to 63,5 cps for the
comparative year.
After taking into account the non-trading items and the decision to write off
all offshore loans owing to the group, Spescom reports a loss for the year of
R3,4 million as compared to a profit of R29,4 million for the previous year.
It is rewarding to note, however, that the operating results for the second
six months of the year reflect a vast improvement on those of the first half.
During the year under review, the group restructured its shareholding in its
US operation, Spescom Software Inc., facilitating external financing and
permitting the redeployment of critical resources. This opens up a possibility
of new structures to bring in the necessary strategic ownership by leaders in
the market. This restructuring has resulted in this investment being accounted
for as an associate and being equity accounted with effect 1 April 2005. The
effect of this change in holding from a subsidiary to an associate resulted in
a recoupment of R52,6 million prior year minority losses.
Spescom"s reduced turnover can be mainly attributed to the following:
- equity accounting instead of consolidating the US operation;
- completion of major international telecommunications contracts with BT and
delays in awarding of replacement business;
- discontinuation of non-core test and measurement activities; and
- continued delays in the full deregulation of the telecommunications sector
in South Africa.
The gearing levels of the group remain satisfactory and largely unchanged.
Subsequent to year-end, the group made further debt repayments.
Prospects
Spescom is entering a new cycle in its history.
The group intends to take a forceful lead in core business areas of the ICT
(Information and Communications Technology) sector. This includes considering
all opportunities for growth, such as exploring acquisitions, in order to
accomplish its strategic objectives.
Spescom will continue to focus on content management and is actively
strengthening the application side of its technology offerings.
The main emphasis will be on telecommunications and voice.
Internationally Spescom remains focused on the globalisation of its own
products and technology.
In support of these objectives Spescom increased its global footprint by
breaking into Middle Eastern markets.
The telecommunications industry continues to be characterised by delays and
uncertainties. However, it is anticipated that the landscape will change
significantly over the next year revealing above average growth, for which the
group is well positioned. The ongoing momentum of this transformation is
expected to be realised in the 2007 financial year.
The contact centre business continues to grow with the world trend towards
offshoring, holding great potential as India"s grip on this market lessens
providing opportunity for South Africa.
The reality of the convergence and synergy of contact centre and voice
technologies is unassailable. Spescom is well placed to take advantage of
these trends.
Directorate
On 21 October 2005, Mr H Isaacman relinquished his position as executive
director of Spescom Limited. This will enable him to focus on sourcing
opportunities for Spescom Software Inc., where he remains a director.
With effect 21 October 2005, Mr T Makore was appointed to the Spescom Limited
board.
Dividend
Spescom continues with its policy of not declaring a dividend. This policy
remains subject to review.
By order of the board
A Farah J Palmer Johannesburg
Chief Executive Officer Chief Financial Officer 24 November 2005
Directors:
J P Myers* (Chairperson), A Farah, W Kansteiner*, T Makore, M C Mogase
(alt. C Rezek), L Ogilvy, J Palmer, P Vallet
*American, Non-executive
Company Secretary:
N Magadze
Registered Office:
Spescom Park, Cnr Alexandra Avenue and Second Road, Halfway House, Midrand,
1685. Tel +27 (11) 266 1500
Registrar:
Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall Street,
Johannesburg, 2001. Tel: +27 (11) 370 5000
Spescom Limited
(Registration number 1987/001083/06)
Share code: SPS ISIN: ZAE000017919
make contact
Website: www.spescom.com
Date: 24/11/2005 12:36:40 PM Produced by the JSE SENS Department
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