| Thu 24 Nov 2005, 13:30 | | DataPro Group Limited - Audited Results For The Ye |
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Datapro Group Limited - Audited Results For The Year Ended 31 August 2005
DataPro Group Limited
(Formerly Casey Investment Holdings Limited)
(Registration No: 1998/016433/06)
Share code: DTP ISIN code: ZAE000058061
("DataPro Group" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2005
Balance Sheets Audited Reviewed Restated
as at as at as at
31 August 28 31 August
2005 February 2004
R"000 2005 R"000
R"000
ASSETS
Non-current assets 124 436 69 214 --
Property, plant and 26 852 18 967 --
equipment
Intangible assets 94 088 48 558 --
Deferred taxation 3 496 1 689 --
Current assets 14 878 10 503 124
Inventories 137 402 --
Trade and other receivables 8 601 6 418 114
Prepayments 783
Other assets 3 000
Taxation 2
Cash and cash equivalents 2 355 3 683 10
Total assets 139 314 79 717 124
EQUITY AND LIABILITIES
Capital and accumulated 93 609 48 533 (7 051)
loss
Share capital and premium 119 960 75 237 23 573
Accumulated loss (26 351) (26 704) (30 624)
Non-current liabilities 5 755 11 497 4 012
Long term borrowings 5 487 8 708 --
Operating lease liabilities 268 -- --
Shareholder loans - non -- 2 789 4 012
interest bearing
Current liabilities 39 950 19 687 3 163
Trade and other payables 20 562 10 046 2 418
Short term borrowings (Note 11 967 7 641 745
1)
Finance lease obligations 1 988 -- --
Shareholders loans 2 055 -- --
Taxation 858 -- --
Bank overdraft 2 520 2 000 --
Total equity and 139 314 79 717 124
liabilities
Ordinary shares in issue at 314 369 228 980 74 980
period end (`000)
Net asset value per share 29.8 21.2 (9.4)
(cents)
Net tangible asset value (0.15) (0.01) (9.4)
per share (cents)
Fully diluted information
(Note 2)
Ordinary shares at period 314 598 229 209 74 980
end (`000)
Net asset value per share 29.8 21.2 (9.4)
(cents)
Net tangible asset value (0.15) (0.01) (9.4)
per share (cents)
Notes
1. Long term liabilities amounting to R7 123 907 are
temporarily reflected under short term borrowings as
the company is in the process of transferring its long
term loans and facilities to RMB Limited.
2. Vantage Capital Group ("Vantage"), a BEE shareholder
in DataPro Group, was granted an American call option to
subscribe for up to 2 295 641 new ordinary shares at an
exercise price based on the 30 day weighted average share
price immediately preceding the exercise of the option, less
a 10% discount, exercisable on or before 28 February 2006.
During the year, this call option was purchased by Douglas
Reed and James Herbst through the transfer of shares to
Vantage, whereby Vantage increased its shareholding in DataPro
Group.
Income Statements Audited Reviewed Restated
for the for the for the
year six six
ended months months
31 August ended 28 ended
2005 February 31 August
R"000 2005 2004
R"000 R"000
Revenue 96 901 49 996 100
Cost of sales (55 936) (27 083) --
Gross profit 40 965 22 913 100
Operating and administrative (29 251) (15 051) (605)
expenses
Other operating income 331 -- 957
EBITDA 12 045 7 862 452
Amortisation of goodwill -- (88) --
Profit on disposal of assets 23 -- --
Depreciation (5 154) (2 000) --
Amortisation of intangible (1 267) -- --
assets
Operating profit 5 647 5 774 452
Finance charges (2 536) (1 325) (275)
Investment income 191 102 18
Net profit before taxation 3 302 4 551 195
Taxation 1 504 -- --
Net profit for the period 4 806 4 551 195
Calculation of headline
earnings
Net profit for the year 4 806 4 551 195
Adjustments for:
Initial listing costs 1 010 -- --
Amortisation of goodwill -- 88 --
Profit on disposal of assets (23) -- --
Tax effect of adjustments 7
Headline earnings for the 5 800 4 639 195
period
Weighted average shares in 228 980 228 980 74 980
issue
Earnings per share ordinary 2.1 2.0 0.26
share (cents)
Headline earnings per 2.5 2.0 0.26
ordinary share (cents)
Fully diluted information
(Note 1)
Weighted average shares in 229 209 229 209 74 980
issue (`000)
Earnings per share ordinary 2.1 2.0 0.26
share (cents)
Headline earnings per 2.5 2.0 0.26
ordinary share (cents)
Abridged Cash Flow Audited Reviewed Restated
Statements for the for the for the
year six six
ended months months
31 August ended ended
2005 28 31 August
R"000 February 2004
2005 R"000
R"000
Net cash inflow/(outflow) 250 (7 079) 333
from operating activities
Dividends paid (2 290) -- --
Net cash outflow from (14 938) (4 816) --
investing activities
Acquisition of subsidiaries (81 309) (36 513) --
Net cash inflow from 98 112 50 081 (326)
financing activities
Net increase in cash and (175) 1 673 7
cash equivalents
Bank balance/(overdraft) at 10 10 3
beginning of period
Cash and cash equivalents at (165) 1 683 10
end of period
Statement of Changes in Equity Shar Share Accumul Tota
e premiu ated l
Capi m loss
tal R"000 R"000 R"00
R"00 0
0
Balance at 01 March 2004 75 23 498 (30 (7
819) 246)
Profit for the six months ended -- -- 195 195
31 August 2004
Balance at 31 August 2004 75 23 498 (30 (7
624) 051)
Balance at 31 August 2004 as 75 23 498 (31 (7
previously reported 255) 682)
Prior year adjustment -- -- 631 631
Restated balance at 31 August 75 23 498 (30 (7
2004 624) 051)
Change in accounting policy - -- -- 1 757 1
write off of negative goodwill 757
Issue of shares to management for 67 5 586 -- 5
the acquisition of DataPro 653
Issue of shares for cash 87 48 037 -- 48
124
Issue of shares for the 85 44 915 -- 45
acquisition of @lantic 000
Write off of issue expenses -- (2 -- (2
against share premium 390) 390)
Profit for the year -- -- 4 806 4
806
Dividend paid -- -- (2 290) (2
290)
Balance at 31 August 2005 314 119 (26 93
646 351) 609
COMMENTARY
The company"s results for the year ended 31 August 2005 are the
first full year results since the acquisition of DataPro
(Proprietary) Limited ("DataPro") which was effective from
01 September 2004. The results also reflect the change
in the company"s year end to 31 August with effect
from 2004, which reported a six month period.
The accounting policies adopted for purposes of this report
comply with South African Statements of Generally
Accepted Accounting Practice (GAAP). In addition, the
company has implemented certain accounting policies
compliant with International Financial Reporting
Standards ("IFRS"), where early adoption of such
accounting policies is applicable. Save for the adoption
of IFRS3 (AC140) (Business Combinations), read in
conjunction with IAS38 (AC129) (Intangible Assets), in
relation to the accounting treatment for goodwill and
intangibles, and the change in accounting interpretation
relating to operating leases (as required by Circular
7/2005 issued by the South African Institute of
Chartered Accountants) , the principal accounting
policies have been consistently applied.
IFRS3 (AC140) provides that goodwill is no longer
amortised with effect from the beginning of the year
and does not require restatement of prior year results.
In addition, negative goodwill has been written off in
accordance with IFRS3 in the current year and is
reflected as a change in accounting policy.
Comparative results have been restated for an
adjustment in terms of IAS39 (AC133) in relation
to the fair value accounting for an interest-free loan, which
was initially accounted for in full in the interim
results of the Company. The prior year results were
not restated in terms of IAS 17 for the change in
accounting interpretation for operating leases
due to such adjustment being immaterial.
The results have been audited by Grant Thornton
and their unqualified audit opinion is available
for inspection at the registered office of the company.
INDUSTRY AND BUSINESS OVERVIEW
Technology enhancements and the growth of the
Internet, coupled with deregulation, has made this
the most dynamic year ever in South Africa"s
Telecommunication sector. DataPro"s target market
has increased from R1.2 billion to an estimated
R40 billion per annum and presents a variety of
opportunities. Voice is still the largest revenue
generator on all Telecommunication networks, with
worldwide Voice applications utilising 10% of the
available bandwidth but generating 80% of revenue.
DataPro, a traditional Internet Service Provider ("ISP")
to South African businesses has capitalised on the
deregulated environment to position itself as a
complementary and viable alternative to Telkom.
DataPro"s traditional ISP business, focusing on the
corporate market, is established and growing steadily.
It"s profitability is largely derived from contracted
annuity-based income that generates positive cash flows.
Anticipating the deregulation of the South African Market
nearly 3 years ago, DataPro started establishing interconnection
agreements with various Telco"s, acquired the appropriate
international licences, launched the VoxTelecom brand and
began building a Voice-Over-Internet-Protocol ("VOIP") infrastructure.
This experience, together with DataPro"s solid Internet
platform, has given the group a clear edge in the market, with
VoxTelecom considered to be a market leader in the VOIP
arena and DataPro Group accordingly well positioned
to take advantage of the telecommunications environment.
FINANCIAL OVERVIEW
The telecommunications environment has necessitated a change
from the prelisting strategy and required a redeployment of
resources during the current year towards building a Voice
business under the brand VoxTelecom. The strategy during the
year was to limit the cash resources allocated to the Voice
start-up to the cash flows generated within the business.
In light of this change in strategy, the directors are pleased
with the results achieved for the year. Due to the fact that
the results cannot be compared to the prior period, commentary
has been limited to the current results, with a comparison to
the prior period of the main operating subsidiary, namely DataPro.
The directors hereby announce the first set of results reflecting
earnings of 2.1 cents per share and headline earnings of 2.5 cents
per share. With an interim dividend of 1 cent per share already
paid out and the current investment in the Voice business, the
directors have decided not to declare a final dividend.
Revenue grew to nearly R97.0 million for the year with a net profit
after tax of R4.80 million. The core ISP business has grown
by 28%, taking into account a measure of deflation on revenue
pricing (30% to 40%). This growth represents a strong performance
showing a substantial increase in revenue in real terms. Cross-selling
opportunities, combined with the increased demand for Internet
bandwidth, has ensured that sales have remained buoyant. Reduced
costs and improved economies of scale have helped maintain margins.
Voice turnover comprised 7% of sales, the bulk of this being low
margin Call-Back and international inbound minutes.
The turnover from VOIP, which was only launched towards
the end of the year under review, was insignificant at R335 000.
By August 2006 we envisage that this revenue will comprise a much
larger percentage of the monthly turnover.
Gross margins increased over the prior year due to critical
mass, economies of scale and bulk purchasing-power.
This was despite the negative impact caused by the
scaling up of the network and increased bandwidth usage for
Voice in the second half of the year.
The start-up costs of VoxTelecom had a major impact on the results
for the year. The total cost of developing the Voice business in
the first 6 months amounted to around R4.6 million, comprising
mainly of increased marketing, training and additional personnel.
In the second half of the year this increased by R3.4 million to
approximately R8.0 million due to the additional network capacity
built to carry Voice, a resultant increase in depreciation and
the costs of piloting and testing which increased bandwidth costs.
In addition, Voice revenue was negatively impacted as a result of
the regulatory changes which resulted in Least-Cost-Routing
(e.g. Premicell) and Call-Back services no longer being actively
marketed.
The directors believe the investment is essential to both the
strategic value and the long term growth of the Group.
Certain non-recurring costs were incurred in the year, namely the
costs of reverse listing into Casey Investment Holdings Limited ("Casey") of
R1.01 million and an additional cost of R0.86 million, which was spent on the
resultant regularisation of Casey and former Casey subsidiaries.
Furthermore, a fair value adjustment of R0.63 million relating
to an interest free shareholder loan, recognised as income in
the interim results, is now reflected as a prior year
adjustment, with an interest charge in the current year of R0.25 million.
The adjustment relating to accounting for operating leases on a
straight line basis resulted in an additional charge to the income
statement of R0.26 million.
The adoption of IFRS3 has also resulted in the amortisation
of intangible assets, comprising trademarks and contracts
acquired following the acquisition of DataPro and Wickhit
during the year, amounting to R1.20 million. This will be
a recurring charge in the income statement each year.
The taxation credit primarily reflects the net impact of
recognition of a deferred taxation asset of R1.80 million..
The aggregate effect of the adoption of IFRS3, and the
application of IAS17 and IAS39 is set out below.
Description Before Adjustment After
Income Statement R"000 R"000 R"000
Amortisation of intangibles -- (1 232) (1 232)
Operating leases - straight line -- (268) (268)
method
Finance leases capitalised - (1 356) 1 356 --
lease costs reduced -- (1 124) (1 124)
- depreciation on -- (427) (427)
finance leases
- interest on finance leases
Other income - interest adjustment 631 (631) --
on interest free loan
Interest charge on interest free -- (251) (251)
loan
Total income statement impact (2 577)
Statement of changes in equity
Accumulated loss - opening balance 31 255
Prior year adjustment - Write 1 757
off negative goodwill 631
- Interest 28 867
adjustment
Accumulated loss - restated
Balance sheet
Capitalisation of finance lease -- 7 280 7 280
assets net of depreciation
Finance lease obligations - -- (5 487) (5 487)
long term -- (1 988) (1 988)
- short term
Operating lease liability -- (268) (268)
DataPro Group acquired Atlantic Internet Services (Proprietary) Limited
("@lantic"), effective 31 August 2005, as detailed below.
No results relating to the acquisition of @lantic have been
incorporated into the income statement for the year under review.
SEGMENTAL REPORTING
Due to convergence in the second 6 months, DataPro integrated Voice
onto a single IP platform, combined the sales and technical teams and
centralised administration. In addition, the company does not separately
identify assets or liabilities attributable to different segments of the
business and accordingly the only segment information available is
turnover. Turnover for Voice amounts to R6.80 million and turnover
for Data amounts to R80.0 million, other turnover making up the
balance. The business is conducted mostly within South Africa
and is managed centrally and accordingly, there is no meaningful
basis for geographic segmental reporting.
FUTURE PROSPECTS
VoxTelecom
DataPro"s Voice business, still in its infancy, is expected to
contribute more significantly to revenue and profit in the
foreseeable future, with revenue currently doubling month-on-month.
Technical problems typically surrounding the introduction of
VOIP have, in the main, been resolved with implementation times
improving. VoxTelecom aims to establish a niche market as the
preferred alternative to Telkom.
By using its core competency of speed as a competitive
advantage, VoxTelecom continues to be first to market and has
successfully launched a Service Provider Channel with over 80
resellers selling Voice solutions. These resellers come from
the Least-Cost-Routing and PABX industry and are well established
in the telecommunications industry.
DataPro Group and @lantic
At the end of the year, DataPro Group acquired @lantic with an
ISP customer base of over 32 000 users. DataPro Group continues
to see the Internet as a significant area of growth in South Africa
and with the launch of broadband products like ADSL, the costs of being
connected to the Internet have been reduced, resulting in phenomenal
growth over the past three years. DataPro was the first to launch a
Business ADSL product that has resulted in DataPro Group having
the broadest range of ADSL products and a clear dominance in the
small-to-medium sector and now, with the acquisition of
@lantic, dominates this market. Substantial growth is expected
from the @lantic customer base through upgrades and increasing
the average sale to these customers. Contracted monthly annuity
revenue at 01 September 2005, including @lantic, was approximately
R10,5 million per month. Services provided by DataPro and
@lantic cover the following:
* Corporate Internet Service Provision - This sector currently
represents the core of DataPro and, although this sector is maturing,
DataPro continues to experience increased demand and market share.
* ADSL - Broadband is currently on a huge growth curve, with margins
increasing generally. The range has been expanded to more exclusive solutions
and usage-based products have been added to the range. The focus is on
increasing the average sale as well as improving market share from 7% to 10%.
Only Telkom and MWeb have significantly more market share than DataPro, which is
well positioned to exploit this opportunity.
* Local Access - As of 01 November 2005, DataPro have become a Telkom Channel
partner which will result in improved gross profit margins.
* Dial Up - This base, primarily comprising the @lantic customer base acquired,
is being upgraded to ADSL and the prospect of revenue sharing by May next year
is positive as @lantic generates a significant number of telephone minutes
every month.
In summary, DataPro is well established, has formed strong strategic alliances,
has a large number of channels, good branding and technological know-how. The
company has a solid growing base in the Data market that is underpinned by
contracted annuity business. Early indications are that VoxTelecom will grow
quickly and the aim is to maintain a leading position and dominate market share
in the 2nd Tier Telecommunication sector. It is anticipated that VOIP, through
VoxTelecom, will ultimately overtake the Data business. In addition, the VOIP
technology will eventually replace cellular Least Cost Routing and International
call-back solutions.
ACQUISITIONS AND ISSUE OF SHARES FOR CASH
At a general meeting of shareholders held on 27 September 2004, shareholders
approved the acquisition of DataPro at a total cost of R41 652 500, which
purchase price was settled in cash of R36 million, paid to BOE Private Equity
Investments (Proprietary) Limited ("BOE"), and through the issue of 66 500 000
new ordinary shares at 8.5 cents per share to DataPro management vendors. In
addition, shareholders approved the issue of 87 500 000 new ordinary shares for
cash at 55 cents per share. A large portion of the proceeds from the issue of
shares for cash were utilised to fund the acquisition of DataPro from BOE.
Details of the above transactions were published in an abridged prospectus on
SENS and in the press on 03 September 2004. The above shares were issued on 18
October 2004.
On 31 August 2005, the company acquired 100% of the shares in, and loan accounts
against Atlantic Internet Services (Proprietary) Limited for a purchase
consideration of R45 million, which purchase consideration was settled by the
issue of 85 388 994 shares at 52.7 cents. The results of @lantic will be
consolidated in the income statement with effect from 01 September 2005.
CHANGE OF NAME
Following the acquisition of DataPro, the company transferred its listing to the
Alternative Exchange ("AltX") of the JSE Limited and changed its name to DataPro
Group Limited with effect from 18 October 2004.
DIRECTOR CHANGES
At the general meeting on 27 September 2004, pursuant to the approval of the
acquisition of DataPro, DG Reed was appointed as Chief Executive Officer, GP
Sweidan as operations director, M Krastanov as a non-executive director and D
Cameron resigned from the board. YT Moerane remained as non-executive
chairperson and JC Herbst as financial director.
MC Mogase has been appointed as a non-executive director, with CM Lister-James
as his alternate, with effect from 11 November 2004. K Chelius resigned as
director on 28 February 2005 and JC Herbst resigned as director on 27 September
2005.
DIVIDENDS
Following the maiden dividend declared during the year, no further dividend is
to be declared this year.
ANNUAL GENERAL MEETING
The annual general meeting of the company will be held at 10h00 on Thursday, 19
January 2006 at DataPro Building, Block B, Rutherford Estate, 1 Scott Street,
Waverley, Johannesburg.
GENERAL
In accordance with AltX Listings Requirements, shareholders are advised of the
risks of investing in a company listed on the AltX and that the JSE does not
guarantee the viability or the success of a company listed on the AltX. In
terms of the JSE Listings Requirements, a Designated Advisor has to be retained
by the company. The Designated Advisor is required, inter alia, to attend all
board meetings held by the company to ensure that all the JSE Listings
Requirements and applicable regulations are complied with, approve the financial
director of the company and guide the company in a competent, professional and
impartial manner. If the company fails to retain a Designated Advisor it must
make arrangements to appoint a new Designated Advisor within 10 business days,
failing which the company faces suspension of trading of its securities. If a
Designated Advisor is not appointed within 30 days of its suspension, the
company faces the termination of its listing without an offer to minorities.
By order of the Board
YT Moerane DG Reed
Chairperson Chief Executive Officer
24 November 2005
Johannesburg
Registered Office
Arcay House, Number 3 Anerley Road, Parktown, Johannesburg,
2193
PO Box 62397, Marshalltown, Johannesburg, 2107
Directors
YT Moerane*, DG Reed, GP Sweidan, M Krastanov*, MC Mogase*
(Alternate CM Lister-James)
* Non-executive
Designated Advisor Transfer Office
Arcay Corporate Services Computershare Investor Services 2004
(Proprietary) Limited
Date: 24/11/2005 01:30:43 PM Produced by the JSE SENS Department
