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BCX
BCX
Business Connexion - Unaudited Group Results for the six months ended 30
November 2005
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)
Share code: BCX
ISIN: ZAE000054631
("Business Connexion" or "the company")
Creating value together
Unaudited Group Results for the six months ended 30 November 2005
- REVENUE GROWTH OF 25%
- CASH POSITIVE
- PLATFORM FOR CONTINUED GROWTH
Group balance sheet
Unaudited Reviewed Reviewed
Restated Restated
30 30 31
November November May
R million 2005 2004 2005
ASSETS
Non-current assets
Property, furniture and 151,9 129,4 124,0
fittings, equipment, vehicles
and investment property
Capitalised leased assets 274,8 274,2 274,2
Intangible assets - goodwill, 191,7 125,5 146,3
software and other
Investment in associates and 131,3 186,7 178,0
other long-term investments
Long-term loans and advances 6,4 13,5 10,1
Deferred tax assets 45,1 4,9 56,7
801,2 734,2 789,3
Current assets
Inventories 52,8 47,6 50,9
Trade accounts receivable 525,2 449,7 534,6
Other accounts receivable 127,9 136,6 122,9
Derivative and embedded 34,9 25,3 60,9
derivative assets
Prepayments 68,7 68,0 49,4
Tax prepaid 3,2 4,4 4,3
Bank balances and cash 656,9 812,0 776,3
1 469,6 1 543,6 1 599,3
TOTAL ASSETS 2 270,8 2 277,8 2 388,6
EQUITY AND LIABILITIES
Equity attributable to parent 1 161,1 1 152,7 1 204,4
shareholders
Minority interests 76,3 82,1 64,2
Total shareholders" equity 1 237,4 1 234,8 1 268,6
Non-current liabilities
Interest-bearing long-term 199,1 218,7 209,6
liabilities
Interest free long-term 133,0 124,5 150,8
liabilities
Post retirement obligations 9,9 6,2 8,3
Provisions 2,4
Deferred tax liabilities 1,0 0,4 0,7
345,4 349,8 369,4
Current liabilities
Short-term borrowings 42,4 23,5 27,1
Trade accounts payable 190,6 184,3 210,4
Other accounts payable 436,5 412,7 451,1
Provisions 13,6 40,7 17,6
Embedded derivative 27,2 26,9
liabilities
Tax 4,9 4,8 17,5
688,0 693,2 750,6
TOTAL EQUITY AND LIABILITIES 2 270,8 2 277,8 2 388,6
Group income statement
Unaudited Reviewed Reviewed
Restated Restated
Six Six Year
months months ended
ended ended
30 30 31 May
November November
R million 2005 2004 2005
Revenue 1 705,9 1 362,8 2 816,1
Cost of sales 1 212,4 922,1 1 928,4
Gross profit 493,5 440,7 887,7
Operating expenses 388,6 349,5 663,4
Foreign exchange and (1,3) 6,3
derivative (losses)/gains
Operational exceptional gains 1,3 1,6 15,4
Operating profit before 104,9 92,8 246,0
depreciation and amortisation
Depreciation and amortisation 32,3 28,1 60,9
Operating profit 72,6 64,7 185,1
Investment income 29,6 35,4 70,2
Share of associates" profits 6,4 10,5
Profit before interest paid 102,2 106,5 265,8
Interest paid 16,7 18,4 52,3
Profit before exceptional 85,5 88,1 213,5
items
Exceptional gains 8,0 78,3 146,9
Profit before tax 93,5 166,4 360,4
Tax 29,6 23,0 86,7
Profit for the period 63,9 143,4 273,7
Profit attributable to 11,6 11,6 (6,3)
minority interests
Profit attributable to equity 52,3 131,8 280,0
holders of the parent
Profit for the period 63,9 143,4 273,7
Dividend per share (cents) 37,0
Earnings per share (cents) 21,5 54,0 113,6
Fully diluted earnings per 20,3 50,4 106,5
share (cents)
Calculation of headline
earnings (R million)
Profit attributable to equity 52,3 131,8 280,0
holders of the parent
Reversal of impairment of 0,7
assets, loans and investments
Goodwill impairments 7,9
Profit on sale of property, 0,3 (0,2)
furniture and fittings,
equipment and vehicles
Profit on sale of businesses (73,7) (116,9)
and associates
Tax effect on disposal of 4,5
businesses and associates
Minority effect of headline (0,1) (2,1)
earnings adjustments
Headline earnings 52,5 58,1 173,9
Weighted average number of 243 204 244 361 246 445
shares in issue (000"s)
Headline earnings per share 21,6 23,8 70,6
(cents)
Fully diluted weighted 257 021 261 386 262 801
average number of shares in
issue (000"s)
Fully diluted headline 20,4 22,2 66,2
earnings per share (cents)
Reconciliation of total shareholders" equity
from SA GAAP to IFRS
Year Six Year
ended months ended
ended
31 May 30 31 May
November
R million 2005 2004 2004
Balance previously reported 1 130,6 1 067,3 921,2
Minority interests 40,4 54,5 49,4
IFRS adjustments directly to
reserves
- Property, furniture and 18,2 16,5 14,0
fittings, equipment and
vehicles
- Capitalised leased assets 101,1 99,4 97,8
- Deferred tax (18,6)
Other adjustments directly to
reserves
- Operating leases (4,4) (4,1) (4,1)
- Provisions 1,3 1,2 1,6
1 268,6 1 234,8 1 079,9
Abridged group cash flow statement
Unaudited Reviewed Reviewed
Restated Restated
Six Six Year
months months ended
ended ended
30 30 31 May
November November
R million 2005 2004 2005
Net cash flow (utilised (48,4) 36,9 (30,8)
in)/from operating activities
Net cash flow (utilised (65,8) 40,1 42,9
in)/from investing activities
Net cash flow utilised in (5,2) (47,4) (18,2)
financing activities
Net changes in cash and cash (119,4) 29,6 (6,1)
equivalents
Cash and cash equivalents at 776,3 782,4 782,4
beginning of the period
Cash and cash equivalents at 656,9 812,0 776,3
end of the period
Group segmental analysis
Unaudited Reviewed Reviewed
Restated Restated
Six Six Year
months months ended
ended ended
30 30 31 May
November November
R million 2005 2004 2005
BUSINESS GROUPINGS ANALYSIS
Revenue
Services 994,6 890,9 1 826,0
Communications 5,3
Technology infrastructure 467,0 313,7 689,2
Business applications 239,0 158,2 300,9
1 705,9 1 362,8 2 816,1
Operating profit
Services 90,1 83,2 180,0
Communications 0,6
Technology infrastructure (15,8) (1,7) 16,8
Business applications 10,9 (0,2) 13,7
Central functions (13,2) (16,6) (25,4)
72,6 64,7 185,1
GEOGRAPHICAL SEGMENTAL
ANALYSIS
Revenue
South Africa 1 606,3 1 276,4 2 623,1
Rest of Africa 81,5 66,8 154,6
Other, principally the United 18,1 19,6 38,4
Kingdom
1 705,9 1 362,8 2 816,1
Operating profit
South Africa 84,4 74,6 197,6
Rest of Africa (12,0) (10,2) (13,2)
Other, principally the United 0,2 0,3 0,7
Kingdom
72,6 64,7 185,1
Group statement of changes in equity
Share Trade- Foreign
mark currency
capital tax Transla- Distribu-
and benefit tion table
R million premium reserve reserve reserves
Balance at 31 May 2004 250,6 94,2 (0,2) 571,9
- audited
Effect of adoption of 4,7
accounting policies
Net movement not 71,4 0,2 10,6
recognised through the
income statement
Treasury shares held 71,4 (71,4)
by share purchase
trust reallocated from
share premium to
distributable reserves
IFRS and other 0,2 82,0
adjustments directly
to reserves
Restated balance at 31 322,0 94,2 587,2
May 2004 - reviewed
Net movement not (1,1) 11,5 (0,4) 7,5
recognised through the
income statement
Treasury shares and (1,1)
related reserves held
by share purchase
trust
Deferred tax 11,5
transferred as a
result of deductions
in respect of
trademarks to 30
November 2004
Foreign exchange loss (0,4)
arising on
consolidation
Reserves of share 5,7
purchase trusts
Minority interest in
subsidiary dividends
IFRS adjustments 1,8
directly to reserves
Net movement 131,8
recognised through the
income statement
Attributable profit 130,4
per the income
statement as
previously reported
IFRS and other 1,4
adjustments to the
income statement
Restated balance at 30 320,9 105,7 (0,4) 726,5
November 2004 -
reviewed
Net movement not 1,0 (105,7) (0,3) 8,5
recognised through the
income statement
Treasury shares and 1,0 (28,7)
related reserves held
by a subsidiary and
share purchase trusts
Change in estimate of (107,1)
trademark tax benefit
reserve
Charge to deferred tax 36,6
for trademark
settlement
Transfer of reserves 1,4 (1,4)
Foreign exchange loss (0,3)
arising on
consolidation
Reserves of share 1,6
purchase trusts
IFRS and other 0,4
adjustments directly
to reserves
Net movement 148,2
recognised through the
income statement
Attributable profit 160,2
per the income
statement as
previously reported
IFRS and other (12,0)
adjustments to the
income statement
Restated balance at 31 321,9 (0,7) 883,2
May 2005 - reviewed
Adoption of IAS 39 2,1
(revised)
Restated balance at 31 321,9 (0,7) 885,3
May 2005 - reviewed
Net movement not (0,1) (0,4)
recognised through the
income statement
Foreign exchange loss (0,4)
arising on
consolidation
Treasury shares and (0,4)
related reserves held
by a subsidiary and
share purchase trusts
Minority interest on 0,3
foreign exchange loss
Net movement 52,3
recognised through the
income statement
Attributable profit 52,3
per the income
statement
Dividend declared (97,2)
Balance at 30 November 321,9 (0,8) 840,0
2005 - unaudited
Group statement of changes in equity
Equity Total
attribu-
table
to Minority Share-
parent holders"
R million Share- interests equity
holders
Balance at 31 May 2004 916,5 49,4 965,9
- audited
Effect of adoption of 4,7 4,7
accounting policies
Net movement not 82,2 27,1 109,3
recognised through the
income statement
Treasury shares held
by share purchase
trust reallocated from
share premium to
distributable reserves
IFRS and other 82,2 27,1 109,3
adjustment directly to
reserves
Restated balance at 31 1 003,4 76,5 1 079,9
May 2004 - reviewed
Net movement not 17,5 (6,0) 11,5
recognised through the
income statement
Treasury shares and (1,1) (1,1)
related reserves held
by share purchase
trust
Deferred tax 11,5 11,5
transferred as a
result of deductions
in respect of
trademarks to 30
November 2004
Foreign exchange loss (0,4) (0,4)
arising on
consolidation
Reserves of share 5,7 5,7
purchase trusts
Minority interest in (6,0) (6,0)
subsidiary dividends
IFRS adjustments 1,8 1,8
directly to reserves
Net movement 131,8 11,6 143,4
recognised through the
income statement
Attributable profit 130,4 11,1 141,5
per the income
statement as
previously reported
IFRS and other 1,4 0,5 1,9
adjustments to the
income statement
Restated balance at 30 1 152,7 82,1 1 234,8
November 2004 -
reviewed
Net movement not (96,5) (96,5)
recognised through the
income statement
Treasury shares and (27,7) (27,7)
related reserves held
by a subsidiary and
share purchase trusts
Change in estimate of (107,1) (107,1)
trademark tax benefit
reserve
Charge to deferred tax 36,6 36,6
for trademark
settlement
Transfer of reserves
Foreign exchange loss (0,3) (0,3)
arising on
consolidation
Reserves of share 1,6 1,6
purchase trusts
IFRS and other 0,4 0,4
adjustments directly
to reserves
Net movement 148,2 (17,9) 130,3
recognised through the
income statement
Attributable profit 160,2 (14,1) 146,1
per the income
statement as
previously reported
IFRS and other (12,0) (3,8) (15,8)
adjustments to the
income statement
Restated balance at 31 1 204,4 64,2 1 268,6
May 2005 - reviewed
Adoption of IAS 39 2,1 0,8 2,9
(revised)
Restated balance at 31 1 206,5 65,0 1 271,5
May 2005 - reviewed
Net movement not (0,5) (0,3) (0,8)
recognised through the
income statement
Foreign exchange loss (0,4) (0,4)
arising on
consolidation
Treasury shares and (0,4) (0,4)
related reserves held
by a subsidiary and
share purchase trusts
Minority interest on 0,3 (0,3)
foreign exchange loss
Net movement 52,3 11,6 63,9
recognised through the
income statement
Attributable profit 52,3 11,6 63,9
per the income
statement
Dividend declared (97,2) (97,2)
Balance at 30 November 1 161,1 76,3 1 237,4
2005 - unaudited
Reconciliation of group income statement from SA GAAP to IFRS
Previously Adjustments Reviewed
reported
Restated
Six months Six months Six months
ended ended ended
30 November 30 November 30 November
R million 2004 2004 2004
Revenue 1 362,8 1 362,8
Cost of sales 922,1 922,1
Gross profit 440,7 440,7
Operating expenses 347,3 2,2 349,5
Foreign exchange and
derivative gains
Operational 1,6 1,6
exceptional gains
Operating profit 95,0 (2,2) 92,8
before depreciation
and amortisation
Depreciation and 32,2 (4,1) 28,1
amortisation
Operating profit 62,8 1,9 64,7
Investment income 35,4 35,4
Share of associates" 6,4 6,4
profits
Profit before interest 104,6 1,9 106,5
paid
Interest paid 18,4 18,4
Profit before 86,2 1,9 88,1
exceptional items
Exceptional gains 78,3 78,3
Profit before tax 164,5 1,9 166,4
Tax 23,0 23,0
Profit for the period 141,5 1,9 143,4
Profit attributable to 11,1 0,5 11,6
minority interests
Profit attributable to 130,4 1,4 131,8
equity holders of the
parent
Profit for the period 141,5 1,9 143,4
Earnings per share 53,4 0,6 54,0
(cents)
Fully diluted earnings 49,9 0,5 50,4
per share (cents)
Reconciliation of group income statement from SA GAAP to IFRS
Previously Adjustments Reviewed
reported
Restated
Year ended Year ended Year ended
31 May 31 May 31 May
R million 2005 2005 2005
Revenue 2 816,1 2 816,1
Cost of sales 1 928,4 1 928,4
Gross profit 887,7 887,7
Operating expenses 660,6 2,8 663,4
Foreign exchange and 6,3 6,3
derivative
gains/(losses)
Operational 15,4 15,4
exceptional gains
Operating profit 248,8 (2,8) 246,0
before depreciation
and amortisation
Depreciation and 68,4 (7,5) 60,9
amortisation
Operating profit 180,4 4,7 185,1
Investment income 70,2 70,2
Share of associates" 10,5 10,5
profits
Profit before interest 261,1 4,7 265,8
paid
Interest paid 52,3 52,3
Profit before 208,8 4,7 213,5
exceptional items
Exceptional gains 146,9 146,9
Profit before tax 355,7 4,7 360,4
Tax 68,1 18,6 86,7
Profit for the period 287,6 (13,9) 273,7
Profit attributable to (3,0) (3,3) (6,3)
minority interests
Profit attributable to 290,6 (10,6) 280,0
equity holders of the
parent
Profit for the period 287,6 (13,9) 273,7
Earnings per share 117,9 (4,3) 113,6
(cents)
Fully diluted earnings 110,6 (4,0) 106,6
per share (cents)
Other group salient information
Unaudited Reviewed Reviewed
30 November 30 November 31 May
2005 2004 2005
Number of shares in 262 637 262 637 262 637
issue (000"s)
Less: shares held in 16 284 14 602 18 977
share purchase trust
and fellow subsidiary
as treasury shares
(000"s)
246 353 248 035 243 660
Number of options in 16 393 25 123 22 759
issue (000"s)
Number of fully 15 943 17 852 13 897
dilutive options
(000"s)
Net asset value per 471,1 470,2 483,0
share (cents)
(Total shareholders"
equity divided by
number of shares in
issue)
R million R million R million
Related party
transactions with
associates
Sale of services and 0,1
goods
Net amounts due by 0,1
related parties
Contingent liabilities
Performance guarantees 46,1 37,6 48,0
Other 1,9 3,3
Guarantee provided to 67,0
a funder of Gadlex
(Pty) Limited, secured
by Gadlex"s
shareholding in
Business Connexion
(Pty) Limited
Capital commitments
Capital 144,2 0,6 149,6
Lease 145,5 171,9 101,5
First time adoption of International Financial Reporting Standards ("IFRS")
The group is reporting under IFRS for the first time for the six months ended 30
November 2005, and accordingly comparatives have been restated where required.
The unaudited results for the six-month period ended 30 November 2005 have been
prepared in accordance with the group"s accounting policies, which comply with
IFRS. The following IFRSs have impacted the group"s accounting policies:
Property, furniture and fittings, equipment and vehicles
The residual values and useful lives of major furniture and fittings, equipment
and vehicles have been assessed and where applicable depreciation has been
adjusted as required by IAS 16. In addition software has been moved from the
category of equipment which is included in property, furniture and fittings,
equipment and vehicles, to intangible assets - goodwill, software and other.
This has been applied retrospectively.
Capitalised leased assets
The group has elected to recognise the property leases capitalised at fair value
in accordance with the deemed cost exemption in IFRS 1 where an entity may elect
to measure an item at fair value at the date of transition. The residual values
and useful lives of major capitalised leased assets have been assessed, and
where applicable depreciation has been adjusted accordingly.
IFRS 2, Share-based payments
The fair value of equity-settled share-based payment transactions is charged to
the income statement and the reciprocal credit is shown in distributable
reserves in the balance sheet as per IFRS 2.
Foreign currency translation reserve
The group has elected to apply the exemption afforded in IFRS 1 whereby the
foreign currency translation reserve is deemed to be zero at date of transition.
Embedded derivative asset and liability
Amendments made to IAS 39, Financial Instruments: Recognition and Measurement in
respect of foreign currency derivatives embedded in a non-financial host
contract has been adjusted effective 1 June 2005. Comparatives have not been
restated. Embedded derivatives raised due to a transaction concluded in a third
currency have been reversed as the contracts are denominated in a currency that
is commonly used in the economic environment in which the transaction takes
place.
Deferred tax
Deferred tax has been adjusted for the changes made to the carrying value of
assets and liabilities.
Minority interests
Minority interests have been adjusted for the changes made to assets and
liabilities because of the adoption of IFRS.
IFRS 5, Non-current assets held for sale and discontinued operations
IFRS 5 has been applied from 1 June 2005. Comparatives have not been restated.
IFRS 4, Insurance contracts
IFRS 4 has been applied from 1 June 2005. Comparatives have not been restated.
OTHER ADJUSTMENTS
Operating leases
The accounting treatment of lease rentals has been modified to comply with the
International interpretation of the requirements of IAS 17, Leases. Escalations
in operating leases are no longer recognised in the periods in which they are
actually incurred, but charged to the income statement on a straight-line basis
over the term of the lease.
Provisions
Amounts included in other accounts payable have been reclassified to provisions
and provisions have been present valued at an appropriate discount rate.
COMMENTS
Operating results
The group"s focus on revenue growth has achieved positive results. Successes
with new outsource clients and small acquisitions has resulted in the group
achieving an increase in revenue of 25,2%. The group has invested significant
resources and sacrificed margin in order to win long-term contracts, grow
revenue and provide the platform for further expansion in the outsource market.
Operating profit grew by 12% to R72,6 million. Results from the "Rest of Africa"
business were disappointing which has impacted significantly on the technology
infrastructure competencies. Appropriate action is being taken to reduce the
cost base of the "Rest of Africa" business unit. Headline earnings per share
(HEPS) have reduced from 23,8 cents per share to 21,6 cents per share. This is a
consequence of the reduction in associate income following the sale of non-core
investments in the previous period and the payment of STC of R10,2 million in
the current period on the group"s maiden dividend. On a comparable basis HEPS
growth is 14%. The reduction in earnings per share is due to the inclusion in
the November 2004 results of the R73,8 million gain realised on the sale of
Mosaic Software Holdings Limited which represented 30,2 cents per share.
The group remained cash positive during the period with cash generated by
operations amounting to R56,3 million. As a result, the group"s balance sheet
remains robust with cash reserves of R656,9 million.
Corporate activity
During November 2005 the group acquired the business of Bidvest Network
Solutions from the Bidvest group. This significantly expands the group"s ability
to offer value added network services to the client base. The business has been
renamed "Business Connexion Communications".
The preference share investment in Corp Invest 40 Limited, that facilitated the
NITAC empowerment structure in Persetel Q Data Africa Holdings Limited, was
redeemed during July 2005. The group received a cash payment of R22 million and
a dividend in specie of 3,23 million BCX shares and 1,59 million Dimension Data
Plc shares. The Dimension Data shares were subsequently sold.
Dividend
The board has committed to the payment of an annual dividend and an announcement
in this regard will be made at the time of the publication of the group"s full
year results.
Prospects
The group"s focus on revenue growth will continue, enhanced by significant
developments under way within BCX. The building of the new data centre facility
in Midrand and the expansion of Business Connexion Communication"s network will
allow the group to meaningfully expand its service offering to the client base.
The group is also implementing SAP to help provide comprehensive management
information to sustain this growth into the foreseeable future.
An improvement in the ICT sector is being experienced, buoyed by the general
improvement in the local economy. A solid platform is being created for
continued revenue and headline earnings growth. The results in the second six
months are accordingly expected to improve upon those achieved in the first
half.
On behalf of the board
RS Berkowitz PA Watt AC Farthing
Chairman Chief Executive Officer Financial Director
Midrand
9 February 2006
Executive directors:
PA Watt (Chief Executive Officer), LB Mophatlane and
AC Farthing (British) (Financial Director)
Non-executive directors:
RS Berkowitz (Chairman). DM Nurek (Deputy Chairman)
JF Buchanan and NN Kekana
Business Connexion Group Limited:
(Incorporated in the Republic of South Africa)
(Registration number: 1988/005282/06)
(Share code: BCX ISIN: ZAE000054631)
Registered office:
Business Connexion Park North
789 16th Road,
Randjespark
Midrand, 1685
Postal address:
Private Bag X48
Halfway House, 1685
Internet address:
http://www.bcx.co.za
Transfer office and transfer secretaries:
Ultra Registars (Pty) Limited
11 Diagonal Street, Johannesburg, 2001
Sponsor:
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
1 Merchant Place,
Corner Fredman Drive and Rivonia Road, Sandton, 2196
Date: 14/02/2006 07:00:27 AM Produced by the JSE SENS Department
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