| Tue 25 Apr 2006, 17:07 | | Set Point - Unaudited Interim Results for the six |
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STO
STO
Set Point - Unaudited Interim Results for the six months ended 28 February 2006
Set Point Technology Holdings Limited(Incorporated in the Republic of South
Africa)(Registration number: 1996/014334/06)Share code: STO ISIN:
ZAE000013629("Set Point" or "the company" or "the group")
Unaudited Interim Results for the six months ended 28 February 2006
- Headline earnings per share: + 27%- Maiden interim dividend
Consolidated income statements
Unaudited Restated Restated**
six months six months year
ended ended ended
28 February 28 February 31 August
2006 2005 2005
R000 R000 R000
Revenue 137 065 108 441 240 172
Cost of sales (63 534) (57 005) (126 827)
Gross profit 73 531 51 436 113 345
Interest received 1 904 2 011 4 443
Operating expenses (52 581) (36 992) (82 788)
Operating profit before goodwill 22 854 16 455 35 000
impairment and capital items
Goodwill impairment - - (679)
Capital items (37) 401 433
Profit before finance costs 22 817 16 856 34 754
Finance costs (6 560) (4 003) (9 678)
Profit before taxation 16 257 12 853 25 076
Taxation (5 600) (4 560) (8 158)
Profit for the period 10 657 8 293 16 918
Attributable to:
- Equity holders of Set Point 10 519 7 639 16 080
- Minority interests 138 654 838
10 657 8 293 16 918
Weighted average number of 280 119 242 109 242 109
shares in issue (thousands)
Fully diluted weighted average 283 017 247 734 246 814
number of shares in issue
(thousands)
Earnings per share (cents) 3.8 3.2 6.6
Headline earnings per share 3.8 3.0 6.7
(cents)
Diluted earnings per share 3.7 3.1 6.5
(cents)
Diluted headline earnings per 3.7 2.9 6.6
share (cents)
Calculation of headline earnings
Profit attributable to equity 10 519 7 639 16 080
holders of Set Point
Adjusted for:
Goodwill impairment - - 679
Loss/(profit) on sale of 37 (401) (433)
property, plant and equipment
Headline earnings 10 556 7 238 16 326
Abridged consolidated statements of changes in equity
Opening balances 86 949 63 892 63 892
Shares issued 25 437 - 13 825
Acquisition of minority - (3 105) (4 945)
interests
Profit for the period 10 519 7 639 16 080
attributable to equity holders
of Set Point
Dividends (5 562) (3 641) (3 639)
Share based compensation - share 22 - 21
options
Share based payment - BEE - - 1 715
transaction
Equity attributable to equity 117 365 64 785 86 949
holders of Set Point
Minority interests 625 600 724
Total equity 117 990 65 385 87 673
Reconciliation between IFRS and
previous SA GAAP
Profit attributable to equity
holders of Set Point
Previously reported under SA 6 812 17 831
GAAP
Transition to IFRS
IAS 16 - Prospective (12) (15)
depreciation adjustments
IFRS 2 - Share based - (21)
compensation - share options
IFRS 2 - Share based payment - - (1 715)
BEE transaction
IFRS 3 - Cessation of goodwill 839 -
amortisation
As reported under IFRS 7 639 16 080
1 September 28 February 31 August
2004 2005 2005
R000 R000 R000
Reconciliation of total equity
Previously reported under SA 69 241 65 031 87 688
GAAP
SA GAAP Adjustments to
accounting policies
IAS 17 - Straight-lining of - (473) -
operating leases *
Transition to IFRS
IAS 16 - Prospective - (12) (15)
depreciation adjustments
IFRS 3 - Cessation of goodwill - 839 -
amortisation
As reported under IFRS 69 241 65 385 87 673
Notes* Straight-lining of operating leases was taken into account in compiling
the August 2005 results and is presented here for clarity in interpreting the
previously presented results for the six months ended 28 February 2005.
** These balances have been audited with the exception of the effects of the
changes in accounting policies relating to the adoption of IFRS
Consolidated balance sheets
Unaudited Restated Restated
28 February 28 February 31 August
2006 2005 2005
R000 R000 R000
Assets
Non-current assets 145 028 56 341 136 367
Property, plant and equipment 26 221 18 156 25 564
Goodwill and intangibles 111 497 29 018 100 060
Deferred taxation 7 310 9 167 10 743
Current assets 116 905 85 730 98 698
Inventories 42 565 30 070 36 759
Receivables 74 269 55 595 59 385
Cash and cash equivalents 71 65 2 554
Total assets 261 933 142 071 235 065
Equity and liabilities
Total equity 117 990 65 385 87 673
Share capital and reserves 117 365 64 785 86 949
Minority interests 625 600 724
Non-current interest bearing 54 379 14 102 70 706
liabilities
Contingent purchase 43 997 7 838 56 304
consideration
Interest bearing liabilities 10 382 6 264 14 402
Current liabilities 89 564 62 584 76 686
Interest bearing liabilities 33 167 21 688 6 246
Payables 55 743 39 253 65 207
Taxation liabilities 654 1 643 5 233
Total equity and liabilities 261 933 142 071 235 065
Shares in issue (net of treasury 307 619 245 377 277 619
shares) (000"s)
Net asset value per share 38 26 31
(cents)
Debt-equity ratio (excluding 37 43 21
contingent purchase
consideration)
Debt-equity ratio (including 74 55 85
contingent purchase
consideration)
1. Contingent liabilities
Performance guarantees 1 691 673 1 306
Other guarantees 400 530 400
2 091 1 203 1 706
2. Capital commitments
There are no material capital
commitments at 28 February 2006.
Abridged consolidated cash flow statements
Unaudited Unaudited Audited
six months six months year
ended ended ended
28 February 28 February 31 August
2006 2005 2005
R000 R000 R000
Cash flows from operating (20 928) (4 376) 24 108
activities
Cash generated by operations 24 881 17 121 38 096
before net working capital
changes
(Increase)/decrease in net (30 981) (9 756) 1 411
working capital
Cash (utilised)/generated by (6 100) 7 365 39 507
operations
Net finance costs (2 284) (1 992) (4 006)
Taxation paid (6 745) (5 660) (7 244)
Dividends paid (5 799) (4 089) (4 149)
Cash flows from investing (5 058) (829) (22 835)
activities
Acquisition of business - (104) (13 494)
Increase in investments (365) - (5 637)
Net replacement of property, (4 693) (725) (3 704)
plant and equipment
Cash flows from financing 23 503 2 448 4 161
activities
Proceeds from issue of shares 25 437 - 13 825
(Decrease)/increase in deferred (25 500) 7 838 -
purchase consideration
Acquisition of minorities - (8 058) -
Decrease in interest bearing (4 020) (3 585) (475)
debt non-current
Increase/(decrease) in interest 27 586 6 253 (9 189)
bearing debt current
Cash and cash equivalents
Net cash (utilised)/generated (2 483) (2 757) 5 434
Overdraft in subsidiary acquired - - (5 702)
At beginning of period 2 554 2 822 2 822
At end of period 71 65 2 554
Segmental information
Profit/
(loss)befor Segment
Revenue e assets
capital
items
Divisions R000 % R000 % R000
Analytical 30 404 22.2 9 119 40.0 39 546
Fluid Handling 52 178 38.1 10 401 45.6 74 531
Instrumentation 2 348 1.7 (497) (2.2) 15 281
Mining 52 135 38.0 11 395 50.0 131 795
Technology
Central - - (7 601) (33.4) 780
Services
137 065 100.0 22 817 100.0 261 933
Segmental information (contd)
Segment Capital Depreciation Number of
liabilities expenditure employees
Divisions R000 R000 R000 # %
Analytical 13 663 3 009 1 347 172 30.3
Fluid Handling 27 184 545 496 98 17.3
Instrumentation 557 32 90 6 1.1
Mining 91 259 1 045 1 047 271 47.7
Technology
Central Services 11 280 148 329 21 3.6
143 943 4 779 3 309 568 100.
0
Review of operations
PROFILE
Set Point operates through three core activities:
- Analytical Services operates through specialised laboratories which offer
expert analysis for the precious metals exploration industry and condition
monitoring of fluids.
- Fluid Handling supplies medium technology to the petrochemical and mining
industries.
- Mining Technology comprises the manufacture, supply and repair of equipment
and services used in underground mining activities.
FINANCIAL RESULTS AND REVIEW OF OPERATIONS
The results for the half year under review have shown a significant improvement
compared with the previous period. This has been achieved through both organic
and acquisitive growth.
Weighted headline earnings per share increased by 27% to 3.8 cents
notwithstanding the increase in ordinary shares issued. Group revenue rose by
26% to R137 million, gross profit margins improved from 47% to 54% and operating
profit before taxation improved by 39% to R22, 8 million.
"On the balance sheet, total equity increased to R117m following an issue of 30m
shares to the vendors of Seran arising from an amendment to the purchase
agreement as set out below. Short term interest-bearing liabilities were high
at the reporting date due to higher receivables and lower payables arising from
the timing of sales to customers for fixed capital contracts in the mining
technology division. This working capital peak will reverse in the next three
months and borrowings should reduce materially by the year end.
Discussions are in progress to settle a further portion of the deferred purchase
consideration to vendors in shares which will further improve the overall debt:
equity ratio."
CORPORATE ACTIVITY
Seran Engineering and Supplies
As previously reported the group acquired Seran with effect from 1 July 2005.
The acquisition agreement provided for the settlement of the remaining
contingent purchase or additional amount, determined by reference to Seran"s PAT
multiplied by 4.5 - less payments to date, in cash or shares. In terms of an
Addendum to the Sale of Business Agreement, announced on SENS on 5 December
2005, the additional amount payable will be calculated by multiplying PAT by 3.5
(not 4.5) and Sethold issued 30 million shares to the vendor. These shares were
issued ex-dividend, at 85 cents per share on 16 January 2006. These shares may
not be sold nor otherwise alienated until 30 November 2008 as Sethold retains a
claw back should the profits be insufficient to support the value of shares
issued. The issuing of these shares has;
- Strengthened the balance sheet
- Reduced the uncertainty relating to the contingent purchase consideration, and
- Resulted in a reduction of the estimated purchase price from R80 million to
R62 million.
Vikori Trading CC ("Mineral Mining")
Shareholders" attention is drawn to the announcement that, effective 2 March
2006, the group had acquired the business of Vikori Trading CC. This business,
trading under the name Mineral Mining, supplies conveyor belting.
The purchase consideration is based on the average after tax profits for the 3
years to 31 August 2008 multiplied by a P/E ratio of 3, plus payment in respect
of fixed assets of R1.4 million and the obligation to purchase inventory of R6
million by no later than 15 December 2006. Managements best estimate of the
purchase consideration is R15 million.
The maximum purchase consideration, excluding inventories, for the business is
R35 million.
PROSPECTS
The group expects improved revenue and operating results for the year ending
31st August 2006.
BASIS OF PREPARATION
Set Point has adopted International Financial Reporting Standards ("IFRS") for
the year ending 31 August 2006. The condensed consolidated interim financial
statements have been prepared in accordance with IAS 34 - Interim financial
reporting, and in compliance with the Listing Requirements of the JSE Limited
and the Companies Act of South Africa. These are Set Point"s first IFRS
condensed consolidated interim financial statements and IFRS1 - First-time
adoption of International Financial Reporting Standards has been applied.
These condensed consolidated interim financial statements have been prepared on
the basis of IFRS and interpretation statements in issue that will be effective
at the Set Point"s first IFRS annual reporting date, 31 August 2006. As a result
of ongoing review and possible amendments by interpretive guidance from the
International Accounting Standards Board and International Financial Reporting
Interpretations Committee, IFRS finally in effect at 31 August 2006 may differ
from IFRS and interpretation statements applied in preparing the condensed
consolidated interim financial statements.
An explanation of how the transition to IFRS has affected the reported financial
position and financial performance of the Set Point is provided below:
IFRS adjustments implemented
a. IFRS 2 - Share-based Payment
In accordance with IFRS 2, the group has recognized an expense in the income
statement for share options granted to employees, with a corresponding credit to
equity, representing the fair value of outstanding employee share options. The
fair value at grant date is charged to profit or loss over the relevant vesting
periods, adjusted to reflect actual and expected vesting levels. Fair value is
determined using the "Black Scholes" pricing model. The IFRS 1 exemption was
elected, limiting the equity instruments included in the valuation to those
granted after 7 November 2002 that vested after 1 January 2005.
The group has also recognized the R1.7 million discount in the previous years
results granted on the issue of 35 million ordinary shares in terms of the BEE
transaction as approved at the general meeting of shareholders held on 29 June
2005.
b. IAS 16 - Property, Plant & Equipment
Past interpretation of SA GAAP did not provide for the re-assessment of an
asset"s useful life and residual value annually. IAS16 requires useful lives and
residual values to be reviewed at least at each financial year-end with
appropriate prospect adjustments to the depreciation charge. This resulted in an
increase in distributable reserves with a corresponding increase on property,
plant and equipment.
c. IFRS3 - Business combinations
In accordance with IFRS goodwill is no longer amortized but is subject to annual
impairment tests. Set Point has made an election in terms of IFRS 1 to apply the
requirements of IFRS 3 to all business combinations with effective dates on or
after 1 April 2004. The classification and accounting treatment of business
combinations with effective dates prior to 1 April 2004 has not been
reconsidered and previously reported goodwill has been included on the basis of
its deemed cost.
DIVIDEND
Dividend Policy
The group dividend policy has been changed. Dividends will now be paid based on
a cover of 3 - 4 times and an interim dividend will be implemented for the first
time in the Set Point Group.
Dividend Declaration
Notice is hereby given that interim dividend number 5 of 1 cent per share has
been declared in respect of the year ending 31 August 2006.
This dividend will be paid out of profits as determined by the directors, to
shareholders recorded as such in the register at the close of business on
the record date, Friday, 30 June 2006. The last date to trade, to
participate in the dividend, is Friday, 23 June 2006. Shares will commence
trading ex-dividend from Monday, 26 June 2006.
The important dates pertaining to this dividend for shareholders trading on the
JSE Limited are as follows:
Last day to trade "CUM" dividend Friday, 23 June 2006
Shares trade "EX" dividend from Monday, 26 June 2006
Record date Friday, 30 June 2006
Payment date Monday, 3 July 2006
Share certificates may not be dematerialised or rematerialised between
Monday, 26 June 2006 and Friday, 30 June 2006, both days inclusive.
CS SeabrookeChairman
25 April 2006
Directors: CS Seabrooke*+ (Chairman), MJ Smith (Deputy Chairman),
EG Gregor (Chief Executive Officer), Dr DE Baloyi*+, GJ Horsfield, BHKent*+, JM
Judin*, GE Nel*(* Non-executive) (+ Independent), Company Secretary: ND
Kennelly
Registered Office: 30 Electron Avenue, Isando 1601, (PO Box 856 Isando 1600)
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited (Reg
no: 1958/003546/06), Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO
Box 61051, Marshalltown 2107)
Sponsor: The Standard Bank of South Africa Limited, Registration number
1962/000738/06
www.setpoint.co.za
Date: 25/04/2006 05:07:38 PM Produced by the JSE SENS Department
