| Tue 16 May 2006, 16:51 | | DataPro Group Limited - Reviewed Results For The S |
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DTP
DTP
DataPro Group Limited - Reviewed Results For The Six Months Ended 28 February
2006
DataPro Group Limited
(Registration Number: 1998/016433/06)
Share code: DTP & ISIN code: ZAE000058061
("DataPro Group" or "the company")
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2006
Revenue up 57%
Operating profit up 80%
Net profit before tax up 153%
Earnings per share up 36%
Balance Sheets Reviewed Restated Restated
as at - -
28 February audited reviewed
2006 as at as at
R"000 31 August 28
2005 February
R"000 2005
R"000
ASSETS
Non-current assets 127 434 120 500 69 666
Property, plant and 22 430 22 226 15 302
equipment
Intangible assets, 100 712 93 515 51 611
including goodwill
Deferred taxation 4 292 4 759 2 753
Current assets 27 263 14 878 10 503
Inventories 361 137 402
Trade and other 24 174 12 384 6 418
receivables
Taxation 2 2 --
Cash and cash equivalents 2 726 2 355 3 683
Total assets 154 697 135 378 80 169
EQUITY AND LIABILITIES
Capital and accumulated 100 894 88 182 48 985
loss
Share capital and premium 131 321 119 960 75 237
Accumulated loss (22 439) (27 096) (26 252)
Equity Reserves (7 988) (4 682)
Non-current liabilities 16 622 7 246 11 497
Long term borrowings 15 040 5 755 8 708
Financial liability 1 582 1 491 --
Shareholder loans -- -- 2 789
Current liabilities 37 181 39 950 19 687
Trade and other payables 23 454 20 562 10 046
Short term borrowings 9 508 13 955 7 641
Shareholders" loans 2 398 2 055 --
Taxation 1 182 858 --
Bank overdraft 639 2 520 2 000
Total equity and 154 697 135 378 80 169
liabilities
Ordinary shares in issue 315 135 314 369 228 980
at period end (`000)
Net asset value per share 32.0 28.1 21.4
(cents)
Net tangible asset value 0.06 (1.70) (1.15)
per share (cents)
Fully diluted information
(Note 1)
Ordinary shares at period 335 164 316 665 231 276
end (`000)
Net asset value per share 30.1 27.8 21.42
(cents)
Net tangible asset value 0.05 (1.7) (1.1)
per share (cents)
Note 1: As at 28 February 2006, up to 18 500 000 new shares are required to
be issued in relation to the acquisition of the business of Netralink,
pending finalisation of warranted turnover in terms of the acquisition
agreement. In addition, an option to subscribe for 1 528 897 ordinary shares
at 52.2 cents per share was exercised on 21 February 2006 and the shares were
issued after the period end. The Netralink and option shares were not in
issue at period end and accordingly the information has been included in the
fully diluted information.
Income Statements Reviewed Restated Restated -
for the - audited reviewed
six months for the for the six
ended 28 year months
February ended ended 28
2006 31 August February
R"000 2005 2005
R"000 R"000
Revenue 78 740 96 901 49 996
Cost of sales (47 408) (55 936) (27 083)
Gross profit 31 332 40 965 22 913
Operating and administrative (23 165) (29 274) (15 694)
expenses
Other operating income 2 737 244 --
Operating profit before 10 904 11 935 7 219
depreciation and
amortisation
Profit on disposal of assets -- 23 --
Depreciation (3 282) (6 794) (2 933)
Amortisation of intangible (1 188) (1 247) (704)
assets
Operating profit 6 434 3 917 3 582
Finance charges (1 243) (2 536) (1 050)
Investment income 92 191 102
Fair value adjustments (382) 110 (263)
Negative goodwill 1 101 432 --
Net profit before taxation 6 002 2 114 2 371
Taxation (1 345) 1 947 244
Net profit for the period 4 657 4 061 2 615
Calculation of headline
earnings
Net profit for the year 4 657 4 061 2 615
Adjustments for:
Initial listing costs -- 1 010 --
Profit on disposal of assets -- (23) --
Negative goodwill (1 101) (432) --
Tax effect of adjustments -- 7 --
Headline earnings for the 3 556 4 623 2 615
period
Weighted average shares in 306 371 228 980 228 980
issue (`000)
Earnings per share ordinary 1.5 1.8 1.1
share (cents)
Headline earnings per 1.2 2.0 1.1
ordinary share (cents)
Dividend per share (cents) -- 1.0 --
Fully diluted information
(Note 1 below)
Weighted average shares in 306 371 229 209 229 209
issue (`000)
Earnings per share ordinary 1.5 1.8 1.1
share (cents)
Headline earnings per 1.2 2.0 1.1
ordinary share (cents)
Note 1: For purposes of calculating weighted average fully diluted share
information, the issue of 18 500 000 shares for the acquisition of the
Netralink business was assumed with effect from 01 January 2006. In
addition, the basic and fully weighted average number of shares has been
reduced by the shares issued for the acquisition of @lantic, against which a
put option exists.
Abridged Cash Flow Statements Reviewed Restated - Restated -
28 Feb audited Reviewed
2006 for the for the
year ended six months
31 August ended
2005 28
R"000 February
2005
R"000
Net cash inflow/(outflow) from 998 250 (7 079)
operating activities
Dividends paid -- (2 290) --
Net cash outflow from (3 901) (96 247) (41 329)
investing activities
Net cash inflow from financing 5 155 98 112 50 081
activities
Net increase in cash and cash 2 252 (175) 1 673
equivalents
Bank balance/(overdraft) at (165) 10 10
beginning of period
Cash and cash equivalents at 2 087 (165) 1 683
end of period
Statements Share Share Shares Equity Accumulated Total
of Changes Capital premium to be Reserves Loss
in Equity R"000 R"000 issued R"000 R"000 R"000
R"000
Balance at
01
September
2004
- As 75 23 498 -- -- (31 255) (7 682)
previously
reported
- Prior -- -- -- -- 631 631
year
adjustment
Restated at 75 23 498 -- -- (30 624) (7 051)
01 September
2004
Change in -- -- -- -- 1 757 1 757
accounting
policy
Issue of
shares
- For
acquisition 67 5 586 -- -- -- 5 653
of DataPro
from
management
- For cash 87 48 037 -- -- -- 48 124
Write off -- (2 113) -- -- -- (2 113)
of share
issue
expenses
Profit for -- -- -- -- 2 615 2 615
period
Balance at 229 75 008 -- -- (26 252) 48 985
28 February
2005
Issue of
shares
- For the 85 44 915 -- -- -- 45 000
acquisition
of @lantic
Write off -- (277) -- -- -- (277)
of share
issue
expenses
Profit for -- -- -- -- 1 446 1 446
the year
Dividend -- -- -- -- (2 290) (2 290)
paid
Equity
reserve -- -- -- (4 682) -- (4 682)
arising on
acquisition
of @lantic
Balance at 314 119 646 -- (4 682) (27 096) 88 182
31 August
2005
Issue of
shares in 1 387 10 973 -- -- 11 361
terms of
options
exercised
Profit for -- -- -- -- 4 657 4 657
the period
Increase in
equity -- -- -- (3 306) -- (3 306)
reserves as
a result of
acquisition
of
Netralink
Balance at 315 120 033 10 973 (7 988) (22 439) 100 894
28 February
2006
COMMENTARY
The board of directors are pleased to present the company"s results for the
six months ended 28 February 2006, reflecting the second interim results
since the acquisition of DataPro (Proprietary) Limited ("DataPro") which was
effective from 01 September 2004.
These interim financial statements have been prepared in accordance with
International Accounting Standard ("IAS") 34 on Interim Financial Reporting.
The accounting policies adopted for purposes of this report comply with
International Financial Reporting Standards ("IFRS"), with 01 September 2004
being the IFRS transition date. In the prior reporting period, the company
implemented certain accounting policies compliant with IFRS, where early
adoption of such accounting policies was applicable and, accordingly, the
principal accounting policies have been consistently applied.
Opening balances and comparative results have been restated for an adjustment
in terms of IAS16 in relation to the accounting for property, plant and
equipment, which requires that the useful lives of assets and the estimated
residual value of assets be evaluated each year.
The results have been reviewed by Grant Thornton and their unqualified review
opinion is available for inspection at the registered office of the company.
INDUSTRY AND BUSINESS OVERVIEW
The DataPro Group of companies has capitalised on the deregulated telecoms
environment to position itself as a complementary and preferred alternative
to Telkom. DataPro remains a traditional Internet Service Provider (ISP) to
South African businesses with a well established annuity business which is
growing steadily.
The acquisition of Atlantic Internet Services (Proprietary) Limited
("@lantic") on 31 August 2005 has given DataPro Group a large
telecommunication footprint in the consumer market, which is a new area of
business for the group. @lantic has a unique distribution platform via 150
regional franchisees with over 600 small retailers and IT firms in their
regions.
Deflation in the sector has been offset by exponential increases in usage and
users. The demand for Internet bandwidth has doubled over the last 12 months
and the trend is set to continue. Broadband users are expected to increase
from 150,000 to over a million in the next 2 years. This will generate
numerous opportunities as a whole new generation of products will, for the
first time, be available in South Africa.
The industry has been characterised by tremendous change in technological
advancements, the growth of the various networks and the continued regulatory
uncertainty. Corporate South Africa is beginning to scrutinise its telephony
costs and alternative cost effective methods of telecommunications are
increasingly being demanded. These scenarios are comprised of a combination
of Voice-Over-Internet-Protocol ("VOIP"), Least Cost Routing ("LCR") and Call
Back methods (together "Voice").
The advent of VOIP has made South Africa a viable call centre destination.
The major metropolitan regions are promoting call centres and this sector has
significant growth prospects. DataPro Group, through VoxTelecom, has
successfully built a telephony platform to take advantage of the growth in
Voice applications.
FINANCIAL OVERVIEW
Revenue grew R28.7 million (57%) over the comparative period. Gross margins
declined to 39.8% from 45.8%, for the same period, which is attributed to
continued spend on VoxTelecom without matching revenues. Deflation on
revenue pricing, integration of @lantic, and the continued delay of IP
interconnect agreements with the incumbent operator have also hampered
revenue generation. The deflation in pricing has been offset by a large
increase in the number of customers and management of costs. Gross profit
increased by R8.4 million (36.7%) to R31.3 million for the half year and
operating profit before depreciation and amortisation has improved to R10.9
million, an increase of R3.6 million or 51.1%, due to careful management of
operating costs.
Operating profit increased by 79.6% to R6.4 million and profit before
taxation increased by 153% over the prior period, although this was partly
due to negative goodwill on the acquisition of Netralink. Net profit after
taxation reflected an increase of R2 million (78%) over the prior period, to
R4.6 million with headline earnings increasing by 32% to R3.5 million.
Whilst headline earnings per share remained constant at 1.2 cents, earnings
per share reflected an increase of 36% to 1.5 cents per share.
DataPro"s monthly contracted core ISP revenue increased by 22%, net of
deflation, to R47,1 million, which represents strong performance in revenue
growth, in real terms. DataPro"s aggressive broadband strategy contributed
positively from November with increased sales, lower input costs, usage-based
billing and additional products, which increased the gross margin percentage.
ADSL is currently growing at around 12% per month, and DataPro is gaining
market share. This sector is expected to contribute significantly to the
growth in earnings in the next 24 months.
Voice revenue increased from R3.0 million to R5.7 million, an 89% increase
over the prior period. Margins also increased from 16.3% to 19.9% but start-
up costs continued to have an impact on the results for the period, although
less so than the prior period.
The acquisition of @lantic has been successfully integrated into the DataPro
Group. @lantic primarily provides dial-up and ADSL solutions for the Sole-
Owner-Home-Owner ("SOHO") market under its own brand. On acquisition,
@lantic had 34 000 customers through its franchise network, which grew to 38
000 as at 28 February 2006. @lantic revenue in this period grew to R20,6
million compared to R15.9 million for the corresponding period, representing
a 30% increase in annuity revenue. Gross margins increased by approximately
5% through economies of scale following the acquisition of @lantic by DataPro
Group.
With effect from 01 January 2006, DataPro acquired Netralink, a small ISP,
with annuity revenues of approximately R800 000 per month. This acquisition
is expected to contribute positively to the annuity book in the future. In
accordance with IFRS3, negative goodwill of R1,1 million relating to the
acquisition of the Netralink business has been taken to the income statement.
The taxation charge comprises a current taxation charge arising from @lantic
as well as a deferred taxation charge against the deferred taxation asset
raised in the prior period.
The aggregate effect of the adoption of IFRS is set out below:
As Effect Other IFRS
previo of R"000 R"000
usly transit
report ion to
ed IFRS
under R"000
GAAP
R"000
There was no effect on equity as reported at 1 September 2004.
Reconciliation of equity at 28
February 2005
Property, plant and 18 967 (933) (2 15 302
equipment 732)
Intangible assets 48 558 -- 3 053 51 611
Deferred taxation 1 689 244 820 2 753
Total non-current assets 69 214 (689) 1 141 69 666
Total current assets 10 -- -- 10 503
503
Total liabilities 31 -- -- 31 184
184
Share capital and premium 75 237 -- -- 75 237
Accumulated loss (26 (689) 1 141 (26
704) 252)
Total equity 48 533 (689) 1 141 48 985
Reconciliation of equity
at 31 August 2005
Property, plant and 26 852 (1 (3 22 226
equipment 620) 006)
Intangible assets 94 088 -- (573) 93 515
Deferred taxation 3 496 443 820 4 759
Total non-current assets 124 (1 (2 120 500
436 177) 759)
Total current assets 14 878 -- -- 14 878
Long term borrowings 5 755 -- 1 491 7 246
Other payables 39 950 -- -- 39 950
Total liabilities 45 705 -- 1 491 47 196
Share capital and premium 119 -- -- 119 960
960
Equity reserve -- -- (4 (4
682) 682)
Accumulated loss (26 (745) -- (27
351) 096)
Total equity 93 609 (745) (4 88 182
682)
Reconciliation of net profit for period
ended 28 February 2005
Gross profit 22 913 -- -- 22 913
Operating and (17 139) (933) (1 (19
administrative 259) 331)
expenses, including
depreciation and
amortisation
Operating profit 5 774 (933) (1 3 582
259)
Investment income 102 -- -- 102
Finance charges (1 325) -- 275 (1
050)
Fair value -- -- (263) (263)
adjustments
Profit before 4 551 (933) (1 2 371
taxation 247)
Taxation -- 244 -- 244
Net profit for the 4 551 (689) (1 2 615
period 247)
Reconciliation of net profit for period
ended 31 August 2005
Gross profit 40 965 -- -- 40 965
Other operating 354 -- (110) 244
income
Operating and (35 672) (1 -- (37
administrative 620) 292)
expenses, including
depreciation and
amortisation
Operating profit 5 647 (1 (110) 3 917
620)
Investment income 191 -- -- 191
Finance charges (2 536) -- -- (2 536)
Fair value -- -- 110 110
adjustments
Negative goodwill -- -- 432 432
Profit before 3 302 (1 432 2 114
taxation 620)
Taxation 1 504 443 -- 1 947
Net profit for the 4 806 (1 432 4 061
period 177)
SEGMENTAL REPORTING
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, details of which are set out below:
Segment R"m
Data (ISP and ADSL) 50.9
@lantic (ISP and ADSL) 20.7
Voice (VoIP, LCR and Call- 7.1
Back)
Total 78.7
FUTURE PROSPECTS
The DataPro Group has established a platform to build a significant
telecommunications business offering a broad range of services. Convergence
of technologies and deregulation has increased the size of the market,
signifying the strategic importance of the VoxTelecom"s strategy.
ISP, ADSL, and @tlantic will continue to be a key focus for growth. Upgrades
off an ever increasing base provided 50% of current ISP growth within
DataPro. The ADSL sector is experiencing unprecedented growth and DataPro is
a leading player in this market. The @lantic channel is being aligned to
ensure that franchisees continue to be successful through branding,
incentivisation and by increasing the range of services to consumers.
VoxTelecom is expected to start contributing more significantly to revenue
and profit in the foreseeable future, with VOIP technical problems, in the
main, having been resolved and the Interconnects in progress. The method of
reducing telephony costs, by routing calls via the same network, is used
extensively in South Africa. DataPro Group intends to acquire an LCR
business to complete the VoxTelecom offering and to provide a customer base
to sell complementary products. Shareholders are referred to a separate
announcement in relation to this intended acquisition.
ACQUISITIONS AND ISSUE OF SHARES FOR CASH
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 period, this call
option was purchased by DG Reed and JC Herbst through the transfer of shares
to Vantage, whereby Vantage increased its shareholding in DataPro Group.
The option was then exercised as follows:
766 744 ordinary shares at 50.6 cents per share, being a 10% discount to the
30-day weighted average share price as at 25 January 2006;
1 528 897 ordinary shares at 52.2 cents per share, being a 10% discount to
the 30-day weighted average share price as at 21 February 2006
DataPro acquired the business of Netralink with effect from 01 January 2006.
The consideration for the acquisition is R10 175 000 to be settled by the
issue to Netralink of a maximum of 18 500 000 ordinary shares at an issue
price of R0.55 per share. The purchase consideration is subject to an
aggregate warranted turnover of R1 600 000, excluding VAT, being achieved
during January and February 2006 and in the event that such turnover is not
achieved, the purchase consideration will be reduced on a pro rata basis
accordingly. The warranted turnover will be audited after 30 June 2006,
after which the final number of shares will be issued and listed.
SUBSEQUENT EVENTS
With effect from 01 March 2006, DataPro has acquired the business of Bizcall
for a purchase consideration of R1 080 000, payable in cash over a 12 month
period. The acquisition provides for an additional payment in the event that
profit after taxation exceeds R750 000, such that any excess above R750 000
will attract a price: earnings ratio of 2 and will constitute an increase in
the purchase price of the investment.
In addition, subject to certain conditions precedent, DataPro Group has
acquired the business and assets of Definity Telecommunications (Proprietary)
Limited, details of which will be announced in a separate announcement to
shareholders.
DIRECTOR CHANGES
JC Herbst resigned as director on 27 September 2005 and S Wentzel was
appointed as an executive director to the board on 24 November 2005.
DIVIDENDS
With the application of cash generated from operations being focussed on the
acquisition of annuity income streams and the continued investment in VOIP,
the directors have decided not to declare an interim dividend.
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
16 May 2006
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, S Wentzel, M Krastanov*, MC
Mogase* (Alternate CM Lister-James)
* Non-executive
Designated Advisor Transfer Office
Arcay Corporate Services Computershare Investor Services 2004
(Proprietary) Limited
Date: 16/05/2006 04:52:23 PM Produced by the JSE SENS Department
