| Thu 31 Aug 2006, 17:39 | | Metrofile - Reviewed Group Results for the Year En |
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MFL
MFL
Metrofile - Reviewed Group Results for the Year Ended 30 June 2006
Metrofile Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
Share code: MFL & ISIN: ZAE000061727
(Metrofile Holdings or "the company" or "the group")
REVIEWED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2006
CONDENSED CONSOLIDATED INCOME STATEMENT
Reviewed Restated
12 month 12 months
ended ended
30 June 30 June
R"000 Notes 2006 2005
Revenue 276 246 254 437
Operating income before foreign
exchange gains 87 057 75 091
Foreign exchange gains 33
Operating income before depreciation 87 057 75 124
Depreciation (13 306) (11 747)
Exceptional gains/(losses) 2 121 (1 742)
Operating profit before finance costs 75 872 61 635
Income from investments 2 077
Finance income 1 072 1 267
Fair value adjustments on financial
instruments 1 568
Finance costs (49 335) (53 782)
Profit before taxation 31 254 9 120
Taxation (3 843) 4 790
Profit for the year 27 411 13 910
Attributable to:
- Equity holders of the parent 18 461 12 573
- Minority interest 8 950 1 337
Attributable profit 27 411 13 910
Earnings per ordinary share
Earnings per ordinary share (cents) 27,5 18,7
Fully diluted earnings per ordinary
share (cents) 1 24,6 5,9
Further information
Number of ordinary shares in issue
(thousands) 74 077 74 077
Number of ordinary shares in
treasury (thousands) 6 877 6 877
Number of ordinary shares in issue
after deducting treasury shares
(thousands) 67 200 67 200
Weighted average number of ordinary
shares in issue (thousands) 67 200 67 200
RECONCILIATION OF HEADLINE EARNINGS
Reviewed Restated
as at as at
30 June 30 June
R"000 2006 2005
Profit attributable to ordinary shareholders 18 461 12 573
Capital loss on sale of investments 3 084 8 970
Net recovery of loans previously impaired (5 259)
Impairment of plant and equipment 88
Profit on sale of plant and equipment (89) (2 536)
Headline earnings 16 197 19 095
Headline earning per ordinary share (cents) 24,1 28,4
Fully diluted headline earning per
ordinary share (cents) 22,7 7,7
CONDENSED CONSOLIDATED BALANCE SHEET
Reviewed Restated
as at as at
30 June 30 June
R"000 Notes 2006 2005
ASSETS
Non-current assets
Property, plant and equipment 167 836 150 174
Long-term receivables 1 126
Intangibles 2
Current assets 67 840 67 104
Inventories 9 248 8 029
Trade receivables 36 193 38 911
Other receivables 8 504 10 793
Bank balances 13 895 9 371
Total assets 235 676 218 404
EQUITY AND LIABILITIES
Equity capital and reserves (265 271) (295 600)
Equity attributable to equity
holders of parent (277 433) (298 812)
Minority interest 12 162 3 212
Non-current liabilities 430 788 438 568
Interest-bearing provisions 3 32 981 36 898
Interest-bearing subordinated
redeemable convertible loans 4 219 522 190 682
Interest-bearing liabilities 5 171 531 205 338
Deferred taxation liability 6 754 5 650
Current liabilities 70 159 75 436
Trade payables 10 266 7 056
Other payables 24 681 24 795
Deferred revenue 3 374 3 317
Provisions 5 432 6 353
Taxation 8 944 13 600
Interest-bearing liabilities 5 17 462 20 315
Total equity and liabilities 235 676 218 404
Net liability per ordinary
share (cents) 434,5 440,2
NOTES:
1. The adjustment to determine diluted earnings per share is directly
attributable to an interest saving of R11,6 million should the Metrofile
Holdings loan notes convert into ordinary shares. The increase in number of
ordinary shares in issue is calculated by dividing the outstanding capital
amount (excluding any accrued interest) of the Metrofile Holdings loan notes
held by third parties (include notes held by third party creditors and excludes
any inter-company loan notes, share options and any other payables) by the
average market price per share during the period and then adding the calculated
increase in shares to the existing weighted average number of ordinary shares in
issue.
2. As intangibles are not revalued, no balances are reflected on the
consolidated balance sheet. In Metrofile (Pty) Limited goodwill and trademarks
in the amount of R182,5 million are reflected, being the values arising from the
inter-group transactions arising in 2004, less trademark amortisation.
3. Long-term interest-bearing provisions include anticipated claims in terms of
the S311 arrangement. The provisions also include creditors that may become
owners of interest-bearing redeemable convertible loans.
4. Interest-bearing convertible loan notes include R130,1 million of the
Metrofile C and R89,4 million of the Metrofile Holdings loan notes that have
been subordinated by the financiers.
5. Long-term interest-bearing liabilities include the Metrofile A and B loan
notes. Short-term interest-bearing liabilities include the Metrofile B facility
and mortgage bond payable in one year.
6. No segmental analysis has been reported as the group trades in only one
segment and only in South Africa.
7 All the assets have been pledged as security against certain loans to the
group.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Restated
as at as at
30 June 30 June
R"000 2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations before net
working capital changes 85 962 92 754
Decrease/(increase) in net working capital 9 260 (9 544)
Cash generated from operations 95 222 83 210
Net finance costs (47 843) (52 515)
Dividends received 2 077
Normal taxation paid (13 422) (10 594)
Net cash inflow from operating activities 36 034 20 101
Net cash (outflow)/inflow from investing
activities (29 243) 26 552
Net cash outflow from financing activities (2 267) (48 966)
Net increase/(decrease) in cash and cash
equivalents 4 524 (2 313)
Cash and cash equivalents at the beginning
of the year 9 371 11 684
Cash and cash equivalents at the end of
the year 13 895 9 371
STATEMENT OF CHANGES IN EQUITY
Non-
distri- Attri-
Share Share butable butable
capital premium reserves loss
R"000 R"000 R"000 R"000
Balance at 1 July 2004 as
previously reported 408 195 656 (2 827) (521 038)
Adjustments for changes in
accounting policies as
result of IFRS adoption
IAS 16 - Property, plant
and equipment 11 212
Restated balance at
1 July 2004 408 195 656 (2 827) (509 826)
Minorities sold during the
year
Net profit for the year
ended 30 June 2005 12 573
Net profit for the period as
previously reported 19 162
Adjustments for changes in
accounting policies as
result of IFRS adoption
IAS 16 - Property, plant
and equipment 2 448
IFRS 2 - Share-based
payments (5 825)
Effect of IFRS adoption -
loss on disposal of 35% of
investment to minorities (1 875)
Effect of IFRS adoption on
minority interest in
restated earnings for the
period (1 337)
Adjustments for changes in
accounting policies as
result of IFRS adoption
booked directly to equity 5 295
Share of disposal of 35% of
investment to minorities
Foreign currency reserve (91)
Restated balance at
30 June 2005 408 195 656 (2 918) (491 958)
Profit for the period 18 461
Foreign currency reserve 2 918
Balance at 30 June 2006 408 195 656 (473 497)
STATEMENT OF CHANGES IN EQUITY
Minority
share-
holder
interest Total
R"000 R"000
Balance at 1 July 2004 as
previously reported 441 (327 360)
Adjustments for changes in
accounting policies as
result of IFRS adoption
IAS 16 - Property, plant
and equipment 11 212
Restated balance at
1 July 2004 441 (316 148)
Minorities sold during
the year (441) (441)
Net profit for the year
ended 30 June 2005 1 337 13 910
Net profit for the period
as previously reported 19 162
Adjustments for changes in
accounting policies as result
of IFRS adoption
IAS 16 - Property, plant
and equipment 2 448
IFRS 2 - Share-based
payments (5 825)
Effect of IFRS adoption -
loss on disposal of 35% of
investment to minorities (1 875)
Effect of IFRS adoption on
minority interest in
restated arnings for the
period 1 337
Adjustments for changes in
accounting policies as
result of IFRS adoption
booked directly to equity 5 295
Share of disposal of 35% of
investment to minorities 1 875 1 875
Foreign currency reserve (91)
Restated balance at
30 June 2005 3 212 (295 600)
Profit for the period 8 950 27 411
Foreign currency reserve 2 918
Balance at 30 June 2006 12 162 (265 271)
TRANSITIONAL REPORT - RECONCILIATION OF ASSETS, LIABILITIES AND EQUITY
Group
30 June 1 July
R"000 2005 2004
Property, plant and equipment
As previously reported
under SA GAAP 134 400 141 264
IAS 16 15 774 11 212
As reported under IFRS 150 174 152 476
Deferred taxation liability
As previously reported under SA GAAP 3 298 2 134
IAS 16 2 352 2 221
As reported under IFRS 5 650 4 355
Capital and reserves
As previously reported under SA GAAP (308 730) (327 360)
IFRS 2 (292)
IAS 16 13 422 11 212
As reported under IFRS (295 600) (316 148)
Profit/(loss)
As previously reported under SA GAAP 19 162
IFRS 2 (5 706)
IAS 16 - reduced depreciation 2 708
IAS 16 and IFRS2 - deferred taxation (379)
Loss on disposal of 35% interest on restated
retained earnings balances at date of aquisition (1 875)
As reported under IFRS 13 910
Attributable to:
- Equity holders of the parent 12 573
- Minority interest 1 337
Profit per share as previously reported (cents) 28,5
Profit per share as reported under IFRS (cents) 18,7
COMMENTARY ON RESULTS
METROFILE HOLDINGS PROFILE
Metrofile Holdings is quoted in the "Support Services - Business Support
Services" sector of the JSE Limited ("JSE").
The sole business of Metrofile Holdings is its investment of 65% in Metrofile
(Pty) Limited.
Metrofile (Pty) Limited is the South African market leader in the management of
business records through its 16 storage centres and locations throughout South
Africa. It provides full life cycle paper and electronic records management on
or offsite, including collation, scanning, digital conversions, physical or
electronic preservation and destruction services that satisfy legislative and
corporate governance requirements.
POST-BALANCE SHEET EVENTS
DEBT REFINANCING
Shareholders and loan creditors are reminded of the terms of the loans and in
particular the definitions of events of default and the potential convertibility
of some of the loans as set out in various communications to shareholders and in
the annual report.
Subsequent to the reporting date, the interest-bearing debt of R320 million in
Metrofile (Pty) Limited has been refinanced. The conversion rights in the
previous financing agreements have been cancelled. The principal terms of the
new refinancing are that interest is serviced monthly, R145million is repayable
at the end of six years and R175million is repayable equally over years two to
six.
INTEREST RATE SWAP
Subsequent to the reporting date, Metrofile (Pty) Limited has entered into a new
interest rate swap agreement for R50 million over four years to mitigate the
risk of increased borrowing costs on its fluctuating rate loans during this
period. The aggregate balance of interest rate swap agreements entered into by
Metrofile (Pty) Limited is R200 million.
LOAN NOTES IN METROFILE HOLDINGS
Metrofile Holdings loan notes and provisions, on which interest is being accrued
monthly but not paid (as the holding company has no cash flows), totalled
R116,4million. These creditors are also directly and indirectly secured by inter
group loan notes of R298,3million. Any amounts not paid to the note holders by 4
March 2009 may be converted to shares in the company, which would dilute
existing shareholders accordingly. The amount converted could, in certain
circumstances, include the inter-company loans as well.
Planned rights issue
The board is considering a rights issue in the fourth quarter of 2006 to raise
R141million to settle the note holders and other creditors and retain cash for
the remaining contingent liabilities, and thereby reduce the group"s risk
profile to acceptable levels. A further announcement is expected in September.
Financial review
The results for the period reflect a satisfactory improvement on the prior year.
EBITDA before exceptional items increased by 16% to R87,6million. Revenue was
ahead of budget due to improved market penetration and the securing of new
government business.
Headline earnings per share were 24,1 cents. Included in the headline earnings
of R16,2 million are non-recurring dividends received of R2 million and tax
reversals of R6,4 million. If these non-recurring amounts are excluded from
headline earnings, headline earnings per share would be 12,1 cents.
The consolidated balance sheet reflects an excess of liabilities over assets. It
should however be noted that the assets on the consolidated balance sheet are
reflected at historical cost. The board regards the group as a going concern for
the following reasons:
- The total of the compulsory convertible subordinated loans, the provisions
that may become subordinated loans and the estimated value of goodwill and
trademarks in Metrofile not reflected in the consolidated balance sheets, are
together sufficient to restore commercial solvency.
- The group"s cash requirements for debt servicing and capital repayments are
satisfactorily covered by the group"s current and projected cash flows and the
group has unutilised working capital facilities.
- Payments to all trade creditors are up to date.
- Balance sheet assets have been tested for impairment and none is over valued.
- The group is trading in line with budgets.
- Key management is in place with appropriate incentives.
Dividends
No dividends have been declared for the current period and it is not the
intention that any dividends will be declared or paid in the foreseeable future.
Basis of preparation and accounting policies
In terms of the Listings Requirements of the JSE, the group results have been
prepared in accordance with the International Financial Reporting Standards
("IFRS") IAS 34 - Interim Financial Reporting, the Listings Requirements of the
JSE and the South African Companies Act.
The group has adopted and applied IFRS for the first time for the year ending 30
June 2006.
The transition date is 1 July 2004 ("the transition date"). The group"s opening
IFRS balance sheet at the transition date and the comparative results for each
of the reporting periods have therefore been restated to reflect all statements
expected to be applicable at 30 June 2006.
The transitional report contains details of the adjustments effected.
IFRS ADJUSTMENTS IMPLEMENTED
IFRS 2 - Share-based payments
The disposal of 35% of Metrofile Holdings" investment in Metrofile (Pty) Limited
in February 2005 was structured in agreements containing certain call and put
options. In terms of IFRS, these transactions should be seen as share-based
payments and the group accounted for these transactions as such retrospectively.
IAS 16 - Revision of estimated useful lives of property, plant and equipment
Past interpretation of SA GAAP did not provide for the re-assessment of an
asset"s useful life and residual value annually. IAS 16 requires useful lives
and residual values to be reviewed at least at each financial year-end. This
resulted in an increase in distributable reserves with a corresponding increase
in property, plant and equipment.
FURTHER DEVELOPMENTS IN IFRS REPORTING
The annual results have been prepared and presented in terms of IFRS and IAS
standards and interpretations applicable at 30 June 2006. The directors
anticipate that the adoption of these standards and interpretations, which are
in issue but not yet effective, will not have a material impact on the annual
financial statements.
IAS 39 - FINANCIAL INSTRUMENTS
Future interest charges related to certain interest rate swap agreements entered
into were accounted for as financial instruments at fair value in the year under
review.
Directorate and corporate governance
Messers Keshan Pillay and Nigel Matthews were appointed to the board of
directors during the period under review and the board currently comprises one
executive and five non-executive directors.
Commitments
- Operating lease commitments for the next five years amount to R10,8 million.
- Metrofile (Pty) Limited has an expected capital expansion and replacement
projects of R22,6 million for the next financial year. This amount will be
funded from free cash flows generated by operating activities.
CONTINGENT LIABILITIES
MGX/EUREKA PENSION FUND
The group is in the process of transferring the assets of this pension fund to
other funds subject to approval from the Financial Services Board. The company
is of the view that there will be no shortfalls for which it is liable. However,
it is presently considering various legal and actuarial opinions, certain of
which allege that the company may have contingent liabilities of up to R9
million. It is expected that this will be resolved in the coming financial year.
BUSINESSES SOLD
The group has contingent liabilities arising from sale agreements for numerous
businesses and assets. None is expected to become constructive obligations.
Secondary Tax on Companies
The group has contingent liabilities for STC in certain of its dormant and
operating subsidiaries.
SRP/EC-HOLD
The group settled the contingent liability during the year under review and
report that no loss to the group arose from the settlement process due to
indemnities that were held from third parties. The costs of the settlement
process were absorbed by the company.
AUDITORS" REVIEW OPINION
The results have been reviewed by Deloitte & Touche whose review report is
available for inspection at the company"s registered office. The report contains
a matter of emphasis with respect to going concern.
PROSPECTS
The board expects to implement the final restructure of the Metrofile group
during the coming financial year, now that most of the legacy issues of the MGX
era have been resolved. The group also expects to propose to shareholders that
it acquires the 35% interest in Metrofile (Pty) Limited not currently owned by
it through an exchange of shares with the holding company. If this is achieved,
Mineworkers Investment Co. (Pty) Limited will still hold in excess of 25% of the
group thereby ensuring its continued empowerment credentials.
The group expects improved revenue and operating results from Metrofile (Pty)
Limited in the coming year. However, the fact that the non-recurring items in
the current years` results (refer to above) will not be repeated and that the
rights issue will be dilutive, are expected to result in a reduction in headline
earnings per share.
Christopher Seabrooke
Chairman
Graham Wackrill
CEO
31 August 2006
Cleveland
Gauteng
Registered office: 3 Gowie Road, The Gables, Cleveland, Johannesburg *
Registration number: 1983/012697/06 * www.metrofileholdings.com
Sponsor: Standard Bank
Transfer secretaries: Computershare Investor Services Limited, 70 Marshall
Street, Johannesburg, 2001
Directors: CS Seabrooke* (Chairman), DE Baloyi*, K Pillay*, SR Midlane*,
INMathews*, GD Wackrill Company secretary: LMThompson *Non-executive
Date: 31/08/2006 05:39:46 PM Produced by the JSE SENS Department
