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BTG
BTG
Bytes - Interim Financial Results for the six months ended 31 August 2006
Bytes Technology Group
IT Services for the Enterprise
Registration number 1911/003874/06
ISIN: ZAE000029526
Share code: BTG
Unaudited Consolidated Interim Financial Results
for the six months ended 31 August 2006
HIGHLIGHTS FOR THE SIX MONTHS
* Revenue up 15%
* Operating profit up 23%
* Headline earnings per share up 25%
* Balance sheet remains strong
Income statements
Six months Six months Year
ended ended ended
31 August 31 August 28
February
% 2006 2005 2006
Figures in R Change (Unaudited) (Unaudited) (Audited)
million
Revenue 15 1 963 1 712 3 470
Operating profit 23 157 128 282
before capital
items
Finance income 30 11 21
Finance expense (30) (20) (36)
Capital items - (3) (38)
Profit before 157 116 229
taxation
Taxation (56) (40) (48)
Profit for the 101 76 181
period
Attributable to:
Equity holders of 96 73 173
BTG
Minority interest 5 3 8
Profit for the 101 76 181
period
Weighted number of 165,4 162,7 163,6
shares in issue
(million)
Earnings per share 30 58,1 44,7 105,7
- basic (cents)
Earnings per share 21 43,9 36,4 85,5
- diluted (cents)
Dividends paid per 45,0 32,0 32,0
share (cents)
Headline earnings 25 58,1 46,5 127,7
per share - basic
(cents)
Headline earnings 18 43,9 37,2 100,9
per share - diluted
(cents)
Adjusted headline 25 58,1 46,5 109,4
earnings per share
- basic (cents)
Adjusted headline 18 43,9 37,2 88,1
earnings per share
- diluted (cents)
Notes
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2006 2005 2006
Figures in R million (Unaudited) (Unaudited) (Audited)
Basis of preparation
The consolidated financial
statements have been
prepared in accordance
with IAS 34 - Interim
Financial Reporting. The
accounting policies used
in the preparation of
these interim results are
consistent with those used
in the annual financial
statements for the year
ended 28 February 2006.
However, certain
adjustments have been made
to the comparative revenue
line to eliminate inter
company revenues or to
more appropriately reflect
revenue disclosure.
1. Headline earnings and
adjusted headline earnings
Attributable earnings is
reconciled to headline
earnings as follows:
Attributable to equity 96 73 173
holders of BTG
Capital items - 3 38
Portion of capital items - - (2)
attributable to minority
interest
Headline earnings 96 76 209
Deferred tax assets raised - - (32)
Portion of deferred tax - - 2
assets raised attributable
to minority interest
Adjusted headline earnings 96 76 179
2. Diluted earnings
Diluted earnings, diluted
headline earnings and
diluted adjusted headline
earnings have been
calculated on the basis
that Kagiso Strategic
Investments (Pty) Limited
exercised its full option
on 22% of the shares in
Bytes Technology Group
South Africa (Pty)
Limited.
Earnings attributable to
equity holders of BTG is
reconciled to diluted
earnings as follows:
Earnings attributable to 96 73 173
equity holders of BTG
Additional 22% minority (18) (11) (28)
interest
Diluted earnings 78 62 145
Headline earnings are
reconciled to diluted
headline earnings as
follows:
Headline earnings 96 76 209
Additional 22% minority (18) (13) (38)
interest
Diluted headline earnings 78 63 171
Adjusted headline earnings
are reconciled to diluted
adjusted headline earnings
as follows:
Adjusted headline earnings 96 76 179
Additional 22% minority (18) (13) (30)
interest
Diluted adjusted headline 78 63 149
earnings
3. Reconciliation between
number of shares used for
earnings per share and
diluted earnings per share
Weighted average number of 165,4 162,7 163,6
shares in issue
Dilutive options 13,3 6,8 5,8
Number of shares used to 178,7 169,5 169,4
calculate dilution
4. Acquisitions
During the period the group made certain complementary acquisitions locally
totalling R12 million in addition to acquiring a Xerox dealer in the UK,
Xclusive Solutions, for a total consideration, subject to certain "earn-
out" targets, of GBP4,4 million. In the six months to 31 August 2006 these
acquisitions contributed R5,1 million to
the consolidated profit before tax.
The acquisitions had the following effect on the group"s assets and
liabilities:
Carrying Fair value Recognised
value adjustments values
Non-current asset 2 20 22
Current assets 23 - 23
Current liabilities (16) - (16)
Net identifiable assets 9 20 29
and liabilities
Goodwill on acquisition 31
Total purchase 60
consideration
Less deferred purchase (13)
consideration
Consideration paid in cash 47
Balance sheets
31 August 31 August 28
February
2006 2005 2006
Figures in R million (Unaudited) (Unaudited) (Audited)
ASSETS
Non-current assets 801 694 715
Property, plant and 121 112 113
equipment
Intangible assets 471 450 417
Non-current loans 70 47 33
receivable
Finance lease assets 70 29 68
Available-for-sale 20 20 20
investment
Deferred taxation 49 36 64
Current assets 1 113 878 964
Inventories 200 153 164
Loans receivable 34 28 27
Accounts receivable 759 697 585
Cash and cash equivalents 120 - 188
TOTAL ASSETS 1 914 1 572 1 679
EQUITY AND LIABILITIES
Total equity 641 497 604
Equity holders of BTG 626 487 589
Minority interest 15 10 15
Non-current liabilities 135 55 95
Liabilities 50 21 16
Finance lease liabilities 70 29 68
Lease accrual 15 5 11
Current liabilities 1 138 1 020 980
Borrowings 34 28 32
Accounts payable and 897 811 814
provisions
Bank overdraft 153 150 90
Taxation 54 31 44
TOTAL EQUITY AND 1 914 1 572 1 679
LIABILITIES
Shares in issue at end of 165,8 163,3 165,0
period (million)
Net asset value per share 386,0 304,3 365,1
(cents)
Net tangible asset value 101,2 28,8 113,3
per share (cents)
Reconciliation of net debt
31 August 31 August 28
February
2006 2005 2006
Figures in R million (Unaudited) (Unaudited) (Audited)
Liabilities (50) (21) (16)
Finance lease liabilities (70) (29) (68)
Borrowings (34) (28) (32)
Total debt per balance (154) (78) (116)
sheet
Less related finance lease 70 29 68
assets
Less related loans 34 28 27
receivable
Total debt (50) (21) (21)
Cash and cash equivalents 120 - 188
Bank overdraft (153) (150) (90)
Total net (debt)/cash (83) (171) 77
Condensed cash flow statements
Six months Six months Year
ended ended ended
31 August 31 August 28
February
2006 2005 2006
Figures in R million (Unaudited) (Unaudited) (Audited)
Operating activities (62) (70) 176
Cash generated by 193 136 319
operations
Net change in working (141) (100) (2)
capital
Net finance costs - (9) (15)
Taxation paid (39) (42) (71)
13 (15) 231
Dividends paid (75) (55) (55)
Investing activities (112) (172) (220)
Financing activities 43 (199) (149)
Decrease in cash and cash (131) (441) (193)
equivalents
Cash and cash equivalents 98 291 291
at beginning of period
Cash and cash equivalents (33) (150) 98
at end of period
Abridged segmental analysis
Six months Six months Year
ended ended ended
31 August 31 August 28
February
2006 2005 2006
Figures in R million (Unaudited) (Unaudited) (Audited)
Revenue
ICT Infrastructure and 829 753 1 520
Services
Software, Consulting and 685 612 1 189
Document Services
Specialised Equipment and 487 381 823
Services
Corporate and Other 2 1 2
Consolidation eliminations (40) (35) (64)
1 963 1 712 3 470
Operating profit before
capital items
ICT Infrastructure and 52 37 72
Services
Software, Consulting and 68 68 114
Document Services
Specialised Equipment and 61 54 120
Services
Corporate and Other (24) (31) (24)
157 128 282
GEOGRAPHICAL SEGMENTS
Revenue by market
South Africa 1 494 1 337 2 751
United Kingdom 433 329 634
Rest of Africa 76 81 149
Consolidation eliminations (40) (35) (64)
Total all operations 1 963 1 712 3 470
Operating profit before
capital items
South Africa 132 107 243
United Kingdom 12 9 18
Rest of Africa 13 12 21
Total all operations 157 128 282
Statements of changes in equity
Deferred
Share hedging Accumulated
Figures in R million capital Reserves reserve deficit
Balance at 28 703 20 (1) (289)
February 2005
(audited)
Recognised income - - - 73
and expense
Foreign currency (1)
translation
differences
Profit for the 73
period
Share based payments 1
Transactions with 6 - - (52)
shareholders
Dividend paid (52)
Issue of share 6
capital
Balance at 31 August 709 20 (1) (268)
2005 (unaudited)
Recognised income - (1) (4) 100
and expense
Foreign currency (2)
translation
differences
Profit for the 100
period
Share based payments 1
Fair value (4)
adjustment to cash
flow hedge
Transactions with 7 - - -
shareholders
Issue of share 7
capital
Balance at 28 716 19 (5) (168)
February 2006
(audited)
Recognised income - 4 4 96
and expense
Foreign currency 1
translation
differences
Profit for the 96
period
Share based payments 3
Fair value 4
adjustment to cash
flow hedge
Transactions with 3 - - (70)
shareholders
Dividend paid (70)
Issue of share 3
capital
Balance at 31 August 719 23 (1) (142)
2006 (unaudited)
Statements of changes in equity
Premium on
minority Minority Total
equity
Figures in R million transactio Total interest equity
ns
Balance at 28 27 460 10 470
February 2005
(audited)
Recognised income - 73 3 76
and expense
Foreign currency (1) (1)
translation
differences
Profit for the 73 3 76
period
Share based payments 1 1
Transactions with - (46) (3) (49)
shareholders
Dividend paid (52) (3) (55)
Issue of share 6 6
capital
Balance at 31 August 27 487 10 497
2005 (unaudited)
Recognised income - 95 5 100
and expense
Foreign currency (2) (2)
translation
differences
Profit for the 100 5 105
period
Share based payments 1 1
Fair value (4) (4)
adjustment to cash
flow hedge
Transactions with - 7 - 7
shareholders
Issue of share 7 7
capital
Balance at 28 27 589 15 604
February 2006
(audited)
Recognised income - 104 5 109
and expense
Foreign currency 1 1
translation
differences
Profit for the 96 5 101
period
Share based payments 3 3
Fair value 4 4
adjustment to cash
flow hedge
Transactions with - (67) (5) (72)
shareholders
Dividend paid (70) (5) (75)
Issue of share 3 3
capital
Balance at 31 August 27 626 15 641
2006 (unaudited)
Supplementary information
Six months Six months Year
ended ended ended
31 August 31 August 28
February
2006 2005 2006
Figures in R million (Unaudited) (Unaudited) (Audited)
Amortisation of intangible 6 2 11
assets
Depreciation of property, 21 19 40
plant and equipment
Foreign exchange 1 4 (3)
gains/(losses)
Capital expenditure 26 23 67
Capital commitments 1 - -
Contingent liabilities 5 - 6
Operating lease
commitments
Payable within the next 12
months:
- property 35 41 38
- plant, equipment and 8 17 5
vehicles
Less related straight- (4) (2) (3)
lined lease accrual
39 56 40
Payable thereafter:
- property 221 226 250
- plant, equipment and 13 11 21
vehicles
Less related straight- (15) (5) (11)
lined lease accrual
219 232 260
Total 258 288 300
Message to Stakeholders
COMMENTARY
Your directors are pleased to report on a further six months of
satisfactory progress for the group with virtually all operations improving
their performances compared with the similar period in the previous year.
Overall revenue showed a very acceptable increase of 15% of which
acquisitions accounted for almost four percentage points. In the light of
continuing low inflation and margin pressures, combined with a relatively
strong rand during the period under review, an organic increase of over 11%
is encouraging.
Once again the Information Technology market continues to present many
challenges and your directors remain convinced that further consolidation
in the sector is essential if economies of scale are to be accessed.
RESULTS
Operating profit improved by 23% from R128 million to R157 million with the
margin moving from 7,3% to 8,0% largely due to rationalisation of operating
expenses.
Net interest charges reduced from R9 million to a negligible amount on the
back of lower borrowings and higher investment income. A continuance of
this trend is anticipated.
Headline earnings per share at 58,1 cents improved by 25% over the
comparable period"s figure of 46,5 cents. Basic earnings per share moved
from 44,7 cents to 58,1 cents, an increase of 30%.
The net borrowing position at half year was R83 million, R88 million better
than that of a year ago. During the period under review, significant cash
outlays were incurred on dividend and tax payments, increased working
capital requirements and acquisitions. The second half will, as usual, show
a much improved position.
OPERATIONS
As mentioned earlier most operations continued to show improved results,
with the significant exception of our IT Solutions (Plato) operation in the
United Kingdom. This very disappointing performance was due to several
factors, some controllable and others not. A further radical restructuring
of this business has been implemented incurring one-off costs of over R2
million. In contrast, our other two United Kingdom operations produced
excellent results so that overall operating profit in the United Kingdom
improved by 33% to R12 million.
Due to the completion of a large, non-recurring contract in Botswana,
operating profit from the rest of Africa was relatively flat when compared
to the corresponding period in the prior year. The income now being
achieved is of a sustainable nature. Distribution of Xerox and Alcatel
product in many African countries yielded profits of some R10 million in
aggregate.
ACQUISITIONS
During the period under review several acquisitions were made involving an
outlay of approximately R50 million. The major portion of this expenditure
was the purchase of Xclusive Solutions Limited, a Xerox dealer in the
United Kingdom, for GBP3,16 million. Further payments of up to R2,5 million
locally and GBP1,24 million in the United Kingdom may be incurred on these
acquisitions if certain earn out targets are achieved.
Additionally, effective 1 September 2006, a further "Xerox" business in the
United Kingdom, Vantage Business Systems Limited, was acquired for an
effective GBP1,5 million.
We continue to pursue an ongoing acquisition strategy. The IFRS accounting
requirement to amortise intangible assets (other than goodwill), which in
the IT industry are an essential part of the business value being acquired,
will however continue to adversely affect earnings.
PROSPECTS
Your board is confident that a satisfactory level of headline earnings will
be achieved in the second half, ensuring an acceptable overall increase for
the full year. An environment, however, of increasing interest rates along
with increasing competition in many areas, will progressively challenge
double digit organic growth.
DIVIDEND
In keeping with the group"s policy of declaring a single dividend at the
end of the financial year, no dividend has been proposed at the interim
stage.
It is envisaged that the dividend for the year will increase commensurately
with earnings.
ACKNOWLEDGEMENTS
Our business, as ever, remains totally dependent on our customers, staff
and business partners. We are indebted to all of them for their support. In
particular, the board appreciates the significant ongoing contribution made
by our Black Economic partner, Kagiso, in all areas of our operations.
By order of the board
Dr Bill Venter David Redshaw Peter Riskowitz
Chairman Chief Executive Group Financial
Officer Director
4 October 2006
Directors
Dr WP Venter (Chairman), PD Redshaw (Chief Executive Officer)+, RJ Abraham,
RJ Griggs+,
SM Pityana*, DC Radley*, DM Ramaphosa*, PR Riskowitz, Dr HA Serebro*, RE
Venter*, PL Wilmot*
* Non-executive + British
Secretaries
BTG Management Services (Pty) Limited
per Ms E Viljoen
Sponsor
Nedbank Capital
The annual financial results are also available on the internet at
www.btgroup.co.za
Date: 04/10/2006 01:45:15 PM Produced by the JSE SENS Department
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