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BCX
BCX
BCX - Business Connexion Group Limited - Unaudited Group Results for the six
months ended 30 November 2006
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)
Share code: BCX
ISIN code: ZAE000054631
Unaudited Group Results of Business Connexion Group Limited
for the six months ended 30 November 2006
Creating value together
Condensed group balance sheet
Unaudited Unaudited Audited
30 November 30 November 31 May
R million 2006 2005 2006
ASSETS
Non-current assets
Property, furniture and
fittings, equipment and vehicles 253,6 146,0 218,5
Investment property 10,5 5,5 10,5
Capitalised leased assets 7,7 274,8 9,1
Rental assets 2,8 0,4 2,4
Goodwill 113,5 111,1 113,5
Other intangible assets 110,7 80,6 91,1
Other long-term investments 130,6 131,3 130,4
Long-term loans and advances 2,4 6,4 2,9
Deferred tax assets 37,0 45,1 35,4
668,8 801,2 613,8
Current assets
Inventories 89,0 52,8 49,6
Trade accounts receivable 720,2 525,2 544,6
Other accounts receivable 135,8 127,9 106,3
Other accounts receivable - sale
of properties 69,2
Derivative and embedded
derivative assets 2,4 34,9
Prepayments 62,4 68,7 51,3
Tax prepaid 1,6 3,2 1,6
Non-current assets held for sale 31,9 279,2
Bank balances and cash 562,4 656,9 743,3
1 674,9 1 469,6 1 775,9
TOTAL ASSETS 2 343,7 2 270,8 2 389,7
EQUITY AND LIABILITIES
Equity attributable to parent
shareholders 1 294,9 1 161,1 1 231,4
Minority interests 108,3 76,3 85,7
Total shareholders` equity 1 403,2 1 237,4 1 317,1
Non-current liabilities
Interest-bearing long-term
liabilities 26,0 199,1 6,0
Interest free long-term
liabilities 121,0 133,0 133,9
Post-retirement obligations 6,9 9,9 9,7
Provisions 4,6 2,4 5,6
Deferred tax liabilities 6,9 1,0 0,2
165,4 345,4 155,4
Current liabilities
Short-term borrowings and bank
overdrafts 7,2 42,4 22,1
Non-current liabilities held for
sale 21,1 203,7
Trade accounts payable 184,9 190,6 217,6
Other accounts payable 560,7 436,5 468,9
Provisions 1,2 13,6 0,6
Tax 4,9 4,3
775,1 688,0 917,2
TOTAL EQUITY AND LIABILITIES 2 343,7 2 270,8 2 389,7
Group income statement
Unaudited Unaudited Audited
Six months Six months
ended ended Year ended
30 November 30 November 31 May
R million 2006 2005 2006
Revenue 1 726,3 1 705,9 3 207,7
Cost of sales 1 241,9 1 212,4 2 229,4
Gross profit 484,4 493,5 978,3
Operating expenses 386,4 388,6 767,3
Foreign exchange and derivative
(losses)/gains (0,5) (1,3) 3,3
Operational exceptional
(losses)/gains (0,9) 1,3 0,1
Operating profit before
depreciation and amortisation 96,6 104,9 214,4
Depreciation and amortisation 42,6 32,3 70,6
Operating profit 54,0 72,6 143,8
Investment income 25,2 29,6 56,0
Profit before interest paid 79,2 102,2 199,8
Interest paid 17,6 16,7 34,0
Profit before exceptional items 61,6 85,5 165,8
Exceptional gains 54,9 8,0 18,3
Profit before tax 116,5 93,5 184,1
Tax 11,6 29,6 46,1
Profit for the year 104,9 63,9 138,0
Profit attributable to equity
holders of the parent 81,3 52,3 116,4
Profit attributable to minority
interests 23,6 11,6 21,6
Profit for the year 104,9 63,9 138,0
Earnings per share (cents) 32,3 21,5 46,9
Diluted earnings per share
(cents) 31,4 20,3 44,6
Dividend per share (cents) 15,0 17,0 17,0
Special devidend per share
(cents) 20,0 20,0
Calculation of headline
earnings (R million)
Profit attributable to equity
holders of the parent 81,3 52,3 116,4
(Profit)/loss on sale of
property, furniture and
fittings,
equipment and vehicles (0,1) 0,3 0,4
Profit on sale of land and
buildings (52,0)
Fair value adjustment of
investment property (5,0)
Tax effect on sale of land and
buildings 3,5
Minority effect of headline
earnings adjustments 12,3 (0,1) 1,1
Headline earnings 45,0 52,5 112,9
Weighted average number of
shares in issue (000s) 250 782 243 204 247 867
Headline earnings per share
(cents) 18,0 21,6 45,6
Diluted weighted average number
of shares in issue (000s) 259 121 257 021 260 758
Diluted headline earnings per
share (cents) 17,4 20,4 43,3
Condensed group statement of changes in equity
Equity
Foreign Attribu-
Share currency table Total
capital Transla- Distribu- to parent share-
and tion table Sharehol- Minority holders`
R million premium reserve reserves ders interest equity
Balance at 31
May 2005 -
reviewed 321,9 (0,7) 885,3 1 206,5 65,0 1 271,5
Net movement
not recognized
through the
income
statement (0,1) (0,4) (0,5) (0,3) (0,8)
Foreign
exchange loss
arising on
consolidation (0,4) (0,4) (0,4)
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts (0,4) (0,4) (0,4)
Minority
interest on
foreign
exchange loss 0,3 0,3 (0,3)
Net movement
recognized
through
the income
statement
Attributable
profit per the
income
statement 52,3 52,3 11,6 63,9
Dividend paid (97,2) (97,2) (97,2)
Balance at 30
November 2005 -
unaudited 321,9 (0,8) 840,0 1 161,1 76,3 1 237,4
Net movement
not recognized
through the
income
statement (1,6) 7,8 6,2 (0,6) 5,6
Foreign
exchange loss
arising on
consolidation (2,2) (2,2) (2,2)
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts 4,6 4,6 4,6
IFRS share-
based payments 3,2 3,2 3,2
Minority
interest on
foreign
exchange loss 0,6 0,6 (0,6)
Net movement
recognized
through
the income
statement
Attributable
profit per the
income
statement 64,1 64,1 10,0 74,1
Balance at 31
May 2006 -
audited 321,9 (2,4) 911,9 1 231,4 85,7 1 317,1
Net movement
not recognized
through the
income
statement 2,4 19,2 21,6 (1,0) 20,6
Foreign
exchange loss
arising on
consolidation 2,4 2,4 2,4
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts 17,3 17,3 17,3
IFRS share-
based payments 1,9 1,9 1,9
Minority
interest on
dividends
received from
subsidiaries (1,0) (1,0)
Net movement
recognized
through
the income
statement
Attributable
profit per the
income
statement 81,3 81,3 23,6 104,9
Dividend paid (39,4) (39,4) (39,4)
Balance at 30
November 2006 -
unaudited 321,9 973,0 1 294,9 108,3 1 403,2
Group segmental analysis
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended
30 November 30 November 31 May
R million 2006 2005 2006
BUSINESS GROUPINGS ANALYSIS
Revenue
Services 918,6 994,6 1 743,1
Business applications 231,0 239,0 425,9
Technology infrastructure 541,8 467,0 1 002,0
Communications 34,9 5,3 36,7
1 726,3 1 705,9 3 207,7
Operating profit
Services 77,1 90,1 182,0
Business applications (0,2) 10,9 (9,0)
Technology infrastructure (5,6) (15,8) (10,9)
Communications (7,0) 0,6 (4,7)
Central functions (10,3) (13,2) (13,6)
54,0 72,6 143,8
GEOGRAPHICAL SEGMENTAL
ANALYSIS
Revenue
South Africa 1 586,5 1 606,3 2 987,1
Rest of Africa 118,2 81,5 185,6
United Kingdom 21,6 18,1 35,0
1 726,3 1 705,9 3 207,7
Operating profit
South Africa 48,5 84,4 159,8
Rest of Africa 5,1 (12,0) (18,0)
United Kingdom 0,4 0,2 2,0
54,0 72,6 143,8
Condensed group cash flow statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 November 30 November 31 May
R million 2006 2005 2005
Net cash flow (utilised in)/from
operating activities (172,8) (48,4) 106,3
Net cash flow from/(utilised in)
investing activities 138,9 (65,8) (140,7)
Net cash flow (utilised in)/from
financing activities (146,7) (5,2) 1,1
Net changes in cash and cash
equivalents (180,6) (119,4) (33,3)
Cash and cash equivalents at
beginning of the period 743,0 776,3 776,3
Cash and cash equivalents at end
of the period 562,4 656,9 743,0
Other group salient information
Unaudited Unaudited Audited
30 November 30 November 31 May
2006 2005 2006
Number of shares in issue (000s) 262 637 262 637 262 637
Less: shares held in share
purchase trust and a fellow
subsidiary as treasury shares 10 564 16 284 12 235
252 073 246 353 250 402
Number of options in issue (000s) 15 358 16 393 17 254
Number of dilutive options (000s) 8 339 15 943 8 773
Net asset value per share (cents) 534,3 471,1 501,5
(Total shareholders` equity
divided by
number of shares in issue)
R million R million R million
Contingent liabilities
Performance guarantees 16,8 46,1 34,7
Other 9,6 9,6
Guarantee provided to a funder of
Gadlex (Proprietary) Limited,
secured by
Gadlex`s shareholding in Business
Connexion (Proprietary) Limited 67,0 67,0 67,0
Capital commitments
Capital 37,6 144,2 79,4
Operating lease 118,7 145,5 121,4
The group results are prepared in accordance with IAS 34, Interim Financial
Reporting. The accounting policies used in the preparation of these results are
consistent with those used in the annual financial statements for the year ended
31 May 2006, which comply with International Financial Reporting Standards and
in the manner required by the Companies Act, 1973 as amended.
Commentary
Operating results
The period under review was largely inwardly focused. Gratifying progress was
made in meeting a number of key business imperatives. These included the
migration of all existing clients to the new data centre, the completion of the
SAP implementation and the introduction of a "next generation network" (NGN).
The SAP implementation and data centre migration were essential in the light of
growing client demands for internal systems that would meet or exceed demanding
local and global corporate governance criteria, including Sarbanes-Oxley
requirements. These initiatives are expected to yield benefits in due course.
Management and staff devoted considerable time to the submission of a vast
number of tenders, having been more than double the number usually occurring at
this time of year. It is hoped that the benefits of this time consuming process
will become evident in the next review period at the earliest.
Revenues in all the business segments remained largely unchanged compared to the
same period last year while operating profit declined. The gross margin
reduction is due to the reallocation of expenses of R10 million previously shown
as operating expenses now shown as cost of sales as well as increased employment
costs due to the critical IT skills shortage in South Africa. The performance of
BCX Communications was also adversely affected by the proposed acquisition by
Telkom. Depreciation increased by R10 million in the light of the increased
investments in the data centre and the SAP implementation. Headline earnings per
share (HEPS) of 18,0 cents was achieved compared to 21,6 cents in the previous
period.
The SAP implementation impacted adversely on trade debtors which grew by R180
million. This together with capital expenditure resulted in cash on hand
declining to R562 million. The quality of the debtors` book is good and the
group`s balance sheet remains sound with net current assets of R900 million.
Corporate activity
The proposed acquisition by Telkom remains conditional upon approval by the
Competition Authorities.
The group`s disposal of seven out of eight commercial properties to Growthpoint
Properties Limited, which was announced in mid-2006, was completed and the sale
of the remaining property is expected to be concluded shortly. This transaction
has enabled the group to negotiate substantially better leasing arrangements in
respect of these properties. The transaction has contributed R52 million to the
group`s first half results with attributable profit increasing to R104,9
million, compared to R63,9 million for the previous first half.
Prospects
The continuing uncertainty surrounding the proposed Telkom acquisition will
remain a challenge. The initial SAP implementation is now completed as well as
the data centre migration; management can now focus on developing the business.
Dividend
In keeping with stated policy, it is anticipated that an annual dividend will be
declared to shareholders in respect of the financial year-end.
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 *DM Nurek resigned on 15 December 2006
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: Link Market Services SA (Pty) Limited,
11 Diagonal Street, Johannesburg, 2001
Sponsor: Rand Merchant Bank, A division of FirstRand Bank Limited, 1 Merchant
Place, Cnr Fredman Drive and Rivonia Road, Sandton, 2196
Date: 20/02/2007 07:30:01 Produced by the JSE SENS Department.
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