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MFL - Metrofile Holdings - Reviewed Group Results for the six months ended
31 December 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 SIX MONTHS ENDED 31 DECEMBER 2006
Condensed income statement
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
R'000 Notes 2006 2005 2006
Revenue 149 912 136 626 276 246
Operating income
before foreign
exchange gains 47 707 42 397 87 057
Foreign exchange 37
gains
Operating income
before depreciation
and exceptional 47 707 42 434 87 057
items
Depreciation (5 709) (5 574) (13 306)
Capital profit on
sale of equity
instruments 1 2 994
Exceptional gains 38 3 706 2 121
Operating profit 45 030 40 566 75 872
before finance
costs
Income from 2 077
investments
Finance income 571 398 1 072
Fair value
adjustments on
financial
instruments (1 935) (3 993) 1 568
Finance costs 1 (28 403) (28 635) (49 335)
Profit before 15 263 8 336 31 254
taxation
Taxation 1 242 (4 492) (3 843)
Profit for the year 15 505 3 844 27 411
Attributable to:
- Equity holders of 10 787 1 545 18 461
the parent
- Minority interest 4 718 2 299 8 950
Attributable profit 15 505 3 844 27 411
Earnings per
ordinary share
Earnings per 11,9 2,3 27,5
ordinary share
(cents)
No dilution effect
has been calculated
as
all the convertible
loans have been
settled
or refinanced
without any
conversion rights
Further information
Number of ordinary
shares in issue
(thousands) 393 997 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) 393 997 67 200 67 200
Weighted average
number of ordinary
shares in issue 90 282 67 200 67 200
(thousands)
Condensed balance sheet
Reviewed Reviewed Audited
as at as at as at
31 Dec 31 Dec 30 June
R'000 Notes 2006 2005 2006
ASSETS
Non-current assets
Property, plant and 167 671 153 351 167 836
equipment
Long-term 5 037 614
prepayments and
receivables
Goodwill 2 156 872
Current assets 93 167 65 020 67 481
Inventories 10 272 8 814 9 248
Trade receivables 3 46 044 40 875 36 193
Other receivables 5 422 5 613 8 145
Bank balances 31 429 9 718 13 895
Total assets 422 747 218 985 235 317
EQUITY AND
LIABILITIES
Equity capital and 42 283 (291 755) (265 270)
reserves
Equity attributable
to equity
holders of parent 42 283 (297 266) (277 432)
Minority interest 5 511 12 162
Non-current 330 492 441 163 430 787
liabilities
Interest-bearing 4 11 179 42 522 32 981
provisions
Interest-bearing
subordinated
redeemable 206 121 219 522
convertible loans
Interest-bearing 5 311 495 187 650 171 531
liabilities
Deferred taxation 7 818 4 870 6 753
liability
Current liabilities 49 972 69 577 69 800
Trade payables 5 290 8 379 10 266
Other payables 19 771 20 364 24 681
Deferred revenue 3 772 5 337 3 374
Provisions 4 224 4 762 5 073
Taxation 5 974 9 480 8 944
Interest-bearing 5 10 941 21 255 17 462
liabilities
Total equity and 422 747 218 985 235 317
liabilities
Net
asset/(liability)
per ordinary
share (cents) 46,8 (442,4) (412,8)
Notes:
1. The finance costs for the six months include R1,5 million of interest
provisions relating to potential claims that still need to be finalised.
The capital profit on sale of equity instruments of R2,99 million relates to
the gain on the sale of equity instruments linked to treasury shares held by
a subsidiary and which have now been cancelled.
The low taxation charge is the result of reversing a provision of R6 million
which is no longer required.
2. Goodwill arose from the acquisition of the 35% minority shareholding in
Metrofile (Pty) Limited.
3. Trade receivables include an amount of R9,1 million for equipment sold in
December 2006. The equipment was imported and paid for before the reporting
date and the proceeds from the sale were received during January 2007.
4. Long-term interest-bearing provisions include possible claims in certain
dormant subsidiaries from the old MGX Group. The claims should be resolved
before the end of the current financial year.
5. Long-term interest-bearing liabilities include the Metrofile Senior and
Mezzanine loans. Short-term interest-bearing liabilites include the portions
of the Metrofile Senior and Mezzanine loans 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 cash flow statement
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
R'000 2006 2005 2006
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash generated from operations
before net working capital 50 738 42 146 84 814
changes
(Increase)/decrease in net (18 490) 44 9 260
working capital
Cash generated from operations 32 248 42 190 94 074
Net finance costs (29 767) (28 237) (46 695)
Dividends received 2 077
Normal taxation paid - current (7 744) (5 905) (7 806)
year
Taxation paid - prior years (17 344) (3 365) (5 616)
Net cash (outflow)/inflow from
operating
activities (22 617) 4 683 36 035
Net cash outflow from investing (5 458) (8 270) (29 243)
activities
Net cash inflow/(outflow) from
financing
activities
Net cash inflow from rights 135 174
issue
Loans repaid (343 515) (27 729) (30 160)
Loans raised 25 801 31 663 27 892
Proceeds from new financing 320 000
facilities
Convertible loan notes repaid (91 861)
Net increase in cash and cash 17 534 347 4 524
equivalents
Cash and cash equivalents at
the
beginning of the period 13 895 9 371 9 371
Cash and cash equivalents at
the end of
the period 31 429 9 718 13 895
Represented by:
Bank balances 31 429 9 718 13 895
Statement of changes in equity
Non- Minority
distri- Attri- share-
Share Share butable butable holder
Capital premium Re-serves loss Interest Total
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 408 195 656 (2 918) (491 957) 3 212 (295 599)
July 2004
Profit for
the six
months ended
31 December 1 545 2 299 3 844
2005
Balance at 408 195 656 (2 918) (490 412) 5 511 (291 755)
31 December
2005
Profit for
the six
months ended
30 June 2006 16 916 6 651 23 567
Foreign 2 918 2 918
Currency
reserve
Balance at 408 195 656 (473 496) 12 162 (265 270)
30 June 2006
Profit for
the six
months ended
31 December 10 787 4 718 15 505
2006
Rights offer 1 163 134 011 135 174
Minority 848 172 904 (16 880) 156 872
acquisition
Treasury 3 (1) 2
shares
cancelled
Balance at 2 422 502 571 (462 710) 42 283
31 December
2006
Reconciliation of headline
earnings
Reviewed Reviewed Audited
as at as at as at
31 Dec 31 Dec 30 June
R'000 2006 2005 2006
Profit to ordinary shareholders 10 787 1 545 18 461
Capital (profit)/loss on sale of (38) 3 084
investments
Capital profit on sale of equity (2 994)
instruments
Net recovery of loans previously (5 259)
impaired
Loss/(profit) on sale of plant 5 24 (89)
and equipment
Headline earnings 7 760 1 569 16 197
Headline earning per ordinary 8,6 2,3 24,1
share (cents)
Commentary on results
Metrofile Holdings profile
Metrofile Holdings is quoted in the "Support Services - Business Support
Services" sector of the JSE Limited ("JSE").
Metrofile 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.
Restructuring
During the period under review, the group completed its restructuring
programme. The debt of R320 million in its operating subsidiaries has been
refinanced and rescheduled over six years. The debt in the holding company
and its subsidiaries was settled through a rights issue which raised a net
amount of R135 million. In addition, the group acquired all of the minority
interests in Metrofile (Pty) Limited in exchange for holding company shares.
The holding company now has sufficient cash on hand to deal with the few
remaining provisions and contingent liabilities of the old MGX Group and has
authority to issue a further 10 million shares for cash if needed for this
purpose only.
The group has a wide spread of shareholders. Its shareholder of reference
with 25% is Mineworkers Investment Company (Pty) Limited.
Financial review
The results for the period were in line with expectations. Revenue increased
by 9,6% to R149,9 million and EBITDA increased by 12,5% to R47,7 million.
We do not believe it is useful to comment on actual headline earnings per
share ("HEPS") or earnings per share ("EPS") for this reporting period as
these metrics have been affected by the substantial increase in the number
of shares in issue and the reduction of debt at different points in the
reporting period, the continued need to raise interest charges on provisions
for creditors where the claims concerned have not yet been finally
determined, and the reversal of a R6 million provision for taxation which is
no longer required.
To assist shareholders, if the refinancing and issue of new shares had taken
place on 1 July 2006, there had been no exceptional items, capital gains,
reversal of tax provisions or interest on claims still to be settled, HEPS
and EPS on the full number of shares now in issue would have been 3,5 cents
for the six month period.
Accounting policies
In terms of the Listing Requirements of the JSE, the group results have been
prepared in accordance with the International Financial Reporting Standard
("IFRS") IAS34 - Interim Financial Reporting, the Listing Requirements of
the JSE and the South African Companies Act. The accounting policies and
methods of computation are consistent with those used in the prior financial
year and comparative period.
Auditors' review opinion
The results have been reviewed by Deloitte & Touche whose unqualified review
report is available for inspection at the company's registered office. The
report no longer contains a matter of emphasis with regard to going concern.
Directorate and corporate governance
Messers. Paul Nkuna and Richard Buttle were appointed to the board of
directors during the period under review and the board currently comprises
two executive and six non-executive directors, of which three are
independent directors.
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.
Contingent liabilities
MGX/Eureka Pension Fund
The trustees are 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 should be noted that one of the actuarial opinions
relating to this fund, is of the opinion that the company may have a
contingent liability of up to R9 million.
Other
The company has no contingent liabilities remaining from past disposals.
Commitments
- Operating lease commitments for the next five years amount to
R9,4 million.
- Metrofile (Pty) Limited has committed to certain capital expansion and
replacement projects of R7,7 million. This will be funded from free cash
flows generated by operating activities.
Post-balance sheet events
No events material to the understanding of the report have occurred in the
period between the period end date and the date of the report.
Prospects
The group expects improved revenue and operating results in the current
financial year. However, HEPS and EPS are unlikely to be comparable with the
previous year or with a normalised year due to the matters referred to above
and due to additional reversals of provisions which may be possible in the
second half.
Christopher Seabrooke
Non-executive Chairman
Graham Wackrill
Chief Executive Officer
28 February 2007
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), P Nkuna* (Deputy chairman), GD Wackrill
(Chief executive officer), DE Baloyi*, RM Buttle,K Pillay*, SR Midlane*, IN
Matthews* Company secretary: LM Thompson *Non-executive
