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MMG
MMG
MMG - MMG Micromega - Audited Abridged Group Results For The Year Ended 31
December 2006
MICROmega Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/003821/06
Share code MMG ISIN ZAE000034435
("Micromega" or "the Company")
AUDITED ABRIDGED GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
- Increase In Revenue 100%
- Increase In Attributable Profits 94%
- Increase In Headline Earnings Per Share 77%
ABRIDGED INCOME STATEMENT
Audited Audited
year year
ended ended
31 December 31 December
2006 2005
R(`000) R(`000)
Revenue 318 417 159 339
Operating Profit 41 448 18 334
Net investment income 1 3 553 3 391
Share of profits of associates 140 48
Profit before taxation 45 141 21 773
Taxation (14 158) (6 440)
Profit after taxation 30 983 15 333
Attributable to:
Ordinary shareholders 29 902 15 442
Minority shareholders 1 081 (109)
Reconciliation of headline earnings
Net profit attributable to ordinary shareholders 29 902 15 442
Impairment of goodwill - 561
Loss on disposal of property, plant and equipment 65 -
Profit on sale of subsidiary 2 - (24 910)
Impairment of loan 3 1 797 26 120
Headline earnings 31 764 17 213
Headline earnings per share (cents) 33.45 18.86
Attributable earnings per share (cents) 31.49 16.92
Fully diluted earnings per share (cents) 30.89 16.40
Weighted average number of shares (000`s) 94 971 91 253
Fully diluted weighted average number of 96 786 94 154
shares (000`s)
Total number of shares in issue (000`s) 96 326 92 905
ABRIDGED BALANCE SHEET
Audited Audited
year year
ended ended
31 December 31 December
2006 2005
R(`000) R(`000)
ASSETS
Non-current assets
Property, plant and equipment 24 252 17 965
Goodwill 32 787 30 079
Intangible assets 18 913 17 664
Deferred tax asset 7 510 10 585
Investments 6 642 3 297
Loans receivable 3 698 4 223
Current assets
Accounts receivable 48 276 38 595
Inventories 18 298 11 635
Current portion of loans receivable 31 1 991
Cash and cash equivalents 55 661 46 254
TOTAL ASSETS 216 068 182 288
EQUITY AND LIABILITIES
Equity
Equity holders` interest 139 343 104 180
Non-distributable reserves 7 826 6 444
Minorities interest 3 073 -
Non-current liabilities
Borrowings 4 984 3 876
Deferred vendor payments 4 5 905 11 211
Current liabilities
Accounts payable 35 481 27 419
Derivative financial instruments 108 -
Provisions 1 625 1 325
Current portion of borrowings 3 888 2 329
Current portion of deferred vendor payments 4 7 441 19 003
Taxation 6 394 6 501
TOTAL EQUITY AND LIABILITIES 216 068 182 288
Net asset value per share (cents) 155.97 119.07
Net tangible asset value per share (cents) 102.30 67.68
ABRIDGED CASH FLOW STATEMENT
Audited Audited
year year
ended ended
31 December 31 December
2006 2005
R(`000) R(`000)
Cash generated by operations 47 444 22 157
Movement in working capital (6 292) (8 555)
Net investment income 1 3 553 3 391
Share of profits of associates 140 48
Taxation paid (11 265) (1 632)
Net cash from operating activities 33 580 15 409
Net cash used in investing activities (13 625) (6 479)
Treasury shares repurchased (5 931) -
Loans granted (1 608) (25 085)
Loans raised / (repaid) (3 009) 17 207
Net cash used in financing activities (10 548) (8 598)
Net increase in bank and cash 9 407 332
Represented as follows:
Bank and cash at beginning of year 46 254 45 922
Bank and cash at end of period 55 661 46 254
Net increase in bank and cash 9 407 332
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Share Share Share- Revalu- Minor- Accumu- Total
capital premium based ation ity lated
payment reserve interest loss
reserve
R(`000) R(`000) R(`000) R(`000) R(`000) R(`000) R(`000)
Balance at 1 887 175 737 2 654 714 109(101 027) 79 074
January 2005
as previously
disclosed
Correction of 5 - - - - - 6 961 6 961
error
Restated balance 887 175 737 2 654 714 109 (94 066) 86 035
At 1 January 2005
Net profit for (109) 15 442 15 333
the year
Employee share 2 407 2 407
options - value
of services
provided
Revaluation of 669 669
property,
plant and
equipment
Change in 152 152
estimate
Issue of shares 42 6 004 6 046
Share issue (18) (18)
expenses
Balance at 31 929 181 723 5 061 1 383 - (85 433)103 663
December 2005
as previously
disclosed
Correction of 5 - - - - - 6 961 6 961
error
Restated balance 929 181 723 5 061 1 383 - (78 472)110 624
At 1 January 2006
Net profit for 1 081 29 902 30 983
the period
Movements in 1 992 1 992
minority interests
after restructuring
Employee share 972 972
options - value
of services
provided
Revaluation of 452 452
property,
plant and
equipment
Realisation of (42) (42)
non-distributable
reserve
Issue of shares 50 11 188 11 238
Share issue (46) (46)
expenses
Treasury shares (16) (5 915) (5 931)
repurchased
Balance at 31 963 186 950 6 033 1 793 3 073 (48 570)150 242
December 2006
NOTES TO THE FINANCIAL INFORMATION
2006 2005
R(`000) R(`000)
1. Net investment income
Interest received 4 382 3 889
Dividends received 8 5
Investment income 4 390 3 894
Less: Finance charges (837) (503)
Net investment income 3 553 3 391
2. Profit on sale of subsidiary
In accordance with the group`s objective of putting - 24 910
effective empowerment structures together the company
sold a 26% holding in G2 Properties (Proprietary)
Limited and purchased a further 25% holding in
Sebata Municipal Solutions (Proprietary) Limited
In 2005 50% of MICROmega Revenue Management Solutions
(Proprietary) Limited was disposed of to Mzimkhulu
Investments (Proprietary) Limited resulting in a
capital profit
3. Impairment of loan
Loan Mzimkhulu Investments (Proprietary) Limited 35 793 33 691
Impairment of loan (32 652) (30 550)
Loan balance 3 141 3 141
Opening balance impairment 30 550 -
Closing balance impairment 32 652 30 550
Movement for the year 2 102 30 550
Taxation effect (305) (4 430)
Impairment in income statement 1 797 26 120
The loan has been impaired until such time as the
revenue generated by the underlying investment is
available to service the repayment of capital. The
impairment is reviewed on an annual basis.
4. Deferred vendor payments
To be settled:
With the distribution of cash resources 2 500 8 530
Through the issue of shares 10 846 21 684
13 346 30 214
Deferred vendor payments are in respect of
acquisitions made. These payments are subject to
profit warranties.
5. Correction of error
During the current financial year MICROmega 6 961 6 961
Holdings Limited received final tax assessments
for prior periods. These assessments resulted in
a difference from the carried forward assessed
loss which resulted in a change to the deferred
tax asset.
COMMENTARY ON RESULTS
We are pleased to report a 77% growth in headline earnings per share, a 100%
increase in revenue and a resultant 94% growth in attributable profit. The
group`s balance sheet continues to strengthen with an increase of 31% in net
asset value and an increase of 51% in net tangible asset value.
During the year MICROmega moved sectors from the financial to the support
services sector. This move was motivated by the entrenched strategy to focus on
earnings growth from a broader base of income generators, with less reliance on
any specific sector. Our diversification strategy has strengthened our organic
growth whilst shielding our earnings against a material event risk in any
specific sector. We continue to extract strategic and economic value from the
synergies which exist between our businesses and this has ensured that we have
not only retained our current market share but gained access to larger markets
at a quicker rate than originally anticipated.
We have maintained our policy of ensuring that all our businesses focus on the
provision of quality products and services. Innovation, product development and
delivery remain at the forefront of our success in retaining and growing our
market share. Our client base has grown considerably over the past twelve months
and we are pleased to report that we are now delivering services across all
continents.
The following sector contribution to headline earnings per share demonstrates
the successful implementation of our diversification strategy:
Financial services sector
The two companies in this sector namely, MICROmega Securities and MICROmega
Revenue Management Solutions, collectively, contributed 33% to total headline
earnings.
Support services sector
The three companies in this sector namely, NOSA, NQA Africa and MECS Africa,
collectively, contributed 24% to total headline earnings.
Information technology sector
The two companies in this sector namely, Intermap and Sebata Municipal
Solutions, collectively, contributed 16% to total headline earnings.
Automotive components sector
The two companies in this sector namely, Deltec Power Distributors and BTM
Manufacturing, collectively, contributed 27% to total headline earnings.
Prospects
We are confident that we can continue to deliver strong earnings growth from our
current operations. We do however believe that there are opportunities to
acquire businesses that are complementary to our current operations and that
will make a significant contribution to our growth in earnings per share.
REPORT OF THE AUDITORS
R W Irish-Alliott Inc`s unmodified audit report on 31 December 2006 summarised
financial statements contained herein is available for inspection at the
company`s registered office.
BY ORDER OF THE BOARD
Directors: IG Morris (Chairman)
RC Lewin (Non-executive)
ES Mpanza (Non-executive)
DM Carson (Non-executive)
Company secretary: DJ Case
AUDITORS:
RW Irish - Alliott Inc. Registered Auditors
TRANSFER SECRETARIES:
Computershare Investor Services 2004 (Proprietary) Limited
SPONSOR:
Vunani Corporate Finance (Proprietary) Limited
6 March 2007
Date: 06/03/2007 17:09:22 Produced by the JSE SENS Department.
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