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Abridged Audited Consolidated Financial Statements for the year ended 31 May 2012 and declatation of cash dividend
Morvest Business Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
JSE code: MOR ISIN: ZAE000152567
(“Morvest” or “the Company” or “the Group”)
ABRIDGED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MAY
2012 AND DECLARATION OF CASH DIVIDEND
Highlights
• EBIITDA up 6%
• Revenue up 7.6%
• Headline earnings up 10%
• Dividend of 1 cent maintained
Abridged consolidated statement of comprehensive income
Audited Audited
Year ended Year ended
31 May 31 May
2012 2011
R'000 R'000
Revenue 868 576 807 300
Cost of sales (410 937) (420 262)
Gross profit 457 639 387 038
EBITDA (earnings before interest, impairment, 112 082 105 681
tax, depreciation and amortisation)
Depreciation (15 280) (15 139)
Amortisation of intangible assets (8 227) (2 003)
Impairment of goodwill and intangible assets (20 163) (14 938)
Net finance costs (12 912) (12 556)
Share of loss from associate (2 406) (899)
Impairment of investment in associate (6 750) (5 951)
Profit before taxation 46 344 54 195
Income tax expense (23 374) (24 075)
Profit for the year 22 970 30 120
Other comprehensive income/(loss) for the 760 (7 039)
year, net of tax
Total comprehensive income for the year 23 730 23 081
Profit attributable to:
Owners of the parent 12 194 11 469
Non-controlling interest 10 776 18 651
22 970 30 120
Total comprehensive income attributable to:
Owners of the parent 12 954 4 430
Non-controlling interest 10 776 18 651
Total comprehensive income for the year 23 730 23 081
Earnings per share (cents) 2.33 2.13
Diluted earnings per share (cents) 1.85 1.83
Notes to the statement of comprehensive income
Headline earnings for the year attributable to 35 596 32 334
ordinary shareholders
Headline earnings per share 6.81 6.02
Diluted headline earnings per share 5.41 5.17
Number of shares („000)
- Weighted average number of shares 522 617 537 319
- Diluted weighted average number of
shares in issue and to be issued 657 617 625 236
Reconciliation of headline earnings
calculation:
Earnings for the year attributable to ordinary 12 194 11 469
shareholders
Goodwill impairment 20 163 14 938
Impairment of investment in associate 3 374 5 951
Profit on disposal of property, plant and (135) (24)
equipment
Headline earnings for the year attributable to 35 596 32 334
ordinary shareholders
Abridged consolidated statement of financial Audited Audited
position
31 May 2012 31 May 2011
R'000 R'000
ASSETS
Non-current assets 315 181 330 591
Property, plant and equipment 44 254 33 964
Goodwill 178 067 198 230
Intangible assets 41 045 49 272
Investment in associate company - 9 157
Deferred taxation 51 815 39 968
Current assets 327 677 251 518
Inventories 65 049 19 702
Trade and other receivables 146 311 130 824
Other financial assets 836 5 373
Taxation receivable 11 523 10 607
Operating lease assets 226 258
Cash and cash equivalents 103 732 84 754
Total assets 642 858 582 109
EQUITY AND LIABILITIES
Capital and reserves 228 711 222 053
Share capital 296 408 298 613
Foreign currency translation reserve (12 154) (13 021)
Accumulated loss (57 432) (64 342)
Available-for-sale financial reserve - 107
Share-based payment reserve 1 889 696
Non-controlling interest 38 688 36 843
Total equity 267 399 258 896
Non-current liabilities 100 679 85 507
Vendor liabilities 14 114 22 170
Other financial liabilities 65 485 44 347
Finance lease obligations 5 744 2 614
Deferred taxation 15 336 16 376
Current liabilities
274 780 237 706
Vendor liabilities 8 056 14 084
Other financial liabilities 16 509 49 418
Finance lease obligations 3 774 9 272
Trade and other payables 232 166 145 283
Provisions 250 3 786
Operating lease liabilities 898 1 154
Current tax payable 13 127 14 709
Total equity and liabilities 642 858 582 109
Total number of shares in issue ('000) 679 159 679 159
Total number of shares in issue after treasury 651 370 663 406
shares ('000)
Net asset value per share (cents) 35.11 33.47
Net tangible asset value per share (cents) 1.44 (3.84)
Abridged consolidated statement of cash flows
Audited Audited
Year ended Year ended
31 May 31 May
2012 2011
R'000 R'000
Net cash flows from operating activities 87 380 62 075
Net cash flows from investing activities (20 844) (18 963)
Net cash flows from financing activities (47 558) (52 157)
Net (decrease)/increase in cash and cash 18 978 (9 045)
equivalents
Cash and cash equivalents at beginning of year 84 754 93 799
Cash and cash equivalents at end of year 103 732 84 754
Abridged consolidated statement of changes in equity
Audited Audited
Year ended Year ended
31 May 31 May
2012 2011
R?000 R?000
Equity – opening balance 258 896 225 685
Issue of share capital - 12 343
Treasury shares issued for BEECo share scheme - 9 257
Shares utilised for BEECo and MANCo share - (21 599)
schemes
Share-based payment expense 1 193 696
Share repurchase (2 205) (2 130)
Non-controlling interest acquired - 3 023
Disposal of subsidiaries - 2 600
Total comprehensive income for the year 23 730 23 081
Allocation of intangible assets to non- - 15 764
controlling interest
Dividend paid (5 284) -
Dividend paid to non-controlling interest (8 931) (9 824)
Equity – closing balance 267 399 258 896
Basis of preparation
The audited abridged consolidated annual financial statements have been
prepared in accordance and comply with International Financial Reporting
Standards, the AC 500 standards and interpretations, the requirements of IAS
34: Interim Financial Reporting, the JSE Limited Listings Requirements and
the Companies Act, No 71 of 2008, as amended.
The financial statements are based on appropriate accounting policies,
consistently applied with those in the audited financial statements for the
previous year ended 31 May 2011, which are supported by reasonable and
prudent judgements and estimates.
The annual financial statements were prepared under the supervision of the
Chief Financial Officer, Suren Singh (MBA, MITM, CIS, and ABP).
Unqualified audit opinion
These condensed consolidated financial results have been audited by Morvest?s
auditors, PKF (Gauteng) Inc. whose unqualified audit report is available for
inspection at Morvest?s registered office.
Commentary
Introduction
The directors of Morvest present the audited abridged consolidated financial
results for the year ended 31 May 2012 (“the year”), reflecting satisfactory
performance. Growth was achieved in revenue, EBITDA and headline earnings per
share despite challenging market conditions.
The audited abridged consolidated financial statements for the year were
authorised for issue by the directors on 16 August 2012.
Group profile
Morvest is a black empowered holding group with an international footprint
spanning Africa (South Africa, Mozambique, and Nigeria), India and the USA.
The group?s operations are aligned into three key divisions: Business Support
Services (including Professional Services and Outsourcing Solutions), ICT
Solutions and the recently added Retail and Consumer Services.
The Retail and Consumer Services division was added in line with the group?s
diversification strategy.
Operational overview
The South African and Nigerian markets were challenging for the period under
review notwithstanding signs of recovery. The domestic operations have
performed well with satisfactory improvements in margins resulting from the
group?s restructuring programme concluded during the year.
Financial results and dividend
Revenue increased 7.6% to R868.6 million from R807.3 million in the prior
year. 95% of revenue was generated in South Africa.
EBITDA amounted to R112.1 million (2011: R105.7 million) reflecting a stable
EBITDA margin of 13%.
Declaration of final cash dividend
The board has declared a final gross cash dividend of 1 cent per share in
respect of the year ended 31 May 2012.
In respect of the normal final gross cash dividend, the following further
information is provided to shareholders in respect of the new dividends tax:
- The dividend has been declared from income reserves
- Secondary tax on companies (STC) credits available amount to 0.41610
cents per share
- The dividend withholding tax rate is 15% and after applying the STC
credits a net dividend of 0.91242 cents per share is paid to those
shareholders who are not exempt from the dividend withholding tax
- Morvest's tax reference number is 9393348157
- The issued number of shares as at declaration date is 679 158 612.
The final dividend will be paid on Monday, 17 September 2012 to shareholders
recorded in the books of the company at the close of business on the record
date, Friday, 14 September 2012.
The salient dates relating to the ordinary dividend are as follows:
Last day to trade cum dividend Friday, 7 September 2012
Shares commence trading ex-dividend Monday, 10 September 2012
Record date Friday, 14 September 2012
Payment date of the dividend Monday, 17 September 2012
Share certificates may not be dematerialised or rematerialized between
Monday, 10 September 2012 and Friday, 14 September 2012, both days inclusive.
Goodwill
Goodwill is reviewed annually for impairment, or more frequently when there
are indicators that impairment may have occurred, by comparing the carrying
value to its recoverable amount. Impairment losses are included in other
operating expenses in the statement of comprehensive income.
During the annual review of the goodwill impairment performed at year-end,
goodwill impairment for the current year of R20 163 000(31 May 2011: R14 938
000) reflects a write-down for the following subsidiaries:
R' 000
- Intergraph Systems Southern Africa (Proprietary) Limited 10 025
- SAB&T Ubuntu Holdings Limited 10 138
20 163
Although the underlying assets have not changed, we have taken a more
conservative view of the valuation. The impairment is a non-cash item.
Property, plant and equipment under construction
During the year Morvest has commenced its investment into a multi-purpose,
centralised campus. The company acquired land for R17 million in Midrand with
the intention of building a new office complex. Construction has begun and
costs incurred to year-end total R4.5 million. The new centralised campus
will reduce current rental costs, eliminate duplication in shared services
and facilitate the Morvest culture through effective communication.
Related parties
During the year certain related parties, in the ordinary course of business,
entered into various loans and transactions with the Group on terms no less
favourable than those arranged with third parties.
Other financial liabilities
Restructuring of Investec facilities
During the year Morvest entered into an agreement with Investec Bank Limited
to restructure its facilities and obtained additional facilities for the
payment of vendor liabilities and the acquisition of the new head office
site.
Share repurchase
During the year the company repurchased 12 million shares, to the value of
R2.2 million on the open market in terms of the share repurchase programme.
Morvest intends to continue repurchasing shares in the forthcoming year
subject to Companies Act requirements and adding value to shareholders.
Subsequent events
The board of directors are not aware of any material events that have taken
place since the reporting date, which would affect the results of the group.
Board of directors
On 15 June 2012 Mrs N Singh resigned as an executive director of the company.
Contingent liabilities
Contingent liabilities relating to certain legal matters as at year end have
a maximum exposure of R1,7 million.
Segmental reporting
The Business Support Services (Professional Services and Outsourcing)
division contributed 61% of Group revenue and the ICT Solutions division the
balance of 39%.
Business Support ICT Solutions Corporate and Total
Services elimination
May 12 May 11 May 12 May 11 May 12 May 11 May 12 May 11
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
External 525 423 520 711 343 153 286 589 - - 868 576 807 300
segment
turnover
Internal 4 556 5 594 16 643 31 420 (21 199) (37 014)
segment
turnover
Total 529 979 526 305 359 796 318 009 (21 199) (37 014) 868 576 807 300
segment
turnover
Profit/(loss 54 961 52 796 16 550 31 786 (48 541) (54 462) 22 970 30 120
) for the
year
Consolidated 531 654 537 200 195 224 206 474 (84 020) (161 565) 642 858 582 109
total assets
Business combinations
Restatement of the statement of financial position as at 31 May 2011
On 25 May 2011, the group acquired a 50.1% interest in R and S Consulting
(Proprietary) Limited (“R and S”). R and S is the only company in Africa
providing mobile data solutions as well as the enabling technologies to
mobile operators. The company has expertise in an array of specialist
disciplines that include GSM, RFID and smart card technologies. The initial
accounting for the R and S acquisition under IFRS 3, 'Business Combinations'
had not been completed as at 31 May 2011. During the year ended 31 May 2012,
adjustments to provisional fair values in respect of the R and S acquisition
were made. As a result, comparative information for the year ended 31 May
2011 has been presented as if the further adjustments to provisional fair
values had been made from the acquisition date 25 May 2011. The impact on the
prior year statement of comprehensive income has been reviewed and no
material adjustments to the statement of comprehensive income were required.
The following table reconciles the impact on the statement of financial
position reported for the year ended 31 May 2011 to the comparative statement
of financial position presented in these financial statements.
Group
provisional Recognised
As at 31 fair value values on
May 2011 adjustments acquisition
R'000 R'000 R'000
Property, plant & equipment 3 586 - 3 586
Intangible assets - 43 799 43 799
Inventories 51 - 51
Trade and other receivables 6 099 - 6 099
Other financial assets 1 044 - 1 044
Cash and cash equivalents 6 207 - 6 207
Finance lease obligation (2 264) - (2 264)
Trade and other payables (2 069) - (2 069)
Deferred taxation - (12 264) (12 264)
Current tax payable (6 607) (6 607)
Non-controlling interest (3 023) (15 764) (18 787)
Net identifiable assets and
liabilities 3 024 15 711 18 795
Goodwill on acquisition 48 230 (15 771) 32 459
Total consideration 51 254 51 254
Contingent consideration 36 254 36 254
Consideration paid in cash 15 000 15 000
Cash acquired (6 207) (6 207)
Net cash outflow 8 793 8 793
Pre-acquisition carrying amounts were determined based on applicable IFRS
immediately before the acquisition. The acquired assets and assumed
liabilities have been valued at their estimated fair values at the
acquisition date.
Outlook
Looking ahead the directors are confident that the group has further
established a solid platform for long-term growth, however the group
continues to see the next 12 to 18 months to be tough.
The further enhancement of BEE equity ownership remains a focus and
challenge.
Expansion further into Africa and internationally is a key strategic
objective for the next 12 to 18 months, as significant growth opportunities
in the emerging markets - primarily in outsourcing; ICT; resourcing; training
and education – could offer an attractive counter to anticipated tough
conditions locally. Successful implementation of the group?s diversification
strategy is a priority for the next financial year.
Appreciation
The board extends its appreciation to our management and staff for their
efforts during the year. We also thank our customers and suppliers for their
continued support.
By order of the Board
Mohammed Varachia Suren Singh
CEO CFO
21 August 2012
Directors:
Dr PS Molefe (Chairman)*#, M Varachia (CEO), S Singh (CFO), M Papiyana (Group
HR Director), A Evan (Executive Director),B Marx*#, A Mohammadali Haji*#, NY
Mhinga*# (*Non-executive, #independent)
Registered office:
10 Kikuyu Road, Sunninghill, 2191
(PO Box 4307, Halfway House, Midrand, 1685)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg
(PO Box 61051, Marshalltown, 2107)
Company secretary:
Noelene Beryl January, 10 Kikuyu Road, Sunninghill
(PO Box 4307, Halfway House, Midrand, 1685)
Sponsor:
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 21/08/2012 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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