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MICROmega - Audited Group Results for The Year Ended 31 December 2004 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 GROUP RESULTSFOR THE YEAR ENDED 31 DECEMBER 2004 ABRIDGED INCOME STATEMENT Audited Audited Year ended Year ended 31 December 31 December 2004 2003 R ("000) R ("000)
Note Gross revenue 85 324 92 495 Operating profit/(loss) 7 348 (24 666) Net finance income 3 811 3 609 Equity accounted profit/(loss) 39 (124) Profit/(loss) before taxation 11 198 (21 181) Taxation (2 330) 4 528 Profit/(loss) after taxation 8 868 (16 653) Minority interest (12) - Net profit/(loss) for the year 8 856 (16 653) Exceptional items 2 6 021 4 270 Earnings/(loss) attributable to 14 877 (12 383) shareholders Reconciliation of headline earnings Exceptional items (6 021) (4 270) Restructuring provision 2 464 - Amortisation of goodwill - 50 415 Capital profit on disposal of subsidiaries - (13 858) Deferred tax - (7 328) Headline earnings 11 320 12 576 Headline earnings per share (cents) 12.88 14.76 Earnings/(loss) per share (cents) 16.93 (14.53) Fully diluted earnings/(loss) per share 16.15 (14.06) (cents) (`000) (`000) Weighted average number of shares 87 876 85 210 Diluted weighted average shares in issue 92 109 88 084 Total number of shares in issue 88 745 85 433 ABRIDGED BALANCE SHEET Audited Audited Year ended Year ended 31 December 31 December 2004 2003
Note Note R ("000) R ("000) ASSETS Non-current assets Fixed assets 3 5 569 3 905 lntangible assets 25 397 - Deferred taxation 10 671 10 682 Loans receivable 5 483 8 569 Investment in associates 116 77 Investments 706 353 Current assets Bank and cash 45 922 49 850 Taxation 407 Loans receivable 6 906 3 117 Accounts receivable 16 834 7 427 Other current assets 4 559 1 574 Total assets 122 163 85 961 EQUITY AND LIABILITIES Capital and reserves Shareholders" equity 79 600 62 275 Minorities interest 109 - Non-current liabilities Vendors loans4 4 9 294 400 Borrowings 302 - Current liabilities Taxation 398 - Vendors loans 4 10 866 468 Accounts payable 14 554 12 834 Provisions 7 040 9 984 Total equity and liabilities 122 163 85 961 Net asset value per share (cents) 89.82 72.89 Net tangible asset value per share (cents) 61.20 72.89 ABRIDGED CASH FLOW STATEMENT Audited Audited Year ended Year ended 31 December 31 December 2004 2003 R ("000) R ("000)
Cash generated by operations 3 874 10 850 Net investment income 3 811 3 485 Taxation paid (2 413) (4 292) Net cash from operating activities 5 272 10 043 Expenditure incurred to maintain operations (1 690) 2 195 Proceeds on disposal of subsidiaries - 14 011 Proceeds on disposal of investments 372 127 Subsidiaries acquired (27 617) - Net cash outflow/inflow from investing activities (28 935) 16 333 Capital raised 2 444 5 721 Loans raised/(repaid) 17 291 (21 116) Net cash inflow/(outflow) from finance activities 19 735 (15 395) Net (decrease)/increase in bank and cash (3 928) 10 981 Represented as follows: Bank and cash at beginning of the year 49 850 38 869 Bank and cash at end of the year 45 922 49 850 Net (decrease)/increase in bank and cash (3 928) 10 981 ABRIDGED STATEMENT OF Share Share Non- Accumulated Total CHANGES Distributable Reserves
IN EQUITY capital premium loss R (" 000) R (" 000) R (" 000) R (" 000) R (" 000) Balance at 1 January 764 133 521 (2 392) (62 157) 69 736 2003 Net loss for the period (24 239) (24 239) as previously reported Dividends 11 237 (16 583) (5 317) 29
Revaluation of foreign 1 983 (1 983) - entity"s opening reserves Foreign currency (1 070) (1 070) translation reserve Issue of shares 66 22 934 23 000 Share issue expenses (92) (92) Balance at 1 January 859 167 600 (1 479) (104 962) 62 018 2003 Fundamental error 5 440 5 440 Restated balance at 1 859 167 600 (1 479) (99 522) 67 458 January 2003 Net loss for the year (12 383) (12 383) Foreign currency 1 479 1 479 translation reserve Issue of shares 2 8 559 8 561 Reduction in share (7) (2 833) (2 840) capital Balance at 31 December 854 173 326 - (111 905) 62 275 2003 Net profit for the year 14 877 14 877 Issue of shares 33 2 415 2 448 Balance at 31 December 887 175 741 - (97 028) 79 600 2004 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policy The financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice. The accounting policies are consistent with those of the previous year, except as otherwise indicated. The group"s auditors, R W Irish-Alliott Inc. have audited the financial statements for the year ended 31 December 2004. Accounting policies are consistant with the previous reporting period and conform to SA Statements of Generally Accepted Accounting Practice. An unqualified audit report is available for inspection at the registered office of the company 2. Exceptional Items The provision raised in the prior year of R6 021 000 is no longer required as the dispute with the previous vendors has been resolved. Consequently the company has no obligation to make payment in this regard. 3. Intangible assets Carrying Additions/ Impairment Carrying
value value 1 January Disposals 31 December 2003 2004 R"(000) R"(000) R"(000) R"(000)
Goodwill arising from 22 443 22 443 acquisitions Software applications 2 954 2 954 - 25 397 - 25 397
Goodwill arising from acquisitions represents the excess of the cost of acquisition over the fair value of net assets acquired. If there is an indication that the value of goodwill is impaired at balance sheet date, the goodwill is written off to its recoverable amount. 4. Vendors loans 2004 2003 R"000 R"000 Vendors loans arising from acquisitions 20 160 868 Less: Current portion (10 866) ( 468) 9 294 400 The amounts due to vendors represent the balance of the purchase consideration owing in respect of acquisitions. The loans are settled through the issue of shares and cash resources over the profit warranty periods. COMMENTARY ON RESULTS The results for the period under review reflect a year in which MICROmega adopted a program of restructuring its businesses to access higher earnings and a broader market share, pursued a number of acquisitions and attended to the implementation of a broad based black economic empowerment and transformation program. The decline in headline earnings of 10% reflects the impact of the continued slow down in income generated by MICROmega Securities from broking activities. The group enjoyed strong earnings growth from both the revenue management and information technology businesses. The demand for these services and consequent growth in these businesses, together with the acquisitions concluded during this period, have ensured that shareholders are in future not materially affected by a fluctuation in earnings from MICROmega Securities that would be as a result of a continuous volatility in both the interest rate and currency markets. PROSPECTS We are pleased to report that all the businesses are well positioned for earnings growth in 2005. The investment in broad based black economic empowerment and an active program of transformation has ensured that the operating entities continue to increase their market share. We have adopted an aggressive acquisition strategy over the past eight months. As a consequence of these transactions and the increase in market share we experienced in 2004 we anticipate a doubling of turnover in 2005 and a strong growth in earnings during this period. The following companies were acquired during the period reported on ending 31 December 2004. We believe these acquisitions and their strategic fit within MICROmega ensures sustainable earnings growth in future periods. Deltec Power Distributors ("Deltec") MICROmega acquired 100% of the issued share capital of Deltec on the 1st October 2004. The business has been in operation for some 22 years providing batteries to the UPS and automotive markets. This business compliments MICROmega"s agency- based businesses and has introduced a market sector previously unavailable to the group. Deltec"s contribution to earnings is anticipated to exceed forecasted expectations for 2005. Unitech Computer Services ("Unitech") MICROmega acquired 100% of the issued share capital of Unitech on the 1st December 2004. This business has been in operation for some 15 years and provides financial management systems to more than 70 local authorities in South Africa and dominates financial system delivery to local authorities in Namibia. The business has a strategic fit with both MICROmega"s revenue management and information technology businesses. The business earnings are annuity based through long-term service support agreements with its clients. ADD-X MICROmega acquired 100% of the issued share capital of ADD-X on the 1st July 2004. This business provides meter reading and related revenue management services to the local public sector in South Africa. ADD-X complimented the restructuring and transformation program which was adopted by our revenue management business during 2004. We are focused at ensuring that we retain our dominant position as market leaders in the provision of risk management and revenue management solutions, and are committed to the delivery of strong earnings growth in 2005. By order of the Board Directors: I G Morris (Chairman) W E Rosenberg (CEO) R Lewin (Executive) J Storom (Executive) A Vercueil (Executive) S Mpanza (Non-Executive) H Seabi (Non- Executive) Company Secretary: C J Holroyd Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited Sponsor: LPC Manhattan Moela Sponsors (Proprietary) Limited Date: 05/04/2005 05:00:07 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
