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Micromega - Audited group results for the year ended 31 December 2005 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 RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 INCREASE IN REVENUE 86.75% INCREASE IN HEADLINE EARNINGS PER SHARE 91.08% INCREASE IN ATTRIBUTABLE EARNINGS PER SHARE 21.57% INCREASE IN NET ASSET VALUE PER SHARE 25.23 ABRIDGED INCOME STATEMENT Audited Audited Year Year ended ended 31 31 December December
2005 2004 Restated for IFRS Notes R ("000) R ("000)
Revenue 159 339 85 324 Operating profit 18 335 6 359 Net finance income 3 390 3 811 Share of profits of associates 48 39 Profit before taxation 21 773 10 209 Taxation -6 440 -3 986 Profit after taxation 15 333 6 223 Exceptional item 0 6 021 Profit for the period 15 333 12 244 Attributable to: Ordinary shareholders 15 442 12 232 Minorities -109 12 Reconciliation of headline earnings Net profit attributable to 15 442 12 232 ordinary shareholders Impairment of goodwill 561 0 Exceptional item 0 -6 021 Profit on sale of 50% of 2 -25 101 0 subsidiary Impairment of loan 3 26 120 0 Restructuring provision 0 2 464 Initial cost of BEE transaction 191 0 Headline earnings 17 213 8675 Headline earnings per share 18.86 9.87 (cents) Attributable earnings per share 16.92 13.92 (cents) Diluted earnings per share (cents) 16.40 13.55 Weighted average number of shares 91 253 87 876 Diluted weighted average shares in 94 154 90 241 issue Total number of shares in issue 92 905 88 745 ABRIDGED BALANCE SHEET Audited Audited Year Year
ended ended 31 31 December December 2005 2004
Restated for IFRS R ("000) R ("000) ASSETS Non-current assets Property, plant and equipment 17 965 6 780 Goodwill 30 079 22 443 Intangible assets 17 664 3 150 Deferred tax 3 624 8 831 Investments 3 297 822 Loans receivable 4 223 5 483 Current assets Inventories 11 635 4 363 Accounts receivable 38 595 16 834 Current portion of loans 1 991 6 906 receivable Cash and cash equivalents 46 254 45 922 Total assets 175 327 121 534 EQUITY AND LIABILITIES Equity Equity holders" interest 97 219 75 596 Minorities interest 0 109 Non-distributable reserve 6 444 3 368 Non-current liabilities Borrowings 15 087 9 596 Current liabilities Taxation 6 501 398 Accounts payable 23 713 14 546 Current portion of borrowings 21 332 10 881 Provisions 5 031 7 040 Total equity and liabilities 175 327 121 534 Net asset value per share (cents) 111.58 89.10 Net tangible asset value per share (cents) 60.19 60.26 ABRIDGED CASH FLOW STATEMENT Audited Audited Year Year ended ended 31 31
December December 2005 2004 Restated for IFRS
R ("000) R ("000) Cash generated by operations -8 389 10 121 Movement in working capital -10 555 -7 460 Net investment income 3 386 3 809 Dividends received 53 41 Taxation paid -1 633 -1 293 Net cash from operating activities -17 138 5 218 Net cash used in investing -6 285 -28 937 activities Capital raised 6 027 2 444 Loans raised 17 728 19 657 Loans repaid 0 -2 310 Net cash used in financing 23 755 19 791 activities Net increase / (decrease) in bank 332 -3 928 and cash Represented as follows: Bank and cash at beginning of the 45 922 49 850 year Bank and cash at end of the period 46 254 45 922 Net increase / (decrease) in bank 332 -3 928 and cash ABRIDGED STATEMENT OF CHANGES Share Share Share-based Revaluation
IN EQUITY capital premium payment reserve reserve R (" 000) R (" 000) R (" 000) R (" 000) Balance at 1 856 173 326 1 512 0 January 2004 SA GAAP reported 856 173 326 0 0 balance at 1 January 2004 Cumulative 0 0 1 512 0 effects of IFRS adoption Restated net 0 0 0 profit for the year Acquisition of subsidiary Minority interest in net profit of the year Employee share 1 142 options - value of services provided Revaluation of 714 property, plant and equipment Issue of shares 31 2 444 0 Share issue 0 -32 0 0 expenses Balance at 1 887 175 738 2 654 714 January 2005 SA GAAP reported 887 175 738 0 0 balance at 1 January 2005 Cumulative 0 0 2 654 714 effects of IFRS adoption Correction of 0 0 0 error Net profit for the period Minority interest in net profit of the year Employee share 2 406 options - value of services provided Revaluation of 669 property, plant and equipment Change in estimate Issue of shares 42 6 004 Share issue 0 -18 expenses Balance at 31 929 181 724 5 060 1383 December 2005 ABRIDGED STATEMENT OF CHANGES (Contd.) Minority Accumulated Total
IN EQUITY interest loss R (" 000) R (" 000) R (" 000) Balance at 1 0 -113 261 62 433 January 2004 SA GAAP reported 0 -111 903 62 279 balance at 1 January 2004 Cumulative -1 358 154 effects of IFRS adoption Restated net 12 232 12 232 profit for the year Acquisition of 97 97 subsidiary Minority interest 12 12 in net profit of the year Employee share 1 142 options - value of services provided Revaluation of 714 property, plant and equipment Issue of shares 0 2 475 Share issue 0 -32 expenses Balance at 1 109 -101 029 79 073 January 2005 SA GAAP reported 109 -97 029 79 705 balance at 1 January 2005 Cumulative 0 -2 389 979 effects of IFRS adoption Correction of -1 610 -1 610 error Net profit for 15 442 15 442 the period Minority interest -109 -109 in net profit of the year Employee share 2 406 options - value of services provided Revaluation of 669 property, plant and equipment Change in 154 154 estimate Issue of shares 6 046 Share issue -18 expenses Balance at 31 0 -85 433 103 663 December 2005 NOTES 1. Basis of preparation The audited abridged results for the year ended 31 December 2005 have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The company is reporting under IFRS for the first time for the year ended 31 December 2005. These standards are subject to ongoing review and may change. Comparative figures have been restated accordingly. The disclosure required by IFRS 1 (First-time Adoption of International Financial Reporting Standards) concerning the transition from South African Statements of Generally Accepted Accounting Practice ("SA GAAP") to IFRS and the required changes in accounting policies are set out in the table below. Reconciliation of SA GAAP to IFRS Audited IFRS 12 months transitions 31 1 January
December 2004 2004 R ("000) R ("000) Balance sheet Equity as previously reported under SA GAAP 79 596 62 279 Restatements for IFRS -631 154 Property, plant and equipment 835 Employee share options - value of services 2 654 1 512 provided IFRS Adjustments to earnings -2 389 -1 358 Deferred tax -121 Correction of error -1 610 Equity as reported under IFRS 78 965 62 433 Income statement Net profit as previously reported under SA GAAP 14 877 Restatements for IFRS -2 645 Change in depreciation 156 Employee share options - value of services -1 142 provided Deferred tax -47 Deferred tax correction of error -1 612 Restated net profit per IFRS 12 232 2005 2004 R ("000) R ("000) 2. Profit on sale of 50 % of subsidiary 50 % of MICROmega Revenue Management Solutions (Proprietary) Limited was disposed of to Mzimkhulu Investments (Pty) Ltd resulting in a capital profit. Capital profit on disposal 25 101 0 3. Long term loan Loan Mzimkhulu Investments (Pty) Ltd 33 691 0 -26 120 Impairment of loan -30 550 0 Tax effect 4 430 Loan balance 3 141 0 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 will be reviewed on an annual basis. Commentary on results We are pleased to report a 91% increase in headline earnings per share to 18.9 cents for the financial year ended 31 December 2005. Operating profits for this reporting period were reduced by R2 226 309 as a direct result of the impact of accounting in accordance with IFRS for share options issued to staff and changes in estimates. The adoption of IFRS has resulted in the prior year headline earnings per share of 11.7 cents being restated to 9.9 cents. The strong increase in earnings can be attributed to the contribution from acquisitions concluded during the year as well as the strong organic growth from our financial and support service businesses. The group has diversified its activities beyond the provision of financial services into support services, information technology, manufacturing and agency businesses. This significantly strengthened the company"s ability to grow earnings without placing key dependency on isolated sectors of the market. Financial services sector The two companies in this sector namely, MICROmega Securities and MICROmega Revenue Management Solutions, collectively, contributed 48% to total headline earnings. MICROmega Securities was established in 1991 and acquired on the 1 February 2000. MICROmega Securities is an inter-dealer broker providing broking services to both domestic and international banks. Whilst the earnings from this business are dependant on market volatility, and the consequent demand for trade between their clients, we remain confident that the role the business has as a dominant provider of liquidity in the domestic markets, will ensure that it continues to make a contribution to earnings growth in future periods. MICROmega Revenue Management Solutions was established in 1972 and acquired on the 1 July 2001. MICROmega Revenue Management Solutions is South Africa"s largest public sector revenue management service provider. The business is responsible for the day to day management of more than a million commercial and domestic consumers. This business was restructured during the first quarter of 2005 to accommodate the need for improved broad based black economic empowerment. We are pleased to report that the restructuring was successful and that the earnings for 2005 reflected these benefits. Report of the Auditors RW Irish-Alliott Inc"s. unmodified audit report on the 31 December 2005 summarised financial statements contained herein is available for inspection at the company"s registered office. Support services The two businesses in this sector namely, MICROmega Risk Management Services and MECS Africa, collectively, contributed 11% to total headline earnings. MICROmega Risk Management Services ("NOSA") provides safety, occupational health and environmental risk management services. It is the exclusive provider of the NOSA Five Star Grading System. NOSA a business founded in 1951 was acquired in January 2005. The business was materially restructured during the year and whilst there was little contribution to earnings from this business, as a direct result of the reinvestment in the restructuring program, we are confident with the growth prospects in forthcoming years. MECS Africa was established in 1981 and acquired on the 1 October 2005. MECS provides flexible alternative solutions to permanent employment in the construction, engineering and petrochemical industry. In addition to South Africa, MECS has operating activities in both Angola and Australia. The business is a dominant service provider in its sector and has, post acquisition, enjoyed significant growth in earnings as a direct result of now having greater access to capital. Information technology The two companies in this sector namely, Intermap and Sebata Municipal Solutions, collectively, contributed 26% to total headline earnings. Intermap was established in 1998 and acquired on the 1 January 2004. Intermap provides leading edge, innovative and efficient customised web-based business information systems for clients in every realm of commerce, industry and government. Services and products from this business were demand driven during the period under review and the consequent order book has ensured that the business will continue to enjoy strong earnings growth in 2006. Sebata Municipal Solutions was established in 1997 and acquired on the 1 December 2004. Sebata provides software development and support services to 87 Local Authorities. Revenue is secured primarily through long-term service level agreements and consequently the business"s earnings are underpinned with strong annuity based income streams. Manufacturing and agency businesses The two companies in this sector namely, Deltec Power Distributors and BTM Manufacturing, collectively, contributed 15% to total headline earnings. Deltec Power Distributors was established in 1979 and acquired on the 1 October 2004. Deltec has an agency agreement to supply both the Global and Delphi battery range in Southern Africa. An aggressive marketing strategy resulted in the business increasing revenues by 40% during the period under review. BTM Manufacturing was established in 1978 and acquired on the 1 November 2005. BTM is the largest manufacturer of Bullbars and the second largest manufacturer of Towbars in South Africa. Given the current growth in the automotive sector the business has enjoyed its strongest growth in revenues and earnings in 2005, it is anticipated that this growth will continue in 2006. Prospects We are confident that revenue will double in 2006, and that we will continue to retain the current operating margins in our businesses. Our strategy is to continue to identify and pursue acquisition opportunities and this together with our current strong earnings growth will ensure that we continue to enjoy the current high levels of growth. 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: D J Case Auditors R W Irish - Alliott Inc. Registered Accountants and Auditors Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd Sponsor: LPC Manhattan Moela Sponsors (Pty) Ltd Date: 31/03/2006 05:36:11 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
