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Micromega - Unaudited interim results for the six months ended 30 June 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") UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Increase In Revenue 152% Increase In Attributable Profits 286% Increase In Headline Earnings Per Share 139% Increase In Net Asset Value Per Share 36% Increase In Net Tangible Asset Value Per Share 31% ABRIDGED INCOME STATEMENT Unaudited Unaudited Audited six months six months year ended ended ended
30 June 30 June 31 December 2006 2005 2005 R(`000) R(`000) R(`000) Revenue 154 582 61 244 159 339 Operating Profit 19 182 4 216 18 335 Net finance income 2 319 1 308 3 390 Share of profits of associates - - 48 Profit before taxation 21 501 5 524 21 773 Taxation (6 606) (2 028) (6 440) Profit after taxation 14 895 3 496 15 333 Attributable to: Ordinary shareholders 13 485 3 496 15 442 Minorities 1 410 - (109) Reconciliation of headline earnings Net profit attributable to ordinary 13 485 3 496 15 442 shareholders Impairment of investment - 1 868 - Impairment of goodwill - - 561 Profit on sales of 50% of subsidiary - - (25 101) Impairment of loan - - 26 120 Initial cost of BEE transaction - - 191 Headline earnings 13 485 5 364 17 213 Headline earnings per share (cents) 14.37 6.01 18.86 Earnings per share (cents) 14.37 3.92 16.92 Diluted earnings per share (cents) 13.89 3.78 16.40 Weighted average number of shares 93 847 89 280 91 253 Diluted weighted average number of 97 062 92 550 94 154 shares Total number of shares in issue 96 316 92 355 92 905 ABRIDGED BALANCE SHEET Unaudited Unaudited Audited six months six months year
ended ended ended 30 June 30 June 31 December 2006 2005 2005 R(`000) R(`000) R(`000)
ASSETS Non-current assets Property, plant and equipment 19 941 9 829 17 965 Goodwill 30 012 28 014 30 079 Intangible assets 17 848 3 454 17 664 Deferred tax asset 3 941 10 687 3 624 Investments 3 425 384 3 297 Loans receivable 5 718 2 509 4 223 Current assets Inventories 11 873 4 948 11 635 Accounts receivable 56 543 23 045 40 586 Current portion of loans receivable - 4 675 - Foreign exchange contracts - 48 - Cash and cash equivalents 40 655 37 198 46 254 TOTAL ASSETS 189 956 124 791 175 327 EQUITY AND LIABILITIES Equity Equity holders" interest 120 258 86 717 97 219 Minorities interest 1 410 109 - Non-distributable reserves 7 224 3 950 6 444 Non-current liabilities Borrowings 15 345 6 745 15 087 Current liabilities Taxation 5 583 2 270 6 501 Accounts payable 27 429 16 269 24 130 Current portion of borrowings 7 076 3 600 20 915 Provisions 5 631 5 131 5 031 TOTAL EQUITY AND LIABILITIES 189 956 124 791 175 327 Net asset value per share (cents) 133.82 98.29 111.58 Net tangible asset value per share 84.13 64.22 60.19 (cents) ABRIDGED CASH FLOW STATEMENT Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December
2006 2005 2005 R(`000) R(`000) R(`000) Cash generated by operations 22 275 6 842 22 157 Movement in working capital (12 895) (4 945) (8 555) Net investment income 2 319 1 308 3 439 Taxation paid (7 840) (677) (1 632) Net cash from operating activities 3 859 2 528 15 409 Net cash used in investing activities (3 936) (11 180) (6 479) Capital raised 9 555 4 781 6 028 Loans raised - 6 476 11 179 Loans repaid (15 077) (11 329) (25 085) Net cash used in financing activities (5 522) (72) (8 598) Net increase/(decrease) in bank and (5 599) (8 724) 332 cash Represented as follows: Bank and cash at beginning of year 46 254 45 922 45 922 Bank and cash at end of period 40 655 37 198 46 254 Net increase/(decrease) in bank and (5 599) (8 724) 332 cash ABRIDGED STATEMENT OF CHANGES IN EQUITY Share Share Share- Revalu- Minor- Accumu- Total capital premium based ation ity lated payment reserve int. 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 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 - (85 422)103 633 December 2005 Net profit for 1 410 13 485 14 895 the period Employee share 780 780 options - value of services provided Issue of shares 34 9 569 9 603 Share issue (49) (49) expenses Balance at 31 963 191 243 5 841 1 383 1 410 (71 948)128 892 December 2006 NOTES 1.Basis of Preparation The unaudited results for the six months ended 30 June 2006 have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The accounting policies used are consistent with those used in the annual financial statements for the year ended 31 December 2006. COMMENTARY ON RESULTS We are pleased with the 139% growth in headline earnings per share. The increase of 152% in turnover is attributed to the impact of acquisitions made in the fourth quarter last year as well as sound organic growth. Our business model has deliberately been structured to ensure we place no dependency on any specific market sector. The contribution to headline earnings from each of our four sectors reflects the implementation of this strategy. Contribution to headline earnings: Financial services sector: 31% Support services sector: 24% Information technology sector: 21% Manufacturing and agency businesses: 24% The group"s balance sheet continues to strengthen. The growth of 36% in net asset value and 31% in net tangible asset value is attributed to the growth in retained earnings and our strategy to use equity as a currency for acquisitions. This can be attributed to the fundamental principles we employ in identifying, pricing and structuring our acquisitions. Our cash flow in the first six months has been impacted by the settlement of vendor payments. These settlements were in respect of profit warranty agreements as well as acquisitions made in the last quarter of 2005. The increase in stock levels from 2005 is one we anticipate to report on annually as we deliberately accumulate stock in our manufacturing businesses to accommodate the increase in seasonal sales in the second half of the year. PROSPECTS We are confident that we will be able to continue to deliver strong earnings growth. We indicated last year that we anticipated a doubling in turnover this year. Our ability to achieve this whilst at the same time preserving our margins is demonstrated in the first half of this year. We remain confident that we can maintain these growth levels for the second half of the year. Consideration is now being given to 2007 and the board is confident that the organic growth we are experiencing from our current businesses bodes well for next year. This together with our ongoing strategy to acquire businesses gives us confidence that our objective to continue to generate sustainable earnings growth can be achieved. By order of the board 17 July 2006 Directors: I G Morris (Chairman) W E Rosenberg (CEO) R C Lewin (Executive) J J L Storom (Executive) A Vercueil (Executive) E S Mpanza (Non-executive) Company Secretary: D J Case Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd Sponsor: Vunani Corporate Finance (Pty) Ltd Date: 17/07/2006 05:00:27 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
