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MMG - Micromega - Unaudited Interim Results: Six Months Ended 30 June 2007 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 2007 Increase In Revenue 48% Increase In Attributable Profits 48% Increase In Headline Earnings Per Share 31% Increase In Net Asset Value Per Share 36% Increase In Net Tangible Asset Value Per Share 46% ABRIDGED INCOME STATEMENT Unaudited Unaudited Audited six months six months year ended ended ended
30 June 30 June 31 December 2007 2006 2006 R(`000) R(`000) R(`000) Revenue 229 320 154 582 318 417 Operating Profit 25 700 19 182 41 448 Net finance income 3 836 2 319 3 553 Share of profits of associates 123 - 140 Profit before taxation 29 659 21 501 45 141 Taxation (8 217) (6 606) (14 158) Profit after taxation 21 442 14 895 30 983 Attributable to: Ordinary shareholders 19 907 13 485 29 902 Minorities 1 535 1 410 1 081 Reconciliation of headline earnings Net profit attributable to ordinary 19 907 13 485 29 902 shareholders (Profit)/loss on disposal of (52) - 65 property, plant and equipment Profit on sale of investment (2 565) - - Impairment of loan 1 047 - 1 797 Headline earnings 18 337 13 485 31 764 Headline earnings per share (cents) 18.81 14.37 33.45 Earnings per share (cents) 20.42 14.37 31.49 Diluted earnings per share (cents) 20.13 13.89 30.89 Weighted average number of shares 97 499 93 847 94 971 Diluted weighted average number of 98 904 97 062 96 786 shares Total number of shares in issue 97 801 96 316 96 326 ABRIDGED BALANCE SHEET Unaudited Unaudited Audited six months six months year ended ended ended
30 June 30 June 31 December 2007 2006 2006 R(`000) R(`000) R(`000) ASSETS Non-current assets Property, plant and equipment 27 458 19 941 24 252 Goodwill 33 238 30 012 32 787 Intangible assets 24 357 17 848 18 913 Deferred tax asset 8 073 3 941 7 510 Investments 8 661 3 425 6 642 Loans receivable 6 974 5 718 3 698 Current assets Inventories 41 810 11 873 18 298 Accounts receivable 86 244 56 543 48 412 Cash and cash equivalents 32 872 40 655 55 661 TOTAL ASSETS 269 687 189 956 216 173 EQUITY AND LIABILITIES Equity Equity holders` interest 164 777 120 258 139 343 Minorities interest 4 608 1 410 3 073 Non-distributable reserves 8 309 7 224 7 826 Non-current liabilities Borrowings 22 539 15 345 10 994 Current liabilities Taxation 5 427 5 583 6 394 Accounts payable 61 567 27 429 35 490 Current portion of borrowings 910 7 076 11 320 Derivative financial instruments - - 108 Provisions 1 550 5 631 1 625 TOTAL EQUITY AND LIABILITIES 269 687 189 956 216 173 Net asset value per share (cents) 181.69 133.82 155.97 Net tangible asset value per share 122.80 84.13 102.30 (cents) ABRIDGED CASH FLOW STATEMENT Unaudited Unaudited Audited six months six months year
ended ended ended 30 June 30 June 31 December 2007 2006 2006 R(`000) R(`000) R(`000)
Cash generated by operations 27 260 22 275 47 452 Movement in working capital (18 904) (12 895) (6 844) Net investment income 3 959 2 319 3 693 Taxation paid (8 697) (7 840) (11 265) Net cash from operating activities 3 618 3 859 33 036 Net cash used in investing activities (21 099) (3 936) (13 625) Capital raised - 9 555 - Loans raised - - 2 000 Loans repaid (10 835) (15 077) (6 073) Treasury shares issued/(repurchased) 5 527 - (5 931) Net cash used in financing activities (5 308) (5 522) (10 004) Net increase/(decrease) in bank and (22 789) (5 599) 9 407 cash Represented as follows: Bank and cash at beginning of year 55 661 46 254 46 254 Bank and cash at end of period 32 872 40 655 55 661 Net increase/(decrease) in bank and (22 789) (5 599) 9 407 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 1 929 181 723 5 061 1 383 - (78 472)110 624 January 2006 Net profit for 1 081 29 902 30 983 the year Movement in 992 1 992 minority interests on 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 51 11 188 11 239 Share issue (46) (46) expenses Treasury shares (17) (5 915) (5 932) repurchased Balance at 31 963 186 950 6 033 1 793 3 073 (48 570)150 242 December 2006 Net profit for 1 535 19 907 21 442 the period Employee share 483 483 options - value of services provided Issue of 15 5 512 5 527 treasury shares Balance at 30 978 192 462 6 516 1 793 4 608 (28 663)177 694 June 2007 NOTES 1 Basis of Preparation The unaudited results for the six months ended 30 June 2007 have been prepared in accordance with IAS 34, Interim Financial Reporting. The accounting policies used are consistent with those used in the annual financial statements for the year ended 31 December 2006. 2 Sale of subsidiary The group repurchased the entire share capital of Lwanelerato (Proprietary) Limited, a company holding a 50% interest in EMPOWERisk (Proprietary) Limited, from the previous Black Economic Empowerment partner effective 1 January 2007. The group than sold the entire investment in Lwanerato (Propietary) Limited to a new Black Economic Empowerment consortium, Theca Trading and Investments Close Corporation, at a total profit of R3 million on the transaction. COMMENTARY ON RESULTS We are pleased to report a 48% increase in revenue, a 48% growth in attributable profit and a 31% growth in headline earnings per share. The group`s balance sheet continues to strengthen with an increase of 36% in net asset value and an increase of 45% in net tangible asset value. We remain firm in our view that our strategy of diversification and the resultant growth in our four sectors of activity was the correct decision. The challenges that we face as a result of diversification have been identified and effectively managed by the board. We believe we have the technical expertise and system capacity to ensure optimal extraction of value from our investments. We plan to continue with this expansion strategy both organically and by way of acquisition while remaining cogniscant of the associated risks and the need to deliver a "no surprises" environment to our shareholders. The following sector contribution to headline earnings per share demonstrates the successful implementation of our diversification strategy: Financial services sector We remain pleased with the growth we are experiencing from this sector. Market volatility in the first half of this year has played an important factor in ensuring the ongoing demand for our inter-dealer brokering services. This sector contributed 22% to total headline earnings. Support services sector This sector has continued to perform well and enjoyed a 64% growth in earnings in comparison with the same period last year. This growth is primarily attributed to the ongoing demand for occupational health, safety and environmental services provided by NOSA. We anticipate, based on the current order book and general market conditions, that NOSA will continue to grow at an accelerated rate well into the future. This sector contributed 30% to total headline earnings. Information technology sector This sector performed below expectation. The unanticipated delay in the implementation of certain principle projects to the public sector has caused a lag in income generation during the period. We anticipate that the second half of this year will see an effective turnaround on delivery both from within our client base and our own businesses. This sector contributed 10% to total headline earnings. Automotive components sector During the period under review we acquired a further two businesses in this sector: Pro Fit and Lubrication Equipment. These businesses have been operating for 27 and 48 years respectively. They bring with them a stable earnings base and a well entrenched client base that we intend to, in due course, leverage into products provided by our other businesses in this sector. The contribution of the new businesses was not material for the period under review and consequently shareholders can look forward to a continued increase in earnings in the second half of this year arising from these businesses. Demand for product from this sector remains at an all time high and our challenge is to ensure that we have the capacity to effectively deliver against this demand. This sector contributed 38% to total headline earnings. PROSPECTS We are confident with our ability to improve on our current growth rate in the second half of this year. Our strategy and focus now is to ensure we have the base to deliver sound earnings growth in 2008. Whilst we remain confident that our organic growth rate has reached an acceptable level we will continue to identify and pursue acquisitions that complement our current operations. By order of the board 24 August 2007 Directors: I G Morris (Chairman) R C Lewin (Non-executive) E S Mpanza (Non-executive) D M Carson (Non-executive) Company Secretary: D J Case Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd Sponsor: Investec Bank Limited Date: 24/08/2007 15:38:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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