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MMG - MICROmega - Unaudited Interim Results For The Six Months

Release Date: 18/08/2008 16:30
Code(s): MMG
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MMG - MICROmega - Unaudited Interim Results For The Six Months Ended 30 June 2008 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 2008 - Increase In Revenue 68% - Increase In Attributable Profits Per Share 84% - Increase In Headline Earnings Per Share 28% - Increase In Net Asset Value Per Share 30% - Increase In Net Tangible Asset Value Per Share 38% ABRIDGED CONSOLIDATED INCOME STATEMENT Unaudited Unaudited Audited six months six months year
ended ended ended 30 June 30 June 31 December 2008 2007 2007 R(`000) R(`000) R(`000)
Revenue 386 314 229 320 483 174 Operating Profit 45 342 25 700 54 354 Net finance income 1 083 3 836 1 798 Share of profits of associates 587 123 (162) Profit before taxation 47 012 29 659 55 990 Taxation expense (9 292) (8 217) (14 400) Profit after taxation 3 37 720 21 442 41 590 Attributable to: Ordinary shareholders 36 141 19 907 40 401 Minorities 1 579 1 535 1 189 Reconciliation of headline earnings Profit attributable to ordinary 36 141 19 907 40 401 shareholders Profit on disposal of property, (69) (52) (114) plant and equipment Profit on sale of subsidiary - (2 565) (2 559) Income from write off of loan accounts - - (77) Profit on disposal of investments - - (464) Impairment of intangible assets - - 122 Impairment of investments - - 32 500 Impairment of loan - 1 047 (28 959) Negative goodwill on business 2 (13 001) - - combination Headline earnings 23 071 18 337 40 850 Headline earnings per share (cents) 23.99 18.81 41.91 Earnings per share (cents) 37.57 20.42 41.45 Diluted earnings per share (cents) 37.18 20.13 40.96 Weighted average number of shares 96 184 97 499 97 464 Diluted weighted average number of 97 211 98 904 98 644 shares Total number of shares in issue 96 759 97 801 98 169 ABRIDGED CONSOLIDATED BALANCE SHEET Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December
2008 2007 2007 R(`000) R(`000) R(`000) ASSETS Non-current assets 164 194 108 761 103 361 Property, plant and equipment 74 637 27 458 25 197 Intangible assets 64 666 57 595 59 762 Deferred tax asset 11 378 8 073 6 583 Investments 8 176 8 661 8 099 Loans receivable 5 337 6 974 3 720 Current assets 247 894 160 926 172 595 Inventories 102 491 41 810 39 278 Trade and other receivables 122 801 86 244 81 668 Current portion of loans receivable 637 - 168 Foreign exchange contracts - - 186 Cash and cash equivalents 21 965 32 872 51 295 TOTAL ASSETS 412 088 269 687 275 956 EQUITY AND LIABILITIES Equity 228 876 177 694 193 683 Equity holders` interest 217 183 164 777 184 476 Minorities interest 6 407 4 608 4 262 Non-distributable reserves 5 286 8 309 4 945 Non-current liabilities 37 960 22 539 5 812 Borrowings 37 960 22 539 5 812 Current liabilities 145 252 69 454 76 461 Taxation 10 433 5 427 5 868 Trade and other payables 124 687 61 567 57 886 Current portion of borrowings 9 830 910 12 257 Provisions 302 1 550 450 TOTAL EQUITY AND LIABILITIES 412 088 269 687 275 956 Net asset value per share (cents) 236.54 181.69 197.30 Net tangible asset value per share 169.71 122.80 136.42 (cents) ABRIDGED CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited Audited six months six months year ended ended ended
30 June 30 June 31 December 2008 2007 2007 R(`000) R(`000) R(`000) Cash generated by operations 38 064 27 260 56 696 Movement in working capital (15 506) (18 904) (17 748) Net finance income 1 174 3 959 1 711 Taxation paid (7 146) (8 697) (13 396) Net cash from operating activities 16 586 3 618 27 263 Net cash used in investing activities (22 606) (21 099) (33 739) Loans raised - - 11 227 Loans repaid (18 440) (10 835) (11 667) Treasury shares (repurchased)/sold (4 870) 5 527 2 550 Net cash used in financing activities (23 310) (5 308) 2 110 Net increase/(decrease) in cash and (29 330) (22 789) (4 366) cash equivalents Represented as follows: Cash and cash equivalents at beginning 51 295 55 661 55 661 of the year Cash and cash equivalents at end of 21 965 32 872 51 295 period Net increase/(decrease) in cash and (29 330) (22 789) (4 366) cash equivalents ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Share- Revalu- Foreign Deal
capital premium based ation currency differ- payment reserve transla- ences reserve tion reserve reserve
R(`000) R(`000) R(`000) R(`000) R(`000) R(`000) Balance at 1 January 963 187 168 806 1 793 - - 2007 Foreign currency trans- 2 lation difference Revaluation of proper- 866 ty, plant and equipment Deferred tax effect on (169) revaluation Creation of non-distri- 1 000 butable reserve - deal differences Employee share options 45 647 - value of services provided Issue of shares 12 3 391 Share issue expenses (9) Treasury shares sold 7 2 543 Recognised directly in 982 193 138 1 453 2 490 2 1 000 equity Net profit for the year Balance at 31 December 982 193 138 1 453 2 490 2 1 000 2007 Foreign currency trans- (2) lation difference Movement in minority interests on business combination Employee share options 39 343 - value of services provided Issue of shares 8 1 401 Share issue expenses (12) Treasury shares repur- (22) (4 848) chased Recognised directly in 968 189 718 1 796 2 490 - 1 000 equity Net profit for the period Balance at 30 June 2008 968 189 718 1 796 2 490 - 1 000 ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) Minority Accumulated Total interest (loss)/ earnings
R(`000) R(`000) R(`000) Balance at 1 January 3 073 (49 045) 144 758 2007 Foreign currency trans- 2 lation difference Revaluation of proper- 866 ty, plant and equipment Deferred tax effect on (169) revaluation Creation of non-distri- (1 000) - butable reserve - deal differences Employee share options 692 - value of services provided Issue of shares 3 403 Share issue expenses (9) Treasury shares sold 2 550 Recognised directly in 3 073 (50 045) 152 093 equity Net profit for the year 1 189 40 401 41 590 Balance at 31 December 4 262 (9 644) 193 683 2007 Foreign currency trans- (2) lation difference Movement in minority 566 566 interests on business combination Employee share options 382 - value of services provided Issue of shares 1 409 Share issue expenses (12) Treasury shares repur- (4 870) chased Recognised directly in 4 828 (9 644) 191 156 equity Net profit for the 1 579 36 141 37 720 period Balance at 30 June 2008 6 407 26 497 228 876 NOTES 1.Basis of Preparation The abridged unaudited consolidated results for the six months ended 30 June 2008 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 2007. 2.Negative goodwill The group purchased the entire share capital of Kolbenco (Proprietary) Limited, effective 1 February 2008 for a total amount of R8 083 767. The fair value of the net tangible assets of Kolbenco (Proprietary) Limited at that date was as follows: Property, plant and equipment 48 331 877 Deferred taxation 2 393 666 Inventories 24 711 814 Trade and other receivables 17 317 427 Borrowings (40 268 627) Trade and other payables (22 565 206) Cash and cash equivalents (8 835 699) 21 085 252
In terms of IFRS3, where the fair value of the assets exceed the purchase consideration, then the resulting gain needs to be recognised immediately in profit or loss on the acquisition date. The resulting gain recognised was R13 001 495. If the operations of Kolbenco had been consolidated since the start of the financial period, namely 1 January 2008, then the consolidated profit after taxation of the group would have decreased by R762 480 together with an increase in turnover of R12 059 000. 3.Profit after taxation The group`s profit after tax was negatively affected by the losses of the start-up entities, namely Stable-Net (Proprietary) Limited and MICROmega Technologies (Proprietary) Limited. The combined after tax loss of these two operations for the first 6 month period of the 2008 financial year was R3 045 104. If these two operations had not been commenced then the group`s profit after taxation would have been as follows: (R`000) - On a fully consolidated basis 37 720 - Add back of the two start-up operations 3 045 Profit after taxation excluding the start-up operations 40 765 Further the salient financial information for the income statement would have been as follows: Including Excluding 6 Months start-up start-up ended 30 operations operations June 2008
Headline earnings per share 23.99 27.15 18.81 Attributable earnings per share 37.57 40.74 20.42 Diluted earnings per share 37.18 40.31 20.13 Based on the numbers provided above, excluding start-up operations, headline earnings per share would have increased by 44% together with an increase of 100% in the attributable earnings per share. COMMENTARY ON RESULTS We are pleased to report a 28% increase in headline earnings per share to 24 cents, a 68% increase in revenue and an 84% increase in attributable profit per share. The group`s balance sheet continues to strengthen with an increase of 30% in net asset value to 237 cents per share and an increase of 38% in net tangible asset value to 170 cents per share. During the period under review the group incurred expenditure to invest in the start up of two new businesses namely, Stable-Net and MICROmega Technologies. The investment in these two operations had a negative impact on headline earnings for the period of 3 cents per share. Without these start up costs our growth in headline earnings per share would have been 44%. We are confident that the establishment costs on these two new operations will generate strong revenues and more importantly profit during the remainder of this financial year. Trading conditions have been significantly tougher than previous periods and we have experienced continuous pressure on our operating margins. Taking into consideration our investment in our two start-up operations we are pleased to report that we have managed to maintain an 8% after tax margin from current operations. This is in line with last year`s performance for the same period under review. Our diversification strategy has worked well both in terms of preserving our profit margins and ensuring that we have the ability to grow our earnings base. Our balance sheet strength and our significantly under-geared position will allow us to continue to grow at the current rate by investing in the scalability of our current operations and in the acquisition of complementary businesses. We are confident that whilst the global economy is currently under pressure we have secured good market share though a portfolio of businesses that hold a unique strategic position in their markets. Our philosophy is one of "owning" a hundred percent of one percent of a market rather than being a marginal supplier in a large market where we would have little capacity to influence our price point. We recognise that trading conditions are not likely to improve materially during the remaining half of the year but we are confident that our operations are robust enough to continue to deliver good earnings growth for our shareholders. By order of the board 18 August 2008 Directors: I G Morris (Chairman) D M Carson (Non-executive) P V Henwood (Non-executive) R C Lewin (Non-executive) J E Newbury (Executive) Company Secretary: D J Case Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd Sponsor: Investec Bank Limited Auditor: KPMG Inc Date: 18/08/2008 16:30:01 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. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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