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DGC - DigiCore Holdings Limited - Group interim results for the six months ended
31 December 2010
DigiCore Holdings Limited
Registration number 1998/012601/06
JSE code: DGC ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
Helping the GLOBE GO GREEN
Group Interim Results for the six months ended 31 December 2010
* TURNOVER - Up 29% to R322 million
* OPERATING PROFIT - Up 15% to R40 million
* INTERIM DIVIDEND - 3 cents/share
COMMENTARY
Introduction
A positive turn for DigiCore after the recessionary burden of the past two
years.
DigiCore`s business remains that of supplying an intelligent fleet management
solution via vehicle-tracking technology on a global basis. C-track South Africa
has established itself as a reliable stolen vehicle recovery company using
satellite tracking information intelligently to recover vehicles that were
hijacked or stolen.
Comparable performance for the six months to 31 December 2010 shows a marked
improvement. Operating profit has increased considerably, if non-recurring items
are excluded. After adjusting for over R7 million in initial losses and
restructuring costs from the Minorplanet merger, unrealised foreign exchange
differences of R1 million and a R5 million reduction in capitalised costs on the
prior year, growth in operating profit is 65%.
One of the highlights of the period was that we overcame problems with component
shortages and sold 22% more units than the comparative period. We also
integrated our acquisition (Minorplanet) into our business successfully,
launched new products, and our Tap-i-fare project, the world`s first bank-
approved wireless smartcard fare-collection system for commuter taxis, went live
in December 2010.
With new management and structures in Malaysia, Mexico and the Middle East,
activity has increased in these regions and we expect increased output going
through our factory soon.
Looking back at our decision not to reduce staff to save some cost during the
economic downturn, we are indeed happy to have retained our expertise to handle
the current inflow of work.
Financial review
The period under review reflected positive sentiments on economic recovery,
albeit modest. All companies and divisions across the DigiCore group increased
revenues.
Six months ended
31 Dec 31 Dec Growth
REVENUE - R`000 2010 2009 %
SA distribution 249 313 194 487 28
Foreign distribution 84 615 58 282 45
Product development and manufacturing 95 481 72 226 32
Group services 10 581 9 863 7
439 990 334 858 31
Included in SA distribution is Fleet Management which felt the impact of the
economic slowdown most severely and it was encouraging to see this subsidiary
lift revenues by 29% during the period. Stolen vehicle recovery operations, also
included in SA distribution, continued its growth path with sales growth of
19.6%. On the back of increased hardware sales, annuity income as a percentage
of total sales reduced to 49% (December 2009: 56%), but in rand terms annuity
income grew by 13.3% to R160 million.
Operating profit increased by 15% to R40.3 million. Considering the impact of
extraneous items listed earlier in the introduction paragraph, the operating
margins have been improved. The continued strength of the rand led to an
unrealised forex loss of R3.6 million for the review period.
Cash generated from operations decreased compared to the prior period, mainly
due to a significant investment in working capital in the last quarter of the
reporting period. Cash balances are expected to improve over the next quarter as
sales from the last quarter are collected and the proceeds of the rights offer
are received.
Earnings per share rose by 1.4% to 10.84 cents.
After much deliberation, the board agreed that in spite of the rights offer to
raise capital in the group; it would continue with its dividend policy of
approximately 3 times cover and pay an interim dividend to shareholders of 3
cents per share.
SA Operations
C-track SA
Although new unit sales were marginally down on the comparative period, our
total base grew by 8% in the six months to 31 December 2010. Component shortages
at the manufacturing plant affected performance but these shortages should now
be behind us. The annuity-income model allowed us to grow turnover by R11.7
million.
Our five own fitment centres and distribution network, administration and
financial systems and value-added services are continually improving while
making inroads into various channels to promote our products.
Fleet Management SA
This division has returned to a growth path in line with vehicle sales and
transport activity. Our network of branches continued to penetrate certain niche
industries as identified some time ago. This good performance, while still using
a sales model with low initial sales value and higher annuity income, will have
an increasingly positive effect. The South African Police Services business has
had a good effect on this division with the purchase of additional units and
maintenance of some 35 000 vehicles. We are delighted to be part of decreasing
their fleet costs while they work to increase their service delivery to the
public.
Some new products such as cCom, a navigation, voice and workflow in one device,
should contribute to future sales growth as noted in recent months.
International
This has been an exciting period. We have successfully integrated the
Minorplanet business into the group in the UK, Holland, Belgium and Ireland,
with all regions now generating profit. Our 25% stake in the Australian
Minorplanet distributor has recorded a remarkable turnaround in the six months
and is now profitable as well.
Our subsidiaries in the UK and Europe were also successfully turned around,
performing much better than anticipated or budgeted for. The UK still had
restructuring and retrenchment costs in Q1 of the year which will not be
repeated, although there might still be some minor labour issues to resolve this
year.
Our new office and staff in Kuala Lumpur created some exciting activity in Asia.
Some pilot projects in the oil and transport industry in the Middle East are
managed by the same team and look promising. Similarly, in Central America, we
have seen improved activity since opening our regional office in Mexico.
After merging the C-track and Minorplanet businesses, we are now the leading
vehicle tracking company in the UK, Europe and Australia by units sold and are
well placed to grow these markets exponentionally.
Rights offer
The R90 million rights offer currently under way, underwritten by Coronation,
will ease working capital, which has been under some pressure after total
acquisition cost of around R40 million and investment of R30 million in
internally financing our unit sales during the past 12 months. Some of the
proceeds are also intended for smaller acquisitions in the near future.
The future
DigiCore awaits a further upturn in global markets this year and we believe we
are well positioned to take advantage of the recent effort and investment to
establish a new worldwide footprint and structure to make us a truly global
player.
With smaller, more cost-effective and intelligent products going into production
soon, we should be able to penetrate both our fleet and stolen vehicle recovery
markets more successfully in the period ahead, particularly in some identified
niche markets.
Underpinned by consistent quarterly growth over the past 15 months, and barring
unforeseen catastrophes, the DigiCore management team is excited about the rest
of the year ahead.
Thank you
We thank the Investor Analyst Society of SA for the "Reporting and
Communications Award" we received as the sector winner for companies with a
market capitalisation of less than R3 billion.
Thanks, too, to our staff and customers for supporting us during the recession.
For and on behalf of the board
NA Gasa NH Vlok
Chairman Chief Executive Officer
10 February 2011
Abridged consolidated statements of financial position
at 31 December 2010
31 Dec 10 31 Dec 09 30 Jun 10
R`000 R`000 R`000
Notes (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 360 321 288 197 346 086
Property, plant and equipment 130 380 105 595 120 493
Goodwill 2 174 874 160 639 172 537
Intangible assets 3 38 728 8 587 36 344
Investments in associates 2 494 6 253 2 493
Other financial assets 7 165 - 7 887
Deferred tax 6 680 7 123 6 332
Current assets 389 882 306 756 312 355
Inventories 98 437 89 230 86 533
Other financial assets - - 304
Current tax receivable 4 650 12 178 6 205
Trade and other receivables 216 419 154 902 169 990
Cash and cash equivalents 70 376 50 446 49 323
Total assets 750 203 594 953 658 441
Equity and Liabilities
Equity attributable to
equity holders of parent 492 871 487 518 485 390
Share capital and premium 4 82 585 82 983 82 585
Reserves 4 (26 241) 1 871 (17 260)
Retained income 436 527 402 664 420 065
Non-controlling interest 14 732 11 486 12 356
Non-current liabilities 35 826 37 169 36 600
Interest-bearing financial
liabilities 5 31 896 34 010 32 425
Finance lease obligation 3 418 2 647 3 138
Deferred tax 512 512 1 037
Current liabilities 206 774 58 780 124 095
Current portion of
interest-bearing financial
liabilities 5 6 299 7 310 9 610
Current tax payable 10 130 12 455 4 525
Finance lease obligation 2 686 2 079 2 513
Trade and other payables 89 714 24 923 55 516
Provisions 9 286 6 013 14 919
Bank overdraft 88 659 6 000 37 012
Total equity and liabilities 750 203 594 953 658 441
Net asset value per share (cents) 226.4 224.0 223.0
Net tangible asset value
per share (cents) 128.3 146.2 127.0
Abridged consolidated statements of comprehensive income
for the six months ended 31 December 2010
Six months Six months Year
ended ended ended
31 Dec 10 31 Dec 09 30 Jun 10
R`000 Growth R`000 R`000
Notes (Unaudited) % (Unaudited) (Audited)
Revenue 322 442 29 249 195 530 534
Cost of sales,
other income
and operating expenses (282 174) (214 272) (459 845)
Operating profit 40 268 15 34 923 70 689
Investment revenue 75 675 1 046
(Loss)/Income from
equity-accounted
investments (583) (667) 909
Finance costs (3 667) (2 135) (4 771)
Profit before taxation 36 093 10 32 796 67 873
Taxation 6 (10 943) 10 (9 988) (20 348)
Profit after tax 25 150 10 22 808 47 525
Profit attributable to:
Equity holders of the
parent 22 774 2 22 408 46 255
Non-controlling
interest 2 376 400 1 270
Other comprehensive
income
Exchange differences on
translating foreign
operations (8 981) (7 127) (30 538)
Total comprehensive income 16 169 3 15 681 16 987
Total comprehensive
income attributable to:
Equity holders
of the parent 13 793 (10) 15 281 15 717
Non-controlling
interest 2 376 400 1 270
Earnings/Dividend
per share
Earnings per
share (cents) 7 10.8 1 10.7 22.0
Diluted
earnings per
share (cents) 7 10.8 1 10.7 22.0
Headline
earnings per
share (cents) 7 10.5 (2) 10.7 21.2
Diluted
headline
earnings per
share (cents) 7 10.5 (2) 10.7 21.2
Interim dividend
per share (cents) 3.0 3.0 3.0
Final dividend
per share (cents) 3.0
Number of ordinary
shares in issue (`000) 217 669 217 669 217 669
Weighted average number
of ordinary shares
in issue (`000) 210 018 209 650 210 018
Diluted weighted
average number
of ordinary shares
in issue (`000) 210 018 209 650 210 018
Reconciliation
of headline earnings:
Basic and diluted earnings 22 774 22 408 46 255
Adjusted for:
(Profit)/Loss
on sale of fixed assets (771) 43 (1 752)
Headline and
diluted headline earnings 22 003 22 451 44 503
Abridged consolidated statements of cash flows
for the six months ended 31 December 2010
Six months Six months Year
ended ended ended
31 Dec 10 31 Dec 09 30 Jun 10
R`000 R`000 R`000
(Unaudited) (Unaudited) (Audited)
Cash flows from operating activities 16 452 21 951 86 480
Cash generated from operations 30 139 43 237 127 309
Net investment income/(finance cost) (3 592) (1 460) (3 725)
Dividends paid (6 312) (8 553) (14 999)
Tax paid (3 783) (11 273) (22 105)
Cash flows from investing activities (34 679) (12 990) (105 944)
Cash flows from financing activities (12 367) (12 421) (16 131)
Total cash and cash equivalents
movement for the period (30 594) (3 460) (35 595)
Cash and cash equivalents at the
beginning of the period 12 311 47 906 47 906
Total cash and cash equivalents at
end of the period (18 283) 44 446 12 311
Abridged consolidated statements of changes in equity
for the six months ended 31 December 2010
Six months Six months Year
ended ended ended
31 Dec 10 31 Dec 09 30 Jun 10
R`000 R`000 R`000
Notes (Unaudited) (Unaudited) (Audited)
Share capital and premium 4
Share capital and premium
at the beginning of the period 82 585 63 863 63 863
Arising on shares issued
to the share trust - - (1 194)
Arising on shares issued
for the purchase of
C-track Limited - 19 120 19 916
Share capital and premium
at the end of the period 82 585 82 983 82 585
Reserves 4
Foreign currency
translation reserve
Balance at the beginning
of the period (21 744) 8 794 8 794
Translation differences
for the period (8 981) (7 127) (30 538)
Balance at the end of the
period (30 725) 1 667 (21 744)
Equity-settled share-based
payment reserve
Balance at the beginning
of the period 4 484 204 204
Proceeds of options issued - - 1 194
Fair value of options issued - - 3 086
Balance at the end of the period 4 484 204 4 484
Share repurchase reserve
Balance at the beginning
of the period - 19 120 19 120
Shares to be issued in
respect of the C-track
Limited transaction - (19 120) (19 120)
Balance at the end of the period - - -
Reserves at the end of the period (26 241) 1 871 (17 260)
Retained income
Retained income at the
beginning of the period 420 065 388 809 388 809
Profit for the period 22 774 22 408 46 255
Dividends paid (6 312) (8 553) (14 999)
Retained income at the end
of the period 436 527 402 664 420 065
Non-controlling interest
Balance at the beginning
of the period 12 356 11 086 11 086
Profit for the period 2 376 400 1 270
Non-controlling interest
at the end of the period 14 732 11 486 12 356
Segment report
for the six months ended 31 December 2010
Six months Six months Year
ended ended ended
31 Dec 10 31 Dec 09 30 Jun 10
R`000 R`000 R`000
(Unaudited) (Unaudited) (Audited)
Revenue
SA distribution 249 313 194 487 415 748
Foreign distribution 84 615 58 282 123 138
Product development and manufacturing 95 481 72 226 154 602
Group services 10 581 9 863 26 237
439 990 334 858 719 725
Inter-segmental revenue (117 548) (85 663) (189 191)
Total revenue 322 442 249 195 530 534
Operating profit/(loss)
SA distribution 33 520 34 032 59 284
Foreign distribution 3 204 (3 240) 146
Product development and manufacturing (3 119) (215) (1 119)
Group services 6 663 4 346 12 378
40 268 34 923 70 689
Investment revenue 75 675 1 046
(Loss)/Income from equity-accounted
investments (583) (667) 909
Finance costs (3 667) (2 135) (4 771)
Profit before taxation 36 093 32 796 67 873
NOTES TO THE ABRIDGED CONSOLIDATED GROUP FINANCIAL STATEMENTS
1. Basis of preparation and accounting policies
The abridged consolidated interim financial statements set out in this report
have been prepared in accordance and comply with International Financial
Reporting Standards and are presented in terms of disclosure requirements set
out in IAS 34:Interim Financial Reporting and the Companies Act, 1973 (as
amended) and the JSE Limited ("JSE") Listings Requirements.
The financial statements are based on appropriate accounting policies,
consistently applied with those used in the audited annual financial statements
for the year ended 30 June 2010, which are supported by reasonable and prudent
judgements and estimates.
These interim financial statements have not been audited or reviewed by the
company`s auditors.
2. Goodwill
Goodwill increased by R14.2 million for the 12-month period due to the
acquisition of MPS 2010 Limited ("MPS 2010"), Minorplanet Belgium, Holland,
Germany and Ireland during the period and the translation of goodwill to the
spot rate on 31 December 2010.
3. Intangible assets
During the 12-month period R21.6 million worth of development costs were
capitalised to the balance sheet. The amount comprises of R18.5 million which
relates to the development of the new C-track v6 software as well as the Tap-i-
FareRegistered in-taxi device hardware for the taxi fare-collection project and
R3.1 million which relates to the alignment of Minorplanets tracking systems
with C-track systems. Intangible assets also include R17.1 million worth of
intellectual property acquired from MPS 2010. Development costs are amortised
over five years from the date that the asset is ready for its intended use.
Intellectual property has been assessed to have an indefinite useful life and is
assessed for impairment at least on an annual basis.
4. Share capital, share premium and reserves
There was no movement in share capital or premium for the period under review.
The share-based payment reserve has increased to R4.4 million due to share
options granted to employees during the period.
The Foreign Currency Translation Reserve has decreased by R32.3 million due to
the translation of foreign subsidiaries and the translation of goodwill to the
spot rate at 31 December 2010.
5. Interest-bearing financial liabilities
The interest-bearing financial liabilities decreased due to a repayment on the
foreign euro loan and further capital repayments on the Absa bond held over the
property. A vendor liability in MPS 2010 of GBP300 000 was also settled in the
review period.
6. Income tax expense
The effective tax rate of 30% (2009: 30%) includes a secondary tax on companies
charge on the final and interim dividends declared and paid during the years
ended 30 June 2010 and 30 June 2009.
7. Earnings per share
The difference between the total number of shares in issue and the weighted
number of shares in issue relates to treasury shares, held by the share trust to
provide share options to employees that will convert in the future.
8. Business combinations
During the 12-month period, DigiCore ultimately acquired the full shareholding
in MPS 2010, a company registered in the United Kingdom, for GBP3 million (R31.5
million) paid in cash.
MPS 2010 has taken over the operations and assets of Minorplanet`s UK business
and the intellectual property of Minorplanet. Further details on this
transaction can be found in the SENS releases of 18 May 2010, 9 June 2010 and
the release of the group audited results for the year ended 30 June 2010 on 21
September 2010.
During the reporting period, DigiCore acquired the operations and assets in the
Minorplanet Businesses in Belgium, Holland and Germany for EUR165 000. The
assets and liabilities were taken over at EUR1 and the remainder of the
consideration paid is included in goodwill. The assets and liabilities taken
over have been incorporated into DigiCore`s subsidiary in Holland, DigiCore
Europe BV. DigiCore also acquired the operations and assets in the Minorplanet
businesses in Ireland for EUR100 000 during the period. The assets and
liabilities were taken over at EUR1 and the remainder of the consideration paid
is included in goodwill. The assets and liabilities taken over have been
incorporated into C-track Ireland Limited.
The initial accounting for the Minorplanet acquisitions have only been
provisionally determined at the end of the reporting period, based on the
directors` best estimate. At the date of finalisation of these interim financial
statements, the necessary market valuations and other calculations have not been
finalised. The initial accounting of the Minorplanet transactions is expected to
be completed before the 2011 financial year-end.
DigiCore acquired a 25.1% stake in a newly formed company in Australia, Vehicle
Management Systems (Pty) Limited ("VMS") for AUS$50 000, which acquired the
operations of Minorplanet`s Distributors in the Asia-Pacific region. The
transaction was concluded in October 2010 and VMS` results until 31 December
2010 have been incorporated using the equity method.
9. Segment information
There has been no change in the basis of segmentation or the measurement of
segment profit since the last interim or annual financial statements.
There has also been no material change in the assets of the respective operating
segments.
10. Post-balance sheet events
The group has recently incorporated a company in Malaysia, C-track Asia Sdn Bhd,
with a view to increasing the group`s footprint in the Middle East, South Asia,
China and South East Asia. The company commenced trading in January 2011.
The group has also recently incorporated a company in Panama, C-track Latin
America S.A., with a view of increasing the group`s footprint in Mexico, Central
and South America. The company commenced trading in January 2011.
DigiCore has embarked on a fully underwritten renounceable rights offer of 30
million new DigiCore ordinary shares of R0.001 each at a price of 300 cents per
rights offer share. The last date to trade these rights will be Friday, 11
February 2011. For more information, shareholders are referred to the circular
containing full details on the rights offer which was mailed to shareholders on
31 January 2011 and the SENS announcements of 16 November 2010, 9 December 2010
and 14 January 2011. The rights offer has been fully underwritten by Coronation
Asset Management (Pty) Limited ("Coronation").
Other than disclosed above, there have been no significant events subsequent to
year-end and up to the date of this report that would require adjustment to the
annual financial statements or further disclosure.
Corporate governance
The group endorses the Code of Corporate Practice and Conduct as set out in the
King Committee Report on Corporate Governance in South Africa (2002) and
complies substantially with the guidelines of the report as required by the JSE.
The audit and risk committee has been tasked with reviewing the guidelines of
King III and changes to the new Companies Act, 2008, and to implement changes in
the group, where applicable.
Sustainability
During the year DigiCore continued with its initiatives and drive towards being
a more sustainable company for itself and its customers. C-track`s C02 Emissions
Report is a First for South African fleet owners and has proved a great success
in truck and bus fleets in Europe and the UK.
Through ongoing driver training and optimised route scheduling, fleet owners can
"go green" by saving fuel and thereby make a positive contribution to slowing
climate change. It`s beyond debate - the future of good business is "going
green".
CORPORATE PROFILE
DigiCore is a JSE-listed group specialising in the research, design,
development, manufacture, sales and support of technologically advanced mobile
asset tracking, management and information solutions for vehicle owners locally
and abroad.
DigiCore, working in partnership with its customers, develops solutions that
deliver measurable business and operational benefits by providing total
visibility and control of mobile assets and mobile workforces; supplying
superior vehicle-tracking solutions ranging from a basic track-and-trace product
to complete integrated enterprise-level solutions for large fleet owners such as
the Royal Mail (UK), the South African Police Service, eThekwini Metro, BHP
Billiton (global) and many others.
DigiCore seeks to achieve outstanding long-term profitability for its
shareholders, while maintaining a high standard of ethics and developing and
rewarding its people accordingly.
CHANGES TO THE BOARD OF DIRECTORS
Advocate Jacob Wiese was appointed a non-executive director with effect from 3
February 2011.
DIVIDEND ANNOUNCEMENT
In line with company policy, the board has declared an interim dividend of 3
cents per share (2009: 3 cents per share).
Payment will be made on Monday, 14 March 2011 to shareholders recorded in the
register on Friday, 11 March 2011. The last day to trade to qualify for the
dividend will be Friday, 4 March 2011 and the shares will be traded ex-dividend
from Monday, 7 March 2011.
Share certificates may not be dematerialised or rematerialised between Monday, 7
March 2011 and Friday, 11 March 2011, both days included.
Registered office
DigiCore Building, Regency Office Park
9 Regency Drive, Route 21 Corporate Park
Irene Ext 30, Centurion, South Africa
(PO Box 68270, Highveld Park, 0169)
Tel: +27 12 450 2222 Fax: +27 12 450 2497
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor
PSG Capital (Pty) Limited
Auditors
PKF (Pta) Incorporated
Directorate
NA Gasa* (Chairman), NH Vlok (Chief Executive Officer), SR Aberdein,
D du Rand, BC Esterhuyzen, BS Khuzwayo*, B Marx*, LG Msengana-Ndlela*,
SS Ntsaluba*, MD Rousseau, FJ Schindehutte, JD Wiese*
*Non-executive
Company secretary
DA Nieuwoudt
Registration number 1998/012601/06
JSE code: DGC ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
Websites
www.digicore.com www.ctrack.co.za
Date: 10/02/2011 07:05:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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