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SBG - Simeka Business Group Limited - Unaudited condensed consolidated interim

Release Date: 25/02/2011 09:38
Code(s): SBG
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SBG - Simeka Business Group Limited - Unaudited condensed consolidated interim financial statements for the six months ended 30 November 2010 Simeka Business Group Limited (Incorporated in the Republic of South Africa) (Registration number 2003/012583/06) JSE code: SBG ISIN: ZAE000074878 ("Simeka" or "the company" or "the group") UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 NOVEMBER 2010 RENEWAL OF CAUTIONARY ANNOUNCEMENT Highlights Revenue R411,1 million Headline earnings R23,2 million Cash reserves R96,0 million NAV per share 44.98 cents Condensed consolidated statement of comprehensive income Unaudited Unaudited Audited six months six months year ended to 30 Nov to 30 Nov 31 May 2010 2009 2010
R`000 R`000 R`000 Revenue 411 087 373 699 697 005 Turnover 408 462 372 307 693 830 Cost of sales (228 180) (218 798) (402 286) Gross profit 180 282 153 509 291 544 EBITDA 60 070 50 325 76 855 Depreciation (7 364) (6 881) (13 002) Amortisation of intangible assets (404) (2 091) (4 685) Impairment of goodwill and intangible assets - (178 625) (271 059) Impairment of investments - - (306) Net finance costs (6 497) (11 666) (21 313) Income from associate 27 160 214 Profit/(loss) before taxation 45 832 (148 778) (233 296) Income tax expense (15 767) (10 141) (4 518) Profit/(loss for the period 30 065 (158 919) (237 814) Other comprehensive income for (1 275) the period, net of tax 294 118 Total comprehensive income/ 28 790 (loss)for the period (158 625) (237 696) Profit/(loss)attributable to: Owners of the parent 22 854 (159 558) (242 914) Non-controlling interest 7 211 639 5 100 30 065 (158 919) (237 814) Total comprehensive income attributable to: Owners of the parent 22 854 (159 264) (242 796) Non-controlling interest 7 211 639 5 100 30 065 (158 625) (237 696) Earnings/(loss)per share (cents) 4.25 (32.45) (44.70) Diluted earnings/(loss)per share (cents) 4.25 (28.92) (44.70) Notes to the statement of comprehensive income Headline earnings for the period attributable to ordinary shareholders 23 161 22 091 27 350
Headline earnings per share 4.31 4.49 5.03 Diluted headline earnings per share 4.31 4.00 5.03 Number of shares (`000) Weighted average number of shares 537 497 491 629 543 414 Diluted weighted average number of shares in issue and to be issued 537 497 551 629 543 414 Reconciliation of headline earnings calculation: Earnings for the period attributable to ordinary shareholders 22 854 (159 558) (242 914) Loss on disposal of subsidiaries and associates - 1 611 10 004 Goodwill impairment - 178 625 230 295 Intangible assets impairment - - 29 350 Profit/ (loss) on disposal of property, plant and equipment 307 (10) 60 Impairment of loans - 1 423 - Impairment of investments - - 556 Headline earnings for the period attributable to ordinary shareholders 23 161 22 091 27 351 Condensed consolidated statement of financial position Unaudited Unaudited Audited
six months six months year ended at 30 Nov at 30 Nov 31 May 2010 2009 2010 R`000 R`000 R`000
ASSETS Non-current assets 259 950 358 485 263 177 Property, plant and equipment 33 790 37 868 37 846 Goodwill 180 709 228 788 180 709 Intangible assets 4 115 48 302 4 519 Other financial assets 3 968 3 519 3 613 Investment in associate company 4 554 10 777 3 789 Deferred taxation 32 814 29 231 32 701 Current assets 301 261 275 433 211 111 Inventories 31 622 7 777 9 624 Trade and other receivables 166 145 163 937 100 124 Financial assets 2 160 1 824 871 Taxation receivable 5 182 4 590 5 182 Operating lease assets 113 113 113 Cash resources 96 039 97 192 95 197 Total assets 561 211 633 918 474 288 EQUITY AND LIABILITIES Capital and reserves 240 833 301 782 219 056 Share capital 300 742 252 370 300 742 Reserves (6 952) (5 699) (5 875) Retained earnings (52 957) 7 545 (75 811) Amounts due to vendors - 47 566 - Non-controlling interest 8 330 8 334 6 629 Total equity 249 163 310 116 225 685 Non-current liabilities 79 624 155 410 94 273 Other financial liabilities (interest-bearing debt) 73 907 138 079 88 221 Finance lease obligation 2 130 1 629 2 465 Deferred taxation 3 587 15 702 3 587 Current liabilities 232 424 168 392 154 330 Other financial liabilities (interest-bearing debt) 41 250 14 153 47 456 Finance lease obligations 7 421 - 5 091 Trade and other payables 158 927 143 145 81 481 Provisions 2 930 - 2 930 Operating lease liability 914 310 1 038 Current tax payable 20 982 10 784 14 936 Bank overdraft - - 1 398 Total equity and liabilities 561 211 633 918 474 288 Total shares in issue (`000) 679 159 602 016 602 016 Total shares in issue after treasury shares (`000) 535 411 549 885 544 637 Net asset value per share (cents) 44.98 54.88 40.22 Net tangible asset value per share (cents) 10.46 4.49 6.21 Condensed consolidated statement of cash flows Unaudited Unaudited Audited
six months six months year ended to 30 Nov to 30 Nov 31 May 2010 2009 2010 R`000 R`000 R`000
Net cash flows from operating activities 32 389 19 609 48 113 Net cash flows from investing activities (6 114) (5 809) (23 688) Net cash flows from financing activities (24 035) (8 694) (22 712) Net increase in cash and cash equivalents 2 240 5 106 1 713 Cash and cash equivalents at beginning of period 93 799 92 086 92 086 Cash and cash equivalents at end of period 96 039 97 192 93 799 Condensed consolidated statement of changes in equity Unaudited Unaudited Audited six months six months year ended to 30 Nov to 30 Nov 31 May
2010 2009 2010 R`000 R`000 R`000 Capital and reserves - opening balance 225 685 482 216 482 216 Shares issued 198 - - Treasury shares - - 915 Payment of vendor liabilities - (6 134) - Acquisition of subsidiaries and businesses - - (6 243) Disposal of subsidiaries - - (712) Foreign currency translation reserve - 294 - Total comprehensive income/(loss) for the period 28 790 (158 919) (237 696) Dividend paid to non- controlling interest (5 510) (7 341) (12 795) Capital and reserves - closing balance 249 163 310 116 225 685 Commentary Basis of preparation The unaudited condensed consolidated interim financial statements have been prepared in compliance with the Companies Act of South Africa 1973, International Financial Reporting Standards (IFRS), AC 500 Standards, International Accounting Standards (IAS) 34 Interim Financial Reporting and its interpretations adopted by the International Accounting Standards Board (IASB), and with the JSE Limited Listings Requirements. The unaudited condensed consolidated interim financial statements have been prepared under the historical cost convention, save for certain financial instruments. The same accounting policies, presentation and methods of computation are followed in these unaudited condensed consolidated interim financial statements as were applied in the preparation of the group`s audited annual financial statements for the previous year ended 31 May 2010. Introduction The directors of Simeka present the unaudited condensed consolidated interim results for the six months ended 30 November 2010 ("the period"), reflecting a solid performance. The unaudited condensed consolidated interim financial statements for the period were authorised for issue by the directors on 25 February 2011. Group profile Simeka is a leading black-empowered provider of Professional Services, Outsourcing and ICT Solutions. Operational overview South African operations performed well, capitalising on the slowly recovering domestic economy, with a strong pipeline in place for the future. The conclusion of the BEE transaction (refer SENS dated 17 September 2010) successfully stabilised risk factors with existing and new customers. Outside South Africa Simeka established a subsidiary and concluded a joint venture in India in an effort to counter international pricing pressure. This will result in increased capacity to capitalise on lucrative and sustainable business opportunities throughout Africa as well as serve as a disaster recovery site. During the period, established operations in Nigeria experienced a slowdown in new orders in line with expectation owing to legislative changes driven by the roll-out of RICA. Share repurchase programme The company repurchased 2 498 471 shares through a subsidiary company during the period at a total cost of R336 836 and intends to continue to repurchase shares in the current year. All share repurchase programmes are subject to group liquidity and solvency tests. Black Economic Empowerment Simeka is black-owned and managed with the majority of Simeka`s board being black. Following the successful implementation of the BEE transaction (refer SENS dated 17 September 2010), the company has significantly improved its BEE rating to Level 2. This BEE platform offers the group a material competitive advantage and is a key contributor to ongoing growth. Notwithstanding the strong BEE profile, Simeka remains committed to continually enhancing its credentials in respect of all aspects of BEE scorecarding. Financial results Revenue increased 10% to R411,1 million from R373,7 million in the comparative period, with 90% being generated from South African operations and the remainder from the rest of Africa. EBITDA of R60,0 million (2009: R50,3 million) was reported for the period. Net margins improved from 5,9% to 7,3% as a result of new contract wins with better margins as well as the conclusion of the once-off retrenchment costs incurred in the prior period. Financing costs reduced to R9,1 million from R13,1 million, largely from a decrease in the prime lending rate during the period and repayments now servicing more borrowings capital than interest. The company has a strengthened statement of financial position following the impairment of goodwill and intangible assets absorbed in the prior year. Cash on hand of R96,0 million is reflective of effective working capital management despite a substantial increase in inventory to R31,6 million resulting from new orders. During the period the company invested R6,7 million in capital expenditure to enable growth and sustainability. The group`s net debt position has improved from R48,0 million as at 31 May 2010 to R28,7 million. Segmental reporting The Business Support Services (People and Process) division contributed 72,5% of group turnover with Technology contributing the balance of 27,5%. Business Support Technology Services Nov 10 Nov 09 Nov 10 Nov 09 R`000 R`000 R`000 R`000
Total segment turnover 296 942 222 594 159 014 210 227 Net profit/ (loss)from ordinary 31 090 18 515 12 353 20 731 activities Consolidated total 267 783 384 990 75 408 195 639 assets Consolidated total 213 272 184 587 40 066 128 260 liabilities Corporate and Totals Eliminations Nov 10 Nov 09 Nov 10 Nov 09
R`000 R`000 R`000 R`000 Total segment (47 494) (60 514) 408 462 372 307 turnover Net profit/ (loss)from ordinary (13 378) (198 165) 30 065 (158 919) activities Consolidated total 218 020 53 289 561 211 633 918 assets Consolidated total 58 710 10 955 312 048 323 802 liabilities Related parties During the period certain subsidiaries, in the ordinary course of business, entered into various loans and transactions with related parties under terms and conditions that are no less favourable than those arranged at arm`s length with third parties. Transactions between the company and its subsidiaries, which are related parties of the company, have been eliminated and consolidated. BEE transactions Shareholders approved two BEE schemes, one for the benefit of key executives and the other for the benefit of management and staff, at the general meeting held on 11 October 2010 and as proposed in the circular to shareholders dated 16 September 2010. The take-up of shares in the group has increased direct black shareholding to enable Simeka to retain existing public and private sector contracts, secure upcoming contract renewals as well as bring new business on stream, while at the same time aligning management`s interests with shareholders. The above IFRS 2 transactions have been calculated in terms of the group`s accounting policy, resulting in an expense amounting to R198 473. Post balance sheet events Disposal of certain intellectual property of Mint Management Technology (Pty) Ltd ("Mint") On 10 December 2010 Mint, a 50,01% subsidiary of Simeka, entered into an assignment agreement with Moputso Investments 66 (Pty) Ltd ("Moputso") in terms of which Mint disposed of certain intellectual property, relating only to its property valuation business, for a 35% equity in Moputso. The consideration of R10 million was discharged by Moputso allotting and issuing 700 ordinary shares in Moputso to Mint equating to a 35% equity stake in Moputso. The financial effects are in the process of being finalised and will be published on completion if required. Mint`s stake in the combined entity will help boost combined operational efficiencies as well as drive a combined data and technology strategy to current and future customers. Change of auditors As announced on 8 February 2011, the company has appointed PKF (Pta) Inc. as its auditors with effect from 8 February 2011. Mazars was not re-appointed by shareholders at the annual general meeting held on 18 January 2011. Board of directors On 8 February 2011 Professor Benjamin Marx was appointed as an independent non- executive director and chairman of the audit committee in place of Mr Peter Gordon, who was not re-appointed by shareholders at the annual general meeting held on 18 January 2011. Mrs Kobote Molefe, a non-executive director of the company, retired at the annual general meeting held on 18 January 2011. Change of name Shareholders are advised that at the general meeting held on 18 January 2011 the special resolution was approved to change the name of the company to Morvest Business Group Limited with effect from 7 March 2011. Outlook Despite signs of a slowly recovering economy, the climate is expected to remain challenging over the next 12 to 18 months. Notwithstanding this outlook, Simeka`s solid business model with strong fundamentals is expected to enable the group to maintain its current performance. The initiative to simplify and streamline the group`s structure for optimal efficiency, as well as healthy cash reserves in hand, will support stability. In the current year Simeka will continue focusing on nurturing existing customer relationships and contracts, reducing debt and further enhancing the group`s BEE status. Renewal of cautionary announcement Further to the cautionary announcement dated 12 January 2011, shareholders are advised that discussions are still in progress, which if successfully concluded, may have a material effect on the price of the company`s securities. Accordingly, shareholders are advised to continue exercising caution when dealing in the company`s securities until further announcement. Appreciation We thank all directors, managers and staff for their tenacity and drive which contributed to the group`s performance in a tough economic environment. We further extend our appreciation to all our shareholders, business associates and loyal customers for their unwavering support in these difficult times. By order of the board Mohammed Varachia Suren Singh CEO CFO 25 February 2011 Directors: Dr PS Molefe (Chairman)*, M Varachia (CEO), S Singh (CFO), M Papiyana (Group HR Director), N Singh, Prof. B Marx *, NY Mhinga* *Non-executive Independent Registered office: 10 Kikuyu Road, Sunninghill, 2191 (PO Box 4307, Halfway House, Midrand, 1685) Transfer secretaries: Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg (PO Box 61051, Marshalltown, 2107) Company secretary: Noelene Beryl January, 10 Kikuyu Road, Sunninghill (PO Box 4307, Halfway House, Midrand, 1685) Designated advisor: Sasfin Capital (a division of Sasfin Bank Limited) Auditors: PKF (Pta) Inc. (appointed 8 February 2011) Date: 25/02/2011 09:38:00 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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