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MMG - MICROmega Holdings Limited - Provisional audited consolidated financial

Release Date: 31/03/2011 17:15
Code(s): MMG
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MMG - MICROmega Holdings Limited - Provisional audited consolidated financial statements for the year ended 31 December 2010 MICROmega Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 1998/003821/06) Share code MMG ISIN ZAE000034435 ("Micromega" or "the company" or "the group") PROVISIONAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME Audited Audited year year
ended ended Note 31 December 31 December 2010 2009 R(`000) R(`000)
Revenue 682 314 747 307 Revenue from continuing operations 681 925 721 900 Revenue from discontinued operations 389 25 407 Cost of sales (451 437) (517 175) Gross profit 230 877 230 132 Gross profit from continuing operations 239 496 227 428 Gross (loss)/profit from discontinued operations (8 619) 2 704 Other income 7 037 9 109 Distribution expenses (6 068) (5 578) Administration expenses (217 052) (196 616) Results from operations 14 794 37 047 Results from continuing operations 24 102 43 947 Results from discontinued operations (9 308) 6 900 Finance income 8 468 9 479 Finance cost (10 794) (16 995) Net finance cost (2 326) (7 516) Share of loss of equity accounted associates (724) (768) Profit before taxation 11 744 28 763 Profit before taxation from continuing operations 22 510 36 346 Loss before taxation from discontinued operations (10 766) (7 673) Taxation expense (3 936) (11 084) Profit for the year 7 808 17 679 Profit from continuing operations 15 547 23 768 Loss from discontinued operations (7 739) (6 089) Other comprehensive income: Foreign currency translation differences 12 42 Revaluation of property 16 099 2 230 Realisation of revaluation reserve (49) - Income tax on other comprehensive income (4 507) (634) Other comprehensive income for the year 11 555 1 638 Total comprehensive income for the year 19 363 19 317 Profit attributable to: Owners of the company 5 673 16 362 Non-controlling interests 2 135 1 317 Profit for the year 7 808 17 679 Total comprehensive income attributable to: Owners of the company 11 432 18 000 Non-controlling interests 7 931 1 317 Total comprehensive income for the year 19 363 19 317 Reconciliation of headline earnings: Profit attributable to ordinary shareholders 5 673 16 362 Profit on disposal of property, plant and equipment (25) (1 786) Impairment of property, plant and equipment 2 2 520 - Profit on disposal of other investments - (1 995) Impairment of goodwill and intangible assets 7 758 7 540 Headline earnings 15 926 20 121 Earnings per share Headline earnings per share (cents) 16.46 20.75 Basic earnings per share (cents) 5.86 16.88 Diluted earnings per share (cents) 5.83 16.77 Continuing operations Basic earnings per share (cents) 13.85 23.16 Diluted earnings per share (cents) 13.78 23.01 Weighted average number of shares (000`s) 96 783 96 958 Diluted weighted average number of shares (000`s) 97 266 97 561 Total number of shares in issue (000`s) 96 462 96 966 SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION Audited Audited
as at as at 31 December 31 December 2010 2009 R(`000) R(`000)
ASSETS Non-current assets 262 828 168 880 Property, plant and equipment 141 332 58 871 Intangible assets 62 902 61 434 Investments in associates 2 476 3 747 Other investments 6 695 6 698 Loans receivable 24 677 21 891 Deferred tax assets 24 746 16 239 Current assets 242 036 251 906 Inventories 51 631 45 200 Retirement benefit surplus 26 844 18 877 Trade and other receivables 113 330 123 976 Current portion of loans receivable 3 539 5 497 Cash and cash equivalents 20 963 29 936 Income tax receivable 1 043 - Non-current assets classified as held for sale 24 686 28 420 TOTAL ASSETS 504 864 420 786 EQUITY AND LIABILITIES EQUITY Share capital and share premium 190 797 191 440 Non-distributable reserves 14 410 8 196 Retained earnings 78 280 66 959 Total equity attributable to owners of the company 283 487 266 595 Non-controlling interests 16 189 13 455 Total equity 299 676 280 050 LIABILITIES Non-current liabilities 69 877 27 530 Borrowings 56 576 19 467 Deferred tax liabilities 13 301 8 063 Current liabilities 135 311 113 206 Bank overdraft 11 844 3 930 Current portion of borrowings 31 886 21 372 Trade and other payables 82 286 86 055 Current portion of deferred vendor payments 789 871 Provisions 8 506 36 Taxation payable - 942 Total liabilities 205 188 140 736 TOTAL EQUITY AND LIABILITIES 504 864 420 786 Net asset value per share (cents) 293.88 274.94 Net tangible asset value per share (cents) 228.68 211.58 SUMMARISED GROUP STATEMENT OF CASH FLOWS Audited Audited year year
ended ended 31 December 31 December 2010 2009 R(`000) R(`000)
Cash generated by operating activities 38 799 50 157 Movement in working capital 446 14 771 Finance income 8 468 9 479 Finance costs (10 794) (16 995) Taxation paid (14 817) (22 589) Net cash inflows from operating activities 22 102 34 823 Cash flows from investing activities Expenditure to maintain operating capacity Property, plant and equipment acquired (68 820) (12 212) Intangible assets acquired (101) (213) Proceeds on disposals of property, plant and equipment 1 528 5 656 Proceeds on disposals of intangible assets - 19 Expenditure for expansion Acquisition of subsidiaries (7 812) (1 578) Internally generated intangible assets (9 368) (4 956) Proceeds on disposal of investments 51 2 359 Loans receivable granted - (26 350) Loans receivable repaid 1 757 1 012 Net cash outflows from investing activities (82 765) (36 263) Cash flows from financing activities Treasury shares repurchased (644) (224) Dividends paid to non-controlling interests (780) (200) Borrowings raised 45 537 12 857 Deferred vendor payments repaid (337) (2 327) Net cash inflows from finance activities 43 776 10 106 (Decrease)/increase in cash and cash equivalents (16 887) 8 666 Cash and cash equivalents at the beginning of the year 26 006 17 340 Cash and cash equivalents at the end of the year 9 119 26 006 SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY Share Share Revalu- Foreign Deal Share Retained capital premium ation currency diffe- based earnings
reserve transla- rences payme- tion reserve nt re reserve serve R(`000) R(`000) R(`000) R(`000) R(`000) R(`000) R(`000)
Balance at 1 971 190 678 2 388 (21) 1 000 2 297 50 597 January 2009 Total comprehen- sive income for the year Profit for the - - - - - - 16 362 year Other comprehen- - - 1 596 42 - - - sive income Foreign currency - - - 42 - - - translation dif- ferences Revaluation - - 1 596 - - - - of property Total comprehen- - - 1 596 42 - - 16 362 sive income for the year Contributions by (1) (208) - - - 894 - and distributions to owners Treasury shares (1) (223) - - - - - purchased Dividends paid by - - - - - - - subsidiary company to non-controlling interests Share-based - 15 - - - 894 - payment transac- tions Total transac- (1) (208) - - - 894 - tions with owners Balance at 31 970 190 470 3 984 21 1 000 3 191 66 959 December 2009 Balance at 1 970 190 470 3 984 21 1 000 3 191 66 959 January 2010 Total comprehen- sive income for the year Profit for the - - - - - - 5 673 year Other comprehen- - - 5 376 12 - - 371 sive income Foreign currency - - - 12 - - - translation dif- ferences Revaluation - - 5 796 - - - - of property Realisation of - - (420) - - - 371 revaluation reserve Total comprehen- - - 5 376 12 - - 6 044 sive income for the year Contributions by (5) (638) - - - 826 5 277 and distributions to owners Treasury shares (5) (639) - - - - - purchased Share-based - 1 - - - 826 - payment transac- tions IFRS 3 Business - - - - - - 5 277 combinations Dividends paid by - - - - - - - subsidiary company to non-controlling interests Total transac- (5) (638) - - - 826 5 277 tions with owners Balance at 31 965 189 832 9 360 33 1 000 4 017 78 280 December 2010 SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED) Total Non-con- Total
trolling Equity interests R(`000) R(`000) R(`000) Balance at 1 247 910 12 338 260 248 January 2009 Total comprehen- sive income for the year Profit for the 16 362 1 317 17 679 year Other comprehen- 1 638 - 1 638 sive income Foreign currency 42 - 42 translation dif- ferences Revaluation 1 596 - 1 596 of property Total comprehen- 18 000 1 317 19 317 sive income for the year Contributions by 685 (200) 485 and distributions to owners Treasury shares (224) - (224) purchase Dividends paid by - (200) (200) subsidiary company to non-controlling interests Share-based 909 - 909 payment transac- tions Total transac- 685 (200) 485 tions with owners Balance at 31 266 595 13 455 280 050 December 2009 Balance at 1 266 595 13 455 280 050 January 2010 Total comprehen- sive income for the year Profit for the 5 673 2 135 7 808 year Other comprehen- 5 759 5 796 11 555 sive income Foreign currency 12 - 12 translation dif- ferences Revaluation 5 796 5 796 11 592 of property Realisation of (49) - (49) revaluation reserve Total comprehen- 11 432 7 931 19 363 sive income for the year Contributions by 5 460 (5 197) 263 and distributions to owners Treasury shares (644) - (644) purchased Share-based 827 - 827 payment transac- tions IFRS 3 Business 5 277 (4 417) 860 combinations Dividends paid by - (780) (780) subsidiary company to non-controlling interests Total transac- 5 460 (5 197) 263 tions with owners Balance at 31 283 487 16 189 299 676 December 2010 NOTES TO THE GROUP FINANCIAL INFORMATION 1. Basis of preparation These provisional audited summarised consolidated financial statements are prepared in accordance with the framework concepts and the recognition and measurement criteria of International Financial Reporting Standards (IFRS), its interpretations adopted by the International Accounting Standards Board(IASB), the presentation and the disclosure requirements of IAS 34 Interim Financial Reporting, the AC 500 standards as issued by the Accounting Practices Board, the Listing Requirements of the JSE Limited and the requirements of the South African Companies Act 61 of 1973, as amended. These provisional audited summarised consolidated financial results are prepared in accordance with the going concern principle under the historical cost basis as modified by the fair value accounting of certain assets and liabilities where required or permitted by IFRS. All financial information presented in South African Rand has been rounded to the nearest thousand. The accounting policies applied in preparing these provisional audited summarised consolidated financial statements are consistent with those presented in the annual financial statements for the year ended 31 December 2009. 2. Impairment of property, plant and equipment The group has impaired the non-current assets classified as held for sale due to negotiations and calculations conducted over the course of the year. It is expected that no further impairments will be required. 3. Segmental information SEGMENT REVENUE Audited Audited year year
ended ended 31 December 31 December 2010 2009 R(`000) R(`000)
Financial Services External sales 44 229 36 619 Support services External sales 324 269 365 123 Information technology External sales 107 820 164 527 Automotive components External sales 232 621 216 290 Property investments Internal sales 11 208 2 677 Adjustments and eliminations (37 833) (37 929) Total revenue 682 314 747 307 SEGMENT PROFIT / (LOSS) Audited Audited year year ended ended
31 December 31 December 2010 2009 R(`000) R(`000) Financial services 6 734 5 387 Support services 10 571 6 911 Information technology 4 885 13 843 Automotive components (7 761) (11 335) Property investments 9 139 2 913 Adjustments and eliminations (17 895) (1 357) Profit attributable to owners 5 673 16 362 of the company SEGMENT ASSETS Audited Audited as at as at 31 December 31 December 2010 2009
R(`000) R(`000) Financial services 321 701 243 511 Support services 102 868 75 644 Information technology 132 361 139 232 Automotive components 185 827 174 560 Property investments 119 657 33 676 Adjustments and eliminations (357 550) (245 837) Total assets 504 864 420 786 4. Commentary on results MICROmega has operating investments in five sectors; the automotive sector, the financial services sector, the support services sector, the information technology sector and the property investment sector, introduced in 2010. The period under review was a year in which we consolidated our existing operations while preparing to re-focus our activities back to our more preferred "intellectual property" driven businesses. A conscious decision was taken not to grow by acquisition as revenue generation in our current sectors remained volatile and sustainability was under question. Fortunately, trading conditions in the second half of the year trended upwards towards the levels enjoyed prior to the global economic down turn in 2008. We are not yet convinced that this is sustainable. The results for the group were significantly impacted by the underperformance of our automotive sector, in particular our Kolbenco and BTM Manufacturing operations. We experienced trading losses of R16,3 million in this sector. In addition to this we have impaired the value of our investment in this sector by a further R9,1 million resulting in a combined loss of R25,4 million for the year. The impact of this sector on the group`s overall performance for the trading periods of 2008, 2009 and 2010 has reinforced our previous decision that we do not view this sector as having sufficient medium to long term prospects albeit we are enjoying a growth in new car sales in 2011. Shareholders should not experience any further negative impact on the operating earnings of the group given the impairments and discontinuation of activities within this sector. Future growth prospects are discernible in our information technology and support services operations. In these two sectors we are pleased to report that market conditions remain kind and our challenge is to secure the requisite skills to meet our client`s expectations and demands. The decision has been taken to expand the services provided by NOSA beyond the African continent. In January 2011 we started to actively support demand for our services from China. The order book for 2011 boasts clients such as China Light and Power and a further twenty blue chip corporates in mainland China. This favourable entry into China bodes well for operating profits for 2011. We anticipate that by the close of this year we will have taken the NOSA services to Latin America where we are experiencing demand from South African based mining operations in that region. Our information technology sector is continuously requiring investment in product development and we have invested substantially in that area during 2010. This investment is expected to assist in growing earnings in 2011 and beyond. The financial services sector is dominated by our inter-dealer broking operation. It performed to expectation. Liquidity and market volatility are the key revenue drivers in this business. Market activity was low in 2010 however we are seeing signs of recovery in 2011 that we believe will continue. The opening of our property investment sector has been motivated by the increase in the number of property rentals that the group`s growth has necessitated. A conversion of operating spend to capital investment at the current property prices underpins sustainable asset growth on our statement of financial position. Whilst we view our overall delivery of earnings to our shareholders in 2010 as being far from acceptable we are confident that 2011 will be a year of more normal trading and we are further confident that our statement of financial position and operating activities are now structured to deliver meaningful growth to shareholders. Any reference to future financial performance included in this announcement, has not been reviewed or reported on by the company`s auditors. Report of the auditors KPMG Inc., MICROmega`s independent auditors have audited the consolidated annual financial statements of the group from which the summarised consolidated financial results have been derived and have expressed an unmodified opinion on the consolidated annual financial statements. The summarised consolidated financial results comprise the summarised consolidated statement of financial position at 31 December 2010, summarised consolidated statement of comprehensive income, summarised consolidated statement of changes in equity and summarised consolidated statement of cash flows for the year then ended and selected explanatory notes. The audit report is available for inspection at MICROmega`s registered offices. By order of the Board 31 March 2011 Directors: D C King (Chairman - appointed 17 January 2011); IG Morris (Chief Executive Officer); DSE Carlisle (Managing Director); DJ Case (Financial Director); PV Henwood (Lead Independent Non-Executive); RC Lewin (Non-Executive) Company Secretary: T de Mendonca Auditors: KPMG Inc. Transfer Secretaries: Computershare Investor Services (Proprietary) Limited Sponsor: Java Capital Attorneys: Eversheds Date: 31/03/2011 17:15:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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