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MIX - Mix Telematics Limited - Audited group financial results for the year

Release Date: 13/06/2011 08:00
Code(s): MIX
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MIX - Mix Telematics Limited - Audited group financial results for the year ended 31 March 2011 MIX TELEMATICS LIMITED Incorporated in the Republic of South Africa Registration number 1995/013858/06 JSE code: MIX ISIN: ZAE000125316 ("MiX Telematics" or "the Company" or "the Group") AUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2011 FINANCIAL HIGHLIGHTS Annuity revenue increased to R503 million Revenue increased to R887 million EBITDAR increased to R200 million Adjusted HEPS increased to 14,1 cents per share Dividend declared increased by 20% to 6 cents per share Cash generated from operations increased to R190 million A WORD FROM THE CEO, STEFAN JOSELOWITZ Firstly I am delighted to report that your Group is back on the growth track. This was by no means an easy year but the signs of easing that we had observed towards the end of the last financial year, improved even further as this latest period progressed. At an adjusted HEPS level of 14.1 cents per share (12.8 cents per share in 2010), we ended the year up 10.2% when comparing against the previous reporting period. As our investors are aware, we are a global group operating from 6 international offices and serving dealers and customers in 135 countries. 41.5% of our total revenue is earned in foreign currency but naturally, we report in South African Rands. It is worth mentioning that we achieved fair growth despite the fact that the Rand strengthened further this year against the global currencies in which we invoice our offshore customers. A weaker Rand would certainly favour our results. Over and above good growth in adjusted HEPS, the following key performance measures are also worth highlighting: Annuity revenue: We grew total annuity revenue to R503 million (up from R477 million in 2010). This translates to 56.8% of our total revenue. Foreign revenue reduced somewhat to R368 million (R379 million in 2010). Ignoring the obvious factor of the currency exchange rate, revenue in our European business was lower off the back of weaker trading in the region and specifically the UK. Cash: Strong cash generation remains a defining feature of the Group and again I am happy to report that our operations did not disappoint. The Group generated R190 million in cash from operations and reduced net debt by R54,6 million from the previous year-end. The big news is that net-debt has been effectively eliminated and we finished the year in a net-cash position. This feat was achieved even after paying out dividends of R32,8 million to shareholders and R56,9 million in capex (which includes product development costs). In light of this strong cash flow the Board has approved a 20% increase in the dividend to 6 cents per share. Significant new resources have been added in our design and product engineering facility in Stellenbosch (for the benefit of our global investors, this is a small university town near Cape Town). This will accelerate speed of new products to market, improve innovation, and ultimately enhance our competitiveness. Trading conditions during the year under review were a mixed bag. As I reported in November, last year`s world cup event in South Africa was certainly entertaining but as per expectations, local sales for the period of the event were disappointing. Despite this, I am happy with the performance of our African operations during the year. Our local fleet business gave a strong showing in the second half, with a number of new deals as well as implementation of some large tender projects, most notably our fledgling contract with Eskom (the local electricity utility). Some of our other regions also traded quite strongly. Our Middle East operation had a good year although political upheaval in the region did give us some headaches and still remain a cause for concern. Our USA operation, which services both North and South America, showed good revenue growth and at an EBITDAR level showed a solid improvement over the previous year. This business won two large deals in the closing months that resulted in a forward-moving order pipeline of several thousand subscribers. It is particularly gratifying that large global customers continue to demonstrate their confidence in our product and service delivery and that we are able to win major contracts against tough international competitors. From our perspective, many of the world economies are still fragile and the UK has been particularly hard hit resulting in disappointing results from our operation based in Birmingham. This business unit services both the UK and Europe and is a key hub for us. We are in the process of refocusing this unit with the aim of returning it to profitability as soon as possible. Our stated strategy is to leverage our strong cash flows to grow our high margin annuity revenue base. We have executed well against this strategy during the past year, growing our corporate subscriber base by over 40%. Additionally, we launched a number of new products during the year, with another major release scheduled for rollout early in the 2012 financial year. These initiatives augur well for the future growth of the Group. We are confident that we are on track to achieve our medium term objectives and remain vigilant for opportunities or transactions that will enhance shareholder value. I would like to extend my deep appreciation to the hardworking team at MiX who, together with our loyal suppliers and customers, drive our growth and success. To Richard Bruyns and our board of directors, thanks for all the wise counsel. CONDENSED GROUP INCOME STATEMENT 12 months 12 months
ended ended 31 March 31 March 2011 2010 Audited Audited
R`000 R`000 Revenue 886 604 840 488 Cost of sales (340 168) (337 603) Gross profit 546 436 502 885 Other income - net 4 877 1 547 Operating expenses (434 133) (394 577) Operating profit (note 4) 117 180 109 855 Finance income 2 193 3 665 Finance cost (13 625) (19 994) Share of joint venture losses - (529) Profit before taxation 105 748 92 997 Taxation (34 247) (26 909) Profit for the year attributable to 71 501 66 088 shareholders CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME 12 months 12 months
ended ended 31 March 31 March 2011 2010 Audited Audited
R`000 R`000 Profit for the year 71 501 66 088 Other comprehensive (losses)/income: Exchange differences on translating foreign (3 872) (36 340) operations Fair value reserve on available-for-sale (167) 167 financial asset Exchange differences on net investment in (2 547) (14 981) foreign operations Taxation relating to components of other - 1 752 comprehensive income Other comprehensive loss for the year, net (6 586) (49 402) of tax Total comprehensive income for the year 64 915 16 686 attributable to shareholders Ordinary shares (`000) - in issue 657 000 657 000 - weighted average 657 000 657 000 - diluted weighted average 658 366 657 974 Attributable earnings per share (cents) - basic 10,9 10,1 - diluted 10,9 10,0 RECONCILIATION OF HEADLINE EARNINGS AND ADJUSTED HEADLINE EARNINGS 12 months 12 months
ended ended 31 March 31 March 2011 2010 Audited Audited
R`000 R`000 Profit for the year 71 501 66 088 Adjusted for: Net loss on disposal of property, plant and 61 496 equipment Impairment of available-for-sale financial 2 552 - asset Impairment of intangible assets 580 - Exchange gain on settlement of net (174) - investment in foreign operation Taxation on the above components 22 (111) Headline earnings 74 542 66 473 Headline earnings per share (cents) - basic 11,3 10,1 - diluted 11,3 10,1 Headline earnings 74 542 66 473 Amortisation of intangible assets arising 21 405 20 801 out of business combinations Tax effect on the amortisation of intangible (3 231) (3 217) assets arising out of business combinations Adjusted headline earnings 92 716 84 057 Adjusted headline earnings per share (cents) - basic 14,1 12,8 - diluted 14,1 12,8 CONDENSED GROUP STATEMENT OF FINANCIAL POSITION 31 March 31 March 2011 2010 Audited Audited
R`000 R`000 ASSETS Non-current assets Property, plant and equipment 44 805 44 424 Intangible assets 647 013 653 171 Available-for-sale financial asset - 2 683 Deferred tax assets 11 302 8 209 Total non-current assets 703 120 708 487 Current assets Inventory 34 549 29 691 Inventory held in client vehicles 28 039 24 809 Trade and other receivables 114 744 126 929 Taxation 1 897 1 857 Restricted cash 1 852 1 639 Cash and cash equivalents 110 007 155 011 Total current assets 291 088 339 936 Total assets 994 208 1 048 423 EQUITY AND LIABILITIES Capital and reserves Share capital 13 13 Share premium 787 353 787 353 Retained earnings 75 413 36 762 Other reserves (179 844) (174 306) Total equity 682 935 649 822 Non-current liabilities Borrowings 36 070 96 056 Deferred tax liabilities 28 170 27 067 Provisions 1 092 14 703 Total non-current liabilities 65 332 137 826 Current liabilities Trade and other payables 133 190 124 090 Borrowings 27 508 71 740 Taxation 4 669 3 964 Provisions 40 606 25 634 Bank overdraft 39 968 35 347 Total current liabilities 245 941 260 775 Total equity and liabilities 994 208 1 048 423 Net cash/(debt) (note 6) 6 461 (48 132) Net asset value per share (cents) 103,9 98,9 Net tangible asset value per share (cents) 5,5 (0,5) Capital expenditure - incurred 56 929 45 658 - authorised but not spent 34 815 27 543 CONDENSED GROUP STATEMENT OF CASH FLOWS 12 months 12 months ended ended 31 March 31 March 2011 2010
Audited Audited R`000 R`000 Operating acitivities Cash generated from operations 189 781 174 529 Net financing costs (9 896) (15 178) Taxation paid (35 577) (36 334) Net cash generated from operating activities 144 308 123 017 Investing activities Capital expenditure (56 929) (45 658) Proceeds from disposal of property, plant 572 1 350 and equipment Net cash utilised in investing activities (56 357) (44 308) Financing activities Net borrowings repaid (103 488) (33 312) Dividends paid (32 812) (26 247) Net cash utilised in financing activities (136 300) (59 559) Net (decrease)/increase in cash and cash (48 349) 19 150 equivalents Cash and cash equivalents at beginning of 119 664 112 363 the year Exchange losses on cash and cash equivalents (1 276) (11 849) Cash and cash equivalents at end of the year 70 039 119 664 ABBREVIATED SEGMENTAL ANALYSIS Inter-
Total segment revenue revenue EBITDA R`000 R`000 R`000 12 months ended 31 March 2011 Africa Vehicle tracking and 342 795 (8 696) 71 758 recovery Fleet management 199 922 (740) 56 015 United Kingdom Fleet management 154 397 - (768) North America Fleet management 51 698 - (1 309) Middle East Fleet management 109 953 - 15 469 International Fleet management and 201 342 (164 067) 49 441 development Total 1 060 107 (173 503) 190 606 Corporate and - - (11 462) consolidation entries Inter-segment (173 503) 173 503 - elimination Total 886 604 - 179 144 12 months ended 31 March 2010 Africa Vehicle tracking and 328 221 (5 115) 76 871 recovery Fleet management 160 534 (7 383) 32 484 United Kingdom Fleet management 204 924 (1 978) 6 368 North America Fleet management 23 920 (9) (11 031) Middle East Fleet management 108 281 (6 036) 9 550 International Fleet management and 156 812 (121 683) 50 476 development Total 982 692 (142 204) 164 718 Corporate and - - (4 489) consolidation entries Inter-segment (142 204) 142 204 - elimination Total 840 488 - 160 229 EBITDAR Assets
R`000 R`000 12 months ended 31 March 2011 Africa Vehicle tracking and 90 368 246 560 recovery
Fleet management 59 433 50 414 United Kingdom Fleet management (362) 87 744 North America Fleet management (1 309) 14 369 Middle East Fleet management 15 469 51 475 International Fleet management and 49 441 224 027 development Total 213 040 674 589 Corporate and (12 897) 430 104 consolidation entries Inter-segment - (110 485) elimination Total 200 143 994 208 12 months ended 31 March 2010 Africa Vehicle tracking and 94 448 272 194 recovery Fleet management 33 802 72 301
United Kingdom Fleet management 6 368 112 424 North America Fleet management (11 031) 11 770 Middle East Fleet management 9 550 60 748 International Fleet management and 50 476 259 393 development
Total 183 613 788 830 Corporate and (4 584) 506 464 consolidation entries Inter-segment - (246 871) elimination Total 179 029 1 048 423 Condensed group statement of changes in equity for the 12 months ended 31 March 2011 Share Share Other capital premium reserves R`000 R`000 R`000
Balance at 31 March 2009 13 787 353 (126 893) Dividends declared of 4 cents per share - - - (note 7) Total comprehensive income for the - - (49 402) period Share-based payments - - 1 989 Balance at 31 March 2010 13 787 353 (174 306) Dividends declared of 5 cents per share - - - (note 7) Total comprehensive income for the - - (6 586) period Share-based payments - - 1 048 Balance at 31 March 2011 13 787 353 (179 844) Retained earnings/ (accumulated losses) Total R`000 R`000
Balance at 31 March 2009 (3 046) 657 427 Dividends declared of 4 cents per share (26 280) (26 280) (note 7) Total comprehensive income for the 66 088 16 686 period Share-based payments - 1 989 Balance at 31 March 2010 36 762 649 822 Dividends declared of 5 cents per share (32 850) (32 850) (note 7) Total comprehensive income for the 71 501 64 915 period Share-based payments - 1 048 Balance at 31 March 2011 75 413 682 935 NOTES TO THE CONDENSED GROUP FINANCIAL RESULTS 1. Audit opinion These condensed consolidated results have been audited by our independent auditors, PricewaterhouseCoopers Inc., who have performed their audit in accordance with the International Standards on Auditing. A copy of their unqualified audit report is available for inspection at the Company`s registered office. 2. Basis of preparation and accounting policies These condensed group financial results have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") and are in compliance with IAS 34: Interim Financial Reporting, the AC500 Standards as issued by the Accounting Practices Board or its successor, the Listings Requirements of the JSE Limited and the South African Companies Act. The accounting policies applied are consistent with those followed in the preparation of the group financial statements for the year ended 31 March 2010, except where the Group has changed its accounting policies (as outlined below) or adopted new or revised accounting standards. The Group has adopted the following new or revised accounting standards in the current period, which had no impact on the Group`s results: - IFRS 3 (revised 2008) Business Combinations - IAS 27 (revised 2008) Consolidated and Separate Financial Statements - IFRS 8 (amendment 2009) Operating Segments - IAS 36 (amendment 2009) Impairment of Assets - IAS 38 (amendment 2009) Intangible Assets In addition, the Group has changed its accounting policy with regard to revenue recognition on hardware cash sales of vehicle tracking and recovery ("SVR") units. Previously, the Group deferred the hardware revenue (together with the related expenditure) over the estimated life of a SVR contract. The Group now recognises the hardware revenue (and the related expenditure) upfront once risks and rewards have transferred and continues to recognise the service revenue on a month to month basis as the service is performed. Management resolved to change the previously applied accounting policy due to the existence of a separate market for the hardware units thereby establishing fair value for the units on a standalone basis. This change in accounting policy resulted in an increase in profit before tax for the current financial year of R2,3 million consisting of increases in revenue and cost of sales of R8,5 million and R6,2 million respectively; and an increase in profit after tax of R1,6 million, and an increase in earnings and headline earnings per share of 0,2 cents per share. The effect on the prior year is considered to be immaterial and therefore the change in accounting policy has not been applied retrospectively resulting in the comparative amounts remaining unchanged. 3. Operating segments The MiX Telematics businesses are managed primarily on a geographic and also on a product basis. During the current year, together with profit measures previously used, a new additional measure of profit performance of the operating segments has been introduced being: earnings before interest, tax, depreciation, amortisation, impairment of assets, negative goodwill and the amortisation of inventory held in client vehicles recognised over the contract period ("EBITDAR"). A reconciliation of EBITDAR to operating profit for the current and comparative year is set out in note 4. 4. Operating profit, EBITDA and EBITDAR 12 months 12 months ended ended
31 March 31 March 2011 2010 Audited Audited R`000 R`000
Operating profit 117 180 109 855 Add depreciation, amortisation and impairments 61 964 50 374 (note 5) EBITDA per segmental analysis 179 144 160 229 Add inventory in client vehicles amortised 20 999 18 800 EBITDAR per segmental analysis 200 143 179 029 5. Depreciation, amortisation and impairments 12 months 12 months
ended ended 31 March 31 March 2011 2010 Audited Audited
R`000 R`000 Depreciation and amortisation 37 427 29 573 Amortisation of intangible assets arising out 21 405 20 801 of business combinations Impairment of available-for-sale financial 2 552 - asset Impairment of intangible assets 580 - Sub total 61 964 50 374 Inventory in client vehicles amortised 20 999 18 800 Total 82 963 69 174 6. Net cash/(debt) Net cash/(debt) is calculated as being net cash and cash equivalents, excluding restricted cash less interest bearing borrowings. 7. Dividends A dividend of R32,9 million (2010: R26,3 million) was paid during the year under review. Using shares in issue of 657 million (2010: 657 million) this equates to a dividend of 5,0 (2010: 4,0) cents per share. 8. Contingent liabilities Connection incentives The Group receives connection/upgrade incentives from Mobile Telephone Networks (Proprietary) Limited for connecting subscribers to their network. In the event that a subscriber contract is terminated during the contract period, the full amount of the connection/upgrade incentive received for this subscriber contract becomes repayable. In the unlikely event that every subscriber contract is terminated prematurely, the potential liability would amount to R75,4 million (31 March 2010: R79,6 million). Any loss incurred in terms of this arrangement is considered minimal. 9. Exchange rates 31 March 31 March 2011 2010 The following major rates of exchange were used: SA Rand: United States Dollar - closing 6,83 7,37 - average 7,21 7,85 SA Rand: British Pound - closing 10,95 11,10 - average 11,21 12,51
10. Subsequent events Other than the dividend declared, the transaction entered into with Intellichain (Proprietary) Limited ("Intellichain") and the closure of One Stop Shop detailed below, the directors are not aware of any matter material or otherwise arising since 31 March 2011 and up to the date of this report, not otherwise dealt with herein. Dividend declared Subsequent to year end, the Board declared a dividend of 6 cents per share. Intellichain Intellichain is a software solution company that focuses on fleet management and supply execution. Effective 1 April 2011, MiX Telematics Africa advanced a convertible loan of R5,5 million to Intellichain; convertible at the option of the lender from 31 March 2012 onwards. In terms of the agreement entered into, MiX Telematics Africa also has call options to take up additional shareholding in Intellichain, from April 2012 onwards with the ultimate ability to own 100% of the company. One Stop Shop Subsequent to year end, the Group resolved to close down One Stop Shop, the vehicle conversion business unit forming part of MiX Telematics UK. The closing down of this business unit is not considered to have a material impact on the Group. 11. Changes to the Board As previously announced, Mr Anthony Welton resigned as interim executive financial director and resumed the role of non-executive director on 31 July 2010. On 1 August 2010, Mrs Megan Pydigadu was appointed as executive financial director, Mr Afzal Patel relinquished his role of audit committee chair, Mr Anthony Welton resumed the role of chair of the audit committee and Mr Hubert Brody was appointed as non-executive director. On 11 November 2010, Ms Fundiswa Roji, previously an alternate board member to Mr Afzal Patel, was appointed as a non-executive director and Mr Howard Scott was appointed as an executive director. On 27 May 2011, Mr Anthony Welton stepped down as chairman and member of the audit committee. He remains a non-executive director. Mr Richard Bruyns has now been appointed as chairman of the audit committee. COMMENTARY 1. Nature of business MiX Telematics is a group that is focused on all levels of vehicle telematics, combining vehicle tracking and recovery, fleet management, driver and passenger safety and compliance services. 2. Operations MiX Telematics Africa MiX Telematics Africa comprises Matrix, the vehicle tracking and recovery business and the fleet business which focuses on providing both large scale enterprise solutions as well as fleet management solutions to clients in South Africa, other SADC countries and in East and West Africa. Large local fleet deals as well as continued growth from the Africa expansion plan resulted in strong growth in the revenue and subscriber base of the Fleet Management business. The vehicle tracking and recovery revenue and subscriber numbers showed some improvement due to improved new vehicle sales volumes. The MiX brand benefitted from strong marketing spend during the Soccer World Cup early in this financial year. MiX Telematics International MiX Telematics International (based in Stellenbosch) develops fleet management and vehicle tracking and recovery products for Group subsidiary companies and is the Group`s global technology and development centre. The half year saw the launch of MiX Track - an entry level vehicle tracking and fleet management service for the UK market - as well as extensions to FM-Web, MiX Telematics` secure web application for online driver and vehicle management. MiX Telematics UK MiX Telematics UK provides fleet management products and solutions to customers across the United Kingdom, Europe and North Africa. These solutions have provided major quantifiable running costs, safety and carbon emission benefits to customers operating in an environment in which legislative controls are becoming more stringent. The United Kingdom and Europe are slowly emerging from an extended recession but the MiX Telematics base is still expanding with some exciting new products launched into the European market at the end of the period. These products and services have helped us regain momentum into mainland Europe and we are encouraged by our prospects at the year-end. We finished a difficult year with an increased base of connected clients. MiX Telematics SDI Middle East MiX Telematics SDI provides driver safety training and management solutions to customers in the Middle East, Eastern Europe, South America and Australasia. The Company has retained its focus on providing safety-related services with growth in the Middle East and Australia. MiX Telematics North America MiX Telematics North America provides driver safety, training and fleet management solutions to customers throughout the Americas. The first half of the year started significantly better than last for this business with repeat orders flowing from existing Oil and Gas customers. A new focus into South America has also started delivering value and this region is becoming a real contributor to the business. Revenues this year finished significantly up over the comparative trading period. The mission still remains to build an annuity base with real critical mass in this region. The signing of two large deals in the closing months of the year has resulted in a forward-moving order pipeline of several thousand subscribers which puts us well on track towards achieving this objective. For and on behalf of the board: SR Bruyns SB Joselowitz Midrand 8 June 2011 NOTICE OF DIVIDEND DECLARATION NUMBER 4 AND SALIENT FEATURES Notice is hereby given that the directors have declared a cash dividend of 6 cents per share for the year ended 31 March 2011. The salient dates are as follows: - Last date to trade cum dividend Friday, 22 July 2011 - Trading ex dividend commences Monday, 25 July 2011 - Record date Friday, 29 July 2011 - Payment date Monday, 1 August 2011 Share certificates may not be dematerialised or rematerialised between Monday, 25 July 2011 and Friday, 29 July 2011, both dates inclusive. On behalf of the board Probity Business Services (Proprietary) Limited (Company Secretary) 8 June 2011 Registered office: Matrix Corner, Howick CloseWaterfall Park, Midrand Directors: SR Bruyns* (Chairman) SB Joselowitz (CEO) R BothaHR Brody* TE BuzerRA Frew* R Friedman* A Patel* ML Pydigadu F Roji* HG Scott CWR Tasker AR Welton* *Non-executive Company secretary: Probity Business Services (Proprietary) Limited Auditors: PricewaterhouseCoopers Inc. Sponsor: Java Capital For more information on our final results, please visit our website at www.mixtelematics.com 13 June 2011 Date: 13/06/2011 08:00:01 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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