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BCX - Business Connexion Group Limited - Reviewed condensed consolidated

Release Date: 19/04/2012 08:00
Code(s): BCX
Wrap Text

BCX - Business Connexion Group Limited - Reviewed condensed consolidated interim financial information for the six months ended 29 February 2012 and trading statement BUSINESS CONNEXION GROUP LIMITED (Incorporated in the Republic of South Africa) (Registration number: 1988/005282/06) (Share code: BCX) (ISIN: ZAE000054631) ("Business Connexion" or "the company" or "the group") REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 29 FEBRUARY 2012 AND TRADING STATEMENT Key features - Revenue increased by 43,5% - Gross profit margin improved from 28,8% to 34,9% - Operating profit increased from R40,2 million to R130,8 million - Cash generated by operations increased from R116,6 million to R265,2 million - Diluted headline earnings per share increased from 9,3 cents to 22,1 cents - 2011 acquisitions enhanced group competencies and reduce earnings volatility Condensed consolidated statement of financial position Reviewed Reviewed Audited 29 February 28 February 31 August R million 2012 2011 2011 ASSETS Non-current assets Property, plant and 439,7 400,8 453,9 equipment Goodwill 552,9 145,6 555,3 Intangible assets 373,5 133,0 378,7 Investments in associate 9,0 5,5 and jointly contolled entity Other investments 242,5 214,7 215,3 Deferred tax assets 55,7 23,3 53,1 1 664,3 926,4 1 661,8
Current assets Inventories 214,9 94,1 178,9 Trade receivables 984,2 713,2 970,1 Other receivables 164,0 210,1 250,6 Pre-payments 87,3 84,9 77,7 Taxation prepaid 3,3 8,1 7,4 Cash and cash equivalents 298,6 174,0 518,3 Assets held for sale 18,0 9,6 18,0 1 770,3 1 294,0 2 021,0 TOTAL ASSETS 3 434,6 2 220,4 3 682,8 EQUITY AND LIABILITIES Shareholders` equity 2 018,0 1 517,0 2 144,6 Non-controlling interests 67,1 5,3 48,5 Total equity 2 085,1 1 522,3 2 193,1 Non-current liabilities Interest-bearing long-term 226,4 25,0 250,7 liabilities Post-retirement benefit 8,1 12,1 7,9 obligations Deferred tax liabilities 58,6 1,8 60,9 293,1 38,9 319,5 Current liabilities Short-term liabilities 75,9 16,9 77,2 Trade payables 412,1 249,5 457,1 Other payables 550,0 387,3 622,3 Provisions 1,5 2,1 0,9 Taxation payable 16,9 3,4 12,7 1 056,4 659,2 1 170,2
TOTAL EQUITY AND 3 434,6 2 220,4 3 682,8 LIABILITIES Condensed consolidated statement of comprehensive income Reviewed Reviewed Audited
six months six months 12 months ended ended ended 29 February 28 February 31 August R million 2012 2011 2011 Revenue 2 691,3 1 875,4 4 314,2 Cost of sales 1 753,2 1 334,6 2 979,1 Gross profit 938,1 540,8 1 335,1 Operating expenses 807,3 500,6 1 177,4 Operating profit 130,8 40,2 157,7 Share of losses from (1,0) (0,1) (0,2) associate and jointly controlled entity Operating profit before 129,8 40,1 157,5 investment income Investment income 18,3 13,9 27,3 Profit before finance 148,1 54,0 184,8 costs Finance costs 17,1 2,6 18,1 Profit before tax 131,0 51,4 166,7 Taxation 30,2 22,2 64,4 Profit for the period 100,8 29,2 102,3 Profit attributable to: Equity holders 80,7 28,5 92,6 Non-controlling interests 20,1 0,7 9,7 100,8 29,2 102,3 Other comprehensive income: Translation of foreign 0,1 2,9 (0,2) operations Total comprehensive income 100,9 32,1 102,1 for the period Total comprehensive income attributable to: Equity holders 80,8 31,4 92,4 Non-controlling interests 20,1 0,7 9,7 100,9 32,1 102,1
Basic earnings per share 20,3 9,5 27,9 (cents) Diluted earnings per share 20,1 9,3 27,6 (cents) Calculation of headline earnings R million Profit attributable to 80,7 28,5 92,6 equity holders Profit on sale of business (68,7) (Profit)/Loss on sale of (0,3) (0,1) 1,5 property, plant and equipment Impairment of investments 6,0 2,5 Impairment of goodwill 2,4 Fair value adjustment to (0,2) investment property Tax effect of headline 29,8 earnings adjustments Headline earnings 88,8 28,4 57,5 Weighted average number of 398 347 300 999 331 689 shares in issue (000`s) Diluted weighted average 400 903 305 824 335 172 number of shares in issue (000`s) Headline earnings per 22,3 9,4 17,3 share (cents) Diluted headline earnings 22,1 9,3 17,2 per share (cents) Condensed consolidated statement of cash flows Reviewed Reviewed Audited six months six months 12 months
ended ended ended 29 February 28 February 31 August R million 2012 2011 2011 Operating cash flows 265,2 116,6 258,5 Working capital changes (152,3) (28,1) 162,9 Investment income 17,8 6,3 12,0 Finance costs paid (3,4) (2,6) (6,3) Dividends paid (215,2) (69,3) (71,0) Taxation refunded/(paid) 4,5 (4,1) (59,4) Cash (utilised (83,4) 18,8 296,7 by)/generated from operating activities Net cash flows utilised in (108,3) (153,1) (325,9) investing activities Net cash flows (utilised (28,0) (50,5) 188,7 in)/generated from financing activities Net changes in cash and (219,7) (184,8) 159,5 cash equivalents Cash and cash equivalents 518,3 358,8 358,8 at beginning of the period Cash and cash equivalents 298,6 174,0 518,3 at end of the period Condensed segmental analysis Reviewed Reviewed Audited six months six months 12 months ended ended ended 29 February 28 February 31 August
R million 2012 2011 2011 Segment revenue Services division 949,7 887,1 1 806,9 UCS division 503,4 353,2 Technology division 429,0 602,0 1 230,9 Canoa division 344,0 136,1 Innovation division 243,4 214,0 417,1 International division 213,9 169,0 368,5 Investment division 8,3 1,5 Corporate office (0,4) 3,3 2 691,3 1 875,4 4 314,2 Segment operating profit Services division 107,2 88,1 177,2 UCS division 49,0 40,1 Technology division (7,7) (1,5) (9,0) Canoa division 42,0 18,0 Innovation division 34,6 18,0 20,0 International division 5,3 (3,0) (7,8) Investment division (14,3) (2,4) 0,9 Corporate office (85,3) (59,0) (81,7) 130,8 40,2 157,7 Other group salient information Reviewed Reviewed Audited 29 February 28 February 31 August
2012 2011 2011 Number of shares in issue 404 972 303 729 404 972 (000`s) Less: Shares held in share 6 424 2 612 2 976 purchase trusts as treasury shares Less: Weighting of shares 70 177 issued during the period Less: Weighting of options 201 118 130 exercised during the period that would have been treasury shares 398 347 300 999 331 689 Dilutive options 2 538 4 796 3 452 Options excercised during 18 29 31 the period that were dilutive for a portion of the period 400 903 305 824 335 172 Number of options in issue 27 186 24 143 21 831 (000`s) Key ratios and statistics Net asset value per share 498,3 499,5 529,6 (cents) Tangible net asset value 311,8 451,4 336,4 per share (cents) Operating margin (%) 4,9 2,1 3,7 Return on equity (%) 8,0 3,7 4,3 Return on total assets 9,0 4,4 5,3 (excluding cash and preference share investments) (%) Current ratio 1,7 2,0 1,7 Average debtors` days 59,0 64,3 65,5 Depreciation and 118,2 65,4 163,0 amortisation (R million) Cost of sales 53,9 43,8 89,9 Operating expenses 64,3 21,6 73,1 R million Contingent liabilities Performance guarantees 52,3 67,7 39,6 Asset finance recourse 13,2 18,5 38,4 deals Other 14,8 2,5 35,5 Capital commitments Capital 27,6 25,7 147,7 Operating leases 236,9 231,1 254,1 The reviewed condensed consolidated interim financial information for the six months ended 29 February 2012 has been prepared in accordance with the recognition and measurement criteria of IFRS (International Financial Reporting Statements), the requirements of International Accounting Standards ("IAS") 34 Interim Financial Reporting, the AC 500 series issued by the Accounting Practices Board, the Listings Requirements of the JSE Limited and the South African Companies Act, 2008. The accounting policies applied in the presentation of the condensed consolidated interim financial information are consistent with those applied for the year ended 31 August 2011, except for new standards and interpretations that became effective on 1 September 2011, the adopting of these standards has had no material effect on the results for the period, nor has it required the restatement of any prior year figures. The condensed consolidated interim financial information has been prepared on the historic cost basis and is presented in Rands rounded to the nearest million, which is Business Connexion`s functional and presentation currency. The interim report should be read in conjunction with the annual financial statements for the year ended 31 August 2011. Condensed consolidated statement of changes in equity Foreign Share- Share currency based
capital and translation Retained payment R million premium reserve earnings reserve Balance at 31 545,1 (27,6) 961,2 65,6 August 2010 - audited Changes in equity for the six months ended 28 February 2011 Movement in 2,4 treasury shares and related reserves held by share purchase trusts Share-based 8,2 payments Non-controlling interest in dividends received Total 2,9 28,5 comprehensive income for the period Dividends paid (69,3) Balance at 28 545,1 (24,7) 922,8 73,8 February 2011 - reviewed Changes in equity for the six months ended 31 August 2011 Movement in (23,0) treasury shares and related reserves held by share purchase trusts Share-based 7,7 payments Transfer share- 13,7 (13,7) based payment reserve to retained earnings Issue of new 584,1 shares Total (3,1) 64,1 comprehensive income for the period Non-controlling (2,2) share of foreign currency translation reserve Sale of stake in business to management Balance at 31 1 129,2 (27,8) 975,4 67,8 August 2011 - audited Changes in equity for the six months ended 29 February 2012 Movement in (0,7) treasury shares and related reserves held by share purchase trusts Share-based 8,3 payments Non-controlling interest in dividends received Total 0,1 80,7 comprehensive income for the period Non-controlling 0,2 share of foreign currency translation reserve Dividends paid (215,2) Balance at 29 1 129,2 (27,7) 840,4 76,1 February 2012 - reviewed Share- Non- holders` controlling Total
R million equity interests equity Balance at 31 1 544,3 6,4 1 550,7 August 2010 - audited Changes in equity for the six months ended 28 February 2011 Movement in 2,4 2,4 treasury shares and related reserves held by share purchase trusts Share-based 8,2 8,2 payments Non-controlling (1,8) (1,8) interest in dividends received Total 31,4 0,7 32,1 comprehensive income for the period Dividends paid (69,3) (69,3) Balance at 28 1 517,0 5,3 1 522,3 February 2011 - reviewed Changes in equity for the six months ended 31 August 2011 Movement in (23,0) (23,0) treasury shares and related reserves held by share purchase trusts Share-based 7,7 7,7 payments Transfer share- based payment reserve to retained earnings Issue of new 584,1 584,1 shares Total 61,0 9,0 70,0 comprehensive income for the period Non-controlling (2,2) 2,2 share of foreign currency translation reserve Sale of stake in 32,0 32,0 business to management Balance at 31 2 144,6 48,5 2 193,1 August 2011 - audited Changes in equity for the six months ended 29 February 2012 Movement in (0,7) (0,7) treasury shares and related reserves held by share purchase trusts Share-based 8,3 8,3 payments Non-controlling (1,3) (1,3) interest in dividends received Total 80,8 20,1 100,9 comprehensive income for the period Non-controlling 0,2 (0,2) share of foreign currency translation reserve Dividends paid (215,2) (215,2) Balance at 29 2 018,0 67,1 2 085,1 February 2012 - reviewed Reviewed Reviewed Audited six months six months 12 months ended ended ended 29 February 28 February 31 August
2012 2011 2011 Normal dividend per share 14,0 23,0 23,0 (cents) Special dividend per 40,0 share (cents) Commentary Introduction Business Connexion Group is benefiting from an enhanced and more diversified product and services offering. Acquisitions in the previous financial year have resulted in the realisation of cross selling opportunities and reduced earnings volatility. Review of operations The group`s Services division delivered robust results, a large portion of which is annuity based. Results for the reporting period saw revenue grow by 7,1% to R949,7 million with process efficiencies driving an improvement in operating profits to R107,2 million. The Services division has maintained a dominant market share in data centres. Recent research by Frost & Sullivan indicates Business Connexion Group`s share at 27% making it the country`s leading provider of cloud-based services. Furthermore, BMI-T named the group as the number one custom application development company in South Africa. The group is pleased with the performance of the acquired UCS assets and Canoa Group. Both have performed in line with, and in some areas, exceeded expectations. Cross selling opportunities have materialised with the group being awarded managed printing contracts at a number of its enterprise clients. The acquisitions have been successfully integrated into the group and are now reported separately as the UCS division and Canoa division. Under the new leadership of Doug Woolley the Technology division is refining its product offering to improve sourcing and enhance vendor relationships. Strategic and exclusive relationships may be pursued to achieve this. The group believes that technology infrastructure design and implementation is an essential part of a complete ICT offering. Increasingly, a focused product offering should differentiate Business Connexion Group in the market place and the business is becoming increasingly relevant in African markets which lag South Africa in terms of their sophistication and stage of development. The International division has further solidified its presence on the African continent with offices in six countries. More than ever, Africa presents a significant opportunity for Business Connexion Group and accessing these markets will be a key focus area in the coming years. The Innovation division has shown improved performance within all business units with specific success in Q-Data Dynamique following corrective action reported on in the prior financial year. Previous challenges reported on within Nanoteq have also been successfully addressed. Content Distribution Solutions (CDS) is the only entity housed within the Investment division. To date the focus for CDS has been on establishing a carrier grade delivery platform. Going forward the focus will shift to achieving critical mass. Financial and operating performance In line with the trading statement released on 5 April 2012, the group generated diluted earnings per share (EPS) of 20,1 cents for the period (2011: 9,3 cents). Diluted headline EPS for the period is 22,1 cents (2011: 9,3 cents). Return on equity at 8,0% increased from 3,7% at 28 February 2011 and return on total assets increased to 9,0% from 4,4% at 28 February 2011 on the back of the improved profitability. Revenue grew by 43,5% to R2 691,3 million for the period bolstered by the acquisitions of the UCS assets and Canoa Group during the previous financial year. Gross profit margins increased to 34,9% from 28,8% in the 2011 period, primarily as a result of higher margin business of the acquired UCS assets and Canoa Group. Operating expenses continue to be tightly managed and increased on a like-for- like basis by 2,9% to R489,7 million in the period (2011: R475,8 million) (excluding the items listed below and the expenses brought in with the acquisitions of the UCS assets and Canoa Group). The group recorded an operating profit margin of 4,9% (2011: 2,1%). The acquisition of the UCS assets and Canoa Group resulted in the creation of intangible assets which are amortised over their useful lives ranging between four and ten years. This resulted in an amortisation charge of R24,6 million for the period. Adjusting for this and for the impairment of the group`s remaining investment in its associate, Hawkstone iSolutions Proprietary Limited, the group achieved a sustainable operating profit margin of 6,0% (2011:3,5%). 2012 2011 R`000 % R`000 % Operating profit as reported 130,8 4,9 40,2 2,1 Amortisation of intangible assets 24,6 relating to the UCS assets and Canoa Group Impairment of Hawkstone 6,0 iSolutions Merger and acquisition costs 10,6 Other 14,2 Sustainable operating profit 161,4 6,0 65,0 3,5 The Services division`s revenue for the period was R949,7 million compared to R887,1 million for the comparative period. The growth in revenue is a consequence of the division`s ability to grow its cloud service offering and professional services business specifically in the application development business. Both these business units have showed good growth. The UCS division contributed R503,4 million to turnover with an operating profit of R49,0 million while the Canoa division contributed R344,0 million in revenue and R42,0 in operating profit. Revenue in the Technology division at R429,0 million is 28,7% down on the comparative period. Significant steps have been taken to restructure and right size the Technology division in line with current market trends in an effort to limit the negative impact on future group profitability while still retaining the division as a strategic component of the group`s offering. The Innovation division has increased revenue by 13,7% to R243,4 million following the restructure previously reported in Q Data DynamiQue and the inclusion of Accsys, the payroll business that formed part of the UCS assets, in the Innovation division. The International division has seen revenue growth of 26,6% to R213,9 million for the period as it continues to extend its reach onto the continent. The group continued to generate strong cash flows. After adding back depreciation and amortisation of R118,2 million, cash generated from operations amounted to R265,2 million. The tax charge includes STC on the dividend paid in January 2012 of R21,9 million, of which R16,2 million relates to the special dividend. This is offset by an overprovision for capital gains tax in the previous financial year of R30,3 million resulting from the sale of Destiny Electronic Commerce Proprietary Limited. Acquisitions and disposals Effective 1 April 2012, the group concluded a transaction to sell its Avaya business to ATIO Proprietary Limited (ATIO). ATIO will become the exclusive partner to Business Connexion Group for all Avaya business in Africa. This forms part of the realignment of the group`s Technology division. Also effective 1 April 2012, Business Connexion Group, through the Services division, acquired 100% of the issued share capital of Quad Automation Proprietary Limited (Quad). Quad is an automation systems integration company offering its clients a single-source solution for fully integrated and advanced computer-based control systems in many industrial sectors. This acquisition will strengthen the Business Connexion Industrial Solutions business making it one of the largest in South Africa. Outlook The changes to the management structure announced on 31 August 2011 have started unlocking the collective strengths of the enlarged group and are anticipated to continue to enhance the performance going forward. The group anticipates continuing to grow its annuity revenue base. The on- going investment in its intellectual property is proving a differentiator. Business Connexion`s enhanced product and services offering, together with its strong cash generation and healthy balance sheet, positions the group extremely well to continue its current growth trajectory across the continent. Trading statement Based on the strong growth for the first half and the expected earnings in the second half of the current financial year the group is reasonably certain that its full year results for the year ending 31 August 2012 will reflect an increase in diluted headline EPS and diluted EPS of greater than 20% when compared to the previous corresponding period. Shareholders are advised that the financial information on which this trading statement is based has not been reviewed and reported on by the group`s external auditors. Auditor`s report The financial results have been reviewed by KPMG Inc. and its unmodified review report is available for inspection at the registered office of the company. Appreciation The board extends its appreciation to management and staff for their dedication and valued efforts. It also thanks its clients, suppliers and shareholders for their continuing belief in and support of Business Connexion Group. For and on behalf of the board AC Ruiters LB Mophatlane Chairman Chief Executive Officer Midrand 19 April 2012 Executive directors: LB Mophatlane (Chief Executive Officer) V Olver (Deputy Chief Executive Officer) LN Weitzman (Chief Financial Officer) JR Jenkins Non-executive directors: AC Ruiters (Chairman)* NN Kekana JM Poluta* J John* M Lehobye* DC Sparrow * Independent non-executive directors FL Sekha resigned effective 19 January 2012. Registered office: Business Connexion Park North 789 - 16th Road, Randjespark, Midrand, 1685 Postal address: Private Bag X48, Halfway House, 1685 Internet address: http://www.bcx.co.za Transfer office and transfer secretaries: Computershare Investor Services Proprietary Limited 70 Marshall Street, Johannesburg, 2001 JSE Sponsor: Rand Merchant Bank A division of FirstRand Bank Limited 1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196 Responsibility for financial statement preparation: Mr LN Weitzman, CA(SA), the chief financial officer is responsible for the financial statements and has supervised the preparation thereof in conjunction with the group financial manager: group finance Mr JW van den Handel, CA(SA). For more information please visit our investor relations website at: www.bcx.co.za Date: 19/04/2012 08:00:04 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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