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CVN - ConvergeNet Holdings Limited and its subsidiaries - Unaudited interim
results for the six months ended 29 February 2012
ConvergeNet Holdings Limited and its subsidiaries
(Registration number 1998/015580/06)
JSE code: CVN ISIN: ZA000102067
Unaudited interim results for the six months ended 29 February 2012
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
R`000 29 Feb 2012 28 Feb 2011 31 Aug 2011
Revenue 416 522 496 572 1 029 363
Other operating income 3 343 1 238 1 749
Income 419 865 497 810 1 031 112
(Loss)/earnings before interest, tax,
depreciation and amortisation charges
(EBITDA) (16 818) 25 550 40 583
Depreciation and amortisation charges (7 884) (6 358) (13 340)
Operating (loss)/profit (24 702) 19 192 27 243
Investment income 1 321 1 745 4 293
Share of profit of associates 2 982 3 511 9 360
Profit on disposal of portion of
investment in associate 16 363 - -
Fair value adjustment of investment (5 140) - -
Finance costs (899) (1 265) (2 284)
Loss/profit before taxation (10 075) 23 183 38 612
Taxation 3 738 (5 450) (7 720)
Total comprehensive (loss)/income for
the period (6 337) 17 733 30 892
Attributable to:
Equity holders of the parent (1 449) 11 897 23 557
Non-controlling interests (4 888) 5 836 7 335
(6 337) 17 733 30 892
Basic (loss)/earnings per ordinary
share (cents) (0.16) 1.34 2.66
Diluted basic (loss)/earnings per
ordinary share (cents) (0.16) 1.33 2.65
Weighted average number of shares 890 644 784 890 568 322 885 225 634
Fully diluted weighted average
number of shares 896 148 185 896 865 941 889 353 185
Total number of shares in issue 921 285 941 915 115 941 915 115 941
Headline (loss)/earnings
per share (1.84) 1.35 2.70
Diluted headline (loss)/earnings
per share (cents) (1.82) 1.34 2.68
Reconciliation between basic and headline (loss)/earnings
Basic (loss)/earnings attributable to
equity holders of parent (1 449) 11 897 23 557
Loss on disposal of assets 86 130 528
(Profit)/loss on disposal of
subsidiaries and associates (16 363) - 74
Impairment of goodwill - - 77
Tax effect of profit on disposal of
subsidiaries and associates 1 374 - -
Portion of adjustments attributable to
non-controlling interests - - (363)
Headline/(loss) earnings (16 352) 12 027 23 873
Net asset value per share (cents) 50.9 51.6 52.7
Net tangible asset value per share
(cents) 29.6 29.4 30.9
Condensed Consolidated Statement of Financial Position
Unaudited Unaudited Audited
as at as at as at
R`000 29 Feb 2012 28 Feb 2011 31 Aug 2011
ASSETS
Non-Current assets
Property, plant and equipment 46 317 32 111 35 424
Goodwill 184 816 184 893 184 816
Intangible assets 10 884 18 074 14 467
Investments in associates 5 590 28 038 36 155
Other financial assets 58 610 37 917 42 385
Deferred taxation 34 098 27 392 26 002
340 315 328 425 339 249
Current assets
Inventories 94 824 92 022 85 981
Loans to group companies 332 - 332
Other financial assets 8 263 9 309 6 168
Current tax receivable 1 187 1 861 3 410
Trade and other receivables 275 545 251 640 252 566
Cash and cash equivalents 36 758 45 126 66 961
416 909 399 958 415 418
TOTAL ASSETS 757 224 728 383 754 667
EQUITY AND LIABILITIES
Total equity
Shareholders` equity 468 832 471 891 482 238
Non-controlling interest 59 265 62 823 64 156
528 097 534 714 546 394
Liabilities
Non-Current liabilities
Other financial liabilities 20 878 17 296 21 124
Finance lease obligation 10 617 1 644 1 039
Operating lease liability 1 734 1 219 1 738
Deferred taxation 4 773 8 929 6 165
38 002 29 088 30 066
Current liabilities
Vendors for acquisition - 2 407 -
Other financial liabilities 1 639 1 866 1 652
Current tax payable 9 666 7 637 4 794
Finance lease obligation 776 568 841
Provisions 10 219 6 450 6 677
Trade and other payables 157 381 129 467 163 803
Bank overdraft 11 444 16 186 440
191 125 164 581 178 207
Total liabilities 229 127 193 669 208 273
TOTAL EQUITY AND LIABILITIES 757 224 728 383 754 667
Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
R`000 29 Feb 2012 28 Feb 2011 31 Aug 2011
Operating activities
Cash (used in)/generated from
operations (49 636) (27 414) 25 277
Finance income 1 321 (571) 4 968
Finance costs (899) 98 (2 186)
Tax received/(paid) 1 345 (5 668) (13 704)
Dividends paid (13 516) - -
Net cash (used in)/generated from
operating activities (61 385) (33 555) 14 355
Net cash generated from/(used in)
investing activities 10 942 3 513 (2 829)
Net cash generated from/(used in)
financing activities 9 236 (3 707) (7 694)
Net (decrease)/increase in cash and
cash equivalents (41 207) (33 749) 3 832
Cash at the beginning of the period 66 521 62 689 62 689
Total cash at end of the period 25 314 28 940 66 521
Condensed Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
R`000 29 Feb 2012 28 Feb 2011 31 Aug 2011
Balance beginning of the period 546 394 513 065 513 065
Total comprehensive (loss)/income
for the period (6337) 17 733 30 892
Dividends (13 516) - -
Issue of treasury shares in terms
of forfeitable share plan 1 798 4 884 3 905
Shares forfeited in terms of
forfeitable share plan - - 3 810
Transactions with non-controlling
shareholders (242) (968) (968)
Own shares acquired by subsidiaries,
held as treasury shares - - (4 310)
Balance at end of period 528 097 534 714 546 394
Condensed Segmental Information
IT Telecom
Infrastructure Infrastructure Corporate
Technology Technology Consolidation
Solutions Solutions and Other Total
Feb Feb Feb Feb Feb Feb Feb Feb
2012 2011 2012 2011 2012 2011 2012 2011
R`000 R`000 R`000 R`000 R`000 R`000 R`000 R`000
Revenue
323 634 400 639 92 888 95 933 - - 416 522 496 572
(Loss)/profit from operations
(11 459) 19 750 (5 024) 7 433 (8 219) (7 991) (24 702) 19 192
Investment income
284 32 228 542 1 233 1 321 1 745
Share of profits of associates
629 146 2 353 - - 3 365 2 982 3 511
Profit on disposal of portion of investment in associate
- - - - 16 363 - 16 363 -
Fair value adjustment of investment
- - - - (5 140) - (5 140) -
Finance costs
(263) (640) (636) (527) - (98) (899) (1 265)
(Loss)/profit before tax
(10 346) 19 540 (3 275) 7 134 3 546 (3 491) (10 075) 23 183
Income tax benefit(expense)
3 475 (6 303) 517 (2 452) (254) 3 305 3 738 (5 450)
(Loss)/profit for the period
(6 871) 13 237 (2 758) 4 682 3 292 (186) (6 337) 17 733
Commentary
1.Statement of compliance
The condensed consolidated financial information has been prepared in
accordance with IAS 34 - Interim financial reporting and is a summary of the
unaudited financial statements of the Group for the six months ended 29
February 2012, which have been prepared in accordance with International
Financial Reporting Standard ("IFRS"), the Listings Requirements of the JSE
Limited, and the Companies Act of South Africa.
2. Accounting policies
The unaudited results for the six months ended 29 February 2012 have been
prepared in accordance with the Group`s accounting policies which comply with
IFRS. The accounting policies adopted are consistent with those applied in
the previous financial year except for the adoption of all new, revised or
amended standard and interpretations which were effective for the Group from
1 September 2011.
3. Corporate governance
The directors of ConvergeNet endorse the Code of Corporate Practices and
Conduct as embodied in the King III Report on Corporate Governance and
recognise their responsibility to conduct the affairs of ConvergeNet with
integrity and accountability in accordance with generally accepted corporate
practices. This includes timely, relevant and meaningful reporting to its
shareholders and other stakeholders, providing a proper and objective
perspective of ConvergeNet.
4. Change in board of directors
Messrs Lester Peteni, Ben Kekana and Ross Macdonald resigned from the board
with effect from 21 January 2012. Pursuant to Mr Peteni`s resignation, Mr
Sandile Swana, an independent non-executive director, has been appointed as
interim chairman of the board. Mr Mpho Scott resigned subsequent to the end
of the reporting period on 2 April 2012. As shareholders are aware, the
company is busy with a change in control and mandatory offer, and the board
of directors will be restructured in due course.
5. Operating results
Revenue decreased by 16% compared to the corresponding period primarily as a
result of the delays in awarding and implementation of some major contracts.
Most of these contracts have been awarded and the recent implementation of a
major contract has commenced in February 2012, which will lead to improved
results in the second half of the financial year.
As a result hereof coupled with the fact that some of the subsidiaries have
incurred substantial expenses to gear up for the contracts, the Group has
suffered an operating loss of R24.702 million compared to an operating profit
of R19.192 million in the corresponding period.
Despite the profit recognised on the sale of a portion of the investment in
an associate and the subsequent change in accounting recognition pursuant to
the sale (see also note 6 below), the Group made a loss for the period of
R6.337 million compared to a profit of R17.773 million in the corresponding
period, reflecting (loss)/earnings per share of (0.16) cents compared to 1.34
cents in the prior six month period.
The balance sheet of the group remains sound with very little gearing carried
on the balance sheet. This leaves the company well positioned in difficult
times and for future opportunities.
6. Corporate activities
Effective 1 September 2011, ConvergeNet acquired the remaining 10% interest
in Structured Connectivity Solutions (Pty) Ltd ("SCS") for a purchase
consideration of R239 520 paid in cash. Following the above, ConvergeNet now
has a 100% interest in SCS. The SCS business has shown a positive turnaround
over the past six months compared to the prior six month period and has a
solid pipeline of new projects.
Effective 1 December 2011, ConvergeNet sold 5% of its 20% shareholding in
FutureCell, an associate company, for an amount of R11.812 million paid in
cash. ConvergeNet has lost significant influence and its remaining 15%
interest has been classified as an investment in financial instruments at
Fair Value through profit and loss. Profit on disposal has been calculated in
terms of IAS 28. The remaining 15% shareholding is valued at R41.662 million
at 29 February 2012 and shareholders are reminded that the company has
entered into a put and call option agreement in relation to the shareholding,
which agreement is exercisable on over the next three years.
7. Dividend
The declaration of cash dividends will continue to be considered by the board
in conjunction with an evaluation of current and future funding requirements
and will be adjusted to levels considered appropriate at the time of
declaration.
ConvergeNet`s continued commitment to optimal cash utilisation will mean that
cash generated by the operations will be used to fund growth. As a result
hereof no dividend has been proposed for the period under review.
A cash dividend of 1.5 cents per share was paid to shareholders on 28
December 2011.
8. Industry and group outlook
There continues to be a demand for the Group`s products, solutions and
services. Whilst many opportunities were delayed as a result of the current
economic situation, these needs will be fulfilled in the short to medium
term. We therefore expect the market conditions to improve in the next six
months and beyond. The pipeline of business in most of the underlying
subsidiaries is large with solid prospects.
The directors of ConvergeNet are satisfied that the fundamentals of the
businesses remain sound and the Group will continue to cautiously invest in
previous identified strategic growth areas.
9. Post balance sheet events
There have been no significant events subsequent to the end of the reporting
period up until the date of this report that requires adjustments or
disclosure.
10. Conclusion
ConvergeNet thanks all our stakeholders. We are grateful for the continued
commitment and support of our customers, employees, suppliers and
shareholders.
For and on behalf of the board
S Swana PWJ Bouwer D Bisschoff
Chairman Chief Executive Officer Financial Director/Preparer
Pretoria
30 April 2012
Corporate Information:
www.convergenet.com
Directors: S Swana *(Chairman), PWJ Bouwer (CEO), DF Bisschoff (CFO), G
Edwards, MJ Krastanov*, T Modise, DD Tabata*, H van Dyk, L Mangope*
(* Non-Executive, Independent)
Company secretary and registered office: Arcay Client Support (Pty) Ltd,
Arcay House II, Number 3 Anerley Road, Parktown, 2193
Business Address: 272 West Avenue, Lakefield Office Park, Block D, Centurion,
0157
Postal Address: P.O. Box 10709, Centurion, 0046
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg, 2001
Sponsor: Arcay Moela Sponsors (Pty) Ltd, Arcay House II, Number 3 Anerley
Road, Parktown, 2193
Email: info@convergenet.co.za
Web: www.convergenet.com
Date: 30/04/2012 11:00:01 Supplied by www.sharenet.co.za
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