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MICROMEGA HOLDINGS LIMITED - Unaudited Interim Results for the six months ended 30 Jun 2012

Release Date: 26/07/2012 08:00
Code(s): MMG
Wrap Text
Unaudited Interim Results for the six months ended 30 Jun 2012

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")

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012

Increase In Headline Earnings Per Share                  87%
Increase In Attributable Earnings Per Share             106%
Increase In Revenue                                       7%
Increase In Net Asset Value Per Share                     9%
Increase In Net Tangible Asset Value Per Share            8%

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
                                        Unaudited   Unaudited     Audited
                                       six months  six months        year
                                            ended       ended       ended
                                          30 June     30 June 31 December
                                             2012        2011        2011
                                           R(000)     R(000)     R(000)
Revenue                                   385 241     359 809     775 483
Revenue from continuing operations        385 241     359 809     690 985
Revenue from discontinued operations           -           -       84 498
Cost of sales                            (243 212)   (228 288)   (520 318)
Gross profit                              142 029     131 521     255 165
Gross profit from continuing operations   142 029     131 521     241 295
Gross profit from discontinued operations      -          -        13 870
Other income                                9 471       1 678       7 940
Distribution expenses                      (2 009)     (3 264)     (6 429)
Administrative expenses                  (107 999)   (111 347)   (246 279)
Results from operations                    41 492      18 588      10 397
Results from continuing operations         41 492      18 588      49 516
Results from discontinued operations           -           -      (39 119)
Finance income                              2 445       3 619       5 731
Finance cost                               (3 681)     (1 905)     (7 076)
Net finance (cost) / income                (1 236)      1 714      (1 345)
Share of loss in equity
accounted associates                         (201)       (630)       (628)
Profit before tax                          40 055      19 672       8 424
Profit before tax from continuing 
operations                                 40 055      19 672      47 823
Loss before tax from discontinued
operations                                     -          -       (39 399)
Taxation (expense) / income               (10 560)     (4 927)      3 413
Profit for the period                      29 495      14 745      11 837
Profit from continuing operations          29 495      14 745      40 975
Loss from discontinued operations              -          -       (29 138)
Other comprehensive income:
Foreign currency translation differences        3         -            (4)
Revaluation of property, plant and 
equipment                                      -        1 064       8 214
Realisation of revaluation reserve             -          -            90
Income tax on other comprehensive income       -         (298)     (1 299)
Other comprehensive income for the period       3         766       7 001
Total comprehensive income for the period  29 498      15 511      18 838
Profit attributable to:
Owners of the company                      28 483      14 125       7 386
Non-controlling interests                   1 012         620       4 451
Profit for the period                      29 495      14 745      11 837
Total comprehensive income attributable 
to:
Owners of the company                      28 486      14 891      10 527 
Non-controlling interests                   1 012         620       8 311
Total comprehensive income for the period  29 498      15 511      18 838
Reconciliation of headline earnings:
Profit attributable to owners of the 
company                                    28 483      14 125       7 386
(Profit) / loss on disposal of property,
plant and equipment                          (257)        157         872
Profit on disposal of intangible assets        -       (1 073)     (1 073)
Impairment of intangible assets       3     3 300          -       15 291
Impairments of assets classified as 
held for sale                                  -           -        1 251
Profit on disposal of business        3    (7 289)         -           -
Profit on disposal of investments in
subsidiaries                                   -           -       (6 361)
Impairment of other investment                 -           -        2 679 
Headline earnings                          24 237      13 209      20 045
Earnings per share:
Headline earnings per share (cents)         25.72       13.72       20.94
Basic earnings per share (cents)            30.23       14.67        7.71
Diluted earnings per share (cents)          29.64       14.58        7.64
Continuing operations
Basic earnings per share (cents)            30.23       14.67       38.15
Diluted earnings per share (cents)          29.64       14.58       37.78
Weighted average number of shares (000)    94 217      96 274      95 736
Diluted weighted average shares in 
issue (000)                                96 094      96 889      96 674
Total number of shares in issue (000)      94 006      96 061      94 294

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
                                        Unaudited   Unaudited     Audited
                                       six months  six months        year
                                            ended       ended       ended
                                          30 June     30 June 31 December
                                             2012        2011        2011
                                           R(000)     R(000)     R(000)
ASSETS
Non-current assets                        273 412     275 014     275 202
Property, plant and equipment             145 188     144 767     147 033
Intangible assets                          73 876      66 770      70 318
Investments in associates                   1 777       1 085       2 038
Other investments                           1 582       6 650       1 573
Loans receivable                           16 174      24 959      23 606
Deferred tax assets                        34 815      30 783      30 634
Current assets                            245 532     254 432     244 156
Inventories                                 6 863      58 741      43 793
Retirement benefit surplus                 21 381      26 797      21 381
Trade and other receivables               166 710     122 835     134 467
Current portion of loans receivable        14 734       5 776      13 539
Cash and cash equivalents                  35 764      16 551      23 742
Income tax receivable                          -           -          642
Non-current assets classified as held 
for sale                                       80      23 732       6 592
Total assets                              518 944     529 446     519 358
EQUITY AND LIABILITIES
EQUITY                                    342 605     314 960     313 889
Share capital and premium                 186 321     190 325     187 022
Non-distributable reserves                 16 575      15 363      16 653
Retained earnings                         114 672      92 463      85 911
Total equity attributable to owners
of the company                            317 568     298 151     289 586
Non-controlling interests                  25 037      16 809      24 303
LIABILITIES 
Non-current liabilities                    72 072      75 487      76 480
Borrowings                                 60 328      60 898      65 192
Deferred tax liabilities                   11 744      14 589      11 288
Current liabilities                       104 267     138 999     128 989
Bank overdraft                                 -        6 061       9 065
Current portion of borrowings              14 910      30 679      14 418
Trade and other payables                   76 152      94 094      99 066
Deferred vendor payments                      534         789         534
Provisions                                  5 906       6 391       5 906
Taxation payable                            6 765         985          - 
TOTAL EQUITIES AND LIABILITIES            518 944     529 446     519 358
Net asset value per share (cents)          337.82      310.38      307.11
Net tangible asset value per share        
(cents)                                    259.23      240.87      232.54
CONDENSED GROUP STATEMENT OF CASH FLOWS
                                        Unaudited   Unaudited     Audited
                                       six months  six months        year
                                            ended       ended       ended
                                          30 June     30 June 31 December
                                             2012        2011        2011
                                           R(000)     R(000)     R(000)
Cash flows from operating activities
Cash generated by operating activities     41 582      23 378      45 848
Movement in working capital               (14 254)     (4 805)    (14 559)
Finance income                              2 445       3 619       5 731
Finance cost                               (3 681)     (1 905)     (7 076)
Tax paid                                   (6 877)     (7 946)    (13 759)
Net cash inflows from operating
Activities                                 19 215      12 341      16 185
Cash flows from investing activities    
Expenditure to maintain operating capacity
Property, plant and equipment acquired     (6 275)     (8 294)    (17 485)
Proceeds on disposals of property, plant 
and equipment                               1 961         736       5 364
Proceeds on disposals of intangible
assets                                         -           -        1 247
Proceeds on disposals of assets
classified as held for sale                 6 512          -       16 356
Expenditure for expansion
Acquisition of subsidiaries                    -           -       (2 957)
Disposal of business / subsidiaries         4 942          -       16 095
Internally generated intangible assets     (7 693)     (4 307)    (20 885)
(Acquisition) / disposal of investments        (9)         45       6 524
Loans receivable repaid / (granted)         6 297      (1 758)     (5 119)
Net cash inflows /(outflows) from 
investing activities                        5 735     (13 578)       (860)
Cash flows from financing activities        
Treasury shares repurchased                  (701)       (507)     (3 810)
Dividends paid to non-controlling 
interests                                    (278)         -       (1 298)
Borrowings (repaid) /raised                (2 884)      3 115      (4 404)
Deferred vendor payments repaid                -           -         (255)
Net cash (outflows) / inflows from 
financing activities                       (3 863)      2 608      (9 767)
Increase in cash and cash equivalents      21 087       1 371       5 558
Cash and cash equivalents at beginning 
of the period                              14 677       9 119       9 119
Cash and cash equivalents at end of 
the period                                 35 764      10 490      14 677

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
                            Share   Share  Share Revalu- Foreign    Deal
                          capital premium  based   ation  currency differ-
                                         payment reserve  transla-   ence
                                         reserve            tion   reserve
                                                          reserve
                          R(000) R(000) R(000) R(000) R(000)  R(000)
Balance as at 1 January   
2011                          965 189 832   4 017   9 360     33     1 000
Total comprehensive            
income for the period
Profit for the period          -       -       -       -      -         -
Other comprehensive income     -       -       -      708     -         -
Revaluation of property        -       -       -      766     -         -
Realisation of revaluation
reserve                        -       -       -      (58)    -         -
Total comprehensive income
for the period                 -       -       -      708     -         -
Transactions with owners
recorded directly in equity    (4)   (468)    245      -      -         -
Treasury shares purchased      (4)   (503)     -       -      -         -
Share-based payment 
transactions                   -       35     245      -      -         -
Total transactions with 
owners                         (4)   (468)    245      -      -         -
Balance as at 30 June
2011                          961 189 364   4 262  10 068     33     1 000
Total comprehensive            
income for the period
Loss for the period            -       -       -       -      -         -
Other comprehensive income     -       -       -    1 031     (4)       -
Foreign currency translation
differences                    -       -       -       -      (4)       -
Revaluation of property        -       -       -    2 289     -         -
Realisation of revaluation 
Reserve                        -       -       -   (1 258)    -         -
Total comprehensive income 
for the period                 -       -       -    1 031     (4)       -
Transactions with owners
recorded directly in equity   (18) (3 285)    263      -      -         -
Treasury shares purchased     (18) (3 285)     -       -      -         -

Share-based payment 
transactions                   -       -      263      -      -         -
Dividends paid to non-
controlling interests          -       -       -       -      -         -
Changes in ownership interests 
in subsidiaries that do not 
result in a loss of control
Business combinations          -       -       -       -      -         -
Total transactions with 
owners                        (18) (3 285)    263      -      -         -
Balance as at 31 December
2011                          943 186 079   4 525  11 099     29     1 000
Total comprehensive            
income for the period
Profit for the period          -       -       -       -      -         -
Other comprehensive income     -       -       -      (62)     3        -
Foreign currency translation
differences                    -       -       -       -       3        -
Realisation of revaluation 
reserve                        -       -       -      (62)    -         -
Total comprehensive income
for the period                 -       -       -      (62)     3        -
Transactions with owners
recorded directly in equity    (3)   (698)    (19)     -      -         -
Treasury shares purchased      (3)   (698)     -       -      -         -
Share-based payment 
transactions                   -       -      (19)     -      -         -
Dividends paid to non- 
controlling interests          -       -       -       -      -         -
Total transactions
with owners                    (3)   (698)    (19)     -      -         -
Balance as at 30 June 2012    940 185 381   4 506  11 037     32     1 000

                                                         Non-
                          Retained earnings   Total   controlling  Total
                                                       interests  equity
                              R(000)        R(000)    R(000)   R(000)
Balance as at 1 January
2011                          78 280        283 487     16 189   299 676
Total comprehensive            
income for the period
Profit for the period         14 125         14 125        620    14 745
Other comprehensive income        58            766         -        766
Revaluation of property           -             766         -        766
Realisation of revaluation 
reserve                           58             -          -         -
Total comprehensive income 
for the period                14 183         14 891        620    15 511
Transactions with owners
recorded directly in equity       -            (227)        -       (227)
Treasury shares purchased         -            (507)        -       (507)
Share-based payment 
transactions                      -             280         -        280
Total transactions with owners    -            (227)        -       (227)
Balance as at 30 June
2011                          92 463        298 151     16 809   314 960
Total comprehensive            
income for the period
Loss for the period           (6 739)        (6 739)     3 831    (2 908)
Other comprehensive income     1 348          2 375      3 860     6 235
Foreign currency translation 
differences                       -              (4)        -         (4)
Revaluation of property           -           2 289      3 860     6 149
Realisation of revaluation 
reserve                        1 348             90         -         90
Total comprehensive income
for the period                (5 391)        (4 364)     7 691     3 327
Transactions with owners
recorded directly in equity       -          (3 040)    (1 298)   (4 338)
Treasury shares purchased         -          (3 303)        -     (3 303)
Share-based payment 
transactions                      -             263         -        263
Dividends paid to non-
controlling interests             -              -      (1 298)   (1 298)
Changes in ownership interests
in subsidiaries that do not
result in a loss of control
Business combinations         (1 161)        (1 161)     1 101       (60)
Total transactions
with owners                   (1 161)        (4 201)      (197)   (4 398)
Balance as at 31 December   
2011                          85 911        289 586     24 303   313 889
Total comprehensive            
income for the period
Profit for the period         28 483         28 483      1 012    29 495
Other comprehensive income        62              3         -          3
Foreign currency translation
differences                       -               3         -          3
Realisation of revaluation
reserve                           62             -          -         -
Total comprehensive income
for the period                28 545         28 486      1 012    29 498 
Transactions with owners
recorded directly in equity      216           (504)      (278)     (782)
Treasury shares purchased         -            (701)        -       (701)
Share-based payment 
transactions                     216            197         -        197
Dividends paid to non- 
controlling interests             -              -        (278)     (278)
Total transactions with 
owners                           216           (504)      (278)     (782)
Balance as at 30 June
2012                         114 672        317 568     25 037   342 605





NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation
These unaudited condensed consolidated interim 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 71 of 2008.  The condensed 
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. 

2. Significant accounting policies
These unaudited condensed consolidated interim financial statements have been 
prepared using accounting policies that comply with International Financial 
Reporting Standards (IFRS).  The accounting policies used are consistent with 
those used in the annual financial statements for the year ended 31 December 
2011.

3. Disposal of business
The Company disposed of the business and assets of Deltec Power Distributors 
(Proprietary) Limited during the interim period under review.  The profit on
disposal represents the excess of the disposal price when compared to the 
fair value of the assets and liabilities disposed of.  Goodwill relating to 
the Deltec Power Distributors business was impaired during the period.

4.Segment information
SEGMENT REVENUE
                                       Unaudited    Unaudited     Audited
                                      six months   six months        year
                                           ended        ended       ended
                                         30 June      30 June 31 December
                                            2012         2011        2011
                                          R(000)      R(000)     R(000)
NOSA
-external sales                          103 771       70 188     155 756
MECS Africa
-external sales                          153 050      101 205     255 929
Deltec Power Distributors
-external sales                           47 732       61 117     129 538
Sebata Municipal Solutions
-external sales                           47 262       47 699     100 440
Turrito Networks
-external sales                            8 725        3 579       9 746
MICROmega Securities
-external sales                           19 908       20 166      40 423
Automotive Disposal
-external sales                              870       58 841      84 498
Holding company and consolidation 
elimination    
-external sales                            2 932        1 188       4 747
-internal sales                              991       (4 174)     (5 594) 
Total revenue                            385 241      359 809     775 483

SEGMENT PROFIT/(LOSS)
                                       Unaudited    Unaudited     Audited
                                      six months   six months        year
                                           ended        ended       ended
                                         30 June      30 June 31 December
                                            2012         2011        2011
                                          R(000)      R(000)     R(000)

NOSA                                      17 874        8 861      22 763
MECS Africa                                5 840        3 955       7 056
Deltec Power Distributors                  9 690        4 866       8 652
Sebata Municipal Solutions                 5 656        4 927       8 707
Turrito Networks                            (532)      (1 166)     (1 474)
MICROmega Securities                       4 814        3 850      10 015
Automotive Disposal                       (1 569)      (3 769)    (29 637)
Holdings company and consolidation       (13 290)      (7 399)    (18 696)
Total profit                              28 483       14 125       7 386

SEGMENT ASSETS
                                       Unaudited    Unaudited     Audited
                                      six months   six months        year
                                           ended        ended       ended
                                         30 June      30 June 31 December
                                            2012         2011        2011
                                          R(000)      R(000)     R(000)

NOSA                                      92 748       60 633      72 321
MECS Africa                               72 980       38 133      62 596
Deltec Power Distributors                 41 855       58 168      61 230
Sebata Municipal Solutions                86 448       86 585      73 496
Turrito Network                            8 889        4 801       6 920
MICROmega Securities                      66 551       47 228      60 383
Automotive Disposal                       44 266      127 278      62 433
Holding company and consolidation        105 207      106 620     119 979
Total assets                             518 944      529 446     519 358

5. Commentary on results
We are pleased to report an increase of 87% in headline earnings per share to 
25.72 cents compared to the same period last year. Our balance sheet 
continues to strengthen with the net asset value per share having increased 
by 9% to 337.82 cents. Operating margins have improved significantly over the 
period from 5% to 10%. This is primarily attributed to our exit from the 
automotive sector and our renewed focus on our traditional service based 
businesses. We have invested significantly in recent years to ensure we have 
both the capacity and competence to deliver sustained earnings growth. We are 
now seeing the benefit of this investment strategy. 

Prospects
NOSA remains a demand driven business. Our ability to meet this demand is 
governed by our access to skills and resources. We have a continuous skills 
development and recruitment program in place but nevertheless believe that it 
will take up to five years before we can fully deliver on even the current 
demand for our services. This is a direct reflection on the importance that 
the government and corporate South Africa is placing on occupational health 
and safety in the work place and bodes well for future earnings growth.  
South Africa is following a global trend towards best practice in this field 
and we see this as continuing due to the increasingly stringent application 
and enforcement of legislation both locally and abroad.

Our technology businesses are performing in line with our anticipated 
earnings forecast for this year. Our cloud computing service has received 
some promising traction in the first half of this year and we are optimistic 
that it will become an important contributor to earnings in the medium term. 

Our inter-dealer broking business and our human resource solutions business 
are both expected to achieve their forecast earnings for 2012. Both 
businesses have focused on expanding their services into the African 
continent and this should assist in achieving sustainable growth beyond this 
year.
 
The restructuring of the group to eliminate unwanted businesses was completed 
with the sale of Deltec in the first half of this year. We now have a 
structure that is robust and that incorporates a portfolio of businesses that 
we can now confidently build upon. Our cash position is strong and was 
further enhanced by receipt of the proceeds from the sale of Deltec 
subsequent to the end of this reporting period.

The second half of the year has traditionally delivered higher levels of 
growth than the first half. We expect no difference this year. We are already 
gaining some visibility into the next financial year and we are cautiously 
optimistic about our prospects for 2013.

These results have not been reviewed or reported on by the Group`s auditors. 
The condensed financial statements have been prepared under the supervision 
of DJ Case CA (SA) and were approved by the board of directors on 25 July 
2012.

By order of the board

Johannesburg
26 July 2012

Directors:
D C King               (Chairman)
I G Morris             (Chief Executive Officer)
D S E Carlisle         (Managing Director)
D J Case               (Financial Director)
P V Henwood            (Lead Independent Non-executive)
R C Lewin              (Non-executive)

Company Secretary:      T de Mendonca
Auditors:               Nexia SAB&T 
Transfer Secretaries:   Computershare Investor Services
Sponsor:                Java Capital 
Attorneys:              Eversheds


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