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Abridged Group report for the year ended 30 June 2012 and Notice of Annual General Meeting
SILVERBRIDGE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration NUMBER 1995/006315/06)
Share code: “SVB” ISIN: ZAE000086229
(“SilverBridge” or “Group”)
ABRIDGED GROUP Report FOR THE year ENDED 30 June 2012 and NOTICE
of ANNUAL GENERAL MEETING
GROUP PROFILE
SilverBridge offers clients in the financial services industry
reliable solutions that is aimed at simplifying their operations
by enabling and improving their business processes. We achieve
this by implementing our system platforms and customising them to
meet client needs. The valuable experience we have gained through
our existing African footprint and the contributions made by
strategic partnerships within our solution eco system, positions
us well to take advantage of opportunities by making life
insurance simpler.
Exergy is our flagship platform that enables core back office
policy administration in the life assurance industry. The broader
Exergy solution package has specific applications which can be
customised to suit the needs of a long-term insurer. We use
solution design to address more than just customisation of
existing products and contract information – we aim to enable our
clients to drive their strategic business objectives efficiently.
Our approach is to identify and define strategic customer business
objectives, translate those to IT requirements and to implement
winning, long-term solutions.
SilverBridge Holdings Limited and SilverBridge Software Solutions
Proprietary Limited are jointly branded as SilverBridge.
Financial Highlights
SilverBridge has completed two major implementation projects. In
doing so, future annuity rental and support income has been
secured and client delivery has been ensured. These projects were,
however, completed above cost budget, which impacted the results.
The other revenue segments, namely rental and support have grown
as the number of clients on the system increased. Development
investment was managed and focussed on creating the SilverBridge
Eco Suite, which is a collection of assets and standards for
implementing more efficiently, assuring better quality and
enabling partners.
Operational Highlights
We are doing business in a highly complex environment with the aim
of simplifying it. Our operational focus has been and continues to
be:
* Creating efficiency tools and making implementations less
complex and less costly
* Improving end to end software development, implementation and
support processes to improve quality
* Building a solution eco-system with specialist and strategic
partners
We are achieving success with our focus areas in the following
ways:
* The Nedgroup Life project is progressing well. We are in the
process of customising the installation of Exergy to meet Nedgroup
Life’s specific business needs. This includes how they sign up new
business, collect premiums and pay claims for their range of life
assurance products. The implementation project is estimated to
last another two and a half years. Annuity income will commence
upon completion of phase 1 which is expected a couple of months
away from the end of the current financial year, according to the
current scope.
* Phase 1 of the Absa implementation is completed. ABSA is
consolidating the work that has been done and we will plan the
next phase later in the year.
* We successfully implemented our standardised offering,
Exergy2Go, for another two new smaller clients in a matter of
weeks. They are currently customising it to meet their
requirements under our guidance.
* We have our first implementation at a new client through a
signed partner utilising our standardised offering, Exergy2Go. It
is progressing very well.
GROUP ABRIDGED AUDITED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2012
12 months 16 months
ended ended
30 June 30 June
2012 2011
Notes R'000 R'000
Revenue 82 576 121 042
Other income 590 1 074
Personnel expenses (67 073) (94 520)
Depreciation and amortisation (3 058) (3 977)
Professional fees paid for services (4 743) (6 671)
Other expenses (12 395) (19 952)
Results from operating activities (4 103) (3 004)
Impairment loss recognised on
intangible assets – (27 689)
Impairment loss recognised on non-
financial receivables (466) –
Fair value adjustment – 11 737
Impairment loss recognised on
withholding tax 1.6 (2 140) –
Loss on disposal of subsidiary (668) –
Loss on disposal of associate (76) –
Share of loss in associate – (34)
Finance income 156 396
Finance costs (164) (14)
Loss before income tax (7 461) (18 608)
Income tax 858 (5 656)
Loss and total comprehensive income
for the period (6 603) (24 264)
Loss and total comprehensive income
attributable to:
Equity holders of the holding company (6 603) (24 782)
Non-controlling interest – 518
Loss and total comprehensive income
for the period (6 603) (24 264)
Loss per share
Basic loss per share 1.3 (19.04) (71.47)
Diluted loss per share 1.3 (19.04) (71.47)
GROUP ABRIDGED AUDITED STATEMENT OF POSITION
as at 30 June 2012
30 June 30 June
2012 2011
Notes R'000 R'000
ASSETS
Non-current assets 17 938 17 406
Plant and equipment 2 195 2 435
Intangible assets 12 496 14 103
Investment in associate – 76
Deferred tax assets 1 437 792
Withholding tax rebates receivable 1 810 –
Current assets 16 454 34 028
Income tax receivable 833 5 548
Revenue recognised not yet invoiced 1.4 712 530
Trade and other receivables 10 388 11 450
Cash and cash equivalents 4 521 16 500
Total assets 34 392 51 434
EQUITY AND LIABILITIES
Equity 21 462 27 484
Share capital 348 348
Share premium 11 871 11 871
Treasury shares (197) (197)
Share based payment reserve 1 338 757
Retained earnings/(Accumulated loss) 8 102 14 705
Current liabilities 12 930 23 950
Income tax payable 248 -
Trade and other payables 7 325 14 852
Deferred revenue 1.4 5 357 9 098
Total liabilities 12 930 23 950
Total equity and liabilities 34 392 51 434
Net asset value per share 61.89 79.26
Tangible net asset value per share 25.86 38.59
GROUP ABRIDGED audited STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2012
Share
based
Issued Share Treasury payment
capital premium shares reserve
R'000 R'000 R'000 R'000
Group
Balance at 1 March 2010 348 11 871 (197) 91
Total comprehensive income
for the period
Loss for the period – – – –
Total comprehensive income
for the period – – – –
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Equity settled share based
payment – – – 689
Dividend paid by subsidiary – – – –
Dividend paid by holding
company – – – –
Transfer of reserve of share
options that did not vest – – – (23)
Total contributions by and
distributions to owners – – – 666
Changes in ownership
interests in subsidiaries
that do not result in a loss
of control
Acquisition of 49% non-
controlling interest – – – –
Total transactions with
owners – – – 666
Balance at 30 June 2011 348 11 871 (197) 757
Total comprehensive income
for the period
Loss for the period – – – –
Total comprehensive income
for the period – – – –
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Equity settled share based
payment – – – 581
Total contributions by and
distributions to owners – – – 581
Changes in ownership
interests in subsidiaries
that do not result in a loss
of control
Total transactions with
owners – – – 581
Balance at 30 June 2012 348 11 871 (197) 1 338
Non-
Retained controlling Total
earnings Total interest equity
R'000 R'000 R'000 R'000
Group
Balance at 1 March 2010 41 798 53 911 3 881 57 792
Total comprehensive
income for the period
Loss for the period (24 782) (24 782) 518 (24 264)
Total comprehensive
income for the period (24 782) (24 782) 518 (24 264)
Transactions with owners,
recorded directly in
equity
Contributions by and
distributions to owners
Equity settled share
based payment – 689 – 689
Dividend paid by
subsidiary – – (2 450) (2 450)
Dividend paid by holding
company (1 733) (1 733) – (1 733)
Transfer of reserve of
share options that did
not vest 23 – – –
Total contributions by
and distributions to
owners (1 710) (1 044) (2 450) (3 494)
Changes in ownership
interests in subsidiaries
that do not result in a
loss of control
Acquisition of 49% non-
controlling interest (601) (601) (1 949) (2 550)
Total transactions with
owners (2 311) (1 645) (4 399) (6 044)
Balance at 30 June 2011 14 705 27 484 – 27 484
Total comprehensive
income for the period
Loss for the period (6 603) (6 603) – (6 603)
Total comprehensive
income for the period (6 603) (6 603) – (6 603)
Transactions with owners,
recorded directly in
equity
Contributions by and
distributions to owners
Equity settled share
based payment – 581 – 581
Total contributions by
and distributions to
owners – 581 – 581
Changes in ownership
interests in subsidiaries
that do not result in a
loss of control
Total transactions with
owners (6 603) (6 022) – (6 022)
Balance at 30 June 2012 8 102 21 462 – 21 462
GROUP ABRIDGED audited CASH FLOW STATEMENT
for the year ended 30 June 2012
12 months 16 months
ended ended
30 June 30 June
2012 2011
R'000 R'000
Cash (utilised in)/generated from
operations (7 841) 17 704
Interest received 127 396
Interest paid (164) (14)
Dividends paid by subsidiary – (2 450)
Taxation paid (754) (2 821)
STC paid – (500)
Net cash (outflow)/inflow from operating
activities (8 632) 12 315
Cash flows from investing activities
Plant and equipment acquired to maintain
operations (1 232) (2 174)
Proceeds from sale of equipment 36 55
Acquisition of Ones & Zeros non-controlling
interest (1 950) (600)
Cash effect on disposal of subsidiary (200) –
Cash outflow with capitalisation of
development costs – (5 797)
Net cash used in investing activities (3 346) (8 516)
Cash flows from financing activities
Dividend paid to equity holders (1) (1 731)
Net cash outflow from financing activities (1) (1 731)
Net (decrease)/increase in cash and cash
equivalents (11 979) 2 068
Cash and cash equivalents at the beginning
of the period 16 500 14 432
Cash and cash equivalents at the end of the
period 4 521 16 500
GROUP ABRIDGED AUDITED SEGMENT REPORTS
for the year ended 30 June 2012
Business segments
12 months to June 2012
12 months Software
Research rental
Implemen- and and
tation Support develop- mainte-
services services ment nance Total
2012 R’000 R’000 R’000 R’000 R’000
Segment total
revenue 29 171 20 081 – 33 324 82 576
Segment External
revenue 29 171 20 081 – 33 324 82 576
Direct segment
cost (28 326) (13 515) (10 872) (1 334) (54 047)
Segment gross
profit 845 6 566 (10 872) 31 990 28 529
Indirect segment
cost (15 581) (7 434) (5 980) (734) (29 729)
Segment result (14 736) (868) (16 852) 31 256 (1 200)
Unallocated
expenses * (2 903)
Operating loss (4 103)
Impairment loss
recognised on
withholding tax (2 140)
Loss on disposal
of subsidiary (668)
Loss on disposal
of associate (76)
Impairment loss
recognised on
non-financial
receivables (466)
Finance income 156
Finance expense (164)
Income tax 858
Loss for the
period (6 603)
16 months to June 2011
Implementation Support Research and
16 months services services development
2011 R’000 R’000 R’000
Segment total revenue 42 344 24 158 –
Inter-Group revenue (477) – –
Segment External
revenue 41 867 24 158 –
Direct segment cost (30 585) (17 410) (18 939)
Cost capitalised – – 5 797
Segment gross profit 11 282 6 748 (13 142)
Indirect segment cost (16 486) (9 384) (10 208)
Segment result (5 204) (2 636) (23 350)
Unallocated expenses *
Operating profit
Impairment loss (1 819) (1 819) (4 719)
Purchase price
liability adjustment 1 467 1 467 –
Finance income
Finance expense
Share of loss in
associate
Income tax expense
Profit for the period
Software
rental and Consulting
16 months maintenance Fees** Total
2011 R’000 R'000 R’000
Segment total revenue 39 309 20 442 126 253
Inter-Group revenue – (4 734) (5 211)
Segment External revenue 39 309 15 708 121 042
Direct segment cost – (10 405) (77 339)
Cost capitalised – – 5 797
Segment gross profit 39 309 5 303 49 500
Indirect segment cost – (5 608) (41 686)
Segment result 39 309 (305) 7 814
Unallocated expenses * (10 818)
Operating profit (3 004)
Impairment loss (10 911) (8 421) (27 689)
Purchase price liability
adjustment 8 803 – 11 737
Finance income 396
Finance expense (14)
Share of loss in
associate (34)
Income tax expense (5 656)
Profit for the period (24 264)
* Unallocated expenses relate to costs incurred at a corporate
level.
** The Group does not report on this segment anymore as consulting
is now consolidated into the implementation segment.
COMMENTARY
1. Notes to the abridged Group financial statements
1.1 Basis of presentation
The abridged Group annual financial statements are prepared in
accordance with the recognition and measurement requirements of
International Financial Reporting Standards (“IFRS”) International
Accounting Standard 34 (IAS 34), the AC 500 series as published by
the Accounting Practices Board (APB), the Listings Requirements of
JSE Limited ("the Listings Requirements") and the requirements of
the Companies Act of South Africa. The abridged Group annual
financial statements for the year ended 30 June 2012 incorporate
extracts of the Group’s unqualified audited financial statements,
which are prepared in accordance with IFRS and the Companies Act,
2008 (Act 71 of 2008) of South Africa ("the Companies Act"). The
accounting policies applied are consistent with those of the
previous financial year. For a better understanding of the Group’s
financial position and results of operations, these abridged
financial statements must be read in conjunction with the Group’s
audited annual financial statements for the year ended 30 June
2012 which include all disclosures required by IFRS, and which are
expected to be released on or about 25 September 2012. The
Group’s integrated report which incorporates the Annual Financial
Statements can be obtained from our website or by contacting the
Company directly. These Annual Financial Statements was prepared
by the Group Financial Manager, Petro Mostert CA (SA) under the
supervision of the Financial Director, Jaco Maritz CA (SA).
1.2 Trade and other payables
Trade and other payables comprised of the following:
2012 2011
R’000 R’000
Trade payables 3 237 1 744
Liability on capital reduction 30 31
Other payables (accruals) 1 449 2 979
Ones & Zeros purchase price liability – 1 950
Withholding tax rebate payable 278 4 798
VAT payable 317 1 273
Leave accrual 2 014 2 077
Total trade and other payables 7 325 14 852
1.3 EARNINGS/(Loss) per share
Basic and diluted Loss per ordinary share
Basic and diluted loss per ordinary share is calculated by
dividing the loss for the period attributable to ordinary equity
holders of the parent, of R6.6 million (2011: R24.8 million) by
the weighted average number of ordinary shares outstanding during
the period of 34.7 million (2011: 34.7 million).
Group
2012 2011
Number Number
of shares of shares
'000 '000
Reconciliation of the weighted average
number of shares in issue
Shares in issue at the beginning of the
period 34 781 34 781
Effect of treasury shares acquired on 1
March 2007 (106) (106)
Weighted average number of shares in
issue at the
end of the period 34 675 34 675
Loss attributable to ordinary
shareholders (R'000) (6 603) (24 782)
Basic and diluted loss per share
(cents) (19.04) (71.47)
Headline and diluted headline (lOSS)/earnings per ordinary share
Headline and diluted headline (loss)/earnings per ordinary share
is calculated by dividing the headline loss attributable to
ordinary equity holders of the parent of R5.9 million (2011:
headline earning of R2.9 million) by the weighted average number
of ordinary shares outstanding during the period of 34.7 million
(2011: 34.7 million).
Group
2012 2011
Number Number
of shares of shares
'000 '000
Weighted average number of shares in issue 34 675 34 675
Reconciliation between basic earnings
and headline earnings
Gross Net Gross Net
R’000 R’000 R’000 R’000
Basic (loss)/earnings (6 603) (24 782)
Adjusted for:
– (Profit)/Loss on
disposal of equipment (15) (11) 36 36
– Impairment loss on
intangible assets
recognized – – 27 689 27 689
– Loss on disposal of
subsidiary 668 668 – –
– Loss on disposal of
associate 76 76 – –
Headline (loss)/earnings (5 870) 2 943
Headline (loss)/earnings
per share (cents) (16.93) 8.49
1.4 - Deferred revenue and revenue recognised BUT not yet invoiced
Deferred revenue and revenue recognised but not yet invoiced
refers to the timing difference between recognition of revenue and
invoicing to the client based on the contracts. The Group is in a
net liability position which means it has received more cash than
what has been recognised as income, which has a positive impact on
working capital. These current liabilities will be converted to
revenue in the short-term and are recoverable from the current
client base.
2011 2011
R'000 R'000
Current asset
Revenue recognised not yet invoiced 712 530
Current liability
Deferred revenue (5 357) (9 098)
Net liability (4 664) (8 568)
1.5 Revenue per geographical segment
Other
South African
Total Africa countries*
R’000 R’000 R’000
12 months ended 30 June 2012 82 576 66 822 15 754
16 months ended 30 June 2011 121 042 80 508 40 534
* Other African countries include Kenya, Malawi, Nigeria, Ghana,
Namibia, Lesotho, Swaziland and Zimbabwe.
1.6 Withholding tax
Management had reviewed the current outstanding with-holding tax
certificates and based on the following factors impaired the with-
holding asset i.e. outstanding certificates not submitted and/or
accepted by SARS:
Reduced profits in the past financial year which affected the
ability to receive tax benefit;
Doing proportionately less business in the rest of Africa outside
South Africa;
Certificates not yet submitted reaching end of life period.
The liability has also been reduced as a result of this impairment
which represents the outstanding credits to clients subject to
receiving with-holding tax rebate. The impairment had a R2 million
effect, impacted the income statement with a R2 million loss which
represents credits to clients on with-holding tax certificates not
submitted/permitted yet.
2. CORPORATE ACTIVITY
2.1 Disposal of associate
The investment of twenty five percent (25%) in Silburn Drake Staff
Connections (Proprietary) Limited, reported on previously as an
associate, was sold for R1 on 17 November 2011 to the majority
shareholders. The investment of R76 479 created through the equity
method of accounting was written off as a loss.
2.2 Disposal of subsidiary
Acczone is incorporated in the Republic of South Africa. The Group
owned 100% of the equity interest in Acczone until 28 February
2012. The full investment in the company was sold to a third
party for R1.
The sale transaction had the following financial effect on the
Group’s statements in the current period:
R’000
Loss created through the net asset value
Net asset value as at 28 February 2012 12
Accounts receivable 214
Accounts payable (202)
Proceeds with the sale of investment –
Loss (12)
Loss created through other items
Impairment of accounts receivable in SilverBridge
Software Solutions (333)
Impairment of loan receivable from Acczone (123)
Working capital payment (200)
Loss (656)
Total loss with sale of subsidiary (668)
2.3. Dividend
No dividend or capital distribution was declared for the period
under review.
3. AUDIT REPORT
The annual financial statements for the year ended 30 June 2012
have been audited by KPMG Inc. Their unmodified audit report is
available for inspection at the Group’s registered office.
4. Subsequent EVENTS
No events occurred subsequent to the period end that would require
the abridged Group annual financial statements to be adjusted.
5. FINANCIAL RESULTS AND PERFORMANCE
While our annuity segments of support and software rental
performed satisfactorily, our implementation segment and the
overall result was impacted by two major projects, which exceeded
the cost budgets. These projects have been completed and future
annuity revenue has been secured.
Given SilverBridge’s relatively small size, deviations from the
project budget during large implementations can have a material
impact on the overall results. Given limited capacity, allocating
additional resources to a project also has an opportunity cost in
the form of potential revenue and profits not earned. This is a
real cost, considering our growing pipeline. If the direct costs
of resolving these projects were reversed and the opportunity cost
added, then the results would have been in line with our overall
budget.
We have continued to take corrective action, improving processes
and implementing more stringent project management to help prevent
recurrence.
The cash reserves and ability to pay dividends have been affected
over the last two years. The business, however, is not capital
intensive and most of the expenses consist of salaries and
employee related costs. Working capital decreased over the last
year meaning that cash flowed out of the business and is being
closely managed to ensure sustainability. The group has overdraft
facilities in place to ensure that obligations are met should
additional cash reserves be required in the short term.
The performance over the past two years has put pressure on the
business but measures that have been put in place will ensure
future financial sustainability. The group is well positioned with
sufficient work to fill capacity and generate the required
revenue. The challenge will be to deliver profitably thereon,
through internal capabilities and external partners.
Segmental review
Implementation
The Implementation segment was impacted by two large projects that
exceeded cost budget. Revenue was severely impacted, especially in
the second six month period, by the utilisation of the majority of
our resources on these projects without generating direct revenue.
These projects were successfully completed and future annuity
revenue in the form of support and software rental was secured. We
also expect future implementation revenue from these clients. We
have taken further corrective action to help prevent future budget
overruns. Our implementation pipeline is healthy.
Support
Support revenue is contracted on a monthly basis and is annuity
based. Revenue continues to grow as the client base grows. Margins
improved in the second six months. The allocation of capacity to
implementation projects put pressure on support. To an extent,
support revenue could have been higher if more capacity was
available.
Software rental
Software rental is annuity based. It depends on usage and
increases with the number of contracts or policies administered on
client systems. It typically grows slowly over time. Rental has
grown over the period mainly as a result of new clients and the
conversion of existing clients from our older “Life” system to the
“Exergy” platform.
Research and development
Research and development costs as a percentage of software rental
revenue decreased. The focus in R&D was the creation of the Eco
Suite, which is a preconfigured system for implementing more
efficiently and enabling partners. It includes tools, processes,
testing and training. It will help clients and SilverBridge to
implement more efficiently. In addition, it will enable
implementation partners to implement SilverBridge’s systems more
easily using only high level specialist services from
SilverBridge. The Eco Suite is important to the group and will be
further developed and refined. The group has not capitalised any
costs during this period.
6. GROUP OUTLOOK
The changing environment within our target market continues to
present new opportunities as financial service institutions search
for ways to reduce costs and improve services to their clients. We
continue to see financial service providers increasing their focus
on improving relationships with their clients, driving internal
efficiencies and differentiating their products as a means to
capture and retain market share. SilverBridge remains well
positioned to meet these needs with the extensive intellectual
property that resides in our systems, people and strategic
partnerships.
The outlook for the Group remains positive. Our annuity revenue
remains a strong pillar for growth. Building it is an on-going
goal that depends on how well we understand and empower our
clients. Our ability to make implementations simpler and improve
quality is important. We are engaged in several implementations
and are actively securing new business.
7. NOTICE OF THE Annual General Meeting
The Annual General Meeting of SilverBridge will be held at Unit
EG001, Sandhurst Office Park, Cnr Katherine & Rivonia Rd, Sandton,
on 26 October 2012, 10:00.
8. DIRECTORATE
During the year under review the board changed as follows:
Mr Andile Sangqu resigned as board member and chairman with effect
from 31 December 2011.
Mr Robert Emslie, an existing independent non-executive director
was appointed as chairman with effect from 1 January 2012.
Mr Litha Gcwabe was appointed as non-executive director on 13 June
2012.
Ms Sphelele Sangweni as alternate director resigned 31 December
2011.
On behalf of the board
Jaco Swanepoel Robert Emslie
Chief Executive Officer Chairman
Pretoria
25 September 2012
CORPORATE INFORMATION
Directors of SilverBridge:
Robert Emslie (Chairman)**, Jaco Swanepoel (CEO), Jeremy de
Villiers **, Litha Gcwabe*, Dinga Madubela *, Tyrrel Murray*,
Sandra Duetsch*, Jaco Maritz.
(All the directors are South African citizens).
* Non-executive
**Independent non-executive
SilverBridge Registered offices
First Floor, Castle View North
495 Prieska Street, Erasmuskloof,
Pretoria, 0048
(PO Box 11799, Erasmuskloof, 0048)
Company Secretary:
Fusion Corporate Secretarial Services (Proprietary) Limited,
represented by Melinda van den Berg
GROUP Auditors:
KPMG Incorporated
(Registration number: 1999/021543/21)
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
(Registration number: 2004/003647/07)
Designated adviser:
Merchantec (Proprietary) Limited
(Registration number: 2008/027362/07)
www.silverbridge.co.za
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