Wrap Text
Audited summarised consolidated financial
information for the year ended 31 August 2012
BUSINESS CONNEXION GROUP LIMITED
(Incorporated in the Republic of South Africa) (Registration number: 1988/005282/06)
(Share code: BCX) (ISIN: ZAE000054631)
("A" Share code: BCA) (ISIN: ZAE000156154)
(Business Connexion" or the company" or the group")
Audited summarised consolidated financial
information for the year ended 31 August 2012
and cash dividend declaration
Key features
- Revenue increased by 35,1% to R5 829,6 million
- Gross margin improved from 30,9% to 31,5%
- EBITDA increased by 59,6% to R511,9 million
- Normalised diluted headline earnings per share of 54,3 cents
- Dividend of 20,0 cents per share delivering a 3,9% dividend yield
Summarised consolidated statement of financial position
Audited Audited
31 August 31 August
R million 2012 2011
ASSETS
Non-current assets
Property, plant and equipment 442,0 453,9
Goodwill 566,9 555,3
Intangible assets 363,3 378,7
Investment in associates 5,5
Long-term loans receivable 32,4
Other investments 213,4 215,3
Deferred tax assets 60,2 53,1
1 678,2 1 661,8
Current assets
Inventories 197,9 178,9
Trade receivables 971,3 970,1
Other receivables 239,0 250,6
Prepayments 81,6 77,7
Taxation prepaid 3,6 7,4
Cash and cash equivalents 443,9 518,3
Assets held for sale 18,0
1 937,3 2 021,0
TOTAL ASSETS 3 615,5 3 682,8
EQUITY AND LIABILITIES
Shareholders' equity 2 105,7 2 144,6
Non-controlling interests 95,8 48,5
Total equity 2 201,5 2 193,1
Non-current liabilities
Interest bearing long-term liabilities 179,5 250,7
Post-retirement benefit obligations 10,6 7,9
Deferred tax liabilities 47,6 60,9
237,7 319,5
Current liabilities
Short-term liabilities 89,2 77,2
Trade payables 425,3 457,1
Other payables 647,6 622,3
Provisions 1,3 0,9
Taxation payable 12,9 12,7
1 176,3 1 170,2
TOTAL EQUITY AND LIABILITIES 3 615,5 3 682,8
Summarised consolidated statement of comprehensive income
Audited Audited
year year
ended ended
31 August 31 August
R million 2012 2011
Revenue 5 829,6 4 314,2
Cost of sales 3 996,1 2 979,1
Gross profit 1 833,5 1 335,1
Operating expenses 1 558,5 1 177,4
Operating profit 275,0 157,7
Share of losses from associates (0,5) (0,2)
Operating profit before investment income 274,5 157,5
Investment income 34,7 27,3
Profit before finance costs 309,2 184,8
Finance costs 27,5 18,1
Profit before tax 281,7 166,7
Taxation 85,6 64,4
Profit for the year 196,1 102,3
Profit attributable to:
Equity holders 149,3 92,6
Non-controlling interests 46,8 9,7
196,1 102,3
Other comprehensive income:
Translation of foreign operations 5,9 (0,2)
Total comprehensive income
for the year 202,0 102,1
Total comprehensive income
attributable to:
Equity holders 155,2 92,4
Non-controlling interests 46,8 9,7
202,0 102,1
Basic earnings per share (cents) 37,5 27,9
Diluted earnings per share (cents) 37,2 27,6
Calculation of headline earnings
R million
Profit attributable to equity holders 149,3 92,6
Profit on sale of businesses (4,6) (68,7)
Loss on sale of property, plant
and equipment 0,7 1,5
Impairment of investments 4,6 2,5
Impairment of goodwill 4,9
Fair value adjustment to
investment property (0,2)
Tax effect of headline earnings
adjustments 0,5 29,8
Headline earnings 155,4 57,5
Weighted average number of shares
in issue (000's) 398 550 331 689
Diluted weighted average number
of shares in issue (000's) 401 097 335 172
Headline earnings per share (cents) 39,0 17,3
Diluted headline earnings per share (cents) 38,8 17,2
Summarised consolidated statement of cash flows
Audited Audited
year year
ended ended
31 August 31 August
R million 2012 2011
Operating cash flows 520,8 258,5
Working capital changes (30,5) 162,9
Investment income 34,6 12,0
Finance costs (22,3) (6,3)
Dividends paid (215,2) (71,0)
Taxation paid (101,4) (59,4)
Cash generated from operating activities 186,0 296,7
Net cash flows utilised in investing activities (203,5) (325,9)
Net cash flows (utilised in)/generated from
financing activities (56,9) 188,7
Net changes in cash and cash equivalents (74,4) 159,5
Cash and cash equivalents
at beginning of the year 518,3 358,8
Cash and cash equivalents
at end of the year 443,9 518,3
Summarised segmental analysis
Audited Audited
year year
ended ended
31 August 31 August
2012 2011
R million Restated
Segment revenue
Services division 1 982,6 1 806,9
UCS division 1 093,2 353,2
Technology division 916,0 1 230,9
Canoa division 860,5 136,1
Innovation division 496,5 417,1
International division 467,2 368,5
Investment division 13,6 1,5
5 829,6 4 314,2
Segment operating profit
Services division 219,3 177,2
UCS division 116,9 40,1
Technology division 3,3 (9,0)
Canoa division 106,5 18,0
Innovation division 67,6 20,0
International division 11,7 (7,8)
Investment division (28,3) 0,9
Corporate office (222,0) (81,7)
275,0 157,7
Other group salient information
Audited Audited
31 August 31 August
2012 2011
Number of shares in issue (000's) 404 972 404 972
Less: Shares held as treasury shares 5 125 2 976
Less: Weighting of shares issued during the year 70 177
Less: Weighting of options exercised during the
year that would have been treasury shares 1 297 130
398 550 331 689
Dilutive options 2 059 3 452
Options excercised during the year that
were dilutive for a portion of the year 488 31
401 097 335 172
Number of options in issue (000's) 24 174 21 831
Key ratios and statistics
Net asset value per share (cents) 520,0 529,6
Tangible net asset value per share (cents) 339,9 336,4
Operating margin (%) 4,7 3,7
Return on total equity (%) 7,1 4,3
Return on total assets (excluding cash
and preference share investments) (%) 9,3 5,3
Current ratio 1,6 1,7
Average debtors days 54,6 65,5
Depreciation and amortisation (R million) 236,9 163,0
Cost of sales 105,9 89,9
Operating expenses 131,0 73,1
Contingent liabilities (R million)
Performance guarantees 91,8 39,6
Asset finance recourse deals 16,0 38,4
Other 34,9 35,5
Capital commitments authorised (R million)
Capital 17,1 147,7
Operating lease 300,7 254,1
The preliminary summarised consolidated financial information has been prepared in
accordance with the recognition and measurement criteria of International Financial
Reporting Statements (IFRS), the requirements of International Accounting Standards (IAS)
34 Interim Financial Reporting, the AC 500 series issued by the Accounting Practices Board,
or its successor, the Listings Requirements of the JSE Limited and the requirements of the
South African Companies Act, 2008. The accounting policies applied in the presentation of
the summarised financial information are consistent with those applied for the year ended
31 August 2011, except for new standards that became effective on or after 1 September
2011. The adoption of these standards has had no material effect on the results for the year,
nor have they required the restatement of any prior year figures. The preliminary summarised
consolidated financial information has been prepared on the historic cost convention as
modified by the valuation of certain financial instruments and is presented in Rands rounded
to the nearest million, which is Business Connexion's functional and presentation currency.
Due to the significant size of the UCS and Canoa divisions they are now managed separately
and no longer form part of the Investment division. The group has restated its segment
report in line with the above.
Summarised consolidated statement of changes in equity
Foreign
Share currency Share-based Non-
capital and translation Retained payment Shareholders' controlling Total
R million premium reserve earnings reserve equity nterests equity
Balance at 31 August 2010 audited 545,1 (27,6) 961,2 65,6 1 544,3 6,4 1 550,7
Movement in treasury shares and related reserves
held by share purchase trust (20,6) (20,6) (20,6)
Share-based payments 15,9 15,9 15,9
Transfer of share-based payment reserve
to retained earnings 13,7 (13,7)
Non-controlling interest in dividends received (1,8) (1,8)
Issue of new shares 584,1 584,1 584,1
Total comprehensive income for the year (0,2) 92,6 92,4 9,7 102,1
Non-controlling interests' share of foreign currency
translation reserve (2,2) (2,2) 2,2
Sale of interest in subsidiary 32,0 32,0
Dividends paid (69,3) (69,3) (69,3)
Balance at 31 August 2011 audited 1 129,2 (27,8) 975,4 67,8 2 144,6 48,5 2 193,1
Movement in treasury shares and related reserves
held by share purchase trust 6,7 6,7 6,7
Share-based payments 13,7 13,7 13,7
Non-controlling interest in dividends received (1,3) (1,3)
Total comprehensive income for the year 5,9 149,3 155,2 46,8 202,0
Non-controlling interests' share of foreign currency
translation reserve 0,7 0,7 (0,7)
Sale of interest in subsidiary 2,5 2,5
Dividends paid (215,2) (215,2) (215,2)
Balance at 31 August 2012 audited 1 129,2 (21,2) 916,2 81,5 2 105,7 95,8 2 201,5
Audited Audited
year year
ended ended
31 August 31 August
2012 2011
Normal dividend per share (cents) 14,0 23,0
Special dividend per share (cents) 40,0
Commentary
Introduction
Business Connexion Group Limited (BCX) has enjoyed an excellent year in difficult economic trading conditions. The strong
growth in key financial metrics is a direct result of the group's seven-year growth strategy to 2016, which focuses on its cloud
services offerings, vertical sector solutions, application development and African expansion.
The strategic acquisitions over the past two years have been successfully integrated and made significant contributions to the
group's results.
BCX employs more than 6 500 employees on the African continent. With revenue in excess of R5,8 billion, the group is
positioned as the largest listed ICT services business in Africa. BCX holds the number one position in ICT Outsourcing in sub-
Saharan Africa (Gartner 2011, March 2012) and is the leading South African cloud-based services provider (Frost and Sullivan,
2011). BCX was also recognised as the largest application development company in South Africa with a 20% market share
(BMI-T 2010, December 2011).
As a values driven and high performance organisation, the group's ability to attract, retain and develop talent is a key
differentiator in maintaining competitive advantage. 2012 was another significant year with regards to the investment in people
through our talent management initiatives, succession planning, internship programme and launching two new leadership
development programmes to enhance leadership capabilities.
More than ever, African expansion presents a significant opportunity for BCX and accessing these markets remains a key
strategic focus. The continued progress in Africa is pleasing with the group's operations across the continent maturing. This has
translated into an improved, and less volatile, financial performance with the group taking market leading positions in some
key, high growth African economies.
BCX is busy rolling out the platform to launch its cloud-based services offerings throughout the rest of Africa. With a significant
share of the platform as a service market in South Africa it is poised to dominate this part of the next IT revolution, as peers
may still need to develop and build their infrastructure. BCX is deploying this infrastructure across the continent and can
therefore comply with the in-country data protection laws that form a barrier to entry for many other players. Cloud services are
changing the future of IT and BCX is optimally positioned with its consolidated approach to data centres, network infrastructure
and applications.
Financial performance
The group continues to pursue its objectives of growing sustainable earnings and in line with the trading statement released on
25 October 2012, the group generated diluted earnings per share (EPS) of 37,2 cents for the financial year (2011: 27,6 cents)
and diluted headline EPS for the year of 38,8 cents (2011: 17,2 cents). On a normalised basis (excluding earn-out payments for
acquisitions and amortisation of intangibles) diluted headline EPS would be 54,3 cents (2011: 44,0 cents).
On the back of the improved profitability, return on equity increased to 7,1% (2011: 4,3%) and return on total assets increased
to 9,3% (2011: 5,3%). Tangible return on equity was 13,8% (2011: 7,5%).
Revenue grew by 35,1% to R5 829,6 million for the year, bolstered by the acquisitions of the UCS assets and Canoa Group
during the previous financial year and good growth from other divisions.
Gross profit margins increased to 31,5% from 30,9%, primarily as a result of higher margin business of the acquired UCS assets
and Canoa Group but also from improvements across other divisions.
Operating expenses continue to be well managed and increased on a like-for-like basis (excluding the items listed below and
the expenses brought in with the acquisitions of the UCS assets and Canoa Group) by 7,8% to R992,1 million for the year
(2011: R920,2 million).
The group recorded a normalised operating profit margin of 6,3% (2011: 4,3%) adjusting for a number of items shown in the
table below:
2012 2011
R'000 % R'000 %
Operating profit as reported 275,0 4,7 157,7 3,7
Amortisation of intangible assets relating to the UCS assets
and Canoa Group 49,2 15,5
Fair value adjustment on Canoa Group earn-out payment 26,2
Impairment of Hawkstone iSolutions 6,0 2,5
Profit on sale of businesses (4,6) (74,3)
Merger and acquisition costs 14,9 31,2
Cost of restructuring 47,2
Other 3,4 6,1
Normalised operating profit 370,1 6,3 185,9 4,3
The key adjustments for 2012 listed above comprise:
- Intangible assets created as a result of the acquisition of the UCS assets and Canoa Group, are amortised over their useful
lives, resulting in an amortisation charge of R49,2 million for the year (2011: R15,5 million).
- Canoa Group exceeded their profit targets and as a result BCX was required to make an additional earn-out payment of
R26,2 million. In terms of IFRS 3 this payment is deemed to be a fair value adjustment of a liability and is recorded through
the statement of comprehensive income. A further earn-out payment of R26,2 million will be made in 2013 contingent on
the profit target for the year ending 31 August 2013 being achieved.
- Business Connexion also impaired its remaining investment in its associate, Hawkstone iSolutions Proprietary Limited.
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.
The group continued to generate strong cash flows with cash generated from operations amounting to R520,8 million.
The Services division's revenue grew by 9,7% for the year to R1 982,6 million, compared to R1 806,9 million for the previous
year. The growth in revenue is a consequence of the division's dominant cloud services offering and its professional services
business, specifically in the application development business which is developing innovative, fit for purpose services and
solutions for clients. The Services division remains committed to developing unique and innovative solutions which will drive
client business value.
The UCS division contributed R1 093,2 million to group revenue with an operating profit of R116,9 million while the Canoa
division contributed R860,5 million in revenue and R106,5 million in operating profit. Both these performances are ahead of
targeted forecasts on acquisition and demonstrate the synergistic benefits of the divisions within the group.
The refocus within the Technology division during the previous financial year has generated positive results with the division
returning to profitability and contributing R3,3 million to operating profit for the year. The division achieved an operating profit
of R11,0 million in the second half of the year reflecting the ongoing improvement in earnings.
The Innovation division increased revenue by 19,0% to R496,5 million following the restructure previously reported in Q Data
DynamiQue (QDD) and the inclusion of Accsys, the payroll business that formed part of the acquired UCS assets. All business
units within the Innovation division have performed according to expectations with QLINK continuing to perform in tough market
conditions. Nanoteq's improved performance is attributable to their international expansion.
The International division has seen revenue growth of 26,8% to R467,2 million for the year, demonstrating the exciting growth
potential in Africa. With approved investments for setting up data centres in Nigeria and Kenya the group is well positioned to
extend its cloud services offerings to the rest of the African continent.
BCX established Content Distribution Solutions (CDS) to deliver the group's local and international connectivity requirements,
as well as to enable the delivery of Limelight Networks content services in sub-Sahara Africa, the primary market being South
Africa. Although the results are not what was expected, CDS enables BCX's cloud strategy.
Corporate activity
BCX entered into a sale of shares, repurchase and subscription agreement with Integr8 IT Proprietary Limited (Integr8 IT") in
terms of which it will purchase 100% of the issued share capital of Integr8 IT.
BCX's current strategy around developing the Connexion Zone is primarily focused at the enterprise market. This acquisition
enhances our competitive advantage in the mid-market corporates, creating a complementary platform of services and broadens
UCS Solutions' historic retail focused infrastructure services.
Integr8 IT is one of the largest privately owned ICT managed services companies. It was established in 2001 and is a leader of
annuity-based infrastructure management and managed services to the mid-market corporates throughout South Africa. The
company owns and operates the Nerve Centre, a digital hub of people, technology and process, that regulates, monitors and
maintains the technology infrastructure for many leading corporations.
The consideration payable by BCX is up to R126,0 million in cash, and will be settled through an initial payment of R56,0 million
payable on the closing date and three potential earn-out payments of up to a maximum of R70,0 million payable on 15 October
2013, 15 October 2014 and 15 October 2015.
Lifting of cautionary announcement
Shareholders are referred to the cautionary announcement dated 8 October 2012 and are advised that caution is no longer
required to be exercised by shareholders when dealing in BCX securities.
Outlook
BCX is benefiting from being a larger and more diversified enterprise with an expanded customer base. Cross selling opportunities
and synergies should contribute positively to future results.
With its growing African footprint, broad client base, reputation and proven abilities, BCX is poised to meet the challenges posed
by the rapid changes and consolidation in the ICT industry and take full advantage of its market position.
A report of the independent auditor
The unmodified audit reports of KPMG Inc. on the annual financial statements and the preliminary summarised financial
statements for the year ended 31 August 2012, dated 2 November 2012, are available for inspection at the registered office
of the company.
Appreciation
The board extends its appreciation to all employees and management for their dedication and valued efforts. It also thanks
clients, suppliers and shareholders for their continuing belief in and support of BCX.
Notice of the annual general meeting
Shareholders are advised that the annual general meeting will be held at the Fundi Auditorium, Business Connexion Park North,
789 Sixteenth Road, Randjespark, Midrand at 11:00 on Monday, 14 January 2013.
Dividend declaration
In line with its dividend policy, the group has increased its dividend per share by 42,9% to 20,0 cents per share from 14,0 cents
per share in the previous financial year. This represents a 3,9% dividend yield based on BCX's 30-day volume weighted average
share price.
Notice is hereby given that a normal gross cash dividend of 20,0 cents per ordinary share (2011: 14,0 cents) has been declared
from income reserves, payable to shareholders for the year ended 31 August 2012. There are 4,4 cents STC credits available per share.
Shareholders who are subject to 15% withholding tax will therefore receive a net cash dividend of 17,66 cents per share. In accordance
with the provisions of Strate, the electronic settlement and custody system used by JSE Limited, the relevant dates for the dividend
are as follows:
Event date
Last date to trade (cum dividend) Friday, 11 January 2013
Shares commence trading (ex dividend) Monday, 14 January 2013
Record date (date shareholders recorded in books) Friday, 18 January 2013
Payment date Monday, 21 January 2013
Share certificates may not be dematerialised or rematerialised between Monday, 14 January 2013 and Friday, 18 January 2013,
both days inclusive.
On Monday, 21 January 2013, the dividends will be electronically transferred to the bank accounts of all certificated shareholders
where this facility is available. Where electronic funds transfers are either not available or not elected by the shareholder,
cheques dated Monday, 21 January 2013 will be posted on that date.
Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 21 January 2013.
The above dates and times are subject to change. Any changes will be released on the Securities Exchange News Service (SENS)
and published in the press. The issued share capital is currently 404 972 468 shares.
For and on behalf of the board
AC Ruiters LB Mophatlane
Chairman Chief Executive Officer
Midrand
2 November 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:
One Capital, 17 Fricker Road, Illovo, 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 Mr JW van den Handel, CA(SA).
BUSINESS CONNEXION GROUP LIMITED
(Incorporated in the Republic of South Africa) (Registration number: 1988/005282/06)
(Share code: BCX) (ISIN: ZAE000054631)
("A" Share code: BCA) (ISIN: ZAE000156154)
Income Tax Number: 9200108711
(Business Connexion" or the company" or the group")
For more information please visit our investor relations website at: www.bcx.co.za Issue date: 5 November 2012
Date: 05/11/2012 08:12:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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