Wrap Text
Unaudited Interim Results
for the six months ended 28 February 2013
ConvergeNet Holdings Limited and its subsidiaries
(Registration number 1998/015580/06)
JSE code: CVN ISIN: ZA000102067
(ConvergeNet or the Group or the Company)
UNAUDITED INTERIM RESULTS
for the six months ended 28 February 2013
Revenue up 16% to R483.3m
Loss for the period up 109% to R23.2m
Headline loss per share down 28% to 1.70 cents per share
Loss per share up 185% to 1.97 cents per share
Net Asset value per share down 16% to 42.2 cents per share
ConvergeNet Holdings Limited and its subsidiaries
(Registration number 1998/015580/06)
JSE code: CVN ISIN: ZA000102067
(ConvergeNet or the Group or the Company)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 28 FERUARY 2013
R000
Unaudited 6 months ended 28 Feb 2013 Restated 6 months ended 29 Feb 2012 Audited year ended 31 Aug 2012
Revenue 483 344 416 522 1 017 357
Cost of sales (354 074) (310 312) (758 192)
Gross profit 129 270 106 210 259 165
Other income 2 492 19 706 20 296
Operating expenses (160 403) (134 255) (286 602)
Operating loss (28 641) (8 339) (7 141)
Finance income 2 277 1 321 2 252
Share of (loss)/profit of associates (45) 2 982 3 392
Fair value adjustments 5 646 (5 140) (2 808)
Impairment of goodwill and other
financial assets (2 985) - (30 151)
Finance costs (2 853) (899) (3 378)
Loss before taxation (26 601) (10 075) (37 834)
Taxation 3 358 (1 064) (8 505)
Loss for the period (23 243) (11 139) (46 339)
Other comprehensive loss:
Translation of foreign currency reserve (1 146) - (391)
Other comprehensive loss (24 389) (11 139) (391)
Total comprehensive loss for the period (24 389) (11 139) (46 730)
Loss attributable to:
Equity holders of the parent (16 640) (6 141) (43 740)
Non-controlling interests (6 603) (4 998) (2 599)
(23 243) (11 139) (46 339)
Total comprehensive loss for the period
attributable to:
Equity holders of the parent (17 224) (6 141) (43 940)
Non-controlling interests (7 165) (4 998) (2 790)
(24 389) (11 139) (46 730)
Loss per ordinary share (cents) (1.97) (0.69) (4.92)
Diluted basic loss per ordinary share
(cents) (1.97) (0.69) (4.90)
Weighted average number of shares 842 829 240 890 644 784 888 730 243
Fully diluted weighted average number
of shares 844 785 906 896 148 185 893 143 576
Total number of shares in issue 921 285 941 921 285 941 921 285 941
Headline loss per share (cents) (1.70) (2.36) (5.01)
Diluted headline loss per share (cents) (1.60) (2.35) (4.98)
Reconciliation between basic and
headline loss
Basic loss attributable to equity holders
of parent (16 640) (6 141) (43 740)
(Profit)/loss on disposal of assets (40) 86 176
(Profit)/loss on disposal of associates - (16 363) (16 363)
(Profit)/loss on disposal of subsidiaries (2 097) - (2 126)
Loss/(profit) on sale of other financial asset 4 959 - 1 891
Impairment of goodwill - - 13 617
Tax effect on adjustments (575) 1 374 2 026
Portion of adjustments attributable to
non-controlling interests 79 - -
Headline loss (14 314) (21 044) (44 519)
Net asset value per share (cents) 42.2 50.4 46.3
Net tangible asset value per share (cents) 23.0 29.1 26.9
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2013
R000
Unaudited as at 28 Feb 2013 Restated as at 29 Feb 2012 Audited as a 31 Aug 2012
ASSETS
Non-Current Assets
Property, plant and equipment 54 378 46 317 54 455
Goodwill 171 199 184 816 171 199
Intangible assets 5 442 10 884 7 926
Investments in associates 5 956 5 590 6 001
Other financial assets 500 58 610 500
Deferred taxation 36 660 29 296 24 802
274 135 335 513 264 883
CURRENT ASSETS
Inventories 81 223 94 824 96 240
Loans to related parties 673 332 2 273
Other financial assets 17 889 8 263 7 336
Current tax receivable 709 1 187 1 394
Trade and other receivables 270 437 275 545 262 281
Cash and cash equivalents 31 663 36 758 66 998
402 594 416 909 436 522
Non-current assets held for sale 43 499
402 594 416 909 480 021
TOTAL ASSETS 676 729 752 422 744 904
EQUITY AND LIABILITIES
TOTAL EQUITY
Shareholders equity 388 364 464 141 426 649
Non-controlling interest 53 096 59 155 61 364
441 460 523 295 488 013
LIABILITIES
Non-Current liabilities
Other financial liabilities 11 299 20 878 16 730
Finance lease obligation 8 099 10 617 6 975
Operating lease liability 1 529 1 734 1 806
Deferred taxation 6 891 4 773 5 309
27 818 38 002 30 820
CURRENT LIABILITIES
Other financial liabilities 21 111 1 639 9 638
Current tax payable 12 252 9 666 6 119
Finance lease obligation 7 911 776 6 968
Provisions 2 611 10 219 3 101
Trade and other payables 162 583 157 381 190 598
Bank overdraft 983 11 444 502
207 451 191 125 216 926
Non-current liabilities held for sale 9 145
207 451 191 125 226 071
Total liabilities 235 269 229 127 256 891
TOTAL EQUITY AND LIABILITIES 676 729 752 422 744 904
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
R000
Unaudited as at 28 Feb 2013 Restated as at 29 Feb 2012 Audited as at 31 Aug 2012
Balance at the beginning of the year 488 013 546 394 546 394
Total comprehensive income for the period (24 389) (11 139) (46 730)
Equity settled share-based payments 397 1 796 2 180
Dividends paid (13 516) (13 516)
Issue of treasury shares in terms of
forfeitable share plan 1 419
Shares forfeited in terms of forfeitable
share plan not yet vested (1 350)
Shares forfeited in terms of forfeitable
share plan (144)
Transactions with non-controlling
shareholders (2 146) (240) (240)
Own shares acquired by subsidiaries,
held as treasury shares (20 415)
Balance at the end of the period 441 460 523 295 488 013
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
R000
Unaudited as at 28 Feb 2013 Restated as at 29 Feb 2012 Audited as at 31 Aug 2012
Operating activities
Cash utilised in operations (37 850) (49 636) (602)
Finance income 2 277 1 321 2 252
Finance costs (2 853) (899) (3 378)
Tax paid (1 153) 1 345 (4 820)
Net cash utilised in operating activities (39 579) (47 869) (6 548)
Net cash generated from/(utilised in)
investing activities 5 392 (2 574) (9 514)
Net cash (utilised in)/generated from financing activities (483) 9 236 16 428
Net (decrease)/increase in cash and cash equivalents (34 670) (41 207) 366
Cash at the beginning of the year 66 496 66 521 66 521
Foreign currency translation (1 146) (391)
Total cash at the end of the period 30 680 25 314 66 496
CONDENSED SEGMENTAL INFORMATION FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
IT Infrastructure Telecom Infrastructure Africa Site Corporate, Consolidation
Technology Solutions Technology Solutions Maintenance Solutions and Other Total
R000 Feb 2013 Feb 2012 Feb 2013 Feb 2012 Feb 2013 Feb 2012 Feb 2013 Feb 2012 Feb 2013 Feb 2012
Revenue 350 202 323 634 123 983 92 888 9 159 483 344 416 522
(Loss)/profit from operations (16 026) (11 459) 4 568 (5 024) (8 712) (8 471) (8 144) (28 641) (8 339)
Finance income 1 641 747 326 32 87 223 542 2 277 1 321
Share of (loss)/profit of associate (45) 629 2 353 (45) 2 982
Fair value adjustments 5 645 (5 140) 5 645 (5 140)
Impairment of goodwill andother
financial assets (1 385) (1 600) (2 985)
Finance costs (2 043) (263) (295) (636) (597) 82 (2 853) (899)
(Loss)/profit before tax (17 858) (10 346) 4 600 (3 275) (9 222) (4 121) 3 546 (26 601) (10 075)
Income tax benefit/(expense) 4 905 3 475 (1 414) 517 (800) 667 (5 056) 3 358 (1 064)
(Loss)/profit for the period (12 953) (6 871) 3 186 (2 758) (10 022) (3 454) (1 510) (23 243) (11 139)
Other comprehensive loss (1 146) (1 146)
Total comprehensive (loss)/profit
for the period (12 953) (6 871) 3 186 (2 758) (11 168) (3 454) (1 510) (24 389) (11 139)
COMMENTARY
1. Statement of compliance
The unaudited condensed consolidated financial information has been
prepared by the Financial Director, DF Bisschoff CA(SA), in accordance
with International Financial Reporting Standards (IFRS), IAS 34 Interim
financial reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the Listings Requirements of the JSE
Limited, and the South African Companies Act 71 of 2008, as amended for
the six months ended 28 February 2013.
2. Accounting policies
The unaudited results for the six months ended 28 February 2013 have
been prepared in accordance with the Groups accounting policies which
comply with IFRS as issued by the International Accounting Standards
Board. 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 2012.
3. Comparative figures
The unaudited results for the six months ended 29 February 2012 has
been restated as a result of a prior year adjustment made on the future
utilisation of Deferred Tax on the available Secondary Tax on Companies
(STC) credits as a result of the new Dividends Tax which became effective
1 April 2012. This interim period adjustment was announced on SENS on
2 November 2012.
4. 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.
5. Change in Board of Directors
During the period under review Mr NG Nika was appointed as an
independent non-executive director with effect from 23 November 2012.
There have been no other changes to the board. At the AGM held on
25 January 2013, directors who were eligible for re-election, were
re-elected.
6. Operating results
Revenue increased by 16% from R416.5 million to R483.3 million for
the period under review. The Group has however made an operating loss
of R28.6 million compared to an operating loss of R8.3 million for the
corresponding period.
The IT infrastructure segment has incurred an operating loss of R16.0 million
(2012: R11.5 million) primarily as a result of a once off cost of R13.9 million.
The once off cost is resulting from a guarantee provided in favour of a
subcontractor who subsequently went into business rescue.
The Telecom infrastructure segment has recovered well in line with
expectations, generating an operating profit of R4.6 million compared to
an operating loss of R5.0 million in the corresponding period.
The African operations incurred an operating loss of R8.7 million (2012:
Not operational) as a result of higher than anticipated start-up costs.
The Group loss after taxation for the six months ended 28 February 2013
was R23.2 million (2012: R11.1 million) and the attributable loss for Equity
holders of the parent was R16.6 million (2012: R6.1 million), representing a
basic loss per ordinary share of 1.97 cents (2012: 0.69 cents) and headline
loss per ordinary share of 1.70 cents (2012: 2.36 cents).
As a result of the losses incurred, the net tangible asset value per share
decreased by 21% to 23 cents per share (2012: 29 cents per share).
7. Corporate Activities
Effective 1 September 2012, Sizwe Africa IT Group (Pty) Ltd sold its 51%
interest in Interface Networking Technology (Pty) Ltd to the non-controlling
shareholder.
ConvergeNet has sold its remaining 15% interest in Future Cell for R40 million
in cash on 27 November 2012 and the related put and call option agreement
was cancelled.
In addition to the above, ConvergeNet Management Service (Pty) Ltd, a wholly
owned subsidiary, on 27 November 2012 purchased 71 478 594 ConvergeNet
ordinary shares from Titan Share Dealers (Pty) Ltd, representing 7.8% of the
issued share capital of ConvergeNet, at 29.7 cents per share, amounting to
R21.2 million.
Effective 1 January 2013, ConvergeNet sold its 70% shareholding in NetXcom
ICT Solutions (Pty) Ltd for a minimal amount to the non-controlling shareholder.
At the AGM held on 25 January 2013 the shareholders approved the conversion
of the authorised and issued ordinary share capital of the company at par
value of R0.001 to ordinary shares of no par value as well as the increase of
the authorised share capital of the company from 1 000 000 000 no par value
shares to 2 000 000 000 no par value shares.
8. 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.
No dividend has been proposed for the period under review.
9. Industry and Group outlook
The Group has progressed its strategy for the next five years and increased
revenues. The Group is streamlining its operations into key technologies and
vertical markets. We have adopted a more cautious approach in expanding our
African operations in order to reduce our risks and ensuring acceptable and
sustainable returns on our investments. A more aggressive approach is also
being formulated to enhance our annuity revenue base, as well as a review
of our sub-contracting and supply chain procedures to reduce our risks and
increase efficiencies. We are also strengthening our position in the optic fibre
rollout space to grow sustainable infrastructure business over the next two to
three years. Eighty per cent of our subsidiaries are showing very promising
results going into the second half of 2013 while the balance is subject to robust
management initiatives. ConvergeNet will also continue to prudently invest in
identified strategic growth areas in the next six months and beyond.
Any forward looking statements in this announcement have not been audited or
reviewed by the Companys auditors.
10. Post balance sheet events
On 12 March 2013, at a general meeting of ConvergeNet shareholders, the
acquisition of the remaining 25% non-controlling interest in Sizwe Africa IT
Group (Pty) Ltd (Sizwe) for an aggregate purchase price of R45.0 million and
the remaining 26% non-controlling interest in Chrystalpine Investments No 9
(Pty) Ltd for an aggregate purchase price of R20.0 million was approved.
The Sizwe acquisition was however conditional on the Takeover Regulation
Panel (TRP) granting the sellers exemption in respect of their obligation to
make a mandatory offer to minorities. The TRP made a ruling on 18 March 2013
that the transaction is exempted from the requirements to make a mandatory
offer but two shareholders have appealed against the TRP ruling. A hearing
before the TRP has been scheduled for 30 April 2013.
11. 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
D Tabata S Swana
Chairman Chief Executive Officer
Centurion
26 April 2013
Corporate Information:
Directors:
DD Tabata* (Chairman), S Swana (CEO), DF Bisschoff (CFO), T Modise,
H van Dyk, L Mangope*^, C Pettit*, NG Nika*^
(* Non-Executive, ^ Independent)
Company secretary:
Juba Statutory Services Proprietary Limited, No 1 Carlsberg, 430 Nieuwenhuyzen
Street, Erasmuskloof, 0174
Registered office:
272 West Avenue, Lakefield Office Park, Block D, Centurion, 0157
Postal Address:
P.O. Box 10709, Centurion, 0046
Transfer Secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street,
Johannesburg, 2001
Sponsor:
Deloitte & Touche Sponsor Services Proprietary Limited, Deloitte & Touche
Place, The Woodlands, 20 Woodlands Drive, Woodmead, 2196
Email:
arlenet@convergenet.co.za
Web:
www.convergenet.com
ConvergeNet Holdings Limited which is a leading supplier of Information
and Communication Technology products and services, servicing
both the local and African markets, released its results for the six
months ended 28 February 2013.
Date: 26/04/2013 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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