Wrap Text
Audited results for the year ended 31 May 2013 renewal of cautionary announcement and declaration of cash dividend
Morvest Business Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
JSE code: MOR ISIN: ZAE000152567
(“Morvest” or “the Company” or “the Group”)
ABRIDGED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MAY
2013 AND DECLARATION OF CASH DIVIDEND AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
Highlights
• EBITDA up 26%
• Revenue up 10%
• Headline earnings up 12%
. Net tangible asset per share up from 1.47 to 12.80 cents following
investment in head office property
• Gross dividend of 1 cent per share
Abridged consolidated statement of comprehensive income
Audited Audited
Year ended Year ended
31 May 31 May
2013 2012
R’000 R’000
Revenue 956 164 868 576
Cost of sales (427 351) (410 937)
Gross profit 528 813 457 639
EBITDA (earnings before interest, impairment, 141 520 112 082
tax, depreciation and amortisation)
Depreciation (14 569) (15 280)
Amortisation of intangible assets (39 265) (8 227)
Impairment of goodwill (33 465) (20 163)
Net finance costs (8 050) (12 912)
Profit on sale of business 6 985 -
Share of loss from associate - (2 406)
Impairment of investment in associate - (6 750)
Profit before taxation 53 156 46 344
Taxation (29 579) (23 374)
Profit for the year 23 577 22 970
Other comprehensive income/(loss) for the 2 087 760
year, net of tax
Total comprehensive income for the year 25 664 23 730
Profit attributable to:
Owners of the parent 11 643 12 194
Non-controlling interest 11 934 10 776
23 577 22 970
Total comprehensive income attributable to:
Owners of the parent 13 730 12 954
Non-controlling interest 11 934 10 776
25 664 23 730
Earnings per share (cents) 2.38 2.33
Diluted earnings per share (cents) 2.38 1.85
Notes to the statement of comprehensive
income:
Headline earnings for the year attributable to 40 032 35 597
ordinary shareholders
Headline earnings per share 8.20 6.81
Diluted headline earnings per share 8.20 5.41
Number of shares (‘000)
- Weighted average number of shares 488 294 522 617
- Diluted weighted average number of
shares in issue and to be issued 488 294 657 617
Reconciliation of headline earnings
calculation:
Earnings for the year attributable to ordinary 11 643 12 194
shareholders
Goodwill impairment 33 465 20 163
Profit on sale of subsidiary (4 745) -
Impairment of investment in associate - 3 375
Profit on disposal of property, plant and (331) (135)
equipment
Headline earnings for the year attributable to 40 032 35 597
ordinary shareholders
Abridged consolidated statement of financial Audited Audited
position
Year ended Year ended
31 May 2013 31 May 2012
R’000 R’000
ASSETS
Non-current assets 353 300 315 181
Property, plant and equipment 143 735 44 254
Goodwill 150 680 178 067
Intangible assets 1 780 41 045
Investment in associate company - -
Deferred taxation 57 105 51 815
Current assets 328 945 327 677
Inventories 30 455 65 049
Trade and other receivables 194 488 146 311
Other financial assets 5 534 836
Taxation receivable 15 095 11 523
Operating lease assets 242 226
Cash and cash equivalents 83 131 103 732
Total assets 682 245 642 858
EQUITY AND LIABILITIES
Capital and reserves 229 582 228 711
Share capital 287 435 296 408
Foreign currency translation reserve (10 067) (12 154)
Accumulated loss (50 868) (57 432)
Share-based payment reserve 3 082 1 889
Non-controlling interest 36 979 38 688
Total equity 266 561 267 399
Non-current liabilities 87 141 100 679
Vendor liabilities 4 717 14 114
Other financial liabilities 56 991 65 485
Finance lease obligations 19 590 5 744
Deferred taxation 5 843 15 336
Current liabilities 328 543 274 780
Vendor liabilities 17 714 8 056
Other financial liabilities 27 892 16 509
Finance lease obligations 8 735 3 774
Trade and other payables 244 079 232 166
Provisions 180 250
Operating lease liabilities 1 079 898
Current tax payable 28 864 13 127
Total equity and liabilities 682 245 642 858
Total number of shares in issue ('000) 679 159 679 159
Total number of shares in issue after treasury 602 511 651 370
shares ('000)
Net asset value per share (cents) 38.10 35.11
Net tangible asset value per share (cents) 12.80 1.47
Abridged consolidated statement of cash flows
Audited Audited
Year ended Year ended
31 May 31 May
2013 2012
R’000 R’000
Net cash flows from operating activities 99 339 87 380
Net cash flows from investing activities (56 455) (20 844)
Net cash flows from financing activities (63 485) (47 558)
Net (decrease)/increase in cash and cash (20 601) 18 978
equivalents
Cash and cash equivalents at beginning of year 103 732 84 754
Cash and cash equivalents at end of year 83 131 103 732
Abridged consolidated statement of changes in equity
Audited Audited
Year ended Year ended
31 May 31 May
2013 2012
R’000 R’000
Equity – opening balance 267 399 258 896
Share-based payment expense 1 193 1 193
Share repurchase (8 973) (2 205)
Non-controlling interest acquired 6 227 -
Non-controlling interest start-up companies 603
Total comprehensive income for the year 25 664 23 730
Dividend paid (5 079) (5 284)
Dividend paid to non-controlling interest (20 473) (8 931)
Equity – closing balance 266 561 267 399
Basis of preparation
The audited abridged consolidated annual financial statements have been
prepared in accordance and comply with International Financial Reporting
Standards, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by
Financial Reporting Standards Council, the requirements of IAS 34: Interim
Financial Reporting, the JSE Limited Listings Requirements and the Companies
Act, No 71 of 2008, as amended.
The financial statements are based on appropriate accounting policies,
consistently applied with those in the audited financial statements for the
previous year ended 31 May 2012, which are supported by reasonable and
prudent judgements and estimates.
The annual financial statements were prepared under the supervision of the
Chief Financial Officer, Suren Singh (MBA, MITM, CIS, and ABP).
Unqualified audit opinion
These abridged consolidated financial results have been audited by Morvest’s
auditors, PKF (Gauteng) Inc., whose unqualified audit report is available for
inspection at Morvest’s registered office.
Commentary
Introduction
Morvest’s audited abridged consolidated financial results for the year ended
31 May 2013 (“the year”) reflect the group’s satisfactory performance in the
current environment. Growth was achieved in revenue, EBITDA and headline
earnings per share despite challenging market conditions.
The audited abridged consolidated financial statements for the year were
authorised for issue by the directors on 27 August 2013.
Group profile
Morvest is a black empowered holding group with an international footprint
spanning Africa (South Africa, Mozambique, and Nigeria), India, UAE and the
USA. The group’s operations are aligned into three key divisions: Business
Support Services (including Professional Services and Outsourcing Solutions),
ICT Solutions and Retail and Consumer Services which is in line with the
group’s diversification strategy.
Operational overview
Both the South African and Nigerian markets were challenging in the year
notwithstanding some early signs of recovery. Nonetheless the group’s
domestic operations performed well with reasonable improvements in margin.
Financial results and dividend
Revenue increased 10,1% to R956,1 million from R868.6 million in the prior
year. 96% of revenue was generated in South Africa.
EBITDA amounted to R141.5 million (2012: R112.1 million) reflecting an
satisfactory EBITDA margin of 14,8%.
Declaration of final cash dividend
The board has declared a final gross cash dividend of 1 cent per share for
the year ended 31 May 2013.
In respect of the normal final gross cash dividend, the following further
information is provided to shareholders in respect of the new dividends tax:
- The dividend has been declared from income reserves
- Secondary tax on companies (STC) credits utilised amount to 1 cent per
share
- The dividend withholding tax rate is 15% resulting in a net dividend of
1 cent per share to those shareholders who are not exempt from the
dividend withholding tax
- Morvest’s tax reference number is 9393348157
- The issued number of shares as at declaration date is 657 828 879
including 67 828 879 treasury shares. The board has also considered the
issue of an additional 222 171 121 million new shares in terms of the
BEE transaction announced on 30 July 2013 and therefore approved a total
dividend of R8,8 million based on 880 000 000 shares payable on Monday,
28 October 2013.
The final dividend will be paid on Monday, 28 October 2013 to shareholders
recorded in the books of the company at the close of business on the record
date, Friday, 25 October 2013.
The salient dates relating to the ordinary dividend are as follows:
Last day to trade cum dividend Friday, 18 October
2013
Shares commence trading ex-dividend Monday 21 October
2013
Record date Friday 25 October
2013
Payment date of the dividend Monday, 28 October
2013
Share certificates may not be dematerialised or rematerialised between
Monday, 21 October 2013 and Friday, 25 October 2013, both days inclusive.
Goodwill
Goodwill is reviewed annually for impairment, or more frequently when there
are indicators that impairment may have occurred, by comparing the carrying
value to its recoverable amount. Impairment losses are included in other
operating expenses in the profit and loss.
During the annual review of goodwill impairment performed at year end,
goodwill impairment for the year was calculated to R33 465 000(31 May 2012:
R26 913 000) from the following CGU’s.
- Intergraph Systems Southern Africa Proprietary Limited R9 680 000
- Morvest Mithratech Proprietary Limited R5 113 000
- SAB&T Ubuntu Holdings Proprietary Limited R 18 672 000
Goodwill impairment of R18 672 000 relating to SAB&T Ubuntu Holdings
Proprietary Limited resulted from the sale of the SAB and T Business
Innovation Group Proprietary Limited which occurred during the period.
Business combinations
On 1 March 2013, ITQ Business Solutions Proprietary Limited - a 51% held
subsidiary of the Group - obtained control of iSolve Business Solutions
Proprietary Limited and SQLDB Technology Solutions Proprietary Limited by
acquiring 60 % of the shares and claims of the issued share capital for cash.
The companies' core business is the provision of solutions and services for
business intelligence, enterprise, custom development, data management,
hardware and licensing and learning. The acquisition is consistent with the
Company’s growth strategy.
In the three months to 31 May 2013, iSolve and SQLDB contributed revenue of
R21 982 613 and a loss after tax of R1 495 447 to the Group's results. If the
acquisition had occurred on 1 June 2012, management estimates that iSolve and
SQLDB would have contributed revenue of R85 555 573 and R1 517 170 profit
after tax to the Group. In determining these amounts management has assumed
that the fair value adjustments that arose on acquisition date, determined
provisionally, would have been the same if the acquisition had occurred on 1
June 2012.
Provisional fair value of assets acquired and liabilities assumed:
At Group
acquisition provisional Recognised
date iSolve fair value values on
and SQLDB adjustments acquisition
R'000 R'000 R'000
Property, plant & equipment 904 - 904
Trade and other receivables 12 898 - 12 898
Other financial assets 3 829 - 3 829
Cash and cash equivalents 12 857 - 12 857
Borrowings (847) - (847)
Other financial liabilities (7 301) - (7 301)
Trade and other payables (6 773) - (6 773)
Net identifiable assets and
liabilities 15 567
Non-controlling interest (6 227)
Goodwill on acquisition 6 078
Total consideration 15 418
Contingent consideration 8 218
Consideration paid in cash 7 200
Total consideration 15 418
Cash acquired 12 857
Consideration paid in cash (7 200)
Net cash inflow 5 657
The acquisition of the above subsidiaries are based on provisional fair
values as the group has not yet determined the fair values of the
identifiable assets, liabilities and/or contingent liabilities. The fair
value of the subsidiaries will be accurately determined by the next
anniversary date.
The provisional goodwill is mainly attributable to the skills and technical
talent of iSolve's work force, and the synergies expected to be achieved from
integrating iSolve into the Group’s existing business.
Property, plant and equipment under construction
The Group continued the construction of the new head office building and
costs for the year totalled R63 million (2012: R4.5 million). The new
building was ready for use on 29 July 2013. The cost subsequent to yearend to
complete the construction is estimated at R2.9 million.
Related parties
During the year certain related parties, in the ordinary course of business,
entered into various loans and transactions with the Group on terms no less
favourable than those arranged with third parties.
Share repurchase
During the year, the company repurchased 48.8 million shares to the value of
R8.9 million on the open market in terms of the share repurchase programme.
Morvest intends to continue repurchasing shares in the forthcoming year
subject to Companies Act requirements and adding value to shareholders.
Subsequent to year end, a total of 21.3 million shares acquired through the
share repurchase program have been cancelled from issued share capital.
Contingent liabilities
Contingent liabilities relating to certain legal matters as at year end have
a maximum exposure of R0.5 million.
All other legal proceedings as disclosed in the prior year have been
satisfactorily resolved in the year under review.
Subsequent events
BEE Transaction
As announced on 30 July 2013, and 22 August 2013, shareholders are advised
that the Company has entered into agreements to implement a BEE transaction
in terms of which executive and non-executive directors of Morvest will
obtain a shareholding in the Company. The circular for the approval of the
BEE transaction has been posted to shareholders on 22 August 2013.
The board of directors are not aware of any other material events that have
taken place since the reporting date, which would affect the results of the
group.
Segment report
The Business Support Services (Professional Services and Outsourcing)
division contributed 59% (2012: 61%) of external revenue and the ICT
Solutions division the balance of 41% (2012: 39%).
2013 External Internal Total segment Profit/(loss) Total assets
segment segment turnover for the year
turnover turnover
R’000 R’000 R’000 R’000 R’000
Business 560 927 45 543 606 470 15 009 544 818
Support
Services
ICT Solutions 395 237 224 023 619 260 41 448 323 784
Corporate - 183 310 183 310 65 553 934 352
Elimination - (452 876) (452 876) (98 433) (1 120 709)
Total 956 164 - 956 164 23 577 682 245
2012 External Internal Total segment Profit/(loss) Total assets
segment segment turnover for the year
turnover turnover
R’000 R’000 R’000 R’000 R’000
Business 525 423 4 556 529 979 54 961 531 654
Support
Services
ICT Solutions 343 153 16 643 359 796 16 550 195 224
Corporate - 78 652 78 652 22 968 593 493
Elimination - (99 851) (99 851) (71 509) (677 513)
Total 868 576 - 868 576 22 970 642 858
The Retail and Consumer Services segment has not been included above as it is
not a reportable segment in terms of IFRS 8.
Outlook
Looking ahead the directors are confident that the Group has cemented a solid
platform for long-term growth. However Morvest continues to see the next 12
to 18 months as remaining tough.
While the further improvement of BEE equity ownership seemed a challenge and
the Group’s BEE rating dropped to Level 3 in August 2013, this will be
substantially addressed through successful implementation of the proposed BEE
transaction.
Expansion further into Africa and internationally is a key strategic
objective for the next 12 to 18 months, as significant growth opportunities
in the emerging markets primarily in outsourcing; ICT; resourcing; training
and education could offer an attractive counter to anticipated difficult
conditions locally. Successful implementation of the group’s diversification
strategy is a priority for the next financial year.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Morvest shareholders are referred to the cautionary announcements the last of
which was dated 22 August 2013 and are advised that the discussions therein
are ongoing and, if successfully concluded, may have a material effect on the
share price of Morvest.
Accordingly, shareholders are advised to continue exercising caution when
dealing in Morvest shares until a further announcement is made.
Appreciation
The board extends its appreciation to our management and staff for their
efforts during the year. We also thank our customers and suppliers for their
continued support.
By order of the Board
Mohammed Varachia Suren Singh
CEO CFO
28 August 2013
Directors:
Dr PS Molefe (Chairman)*#, M Varachia (CEO), S Singh (CFO), M Papiyana (Group
HR Director), A Evan (Executive Director),Prof. B Marx*#, A Mohammadali
Haji*#, NY Mhinga*# (*Non-executive, #independent)
Registered office:
188 14th Road, Noordwyk, Midrand, 1685
(PO Box 4307, Halfway House, Midrand, 1685)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg
(PO Box 61051, Marshalltown, 2107)
Company secretary:
Noelene Beryl January, 188 14th Road, Noordwyk, Midrand, 1685
(P O Box 4307, Halfway House, Midrand, 1685)
Sponsor:
Sasfin Capital (a division of Sasfin Bank Limited)
Auditors:
PKF (Gauteng) Inc.
Date: 28/08/2013 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
