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Group Audited Results For The Year Ended 30 June 2013
Digicore Holdings Ltd
Company registration number 1998/012601/06
JSE code: DGC ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
GROUP AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2013
- REVENUE R863 million
up 2%
- EBITDA R114 million
up 7%
- CASH GENERATED FROM OPERATIONS R126 million
up 28%
- UNITS SHIPPED 89 228
up 17%
COMMENTARY
DigiCore's results for the year ended 30 June 2013 reflect the most difficult period
since the group's listing on the JSE in 1998.
The business has gone through a consolidation process. This included
management changes, closure of the Mexico office and completion of business
development initiatives in Asia without immediate returns. The same applies to
development costs in the UK insurance market.
Cellular connection incentive bonuses paid by networks were stopped, with
a short-term impact on performance and cash flow. However, lower monthly
subscriptions will have a greater positive effect long term.
Working capital management remains a primary area of focus for the board.
One of the associated initiatives relates to the funding structure of the Discovery
Insure project, and the board is pleased to report that these terms and conditions
with Discovery Insure Limited were changed by mutual agreement. The project
is currently run on a subscription revenue basis and the cost of units installed
in customers' vehicles is capitalised to property, plant and equipment as rental
stock. Under the revised terms, DigiCore will sell the hardware to Discovery Insure
and subscription revenue will be adjusted to cover services only. This will result in
derecognising rental stock capitalised for the project, which in turn will improve
DigiCore's gearing and alleviate some cash flow pressures. We expect the project
with Discovery Insure to continue growing and contribute significantly to the group
in the next financial year and beyond.
We have implemented tighter control of debtors in terms of credit vetting, actions
for non-payment and the general administration and interaction with clients.
Similar controls for operating and capital expenditure have been instituted to
ensure no wastage going forward.
Sales and marketing strategies have been implemented to improve turnover for
the next year.
FINANCIAL OVERVIEW
For the year ended 30 June 2013, the group has increased the installed base by
89 228 units. This is an increase of 17% against the 76 160 units shipped for the
prior financial year.
Revenue increased by 2% to R863 million from R844 million for the comparative
reporting period.
Earnings before interest, impairments, taxation, depreciation and capital items
(EBITDA) rose 7% to R114.3 million (2012: R106.9 million).
Depreciation and amortisation charges rose significantly due to the increase in
rental assets being depreciated over the term of contracts. Major contributors
to the higher depreciation charge include the R15.3 million depreciation of
intangible assets under development and R61.9 million related to rental stock. A
detailed impairment review was done and goodwill relating to subsidiaries in the
United Kingdom and Europe has been impaired.
Finance costs have risen to R14.4 million (2012: R6.0 million) due to the greater
investment in rental assets.
Cash flow from operating activities increased by 63% to R104.5 million (2012:
R64.0 million). Cash flow from investing activities reduced by 24% to an investment of
R96.0 million (2012: R125.8 million). The net impact is that cash flow from operating
and investing activities has been reduced from a negative cash flow in 2012 of
R61.8 million to a positive cash flow for the period under review of R8.5 million.
TECHNOLOGY REVIEW
In the review period, the group's R&D divisions in South Africa, UK and Australia
completed the migration to Ctrack's new-generation iS platform, lifting the
overall capability of the Ctrack product portfolio. A global training and change
management programme for sales and technical installation staff ensured the
benefits, features and capabilities of Ctrack's latest range of telematics systems
are well understood.
The Ctrack iS range supports the latest insurance telematics requirements, 2G and
3G GSM networks, while a unique scripting language allows customer-specific
business and fleet monitoring rules to be loaded on individual units. This flexibility
and tailored implementation allowed unit and communication cost reductions to
be passed on to the client, increasing our price competitiveness in the market,
especially for the insurance sector.
A substantial investment in development in 2013 produced a number of new
products scheduled for commercial release in the 2014 financial year. Ctrack
On-the-Road®, a touch-screen terminal based on smartphone technology, brings
advanced navigation, job/task management, messaging, voice and includes a
forward-looking video camera for driver behaviour and accident investigations.
Ctrack OBD-II, a small telematics device that plugs in to the maintenance port
of modern passenger vehicles, extends telematics options for the fleet manager
and insurance companies. The Tap-i-FareTM tap-and-go fare collection system was
enhanced and, for Australia, a legally compliant driver-fatigue monitoring solution
and support for the Intelligent (telematics) Access Platform (IAP) was implemented.
Investment in systems and software resulted in the release of a new interactive
business intelligence and key performance indicator module.This powerful module
enables customers to view fleet use and productivity trends in high-end graphic
format. In addition, the Ctrack MaxX server and cloud platforms were enhanced
to support DigiCore's internal process improvement programme. This included the
development of SID (systems integration device), a paperless workflow-oriented
process and installation tool that provides a fully automated installation.
OPERATIONAL REVIEW
South Africa
Ctrack
Investment in the sales structure has provided new opportunities in the motor
dealership and insurance channels. Sales skills have been expanded through a
mixture of training and recruitment to meet the challenges of a more demanding
marketplace. Fleet sales focus is moving to a more consultative sales approach to
assist customers in optimising benefits from their Ctrack telematics solutions. A new
partnership with VSC Solutions, owned by Super Group, will assist in selling a total
fleet solution to our customers in the logistics sector.
The FleetConnect software suite for fleet management continues to evolve and
was implemented with Wesbank in August 2013. FleetConnect will also be used to
enhance Ctrack's bureau service to customers.
The telesales function has focused on renewal of the existing customer base and
third-party call centres have been appointed to drive new business acquisition in
the consumer market in the new financial year. An agreement with International
SOS South Africa will provide the opportunity to sell value-added services, such as
medical support and roadside assistance, to the consumer customer base.
Discovery Insure installations have risen to over 40 000 Ctrack insurance telematics
systems to date. Strong growth is expected over coming years as the market
becomes more aware of the concept of rewarding better and safer driving habits.
The South African Police Service (SAPS) saw the accelerated deployment of the
integrated Ctrack and emergency dispatching system to its 10111 operation
centres nationally, enhancing reaction time and service to the public. Development
of products for SAPS is ongoing in the light of the partnership.
The customer-focused drive initiated in the first half of the year has set a new
benchmark for customer service. This included some necessary changes in the
department and introduction of tighter measurement criteria to improve our overall
service excellence.
Tap-i-Fare
Tap-i-Fare continues to work closely with the taxi industry in both KwaZulu-Natal and
the Western Cape, with additional roll-outs during the period.
Ctrack Mzansi
Ctrack Mzansi is in its second year of operation and moved from a level 4 to level
1 B-BBEE (broad-based black economic empowerment) contributor in 2013. The
Department of Labour was a significant contract win in the period and we await
the outcome of other fleet tenders.
INTERNATIONAL
Europe and UK
The European business was restructured to deliver operational efficiencies and
cost control remains a focus for the European management team. This resulted in
some restructuring costs in the year.
The insurance market in Europe continues to develop and Ctrack is well placed to
capitalise on growth opportunities in the coming year. We continue to work closely
with customers and partners in this sector and have overseen the successful
launch of an insurance-based product in the UK.
Ctrack remains optimistic about the growth potential across the European market.
Africa
The mining industry is the key focus and revenue generator for Ctrack Africa as
vehicle telematics continue to form an integral part of the health and safety
monitoring environment. Systems sales increased year on year despite ongoing
challenges in the mining environment.
The changing face of the African continent continues to attract global companies
exploring for minerals and resources, and various distributors have played a
material roll in expanding Ctrack's African footprint and redistributing our products
and services.
Australia and New Zealand
The company launched a range of new 3G products to the market, including
products and solutions in the iS 100 and iS 200 series. The business continues to
upgrade the former Minorplanet database with Ctrack products and solutions.
While there has been some slowdown in the Australian economy, the targeted
industry segments of mining, insurance, fleet and heavy vehicles continue to
provide growth opportunities for the group. Ctrack ANZ has also partnered with
key telecommunications carriers in the region, enabling our range of products
and services to be presented via the individual carriers' mobile to mobile (M2M)
segments.
We expect to continue increasing revenues and thus profitability through several
projects currently under development with the carrier and insurance sectors.
Asia and Middle East
Ctrack has entrenched its position in the Asia and Middle East region with 2G
and 3G, cross-border tracking and solutions for the Transported Asset Protection
Association (TAPA).
Growth was also recorded in the leasing, car rental, mining, logistics and cash-
in-transit sectors. The insurance sector is beginning to gain traction as Malaysia
moves to a deregulated model in 2015.
The launch of the long-haul solution for cross-border logistics later in the new year
will meet the demands of the market for trailers, cold-chain and cargo tracking.
Chinese and Thai languages will be supported later in the year in time for
respective market launches.
Latin America
The Ctrack Latin America operation has been replaced with distributors in Mexico,
Chile, Peru and Colombia.
INDUSTRY COMMENTS
DigiCore is progressing with the shift from selling tracking devices to an information-
based service-and-subscription revenue model supported by client options for
value-added solutions.
The strategic and special projects division continues to identify and define
innovative applications and future telematics trends. As a result, DigiCore maintains
its leadership in insurance telematics. With over 500 million operating hours and
a database of over 1 billion kilometres for insured vehicles, our solution offers new
opportunities to the global short-term vehicle insurance industry.
As rising fuel costs remain an important driver of telematics solutions for companies,
the concept of total fleet management is gathering momentum and will offer new
opportunities as we supply the means for deeper fleet analysis.
Working on a number of other telematics initiatives outside the traditional vehicle
and fleet management areas is a key part of DigiCore's strategy to be a leader
in reshaping the telematics industry. As example, Megafortris/ISIS, which is a
combination of client partner request and our Thripp Container research strategy,
won the Department of Trade and Industry's technology prize, and is now being
rolled out worldwide.
OUTLOOK
The consolidation and management changes undertaken, particularly in the
past six months, leaves the board cautiously optimistic of an improved trading
performance in the year ahead. With the new technology platform firmly in place,
commercialisation of our latest product and software solutions, and the investment
in our sales structure, the group has already started to capitalise on opportunities in
the fleet, mining, government and insurance telematics industries.
Our sales model in future should be more balanced with the external funding
now in place. This will allow us improved shorter-term profits and cash flow while still
building future annuity income, although at a slower but more sustainable pace.
We have recaptured lost fleet management business and trust we will continue this
trend. New channels to distribute our stolen vehicle recovery products have been
opened and volumes are improving.
Partnerships and long-standing relationships with loyal customers, locally and
internationally, will contribute to the number of systems sold and growing annuity
revenue streams on the back of new technology and solid customer service.
For and on behalf of the board
N H Vlok A J Voogt
Chief Executive Officer and Chairman Chief Financial Officer
Centurion
23 September 2013
ABRIDGED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
at 30 June 2013
30 Jun 13 30 Jun 12
R'000 R'000
Notes (Audited) (Audited)
Assets
Non-current assets 477 084 541 519
Property, plant and equipment 2 201 435 203 730
Goodwill 3 158 780 220 584
Intangible assets 85 337 79 487
Investments in associates 7 939 7 110
Other financial assets - 1 250
Deferred tax 23 593 29 358
Current assets 402 857 365 136
Inventories 104 347 95 763
Current tax receivable 6 400 2 426
Trade and other receivables 249 579 225 628
Cash and cash equivalents 42 531 41 319
Assets held for sale 4 - 28 606
Total assets 879 941 935 261
Equity and liabilities
Equity attributable to equity holders of parent 632 973 643 988
Share capital and premium 166 324 166 324
Foreign currency translation reserve 43 182 (524)
Share-based payment reserve 10 935 9 989
Retained income 412 532 468 199
Non-controlling interest 15 757 (14 524)
Non-current liabilities 55 357 33 040
Interest-bearing financial liabilities 39 461 22 995
Finance lease obligation 14 481 7 810
Deferred tax 1 415 2 235
Current liabilities 175 854 176 209
Current portion of interest-bearing financial liabilities 46 614 10 183
Current tax payable 4 028 16 222
Finance lease obligation 5 668 7 111
Trade and other payables 61 667 66 279
Provisions 5 835 6 244
Bank overdraft 52 042 70 170
Liabilities held for sale 4 - 96 548
Total equity and liabilities 879 941 935 261
Net asset value per share (cents) 255,6 260,0
Net tangible per share (cents) 157,0 138,9
ABRIDGED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 30 June 2013
Year ended Year ended
30 June 13 30 June 12
Growth R'000 R'000
Notes % (Audited) (Audited)
Revenue 2 862 588 844 379
Earnings before interest, impairments, taxation,
depreciation, amortisation and capital items 7 114 339 106 932
Depreciation and amortisation 2 61 (98 424) (61 133)
Capital Items 5 (60 373) (229)
Operating profit (198) (44 458) 45 570
Investment revenue 216 100
Income from equity accounted investments 2 131 2 259
Finance costs (14 378) (6 033)
(Loss)/Profit before taxation (235) (56 489) 41 896
Taxation (137) 4 362 (11 886)
(Loss)/Profit after tax (274) (52 127) 30 010
Other comprehensive income:
Exchange differences on translating foreign operations 43 706 13 670
Total comprehensive income for the year (119) (8 421) 43 680
(Loss)/Profit attributable to:
Equity holders of the parent (285) (51 971) 28 122
Non-controlling interest (156) 1 888
(274) (52 127) 30 010
Total comprehensive (loss)/income for the year
attributable to:
Equity holders of the parent (8 265) 41 792
Non-controlling interest (156) 1 888
(8 421) 43 680
(Loss)/Earnings per share (cents) 6 (270) (21,7) 12,7
Diluted (loss)/earnings per share (cents) 6 (270) (21,7) 12,7
Headline earnings per share (cents) 6 (74) 3,3 12,7
Diluted headline earnings per share (cents) 6 (74) 3,3 12,7
ABRIDGED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
for the year ended 30 June 2013
Year ended Year ended
30 Jun 13 30 Jun 12
R'000 R'000
Notes (Audited) (Audited)
Share capital and premium:
Share capital and premium at the beginning of the year 166 324 166 215
Share options exercised - 109
Share capital and premium at the end of the year 166 324 166 324
Reserves:
Foreign currency translation reserve
Balance at the beginning of the year (524) (14 194)
Comprehensive income for the year 43 706 13 670
Balance at the end of the year 43 182 (524)
Equity settled share-based payment reserve
Balance at the beginning of the year 9 989 7 288
Share options cancelled (1 859) (974)
Share-based payment cost for the year 2 805 3 675
Balance at the end of the year 10 935 9 989
Reserves at the end of the year 54 117 9 465
Retained Income:
Retained Income at the beginning of the year 468 199 454 673
Comprehensive income/(loss) for the year (51 971) 28 122
Share options cancelled 1 859 974
Acquisition of a further 27% in Ctrack (Proprietary) Limited 7 (5 568) -
Non-controlling interest in Ctrack Latin America S.A derecognised 13 -
Dividends paid - (15 570)
Retained Income at the end of the year 412 532 468 199
Non-controlling Interest:
Balance at the beginning of the year (14 524) 17 322
Comprehensive income/(loss) for the year (156) 1 888
Business combinations 7 (874) (33 635)
Acquisition of 47% in IFCS (Proprietary) Limited from outside shareholders - (99)
Sale of Worldmark SA (Proprietary) Limited 4 32 636 -
Acquisition of a further 27% in Ctrack (Proprietary) Limited 7 (1 312) -
Non-controlling interest in Ctrack Latin America S.A derecognised (13) -
Non-controlling interest at the end of the year 15 757 (14 524)
ABRIDGED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the year ended 30 June 2013
Year ended Year ended
30 Jun 13 30 Jun 12
R'000 R'000
(Audited) (Audited)
Cash flows from operating activities 104 597 63 949
Cash generated from operations 125 620 97 868
Net Finance cost (14 162) (5 933)
Dividends paid - (15 570)
Tax paid (6 861) (12 416)
Cash flows from investing activities (96 021) (125 781)
Cash flows from financing activities 15 714 (16 975)
Total cash and cash equivalents movement for the year 24 290 (78 807)
Cash and cash equivalents at the beginning of the year (28 851) 52 569
Effect of exchange rate movement on cash balances (4 950) (2 613)
Total cash and cash equivalents at end of the year (9 511) (28 851)
ABRIDGED SEGMENTAL ANALYSIS
for the year ended 30 June 2013
Year ended Year ended
30 Jun 13 30 Jun 12
R'000 R'000
(Audited) (Audited)
Revenue
SA distribution 527 032 579 426
External revenue 516 361 539 627
Internal segment revenue 10 671 39 799
Foreign distribution 298 983 281 480
External revenue 285 399 250 018
Internal segment revenue 13 584 31 462
Product development and manufacturing 206 853 194 434
External revenue 53 026 44 915
Internal segment revenue 153 827 149 519
Group services 30 836 27 957
External revenue 7 772 9 819
Internal segment revenue 23 064 18 138
1 063 704 1 083 297
Inter segmental revenue (201 146) (238 918)
Operating (loss)/profit
SA distribution 10 955 60 338
Foreign distribution (60 164) (15 394)
Product development and manufacturing 16 307 15 198
Group services (11 556) (14 572)
(44 458) 45 570
Investment revenue 216 100
Income from equity accounted investments 2 131 2 259
Finance costs (14 378) (6 033)
(Loss)/Profit before taxation (56 489) 41 896
Segment assets
SA distribution 373 057 285 513
Foreign distribution 156 191 150 832
Product development and manufacturing 195 118 110 375
Group services 241 711 452 348
966 077 999 068
Eliminations (86 136) (63 807)
Total assets 879 941 935 261
Segment liabilities
SA distribution (201 486) (152 106)
Foreign distribution (70 650) (79 127)
Product development and manufacturing (19 750) (24 905)
Group services (25 461) (113 466)
(317 347) (369 604)
Eliminations 86 136 63 807
Total liabilities (231 211) (305 797)
NOTES TO THE ABRIDGED GROUP FINANCIAL STATEMENTS
1. Basis of preparation and presentation of financial statements
The abridged consolidated financial statements have been derived from the
annual financial statements for the year ended 30 June 2013. The abridged
financial statements are prepared in accordance with the Framework Concepts
and the measurement and recognition requirements of IFRS and contain the
information required by IAS 34: Interim Financial Reporting as well as the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee, the
JSE Limited Listings Requirements, and the requirements of the Companies Act,
2008 (as amended).
The accounting policies are in terms of IFRS and are consistent with those of
the consolidated Annual Financial Statements at 30 June 2013 as issued on
23 September 2013. The accounting policies are supported by reasonable and fair
judgments and estimates.
The board has approved the financial statements which have been abridged for
purposes of this report. The financial statements were internally compiled by Mr AJ
Voogt CA(SA), the Group Chief Financial Officer and Mr V Venkatkumar CA(SA),
the Group Financial Manager.
These abridged consolidated group financial statements have been extracted
from the audited annual financial statements upon which Mazars(Gauteng) Inc,
the group's auditors, have issued an unqualified report. The group annual financial
statements are available for inspection at the company's registered office.
Any reference to future financial performance included in this announcement,
the commentary within the Corporate Governance, Sustainability and Corporate
Profile headings and the financial and operational commentary have not been
reported on by our auditors.
2. Property, plant and equipment
Property, plant and equipment has increased over the year due to the continued
investment into rental assets of R98.7 million. Included in this amount is a
depreciation charge of R83.08 million for the year (2012: R51.04 million).
3. Goodwill
The goodwill amount per the statement of financial position is reconciled as follows:
R'000
Cost at 30 June 2012 220,584
Accumulated impairments at 30 June 2012 -
Carrying value at 30 June 2012 220 584
Additions through business combinations 3 801
Disposals through business divesture (41 131)
Foreign exchange movements 33 026
Impairment losses recognised (57 500)
Carrying value at 30 June 2013 158 780
Cost at 30 June 2013 216 280
Accumulated impairments at 30 June 2013 (57 500)
The impairment of goodwill has been allocated to the following Cash Generating
Units (CGU's) (Amounts in R'000):
Carrying Carrying
amount amount
prior to after
Cash Generating impairment Impairment impairment
Unit Segment of goodwill of goodwill of goodwill 2012
DigiCore Electronics SA 8 953 - 8 953 8 953
(Proprietary) Limited distribution
Ctrack SA (Proprietary) SA 9 195 - 9 195 9 195
Limited distribution
DigiCore Fleet SA 1 458 - 1 458 1 458
Management SA distribution
(Proprietary) Limited
Worldmark SA SA - - - 41 131
(Proprietary) Limited* distribution
Alchemist House SA 3 801 (3 801) - -
(Proprietary) Limited distribution
Ctrack Limited Foreign 51 321 (8 000) 43 321 48 173
distribution
DigiCore Europe B.V. Foreign 76 090 (37 286) 38 804 57 127
distribution
Ctrack Benelux B.V. Foreign 42 460 - 42 460 34 156
distribution
Ctrack Deutschland Foreign 4 996 - 4 996 4 396
GmbH distribution
Ctrack UK Limited Foreign 8 413 (8 413) - 7 059
distribution
Ctrack (Proprietary) Foreign 9 593 - 9 593 8 936
Limited distribution
Total 216 280 (57 500) 158 780 220 584
* Worldmark SA (Proprietary) Limited was sold on 31 January 2013, refer to disposal of
subsidiary note, 4.
4. Disposal of subsidiary
On 31 January 2013, the group sold its 50.1% held investment in Worldmark SA
(Proprietary) Limited to Autovest Limited for a total proceed of R7 000 000 which was
settled in cash. Worldmark SA (Proprietary) Limited was presented as a non-current
asset held for sale, following the commitment of group's management, on 30 June
2012 to a plan to sell the subsidiary due to the purchaser having an enhanced
national footprint of motor vehicle dealerships. The profit after tax of Worldmark SA
(Proprietary) Limited from 1 July 2012 up the date of disposal was R414 367.
Based on the book values of the net asset disposed of and the related sales
proceed, the loss on disposal of Worldmark SA (Proprietary) Limited is R1 047 497
as summarised below. This amount has been included in other expenses in
comprehensive income.
At 31 January 2013 the disposal group comprised the following assets and
liabilities:
R'000
Assets classified as held for sale
Property, plant and equipment 4 917
Inventories 8 577
Trade and other receivables 13 386
Cash and cash equivalents (2 747)
24 133
Liabilities classified as held for sale
Other financial liabilities 80 776
Finance lease obligation 995
Trade and other payables 10 106
91 877
Group loss on disposal
Net assets disposed of (67 744)
Goodwill derecognised 41 631
Non-controlling interest derecognised 32 636
Consideration received (7 000)
Profit recognised in Ctrack SA (Proprietary) Limited (570)
(1 047)
5. Capital items
Capital items consist of the following:
30 June 2013 30 June 2012
R'000 R'000
Loss on sale of property, plant and equipment (1 826) (129)
Loss on sale of Worldmark SA (Proprietary)
Limited (1 047) -
Impairment of goodwill (57 500) -
Impairment loss on re-measurement
of disposal group held for sale - (100)
(60 373) (229)
6. Earnings per share
30 June 2013 30 June 2012
(Loss)/earnings per share (cents) (21.7) 12.7
Diluted (loss)/earnings per share (cents) (21.7) 12.7
Headline earnings per share (cents) 3.3 12.7
Diluted headline earnings per share (cents) 3.3 12.7
Interim dividend per share (cents) - 3.0
Final dividend per share (cents) - -
Total dividend per share (cents) - 3.0
Number of ordinary shares in issue ('000) 247 669 247 669
Weighted number of shares in issue to be used
in the calculation of basic and diluted earnings
per share ('000) 239 607 220 756
Reconciliation of headline earnings:
Basic and diluted earnings (51 971) 28 122
Adjusted for:
Loss on sale of property, plant and equipment 1 826 129
Impairment loss on remeasurement of assets
and liabilities held for sale - 100
Gain on bargain purchase of Dedical
(Proprietary) Limited - 567
Loss on sale of Worldmark SA (Proprietary)
Limited 1 047 -
Impairment of goodwill 57 500 -
8 402 27 784
Tax effect on adjustments (511) (36)
Non-controlling interest in adjustments - 228
Basic and diluted headline earnings 7 891 27 976
7. Business combinations
Ctrack (Proprietary) Limited
On 1 September 2012, the group acquired an additional 27% interest in Ctrack
(Proprietary) Limited for AUD810 000 equivalent to R6 880 511 which was settled in
cash. This increased the group's ownership from 65% to 92%. The carrying amount
of Ctrack (Proprietary) Limited's net assets in the group's financial statements on
the date of acquisition was R5 545 032. The group recognised a decrease in non-
controlling interests of R1 312 400 and the excess of the consideration paid over the
non-controlling interest derecognised of R5 568 111 has been recognised in equity.
Fair value of assets acquired and liabilities assumed:
R'000
Non-controlling interest derecognised 1 312
Excess of consideration paid over non-controlling interest
recognised in retained earnings 5 568
6 880
Acquisition date fair value of consideration paid
Cash 6 880
Non-controlling interest is measured at the non-controlling interest's proportionate
share of the acquiree's identifiable net assets.
Alchemist House (Proprietary) Limited T/A Fleet Connect
On Thursday, 1 November, 2012 the group acquired a further 25% of the voting
equity interest of Alchemist House (Proprietary) Limited T/A Fleet Connect which
resulted in the group obtaining control over Alchemist House (Proprietary) Limited
T/A Fleet Connect. This was in addition to an existing interest of 26% which was
obtained on Thursday, 1 September, 2011. Alchemist House (Proprietary) Limited's
results were accounted for using the equity method until 31 October 2012. The
fair value purchase consideration for this transaction was R1 350 000 which was
paid in cash. Alchemist House (Proprietary) Limited T/A Fleet Connect is principally
involved in the Fleet Management industry in the South African market. As
a result of the acquisition, the group is expecting to enhance its range of fleet
management products and services. It is also expecting to reduce costs through
economies of scale.
Goodwill of R3 801 194 arising from the acquisition consists largely of the synergies
and economies of scale expected from combining the operations of the entities.
Fair value of assets acquired and liabilities assumed:
R'000
Property, plant and equipment 222
Trade and other receivables 495
Cash and cash equivalents 132
Other financial liabilities (1 977)
Deferred tax (145)
Trade and other payables (656)
Total identifiable net assets (1 929)
Non-controlling interest 874
Goodwill 3 801
2 746
Acquisition date fair value of consideration paid
Cash 1 350
Fair value of equity interest held before business combination 1 396
2 746
Non-controlling interest is measured at the non-controlling interest's proportionate
share of the acquiree's identifiable net assets.
Revenue of R6 577 052 and profit of R311 716 of Alchemist House (Proprietary)
Limited T/A Fleet Connect have been included in the group's results since the
date of acquisition. If the acquisition had occurred on 1 July 2012, management
estimates that Alchemist House (Proprietary) Limited would have contributed a loss
after taxation of R146 783 and revenue of R9 389 770 respectively. In determining
these amount, management have assumed that the fair value adjustments,
determined provisionally, that arose on the date of acquisition would have been
the same if the acquisition had occurred on 1 July 2012.
The fair value of trade and other receivables acquires approximate their book
values as the impact of discounting is not considered material due to the short-
term nature of the receivables. The acquisition of Alchemist House (Proprietary)
Limited is 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 business will be accurately determined by the next reporting date.
8. Post-financial year end events
During September 2013 the group renegotiated the terms and conditions of
financial structure of the project with Discovery Insure Limited. This project is
currently run on a subscription revenue basis and the cost of the units installed in
customers vehicles is capitalised to property, plant and equipment as rental stock.
Under the revised terms, the group will sell the hardware to Discovery Insure and
the subscription revenue will be adjusted to cover services only. This will result in the
de-recognition of rental stock capitalised in respect of the project, an improvement
in the group's gearing and alleviate some cash flow pressures experienced to date.
The effective date of the revised terms and conditions is 1 July 2013. The group
expects the project with Discovery Insure Limited to grow from strength to strength
and contribute significantly to the group in the 2014 financial year and beyond.
Other than those disclosed above, there have been no significant events
subsequent to year-end and up to the date of this report that would require
adjustment to the annual financial statements or further disclosure.
DIVIDEND DECLARATION
No final dividend will be declared and paid to the shareholders. The board agreed
to retain cash for future growth. (30 June 2012: 0 cents).
CHANGES TO THE BOARD OF DIRECTORS
The following changes to the board took place over the period:
- Ms L Msengana-Ndlela resigned as independent non-executive director on
28 February 2013.
- Mr J Verster resigned as Chief Technology Officer on 28 March 2013.
Mr D du Rand has assumed this role from this date.
- Mr NA Gasa passed away on 26 March 2013 and Mr G Pretorius has assumed
the role of lead independent director going forward.
- Mr AJ Voogt has tendered his resignation as Chief Financial Officer with effect
from 31 October 2013. Mr PJ Grové has been appointed to the role effective
from 1 November 2013.
- Mr SR Aberdein has given notice that he will retire as executive director with
effect from 30 November 2013.
- Adv BS Khuzwayo has tendered his resignation as independent non-executive
director with effect from 9 September 2013.
CORPORATE GOVERNANCE
The board of directors aspires to conduct the group's business with responsibility,
accountability, fairness and transparency and strives to be a good corporate
citizen.
The directors agree with the spirit and principles of corporate governance set out
in the King Report on Governance in South Africa (2009) (King III). The board is
committed to applying appropriate corporate governance policies and practices
in each company in the group.
The JSE Limited mandates certain disclosure requirements on corporate
governance and DigiCore complies in all material aspects to the regulations and
codes of the Exchange.
SUSTAINABILITY
Sustainability forms the cornerstone of our values and is part of our board's
mandate.The group understands that its business is part of the greater environment
in which we live, so our actions are shaped by national and international trends in
sustainable development. DigiCore is a long-term business and this determines our
actions as the group strive to be a responsible corporate citizen and respect the
society and environment in which we operate.
The focus of the group going forward is to balance financial growth with our focus
on people, especially staff satisfaction, while ensuring we remain committed to
equal opportunity employment and stakeholder satisfaction. It underpins our
approach to attracting, retaining and developing our people. It guides our actions
in the contribution we make to preserving our environment. It drives our continued
cost-effective growth.
In support of the vision and strategy on sustainability, the group has adopted the
Global Reporting Initiative Framework for which a report has been prepared in
accordance with GRI G3.1 guidelines. With the release of the integrated annual
report 2012 in October 2012, DigiCore obtained external assurance on selected
profile, strategy and performance indicators and the application level C+ report
is available.
Please refer to the website for further information on sustainability within the group.
CORPORATE PROFILE
DigiCore is a JSE-listed group specialising in the research, design, development,
manufacture, sales and support of technologically advanced mobile asset
tracking, management and information solutions for vehicle owners locally and
abroad.
DigiCore, working in partnership with its customers, develops solutions that deliver
measurable business and operational benefits by providing total visibility and
control of mobile assets and mobile workforces; supplying superior vehicle-tracking
solutions ranging from a basic track-and-trace product to complete integrated
enterprise-level solutions for large fleet owners such as the Royal Mail (UK), the
South African Police Service, eThekwini Metro, BHP Billiton (global) and many others.
DigiCore seeks to achieve outstanding long-term profitability for its shareholders,
while maintaining a high standard of ethics and developing and rewarding its
people accordingly.
Registered office
DigiCore Building, Regency Office Park, 9 Regency Drive,
Route 21 Corporate Park, Irene Ext 30, Centurion, South Africa
P.O. Box 68270, Highveld Park, 0169, Tel: +27 (0)12 450 2222
Fax: +27 (0)12 450 2497
Transfer secretaries
Computershare Investor Services
(Pty) Limited
70 Marshall Street Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Directorate
Executive
NH Vlok (Chief Executive Officer and Chairman), SR Aberdein,
D du Rand, MD Rousseau, AJ Voogt (Chief Financial Officer)
Non-executive
Prof B Marx, SS Ntsaluba
G Pretorius (Lead independent), JD Wiese
Company secretary
DA Nieuwoudt
Sponsor
PSG Capital (Pty) Limited
Auditors
Mazars (Gauteng)
Incorporated
www.digicore.com www.ctrack.com
25 September 2013
Date: 25/09/2013 09:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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