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Audited Summarised Consolidated Financial Results for the year ended 31 August 2013 and cash dividend declaration
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1988/005282/06) (Income tax number: 9200108711)
(Share code: BCX) (ISIN: ZAE000054631)
("Business Connexion" or "the company" or "the Group")
AUDITED SUMMARISED CONSOLIDATED FINANCIAL
RESULTS FOR THE YEAR ENDED 31 AUGUST 2013 AND CASH DIVIDEND DECLARATION
Key features
- Revenue increased by 5,9% to R6 173,3 million
- Operating profit increased by 17,3% to R322,6 million
- Operating expenses up 0,5% in line with improved
operating efficiencies
- EBITDA increased by 9,5% to R560,5 million
- Normalised diluted headline earnings per share of
52,6 cents (2012: 50,6 cents)
Summarised consolidated statement of financial position
Audited Audited
31 August 31 August
R million 2013 2012
ASSETS
Non-current assets
Property, plant and equipment 480,6 442,0
Goodwill 631,9 566,9
Intangible assets 411,9 363,3
Investment in jointly controlled entity 94,6
Long-term loans and receivables 31,6 32,4
Other investments 223,7 213,4
Deferred tax assets 44,5 60,2
1 918,8 1 678,2
Current assets
Inventories 192,0 197,9
Trade receivables 1 189,8 971,3
Other receivables 297,9 239,0
Prepayments 126,7 81,6
Taxation prepaid 3,4 3,6
Cash and cash equivalents 196,8 443,9
Assets held for sale 13,9
2 020,5 1 937,3
TOTAL ASSETS 3 939,3 3 615,5
EQUITY AND LIABILITIES
Shareholders' equity 2 232,2 2 105,7
Non-controlling interests 168,6 95,8
Total equity 2 400,8 2 201,5
Non-current liabilities
Interest bearing long-term liabilities 156,2 179,5
Interest free long-term liabilities 21,9
Contingent consideration 63,3
Post-retirement benefit obligations 14,9 10,6
Deferred tax liabilities 49,8 47,6
306,1 237,7
Current liabilities
Short-term liabilities 75,2 89,2
Trade payables 554,2 425,3
Other payables 580,1 647,6
Provisions 1,1 1,3
Taxation payable 17,0 12,9
Liabilities held for sale 4,8
1 232,4 1 176,3
TOTAL EQUITY AND LIABILITIES 3 939,3 3 615,5
Summarised consolidated statement of comprehensive income
Audited Audited
twelve months twelve months
ended ended
31 August 31 August
R million 2013 2012
Revenue 6 173,3 5 829,6
Continuing operations 6 074,1 5 744,6
Discontinued operations 99,2 85,0
Cost of sales 4 305,1 3 996,1
Continuing operations 4 263,8 3 957,9
Discontinued operations 41,3 38,2
Gross profit 1 868,2 1 833,5
Operating expenses 1 545,6 1 558,5
Continuing operations 1 529,5 1 541,9
Discontinued operations 16,1 16,6
Operating profit 322,6 275,0
Share of profits/(losses) from jointly
controlled entities 1,6 (0,5)
Operating profit before investment income 324,2 274,5
Investment income 27,6 34,7
Profit before finance costs 351,8 309,2
Finance costs 25,5 27,5
Profit before tax 326,3 281,7
Taxation 93,3 85,6
Profit for the year 233,0 196,1
Profit attributable to:
Equity holders
Profit from continuing operations 149,1 127,5
Profit from discontinued operations 30,0 21,8
179,1 149,3
Non-controlling interest
Profit from continuing operations 53,9 46,8
Total attributable:
Profit from continuing operations 203,0 174,3
Profit from discontinued operations 30,0 21,8
233,0 196,1
Other comprehensive income:
Translation of foreign operations 13,1 5,9
Total comprehensive income for the year 246,1 202,0
Total comprehensive income attributable to:
Equity holders 191,4 155,2
Non-controlling interests 54,7 46,8
246,1 202,0
Basic earnings per share (cents) 44,7 37,5
Diluted earnings per share (cents) 44,5 37,2
Calculation of headline earnings (R million)
Profit attributable to equity holders 179,1 149,3
Profit on sale of business (84,0) (4,6)
Loss on sale of property, plant and equipment 2,4 0,7
Impairment of investment 4,6
Impairment of goodwill 40,1 4,9
Bargain purchase price on acquisition of subsidiary (0,1)
Tax effect of headline earnings adjustments (0,3) 0,5
Headline earnings 137,2 155,4
Weighted average number of shares in issue (000's) 400 570 398 550
Diluted weighted average number of shares in issue (000's) 402 602 401 097
Headline earnings per share (cents) 34,2 39,0
Diluted headline earnings per share (cents) 34,1 38,8
Summarised consolidated statement of changes in equity
Foreign
Share currency Share-based Share- Non-
capital and translation Retained payment holders' controlling Total
R million premium reserve earnings reserve equity interests equity
Balance at 31 August 2011 1 129,2 (27,8) 975,4 67,8 2 144,6 48,5 2 193,1
Changes in equity for the year ended 31 August 2012
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 1 129,2 (21,2) 916,2 81,5 2 105,7 95,8 2 201,5
Changes in equity for the year ended 31 August 2013
Movement in treasury shares and related reserves held by share purchase trust 4,1 4,1 4,1
Share-based payments 11,2 11,2 11,2
Non-controlling interest in dividends received (3,9) (3,9)
Movement in translation of foreign operations 12,2 12,2 0,9 13,1
Total comprehensive income for the year 179,1 179,1 53,9 233,0
Non-controlling interests' share of reserves of acquired entity 21,9 21,9
Dividends paid (80,1) (80,1) (80,1)
Balance at 31 August 2013 1 129,2 (9,0) 1 019,3 92,7 2 232,2 168,6 2 400,8
Audited Audited
twelve months twelve months
ended ended
31 August 31 August
2013 2012
Normal dividend per share (cents) 20,0 14,0
Special dividend per share (cents) 40,0
Summarised consolidated statement of cash flows
Audited Audited
twelve months twelve months
ended ended
31 August 31 August
R million 2013 2012
Operating cash flows 527,7 520,8
Working capital changes (220,0) (30,5)
Investment income 18,1 34,6
Finance costs (25,5) (22,3)
Dividends paid (80,1) (215,2)
Taxation paid (89,6) (101,4)
Cash generated by operating activities 130,6 186,0
Net cash flows utilised in investing activities (339,8) (203,5)
Net cash flows utilised in financing activities (37,9) (56,9)
Net changes in cash and cash equivalents (247,1) (74,4)
Cash and cash equivalents
at beginning of the year 443,9 518,3
Cash and cash equivalents
at end of the year 196,8 443,9
Summarised segmental analysis
Audited Audited
twelve months twelve months
ended ended
31 August 31 August
R million 2013 2012
Segment revenue
Services division 2 149,3 1 996,2
UCS division 1 170,9 1 093,2
Canoa division 1 117,5 860,5
Technology division 694,7 916,0
International division 532,2 467,2
Innovation division 508,7 496,5
6 173,3 5 829,6
Segment operating profit
Services division 157,6 191,0
UCS division 100,4 116,9
Canoa division 116,1 106,5
Technology division 26,5 3,3
International division 11,1 11,7
Innovation division 93,6 67,6
Corporate office (182,7) (222,0)
322,6 275,0
Other group salient information
Audited Audited
31 August 31 August
2013 2012
Number of shares in issue (000's) 404 972 404 972
Less: Weighted shares held in share purchase
trust and a subsidiary as treasury shares 3 415 5 125
Less: Weighting of options exercised during
the year that would have been treasury
shares 987 1 297
400 570 398 550
Dilutive options 1 591 2 059
Options exercised during the year that were
dilutive for a portion of the period 441 488
402 602 401 097
Number of options in issue (000's) 15 983 24 174
Key ratios and statistics
Net asset value per share (cents) 551,2 520,0
Tangible net asset value per share (cents)
(excluding goodwill and fair value of contracts) 354,7 339,9
Operating margin (%) 5,2 4,7
Return on total equity (%) 8,0 7,1
Return on total assets (excluding cash
and preference share investments) (%) 9,2 9,3
Current ratio 1,6 1,6
Average debtors days 57,5 54,6
Depreciation and amortisation 237,9 236,9
Cost of sales 97,9 105,9
Operating expenses 140,0 131,0
Contingent liabilities (R million)
Performance guarantees 60,8 91,8
Asset finance recourse deals 53,2 16,0
Other 33,3 34,9
Capital commitments (R million)
Capital 49,8 17,1
Operating lease 292,5 300,7
The summarised consolidated financial results have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting Standards (IFRS),
the presentation and disclosure requirements of International Accounting Standard 34:
Interim Financial Reporting applied to year-end reporting, the Listings Requirements of the
JSE Limited, the South African Institute of Chartered Accountants Financial Reporting Guides
as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council and the requirements of the South
African Companies Act, 2008.
The accounting policies applied in the presentation of the summarised consolidated financial
results are consistent with those applied for the year ended 31 August 2012, except for new
standards that became effective 1 September 2012. The adoption of these standards did not
have a material effect on the results for the year, nor have they required the restatement of
any prior year figures.
The summarised consolidated financial results have 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.
Content Distribution Solutions, which was previously reflected under the Investment division,
has been incorporated into the Services division. The group has restated its segment report
in line with the above.
Commentary
Introduction
The past year saw Business Connexion gain significant momentum on its journey to being Africa's leading technology company.
The focus on solid organic growth, African expansion, strategic acquisitions in the context of long-term sustainability and cost
containment has delivered a robust performance in 2013, and further builds the foundation to support the Group's future growth.
Key operational highlights for 2013 included:
Improved footprint in the rapidly expanding African market, including solid growth from the Group's Nigerian operation;
Canoa division driving market share growth in the Managed Print Solutions segment;
Innovation division's performance underlining the quality and growth of BCX-owned intellectual property businesses within
the Group;
Continued investment in the cloud strategy;
Significant new client wins; and
Growth in the retail market sector.
Financial performance
Revenue grew by 5,9% to R6 173,3 million for the year, bolstered by good organic growth.
Operating expenses continue to be tightly managed and decreased by 0,8% to R1 545,6 million for the year (2012: R1 558,5 million).
Excluding the effect of the adjustments reflected in the table below, normalised operating expenses increased by only 0,5%,
demonstrating the success of the Group's central cost management and the maturity of its Shared Services approach.
Gross profit margins decreased slightly to 30,3% from 31,5% the previous year primarily as a result of delays in transitioning
a number of new contracts in the first half of the year. This non recurring event resulted in cost carried for a number of months
without corresponding revenue.
The Group recorded a normalised operating profit margin of 5,9% (2012: 6,1%).
2013 2012
R'000 % R'000 %
Operating profit as reported 322,6 5,2 275,0 4,7
Amortisation of intangible assets relating to the UCS assets, Canoa Group and Integr8 IT 52,6 49,2
Fair value adjustment on Canoa Group earn-out payment 26,2 26,2
Fair value adjustment on "A" share buy-back 4,3
Profit on sale of business (84,0) (4,6)
Impairment of goodwill 40,1 4,9
Impairment of investments 4,5
Normalised operating profit 361,8 5,9 355,2 6,1
The tax charge increased as a result of the reversal of an overprovision for capital gains tax in the previous financial year of
R30,3 million, linked to the sale of Destiny Electronic Commerce Proprietary Limited, which was partially offset by STC on the
dividend paid in January 2012 of R21,9 million, of which R16,2 million related to the special dividend.
The Group generated diluted earnings per share (EPS) of 44,5 cents for the year (2012: 37,2 cents) and diluted headline
EPS for the year of 34,1 cents (2012: 38,8 cents). On a normalised basis, excluding the items listed above, diluted headline
EPS would be 52,6 cents (2012: 50,6 cents).
Return on equity advanced to 8,0% (2012: 7,1%) on the back of improved profitability whilst return on total assets remained
flat at 9,2% (2012: 9,3%). Tangible return on equity was 17,9% (2012: 13,8%). Our target return on equity in the medium
term remains 17,0%.
The Group continued to generate healthy cash flows with cash from operations of R527,7 million before working capital changes.
Capital expenditure, which included a significant investment of R142,5 million during the first half of the year, dividends paid
and deterioration in working capital, driven by outstanding debtors only being collected during the week after year-end, were
the main contributors to cash outflows.
Divisional performance
Services division
The Services division offers a full range of ICT infrastructure services including cloud services through state of the art data centres.
Divisional revenue grew by 7,7% to R2 149,3 million (2012: R1 996,2 million). The revenue growth was achieved through the
division's application development business, especially in the public sector.
Profitability was negatively impacted by the delays in transitioning a number of new contracts in the first half of the year.
UCS division
The UCS division offers a full range of ICT infrastructure services targeted at Tier-1 retail and Tier-2 IT services requirements
through its leveraged infrastructure hosting and services platform.
Revenue increased 7,1% to R1 170,9 million (2012: R1 093,2 million) and operating profit dropped by 14,1% to R100,4 million
(2012: R116,9 million). Operating profit was impacted by a restructure in CEB Maintenance following client project delays and
the integration of a new cabling business at lower than expected margins.
Despite difficult trading conditions within the retail industry the UCS assets continued to show pleasing growth. In addition,
the expansion of the Group's retail offerings into Africa is starting to gain traction and will further materialise in the year ahead
as it entrenches its position as the dominant IT Services player in the retail industry sector in sub-Saharan Africa.
Canoa division
The Canoa division offers Managed Print Solutions (MPS), office automation and has exclusive distribution rights for Canon copy,
print and imaging solutions in Southern Africa.
BCX's entry into MPS together with Canon proved successful in spite of a highly competitive industry. This was evidenced
through the profit contribution of the division, driven by good growth in the large corporate market.
Revenue for the year increased 29,9% to R1 117,5 million (2012: R860,5 million) and operating profit by 9,0% to R116,1 million
(2012: R106,5 million).
Technology division
The Technology division delivers innovative technology solutions to both private enterprise and the public sector in conjunction
with the world's leading vendors and partners.
Positive results were achieved with revenue of R694,7 million and a contribution of R26,5 million to operating profit for the year
(2012: R3,3 million).
International division
The International division is responsible for capturing growth in Kenya, Mozambique, Namibia, Nigeria, Tanzania, Zambia and
the UK.
Revenue in the International division grew 13,9% to R532,3 million (2012: R467,2 million) with operating profit of R11,1 million
(2012: R11,7 million).
Growth in Nigeria has been strong and it is the biggest profit contributor in the division. The Group remains confident in
unlocking the significant future potential in Africa.
Innovation division
The primary activities of the Innovation division are centred on software or packaged intellectual property positioned to provide
tailored solutions across Africa.
Although the division's revenue remained flat at R508,7 million (2012: R496,5 million), all business units within the
division performed according to expectations and supported an increased contribution to operating profit of R93,6 million
(2012: R67,6 million).
The division has successfully developed internationally competitive product suites whilst at the same time improving bottom
line growth significantly. In particular, the performances of LARA and Nanoteq have been strong whilst the sale
of the QLINK business for a significant premium is further evidence of the success of the strategy supporting the creation of
this division three years ago.
Corporate activity
Effective 1 April 2013, the Group concluded a transaction to sell, as a going concern, its Learning Solutions division to ATIO's
Netcampus Proprietary Limited (Netcampus), in exchange for 50% plus 1 share of the ordinary shares of Netcampus.
Effective 11 July 2013, the Group concluded a transaction to sell, as a going concern, its QDD business to Arinso SA Proprietary
Limited (Arinso), in exchange for 50% of the ordinary shares in Arinso. Arinso forms part of the NorthgateArinso Group, which
is a leading global human resources software and services provider offering human resources business solutions to employers
of all sizes, including Global Fortune® 500 companies and public sector organisations.
Effective 1 September 2013, the Group entered into an agreement to dispose of its entire interest in the QLINK business
unit to Summit Garnishee Solutions Proprietary Limited (SGS), as a going concern, for a cash consideration of R187,5 million.
SGS is a privately-owned company that is not a related party to the Group. The consideration was settled in full on the date
that the last suspensive condition was fulfilled.
Effective 8 October 2013, the transaction to repurchase, by way of a scheme of arrangement, 25 033 334 BCX "A" ordinary
shares, and the consequent delisting of all the remaining "A" shares, was successfully implemented.
Outlook
Looking ahead, the Group will continue to focus on driving higher returns, including attaining its return on equity targets through
a number of ongoing initiatives, including continued efforts to entrench and grow its footprint in Africa.
Organic growth in Nigeria will be supported by potential niche acquisitions as the Group continues to focus on this key growth
market.
The recently created NGA Africa joint venture with NorthgateArinso has resulted in the market leading HR services and BPO
business in the high growth human capital management segment.
Internal Group-wide optimisation and cross-selling projects will continue to enhance cost efficiencies and leverage synergies
emanating from the acquisitions made by the Group over the past few years.
Leveraging off the key achievements of 2013, in addition to the initiatives highlighted above, the Group is confident that it will
achieve further revenue and earnings growth in the next financial year.
Auditor's report
The unmodified audit reports of KPMG Inc. on the audited consolidated financial statements and the summarised consolidated
financial results for the year ended 31 August 2013, dated 15 November 2013, 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 its
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 16 January 2014.
Dividend declaration
In line with its dividend policy, the Group has kept its dividend at 20 cents per share.
Notice is hereby given that a normal gross cash dividend of 20,0 cents per ordinary share (2012: 20,0 cents) has been declared
from income reserves, payable to shareholders for the year ended 31 August 2013. There are no STC credits available per share.
Shareholders who are subject to 15% withholding tax will, therefore, receive a net cash dividend of 17,0 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, 10 January 2014
Shares commence trading (ex-dividend) Monday, 13 January 2014
Record date (date shareholders recorded in books) Friday, 17 January 2014
Payment date Monday, 20 January 2014
Share certificates may not be dematerialised or rematerialised between Monday, 13 January 2014 and Friday, 17 January 2014,
both days inclusive.
On Monday, 20 January 2014, 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, 20 January 2014 will be posted on that date.
Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 20 January 2014.
The above dates and times are subject to change. Any changes will be published on the Securities Exchange News Service
(SENS) and in the press. The issued share capital is currently 404 972 468.
For and on behalf of the board
AC Ruiters LB Mophatlane
Chairman Chief Executive Officer
Midrand
19 November 2013
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)*, JA Bester*^, A Darko*^#, M Ettling*^, NN Kekana, J John*, M Lehobye*, D Sparrow
* Independant non-executive directors ^ Appointed 8 October 2013 JM Poluta resigned 21 June 2013 # Ghanian British
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 Lawrence 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 Ms Prudence Mbebe CA(SA).
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1988/005282/06) (Income tax number: 9200108711)
(Share code: BCX) (ISIN: ZAE000054631)
("Business Connexion" or "the company" or "the Group")
For more information please visit our investor relations website at www.bcx.co.za
Issue date: 19 November 2013
Date: 19/11/2013 07:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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