Wrap Text
Reviewed condensed consolidated interim financial information and cautionary announcement
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1988/005282/06)
(Share code: BCX) (ISIN: ZAE000054631)
("Business Connexion" or "the company" or "the group")
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2014
AND CAUTIONARY ANNOUNCEMENT
Revenue
increased by 5,5% to
R3 067,0 million
EBITDA
increased by 61,8% to
R421,8 million
Operating profit
increased by 107,0% to
R300,3 million
Cash generated
from operations
increased to
R261,7 million
Normalised diluted
headline earnings
earnings per share of 20,7 cents
(2013: 21,3 cents)
Condensed consolidated statement of financial position
Reviewed Reviewed Audited
28 February 28 February 31 August
R million 2014 2013 2013
ASSETS
Non-current assets
Property, plant and equipment 479,0 480,4 480,6
Goodwill 629,5 662,8 631,9
Intangible assets 359,6 374,6 411,9
Investment in associate 92,5 94,6
Long-term loans and receivables 6,2 30,5 31,6
Other investments 231,3 222,5 223,7
Deferred tax assets 35,1 45,0 44,5
1 833,2 1 815,8 1 918,8
Current assets
Inventories 209,5 221,4 192,0
Trade receivables 1 077,6 955,0 1 189,8
Other receivables 290,0 289,7 297,9
Prepayments 147,5 106,4 126,7
Taxation prepaid 5,1 1,3 3,4
Cash and cash equivalents 204,6 158,1 196,8
Assets held for sale 13,9
1 934,3 1 731,9 2 020,5
TOTAL ASSETS 3 767,5 3 547,7 3 939,3
EQUITY AND LIABILITIES
Shareholders' equity 2 256,1 2 112,2 2 232,2
Non-controlling interests 125,6 115,1 168,6
Total equity 2 381,7 2 227,3 2 400,8
Non-current liabilities
Interest bearing long-term liabilities 131,4 177,9 156,2
Interest free long-term liabilities 21,9 21,9
Post-retirement benefit obligations 15,6 10,6 14,9
Contigent consideration 63,3 63,3
Deferred tax liabilities 43,1 44,2 49,8
275,3 232,7 306,1
Current liabilities
Short-term liabilities 190,1 73,7 75,2
Trade payables 394,9 404,5 554,2
Other payables 490,3 596,0 580,1
Provisions 1,1 4,5 1,1
Taxation payable 34,1 9,0 17,0
Liabilities held for sale 4,8
1 110,5 1 087,7 1 232,4
TOTAL EQUITY AND LIABILITIES 3 767,5 3 547,7 3 939,3
Condensed consolidated statement of comprehensive income
Reviewed Reviewed Audited
six months six months twelve months
ended ended ended
28 February 28 February 31 August
R million 2014 2013 2013
Revenue 3 067,0 2 907,3 6 173,3
– Continuing operations 3 067,0 2 859,4 6 074,1
– Discontinued operations 47,9 99,2
Cost of sales 2 146,1 2 031,3 4 305,1
– Continuing operations 2 146,1 2 012,0 4 263,8
– Discontinued operations 19,3 41,3
Gross profit 920,9 876,0 1 868,2
Operating expenses 620,6 730,9 1 545,6
– Continuing operations 620,6 722,5 1 529,5
– Discontinued operations 8,4 16,1
Operating profit 300,3 145,1 322,6
Share of (losses)/profits from associate (2,1) 1,6
Operating profit before
investment income 298,2 145,1 324,2
Investment income 17,2 14,4 27,6
Profit before finance costs 315,4 159,5 351,8
Finance costs 17,7 9,7 25,5
Profit before tax 297,7 149,8 326,3
Taxation 73,3 48,4 93,3
Profit for the period 224,4 101,4 233,0
Profit attributable to:
Equity holders
Profit from continuing operations 203,1 58,2 149,1
Profit from discontinued operations 20,2 30,0
203,1 78,4 179,1
Non-controlling interests
Profit from continuing operations 21,3 23,0 53,9
21,3 23,0 53,9
Total attributable
Profit from continuing operations 224,4 81,2 203,0
Profit from discontinued operations 20,2 30,0
224,4 101,4 233,0
Other comprehensive income:
Translation of foreign operations 1,4 1,3 13,1
225,8 102,7 246,1
Total comprehensive income
attributable to:
Equity holders 204,2 79,7 191,4
Non-controlling interests 21,6 23,0 54,7
225,8 102,7 246,1
Earnings per share
From continuing and discontinued
operations
Basic earnings per share (cents) 52,2 19,6 44,7
Diluted earnings per share (cents) 52,0 19,5 44,5
Calculation of headline earnings
R million
Profit attributable to equity holders 203,1 78,4 179,1
Profit on sale of business (171,8) (84,0)
Loss on sale of property, plant and equipment 0,5 2,4
Reversal of impairment on investment (4,2)
Impairment of goodwill 2,4 2,4 40,1
Bargain purchase on acquisition of subsidiary (0,1)
Tax effect of headline earnings adjustments 26,8 (0,3)
Headline earnings 61,0 76,6 137,2
Weighted average number of shares
in issue (000's) 388 873 400 446 400 570
Diluted weighted average number of shares
in issue (000's) 390 815 402 660 402 602
Headline earnings per share (cents) 15,7 19,1 34,3
Diluted headline earnings per share (cents) 15,6 19,0 34,1
Condensed consolidated statement of cash flows
Reviewed Reviewed Audited
six months six months twelve months
ended ended ended
28 February 28 February 31 August
R million 2014 2013 2013
Operating cash flows 261,7 250,0 527,7
Working capital changes (162,5) (181,0) (220,0)
Investment income 9,4 21,1 18,1
Finance costs (17,7) (9,7) (25,5)
Dividends paid (121,6) (80,1) (80,1)
Taxation paid (55,6) (43,9) (89,6)
Cash (utilised in)/generated from
operating activities (86,3) (43,6) 130,6
Net cash flows utilised in investing activities 107,9 (222,8) (339,8)
Net cash flows generated from/(utilised in)
financing activities (13,8) (19,4) (37,9)
Net changes in cash
and cash equivalents 7,8 (285,8) (247,1)
Cash and cash equivalents
at beginning of the period 196,8 443,9 443,9
Cash and cash equivalents
at end of the period 204,6 158,1 196,8
Condensed segmental analysis
Reviewed Reviewed Audited
six months six months twelve months
ended ended ended
28 February 28 February 31 August
R million 2014 2013 2013
Segment revenue
Services division 1 103,0 988,9 2 149,3
UCS division 610,9 560,1 1 170,9
Canoa division 522,7 514,9 1 117,5
Technology division 356,6 359,5 694,7
International division 314,0 239,8 532,2
Innovation division 159,8 244,1 508,7
3 067,0 2 907,3 6 173,3
Segment operating profit
Services division 101,0 68,1 157,6
UCS division 50,2 47,0 100,4
Canoa division 47,6 56,9 116,1
Technology division 16,3 13,1 26,5
International division (12,7) 5,7 11,1
Innovation division 19,2 37,8 93,6
Corporate office 78,7 (83,5) (182,7)
300,3 145,1 322,6
Other group salient information
Reviewed Reviewed Audited
28 February 29 February 31 August
2014 2013 2013
Number of shares in issue (000's) 404 972 404 972 404 972
Less: weighted shares held in share
purchase trusts and a subsidiary
as treasury shares 16 039 4 307 3 415
Less: weighting of options exercised during
the period that would have been
treasury shares 60 219 987
388 873 400 446 400 570
Dilutive options 1 942 2 151 1 591
Options excercised during the period
that were dilutive for a portion
of the period 63 441
390 815 402 660 402 602
Number of options in issue (000's) 25 149 18 989 15 983
Key ratios and statistics
Net asset value per share (cents) 557,1 521,6 551,2
Tangible net asset value per share (cents)
(excluding goodwill and fair value
of contracts) 365,9 319,3 354,7
Operating margin (%) 9,8 5,0 5,2
Return on total equity (%) 18,0 7,5 8,0
Tangible return on equity (%) 30,4 15,4 17,9
Return on total assets (%)
(excluding cash and preference share
investments) 18,0 9,2 9,2
Current ratio 1,7 1,6 1,6
Average debtors days 60,0 54,1 57,5
Depreciation and amortisation 121,5 115,6 237,9
Cost of sales 48,6 49,0 97,9
Operating expenses 72,9 66,6 140,0
Contingent liabilities (R million)
Performance guarantees 30,3 72,2 60,8
Asset finance recourse deals 37,7 67,0 3,2
Other 110,7 36,2 33,3
Capital commitments (R million)
Capital 19,7 23,0 49,8
Operating lease 206,5 297,5 292,5
Basis of preparation and accounting policies
The condensed consolidated interim financial statements for the six months ended 28 February 2014 have been
prepared in accordance with IAS 34: Interim Financial Reporting, the Listings Requirements of the JSE Limited,
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial
Reporting Pronouncements as issued by the Financial Reporting Standards Council, as well as the South African
Companies Act, 2008.
The accounting policies applied are consistent with those applied for the year ended 31 August 2013, except for
new standards that became effective 1 September 2013. The adoption of these standards did not have a material
effect on the results for the period, nor have they required the restatement of any prior year figures.
The condensed consolidated interim financial statements have been prepared on the historic cost convention,
as modified by the valuation of certain financial instruments, and are presented in Rands rounded to the
nearest million, which is Business Connexion's functional and presentation currency.
Condensed consolidated statement of changes in equity
Foreign currency Share-based Non-
Share capital translation Retained payment Shareholders' controlling Total
R million and premium reserve earnings reserve equity interests equity
Balance at 31 August 2013 – audited 1 129,2 (21,2) 916,2 81,5 2 105,7 95,8 2 201,5
Changes in equity for the six months ended 28 February 2013
Movement in treasury shares and related reserves held by
share purchase trust 2,1 2,1 2,1
Share-based payments 5,0 5,0 5,0
Non-controlling interest in dividends received (3,9) (3,9)
Total comprehensive income for the period 1,3 78,4 79,7 23,0 102,7
Non-controlling interests' share of foreign currency translations reserve (0,2) (0,2) 0,2
Dividends paid (80,1) (80,1) (80,1)
Balance at 28 February 2013 – reviewed 1 129,2 (19,9) 916,4 86,5 2 112,2 115,1 2 227,3
Changes in equity for the six months ended 31 August 2013
Movement in treasury shares and related reserves held by
share purchase trust 2,0 2,0 2,0
Share-based payments 6,2 6,2 6,2
Total comprehensive income for the period 10,9 100,9 111,8 31,6 143,4
Profit for the period 100,7 100,7 30,8 131,5
Movement in translation of foreign operations 10,9 0,2 11,1 0,8 11,9
Non-controlling interests' share of reserves of acquired entity 21,9 21,9
Balance at 31 August 2014 – audited 1 129,2 (9,0) 1 019,3 92,7 2 232,2 168,6 2 400,8
Changes in equity for the six months ended 28 February 2013
Movement in treasury shares and related reserves held by
share purchase trust (72,9) (1,3) (74,2) (74,2)
Share-based payments 5,3 5,3 5,3
Acquisition of minority interest without change of control (30,4) (30,4) (24,0) (54,4)
Total comprehensive income for the period 1,1 203,1 204,2 21,6 225,8
Profit for the period 203,1 203,1 21,3 224,4
Movement in translation of foreign operations 1,1 1,1 0,3 1,4
Dividends paid (81,0) (81,0) (40,6) (121,6)
Balance at 28 February 2014 – reviewed 1 056,3 (7,9) 1 109,7 98,0 2 256,1 125,6 2 381,7
Reviewed Reviewed Audited
six months six months twelve months
ended ended ended
28 February 28 February 31 August
2014 2013 2013
Normal dividend per share (cents) 20,0 20,0 20,0
Commentary
Financial performance
Revenue increased by 5,5% to R3 067,0 million for the period ended 28 February 2014. Excluding
the sale of Qlink, revenue increased by 6,3% which was attributable to new business won during
the period.
Gross profit margins remained stable at 30,0% despite continuous market pressure.
Operating expenses continue to be a focus area with normalised operating expenses increasing by
6,1% excluding the adjustments related to the sale of Qlink.
The group recorded a normalised operating profit margin of 5,1% (2013: 5,2%).
2014 2013
R'000 % R'000 %
Operating profit as reported 300,3 9,8 145,1 5,0
Amortisation of intangible assets relating
to the UCS assets, Canoa Group and
Integr8 IT 27,7 25,3
Profit on sale of business – Qlink (171,8)
Discontinued operations – Qlink (20,2)
Normalised operating profit 156,2 5,1 150,2 5,2
The tax charge increased as a result of capital gains tax of R26,9 million on the sale of Qlink.
The group generated diluted earnings per share (EPS) of 52,0 cents for the six months (2013:
19,5 cents) and diluted headline EPS for the six months of 15,6 cents (2013: 19,0 cents). On a normalised
basis, excluding the items listed above, diluted headline EPS is 20,7 cents (2013: 21,3 cents).
The increase in return on total equity to 18,0% (2013: 7,5%) and the return on total assets at
18,0% (2013: 9,2%) are largely due to the sale of Qlink and the share buy-back programme initiated
in November 2013. BCX is committed to reach a sustainable return on total equity of 17% over
the medium term through a combination of divisional profitability improvements, dividend cover
maintenance, a more efficient debt profile, share buy-back, M&A activity and African expansion.
The group continued to generate healthy cash flows with cash from operations of R261,7 million
before working capital changes as well as a cash realisation of R187,5 million from the sale of the
Qlink business.
Divisional performance
Services division
The Services division offers a full range of ICT infrastructure services and value added business
solutions, including cloud services through state of the art data centres.
Divisional revenue grew by 11,5% to R1 103,0 million (2013: R988,9 million). The revenue growth
relates to new business won in the latter part of the prior year. These new client wins contributed to
a recovery in operating profit growing 48,3% to R101,0 million (2013: R68,1 million).
UCS division
The UCS division offers a full range of ICT infrastructure services targeted at the retail industry.
Through the strategic acquisition of Integr8 IT BCX has been able to target the mid-tier market
segment allowing the group to diversify its service offering.
Revenue increased 9,1% to R610,9 million (2013: R560,1 million) and operating profit improved to
R50,2 million (2013: R47,0 million). Despite difficult trading conditions within the retail industry, the
division continues to show pleasing growth.
Canoa division
The Canoa division offers Managed Print Solutions (MPS) and office automation. The division has the
exclusive distribution rights for Canon copy, print and imaging solutions in Southern Africa.
BCX's entry into the Nigerian MPS market during the period offers very exciting prospects for the
group.
Revenue remained stable at R522,7 million (2013: R514,9 million) whilst operating profit decreased
to R47,6 million (2013: R56,9 million) as a result of lower margin product business during the
period.
Technology division
The Technology division delivers innovative technology solutions to both the private and the public
sector in conjunction with the world's leading vendors and partners.
Positive results were achieved with revenue of R356,6 million and a contribution of R16,3 million to
operating profit for the year (2013: R13,1 million).
International division
The International division is responsible for capturing growth in West Africa, East Africa and Southern
Africa (excluding South Africa).
Revenue in the International division grew 30,9% to R314,0 million (2013: R239,8 million) supported
by a growing presence in Nigeria.
A once off project in Ghana in the previous financial year and timing issues on stock deliveries in
Nigeria contributed to the operating loss of R12,7 million for the period. The issues in Nigeria have
been addressed and the group expects the division to return to profitability in the second half of
the year.
Innovation division
The Innovation division is responsible for the group's own intellectual property. During the period
the group secured new business in Kenya and will implement its ERP system in various local
municipalities.
The division's decreased revenue of R159,8 million (2013: R244,1 million) relates solely to the sale
of Qlink and the joint venture transaction with NorthgateArinso.
Corporate activity
With effect from 1 March 2014, the group:
- concluded a transaction to acquire the assets and contracts of Panabiz Nigeria. Panabiz Nigeria is
a Managed Print Services (MPS) company and a well-established Canon distributor operating in
West Africa;
- concluded a transaction to acquire 100% of the shareholding in Ultimate Solutions Proprietary
Limited. Ultimate Solutions is Botswana's market leader in Point of Sale solutions with branches
in Gaborone, Maun and Francistown and a retail customer base of over 800 stores across the
country; and
- the group entered into an agreement to acquire a 30% stake in African Arete Proprietary Limited,
a services solutions business focussed on the SME market which will complement BCX's existing
portfolio in KwaZulu-Natal.
Outlook
The group is clustering all its delivery entities into three centres of excellence – Converged
infrastructure solutions, Business solutions, and Investments and Alliances. This is expected to
enable the group's significant capabilities to be deployed across Africa to support the emerging
growth opportunities.
The newly created customer advocacy function will ensure that the group remains agile and will
enable the group to deliver services and solutions that address the evolving needs of its customers
wherever required.
The group remains confident that the benefits from group-wide cross-selling combined with an
improved performance from Nigeria, will result in the group achieving its targets for the full year.
Aside from the transactions referred to under the Corporate activity heading and Cautionary
announcement which follows there have been no other significant subsequent events.
Independent review by the auditors
The condensed consolidated interim financial statements for the six months ended 28 February 2014
have been reviewed by KPMG Inc. and their unmodified review report is available for inspection at
the registered office of the company.
Cautionary announcement
BCX shareholders are advised that the board of directors of the company has entered into discussions,
which, if successfully concluded, may have a material effect on the price at which BCX's securities
trade on the JSE.
Accordingly, BCX shareholders are advised to exercise caution when dealing in BCX's securities until
a further announcement is made.
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 support of BCX.
For and on behalf of the board
AC Ruiters LB Mophatlane
Chairman Chief Executive Officer
Midrand
15 April 2014
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 # Ghanain ^ 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 condensed consolidated
interim financial information and has supervised the preparation thereof.
For more information please visit our investor relations website at www.bcx.co.za
Issue date: 15 April 2014
Date: 15/04/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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