Wrap Text
Reviewed provisional results for the year ended 28 February 2014
Ansys Limited
("Ansys" or "the company" or "the group")
(Incorporated in the Republic of South Africa)
(RegistrationNumber: 1987/001222/06)
Share Code: ANS
ISIN: ZAE000097028
REVIEWED PROVISIONAL ANNUAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2014
KEY FEATURES
- Order book up by 630% to R190 million
- Basic loss per share improved by 50% to (3,85) cents
- Restructuring successfully completed
- Tedaka Technologies business combination concluded and integrated
- Consolidated platform for growth
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At At
28 February 2014 28 February 2013
(Reviewed) (Audited)
Notes R'000 R'000
Assets
Non-current assets 33 940 31 751
Plant and equipment 1 610 509
Intangible assets 2 19 202 21 604
Deferred tax asset 13 128 9 638
Current assets 53 836 31 873
Inventories 29 217 8 265
Trade and other receivables 24 030 23 398
Cash and cash equivalents 508 54
Derivative financial assets 81 4
Current tax receivable - 152
Total assets 87 776 63 624
Equity and liabilities
Equity 32 408 37 435
Capital and reserves 32 408 37 435
Non-current liabilities 11 977 2 452
Instalment sale agreements 436 -
Other financial liabilities 3 9 993 -
Deferred tax liability 1 548 2 452
Current liabilities 43 391 23 737
Instalment sale agreements 179 -
Provisions 208 -
Borrowings - 2 133
Trade and other payables 35 282 12 959
Cash and cash equivalents 7 722 8 645
Total equity and liabilities 87 776 63 624
Number of shares in issue 244 867 056 164 867 056
Net asset value per share (cents) 13.2 22.7
Tangible net asset value per share (cents) 5.4 9.6
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
28 February 2014 28 February 2013
(Reviewed) (Audited)
Note R'000 R'000
Revenue 65 803 81 259
Cost of sales (42 678) (47 744)
Gross profit 23 125 33 515
Other income 1 979 444
Operating costs (30 499) (27 974)
EBITDA (5 395) 5 985
Depreciation and amortisation (1 947) (3 772)
Development cost impairment 2 (868) (8 536)
Goodwill impairment - (7 907)
Operating loss (8 210) (14 228)
Finance income 3 -
Finance cost (903) (1 112)
Loss before taxation (9 110) (15 340)
Taxation 2 085 2 792
Loss for the year (7 025) (12 548)
Other comprehensive income, net of tax - -
Total comprehensive loss for the year (7 025) (12 548)
Basic loss per share (cents) (3.85) (7.74)
Diluted loss per share (cents) (3.85) (7.74)
Headline (loss)/earnings per share (cents) 4 (3.58) 2.40
Diluted headline (loss)/earnings per share (cents) 4 (3.58) 2.40
Weighted average number of shares in issue 182 620 481 162 162 946
Diluted average number of shares in issue 182 620 481 162 162 946
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued share Retained income/ Total
capital (accumulated loss) equity
Notes R'000 R'000 R'000
Balance as at 1 March 2012 46 728 2 715 49 443
Movements during the year
Share issue 540 - 540
Loss for the year - (12 548) (12 548)
Balance as at 28 February 2013 (Audited) 47 268 (9 833) 37 435
Movements during the year
Share issue 1 26 400 - 26 400
Common control business combination 1 - (24 402) (24 402)
Loss for the year - (7 025) (7 025)
Balance as at 28 February 2014 (Reviewed) 73 668 (41 260) 32 408
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
28 February 2014 28 February 2013
(Reviewed) (Audited)
R'000 R'000
Cash flows from operating activities before working capital (6 582) 4 582
Changes in working capital 10 222 (2 555)
Cash flows from operating activities 3 540 2 027
Cash flows from investing activities (329) (5 397)
Cash flows from financing activities (1 834) (784)
Cash flows for the year 1 377 (4 153)
Cash and cash equivalents at beginning of the year (8 591) (4 438)
Cash and cash equivalents at end of the year (7 214) (8 591)
CONDENSED SEGMENT REPORT
Year ended Year ended
28 February 2014 28 February 2013
(Reviewed) (Audited)
Notes R'000 R'000
Segment revenue
Rail 37 118 57 800
Defence 15 031 18 230
Mining* 543 5 229
Telecommunications** 1 13 111 -
Total 65 803 81 259
Segment profit/(loss)
Rail 9 843 5 534
Defence 8 256 8 318
Mining* (4 324) (9 750)
Telecommunications** 1 (2 308) -
11 467 4 102
Corporate unallocated (19 677) (18 330)
Finance cost (903) (1 112)
Finance income 3 -
Loss before taxation (9 110) (15 340)
Financial position
Assets 87 776 63 624
Rail 22 125 21 280
Defence 1 677 10 308
Mining* 6 212 12 473
Telecommunications** 1 37 698 -
Unallocated 20 064 19 563
Liabilities 55 368 26 189
Rail 72 -
Defence 1 347 -
Mining* 17 -
Telecommunications** 1 45 391 -
Unallocated 8 541 26 189
The segment report has changed from the prior year as follows:
*The segment name has been changed from ‘Mining and Industrial' to ‘Mining', as the current and prior year revenue
generated from this sector was only from mining customers.
**Tedaka, a telecommunication specialist, is included into a new operating segment named "Telecommunications"
COMMENTARY
Introduction
The year to 28 February 2014 ("the year") saw Ansys successfully complete its restructuring programme for long-term
sustainability and improved competitiveness, under the leadership of new CEO Teddy Daka (former non-executive group
Chair). Revenue declined to R65,8 million (2013: R81,3 million) owing to the delayed release of procurement packages of
major clients and the depressed mining sector. Notwithstanding this, the group contained the loss for the year to R7,0 million,
almost halved when compared to the previous year (2013: loss R12,5 million), a direct result of the restructuring programme.
The segmental profits/losses indicate a similar more positive trend.
The order book improved in the second half of the year and at year-end totalled R190 million with a rolling five year horizon.
Group profile
The group designs, develops and distributes niche technology-driven engineering solutions for harsh environments in four
key sectors: Rail, Mining, Defence and Telecommunications. Ansys' range of standard and bespoke solutions is aimed at
improving clients' productivity, safety and security.
The group intends to be a centre of engineering excellence and is focussed on research and development in order to remain
at the forefront of innovation in its areas of operation.
Headquartered in Centurion, Tshwane, its geographic footprint extends throughout South Africa and into Botswana with the
strategic intent to expand further into Africa and beyond.
Operations
Rail
During the year Ansys secured the award of an R188 million contract (undiscounted over the contract period) from Transnet
for an integrated dashboard display system ("ISD") for locomotives. The ISD was designed and developed in-house specifically
for Transnet's requirements and will be installed in the full fleet over the next five years. The award reflects the group's
strategy of securing longer-term contracts with the possibility of annuity income in the maintenance phase. The ISD is a
world-class system and with variation has the potential for sales beyond Transnet and South Africa's borders.
Ansys has maintained capacity in this sector ahead of the execution phase of this and other recently secured projects, to roll
out in the year ahead (FY2015). In line with our strategic intent, we continued to invest in Research and Development projects
for the rail market which we expect to convert into long-term delivery contracts in the next financial year.
Although revenue in the segment declined to R37,2 million (2013: R57,8 million), profit for the year increased significantly
to R9,8 million (2013: R5,8 million) due to a focus on higher margin products and services. The decline in revenue was
mainly due to the delay in release of procurement packages and a longer than expected procurement cycle from our major
client.
Defence
Performance in this segment was as expected. The current major project will taper off to conclusion in mid-2015. In line
with our previously stated strategy, the group remains opportunistic in this sector in anticipation of increased activity in the
market. It is projected that the use of private sector contractors by state-owned enterprises will increase in light of demanding
delivery targets and that government will now proactively address its historic underspending in this area. We are cautiously
optimistic of a healthier year ahead and of starting to realise the benefits of our retained capacity from FY2016 onwards.
Revenue in the segment declined to R15,0 million (R18,2 million). In the face of this challenge the segment managed to
retain consistent profits year-on-year at R8,3 million (2013: R8,3 million).
Mining
The domestic mining industry remained depressed in the year, impacted by global factors including a decline in demand for
platinum particularly from a weakened European Union. This was exacerbated by widespread local strike action. However,
we anticipate that the sector should start to recover in the year ahead (FY2015). Ansys is maintaining its competency and
increasing investment in capability to capitalise on the anticipated uptake. Further, the group is looking to expand
internationally to markets to which Ansys' solutions are well suited.
The above resulted in a decline in revenue for the year in the segment to R0,5 million (2013: R5,2 million) while the loss for
the year of R4,3 million was improved compared to FY2013 (2013: loss R9,7 million).
Telecommunications ("Telecoms")
This growing sector provides promising opportunities which align with the group's drive for localisation.
The segment, comprising of Tedaka, achieved revenue of R13,1 million for the three months of inclusion in Ansys' results
and posted a loss for the same period of R2,3 million before tax as per the segment report. Tedaka competes in a tight
market characterised by increasing pricing pressure on suppliers. Cost improvement measures have been put in place to
boost profitability while enabling continued competitiveness.
Restructuring benefits
Ansys' business model has been effectively clarified as technology research and development, with the intention to build a
rich Intellectual Property ("IP") legacy leveraging in-house engineering expertise. The cost base has been completely
restructured to align more appropriately with the revenue nature of the business (which is project-driven rather than annuity-
based) and with market cyclicality. In order to enable a scalable cost structure, core functions have been retained in-house
and certain support functions outsourced. Further, the extensive production facility has been scaled-down into maintenance
and repair plant with capacity for small production runs in line with the group's key focus, resulting in significant cost savings.
The benefits of the restructuring have started to be realised and the group is well poised for growth going forward.
Tedaka Technologies Proprietary Limited ("Tedaka") transaction
As previously announced during the year, the group concluded the business combination of telecoms solutions specialist
Tedaka. Refer to note 1 for the detail of the purchase consideration. The group will be able to access IP synergies and gain
exposure to opportunities in the fast-growing telecoms sector.
CEO Teddy Daka is a trustee of TDK Trust, which wholly owns Tedaka Investments Proprietary Limited, the seller of Tedaka.
Tedaka has been successfully integrated into the group and contributed to results for three months.
Tedaka is recognised as a significant player in the telecoms industry with strong competency in passive connectivity. It
maintains its positioning through ownership of its client relationships, white labelling and innovating its own technologies
for the market.
Its revenue model with quick project turnaround is advantageous to Ansys as a balance to the group's more lumpy revenue
stream (as explained above). Further, Tedaka has an established blue-chip client base offering opportunity for expansion
and cross-selling.
Growth strategy
Our long-term strategic objective is to become an original equipment manufacturer ("OEM") by producing proprietary
technologies in-house, supplemented by those of strategic OEM partners. Our focus on research and development will
position Ansys in time as an IP-led provider of technology solutions in our key markets.
Our growth ambitions will necessitate both ongoing organic growth and acquisitive activity. The group's acquisition strategy
requires primarily that target companies strengthen Ansys' IP capacity and market access.
We see emerging markets as critical to our growth strategy. South Africa therefore provides the group with an ideal platform
for testing and perfecting our solutions. It is our strategic intent that our locally developed and manufactured products are
developed to world-class standards, capable of distribution globally.
B-BBEE
During the year Ansys improved its rating to a Level 4 contributor from Level 5. A number of initiatives have been embarked
upon that will realise significant results. The group has set a strategic goal of progressing to Level 1 in the medium term,
and programmes are in place to drive achievement of this goal led by the Remuneration, Social and Ethics Committee.
This committee is supported by management's B-BBEE Committee that is tasked with implementing the various initiatives
aimed at aggressively accelerating our status.
In the interim, we are proud to report that the Ansys is 57% black-owned and controlled. The board is 83% black with
women comprising 50% and black women in particular comprising 33%. The top management team is 50% black.
Directorate
As previously announced, effective 5 June 2013, the following changes were made to the board of directors: T Daka stepped
down from his role as non-executive Chair and assumed the role of Chief Executive Officer, N Mjoli-Mncube was appointed
as independent non-executive Chair in his stead and SP Mzimela was appointed as an independent non-executive director
and a member of the Audit and Risk Committee. All new appointments were ratified at the company's previous annual
general meeting held during the year. There have been no further changes since year-end to date of this announcement.
Outlook
Consensus is that South Africa's GDP is not expected to grow above 2% in 2014, save in the event of government unlocking
significant infrastructure spend which may act as a major stimulus. In contrast, other countries in Africa are projected to
grow GDP by 6-8%, coming off lower bases. This underpins our strategic intent to expand further onto the continent.
There are also signs of an upswing in the global economy, predicated on the tentative US recovery cementing and filtering
through to the East and Europe. The consequent potential boost to the mining market in South Africa offers exciting opportunity
for the group. The rail industry continues to grow and is expected to benefit from Transnet's planned R320 billion spend over
the next 5 years. Our defence segment is likely to benefit from the anticipated increased spend on defence by the
government. The telecoms segment will benefit from the planned FTTx rollout in a rapidly expanding sector.
Financial results and dividend policy
Statement of financial position
The majority of the movement in the statement of financial position was as a result of the Tedaka business combination.
Refer to note 1 of the notes to the provisional financial information.
Significant movements outside the acquisition were as follows:
- Decrease in trade and other receivables as well as trade and other payables due to a decrease in the invoicing activity
for the last quarter of FY2014
- Decrease in borrowings due to the repayment of a shareholder loan during FY2014
- Increase in inventory relates to the work-in-progress for the current projects being executed
Cash flow statement
- Cash inflows from operating activities for the year improved by R1,5 million due to improved working capital cycles
- Cash outflows from investing activities for the year were primarily due to Tedaka bank overdraft assumed as well as the
net of the purchase and disposal of plant and equipment
- Cash outflows from financing activities for the year were mainly attributable to the repayment of a shareholder loan
of R2.1 million
Statement of comprehensive income
Loss for the year
The loss for the year, albeit reduced from the previous year, was primarily a direct result of the reduction in revenue. Refer
to the segment report for further details regarding the segment results.
Ansys' dividend policy is and will remain predicated on due regard for the group's profitability, cash flow position and future
capital requirements. Accordingly no dividend was declared for the year.
NOTES TO THE PROVISIONAL FINANCIAL INFORMATION
1. Common control business combination
On 9 December 2013, the group acquired 100% of the share capital of Tedaka, a telecoms distribution company for
infrastructure products and related network accessories.
The company acquired the entire issued share capital of Tedaka, which was controlled by Ansys' Chief Executive Officer
Teddy Daka. In view of his pre-existing significant interest in the issued share capital of Ansys, and taking account of an
analysis of the attendance and voting patterns at shareholder meetings, it is the judgement of the board that Teddy Daka
had de facto control over Ansys before the transaction. The directors have assessed that this business combination meets
the definition of a business combination under common control. Such a business combination does not fall within the scope
of IFRS 3 - Business Combinations and the directors have therefore recognised the assets and liabilities of the acquiree at
their carrying values on the transaction date.
The business combination of Tedaka will expand the group offering to include solutions for the telecoms sector, thereby
reducing the group's exposure to the rail and defence sectors. The supplier agreements secured by Tedaka will allow the
group to provide state-of-the-art products that suit the needs of telecoms operators in their continuous upgrading of their
networks.
The acquired business contributed revenues of R13,1 million and a net loss after taxation of R1,7 million to the group for
the period 9 December 2013 to 28 February 2014.
The results are included in the telecoms segment as part of the segment report.
Details of the net assets acquired: R'000
Negative carrying value of net assets acquired 6 002
Less:
Purchase consideration 18 400
Shares issued 18 400
Retained earnings 24 402
The value of the shares issued was based on the published share price of 33 cents at 9 December 2013, of which R8 million
represented the purchase of the convertible equity loan and R18.4 million represented the sales share of Tedaka.
The initial purchase consideration, as per the signed sale agreement, was made up as follows:
- An initial tranche payment of 80 000 000 Ansys shares at 20 cents per share. The first tranche payment is allocated to
the convertible equity loan of R8 000 000 and to the sale shares of R8 000 000.
- A second tranche payment will be made in an amount equal to profit after taxation of Tedaka for the financial year ending
28 February 2014, multiplied by a price: earnings ratio of 3 less the initial first tranche payment, which will be payable
in newly issued Ansys shares at an issue price of 20 cents per share.
Tedaka did not meet its profit targets and therefore no payments in shares in addition to the initial payment will be made.
The transaction cost of the business combination approximated to R1.4 million.
NOTES TO THE PROVISIONAL FINANCIAL INFORMATION
1. Common control business combination continued
Carrying value of assets acquired R'000
Property, plant and equipment 1 448
Loans receivable 112
Inventories 19 560
Trade and other receivables 14 960
Trade and other payables (25 149)
Other financial liabilities (17 666)
Deferred tax asset 2 156
Bank overdraft (780)
Borrowings (643)
Total net assets acquired (6 002)
Cash consideration paid -
Less: overdraft assumed 780
Net cash outflow on acquisition (780)
2. Intangible assets Mobile Other
CRMS RTU Goodwill intangible assets Total
R000 R000 R000 R000 R000
Year ended 28 February 2014 (Reviewed)
Opening net carrying amount 2 107 4 386 15 059 52 21 604
Movement:
- impairment (226) (642) - - (868)
- other (582) (922) - (30) (1 534)
Closing net carry amount 1 299 2 822 15 059 22 19 202
Year ended 28 February 2013 (Audited)
Opening net carrying amount 11 485 1 447 22 966 112 36 010
Movement:
- impairment (8 536) - (7 907) - (16 443)
- other (840) 2 939 - (60) 2 037
Closing net carry amount 2 107 4 386 15 059 52 21 604
The challenging labour market conditions have had a significant impact on the sales of the Rope Monitoring Systems, namely
Continuous Rope Monitoring System ("CRMS") and Mobile Rope Testing Unit ("RTU"), which triggered the requirement for
an impairment. This impairment formed part of the mining segment results.
3. Related party balances Year ended Year ended
28 February 2014 28 February 2013
(Reviewed) (Audited)
Relationship R'000 R'000
Other financial liabilities
Bearing Management Consulting Proprietary Limited Same director (T Daka) 923 -
Tedaka Investment Proprietary Limited Same director (T Daka) 9 070 -
9 993 -
NOTES TO THE PROVISIONAL FINANCIAL INFORMATION
4. Headline (loss)/earnings Year ended Year ended
28 February 2014 28 February 2013
(Reviewed) (Audited)
R'000 R'000
Reconciliation of headline (loss)/earnings:
Loss attributable to ordinary shareholders (7 025) (12 548)
Goodwill impairment - 7 907
Development cost impairment 868 8 536
Profit on disposal of plant and equipment (522) -
Total tax effects of adjustments 146) -
Headline (loss)/earnings attributable to ordinary shareholders (6 533) 3 895
Headline (loss)/earnings per share (cents) (3.58) 2.40
Diluted headline (loss)/earnings per share (cents) (3.58) 2.40
Statement of compliance, basis of preparation and review opinion
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS
and consistent with those of the annual financial statements for the year ended 28 February 2013, except for the adoption
of new, improved and revised standards and interpretations which became effective, which had no material effect on the
financial results.
The directors take full responsibility for the preparation of the provisional financial information and the financial information
has been correctly extracted from the underlying annual financial statements.
The provisional condensed consolidated financial statements for the year ended 28 February 2014 have been reviewed by
the company's auditor, BDO South Africa Incorporated, who has expressed an unmodified review conclusion on the results.
A copy of their review report is available for inspection at the company's registered office. The auditor's report does not
necessarily report on all of the information contained in these financial results. Shareholders are therefore advised that in
order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's
report together with the accompanying financial information from the issuer's registered office.
Preparer
These results were prepared under the supervision of Rachelle Grobbelaar, the Chief Financial Officer.
Going concern
The directors have reviewed the group's budget and cash flow forecast for the year to February 2015 which include certain
assumptions about the cash flows from projects and raising additional funding when required. On this basis and in light of
the group's current financial position, the directors are satisfied that the group will continue to operate for the foreseeable
future and have therefore adopted the going concern basis in preparing these reviewed provisional financial results.
Events subsequent to year-end
The directors are not aware of any significant subsequent events that have occurred between year-end and the date of this
announcement that may materially affect the results of the group for the year or its financial position as at 28 February 2014.
NOTES TO THE PROVISIONAL FINANCIAL INFORMATION
Appreciation
Our thanks to our fellow directors for their tenacity and grit through a challenging period. We also thank our employees for
their loyalty and unflagging enthusiasm in the face of many strategic changes at the group. We are proud to lead this talented
and committed team to a brighter future.
Finally, thank you to our customers, business partners, advisers, suppliers and shareholders for their sustained faith in our
prospects. No growth or economic activity would be possible without orders and the capable employees and shareholder
investment to execute them. We will work hard to maintain your confidence.
By order of the board
29 May 2014
Teddy Daka Rachelle Grobbelaar
Chief Executive Officer Chief Financial Officer
CORPORATE INFORMATION
Directors T Daka (CEO) | R Grobbelaar (CFO) | NS Mjoli-Mncube* (Chair)
FF Dantile* | MD Keebine* | SP Mzimela*
*Independent non-executive
Registration number 1987/001222/06
Registered address 140 Bauhinia Street | Centurion | Pretoria 0157
Postal address PO Box 95361 | Waterkloof | Pretoria 0145
Telephone +27 12 749 1800
Facsimile +27 12 665 2767
Email info@ansys.co.za
Company secretary Fusion Corporate Secretarial Services Proprietary Limited
Designated Advisor Exchange Sponsors 2008 Proprietary Limited
Transfer secretaries Computershare Investor Services Proprietary Limited
Date: 29/05/2014 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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