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Group Abridged Audited Results For The Year Ended 30 June 2014 And Notice Of Annual General Meeting
SILVERBRIDGE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration NUMBER 1995/006315/06)
Share code: “SVB” ISIN: ZAE000086229
(SilverBridge or Group OR THE COMPANY)
GROUP ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED
30 June 2014 AND Notice of annual general meeting
GROUP PROFILE
SilverBridge offers clients in the insurance industry reliable solutions that aim to simplify their
operations by enabling and improving their business processes. We achieve this by implementing our
system platforms and customising them to meet client needs. Our software is rented to our customers
on a usage basis. The valuable experience we have gained through our existing African footprint and
strategic partnerships positions us well to take advantage of opportunities while making life
insurance simpler and more accessible.
Exergy is our flagship platform that enables core back office policy administration in the life
assurance industry. The broader Exergy solution package has specific applications which can be
customised to suit the needs of a long-term insurer. We aim to enable our clients to drive their
strategic business objectives more efficiently. Our approach is to identify and define strategic
customer business objectives, translate them into IT requirements and implement sustainable solutions.
The Group’s integrated report which incorporates the Annual Financial Statements can be obtained
from our website or by contacting the Company directly. These abridged financial statements were
prepared by the Head of Finance and Shared Services, Petro Mostert CA(SA), under the supervision
of the Financial Director, Lee Kuyper CA(SA).
GROUP ABRIDGED AUDITED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2014
Notes 2014 2013
R’000 R’000
Revenue 1.5 83 844 82 247
Other income 430 316
Personnel expenses (57 730) (60 279)
Depreciation and amortisation (2 198) (2 990)
Professional fees paid for services (3 892) (4 117)
Other expenses (12 159) (11 962)
Results from operating activities 8 295 3 215
Finance income 167 182
Finance costs (27) (310)
Profit before income tax 8 435 3 087
Income tax (2 516) (765)
Profit and total comprehensive income for the year 5 919 2 322
Earnings per share
Basic earnings per share 1.3 17.1 6.7
Diluted earnings per share 1.3 17.1 6.7
GROUP ABRIDGED AUDITED STATEMENT OF FINANCIAL POSITION as at 30 June 2014
Notes 2014 2013
R’000 R’000
ASSETS
Non-current assets 15 086 14 808
Equipment 1 244 841
Intangible assets and goodwill 11 110 11 670
Deferred tax assets 764 280
Withholding tax rebates receivable 1 968 2 017
Current assets 27 429 17 910
Income tax receivable – 1 102
Withholding tax rebates receivable 953 -
Revenue recognised not yet invoiced 1.4 6 635 1 297
Trade and other receivables 11 907 12 308
Cash and cash equivalents 7 934 3 203
Total assets 42 515 32 718
EQUITY AND LIABILITIES
Equity 30 501 24 229
Share capital 348 348
Share premium 11 871 11 871
Treasury shares (197) (197)
Share based payment reserve 512 1 070
Retained earnings 17 967 11 137
Non-current liabilities 30 –
Deferred tax liabilities 30 –
Current liabilities 11 984 8 489
Income tax payable 611 –
Trade and other payables 1.2 8 616 6 807
Provision 2 415 –
Deferred revenue 1.4 342 1 682
Total liabilities 12 014 8 489
Total equity and liabilities 42 515 32 718
Net asset value per share (cents) 1.6 87.96 69.87
Net tangible asset value per share (cents) 1.7 55.92 36.22
GROUP ABRIDGED audited STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2014
Share Share Treasury Share Retained Total
capital premium shares based earnings equity
payment
R’000 reserve
Balance at 1 July 2012 348 11 871 (197) 1 338 8 102 21 462
Total comprehensive income
for the year
Profit for the year – – – – 2 322 2 322
Total comprehensive income
for the year – – – – 2 322 2 322
Equity settled share based payment – – – 445 – 445
Transfer of reserve of share
options that did not vest – – – (713) 713 –
Total contributions by and
distributions to owners – – – (268) 713 445
Total transactions with owners – – – (268) 713 445
Balance at 30 June 2013 348 11 871 (197) 1 070 11 137 24 229
Total comprehensive income
for the year
Profit for the year – – – – 5 919 5 919
Total comprehensive
income for the year – – – – 5 919 5 919
Equity settled share
based payment – – – 353 – 353
Transfer of reserve of share
options that did not vest – – – (911) 911 –
Total contributions by
and distributions to owners – – – (558) 911 353
Total transactions with owners – – – (558) 911 353
Balance at 30 June 2014 348 11 871 (197) 512 17 967 30 501
GROUP ABRIDGED audited CASH FLOW STATEMENT for the year ended 30 June 2014
Notes 2014 2013
R’000 R’000
Cash generated from operations 7 858 157
Interest received 167 112
Interest paid (27) (190)
Taxation paid (1 256) (173)
Net cash inflow/(outflow) from operating activities 6 742 (94)
Cash flows from investing activities
Equipment acquired to maintain operations (1 050) (492)
Proceeds from sale of equipment 41 24
Cash outflow from capitalisation of development costs (1 002) (756)
Net cash used in investing activities (2 011) (1 224)
Cash flows from financing activities
Net cash flow from financing activities – –
Net increase/(decrease) in cash and cash equivalents 4 731 (1 318)
Cash and cash equivalents at the beginning of the year 3 203 4 521
Cash and cash equivalents at the end of the year 7 934 3 203
GROUP ABRIDGED audited SEGMENT REPORTS for the year ended 30 June 2014
Business segments
Owing to structural changes within the operations of the Group and the introduction of the Connect
service business from the interim reporting date, the segment reporting was changed to align with the
manner in which the operations are measured. A new segment, SilverBridge support services, was introduced.
The prior year segment results have not been restated into the newly formed segments owing to the
relatively small impact of the introduction of the new segment and that a comparison between prior year
and current year is still easily made. For comparison with prior year results, the Connect implementation
segment relates to the previous implementation segment and the Connect support services segment together
with the SilverBridge support services segment relates to the previous Support services segment.
Warranty and maintenance expenses have been allocated to the SilverBridge software rental and maintenance
segment. These costs were previously allocated to the SilverBridge research and development segment and
to indirect costs. This change was made to better reflect the operational nature of the costs in relation
to the revenue generated. Prior year segment results have been restated to reflect this change.
Revenue related to smaller enhancement projects done for existing clients has been allocated to the Connect
support services segment. It was previously allocated to the Connect implementation segment. This change
was made to better reflect the nature of the revenue generated. Prior year segment results have been
restated to reflect this change.
2014 Connect Connect SilverBridge SilverBridge SilverBridge Total
Imple- support Support research & softwae
mentation services services development rental &
R’000 maintenance
Segment revenue 20 683 24 707 9 312 – 37 137 91 839
Segment revenue
inter-group – – (7 995) (7 995)
Segment revenue
external 20 683 24 707 1 317 – 37 137 83 844
Direct segment cost (13 584) (10 360) (1 793) (9 664) (5 746) (41 147)
Cost capitalised – – – 1 002 – 1 002
Segment gross profit 7 099 14 347 (476) (8 662) 31 391 43 699
Indirect
segment cost (10 843) (8 269) (1 431) (7 713) (4 586) (32 842)
Segment result (3 744) 6 078 (1 907) (16 375) 26 805 10 857
Unallocated
expenses * (2 562)
Operating profit 8 295
Finance income 167
Finance expense (27)
Income tax (2 516)
Profit for the year 5 919
* Unallocated expenses relate to costs incurred at a corporate level.
2013 Imple-
mentation Support research & software
services services development rental &
R’000 maintenance Total
Segment revenue 22 524 25 530 – 34 193 82 247
Direct segment cost (20 596) (14 912) (8 307) (5 850) (49 665)
Cost capitalised – – 756 – 756
Segment gross profit 1 928 10 618 (7 551) 28 343 33 338
Indirect
segment cost (11 484) (8 315) (4 632) (3 262) (27 693)
Segment result (9 556) 2 303 (12 183) 25 081 5 645
Unallocated
expenses * (2 430)
Operating profit 3 215
Finance income 182
Finance expense (310)
Income tax (765)
Profit for the year 2 322
* Unallocated expenses relate to costs incurred at a corporate level.
COMMENTARY
1. NOTES TO THE GROUP ABRIDGED FINANCIAL STATEMENTS
1.1 Basis of preparation
The summary consolidated financial statements are prepared in accordance with requirements of the JSE Limited
Listings Requirements for abridged reports and the requirements of the Companies Act applicable to summary
financial statements. The Listings Requirements require abridged reports to be prepared in accordance with
the framework concepts and the recognition requirements of International Financial Reporting Standards (IFRS)
and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum, contain the
information required by IAS 34 Interim Financial Reporting.
The Group abridged annual financial statements for the year ended 30 June 2014 incorporate extracts of the
Group’s unqualified audited financial statements, which are prepared in accordance with IFRS and the Companies
Act. Except for the changes below, the accounting policies have been applied consistently to all years presented
in these consolidated financial statements and financial statements and have been applied consistently by Group entities.
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to
standards, with a date of initial application of 1 July 2013:
Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)
The new disclosures require entities to disclose gross amounts of financial assets and financial liabilities subject
to rights of set-off, amounts set off in accordance with the accounting standards, and the related net credit exposure.
This information helps investors understand the extent to which an entity has set off financial assets and financial
liabilities in its statement of financial position and the effects of rights of set-off on the entity’s rights and obligations.
The adoption of this standards did not have a significant impact on the financial reporting of the Group or the Company.
IFRS 10, Consolidated Financial Statements (2011)
IFRS 10 introduces a single control model that focuses on whether the Group has power over an investee, exposure or
rights to variable returns from its involvement with the investee and the ability to use its power to affect those returns.
In accordance with the transitional provisions of IFRS 10, the Group reassessed the control conclusion for its investees
at 1 July 2013. The Group did not change its control conclusion in respect of any of its investees. The adoption of this
standard did not have a significant impact on the financial reporting of the Group or the Company.
IFRS 12, Disclosure of Interests in Other Entities
IFRS 12 brings together in a single standard all the disclosure requirements about an entity’s interests in subsidiaries,
joint arrangements, associates and unconsolidated structured entities. IFRS 12 requires the disclosure of information
about the nature, risks and financial effects of these interests.
As the Group only has wholly-owned subsidiaries, the adoption of this standard did not have a significant impact on the
financial reporting of the Group or the Company.
IFRS 13, Fair Value Measurement
IFRS 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets
and liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures
requirements for fair value measurements.
The key principles in IFRS 13 are as follows:
- Fair value is an exit price
- Measurement considers characteristics of the asset or liability and not entity-specific characteristics
- Measurement assumes a transaction in the entity’s principle (or most advantageous) market between market participants
- Price is not adjusted for transaction costs
- Measurement maximises the use of relevant observable inputs and minimises the use of unobservable inputs
- The three-level fair value hierarchy is extended to all fair value measurements
The adoption of this standard did not have a significant impact on the financial reporting of the Group or the Company.
For a better understanding of the Group’s financial position and results of operations, these abridged financial
statements must be read in conjunction with the Group’s audited annual financial statements for the year ended
30 June 2014 which include all disclosures required by IFRS, and which are expected to be released on or about
17 September 2014.
The directors take full responsibility for the preparation of the abridged report and the financial information has
been correctly extracted from the underlying annual financial statements. This abridged report is extracted from
audited information, but is not itself audited.
1.2 Trade and other payables
Trade and other payables comprised of the following:
2014 2013
R’000 R’000
Trade payables 875 2 783
Liability on capital reduction - 30
Other payables (accruals) 1 783 1 487
Withholding tax rebate payable - 278
VAT payable 458 177
Incentive accrual 2 984 -
Leave accrual 2 516 2 052
Total trade and other payables 8 616 6 807
1.3 EARNINGS per share
Basic and diluted earnings per ordinary share
Basic and diluted earnings per ordinary share is calculated by dividing the earnings for the year attributable to
ordinary equity holders of the parent of R5.9 million (2013: R2.3 million) by the weighted average number of ordinary
shares outstanding during the year of 34.7 million (2013: 34.7 million).
2014 2013
Reconciliation of the weighted average number of shares in issue
Shares in issue at the beginning of the year (‘000) 34 781 34 781
Effect of treasury shares acquired on 1 March 2007 (‘000) (106) (106)
Shares in issue at the end of the year (‘000) 34 675 34 675
Weighted average number of shares in issue at
the end of the year (‘000) 34 675 34 675
Earnings attributable to ordinary shareholders (R’000) 5 919 2 322
Basic and diluted earnings per share (cents) 17.1 6.7
Headline and diluted earnings per ordinary share
Headline and diluted headline earnings per ordinary share is calculated by dividing the headline earnings
attributable to ordinary equity holders of the parent of R5.9 million (2013: R2.3 million) by the weighted average
number of ordinary shares outstanding during the year of 34.7 million (2013: 34.7 million).
2014 2013
Weighted average number of shares in issue (‘000) 34 675 34 675
Reconciliation between basic earnings and headline earnings
Basic earnings (R’000) 5 919 2 322
Adjusted for:
Loss/(Profit) on disposal of equipment (R’000) (22) 298
Headline earnings (R’000) 5 897 2 620
Headline and diluted headline earnings per share (cents) 17.0 7.6
1.4 Deferred revenue and revenue recognised BUT not yet invoiced
Deferred revenue and revenue recognised but not yet invoiced refers to the timing difference between recognition
of revenue and invoicing to the client.
2014 2013
R’000 R’000
Current asset
Revenue recognised not yet invoiced 6 635 1 297
Current liability
Deferred revenue (342) (1 682)
Net asset/(liability) 6 293 (385)
1.5 Revenue per geographical segment
Total South Other
Africa African
countries*
R’000 R’000 R’000
Year ended 30 June 2014 83 844 50 938 32 906
Year ended 30 June 2013 82 247 60 420 21 827
* Other African countries include Angola, Botswana, Kenya, Malawi, Mauritius, Nigeria, Ghana, Namibia, Lesotho, Swaziland,
Zambia and Zimbabwe.
1.6 Net asset value per share
The net asset value per share is calculated by the value of the Group’s assets minus the value of its liabilities, divided
by number of ordinary shares in issue.
1.7 Net tangible asset value per share
The net asset value per share is calculated by the value of the Group’s tangible assets minus the value of its liabilities,
divided by number of ordinary shares in issue.
2. CORPORATE ACTIVITY
2.1. Dividend
No dividend or capital distribution was declared for the year under review.
3. AUDIT REPORT
The financial statements for the year ended 30 June 2014 have been audited by KPMG Inc. with Willem Pretorius as the
designated partner. Their unmodified audit report is available for inspection at the Group’s registered office.
4. SUBSEQUENT EVENTS
No events occurred subsequent to the year end that would require the Group annual financial statements to be adjusted.
5. FINANCIAL RESULTS AND PERFORMANCE
The Group continued to improve its position in the current year. We have further improved profitability through increased
revenue in high margin segments and continued focus on cost control.
Client relationships continue to improve. Our largest implementation project has gone live during the year and remains a
key focus area going forward.
While overall Group revenue increased marginally, there were healthy increases in annuity revenue, which contributed to
the improved profitability.
Total costs declined by 4% from a continued focus on keeping cost structures optimal for our current operations. Cost
awareness remains important going forward.
The Group’s profitability improved to a net profit of R5.9 million and HEPS of 17.0 cents. Sequentially, there was an
improvement from the first to the second half of the year.
Cash flow from operating activities led to a net inflow of R6.7 million. This is a R6.8 million improvement from last year.
The cash position of the Group improved to R7.9 million at year end compared to R3.2 million last year. Cash and working
capital continue to be managed carefully.
Segmental review
Connect implementation services
This segment implements our solutions for clients and is project based.
Revenue declined by 8% but gross profit more than tripled, yielding a gross margin of 34% compared to last year’s 9%.
The improvement came from a number of smaller projects with shorter timeframes and healthier margins. However, our largest
implementation project continued to weigh on the segment resulting in an overall result below target. After indirect costs,
a loss of R3.7 million was reported, an improvement from last year’s R9.6 million loss.
We intend making further improvements over time through increased focus on smaller, higher margin implementation projects,
while continuing to manage our large implementation project carefully.
Connect support services
Support is contracted on a monthly basis and is annuity based.
Compared to last year’s Support services segment, revenue declined by 3%. Gross profit was up a healthy 35% with the gross
profit margin increasing to 58% from last year’s 42%. After indirect costs, R6.1 million profit was achieved, an improvement
from last year’s profit of R2.3 million.
The decline in revenue is a result of our strategic decision to enable clients and partners to support our software at two
of our large support clients. However, several new smaller support contracts were added, which helped revenue and improved
profitability.
SilverBridge support services
This is a new segment that was created by separating SilverBridge’s software activities (SilverBridge) from its implementation
and support activities (Connect). It provides expert level software support and training services to clients and partners.
The segment is still relatively small and posted a loss of R1.9 million for the year.
This segment should become profitable as it achieves more scale.
SilverBridge software rental
Software rental is annuity based. It depends on usage, increasing with the number of contracts or policies administered.
We are pleased with the growth in revenue of 9%, driven by a combination of increased usage and the addition of new clients.
After the allocation of direct costs related to warranty and maintenance as well as indirect costs, the segment made a profit
of R26.8 million. This is 7% higher than the previous year.
Our software and the growth of our annuity rental stream remain a core focus going forward.
SilverBridge research and development (“R&D”)
Our R&D efforts continued with further development of the Eco-Suite, a set of assets that forms a platform for implementing
more efficiently and enabling partners and clients. It includes tools, processes, testing and training as well as the
development of new complementary software modules, which will create new revenue streams for the Group. We will continue to
invest in our asset base, balancing effort between development of new assets for future returns and keeping existing assets
relevant in terms of latest technology and market trends.
6. GROUP OUTLOOK
The changing environment within our target market continues to present new opportunities as financial service institutions
search for ways to reduce cost, improve service to their clients and enter new emerging markets. We continue to see financial
service providers driving internal efficiencies and differentiating their products as a means to capture and retain market
share. SilverBridge remains well positioned to meet these needs.
In our own business we have challenges and risks which we continue to focus on, manage and mitigate. We are mitigating some
of our risk by gearing up partners to implement our software, while also managing the risk in our own current large
implementation. We continue to add new clients and strive toward implementing and supporting our solutions in a more effective
and efficient manner.
At the same time we are focused on growing the revenue of the Group. We continue operating within our current business model
but we are also exploring ways to leverage our competencies in other market segments.
Overall, the outlook for the Group remains positive as we continue to build our core annuity revenue and strengthen our
business around this.
7. NOTICE OF THE Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held at 10:00 on Thursday, 16 October 2014
at the registered office of SilverBridge, 495 Prieska Street, Erasmuskloof, Pretoria, to transact the business as stated
in the notice of the Annual General Meeting, which is contained in the Integrated Annual Report to be distributed on or
about 17 September 2014.
The board of directors of SilverBridge (“the Board”) has determined that, in terms of section 62(3)(a), as read with
section 59 of the Companies Act, 2008 (Act 71 of 2008), the record date for the purposes of determining which shareholders
of the Company are entitled to participate in and vote at the Annual General Meeting is Friday, 10 October 2014. Accordingly,
the last day to trade in SilverBridge shares in order to be recorded in the Register to be entitled to vote at the Annual
General Meeting will be Friday, 3 October 2014
8. DIRECTORATE
During the year under review the following changes to the Board occurred:
Mr L Gcwabe resigned from the Board with effect from 13 February 2014, following his resignation from Kagiso Tiso Holdings Limited, a major shareholder in SilverBridge;
Ms J Chikaonda has been appointed as a non-executive director with effect from 25 June 2014; and
Mr L Kuyper whom was already an executive director, assumed the role of financial director on 11 September 2013.
On behalf of the Board
Jaco Swanepoel Robert Emslie
Chief Executive Officer Chairman
Pretoria
16 September 2014
CORPORATE INFORMATION
Directors of SilverBridge:
Robert Emslie (Chairman) **, Jaco Swanepoel (CEO), Jeremy de Villiers **, J Chikaonda *, Hasheel Govind *, Tyrrel Murray*, Lee Kuyper (Financial Director).
(All the directors are South African citizens).
* Non-executive
**Independent non-executive
SilverBridge Registered offices
First Floor, Castle View North
495 Prieska Street, Erasmuskloof,
Pretoria, 0048
(PO Box 11799, Erasmuskloof, 0048)
Company Secretary:
Fusion Corporate Secretarial Services Proprietary Limited,
represented by Melinda Gous
GROUP AUDITORS:
KPMG Incorporated
(Registration number: 1999/012543/21)
Transfer secretaries
Computershare Investor Services Proprietary Limited
(Registration number: 2004/003647/07)
Designated adviser:
Merchantec Proprietary Limited
(Registration number: 2008/027362/07)
www.silverbridge.co.za
Date: 16/09/2014 09:37:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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