Wrap Text
Abridged Audited Results for the Year Ended 30 June 2015, Dividend Declaration and Notice of AGM
COGNITION HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1997/010640/06)
Share code: CGN ISIN: ZAE000197042
(“Cognition” or “the Group” or “the Company”)
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2015, DIVIDEND DECLARATION
AND NOTICE OF AGM
ABRIDGED STATEMENT OF FINANCIAL POSITION
Audited as at Audited as at
Figures in Rand Change
30 June 2015 30 June 2014
Assets
Non-Current Assets
Property, plant and equipment -0.83% 15 715 013 15 847 284
Goodwill 16 534 881 -
Intangible assets 18.40% 11 734 951 9 911 690
Investment in associates 295.34% 12 180 379 3 080 993
Deferred tax asset 14.09% 206 485 180 983
94.24% 56 371 709 29 020 950
Current Assets
Inventories -10.80% 410 401 460 095
Trade and other receivables 64.51% 31 163 376 18 943 686
Cash and cash equivalents -20.15% 95 138 781 119 142 094
-8.54% 126 712 558 138 545 875
Total Assets 9.26% 183 084 267 167 566 825
Equity and Liabilities
Equity
Share capital 6.62% 56 110 451 52 624 736
Retained income 10.68% 94 200 852 85 107 940
9.13% 150 311 303 137 732 676
Non-controlling interest 1 466 421 -
10.20% 151 777 724 137 732 676
Liabilities
Non-Current Liabilities
Other financial liability 1 666 341 -
Interest bearing liabilities -28.15% 2 499 293 3 478 698
Deferred tax liability 307.06% 3 851 644 946 222
81.18% 8 017 278 4 424 920
Current Liabilities
Current tax payable 31.99% 950 677 720 268
Interest bearing liabilities 20.97% 1 732 963 1 432 559
Trade and other payables 13.79% 19 146 599 16 826 921
Provisions -79.12% 1 320 094 6 322 924
Unclaimed dividends 30.38% 138 932 106 557
-8.34% 23 289 265 25 409 229
Total Liabilities 4.94% 31 306 543 29 834 149
Total Equity and Liabilities 9.26% 183 084 267 167 566 825
Net asset value per share (cents) 7.83% 109.23 101.30
Net tangible asset value per share
-5.66% 88.68 94.01
(cents)
ABRIDGED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Audited Audited
Figures in Rand Change year ended year ended
30 June 2015 30 June 2014
Revenue -13.19% 102 604 772 118 197 594
Cost of services (40 706 759) (48 122 518)
Gross profit -11.67% 61 898 013 70 075 076
Other income 774 609 587 419
Operating expenses (10 333 581) (9 670 789)
Staff costs (18 902 705) (23 063 331)
Depreciation and amortisation expense (4 118 013) (4 577 825)
Operating profit (loss) -12.09% 29 318 323 33 350 550
Investment income 6 158 722 5 669 212
Income from equity accounted investments 1 099 386 -
Finance costs (390 087) (440 329)
Profit before taxation -6.20% 36 186 344 38 579 433
Taxation (9 777 623) (11 098 151)
Total comprehensive income for the
26 408 721 27 481 282
year
Profit for the year attributable to:
Owners of the parent -6.82% 25 606 808 27 481 282
Non- controlling interest 801 913 -
-3.90% 26 408 721 27 481 282
Basic earnings per share (cents) -7.82% 18.63 20.21
Diluted earnings per share (cents) -7.82% 18.63 20.21
Headline earnings per share (cents) -8.16% 18.56 20.21
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Total Equity
Non-
attributable
Share Share Total Retained controlli
Figures in Rand to holders Total Equity
Capital Premium Share income ng
of the
interest
parent
Balance at 1 July
136 002 52 488 734 52 624 736 73 946 903 126 571 639 - 126 571 639
2013
Change in equity
Total comprehensive
- - - 27 481 282 27 481 282 - 27 481 282
income for the year
Dividends - - - (16 320 245) (16 320 245) - (16 320 245)
Total changes - - - 11 161 037 11 161 037 - 11 161 037
Balance at 1 July
136 002 52 488 734 52 624 736 85 107 940 137 732 676 - 137 732 676
2014
Change in equity
Total comprehensive
- - - 25 606 808 25 606 808 801 913 26 408 721
income for the year
Issue of shares 1 614 3 484 101 3 485 715 - 3 485 715 - 3 485 715
Non-controlling interest
as a result of an - - - - - 664 508 664 508
acquisition
Dividends - - - (16 513 896) (16 513 896) - (16 513 896)
Total changes 1 614 3 484 101 3 485 715 9 092 912 12 578 627 1 466 421 14 045 048
Balance at 30 June
137 616 55 972 835 56 110 451 94 200 852 150 311 303 1 466 421 151 777 724
2015
ABRIDGED STATEMENT OF CASH FLOWS
Audited Audited
Figures in Rand Change year ended year ended
30 June 2015 30 June 2014
Cash flows from operating activities
Cash generated from operations 18 609 103 40 932 689
Interest income 6 158 722 5 669 212
Finance costs (390 087) (440 329)
Tax paid (7 214 970) (9 908 418)
Net cash from operating activities -52.66% 17 162 768 36 253 154
Cash flows from investing activities
Purchase of property, plant and
(1 618 115) (2 180 238)
equipment
Proceeds on disposal of property, plant 335 166 252 839
and equipment
Purchase of intangible assets (4 383 709) (3 682 670)
Business combinations (13 824 616) -
Investment in associates (4 514 285) (3 080 993)
Net cash from investing activities 176.21% (24 005 559) (8 691 062)
Cash flows from financing activities
Repayment of interest bearing liabilities (679 001) (1 471 383)
Dividends paid (16 481 521) (16 282 974)
Net cash from financing activities -3.34% (17 160 522) (17 754 357)
Total cash and cash equivalents
(24 003 313) 9 807 735
movement for the year
Cash and cash equivalents at the
119 142 094 109 334 359
beginning of the year
Total cash and cash equivalents at
-20.15% 95 138 781 119 142 094
end of the year
NOTES TO THE ABRIDGED AUDITED FINANCIAL RESULTS
1. BASIS OF PREPARATION
The Group annual financial statements from which these consolidated audited financial statements were
derived have been prepared on the historical cost basis excluding financial instruments which are accounted
for in terms of IAS39 and conform to International Financial Reporting Standards (“IFRS”) and with the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Financial Reporting Standards Council. The accounting policies
applied in the preparation of these consolidated audited financial results, which are based on reasonable
judgements and estimates, are in accordance with IFRS, and are consistent with those applied in the Group
annual financial statements for the year ended 30 June 2014. These consolidated audited statements set out
in this report have been prepared in terms of IAS 34 – Interim Financial Reporting, the Companies Act, 2008
(Act 71 of 2008), as amended, and the Listings Requirements of JSE Limited (“JSE”).
These consolidated audited financial statements were prepared under the supervision of the Financial
Director, Pieter Scholtz CA(SA).
Audit Report
The auditors, Grant Thornton Johannesburg Partnership, have issued their unmodified opinion on the
Group’s annual financial statements for the year ended 30 June 2015. The audit was conducted in
accordance with International Standards on Auditing. A copy of the auditor’s report together with a copy of
the audited financial statements are available for inspection at the Company’s registered office. These
abridged financial statements have been derived from the Group’s annual financial statements and are
consistent in all material respects with the Group’s annual financial statements. The contents of this
announcement are extracted from audited information, although the announcement is not itself audited. The
directors of the Group take full responsibility for the preparation of this announcement and confirm that the
financial information has been correctly extracted from the underlying annual financial statements.
2. RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Audited Audited
Figures in Rand year ended year ended
30 June 2015 30 June 2014
The calculation of earnings per share is based on profits of
R25 606 808 attributable to equity holders of the parent
2014: R27 481 282) and a weighted average of
137 448 249 (2014: 136 002 041) ordinary shares in issue
during the year 18.63 cents 20.21 cents
The calculation of headline earnings per share is based on
profits of R25 504 736 attributable to equity holders of the
parent (2014: R27 481 282) and a weighted average of
137 448 249 (2014:136 002 041) ordinary shares in issue
during the year 18.56 cents 20.21 cents
Reconciliation between earnings and headline earnings
Profit attributable to ordinary shareholders of parent 25 606 808 27 481 282
Profit on disposal of property, plant and equipment: (141 766) -
Tax effect of the disposal of property, plant and equipment 39 694 -
Headline earnings 25 504 736 27 481 282
The calculation of diluted earnings per share is based on
profits of R25 606 808 (2014: R27 481 282) and a weighted
average of 137 448 249 (2014: 136 002 041) ordinary
shares issued during the year
18.63 cents 20.21 cents
Reconciliation between earnings and diluted earnings per share:
Weighted average number of shares used in the calculation
of earnings per share
137 448 249 136 002 041
There were no instruments issued during the current year that have a dilutive impact.
3. SEGMENTAL REPORTING
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision makers. These chief operating decision-makers (“the CODM”) have been identified as the
executive committee members who make strategic decisions. The CODM have organised the operations of
the company based on its brands and this has resulted in the creation of the following reportable segments:
Active Data Exchange Services - a unified messaging system that integrates and delivers a suite of
messaging services through a single hosted platform.
Knowledge Creation and Management - Building permission-based marketing strategies to enhance singular
customer profiles, with deep granularity in line with privacy legislation. Using technology to establish a “new
asset class” by collecting data, adding content and meaning to create information and providing insights,
inferences and experiences to culminate in knowledge.
During the year under review the Group merged its BizWorx and MediaWorx reporting divisions and from
now on will report on them together under Active Data Exchange Services. The Group also created a new
division called Knowledge Creation and Management. Items reported previously under MediaWorx that
specifically relate to Knowledge Creation and Management have been reclassified and retrospectively
reported.
The accounting policies applied to the operating segments are the same as those described in the basis of
preparation paragraph above. Active Data Exchange Services are provided within South Africa as well as in
38 African countries (“Africa Sales”). Within the year under review 4.4% (2014: 2.9%) of its revenue can be
attributed to Africa Sales. The company allocates revenue to each country based on the relevant domicile of
the client. All of the company’s assets are located in South Africa.
Active Data Exchange Services currently generate 65.2% (2014: 72.8%) of its revenue through three large
network service providers. The reconciliation of the gross profit to the profit before taxation is provided in the
statement of comprehensive income. The CODM reviews these income and expense items on a Group basis
and not per individual segment. All assets and liabilities are reviewed on a Group basis by the CODM.
Audited
Audited
year ended
Figures in Rand year ended
30 June 2014
30 June 2015
– Restated
Revenue
Active Data Exchange Services 88 744 297 114 411 986
Knowledge Creation and Management 13 860 475 3 785 608
102 604 772 118 197 594
Cost of sale
Active Data Exchange Services (37 861 945) (47 934 518)
Knowledge Creation and Management (2 844 814) (188 000)
(40 706 759) (48 122 518)
Gross Profit
Active Data Exchange Services 50 882 352 66 477 468
Knowledge Creation and Management 11 015 661 3 597 608
61 898 013 70 075 076
4. ACQUISITION OF NEW BUSINESS
The Group acquired 63% in the business known as the BMi Sport Group that includes BMi Sport Info
Proprietary Limited, BMi Sponsor Value Research CC and BMi Sponsorwatch Proprietary Limited. The
principal business of the BMi Sport Group is sport sponsorship and media monitoring and research.
The purchase price is contingent on the net profit performance of the business for the period 1 January 2015
to 31 December 2017.
At 30 June 2015 the estimated purchase price was R17 666 341. The purchase price is capped at
R22 000 000 and had a floor of R16 000 000 which was paid within the year under review. The contingent
consideration recognised the Group’s estimate of the contingent consideration which will be payable.
The acquired business contributed revenues of R7 858 249 and net profit after tax to the value of
R2 439 842 from the date of acquisition being 1 March 2015 up to 30 June 2015 of which R1 537 100 is
attributable to the owners of the parent.
If the business was acquired on 1 July 2014, the revenue and profit after tax would have been R22 277 106
and R5 203 841 respectively. As the purchase price adjustment account has not yet been finalised, a
detailed assessment of the identifiable assets and liabilities acquired and their respective fair value had not
yet been completed at year-end. Once a detailed assessment is completed, the required adjustment will be
processed. The purchase consideration has provisionally been allocated to goodwill.
The assets and liabilities as at 1 March 2015 arising from the acquisition of the BMi Sport Group were:
Figures in Rand 1 March 2015
Cash and cash equivalents 2 175 384
Trade and other receivables 3 274 790
Property, plant and equipment 579
5 450 753
Trade creditors (3 107 105)
Taxation (547 681)
Net fair value of assets 1 795 967
Less: Non-controlling interest (37%) (664 507)
Net Fair Value held by the Group 1 131 460
Goodwill 16 534 881
Purchase consideration 17 666 341
Cash and cash equivalent received (2 175 384)
Obligation to settle (1 666 341)
Cash consideration paid 13 824 616
COMMENTARY
The board of directors of Cognition (“the Board”) are proud to announce their results for the year ended
30 June 2015.
NATURE OF THE BUSINESS
The Group provides interactive telecommunication, switching and business services, orientated around fixed
and mobile networks. These include a broad range of services to the Fast Moving Consumer Goods
(“FMCG”) market, business and financial community, as well as media groups.
FINANCIAL PERFORMANCE
During the year under review the Group maintained an operating profit margin of 28% with a slight decrease
(3.7%) in its bottom line profitability from R27.4 million last year to R26.4 million this year. This was achieved
even though revenue decreased by 13.2% from R118.2 million to R102.6 million.
Earnings before interest, taxation, depreciation and amortisation (“EBITDA”) decreased by 16.3% down to
R33.4 million (2014: R39.9 million) and, based on the weighted average number of shares in issue, earnings
per share (“EPS”) decreased by 7.8% from 20.21 cents in the prior year to 18.63 cents this year. Headline
earnings per share (“HEPS”) decreased by 8.16% to 18.56 cents from 20.21 cents in the previous
corresponding period.
During the year the executive of the Group changed the way in which the Group organises the internal
operations of the Company. The Group accordingly no longer reports in terms of the MediaWorx division and
BizWorx divisions but now reports on:
- Active Data Exchange Services – A unified messaging system that integrates and delivers a suite of
messaging services through a single hosted platform. This is a combination of our BizWorx and
MediaWorx divisions excluding specific projects previously included in MediaWorx that has evolved
into Knowledge Creation and Management.
- Knowledge Creation and Management - Building permission-based marketing strategies to enhance
singular customer profiles, with deep granularity in line with privacy legislation.
Gross profit on Active Data Exchange Service reduced from R66.4 million to R50.8 million during the year
under review. This is mostly attributable to a decline in revenue generated by the Group’s Fax2email service.
Despite the decline the division remains very profitable and has an outstanding operating margin.
The Knowledge Creation and Management Division has recorded a 272% increase in revenue from
R3.7 million to R13.7 million. Of this 44% has been achieved through internal sales and the expansion of our
product offering with the remaining 56% coming through the Group’s acquisition of the equity in the BMi
Sport Group with effect from 1 March 2015.
Management attempts to keep operating costs down to a minimum as far as possible and during the year
under review was able to keep the increase in operating expenditure to 7.3% for the year from R9.6 million to
R10.3 million which includes the additional operating expenditure from BMi Sport from 1 March 2015.
The Group has reduced its staff expenditure cost by 17.8% from R23 million to R18.9 million in the year
under review.
Cash movements
The Group used R24 million of its cash resources to:
- invest in various associate companies;
- acquire 63% of the equity in the BMi Sport Group; and
- declare and pay a dividend to shareholders in the amount of R16 481 521.
The impact of this is that the Group’s cash reserves reduced from R119 million to R95 million, a reduction of
20.1%.
Equity movements
During the year under review the Group issued 1 613 757 shares as part compensation for the investment in
BMi Research.
Going Concern
The Board has formally considered the going concern assertion for the year going forward and is of the
opinion that it is appropriate.
Conclusion
The Group is in a remarkably strong financial position and has made key strategic investments in the past
year that will enable the Group to become a significant player within the data and knowledge economy.
OPERATIONAL PERFORMANCE
Group Profile
Cognition is an information, communication and technology company (“ICT”) that provides a broad range of
bespoke services to media companies, fast moving consumer goods organisations and above, below and
through the line digital agencies. In addition, the Group provides consulting, research, data management and
knowledge creation and management.
Cognition operates via two distinct strategic objectives being:
- Active data exchange services
- Knowledge creation and management
Operational Performance
The year under review was a difficult trading year primarily due to:
- delays in finalising expected large contracts which never materialised in the year under review. A
number of these large contracts are expected to be finalised in the next financial year. In fact we have a
healthy pipeline for the first quarter of the year.
- a decline in Fax2Email volumes which was an anticipated industry phenomenon. The Group has, for the
last 10 years, enjoyed very good annuity income from this virtual data exchange service and whilst it is
expected to continue generating good revenue, it will be at a declining rate as newer technologies
supersede faxing, being a natural evolution of technology changes.
Despite these two factors, the Group still achieved a total comprehensive income for the year of
R26.4 million. Net cash and cash equivalents amounted to R95 million after the Group made two
investments totalling R20.5 million and paid its dividend of R16.5 million, a total of R37 million.
The Group has a very clear and precise strategy which can be summarised as follows:
- Maintaining and supporting faxing solutions with the knowledge that it is declining in favour of newer
technologies. The impact of this on costs and human resources is minimal as the service is fully
automated. We still anticipate good annuity income from this service albeit at a lower rate.
- Increasing the growth of our call-to-action campaigns in line with historical trends.
- Introducing our community builds and knowledge creation and management solutions as a natural
extension of our call-to-action campaigns (SMS, IVR, USSD, MMS, IM, and loyalty) based on an annuity
formula to supplement and then, over time, exceed our faxing annuity income.
- Acquisitions that support the development of knowledge creation and management. Our initial
investments being: Livingfacts, BMi Research and BMi Sport.
The results under review can be summarised as follows:
Revenue was lower at R102 million (R118 million: 2014) primarily due to the reduced faxing average rate per
user (ARPU). Profit before tax was R36 million which was also down on the prior year (R38.5 million: 2014)
similarly due to the decline in faxing revenue for inbound faxes. Faxing out (PC2Fax) increased by 5%
although off a lower base.
On a positive note, revenue from knowledge creation and management increased by 273% from R3.7 million
to R13.8 million. Gross profit on knowledge creation was up 214% to R11 million from R3.5 million the
previous year. We are very encouraged by this growth as the future of Cognition is based on knowledge
creation and management and our anticipated annuity revenue from this growth is intended to supplement
(in the short term) the decline in faxing ARPU and, in the long term, surpass historical faxing revenue.
Despite our decline in total comprehensive income, our financial ratios are solid with: EBITDA margin at
32.59%, operating profit margin at 28.57% and ROE at 18.34%. Our liquidity ratio is 5.6 times.
The Group has two main operating divisions: Active Data Exchange Services and Knowledge
Creation and Management.
Active Data Exchange Services
This division reaches the market via MediaWorx. The raison d’être of MediaWorx is to provide clients with
the technology and capability to interact with the customers of their brands by using single or multiple bearer
services developed and hosted on the Group’s proprietary technical platform.
Given the Group’s second purpose of “Knowledge Creation and Management”, this division has renewed
vigour in managing the data collected via the technology with a more longitudinal purpose, enabling the
structured collation of data into communities which creates observational capabilities over defined periods.
MediaWorx accordingly plays a fundamental role as the catalyst to initiate data collection whilst at the same
time enabling the client to achieve its objectives of brand salience, brand building and brand identity.
MediaWorx has three core focusses:
• Media Infotainment (“MI”)
MI focusses on providing clients with the technology platform for consumer interaction enabling voting
services, competitions and comment lines using services such as: SMS, USSD and IVR. These services are
provided to well-known television and game shows such as: Idols, Big Brother, Strictly Come Dancing, X
Factor, SA’s Got Talent and similar shows.
These services are offered in South Africa and 38 countries throughout Africa via 95 mobile networks. By
their very nature these television and game shows initiate huge amounts of demographic data which can be
used for observational purposes.
• Retail Promotion (“RP”)
RP provides our clients with the technology to market the identity of their brands via competitions or
promotions. These include: SMS, IVR, NFC, augmented reality and fulfilment services. These are offered
above-the-line (TV and radio), below-the-line (print and on pack) and via social media. Clients serviced
during the year under review include Caxton, Huletts, Kellogg’s, Imana, Pep, Golden Cloud, Robertsons,
SAN, Pick n Pay, Spier, Amka and Bokomo.
Whilst the primary purpose of these campaigns is promotional in nature, they stimulate huge amounts of
demographic and geospatial data and create the foundations for database development and community
building.
• Data Investment (“DI”)
DI strategically adopts call-to-action campaigns using services such as: SMS, IVR, NFC, augmented reality
and USSD, to collect demographic and psychographic data to enhance the building of databases for long-
term strategic purposes. DI is a strategic and operational tool for knowledge creation and management.
These services are offered to clients with the specific intention of using a promotion or competition to collect
defined demographic or psychographic data to enhance the client’s data warehouse as part of a long-term
strategy to build a knowledge dashboard.
Clients that made use of this service during the year under review included SAB, Pep, Ackermans, Flash,
DSTV and Samsung.
MediaWorx Africa
Our footprint in Africa remains strong with relationships established in 38 countries via 95 mobile networks.
This is primarily for the purpose of SMS interactions, voting and media infotainment services like Big Brother.
We see huge upside growth in Africa not only for media infotainment services but also research on behalf of
BMi Sport and accordingly intend to grow our footprint, presence and capacity for the rest of Africa.
Faxing Services
Over the last 12 years faxing solutions have provided solid annuity revenue for the Group. We have stated in
previous reports that faxing has and will continue to decline as newer technologies emerge and become
more prevalent.
Fax2Email revenue for the year under review declined by 28%, primarily due to lower volumes.
Despite this we still increased our subscriber base by an average of 2 611 new subscribers per week or
146 246 new subscribers in the year, taking our total user base to 409 000. Our internal review however
shows that against the increase in subscribers, frequency of use has declined, thus resulting in lesser
revenue.
Email2Fax (the reverse of Fax2Email) has, however, grown by 5.07% year on year. We therefore believe
that although we may encounter an increase in subscribers, the frequency of subscribers using faxes will
decrease over time, yet will continue to provide good annuity income with very little resources required. We
anticipate seeing a moderate growth in Email2Fax.
Knowledge Creation and Management
Cognition, prior to its name change from FoneWorx, successfully developed and hosted thousands of call-to-
action campaigns (SMS, IVR, USSD, MMS and IM) for hundreds of blue chip brands and agencies over the
last 19 years.
Whilst these yielded fantastic results for their purpose and objectives, primarily orientated around brand
awareness (salience) and promotions, huge data (albeit limited in scope) was collected for very little strategic
or secondary purpose. Over the last few years the whole world, and in particular the media industry which
forms the core of many of the Group’s clients, struggled with the concept of Big Data, analytics and fusing
data sources. Most companies knew they needed to get into data management, but weren’t sure how and
what to do.
For the Group the move from call-to-action campaigns or simply just collecting Big Data, to adding value to
the data in a structured and strategic way, was a natural progression and the Group’s Sigmoid Curve of
taking the data to a new strategic level, was a natural growth path.
To ease our clients into the often daunting arena of ‘Big Data’, we created a transitioning process of taking
our clients from call-to-action data to building what we call ‘communities’ or defined ‘eco systems’. In simple
terms, adding ‘layers’ or ‘objects’ of more information around the already collected minimalistic data and
finally into our full blown strategic knowledge build called “Knowledge 350”.
The transition and progression through these three steps is measured and strategic. We conceptualised,
designed and built a model that would enable us to provide clients with a roadmap of: understanding their
customers, collecting data from multiple touch points with the intention of data fusion), adding context and
meaning to layer the raw data with information and finally by creating meaningful knowledge with great and
deep insights.
The Knowledge 350 model is a 15-step roadmap comprising multiple operational and strategic questions, to
ultimately build a meaningful knowledge dashboard that clients can use to effectively communicate with their
customers and to monetise the exchange of communication.
To support the 15-step Knowledge 350 roadmap, we have been building a knowledge database and
Business Intelligence (BI) dashboard and marketing interface. This tool will be launched in the 3rd quarter of
2015 and will enable clients to manage their data to achieve the objectives of:
- better understanding customers (demographic / psychographic);
- enhancing marketing and sales initiatives via effective one-to-one marketing initiatives;
- self-creating intangible assets; - minimising costs; and
- monetising data.
Our intention with Knowledge 350 is to create multiple solution-driven packages which provide clients with
different layers of services.
The packages will provide annuity income to the Group which will complement our existing annuity
generated from faxing solutions.
Great Progress Bodes Well For the Ensuing Year
During the year under review our technical team has been developing a very robust and scalable engine for
panels and surveys which will enable the Group to build a large group of respondents who are representative
of the population and provide clients with frequent and rapid response to mobile and web surveys.
In addition, the team has been developing our new Knowledge 350? Data Warehouse (“DW”) which is
overlaid with a flexible Business Intelligence (“BI”) tool using Micro Strategy software which was developed in
Washington DC. This application will be deployed “on-premises” or via secure cloud services.
Our Knowledge 350 engine and BI tool will be interfaced to our own proprietary marketing dashboard,
enabling our clients to seamlessly send communications to individuals in the database.
Good progress has been made in the testing and early life cycle of this product with a number of our existing
clients using the community build phase. We expect the product to be completed and ready for launch during
September 2015 which will then enable us to approach a number of our existing clients that we currently
provide call-to-action campaigns, and also to look at new clients and sectors of the market.
The desired objectives of the Knowledge 350 solution are to create the technology and methodology to:
- provide the right data at the right time to the correct people so that the most appropriate decisions
can be made;
- ensure a blend between data, technology and content achieves operational excellence;
- enable organisational alignment and a common measure of key performance indicators; and
- visualise data in a way that promotes insights and understanding.
Investment Updates
BMi Sport Group (“BMi Sport”)
During March 2015 the Group acquired 63% of BMi Sport. The business, in its entirety, was relocated to our
head office in Randburg. We provided BMi Sport with state-of-the-art hosting facilities, an improved working
environment as well as an enhanced technical infrastructure and services.
BMi Sport provides research and media monitoring of South African sports in general and the South African
sports sponsorship market in particular, to most of South Africa’s major sponsors, television channels,
sporting goods companies, sport controlling bodies and sponsorship management companies.
We are extremely excited about the opportunities and growth potential of BMi Sport. In particular we see:
- the opportunity to integrate our Knowledge 350? dashboard and database solution to a number of
their clients. We have already identified three sporting bodies where we will deploy this solution,
which offers over one million individuals;
- the opportunity to replicate the suite of services offered by them throughout Africa. This will
complement our Africa MediaWorx footprint; and
- the opportunity to deploy the services in Asia and in particular China.
We are currently investigating and trialling new software and hardware that will increase the speed of radio,
television and print monitoring so as to enhance output and enable our replication of services outside South
Africa to be a lot quicker.
During the year under review Telkom, being a significant account for BMi Sport, renewed its supplier status
for an additional three years.
BMi Sport’s sponsorship rights, packaging and evaluation services, known as “BMi Pre Value” has once
again shown excellent promise as the industry benchmarking tool for many major sponsorship rights fees. To
this end BMi Sport will be involved in: Super Rugby Naming Rights, Cricket SA – the Protea’s naming rights
valuation, Currie Cup naming rights, stadium naming rights, Netball SA and SAFA rights, to mention a few.
BMi Sport’s socio-economic and sporting impact valuations on the benefits of hosting events in South Africa
continues to expand and has been recognised by government and events holders alike as the most
comprehensive and accurate impact analysis in the industry.
Livingfacts Proprietary Limited (“Livingfacts”)
Livingfacts develops bespoke research that enables their clients to implement their strategies and achieve
their goals.
These specialised capabilities help clients understand stakeholders’ and customers’ needs, perceptions and
realities.
Despite a very competitive market Livingfacts was able to increase its operating margin by 29% year on
year. This was achieved through a greater focus on utilising technology-based research collection methods
and increasing productivity of people based resources.
Livingfacts continues to entrench itself with its core blue chip clients, by achieving a 90% average
satisfaction rating. This is as a result of consistent and specialised services. This is particularly within
selected consumer segments including: financial, health, retail and logistics.
We are very proud that, during the year under review, Livingfacts was selected as the research partner for
Old Mutual Corporate’s first SME employee benefits monitor, which evaluates the status of employee
benefits and retirement provision in the SME Segment.
BMi Research Proprietary Limited (“BMi Research”)
BMi Research is a full service house, specialising in qualitative and quantitative research solutions. With
multi-sector experience which understands industrial and manufacturing research, wholesale to retail
intelligence and shopper insights.
During the year under review, BMi Research invested in third generation mobile data collection terminals
to deliver fast and accurate competitor pricing data. BMi Research is a pricing data specialist.
BMi Research has also invested in mobile tablets for use in the consumer research division.
An exciting development for BMi Research is the internal capacity built to create dashboards for clients
which includes Predictive Analytics Solutions.
BMi Research’s analytics team has built unique client dashboards in QlikView which provides trended data
from executive dashboards down to granular views in a user-friendly real-time basis.
Re-branding
During the year under review we moved to the main board of the JSE and changed the name of the holding
company from FoneWorx Holdings Limited to Cognition Holdings Limited. The name change aligns with our
new strategy in the knowledge economy as we move away from a pure telecommunications environment to
data analytics and insights.
Future Prospects
Our strategic positioning will be to enhance our performance in our two distinct, yet complementary,
operating divisions:
- Active Data Exchange Services
- Knowledge Creation and Management
Active Data Exchange Services
We will constantly add new technologies to our profile of services to ensure greater choice, reach and
response for our clients. New technologies will, for example, include mobile augmented reality, mobile
beacons and near field communication (NFC).
Our strategy is to use Active Data Exchange Services as the methodology to collect data as the forerunner
to our Knowledge 350 data building.
Our strategy is also to increase our reach into Africa and to expand beyond our current reach of 95 networks
in 38 countries. This will be achieved by further collaborations with international players or via investments.
Knowledge Creation and Management
We see great potential with our Knowledge 350 strategy, which includes our DW and BI software solution
which will benefit our clients by:
- reducing reporting effort;
- reducing information bottlenecks; and
- providing a “single source of truth” with actionable data to enable evidence-based decision making.
We have a number of existing clients lined up to adopt the Knowledge 350? software solution on its launch
during September 2015.
Our Knowledge 350 software solution will also open up new sectors and markets to our traditional Fast
Moving Consumer Goods environment.
Investment Opportunities
We have evaluated a number of possible investments that would complement our move into the knowledge
economy and this will add to our acquisition-led growth strategy. These will be short-listed in the current
financial year and shareholders will be kept updated with progress in this regard.
We are very conscious of our need to enhance our Business Analytics and Business Intelligence capability
and to this end we are collaborating with highly qualified actuaries and data scientists. Shareholders will be
kept updated in this regard.
On behalf of Cognition, I remain thankful to the members of the Board for their valuable input and
contribution to the growth of the Group as well as to all our staff for their hard work, loyalty and contribution
to the execution of our strategy.
- I would also like to extend my thanks to the leadership of Livingfacts, BMi Research and BMi Sport for their
contribution to our collective strategy, and lastly, but importantly, to all our network suppliers, dealers,
partners, customers and all stakeholders.
Appreciation and Moving Forward
The chairman of the Board is very positive about the future direction of the Group in the Knowledge
Economy and wishes to take this opportunity to thank the members of the Board and divisional executives
for their dedication and leadership.
Cognition’s ongoing prosperity will be a reflection of all the staff’s commitment, team spirit and appetite for
new challenges and opportunities.
In addition, the chairman wishes to send sincere thanks to all our dealers, customers, partners and our new
equity partners for their support and continued commitment.
AUDIT REPORT
The abridged annual financial statements for the year ended 30 June 2015 have been audited by Grant
Thornton Johannesburg Partnership, the Company’s auditors. Their unmodified audit report is available for
inspection at Cognition’s registered office during office hours.
CORPORATE GOVERNANCE
The Board recognises the need to conduct the affairs of the Group with integrity and in compliance with the
principles of the King Report on Governance Principles of South Africa (“King III report”). Throughout the
year under review the Group has complied with the principles as set out in the King III report except for the
following:
Composition of the Board
During the year the Board’s composition comprised of six non-executive directors (three independent) and
three executive directors with such composition remaining unchanged during the year under review.
Composition of the Audit Committee
During the year under review the Audit and Risk Committee consisted of two independent non-executive
directors and a non-executive director. The Board is satisfied that the non-executive director is sufficiently
independent and is not unduly influenced or biased and that he is independent in character and judgement.
FINAL DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a gross final dividend of 12 cents for the financial
year ended 30 June 2015 (2014: 12 cents per share), which is adjusted for withholding tax. The final
dividend has not been included as a liability in these audited financial statements as it was declared
subsequent to year end. The final dividend for June 2015 is payable to all shareholders on the Register of
Members on Friday, 23 October 2015. In terms of the dividends tax, effective 1 April 2012, the following
additional information is disclosed:
- the local dividend tax rate is 15%;
- the dividends will be payable from income reserves;
- the dividend tax to be withheld by the Company amounts to 1.8 cents per share;
- therefore the net dividend payable to shareholders who are not exempt from dividends tax amounts to
10.2 cents per share, while the gross dividend payable to shareholders who are exempt from dividend
tax amounts to 12 cents per share;
- the issued share capital of the Company at the declaration date comprises 137 615 798 ordinary
shares; and
- the Group’s income tax reference number is 9087/450/84/8.
Declaration date: Tuesday, 29 September 2015
Last day to trade cum the dividend Friday, 16 October 2015
Date trading commences ex the dividend Monday, 19 October 2015
Record date Friday, 23 October 2015
Date of payment Monday, 26 October 2015
Share certificates may not be dematerialised or rematerialised between Monday, 19 October 2015 and
Friday, 23 October 2015, both dates inclusive.
NOTICE OF AGM
Notice is hereby given that the 17th Annual General Meeting (“Annual General Meeting”) of shareholders of
Cognition will be held at 10:00 on Thursday, 3 December 2015 at Cognition House, Corner Bram Fischer
Drive and Will Scarlet Road, Ferndale Randburg (entrance on Will Scarlet Road) for the purpose of
considering, and, if deemed fit, passing, with or without modification, the resolutions set out hereafter.
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), as amended, 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, 27 November
2015. Accordingly, the last day to trade Cognition shares in order to be recorded in the Register to be
entitled to vote will be Friday, 20 November 2015.
For and on behalf of the Board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
29 September 2015
Business and Registered Office:
Cognition House
Corner of Bram Fischer Drive and Will Scarlet Road
Ferndale, Randburg, 2194
PO Box 3386, Pinegowrie, 2123
Telephone +27-11-293-0000
Fax 086-610-1000 / +27-11-787-2137
Directors: Ashvin Mancha#* - Chairman, Mark Smith – Chief Executive Officer, Pieter Scholtz - Financial
Director, Gaurang Mooney* (Botswana), Graham Groenewaldt – Sales Director, Paul Jenkins#*, Roger Pitt#*,
Marc du Plessis#, Piet Greyling#
# Non-executive
* Independent
Company Secretary: Stefan Kleynhans BA BIuris LLB LLM (Banking Law)
Auditors: Grant Thornton Johannesburg Partnership
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Merchantec Capital
Date: 29/09/2015 04:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
