Unaudited condensed consolidated interim results for the six months ended 30 September 2015 MICROmega Holdings Limited Incorporated in the Republic of South Africa (Registration number 1998/003821/06) JSE Share code: MMG ISIN: ZAE000034435 (“MICROmega” or “the company” or “the group”) UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015 CONDENSED GROUP STATEMENT OF PROFIT AND LOSS Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2015 2014 2015 R’000 R’000 R’000 Revenue 564 372 484 165 1 035 683 Cost of sales (288 670) (253 555) (576 068) Gross profit 275 702 230 610 459 615 Other net income 8 018 8 677 16 590 Distribution expenses (2 634) (1 851) (4 170) Administration expenses (174 755) (162 000) (306 093) Results from operations 106 331 75 436 165 942 Finance income 2 050 2 660 5 041 Finance cost (840) (1 179) (1 767) Share of profit of equity accounted associate 762 649 1 978 Profit before tax 108 303 77 566 171 194 Tax expense (30 595) (20 278) (44 823) Profit for the period 77 708 57 288 126 371 Profit attributable to: Owners of the parent 69 067 48 821 110 653 Non-controlling interest 8 641 8 467 15 718 77 708 57 288 126 371 Attributable earnings per share (cents) Basic 61.86 45.96 101.27 Diluted 60.98 45.06 99.45 Headline 61.81 45.96 101.30 CONDENSED GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2015 2014 2015 R’000 R’000 R’000 Profit for the period 77 708 57 288 126 371 Other comprehensive income: Foreign currency translation differences 4 044 4 817 1 461 Revaluation of property - - (2 500) Reversal of deal difference reserve - - (1 000) Income tax on other comprehensive income - - 465 Total comprehensive income for the period 81 752 62 105 124 797 Total comprehensive income attributable to: Owners of the parent 73 111 53 638 109 079 Non-controlling interest 8 641 8 467 15 718 81 752 62 105 124 797 Reconciliation of headline earnings: Profit attributable to owners of the parent 69 067 48 821 110 653 Profit on disposal of property, plant and equipment (60) (5) (68) Impairment of intangible assets - - 95 Headline earnings 69 007 48 816 110 680 Weighted average number of shares (000s) 111 646 106 214 109 265 Diluted weighted average number of shares (000s) 113 254 108 342 111 270 Total number of shares in issue (000s) 112 034 110 311 111 504 CONDENSED GROUP STATEMENT OF FINANCIAL POSITION Unaudited Unaudited Audited As at As at As at 30 September 30 September 31 March 2015 2014 2015 R’000 R’000 R’000 ASSETS Non-current assets 606 695 497 463 540 579 Property, plant and equipment 68 091 52 867 58 711 Intangible assets 480 554 369 674 432 242 Investments in associates 12 600 11 528 12 857 Other investments 291 208 283 Other financial assets 704 3 779 - Deferred tax assets 44 455 59 407 36 486 Current assets 410 989 415 988 439 629 Inventories 47 633 19 506 28 377 Trade and other receivables 257 214 224 512 239 225 Income tax receivable 4 375 7 033 8 251 Other financial assets 9 378 12 656 15 891 Cash and cash equivalents 92 389 152 281 147 885 TOTAL ASSETS 1 017 684 913 451 980 208 EQUITY AND LIABILITIES EQUITY 685 426 601 920 671 673 Share capital and share premium 270 792 257 349 266 203 Other reserves 11 983 11 327 6 261 Retained earnings 333 103 268 548 330 218 Non-controlling interest 69 548 64 696 68 991 LIABILITIES Non-current liabilities 73 667 89 504 73 125 Other financial liabilities 13 578 13 245 11 371 Deferred vendor payments 15 153 18 484 13 333 Deferred tax liabilities 44 936 57 775 48 421 Current liabilities 258 591 222 027 235 410 Trade and other payables 167 623 169 915 166 674 Other financial liabilities 4 201 3 204 3 101 Income tax payable 32 473 16 656 9 688 Deferred vendor payments 54 294 32 252 55 947 TOTAL LIABILITIES 332 258 311 531 308 535 TOTAL EQUITY AND LIABILITIES 1 017 684 913 451 980 208 Net asset value per share (cents) 549.72 487.42 540.50 Net tangible asset value per share (cents) 120.79 152.30 152.86 CONDENSED GROUP STATEMENT OF CASH FLOW Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2015 2014 2015 R’000 R’000 R’000 Cash flow from operating activities excluding 105 466 71 133 151 541 working capital changes Movement in working capital (33 696) 19 641 (47 845) Cash flow from investing activities (45 558) (74 643) (70 981) Cash flow from financing activities (81 708) 27 304 6 324 (Decrease) / Increase in cash and cash equivalents (55 496) 43 435 39 039 Cash and cash equivalents at the beginning of the period 147 885 108 846 108 846 Cash and cash equivalents at the end of the period 92 389 152 281 147 885 CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2015 2014 2015 R’000 R’000 R’000 Balance at the beginning of the period 671 673 504 269 504 269 Profit for the period 77 708 57 288 126 371 Other comprehensive income 4 044 4 817 (1 574) Transactions with owners, recorded directly in equity (41 315) 35 546 42 607 Changes in ownership interest in subsidiaries (26 684) - - Balance at the end of the period 685 426 601 920 671 673 NOTES TO THE GROUP FINANCIAL INFORMATION 1. Basis of preparation These condensed consolidated financial statements are prepared in accordance with the framework concepts and the recognition and measurement criteria of International Financial Reporting Standards (IFRS), its interpretations adopted by the International Accounting Standards Board (IASB), the presentation and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, IAS 34 – Interim Financial Reporting, the Listings Requirements of the JSE Limited and the requirements of the Companies Act of South Africa (Act 71 of 2008), as amended. The condensed consolidated financial results are prepared in accordance with the going concern principle under the historical cost basis as modified by the fair value accounting of certain assets and liabilities where required or permitted by IFRS. The condensed consolidated financial results have been prepared under the supervision of Russell Dick, CA (SA). All financial information presented in South African Rand has been rounded to the nearest thousand. 2. Significant accounting policies These condensed consolidated financial statements have been prepared using accounting policies that comply with IFRS. The accounting policies used are consistent with those used in the audited annual consolidated financial statements for the period ended 31 March 2015. 3. Business combinations Profit Reform Proprietary Limited (trading as “COID Support”) On 1 August 2015, the group acquired a 51% interest in COID Support for a consideration of R5 million. Goodwill to the value of R4.6 million was accounted for. The net assets acquired amounted to R0.7 million and a non-controlling interest of R0.3 million was recognised. Nerdworks Proprietary Limited On 1 September 2015, the group acquired a 51% interest in Nerdworks Proprietary Limited for a consideration of R7.9 million. Goodwill to the value of R6.9 million was accounted for. The net assets acquired amounted to R2.3 million and a non- controlling interest of R1.1 million was recognised. Yonke Education and Training Solutions Proprietary Limited On 1 September 2015, the group acquired a 50% interest in Yonke Education and Training Solutions Proprietary Limited for a consideration of R3.4 million. Goodwill to the value of R0.7 million was accounted for. The net assets acquired amounted to R2.6 million. The fair value of assets acquired and liabilities assumed relating to the above business combinations are subject to change should additional information become available within the 12 month re-measurement period from date of acquisition. 4. Segment information Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2015 2014 2015 R’000 R’000 R’000 SEGMENT REVENUE Occupational health and safety 223 554 158 816 333 253 Labour supply 99 197 124 477 264 071 Information technology 220 344 184 394 399 605 Financial services 20 739 16 840 38 378 Holdings and consolidated 538 (362) 376 Total revenue 564 372 484 165 1 035 683 SEGMENT PROFIT / (LOSS) Occupational health and safety 40 998 32 600 65 545 Labour supply 578 766 2 125 Information technology 34 588 32 877 59 123 Financial services 3 350 1 410 5 672 Holdings and consolidated (10 447) (18 832) (21 812) Total profit 69 067 48 821 110 653 SEGMENT ASSETS Occupational health and safety 377 349 405 181 409 512 Labour supply 45 459 73 125 60 566 Information technology 333 673 272 923 283 969 Financial services 56 107 75 231 71 914 Holdings and consolidated 205 096 86 991 154 247 Total assets 1 017 684 913 451 980 208 5. Corporate Governance and changes to the board of directors of MICROmega (“board”) MICROmega has embraced the recommendations of the King III Report on governance and strives to provide reports to shareholders that are timely, accurate, consistent and informative. Alan Barrington Swan resigned as Lead Independent Non-Executive Director with effect from 9 September 2015. 6. Subsequent events Subsequent to the reporting period, the group acquired a 100% interest in The Training Room Online Proprietary Limited for a consideration of R40 million. Shareholders are referred to the announcement released on SENS on 30 October 2015, wherein shareholders were advised of the disposal of GIM Holdings Proprietary Limited, a wholly-owned subsidiary of MECS Africa Proprietary Limited, which is in turn a wholly owned subsidiary of MICROmega, to Kamberg Investment Holdings Proprietary Limited (“Kamberg”). The entire issued share capital of Kamberg is held by the Greg Morris Family Trust, of which Mr Greg Morris, the Chief Executive Officer of MICROmega, is the sole beneficiary (“the Transaction”). A circular containing full details of the Transaction and a notice to convene a general meeting of MICROmega shareholders will be sent to MICROmega shareholders in due course. No other significant events have occurred in the period between the reporting date and the date of this report. 7. Commentary on results The period under review presented the group with the poorest general trading environment that we have witnessed in the last decade. In particular, we experienced substantial reductions and deferrals of business from our large multi-national clients in South Africa and from large SOEs in China. This is in accordance with global cost cutting exercises by those clients that we expect to remain in place for the foreseeable future. We were also negatively impacted by a substantial public sector project that has become embroiled in a larger dispute between the main contracting parties that has raised doubts about our ability to receive payment for services already provided. We deemed it prudent not to recognise the amounts due but have fully recognised the cost of sales. We will continue to pursue recovery of amounts due to us. Despite the above, we continue to find new opportunities in our targeted markets and it is a tribute to the quality of our products, services and entrepreneurial capacity that we were able to grow headline earnings per share (“HEPS”) by 34% in such a challenging environment. We anticipate that the second half of the year will produce HEPS in excess of the first half. We also reaffirm that we remain confident about our ability to continue to generate growth in HEPS at well above the JSE average for this year and for the following financial year. There are a number of strong opportunities for us to extend our existing range of products and services - both organically and through acquisition. By order of the board 5 November 2015 Directors: DC King (Executive Chairman); IG Morris (Chief Executive Officer); RB Dick (Financial Director); DSE Carlisle (Executive Director); DA Di Siena (Independent Non–Executive Director); PH Duvenhage (Non-Executive Director); TW Hamill (Non–Executive Director); GE Jacobs (Independent Non–Executive Director); RC Lewin (Non–Executive Director). Company Secretary: RJ Viljoen Auditors: Nexia SAB&T Transfer Secretaries: Singular Systems Proprietary Limited Sponsor: Merchantec Capital Attorneys: Di Siena Inc. Note: No forward looking statements in this announcement have been reviewed or reported on by MICROmega’s auditors. Date: 05/11/2015 02:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 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