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ANSYS LIMITED - Reviewed Provisional Condensed Consolidated Interim Financial Statements for the period ended 31 August 2015

Release Date: 30/11/2015 07:50
Code(s): ANS     PDF:  
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Reviewed Provisional Condensed Consolidated Interim Financial Statements for the period ended 31 August 2015

Ansys Limited
("Ansys" or "the company" or "the group")
(Incorporated in the Republic of South Africa)
(Registration Number: 1987/001222/06)
Share Code: ANS
ISIN: ZAE000097028

Reviewed Provisional Condensed Consolidated Interim Financial Statements
for the period ended 31 August 2015

HIGHLIGHTS
-  Revenue increased to R155.1 million from R80.5 million
-  EBITDA improved to R9.1 million from R2.1 million
-  HEPS up to earnings of R1.32 cents from a loss of R0.16 cents
-  Order book increased to R660 million from R400 million

Condensed consolidated statement of financial position
As at 31 August 2015

                                                              6 months         6 months               Year
                                                                 ended            ended              ended
                                                           31 Aug 2015      31 Aug 2014        28 Feb 2015
                                                  Notes     (Reviewed)       (Reviewed)          (Audited)
                                                                 R'000            R'000              R'000
Assets     
Non-current assets                                             170 782           32 362             27 091
Property, plan and equipment                                    43 982            1 435              1 716
Intangible assets                                    2         118 205           19 062             16 869
Deferred tax asset                                               8 596           11 865              8 506
Current assets                                                 157 079           60 945            124 739
Inventories                                                     61 770           26 235             40 533
Trade and other receivables                                     73 890           32 657             64 816
Cash and cash equivalents                                       21 074            2 053             19 390
Other financial assets                                             345                -                  -
Total assets                                                   327 862           93 307            151 830
Equity and liabilities     
Equity                                                         185 598           32 199             42 433
Capital, reserves and non-     
controlling interest                                           185 598           32 199             42 433
Non-current liabilities                                         35 086           16 023             10 496
Instalment sale agreement                                         4269              297                532
Interest bearing borrowings                          4          29 729                -                  -
Loans from related parties                           3               -           14 436              9 070
Deferred tax liability                                           1 088            1 290                894
Current liabilities                                            107 178           45 085             98 901
Instalment sale agreements                                       1 848              231                350
Provisions                                                       2 750              614              2 280
Interest bearing borrowings                          4             571                -                  -
Other financial liabilities                          2          11 943                -                  -
Loans from related parties                           3               -            1 000              5 998
Trade and other payables                                        81 916           36 566             89 938
Current tax payable                                              1 073                -                335
Cash and cash equivalents                                        7 077            6 674                  -
Total equity and liabilities                                   327 862           93 307            151 830
Number of shares in issue                                  461 038 321      244 867 056        244 867 056
Net asset value per share (cents)                                 40.3             13.2               17.3
Tangible net asset value per     
share (cents)                                                     14.6              5.2               10.4

Condensed consolidated statement of comprehensive income
For the six months ended 31 August 2015

                                                              6 months         6 months              Year
                                                                 ended            ended             ended
                                                           31 Aug 2015      31 Aug 2014       28 Feb 2015
                                                  Notes     (Reviewed)       (Reviewed)         (Audited)
                                                                 R'000            R'000             R'000


Revenue                                                        155 073           80 529           251 121
Cost ofsales                                                 (110 706)         (59 337)         (187 916)
Gross profit                                                    43 737           21 192            63 205
Other income                                                       117              196               361
Operating costs                                               (33 135)         (19 244)          (48 748)
Other (losses)/gains                                           (2 298)                -             4 270
EBITDA                                                           9 051            2 144            19 088
Depreciation and amortisation                                  (2 205)          (1 027)           (1 785)
Development cost impairment 
reversal/(impairment)                                                -              253           (1 168)
Profit before interest and 
taxation                                                         6 846            1 370            16 135
Finance income                                                     443                8                34
Finance cost                                                     (801)            (584)           (1 842)
Profit before taxation                                           6 488              794            14 327
Taxation                                                       (2 184)          (1 003)           (4 302)
Profit/(loss) for the period                                     4 304            (209)            10 025
Other comprehensive income, 
net of tax                                                           -                -                 -
Total comprehensive
profit/(loss) for the period                                     4 304            (209)            10 025
Attributable to:
Equity holders of the company                                    4 337            (209)            10 025
Non-controlling interest                                          (32)                -                 -
Basic earnings/(loss) per share 
(cents)                                                           1.32           (0.09)              4.09
Diluted earnings/(loss) per share  
(cents)                                                           1.32           (0.09)              4.09
Weighted average number of
shares in issue                                      2     324 954 810      244 867 056       244 867 056
Diluted average number of  
shares in issue                                      2     324 954 810      244 867 056       244 867 056
 
Condensed consolidated statement of cash flows
For the six months ended 31 August 2015

                                                                  6 months          6 months          Year
                                                                     ended             ended         ended
                                                               31 Aug 2015       31 Aug 2014   28 Feb 2015
                                                                (Reviewed)        (Reviewed)     (Audited)
                   
                                                                     R'000             R'000         R'000
Cash flows from operating                   
activities before working capital                                    8 634             1 650        17 823
Changes in working capital                                        (64 262)           (3 951)         4 626
Cash flows from operating                   
activities                                                        (55 628)           (2 301)        22 449
Cash flows from investing                   
activities                                                          23 119             (462)         (643)
Cash flows from financing                   
activities                                                          27 116             5 356         4 798
Cash flows for the period                                          (5 393)             2 593        26 604
Cash and cash equivalents at                    
beginning of period                                                 19 390           (7 214)       (7 214)
Cash and cash equivalents at                   
end of the period                                                   13 997           (4 621)        19 390

Condensed consolidated statement of changes in equity
For the six months ended 31 August 2015

                                                                Issued       Accu-         Non-
                                                                 share     mulated  controlling
                                                       Notes   capital      losses     interest       Total
                                                                 R'000       R'000        R'000       R'000
Balance as at 1 March 2014 
(Reviewed)                                                      73 668    (41 260)            -      32 408
Movements during the period 
Loss for the period                                                  -       (209)            -       (209) 
Balance as at 31 August 2014 
(Reviewed)                                                      73 668    (41 469)            -      32 199
Movements during the period 
Profit for the period                                                -      10 234            -      10 234 
Balance as at 28 February 2015 
(Audited)                                                       73 668    (31 235)            -     42 433
Movements during the period 
Shares issued                                           2,3     26 269           -            -      26 269
Business combination                                      2    112 203           -          389     112 592
Profit/(loss) for the period                                         -       4 337         (32)       4 304 
Balance as at 31 August 2015 
(Reviewed)                                                    212 140    (26 898)          357     185 598
  
  

Condensed consolidated segment report
For the six months ended 31 August 2015
                                                                    6 months        6 months          Year
                                                                       ended           ended         ended
                                                                 31 Aug 2015     31 Aug 2014   28 Feb 2015
                                                           Notes  (Reviewed)      (Reviewed)     (Audited)
                                                                       R'000           R'000         R'000
Segment revenue*                     
Rail                                                                  60 215          20 921        94 109
Defence and Information                     
Security***                                                           24 208           9 089         9 993
Mining and Industrial***                                              16 753           2 112         2 112
Telecommunications                                                    53 897          48 407       144 907
Total                                                                155 073          80 529       251 121
Segment profit/(loss) 
Rail                                                                  10 834           5 690        29 778
Defence and Information                     
Security***                                                            8 478           3 564         2 721
Mining and Industrial***                                               (588)           (334)       (4 110)
Telecommunications                                                     3 412             643         5 936
Subtotal                                                              16 105           9 563        34 325
Corporate unallocated**                                              (9 259)         (8 193)      (18 190)
Finance cost                                                           (801)           (584)       (1 842)
Finance income                                                           443               8            34
Profit before taxation                                                 6 488             794        14 327
Financial position                     
Assets                                                               327 862          93 307       151 830
Rail                                                                  56 702          27 848        58 810
Defence and Information                     
Security***                                                           14 655           2 963         1 012
Mining and Industrial***                                              28 423           8 246         1 635
Telecommunications                                                    31 249          40 620        55 881
Intangible assets to be                     
classified                                                     2      87 731               -             -
Unallocated**                                                        109 102          13 630        34 492
Liabilities                                                          142 264          61 108       109 397
Rail                                                                   2 270              70             -
Defence and Information                     
Security***                                                           31 244             480             -
Mining and Industrial***                                              27 314              64             -
Telecommunications                                                    35 735          48 539        59 563
Unallocated**                                                         45 701          11 955        49 834
                     
*   There was no intersegment revenue
**  Unallocated includes, head office, corporate, marketing, admin and consolidation
   adjustments 
*** Management is reviewing the segment report due to the Parsec acquisition. The segment
    name has been changed from "Mining" to "Mining & Industrial" as well as "Defence" to
    "Defence & Information Security" to include new segments from the Parsec acquisition.

COMMENTARY

GROUP PROFILE
The group develops, produces, distributes and integrates niche technology-driven engineering
solutions for harsh environments in four key sectors: Rail, Mining and Industrial, Defence and
Information Security as well as 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 that is underpinned by research and
development in order to remain at the forefront of innovation in its areas of operation.

FINANCIAL RESULTS HIGHLIGHTS
Revenue is up by 93% from R80.5 million to R155.1 million. EBITDA improved to R9.1 million from
R2.1 million representing an increase of 333%.

The group's performance continues to reflect growth across the board. This year's interims have
been augmented by the inclusion of Parsec Holdings Pty Ltd ("Parsec Holdings") for the three
months from the effective acquisition date of 1 June 2015. Headline profit improved to R4.3 million
from a loss of R0.391 million in the comparative period translating to headline profit per share of
R1.32 cents (August 2014: headline loss per share of R0.16 cents).

OUR OPERATIONS
Rail
Performance in the first half was in line with expectations with revenue increasing by 188% to
R60.2 million compared to R20.9 million in the comparable period. Rail profit improved to R6.8
million from R5.7 million, an increase of 19%, due to the execution of long term contracts.

Defence & Information Security
Defence revenue grew by 168% to R24.2 million (August 2014:R9 million) and achieved a profit
increase of 81% to R6.5 million (August 2014:R3.6 million). This growth is mainly a result of the
amalgamation of the Parsec defence and Ansys defence businesses.

Mining & Industrial
Performance in mining and industrial has improved following the acquisition of Parsec when
compared to the previous year's interim results. Revenue for the period increased to R16.8 million
(August 2014: R2.1 million) with a loss of R0.6 million (August 2014: R0.3 million).

Telecommunications
Performance in the first half of the year showed a notable improvement in line with expectations,
with revenue up by 11% to R53.9 million (August 2014: R48.4 million) driving an increase in profit
to R3.4 million (August 2014: R0.6 million). In addition to the expectations, growth was also
boosted by the acquisition of Parsec's telecommunication business.

OUTLOOK
The strategy is yielding tangible benefits for the group. We have improved the Statement of
Financial Position and simplified the Group. We expect continued and improved performance in the
second half of the year.

The telecommunications sector is growing due to wireless and fibre network rollouts as well as
general network upgrades to meet increased demand for bandwidth. We are well positioned with
our products and services to benefit from this growth.

The mining and industrial sector outlook remains subdued; however, we are cautiously optimistic
about this sector where we are a supplier of safety and productivity enhancing products.

The amalgamation of the Ansys and Parsec defence and information security businesses into a
single division has resulted in the creation of the critical mass required to be a player in the sector
both locally and internationally. The local defence market continues to show signs of growth which
the group is well positioned to exploit. Our opportunities in the international defence business
remain strong.

Despite the slowdown in the economy which may impact our rail business, our rail clients continue
to invest in the product areas of safety and productivity that the group operates in.

Given the persistent cyber security challenges experienced worldwide and the robust growth and
demand for innovation in the telecommunications sector, some of our telecommunications and
information security products are geared to accelerate our growth within these sectors both locally
and internationally.

FINANCIAL RESULTS COMMENTARY

The Parsec Holdings acquisition was concluded on 1 June 2015 and the results have been included
in the reported results for the period ending 31 August 2015. As a result the majority of the
movement in the statement of comprehensive income, the statement of financial position and the
cash flow statement is due to the Parsec business combination.

Significant movement other than noted above, comparing the period ending 31 August 2015 with
the period ending 31 August 2014, includes the following:

CASH FLOW STATEMENT
The changes in working capital had a significant impact on the cash outflow from operating
activities which decreased to R55.6 million (outflow in August 2014: R2.3 million). Included in the
working capital change of R64.3 million (outflow in August 2014: R3.9 million) is a R30.3 million
trade creditor relating to the purchase of the Parsec Group office building that was subsequently
replaced by the bond referred to in note 4.

STATEMENT OF COMPREHENSIVE INCOME
The taxation expense of R2.2 million comprises deferred tax of R1.1 million and current taxation of
R1.1 million.

STATEMENT OF FINANCIAL POSITION
Intangible assets of R118.2 million includes "intangible assets to be classified" of R87.7 million
relating to the Parsec acquisition. Refer to note 2 in the notes to the financial information.

Other financial liabilities of R11.9 million relates to the outstanding balance of the cash
consideration payable for the Parsec acquisition. The total cash consideration payable of R21.9
million, was reduced by the first tranche payment of R10 million. Refer to note 2 in the notes to
the financial information.

NOTES TO THE FINANCIAL INFORMATION
1. Headline earnings per share for the 6 months ended 31 August 2015

                                                           6 months       6 months           Year
                                                              ended          ended          ended
                                                        31 Aug 2015    31 Aug 2014    28 Feb 2015
                                                         (Reviewed)     (Reviewed)      (Audited)
                                                              R'000          R'000          R'000
Reconciliation of headline   
earnings/(loss):   
Profit/(loss) attributable to ordinary   
shareholders                                                  4 304          (209)         10 025
Development cost impairment                                       -          (253)          1 168
Total tax effects of adjustments                                  -             71          (327)
Headline earnings/(loss) attributable    
to ordinary shareholders                                      4 304          (391)         10 866
Headline earnings/(loss) per share   
(cents)                                                        1.32         (0.16)           4.44
Diluted headline earnings/(loss) per    
share                                                          1.32         (0.16)           4.44

2. Acquisition of Parsec group

On 1 June 2015, the Group acquired the shares and all the shareholders' claims against Parsec
Holdings, Parsec and Redline Telecommunications SA Pty Ltd ("Redline").

The acquired business contributed revenues of R43.9 million and net profit of R2.6 million to the
group for the period from 1 June 2015 to 31 August 2015. If the acquisition had occurred on 1 April 2015, 
the acquired business would have contributed revenues of R75.9 million and net profit
of R1 million to the group up to the period ending 31 August 2015.

Details of the net assets acquired are as follows:

                                                                                             R'000
Fair value of the purchase consideration
-  Shares issued (1 June 2015 share price of 77 cents)                                     112 203
-  Cash consideration                                                                       15 570
-  Contingent cash consideration                                                             6 373
Total purchase consideration                                                               134 146
The fair value of assets acquired comprise:
Property, plant and equipment                                                               40 983 
Intangible assets                                                                            6 911
Goodwill                                                                                     7 288 
Deferred tax                                                                                   975
Other financial assets                                                                         345
Inventory                                                                                   15 501 
Trade and other receivables                                                                 36 322 
Cash and cash equivalents                                                                   20 781 
Current tax payable                                                                            308
Non-controlling interest                                                                     (389) 
Interest bearing borrowings                                                                (4 387) 
Trade and other payables                                                                  (78 223)
Total fair value of assets acquired                                                         46 415
Intangible assets to be classified                                                          87 731
Total purchase consideration                                                               134 146

The issue price of 40 cents per share, as reported in the circular, was determined by the board on
8 October 2014 and was at a premium of 1.37% to the 30 day VWAP of Ansys for the 30 days
preceding 8 October 2014. The fair value of the shares issued was based on the published share
price as at 1 June 2015, which was 77 cents. The impact of the fair value of the shares was an
increase of R30.5 million to the purchase consideration relating to the increase in the market price.

The initial purchase consideration was made up as follows:
­ R63 583 492, of which R6 700 000 relates to the property and is only payable once the
   property is transferred into the name of Parsec Properties Pty Ltd, payable to Parsec Holdings
   sellers, by the issue of 102 475 593 Ansys shares at 40 cents per share and R22 593 255 in cash;
­  R15 750 002, which relates to the 25% shareholding in Parsec, not owned by Parsec Holdings,
   payable to the Parsec seller, by the issue of 39 375 004 Ansys shares at 40 cents per share;
   and
­ R2 399 626, which relates to the 20% shareholding in Redline not owned by Parsec Holdings,
   payable to the Redline Telecommunications seller by the issue of 3 867 404 Ansys shares at
   40 cents per share and R852 664 in cash.

Prior to the effective date, Parsec Holdings distributed R10 000 000 and R9 779 203 to the Parsec
Holdings sellers.

The cash consideration payable (undiscounted) to the sellers will be settled in three tranches as
follows:

­ the first tranche of R10 000 000 was paid in cash on the closing date, R9 636 327 was paid to
   the Parsec Holdings sellers and R363 673 was paid to the Redline sellers. This payment was
   subject to Parsec Holdings achieving a minimum NTAV of R25 million on the effective date,
   which was achieved.
­ the second tranche of R3 500 000 is payable in cash on 1 December 2015, to the sellers.
   R3 372 715 is payable to the Parsec Holding sellers and R127 285 payable in cash to the
   Redline sellers.
­ the third tranche of R9 945 919 is payable in cash to the sellers as follows:
   ­ the first instalment of R2 300 000 is payable on 1 June 2016, R2 216 255 to the Parsec
      Holdings sellers and R83 645 to the Redline sellers.
   ­ the subsequent instalments of R2 500 000 each are payable in quarterly instalments
      commencing 1 June 2017 and accruing interest at the prime interest rate. R7 367 858 is
      payable to Parsec Holdings and R278 061 to the Redline sellers.
   ­ these are payable subject to Parsec having sufficient free cash flow. In the event that
      Parsec does not have sufficient free cash flow, the quarterly instalments of R2 500 000
      each shall be increased by the amount of the shortfall in free cash flow.
   ­ in the event that any tranche and/or tranche shortfall is not paid after 36 months from
      1 June 2015, due to a shortfall in free cash flows, all the said amounts shall be forfeited.

The purchase price was funded by a capital raising in terms of a general issue for cash of
47 778 889 shares at 36 cents to various investors and the cash instalments will be funded out of
current cash flows. Refer to the shares issued in the Statement of Changes in Equity.

The total number of Ansys shares issued to the sellers was 145 718 001, which were all issued in
July 2015. Refer to the business combination in the Statement of Changes in Equity.

Management is in the process of completing the purchase price allocation and the "intangible assets to be classified" 
will be re-classified at year-end.

3. Loans from related parties
                                                                  6 months       6 months           Year
                                                                     ended          ended          ended
                                                               31 Aug 2015    31 Aug 2014    28 Feb 2015
                                                                (Reviewed)     (Reviewed)      (Audited)

Name                                        Relationship             R'000          R'000          R'000
Amounts owing to:                           
                                           Same director
-  TDK Trust                                    (T Daka)                 -          1 000              -
                                          Same director   
-  Tedaka Investments Pty Ltd                   (T Daka)                 -        (9 070)        (9 070)
-  Bearing Management                      Same director   
   Consultants Pty Ltd                          (T Daka)                 -          (966)        (1 792)
                                           Same director   
-  Teddy Daka                                   (T Daka)                 -        (3 400)        (4 206)                                                                 
                                                                        -       (15 436)       (15 058)
Non-current liabilities                                                  -       (14 436)        (9 070)
Current liabilities                                                      -        (1 000)        (5 998)                                                                   
                                                                         -       (15 436)       (15 098)

The Tedaka Investments Pty Ltd loan was repaid with the issue of 22 674 375 shares at 40 cents
as part of the Parsec Holdings acquisition. Refer to the shares issued in the Statement of Changes
in Equity. The other loans were repaid in cash.

4.  Interest bearing loan


                                                                6 months         6 months           Year
                                                                   ended            ended          ended
                                                             31 Aug 2015      31 Aug 2014    28 Feb 2015
                                                              (Reviewed)       (Reviewed)      (Audited)
                                                                   R'000            R'000          R'000
Parsec Properties Pty Ltd loan from Nedbank                       30 300                -              -
                                                                  30 300                -              -
Non-current liabilities                                           29 729                -              -
Current liabilities                                                  571                -              -
                                                                  30 300                -              -

The interest bearing borrowing is within Parsec Properties Pty Ltd for the new Parsec group office.
The loan is secured over the property and is repayable over 10 years, for which the first 3 years
the interest is fixed at 10.43% and thereafter it will be at prime less 0.5%. A R5 million residual
value will remain on the loan at the end of the 10-year period. Included in the R30.3 million loan is
mezzanine finance of R5 million, with interest rate at 11.5% and is repayable at end of the 3-year
period.

STATEMENT OF COMPLIANCE, BASIS OF PREPARATION AND REVIEW REPORT
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and the requirements of the
Companies Act of South Africa. The accounting policies applied in the preparation of these interim
financial statements are in terms of International Financial Reporting Standards and are consistent
with those applied in the previous annual financial statements. The directors take full responsibility
for the preparation of the condensed interim financial statements.

These interim condensed consolidated financial statements for the period ended 31 August 2015
have been reviewed by PricewaterhouseCoopers Incorporated, which expressed an unqualified
review conclusion.

A copy of the auditor's report is available for inspection at the company's registered office together
with the financial statements identified in the auditor's report.

The auditor's report does not necessarily report on all 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 issuers registered office.

PREPARER
These results were prepared under the supervision of Rachelle Grobbelaar CA (SA), the Chief
Financial Officer.

GOING CONCERN
The directors have reviewed the group's budget and cash flow forecast for the year to August
2016. 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 adopted the going
concern basis in preparing these reviewed provisional financial results.

DIRECTORATE
The following changes were made to the board of directors:
N Medupe – appointed 9 September 2015
Dr SJ Khoza – appointed 21 October 2015
FF Dantile – resigned 9 September 2015
AR van der Watt – appointed 1 June 2015
CP Bester – appointed 1 June 2015

BBBEE
Ansys improved its BEE rating from a level 4 to a level 2.

EVENTS SUBSEQUENT TO YEAR END
PricewaterhouseCoopers was appointed as Auditors to the Group with effect 1 October 2015.
PricewaterhouseCoopers are the Auditors of the Parsec Group.

Ansys changed its year-end from 28 February to 31 March to align its year–end with the year-end
date of the Parsec Group.

The directors are not aware of any significant events, other than noted above, that have occurred
between the interim period ending 31 August 2015 and the date of this report that may materially
affect the results of the group for the year or its financial position as at
31 August 2015.

By order of the board

Teddy Daka                  Rachelle Grobbelaar
Chief Executive Officer     Chief Financial Officer
30 November 2015

Directors
CP Bester, T Daka* (CEO); R Grobbelaar* (CFO); Dr. SJ Khoza, N Medupe, NS Mjoli Mncube;
S P Mzimela, AR van der Watt
*Executive
Company secretary
M van den Berg
Telephone: +27 12 749 1800
Facsimile: +27 12 665 2767
Website: www.ansys.co.za
Registered office:140 Bauhinia Street Centurion, Pretoria 0157 
(PO Box 95361, Waterkloof,Pretoria)
Designated adviser: Exchange Sponsors 2008 Pty Ltd
Transfer secretaries: Computershare Investor Services Pty Ltd



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