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METROFILE HOLDINGS LIMITED - Preliminary audited group results for the year ended 30 June 2016

Release Date: 29/08/2016 17:15
Code(s): MFL     PDF:  
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Preliminary audited group results for the year ended 30 June 2016

METROFILE HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1983/012697/06)
Share code: MFL
ISIN: ZAE000061727
("Metrofile" or "the Company" or "the group")

PRELIMINARY AUDITED GROUP RESULTS
for the year ended 30 June 2016

                                                                 DIVIDENDS PER SHARE
NORMALISED HEPS         NORMALISED REVENUE   NORMALISED EBITDA   FOR THE YEAR
33,8 cents per share    R796,5 million       R253,0 million      30,0 cents per share
UP                      UP                   UP                  UP                    
4,6%                    10,5%                6,9%                42,9%                                            
            
Summarised consolidated income statement
                                                                                               Normalised    Normalised
                                                                      Audited       Audited     Unaudited     Unaudited
                                                                    12 months     12 months     12 months     12 months
                                                                        ended         ended         ended         ended
                                                                      30 June       30 June       30 June       30 June
R'000                                                                    2016          2015          2016          2015
Revenue                                                               777 577       701 898       796 497       720 873
Earnings before interest, taxation, depreciation
and amortisation (EBITDA)                                             235 024       218 426       253 045       236 603
Depreciation                                                         (35 737)      (31 636)      (36 362)      (32 320)
Operating profit before finance costs                                 199 287       186 790       216 683       204 283
Net finance costs                                                    (14 687)      (13 084)      (12 805)      (12 402)
Finance income                                                          4 646         7 492         4 646         7 492
Finance costs                                                        (19 333)      (20 576)      (17 451)      (19 894)
Profit before taxation                                                184 600       173 706       203 878       191 881
Taxation                                                             (48 949)      (46 244)      (54 347)      (51 333)
Profit for the year                                                   135 651       127 462       149 531       140 548
Attributable to:
Owners of the parent                                                  130 129       124 620       144 009       137 706
Non-controlling interests                                               5 522         2 842         5 522         2 842
Profit for the year                                                   135 651       127 462       149 531       140 548
Further information
Number of ordinary shares in issue                    (thousands)     425 084       427 084       425 084       427 084
Weighted average number of ordinary shares
in issue                                              (thousands)     425 944       425 831       425 944       425 831
Basic earnings per ordinary share
Basic earnings per ordinary share                         (cents)        30,6          29,3          33,9          32,3
Diluted earnings per ordinary share
Diluted earnings per ordinary share                       (cents)        30,6          29,2          33,9          32,3
Headline earnings per ordinary share
Headline earnings per ordinary share                      (cents)        30,5          29,3          33,8          32,3
Dividend per ordinary share
Interim dividend per ordinary share – paid                (cents)        11,0           9,0          11,0           9,0
Final dividend per ordinary share – proposed/paid         (cents)        19,0          12,0          19,0          12,0

Summarised consolidated
statement of comprehensive income
                                                                                               Normalised    Normalised
                                                                      Audited      Audited      Unaudited     Unaudited
                                                                    12 months    12 months      12 months     12 months
                                                                        ended        ended          ended         ended
                                                                      30 June      30 June        30 June       30 June
R'000                                                                    2016         2015           2016          2015
Profit for the year                                                   135 651      127 462        149 531       140 548
Other comprehensive income for the year net of tax*                       656        (773)            656         (773)
Hedge accounting for fair value on interest rate swaps                      –          133              –           133
Currency movement on translation of foreign subsidiary                    656        (906)            656         (906)
Total comprehensive income for the year                               136 307      126 689        150 187       139 775
Attributable to:
Owners of the parent                                                  130 551      123 812        144 431       136 898
Non-controlling interests                                               5 756        2 877          5 756         2 877

* All items will subsequently be reclassified to profit and loss.

Reconciliation of headline earnings
                                                                                               Normalised    Normalised
                                                                       Audited      Audited     Unaudited     Unaudited
                                                                     12 months    12 months     12 months     12 months
                                                                         ended        ended         ended         ended
                                                                       30 June      30 June       30 June       30 June
R'000                                                                     2016         2015          2016          2015
Profit attributable to owners of the parent                            130 129      124 620       144 009       137 706
Profit on disposal of plant and equipment                                (294)        (231)         (294)         (231)
Tax effect of above items                                                  179          205           179           205
Headline earnings                                                      130 014      124 594       143 894       137 680
Headline earning per ordinary share                        (cents)        30,6         29,3          33,8          32,3

Summarised segmental information
                                                                           Revenue                       EBITDA
                                                                       Audited      Audited        Audited      Audited
                                                                     12 months    12 months      12 months    12 months
                                                                         ended        ended          ended        ended
                                                                       30 June      30 June        30 June      30 June
R'000                                                                     2016         2015          2016          2015
Records Management                                                     612 318      545 217       159 346       145 224
Property Companies
(Occupied by Records Management businesses)                             59 901       53 366        59 901        53 366
CSX Customer Services                                                   95 997       95 975       (1 060)         6 512
Other                                                                   79 904       70 992        16 837        13 324
Intergroup                                                            (70 543)     (63 652)             –             –
Total                                                                  777 577      701 898       235 024       218 426

                                                                        Operating profit             Tangible assets
                                                                       Audited      Audited        Audited      Audited
                                                                     12 months    12 months      12 months    12 months
                                                                         ended        ended          ended        ended
                                                                       30 June      30 June        30 June      30 June
R'000                                                                     2016         2015           2016         2015
Records Management                                                     131 438      121 423        339 755      405 372
Property Companies
(Occupied by Records Management businesses)                             59 901       53 366        294 785      259 106
CSX Customer Services                                                  (1 647)        5 788         23 590       22 346
Other                                                                    9 595        6 213         67 088       56 555
Total                                                                  199 287      186 790        725 218      743 379

"Other"               includes Metrofile Holdings, Rainbow Paper Management, Global Continuity, Cleardata and Lexie Legal Services.
"Records Management"  represents the global document storage and management and scanning business units which are managed
                      and operated geographically.

Summarised consolidated
statement of financial position

                                                                                                     Audited    Audited
                                                                                                       as at      as at
                                                                                                     30 June    30 June
R'000                                                                                     Notes         2016       2015
ASSETS
Non-current assets                                                                                   722 858    660 262
Property                                                                                      1      292 835    258 349
Plant and equipment                                                                                  204 317    202 051
Goodwill                                                                                             218 573    194 615
Intangible assets                                                                                      1 868          –
Investment in associate                                                                                  449          –
Long-term receivable                                                                                     559      1 574
Deferred tax assets                                                                                    4 257      3 673
Current assets                                                                                       227 506    281 405
Inventories                                                                                           19 443     14 549
Trade receivables                                                                                    136 293    121 245
Other receivables                                                                             2       46 053     25 094
Bank balances                                                                                         25 717    120 517
Total assets                                                                                         950 364    941 667

EQUITY AND LIABILITIES
Equity and reserves                                                                                  660 341    630 407
Equity attributable to owners of the parent                                                          643 398    617 520
Non-controlling interests                                                                             16 943     12 887
Non-current liabilities                                                                              144 942    175 160
Interest-bearing liabilities                                                                  3      123 297    156 125
Deferred taxation liability                                                                           21 645     19 035
Current liabilities                                                                                  145 081    136 100
Trade and other payables                                                                              69 658     71 305
Deferred revenue                                                                                      13 427     12 331
Bank overdraft                                                                                           345         49
Provisions                                                                                             2 678      2 436
Taxation                                                                                               9 768      2 616
Interest-bearing liabilities                                                                  3       49 205     47 363
Total equity and liabilities                                                                         950 364    941 667
Net asset value per ordinary share                                                      (cents)        151,4      144,6

Notes:
   
1. The majority of the group's properties have been pledged as security against certain loans to
   the group.
2. Other receivables includes a prepayment on land acquired for which transfer had not been registered at 30 June 2016.   
3. Long-term interest-bearing liabilities represent the Metrofile (Pty) Ltd amortising and revolving
   facilities. Short-term interest-bearing liabilities include the portions of the Metrofile (Pty) Ltd
   amortising loan facility and group company loan agreements payable within one year. The
   Metrofile (Pty) Ltd borrowings are JIBAR linked, whilst the other borrowings are prime linked.

Summarised consolidated statement of cash flows
                                                                                                   Audited      Audited
                                                                                                 12 months    12 months
                                                                                                     ended        ended
                                                                                                   30 June      30 June
R'000                                                                                                 2016         2015
Cash generated from operations before
net working capital changes                                                                        229 066      222 315
(Increase)/decrease in net working capital                                                        (41 208)       38 211
Increase in normal net working capital                                                            (41 208)     (25 823)
Decrease in net normal working capital
due to insurance claim                                                                                   –       64 034
Cash generated from operations                                                                     187 858      260 526
Net finance costs paid                                                                            (14 687)     (13 084)
Dividends paid                                                                                    (97 835)     (72 297)
Normal taxation paid                                                                              (39 724)     (58 568)
Net cash inflow from operating activities                                                           35 612      116 577
Net cash outflow from investing activities
Investment in property: expansion                                                                 (21 786)      (6 354)
Investment in plant and equipment: expansion                                                      (44 578)     (35 536)
Investment in property: replacement                                                                      –     (17 322)
Investment in plant and equipment: replacement                                                     (7 192)      (7 952)
Proceeds on disposal of property, plant and equipment                                                1 506        1 684
Additions to Intangible assets                                                                     (1 967)            –
Investment in associate company                                                                      (449)            -
Acquisition of subsidiary                                                                         (25 256)     (28 575)
Net cash outflow from financing activities
Loans repaid                                                                                      (30 986)     (35 253)
Loans drawn down                                                                                         –       97 919
Net (decrease))/increase in cash and cash equivalents                                              (95 096)      85 188
Cash and cash equivalents at the beginning of the year                                             120 468       35 280
Cash and cash equivalents at the end of the year                                                    25 372      120 468
Represented by:
Bank balances                                                                                       25 717      120 517
Bank overdrafts                                                                                      (345)         (49)

Summarised consolidated statement of changes in equity
                                                                                                      Total equity
                                                                                                            before
                                                                           Accumulated                        Non-          Non-
                                                     Share       Share        profits/        Other    controlling   controlling
R'000                                              capital     premium        (losses)     reserves       interest      interest       Total
Balance at 30 June 2014 (audited)                    2 601     570 893        (21 889)       10 189        561 794         6 028     567 822
Shares issued in terms of share schemes                 24      18 043                                      18 067                    18 067
IFRS 2 Equity reserve relating to share schemes                                               4 211          4 211                     4 211
Share scheme settlement                                                       (12 474)      (5 593)       (18 067)                  (18 067)
Minority contribution on acquisition of subsidiary                                                                         3 982       3 982
Dividends declared                                                            (72 297)                    (72 297)                  (72 297)
Total comprehensive income
for the year ended 30 June 2015                                                124 620        (808)        123 812         2 877     126 689
Balance at 30 June 2015  (audited)                   2 625     588 936          17 960        7 999        617 520        12 887     630 407
Purchase of treasury shares                                    (9 577)                                     (9 577)                   (9 577)
IFRS 2 Equity reserve relating to share schemes                                               4 440          4 440                     4 440
Share scheme settlement                                                                     (1 494)        (1 494)                   (1 494)
Minority contribution on acquisition of subsidiary                                                                       (1 700)     (1 700)
Dividends declared                                                            (98 042)                    (98 042)                  (98 042)
Total comprehensive income
for the year ended 30 June 2016                                                130 129          422        130 551         5 756     136 307
Balance at 30 June 2016  (audited)                   2 625     579 359          50 047       11 367        643 398        16 943     660 341

Commentary on the results

Profile
Metrofile is the dominant service provider in both physical and
digital information and records management in Africa. 
The group is represented in the six major provinces of South Africa, Botswana,
Mozambique, Nigeria, Zambia, the United Arab Emirates, Qatar,
Oman and, through subsidiary CSX Customer Services, undertakes
contracts in various other African countries. The Metrofile Records
Management division operates from 44 facilities, at 21 locations,
covering more than 87 136 square metres of warehousing and office
space. In accordance with its owner/lessee model, 68% of these
facilities are owned by the group. The rest of the group's divisions
lease their premises. In order to optimise operational efficiency,
Metrofile has a long-term target of owning approximately 70% of the
properties from which the Metrofile Records Management division operates.

Services include physical and digital Records Storage and
Management, Image Processing, Backup Storage and Management,
Records Management Software and Records Management
Consultancy, Business Continuity and IT Continuity, File plan
development, Confidential Records Destruction, Paper Recycling
as well as the sale and maintenance of a wide range of business
equipment, including scanners, library security systems, mailing and
packaging machines.

Metrofile has been listed on the JSE Limited ("JSE") since 1995
and its ordinary shares are quoted in the "Support Services"
sector of the JSE. Metrofile is a black-owned company with black
ownership amounting to 53,36% whilst its largest shareholder is its
empowerment partner, Mineworkers Investment Company ("MIC")
which owns 34,41% of Metrofile's equity.

Strategy
Metrofile will continue to expand its services in the information
management sector, through both innovation and acquisition.
The continued focus on cross-selling the group's diverse range of
services to both new and existing customers remains a key part of
the group's international strategy. The necessity for businesses to
not only archive but manage all types of records, whether they be in
physical or digital format, positions the group well to assist companies
with their record-keeping requirements, thereby mitigating risk to the organisation.

The group's expansion strategy continues to take cognisance of potential target
countries' business and political environment, governance, market
attractiveness, language, infrastructure, logistics, education and
labour force, potential client industries and overall risk.

Financial review
IFRS required that 36 months' business interruption insurance
proceeds relating to a fire at a facility in 2013 be recognised in full in
the 2014 financial year. Normalised results are accordingly presented
again, recognising this receipt over 36 months in order to present
more representative results for each affected reporting period.

Normalised revenue increased by 10,5% to R796,5 million, whilst
normalised EBITDA increased by 6,9% to R253,0 million.

Normalised headline earnings increased by 4,5% to R143,9 million.

Normalised basic earnings per share ("EPS") increased by 5,0% to
33,9 cents and normalised headline earnings per share ("HEPS")
increased by 4,6% to 33,8 cents. It should be noted that during the
period the group incurred non-recurring costs of R8,7 million after tax
equal to 2 cents per share arising from Head Office restructuring and
one-off CEO transition costs.

Cash generated from operations before net working capital changes
increased by 3,0% whilst the cash generated from operations
decreased by 27,9%.

Capital investments of R73,6 million were effected mainly for
expansion and included the development of new facilities in
Mbombela and Cape Town, and the purchase of racking, equipment
and mobile shredding units of R44,6 million required for growth.

The group's total interest bearing debt amounted to R172,5 million
at the year end, which equates to a Debt: Normalised EBITDA ratio
of 0,68 times.

Dividend policy
The Board has targeted maintaining debt levels at least at 1,5 times 
EBITDA. However, continued strong cash generation has resulted in 
leverage remaining below this level. The Board has accordingly resolved 
to reduce dividend cover from 1,5 times to a target range of 1,25 to
1,5 times with effect from the 2016 financial year. In addition, until 
the minimum debt levels are achieved, the Board has further resolved to 
pay dividends with cover below the target range. The dividend for 2016 
has accordingly been increased by 42,9% to 30 cents per share 
representing cover of 1,1 times.

Acquisitions
In line with its bolt-on geographical acquisition strategy, the group
acquired interests in the following subsidiaries during the period:
  
- 100% shareholding in Document Bank Botswana (Botswana)
  – effective 1 January 2016;
- 49% shareholding in Al Bidda Metrofile LLC (Qatar) – effective
  1 January 2016;
- 40% shareholding in Lexie Legal Services (Pty) Ltd (South Africa)
  – effective 1 January 2016; and
- 51% shareholding in E-File Teejan LLC via E-File Masters LLC
  (Oman) – effective 1 February 2016.

Where applicable, goodwill has been recognised on the acquisitions
as the group's cash-generating units are expected to benefit from the
synergies of the combinations.

Basis of preparation and accounting policies
The directors take full responsibility for the preparation of these
Preliminary Audited Group Results. The group results have been
prepared, under the supervision of Mr MC McGowan, CA(SA). The
summarised financial information has been prepared in accordance
with the framework concepts and measurement and recognition
requirements of International Financial Reporting Standards (IFRS),
the SAICA Financial Reporting Guidelines as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council, the information
as required by IAS 34: Interim Financial Reporting, the JSE Listings
Requirements and the requirements of the Companies Act of South
Africa. The report has been prepared using accounting policies that
comply with IFRS which are consistent with those applied in the
financial statements for the year ended 30 June 2015.

Certain accounting pronouncements became effective during the
current financial year; however, these do not have an impact on either
transactions or disclosures.

Audit opinion
The independent auditors, Deloitte & Touche, have issued their
unmodified audit opinion, on the consolidated financial statements for
30 June 2016 year-end, in accordance with International Standards
on Auditing. These financial statements have been derived from the
consolidated financial statements and are consistent in all material
respects, with the consolidated financial statements. A copy of the
audit report on the summarised financial statements, the audited financial 
statements and the audit report are available for inspection at 
the Company's registered office. The auditor's report does not necessarily 
report on the information contained in this announcement. Shareholders 
are therefore advised that in order to obtain a full understanding of 
the nature of the auditor's engagement, they should obtain a full copy 
of the auditor's report, together with the accompanying consolidated 
financial information from the issuer's registered office. Any reference 
to future financial performance included in this announcement, has not 
been reviewed or reported on by the Company's auditors.

Related parties
In terms of a consulting agreement, and as approved at the Annual
General Meeting, the MIC fees of R1,44 million (2015: R1,35 million)
were paid during the period under review.

Directorate and corporate governance
The Board currently comprises of two executive and six non-executive
directors, of whom four are independent directors. Mr IN Matthews
remains the lead independent director. As advised previously,
Mr P Serima took over as CEO from Mr G Wackrill who retired on
31 March 2016. Mr Wackrill remains on the Board as a non-executive director.

Dividends
As explained under Dividend Policy, the Board has agreed a dividend
for the full year of 30 cents per share.

Notice is hereby given that a final gross cash dividend of
19,0 cents per share in respect of the year ended 30 June 2016 has
been declared payable to the holders of ordinary shares recorded
in the books of the Company on Friday, 7 October 2016. The last
day to trade cum-dividend will therefore be Tuesday, 4 October
2016 and Metrofile shares will trade ex-dividend from Wednesday,
5 October 2016. Payment of the dividend will be made on Monday,
10 October 2016. Share certificates may not be dematerialised or
rematerialised between Wednesday, 5 October 2016 and Friday,
7 October 2016, both days inclusive. Withholding tax on dividends will
be deducted for all shareholders who are not exempt in terms of the
legislation at a rate of 15% which will result in a final net cash dividend
of 16,15 cents per share. The Company's issued share capital remains
unchanged at 425 084 010 shares. The Company's tax number is 9375066710.

Commitments
The group continues to monitor and optimise its balance of owned
and leased premises to ensure the continued availability of space to
meet expansionary demand relative to the cost of unutilised facilities.
Operating lease commitments amount to R104,3 million for the next
five years. Capital investment plans for the forthcoming financial year
amount to R130,0 million.

Events after the reporting date
There have been no material events after the reporting date.

Outlook
Metrofile anticipates continued growth in the challenging economic
and business environments, both locally and on the African continent.
The group will continue to seek growth opportunities across all business 
units, both locally and internationally, in cradle to grave document 
management solutions. At this stage, Metrofile expects to resume its 
historic earnings growth profile in the forthcoming financial year.

This statement has not been reviewed or audited by Metrofile's
auditors.

Christopher Seabrooke                     Pfungwa Serima
Non-executive Chairman                    Chief Executive Officer

29 August 2016
Senderwood
Gauteng

Corporate information

Registered office
41 Wordsworth Avenue
Senderwood
Bedfordview
2007

www.metrofileholdings.com

Sponsor
The Standard Bank of South Africa Limited

Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001

Directors
CS Seabrooke^* (Chairman)
MS Bomela* (Deputy Chairman)
PG Serima (CEO)
MC McGowan (CFO)
P Langeni^*
CN Mapaure*
IN Matthews#*
GD Wackrill*
SV Zilwa^*

# Lead independent
^ Independent
* Non-executive

Company Secretary
P Atkins



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