Unaudited Condensed Consolidated Interim Results for the Six Months Ended 30 September 2016 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 2016 UNAUDITED 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 2016 2015 2016 R’000 R’000 R’000 Revenue 697 106 564 372 1 193 921 Cost of sales (329 128) (288 670) (619 783) Gross profit 367 978 275 702 574 138 Other net income/(expenses) 4 557 8 018 22 773 Distribution expenses (3 942) (2 634) (7 384) Administration expenses (228 431) (174 755) (374 779) Results from operations 140 162 106 331 214 748 Finance income 885 2 050 3 279 Finance cost (4 826) (840) (5 245) Share of profit of equity accounted associate 881 762 1 811 Profit before tax 137 102 108 303 214 593 Tax expense (31 524) (30 595) (55 856) Profit for the period 105 578 77 708 158 737 Profit attributable to: Owners of the parent 84 859 69 067 145 433 Non-controlling interest 20 719 8 641 13 304 105 578 77 708 158 737 Attributable earnings per share (cents) Basic 75.08 61.86 129.64 Diluted basic 73.55 60.98 126.07 Headline 74.80 61.81 123.43 Diluted headline 73.27 60.93 120.03 AUDITED 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 2016 2015 2016 R’000 R’000 R’000 Profit for the period 105 578 77 708 158 737 Other comprehensive income: Foreign currency translation differences 3 660 4 044 3 347 Total comprehensive income for the period 109 238 81 752 162 084 Total comprehensive income attributable to: Owners of the parent 88 519 73 111 148 780 Non-controlling interest 20 719 8 641 13 304 109 238 81 752 162 084 Reconciliation of headline earnings: Profit attributable to owners of the parent 84 859 69 067 145 433 Loss/(profit) on disposal of property, plant and equipment (324) (60) 116 Profit on disposal of investment in subsidiaries - - (7 365) Loss on disposal of investments - - 283 Headline earnings 84 535 69 007 138 467 Weighted average number of shares (000s) 113 021 111 646 112 185 Diluted weighted average number of shares (000s) 115 379 113 254 115 360 Total number of shares in issue (000s) 113 439 112 034 112 833 UNAUDITED CONDENSED GROUP STATEMENT OF FINANCIAL POSITION Unaudited Unaudited Audited As at As at As at 30 September 30 September 31 March 2016 2015 2016 R’000 R’000 R’000 ASSETS Non-current assets 775 002 606 695 691 877 Property, plant and equipment 55 279 68 091 53 558 Intangible assets 661 478 480 554 581 276 Investments in associates 14 529 12 600 13 648 Other investments - 291 - Other financial assets 175 704 5 063 Deferred tax assets 43 541 44 455 38 332 Current assets 515 615 410 989 440 440 Inventories 42 347 47 633 41 851 Trade and other receivables 368 926 257 214 300 563 Income tax receivable 6 750 4 375 6 575 Other financial assets 6 535 9 378 2 024 Cash and cash equivalents 91 057 92 389 89 427 TOTAL ASSETS 1 290 617 1 017 684 1 132 317 EQUITY AND LIABILITIES EQUITY 825 669 685 426 766 508 Share capital and share premium 271 787 270 792 266 852 Other reserves 11 117 11 983 12 333 Retained earnings 448 083 333 103 411 651 Non-controlling interest 94 682 69 548 75 672 LIABILITIES Non-current liabilities 105 142 73 667 103 991 Other financial liabilities 5 998 13 578 4 998 Deferred vendor payments 19 607 15 153 27 343 Deferred tax liabilities 79 537 44 936 71 650 Current liabilities 359 806 258 591 261 818 Trade and other payables 239 303 167 623 161 646 Other financial liabilities 3 210 4 201 3 347 Income tax payable 21 974 32 473 11 879 Deferred vendor payments 26 741 54 294 35 409 Bank overdraft 68 578 - 49 537 TOTAL LIABILITIES 464 948 332 258 365 809 TOTAL EQUITY AND LIABILITIES 1 290 617 1 017 684 1 132 317 Net asset value per share (cents) 644.39 549.72 624.20 Net tangible asset value per share (cents) 61.27 120.79 109.07 UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOW Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2016 2015 2016 R’000 R’000 R’000 Cash flow from operating activities excluding working capital changes 122 387 105 466 202 450 Movement in working capital 4 966 (33 696) (76 004) Cash flow from investing activities (89 351) (45 558) (130 294) Cash flow from financing activities (55 413) (81 708) (104 147) Decrease in cash and cash equivalents (17 411) (55 496) (107 995) Cash and cash equivalents at the beginning of the period 39 890 147 885 147 885 Cash and cash equivalents at the end of the period 22 479 92 389 39 980 UNAUDITED 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 2016 2015 2016 R’000 R’000 R’000 Balance at the beginning of the period 766 508 671 673 671 673 Profit for the period 105 578 77 708 158 737 Other comprehensive income 3 660 4 044 3 347 Transactions with owners, recorded directly in equity (49 656) (41 315) (41 665) Changes in ownership interest in subsidiaries (421) (26 684) (25 584) Balance at the end of the period 825 669 685 426 766 508 NOTES TO THE GROUP FINANCIAL INFORMATION 1. Basis of preparation These condensed consolidated financial statements for the six months ended 30 September 2016 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), the Financial Director. 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 and are consistent with those used in the audited annual consolidated financial statements for the year ended 31 March 2016. 3. Segment information Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2016 2015 2016 R’000 R’000 R’000 SEGMENT REVENUE Occupational health and safety 287 826 223 554 452 594 Labour supply 74 225 99 197 217 726 Information technology 316 055 220 334 494 221 Financial services 29 364 20 739 46 821 Holdings and consolidated (10 364) 538 (17 441) Total revenue 697 106 564 372 1 193 921 SEGMENT PROFIT / (LOSS) Occupational health and safety 39 634 40 998 72 582 Labour supply 1 866 578 4 057 Information technology 54 401 34 588 87 184 Financial services 6 713 3 350 8 176 Holdings and consolidated (17 755) (10 447) (26 566) Total profit 84 859 69 067 145 433 SEGMENT ASSETS Occupational health and safety 448 967 377 349 406 843 Labour supply 41 717 45 459 59 535 Information technology 507 554 333 673 421 999 Financial services 18 609 56 107 52 048 Holdings and consolidated 273 770 205 096 191 892 Total assets 1 290 617 1 017 684 1 132 317 4. 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. 5. Subsequent events No significant events have occurred in the period between the reporting date and the date of this report. 6. Commentary on results The financial performance for the period under review is pleasing given the continuance of the poor economic conditions referred to in the recently published annual report. This economic malaise directly affected our health & safety businesses due to the ongoing training needs of our large corporate clients, with both public and private sector declining for the first time in 10 years. This was solely due to reductions in employment that have been witnessed across most business sectors over the last 2 years. This resultant decline in high margin revenue was mitigated by our decision to add new products and services under our premium NOSA brand. Under the circumstances, the overall modest decline in profitability for these businesses is acceptable for the period under review during which the new opportunities had to be introduced and integrated. Going forward, we expect our health and safety group to resume its historical growth pattern. Our information technology businesses produced a growth in profitability of almost 60%. This performance would have been even more impressive if the local government elections had not delayed the receipt of new business until after the close of the reporting period. This particularly affected our proprietary software and our proprietary water technology businesses. There is no indication that the rapid growth in profitability of our technology businesses will not continue in the foreseeable future. Our financial services businesses are a relatively small contributor to group profitability however, they performed exceptionally well with a growth in profitability of a little over 100%. This was mainly as a result of the financial market volatility caused by international concerns around the global economy, Brexit and the USA elections. Our labour supply business is a high value, low margin business that has experienced a managed slow-down in its business due to our unwillingness to allocate further capital to this industry sector. Because of this reduction in activity, short-term profitability grew by over 200% off a very low base and it remains a minor contributor to group profit. By order of the board 3 November 2016 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); and D Passmore (Independent Non-Executive Director) Company Secretary: RJ Viljoen Auditors: Nexia SAB&T Transfer Secretaries: Singular Systems Proprietary Limited Sponsor: Merchantec Capital Attorneys: Di Siena Attorneys Note: No forward looking statements in this announcement have been reviewed or reported on by MICROmega’s auditors. Date: 03/11/2016 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 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