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Provisional Condensed Annual Consolidated Results for the Year Ended 31 March 2017
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")
PROVISIONAL CONDENSED ANNUAL CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH 2017
CONDENSED GROUP STATEMENT OF PROFIT AND LOSS
Audited Audited
31 March 31 March
2017 2016
R'000 R'000
Revenue 1 357 129 1 193 921
Cost of sales (654 192) (619 783)
Gross profit 702 937 574 138
Other net income/(expenses) 6 300 22 773
Distribution expenses (5 400) (7 384)
Administration expenses (433 388) (374 779)
Results from operations 270 449 214 748
Finance income 2 140 3 279
Finance cost (3 543) (5 245)
Share of profit of equity accounted associate 1 902 1 811
Profit before tax 270 948 214 593
Tax expense (55 775) (55 856)
Profit for the year 215 173 158 737
Profit attributable to:
Owners of the parent 176 836 145 433
Non-controlling interest 38 337 13 304
215 173 158 737
Attributable earnings per share (cents)
Basic 155.59 129.64
Diluted basic 154.58 126.07
Headline 157.76 123.43
Diluted headline 156.74 120.03
CONDENSED GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME
Audited Audited
31 March 31 March
2017 2016
R'000 R'000
Profit for the year 215 173 158 737
Other comprehensive income:
Foreign currency translation differences (5 667) 3 347
209 506 162 084
Total comprehensive income attributable to:
Owners of the parent 171 169 148 780
Non-controlling interest 38 337 13 304
209 506 162 084
Reconciliation of headline earnings:
Profit attributable to owners of the parent 176 836 145 433
Loss/(profit) on disposal of property, plant and equipment (1 440) 116
Loss/(profit) on disposal of investment in subsidiaries 3 906 (7 365)
Loss on disposal of investments - 283
Headline earnings 179 302 138 467
Weighted average number of shares (000s) 113 656 112 185
Diluted weighted average number of shares (000s) 114 394 115 360
Total number of shares in issue (000s) 114 211 112 833
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
As at As at
31 March 31 March
2017 2016
R'000 R'000
ASSETS
Non-current assets 838 151 691 877
Property, plant and equipment 59 677 53 558
Intangible assets 735 664 581 276
Investments in associates 15 550 13 648
Other financial assets - 5 063
Deferred tax assets 27 260 38 332
Current assets 516 433 440 440
Inventories 44 777 41 851
Trade and other receivables 409 018 300 563
Income tax receivable 5 806 6 575
Other financial assets 6 288 2 024
Cash and cash equivalents 50 544 89 427
TOTAL ASSETS 1 354 584 1 132 317
EQUITY AND LIABILITIES
EQUITY 948 790 766 508
Share capital and share premium 292 452 266 852
Other reserves 6 909 12 333
Retained earnings 534 917 411 651
Non-controlling interest 114 512 75 672
LIABILITIES
Non-current liabilities 103 378 103 991
Other financial liabilities 4 359 4 998
Deferred vendor payments 7 126 27 343
Deferred tax liabilities 91 893 71 650
Current liabilities 302 416 261 818
Trade and other payables 202 016 161 646
Other financial liabilities 2 795 3 347
Income tax payable 6 397 11 879
Deferred vendor payments 32 644 35 409
Bank overdraft 58 564 49 537
TOTAL LIABILITIES 405 794 365 809
TOTAL EQUITY AND LIABILITIES 1 354 584 1 132 317
Net asset value per share (cents) 730.47 624.20
Net tangible asset value per share (cents) 86.34 109.07
CONDENSED GROUP STATEMENT OF CASH FLOW
Audited Audited
31 March 31 March
2017 2016
R'000 R’000
Cash flow from operating activities 187 477 126 446
Cash generated from operations 216 994 152 491
Finance income 2 140 3 279
Finance costs (1 475) (1 965)
Income tax paid (30 182) (27 359)
Cash flow from investing activities (165 278) (130 294)
Property, plant and equipment acquired (19 938) (16 749)
Intangible assets acquired (158 197) (106 574)
Proceeds on disposal of property, plant and equipment 3 918 4 266
Acquisition of subsidiaries and businesses (6 750) (15 117)
Acquisition of non-controlling interest without a change in control (2 128) (7 793)
Proceeds on disposal of subsidiaries 17 018 2 869
Loans receivable repaid 799 8 804
Cash flow from financing activities (70 109) (104 147)
Treasury shares repurchased (10 841) (12 029)
Other financial liabilities repaid (5 035) (4 161)
Deferred vendor payments repaid (1 607) (38 471)
Dividends paid to non-controlling interest (3 139) (9 266)
Dividends paid (49 487) (40 220)
(Decrease)\Increase in cash and cash equivalents (47 910) (107 995)
Cash and cash equivalents at the beginning of the year 39 890 147 885
Cash and cash equivalents at the end of the year (8 020) 39 890
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Share Other Retained Non- TOTAL
Capital and Reserves Earnings Controlling
Share Interest
Premium
R'000 R'000 R'000 R'000 R'000
Balance at 1 April 2015 266 203 6 261 330 218 68 991 671 673
Profit for the year - - 145 433 13 304 158 737
Other comprehensive income - 3 347 - - 3 347
Transactions with owners, recorded directly in 649 2 725 (39 138) (5 901) (41 665)
equity
Changes in ownership interest in subsidiaries - - (24 862) (722) (25 584)
without a change in control
Balance at 31 March 2016 266 852 12 333 411 651 75 672 766 508
Balance at 1 April 2016 266 852 12 333 411 651 75 672 766 508
Profit for the year - - 176 836 38 337 215 173
Other comprehensive income - (5 667) - - (5 667)
Transactions with owners, recorded directly in 25 600 243 (47 717) (3 139) (25 013)
equity
Changes in ownership interest in subsidiaries - - (5 853) 3 642 (2 211)
Balance at 31 March 2017 292 452 6 909 534 917 114 512 948 790
NOTES TO THE GROUP FINANCIAL INFORMATION
1. Basis of preparation
These provisional condensed annual consolidated results for the year ended 31 March 2017 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 provisional audited condensed
annual 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
provisional condensed annual consolidated financial results have been prepared under the supervision of Cornelia Kemp,
CA(SA), the Financial Director.
The provisional condensed annual consolidated financial statements are extracted from the audited annual consolidated
financial statements and are consistent in all material respects with the group financial statements which are available for
inspection at the company's registered office. This provisional report is extracted from audited financial information but is not
itself audited.
The directors take full responsibility for the preparation of the report and confirm the financial information has been correctly
extracted from the underlying audited annual consolidated financial information.
All financial information presented in South African Rand has been rounded to the nearest thousand.
2. Significant accounting policies
These provisional condensed annual 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. Audit opinion
The annual consolidated financial statements were audited by the group's auditors, Nexia SAB&T, and their unmodified audit
report is available for inspection at the group's registered office.
4. Business combinations
The CSIR
On 16 September 2016, the group acquired the CSIR Food and Beverage Laboratories for a consideration of R6.8 million.
Goodwill to the value of R4.8 million was accounted for. The amount of net assets acquired amounted to R2.0 million. The
CSIR Food and Beverage Laboratories business has been incorporated into Aspirata Testing and Certification Services
Proprietary Limited.
5. Disposal of subsidiaries
MECS Africa Proprietary Limited and MECS Growth Proprietary Limited ("MECS")
On 31 January 2017, the group disposed of its 100% interest in MECS Africa Proprietary Limited for a consideration of R16.5
million, which resulted in a loss of control of MECS Africa Proprietary Limited. This event resulted in a loss of R6.6 million
recorded in profit and loss.
MICROmega Securities Proprietary Limited
On 31 January 2017, the group disposed of its 100% interest in MICROmega Securities Proprietary Limited for a consideration
of R22.1 million, which resulted in a loss of control of MICROmega Securities Proprietary Limited. This event resulted in a profit
of R6.6 million recorded in profit and loss.
SAICMB Proprietary Limited (Australia)
On 31 January 2017 the group disposed of its 50% interest in SAICMB Australia Proprietary Limited for a consideration of R2.9
million, which resulted in a loss of control of SAICMB Australia Proprietary Limited. This event resulted in a loss of R1.1 million
recorded in profit and loss and the re-cycling of R0.6 million to non-controlling interest in equity.
6. Segment information
Audited Audited
31 March 31 March
2017 2016
R'000 R'000
SEGMENT REVENUE
Testing inspection and certification services 563 441 452 594
Labour supply 116 921 217 726
Information technology 649 607 494 221
Financial services 46 681 46 821
Holdings and consolidated (19 521) (17 441)
Total revenue 1 357 129 1 193 921
SEGMENT PROFIT / (LOSS)
Testing inspection and certification services 89 051 72 582
Labour supply 4 055 4 057
Information technology 118 859 87 184
Financial services 7 312 8 176
Holdings and consolidated (42 441) (26 566)
Total profit 176 836 145 433
SEGMENT ASSETS
Testing inspection and certification services 550 024 406 843
Labour supply - 59 535
Information technology 739 916 421 999
Financial services - 52 048
Holdings and consolidated 64 644 191 892
Total assets 1 354 584 1 132 317
7. Related party disclosure
The group entered into transactions and had balances with related parties as listed below. These include associates, joint
operations, directors and members of key management. The transactions that are eliminated on consolidation are not
included. Transactions with related parties are effected on a commercial basis and related party debts are repayable on a
commercial basis.
Audited Audited
31 March 31 March
2017 2016
R'000 R'000
Kyostax Proprietary Limited
Associate
Revenue 14 804 14 320
Other financial assets 5 640 5 640
GFI Securities Nyon SARL
Joint operation
Revenue 23 119 13 046
Trade receivables - 9 236
Kamberg Investment Holdings Proprietary Limited
Trade receivables 5 176 5 176
8. 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.
Deborah Di Siena was appointed as Independent Non-Executive Chairperson and resigned as Chairperson of the Audit
Committee with effect from 31 March 2017.
Russell Dick was appointed as Group Chief Operations Officer and resigned as Group Financial Director on 31 March 2017.
Cornelia Kemp was appointed as Group Financial Director on 31 March 2017.
Craig King was appointed as Group Director – Strategic Finance on 31 March 2017.
Duncan Carlisle resigned as Executive Director on 31 March 2017.
Dave King resigned as Executive Chairperson on 31 March 2017.
9. Subsequent events
On 1 May 2017, the group acquired the Occupational Hygiene and Occupational Health and Safety Divisions from LexisNexis
Legal and Professional for a consideration of R3 million.
No other significant events have occurred in the period between the reporting date and the date of this report.
10. Commentary on results
The results for the year were pleasing given the ongoing difficulties that the South African economy continues to endure. It is
noteworthy that the growth in headline earnings is largely organic, with the exception of a minor contribution in respect of the
acquisition of the food and beverage certification laboratories from the CSIR in September 2016.
The resilience of our business model, whereby we develop and own our intellectual property (IP), has again proved itself
capable of delivering well above market growth in earnings and dividends for our shareholders. We have stressed the
importance of this in prior years and it is pleasing to continue to deliver on this expectation.
Prior to year-end, we disposed of the two businesses that have, in recent years, been unable to contribute to the overall growth
of the group, being the financial broking and the labour broking businesses. Our decision to divest from these businesses,
secured the release of working capital that can be better deployed in our higher growth assets. This will have a positive impact
on all our ratios in the present financial year.
The group now operates in four distinct sectors:
- Testing, inspection and certification services (NOSA);
- Education and training (NOSA and TTRO);
- Information technology and software (Sebata, Turrito, Dial a Nerd); and
- Water management technology (USC, Amanzi).
The year under review was particularly significant for Sebata as it invested a further R138m to upgrade its proprietary enterprise
software. This was done to meet the mSCOA demands placed on local authorities by central government and to simultaneously
ensure that the software could meet the needs of the larger metropolitans. The traditional customer base of Sebata had been
the small to mid-size local authorities. This increased investment proved its worth when Sebata secured the contract for Nelson
Mandela Bay Metro against strong opposition from SAP software. A number of other local authorities were gained from
competitors during the year and Sebata is now the leading provider of enterprise software to local authorities in South Africa
with a number of exciting opportunities for the present year.
USC's proprietary water management technology also had a breakthrough year with regard to its market acceptance, both
locally and internationally. In addition to an increased presence in South Africa, USC has received orders from Zambia,
Zimbabwe, Brunei, the Solomon Islands and the UAE. Excitingly, proof of concepts are being implemented in Mexico,
Colombia, the USA, Brazil, Tanzania, Nigeria and Djibouti. The opportunities that the international marketplace provides for
our proven South African developed technology in assisting with the global water crisis are significant.
Our NOSA businesses were unable to continue with the growth pattern experienced over the last decade as the South African
economy continued to stagnate. In recognition of the likelihood that this will continue in the present year, it was deemed
appropriate to take some of the cost out of the businesses, while simultaneously using our strong brands to exploit additional
markets. The benefit of this should be felt in the coming year.
TTRO had a strong year as a result of a significant contract in Saudi Arabia and we believe that its leading role in digitising
services for the education sector will continue to provide growth opportunities in South Africa and internationally.
Whilst we believe that all business sectors will contribute above average growth in the present year, we anticipate higher levels
of growth from our information technology and our water management technology businesses.
The board has elected to increase the cash dividend from 43 cents per share in the previous financial year to 55 cents per
share for the current financial year, in line with our growth in headline earnings.
11. Cash dividend
Notice is hereby given that the directors have declared a final gross cash dividend of 55 cents per share for the financial year
ended 31 March 2017, which is adjusted for withholding tax. The final dividend has not been included as a liability in these
provisional condensed annual consolidated financial statements as it was declared subsequent to year end.
The final dividend for the year ended 31 March 2017 is payable to all shareholders on the Register of Members on Thursday,
15 June 2017. In terms of the dividends tax, effective 1 April 2012, the following additional information is disclosed:
- this is a dividend as defined in the Income Tax Act, 1962;
- the local dividend tax rate is 20%;
- the dividends will be payable from income reserves;
- the dividend tax to be withheld by the company amounts to 11 cents per share;
- therefore the net dividend payable to shareholders who are not exempt from dividends tax amounts to 44 cents per
share, while the gross dividend payable to shareholders who are exempt from dividends tax amounts to 55 cents per
share;
- the issued share capital of the company at the declaration date comprises 114 915 089 ordinary shares; and
- the group´s income tax reference number is 9457/323/84/9.
The salient dates will be as follows:
Declaration date: Thursday, 25 May 2017
Last day to trade: Monday, 12 June 2017
Shares trade ex-dividend: Tuesday, 13 June 2017
Record date: Thursday, 15 June 2017
Payment date: Monday, 19 June 2017
Share certificates may not be dematerialised or rematerialised between Tuesday, 13 June 2017 and Thursday, 15 June
2017, both days inclusive.
By order of the board
25 May 2017
Directors: DA Di Siena (Independent Non-Executive Chairperson); IG Morris (Chief Executive Officer); RB Dick (Chief
Operations Officer); C Kemp (Financial Director); CA King (Director – Strategic Finance); PH Duvenhage (Non-Executive
Director); TW Hamill (Non–Executive Director); GE Jacobs (Independent Non–Executive Director); RC Lewin (Independent
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: 25/05/2017 05:43:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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