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MICROMEGA HOLDINGS LIMITED - Provisional Condensed Annual Consolidated Results for the Year Ended 31 March 2017

Release Date: 25/05/2017 17:43
Code(s): MMG     PDF:  
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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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