Wrap Text
Short Form: Reviewed Preliminary Condensed Consolidated Results for the year ended 30 June 2022
COGNITION HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1997/010640/06)
Share code: CGN ISIN: ZAE000197042
(“Cognition” or “the Group” or “the Company”)
SHORT FORM – REVIEWED PRELIMINARY CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED
30 JUNE 2022
Financial Position:
30 June 2022 30 June 2021
Change R'000 R'000
Total assets -15.91% 250 745 298 173
Cash and cash equivalents 3.72% 113 896 109 812
Equity -20.15% 194 053 243 029
Total liabilities 3.30% 56 962 55 144
Financial Performance for the period:
30 June 2022 30 June 2021
R'000 R'000
Revenue 4.50% 240 944 230 563
Gross profit 4.40% 207 430 198 679
(Loss) / profit before tax -339.99% (45 494) 18 957
Net asset value and earnings per share:
Net asset value per share -23.26% 73.06 cents 95.21 cents
Basic earnings per share -2 561.11% (22.15) cents 0.90 cents
Headline earnings per share -84.78% 0.46 cents 3.03 cents
FINANCIAL PERFORMANCE
The Group benefited from improved market conditions within the second half of the year under review
with revenue increasing by 4.5% from R230 million to R241 million for the year, as compared to the reported
interim results that reflected a decline in revenue as compared to the previous interim result period.
Revenue from Active Data Exchange Services increased by 3% from R37.1 million to R38.2 million although
Gross Profit remained stable at R27.2 million. The segment was still impacted by pandemic-related market
conditions within the first half of the year. The Knowledge Creation and Management revenue segment
revenue increased by 4.79% from R193,4 million to R202,6 million with a Gross Profit increase of 5.17% from
R171,4 million to R180.2 million. Channel Incentive Services is part of this division and was severely hampered
by restrictions imposed on it by some retail channels, however the decline in Channel Incentives Services
was offset by improved sales within the Research Assets that is also part of this segment.
Private Property operates in an ever-changing digital landscape. The Private Property board approved an
investment budget to support the Company’s mid to long term strategy at the beginning of this financial
year. This investment budget required the Company to upgrade its technology and solidify its brand within
the market. As disclosed in note 2 above, the Group evaluated the goodwill associated with the asset
which resulted in an impairment charge of R41.6 million.
The Group engaged in a re-evaluation process of its strategic growth prospects. It decided to no longer
pursue some interests which has resulted in it having to impair some intangible assets that were not yet
available for use and do not form part of the Group’s strategic focus areas. This has resulted in the Group
impairing R8.2 million of intangible assets in the period. Further to this, the Group disposed of its interest in
the BMi Sport Group and UNiID resulting in a loss on disposal of R3.4 million.
The Group’s operating expenses increased by 34.79% from R72.4 million to R97.6 million. This increase is due
to the substantial reinvestment that Private Property made into its platform in the past year and its increased
marketing spend. Staff costs increased from R92.2 million to R97.4 million due to an increased staff count.
The net result of the above is that the Group is reporting a significant loss before taxation of R49.9 million
and a comprehensive loss of R45.5 million although the bulk of this loss relates to impairment charges. The
Group’s Earnings Before Interest Tax Amortisation as well as impairment charges were R9.2 million
compared to R33.3 million in the previous year.
The Group continues to maintain a prudent approach regarding the use and allocation of its resources
and continues to maintain a healthy financial position with very limited long-term debt and a healthy cash
balance. The Group’s cash resources increased from R109.8 million in the previous financial year to R113.9
million, an increase of 3.72%. The Group generated R14 million net cash from operating activities in the past
year down from R37.7 million in the prior year which is due to the increased spend by Private Property on
its technology platform.
The Group’s Trade and Other Receivables increased to R40.9 million from R36.7 million with an increase in
Trade and Other Payables from R34.3 million to R37.9 million thereby maintaining the Group’s working
capital ratios
OPERATIONAL PERFORMANCE
Although the Cognition business is still not yet in the position that we would like, we have managed to
perform several of the tasks set out at the end of the first half, which have all contributed to improved
overall performance. As a result, as a business, we are firmly positioned to focus on core activities and to
continue enhancing the future of the Company.
Revenue and profits remain under pressure and are well below pre-Covid levels, caused by the reduced
Fax2Email revenue which has basically reduced to zero and a reduction in Channel Incentives that is
operating in a very competitive market. However, Management has identified critical facets within the
Group, and the focus has been to grow these parts of the business, with an intense focus on customer
engagement and collaboration with group companies.
Property Portal – Established over 20 years ago, Private Property is a multi-site property marketplace that
presents property listings, news and advice to property shoppers. It charges real estate professionals and
related advertising clients to market to that audience. It achieves this by delivering relevant property
content to consumers through custom-designed and developed applications and web platforms. The
business strikes a balance between being a part technology company, part media channel and part
content publisher.
Recognising its customers’ ever-changing digital landscape and needs, the Private Property management
Team continues interrogating its priorities and business imperatives. In addition to the approved investment
budget at the beginning of this financial year, the Board has resolved to commit more significant
investment in future growth prospects and its long-term upstream and downstream markets serviced by its
web-based platform. This will require an allocation of considerable additional resources in upgrading its
technology and solidifying its brand in the market while sacrificing short-term profits in favour of mid to long-
term customer and revenue growth over the next three years.
Research and Insights – Customised research and insights partner, focusing on product pricing, B2B and
consumer research, market sizing and advertising monitoring.
As presented in the interim results, Management agreed to terms which resulted in the sale of the
Company’s entire shareholding in the BMi Sport Group to the BMi Sport Group management.
The remainder of the Group’s research assets (BMi Research, Livingfacts and Adcheck) have performed
well and have exceeded revenue and profit forecasts as expected, turning the business into a profitable
position. If we remove the impairment of the intangible asset, the Company has performed ahead of pre-
Covid numbers. The diverse strategic and bespoke research and analytics solutions remain an essential
part of the business and necessary for future growth. Looking into the new financial year, management
has structured the business for growth by ensuring the team is focused on delivering exceptional insights to
our customers and collaborating with group companies. In addition, a dedicated team has been selected
to look for further research opportunities and to continue to automate processes to improve efficiencies.
Campaign and Data Management Service - Collaborates with brands and agencies that want to connect,
engage with and understand their customers using the relevant market technology.
As mentioned in our Half Year Report, FoneWorx urgently required a rejuvenation. We are pleased to report
that the team members have pulled together and made significant strides in the correct direction. The
realignment of costs and the introduction of new products has made this process possible, and from
February to June, the company has remained profitable. Based on our positive pipeline, this trend is likely
to continue for the new financial year. The first set of products to be released range from a series of
gamification products, with enhancement on our WhatsApp offering, plus enhanced Instagram services
and the like. In addition, we have acquired new technical skills and believe we will be well set in this area
for the latest financial year. Albeit small wins, they have been welcomed by our clients. We now look
forward to ongoing development in this space.
In addition to the above, the IT and Development departments have standardised across a sustainable
development stack, allowing for ready recruitment and department growth in the future. We believe these
improvements and new products will allow for increased revenue opportunities with minimal effect on
additional development capacity. Over the next financial year, our focus areas will continue adding more
products and enhancing existing ones, making them more efficient and relative. As a result, we are now
better positioned to adapt as technologies, markets and trends change rapidly.
Channel Incentives and Loyalty - Channel Incentives enable brands to reward resellers and sales agents
that market and sell its product to end consumers. In addition, the Channel Incentives platform simplified
the claiming of incentives and assists with the product training process, leading to increased sales and
product knowledge.
Unfortunately, this sector continues to feel the strain of the move by networks to consolidate the incentive
programmes with a single service provider. That said, the onboarding of several smaller brands has
subsequently subsidised some of the lost revenues. The non-network-related incentive business continues
to do well, with small gains achieved during the period. We remain optimistic that our turnkey solution to
incentivise staff or agents via our platform will continue to grow.
Prospects
Albeit early days in the turnaround plan at Cognition Holdings, the general confidence continues to
improve within the business with a clear sense of direction. Management is still focused on the several key
initiatives previously identified, which will continue to strengthen the core of the Company and drive
revenue and profit growth. As presented in the interim report, these include, but are not limited to, the
following:
A clear focus on increasing technological capacity, which will enable us to react quickly to customer
needs
Improved solutions for customers to drive revenue growth
Right-sizing of the business and simplification of internal systems and processes
Ongoing monitoring and control of costs within the business
This direct and strategic focus leaves us in a solid position to make concise and accurate decisions
regarding future acquisitions better aligned with our fundamental strategy, enabling immediate
integration and faster growth.
EVENTS AFTER REPORTING PERIOD
On 12 August 2022, the company has entered into separate agreements constituting one indivisible
transaction, with BetterHome Group Limited (“BetterHome’), ooba Proprietary Limited (“ooba”) and
Fledge Capital Proprietary Limited (“Fledge”) (collectively, “the Purchasers”) in terms of which it will, subject
inter alia to the conditions precedent dispose of its 50,01% interest in Private Property for an amount of R150
million. The effective date of the disposal is expected to be on or around 16 November 2022.
The content of this short form announcement is the responsibility of the directors. Shareholders are advised
that this short form announcement represents a summary of the information contained in the full long form
announcement which is available at:
https://senspdf.jse.co.za/documents/2022/JSE/ISSE/CGN/YE22.pdf
and also published on the Company’s website at:
http://www.cognitionholdings.co.za/pages/display/annual_results
Any investment decisions by investors and/or shareholders should be based on a consideration of the full
announcement as a whole and investors and shareholders are encouraged to review the full
announcement, which is available as detailed herein.
Copies of the full announcement may also be requested at the Company’s registered office or the office
of the sponsor, AcaciaCap Advisors, at no charge, during office hours. Any investment decision should be
based on the full announcement released on SENS and published on the Company’s website.
The Group’s auditor, BDO South Africa Inc. has reviewed the preliminary condensed consolidated results
for the year ended 30 June 2022 and expressed an unmodified review conclusion thereon.
For and on behalf of the Board
Paul Jenkins Rob Fedder Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
2 September 2022
Business and Registered Office:
Cognition House
Corner of Bram Fischer Drive and
Will Scarlet Road
Ferndale, Randburg, 2194
PO Box 3386, Pinegowrie, 2123
Telephone +27-11-293-0000
Fax 086-610-1000
Directors: Paul Jenkins#* - Chairman, Rob Fedder – CEO, Pieter Scholtz - Financial Director,
Graham Groenewaldt – Sales Director, Miles Crisp#*, Dennis Lupambo#*, Steve Naudé#*, Amasi
Mwela#, Servaas de Kock#
# Non-executive * Independent
Company Secretary: Felicia van der Merwe CA(SA)
Auditor: BDO South Africa Incorporated
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Sponsor: AcaciaCap Advisors Proprietary Limited
Date: 02-09-2022 05:00:00
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