Wrap Text
Interim results for the 6 month period ended 30 November 2014
Morvest Group Limited (previously Morvest Business Group Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
JSE code: MOR
ISIN: ZAE000152567
("Morvest" or "the Company" or "the Group")
Unaudited condensed consolidated interim results
for the six months ended 30 November 2014
Highlights
- Revenue of R537,6 million
- Headline earnings of R29,9 million
- Headline earnings per share of 6,57 cents
- Net asset value per share of 35,40 cents
Statement of profit and loss and other comprehensive income
Group
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
2014 2013 2014
R'000 R'000 R'000
Revenue 537 568 545 428 1 100 757
Cost of sales (280 824) (265 416) (610 944)
Gross profit 256 744 280 012 489 813
Earnings before interest,
impairment, taxation,
depreciation, profit on sale of
subsidiary and amortisation
("EBIITDA") 83 811 84 190 157 525
Depreciation (5 686) (8 634) (16 299)
Amortisation of intangible
assets (296) (297) (1 484)
Impairment of goodwill - - (12 325)
Operating profit before
investment income
(operating profit) 77 829 75 259 127 417
Net finance costs (7 807) (6 235) (13 078)
Profit/(loss) on sale of subsidiary 25 730 - (1 703)
Profit before tax 95 752 69 024 112 636
Income tax expense (27 445) (23 642) (40 563)
Profit for the period 68 307 45 382 72 073
Other comprehensive income
for the period, net of tax 143 (826) (732)
Total comprehensive
income for the period 68 450 44 556 71 341
Profit attributable to:
Owners of the parent 53 134 29 499 35 563
Non-controlling interest 15 173 15 883 36 510
68 307 45 382 72 073
Total comprehensive
income attributable to:
Owners of the parent 53 277 28 673 34 831
Non-controlling interest 15 173 15 883 36 510
68 450 44 556 71 341
Commentary to the statement
of profit and loss and other
comprehensive income
Headline earnings
reconciliation:
Profit after taxation attributable
to equity holders of the parent 53 134 29 499 35 563
Adjusted for:
Goodwill impairment - - 12 325
Profit/(loss) on disposal of
subsidiary (25 730) - 1 703
Profit/(loss) on disposal of
property, plant and equipment - - (284)
Tax effect of adjustments 2 491 - (2 731)
Headline earnings 29 895 29 499 46 576
Number of shares ('000)
- Weighted average number
of shares 455 245 455 469 455 245
- Diluted weighted average
number of shares 500 890 476 074 566 659
Headline earnings per share
Headline earnings per share 6,57 6,48 10,23
Diluted headline earnings
per share 5,97 6,20 8,22
Earnings per share (cents)
Earnings per share (cents) 11,67 6,48 7,81
Diluted earnings per share (cents) 10,61 6,20 6,28
Statement of financial position
Group
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
2014 2013 2014
R'000 R'000 R'000
Assets
Non-current assets 357 731 362 092 320 261
Investment property 2 331 4 394 2 331
Property, plant & equipment 137 517 149 624 141 153
Goodwill 171 009 150 680 133 562
Intangible asset - 1 483 296
Other financial assets - - 3 306
Deferred taxation 46 874 55 911 39 613
Current assets 376 627 310 346 323 634
Inventories 21 074 17 975 19 198
Trade & other receivables 162 488 171 939 148 668
Other financial assets 21 133 4 763 11 184
Taxation receivable 9 708 15 965 7 721
Operating lease asset 20 16 16
Cash & cash equivalents 162 204 99 688 136 847
Total assets 734 358 672 438 643 895
Equity and liabilities
Equity attributable to
owners of the parent 311 523 251 791 261 709
Share capital 287 435 284 960 287 435
Foreign currency translation
reserve (10 656) (10 893) (10 799)
Retained earnings 28 729 (26 119) (19 855)
Share-based payment reserve 6 015 3 843 4 928
Non-controlling interest 43 517 45 819 52 121
Total equity 355 040 297 610 313 830
Non-current liabilities 118 204 79 231 94 114
Vendor liabilities 16 623 4 910 -
Other financial liabilities 67 383 53 315 68 608
Finance lease obligation 15 455 15 715 18 562
Deferred taxation 18 743 5 291 6 944
Current liabilities 261 114 295 597 235 951
Vendor liabilities 27 723 19 657 14 430
Other financial liabilities 59 970 28 334 42 941
Finance lease obligation 2 342 8 737 4 387
Trade and other payables 139 266 203 999 153 519
Provisions 607 180 180
Operating lease liabilities 752 751 -
Current tax payable 26 345 33 939 19 289
Bank overdraft 4 109 - 1 205
Total equity and liabilities 734 358 672 438 643 895
Commentary to the statement
of financial position
Total number of shares in issue 880 000 880 000 880 000
Net asset value per
share (cents) 35,40 28,61 29,74
Net tangible asset value
per share (cents) 15,97 11,32 14,53
Statement of cash flows
Group
Unaudited Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
2014 2013 2014
R'000 R'000 R'000
Net cash flows from
operating activities 40 750 56 079 85 094
Net cash flows from
investing activities 43 736 (18 146) (22 545)
Net cash flows from
financing activities (62 033) (21 376) (10 038)
Net (decrease)/increase in
cash and cash equivalents 22 453 16 557 52 511
Cash and cash equivalents
at beginning of the period 135 642 83 131 83 131
Cash and cash equivalents
at the end of the period 158 095 99 688 135 642
Statement of changes in equity
Group
Unaudited Reviewed Audited
30 November 30 November 31 May
2014 2013 2014
R'000 R'000 R'000
Share capital and
share premium
Balance at beginning of
the period 287 435 287 435 287 435
Issue of share capital - 35 547 35 547
Share repurchase - (2 475) (2 127)
Shares cancelled - - 2 127
Share issued for BEECo
share scheme - - 10 853
Share issued for BEECo 2
share scheme - (35 547) -
Shares utilised for BEECo/
MANCo share schemes - - (46 400)
Balance at end of the period 287 435 284 960 287 435
Share-based payment reserve
Balance at beginning of
the period 4 928 3 082 3 082
Share-based payment
expense 1 087 761 1 846
Balance at end of the period 6 015 3 843 4 928
Foreign currency translation
reserve
Balance at beginning of
the period (10 799) (10 067) (10 067)
Other comprehensive income
for the period 143 (826) (732)
Balance at end of the period (10 656) (10 893) (10 799)
Retained earnings
Balance at beginning of the
period (19 855) (50 868) (50 868)
Total comprehensive income
- profit for the period 53 134 29 499 35 563
Dividends paid (4 550) (4 750) (4 550)
Balance end of the period 28 729 (26 119) (19 855)
Non-controlling interest
Balance at beginning of
the period 52 121 36 979 36 979
Profit for the period 15 173 15 883 36 510
Disposal of subsidiary (15 302) - (6 695)
Dividend paid to non-
controlling interest (8 475) (7 043) (14 673)
Balance at end of the period 43 517 45 819 52 121
Total equity 355 040 297 610 313 830
Commentary
Basis of preparation
The unaudited condensed consolidated interim results for the period ended 30 November 2014
have been prepared in accordance with and containing the information required by International
Accounting Standard (IAS) 34: Interim Financial Reporting, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council, and are in compliance with the Listings Requirements
of the JSE Limited.
The accounting policies as well as the methods of computation used in the preparation of
the results for the period ended 30 November 2014 are in terms of International Financial
Reporting Standards (IFRS) and are consistent with those applied in the audited annual
financial statements for the year ended 31 May 2014.
The results are presented in Rands, which is Morvest's presentation currency.
The unaudited condensed consolidated interim results have been prepared under the
supervision of Suren Singh (MBA, MITM, CIS and ABP) in his capacity as Chief Financial
Officer and are the responsibility of the directors of Morvest.
Introduction
The directors of Morvest present the unaudited condensed consolidated interim results for
the six months ended 30 November 2014 ("the period"), reflecting marginal downward performance
in revenue and EBIITDA, however headline earnings are up despite challenging market conditions.
The unaudited condensed consolidated interim results for the period ended 30 November 2014
were authorised for issue by the directors on 19 February 2015.
Group Profile
Morvest is a black empowered global diversified investment holding group with an
international footprint spanning Africa (South Africa, Mozambique and Nigeria),
India, UAE and USA. The Group's operations are aligned into three segments:
Business and Industrial Services (including Professional Services and Outsourcing
Solutions divisions), ICT Solutions and Retail and Other Investments.
Morvest name change
The change of name of "Morvest Business Group Limited" to "Morvest Group Limited" was approved
by the requisite majority of shareholders at the annual general meeting held on 21 November 2014
and the special resolution amending the Company's memorandum of incorporation had been registered
with Companies and Intellectual Property Commission ("CIPC").
Operational and Financial Review
The South African and Nigerian markets continued to be challenging for the period under
review. Business and Industrial Services contributed to 43,9% of the revenue (2013: 49%), with
ICT Solutions contributing 39,8% (2013: 49,9%), resulting from the sale of one of the entities
in this segment and with Retail & Other Investments contributed 8,2% (2013: 1,6%) as a result
of the acquisition of Simmons (South Africa). Approximately 95% of revenue was generated in
South Africa and the balance from Africa.
EBIITDA amounted to R 83,8 million (2013: R84,1 million) with margins increased slightly to
15,6% (2013: 15,4%) The Group posted headline earnings of R29,9 million (2013: R29,5 million)
translating into headline earnings per share of 6,57 cents (2013: 6,48 cents) up marginally,
however the effects on headline earnings per share which if based on 880 million actual shares
in issue is 3,4 cents per share should the share-based payments transactions be fully accounted
for today. The earnings per share is up to 11,67 cents (2013: 6,48 cents) resulting from net of
tax profit from the sale of subsidiary amounting to R23,2 million.
Cash and cash equivalents at the end of the period amounted to R158,1 million. The cash
included the proceeds from the sale of R and S Consulting Proprietary Limited. Given the next 6 to 12 months are
expected to be challenging, the Group is taking a prudent approach to cash utilisation and
working capital management.
Dividend declaration
Morvest paid a final gross cash dividend of 1 cent per share for the previous year ended
31 May 2014 on 27 October 2014.
No interim dividend was declared.
Notes to the Financial Statements
Business acquired
On 1 August 2014, the Group acquired a 75% interest in Simmons (South Africa) through
Morvest Retail and Other Investments for a fair value purchase consideration of R71,1 million.
An initial payment of R40 million was made on the effective transaction date, while the remaining
balance of R 31,1 million is payable based upon the achievement of annual profit after tax ("PAT")
targets over a three year period as per the agreement. The Group estimates that the outcomes of the
PAT targets over the three year period to be fully achievable.
Simmons (South Africa) manufactures and distributes beds, bed bases, linen, bedding and
ancillary and associated products, and is the partner of Simmons Bedding Company in most
African regions, which markets and sells Simmons's International's products worldwide under
the Simmons International guidelines. Simmons International has a 140 year history in
manufacturing and selling high quality mattresses to the premium markets.
Group
Acquisition provisional Recognised
carrying fair value values on
amount adjustments acquisition
R'000 R'000 R'000
Property, plant & equipment 1 732 - 1 732
Inventories 10 418 - 10 418
Trade & other receivables 11 373 - 11 373
Other financial liability (9 517) - (9 517)
Trade and other payables (12 777) - (12 777)
Net identifiable assets
and liabilities 1 229 - 1 229
Goodwill on acquisition - - 69 909
Total consideration - - 71 138
Contingent consideration - - (31 138)
Consideration funded - - (20 000)
Consideration settled in cash - - 20 000
Cash acquired - - -
Net cash (outflow)/inflow - - (20 000)
The acquisition of Simmons (South Africa) is based on provisional fair values as the
Group has not yet determined the fair values of the identifiable assets, liabilities
and or contingent liabilities. The fair value of the subsidiary will be accurately
determined by the next reporting date.
The goodwill from the acquisition is mainly attributable to the exclusive licensing agreement
which Simmons (South Africa) has with Simmons USA for specialised technology, established
brand and Intellectual Property used in the production process of beds, bed bases, linen,
bedding and ancillary and associated products.
If Simmon (South Africa) results for the months' of June and July were however included in
the Group's results for the six months ended 30 November 2014, the amount that would have
been included in the Group's results is a net profit after taxation of R1,2 million and revenue
of R15,8 million respectively.
Disposals of business
The Group sold its entire investment, assets and liabilities in R and S Consulting (Pty) Limited,
which formed part of the Group's ICT Solutions reportable segment, for R73,3 million. The profit
on sale of R 25,7 million is disclosed as profit on sale of a subsidiary in the statement of
comprehensive income.
Morvest believes that it is the appropriate time to dispose of its shareholding at an acceptable
return on its initial investment. The cash proceeds will be utilised to explore certain alternative
opportunities in line with Morvest's diversified investment holding strategy.
R'000
Property, plant and equipment 1 752
Deferred taxation 759
Inventory 345
Trade and other receivables 32 873
Cash and cash equivalents 7 054
Finance lease (663)
Current tax payable (6 350)
Trade and other payables (5 463)
Total net assets disposed 30 307
Goodwill disposed 32 462
Non-controlling interest (15 150)
47 619
Profit on sale
of business 25 730
Total consideration 73 349
Consideration receivable (6 081)
Consideration settled in cash 67 268
Cash disposed (7 054)
Net cash (outflow)/inflow 60 214
Goodwill
The goodwill amount per the statement of financial position is reconciled as follows:
R'000
Cost 200 329
Accumulated impairments (66 767)
Carrying amount at
31 May 2014 133 562
Acquisition of Simmons
(South Africa) 69 909
Disposal of R and S
Consulting (Pty) Limited (32 462)
Carrying amount at
30 November 2014 171 009
Segmental reporting
The Business and Industrial Services division contributed 43,9% (2013: 49%) of group turnover.
The Group started a new Retail and Other Investments segment during the 2012 financial year.
This segment did not meet the requirements of IFRS 8 for it to be reported separately in the
prior periods and was included in the ICT Solutions Segment, however, this segment now meets
the requirements of IFRS 8 for it to be reported separately and has been included as Retail
Investments segment.
As a result of the above, the Group has reclassified the comparative segment information for
the six month period ended 30 November 2013 and for the twelve month period ended 31 May 2014.
External Internal Total
segment segment segment
revenue revenue revenue
R'000 R'000 R'000
November 2014
Business and Industrial
Services 236 167 43 644 279 811
ICT Solutions 214 124 39 571 253 695
Retail and other
Investments 37 071 6 851 43 922
Corporate 50 206 9 278 59 484
Elimination - (99 344) (99 344)
Total 537 568 - 537 568
November 2013
Business and Industrial
Services 267 202 30 475 297 677
ICT Solutions 272 092 26 479 298 571
Retail and other
Investments 6 134 2 305 8 439
Corporate - 56 782 56 782
Elimination - (116 041) (116 041)
Total 545 428 - 545 428
May 2014
Business and Industrial
Services 510 281 66 290 576 571
ICT Solutions 578 856 59 041 637 897
Retail and other
Investments 10 963 7 150 18 113
Corporate 657 138 565 139 222
Elimination - (271 046) (271 046)
Total 1 100 757 - 1 100 757
Profit/(loss) Total Total
for the year assets liabilities
R'000 R'000 R'000
November 2014
Business and Industrial
Services 18 361 531 384 159 337
ICT Solutions 21 877 327 520 249 602
Retail and other
Investments 8 597 142 621 136 678
Corporate 22 529 886 556 616 503
Elimination (3 057) (1 153 723) (782 802)
Total 68 307 734 358 379 318
November 2013
Business and Industrial
Services 22 882 535 735 200 600
ICT Solutions 27 077 367 848 296 429
Retail and other
Investments (1 321) 22 208 17 865
Corporate 9 953 888 836 628 671
Elimination (13 209) (1 142 189) (768 737)
Total 45 382 672 438 374 828
May 2014
Business and Industrial
Services 38 955 548 673 194 034
ICT Solutions 66 031 357 099 276 351
Retail and other
Investments (2 494) 25 745 18 810
Corporate 3 824 894 589 652 142
Elimination (34 243) (1 182 211) (811 272)
Total 72 073 643 895 330 065
Related Parties
During the period under review, certain subsidiaries in the ordinary course of business
entered into various loans and transactions with related parties under terms that are no
less or more favourable than those arranged with third parties.
Transactions between the company and its subsidiaries, which are related parties of the
company, have been eliminated and consolidated.
Events after the reporting date
Subsequent to the six months ended reporting period, the Group through Morvest Retail and
Other Investments (Proprietary) Limited a 50,01% subsidiary, has withdrawn from an agreement
with Omman, whereby Morvest Retail was going to acquire 50,05% of the share capital of Omman
for a total purchase consideration of R 2,5 million. Omman is a property rental business whose
sole property is Ushaka Mall situated in Stanger, Durban.
Outlook
Looking ahead, the directors are confident that the Group is establishing a solid platform
for long-term growth with its strategy to become a global diversified investment holding
company, however, we continue to see the next 6 to 12 months to be challenging. A key focus
area will be investments into strategic businesses and retail brands in African markets
as well as the emerging markets of India and the UAE to offset the difficult local trading
conditions. Cost cutting remains a key focus area. New B-BBEE requirements remains a risk
which the Group is proactively addressing.
Appreciation
We thank all directors, managers and staff for their tenacity and drive which contributed to
the Group's performance in a tough economic environment.
We further extend our appreciation to all our shareholders, business associates and loyal
customers for their unwavering support in these difficult times.
By order of the board
Mohammed Varachia
CEO
Suren Singh
CFO
19 February 2015
Directors
Dr PS Molefe (Chairman)*#,
MS Varachia (CEO),
S Singh (CFO),
M Papiyana (Group HR Director),
A Evan (Executive Director),
Prof. B Marx *#,
NY Mhinga*#,
A Mohammadali-Haji*#
* Non-executive # Independent
Registered office
188 14th Road,
Noordwyk,
Midrand,
1685
PO Box 4307,
Halfway House,
Midrand,
1685
Transfer secretaries
Computershare Investor Services (Proprietary) Limited,
70 Marshall Street,
Johannesburg
PO Box 61051,
Marshalltown,
2107
Company secretary
Noelene Beryl January,
188 14th Road,
Noordwyk,
Midrand,
1685
PO Box 4307,
Halfway House,
Midrand,
1685
Sponsor
Sasfin Capital (A division of Sasfin Bank Limited)
Auditors
Mazars (Gauteng) Inc.
www.morvest.co.za
Date: 19/02/2015 04:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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