Wrap Text
Reviewed condensed consolidated interim financial statements for the six months ended 28 February 2015
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
("Business Connexion" or "the Company" of "the Group")
Registration number: 1998/005282/06
Share code: BCX ISIN: ZAE000054631
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2015
Revenue EBITDA of Normalised Normalised Operating
growth of R270,8 million operating profit diluted headline cash flows of
16,0% increased by earnings per R282,0 million
25,7% to share of (2014:
R199,4 million 25,9 cents R259,0 million)
per share
(2014:
20,7 cents)
Condensed consolidated statement of financial position
Reviewed Reviewed Audited
28 February 28 February 31 August
R million 2015 2014 2014
ASSETS
Non-current assets
Property, plant and equipment 450,1 479,0 479,4
Goodwill 667,8 629,5 667,8
Intangible assets 341,3 359,6 361,2
Investment in equity accounted joint venture and associates 113,4 92,5 118,0
Long-term loans receivable 3,9 6,2 4,9
Other investments 231,3
Deferred tax assets 43,0 35,1 50,8
1 619,5 1 833,2 1 682,1
Current assets
Other investments 241,4 231,3
Inventories 219,3 209,5 220,3
Trade receivables 1 263,3 1 077,6 1 184,9
Other receivables 413,6 290,0 304,7
Prepayments 129,8 147,5 151,6
Taxation prepaid 4,4 5,1 3,7
Cash and cash equivalents 189,3 204,6 222,9
2 461,1 1 934,3 2 319,4
TOTAL ASSETS 4 080,6 3 767,5 4 001,5
EQUITY AND LIABILITIES
Shareholders' equity 2 247,2 2 256,1 2 267,7
Non-controlling interests 132,2 125,6 124,8
Total equity 2 379,4 2 381,7 2 392,5
Non-current liabilities
Interest-bearing long-term liabilities 90,5 131,4 108,0
Interest-free long-term liabilities 21,9 0,8
Contingent consideration 63,3 46,6
Post-retirement benefit obligations 12,0 15,6 15,5
Deferred tax liabilities 31,1 43,1 36,1
133,6 275,3 207,0
Current liabilities
Short-term liabilities 497,2 190,1 274,6
Trade payables 454,2 394,9 501,3
Contingent consideration 50,7 15,4
Other payables 549,7 490,3 589,3
Provisions 1,2 1,1 0,9
Taxation payable 14,6 34,1 20,5
1 567,6 1 110,5 1 402,0
TOTAL EQUITY AND LIABILITIES 4 080,6 3 767,5 4 001,5
Condensed consolidated statement of comprehensive income
Reviewed Reviewed Audited
six months six months year
ended ended ended
28 February 28 February 31 August
R million 2015 2014 2014
Revenue 3 556,9 3 067,0 6 512,3
Cost of sales 2 582,7 2 146,1 4 624,3
Gross profit 974,2 920,9 1 888,0
Operating expenses 812,4 620,6 1 467,2
Operating profit 161,8 300,3 420,8
Share of losses from equity accounted joint venture
and associates (4,7) (2,1) (0,5)
Operating profit before investment income 157,1 298,2 420,3
Investment income 16,8 17,2 26,8
Profit before finance costs 173,9 315,4 447,1
Finance costs 26,2 17,7 36,5
Profit before tax 147,7 297,7 410,6
Taxation 54,5 73,3 109,6
Profit for the period 93,2 224,4 301,0
Profit attributable to:
Equity holders 67,5 203,1 245,3
Non-controlling interests 25,7 21,3 55,7
Total attributable profit 93,2 224,4 301,0
Other comprehensive income:
Translation of foreign operations (25,1) 1,4 2,8
Remeasurement on post-retirement obligations 3,2
Total comprehensive income for the period 68,1 225,8 307,0
Total comprehensive income attributable to:
Equity holders 43,0 204,2 251,3
Non-controlling interests 25,1 21,6 55,7
68,1 225,8 307,0
Basic earnings per share (cents) 17,8 52,2 64,8
Diluted earnings per share (cents) 17,6 52,0 64,5
Calculation of headline earnings (R million)
Profit attributable to equity holders 67,5 203,1 245,3
Profit on sale of business (171,8) (171,9)
Loss/(profit) on sale of property, plant and equipment,
capitalised leased assets and other intangible assets 0,2 0,5 (6,9)
Impairment of goodwill 2,4 4,9
Bargain purchase (8,5)
Tax effect of headline earnings adjustments 26,8 27,1
Headline earnings 67,7 (61,0) 90,0
Weighted average number of shares in issue (000s) 379 252 388 873 378 759
Diluted weighted average number of shares in issue (000s) 383 135 390 815 380 686
Headline earnings per share (cents) 17,9 15,7 23,8
Diluted headline earnings per share (cents) 17,7 15,6 23,6
Condensed consolidated statement of changes in equity
Share Foreign Share-
capital currency based Share- Non-
and translation Retained payment holders' controlling Total
R million premium reserve earnings reserve equity interests equity
Balance at 31 August 2013
- audited 1 129,2 (9,0) 1 019,3 92,7 2 232,2 168,6 2 400,8
Profit for the period 203,1 203,1 21,3 224,4
Other comprehensive income 1,1 1,1 0,3 1,4
Movement in treasury shares
and related reserves (72,9) (1,3) (74,2) (74,2)
Share-based payment expense 5,3 5,3 5,3
Acquisition of non-controlling
interest without change of control (30,4) (30,4) (24,0) (54,4)
Non-controlling interest in
dividends received from
subsidiaries (40,6) (40,6)
Dividends paid (78,3) (78,3) (78,3)
Balance at 28 February 2014
– reviewed 1 056,3 (7,9) 1 112,4 98,0 2 258,8 125,6 2 384,4
Profit for the period 42,2 42,2 34,4 76,6
Other comprehensive income 1,7 3,2 4,9 0,0 4,9
Movement in treasury shares
and related reserves (58,2) (5,1) (63,3) (63,3)
Share-based payment expense 8,5 8,5 8,5
Acquisition of non-controlling
interest without change of control 16,6 16,6 (24,1) (7,5)
Non-controlling interest in
dividends received from
subsidiaries (11,1) (11,1)
Dividends paid 0,0 0,0 0,0
Balance at 31 August 2014
– audited 998,1 (6,2) 1 169,3 106,5 2 267,7 124,8 2 392,5
Profit for the period 67,5 67,5 25,7 93,2
Other comprehensive income (24,5) (24,5) (0,6) (25,1)
Share-based payment expense 13,8 13,8 13,8
Non-controlling interest in
dividends received from
subsidiaries (17,7) (17,7)
Dividends paid (77,3) (77,3) (77,3)
Balance at 28 February 2015
– reviewed 998,1 (30,7) 1 159,5 120,3 2 247,2 132,2 2 379,4
Reviewed Reviewed
six six Audited
months months year
ended ended ended
28 February 28 February 31 August
2015 2014 2014
Normal dividend per share (cents) 20,0 20,0 20,0
Condensed consolidated statement of cash flows
Reviewed Reviewed
six months six months
ended ended
28 February 28 February
R million 2015 2014
Operating cash flows 282,0 259,0
Working capital changes (274,7) (162,5)
Investment income 8,0 9,4
Finance costs (9,0) (17,7)
Dividends paid (77,3) (78,3)
Dividends paid non-controlling interest (17,7) (40,6)
Taxation paid (56,8) (55,6)
Cash (utilised in)/generated from operating activities (145,5) (86,3)
Net cash flows utilised in investing activities (77,4) 107,9
Net cash flows utilised in financing activities 189,3 (13,8)
Net changes in cash and cash equivalents (33,6) 7,8
Cash and cash equivalents at beginning of period 222,9 196,8
Cash and cash equivalents at end of period 189,3 204,6
Condensed consolidated segmental analysis
Reviewed Reviewed Audited
six months six months year
ended ended ended
28 February 28 February 31 August
R million 2015 2014* 2014*
Segment revenue
Solutions and service delivery 2 073,0 1 955,9 4 091,7
Technology and sourcing 1 438,3 1 081,8 2 348,9
Investments 45,6 29,3 71,7
3 556,9 3 067,0 6 512,3
Segment operating profit
Solutions and service delivery 182,4 178,5 364,5
Technology and sourcing 53,1 42,0 95,2
Investments 12,3 3,2 11,8
Corporate services (86,0) 76,6 (50,7)
161,8 300,3 420,8
* Reportable segments have been restated to reflect the change in the operating model.
Other group salient information
Reviewed Reviewed Audited
28 February 28 February 31 August
2015 2014 2014
Number of shares in issue (000's) 404 972 404 972 404 972
Less: Weighted shares held in share purchase trusts
and a subsidiary as treasury shares 25 596 16 039 25 696
Less: Weighting of options exercised during the period
that would have been treasury shares 124 60 517
379 252 388 873 378 759
Dilutive options
3 855 1 942 1 681
Options excercised during the period that were dilutive
for a portion of the year 28 246
383 135 390 815 380 686
Number of share appreciation rights in issue (000's) 16 307 25 149 16 356
Number of forfeitable shares in issue (000's) 5 819 7 131
Key ratios and statistics
Net asset value per share (cents) 554,9 557,1 560,0
Tangible net asset value per share
(excluding goodwill and fair value of contracts) (cents) 364,5 365,9 365,0
Operating margin (%) 4,6 9,8 6,5
Return on total equity (%) 6,1 18,0 10,8
Return on total assets
(excluding cash and preference share investments)(%) 8,9 18,0 11,9
Current ratio 1,6 1,7 1,7
Average debtors days 56,0 60,0 60,2
Depreciation and amortisation (R million) 108,9 121,5 239,5
Cost of sales 52,6 48,6 101,2
Operating expenses 56,3 72,9 138,3
Contingent liabilities (R million)
Performance guarantees 124,9 141,0 91,7
Asset finance recourse deals 13,4 37,7 23,7
Capital commitments (R million)
Capital 71,1 19,7 54,9
Operating lease 290,8 206,5 314,8
Basis of preparation and statement of compliance
The condensed consolidated interim financial statements for the six months ended 28 February 2015 are prepared
in accordance with the JSE Listings Requirements for interim reports, and the requirements of the Company's Act
applicable to summarised financial statements. The Listings Requirements require interim reports to be prepared
in accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and has
been prepared in accordance with IAS 34, Interim Financial Reporting. The condensed consolidated interim financial
statements exclude the fair value disclosure as required by IAS 34.16A(j).
The accounting policies applied in the preparation of the condensed consolidated interim financial statements
are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous
consolidated annual financial statements.
The condensed consolidated interim financial statements do not include all the disclosure required for complete
annual financial statements prepared in accordance with IFRS.
These condensed consolidated interim financial statements have been prepared in accordance with the historic cost
convention except that certain items, including derivative instruments and financial assets at fair value through
profit or loss, are stated at fair value.
The condensed consolidated interim financial statements are presented in South African rand, which is Business
Connexion Group Limited functional and presentation currency.
The condensed consolidated interim financial statements appearing in this announcement are the responsibility of
the directors. The directors take full responsibility for the preparation of the condensed consolidated interim
financial statements. Mr LN Weitzman CA(SA), the Chief Financial Officer, is responsible for the condensed
consolidated interim financial statements and supervised the preparation thereof in conjunction with
Ms SA Barnfather CA(SA), the Group Financial Manager.
Commentary
Introduction
The global trend of Information Technology (IT) and Telecoms convergence continues as demonstrated by many
traditional IT companies merging with Telecoms companies. This is driving the development of new products and
services.
Furthermore, enterprise clients are focussing on innovation, customer experience and productivity enhancements,
which is driving the need for automation and analytics across industries.
Business Connexion is well positioned, as a leading IT service provider with broad industry expertise, to continue
playing a leading role in the "Internet of Things", across industry verticals and diverse business domains.
Financial performance
Revenue grew by 16,0% to R3 556,9 million compared to the prior period. This growth was underpinned by organic
revenue growth of 15,1% resulting from new client wins. This trend continues to reflect the Group's focus on an
improved sales culture and cross-selling.
Gross profit margins at 27,4% (2014: 30,0%) remain largely unchanged despite continuing tough economic
conditions as well as market and client pricing pressures.
The focus on operating expenses and balance sheet management continues, with normalised operating expenses
remaining flat and reduced capital expenditure.
The Group recorded a normalised operating profit margin of 5,6% (2014: 5,2%).
2015 2015 2014 2014
Rm % Rm %
Operating profit as reported 161,8 4,6 300,3 9,8
Profit on sale of business (171,8)
Amortisation of intangible assets 20,6 27,7
Impairment of goodwill 2,4
Telkom transaction costs 7,7
Net cost from restructuring 9,3
Normalised operating profit 199,4 5,6 158,7 5,2
The tax charge in the prior period included the provision for capital gains tax on the sale of QLink of
R25,7 million.
The Group generated diluted earnings per share (EPS) of 17,6 cents for the period (2014: 52,0 cents)
and diluted headline EPS for the period of 17,7 cents (2014: 15,6 cents). On a normalised basis, excluding
primarily the profit on the sale of QLink and the impact of the amortisation of intangibles, diluted headline EPS is
25,9 cents (2014: 20,7 cents).
The Group continued to generate strong operating cash flows of R282,0 million (2014: R259,0 million).
Change in segmental reporting
In order to respond to the changing business environment, the operating model has been aligned to better support
and deliver value to its clients. This operating model simplifies the business and enables improved decision making
across the Group's geographical footprint.
Effective 1 September 2014, the operating model comprises:
- The Solutions and Service Delivery division, which includes what was previously known as Services,
UCS and Innovation
- The Technology and Sourcing division comprising the Technology and Canoa businesses
- The Investments division, which is made up of the Group's strategic investments, including its investments in
Nanoteq, African Arête, Appzone and Northgate Arinso
- The results of the International division have been incorporated into the above divisions
To reflect the new operating model, reportable segments have been restated accordingly.
Divisional performance
Solutions and Service Delivery division
The Solutions and Service Delivery division offers a full range of infrastructure services, application services and
value added business solutions. Along with the end-to-end solutions targeted at the retail industry, this division has
been able to "verticalise" its service offerings more effectively. Through its state of the art data centres, Business
Connexion is the leading cloud services provider in Africa.
Divisional revenue grew organically by 6,0% to R2 073,0 million (2014: R1 955,9 million). The increase in revenue
within the division is due to new business won, further client renewals and increased consulting and application
development business. Gross profit margins were maintained despite the tough economic environment. Operating
profit margin at 8,8% is in line with the prior period.
Technology and Sourcing division
The Technology and Sourcing division delivers innovative technology solutions to both the private and the public
sector in conjunction with the world's leading vendors and partners. This division also offers Managed Print Solutions
and office automation through its exclusive distribution rights for Canon print and imaging solutions in
Southern Africa.
Revenue increased by 33,0% to R1 438,3 million (2014: R1 081,8 million) due to the award of new business during
the period. Operating profit increased by 26,4% to R53,1 million (2014: R42,0 million).
Investments division
The Investments division consists of the Group's strategic investments.
Revenue increased by 55,6% to R45,6 million (2014: R29,3 million), supported by strong revenue growth from the
Middle East. The nearly threefold increase in operating profit to R12,3 million (2014: R3,2 million) was underpinned
by the growth in revenue from this division.
Corporate activity
Subsequent to 28 February 2015, and in line with the Group's strategic intent, the following transactions were
entered into:
- The Group entered into an agreement to dispose of a 15% interest in Nanoteq Proprietary Limited, to a black
economic empowerment consortium. Nanoteq is the Group's encryption technology service provider. Following
the transaction, the Group will retain a controlling interest of 60%. The transaction is subject to the fulfilment
of certain conditions precedent.
- Effective 1 March 2015, the Group entered into an agreement to acquire 100% of Joint Venture Pump Services
Proprietary Limited (JVPS). JVPS's comprehensive portfolio includes fuel dispensing and forecourt automation
equipment, an environmental management solution for the forecourt, all of which allows the Solutions and
Services Delivery division to provide leading technology capable of enabling the "Internet of Things".
Update on the Telkom transaction
At a shareholders meeting on 11 August 2014, shareholders voted in favour of the offer by Telkom SA SOC Limited
to acquire the entire issued share capital of Business Connexion Group Limited by way of schemes of arrangement.
The implementation agreement entered into on 21 May 2014, was amended on 31 March 2015 to extend the Long
Stop Date from 31 March 2015 to 30 April 2015. This was to cater for the regulatory approval from the Competition
Commission of South Africa and ICASA if necessary.
Approval from the Common Market for Eastern and Southern Africa (COMESA) Commission was received on
16 March 2015.
Upon receipt of the above approvals, final approval will be sought from the Takeover Regulations Panel (TRP)
and the JSE Limited (JSE).
Outlook
As industry dynamics continue to evolve in the coming years, underpinned by market consolidation, there will be
a fundamental shift to the cloud and the "Internet of Things". This, together with the requirement for analytics,
mobility and security will present opportunities for the Group.
The mergers and acquisitions strategy focussing on the rest of Africa and the acquisition of innovative solutions will
ensure that Business Connexion is positioned to play a leading integration role in the "Internet of Things".
The performance of the core business and the strategy execution is reflected in the record first half revenue growth
rate which the Group anticipates to continue for the year.
Independent review by the auditors
These condensed consolidated interim financial statements for the six months ended 28 February 2015 have been
reviewed by the auditors, KPMG Inc. The individual auditor assigned to perform the review is Mr LP Fourie. KPMG
Inc. has issued an unmodified review report on the condensed consolidated interim financial statements. The
auditor's report is available for inspection at the registered office of the Company.
Appreciation
The Board extends its appreciation to management and employees for their dedication and valued efforts.
It also thanks its clients for the trust they place in Business Connexion and its suppliers and shareholders for their
continuing support.
For and on behalf of the Board
A C Ruiters L I Mophatlane
Chairman Chief Executive Officer
Midrand
14 April 2015
Administration
Executive directors
LI Mophatlane (Chief Executive Officer), V Olver (Deputy Chief Executive Officer),
LN Weitzman (Chief Financial Officer), JR Jenkins
Non-executive directors
AC Ruiters (Chairman)*, JA Bester*, AB Darko*#, ME Ettling*†, NN Kekana, J John*, M Lehobye*, DC Sparrow
*Independent non-executive directors #Ghanaian †British
Registered office
Business Connexion Park North, 789 Sixteenth Road, Randjespark, Midrand, 1685
Postal address:
Private Bag X48, Halfway House, 1685
Internet address
http://www.bcx.co.za
Transfer secretaries
Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
JSE sponsor
One Capital Sponsor Services Proprietary Limited, 17 Fricker Road, Illovo, 2196
For more information, please visit our investor relations website at www.bcx.co.za
Issue date 14 April 2015
Date: 16/04/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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