Wrap Text
Reviewed Condensed Consolidated Results for the Six Months Ended 30 September 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”)
REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017
CONDENSED GROUP STATEMENT OF PROFIT AND LOSS
Reviewed Unaudited Audited
6 months ended 6 months 12 months
ended* ended*
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Continuing operations
Revenue 376 368 410 387 808 176
Cost of sales (159 783) (223 754) (418 029)
Gross profit 216 585 186 633 390 147
Other net income/(expenses) 26 265 5 842 6 824
Distribution expenses (2 336) (2 592) (2 659)
Administration expenses (175 532) (124 397) (267 871)
Results from operations 64 982 65 486 126 441
Finance income 886 594 1 816
Finance cost (2 100) (4 644) (3 325)
Share of profit of equity accounted associate 159 881 1 902
Profit before tax 63 927 62 317 126 834
Tax expense (10 687) (14 150) (30 781)
Profit for the period from continuing operations 53 240 48 167 96 053
Profit for the period from discontinued operations 43 554 57 411 119 120
Profit for the period 96 794 105 578 215 173
Profit attributable to:
Owners of the parent - continuing 46 730 40 068 61 459
Owners of the parent - discontinued 41 465 44 791 115 377
Non-controlling interest – continuing 6 510 8 099 15 023
Non-controlling interest - discontinued 2 089 12 620 23 314
96 794 105 578 215 173
Attributable earnings per share (cents)
Basic 77.22 75.08 155.59
Continuing operations 40.92 35.45 54.08
Discontinued operations 36.30 39.63 101.51
Diluted basic 76.80 73.55 154.58
Continuing operations 40.70 34.73 53.73
Discontinued operations 36.10 38.82 100.85
Headline 78.91 74.80 157.76
Continuing operations 42.64 35.27 56.31
Discontinued operations 36.27 39.53 101.45
Diluted headline 78.48 73.27 156.74
Continuing operations 42.41 34.55 55.94
Discontinued operations 36.07 38.72 100.80
*The comparative periods included in the statement of profit and loss have been re-presented to align the disclosure with the requirements of IFRS5 on
discontinued operations.
CONDENSED GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME
Reviewed Unaudited Audited
6 months ended 6 months 12 months
ended ended
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Profit for the year 96 794 105 578 215 173
Other comprehensive income:
Foreign currency translation differences 2 424 3 660 (5 667)
99 218 109 238 209 506
Total comprehensive income attributable to:
Owners of the parent 90 619 88 519 171 169
Non-controlling interest 8 599 20 719 38 337
99 218 109 238 209 506
Reconciliation of headline earnings (net of tax):
Profit attributable to owners of the parent 88 195 84 859 176 836
Loss/(profit) on disposal of property, plant and equipment (345) (324) (1 440)
Loss/(profit) on disposal of investment in subsidiaries 2 269 - 3 906
Headline earnings 90 119 84 535 179 302
Weighted average number of shares (000s) 114 211 113 021 113 656
Diluted weighted average number of shares (000s) 114 830 115 379 114 394
Total number of shares in issue (000s) 114 211 113 439 114 211
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed Unaudited Audited
As at As at As at
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
ASSETS
Non-current assets 613 301 775 002 838 151
Property, plant and equipment 34 983 55 279 59 677
Intangible assets 497 628 661 478 735 664
Investments in associates 50 709 14 529 15 550
Other financial assets 548 175 -
Deferred tax assets 29 433 43 541 27 260
Current assets 439 848 515 615 516 433
Inventories 64 740 42 347 44 777
Trade and other receivables 341 400 368 926 409 018
Income tax receivable 5 052 6 750 5 806
Other financial assets 5 638 6 535 6 288
Cash and cash equivalents 23 018 91 057 50 544
Assets held for sale 484 306 - -
TOTAL ASSETS 1 537 455 1 290 617 1 354 584
EQUITY AND LIABILITIES
EQUITY 959 926 825 669 948 790
Share capital and share premium 292 452 271 787 292 452
Other reserves 11 052 11 117 6 909
Retained earnings 560 740 448 083 534 917
Non-controlling interest 95 682 94 682 114 512
LIABILITIES
Non-current liabilities 72 788 105 142 103 378
Other financial liabilities 3 241 5 998 4 359
Deferred vendor payments 13 670 19 607 7 126
Deferred tax liabilities 55 877 79 537 91 893
Current liabilities 371 159 359 806 302 416
Trade and other payables 217 453 239 303 202 016
Other financial liabilities 37 155 3 210 2 795
Income tax payable 5 686 21 974 6 397
Deferred vendor payments 21 537 26 741 32 644
Bank overdraft 89 328 68 578 58 564
Liabilities directly associated with assets held for sale 133 582 - -
TOTAL LIABILITIES 577 529 464 948 405 794
TOTAL EQUITY AND LIABILITIES 1 537 455 1 290 617 1 354 584
Net asset value per share (cents) 756.71 644.39 730.47
Net tangible asset value per share (cents) 321.00 61.27 86.34
CONDENSED GROUP STATEMENT OF CASH FLOW
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 30 September 31 March
September
2017 2016 2017
R’000 R’000 R’000
Cash flow from operating activities 105 020 127 353 187 477
Cash generated from operations 120 552 146 417 216 994
Finance income 1 180 885 2 140
Finance costs (926) (1 351) (1 475)
Income tax paid (15 786) (18 598) (30 182)
Cash flow from investing activities (105 732) (89 351) (165 278)
Property, plant and equipment acquired (13 657) (12 154) (19 938)
Intangible assets acquired (89 797) (72 163) (158 197)
Proceeds on disposal of property, plant and equipment 2 571 1 276 3 918
Acquisition of subsidiaries and businesses (5 876) (6 750) (6 750)
Acquisition of non-controlling interest without a change in control - - (2 128)
Proceeds on disposal of subsidiaries 925 - 17 018
Loans receivable repaid 102 440 799
Cash flow from financing activities (42 067) (55 413) (70 109)
Treasury shares repurchased - (3 764) (10 841)
Other financial liabilities repaid (1 670) (1 946) (5 035)
Other financial liabilities advanced 31 960 - -
Deferred vendor payments repaid (6 794) - (1 607)
Dividends paid to non-controlling interest (2 362) (855) (3 139)
Dividends paid (63 201) (48 848) (49 487)
(Decrease)\Increase in cash and cash equivalents (42 779) (17 411) (47 910)
Cash and cash equivalents at the beginning of the year (8 020) 39 890 39 890
Cash and cash equivalents included in assets held for sale (15 511) - -
Cash and cash equivalents at the end of the year (66 310) 22 479 (8 020)
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 2016 266 852 12 333 411 651 75 672 766 508
Profit for the year - - 84 859 20 719 105 578
Other comprehensive income - 3 660 - - 3 660
Transactions with owners, recorded directly in 4 935 (4 876) (48 006) (1 709) (49 656)
equity
Changes in ownership interest in subsidiaries - - (421) - (421)
without a change in control
Balance at 30 September 2016 271 787 11 117 448 083 94 682 825 669
Balance at 1 October 2016 271 787 11 117 448 083 94 682 825 669
Profit for the year - - 91 977 17 618 109 595
Other comprehensive income - (9 327) - - (9 327)
Transactions with owners, recorded directly in 20 665 5 119 289 (1 430) 24 643
equity
Changes in ownership interest in subsidiaries - - (5 432) 3 642 (1 790)
without a change in control
Balance at 31 March 2017 292 452 6 909 534 917 114 512 948 790
Balance at 1 April 2017 292 452 6 909 534 917 114 512 948 790
Profit for the year - - 88 195 8 599 96 794
Other comprehensive income - 2 424 - - 2 424
Transactions with owners, recorded directly in - 1 719 (63 201) (26 600) (88 082)
equity
Changes in ownership interest in subsidiaries - - 829 (829) -
without a change in control
Balance at 30 September 2017 292 452 11 052 560 740 95 682 959 926
NOTES TO THE GROUP FINANCIAL INFORMATION
1. Basis of preparation
These reviewed condensed consolidated interim financial statements for the six months ended 30 September 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 reviewed condensed consolidated interim financial statements 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 fair value of financial instruments approximates their carrying value. The reviewed
condensed consolidated interim financial statements have been prepared under the supervision of Cornelia Kemp, CA (SA),
the Financial Director.
All financial information presented in South African Rand has been rounded to the nearest thousand.
2. Significant accounting policies
These reviewed condensed consolidated interim 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 2017.
3. Review conclusion
A review has been performed on the condensed consolidated interim financial statements in terms of the JSE Limited Listings
Requirements for inclusion in the circular relating to the disposal of the NOSA Group. These condensed consolidated interim
financial statements for the period ended 30 September 2017 have been reviewed by Nexia SAB&T, who expressed an
unmodified review conclusion. The review was performed in accordance with ISRE 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity. Any reference to future financial performance included in this
announcement has not been reviewed or reported on by the Group’s external auditors. A copy of the auditor’s review report is
available for inspection at the company’s registered office together with the condensed consolidated interim financial
statements identified in the auditor’s report.
4. Business combinations
IPES-Utility Management Systems Proprietary Limited (“UMS”)
On 1 April 2017, the group acquired UMS for a consideration of R42.3 million. Goodwill to the value of R35.2 million was
accounted for. The amount of net assets acquired amounted to R6.2 million.
5. Disposal of subsidiaries
Profit Reform Proprietary Limited (“COID Support”)
On 1 August 2017, the group disposed of its 51% interest in COID Support for a consideration of R2.2 million, which resulted
in a loss of control of COID Support. This event resulted in the derecognition of goodwill to the value of R4.3million and other
net assets of R1.5million, which is included in the loss on disposal of R3.6 million.
The Training Room Online Proprietary Limited and The Training Room Online Global Limited (“TTRO”)
On 1 April 2017, the group disposed of its 31% interest in TTRO for a consideration of R25.0 million, which resulted in a loss
of control of TTRO. This resulted in the re-measurement of the deferred vendor payments to the value of R24.8 million and a
profit on disposal of R5.0 million recorded in profit and loss.
6. Discontinued operations
NOSA Group - Testing inspection and certification services segment
On 13 October 2017 the group announced the proposed disposal of NOSA Group for an aggregate cash consideration of
R747.8 million. The group treated these operations in accordance with IFRS 5. The following table details the results of these
discontinued operations included in the group statement of profit and loss.
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Revenue 238 623 230 125 439 304
Cost of sales (94 770) (91 626) (185 845)
Gross profit 143 853 138 499 253 459
Other net income/(expenses) 3 882 (1 188) (175)
Distribution expenses (1 337) (1 321) (2 675)
Administration expenses (87 808) (88 733) (146 586)
Results from operations 58 590 47 257 104 023
Finance income 294 290 312
Finance cost (64) (154) (186)
Share of profit of equity accounted associate - - -
Profit before tax 58 820 47 393 104 149
Tax expense (15 266) (12 654) (24 971)
Profit from discontinued operations 43 554 34 739 79 178
Profit from discontinued operations attributable to:
Owners of the parent 41 465 33 228 75 435
Non-controlling interest 2 089 1 511 3 743
43 554 34 739 79 178
The following table details the assets and liabilities classified as held for sale in the group statement of financial position.
Reviewed
As at
30 September
2017
R’000
ASSETS
Property, plant and equipment 30 829
Intangible assets 320 238
Deferred tax assets 3 203
Inventories 3 390
Trade and other receivables 111 135
Cash and cash equivalents 15 511
TOTAL ASSETS 484 306
LIABILITIES
Deferred vendor payments (2 000)
Deferred tax liabilities (46 760)
Trade and other payables (73 064)
Income tax payable (6 768)
Current portion of deferred vendor payments (4 990)
TOTAL LIABILITIES (133 582)
NET ASSETS 350 724
The following table details the cash flow of the discontinued operations included in the group cash flow statement.
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Cash flow from operating activities 34 794 40 214 47 216
Cash flow from investing activities (15 465) (21 328) (29 688)
Cash flow from financing activities (4 786) (5 208) (6 353)
The Training Room Online - Testing inspection and certification services segment
The group disposed of 31% of its interest in The Training Room Online on 1 April. The group treated these operations in
accordance with IFRS 5. The following table details the results of these discontinued operations included in the group statement
of profit and loss.
Reviewed Unaudited Audited
6 months ended 6 months 12 months
ended ended
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Revenue - 56 594 109 649
Cost of sales - (13 748) (50 318)
Gross profit - 42 846 59 331
Other net income/(expenses) - (97) (349)
Distribution expenses - (29) (66)
Administration expenses - (15 301) (18 931)
Results from operations - 27 419 39 985
Finance income - 1 12
Finance cost - (28) (32)
Profit before tax - 27 392 39 965
Tax expense - (4 720) (23)
Profit from discontinued operations - 22 672 39 942
Profit from discontinued operations attributable to:
Owners of the parent - 11 563 20 371
Non-controlling interest - 11 109 19 571
- 22 672 39 942
7. Commitments and contingencies
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Operating lease commitments
The future aggregated minimum lease payments under non-
cancellable operating leases are as follows:
Not later than one year 31 682 26 771 32 723
Later than one year and not later than five years 61 274 94 482 69 732
Later than five years - 1 459 -
92 956 122 712 102 455
Capital commitments
There were no capital expenditure contracted for at the reporting date which have not yet been incurred and recognized in the
financial statements.
Contingencies
The group has contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course
of business. It is not anticipated that any material liabilities will arise from these contingent liabilities.
8. Segment information
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
SEGMENT REVENUE
Testing inspection and certification services 3 491 1 107 14 427
Labour supply - 74 225 116 921
Information technology 382 709 316 055 649 607
Financial services - 29 364 46 681
Holdings and consolidated (9 832) (10 364) (19 460)
Total revenue 376 368 410 387 808 176
SEGMENT PROFIT / (LOSS)
Testing inspection and certification services 412 233 3 661
Labour supply - 1 866 4 055
Information technology 55 968 54 401 118 859
Financial services - 6 713 7 312
Holdings and consolidated (9 650) (23 145) (72 428)
Total profit 46 730 40 068 61 459
SEGMENT ASSETS
Testing inspection and certification services 480 891 448 967 550 024
Labour supply - 41 717 -
Information technology 847 396 507 554 739 916
Financial services - 18 609 -
Holdings and consolidated 209 168 273 770 64 644
Total assets 1 537 455 1 290 617 1 354 584
SEGMENT LIABILITIES
Testing inspection and certification services 146 226 160 834 151 631
Labour supply - 10 696 -
Information technology 476 002 240 983 416 757
Financial services - 1 443 -
Holdings and consolidated (44 699) 50 992 (162 594)
Total liabilities 577 529 464 948 405 794
9. 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.
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Kyostax Proprietary Limited
Associate
Revenue 7 579 7 186 14 804
Other financial assets 4 640 5 640 5 640
GFI Securities Nyon SARL
Joint operation
Revenue - 13 449 23 119
Trade receivables - 7 605 -
Kamberg Investment Holdings Proprietary Limited
Trade receivables 5 176 - 5 176
10. Corporate Governance and changes to the board of directors of MICROmega (“board”)
MICROmega has embraced the recommendations of the King IV Report on governance and strives to provide reports to
shareholders that are timely, accurate, consistent and informative.
11. Subsequent events
With the exception of the corporate action mentioned in note 6, no other significant events have occurred in the period between
the reporting date and the date of this report.
12. Commentary on results
The Board previously announced our decision to dispose of businesses that no longer meet our growth expectations. This
included our money broking business, labour broking business, online training business and the recent sale of the Nosa Group
that will be shortly circulated to shareholders for final approval. We are satisfied that we created shareholder value through this
trade sale which, together with the disposal of The Training Room Online and Profit Reform, gives us a complete exit from the
occupational health and safety support services sector. We will henceforth focus exclusively on our faster growing technology
assets.
A like-for-like comparison of the results to the prior period cannot be easily made. The disposed businesses contributed R18
million in attributable earnings for the prior period with a zero contribution in the present reported period. This earnings gap will
be more than adequately replaced in future as we continue to redeploy our capital into our remaining technology businesses.
The Nosa Group, which is being held for disposal, contributed a 14% growth in earnings. This relatively modest growth is in
line with the expectations we had at the start of the financial year.
Our core technology businesses had a curious and frustrating six months. The increased investment in our proprietary
technology has delivered our market leader expectation. We are now the leader in South Africa in the provision of enterprise
management software to local authorities and our smart water technology is also now proving to be the market leader that we
anticipated.
The truly frustrating part is the present inability to take full advantage of this dominant market position. The failure of local
authorities to find budget for essential services and to make payment even when budget is available has negatively affected
many companies. We are no exception. Our ability to secure business and timeously convert our sales to cash remains
challenging. This resulted in unanticipated delays in delivery pending comfort on payment. Despite this challenging
environment we generated a growth of 20% in our enterprise management systems and support services businesses. We are
working on alternative payment models that will allow this business to generate higher growth levels going forward.
Our major disappointment has been the impact of non-payment on our ability to deliver our smart water meter technology into
a customer base that desperately wants and needs it. This business should have comfortably delivered strong growth to the
end of September. Instead it delivered a decline of 56%. This decline was exacerbated by our decision, based on non-payment,
to take back smart water technology sold in the last financial year and having to rework it to accommodate alternative client
specifications. This was the correct decision to mitigate loss but cost us R8.3m in earnings. We are actively working on more
creative funding solutions that will allow us to be paid in full while delaying the need for up-front payment from those local
authorities who want our technology but cannot afford it from present revenue generation.
On a positive note, we can report that the Western Cape has adopted our smart water technology. We are in the process of
expanding our production facilities to accommodate this and orders we are starting to receive from our Africa partners and
agents in Europe and the Middle East. We believe that this business will be the Group’s highest growth asset in the short to
medium term.
The holding company’s operating cost is distorted by the high rental we pay for our Sandton Head Office- especially after the
relocation of Nosa staff to Centurion. This will be attended to next year.
We are now focusing exclusively on our technology businesses which have been strategically arranged to be leaders in the
IoT space, leveraging off the technology “real estate” we achieve every time one of our smart water meters is adopted by a
household.
We anticipate that our trading environment will remain tough for the foreseeable future. Hard work, innovation and high levels
of commitment to customer service are vital if we are to continue to grow at the levels we demand.
By order of the board
14 December 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
Date: 14/12/2017 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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