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Provisional Condensed Annual Consolidated Results for the Year Ended 31 March 2018
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 2018
CONDENSED GROUP STATEMENT OF PROFIT AND LOSS
Audited Audited
12 months 12 months
ended ended*
31 March 31 March
2018 2017
R’000 R’000
Continuing operations
Revenue 797 957 808 176
Cost of sales (354 790) (418 029)
Gross profit 443 167 390 147
Other net income 41 349 6 824
Distribution expenses (4 489) (2 659)
Administration expenses (344 033) (267 871)
Profit from operations 135 994 126 441
Finance income 2 073 1 816
Finance cost (8 210) (3 325)
Share of profit of equity accounted associate 1 271 1 902
Profit before tax 131 128 126 834
Tax expense (37 269) (30 781)
Profit for the year from continuing operations 93 859 96 053
Profit for the year from discontinued operations 95 989 119 120
Profit for the year 189 848 215 173
Profit attributable to:
Owners of the parent - continuing 83 795 61 459
Owners of the parent - discontinued 92 656 115 377
Non-controlling interest – continuing 10 064 15 023
Non-controlling interest - discontinued 3 333 23 314
189 848 215 173
Attributable earnings per share (cents)
Basic 154.50 155.59
Continuing operations 73.37 54.08
Discontinued operations 81.13 101.51
Diluted basic 154.04 154.58
Continuing operations 73.15 53.73
Discontinued operations 80.89 100.85
Headline 153.26 157.76
Continuing operations 72.13 56.31
Discontinued operations 81.13 101.45
Diluted headline 152.80 156.74
Continuing operations 71.91 55.94
Discontinued operations 80.89 100.80
*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
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
R’000 R’000
Profit for the year 189 848 215 173
Other comprehensive income:
Foreign currency translation differences 1 502 (5 667)
Disposal of subsidiaries (1 730) -
189 620 209 506
Total comprehensive income attributable to:
Owners of the parent 176 223 171 169
Non-controlling interest 13 397 38 337
189 620 209 506
Reconciliation of headline earnings (net of tax) for
continuing operations:
Profit attributable to owners of the parent 83 795 61 459
Profit on disposal of property, plant and equipment (443) (1 371)
Loss/(profit) on disposal of investment in subsidiaries (977) 3 906
Headline earnings 82 375 63 994
Reconciliation of headline earnings (net of tax) for
discontinued operations:
Profit attributable to owners of the parent 92 656 115 377
Loss/(profit) on disposal of property, plant and equipment 5 (69)
Loss/(profit) on disposal of investment in subsidiaries - -
Headline earnings 92 661 115 308
Weighted average number of shares (000s) 114 209 113 656
Diluted weighted average number of shares (000s) 114 549 114 394
Total number of shares in issue (000s) 114 597 114 211
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
As at As at
31 March 31 March
2018 2017
R’000 R’000
ASSETS
Non-current assets 664 702 838 151
Property, plant and equipment 36 245 59 677
Intangible assets 560 104 735 664
Investments in associates 17 806 15 550
Other financial assets 25 000 -
Deferred tax assets 25 547 27 260
Current assets 434 417 516 433
Inventories 53 114 44 777
Trade and other receivables 295 571 409 018
Income tax receivable 6 335 5 806
Other financial assets 39 777 6 288
Cash and cash equivalents 39 620 50 544
Assets held for sale 501 463 -
TOTAL ASSETS 1 600 582 1 354 584
EQUITY AND LIABILITIES
EQUITY 1 051 449 948 790
Share capital and share premium 295 937 292 452
Other reserves 7 114 6 909
Retained earnings 650 059 534 917
Non-controlling interest 98 339 114 512
LIABILITIES
Non-current liabilities 77 449 103 378
Other financial liabilities 1 745 4 359
Deferred vendor payments 8 566 7 126
Deferred tax liabilities 67 138 91 893
Current liabilities 344 145 302 416
Trade and other payables 177 255 202 016
Other financial liabilities 35 320 2 795
Income tax payable 6 271 6 397
Deferred vendor payments 6 571 32 644
Bank overdraft 118 728 58 564
Liabilities directly associated with assets held for sale 127 539 -
TOTAL LIABILITIES 549 133 405 794
TOTAL EQUITY AND LIABILITIES 1 600 582 1 354 584
Net asset value per share (cents) 831.71 730.47
Net tangible asset value per share (cents) 342.95 86.34
CONDENSED GROUP STATEMENT OF CASH FLOW
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
R’000 R’000
Cash flow from operating activities 234 876 187 477
Cash generated from operations 261 541 216 994
Finance income 1 968 2 140
Finance costs (324) (1 475)
Income tax paid (28 309) (30 182)
Cash flow from investing activities (225 935) (165 278)
Property, plant and equipment acquired (42 506) (19 938)
Intangible assets acquired (168 919) (158 197)
Proceeds on disposal of property, plant and equipment 2 120 3 918
Acquisition of subsidiaries and businesses (4 376) (6 750)
Acquisition of non-controlling interest without a change in control - (2 128)
Cash (forfeited)/received on disposal of subsidiaries and businesses (13 765) 17 018
Loans receivable repaid 1 511 799
Cash flow from financing activities (60 972) (70 109)
Treasury shares repurchased (544) (10 841)
Other financial liabilities repaid (4 625) (5 035)
Other financial liabilities raised 31 960 -
Deferred vendor payments repaid (19 497) (1 607)
Dividends paid to non-controlling interest (5 332) (3 139)
Dividends paid (62 934) (49 487)
(Decrease)\Increase in cash and cash equivalents (52 031) (47 910)
Cash and cash equivalents included in assets held for sale (19 057) -
Cash and cash equivalents at the beginning of the year (8 020) 39 890
Cash and cash equivalents at the end of the year (79 108) (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 - - 176 836 38 337 215 173
Other comprehensive income
Foreign currency translation differences - (5 667) - - (5 667)
Transactions with owners, recorded directly in
equity
Dividends paid - - (49 487) (3 139) (52 626)
Treasury shares purchased (10 841) - - - (10 841)
Share-based payment transactions 2 834 243 1 770 - 4 847
Acquisition of subsidiaries 33 607 - - - 33 607
Changes in ownership interest in subsidiaries - - (5 853) 3 642 (2 211)
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 - - 176 451 13 397 189 848
Other comprehensive income
Foreign currency translation differences - 1 502 - - 1 502
Transactions with owners, recorded directly in
equity
Dividends paid (62 934) (5 332) (68 266)
Share-based payment transactions 4 023 433 1 625 - 6 081
Disposal of subsidiaries - (1 730) - (24 238) (25 968)
Treasury shares purchased (538) - - - (538)
Balance at 31 March 2018 295 937 7 114 650 059 98 339 1 051 449
NOTES TO THE GROUP FINANCIAL INFORMATION
1. Basis of preparation
These provisional condensed annual consolidated financial statements for the year ended 31 March 2018 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 condensed annual consolidated 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 provisional condensed
annual consolidated financial statements 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 2017.
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
IPES-Utility Management Systems Proprietary Limited (“UMS”)
On 1 April 2017, the group acquired UMS for a consideration of R31.9 million. Goodwill to the value of R25.7 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 up to
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.
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
R’000 R’000
Revenue 490 979 439 304
Cost of sales (200 645) (185 845)
Gross profit 290 334 253 459
Other net income/(expenses) 2 399 (175)
Distribution expenses (3 100) (2 675)
Administration expenses (177 247) (146 586)
Results from operations 112 386 104 023
Finance income 787 312
Finance cost (543) (186)
Profit before tax 112 630 104 149
Tax expense (16 641) (24 971)
Profit from discontinued operations 95 989 79 178
Profit from discontinued operations attributable to:
Owners of the parent 92 656 75 435
Non-controlling interest 3 333 3 743
95 989 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
31 March
2018
R’000
ASSETS
Property, plant and equipment 45 636
Intangible assets 324 407
Deferred tax assets -
Inventories 3 273
Trade and other receivables 109 090
Cash and cash equivalents 19 057
TOTAL ASSETS 501 463
LIABILITIES
Deferred vendor payments (4 100)
Deferred tax liabilities (45 445)
Trade and other payables (76 576)
Income tax payable (1 414)
TOTAL LIABILITIES (127 535)
NET ASSETS 373 928
The following table details the cash flow of the discontinued operations included in the group cash flow statement.
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
R’000 R’000
Cash flow from operating activities 116 057 47 216
Cash flow from investing activities (39 450) (29 688)
Cash flow from financing activities (22 542) (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.
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
R’000 R’000
Revenue - 109 649
Cost of sales - (50 318)
Gross profit - 59 331
Other net income/(expenses) - (349)
Distribution expenses - (66)
Administration expenses - (18 931)
Results from operations - 39 985
Finance income - 12
Finance cost - (32)
Profit before tax - 39 965
Tax expense - (23)
Profit from discontinued operations - 39 942
Profit from discontinued operations attributable to:
Owners of the parent - 20 371
Non-controlling interest - 19 571
- 39 942
7. Commitments and contingencies
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
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 16 257 32 723
Later than one year and not later than five years 49 583 69 732
Later than five years 741 -
66 581 102 455
Capital commitments
There were no capital expenditure contracted for at the reporting date which have not yet been incurred and recognised 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
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
R’000 R’000
SEGMENT REVENUE
Testing inspection and certification services 3 491 14 427
Labour supply - 116 921
Information technology 813 354 649 607
Financial services - 46 681
Holdings and consolidated (18 888) (19 460)
Total revenue 797 957 808 176
SEGMENT PROFIT / (LOSS)
Testing inspection and certification services 412 3 661
Labour supply - 4 055
Information technology 121 646 118 859
Financial services - 7 312
Holdings and consolidated (38 263) (72 428)
Total profit 83 795 61 459
SEGMENT ASSETS
Testing inspection and certification services 501 463 550 024
Labour supply - -
Information technology 903 170 739 916
Financial services - -
Holdings and consolidated 195 949 64 644
Total assets 1 600 582 1 354 584
SEGMENT LIABILITIES
Testing inspection and certification services 127 539 151 631
Labour supply - -
Information technology 478 269 416 757
Financial services - -
Holdings and consolidated (56 675) (162 594)
Total liabilities 549 133 405 794
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.
Audited Audited
12 months 12 months
ended ended
31 March 31 March
2018 2017
R’000 R’000
Kyostax Proprietary Limited
Associate
Revenue 15 718 14 804
Other financial assets 4 640 5 640
GFI Securities Nyon SARL
Joint operation
Revenue - 23 119
Trade receivables - -
Kamberg Investment Holdings Proprietary Limited
Trade receivables 104 5 176
Shareholders for dividend 1 370 -
Interest paid 298 -
Laird Investments Proprietary Limited
Shareholders for dividend 26 934 -
Interest paid 2 641 -
Talacar Holdings Proprietary Limited
Consulting fees 2 538 -
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.
Subsequent to year-end, Russell Dick resigned as an executive director of the board with effect from 18 April 2018 in line with
the group’s policy to not have operational executives on the board. He was appointed as the Chief Executive Officer of
MICROmega H2O Proprietary Limited.
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
During the year under review, MICROmega has been restructured to become solely a provider of proprietary technology based
solutions and services. These have been classified under continuing operations in the results. We are pleased to report a 36%
growth in attributable earnings, from 54.08 cents to 73.37 cents, and 28% growth in headline earnings from 56.31 cents to
72.13 cents from these continuing operations. We are very satisfied with this growth rate given the tough market conditions
and volatile political landscape within which we have been operating.
The restructuring will cause a reduction in the earnings base after the disposal of NOSA, which has traditionally been our
second biggest earnings contributor. This was compensated for by the dividend distribution made in April 2018 of R3 a share
from the disposal proceeds. Part of the disposal proceeds have yet to be settled as they are subject to finalisation of the year
end results for NOSA and an independent review thereof. It remains our view that our market capitalisation is well below the
valuation of our underlying businesses given their capacity to deliver sustainable earnings growth, and we are therefore
continuing to explore mechanisms to unlock tangible value for our shareholders.
Prospects
MICROmega has now, for the first time since its listing in 2000, rationalised its portfolio of businesses into a single focused
portfolio. An application has been lodged with the JSE to move the FTSE sector classification from the business support
services sector to the computer services sector and it is anticipated that this will take place no later than the end of
September 2018.
Our ERP and water management solutions have now been fully aligned to the increasing adoption of the smart city concept.
In particular, our water management solutions and services are now being utilised in most regions in South Africa with the City
of Cape Town taking the lead in this regard. The success we are enjoying in South Africa affords us the platform to export our
solutions into Africa and other regions that have water demand management needs.
Financial Results
The results for the period reflect an increase of 13.86% in net asset value, a decrease of 0.7% in earnings per share, a decrease
of 2.85% in headline earnings per share and a 7.55% increase in operating profit. These results need to be viewed in the
context of the disposals of The Training Room Online, MECS Africa and MICROmega Securities businesses in the 2017
financial year, all of which contributed 28 cents per share to attributable earnings in that period. Taking this into consideration
we are pleased with the 21% growth in attributable earnings per share achieved in this reporting period.
By order of the board
28 June 2018
Directors: DA Di Siena (Independent Non-Executive Chairperson); IG Morris (Chief Executive 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 has been reviewed or reported on by MICROmega’s auditors.
Date: 28/06/2018 05:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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