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SEBATA HOLDINGS LIMITED - Condensed Consolidated Results for the Six Months Ended 30 September 2018

Release Date: 20/12/2018 16:15
Code(s): SEB     PDF:  
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Condensed Consolidated Results for the Six Months Ended 30 September 2018

Sebata Holdings Limited
(Previously MICROmega Holdings Limited)
Incorporated in the Republic of South Africa
(Registration number 1998/003821/06)
JSE Share code: SEB ISIN: ZAE000260493
(“Sebata” or “the company” or “the group”)

CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

CONDENSED GROUP STATEMENT OF PROFIT AND LOSS

                                                         Unaudited         Reviewed        Audited
                                                    6 months ended         6 months      12 months
                                                                              ended          ended
                                                      30 September     30 September       31 March
                                                              2018             2017           2018
                                                             R’000            R’000          R’000
 Continuing operations
 Revenue                                                    399 943          376 368       797 957
 Cost of sales                                            (193 539)        (159 783)     (354 790)
 Gross profit                                               206 404          216 585       443 167
 Other net income                                           316 092           26 265        41 349
 Distribution expenses                                       (2 182)         (2 336)       (4 489)
 Administration expenses                                  (174 075)        (175 532)     (344 033)
 Profit from operations                                     346 239           64 982       135 994
 Finance income                                                3 708             886         2 073
 Finance cost                                                (2 872)         (2 100)       (8 210)
 Share of profit of equity accounted associate                   860             159         1 271
 Profit before tax                                          347 935           63 927       131 128
 Tax expense                                              (131 489)         (10 687)      (37 269)
 Profit for the year from continuing operations             216 446           53 240        93 859
 Profit for the year from discontinued operations                  -          43 554        95 989
 Profit for the year                                        216 446           96 794       189 848



 Profit attributable to:
 Owners of the parent - continuing                         209 409           46 730        83 795
 Owners of the parent - discontinued                             -           41 465        92 656
 Non-controlling interest – continuing                       7 037            6 510        10 064
 Non-controlling interest - discontinued                         -            2 089         3 333
                                                           216 446           96 794       189 848
 Attributable earnings per share (cents)
 Basic                                                      182.50             77.22       154.50
 Continuing operations                                      182.50             40.92        73.37
 Discontinued operations                                         -             36.30        81.13
 Diluted basic                                              182.34             76.80       154.04
 Continuing operations                                      182.34             40.70        73.15
 Discontinued operations                                         -             36.10        80.89
 Headline                                                    20.76             78.91       153.26
 Continuing operations                                       20.76             42.64        72.13
 Discontinued operations                                         -             36.27        81.13
 Diluted headline                                            20.74             78.48       152.80
 Continuing operations                                       20.74             42.41        71.91
 Discontinued operations                                         -             36.07        80.89




CONDENSED GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME

                                                                Unaudited        Reviewed      Audited
                                                                 6 months        6 months    12 months
                                                                    ended           ended        ended
                                                             30 September    30 September     31 March
                                                                     2018            2017         2018
                                                                    R’000           R’000        R’000

Profit for the year                                               216 446          96 794      189 848
Other comprehensive income:
Foreign currency translation differences                              (32)          2 424        1 502
Disposal of subsidiaries                                            2 939               -      (1 730)
                                                                  219 353          99 218      189 620

Total comprehensive income attributable to:
Owners of the parent                                              212 316          90 619      176 223
Non-controlling interest                                            7 037           8 599       13 397
                                                                  219 353          99 218      189 620

Reconciliation of headline earnings (net of tax) for
continuing operations:
Profit attributable to owners of the parent                        209 409         46 730       83 795
Profit on disposal of property, plant and equipment                  (146)          (304)        (443)
(Profit)/loss on disposal of investment in subsidiaries          (185 441)          2 269        (977)
Headline earnings                                                   23 822         48 695       82 375

Reconciliation of headline earnings (net of tax) for
discontinued operations:
Profit attributable to owners of the parent                              -         41 465       92 656
Loss/(profit) on disposal of property, plant and equipment               -           (41)            5
Loss/(profit) on disposal of investment in subsidiaries                  -              -            -
Headline earnings                                                        -         41 424       92 661

Weighted average number of shares (000s)                           114 742        114 211      114 209
Diluted weighted average number of shares (000s)                   114 844        114 830      114 549
Total number of shares in issue (000s)                             113 729        114 211      114 597



CONDENSED GROUP STATEMENT OF FINANCIAL POSITION

                                                           Unaudited      Reviewed     Audited
                                                               As at         As at       As at
                                                        30 September  30 September    31 March
                                                                2018          2017        2018
                                                               R’000         R’000       R’000
ASSETS
Non-current assets                                           687 788       613 301     664 702
Property, plant and equipment                                 33 374        34 983      36 245
Intangible assets                                            614 666       497 628     560 104
Investments in associates                                     18 666        50 709      17 806
Other financial assets                                             -           548      25 000
Deferred tax assets                                           21 082        29 433      25 547

Current assets                                               555 712       439 848     434 417
Inventories                                                   53 352        64 740      53 114
Trade and other receivables                                  318 436       341 400     295 571
Income tax receivable                                          4 045         5 052       6 335
Other financial assets                                        97 903         5 638      39 777
Cash and cash equivalents                                     81 976        23 018      39 620

Assets held for sale                                               -       484 306     501 463

TOTAL ASSETS                                               1 243 500     1 537 455   1 600 582

EQUITY AND LIABILITIES
EQUITY                                                       860 050       959 926   1 051 449
Share capital and share premium                              288 161       292 452     295 937
Other reserves                                                 8 487        11 052       7 114
Retained earnings                                            517 856       560 740     650 059
Non-controlling interest                                      45 546        95 682      98 339

LIABILITIES
Non-current liabilities                                       74 904        72 788      77 449
Other financial liabilities                                      520         3 241       1 745
Deferred vendor payments                                           -        13 670       8 566
Deferred tax liabilities                                      74 384        55 877      67 138

Current liabilities                                          308 546       371 159     344 145
Trade and other payables                                     135 918       217 453     177 255
Other financial liabilities                                   54 559        37 155      35 320
Income tax payable                                           111 523         5 686       6 271
Deferred vendor payments                                       6 546        21 537       6 571
Bank overdraft                                                     -        89 328     118 728

Liabilities directly associated with assets held for sale          -       133 582     127 539

TOTAL LIABILITIES                                            383 450       577 529     549 133

TOTAL EQUITY AND LIABILITIES                               1 243 500     1 537 455   1 600 582

Net asset value per share (cents)                             716.19        756.71      831.71
Net tangible asset value per share (cents)                    173.96        321.00      342.95


CONDENSED GROUP STATEMENT OF CASH FLOW

                                                                            Unaudited             Reviewed          Audited
                                                                             6 months             6 months        12 months
                                                                                ended                ended            ended
                                                                         30 September         30 September         31 March
                                                                                 2018                 2017             2018
                                                                                R’000                R’000            R’000
Cash flow from operating activities                                          (38 677)              105 020          234 876
Cash generated from operations                                               (26 249)              120 552          261 541
Finance income                                                                   2 211               1 180            1 968
Finance costs                                                                  (2 425)               (926)            (324)
Income tax paid                                                              (12 214)             (15 786)         (28 309)

Cash flow from investing activities                                           540 280            (105 732)        (225 935)
Property, plant and equipment acquired                                         (6 394)            (13 657)         (42 506)
Intangible assets acquired                                                    (55 824)            (89 797)        (168 919)
Proceeds on disposal of property, plant and equipment                            2 545               2 571            2 120
Acquisition of subsidiaries and businesses                                           -             (5 876)          (4 376)
Acquisition of non-controlling interest without a change in control                  -                   -                -
Cash (forfeited)/received on disposal of subsidiaries and businesses          585 700                  925         (13 765)
Loans receivable raised                                                         14 253                 102            1 511

Cash flow from financing activities                                          (340 519)            (42 067)         (60 972)
Treasury shares repurchased                                                    (7 975)                   -            (544)
Other financial liabilities repaid                                             (1 373)             (1 670)          (4 625)
Other financial liabilities raised                                              17 626              31 960           31 960
Deferred vendor payments repaid                                                (2 250)             (6 794)         (19 497)
Dividends paid to non-controlling interest                                     (2 755)             (2 362)          (5 332)
Dividends paid                                                               (343 792)            (63 201)         (62 934)



(Decrease)\Increase in cash and cash equivalents                              161 084             (42 779)         (52 031)
Cash and cash equivalents included in assets held for sale                           -             (8 020)         (19 057)
Cash and cash equivalents at the beginning of the year                        (79 108)            (15 511)          (8 020)
Cash and cash equivalents at the end of the year                                81 976            (66 310)         (79 108)


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 2017                                   292 452         6 909       534 917          114 512        948 790
Profit for the year                                             -             -        88 195            8 599         96 794
 Other comprehensive income
 Foreign currency translation differences                       -         2 424             -                -          2 424
 Transactions with owners, recorded directly in
 equity
 Dividends paid                                                 -             -      (62 934)                -       (62 934)
 Treasury shares purchased                                      -             -             -                -              -
 Share-based payment transactions                                         1 719         (267)                           1 452
 Disposal of subsidiaries                                       -             -             -         (26 600)       (26 600)
 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

 Balance at 1 October 2017                                292 452        11 052       560 740           95 682        959 926
 Profit for the year                                            -             -        88 256            4 798         93 054
 Other comprehensive income
 Foreign currency translation differences                       -         (922)             -                -          (922)
 Transactions with owners, recorded directly in
 equity
 Dividends paid                                                 -              -            -          (5 332)        (5 332)
 Share-based payment transactions                           4 023        (1 286)        1 892                -          4 629
 Disposal of subsidiaries                                       -        (1 730)            -            2 362            632
 Treasury shares purchased                                  (538)              -            -                -          (538)
 Changes in ownership interest in subsidiaries                  -              -        (829)              829              -
 without a change in control
 Balance at 31 March 2018                                 295 937          7 114      650 059           98 339      1 051 449

 Balance at 1 April 2017                                  295 937          7 114      650 059           98 339      1 051 449
 Profit for the year                                            -              -      209 409            7 037        216 446
 Other comprehensive income
 Foreign currency translation differences                       -           (32)            -                -           (32)
 Transactions with owners, recorded directly in
 equity
 Dividends paid                                                 -              -    (343 792)          (2 755)      (346 547)
 Share-based payment transactions                             199        (1 534)        2 180                -            845
 Disposal of subsidiaries                                       -          2 939            -         (57 075)       (54 136)
 Treasury shares purchased                                (7 975)              -            -                -        (7 975)
 Balance at 30 September 2018                             288 161          8 487      517 856           45 546        860 050


NOTES TO THE GROUP FINANCIAL INFORMATION

1. Basis of preparation
These unaudited condensed interim consolidated financial statements for the six months ended 30 September 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 unaudited condensed interim 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 unaudited
condensed interim consolidated financial statements have been prepared under the supervision of Pierre Van Eeden, 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 unaudited condensed interim 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 2018.

3. Disposal of subsidiaries

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 in the 2018 financial year. There is an ongoing
dispute with the purchasers regarding the Earn Out, this dispute is expected to be finalised by year end.


4. Commitments and contingencies

                                                                               Unaudited           Reviewed             Audited
                                                                                6 months           6 months           12 months
                                                                                   Ended              ended               ended
                                                                            30 September       30 September            31 March
                                                                                     2018              2017                2018
                                                                                    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                                                            25 614            31 682             16 257
 Later than one year and not later than five years                                  33 591            61 274             49 583
 Later than five years                                                                   -                 -                741
                                                                                    59 205            92 956             66 581

 Capital commitments
 There was no capital expenditure contracted for at the reporting date which has 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.


5. Segment information

                                                                               Unaudited          Reviewed            Audited
                                                                                6 months          6 months          12 months
                                                                                   Ended             ended              ended
                                                                            30 September      30 September           31 March
                                                                                    2018              2017               2018
                                                                                   R’000             R’000              R’000

 SEGMENT REVENUE
 Consulting Services                                                             124 621           134 155            251 309
 Software Solutions                                                               76 992            91 315            203 450
 ICT Support Services                                                             91 644            74 191            148 787
 Water Technologies                                                              120 021            90 780            226 339
 Holdings and consolidated                                                      (13 335)          (14 073)           (31 928)
 Total revenue                                                                   399 943           376 368            797 957



 SEGMENT PROFIT / (LOSS)
 Consulting Services                                                               3 358             8 009             12 027
 Software Solutions                                                                7 442            30 083             74 052
 ICT Support Services                                                              8 525             8 672             11 897
 Water Technologies                                                               13 263             6 031             10 438
 Holdings and consolidated                                                       176 821           (6 065)           (24 620)
 Total profit                                                                    209 409            46 730             83 795

 SEGMENT ASSETS
 Consulting Services                                                             183 281           225 848            188 564
 Software Solutions                                                              535 344           408 993            503 851
 ICT Support Services                                                             74 143            72 017             62 595
 Water Technologies                                                              276 139           296 470            283 679
 Holdings and consolidated                                                       174 593           534 127            561 893
 Total assets                                                                  1 243 500         1 537 455          1 600 582

 SEGMENT LIABILITIES
 Consulting Services                                                              45 079            66 624             56 788
 Software Solutions                                                               72 696            94 918            272 439
 ICT Support Services                                                             22 059            30 274             26 053
 Water Technologies                                                              143 388           184 177            166 076
 Holdings and consolidated                                                       100 228           201 536             27 777
 Total liabilities                                                               383 450           577 529            549 133

6. 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.


                                                                              Unaudited          Reviewed            Audited
                                                                               6 months          6 months          12 months
                                                                                  Ended             ended              ended
                                                                           30 September      30 September           31 March
                                                                                   2018              2017               2018
                                                                                  R’000             R’000              R’000
 Kyostax Proprietary Limited
 Associate
 Revenue                                                                          6 500             7 579             15 718
 Other financial assets                                                           4 640             4 640              4 640
 Kamberg Investment Holdings Proprietary Limited
 Trade receivables                                                                    -             5 176                104
 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             2 538              2 538




7. Corporate Governance and changes to the board of directors of Sebata (“board”)

Sebata 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.

Changes to the board which occurred subsequent to the period end were as follows:
   • Cornelia Kemp resigned as the Financial Director with effect from 31 October 2018.
   • Pierre van Eeden was appointed as Financial Director with effect from 1 November 2018.
   • Grant Jacobs has resigned as Independent Non-Executive Director with effect from 12 October 2018.
   • Ruan Viljoen resigned as the Company Secretary with effect from 31 October 2018.
   • Reegan Smith was appointed as the Company Secretary with effect from 1 November 2018.


8. Subsequent events

No other significant events have occurred in the period between the reporting date and the date of this report.

9. Commentary on results

During the six months under review, Sebata was restructured into four distinct operating divisions. These have been classified
under continuing operations in the results and disclosed in the segmental reporting note. The first six months of the year were
tough, particularly for the Software Solutions division which is historically the biggest earnings contributor to the group. The
volatile political landscape within which we have been operating has resulted in a slower than expected uptake of our software
solutions within local government which has contributed to the poor performance of that business. This is a reflected in the
decrease of 51.3% in the HEPS from continuing operations from 42.64 cents as at 30 September 2017 to 20.76 cents. The
decrease in continued HEPS is a direct result of a key municipal client failing to pay approximately R88 million that is due to
the Company. While we are confident that we will receive the funds the Company has decided, due to the prolonged difficulty
in receiving payment, to exclude this amount from the period’s earnings. Without this adjustment, continued HEPS would have
been approximately 20% up on a normalised basis.

While EPS from continuing operations of 182.5 cents reflected a 346% increase from 40.92 cents as at 30 September 2017,
this is largely attributable to the profit recognised on the sale of the NOSA Group of Companies.


Outlook

Sebata has now, for the first time since its listing in 2000, rationalised its portfolio of businesses into a single focused portfolio
and has reclassified its FTSE sector classification with the JSE from the business support services to the computer services
sector. In line with this rationalisation, the group has been reorganised into four distinct divisions; Software Solutions, Water
Technologies, ICT Support Services and Consulting Services allowing for a clear focus and strategy underpinned by proprietary
intellectual property.

The Water Technologies division continues to perform well as the demand for our water management devices and solutions
grows both locally and internationally.

The investment in the Software Solutions division is largely behind us. The rewrites were in line with changing legislation to the
functionality of Local Government’s financial management systems. To date, we have successfully implemented the new
software at 39 clients. We believe that our superior product and reduced competition will yield strong returns on this investment.

We anticipate that the dispute with the Purchasers on the Earn Out relating to the disposal of the NOSA Group of Companies
will be resolved by financial year end. Once this has been resolved we will be in a better position to finalise a further dividend
in relation to the sale, as previously communicated.

Financial Results

Revenue has increased by 6.1% compared to the previous corresponding period. This has however not been translated to
attributable earnings at the same rate due to the tough trading conditions described above. The net asset value per share of
the group has decreased by 5.3% from 756.71 cents as at 30 September 2017 to 716.19 cents. This is due to the disposal of
the NOSA Group of companies. The Board is confident that the group will be able to generate the expected returns for
shareholders going forward that it has consistently done in the past.

By order of the Board


20 December 2018


Directors: DA Di Siena (Independent Non-Executive Chairperson); IG Morris (Chief Executive Officer); P van Eeden (Financial
Director); CA King (Director – Strategic Finance); PH Duvenhage (Non-Executive Director); TW Hamill (Non–Executive
Director); RC Lewin (Independent Non–Executive Director); and D Passmore (Independent Non-Executive Director)

Company Secretary: RB Smith

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 have been reviewed or reported on by Sebata’s auditors.

Date: 20/12/2018 04:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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