METROFILE HOLDINGS LIMITED - Unaudited Summarised Group Interim Results

Release Date: 15/03/2019 10:21
Code(s): MFL
 
Wrap Text
Unaudited Summarised Group Interim Results

Metrofile Holdings Limited: Incorporated in the Republic of South Africa
(Registration number 1983/012697/06)
Share code: MFL ISIN: ZAE000061727
("Metrofile" or "the Company" or "the group")

UNAUDITED SUMMARISED GROUP INTERIM RESULTS
for the six months ended 31 December 2018

REVENUE
UP R490.2m
7.5%

EBITDA
Down R123.7m
(3.0%)

EPS
Down 10.2c
(45.2%)

HEPS
Down 10.2c
(34.6%)

DPS
Down 5.0c
(61.5%)

SUMMARISED CONSOLIDATED INCOME STATEMENT
                                                                                                                                                    Restated
                                                                                                                           Unaudited   Unaudited     Audited
                                                                                                                          six months  six months   12 months
                                                                                                                               ended       ended       ended
R'000                                                                                                               Note   31 Dec 18   31 Dec 17   30 Jun 18
Revenue                                                                                                                      490 197     456 050     952 988
Earnings before interest, taxation, depreciation and
amortisation (EBITDA)                                                                                                        123 747     127 573     270 175
Depreciation and amortisation                                                                                               (22 575)    (20 376)   (42 506)*
Operating profit                                                                                                             101 172     107 197     227 669
Net finance costs                                                                                                           (33 554)    (15 781)    (46 241)
Finance income                                                                                                                   850         825       1 502
Finance costs                                                                                                               (34 404)    (16 606)    (47 743)
Acquisition-related expenses                                                                                                       -           -    (15 495)
Profit on sale of a subsidiary                                                                                                     -      12 544       7 592
Profit before taxation                                                                                                        67 618     103 960     173 525
Taxation                                                                                                                    (26 885)    (25 975)    (49 671)
Profit for the year                                                                                                           40 733      77 985     123 854
Attributable to:
Owners of the parent                                                                                                          42 343      77 474     127 613
Non-controlling interests                                                                                                    (1 610)         511     (3 759)
Profit for the year                                                                                                           40 733      77 985     123 854
Further information
Number of ordinary shares in issue
(excluding treasury shares)                (thousands)                                                                       416 191     416 164     416 164
Weighted average number of ordinary shares
in issue                                   (thousands)                                                                       416 173     417 233     417 233
Basic earnings per ordinary share
Basic earnings per ordinary share              (cents)                                                                          10.2        18.6        30.6
Diluted earnings per ordinary share
Diluted earnings per ordinary share            (cents)                                                                          10.2        18.6        30.6
Headline earnings per ordinary share
Headline earnings per ordinary share           (cents)                                                                          10.2        15.6        28.9
Dividend per ordinary share
Interim scrip dividend/dividend per
ordinary share - proposed/paid                 (cents)                                                                           5.0        13.0        13.0
Final dividend per ordinary share -
paid                                           (cents)                                                                             -           -         8.0

* Restated - refer to note in commentary.

SUMMARISED SEGMENTAL INFORMATION
                                                                                           Revenue                                 EBITDA
                                                                              Unaudited      Unaudited       Audited    Unaudited    Unaudited       Audited
                                                                             six months     six months     12 months   six months   six months     12 months
                                                                                  ended          ended         ended        ended        ended         ended
R'000                                                                         31 Dec 18      31 Dec 17    30 June 18    31 Dec 18    31 Dec 17    30 June 18
Records Management                                                              344 322        321 744       671 673       78 420       85 484       162 191
CSX Customer Services                                                            52 517         40 058        79 457        5 213        (613)       (1 514)
Property Companies
(Occupied by Records
Management
businesses)                                                                      41 693         36 689        73 853       41 693       36 689        73 853
Tidy Files                                                                       71 381         72 195       158 928        4 250        8 520        19 656
Other                                                                            28 423         27 760        55 014      (5 829)      (2 507)        15 989
Intergroup                                                                     (48 139)       (42 396)      (85 937)            -            -             -
Total                                                                           490 197        456 050       952 988      123 747      127 573       270 175
South African operations                                                        417 317        409 117       842 238      105 930      122 418       254 931
Non-South African
operations                                                                       72 880         46 933       110 750       17 817        5 155        15 244

                                                                                            Operating profit                       Tangible assets
                                                                                                               Restated
                                                                                     Unaudited   Unaudited      Audited   Unaudited   Unaudited      Audited
                                                                                    six months  six months    12 months  six months  six months    12 months
                                                                                         ended       ended        ended       ended       ended        ended
R'000                                                                                31 Dec 18   31 Dec 17   30 June 18   31 Dec 18   31 Dec 17   30 June 18
Records Management                                                                      63 402      71 703      134 194     433 600     346 636      411 637
CSX Customer Services                                                                    4 608     (3 568)      (2 794)      28 920      33 469       37 453
Property Companies
(Occupied by Records
Management
businesses)                                                                             41 693      36 689       73 853     349 277     341 398      343 971
Tidy Files                                                                               1 702       5 705       14 236      43 034      38 617       41 984
Other                                                                                 (10 233)     (3 332)        8 180      65 488      65 024       58 131
Total                                                                                  101 172     107 197      227 669     920 319     825 144      893 176
South African operations                                                                87 028     104 869      218 408     799 000     747 245      772 960
Non-South African
operations                                                                              14 144       2 328        9 261     121 319      77 899      120 216

"Records Management" represents the global document storage & management and scanning business units which are
managed and operated geographically.

"Other" includes Metrofile Holdings, Global Continuity, Cleardata and Dexterity.

SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                                             Restated               Total equity
                                                                    Share     Share       Accumulated     Other  before minority
R'000                                                             capital   premium  profits/(losses)  reserves    apportionment  Non-controlling      Total
Balance at 30 June 2017                                             2 675   559 811            49 566    11 955          624 007           23 636    647 643
Purchase of Treasury Shares                                                (19 937)                                     (19 937)                    (19 937)
IFRS 2 Equity reserve relating to share schemes                                                           5 076            5 076                       5 076
Share scheme settlement                                                                                 (6 498)          (6 498)                     (6 498)
Purchase of remaining non-controlling interest of subsidiary                                  (1 016)                    (1 016)          (7 724)    (8 740)
Dividends declared                                                                          (125 979)                  (125 979)                   (125 979)
Total comprehensive income for the period ended 30 June 2018                                  127 613     5 417          133 030          (2 742)    130 288
Balance at 30 June 2018                                             2 675   539 874            50 184    15 950          608 683           13 170    621 853
Share scheme settlement                                                                                    (86)             (86)                        (86)
Sale of non-controlling interest of subsidiary                                                  5 976                      5 976          (5 228)        748
Dividends declared                                                                           (34 522)                   (34 522)                    (34 522)
Total comprehensive income for the period ended 31 December 2018                               42 343     1 338           43 681            (546)     43 135
Balance at 31 December 2018                                         2 675   539 874            63 981    17 202          623 732            7 396    631 128

SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                                                                                                    Restated
                                                                                                                        Unaudited    Unaudited       Audited
                                                                                                                       six months   six months     12 months
                                                                                                                            ended        ended         ended
R'000                                                                                                                   31 Dec 18    31 Dec 17    30 June 18
Profit for the period                                                                                                       40 733      77 985       123 854
Other comprehensive income for the period net of tax*
Currency movement on translation of foreign subsidiary                                                                      2 402      (2 273)         6 434
Total comprehensive income for the period                                                                                  43 135       75 712       130 288
Attributable to:
Owners of the parent                                                                                                       43 681       76 205       133 030
Non-controlling interests                                                                                                   (546)        (493)       (2 742)

* All items will subsequently be reclassified to profit and loss.

SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                                                                         Unaudited    Unaudited      Audited
                                                                                                                        six months   six months    12 months
                                                                                                                             ended        ended        ended
R'000                                                                                                                    31 Dec 18    31 Dec 17   30 June 18
Cash generated from operations
before net working capital changes                                                                                         112 860      129 101      255 577
(Increase) decrease in net working capital                                                                                 (4 908)      (9 473)     (24 594)
Cash generated from operations                                                                                             107 952      119 628      230 983
Net finance costs paid                                                                                                    (33 559)     (15 781)     (46 241)
Normal taxation paid                                                                                                      (28 175)     (31 595)     (51 361)
Net cash inflow from operating activities                                                                                   46 218       72 252      133 381
Net cash outflow from investing activities:
Investment in plant and equipment: expansion                                                                              (16 954)     (45 161)     (64 523)
Investment in plant and equipment: replacement                                                                            (12 874)      (6 027)     (15 818)
Proceeds on disposal of property, plant and equipment                                                                          583          479       13 623
Effects of foreign currency differences on fixed assets                                                                          -          450      (2 598)
Acquisition of investment in unlisted associate and
joint venture                                                                                                                    -            -            -
Increase in loans to associate company                                                                                           -      (1 500)      (1 500)
Acquisition of subsidiaries                                                                                                (3 616)     (77 862)    (335 516)
Proceeds on disposal of subsidiary                                                                                                       12 545       12 235
Net cash inflow (outflow) from financing activities:
Issue of shares in terms of vendor placements                                                                                    -            -            -
Purchase of Treasury shares                                                                                                      -     (19 937)     (19 937)
Dividends paid                                                                                                            (34 522)     (71 214)    (125 682)
Loans repaid                                                                                                                 (128)      (2 244)     (14 147)
Long-term liabilities raised                                                                                                19 835      129 515      444 932
Net increase in cash and cash equivalents                                                                                  (1 458)      (8 704)       24 450
Cash and cash equivalents at the beginning of the year                                                                      49 043       24 593       24 593
Cash and cash equivalents at the end of the year                                                                            47 585       15 889       49 043
Represented by:
Bank balances                                                                                                               57 990       31 505       52 331
Bank overdrafts                                                                                                           (10 405)     (15 616)      (3 288)

SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                                                                                                    Restated
                                                                                                                       Unaudited     Unaudited       Audited
                                                                                                                           as at         as at         as at
R'000                                                                                                         Notes    31 Dec 18     31 Dec 17    30 June 18
ASSETS
Non-current assets                                                                                                     1 165 874      878 588      1 155 118
Property                                                                                                          1      359 213      341 069        359 213
Plant and equipment                                                                                                      240 064      229 590        230 605
Goodwill                                                                                                                 488 052      287 963       484 437*
Intangible assets                                                                                                         60 298            -        59 636*
Investment                                                                                                                 9 331        8 796          9 353
Long-term receivable                                                                                                       1 977        2 528          2 419
Deferred tax asset                                                                                                         6 939        8 642          9 455
Current assets                                                                                                           327 072      251 957        300 939
Inventories                                                                                                               32 948       27 267         34 747
Trade receivables                                                                                                        185 954      155 508        184 726
Other receivables                                                                                                         50 180       35 241         29 135
Taxation                                                                                                                       -        2 436              -
Bank balances                                                                                                             57 990       31 505         52 331
Total assets                                                                                                           1 492 946    1 130 545      1 456 057
EQUITY AND LIABILITIES
Equity and reserves                                                                                                      631 128      625 633        621 853
Equity attributable to owners of the parent                                                                              623 732      610 215        608 683
Non-controlling interests                                                                                                  7 396       15 418         13 170
Non-current liabilities                                                                                                  660 549      348 602        640 877
Interest-bearing liabilities                                                                                      2      613 107      321 948        597 118
Deferred taxation liability                                                                                               47 442       26 654         43 759
Current liabilities                                                                                                      201 269      156 310        193 327
Trade and other payables                                                                                                  99 356       84 954        101 765
Deferred revenue                                                                                                          18 058       13 986         13 661
Bank overdraft                                                                                                            10 405       15 616          3 288
Provisions                                                                                                                 1 015          899          4 093
Taxation                                                                                                                   1 985            -          3 786
Interest-bearing liabilities                                                                                      2       70 450       40 855         66 734
Total equity and liabilities                                                                                           1 492 946    1 130 545      1 456 057

* Restated - refer to note in commentary.

Notes:
1. The majority of the groups properties have been pledged as security against certain loans to the group.
2. Long-term interest-bearing liabilities represent the Metrofile Proprietary Limited amortising and revolving facilities.
   Short-term interest-bearing liabilities include the portions of the Metrofile Proprietary Limited amortising loan facility and
   Group company loan agreements payable within one year. The Metrofile Proprietary Limited borrowings are JIBAR linked,
   whilst the other borrowings are prime linked.

RECONCILIATION OF HEADLINE EARNINGS
                                                                                                                                                    Restated
                                                                                                                         Unaudited    Unaudited      Audited
                                                                                                                        six months   six months    12 months
                                                                                                                             ended        ended        ended
R'000                                                                                                                    31 Dec 18    31 Dec 17   30 June 18
Profit attributable to owners of the parent                                                                                 42 343       77 474      127 613
Profit on disposal of subsidiary                                                                                                 -     (12 544)      (7 592)
Loss (profit) on disposal of plant and equipment                                                                               139           71           48
Tax effect of above items                                                                                                       21           72          194
Headline earnings                                                                                                           42 503       65 073      120 263
Headline earning per ordinary share (cents)                                                                                   10.2         15.6         28.9

RECONCILIATION OF NORMALISED EARNINGS
                                                                                                                                                    Restated
                                                                                                                         Unaudited    Unaudited      Audited
                                                                                                                        six months   six months    12 months
                                                                                                                             ended        ended        ended
R'000                                                                                                                    31 Dec 18    31 Dec 17   30 June 18
Headline earnings for purposes of headlines earnings per share                                                                   -            -      120 263
Adjusted for after tax:                                                                                                          -            -       12 024
Acquisition-related costs                                                                                                        -            -            -
Normalised headline earnings for purposes of normalised
headline earnings per share                                                                                                      -            -      132 287
Normalised headline earnings per share (NHEPS)         (cents)                                                                   -            -         31.8

Commentary on the results

Metrofile is Africa's market leader in records and information management, offering a range of physical
storage and digital services, as well as the confidential destruction and recycling of records. Founded and
listed in South Africa, the Group is growing steadily in the Middle East and other African countries.

The Records and Information Management division operates from 70 facilities (physical box storage
warehouses), at 40 locations, covering 122 580 square metres of warehousing space.

Metrofile is a 57.4% black-owned company. Its empowerment partner and shareholder of reference,
Mineworkers Investment Company ("MIC"), owns 36.95% of Metrofile's equity.

Overview of interim results

Revenue increased 7.5% to R490.2 million mainly due to the Kenya acquisition and good performance by CSX
Customer Services. EBITDA declined by 3% to R123.7 million. Basic Earnings Per Share (EPS) decreased by 45.2%
to 10.2 cents per share and Headline Earnings Per Share (HEPS) by 34.6% to 10.2 cents per share. The decrease
was largely due to the material higher interest charge and the higher effective tax rate of 40% for the period.

Cash generated from operations declined by 9.7%.

Capital expenditure incurred to date amounted to R29.8 million, R17.0 million of which was expansion.

The Group's gross interest-bearing debt was R694 million, which is higher than the Board's planned maximum debt
utilisation. The Board has accordingly declared a scrip dividend with a cash alternative to facilitate the ongoing
reduction in debt.

Growth outside of South Africa

Markets outside South Africa still offer significant growth opportunities particularly in Kenya, Mozambique
and Zambia.

Notwithstanding the unresolved socio-economic and political disruption in the Gulf Cooperation Council (GCC)
States of the Middle East, Metrofile recorded revenue growth of 55% from our operations outside of South Africa,
which contributed 14.9% of the total revenue for the period.

Corporate activity

The Group disposed of 38% of its shareholding in Nigeria to a local partner in August 2018.

Basis of preparation and accounting policies

The summarised consolidated unaudited interim financial results are prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS), the SAICA Financial Reporting Guidelines and AC 500 Standards as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council,
the information as required by IAS 34: Interim Financial Reporting, the JSE Limited Listings Requirements and the
requirements of the Companies Act of South Africa. These interim results were prepared using accounting policies
that comply with IFRS, and are consistent with those applied in the financial statements for the year ended 30
June 2018.

The Group results have been prepared, under the supervision of Mr Pfungwa Serima BSc (CompSc) and Business
Studies.

The accounting policies and basis of preparation for the financial statements are in all material respects consistent
with those applied in the 2018 annual financial statements apart from the adoption of new IFRSs that became
effective on 1 January 2018.The changes in accounting policies reflected below are also expected to be reflected
in the Group's consolidated financial statements as at and for the year ending 30 June 2019.

The Group adopted IFRS 15: Revenue from Contracts with Customers and IFRS 9: Financial Instruments from
1 July 2018. A number of other new standards and emendments to existing standards became effective from
1 January 2018, but these do not have a material impact on the Group's financial statements.
The effect of initially applying these standards is mainly follows:

IFRS 15: Revenue from Contracts with Customers

Apart from providing more extensive disclosure on the Group's revenue transactions, the application of IFRS 15 has
not had a significant impact on the financial position and/or financial perfomance of the Group as described above
and, accordingly, no adjustment was made on the opening reserves.

IFRS 9 Financial Instruments

The standard sets out the requirements for recognising and measuring financial assets, financial liabilities and
some contracts to buy or sell non-financial items. This standard replaces IAS 39: Financial Instruments: Recognition
and measurement.

The principles with regards to the classification and measurement of financial assets and liabilities, measuring
impairment allowances for financial assets have been amended due to the implementation of the new accounting
standard, IFRS 9: Financial Instruments, applicable to all accounting periods beginning on or after 1 January 2018.
IFRS 9 has had no material impact on the financial results.

Restatement in terms of IFRS 3

Acquisition of Metrofile Records Management (Kenya), formerly G4S

In January 2018, the Group acquired a 100% shareholding in Metrofile Records Management (Kenya) Proprietary Limited
Kenya for a purchase consideration of R259.4 million which was paid in cash. In terms of the agreement, a further payment of
R3.6 million was made in December 2018 following a purchase price adjustment, bringing the total consideration paid to R263 million.
The purchase price allocation for the identifiable assets acquired and the liabilities was provisional as at
30 June 2018. Subsequent to year-end, the assessment of fair values allocated to the individual components and
the purchase price allocation was finalised, resulting in a revised allocation to the fair values of assets, liabilities
and goodwill as reflected below.

In terms of IFRS 3: Business Combinations, the Group restated the 2018 statement of financial position, statement
of comprehensive income and statement of changes in equity and accompanying notes to reflect the
abovementioned changes as if they had occurred as at the acquisition date.

                                                                                            30 June 2018
                                                                                           R'000         R'000
                                                                                                    Previously
Carrying value of acquiree's net assets at the acquisition date                         Restated      reported
Net identifiable assets and liabilities at 30 June                                        21 583        21 583
Value of customers acquired                                                               61 692             -
Deferred tax liability (on value of customers)                                          (18 508)
Net identifiable assets and liabilities acquired                                          64 767        21 583
Goodwill on acquisition                                                                  194 633       237 817
Net consideration paid                                                                   259 400       259 400

IMPACT OF RESTATEMENT ON STATEMENT OF FINANCIAL POSITION
                                                                                             30 June 2018
                                                                                           R'000         R'000
                                                                                                    Previously
Carrying value of acquiree's net assets at the acquisition date                         Restated      reported
Non-current assets
Goodwill                                                                                 484 437       527 621
Intangible assets                                                                         59 636             -
Non-current liabilities
Deferred tax liabilities                                                                  43 759        25 867

IMPACT OF RESTATEMENT ON INCOME STATEMENT FOR THE PERIOD
ENDED 30 JUNE 2018
                                                                                             30 June 2018
                                                                                           R'000         R'000
                                                                                                    Previously
                                                                                        Restated      reported
Amortisation of the value of customers acquired                                          (2 056)             -
Taxation                                                                                     617             -
Impact on net profits                                                                    (1 439)             -

Related parties

In terms of a consulting agreement, and as approved at the Annual General Meeting, fees of R0.98 million
(2017: R0.81 million) were paid to MIC during the period under review.

Dividend

Shareholders are informed that the Board has resolved to declare an interim scrip dividend of 5 cent, with a cash
alternative. A further announcement setting out the full terms and salient dates will be published in due course.

Metrofile directors have advised that, to the extent they or any of their associates have shares in the Company, they
intend to accept the scrip alternative.

Directorate and Corporate Governance

Mr L Rood was appointed alternate to Mr C Seabrooke, effective 1 February 2019, Mrs PK Dludla resigned, effective
8 March 2019 and, as announced, Mr S Mansingh will be appointed as CFO, effective 1 April 2019, which will
result in the board comprising of two executive and seven non-executive directors, of which four are independent
directors.

Commitments

Metrofile owns or leases premises based on the prevailing economic realities in each country where we operate.
Operating lease commitments amount to R87.6 million for the next five years. Capital investment plans for the full
financial year amount to R84.6 million.

Share issues and buy-backs

There were no share buy-backs during the period under review. There are accordingly 416 164 210 shares in issue,
net of treasury shares, at 31 December 2018.

Value creation strategy

Metrofile intends to enhance its growth prospects and expansion by:
- restructuring our operating model;
- strategic acquisition and expansion;
- enhancing our client relationships; and
- nimble and tailor-made solutions.

These will be achieved through the following key strategic pillars:
- Secure Storage
- Business Support Services
- Products and Solutions
- Digital Services

Prospects

Trading conditions remain difficult, but we anticipate a better second half.

Our digital services strategy continues to progress and will grow through co-innovation with existing and new
customers as well as selected joint ventures with specialised digital solution providers.

This statement has not been reviewed or audited by Metrofile's auditors.

Christopher Seabrooke                                     Pfungwa Serima
Non-executive Chairman                                    Group Chief Executive Officer
Senderwood, Gauteng
15 March 2019

Corporate information

Registered office: 41 Wordsworth Avenue Senderwood Bedfordview 2007
www.metrofilegroup.com

Sponsor: The Standard Bank of South Africa Limited

Transfer secretaries: Computershare Investor Services (Pty) Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196

Directors: CS Seabrooke^* (Chairman), MS Bomela* (Deputy Chairman), PG Serima (CEO),
MZ Abdulla*, P Langeni(#)*, LE Mthimunye^*, GD Wackrill*, SV Zilwa^*, L Rood^* (Alternate)
(#) Lead independent ^Independent *Non-executive

Company Secretary: P Atkins



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