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DGC
DGC
DGC - DigiCore Holdings Limited - DigiCore Holdings Limited Interim Results
for the six months ended 31 December 2009
DigiCore Holdings Limited
Incorporated in the Republic of South Africa
Registration number 1998/012601/06
JSE code: DGC ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
DigiCore Holdings Limited Interim Results for the six months ended 31 December
2009
R249 million TURNOVER
R23 million PROFIT AFTER TAX
3 cents DIVIDEND PER SHARE
COMMENTARY
Introduction
Over the years, DigiCore has grown from just commercial vehicle fleet
management to include a successful stolen vehicle recovery (SVR) business and
has recently added personal tracking to its portfolio of products. This
personal tracking launch will coincide with the FIFA World Cup in June 2010
for the convenience and safety of visitors to South Africa.
The economic recession that continued throughout 2009 severely affected the
results for the first six months of our current financial year (to 31 December
2009), with lower sales volumes overall compounded by a change in the sales
mix as higher-yielding fleet management unit sales contracted.
We partially mitigated this adverse impact by reducing group operating
expenditure by 14% compared to the preceding six months (January - June 2009)
while continuing to invest in possible new growth areas.
Internationally, although we recorded losses from our new office in France and
our SME (Small and Medium enterprises) sales team in the UK, which was still
being established in the review period, we remain confident that we will reap
the benefits of these initiatives in the near future as sales in these areas
continue to grow.
In South Africa we have opened additional C-track fitment centres, for our
stolen vehicle recovery products, in Durban and Cape Town. This will give us
greater visibility and improved customer access to our products in these
areas.
Financial results
Group revenue decreased from R288 million for the six months ended 31 December
2008 to R249 million for the review period. Gross margins have been under
pressure mainly due to growth in lower-margin SVR units and a severe decline
in the traditionally higher-margin fleet management products. Pricing
pressures, particularly the export market, have also affected gross margins,
as to be expected during economic downturns.
Net profit after tax reduced by 59% from R56.7 million (2008) to R22.8 million
for the interim period. As our overheads are relatively fixed, a reduction in
turnover has a severe effect; equally, when turnover rises, net profit after
tax will again grow exponentially.
A highlight of the period was the SVR business (CTSA) unit where revenues
increased by 45.6%, with an increase of 16% in the installed base.
The continued strength of the rand has led to an unrealised forex loss of some
R2.1 million during the period. Compared to an unrealised forex profit for the
comparable period in 2008, this represents an adverse movement of R7 million.
The profit after tax for the period under review has improved by 17% on the
six-month period January to June 2009.
Operations
Despite the recession, DigiCore increased unit sales by 1.5% on the
comparative period and 23% on the period January and June 2009. Our export
sales have decreased to only 40% of total units produced, from the usual level
of over 50%.
Our UK, European and Pakistan businesses, which traditionally comprise the
bulk of our export sales, continued to take the brunt of the economic downturn
and are still struggling to gain momentum.
In South Africa, our SVR business has achieved constant growth over the past
two years and we are confident this growth will continue. We have already
shown that we can successfully compete in this very cost-sensitive market and
by offering our superior products at competitive pricing, we are continually
building new relationships and sales channels. Our SVR, cellular and bureau
businesses have increased turnover by 45.6% on the comparative period in 2008
and now constitute approximately half of our South African turnover.
Our fleet management business suffered during the period, in line with the
reduction in commercial vehicle sales, and has been particularly affected by
the reduction in government spending. We trust that our new "Go Green" range
of reporting on CO2 emissions will support growth in the coming months.
Our R&D team have used this slower period to consolidate and performed well in
a very demanding market, characterised by continual calls for customised
software. DigiCore is confident about the new C-track Solo CX95 onboard unit
developed for a German vehicle manufacturer. The unit has already passed the
manufacturer`s stringent electrical tests and environmental tests are under
way.
We are reviewing our international operations to ensure that each country
provides a suitable return on investment and product support. This may lead to
consolidation in certain areas but, at the same time, we are looking for
opportunities to expand into the North and South Americas. Distributors have
already been identified and local product-approval processes have been
initiated. We expect to start product shipments by mid-2010 to at least one
new distributor.
Outlook
All indications are that the group has weathered the worst, with the lowest
sales recorded during April to August 2009. Enquiries and sales have since
steadily increased and at the time of writing this release (March 2010) we are
confident of a gradual recovery in our markets.
Contrary to some of our competitors, particularly in Europe, we have not
retrenched skilled labour and are well placed to capitalise on the upturn in
the world economy. We are equally well placed for a number of local and
international tenders and confident that we have also seen the start of
increased spending by larger corporates and utilities.
DigiCore`s management team is cautiously optimistic that our key markets will
return to reasonably improved profitability in the second half of our
financial year.
For and on behalf of the board
NA Gasa NH Vlok
Chairman Chief Executive Officer
9 March 2010
Abridged consolidated statements of financial position at 31 December 2009
31 Dec 09 31 Dec 08 30 Jun 09
R`000 R`000 R`000
(Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 288 197 268 662 281 811
Property, plant and equipment 105 595 86 948 103 789
Goodwill (note 2) 160 639 159 611 168 552
Intangible assets (note 3) 8 587 - -
Investments in associates 6 253 10 891 2 328
Deferred tax 7 123 11 212 7 142
Current assets 306 756 331 750 345 084
Inventories 89 230 102 077 104 011
Trade and other receivables 154 902 190 845 171 368
Current taxation receivable 12 178 - 12 299
Cash and cash equivalents 50 446 38 828 57 406
Total assets 594 953 600 412 626 895
Equity and liabilities
Equity attributable to equity 487 518 480 808 480 790
holders of parent
Share capital and premium (note 4) 82 983 62 920 63 863
Equity reserve (note 4) - 19 119 19 120
Equity reserve - share-based 204 5 200 204
payments
Foreign currency translation 1 667 16 352 8 794
reserve
Retained income 402 664 377 217 388 809
Minority interest 11 486 12 098 11 086
Non-current liabilities 39 248 47 573 44 289
Interest-bearing financial 38 736 47 573 43 777
liabilities (note 5)
Deferred tax 512 - 512
Current liabilities 56 701 59 933 90 730
Current portion of interest-bearing 7 310 9 408 14 691
financial liabilities (note 5)
Bank overdraft 6 000 - 9 500
Provisions 6 013 9 049 11 801
Current taxation payable 12 455 8 180 13 693
Trade and other payables 24 923 33 296 41 045
Total equity and liabilities 594 953 600 412 626 895
Net asset value per share (cents) 224.0 223.4 223.3
Net tangible asset value per share 146.2 149.2 145.0
(cents)
Abridged consolidated statements of comprehensive income for the six months
ended 31 December 2009
Six months Six months Six months Year
ended ended ended ended
31 Dec 09 Growth 31 Dec 08 30 Jun 09 30 Jun 09
R`000 % R`000 R`000 R`000
(Unaudited) (Unaudited) (Unaudited) (Audited)
Revenue 249 195 (13) 287 873 288 361 576 234
Cost of sales and (214 272) (209 028) (254 085) (463 113)
operating
expenses
Net operating 34 923 (56) 78 845 34 276 113 121
profit for the
period
Investment income 675 2 037 161 2 198
Finance costs (2 135) (971) (2 711) (3 682)
Share of (667) - (497) (497)
profit/(loss)
from associate
Profit before 32 796 (59) 79 911 31 229 111 140
taxation
Income tax (9 988) (57) (23 198) (11 748) (34 946)
expense (note 6)
Net profit after 22 808 (60) 56 713 19 481 76 194
tax
Attributable to:
Minority 400 2 466 (1 013) 1 453
shareholders
Equity holders of 22 408 (59) 54 247 20 494 74 741
the parent
Other
comprehensive
income
Currency (7 127) 750 (7 558) (6 808)
translation
differences
Total 15 681 (73) 57 463 11 923 69 386
comprehensive
income
Attributable to:
Minority 400 2 466 (1 013) 1 453
shareholders
Equity holders of 15 281 (72) 54 997 12 936 67 933
the parent
Number of 217 669 215 264 215 264
ordinary shares
in issue (`000)
Weighted number 209 650 206 180 207 057
of ordinary
shares in issue
(`000)
Fully diluted 209 650 217 669 209 462
number of
ordinary shares
in issue (`000)
Basic earnings 10.7 (59) 26.3 9.8 36.1
per share (cents)
(note 7)
Headline earnings 10.7 (59) 26.0 9.9 35.9
per share (cents)
(note 7)
Fully diluted 10.7 (57) 24.9 10.8 35.7
basic earnings
per share (cents)
(note 7)
Fully diluted 10.7 (57) 24.7 10.8 35.5
headline earnings
per share (cents)
(note 7)
Interim dividend 3.0 6.0 6.0
per share (cents)
Final dividend 4.0 4.0
per share (cents)
Reconciliation
between basic to
headline
earnings:
Attributable 22 408 54 247 20 494 74 741
earnings
Loss/(profit) on 43 (560) 85 (475)
disposal of fixed
asset
Headline earnings 22 451 53 687 20 579 74 266
Abridged consolidated statements of cash flows for the six months ended 31
December 2009
Six months Six months Year
ended ended ended
31 Dec 09 31 Dec 08 30 Jun 09
R`000 R`000 R`000
(Unaudited) (Unaudited) (Audited)
Cash flows from operating 21 951 (36 315) (794)
activities
Cash generated from operating 43 237 19 991 85 033
activities
Net investment income/(expense) (1 460) 1 066 (1 484)
Taxation paid (11 273) (28 896) (42 849)
Dividend paid (8 553) (28 476) (41 494)
Cash flows from investing (12 990) (56 350) (79 829)
activities
Cash flows from financing (12 421) 23 087 20 123
activities
Decrease in cash and cash (3 460) (69 578) (60 500)
equivalents for the period
Cash and cash equivalents at the 47 906 108 406 108 406
beginning of the period
Cash and cash equivalents at the 44 446 38 828 47 906
end of the period
Abridged consolidated statements of changes in equity for the six months ended
31 December 2009
Six months Six months Year
ended ended ended
31 Dec 09 31 Dec 08 30 Jun 09
R`000 R`000 R`000
(Unaudited) (Unaudited) (Audited)
Share capital and premium
Share capital and premium at the 63 863 44 635 44 635
beginning of the period
Movement in treasury shares - (251) (772)
Arising on shares issued for the - - 879
share trust
Arising on shares issued for the 19 120 18 536 19 121
purchase of Digicore Limited
Share capital and premium at the 82 983 62 920 63 863
end of the period
Distributable reserves
Foreign currency translation
reserve
Balance at beginning of the 8 794 15 602 15 602
period
Arising during current period (7 127) 750 (6 808)
Balance at end of the period 1 667 16 352 8 794
Equity-settled share-based
payment reserve
Balance at beginning of the 204 5 200 5 200
period
Employee share option scheme - - (880)
Share options cancelled - - (4 116)
Balance at end of the period 204 5 200 204
Equity instrument to be issued
Balance at beginning of the 19 120 38 241 38 241
period
Shares to be issued in respect of (19 120) (19 122) (19 121)
Digicore Limited transaction
Balance at end of the period - 19 119 19 120
1 871 40 671 28 118
Retained income
Retained income at the beginning 388 809 351 446 351 446
of the period
Movement in attributable earnings 22 408 54 247 74 741
during the period
Share options cancelled - - 4 116
Dividends paid during the period (8 553) (28 476) (41 494)
Retained income at the end of the 402 664 377 217 388 809
period
Minority interest
Balance at the beginning of the 11 086 9 632 9 632
period
Movement through business - - 1
combinations
Share of recognised income and 400 2 466 1 453
expenses
Minority interest at the end of 11 486 12 098 11 086
the period
Segment report
for the six months ended 31 December 2009
Six months Six months Year
ended ended ended
31 Dec 09 31 Dec 08 30 Jun 09
R`000 R`000 R`000
(Unaudited) (Unaudited) (Audited)
Revenue
SA distribution 194 487 190 207 369 674
Foreign distribution 58 282 79 293 171 315
Product development and 72 226 99 960 174 851
manufacturing
Group services 9 863 4 390 25 264
334 858 373 850 741 104
Inter-group revenue elimination (85 663) (85 977) (164 870)
249 195 287 873 576 234
Operating profit/(loss)
SA distribution 34 032 30 214 55 572
Foreign distribution (3 240) 16 466 30 539
Product development and (215) 35 023 19 466
manufacturing
Group services 4 346 (2 858) 7 544
Segment result 34 923 78 845 113 121
Net finance (cost)/income (1 460) 1 066 (1 484)
Share of profit/(loss) from (667) - (497)
associate
Profit before taxation 32 796 79 911 111 140
Notes to the abridged financial statements
1. Basis of preparation and accounting policies
The abridged consolidated interim financial statements set out in this report
have been prepared in accordance and comply with International Financial
Reporting Standards and are presented in terms of disclosure requirements set
out in IAS 34: Interim Financial Reporting and the Companies Act, 1973 (as
amended) and the JSE Limited ("JSE") Listings Requirements.
The interim financial statements are based on appropriate accounting policies,
consistently applied with those used in the audited annual financial
statements for the year ended 30 June 2009, which are supported by reasonable
and prudent judgements and estimates, with the following exceptions:
- IAS 1 (Revised): Presentation of Financial Statements, effective for
accounting periods commencing on or after 1 January 2009. This statement
required certain changes in disclosure as well as the introduction of the
"Statement of comprehensive income". These changes had no impact on the
financial position or results of the group; and
- IFRS 8: Operating segments, effective for accounting periods commencing
on or after 1 January 2009. This standard requires the disclosure of
information based on the "management approach" to the reporting of the
financial performance of operating segments. This change had no impact on
the financial position or results of the group and is merely a disclosure
issue.
These interim financial statements have not been audited or reviewed by the
company`s auditors.
2. Goodwill
Goodwill during the period decreased by R7.9 million as a result of the
valuation of foreign goodwill at 31 December 2009 at the spot rate.
3. Intangible assets
During the period R8.6 million worth of development costs were capitalised to
the balance sheet for the development of the new C-track v6 software as well
as the Tap-i-FareRegistered in taxi device hardware for the taxi fare-
collection project.
4. Share capital, share premium and reserves
During the reporting period 2 405 078 shares were issued as part payment for
the profit warranties that were met for the DigiCore Limited share purchase
from minorities for the financial years ended 30 June 2008 and 2009.
The equity reserve was reduced in the current reporting period by R19.1
million as a result of the issue of the shares for the profit warranty being
met.
5. Interest-bearing financial liabilities
The interest-bearing financial liabilities decreased due to the repayment of
R4.8 million on the foreign Euro loan as well as the payment of R4.4 million
to the vendors of DigiCore Limited.
6. Income tax expense
The effective tax rate of 30% (2008: 29%) includes a Secondary Tax on
Companies (STC) charge on the final and interim dividends declared and paid
during the years ended 30 June 2009 and 30 June 2008.
7. Earnings per share
The difference between the total number of shares in issue and the weighted
number of shares in issue relates to treasury shares, held by the share trust
to provide share options to employees that will convert in the future and
shares that were issued to the minorities of DigiCore Limited during the
reporting period.
Post-balance sheet events
There have been no significant events subsequent to year-end and up to the
date of this report, that would require adjustment or further disclosure.
Corporate governance
The group endorses the Code of Corporate Practice and Conduct as set out in
the King Committee Report on Corporate Governance in South Africa (2002) and
complies substantially with the guidelines of the report as required by the
JSE. The audit and risk committee has been tasked with reviewing the
guidelines of King III and implementing changes into the group where
applicable.
CORPORATE PROFILE
DigiCore is a JSE listed group that specialises in the research, design,
development, manufacture, sales and support of technologically advanced mobile
asset tracking, management and information solutions for vehicle owners
locally and abroad.
DigiCore, working in partnership with its customers, develop solutions that
deliver measurable business and operational benefits by providing total
visibility and control of mobile assets and mobile workforces; supplying
superior vehicle tracking solutions ranging from a basic track and trace
product to complete integrated enterprise level solutions for large fleet
owners such as the Royal Mail (UK), the South African Police Service,
eThekwini Metro, BHP Billiton (global) and many others.
DigiCore seeks to achieve outstanding long-term profitability for their
shareholders, whilst maintaining a high standard of ethics and developing and
rewarding their people accordingly.
BOARD OF DIRECTORS ANNOUNCEMENT
Mr Bruce Richards resigned as executive director with effect from 26 November
2009.
Mr Barney Esterhuyzen will assume the role of Director of International
business for the next six months with immediate effect. Shareholders are
hereby advised as required in terms of Rule 3.59 (c) of the JSE Listings
Requirements that this constitutes a change in the function of Mr Barney
Esterhuyzen from non-executive director to executive director.
DIVIDEND ANNOUNCEMENT
In line with company policy, the board has declared an interim dividend of 3
cents per share (2008: 6 cents per share).
Payment will be made on Monday, 29 March 2010 to shareholders recorded in the
register on Friday, 26 March 2010. The last day to trade to qualify for the
dividend will be Thursday, 18 March 2010 and the shares will be traded ex-
dividend from Friday, 19 March 2010.
Share certificates may not be dematerialised or rematerialised between Friday,
19 March 2010 and Friday, 26 March 2010.
Registered office
DigiCore Building, Regency Office Park9 Regency Drive, Route 21 Corporate
ParkIrene Ext 30, Centurion, South Africa
(PO Box 68270, Highveld Park, 0169)
Tel: +27 12 450 2222 Fax: +27 12 450 2497
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor
PSG Capital (Pty) Limited
Auditors
PKF (Pta) Incorporated
Directorate
NA Gasa* (Chairman), NH Vlok (Chief Executive Officer),
SR Aberdein, D du Rand, BC Esterhuyzen, BS Khuzwayo*,
B Marx*, SS Ntsaluba*, MD Rousseau, FJ Schindehutte
*Non-executive
Company secretary
DA Nieuwoudt
Websites
www.digicore.com
www.ctrack.co.za
Date: 09/03/2010 07:05:10 Produced by the JSE SENS Department.
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