Provisional summary audited consolidated financial statements. for the year ended 30 June 2015

Transcription

1 Provisional summary audited consolidated financial statements for the year ended 30 June 2015

2 Consolidated Statements of Financial Position at 30 June 2015 Notes 30 Jun Jun 14 ASSETS Non-current assets Property, plant and equipment Goodwill Intangible assets Investments in associates Deferred tax Current assets Inventories Current tax receivable Trade and other receivables Other financial assets Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of parent Share capital and premium Foreign currency translation reserve Share-based payment reserve Retained income Non-controlling interest 7 (1 308) (2 505) Non-current liabilities Other financial liabilities Finance lease liabilities Deferred tax Current liabilities Other financial liabilities Current tax payable Finance lease liabilities Trade and other payables Deferred income Provisions Bank overdraft Total equity and liabilities

3 Consolidated Statements of Profit and Loss and Other Comprehensive Income for the year ended 30 June 2015 Notes Year ended 30 Jun 15 % growth Year ended 30 Jun 14 Revenue (4) Cost of sales ( ) (18) ( ) Gross profit Other income Selling and administrative expenses ( ) ( ) Earnings before interest, impairments, taxation, depreciation and amortisation Depreciation and amortisation (75 192) (77 878) Impairment of rental stock (2 003) (4 315) Impairment of intangible assets (508) Operating Profit before Financing Activities Investment revenue Finance costs (11 076) (14 345) Net finance costs (10 997) (10 702) Income from equity-accounted investments Profit before taxation Taxation (239) (864) Profit after tax Other comprehensive income: Exchange differences on translating foreign operations reclassifiable (7 641) (28 427) Total comprehensive income for the year (489) (20 632) Profit attributable to: Owners of the parent Non-controlling interest Total comprehensive income for the year Attributable to: Owners of the parent (474) (21 391) Non-controlling interest (20 632) Earnings per share 9 Earnings per share (cents) 36, ,94 Diluted earnings per share (cents) 32, ,83 2

4 Consolidated Statements of Changes in Equity for the year ended 30 June 2015 Notes 30 Jun Jun 14 Share capital and premium Share capital and premium at the beginning of the year Issue of shares during the year Share options exercised 51 Share capital and premium at the end of the year Reserves Foreign currency translation reserve Balance at the beginning of the year Translation differences for the year (7 641) (28 427) Balance at the end of the year Share-based payment reserve Balance at the beginning of the year Share-based payment cost for the year Share options exercised (51) Share options cancelled (1 271) Balance at the end of the year Total reserves Retained income Retained income at the beginning of the year Profit for the year Dividends paid Share options cancelled Acquisition of remaining 49% shares in Alchemist House Proprietary Limited 7 (5 814) Acquisition of remaining 2% in Integrated Fare Collection Services Proprietary Limited 7 (417) Buyback of shares in DigiCore Fleet Management SA Proprietary Limited Retained income at the end of the year Non-controlling interest Balance at the beginning of the year (2 505) Profit for the year Acquisition of remaining 49% shares in Alchemist House Proprietary Limited Acquisition of remaining 2% in Integrated Fare Collection Services Proprietary Limited 7 (33) Buyback of shares in DigiCore Fleet Management SA Proprietary Limited (19 021) Balance at the end of the year (1 308) (2 505) 3

5 Consolidated Statements of Cash flows for the year ended 30 June 2015 Notes 30 Jun Jun 14 Cash flows from operating activities Cash generated from operations Interest income Finance costs (11 076) (14 345) Tax paid (3 100) (2 125) Net cash from operating activities Cash flows from investing activities Purchase of property, plant and equipment (70 271) (65 005) Proceeds on sale of property, plant and equipment Purchase of intangible assets (38 195) (36 509) Proceeds on sale of shares in TPL Trakker Limited Net cash from investing activities (50 184) (92 345) Cash flows from financing activities Repayment of other financial liabilities 8 (19 168) (53 705) Finance lease payments (11 769) (16 688) Payment to Non-controlling shareholders of Alchemist House Proprietary Limited for remaining 49% shareholding 7 (2 714) Payment to Non-controlling shareholders of Integrated Fare Collections Services Proprietary Limited for remaining 2% shareholding 7 (450) Buyback of shares in DigiCore Fleet Management SA Proprietary Limited (9 706) Net cash from financing activities (34 101) (80 099) Total cash movement for the year (23 478) Cash and cash equivalents at the beginning of the year (30 456) (9 511) Effect of exchange rate movements on cash balances Total cash and cash equivalents at the end of the year (30 456) 4

6 Consolidated Segmental Analysis for the year ended 30 June Jun Jun 14 Total segment revenue SA distribution External revenue Internal segment revenue (10 387) (34 062) Foreign distribution External revenue Internal segment revenue Product development and manufacturing ( ) (57 974) External revenue Internal segment revenue ( ) ( ) Group services (12 506) External revenue Internal segment revenue (10 329) (18 953) Total external revenue Eliminations Profit/(loss) before taxation SA distribution (42 624) Foreign distribution Product development and manufacturing (11 763) Group services (23 835) Eliminations (490) Total profit/(loss) before taxation Segment assets SA distribution Foreign distribution Product development and manufacturing Group services Eliminations ( ) ( ) Total assets Segment liabilities SA distribution ( ) ( ) Foreign distribution ( ) ( ) Product development and manufacturing (27 184) ( ) Group services ( ) ( ) ( ) ( ) Eliminations Total liabilities ( ) ( ) 5

7 Notes to the consolidated financial statements 1. BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS The consolidated financial statements are prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and contain the information required by IAS 34 Interim Financial Reporting as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Limited Listings Requirements, and the requirements of the Companies Act, Act 71 of 2008, as amended. The accounting policies are in terms of IFRS and are consistent with those of the consolidated annual financial statements at 30 June 2015 as issued on 30 September The accounting policies are supported by reasonable and prudent judgments and estimates. The board has approved the financial statements which have been summarised for purposes of this report. The financial statements were internally compiled by Mr PJ Grové CA(SA), the group chief financial officer and Mr V Venkatkumar CA(SA), the group financial manager. Any reference to future financial performance included in this announcement, the commentary within the corporate governance, sustainability and corporate profile headings and the financial and operation commentary have not been audited by our auditors. Audit opinion The auditors, Mazars (Gauteng) Inc., have issued their unmodified opinion on the Group s annual financial statements for the year ended 30 June A copy of the auditor s report together with a copy of the audited financial statements are available for inspection at the company s registered office. These consolidated financial statements have been derived from the Group s annual financial statements. The contents of this announcement are extracted from audited information, although the announcement is not itself audited. The directors take full responsibility for the preparation of the consolidated report and the financial information has been correctly extracted from the underlying annual financial statements. The auditor s report does not necessarily report on all the information contained in this announcement. Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditor s engagement, they should obtain a copy of the auditor s report together with the accompanying financial information from the company s registered office. 2. PROPERTY, PLANT AND EQUIPMENT The Group has invested R65,1 million into rental assets for the year ended 30 June 2015 (2014: R59,4 million). Depreciation for the year ended 30 June 2015 on rental units amounts to R41,4 million (2014: R41,1 million). 3. GOODWILL The goodwill amount per the statement of financial position is reconciled as follows: Cost Accumulated impairments (57 500) Carrying value at 30 June Foreign exchange movements (2 612) Carrying value at 30 June Cost at 30 June Accumulated impairments at 30 June 2015 (57 500) 4. INVESTMENTS IN ASSOCIATES TPL Trakker Limited During the year, the Group sold shares or 81,23% of its shareholding in TPL Trakker Limited, an associate company of the Group incorporated in Pakistan, for an amount equivalent to R The Group previously held 25,86% of the issued share capital of TPL Trakker Limited and subsequent to this transaction, the Group s shareholding in the company amounts to 4,85%. 6

8 Notes to the consolidated financial statements continued 4. INVESTMENTS IN ASSOCIATES continued TPL Trakker Limited continued The Group recognised a profit on the sale of the shares of R and the profit is included in other income in the statement of profit and loss and other comprehensive income. The Group has classified the remaining interest in TPL Trakker Limited as a financial asset designated at fair value through profit and loss. Refer to the other financial assets note. Mega Fortris Ctrack Solutions Sdn Bhd During the year under review the Group sold its entire 30% shareholding in Mega Fortris Ctrack Solutions Sdn Bhd, the Group s associate company incorporated in Malaysia, for an amount equivalent to R3. The Group recognised a loss on the sale of the shares of R and this is included in sales and administrative expenses in the statement of profit and loss and other comprehensive income. 5. OTHER FINANCIAL ASSETS The remaining investment in TPL Trakker Limited is designated at fair value through profit and loss because the investment is managed on a fair value basis and TPL Trakker is listed on the Karachi Stock Exchange and the company s share price can be actively monitored. The Group also intends to sell the remaining shares within the next 12 months. At 30 June 2015 the Group owned (2014: ) shares in the company. The investment was classified as an investment in associate in 2014 and with the sale of shares, the Group has reclassified the investment due to the loss of significant influence. The closing share price on 30 June 2015 was 15,86 Pakistan Rupees (PKR). Using the spot rate of PKR0,1197:1 at 30 June 2015, the Group realised a gain of R on measurement to fair value. The gain is shown under other income in the statement of profit and loss and other comprehensive income. 6. SHARE CAPITAL AND PREMIUM During the year under review the Group bought a further 49% shareholding held by the non-controlling shareholders of Alchemist House Proprietary Limited. The fair value purchase consideration was set at R , which consisted of cash of R and shares in DigiCore Holdings Limited issued at a price of R2 each. 7. ACQUISITION OF NON-CONTROLLING INTEREST Alchemist House Proprietary Limited T/A Fleet Connect On 25 September 2014 the Group bought a further 49% shareholding held by the non-controlling shareholders of Alchemist House Proprietary Limited. The fair value purchase consideration was set at R , which consisted of cash of R and shares in DigiCore Holdings Limited issued at a price of R2 each. The acquisition took the Group s shareholding in the company from 51% to 100%. The Group recognised an increase in non-controlling interest of R and a decrease in retained earnings of R The following summarises the changes in the Group s ownership interest in Alchemist House Proprietary Limited (amounts in ): Group s ownership interest at 1 July Effect of increase in Group s ownership interest (1 064) Share of comprehensive income Group s ownership interest at 30 June Schedule for effects on the equity attributable to owners of the parent of change in its ownership interest in a subsidiary that did not result in a loss of control Non-controlling interest derecognised (1 064) Difference between consideration paid over non-controlling interest recognised in retained earnings

9 Notes to the consolidated financial statements continued 7. ACQUISITION OF NON-CONTROLLING INTEREST continued Non-controlling interest Non-controlling interest, which is a present ownership interest, entitles its holders to a proportionate share of the entity s net assets in the event of liquidation, and is measured at the present ownership interest s proportionate share of the acquiree s identifiable net assets. There are no other components of non-controlling interests. Acquisition date fair value of consideration paid Cash (2 714) Equity ordinary shares in DigiCore Holdings Limited (2 036) (4 750) Equity issued as part of consideration paid The fair value of ordinary shares issued as part of the consideration for the non-controlling interest was determined with reference to the closing market price of the shares at the time the acquisition was concluded. Integrated Fare Collection Services Proprietary Limited On 1 March 2015 the Group bought a further 2% shareholding held by the non-controlling shareholders of Integrated Fare Collection Services Proprietary Limited. The fair value purchase consideration was set at R , which was paid in cash. The acquisition took the Group s shareholding in the company from 98% to 100%. The Group recognised a decrease in non-controlling interest of R and a decrease in retained earnings of R The following summarises the changes in the Group s ownership interest in Integrated Fare Collection Services Proprietary Limited: Group s ownership interest at 1 July Effect of increase in Group s ownership interest 33 Share of comprehensive income 417 Group s ownership interest at 30 June Schedule for effects on the equity attributable to owners of the parent of change in its ownership interest in a subsidiary that did not result in a loss of control Non-controlling interest derecognised 33 Difference between consideration paid over non-controlling interest recognised in retained earnings Non-controlling interest Non-controlling interest, which is a present ownership interest, entitles its holders to a proportionate share of the entity s net assets in the event of liquidation, and is measured at the present ownership interest s proportionate share of the acquiree s identifiable net assets. There are no other components of non-controlling interests. Acquisition date fair value of consideration paid Cash (450) 8. OTHER FINANCIAL LIABILITIES The Group s facilities of R15 million with Merchant West was settled in September The Group also repaid Absa Bank R4,1 million for facilities granted. 8

10 Notes to the consolidated financial statements continued 9. EARNINGS PER SHARE Basic earnings per share are calculated by dividing the profit attributable to equity holders of the parent amount by the weighted average number of shares in issue. Diluted earnings per share are calculated by dividing the relevant earnings by the weighted average number of shares in issue after taking the dilutive impact of potential ordinary shares to be issued into account. 30 Jun 15 % growth 30 Jun 14 EARNINGS PER SHARE Earnings per share (cents) 36, ,94 Diluted earnings per share (cents) 32, ,83 Headline earnings per share (cents) 21, ,23 Diluted headline earnings per share (cents) 18, ,04 Final dividend per share (cents) EARNINGS PER SHARE CALCULATIONS Reconciliation of weighted number of shares to be used in the calculation of basic and headline earnings per share ( 000) Opening balance Weighted number of shares issued for the acquisition of non-controlling interest in Alchemist House Proprietary Limited 218 _ Weighted number of share options exercised Reconciliation of weighted number of shares to be used in the calculation of diluted and diluted headline earnings per share ( 000) Weighted average number of ordinary shares in issue Adjusted for: potentially dilutive impact of share options RECONCILIATION OF HEADLINE EARNINGS Profit attributable to equity holders of the parent Adjusted for: (Profit)/loss on sale of property, plant and equipment (2 820) (Profit) on sale of shares in TPL Trakker Limited (35 414) Loss on sale of investment in Mega Fortris Ctrack Solutions Sdn Bhd 99 Impairment of property, plant and equipment Impairment of intangible assets 508 Adjustment to income from equity-accounted associates gain on sale of property, plant and equipment (229) Adjustment to income from equity-accounted associates gain on sale of associate (1 742) Tax effect on adjustments 789 (459) Non-controlling interest in adjustments Basic and diluted headline earnings DIVIDEND DECLARATION No final dividend will be declared and paid to the shareholders. The board agreed to retain cash for future growth (30 June 2014: nil). EVENTS AFTER THE REPORTING PERIOD Shareholders are referred to the joint announcement published by Novatel Wireless, Inc. and DigiCore on 19 June 2015, in terms of which shareholders were advised that the Group has entered into a transaction implementation agreement with Novatel Wireless which constitutes notification to the DigiCore board of directors of a firm intention to make an offer to acquire all the ordinary shares in the Group other than the ordinary shares held by any subsidiaries of the Group and the ordinary shares held by the DigiCore Holdings Limited Share Trust (Excluded Shares), by way of a scheme of arrangement (Scheme) or, if specified conditions of the scheme should not be fulfilled, to acquire all or a majority of the ordinary shares, excluding the excluded shares, by way of a substitute offer (Substitute Offer). 9

11 Notes to the consolidated financial statements continued Shareholders are referred to the joint announcement published by Novatel Wireless and DigiCore on 31 July 2015, whereby shareholders were advised that a circular, setting out the terms and conditions of the scheme and the substitute offer, and also incorporating a notice convening a general meeting of shareholders had been distributed to shareholders (Circular). In addition, shareholders are referred to the announcements published on the SENS dated 2 and 15 September 2015 and are advised that all of the conditions precedent as set out in the circular have now been fulfilled or waived and, accordingly, the scheme has become unconditional. CHANGES TO THE BOARD OF DIRECTORS Alex Mashinsky, Michael Newman and Lance Wagner Bridges were appointed as directors of the company in order to facilitate the transition and change of control pursuant to the scheme of arrangement approved by the shareholders at the general meeting held on 2 September RELATED PARTIES During the year, certain subsidiaries in the ordinary course of business, entered into loans and transactions with related parties under terms that are no less favourable than those arranged with third parties. CORPORATE GOVERNANCE The board of directors aspires to conduct the Group s business with responsibility, accountability, fairness and transparency and strives to be a good corporate citizen. The directors agree with the spirit and principles of corporate governance set out in the King Report on Governance in South Africa (2009) (King III). The board is committed to applying appropriate corporate governance policies and practices in each company in the Group. SUSTAINABILITY Sustainability forms the cornerstone of our values and is part of our board s mandate. The Group understands that its business is part of the greater environment in which we live, so our actions are shaped by national and international trends in sustainable development. DigiCore is a long-term business and this determines our actions as the Group strives to be a responsible corporate citizen and respect the society and environment in which we operate. The focus of the Group going forward is to balance financial growth with our focus on people, especially staff satisfaction, while ensuring we remain committed to equal opportunity employment and stakeholder satisfaction. It underpins our approach to attracting, retaining and developing our people. It guides our actions in the contribution we make to preserving our environment. It drives our continued costeffective growth. In support of the vision and strategy on sustainability, the Group has adopted the Global Reporting Initiative (GRI) Framework for which a report has been prepared in accordance with GRI G3.1 guidelines and transitioning into GRI G4. With the release of the integrated annual report 2014 in October 2014, DigiCore followed the combined assurance model as proposed by King III. Please refer to the website for further information on sustainability within the Group. CORPORATE PROFILE DigiCore is a JSE-listed group that specialises in vehicle tracking, fleet management solutions and insurance telematics for an international client base. With almost 30 years of innovation, technical and implementation experience, DigiCore provides advanced machine-to-machine communication and telematics solutions that add value to its global base of customers with mobile assets. DigiCore s end-to-end research, design, development, manufacture, sales and support of tailored solutions for customers is serviced by a global network of staff and team members in over 50 countries. Our technology and electronic division designs and develops a range of asset management and monitoring systems using GPS satellite positioning, GSM cellular communication systems and other advanced communication and sensory technologies. The result is products and solutions ranging from basic track-and-trace with stolen vehicle response services for the consumer market to complete integrated enterprise-level solutions for large fleet owners such as Discovery Insure, Network Rail (UK), Thames Water (UK), the South African Police Service, ethekwini Metro, BHP Billiton (global) and many others under the Ctrack brand. Operations span six continents with over employees. 10

12 Commentary It is with pleasure that the board announces a positive set of results, probably the last announcement as a JSE-listed entity s positive performance attracted the interest of Novatel Wireless Inc. (Novatel), a company listed on the NASDAQ in the United States of America, which has subsequently resulted in Novatel s offer to acquire all of the ordinary shares in DigiCore, other than the ordinary shares held by any subsidiaries of DigiCore and the ordinary shares held by the DigiCore Holdings Limited Share Trust for an amount of R4,40 per share, which offer became unconditional on Tuesday, 15 September 2015 to be executed on Monday, 5 October In addition to the exciting prospects and opportunities resulting from the Novatel transaction, 2015 was not only a year of DigiCore celebrating 30 years of being Always Visible, but also produced results that reconfirmed the long anticipated turnaround of the business and saw our international business returning to profitability. The restructuring of management, changing of strategies, policies and the enhanced systems and processes implemented in the current and prior periods have continued to optimise the business and bear fruit reflected in the results. From investing in our sales structures and skills across the business and identifying key focus areas in our consumer channel, we have been able to maintain and further develop a healthy sales pipeline allowing us to leverage off a variety of our solutions, including and not limited to: FleetConnect, a web-based (SaaS) asset management software which integrates fuel, maintenance and toll spend providing users with data enriched information to make business decisions to optimise fleet size and performance, and improve behaviour for safety and help drive lower maintenance costs Bureau service, where Ctrack customers received automated reports as well as dynamic key performance indicator reporting on drivers and vehicles respectively Insurance telematics Jamming detection Camera and navigation solutions with workforce management. Underscoring our continued investment in technology, DigiCore s Ctrack received the 2014 Technology Top 100 Award for management of technology (large enterprise category), endorsed by the Department of Science and Technology in South Africa. To further demonstrate the synergy between DigiCore and Novatel, Ctrack s OB130 plug and play solution, which is made up of Novatel hardware coupled with Ctrack s superior firmware, received high accolades at the Automechanika Innovation awards in FINANCIAL OVERVIEW The 2015 financial period was highlighted by the group restoring a positive cash position, the sale of a large portion of the TPL Trakker Limited s shareholdings and the continued application of successful cost saving initiatives. During the financial period, the investment in TPL Trakker Limited was reduced from 25,8% to 4,86%. Profit before tax for the group increased to R86,7 million compared to the R8,6 million in the prior period. The revenue generated by the group compared to the comparative period decreased by R33,4 million. The decrease was mainly due to a reduction in revenue relating to the international insurance telematics business and a higher conversion of sales into annuity contracts. The gross profit margin increased from 63,5% to 69%. The increase was due to successful cost saving initiatives implemented by management. Selling and administrative expenses decreased by R5,5 million. Considering that on 1 July 2014, the general staff cost increased by 7%, it is evident that the cost saving initiatives implemented by the group were effective. The results, however, include adjustments that management does not expect to be reoccurring in the future. Other income mainly consists of R35,4 million profit on the sale of TPL Trakker Limited shares and a R20 million fair value gain on the revaluation of the remaining TPL Trakker Limited shares. With the continued focus to reduce inventory balances, decrease stock days, decrease receivable days and with the proceeds from the sale of the TPL Trakker Limited shares, the group continued to generate positive cash flows ending the year on a cash-positive position of R11,4 million after paying back R30,9 million in debt and a further R9,6 million worth of overdraft facilities. This demonstrates the significant improvement in collections and the effect of controls and processes implemented when compared to the negative cash position of R30,4 million on the prior year. INDUSTRY COMMENTS DigiCore has progressed well with the requirement from medium to large fleet operators for a more information-based services and subscription model, allowing third-party information, such as routing and scheduling, and fuel card transactions to be incorporated into our reporting software. The integration with other systems gives operators the full status of their operation in one report. 11

13 Commentary continued The scalability of our product has enabled us to develop and supply quality products at very attractive prices to improve our market share in the competitive consumer market, while meeting insurance and safety-driven needs. In addition, as we support customers with big data analysis services, we will strengthen our competitiveness in corporate and insurance channels. We have developed a driver behaviour and risk rating programme with the support of the University of Pretoria. This furthers our reputation in insurance telematics technology and enhances our product offering for insurance houses internationally. OUTLOOK After optimising our business in the 2014 financial year and stepping up sales resources and skills over the financial year, we are on track and continue with our growth phase. Systems, controls and strategies to manage stock, debtors and cash flow more effectively are in place, allowing the management team to focus externally on relationships, sales and marketing and to identify new opportunities for growth. With the imminent take over by Novatel, we are excited about the new opportunities that await us, growing our global footprint and enhancing our product offering ensuring that we supply a superior end-to-end solution to our clients. The last date to trade was Friday, 25 September 2015 and the termination of listing of the DigiCore shares from the JSE shall take place at the commencement of trade on Tuesday, 6 October With the delisting of the DigiCore shares from the JSE s main board, these results will be the last set presented to the public. The directors and management would like to take this opportunity to thank all stakeholders for their ongoing support over the last 30 years. We want to thank our loyal customers, suppliers, investors, the non-executive board members and our staff members for their support over the 30 years and trust we will continue to supply world-class products and remain on our growth path as planned. For and on behalf of the board NH Vlok Chief executive officer PJ Grove Chief financial officer 30 September 2015 Centurion Registered office DigiCore Building, Regency Office Park, 9 Regency Drive, Route 21 Corporate Park, Irene Ext 30, Centurion, South Africa PO Box 68270, Highveld Park, 0169, Tel: +27 (0) Fax: +27 (0) Transfer secretaries Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001, PO Box 61051, Marshalltown, 2107 Sponsor PSG Capital Proprietary Limited Auditors Mazars (Gauteng) Incorporated Executives NH Vlok (chief executive officer), PJ Grové (chief financial officer), A Mashinsky, M Newman, LW Bridges Non-executive G Pretorius* (chairman), B Marx*, SP Naudé*, SS Ntsaluba*, JPduP le Roux *Independent non-executive director Company secretary N Bofilatos