Ansys Limited FY 2014 financial results


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Ansys Limited listed on the Johannesburg Stock Exchange has released their Full Year Results. Check out insights into this company in their presentation which appears below. Sign up to to recieve earnings presentations of all listed companies in Africa by email.

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Ansys Limited FY 2014 financial results

  2. 2. At At 28 February 2014 28 February 2013 (Reviewed) (Audited) Notes R'000 R'000 Assets Non-current assets 33 940 31 751 Plant and equipment 1 610 509 Intangible assets 2 19 202 21 604 Deferred tax asset 13 128 9 638 Current assets 53 836 31 873 Inventories 29 217 8 265 Trade and other receivables 24 030 23 398 Cash and cash equivalents 508 54 Derivative financial assets 81 4 Current tax receivable – 152 Total assets 87 776 63 624 Equity and liabilities Equity 32 408 37 435 Capital and reserves 32 408 37 435 Non-current liabilities 11 977 2 452 Instalment sale agreements 436 – Other financial liabilities 3 9 993 – Deferred tax liability 1 548 2 452 Current liabilities 43 391 23 737 Instalment sale agreements 179 – Provisions 208 – Borrowings – 2 133 Trade and other payables 35 282 12 959 Cash and cash equivalents 7 722 8 645 Total equity and liabilities 87 776 63 624 Number of shares in issue 244 867 056 164 867 056 Net asset value per share (cents) 13.2 22.7 Tangible net asset value per share (cents) 5.4 9.6 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION KEY FEATURES n Order book up by 630% to R190 million n Basic loss per share improved by 50% to (3,85) cents n Restructuring successfully completed n Tedaka Technologies business combination concluded and integrated n Consolidated platform for growth
  3. 3. Year ended Year ended 28 February 2014 28 February 2013 (Reviewed) (Audited) Note R'000 R'000 Revenue 65 803) 81 259) Cost of sales (42 678) (47 744) Gross profit 23 125) 33 515) Other income 1 979) 444) Operating costs (30 499) (27 974) EBITDA (5 395) 5 985) Depreciation and amortisation (1 947) (3 772) Development cost impairment 2 (868) (8 536) Goodwill impairment –) (7 907) Operating loss (8 210) (14 228) Finance income 3) –) Finance cost (903) (1 112) Loss before taxation (9 110) (15 340) Taxation 2 085) 2 792) Loss for the year (7 025) (12 548) Other comprehensive income, net of tax –) –) Total comprehensive loss for the year (7 025) (12 548) Basic loss per share (cents) (3.85) (7.74) Diluted loss per share (cents) (3.85) (7.74) Headline (loss)/earnings per share (cents) 4 (3.58) 2.40) Diluted headline (loss)/earnings per share (cents) 4 (3.58) 2.40) Weighted average number of shares in issue 182 620 481 162 162 946) Diluted average number of shares in issue 182 620 481 162 162 946) CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
  4. 4. Issued share Retained income/ Total capital (accumulated loss) equity Notes R'000 R'000 R'000 Balance as at 1 March 2012 46 728 2 715) 49 443) Movements during the year Share issue 540 –) 540) Loss for the year – (12 548) (12 548) Balance as at 28 February 2013 (Audited) 47 268 (9 833) 37 435) Movements during the year Share issue 1 26 400 –) 26 400) Common control business combination 1 – (24 402) (24 402) Loss for the year – (7 025) (7 025) Balance as at 28 February 2014 (Reviewed) 73 668 (41 260) 32 408) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended Year ended 28 February 2014 28 February 2013 (Reviewed) (Audited) R'000 R'000 Cash flows from operating activities before working capital (6 582)) 4 582) Changes in working capital 10 222)) (2 555) Cash flows from operating activities 3 540) 2 027) Cash flows from investing activities (329) (5 397) Cash flows from financing activities (1 834) (784) Cash flows for the year 1 377) (4 153) Cash and cash equivalents at beginning of the year (8 591) (4 438) Cash and cash equivalents at end of the year (7 214) (8 591) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
  5. 5. Year ended Year ended 28 February 2014 28 February 2013 (Reviewed) (Audited) Notes R'000 R'000 Segment revenue Rail 37 118) 57 800) Defence 15 031) 18 230) Mining* 543) 5 229) Telecommunications** 1 13 111) – ) Total 65 803) 81 259) Segment profit/(loss) Rail 9 843) 5 534) Defence 8 256) 8 318) Mining* (4 324) (9 750) Telecommunications** 1 (2 308) –) 11 467) 4 102) Corporate unallocated (19 677) (18 330) Finance cost (903) (1 112) Finance income 3) –) Loss before taxation (9 110) (15 340) Financial position Assets 87 776) 63 624) Rail 22 125) 21 280) Defence 1 677) 10 308) Mining* 6 212) 12 473) Telecommunications** 1 37 698) –) Unallocated 20 064) 19 563) Liabilities 55 368) 26 189) Rail 72) –) Defence 1 347) –) Mining* 17) –) Telecommunications** 1 45 391) –) Unallocated 8 541) 26 189) The segment report has changed from the prior year as follows: *The segment name has been changed from ‘Mining and Industrial’ to ‘Mining’, as the current and prior year revenue generated from this sector was only from mining customers. **Tedaka, a telecommunication specialist, is included into a new operating segment named “Telecommunications” CONDENSED SEGMENT REPORT
  6. 6. Introduction The year to 28 February 2014 (“the year”) saw Ansys successfully complete its restructuring programme for long-term sustainability and improved competitiveness, under the leadership of new CEO Teddy Daka (former non-executive group Chair). Revenue declined to R65,8 million (2013: R81,3 million) owing to the delayed release of procurement packages of major clients and the depressed mining sector. Notwithstanding this, the group contained the loss for the year to R7,0 million, almost halved when compared to the previous year (2013: loss R12,5 million), a direct result of the restructuring programme. The segmental profits/losses indicate a similar more positive trend. The order book improved in the second half of the year and at year-end totalled R190 million with a rolling five year horizon. Group profile The group designs, develops and distributes niche technology-driven engineering solutions for harsh environments in four key sectors: Rail, Mining, Defence and Telecommunications. Ansys’ range of standard and bespoke solutions is aimed at improving clients’ productivity, safety and security. The group intends to be a centre of engineering excellence and is focussed on research and development in order to remain at the forefront of innovation in its areas of operation. Headquartered in Centurion, Tshwane, its geographic footprint extends throughout South Africa and into Botswana with the strategic intent to expand further into Africa and beyond. Operations Rail During the year Ansys secured the award of an R188 million contract (undiscounted over the contract period) from Transnet for an integrated dashboard display system (“ISD”) for locomotives. The ISD was designed and developed in-house specifically for Transnet’s requirements and will be installed in the full fleet over the next five years. The award reflects the group’s strategy of securing longer-term contracts with the possibility of annuity income in the maintenance phase. The ISD is a world-class system and with variation has the potential for sales beyond Transnet and South Africa’s borders. Ansys has maintained capacity in this sector ahead of the execution phase of this and other recently secured projects, to roll out in the year ahead (FY2015). In line with our strategic intent, we continued to invest in Research and Development projects for the rail market which we expect to convert into long-term delivery contracts in the next financial year. Although revenue in the segment declined to R37,2 million (2013: R57,8 million), profit for the year increased significantly to R9,8 million (2013: R5,8 million) due to a focus on higher margin products and services. The decline in revenue was mainly due to the delay in release of procurement packages and a longer than expected procurement cycle from our major client. Defence Performance in this segment was as expected. The current major project will taper off to conclusion in mid-2015. In line with our previously stated strategy, the group remains opportunistic in this sector in anticipation of increased activity in the market. It is projected that the use of private sector contractors by state-owned enterprises will increase in light of demanding delivery targets and that government will now proactively address its historic underspending in this area. We are cautiously optimistic of a healthier year ahead and of starting to realise the benefits of our retained capacity from FY2016 onwards. Revenue in the segment declined to R15,0 million (R18,2 million). In the face of this challenge the segment managed to retain consistent profits year-on-year at R8,3 million (2013: R8,3 million). Mining The domestic mining industry remained depressed in the year, impacted by global factors including a decline in demand for platinum particularly from a weakened European Union. This was exacerbated by widespread local strike action. However, we anticipate that the sector should start to recover in the year ahead (FY2015). Ansys is maintaining its competency and increasing investment in capability to capitalise on the anticipated uptake. Further, the group is looking to expand internationally to markets to which Ansys’ solutions are well suited. COMMENTARY
  7. 7. The above resulted in a decline in revenue for the year in the segment to R0,5 million (2013: R5,2 million) while the loss for the year of R4,3 million was improved compared to FY2013 (2013: loss R9,7 million). Telecommunications (“Telecoms”) This growing sector provides promising opportunities which align with the group’s drive for localisation. The segment, comprising of Tedaka, achieved revenue of R13,1 million for the three months of inclusion in Ansys’ results and posted a loss for the same period of R2,3 million before tax as per the segment report. Tedaka competes in a tight market characterised by increasing pricing pressure on suppliers. Cost improvement measures have been put in place to boost profitability while enabling continued competitiveness. Restructuring benefits Ansys’ business model has been effectively clarified as technology research and development, with the intention to build a rich Intellectual Property (“IP”) legacy leveraging in-house engineering expertise. The cost base has been completely restructured to align more appropriately with the revenue nature of the business (which is project-driven rather than annuity- based) and with market cyclicality. In order to enable a scalable cost structure, core functions have been retained in-house and certain support functions outsourced. Further, the extensive production facility has been scaled-down into maintenance and repair plant with capacity for small production runs in line with the group’s key focus, resulting in significant cost savings. The benefits of the restructuring have started to be realised and the group is well poised for growth going forward. Tedaka Technologies Proprietary Limited (“Tedaka”) transaction As previously announced during the year, the group concluded the business combination of telecoms solutions specialist Tedaka. Refer to note 1 for the detail of the purchase consideration. The group will be able to access IP synergies and gain exposure to opportunities in the fast-growing telecoms sector. CEO Teddy Daka is a trustee of TDK Trust, which wholly owns Tedaka Investments Proprietary Limited, the seller of Tedaka. Tedaka has been successfully integrated into the group and contributed to results for three months. Tedaka is recognised as a significant player in the telecoms industry with strong competency in passive connectivity. It maintains its positioning through ownership of its client relationships, white labelling and innovating its own technologies for the market. Its revenue model with quick project turnaround is advantageous to Ansys as a balance to the group’s more lumpy revenue stream (as explained above). Further, Tedaka has an established blue-chip client base offering opportunity for expansion and cross-selling. Growth strategy Our long-term strategic objective is to become an original equipment manufacturer (“OEM”) by producing proprietary technologies in-house, supplemented by those of strategic OEM partners. Our focus on research and development will position Ansys in time as an IP-led provider of technology solutions in our key markets. Our growth ambitions will necessitate both ongoing organic growth and acquisitive activity. The group’s acquisition strategy requires primarily that target companies strengthen Ansys’ IP capacity and market access. We see emerging markets as critical to our growth strategy. South Africa therefore provides the group with an ideal platform for testing and perfecting our solutions. It is our strategic intent that our locally developed and manufactured products are developed to world-class standards, capable of distribution globally. B-BBEE During the year Ansys improved its rating to a Level 4 contributor from Level 5. A number of initiatives have been embarked upon that will realise significant results. The group has set a strategic goal of progressing to Level 1 in the medium term, and programmes are in place to drive achievement of this goal led by the Remuneration, Social and Ethics Committee. COMMENTARY CONTINUED
  8. 8. COMMENTARY CONTINUED This committee is supported by management’s B-BBEE Committee that is tasked with implementing the various initiatives aimed at aggressively accelerating our status. In the interim, we are proud to report that the Ansys is 57% black-owned and controlled. The board is 83% black with women comprising 50% and black women in particular comprising 33%. The top management team is 50% black. Directorate As previously announced, effective 5 June 2013, the following changes were made to the board of directors:T Daka stepped down from his role as non-executive Chair and assumed the role of Chief Executive Officer, N Mjoli-Mncube was appointed as independent non-executive Chair in his stead and SP Mzimela was appointed as an independent non-executive director and a member of the Audit and Risk Committee. All new appointments were ratified at the company’s previous annual general meeting held during the year. There have been no further changes since year-end to date of this announcement. Outlook Consensus is that South Africa’s GDP is not expected to grow above 2% in 2014, save in the event of government unlocking significant infrastructure spend which may act as a major stimulus. In contrast, other countries in Africa are projected to grow GDP by 6-8%, coming off lower bases. This underpins our strategic intent to expand further onto the continent. There are also signs of an upswing in the global economy, predicated on the tentative US recovery cementing and filtering through to the East and Europe. The consequent potential boost to the mining market in South Africa offers exciting opportunity for the group. The rail industry continues to grow and is expected to benefit from Transnet’s planned R320 billion spend over the next 5 years. Our defence segment is likely to benefit from the anticipated increased spend on defence by the government. The telecoms segment will benefit from the planned FTTx rollout in a rapidly expanding sector. Financial results and dividend policy Statement of financial position The majority of the movement in the statement of financial position was as a result of the Tedaka business combination. Refer to note 1 of the notes to the provisional financial information. Significant movements outside the acquisition were as follows: n Decrease in trade and other receivables as well as trade and other payables due to a decrease in the invoicing activity for the last quarter of FY2014 n Decrease in borrowings due to the repayment of a shareholder loan during FY2014 n Increase in inventory relates to the work-in-progress for the current projects being executed Cash flow statement n Cash inflows from operating activities for the year improved by R1,5 million due to improved working capital cycles n Cash outflows from investing activities for the year were primarily due to Tedaka bank overdraft assumed as well as the net of the purchase and disposal of plant and equipment n Cash outflows from financing activities for the year were mainly attributable to the repayment of a shareholder loan of R2.1 million Statement of comprehensive income Loss for the year The loss for the year, albeit reduced from the previous year, was primarily a direct result of the reduction in revenue. Refer to the segment report for further details regarding the segment results. Ansys’ dividend policy is and will remain predicated on due regard for the group’s profitability, cash flow position and future capital requirements. Accordingly no dividend was declared for the year.
  9. 9. Details of the net assets acquired: R’000) ) Negative carrying value of net assets acquired 6 002) Less: Purchase consideration 18 400) Shares issued 18 400) Retained earnings 24 402) The value of the shares issued was based on the published share price of 33 cents at 9 December 2013, of which R8 million represented the purchase of the convertible equity loan and R18.4 million represented the sales share of Tedaka. The initial purchase consideration, as per the signed sale agreement, was made up as follows: – An initial tranche payment of 80 000 000 Ansys shares at 20 cents per share. The first tranche payment is allocated to the convertible equity loan of R8 000 000 and to the sale shares of R8 000 000. – A second tranche payment will be made in an amount equal to profit after taxation of Tedaka for the financial year ending 28 February 2014, multiplied by a price: earnings ratio of 3 less the initial first tranche payment, which will be payable in newly issued Ansys shares at an issue price of 20 cents per share. Tedaka did not meet its profit targets and therefore no payments in shares in addition to the initial payment will be made. The transaction cost of the business combination approximated to R1.4 million. NOTES TO THE PROVISIONAL FINANCIAL INFORMATION 1. Common control business combination On 9 December 2013, the group acquired 100% of the share capital of Tedaka, a telecoms distribution company for infrastructure products and related network accessories. The company acquired the entire issued share capital of Tedaka, which was controlled by Ansys’ Chief Executive Officer Teddy Daka. In view of his pre-existing significant interest in the issued share capital of Ansys, and taking account of an analysis of the attendance and voting patterns at shareholder meetings, it is the judgement of the board that Teddy Daka had de facto control over Ansys before the transaction. The directors have assessed that this business combination meets the definition of a business combination under common control. Such a business combination does not fall within the scope of IFRS 3 – Business Combinations and the directors have therefore recognised the assets and liabilities of the acquiree at their carrying values on the transaction date. The business combination of Tedaka will expand the group offering to include solutions for the telecoms sector, thereby reducing the group’s exposure to the rail and defence sectors. The supplier agreements secured by Tedaka will allow the group to provide state-of-the-art products that suit the needs of telecoms operators in their continuous upgrading of their networks. The acquired business contributed revenues of R13,1 million and a net loss after taxation of R1,7 million to the group for the period 9 December 2013 to 28 February 2014. The results are included in the telecoms segment as part of the segment report.
  10. 10. 1. Common control business combination continued Carrying value of assets acquired R’000) Property, plant and equipment 1 448) Loans receivable 112) Inventories 19 560) Trade and other receivables 14 960) Trade and other payables (25 149) Other financial liabilities (17 666) Deferred tax asset 2 156) Bank overdraft (780) Borrowings (643) Total net assets acquired (6 002)) Cash consideration paid –) Less: overdraft assumed 780) Net cash outflow on acquisition (780) NOTES TO THE PROVISIONAL FINANCIAL INFORMATION 2. Intangible assets Year ended Year ended 28 February 2014 28 February 2013 (Reviewed) (Audited) Relationship R'000 R'000 Other financial liabilities Bearing Management Consulting Proprietary Limited Same director (T Daka) 923) –) Tedaka Investment Proprietary Limited Same director (T Daka) 9 070) –) 9 993) –) 3. Related party balances Mobile Other CRMS RTU Goodwill intangible assets Total R000 R000 R000 R000 R000 Year ended 28 February 2014 (Reviewed) Opening net carrying amount 2 107) 4 386 15 059) 52) 21 604) Movement: – impairment (226) (642) –) –) (868) – other (582) (922) –) (30) (1 534) Closing net carry amount 1 299) 2 822 15 059) 22) 19 202) Year ended 28 February 2013 (Audited) Opening net carrying amount 11 485 1 447 22 966) 112) 36 010) Movement: – impairment (8 536) – (7 907) –) (16 443) – other (840) 2 939 –) (60) 2 037) Closing net carry amount 2 107) 4 386 15 059) 52) 21 604) The challenging labour market conditions have had a significant impact on the sales of the Rope Monitoring Systems, namely Continuous Rope Monitoring System (”CRMS”) and Mobile Rope Testing Unit (“RTU”), which triggered the requirement for an impairment. This impairment formed part of the mining segment results.
  11. 11. Year ended Year ended 28 February 2014 28 February 2013 (Reviewed) (Audited) R'000 R'000 Reconciliation of headline (loss)/earnings: Loss attributable to ordinary shareholders (7 025) (12 548) Goodwill impairment –) 7 907) Development cost impairment 868) 8 536) Profit on disposal of plant and equipment (522) –) Total tax effects of adjustments 146) –) Headline (loss)/earnings attributable to ordinary shareholders (6 533) 3 895) Headline (loss)/earnings per share (cents) (3.58) 2.40) Diluted headline (loss)/earnings per share (cents) (3.58) 2.40) 4. Headline (loss)/earnings NOTES TO THE PROVISIONAL FINANCIAL INFORMATION Statement of compliance, basis of preparation and review opinion The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa. The Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and consistent with those of the annual financial statements for the year ended 28 February 2013, except for the adoption of new, improved and revised standards and interpretations which became effective, which had no material effect on the financial results. The directors take full responsibility for the preparation of the provisional financial information and the financial information has been correctly extracted from the underlying annual financial statements. The provisional condensed consolidated financial statements for the year ended 28 February 2014 have been reviewed by the company's auditor, BDO South Africa Incorporated, who has expressed an unmodified review conclusion on the results. A copy of their review report is available for inspection at the company’s registered office. The auditor’s report does not necessarily report on all of the information contained in these financial results. 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 issuer’s registered office. Preparer These results were prepared under the supervision of Rachelle Grobbelaar, the Chief Financial Officer. Going concern The directors have reviewed the group’s budget and cash flow forecast for the year to February 2015 which include certain assumptions about the cash flows from projects and raising additional funding when required. On this basis and in light of the group’s current financial position, the directors are satisfied that the group will continue to operate for the foreseeable future and have therefore adopted the going concern basis in preparing these reviewed provisional financial results. Events subsequent to year-end The directors are not aware of any significant subsequent events that have occurred between year-end and the date of this announcement that may materially affect the results of the group for the year or its financial position as at 28 February 2014.
  12. 12. Directors T Daka (CEO) | R Grobbelaar (CFO) | NS Mjoli-Mncube* (Chair) FF Dantile* | MD Keebine* | SP Mzimela* *Independent non-executive Registration number 1987/001222/06 Registered address 140 Bauhinia Street | Centurion | Pretoria 0157 Postal address PO Box 95361 | Waterkloof | Pretoria 0145 Telephone +27 12 749 1800 Facsimile +27 12 665 2767 Email Company secretary Fusion Corporate Secretarial Services Proprietary Limited Designated Advisor Exchange Sponsors 2008 Proprietary Limited Transfer secretaries Computershare Investor Services Proprietary Limited CORPORATE INFORMATION NOTES TO THE PROVISIONAL FINANCIAL INFORMATION Appreciation Our thanks to our fellow directors for their tenacity and grit through a challenging period. We also thank our employees for their loyalty and unflagging enthusiasm in the face of many strategic changes at the group. We are proud to lead this talented and committed team to a brighter future. Finally, thank you to our customers, business partners, advisers, suppliers and shareholders for their sustained faith in our prospects. No growth or economic activity would be possible without orders and the capable employees and shareholder investment to execute them. We will work hard to maintain your confidence. By order of the board 29 May 2014 Teddy Daka Rachelle Grobbelaar Chief Executive Officer Chief Financial Officer