Mixed results from Simeka BSG

By Iain Scott, ITWeb group consulting editor

Johannesburg, 10 Feb 2006

Simeka BSG, formerly Xantium Technology Holdings, failed to translate a 152% revenue increase into a profit improvement in the half-year to November.

While revenue rose from R38.79 million to R97.71 million, the group's attributable profit decreased marginally from R6.26 million to R6.19 million.

However, results reflect its performance prior to the merger with MICT Solutions Group and the acquisition of Simeka Management Consulting, the group points out.

The group has also been restructured following those deals, says Simeka BSG director and former CEO James Murray.

The profit performance is a result of R7 million aggregate losses incurred in two divisions, says Murray.

"The losses arose partly due to operational challenges such as the slow recovery of debtors," he adds. "However, a large portion of the losses were anticipated as we incurred costs to rationalise the divisions for the new group structure following the transactions."

First-time compliance with a new international accounting standard also resulted in an imputed interest charge of R1.2 million against income, he says.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose from R9.57 million to R10.68 million, reflecting a decrease in the EBITDA margin from 24.7% to 10.9%. Pre-tax profit was marginally up at R9.44 million compared with R9.34 million previously.

Headline earnings per share slipped from 4.8c to 4.4c.

The balance sheet reflects a current ratio of 0.95, compared with 1.55 previously, with current assets of R56.95 million (2004: R27.98 million) and current liabilities of R60.14 million (R18.04 million).

The net current liability is mainly because of outstanding vendor liabilities, says Murray. He expects the group to return to a net current asset position by the year-end.

Following the merger and subsequent restructuring, Simeka BSG is expected to achieve revenue of R315.2 million, attributable earnings of R25.5 million and headline earnings of 8.6c a share for the 2006 financial year. CEO Mohammed Varachia says he is optimistic about the company's prospects.

The company's share was trading at 47c on the JSE late this morning, up 6c or 14.6% from yesterday's close.