Comparex emerges stronger after European sale

Comparex Holdings has emerged from the sale of its European operations with a strong balance sheet and positive cash flow from its continuing operations.

The group`s share price responded well to the news, rising 25c or 4.35% to 600c by late morning.

The group has split the financial statements for the six months to 30 November into continuing operations, stripping out the European results, and statutory figures that include the performance of the European operations up to 1 November.

On a continuing operations basis, revenue increased 7.3% to R1.4 billion. The group achieved earnings of R107.8 million before interest, tax and depreciation, compared with R99.6 million in the same period of 2001.

CEO Peter Watt says more than 70% of revenue was derived from services and annuity business, which contributed to an improvement in the trading margin from 5% to 5.9%.

The group`s after-tax profit slipped from R133.2 million to R104.6 million although headline earnings per share rose to 47c from 36.5c.

The balance sheet shows cash resources of about R1.8 billion, which excludes the proceeds from the sale of the European business as payment of 12.7 million euros was received on 6 December, after the period`s end.

With the disposed European operations included, the group incurred an operating loss of R83.8 million and a headline loss of 15.4c a share (2001: 263.9c profit).

Watt says he expects the financial results for the second half of the year to exceed those of the first half.

Prospects in Africa, particularly in west Africa where the group has been short-listed to handle several large projects, are good.

"We have also won a number of contracts in Malawi and Kenya in the government and banking sectors. We are working with our local partner in Ethiopia on the implementation of a large network for the Federal Inland Revenue Authority."

The African expansion is a major drive which Watt says could not be achieved with Comparex Africa`s earlier structure.

"We have restructured the business into a matrix structure in the past few years. In the PQ Africa days with the various silos you could have 20 people visit one customer in a day. We are now in the position where we have one channel to the customer.

"We couldn`t expand into Africa until we had that model in place, and we`ve been very successful in that area."

Comparex is in the process of evaluating proposals from potential black economic empowerment partners and hopes to make an announcement soon.

Watt says that among other things, Comparex wants to gain a large part of the market in terms of government and parastatal business. An equity stake of less than 25% is not meaningful, he says.

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