MICROmega earnings fall

A series of once-off items has sideswiped investment holding company MICROmega's earnings to the tune of R43.1 million in pre-tax profit.

The company, which is invested in financial services, support services, IT and automotive components sectors, says this is the first time in six years that earnings have dropped.

It blames a “number of event risks that occurred during the year” for the decrease. Headline earnings per share plummeted 48%, to 20.75c, and revenue dropped 11%, to R747 million, in the year to December.

MICROmega says it has put risk reduction strategies into place to limit future effects on earnings.

Among the factors that hammered profit was the loss of R11.4 million from Kolbenco in pre-tax profit. Kolbenco has closed down its manufacturing activities, because of the downturn in the automotive sector. The closure of the business unit resulted in R115 million less revenue for the group.

The National Automotive Association of SA has, however, indicated the sector is looking up. Executive manager Norman Lamprecht previously said domestic sales were expected to pick up 7% during 2010. However, the industry is coming out of a three-and-a-half-year recession, during which sales dropped by half.

MICROmega also lost R9.9 million on currency conversions, compared with a R6.1 million profit last year. It was also forced to collapse a failed empowerment deal, which resulted in goodwill being impaired by R7.5 million.

Despite the company's bad year, MICROmega is confident about its financial performance for this year.

It points out that its IT sector reflected the highest growth in revenue and attributable profit. The company has several IT subsidiaries and offers software solutions, information management and hardware.

MICROmega's services sector performed in line with expectations, and is seeing increased spend from the mining and petrochemical industries.

Although the financial services sector was directly affected by the global economic downturn, it performed relatively well, with earnings in line with the 2008 results.