Fleet management technology company DigiCore has concluded an empowerment deal at branch level by selling almost a third of a subsidiary company to black entities.
The company told shareholders on Monday that its wholly-owned subsidiary, DigiCore Fleet Management, has divested its branch distribution business to DigiCore Lectro Track for R124 million. Lectro Track is a 70%-held DigiCore subsidiary.
The balance of Lectro Track is held by Amabubesi Investments with 17.4%, and Western Breeze Trading, which holds 12.6%. Amabubesi Investments, chaired by Bulelani Ngcuka, has previously signed a reported multimillion-rand deal with one of East London`s oldest IT companies, ELCB.
The transaction was funded through the creation of an interest-bearing loan account, which will be repaid to DigiCore Fleet Management. The loan will be repaid at prime over the next 7.5 years.
Effective on 1 July 2006, the deal sees Lectro Track acquiring a "going concern" with a net asset value of R8 million. The company it acquired supplies fleet-management services and related activities to the South African transport industry.
"Through its service centres and branch network it installs and distributes a number of products, such as the various C-Track units, Co-Driver and other related products. It also provides technical support to customers," the company said.
Future benefit
DigiCore told shareholders that, "as a result of Lectro Track being 30% black owned, DigiCore is expected to benefit through Lectro Track assisting senior management in identifying business opportunities and growing its market share in both the corporate and public sectors".
The company also illustrated the effect the deal is expected to have on its bottom line. These pro forma financial effects were based on its financial results for the six months to end-December, it said.
Based on the assumption that the transaction came into effect a year earlier, earnings per share are expected to drop to 11.1c from 11.5c. Headline earnings per share will go to 11c from 11.3c.
There would, however, be no effect on the company`s net asset value, based on the assumption that the transaction was effected at the end of last December.
JSE-listed DigiCore provides and disseminates management information to its customers, allowing them to effectively manage their mobile assets. The holding company has subsidiaries on five continents and employs 300 people in nine branches in SA.
"Currently, there is DigiCore representation in Europe, Pakistan, UK, Brazil, Nigeria, the Middle East and Kenya with 20 DigiCore approved distributors," the company states.
DigiCore`s shares closed at R3.20 on Monday, slightly off Friday`s close of R3.22. Its 12-month high is R3.50.
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