Impairment hurts BTG

Bytes Technology Group (BTG) has reported a 32% increase in headline earnings per share to 89.7c a share for the year to February, compared with 67.9c a share for the previous year.

Operating income before goodwill amortisation and capital items rose by 22% from R184.6 million to R226 million on the back of an 11% increase in revenue from R2.61 billion to R2.91 billion.

However, goodwill amortisation and impairment, totalling R253.8 million, led to an after tax loss of R80.3 million and an attributable loss of R87.2 million. The group incurred a basic loss per share of 56.1c, compared with a previous loss of 24.7c a share.

Despite this, a dividend of 32c a share has been declared, up from the previous dividend of 22c.

"We again experienced a disappointing year in our UK operations despite the fact that we moved from an operating loss of R5 million the previous year to a small operating profit," says CEO David Redshaw.

As reported at the interim stage, the group impaired the goodwill associated with the UK-based Plato operation by R100 million. Redshaw says the board is disappointed that the step was deemed necessary, but it is in line with the group`s conservative financial policies.

"The change in accounting standards in terms of which goodwill amortisation will no longer be permitted from the commencement of the 2006 financial year, will ensure attributable earnings and earnings per share improve noticeably in the future," he adds.

"Headline earnings, a much more meaningful measure of performance, will be unaffected by this accounting change."

Redshaw says the improvement in the operating margin, from 7.1% to 7.7%, was the result of improved efficiencies in most operations. "All our South African operations produced acceptable results in a market that continues to produce many challenges."

The ongoing merger with CS Holdings (CSH) "has thus far proved to be satisfactory as we go through various physical relocations and structural changes". The operation made a positive contribution to earnings at both operating and attributable levels during the four months after it was acquired.

Redshaw adds that the involvement with black economic empowerment shareholder Kagiso, which has a 27% stake in BTG`s local operations, has been "a resounding success with their providing multifaceted assistance to all of our operations".

He says that given the improvement in the UK operations, benefits from the acquisition of CSH, an increased shareholding in BTG`s healthcare IT cooperation and the advantages to be gained from re-involvement in asset financing, the board "has a high level of confidence that the group is well positioned to continue to produce acceptable results for the future".

The BTG share was trading unchanged at 800c on the JSE this morning.

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