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A N N U A L R E P O R T
’06
� Design � Build � Operate � Maintain
SIMEKA BSG LIMITED ANNUAL REPORT 2006
Concept, layout & designby Maxx Corporate Communications
Editorial drafted by Envisage
The mergerIn 2005, the company then known as Xantium Technology Holdingsacquired Simeka Management Consulting and subsequently mergedwith MICT. This saw the three core companies and eight of their re-spective subsidiaries evolve to Simeka BSG. The businesses thatmake up Simeka BSG were specifically selected for their niche expert-ise and leadership in their respective fields.
Warning: The listing of the ordinary shares in the company is on Altx. Shareholders are advised of the risks ofinvesting in a company listed on Altx. Shareholders are advised that the JSE does not guarantee the viability orthe success of a company listed on Altx. In terms of the JSE Listings Requirements a designated advisor has to beretained by the company. The designated advisor is required to, inter alia, attend all board meetings held bythe company to ensure that all JSE Listings Requirements and applicable regulations are complied with, approvethe financial director of the company and guide the company in a competent, professional and impartial manner.If the company fails to retain the designated advisor it must make arrangements to appoint a new designatedadvisor within 10 business days, failing which the company faces suspension of trading of its securities. If a des-ignated advisor is not appointed within 30 days of its suspension the company faces the termination of its listingwithout an offer to minority shareholders.
VisionTo be the leading business solutions provider in our target markets.To be recognised as one of the great African companies of all time.
MissionTo:• challenge conventional thinking• provide the best class of service and solutions• continuously deliver stakeholder value • be recognised as a preferred employer • uphold the highest standards and principles of corporate gover-nance
• facilitate BEE transformation • support social upliftment
Simeka is the Venda translation of “continual growth”, asreflected in the symbol of the leaf. The prominent nodesof the leaf symbolise our core focus on information, commu-nication and technology.
ContentsFinancial highlights 1
Definitions 1
Group structure and executive committee 2
Corporate profile 3
Directorate 8
Chairman’s report 10
CEO’s report 12
Corporate governance report 15
Sustainability report 20
CFO’s report 25
Annual financial statements 27
Analysis of shareholders 69
Shareholders’ diary 70
JSE performance 70
Notice of annual general meeting 71
Form of proxy 77
Notes to the form of proxy 78
Corporate information 79
Simeka COVERS:Layout 1 9/26/06 2:14 PM Page 2
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Financial highlights� Revenue up 247%
� Earnings before interest and tax up 149%
� Adjusted headline earnings per share up 39%
� Significant increase in net cash flow from operations
� Approximately R22,0 million vendor liabilities repaid in cash
”Altx” Alternative Exchange ofthe JSE Limited
”BEE” Black economicempowerment
”the board” The board of directorsof Simeka BSG Limited
”the company” or
”Simeka BSG” Simeka BSG Limited
”the current year” The year ending 31 May 2006
”the group” Simeka BSG Limitedand its subsidiaries
”I-CSS” Independent-ComputerSupport Services
(Pty) Limited
”ICT” Information,Communication andTechnology
”JSE” JSE Limited
”King II Report” King Report onCorporate Governancefor South Africa 2002
”MICT” MICT Solutions Group
Limited
”Mithratech” Motoma Mithratech
(Pty) Limited
”the previous year” The year ended
31 May 2005
”SENS” Stock Exchange NewsService
”Simeka Consulting” Simeka Consulting (Pty) Limited
”the year” or
”the year under review”The year ended
31 May 2006
“Xantium” Xantium TechnologyHoldings Limited
Definitions
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Group structure
Applications andImplementation
ConsultingTechnology Solutionsand Support
Assembly andManufacturing
Mohammed Varachia CEO
Alex EvanGroup Legal Officer
Madoda PapiyanaGroup Human Resources
Suren Singh CFO
Noelene de KokerCompany Secretary
Kamal RamsinghCOO
100%
100%
100%
92%
100%
100%
51%
100%
100%
100%
100%
100%
Executive committee
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Corporate ProfileSimeka BSG is a black empowered business solutions group operating in the ICT sector. The group wasformed in 2005 following the merger of MICT with Xantium Technology Holdings, shortly after the latterhad acquired Simeka Consulting.
The group’s offerings, and its 12 operating entities, are currently structured within four vertical pillarsworking together to deliver a complete customer solution.
Pillar 1 – ConsultingUsing globalknowledge,expertise andbest practicemethodologies todesign anddevelop strategiesthat will assistcompanies toalign their ICTinfrastructure andstrategy to meettheir businessrequirements
Pillar 2 –Applications andImplementationIdentifying,developing andimplementingthe IT systemsand solutiionsthat answer to customers’ uniquebusinessrequirements
Pillar 4 –Assembly andManufacturingAssembly andmanufacturing ofICT equipmentand supply ofconsumables fora completecustomer solution
4 PILLARSOF KNOWLEDGE
Pillar 3 –TechnologySolutions andSupportDelivering theservice and supportthat ensures thatcustomers’ ITinfrastructurecontinues to functionthe way it should inline with theirbusiness needs
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Major clientsGSSC, Old Mutual,
SAPS, SITA,
Standard Bank,
Telkom, Vodacom
� Simeka Consulting provides management consulting including IT advisory and informationsecurity services to the public sector and the telecommunications, media, energy, utilities andfinancial services sectors.
� Simeka Resourcing Solutions provides long-term and short-term contractors, permanentplacements and retainer practitioners in specialised fields for the ICT market, with a specificfocus on the public sector.
� Foster-Melliar delivers business service management (“BSM”) consulting solutions focused onIT-business alignment. Delivery continues post implementation through skills transfer (ITIL etc.),mentoring and training.
STRATEGIC PARTNERS:Argent, BIP, CA, COGNA, EXIN, Hummingbird, ISEB, RightAnswers.
This pillar uses global knowledge, expertise and best practice methodologies
to design and develop strategies that assist companies in aligning their
ICT infrastructure and strategy to meet their business needs.
Consulting
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� Intergraph Systems specialises in spatial technology solutions whichtransform complex data into accessible information. Services includepresenting the complex information as a map or 3D drawing to theconstruction, mining, marine and public sectors.
� ITQ delivers enterprise business solutions which include bespoke softwaredevelopment and business intelligence. The company is evolving into a leaderof Service Orientated Architecture (“SOA”).
STRATEGIC PARTNERS:Intergraph Corporation, Microsoft, Oracle.
Major clientsDepartment of Labour,
Foster Wheeler, Imperial,
Kellogs, Laike Bank (Cyprus),
Medscheme, Murray &
Roberts, PBMR, Sappi,
Sasol, SA Tourism
This pillar identifies, develops and implements ICT software
applications, systems and solutions.
Applications and Implementation
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� Advocate Solutions provides ICT solutions implementation, maintenance and support forcustomers and original equipment manufacturers (“OEMs”). The offering includes on-sitemaintenance of IT hardware, warranty support for OEMs and hard ware and software audits.
� I-CSS offers a modular and component repair facility for computers and peripheral hardware.The company focuses on servicing products during the warranty period and is accredited bya number of OEMs.
� MICT Value Added Reseller specialises in IT infrastructure, including supply of leadinghardware and data integrity solutions for a wide spectrum of industries and varyingorganisational size.
� Cybernet Africa Logistics provides technical point-to-point delivery services, warehousing,maintenance and support, component swapping and transport. The company responds tocalls logged by OEM call centres.
STRATEGIC PARTNERS:DHL, EDS, Gestetner, HP, Microsoft, Service Parts Logistics.
Major clientsAcer, Department of
Justice, DHL, Dimension
Data, Epson,
Fujitsu Siemens,
HP,
Reserve Bank,
Samsung,
Santam, Sony
This pillar services and supports customers’ ICT infrastructure and provides
complete technology solutions, including hardware, to ensure optimal
service levels in line with their business needs.
Technology Solutions and Support
This pillar manufactures and produces customer solutions including
assembling ICT electronic equipment and hardware, manufacturing
scratch cards and smartcard fulfilment services as well as barcoding
and labelling solutions.
Assembly and Manufacturing
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� Matomo Technologies’ service offering includes the assembly of computersand ICT related equipment and procuring of computer components. Thecompany further performs testing and HDD imaging and has a tripartiteagreement with HP and Microsoft for the installation of select Microsoftsoftware and the exclusive assembly of HP products in sub-Saharan Africa.
� Mithratech provides secure recharge vouchers and smartcard applications formobile and fixed line telecommunications networks as well as secure paymentsolutions. The company further produces phone, club membership and bankcards requiring security elements such as magnetic strips.
� Spec Systems imports and supplies equipment and consumables for PVC cardprinting and barcode labelling. The company provides scanners, labelling,card printing solutions and manufactured consumables for this market.
STRATEGIC PARTNERS:Axiz, Datalogic, HP, Microsoft, Renform, Sinzanani, Sony Chemicals, Tarsus,Thompson Litho, Zebra.
Major clientsDHL, Discovery Health,
Emtel Mauritius,
Ghana Tel, HP, MCel,
Microsoft, Momentum,
MTN, MTX Malawi, SAPS,
Standard Bank, Tarsus,
Vodacom
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Mohammed Varachia (CEO) 37BCompt (Honours) CA(SA)Appointed 15 December 2005
Mohammed is the co-founder of MotomaICT Group and MICT and has establisheda number of companies primarily in the ICTsector. He has over 10 years’ experiencein various leadership positions.
James Henry Murray 39Appointed 3 August 2003
James has over 15 years’ experience inthe ICT sector with particular expertise inthe Microsoft environment. Hesuccessfully listed and was managingdirector of TCO Holdings Limited. Jamespreviously served as CEO of XantiumTechnology Holdings and later joint CEOof Simeka BSG.
Madoda Papiyana (Group HumanResources Officer) 32National Diploma Human ResourcesManagementAppointed 15 December 2005
Madoda is currently completing a BTech and BCom. He has completed aFinance for Non-Financial Managerscourse through the Graduate Institute ofManagement and Technology.
Kamal Ramsingh (COO) 39BSc MBL (cum laude) Appointed 15 December 2005
Kamal spent 11 years at Deloitte Consulting as the partner responsible for telecommuni cations industry practicespecialising in strategy and architecture,project manage ment and enterprisetransformation. He joined SimekaConsulting as managing director in 2003and became COO of Simeka BSGfollowing the group’s acquisi tion ofSimeka Consulting.
Surendranath (Suren) Singh (CFO) 47MBA MITM CIS ABPAppointed 15 December 2005
Suren has held leadership positions duringmore than 20 years’ experience at severallarge companies. Within the ICT andfinancial services sectors specifically, he hasheld the positions of Group FinancialManager, Group Financial Director, GroupExecutive Director Investments & BusinessDevelopment and is currently CFO ofSimeka BSG.
DirectorateExecutive directors
Marc Schrader 43BCom (Hons) (BIS)Appointed 3 March 2006
Marc is the managing director of ITQ,which he co-founded in 2000. Prior tothis he founded Quantum Technologies, acompany internationally recognised forsoftware development. Marc has over20 years’ experience in the IT industry,specifically the software developmentand business applications sectors.
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Dr Popo Simon Molefe (Chairman) 54 Appointed 16 July 2004
Dr Molefe followed a high-profile seniorcareer in politics before moving successfullyinto commerce. He formerly served two termsas the Premier of the North West Province andis a member of the ANC’s National ExecutiveCommittee. For the past ten years he hasfacilitated the development of businesses inthe North West Province. He is currentlyChairman of ARMSCOR and PETROSA,Chancellor of North-West University and CEOand founder of Lereko Investment Holdings.
Barry Henry Fraser 37BA (Hons) MM (Public & DevelopmentManagement)Appointed 15 December 2005
Barry has ten years’ experience inconsulting, having conducted strategicand organisational reviews and projectmanagement for government as well asacademic institutions. He has served as adeputy director of training anddevelopment at the Gauteng ProvincialService Commission and is currently theCEO of Simeka Investment Holdings.
Tozamile Botha (Deputy Chairman) 58MPhil (Political Science) DiplomaDevelopment Administration andFinancial ManagementAppointed 15 December 2005
Tozamile has over 14 years’ experience inthe government and private sectors. He isa co-founder and non-executive Chairmanof Motoma ICT Group and MICT.
Muthanyi Robinson Ramaite 38 B.Juris MM (Public & Development Management)Appointed 15 December 2005
Robinson has extensive experience in the public sector havingworked for the Department of Public Service and Administrationand sat on the board of the State Information Technology Agency(SITA). He has been involved in a number of investment andtransformation initiatives in the property, mining and ICT sectors.Robinson is currently on the board of a number of privatecompanies and is a non-executive director of MvelaphandaResources Limited.
Kobote (Bobbley) Johanna Molefe 44Appointed 3 August 2003
Bobbley has held senior positions in publicrelations and marketing for a number ofmajor SA corporates including armsmanufacturer Denel and Howden Africa.She has extensive experience in marketingstrategy and culture management. Shepreviously served as an executive directorof Simeka BSG responsible for groupmarketing.
Non-executive directors
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Chairman’s report
Dr Popo Simon Molefe Chairman
INTRODUCTION
The year has been both challenging and rewarding asthe group has moved from a fledgling Altx ICT listingas Xantium Technology Holdings to a significantlymore mature organisation in Simeka BSG. Theacquisition of Simeka Consulting by Xantium, followedby the merger with MICT and acquisition of Mithratech(“the merger”), have driven significant growth andpositioned Simeka BSG as a majority black-ownedcompany at the forefront of its industry.
The name was changed to Simeka BSG early in 2006to reflect the expanded group and our commitment tocontinued growth, as the Venda meaning of the word“Simeka” indicates.
FINANCIAL RESULTS
The maiden results for the new merged group,Simeka BSG, were pleasing with a 247% increase inrevenue to R326,1 million and EBITDA up 149%.Headline earnings per share rose 39% to 9,9 cents,which was 15% higher than forecast on 23 November2006 on conclusion of the merger.
Simeka BSG is well-positionedfor organic as well asacquisitive growth. In terms ofgeographic expansion theAfrican continent offers anumber of excitingopportunities.
– Dr Popo Simon Molefe, Chairman
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BEE
Our BEE platform remains a strong competitiveadvantage and key contributor to ongoing growth. In2005 EmpowerDex calculated our BEE ownership at53%. The merger has further boosted our BEE standingwith 80% of executive directors being HDIs, 50% ofexecutive management made up of HDIs and 57% ofour more than 900 employees being HDIs.
Although we already exceed ICT Charterrequirements, we are committed to further enhancingour creden tials in terms of the Charter particularlywith regard to corporate social responsibility andaffirmative procurement.
DIRECTORS AND MANAGEMENT
Following the completion of the merger, MohammedVarachia formally joined the board as CEO having beenappointed by shareholders at the general meeting on15 December 2005, with Kamal Ramsingh joining asCOO, Suren Singh as CFO and Madoda Papiyana asHuman Resources Director. In addition, Tozamile Botha,Barry Fraser and Robinson Ramaite were appointed tothe board as non-executive directors. Marc Schraderwas appointed to the board as an executive director on3 March 2006.
I look forward to working together as an integratedboard to maintain the positive growth of the newmerged group.
PROSPECTS
Simeka BSG is well-positioned for organic as well asacquisitive growth. In terms of geographic expansionthe African continent offers a number of excitingopportunities, while in South Africa new niche marketsoffer further strategic acquisition opportunities.
OUR PEOPLE
Our people remain Simeka BSG’s key strength and wetherefore remain committed to our philosophy ofprioritising passion over experience. Employees areencouraged to achieve excellence by challengingconventional thinking, and going forward will beincentivised to maintain their commitment anddedication through share ownership. This will furtheralign their interests with those of shareholders tooptimise returns.
APPRECIATION
My thanks to my fellow directors for their wise counselduring the year and the entire Simeka BSG team fortheir hard work and dedication. Despite the obstaclesthat accompany such a transition from a fledgling toan established listing, our organisation has not onlymet but exceeded market expectations. This is anotable achievement of which I am proud.
I also extend my thanks to our international businesspartners, advisors, suppliers and shareholders for theirloyal support.
Dr Popo Simon MolefeChairman25 July 2006
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CEO’s report
INTRODUCTION
The name and face of the group have changedconsiderably during the year, presenting excitingchallenges and new opportunities. We have success fullyemerged from a period of transition to post strong resultsahead of market expectations. The year saw the beddingdown of the acquisitions completed during the previousyear including Spec Systems, Waymark Consulting,Foster-Melliar and ITQ (“the acquisitions”) and thecompletion of a successful merger (see ”The merger”below) which resulted in a name change from XantiumTechnology Holdings to Simeka BSG.
With the bedding down of the previous year’sacquisitions and the merger, the group hasconsiderably increased its national footprint andenhanced and augmented its ICT business solutionsoffering. Our ISO 9001/2000 accreditation acrossthe group reflects our strong commitment to quality.
The strong and passionatemanagement team has focusedon solid business fundamentalswhich contributed to the group’sexceptional growth and returns.
– Mohammed Varachia, CEO
Mohammed
Mohammed Varachia CEO
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Two of the group’s subsidiaries, Xantium IT Services andXantium Professional Services, incurred pre-tax losses asa result of restructuring. Xantium Professional Serviceshas since been moved under the manage ment of Foster-Melliar and the losses curtailed. The overheadcost structure at Xantium IT Services has beensignificantly reduced and management is focused onrebuilding this value-added reseller division under thebranding of MICT Value Added Reseller with thefinancial restructuring being concluded in the newfinancial year.
Vendor liabilities totalling R130 million were repaidduring the year, of which R21,7 million was paid fromcash generated from operations and the balance bythe issue of shares.
At year-end the group had a net asset position. Asuccessful issue of shares for cash in December 2005,continued healthy cash flow generation, the mergerand the implementation of strict credit vetting policieshave boosted working capital management toenhance the group’s cash position.
SEGMENTAL PERFORMANCE
The group is differentiated by its ability to enhancecommodity offerings through deep technical expertise.With the restructuring during the year into fouroperating pillars Simeka BSG is now able to offerunique client solutions.
Consulting
Consulting is responsible for designing and developingstrategies to assist businesses in aligning their ICTsolutions with their business requirements. This pillarincorporates three businesses and accounted for 30%of turnover.
The strong and passionate management team hasfocused on solid business fundamentals and ensured thatall the businesses are well-positioned to contribute furtherto the group’s exceptional growth and returns. Growthprospects have been secured through the current contractsin hand which provide recurring revenues.
Simeka BSG’s five key strategic philosophies form thecornerstone of its growth policy:
� working towards an average cost to income ratio ofnot more than 85%;
� increasing free cash flow;� maintaining long-term sustainable growth;� striving towards service excellence; and � entrenching market leadership.
THE MERGER
The year was marked by the merger with MICT and theacquisition of Mithratech (“the merger”), which receivedCompetition Committee approval on 11 January 2006.Following the merger the group has been restructuredinto four operating pillars. All have been refocused toensure that each business is profitable with a long-termsustainable growth path. The decentralised basis allowsfor effective manage ment, integration and focus on thefive key strategic philosophies espoused by the group.
FINANCIAL RESULTS
Revenue increased to R326,1 million from R93,8 millionin the previous year, while EBITDA grew by 149% toR41,4 million from R16,6 million. (See page 37 “Cashflow statements”.)
Stringent debt and credit management saw net cashfrom operations increase to R31,2 million fromR3,6 million.(See page 37 “Cash flow statements”.)
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Applications and Implementation
Applications and Implementation incorporates twobusinesses and develops ICT applications to meet thecustomers’ unique requirements. It accounted for 18%of sales.
Technology Solutions and Support
Technology Solutions and Support provides servicesand products which ensure that customers’ ICTinfrastructure continues to function, includingmaintenance of software and hardware. This unitincor porates four businesses and accounts for 29% ofsales. It incurred a loss before interest and tax as aresult of incorporating the losses of Xantium IT ofapproximately R5,6 million for the year. That businesshas since been restructured and rationalised, theoverhead cost structures significantly reduced andmanagement focused on rebuilding this entity underthe branding of MICT Value Added Reseller.
Assembly and Manufacturing
This area provides services such as the assembly ofcomputers and the manufacturing of consumablesand secure payment vouchers. Assembly andManufacturing incorporates three businesses andaccounts for 23% of sales.
PROSPECTS
Simeka BSG will continue to focus on its five strategicphilosophies and build on the strong foundation laidduring 2005/06. The group will seek to boost itspipeline with strong recurring or annuity revenues.
With many of the group’s brands enjoying marketleadership, Simeka BSG is well-positioned within marketsegments that are undergoing rapid growth such asfinancial services, energy, telecommunications and thepublic sector. This should enable the group to realisesignificant organic growth, as reflected since year-end inthe renewal of a number of key material contracts.
CEO’s report continued
Growth is expected in information security, documentmanagement, storage, secure pay ment and electronicprocurement solutions where Simeka BSG will leverage theexisting offering to expand.
Simeka BSG’s strengthened financial stability andhealthy cash flows from operations will enable the groupto complement the organic growth with suitable strategicacquisitions that fulfil the objective of geographicexpansion into Africa and penetration of niche markets.
Finally, while the group’s current BEE status exceedsCharter requirements, Simeka BSG believes that thisarea is key to future growth and will continue to seekto enhance its BEE profile at all levels.
APPRECIATION
I extend my thanks to all directors, managers and staffwho have been integral to Simeka BSG’s success. If notfor our passionate and committed people the group’sgood performance would not have been possible.Thank you also to our business partners, suppliers,advisors and loyal customers for their support. We willcontinue striving for excellence with passion.
Mohammed VarachiaCEO25 July 2006
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The directors of Simeka BSG are committed toimplementing the Code of Corporate Practices andConduct set out in the King II Report. The boardcontinually monitors compliance to ensure ongoingimprovement of operational and corporate practices.
THE BOARD
At year-end Simeka BSG’s board was chaired by non-executive director Dr PS Molefe and comprised a furtherfour non-executive directors including T Botha, BH Fraserand MR Ramaite who were appointed as non-executivedirectors on 15 December 2005. KJ Molefe wasappointed as a non-executive director on 30 January2006, having previously served as an executivedirector. The non-executive directors contribute a widerange of skills, knowledge and experience and are notinvolved in the day-to-day operations of the group.
At the date of this report there are six executivedirectors, now including JH Murray who on30 January 2006 stepped down as joint CEO,M Varachia (CEO), M Papiyana (Human ResourcesDirector), K Ramsingh (COO), S Singh (CFO) andM Schrader who was appointed as an executivedirector on 3 March 2006.
The executive directors have entered into servicecontracts including voluntary restraints of trade, withthe CEO, CFO and COO contracted to remainemployed by the group until 1 December 2008 at theearliest.
The group recognises the King II Reportrecommendations that board membership include amajority of non-executive directors as well asindependent non-executive directors, and will becognisant of these recommendations when consideringnew board appointments.
The roles of Chairman and CEO are strictly separated.The clear division of responsibilities is echoed acrossthe board, ensuring that no director can exerciseunfettered powers of decision-making.
In terms of the Articles of Association one-third of thedirectors retire at each annual general meeting, withthe newest appointees retiring first followed by thelonger serving members on a rotational basis. Retiringdirectors are free to make themselves available for re-election at the annual general meeting, providedthat they remain eligible as required by the Articles ofAssociation and in compliance with the JSE ListingsRequirements. Accordingly K Ramsingh will retire at theforthcoming annual general meeting and beingeligible, will offer himself for re-election. BH Fraser,MR Ramaite and M Schrader will retire by rotation andwill not offer themselves for re-election.
All directors have unrestricted access to the advice andservices of the company secretary and to companyrecords, information, documents and property. Non-executive directors also have unfettered access tomanagement at any time. All directors are entitled, atthe company’s expense, to seek independentprofessional advice on any matters pertaining to thegroup where they deem this to be necessary.
Simeka BSG’s Board Charter has been adopted postyear-end. The Charter codifies the board’scomposition, procedures, duties and responsibilities aswell as guidelines for the appointment of directors,succession planning and directors’ remuneration. TheCharter further provides for a formal annual self-evaluation review.
Corporate governance report
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Board meetingsDirectors Ordinary Special
Dr PS Molefe (Chairman)* 4(6) 2(5)
T Botha* appointed 15 December 2005 2(2) 1(1)
BH Fraser* appointed 15 December 2005 2(2) 1(1)
PA Johnston resigned 30 January 2006 5(6) 4(5)
KJ Molefe* 5(6) 4(5)
JH Murray 5(6) 4(5)
NP Nkwanca* resigned 8 November 2005 2(4) 3(4)
M Papiyana appointed 15 December 2005 2(2) 1(1)
MR Ramaite* appointed 15 December 2005 2(2) 0(1)
K Ramsingh (COO) appointed 15 December 2005 2(2) 1(1)
M Schrader appointed 3 March 2006 1(2) 0(1)
TT Schrimpton resigned 4 August 2005 4(4) 4(4)
NB Senne* resigned 15 December 2005 1(4) 3(4)
S Singh (CFO) appointed 15 December 2005 2(2) 1(1)
M Varachia (CEO) appointed 15 December 2005 2(2) 1(1)
*Non-executive
BOARD PROCESSES
Conflicts of interest and share dealings
Directors are required to disclose their shareholdings,additional directorships and any potential conflicts ofinterest to the chairman and the company secretary.If there is a conflict of interests in respect of a transactioninvolving a director, such director must recuse himselffrom deliberations in respect of that transaction. Shouldthe conflict of interests be ongoing, the director must
resign from the company. In addition, directors andsenior employees likely to have access to the company’sfinancial results and other price-sensitive information areprohibited from dealing in Simeka BSG’s shares forspecified time periods preceding the relevantannouncements. Any dealings in Simeka BSG’s sharesduring appropriate times are reported to the chairmanand company secretary, who together with theDesignated Advisor ensure that these dealings arepublished on SENS.
Corporate governance report continued
BOARD ATTENDANCE
The board meets four times a year with additional meetings convened where necessary. Attendance at boardmeetings during the year is set out below:
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Succession planning
Succession planning at board level is facilitated bySimeka BSG’s skills development at managerial level.The group’s weekly Executive Committee (“EXCO”)Operational Meetings are attended by all keymanagers to ensure a thorough understanding ofbusiness units and levels of operation. The keyexecutive management of all companies acquired bythe group have signed three-year service agreementsand are tasked with training and mentoring juniormanagement in their respective areas of operation.
New appointments
The board has implemented steps to ensure that newappointees receive a full, formal and tailored induction.This includes site visits, introductions to keymanagement and copies of interim and annualfinancial statements. In addition, all new directorscompulsorily attend the four-day Altx Directors InductionProgramme run through the Wits Business School andendorsed by the Institute of Directors. The programme iscomprehensive, covering pertinent aspects of companylaw, stock exchange regulations, the roles,responsibilities and liabilities of directors, basictechniques of financial analysis and the importance ofinvestor and media relations.
Ongoing support and resources are provided todirectors in order to expand and refresh their skills,knowledge and familiarity with the company. Thisincludes professional development training in the formof regular updates on changes in laws and regula tions,site visits and professional and skills training courses.
Legal and regulatory compliance
The company secretary together with key management isresponsible for monitoring the group’s compliance with theJSE Listings Requirements and the requirements of theCompanies Act and other legislation applicable toSimeka BSG. Subsidiaries report to the company
secretary in this regard and the company secretarytogether with the Group Legal Officer report to the board.
BOARD COMMITTEES
All committee chairmen attend the group’s annualgeneral meetings in accordance with the King II Report.Committee Charters have been adopted by the boardduring the current year and will be updated annually inorder to keep pace with international developmentsand best-practice.
EXCO
EXCO is chaired by the CEO and further consists of thegroup’s titled executive directors, the companysecretary and the Group Legal Officer. The committeeis responsible for the day-to-day running of thecompany, review of operations and main tenance anddevelopment of group strategy. The committee is furtherresponsible for the ongoing assessment andimplementation of Simeka BSG’s employment equitypolicy. The company secretary updates executivemanagement on any changes to corporate governanceissues at EXCO meetings to enable them to fully andproperly discharge their responsibilities in this regard.
Audit committeeThe Audit Committee is chaired by non-executive directorBH Fraser and comprises a further two non-executivedirectors. The CEO, CFO, external auditors andDesignator Advisor are invited to attend all AuditCommittee meetings.
As set out in the Audit Committee Charter, thecommittee is tasked with:
� reviewing the effectiveness of the group’s informa tion systems, systems of internal control, riskmanage ment policies and internal audit function;
� assessing the effectiveness of the external auditorsand making recommendations for their retentionand appointment;
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Corporate governance report continued
� approving any non-audit services to be performedby the external auditors;
� examining the group’s accounting policies;� monitoring compliance with legislation and
regulatory requirements;� advising the board on the accounting implications of
major transactions; and� reviewing the group’s adherence to the principles of
corporate governance in the King II Report.
The committee conducts an annual self-evaluation exercisewhereby it reviews and assesses its own performance interms of the Charter. Recommendations are tabled at thenext meeting and actioned as soon as possible.
The external auditors report to the committee ateach meeting and the committee approves auditing fees.The internal and external auditors have unrestricted accessto the Audit Committee and its chairman.
Attendance at the three Audit Committee meetings forthe reconstituted committee held during the year is setout below:
Director Audit committee meetings
BH Fraser* 3(3)
T Botha 3(3)
KJ Molefe 0(3)
*Audit Committee Chairman
Remuneration committee
During the year Simeka BSG established a formalRemunera tion Committee which is chaired by non-executive director T Botha and consists of a further twonon-executive directors.
The committee meets at least once a year or on an ad hocadditional basis as required.
Attendance at the meeting held during the year is set outin the following table:
Director Remuneration committee meetings
T Botha* 1(1)
BH Fraser 1(1)
KJ Molefe 1(1)
*Remuneration Committee Chairman
Simeka BSG aims to attract and retain hard working,entrepreneurial candidates passionate about the ICTindustry. To this end basic salaries are as far aspossible market-related with incentives based onperformance assessments against pre-determinedkey deliverables. Simeka BSG envisages that via theproposed share incentive scheme, employees willbe share holders in the company to the extentcommensurate with level of employment, ensuring thatthey participate in wealth creation and aligning theirinterests with those of all stakeholders.
ACCOUNTING AND AUDITINGExternal auditThe external auditors are responsible for reportingon whether the financial statements are fairly presented incompliance with International Financial Report -ing Standards. Their audit includes an assessmentof internal controls. The preparation of the annual financialstatements remains the responsibility of the directors.
Internal auditIn light of the size of the group, the board considers adedicated internal audit function to be impractical atpresent. Internal audit responsibilities are currentlymanaged by the Audit Committee and executivemanagement. A formal function will be consideredwhen the size and nature of the group demands.
INTERNAL CONTROL AND RISK MANAGEMENTInternal controlThe board is responsible for the group’s systems ofinternal control and risk management, assisted by the Audit
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Challenge Counter measureEstablishing a � Acquisition of I-CSS, Advocate Solutions and Cybernet Africa Logisticsnational presence � Further strategic acquisitions to entrench a national foothold
� Organic growthMaintaining and � Merger with MICTimproving levels � Ongoing assessment of levels of BEE and formulation of appropriate strategiesof BEE � Strategic acquisitions
� Employment equity policyAttracting and � Direct participation in wealth creation through proposed share incentive schemeretaining superior skills � Entrepreneurial environment rewarding innovation and challenging conventional
thought Credit risk � Pre-service credit applications and checks
� Debtors’ recovery systemsKey management � Share incentive scheme
� Contingency planning
Committee. These systems of internal control are designed toprovide reasonable but not absolute assurance as to theintegrity and reliability of the financial statements and tosafeguard and maintain account ability of the group’s assets.These systems also provide reasonable but not absoluteassurance regarding compliance with statutory laws andregulations and the maintenance of proper accounting records.
The group’s systems of internal control are further designed todetect and minimise significant fraud, potential liability, lossand material misstatement. There are inherent limitations to theeffectiveness of any system of internal control, including thepossibility of human error and the circumvention or overridingof controls. The system is therefore designed to manage ratherthan eliminate risk of failure and opportunity risk.
Nothing has come to the attention of the board to indicatethat there has been a material breakdown in the internalsystems of control during the year.
Risk management
The board assisted by the Audit Committee is responsiblefor ensuring that appropriate risk management processesare in place. Key industry risks facing the group include:
STAKEHOLDER COMMUNICATIONThe company is committed to timely, consistent and trans parent communication with all stakeholders. Staff attendregular informal information-sharing sessions led by the CEOand CFO. A quarterly newsletter will be distributed to staffand posted on the company website for stakeholders. TheCEO further meets with major shareholders, institutionalinvestors and analysts on an on going basis. Whereappropriate the CEO and CFO liaise with the financial pressin order to ensure accurate reporting.
Company announcements are published on SENS and infuture will be posted on the company’s website. Financialresults announcements are also posted to shareholders whoare encouraged to attend the annual general meeting toenhance interaction with the board.
CODE OF ETHICSAll employees have access to Simeka BSG’s code ofethics via the group’s intranet and QualityManagement Systems.
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BEE
In 2005 EmpowerDex calculated Simeka BSG’s BEEownership at 53%. 80% of executive directors are HDIs. Executive management is made up of 50%HDIs with 57% of our more than 900 employeesbeing HDIs.
Although the group exceeds the ICT Charterrequirements, focus remains on enhancing credentialsespecially in respect of corporate social responsibility,affirmative procurement and enterprise development.
Affirmative procurement/Enterprise development
The group contributes to enterprise developmentthrough outsourcing to black empowered companiesand prioritising SMMEs where viable. I-CSS forinstance has taken this a step further through ”PartnerAssist”, which empowers SMMEs in the bench repairenvironment through skills, expertise and technicalknowledge transfer. I-CSS will make its facilities andtechnology available to these SMMEs and engage inskills sharing.
The majority of the group’s subsidiaries have anaffirmative procurement spend of over 50%.
Employment equity
Simeka BSG’s employment equity policy sets out a fairand equitable employment strategy that emphasisesinternal skills development and advancement. The groupis committed to training and development for HDIs throughprogrammes of mentoring, coaching and performancemanagement. The policy also sets out the need toestablish numerical targets to measure employment equityand to continually assess training needs. The responsibilityfor implementing employment equity lies with the CEOassisted by EXCO, with all employees encouraged tosupport employment equity in the workplace.
Simeka BSG’s positive steps in this area are evidencedbelow:
Sustainability report
MALE FEMALEOccupational levels African Coloured Indian White Disabled African Coloured Indian White Disabled Total
Top management 1 – 3 1 – – – – – – 5
Senior management 4 6 11 43 1 2 – 4 15 – 86
Professionally qualified 16 10 10 109 – 10 3 1 33 – 192
Skilled and junior management 48 26 19 49 – 36 20 21 69 – 288
Semi-skilled 61 5 4 2 – 31 12 2 4 – 121
Unskilled 2 – – – – 3 – – – – 5
Total permanent 132 47 47 204 1 82 35 28 121 – 697
Part time/Temporary 57 13 15 64 – 18 12 3 34 – 216
TOTAL 189 60 62 268 1 100 47 31 155 – 913
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Skills development and training
Each subsidiary submits a Workplace Skills Plan toSETA. Annual Training Reports are also submitted toSETA to track achievement against targets.
Ongoing skills development and training is key to thegroup’s policy of advancement, particularly of HDIswho display exceptional ability and aptitude. Duringthe year Simeka BSG subsidiaries spent between 3% and 5% of their total respective payrolls on skillsdevelopment and training. During the year 100% ofcourse attendees were HDIs. Courses included:
� A learnership programme through MatomoTechnologies which provided 20 HDI learners with
theory and full on-the-job training. The programmewas accredited and approved by ISETT SETA andconducted through College Campus. The HDIlearners all successfully completed the programmeacquiring a National Qualification Framework Level4. Twelve of the learners were subsequentlyemployed by Matomo Technologies and theremaining eight were deployed to AdvocateSolutions for possible employment;
� I-CSS partnering with the North West ProvinceSocial Development Department and ZinjivaTechnologies in a programme which saw sevenHDIs taught to strip and repair units such asnotebooks and desktop computers; and
� Two candidates receiving call centre training at I-CSS.
Our candidates
Matomo Technologies learnership programme candidates 2006
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Simeka BSG continued the unique Skills Education andLearning (SEAL) programme which seeks to encourageemployees, particularly HDIs, to attain the highestcapability in their respective disciplines byincentivising and rewarding self-growth. SEAL focuseson three primary operational areas – Client ServicesManagement, Microsoft certification and SolutionsArchitect certification. One candidate under thisprogramme has taken a position as a bookkeeper forMatomo Technologies.
Simeka BSG’s training and development policy furtherprovides for a mentorship programme in terms of
which the company aims to recruit four candidates ayear from rural communities through word-of-mouthrecommendation. The candidates are teamed with twogroup senior executives whom they shadow to learncommunication, presentation and sales skills. Theyfurther attend technology training modules with SimekaBSG’s global partners including HP, JD Edwards,Microsoft and Tarsus.
On completion of the 12-month programme successfulcandidates are appointed as full-time employeesequipped with the knowledge and skills to advanceultimately to a management position.
I-CSS and North West Province Social Development
Department learnership programme candidates 2006
Our candidates
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Sustainability report continued
The SEAL and mentorship programmes assist the board inensuring a succession strategy at junior management level.
Employee participation
The group’s culture promotes ”open-door”communication at all levels, facilitated by a ”flat-structure” principle. The intranet offers opportunity forinformal information-sharing sessions and providesemployees with access to all group policies. In futureemployees will also receive a regular newsletterdetailing the latest developments within the group and inthe applicable legislative and regulatory environments.
Going forward employees will participate in ownership ofthe group and its wealth creation through Simeka BSG’sproposed share incentive scheme, which will alignemployees’ interests with those of all stakeholders.
Employees currently participate in the group performancebonus scheme based on individual and companyperformance. The reward and recognition policy sets outsome of the rewards for employees.
Health and safety
The group is committed to a safe and healthy workingenvironment in compliance with the South AfricanOccupational Health and Safety Act. Simeka BSG hasa formal Safety, Health, Environment and Quality(“SHEQ”) policy in place in terms of which employeesare required to report any health and safety risks to theirsupervisor who in turn reports to the Group SHEQRepresentative.
The Group SHEQ Representative is responsible forreporting to executive management at EXCO meetingsany safety and health risks identified by supervisors. TheGroup SHEQ Representative regularly assesses healthand safety risks in line with the group’s policy and basedon the reports received from the supervisors, provides
recommendations to the managing director of therelevant subsidiary.
During the year the Group SHEQ Representativeattended further training to help in the identification ofpossible hazards. Employees attended the followinghealth and safety training courses:� SHE Inspection Training� Legal Compliance Assessment� Hazard Identification and Risk Assessment
During the current year the Group SHEQ Representativewill formalise a process for legal compliance assessmentswhich will include identifying significant risks, aligningwith legal requirements, developing operatingprocedures and keeping relevant SHEQ records.
HIV/AIDS
Simeka BSG is concerned about the HIV/AIDS pandemicand provides for fair, ethical and equitable treatment ofemployees living with HIV/AIDS in the group’s formalHIV/AIDS policy. The group acknowledges thatHIV/AIDS shows no racial or class preference.
As set out in the group’s HIV/AIDS policy Simeka BSG isrequired to maintain the confidentiality of an employee’shealth condition. Relevant managers are briefed onmanaging an HIV-positive employee who has voluntarilydisclosed his/her status. They are tasked with providingfactual information and acknowledge that continuedemployment for an infected employee may betherapeutically important.
Employees are encouraged to seek medical treatmentand assistance from support groups and counsellors.Simeka BSG further enforces a precaution policy for allemployees at risk of infection such as those performingFirst Aid.
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Environment
Although the nature of the group as an ICT businesssolutions provider does not lend itself to specificenvironmental reporting, the group is committedto its SHEQ policy and the requirements of its ISO 9001/2000 Certification. The policy codifies thegroup’s commitment to assessing the potential impactof its operations, however small, on the environmentand taking preventative measures to protect theenvironment. It further requires all employees to reportany environmental hazards.
Simeka BSG encourages cost-effective waste recyclingincluding separation of waste at source and the safedisposal of unavoidable waste. The group furtherencourages a ”paperless office” to conserve naturalresources and supports the recycling and re-use ofhardware components.
Corporate social investment (CSI)
Simeka BSG is an active member and supporter of the”Proudly South African” campaign.
The group acknowledges its responsibility towards thecommunities in which it operates as well as broaderdevelopment projects. To this end Simeka BSG hascommitted to funding one large project annually,which will be supported by all subsidiaries. The groupis currently building a school in eNgcobo, EasternCape. To date approximately R0,5 million has beeninvested in this project.
During the current year the group will establish a socialresponsibility committee to manage the annualdonation.
Sustainability report continued
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CFO’s report
Following the merger,Simeka BSG successfullyimplemented appropriatestrategic, operational andexecutive integration.
– Suren Singh, CFO
Mohammed
Suren SinghCFO
The group has adopted International Financial ReportingStandards (“IFRS”) for the financial year ended 31 May2006. Comparative results for the year ended 31 May2005 have accordingly been restated as per IFRS 1requirements.
INCOME STATEMENT
During the year Simeka BSG focused on growingrevenue that is profitable and capital efficient. Thisresulted in EBITDA increasing by 149% to R41,4 million(2006) from R16,6 million (2005).
CASH FLOW STATEMENT
In order to counteract the challenge presented bydebtors’ collection periods, a hands-on approach toworking capital management was implemented. Thisresulted in debtors’ days improving from 83 days (2005)to 64 days (2006), while creditors’ payment daysimproved from 103 days (2005) to 86 days (2006).
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occurred in the latter six months of the year together withthe change in revenue mix, impacted on margins.Xantium IT Services and Xantium Professional Servicesboth incurred pre-tax losses for the year. XantiumProfessional Services has since been moved under themanagement of Foster-Melliar and the losses curtailed.Xantium IT Services has been restructured andrationalised and the overhead cost structure significantlyreduced with the view to rebuild this value-added resellerdivision under the brand of MICT Value Added Reseller.
Suren SinghCFO25 July 2006
During the past six months the group sought to improveoperating efficiencies by driving break-even levels of allthe subsidiaries with a strong focus on the cost to incomeratio and a target of no more than 85% (see CEO’sreport).
ACCOUNTING SYSTEMS AND POLICIES
Following the merger (see CEO’s Report), Simeka BSGsuccessfully implemented appropriate strategic,operational and executive integration. This includedintegrating accounting systems and policies throughoutthe group - accounting systems were standardised toPastel Evolution and centralised financial accounting andtreasury functions are being introduced to maximisesynergies within the group.
MARGINS
The restructuring of the group following the merger, which
CFO’s report continued
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Declaration by company secretary 27
Directors’ statement of responsibility 28
Report of the independent auditors 29
Directors’ report 30
Income statements 34
Balance sheets 35
Statements of changes in equity 36
Cash flow statements 37
Accounting policies 38
Notes to the annual financial statements 46
Annual financial statements for the year ended 31 May 2006
Declaration by company secretaryI declare that to the best of my knowledge the company has lodged with the Registrar of Companies all suchreturns as are required of a public company in terms of the South African Companies Act, 1973 and that allsuch returns are true, correct and up to date.
NB de Koker
Johannesburg
25 July 2006
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The directors are required by the South African CompaniesAct, 1973, to maintain adequate accounting records andare responsible for the content and integrity of the annualfinancial statements and related financial informationincluded in this report. It is their responsibility to ensure thatthe annual financial statements fairly present the state ofaffairs of the company as at the end of the financial yearand the results of its operations and cash flows for theperiod then ended, in conformity with InternationalAccounting Standards.
The annual financial statements, which are presented onpages 27 to 68, are prepared in accordance withInternational Accounting Standards and are based uponappropriate accounting policies consistently applied andsupported by reasonable and prudent judgments andestimates.
The directors acknowledge that they are ultimatelyresponsible for the systems of internal control established bythe company and place considerable importance onmaintaining a strong control environment.
To enable the directors to meet this responsibility, the boardof directors sets standards for internal control aimed atreducing the risk of error or loss in a cost-effective manner.The standards include the proper delegation ofresponsibilities within a clearly defined framework, effectiveaccounting procedures and adequate segregation ofduties to ensure an acceptable level of risk. These controlsare monitored throughout the company and all employeesare required to maintain the highest ethical standards inensuring the company’s business is conducted in a mannerthat in all reasonable circumstances is above reproach.
The focus of risk management in the company is onidentifying, assessing, managing and monitoring all knownforms of risk across the company. While operating riskcannot be fully eliminated, the company endeavours tominimise it by ensuring that appropriate infrastructure,
controls, systems and ethical behaviour are applied andmanaged within predetermined procedures andconstraints.
The directors are of the opinion, based on the informationand explanations given by management, that the systemsof internal control provide reasonable assurance that thefinancial records may be relied on for the preparation ofthe annual financial statements. However, any system ofinternal financial control can provide only reasonable, andnot absolute, assurance against material misstatement orloss.
The directors have reviewed the company’s cash flowforecast for the year to 31 May 2007 and, in light of thisreview and the current financial position, are satisfied thatthe company has or has access to adequate resources tocontinue as a going concern for the foreseeable future.
Although the board of directors is primarily responsible forthe financial affairs of the company, they are supported bythe company’s external auditors PKF (Pta) Inc. The auditorsare responsible for independently reviewing and reportingon the company’s annual financial statements. The annualfinancial statements have been examined by the auditorsand their report is presented on page 29.
The annual financial statements were approved by theboard of directors and signed on its behalf by:
M Varachia S Singh
CEO CFO
Johannesburg
25 July 2006
Directors’ statement of responsibility
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REPORT OF THE INDEPENDENT AUDITORS TO THEMEMBERS OF SIMEKA BSG LIMITED.We have audited the annual financial statements and group annual financial statements of Simeka BSGLimited for the year ended 31 May 2006 set out onpages 27 to 68. These annual financial statements arethe responsibility of the directors of the company. Ourresponsibility is to express an opinion on these annualfinancial statements based on our audit.
SCOPEWe conducted our audit in accordance withstatements of South African Auditing Standards. Thosestandards require that we plan and perform the auditto provide reasonable assurance that the annualfinancial statements are free of material misstatement.
An audit includes:• examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements;• assessing the accounting principles used and
significant estimates made by management; and• evaluating the overall financial statement
presentation.
We believe that our audit provides a reasonable basisfor our opinion.
AUDIT OPINIONIn our opinion the annual financial statements fairlypresent, in all material respects, the financial positionof the company and the group at 31 May 2006 andthe results of their operations and cash flows for theyear then ended in accordance with InternationalFinancial Reporting Standards, and in the mannerrequired by the Companies Act in South Africa.
PKF (Pta) Inc.Registered Accountants and Auditors Chartered Accountants (SA)
Johannesburg25 July 2006
Report of the independent auditors
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NATURE OF BUSINESS
Simeka BSG is a black-empowered business solutionsgroup servicing multiple industry sectors. The groupoperates pri marily through the four pillars ofConsulting, Applications and Implementation,Technology Solutions and Support and Assembly andManufacturing.
FINANCIAL RESULTS AND DIVIDEND
The annual financial results of the company and group for the year ended 31 May 2006 are set out in the annual financial statements andaccompanying notes.
In line with group policy, no dividend has beendeclared for the year. The dividend policy will bereviewed at the upcoming annual general meeting.
ACCOUNTING POLICIES
The following Standards were applied prior to thecommencement dates in the year under review:The group has adopted International FinancialReporting Standards (“IFRS”) for the financial yearended 31 May 2006 (“the year”). IFRS 1 – First timeAdoption of International Financial ReportingStandards has been applied in preparing theabridged audited consolidated financial results (“theresults”) in accordance with IAS 34 – FinancialReporting.
All assets and liabilities were restated to fair values inaccordance with the compliance criteria required by IFRS 1.
As at the financial year-end there were no changes tothe impairment valuation. The group no longerprovides for amortisation of goodwill and goodwill isnow subject to an annual impairment test.
The last impairment test was performed as at30 November 2005 and therefore the nextimpairment test will be performed as at 30 November2006. Comparative results for the year ended31 May 2005 have accordingly been restated as perIFRS 1 requirements.
The impact on the results of the company in adoptingthe above policies is reflected in note 29 to the annualfinancial statements.
NON-CURRENT ASSETS
During the year the group acquired property, plant andequipment to the value of R12 647 000 (2005:R1 817 000), through business combinations, and tothe value of R1 977 000 (2005: R2 013 000),through the ordinary course of businesses. Simeka BSGalso disposed of property, plant and equipment with abook value of R18 000 (2005: R502 000) throughthe ordinary course of business.
During the year the group acquired an intangible assetto the value of R4 947 000, through businesscombinations.
SHARE CAPITAL AND VENDOR OBLIGATIONS
On 1 June 2005 the authorised share capital of thecompany comprised 500 000 000 ordinary shares,of which 135 000 000 were in issue.
A total of R130,0 million in vendor liabilities has beendischarged during the year, of which R21,7 millionwas paid from cash generated from operations andthe balance of R108,3 million by the issue of shares.
Directors’ report
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At 31 May 2006 the aggregate number of ordinaryshares in issue was accordingly 345 946 405. Thecompany’s unissued shares have been placed underthe control of the directors until the upcoming annual general meeting.
DIRECTORATE
The directors of the company are set out on pages 8and 9. Following Competition Commission approvalfor the merger with MICT on 11 January 2006, theappointments of M Varachia as CEO, S Singh asCFO, K Ramsingh as COO and M Papiyana asGroup Human Resources Director were formallyimplemented. In addition T Botha, BH Fraser andMR Ramaite were appointed as non-executivedirectors. All appointments were confirmed at thegeneral meeting on 15 December 2005. KJ Molefewas appointed as a non-executive director on30 January 2006, having previously served as anexecutive director. On 3 March 2006 M Schraderwas appointed as an executive director.
In terms of the articles of association BH Fraser,K Ramsingh, MR Ramaite and M Schrader will resign byrotation at the upcoming annual general meeting.K Ramsingh, being eligible, will offer himself forre-election. BH Fraser, MR Ramaite and M Schrader willnot offer themselves for re-election.
DIRECTORS’ REMUNERATION AND INTERESTS
IN CONTRACTS
Directors’ emoluments are set out in the table on page 32.
SUBSIDIARIES, ASSOCIATES AND OTHER
INVESTMENTS
Information relating to the company’s financial interestin its subsidiaries, associates and other investments isset out in note 7 to the annual financial statements.
The following ordinary shares were issued during the year:
Allotment Date Allotment detail No of shares Issue price
22 August 2005 ITQ vendor repayment 4 716 981 R0,5322 August 2005 XPS vendor repayment 4 337 543 R0,102 December 2006 Share placement 20 000 000 R0,5012 April 2006 SRS vendor repayment 800 000 R0,6012 April 2006 SC vendor payment 42 110 928 R0,6012 April 2006 MICT vendor payment 130 000 000 R0,6012 April 2006 Basfour fee payment 2 000 000 R0,6028 April 2006 Foster-Melliar vendor repayment 1 666 667 R0,603 May 2006 ITQ vendor repayment 5 314 286 R0,70
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DIRECTORS’ SHAREHOLDING AT 31 MAY 2006Direct Indirect
Non- Non-Director Beneficial beneficial Beneficial beneficial Total %
M Varachia – – – 59 981 285 59 981 285 17,34T Botha 53 949 500 – 3 431 789 – 57 381 289 16,59BH Fraser – – 15 159 934 – 15 159 934 4,38MR Ramaite – – 15 159 934 – 15 159 934 4,38JH Murray 4 252 500 – – – 4 252 500 1,23M Schrader 4 263 289 – – – 4 263 289 1,23K Ramsingh – – 4 211 093 – 4 211 093 1,22KJ Molefe 970 000 – 8 730 000 – 9 700 000 2,8S Singh 300 000 – – – 300 000 0,09M Papiyana 200 000 – – – 200 000 0,06
63 935 289 – 46 692 746 59 981 285 170 609 320 49,32
There has been no change in directors’ shareholdings between year-end and the date of this report save forM Varachia who acquired 4,5 million indirect non-beneficial shares from T Botha on 2 June 2006.
DIRECTORS’ EMOLUMENTSDirector’s name Basic Total Total
salary Benefits 2006 2005R’000 R’000 R’000 R’000
Non-executiveT Botha* 120 – 120 –BH Fraser – – – –KJ Molefe 212 25 237 –PS Molefe 240 – 240 240NP Nkwanca – – – –MR Ramaite* – – – –NB Senne – – – –
572 25 597 240
ExecutivePA Johnston 334 67 401 270KJ Molefe – – – 245JH Murray 306 29 335 270M Papiyana* 217 10 227 –KS Ramsingh** 833 73 906 –M Schrader 698 202 900 –TT Schrimpton – – – 324S Singh* 374 7 381 –MS Varachia* 631 103 734 –
3 393 491 3 884 1 109
3 965 516 4 481 1 349* Six months** Ten months
Directors’ report continued
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SHARE SCHEME
The group’s employee share incentive scheme isallotted a maximum of 15% of Simeka BSG’s issuedshares in any one year. Options are exercisable inthree successive tranches of 33% on each anniversarydate of issue for a period of three years from thegranting of the options. The strike price of the optionsis calculated as an average of the trading price of theshares over the five days preceding the date ofexercise of the option. To date no shares have beenissued in terms of the share scheme.
COMPANY SECRETARY
The secretary of the company is Noelene Beryl deKoker whose business and postal addresses, whichare also the registered addresses of the company, areset out on page 27 of this annual report.
25 July 2006AUDITORS
PKF (Pta) Inc. were appointed to replace PKF (Jhb) Inc.as the company’s auditors with effect from11 April 2006. PKF (Pta) Inc. will continue in office inaccordance with section 270(2) of the South AfricanCompanies Act, 1973, subject to shareholderapproval at the upcoming annual general meeting.
SPECIAL RESOLUTIONS
A special resolution to grant general authority toSimeka BSG and its subsidiaries to repurchase shareswas passed by the company at the annual generalmeeting on 15 December 2005.
POST BALANCE SHEET EVENTS
The directors are not aware of any matter orcircumstance arising since the end of the financial yearthat would have a material effect on the matters set outin this annual report.
ASSOCIATES’ SHAREHOLDING Shares %
Blue Dot Investments (Pty) Limited 4 731 042 1,37Xantium Technology Holdings Limited (nominees) 1 490 720 0,43Morestat Nominees 100 000 0,3
6 321 762 1,83
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Income statements for the year ended 31 May 2006
Revenue 17 326 145 93 844 1 398 –
Cost of sales (188 346) (52 243) – –
Gross profit 137 799 41 601 1 398 –
Other income 3 483 185 – –
Other operating expenses (104 728) (25 884) (710) (364)
Operating profit before finance costs 18 36 554 15 902 688 (364)
Investment income 19 2 011 229 10 107 1 525
Finance costs 20 (3 761) (1 485) (1 830) (1 346)
Share of profit from associate 21 759 –
Profit before tax 35 563 14 646 8 965 (185)
Taxation 22 (8 995) (4 569) (214) (363)
Profit for the year 26 568 10 077 8 751 (548)
Attributable to:
Equity holders of the parent 25 010 9 485 8 751 (548)
Minority interest 1 558 592 – –
Net profit/(loss) for the year 26 568 10 077 8 751 (548)
Earnings per share 23
Earnings/(loss) per share (cents) 23.1 11.34 7.33 – –
Headline earnings/(loss) per share (cents) 23.2 11.33 7.26 – –
Diluted earnings/(loss) per share (cents) 23.4 11.34 7.33 – –
Adjusted headline earnings/loss per share 23.5 9.9 7.1 – –
Earnings/(loss) on weighted shares in issueand to be issued 23.6 9.03 6.30 – –
Headline earnings/(loss) on weightedshares in issue and to be issued 23.7 9.03 6.24 – –
Group Company2006 2005 2006 2005
Notes R’000 R’000 R’000 R’000
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Balance sheets at 31 May 2006
Group Company2006 2005 2006 2005
Notes R’000 R’000 R’000 R’000
Assets
Non-current assets 232 697 74 069 209 809 72 111
Property, plant and equipment 2 14 580 4 042 32 –Goodwill 3 207 703 69 633 – –Intangible asset 4 4 387 – – –Investments 5 1 043 – 209 777 72 111 Investment in associate 7 758 350 – – Deferred taxation 8 4 226 44 – –
Current assets 99 262 39 394 5 323 83
Inventories 9 12 852 3 641 – – Trade and other receivables 10 69 593 24 380 571 3 Loans to other group companies 11 – – 4 666 – Cash and cash equivalents 27 16 817 11 373 86 80
Total assets 331 959 113 463 215 132 72 194
Equity and liabilities
Capital and reserves 197 355 47 789 173 450 40 143
Share capital 12 35 14 35 14 Share premium 12 138 178 16 345 138 178 16 345Retained earnings 32 050 7 040 8 145 (606)Amounts due to vendors 12 27 092 24 390 27 092 24 390
Minority interest 1 672 2 068 – –
Total equity 199 027 49 857 173 450 40 143
Non-current liabilities 37 721 19 607 11 218 13 479
Vendor liabilities 13 11 218 19 607 11 218 13 479 Long-term liabilities 14 26 503 – – –
Current liabilities 95 211 43 999 30 464 18 572
Current portion of vendor liability 13 16 380 20 590 16 380 18 076 Current portion of long-term liabilities 14 4 452 – 1 400 – Loans from other group companies 15 – – 11 827 – Trade and other payables 16 67 829 18 390 295 150 Current tax payable 6 220 3 643 562 346Bank overdraft 27 331 1 376 – –
331 959 113 463 215 132 72 194
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Attributable to equity holders of the parentShare Share Amounts due Retained Minority Total
capital premium to vendors earnings Total interest equityR’000 R’000 R’000 R’000 R’000 R’000 R’000
GroupBalance at 31 May 2004 10 1 499 – (2 543) (1 034) (251) (1 285)Transition to IFRS 1 98 98 – 98
Restated balance 10 1 499 – (2 445) (936) (251) (1 187)
Profit for the year – – – 9 485 9 485 592 10 077Total recognised income and expense for the year – – – 9 485 9 485 592 10 077
Issue of share capital 4 15 497 – – 15 501 – 15 501Share issue expenses written off – (651) – – (651) – (651)Purchase of subsidiaries & businesses – – 24 390 – 24 390 1 727 26 117
Balance at 31 May 2005 14 16 345 24 390 7 040 47 789 2 068 49 857
Profit for the year – – – 25 010 25 010 1 558 26 568
Total recognised income and expense for the year – – – 25 010 25 010 1 558 26 568
Issue of share capital 21 122 579 – – 122 600 – 122 600Share issue expenses written off – (746) – – (746) – (746)Dividends – – – – (588) (588)
Purchase of subsidiaries & businesses – – 2 702 – 2 702 (1 366) 1 336
Balance at 31 May 2006 35 138 178 27 092 32 050 197 355 1 672 199 027
CompanyBalance at 31 May 2004 10 1 499 – (58) 1 451 – 1 451
Profit for the year – – – (548) (548) – (548)
Total recognised income and expense for the year – – – (548) (548) – (548)
Issue of share capital 4 15 497 – – 15 501 – 15 501Share issue expenses written off – (651) – – (651) – (651)Purchase of subsidiaries & businesses – – 24 390 – 24 390 – 24 390
Balance at 31 May 2005 14 16 345 24 390 (606) 40 143 – 40 143
Profit for the year – – – 8 751 8 751 – 8 751
Total recognised income and expense for the year – – – 8 751 8 751 – 8 751
Issue of share capital 21 122 579 – – 122 600 – 122 600Share issue expenses written off – (746) – – (746) – (746)Dividends – – – – – – –
Purchase of subsidiaries & businesses – – 2 702 – 2 702 – 2 702
Balance at 31 May 2006 35 138 178 27 092 8 145 173 450 – 173 450
Statements of changes in equity for the year ended 31 May 2006
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Cash flow statements for the year ended 31 May 2006
Cash flows from operating activitiesCash receipts from customers 341 523 106 575 1 966 (14)Cash paid to suppliers and employees (302 546) (102 313) (1 697) (211)
Cash generated from operations 24 38 977 4 262 269 (225)Investment income 2 011 229 8 895 1 525Taxation paid 25 (7 677) (703) – – Finance costs (2 018) (141) (87) (2)
Net cash from operating activities 31 293 3 647 9 077 1 298
Cash flows from investing activitiesProceeds on disposal of property, plant and equipment 33 620 – –Acquisition of property, plant and equipment (1 977) (2 196) (36) Acquisition of subsidiaries 26 (7 157) 1 913 (7 000) (2 486)Decrease/(increase) in loans to subsidiaries – – – (10 257)(Increase) in other investments (1 043) – – (Decrease) in vendor liabilities (15 705) – (15 705) –
Net cash used in investing activities (25 850) 337 (22 741) (12 743)
Cash flows from financing activitiesProceeds from issue of share capital 10 000 12 350 10 000 12 350(Decrease)/increase in long-term liabilities (8 938) (2 430) – –Increase/(decrease) in short-term liabilities 1 400 (113) 1 400 –Increase/(decrease) in short- term receivables (1 179) – – –Increase/(decrease) in loan from subsidiaries – – 2 270 (670)Dividends received 351 – – –Dividends paid (588) – – –
Net cash used in financing activities 1 046 9 807 13 670 11 680
Net increase in cash and cash equivalents 6 489 13 791 6 235Cash and cash equivalents at beginning of the year 9 997 (3 794) 80 (155)
Cash and cash equivalents at end of the year 27 16 486 9 997 86 80
Group Company2006 2005 2006 2005
Notes R’000 R’000 R’000 R’000
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1 STATEMENT OF COMPLIANCE
The consolidated financial statements have beenprepared in accordance with International FinancialReporting Standards (IFRS) and its interpretationsadopted by the International Accounting StandardsBoard (IASB). These are the group’s first consolidatedfinancial statements and IFRS 1 has been applied.
An explanation of how the transition to IFRS has affectedthe reported financial position, financial performanceand cash flows of the group is provided in note 29.
1.1 Basis of preparation
The financial statements are presented in rands, roundedto the nearest thousand. They are prepared on thehistorical cost basis except that the following assets andliabilities are stated at their fair value: derivative financialinstruments, financial instruments held-for-trading, financialinstruments classified as available-for-sale, biologicalassets and investment property.
Non-current assets and disposal groups held-for-sale arestated at the lower of carrying amount and fair value lesscosts to sell.
The preparation of financial statements in conformity withIFRS requires management to make judgements,estimates and assumptions that affect the application ofpolicies and reported amounts of assets and liabilities,income and expenses. The estimates and associatedassumptions are based on historical experience andvarious other factors that are believed to be reasonableunder the circumstances, the results of which form thebasis of making the judgements about carrying values ofassets and liabilities that are not readily apparent fromother sources. Actual results may differ from theseestimates. The estimates and underlying assumptions arereviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period of the revision and futureperiods if the revision affects both current and futureperiods.
Judgements made by management in the applicationof IFRS that have significant effect on the financialstatements and estimates with a significant risk ofmaterial adjustment in the next year are discussed innote 29.
The accounting policies set out below have beenapplied consistently to all periods presented in theseconsolidated financial statements and in preparing anopening IFRS balance sheet at 1 June 2004 for thepurposes of the transition to IFRS 1.
1.2 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the company.Control exists when the company has the powerdirectly or indirectly to govern the financial andoperating policies of an entity so as to obtain benefitsfrom its activities. In assessing control, potential votingrights that presently are exercisable or convertible aretaken into account. The financial statements ofsubsidiaries are included in the consolidated financialstatements from the date that control commences untilthe date that control ceases.
Associates
Associates are those entities in which the group hassignificant influence, but not control, over the financialand operating policies. The consolidated financialstatements include the group’s share of the totalrecognised gains and losses of associates on anequity-accounted basis, from the date that significantinfluence commences until the date that significantinfluence ceases. When the group’s share of losses
Accounting policies for the year ended 31 May 2006
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exceeds its interest in an associate, the group’scarrying amount is reduced to nil and recognition offurther losses is discontinued except to the extent thatthe group has incurred legal or constructive obligationsor made payments on behalf of an associate.
Transactions eliminated on consolidation
Intra-group balances and any unrealised gains andlosses or income and expenses arising from intra-grouptransactions, are eliminated in preparing theconsolidated financial statements. Unrealised gainsarising from transactions with associates and jointlycontrolled entities are eliminated to the extent of thegroup’s interest in the entity. Unrealised losses areeliminated in the same way as unrealised gains, butonly to the extent that there is no evidence ofimpairment.
1.3 Property, plant and equipment
Items of property, plant and equipment are stated atcost as deemed cost less accumulated depreciationand impairment losses.
Costs include costs incurred initially to acquire orconstruct an item of property, plant and equipment andcosts incurred subsequently to add to, replace part of,or service it. If a replacement cost is recognised in thecarrying amount of an item of property, plant andequipment, the carrying amount of the replaced part isde-recognised.
The group recognises in the carrying amount of anitem of property, plant and equipment the cost ofreplacing part of such an item when that cost isincurred, if it is probable that the future economicbenefits embodied with the item will flow to the groupand the cost of the item can be measured reliably. Allother costs are recognised in the income statement asan expense as incurred.
Certain items of property, plant and equipment thathad been revalued to fair value on or prior to 1 June2004, the date of transition to IFRS, are measured onthe basis of deemed cost being the revalued amountat the date of that revaluation.
Each part of an item of property, plant and equipmentwith a cost that is significant in relation to the total costof the item shall be depreciated separately.
The depreciation charge for each period is recognised inprofit or loss unless it is included in the carrying amountof another asset.
The gain or loss arising from the derecognition of an itemof property, plant and equipment is included in profit orloss when the item is derecognised. The gain or lossarising from the derecognition of an item of property,plant and equipment is determined as the differencebetween the net disposal proceeds, if any, and thecarrying amount of the item.
Depreciation is provided on all property, plant andequipment other than freehold land, to write down thecost, less residual value, on a straight-line basis over theiruseful lives as follows:
Item Average useful lifePlant and machinery 5 yearsMotor vehicles 5 yearsComputer equipment 3 yearsComputer software 5 yearsFurniture and fittings 10 yearsOffice equipment 6 yearsSecurity 5 yearsLeasehold improvements 6 yearsStudy material 3 years
The residual value and the useful life of each asset arereviewed at each financial year-end.
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1.4 Goodwill
All business combinations are accounted for by applyingthe purchase method. Goodwill represents amountsarising on acquisition of subsidiaries, associates and jointventures. In respect of business acquisitions that haveoccurred since 1 June 2004, goodwill represents thedifference between the cost of the acquisition and the fairvalue of the net identifiable assets acquired.
In respect of acquisitions prior to this date, goodwill isincluded on the basis of its deemed cost, whichrepresents the amount recorded under previous GAAP.The classification and accounting treatment of businesscombinations that occurred prior to 1 June 2004 has notbeen reconsidered in preparing the group’s opening IFRSbalance sheet at 1 June 2004 (see note 29).
Goodwill is stated at cost less any accumulatedimpairment losses. Goodwill is allocated to cash-generating units and is no longer amortised but is testedannually for impairment.
In respect of associates, the carrying amount of goodwillis included in the carrying amount of the investment in theassociate.
Negative goodwill arising on an acquisition isrecognised directly in profit or loss.
Internally generated goodwill is not recognised as an asset.
1.5 Intangible assets
Intangible assets are carried at cost less anyaccumulated amortisation and any impairment losses.
The amortisation period and the amortisation methodfor intangible assets are reviewed at every year-end.
Reassessing the useful life of an intangible asset with adefinite useful life after it was classified as indefinite isan indicator that the asset may be impaired. As a resultthe asset is tested for impairment and the remainingcarrying amount is amortised over its useful life.
Internally generated brands, mastheads, publishingtitles, customer lists and items similar in substance arenot recognised as intangible assets.
Amortisation is provided to write down the intangibleassets, on a straight-line basis, to their residual valuesas follows:
Item Useful lifeContract rights 5 years
1.6 Impairment of assets
The company assesses at each balance sheet datewhether there is any indication that an asset may beimpaired. If any such indication exists, the companyestimates the recoverable amount of the asset.
Irrespective of whether there is any indication ofimpairment, the company also:– tests intangible assets with an indefinite useful life
or intangible assets not yet available-for-use for impairment annually by comparing theircarrying amount with their recoverable amount.This impairment test is performed during the annualyear and at the same time every year; and
– tests goodwill acquired in a business combinationfor impairment annually.
If there is any indication that an asset may beimpaired, the recoverable amount is estimated for theindividual asset. If it is not possible to estimatethe recoverable amount of the individual asset, therecoverable amount of the cash-generating unit towhich the asset belongs is determined.
Accounting policies for the year ended 31 May 2006 continued
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1.7 Inventories
Inventories are valued at the lower of cost or net reali sable value. The cost includes transport andhandling costs, but excludes interest charges.
Costs are determined on the following bases: – raw materials are valued at invoice cost on a first-
in, first-out (FIFO) basis; and– merchandise is valued at invoice cost on a
weighted average basis.
Write-downs to net realisable value and inventorylosses are expensed in the period in which the write-downs or losses occur.
1.8 Investments in subsidiaries
Investments in subsidiaries are carried at cost less anyaccumulated impairment.
The cost of an investment in a subsidiary is theaggregate of:– the fair value, at the date of exchange, of assets
given, liabilities incurred or assumed and equityinstruments issued by the company; plus
– any costs directly attributable to the purchase of the subsidiary.
An adjustment to the cost of a business combinationcontingent on future events is included in the cost of thecombination if the adjustment is probable and can bemeasured reliably.
1.9 Financial instruments
Initial recognition
The company classifies financial instruments, or theircomponent parts, on initial recognition as a financialasset, a financial liability or an equity instrument inaccordance with the substance of the contractualarrangement.
Financial assets and financial liabilities are recognisedon the company's balance sheet when the companybecomes party to the contractual provisions of theinstrument.
Loans to/(from) group companies
These include loans to holding companies, fellowsubsidiaries, subsidiaries, joint ventures and associatesand are recognised initially at fair value plus directtransaction costs.
Subsequently these loans are measured at amortised costusing the effective interest rate method, less anyimpairment loss recognised to reflect irrecoverableamounts.
On loans receivable an impairment loss is recognised inprofit or loss when there is objective evidence that it isimpaired. The impairment is measured as the differencebetween the investment’s carrying amount and thepresent value of estimated future cash flows discounted atthe effective interest rate computed at initial recognition.
Impairment losses are reversed in subsequent periodswhen an increase in the investment’s recoverable amountcan be related objectively to an event occurring after theimpairment was recognised, subject to the restriction thatthe carrying amount of the investment at the date theimpairment is reversed shall not exceed what theamortised cost would have been had the impairment notbeen recognised.
Loans to shareholders, directors, managers and employees
These financial assets are initially at fair value plus directtransaction costs.
Subsequently these loans are measured at amortised costusing the effective interest rate method, less any impairmentloss recognised to reflect irrecoverable amounts.
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On loans receivable an impairment loss is recog nised inprofit or loss when there is objective eviden ce that it isimpaired. The impairment is measured as the differencebetween the investment’s carrying amount and the presentvalue of estimated future cash flows discounted at theeffective interest rate computed at initial recognition.
Impairment losses are reversed in subsequent periods whenan increase in the investment’s recoverable amount can berelated objectively to an event occurring after theimpairment was recognised, subject to the restriction thatthe carrying amount of the investment at the date theimpairment is reversed shall not exceed what the amortisedcost would have been had the impairment not beenrecognised.
Trade and other receivables
Trade receivables are measured at initial recognition at fairvalue and are subsequently measured at amortised costusing the effective interest rate method. Appropriateallowances for estimated irrecoverable amounts arerecognised in profit or loss when there is objectiveevidence that the asset is impaired. The allowancerecognised is measured as the difference between theasset’s carrying amount and the present value of estimatedfuture cash flows discounted at the effective interest ratecomputed at initial recognition.
Trade and other payables
Trade payables are initially measured at fair value, and aresubsequently measured at amortised cost, using theeffective interest rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand anddemand deposits, and other short-term highly liquidinvestments that are readily convertible to a known amountof cash and are subject to an insignificant risk of changesin value. These are initially and subsequently recorded atfair value.
Bank overdraft and borrowings
Bank overdrafts and borrowings are initially measured atfair value, and are subsequently measured at amortisedcost, using the effective interest rate method. Anydifference between the proceeds (net of transaction costs)and the settlement or redemption of borrowings isrecognised over the term of the borrowings in accordancewith the company’s accounting policy for borrowing costs.
Held-for-trading financial assets
Investments are recognised and derecognised on a tradedate basis where the purchase or sale of an investment isunder a contract whose terms require delivery of theinvestment within the timeframe established by the marketconcerned.
Investments are measured initially and subsequently at fairvalue, gains and losses arising from changes in fair valueare included in profit or loss for the period.
Derivatives
Derivative financial instruments, consisting of foreignexchange contracts and interest rate swaps, are initiallymeasured at fair value on the contract date and are re-measured to fair value at subsequent reporting dates.
Derivatives embedded in other financial instruments orother non-financial host contracts are treated as separatederivatives when their risks and characteristics are notclosely related to those of the host contract and the hostcontract is not carried at fair value with unrealised gains orlosses reported in profit or loss.
Changes in the fair value of derivative financialinstruments are recognised in profit or loss as they arise.
Available-for-sale financial assets
Investments are recognised and derecognised on a tradedate basis where the purchase or sale of an investment
Accounting policies for the year ended 31 May 2006 continued
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is under a contract whose terms require delivery of theinvestment within the timeframe established by the marketconcerned. These investments are measured initially andsubsequently at fair value. Gains and losses arising fromchanges in fair value are recognised directly in equityuntil the security is disposed of or is determined to beimpaired at which time the cumulative gain or losspreviously recognised in equity is included in the profit orloss for the period.
Impairment losses recognised in profit or loss for equityinvestments classified as available-for-sale are notsubsequently reversed through profit or loss. Impairmentlosses recognised in profit or loss for debt instrumentsclassified as available-for-sale are subsequently reversedif an increase in the fair value of the instrument can beobjectively related to an event occurring after therecognition of the impairment loss.
Held-to-maturity and loans and receivables
These financial assets are initially measured at fair valueplus direct transaction costs.
At subsequent reporting dates these are measured atamortised cost using the effective interest rate method,less any impairment loss recognised to reflectirrecoverable amounts. An impairment loss is recognisedin profit or loss when there is objective evidence that theasset is impaired and is measured as the differencebetween the investment’s carrying amount and thepresent value of estimated future cash flows discounted atthe effective interest rate computed at initial recognition.Impairment losses are reversed in subsequent periodswhen an increase in the investment’s recoverable amountcan be related objectively to an event occurring after theimpairment was recognised, subject to the restriction thatthe carrying amount of the investment at the date theimpairment is reversed shall not exceed what theamortised cost would have been had the impairment notbeen recognised.
Financial assets that the company has the positiveintention and ability to hold to maturity are classified asmaturity.
1.10 Translation of foreign currencies
Foreign currency transactions
A foreign currency transaction is recorded on initialrecognition in rands, by applying to the foreign currencyamount the spot exchange rate between the functionalcurrency and the foreign currency at the date of thetransaction.
At each balance sheet date:– foreign currency monetary items are translated using
the closing rate;– non-monetary items that are measured in terms of
historical cost in a foreign currency are translatedusing the exchange rate at the date of the transaction;and
– non-monetary items that are measured at fair value ina foreign currency are translated using the exchangerates at the date when the fair value was determined.
Exchange differences arising on the settlement ofmonetary items or on translating monetary items at ratesdifferent from those at which they were translated oninitial recognition during the period or in previousfinancial statements are recognised in profit or loss in theperiod in which they arise.
1.11 Leases
Finance lease payments
A lease is classified as a finance lease if it transferssubstantially all the risks and rewards incidental toownership. A lease is classified as an operating leaseif it does not transfer substantially all the risks andrewards incidental to ownership.
Finance leases are recognised as assets and liabilitiesin the balance sheet at amounts equal to the fair value
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of the leased property or, if lower, the present value onthe minimum lease payments. The correspondingliability to the lessor is included in the balance sheet asa finance lease obligation.
The discount rate used in calculating the present valueof the minimum lease payments is the interest rateimplicit in the lease.
The lease payments are apportioned between thefinance charge and reduction of the outstandingliability. The finance charge is allocated to each periodduring the lease term so as to produce a constantperiodic rate on the remaining balance of the liability.
Operating lease payments
Payments made under operating leases arerecognised in the income statement on a straight-linebasis over the term of the lease. Lease incentivesreceived are recognised in the income statement as anintegral part of the total lease expense.
1.12 Provisions
A provision is recognised in the balance sheet whenthe group has a present legal or constructive obligationas a result of a past event and it is probable that anoutflow of economic benefits will be required to settlethe obligation. If the effect is material, provisions aredetermined by discounting the expected future cashflows at a pre-tax rate that reflects current marketassessments of the time value of money and, whereappropriate, the risks specific to the liability.
Warranties
A provision for warranties is recognised when theunderlying products or services are sold. The provisionis based on historical warranty data and a weightingof all possible outcomes against their associatedprobabilities.
Onerous contracts
A provision for onerous contracts is recognised whenthe expected benefits to be derived by the group froma contract are lower than the unavoidable cost ofmeeting its obligations under the contract.
1.13 Taxation
Current taxation
Income tax on the profit or loss for the year comprisescurrent and deferred tax. Income tax is recognised inthe income statement except to the extent that it relatesto items recognised directly in equity, in which case itis recognised in equity.
Current tax is the expected tax payable on the taxableincome for the year, using tax rates enacted orsubstantially enacted at the balance sheet date, andany adjustment to tax payable in respect of previousyears.
Deferred taxation
Deferred tax is provided using the balance sheetliability method, providing for temporary differencesbetween the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts usedfor taxation purposes. The following temporarydifferences are not provided for: goodwill notdeductible for tax purposes, the initial recognition ofassets or liabilities that affect neither accounting nortaxable profit, and differences relating to invest mentsin subsidiaries to the extent that they will probably notreverse in the foreseeable future. The amount ofdeferred tax provided is based on the expectedmanner of realisation or settlement of the carryingamount of assets and liabilities, using tax rates enactedor substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent thatit is probable that future taxable profits will be available
Accounting policies for the year ended 31 May 2006 continued
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against which the asset can be utilised. Deferred taxassets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised.
Secondary taxation on companiesAdditional income taxes that arise from the distributionof dividends are recognised at the same time as theliability to pay the related dividend.
1.14 Revenue Goods sold and services renderedRevenue from the sale of goods is recognised in theincome statement when the significant risks andrewards of ownership have been transferred to thebuyer. Revenue from services rendered is recognised inthe income statement in proportion to the stage ofcompletion of the transaction at the balance sheetdate. The stage of completion is assessed by referenceto surveys of work performed. No revenue isrecognised if there are significant uncertaintiesregarding recovery of the consideration due,associated costs or the possible return of goods alsocontinuing management involvement with the goods.
Interest receivedInterest is recognised, in profit or loss, using theeffective interest rate method.
Dividends receivedDividends are recognised, in profit or loss, when thecompany’s right to receive payment has beenestablished.
1.15 Employee benefits
Short-term employee benefits
The cost of short-term employee benefits, (thosepayable within 12 months after the service isrendered, such as paid vacation leave and sick leavebonuses and non-monetary benefits such as medicalcare), are recognised in the period in which theservice is rendered and are not discounted.
The expected cost of compensated absences isrecognised as an expense as the employees renderservices that increase their entitlement or, in the caseof non-accumulating absences, when the absenceoccurs.
The expected cost of profit sharing and bonuspayments is recognised as an expense when there isa legal or constructive obligation to make suchpayments as a result of past performance.
Defined contribution plans
Payments to defined contribution retirement benefitplans are charged as an expense as they fall due.Payments made to industry-managed (or state plans)retirement benefit schemes are dealt with as definedcontribution plans where the company’s obligationunder the schemes is equivalent to those arising in adefined contribution retirement benefit plan.
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2 Property, plant and equipment2006 2005R’000 R’000
Accumulated Carrying Accumulated CarryingCost depreciation value Cost depreciation value
Group
Owned
Plant and machinery 3 483 (1 102) 2 381 2 122 (193) 1 929Motor vehicles 892 (292) 600 386 (35) 351Computer equipment 4 693 (2 806) 1 887 2 972 (2 146) 826Computer software 125 (80) 45 78 (55) 23Furniture and fittings 1 625 (449) 1 176 972 (315) 657Office equipment 1 361 (455) 906 652 (396) 256Security 49 (11) 38 – – –Leasehold improvements 249 (56) 193 – – Study material 71 (13) 58 – – –
12 549 (5 264) 7 285 7 182 (3 140) 4 042
Leased
Plant and machinery 8 297 (1 815) 6 482 – – –Motor vehicles 677 (93) 584 – – –Computer equipment 51 (14) 37 – – –Furniture and fittings 45 (4) 41 – – –Office equipment 169 (18) 151 – – –
9 239 (1 944) 7 295 – – –
Total 21 788 (7 208) 14 580 7 182 (3 140) 4 042
Notes to the annual financial statements for the year ended 31 May 2006
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Reconciliation of property, plant and equipment
Additionsthrough
Opening subsidiaries Closingbalance acquired Additions Disposals Depreciation balance
R’000 R’000 R’000 R’000 R’000 R’000
Group2006OwnedPlant and machinery 1 929 1 222 139 – (909) 2 381 Motor vehicles 351 506 – – (257) 600 Computer equipment 826 1 063 676 (18) (660) 1 887 Computer software 23 33 14 – (25) 45Furniture and fittings 657 573 80 – (134) 1 176Office equipment 256 149 560 – (59) 906Security – 36 13 – (11) 38Leasehold improvements – 138 111 – (56) 193 Study material – – 71 – (13) 58
4 042 3 720 1 665 (18) (2 124) 7 285
LeasedPlant and machinery – 8 297 – – (1 815) 6 482Motor vehicles – 365 312 – (93) 584Computer equipment – 51 – – (14) 37Furniture and fittings – 45 – – (4) 41 Office equipment – 169 – – (18) 151
– 8 927 312 – (1 944) 7 295
Total 4 042 12 647 1 977 (18) (4 068) 14 580
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Reconciliation of property, plant and equipment (continued)
Additionsthrough
Opening subsidiaries Closingbalance acquired Additions Disposals Depreciation balance
R’000 R’000 R’000 R’000 R’000 R’000
2005OwnedPlant and machinery – – 2 146 (22) (195) 1 929Motor vehicles 395 – 511 (428) (127) 351Computer equipment 510 – 624 (52) (256) 826Computer software 21 – 15 – (13) 23Furniture and fittings 350 – 371 – (64) 657Office equipment 160 – 163 – (67) 256
1 436 – 3 830 (502) (722) 4 042
Total 1 436 – 3 830 (502) (722) 4 042
2006 2005R’000 R’000
Accumulated Carrying Accumulated CarryingCost depreciation value Cost depreciation value
CompanyComputer equipment 36 (4) 32 – – –
36 (4) 32 – – –
Additionsthrough
Opening subsidiaries Closingbalance acquired Additions Disposals Depreciation balance
R’000 R’000 R’000 R’000 R’000 R’000
Company2006Computer equipment – – 36 – (4) 32
– – 36 – (4) 32
The group leases various classes of property, plant and equipment under number of finance leases. At 31 May 2006the net carrying of leased property, plant and equipment was R7 257 000 (2005: R4 042 000). The leasedproperty, plant and equipment secure the finance lease obligations.
Notes to the annual financial statements for the year ended 31 May 2006continued
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3 Goodwill2006 2005R’000 R’000
Accumulated Carrying Accumulated CarryingCost impairment value Cost impairment value
GroupGoodwill 207 703 – 207 703 69 633 – 69 633
207 703 – 207 703 69 633 – 69 633
Reconciliation of goodwillAdditions
throughOpening subsidiaries Closingbalance acquired Additions Disposals Impairment balance
R’000 R’000 R’000 R’000 R’000 R’000
Group2006Goodwill 69 633 138 070 – – – 207 703
69 633 138 070 – – – 207 703
2005Goodwill 1 961 67 672 – – – 69 633
1 961 67 672 – – – 69 633
4 Intangible asset2006 2005R’000 R’000
Accumulated Carrying Accumulated CarryingCost amortisation value Cost amortisation value
GroupIntangible asset 4 947 (560) 4 387 – – –
4 947 (560) 4 387 – – –
Reconciliation of intangible assetAdditions
throughOpening subsidiaries Closingbalance acquired Additions Disposals Amortisation balance
R’000 R’000 R’000 R’000 R’000 R’000
Group2006Intangible assets – 4 947 – – (560) 4 387
– 4 947 – – (560) 4 387
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Notes to the annual financial statements for the year ended 31 May 2006continued
5 InvestmentsPercentage Company Companyownership 2006 2005
Nature of business % R’000 R’000
CompanyDirectly heldXantium ProfessionalServices (Pty) Limited Consulting 100 6 763 6 763
Xantium IT Services IT manufacturing, sales and (Pty) Limited distribution 100 21 033 19 617
Foster Melliar (Pty)Limited Consulting 100 5 784 5 433
Simeka Resourcing Solutions(Pty) Limited Consulting 100 17 662 7 668
Xantium Digital CardServices (Pty) Limited IT sales and distribution 51 * *
ITQ (Pty) Limited Applications and implementation 100 37 627 32 630
Finfleet (Pty) Limited Software development 100 * *
MICT Solutions Group Limited Post implementation 100 78 000 –
Motoma Mithratech (Pty)Limited Assembly and manufacturing 100 9 000 –
Simeka Consulting (Pty)Limited Consulting 100 33 908 –
209 777 72 111
* Value below R1 000Simeka Resourcing Solutions (Pty) Limited was previously called Waymark Consulting (Pty) Limited.MICT Solutions Group Limited is an unlisted public company.
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6 Business combinationGroupMICT Solutions Group LimitedOn 1 December 2005, Simeka BSG Limited acquired 100% of the shares in MICT Solutions Group Limited and itsunderlying subsidiaries, Intergraph Systems Southern Africa (Pty) Limited, Cybernet Africa Logistics (Pty) Limited,Independent Computer Support Services (Pty) Limited, Advocate Solutions (Pty) Limited and Matomo Technologies (Pty)Limited. The cost of acquisition amounted to R78 000 000 and was paid in shares.
Goodwill of R80 671 567 arose due to expected synergy between the assets of MICT Solutions Group Limited andSimeka BSG Limited. MICT Solutions Group Limited’s profit, included in the group’s profit, is R4 972 760.
Carrying value Fair valueR’000 R’000
On 1 December 2005 the fair values and carrying amounts of MICT Solutions Group Limited and its underlying subsidiaries were as follows:
Property, plant and equipment 2 542 2 542 Intangible asset 4 947 4 947Deferred taxation 96 96Loans receivable 1 758 1 758Loans to other group companies 1 339 1 339Inventory 1 092 1 092Trade and other receivables 31 461 31 461Cash and cash equivalents 1 340 1 340Loans from other group companies (6 582) (6 582)Shareholders’ loans (3 430) (3 430)Long-term liabilities (16 087) (16 087) Trade and other payables (17 851) (17 851)Taxation payable (1 943) (1 943)
Motoma Mithratech (Pty) LimitedOn 1 December 2005, Simeka BSG Limited acquired 100% of the shares in Motoma Mithratech (Pty) Limited. Thecost of acquisition amounted to R9 000 000 and was paid in shares. Goodwill of R17 337 827 arose due toexpected synergy between the assets of Motoma Mithratech (Pty) Limited and Simeka BSG Limited. Motoma Mithratech(Pty) Limited’s profit included in the group’s profit is R6 129 350. However, if Motoma Mithratech (Pty) Limited’s resultswere included in the group’s results for the entire year, the group’s profits would have amounted to R26 299 563 andits revenue to R367 947 019.
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6 Business combination (continued)Carrying value Fair value
R’000 R’000
On 1 December 2005 the fair values and carrying amounts of Motoma Mithratech (Pty) Limited were as follows:
Property, plant and equipment 9 841 9 841Deferred taxation 4 770 4 770 Inventory 4 501 4 501Trade and other receivables 9 192 9 192 Cash and cash equivalents 1 076 1 076Shareholders’ loans (634) (634) Long-term liabilities (25 221) (25 221) Trade and other payables (11 864) (11 864)
Simeka Consulting (Pty) LimitedOn 28 September 2005, Simeka BSG Limited acquired net assets of Simeka Consulting (Pty) Limited. The cost ofacquisition amounted to R33 908 114 and is payable in cash and shares. Goodwill of R33 939 374 arose due toexpected synergy between the business of Simeka Consulting (Pty) Limited and Simeka BSG Limited. Simeka Consulting(Pty) Limited’s profit, included in the group’s profit, is R4 513 372.
Carrying value Fair valueR’000 R’000
On 1 August 2005 the fair values and carrying amounts of Simeka Consulting (Pty) Limited were as follows:
Property, plant and equipment 264 264 Trade and other receivables 6 964 6 964Long-term liabilities (175) (175) Trade and other payables (4 531) (4 531) Bank overdraft (2 573) (2 573)
Simeka Resourcing Solutions (Pty) LimitedOn 1 September 2005, Simeka BSG Limited acquired 49% of the remaining share capital of Simeka ResourcingSolutions (Pty) Limited. The cost of acquisition amounted to R9 994 037 and is payable in cash and shares. Goodwillof R7 866 234 arose due to the premium paid for the additional 49%. Simeka Resourcing Solutions (Pty) Limited’sprofit included in the group’s profits, is R2 475 049. However if Simeka Resourcing Solutions (Pty) Limited’s results wereincluded in the group’s results for the entire year, the group’s profits would have amounted to R2 847 066.
Notes to the annual financial statements for the year ended 31 May 2006continued
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7 Investment in associateGroup
Percentage 2006 2005Nature of business Country ownership R’000 R’000
GroupInvestment in associateIcentric Consulting (Pty)Limited IT consulting South Africa 42,5 758 350
758 350
The group’s share of post-acquisition profit for the year ended 31 May 2006 is R408 270.
Summary of financial information of Icentric (Pty) Limited – 100%
Group 2006 2005
R’000 R’000
Non-current assets 274 121Current assets 3 203 1 791Current liabilities 1 353 1 120Equity 2 124 792Profit after tax 1 807 791Revenue 8 617 3 915
8 Deferred taxationGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Represented by: Accelerated allowances (1 292) (133) – –Provisions 1 152 181 – –Leases 1 036 – – –Assessed loss 3 330 – – –Prepaid expenses – (4) – –
4 226 44 – –
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Notes to the annual financial statements for the year ended 31 May 2006continued
9 InventoriesGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Raw materials 4 039 406 – – Merchandise 4 926 3 235 – – Work-in-progress 3 887 – – –
12 852 3 641 – –
10 Trade and other receivablesGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Trade receivables 66 289 23 965 571 3Short-term receivables 2 957 – – –Other receivables 347 415 – –
69 593 24 380 571 3
11 Loans to group companiesGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Xantium Professional Services (Pty) Limited 2 667 – Foster-Melliar (Pty) Limited 1 999 –
4 666 –
The loans are unsecured and interest free with no fixed terms of repayment.
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12 Share capitalGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Authorised500 000 000 ordinary shares of R0,0001 each 50 50 50 50
Issued345 946 405 (2005: 135 000 000) ordinary shares 35 14 35 14 of R0,0001 eachShare premium 138 178 16 345 138 178 16 345
138 213 16 359 138 213 16 359
The unissued shares are under the control of thedirectors until the upcoming annual general meeting.
Amounts due to vendorsShares Share Shares Share
outstanding value outstanding value2006 2006 2005 2005’000 R’000 ’000 R’000
For subsidiaries and businesses acquired:Xantium Professional Services (Pty) Limited 650 65 7 988 4 232 Xantium IT Services (Pty) Limited* 10 750 5 715 15 280 7 640 Foster Melliar (Pty) Limited 1 428 715 3 095 2 548 Simeka Resourcing Solutions (Pty) Limited 8 462 5 817 4 820 2 787 ITQ (Pty) Limited 11 560 5 780 16 304 7 183 Motoma Mithratech (Pty) Limited 15 000 9 000 – –
47 850 27 092 47 487 24 390
* The shares outstanding is for the purchase of Spec Systems,a division of Xantium IT Services (Pty) Limited.
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Notes to the annual financial statements for the year ended 31 May 2006continued
13 Vendor liabilitiesGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
For subsidiaries and businesses acquired:Xantium IT Services (Pty) Limited* 4 146 8 642 4 146 – Foster Melliar (Pty) Limited 936 1 828 936 1 828Simeka Resourcing Solutions (Pty) Limited 8 508 – 8 508 3 713 ITQ (Pty) Limited 12 366 26 014 12 366 26 014Simeka Consulting (Pty) Limited 1 642 3 713 1 642 –
27 598 40 197 27 598 31 555
Current portion included under current liabilities:Xantium IT Services (Pty) Limited * (4 146) (2 514) (4 146) –Foster Melliar (Pty) Limited (936) (1 828) (936) (1 828)Simeka Resourcing Solutions (Pty) Limited (5 242) (3 054) (5 242) (3 054)ITQ (Pty) Limited (6 056) (13 194) (6 056) (13 194)
(16 380) (20 590) (16 380) (18 076)
11 218 19 607 11 218 13 479
* The liability outstanding is for the purchase of Spec Systems,a division of Xantium IT Services (Pty) Limited. Vendor liabilities have been discounted to their present value at the company’s average cost of borrowings.
14 Long-term liabilities
Interest-bearing liabilities 25 981 – – –Non interest-bearing liabilities 1 400 – 1 400 –Finance leases 3 574 – – –
Total amount outstanding 30 955 – 1400 –Less: amount included in current liabilities (4 452) – (1 400) –
Long-term portion outstanding 26 503 – – –
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Reconciliation between the total minimum lease payments and their present value
Up to 2 to 5 More than1 year years 5 years Total
2006Minimum lease payments 3 388 690 – 4 078Finance cost (336) (168) – (504)
Present value 3 052 552 – 3 574
The finance lease agreements are repayable in 60 monthly instalments and bear interest at prime.Interest-bearing liabilities are repayable over 36 months and bear interest at prime.Non interest-bearing liabilities are unsecured and interest free with no fixed terms of repayment. The group’s borrowing powers have not been exceeded in terms of the Articles of Association of the holding companyand of the underlying subsidiaries.
15 Loans from group companiesGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Xantium IT Services (Pty) Limited – – 4 425 –ITQ (Pty) Limited – – 2 598 –Simeka Resourcing Solutions (Pty) Limited – – 2 604 –Simeka Consulting (Pty) Limited – – 2 200 –
– – 11 827 –
The loans are unsecured and interest free with no fixed terms of repayment.
16 Trade and other payablesGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Trade payables 62 794 13 358 295 150Other payables 1 061 3 851 – –Provisions 3 974 1 181 – –
67 829 18 390 295 150
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Notes to the annual financial statements for the year ended 31 May 2006continued
16 Trade and other payables (continued)Reconciliation of provisions
Additionsthrough
Opening subsidiaries Closingbalance acquired Additions Utilised balance
R’000 R’000 R’000 R’000
Group2006Leave pay 774 1 526 262 – 2 562562BonusesBonuses 407 407 374 374 –– (215) (215) 566566Credit notesCredit notes – – – – 7272 –– 7272Obsolete stockObsolete stock –– 3 8173 817 –– (3 056) (3 056) 761761WarrantiesWarranties – – 132 132 – – (118) (118) 1414
1 181 1 181 5 849 5 849 333333 ((3 390) 3 974
2005Leave pay 205 – 569 – 774Bonuses – – 407 – 407Other 300 – – (300) –
505 – 976 (300) 1 181
17 RevenueGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Sale of goods 112 774 36 567 – –Rendering of services 213 371 57 277 1 398 –
326 145 93 844 1 398 –
Revenue comprises turnover, which excludes value-added taxand represents the invoiced value of goods and services supplied.
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18 Operating profit before finance costsGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Amortisation of intangible asset 560 – – –Auditors’ remuneration– Audit fees 1 490 284 376 12Consulting fees 3 346 967 227 100Depreciation 4 068 722 4 –Directors’ emoluments 4 481 1 349 – –
Non-executive directors
– Salaries 597 240 – – – Fringe benefits – – – –Executive directors– Salaries 3 884 986 – –– Fringe benefits – 123 – –
Foreign exchange (gains)/losses (1 103) (150) – – (Profit)/loss on disposal of property, plant and equipment (15) (86) – –Operating lease rentals 5 992 807 – –
– Premises 5 611 788 – –– Equipment 381 19 – –
Secretarial services 49 24 – –Staff costs excluding directors’ emoluments 59 539 14 601 – –
19 Investment incomeGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Interest received 2 011 229 136 1 525Dividends received – – 9 971 –
2 011 229 10 107 1 525
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Notes to the annual financial statements for the year ended 31 May 2006continued
20 Finance costsGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Vendor liabilities 1 743 1 344 1 743 1 344Long-term loans 1 066 – – –Finance leases 383 83 – –Bank overdraft 340 58 – 2Other 229 – 87 –
3 761 1 485 1 830 1 346
21 Share of profit from associate
Share of retained profits 408 – – –Dividends received 351 – – –
759 – – –
22 Taxation
South African normal tax– Current year 8 311 3 717 214 346Deferred taxation– Temporary differences 684 826 – 16– Rate change – 26 – 1
8 995 4 569 214 363
Reconciliation of rate of taxation % % % %
South African normal tax rate 29,00 29,00 29,00 29,00Non-taxable income (8,10) (0,70) (32,25) –Non-deductible expenses 0,90 0,04 5,64 2,24Assessed loss utilised 3,49 – – –Rate change – 0,16 – –
Effective rate 25,29 28,50 2,39 31,24
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23 Earnings per share23.1 Earnings per share
The calculation of earnings per ordinary share for the group is based on an income attributable to ordinaryshareholders of R25 010 (2005: R9 485) and weighted average of 220 618 642 (2005: 129 452 054)ordinary shares in issue.
23.2 Headline earnings per shareThe calculation of headline earnings per ordinary share for the group is based on an income of R24 995(2005: R9 399) and weighted average of 220 618 642 (2005: 129 452 054) shares in issue.
Group2006 2005
R’000 R’000
23.3 Reconciliation between earnings/(loss)and headline earnings/(losses)Earnings/(loss) for the year attributable toordinary shareholders 25 010 9 485Profit/(loss) on disposal of property, plant and equipment (15) (86)
Headline earnings 24 995 9 399Interest on liabilities due to vendors 1 743 1 344Amortisation 561 –
Adjusted headline earnings 27 299 10 743
23.4 Diluted earnings/(loss) per shareThe calculation of diluted earnings per share is based on an income of R25 010 (2005: R9 485) and aweighted average of 220 618 642 (2005: 129 452 054) ordinary shares in issue.
23.5 Adjusted headline earnings/(loss) per shareThe calculation of headline earnings per share is basd on an income of R27 299 (2005: R10 743) and ona total number of shares that are in issue and will be issued for acquisition of 276 854 653 (2005: 150 664 067)weigted over the same period in which all acquisition earnings have been imcluded in the company’s earnings.
23.6 Earnings on weighted shares in issue and to be issuedThe calculation of weighted earnings per share is based on the total number of shares that are in issue and willbe issued for acquisitions of 276 854 653 (2005: 150 664 067) weighted over the same period in whichall acquisitions earnings have been included in the company's earnings.
23.7 Headline earnings on weighted shares in issue and to be issuedThe calculation of weighted headline earnings is based on the total number of shares that are in issue and willbe issued for acquisitions of 276 854 653 (2005: 150 664 067) weighted over the same period in whichall acquisitions earnings have been included in the company's earnings.
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Notes to the annual financial statements for the year ended 31 May 2006continued
24 Cash generated/(utilised) in operationsGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Profit before taxation 35 563 14 646 8 965 (185) Adjustments for non-cash items:– Depreciation 4 068 722 4 –– Amortisation 560 – – –– Investment income (2 011) (229) (10 107) (1 525) – Finance costs 3 761 1 485 1 830 1 346 – Profit/loss on foreign exchange (1 103) (150) – – – Profit/(loss) on disposal of fixed assets (15) (86) – – – Movement in provisions (3 056) 676 – (5)
37 767 17 064 692 (369)Operating income/(loss) before changesin working capital
– Inventories (3 618) (1 650) – –– Accounts receivable (15 378) (12 731) (568) 14 – Accounts payable 20 206 1 579 145 130
38 977 4 262 269 (225)
25 Taxation paid
Balance at beginning of year 3 643 (66) (346) 363Taxation charge as per income statement 8 995 4 569 (216) (16)Deferred taxation charge (684) (826) – (1)Rate change – (26) – –Taxation liability assumed on acquisition 1 943 695 – – Balance at the end of the year (6 220) (3 643) 562 (346)
7 677 703 – –
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26 Acquisition of subsidiaries and businessesGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Property, plant and equipment 12 647 1 817 – –Intangible asset 4 947 – – –Investments – 350 – –Deferred taxation 4 866 – – –Loans receivable 1 758 – – –Loans to other group companies 1 339 – – –Inventory 5 593 1 935 – –Trade and other receivables 47 617 4 653 – –Cash and cash equivalents (157) 9 016 – – Loans from other group companies (6 582) – – –Shareholders loans (4 064) – – –Long-term liabilities (41 483) (282) – –Trade and other payables (34 245) (8 386) – –Taxation payable (1 943) (695) – –Minority interest (1 352) (1 476) – –
Total net assets purchased (11 059) 6 932 – –Goodwill 131 967 69 034 – –
Total purchase price 120 908 75 966 – –Shares issued to be issued (112 267) (26 890) – –
8 641 49 076 – –Portion of purchase price unpaid (1 641) (41 973) – –
Total purchase price settled in cash 7 000 7 103 – –Cash acquired in businesses 157 (9 016) – –
Cash paid 7 157 (1 913) – –
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Notes to the annual financial statements for the year ended 31 May 2006continued
27 Cash and cash equivalentsGroup Company
2006 2005 2006 2005R’000 R’000 R’000 R’000
Bank and cash balances 16 817 11 373 86 80Bank overdraft (331) (1 376) – –
16 486 9 997 86 80
Bank overdraftXantium IT Services (Pty) Limited has an invoice discounting facility of R4 000 000 secured by a cession of tradereceivables and unlimited securityship, including a cession of loan funds by Simeka BSG Limited.
28 Commitments
The following operating lease charges are payable onequipment and premises:– Due within one year 3 116 812 – –– Due within one to five years 7 068 1 594 – –
10 184 2 406 – –
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29 First-time adoption of IFRSThe date of transition was 1 June 2004 and the effects of the transition were as follows:
As reported Effectsunder previous of transition
Notes GAAP to IFRS IFRS
Property, plant and equipment 1 436 – 1 436 Goodwill 1 1 863 98 1 961 Deferred tax 896 – 896
Total non-current assets 4 195 98 4 293
Trade and other receivables 6 996 – 6 996 Inventories 55 – 55 Taxation receivable 66 – 66Cash and cash equivalents 353 – 353
Total current assets 7 470 – 7 470
Interest-bearing loan 396 – 396Non interest-bearing loan 509 – 509 Trade and other payables 7 303 – 7 303 Provisions 595 – 595Bank overdraft 4 147 – 4 147
Total liabilities 12 950 – 12 950
Total assets less total liabilities (1 285) 98 (1 187)
Issued capital 10 – 10Share premium 1 499 – 1 499Retained earnings 1 (2 543) 98 (2 445)Minority interest (251) – (251)
Total equity (1 285) 98 (1 187)
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Notes to the annual financial statements for the year ended 31 May 2006continued
Reconciliation of equity at 31 May 2005As reported Effects
under previous of transition Notes GAAP to IFRS IFRS
Property, plant and equipment 4 042 – 4 042 Goodwill 2 70 879 (1 344) 69 535 Investments 350 – 350 Deferred tax 44 – 44
Total non-current assets 75 315 (1 344) 73 971
Trade and other receivables 24 380 – 24 380 Inventories 3 641 – 3 641 Taxation receivable – – – Cash and cash equivalents 11 373 – 11 373
Total current assets 39 394 – 39 394
Interest-bearing loan – – – Non interest-bearing loan 40 197 – 40 197 Trade and other payables 16 828 – 16 828 Provisions 1 562 – 1 562Taxation payable 3 643 – 3 643 Bank overdraft 1 376 – 1 376
Total liabilities 63 606 – 63 606
Total assets less total liabilities 51 103 (1 344) 49 759
Issued capital 14 – 14Share premium 16 345 – 16 345Retained earnings 2 8 286 (1 344) 6 942Amounts due to vendors 24 390 – 24 390Minority interest 2 068 – 2 068
Total equity 51 103 (1 344) 49 759
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Reconciliation of profit or loss for 2005As reported Effects
under previous of transition Notes GAAP to IFRS IFRS
Revenue 93 844 – 93 844 Cost of sales (52 243) – (52 243)
Gross profit 41 601 – 41 601
Other income 185 – 185 Operating expenses (25 884) – (25 884) Investment income 229 – 229 Finance costs 2 (141) (1 344) (1 485)
Net profit before taxation 15 990 (1 344) 14 646 Taxation (4 569) – (4 569)
Net profit after taxation 11 421 (1 344) 10 077
Attributable to:
Equity holders of the parent (10 829) 1 344 (9 485)Minority interest (592) – (592)
Net profit/(loss) for the year (11 421) 1 344 (10 077)
Note 1Goodwill under previous GAAP was amortised over five years. As from the 2005 annual financial year goodwill isno longer amortised and the cost for all previous goodwill is carried at its carrying value. This is its cost less previousaccumulated amortisation. The carrying value is subject to an annual impairment test. Under IFRS goodwill is reflectedat its fair value which is the cost less any accumulated impairment.
Note 2Vendor liabilities under previous GAAP were carried at cost. Under IFRS vendor liabilities should reflect the fair valueof amounts owed and have subsequently been discounted to their present value using the company’s cost ofborrowings. The effect of the discounting has been taken to goodwill as it affects the cost of the transaction.
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Notes to the annual financial statements for the year ended 31 May 2006continued
30 Related partiesRelated parties include shareholders, directors andcompanies controlled by the directors.
During the year, certain subsidiaries, in the ordinarycourse of business entered into various loan transactionswith related parties under terms that are no lessfavourable than those arranged with third parties.
31 Financial risk managementInterest rate riskThe group is exposed to interest rate risk as it borrows and places funds. This risk is managed byutilising an appropriate mix between fixed and floatingrate borrowings.
Credit riskCredit risk relates to potential exposure on tradereceivables, loans and bank and call deposits. The grouplimits its counterparty exposure arising from money marketinstruments by dealing only with well-established financialinstitutions of high credit standing. Loans are only madeto entities known to the directors where their recoverabilityis assured beyond any reasonable doubt.
Trade receivables consist mainly of a large widespreadcustomer base. The financial position of customers ismonitored on an ongoing basis.
At the balance sheet date, the group did not considerthere to be any significant concentration of credit riskwhich has not been adequately provided for.
Liquidity risk The group manages liquidity risk by monitoring forecastcash flows and ensuring that adequate cash resourcesand unutilised borrowing facilities are maintained.
Foreign currency risk The group undertakes certain transactions deno minated in foreign currencies which therefore have exposure to exchange fluctuations. The group manages ex chan gerate exposures using forward exchange contracts (andnatural hedges). Where appropriate open positions aremaintained when the market trends are favourable.
32 Subsequent eventsThere are no matters or circumstances arising since the endof the financial year ended 31 May 2006 that have amaterial impact on the matters set out in this annual report.
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Analysis of shareholdersShareholder information at 31 May 2006
% ofNo of % of No of issued
shareholders shareholders shares capital
1 Range of shareholdingsRange1 – 50 000 629 71,80 9 960 609 2,8850 001 – 100 000 80 9,14 6 608 343 1,91100 001 – 1 000 000 120 13,70 34 832 441 10,071 000 001 and more 47 5,36 294 545 012 85,14
Total 876 100,00 345 946 405 100,00
2 Categories of shareholders
Individuals 486 55,48 149 288 824 43,15Nominee companies and trusts 177 20,21 65 668 245 18,98Public/private companies 155 17,69 112 507 365 32,52Other corporate bodies 58 6,62 18 481 971 5,35
Total 876 100,00 345 946 405 100,00
3 Beneficial shareholders holding 5% or more of the share capital
MS Varachia Holdings Company (Pty) Limited 56 549 500 16,35T Botha 53 949 500 15,59Simeka Management Consulting (Pty) Limited 42 110 928 12,17Spyglass Funds 22 545 560 6,52
4 Shareholder spread
Public 865 98,74 1 622 439 46,90
Non-public 11 1,26 183 702 479 53,10Directors 9 1,03 140 100 831 40,50Associate companies 2 0,23 43 601 648 12,60
Totals 876 100,00 345 946 405 100,00
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At 31 May 2006
Closing price (cents) 44
High for the year (cents) 65
Low for the year (cents) 38
Volume of shares traded (‘000) during the year 74 320
Value of shares traded (R’000) during the year 36 104
JSE performance
Shareholders’ diaryAnnual General Meeting 27 October 2006
Announcement of interim results January/February
Financial year-end 31 May
Announcement of final results July/August
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Notice of annual general meetingSimeka BSG Limited (Registration number 2003/012583/06)(Incorporated in the Republic of South Africa)(“ Simeka BSG” or “ the company” )Share code SBG ISIN code ZAE000074878
Notice is hereby given that the annual general meeting
of shareholders of the company will be held at 2nd Floor,
Quantum Leap 17, Cnr. Rivonia and Naivasha Roads,
Sunninghill, Gauteng on 27 October 2006 at 10:00 for
the purpose of considering, and if deemed fit, passing
with or without modification, the following resolutions:
1. To receive and consider the annual financial
statements of the company and the group for the
year ended 31 May 2006, together with the
directors’ and independent auditors’ reports.
2. To re-elect K Ramsingh as a director of the
company, who retires by rotation in terms of the
company’s Articles of Association and who being
eligible offers himself for re-election.
An abbreviated curriculum vitae in respect of
K Ramsingh is contained on page 8 of the annual
report of which this notice forms part.
3. To approve the appointment of A Evan as an
executive director of the company.
An abbreviated curriculum vitae in respect of
A Evan is set out below:
Alex Evan 41 BA LLB
Alex has extensive experience in ICT sector
regulation and legislation and has been
closely involved with developing aspects of
telecommunications regulations.
4. To re-appoint PKF (Pta) Inc. as independent
auditors of the company.
5. To approve the remuneration of the directors
reflected on page 32 of the annual report of
which this notice forms part.
As special business, to consider and, if deemed
fit, pass with or without modification, the
following resolutions:
6. To consider and if deemed fit to pass, with or
without modification, the following as ordinaryresolution 1:“ RESOLVED THAT the entire authorised but
unissued share capital of the company, from time
to time, be placed under the control of the
directors of the company until the next annual
general meeting with the authority to allot and
issue all or part thereof in their discretion, subject
to Sections 221 and 222 of the Companies
Act, 61 of 1973, as amended, and the Listings
Requirements of the JSE Limited.”
7. To consider and if deemed fit to pass, with or
without modification, the following as ordinaryresolution 2:“ RESOLVED THAT pursuant to the Articles of
Association of the company, the directors of the
company be and are hereby authorised, until the
next annual general meeting of the company
(when this authority shall lapse unless it is
renewed at that annual general meeting,
provided that it shall not extend beyond 15
months from the date of this annual general
meeting), to allot and issue ordinary shares for
cash subject to the Listings Requirements of the JSE
Limited (“JSE”) and the Companies Act, 61 of
1973, as amended, on the following bases:
a) the allotment and issue of ordinary shares for
cash shall be made only to persons qualifying
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as public shareholders as defined in the
Listings Requirements of the JSE, and not to
related parties;
b) the number of ordinary shares issued for cash
shall not in the aggregate in any one financial
year of the company (commencing 1 June
2006) exceed 15% of the company’s issued
ordinary shares. The number of ordinary
shares which may be issued for cash shall be
based on the number of ordinary shares in
issue at the date of the application, less any
ordinary shares issued by the company during
the current financial year, provided that any
ordinary shares to be issued for cash pursuant
to a rights issue (announced and irrevocable
and underwritten) or acquisition (concluded up
to the date of application) may be included as
though they were ordinary shares in issue at
the date of application;
c) the maximum discount at which ordinary
shares may be issued for cash is 10% of
the weighted average traded price on the
JSE of those ordinary shares over
30 days prior to the date that the price of
the issue is determined by the directors of
the company;
d) after the company has issued ordinary shares
for cash which represent, on a cumulative
basis within a financial year, 5% or more of
the number of ordinary shares in issue prior to
that issue, the company shall publish an
announcement containing full details of the
issue, including the effect of the issue on the
net asset value and earnings per share of the
company; and
e) the securities which are the subject of the issuefor cash must be of a class already in issue, orwhere this is not the case, must be limited tosuch securities or rights as are convertible intoa class already in issue”.Note: In terms of the Listings Requirements ofthe JSE, a 75% majority of the votes cast byshareholders present or represented by proxyat the annual general meeting must be cast infavour of ordinary resolution 2 for it to beapproved.
8. To consider and if deemed fit to pass, with orwithout modification, the following as ordinaryresolution 3:“ RESOLVED THAT, with reference to theannouncement made to shareholders on18 August 2006, the following variations to theterms of the acquisition of the entire issued sharecapital of Waymark Consulting (Proprietary)Limited (“Waymark”) be approved:The company agrees to vary the pricing andpayment terms of its acquisition of Waymark, butonly as such terms pertain to one of the vendors,E Scholtz, who sold 25% of the issued shares inWaymark to the company. Scholtz has resignedas an executive of the company and director of itssubsidiary with effect from 31 March 2006, butremains bound by the restraint of tradeundertakings he provided.
The variations relate to payments that would havefallen due to Scholtz on and after 31 August2006 (“the remaining payments”), all paymentsdue prior to that date having being discharged bythe company. In this regard, the followingpayments were still owed to Scholtz:
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a) a cash payment of R1,982,250 (divided into3 instalments, payable at 31 August 2006,2007 and 2008);and
b) the delivery of 1 175 000 Simeka BSGshares issued at 65 cents per share at31 August 2006, the delivery of 750 000shares issued at 70 cents per share at31 August 2007 and the delivery of895 000 shares issued at 75 cents per shareat 31 August 2008.
The revised pricing and payment terms agreedwith Scholtz in settlement of the remainingpayments are as follows:a) a cash payment of R500,000 (which was
settled by the company as of 31 March2006);
b) a cash payment of R1,8 million (which wassettled by the company as of 31 August2006); and
c) an interest free cash payment of R1,2 million,payable in twelve monthly instalments ofR100,000 each, to be made on the last dayof each calendar month from January 2007.
This resolution is subject to the condition that asimple majority of votes of shareholders are castin favour thereof, but excluding the votes of anyrelated party and its associates."
9. To consider and if deemed fit to pass, with orwithout modification, the following as specialresolution 1:“ RESOLVED THAT the company approves, asa general approval contemplated in Section 85of the Companies Act, 61 of 1973, as amended(“the Act”), the acquisition by the company (or bya subsidiary of the company) of ordinary sharesissued by the company on such terms and
conditions and in such amounts as the directors ofthe company may decide, but subject always tothe provisions of the Act and the ListingsRequirements of the JSE Limited (“JSE”), whichgeneral approval shall endure until the nextannual general meeting of the company (whenthis approval shall lapse unless it is renewed atthat annual general meeting, provided that it shallnot extend beyond 15 months from the date ofregistration of this special resolution), subject tothe following limitations:
a) the repurchase of securities is implemented
through the order book of the JSE trading
system, without any prior understanding or
arrangement between the company and the
counter party;
b) the company is so authorised by its Articles of
Association;
c) the general repurchase is limited to a
maximum of 20% in aggregate of the
company’s issued share capital in any one
financial year;
d) the general repurchase by the subsidiaries of
the company is limited to a maximum of 10%
in aggregate of the company’s issued share
capital in any one financial year;
e) the repurchase is not made at a price greater
than 10% above the weighted average of the
market value for the securities for the five
business days immediately preceding the date
on which the transaction was effected;
f) the repurchase does not take place during
a prohibited period as defined in
paragraph 3.67 of the Listings Requirements
of the JSE;
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g) the company publishes an announcement after
it or its subsidiaries has cumulatively acquired
3% of the number of ordinary shares in issue
at the time that the shareholders’ authority
for the purchase is granted and for each
3% in aggregate of the initial number
acquired thereafter;
h) the company remains in compliance with
paragraphs 3.37 to 3.41 of the Listings
Requirements of the JSE concerning
shareholder spread after such repurchase;
i) the company appoints only one agent to effect
any repurchases on its behalf; and
j) after considering the aggregate effect of the
maximum repurchase of 20% of the
company’s shares, the directors are of the
opinion that:
(i) the company and the group are in a
position to repay their debt in the ordinary
course of business for a period of 12
months after the date of this notice of
annual general meeting;
(ii) the consolidated assets of the company,
being fairly valued in accordance with
Generally Accepted Accounting Practice,
are in excess of the consolidated liabilities
of the company for a period of 12 months
after the date of this notice of annual
general meeting;
(iii) the ordinary capital and reserves of the
company and the group are adequate for
a period of 12 months after the date of this
notice of annual general meeting;
(iv) the available working capital is adequate
to continue the operations of the company
and the group for a period of 12 months after
the date of this notice of annual general
meeting; and
(v) the company’s designated advisor will
confirm adequacy of the company’s
working capital for the purposes of
undertaking the repurchase of shares in
writing to the JSE prior to the company (or
any subsidiary) entering the market to
proceed with the repurchase.”
The reason for and effect of special resolution 1
is to authorise the company and its subsidiaries,
by way of general approval, to acquire the
company’s issued ordinary shares on terms and
conditions and in amounts to be determined
by the directors of the company, subject to certain
statutory provisions and the Listings Requirements
of the JSE.
Directors’ statement regarding the utilisation ofthe authority soughtThe directors of the company have no immediate
intention to use this authority to purchase the ordinary
shares of the company. However the directors are of
the opinion that this authority should be in place should
it be appropriate to undertake a share repurchase
during the currency of the authority.
Other disclosures in terms of Section 11.26 of theListings Requirements of the JSEThe following additional information, some of which
may appear elsewhere in the annual report of which
this notice forms part, is provided in terms of the
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Listings Requirements of the JSE for purposes of this
general authority:
• Directors and management – pages 8 and 9;
• Major beneficial shareholders – page 69;
• Directors’ interests in ordinary shares – pages 32;
and
• Share capital of the company – page 30.
Litigation statementThe directors of the company whose names appear on
pages 8 and 9 of the annual report of which this
notice forms part, are not aware of any legal or
arbitration proceedings including proceedings that are
pending or threatened, that may have or had in the
recent past (being at least the previous 12 months) a
material effect on the group’s financial position.
Directors’ responsibility statement The directors whose names appear on pages 8 and 9
of the annual report, collectively and individually
accept full responsibility for the accuracy of the
information pertaining to this special resolution and
certify that, to the best of their knowledge and belief,
there are no facts that have been omitted which would
make any statement false or misleading, all reasonable
enquiries to ascertain such facts have been made and
the special resolution contains all information required
by the Act and the Listings Requirements of the JSE.
Material changesOther than the facts and developments reported on in
the annual report, there have been no material
changes in the affairs or financial position of the
company and its subsidiaries since the date of
signature of the audit report and up to the date of
this notice.
Voting and proxiesA shareholder of the company entitled to attend, speak
and vote at the annual general meeting is entitled to
appoint a proxy or proxies to attend, speak and on a
poll to vote in his stead. The proxy need not be a
shareholder of the company. A form of proxy is
attached for the convenience of any certificatedshareholder and own-name registereddematerialised shareholder who cannot attend the
annual general meeting, but who wishes to be
represented.
Additional forms of proxy may also be obtained on
request from the company’s registered office. The
completed forms of proxy must be deposited at,
posted or faxed to the transfer secretaries at the
address below, to be received by no later than 10:00on Wednesday, 25 October 2006. Any member
who completes and lodges a form of proxy will
nevertheless be entitled to attend and vote in person at
the annual general meeting should the member
subsequently decide to do so.
On a show of hands, every shareholder of the company
present in person or represented by proxy shall have one
vote only. On a poll, every shareholder of the company
present in person or represented by proxy shall have one
vote for every share held in the company by such
shareholder.
Shareholders who have dematerialised their ordinary
shares through a Central Securities Depository
Participant (“CSDP”) or broker, other than own-name
registered dematerialised shareholders, and who
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wish to attend the annual general meeting must
request their CSDP or broker to issue them with
a letter of representation. Alternatively dematerialised
shareholders other than own-name registered
dematerialised shareholders, who wish to be
represented must provide their CSDP or broker with
their voting instructions in terms of the custody
agreement between them and their CSDP or broker in
the manner and timeframe stipulated.
By order of the board
NB de KokerCompany secretary
25 July 2006
Registered office Transfer secretaries1st Floor, South Block Link Market Services
6 Protea Place (Pty) Limited (formerly Ultra
5th Floor Registrars (Pty) Limited)
Sandton 11 Diagonal Street
Johannesburg
2001
(PO Box 4307 (PO Box 4844
Halfway House Johannesburg, 2000)
Midrand, 1685)
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Form of proxy
Number of votes
For* Against* Abstain*
1. Adoption of the annual financial statements
2. Re-election of K Ramsingh as a director of the company
3. Approval of the appointment of A Evan as an executive director of the company
4. Re-appointment of PKF (Pta) Inc. as auditors of the company
5. Approval of directors’ remuneration
6. Ordinary resolution 1: to place unissued shares under directors’ control
7. Ordinary resolution 2: to issue unissued shares for cash
8. Ordinary resolution 3: to vary the terms of the acquisition of Waymark Consulting (Pty) Limited
9. Special resolution 1: to grant general authority to Simeka BSG and its subsidiaries to buy back shares
Signed at (place) ____________________________________________on (date)__________________________________________________________ 2006
Member’s signature Assisted by (if applicable)
Please read the notes on the reverse.
Simeka BSG Limited (Registration number 2003/012583/06)(Incorporated in the Republic of South Africa)(“ Simeka BSG” or “ the company” )Share code SBG ISIN code ZAE000074878
For use at the annual general meeting of the company to be held at 2nd Floor, Quantum Leap 17, Cnr. Rivonia and Naivasha Roads, Sunninghill,Gauteng on 27 October 2006 at 10:00 and at any adjournment thereof.For use by the holders of the company’ s certificated ordinary shares (“ certified shareholder” ) and/or dematerialised ordinary shares heldthrough a Central Securities Depository Participant (“ CSDP” ) or broker who have selected own-name registration (“ own-name dematerialisedshareholders” ). Not for the use by holders of the company’s dematerialised ordinary shares who are not own-name dematerialised shareholders. Suchshareholders must contact their CSDP or broker timeously if they wish to attend and vote at the annual general meeting and request that they beissued with the necessary authorisation to do so, or provide the CSDP or broker timeously with their voting instructions should they not wish toattend the annual general meeting in order for the CSDP or broker to vote thereat in accordance with their instructions.
I/We______________________________of________________________________________________________________________________________(Address)
being a member/members of Simeka BSG and holding ___________________________________________ordinary shares in the company, hereby appoint
1. __________________________________________________________of __________________________________________________________________or failing him/her
2. __________________________________________________________of __________________________________________________________________or failing him/her
3. the chairman of the annual general meeting,
as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purpose of considering and, if deemed fit,passing, with or without modification, the special and ordinary resolutions to be proposed thereat and at any adjournment thereof; and to vote for and/or againstthe special and ordinary resolutions and/or abstain from voting in respect of the Simeka BSG ordinary shares registered in my/our name(s), in accordance withthe following instructions: *Please indicate with an “ X” in the appropriate spaces below how you wish your votes to be cast
Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.
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1. This form of proxy is to be completed only by thosemembers who are: a) holding shares in a certificated form; orb) recorded in the sub-register in electronic form in
their “own name”.2. Members who have dematerialised their shares
and wish to attend the annual general meeting must contact their Central Securities DepositoryParticipant (“CSDP”) or broker who will furnish themwith the necessary authority to attend the annualgeneral meeting, or they must instruct their CSDP orbroker as to how they wish to vote in this regard.This must be done in terms of the agreement enteredinto between the members and their CSDP or broker.
3. Each member is entitled to appoint one or moreproxies (who need not be a member(s) of thecompany) to attend, speak and, on a poll, vote inplace of that member at the annual general meeting.
4. A member may insert the name of a proxy or thenames of two alternative proxies of the member’schoice in the space provided, with or withoutdeleting “the chairman of the annual generalmeeting”. The person whose name stands first on theform of proxy and who is present at the annualgeneral meeting will be entitled to act as proxy to theexclusion of those whose names follow.
5. A member’s instructions to the proxy must beindicated by the insertion of the relevant number ofvotes exercisable by that member in the appropriatebox(es) provided. Failure to comply with the abovewill be deemed to authorise the chairman of theannual general meeting, if the chairman is theauthorised proxy, to vote in favour of the ordinaryand special resolutions at the annual generalmeeting, or any other proxy to vote or to abstain fromvoting at the annual general meeting as he/shedeems fit, in respect of all the member’s votesexercisable thereat.
6. A member or his/her proxy is not obliged to vote inrespect of all the ordinary shares held by suchmember or represented by such proxy, but the total
number of votes for or against the ordinary andspecial resolutions and in respect of which anyabstention is recorded may not exceed the totalnumber of votes to which the member or his/herproxy is entitled.
7. Documentary evidence establishing the authority of aperson signing this form of proxy in a representativecapacity must be attached to this form of proxy,unless previously recorded by the company’s transferoffice or waived by the chairman of the annualgeneral meeting.
8. The chairman of the annual general meeting mayreject or accept any form of proxy which iscompleted and/or received other than inaccordance with these instructions, provided that heis satisfied as to the manner in which a memberwishes to vote.
9. Any alterations or corrections to this form of proxymust be initialled by the signatory(ies).
10. The completion and lodging of this form of proxy willnot preclude the relevant member from attending theannual general meeting and speaking and voting inperson thereat to the exclusion of any proxyappointed, should such member wish to do so.
11. A minor must be assisted by his/her parent guardianunless the relevant documents establishing his/herlegal capacity are produced or have been registeredby the company’s transfer secretaries.
12. Where there are joint holders of any shares, only thatholder whose name appears first in the register inrespect of such shares need sign this form of proxy.
13. Forms of proxy must be lodged with the transfersecretaries at the address given below not later than10:00 on Wednesday, 25 October 2006:Link Market Services South Africa (Pty) Limited(formerly Ultra Registrars (Pty) Limited)5th Floor11 Diagonal StreetJohannesburg 2001(PO Box 4844, Johannesburg, 2000)
Notes to the form of proxy
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Corporate informationCompany secretary and registered officeNB de Koker 1st Floor, South Block6 Protea PlaceSandtonPO Box 4307Halfway House, Midrand, 1685Telephone 011 676 1000Fax 011 884 3087
Designated advisorJava Capital (Pty) Limited (a designated advisor registered with JSE Limited)2 Arnold Road, Rosebank, 2196PO Box 2087,Parklands, 2121Telephone 011 283 0042Fax 011 283 0065
AttorneysAlex Evans Inc.1st Floor, South Block6 Protea PlaceSandtonPO Box 4307Halfway House, Midrand, 1685Telephone 011 676 1000Fax 011 884 3087
AuditorsPKF (Pta) Inc.(formerly Fisher Hoffman PKF) 105 Club AvenueWaterkloof Heights, PretoriaP O Box 98060Waterkloof Heights, 0065Telephone 012 460 9000Fax: 012 346 2380
Transfer secretariesLink Market Services (Pty) Limited(formerly Ultra Registrars (Pty) Limited)5th Floor, 11 Diagonal StreetJohannesburg, 2001PO Box 4844Johannesburg, 2000Telephone 011 370 5775Fax 011 370 5780
Commercial bankersRMB Private Bank(a division of FirstRand Bank Limited)No 3 Merchant Place1 Fredman DriveSandton 2196PO Box 785611, Sandton, 2146Telephone 011 303 5555Fax 011 301 4350
Nedbank Corporate(a division of Nedcor Bank Limited)1st Floor, 100 Main StreetJohannesburg, 2001PO Box 61558MarshalltownJohannesburg, 2107Telephone 011 630 6223Fax 011 630 6278
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Notes
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Notes