ANNUAL REPORT 2009 - · PDF fileDTH | ANNUAL REPORT 2009. 3 ABOUT DYNAMIC TECHNOLOGY HOLDINGS...
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Tailor-made software solutions that always measure up. ANNUAL REPORT 2009
Transcript of ANNUAL REPORT 2009 - · PDF fileDTH | ANNUAL REPORT 2009. 3 ABOUT DYNAMIC TECHNOLOGY HOLDINGS...
Tailor-made software solutions that always measure up.
ANNUAL REPORT 2009
There is always space for dynamic people inTHE FASTEST GROWING SOFTWARE TEAM!
.NetArchitect
.NetDeveloper
BA
ProjectManager
DataArchitect
TestAnalyst
WORK FOR DVT?
Send your CV to:
(Johannesburg offices)
(Cape Town offices)
If you ca
n fill on
e
of our ga
ps. . .
SoftwareArchitect
SoftwareEngineer
JavaDeveloper
SystemsAnalyst
www.dvt.co.za
DevelopmentManager
TechnicalBusiness Analyst
BPMConsultant
SoftwareArchitect
TABLE OF CONTENTS
Table of Contents
About Dynamic Technology Holdings
Group Structure
Financial Highlights
Value Added Statement
Board of Directors
Chairman’s Report
CEO’s Report
Corporate Governance and Sustainability
Shareholder Analysis
2009 Annual Financial Statements
Directors’ Responsibilities and Approval
Report of the Independent Auditors
Directors’ Report
Balance Sheets
Statement of Changes in Equity
Statement of Changes in Equity
Income Statement
Cash Flow Statements
Accounting Policies
Notes to the Financial Statements
Notice of Annual General Meeting
Corporate Information
Form of Proxy
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DTH | ANNUAL REPORT 2009
ABOUT DYNAMIC TECHNOLOGY HOLDINGS3
AltX-listed, Dynamic Technology Holdings (JSE:DTH) is a group of businesses specialising in applicationsoftware. Our core focus is providing tailor-made solutions to fit the specific needs of our clients. We typically use a blend of existing and custom built software and components. Through its operating business, we offer solutions based on both Microsoft .Net™ and Java™ development platforms and also provide specialist skills and professional services across the entire software deve opment lifecycle.
DVT specialises in the development, delivery, implementation, and support of applications software and related services. We don’t deliver ‘nice-to-have’ solutions, we deliver software central to core business functions; indispensable software that supports key business processes. Most of the solutions we develop are based on leading Microsoft .Net and Java (IBM and open source) technologies.
Our process is simple: First we listen. Then we seek to understand the problem. Finally, we architect, design and develop the correct and most effective solution for each client, making sure that our solutions are effective, produce results and add value to our clients.
Offline Digital is a specialized business focussing on the development and implementation of customised content management and publishing solutions. Single source content management, multi-channel (print, web and mobile) publishing and personalisation are highly developed features of our solution offering.
Our solutions are based on a framework of existing software components which are customised and configured to deliver tailor-made solutions. This gives our clients the best of both worlds by providing a level of customisation associated with a bespoke developments with the timescale and costs associated with “off the shelf” products.
Emerald Consulting delivers information technology solutions across many business areas, specializing in implementation, support, development and training for specific vertical market products. Our solutions are based on products like Thomson Reuters Practice and Financial Management Systems, Business Objects and a Business Process Management Solution for Professional Services Firms.
Our hands-on approach is blended with solid experience in the professional services and legal markets assure a realistic and well-formulated project plan. As a team, we provide customers with a more effective way to manage their most valuable asset, their information.
The Talent Exchange is a specialist IT staffing recruitment company with a focus on software development related positions. We provide software development talent on permanent, contract and contract-to-hire basis. We leverage our relationship with the DTH Group to source top class software development professionals in the market and to identify companies that offer rewarding careers for software development professionals.
Because software development is the core business of the DTH Group, we understand what makes a good software developer, project manager, business analyst or tester. It is this understanding and our large database of software development professionals, that positions us uniquely.
www.dvt.co.za
www.dth.co.za
www.offlinedigital.co.za
www.talentexchange.co.za www.e-c.co.za
GROUP STRUCTURE
Cornastone TechnologyInvestments (Pty) Ltd Non-public shareholders
including directors,associates and treasury
214 public shareholdersowning 14,044,572 shares
20,9% 51,0% 28,1%
DTH Dynamic TechnologyHoldings Limited
100% 100% 100% 66,7%
Dynamic VisualTechnologies
(Pty) Ltd
Dynamic VisualTechnologies (Gauteng)
(Pty) Ltd
The Talent Exchange(Pty) Ltd
Offline Digital (Pty) Ltd
DTH | ANNUAL REPORT 2009
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Microsoft and Java development and
professional services.
Practice management software solutions for
legal industry.
IT staffing and recruitment agency and labour broker.
Specialist content management and digital
publishing solutions.
SUBSIDIARIES
DIVISIONS AND BUSINESSES
NOTES:1. The diagram above represents the group structure as at 28 February 2009.2. DVT Cape and Emerald Consulting operate as divisions of Dynamic Visual Technologies (Pty) Ltd.3. From 1 March 2009 the business of The Talent Exchange (Pty) Ltd was transferred to Dynamic Visual Technologies (Gauteng) (Pty) Ltd and now operates as a division of that company.
ABOUT DVT5
WHAT WE DOWe provide application software development solutions, which include:
• Custom software development using leading Microsoft and JavaTM technologies
• Enterprise system architecture consulting
• System integration and implementation including SOA solutions
• Business intelligence solutions
• Provision of software development consultants to clients (Microsoft developers, Java developers, Project Managers, Business Analysts and Testers)
OUR TEAMMany of DVT’s staff members are certified practitioners; all of them are passionate about software development.
OUR CLIENTSOur client list includes Allan Gray, DirectAxis, FNB, Fundamo, Hollard, Liberty Life, Maxiprest, Momentum, Old Mutual, Postilion, Sanlam, Sasol, Standard Bank, Vodacom & many others.
Pioneered in 1999, DVT is the founding company of the Dynamic Technology Holdings Group (DTH), which listed on the Altx board of the Johannesburg Stock Exchange in 2007.DTH now has a number of businesses that provide tailor-made software solutions to clients throughout South Africa.
SOME OF THE TECHNOLOGIES WE USEDVT is a Microsoft Gold Certified Partner for both Custom Development and as an ISV.
The Microsoft technologies we use include:• .Net 1.1, 2.0, 3.0 and 3.5• ASP.NET, Silverlight and WPF • WCF and Windows Workflow• Windows Mobile• Microsoft SQL Server 2005 and 2008• Microsoft Team Foundation Server• SharePoint Portal Server
DVT provides enterprise Java based solutions on open source and IBM platforms to a number of blue chip corporate clients.
The Java technologies we use include:• Java (up to 1.6) including JEE• JSP, JSF, Wicket, Struts, Spring, etc.• EJB, Hibernate, JDBC, etc.• JBoss, Glassfish, WebSphere and Weblogic application servers• WebSphere Portal Server and LifeRay Portal Server• WebSphere Process Server
DTH | ANNUAL REPORT 2009
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COMPANIES LOOKING TO DEPLOY SOFTWARE SOLUTIONS ARE FACED WITH A NUMBER OF CHALLENGES.
Some of the more critical questions to consider are:• Is a custom-built or off-the-shelf packaged solution more appropriate? Or is a hybrid, blended approach better?
• Will the solution satisfy the core business requirements, and will the business actually use the final product in the way it was originally intended?
• Will an international or local solutions provider be a better choice?
The three questions are relatively easy to answer.• Build, buy or blend? If the business requirements are unique, build. If they are generic, buy. If they sit somewhere in between, blend. The blended option means buy an off-the-shelf package and make minor modifications, filling the gaps with custom development alongside the package. Do not modify it too much as the best practices embedded in the application do not welcome extensive modification. Instead, make changes to the existing business processes so that they are more compatible with the packaged solution. Extensive modification of a software package introduces significant risk of project overruns, unplanned expense, and has high potential to increase the ongoing cost of ownership.
• History has shown the original business needs and the solution finally delivered often bear little resemblance to one another. Taking delivery of a horse when you asked for a camel will be problematic for most enterprises. The “broken telephone” syndrome is an unfortunate characteristic of software delivery, even after more than fifty years of trying. At DVT, it is the ongoing responsibility of the business analyst to make sure the telephone works. We employ some of the best and most insightful business analysts in the country.
• DVT has all its best skills at home. Many international companies will purport to have these skills but ultimately fall well short of the expectation raised during the pre-sales process. To exacerbate this, many international solutions providers avoid significant ongoing investment into South African clients because the expected return is a fraction of global revenue. Indeed, South Africa constitutes a fraction of global technology spend. It is usually local companies, with a track record of local delivery, which follow through on price and expectation in the long run.
By Chris Wilkins,CEO, JSE AltX-listed Dynamic Technology Holdings
At DVT, we deliver appropriate business solutions. We have a flexible and friendly attitude, an appetite for hard work, and incorporate a systemic approach by applying skills at the right time and at the right place to deliver good value for money.
Since inception, DVT has emphasised that the three complementary disciplines of software development, business analysis and project management are all crucial to successful software delivery. All software development should include a cost for managing the process (project management) and managing the scope (business analysis). This then makes it easy to manage quality and ensures the business is ready to embrace the new technology.
DVT can also provide a range of flexible contractual options. We are happy to discuss any type of pricing structure, and we leave plenty of room for negotiation.
The hunger to succeed is probably the single biggest driver in ensuring successful business. Using that criterion as a starting point, it makes a lot of sense to invest time and money when considering a custom-built or packaged option; select a solutions partner that offers a comprehensive range of skills across the entire software development lifecycle; and make use of local, specialised companies that want to keep their clients happy.
Chris Wilkins
ANSWER THE 3 SOFTWARE CHALLENGES
FINANCIAL HIGHLIGHTS
39,6%REVENUE
44,9%ATTRIBUTABLE
EARNINGS
24,1%HEADLINE EARNINGS
PER SHARE
Revenue increased by 39,6% to R81,8 million Attributable earnings increased by 44,9% to R8,7 million Headline earnings per share increased by 24,1% to 17,5 cents Total assets increased by 28,8% to R43,0 million Tangible net asset value per share increased by 47,5% to 45,2 cents Cash increased to R13,8 million
OPERATING PROFIT (Rm)
2007Pro Forma
2008Audited
2009Audited
TURNOVER (Rm)
2007Pro Forma
2008Audited
2009Audited
90
80
70
60
50
40
30
20
10
0
12
10
8
6
4
2
0
HEPS (Cents)
2007Pro Forma
2008Audited
2009Audited
20
18
16
14
12
10
8
6
4
2
0
2007Pro Forma1
2008Audited2
2009Audited
Turnover (R ‘000) 44,473 58,601 81,781
Operating profit (R ‘000) 6,345 8,123 10,695
Operating profit margin (%) 14.3% 13,9% 13.1%
Headline earnings per share (cents) 9 14 17
Cash generated from operation (R ‘000) 3,498 5,497 4,664
Cash and cash equivalents (R’000) 903 11,818 13,752
Nett asses value per share (cents) 24 51 67
Net tangible asset value per share (cents) (1) 31 451Extracted from historical pro forma aggregated results for 2007 as presented and reported thereon in the Prospectus dated 29 October 2007 as if the restructuring of the Company was effected on 1 March 2006.
2Extracted from the audited annual financial statements for the period ended 28 February 2007.
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VALUE ADDED STATEMENT 8
2009(R’000) %
2008(R’000) %
Turnover and other income 81,881 58,862
Cost of Goods overheads and other expenses (8,696) (7,352)
Value added 73,185 51,510
Income from investments 1,250 455
WEALTH CREATED 74,435 51,965 100.0
Distribution Wealth
EMPLOYEES
Remuneration and benefits 61,759 83.0 42,856 82.7
PROVIDERS OF CAPITAL
Finance charges 57 0.1 2 0,0
GOVERNMENT
Taxation 3,170 4.3 2,456 4.7
RETAINED TO DEVELOP FUTURE GROWTH 9,449 12.7 6,652 12,5
Deferred tax (161) (0.2) (47) (0.1)
Depreciation and amortisation 731 0.1 531 1.0
Net profit for the year 8,879 11.9 6,167 11.6
WEALTH DISTRIBUTED 74,435 100.00 51,965 100.0
2009 2008
Employees
Providers of Capital
Government
Retained to developfuture growth
Employees
Providers of Capital
Government
Retained to developfuture growth
DTH | ANNUAL REPORT 2009
H. RATSHEFOLA (Non-Executive Chairman)BCom (University of North West)
Hamilton is the co-founder and joint chief executive of Cornastone Technology Holdings.He has over 20 years experience in the IT industry; much of it at executive and board level. He served as the executive leading the IBM public sector business and performed the same role as executive director for the then JSE listed Computer Configuration Holdings Limited. He has been recognised over the years by the IT industry for his contribution. In 1999 and 2000 he was recognised as one of the Top 20 Black IT professionals in South Africa. In 2007 Hamilton won the coveted IT Personality of the Year 2007 Award from the Computer Society of South Africa, Gartner Group and GIBS.
C. J. WILKINS (CEO)National Higher Diploma (Cape Technikon)
Chris is a founder of DVT, the originalbusiness of the group. As CEO of DTH he provides the core business vision for the group.He has 21 years experience in the software development industry and has started and managed a number of businesses culminating with the formation of DVT in 1999.Chris qualified as a management accountant before moving to software development in the mid-eighties. After working as a software developer in Cape Town, he relocated to the UK for seven years where he worked as an independent delivery systems specialist in the software and related services industry. Chris finished off his term in the UK as a project manager for IBM in London. He resettled in Cape Town 10 years ago where he now lives with his family.
BOARD OF DIRECTORS9
G FOWLER (CFO)BCom (Accounts) (Rand Afrikaans University)
Graham has 19 years experience in financial management, including 10 as a financial director in the IT industry.Graham graduated in 1990 and completed his articles with G.J. Bazley & Co. He was financial manager of Zotos Construction with sole responsibility for finance and operations in the group, which gave him a solid grounding in a sometimes very challenging project-orientated environment.In 1999 Graham joined Software Futures as financial manager and was later appointed as financial director. He formed part of a dynamic team of entrepreneurs who managed the company through a series of mergers and acquisitions, growing it to be one of the largest in South Africa in its field.
D. M. HUGHES(Executive Director and Company Secretary)
Derek has a 21-year career in IT with a wealth of experience in managing software business. He has been with the DTH group for 6 years after joining the founders to establish DVT’s new operations in Gauteng. Derek was previously CEO of Software Futures which had over 500 staff and was the largest software development company in South Africa at the time, won numerous awards from the industry and was considered one of the best places to work in IT in South Africa. He oversaw and managed more than 10 mergers and acquisitions for Software Futures.Prior to that, Derek worked for IBM South Africa in as a product manager for software development tools and started his career as technical architect and pioneer at Sanlam.
J. MAMOGALE (Independent Non-Executive Director)BCom (University of North West)
Jackson has a career spanning 19 years in information technology solutions and consulting. He is currently managing director of Cornastone Consulting which employs 100 professionals in various disciplines of application development, outsourcing, enterprise IT management and IT logical access management solutions. He worked in application development for one of the leading banks in South Africa before joining Andersen Consulting, now known as Accenture, where he worked for 8 years in various disciplines ranging from technical architecture consulting to senior management leadership. He held key positions in various engagements in the transportation, retail, financial services and public sector.
R. J. FEHRSEN (Independent Non-Executive Director)CTA (University of the Witwatersrand), CA (SA)
Rod has over thirty years general business management experience, mostly at executive and board level, within major listed South African companies with international interests.He spent six years as a partner in a technology focussed private equity fund with leading private equity company, Ethos. While with Ethos he was integrally involved in a number of major investment transactions. He served (and continues to serve) on the boards of selected technology companies.Rod has held office on a number of prestigious South African and international organisations including Young Presidents Organisation (YPO) and the Institute of Marketing Management. Rod qualified as a chartered accountant after serving his articles with Ernst and Young.
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DTH | ANNUAL REPORT 2009
When we listed in November 2007, we made a forecast for February 2009. It is therefore a pleasure for me to confirm that DTH has met the forecast we promised in 2007, despite difficult trading and economic conditions experienced.
Once more credit goes to great leadership of Chris Wilkins, our CEO, and his team, who, under difficult trading environment exceeded expectation with a 39.6% increase in turnover, 44% growth in attributable earnings, and 24% increase in headline earnings per share.
DTH is still in the fortunate position of designing, building and maintaining mission critical applications for our customers. The demand for application maintenance and requests for modification and upgrades to meet changing business requirements has been consistent and has kept DTH’s pipeline healthy. We have had excellent retention of services in our existing customers.
DTH is committed to growing the business organically within the constraints of market conditions, while considering acquisitions which will complement our existing businesses and/or strengthen our product offerings and improve the balance between services and product.
GOVERNANCEThis remains an area of focus for the board. Satisfactory changes were made this year and compliance with the King Code has been improved. The board has been strengthened and balanced, with effective committees established and mandated.
We have put together a BEE Executive Committee, to assist our business to continue to adopt the principles of Broad Based Economic Empowerment in our overall business strategy. We have made tremendous progress in the compliance to the BEE charter in our sector, and will continue to put a special focus on areas such as skills development, affirmative procurement, and enterprise development.
CHANGES TO THE BOARDOn the management front, we announced the departure of our Chief Operating Officer, Ashley De Klerk. This was a disappointment and a loss, but Ashley made a positive
“DTH is still in the fortunate position of
designing, building and maintaining mission
critical applications for our customers”
Hamilton Ratshefola
CHAIRMAN’S REPORT11
THANKSI consider the DTH management team one of the best in the business of software development and software engineering. I am even more confident of the DTH future and its prospects in the software marketplace.
I’d like to thank management and the broader DTH team for delivering exceptional results during very difficult trading periods.
Hamilton RatshefolaNon-executive Chairman
contribution while with the group and remains a shareholder and good friend of the group.
Derek Hughes, one of founders of DTH, took over the reins from Ashley in Gauteng and became an executive director again from November 2008.
Our focus on strengthening the DTH Board and improving overall governance continues. The Board welcomed Rod Fehrsen as an independent non-executive director in March 2009. Rod is a chartered accountant and experienced executive manager and board member, and brings this valuable experience and skill to the board. Rod now also chairs our Audit Committee.
The appointment of an additional independent non-Executive Director is in the pipeline.
“Conditions are placing additional challenges
on the business”
THE FUTUREOverall the past financial year for DTH was successful and rewarding, but 2009/10 is going to be very challenging due to the economic conditions.
Those conditions are placing additional challenges on the business most notably in the form of downward pressure on operating margin as customer’s IT budgets come under pressure.
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DTH | ANNUAL REPORT 2009
It gives me great pleasure, on behalf of the board, to present our results for the financial year ended 28 February 2009.
The period under review marks the end of the second financial year of our successful listing on the ALTx of the JSE.
We have met all projections as stated in our prospectus of November 2007. This past year we achieved our financial objectives and laid down the foundations for future prosperity and growth.
YEAR IN REVIEWSummary2008 could best be described as tumultuous in global economic terms. More than ever, our thoughts and actions are affected by ever-changing socio-economic circumstances in a highly-connected and interactive world. Our media deliver enormous amounts of provocative, emotive and sometimes conflicting information. Recently, you could be forgiven for thinking that the economic world as we know it has come to an abrupt halt.
Perspective, however, is an important characteristic in both good and bad times. And we always need a good dose of perspective, especially here in South Africa.
Our financial year to February 2009 ended on a very positive note wherein we once again met our annual financial targets as stated in our Prospectus of November 2007. In FY09 we continued to find a balance between investment for growth and taking profit from our position in the market.
Our focus in FY09 was two-fold. We wanted to deliver on our financial promises, and we had to consider the uncertain economic conditions ahead.
Our financial success came from hard work, a solid delivery capability, and a credible, recognised brand. Our risk management in FY09 involved building strong cash reserves, retaining key staff, increasing new business development capacity, and diversifying through prudent acquisition into independent, cash generative businesses.
“We have met allprojections as statedin our prospectus of
November 2007.”
CEO’S REPORT13
Chris Wilkins
FINANCIAL REVIEWOur primary financial goals were to meet our revenue and profit targets and further improve our cash position.
RevenueRevenue for the group increased 39,6% to R81,8m (2008: R58,6m). Strong organic growth accounted for most of the increase, with the balance arising from the acquisition of Emerald Consulting.
Operating ProfitsOperating profits increased by 31,7% at an operating margin of 13,1%. On the strength of these results, the Group’s attributable earnings grew by 44,9% to R8,7m.
Operating margin dropped slightly year on year, primarily due to downward pressure on rates resulting from general negative market conditions and pressure on IT budgets. There was also continued upward pressure on salaries during the financial year. Under testing circumstances and aggressive targets, we believe that both rates and salaries were effectively managed in FY09.
Headline earnings per share were 17,5c (2008: 14,1c). EPS growth of 24,1% was lower than the growth in attributable earnings due to the volume weighted number of shares in issue for the year increasing to 49,9m shares (2008: 41,9m). This increase resulted from the full effect of listing only reflecting in the year under review. The Group declared and paid a maiden dividend of 3 cents per share on 6 July 2009.
Balance SheetOur net cash position at year end did not improve as much as was hoped. This was due to a number of large payments from debtors being received shortly after year end.
OPERATIONAL REVIEWOur key operational goals were to further diversify our corporate client base and increase our footprint into medium sized clients. Although we have successfully diversified our corporate client base, more focus will be required over the next 12-18 months to improve our reach into medium sized companies.
Our sales focus required less effort than anticipated due to excellent retention of and further opportunities with existing clients.
Our SolutionsDTH provides software solutions and related services mainly to the South African market. We build solutions on Microsoft, Java and Open Source technologies. Our largest subsidiary, DVT, is a Gold Certified Microsoft Partner.
We offer custom built software and a number of pre- packaged software products. Our software products provide Practice Management Solutions for the legal and professional services industries, Content and Web solutions, Loyalty, Reward and Incentive programs, IT Help Desk, Service Desk and Call Centre solutions.
Our related services include an extensive range of skills that are all required, at some point or another, during the business of writing and successfully implementing software.
Our Contractual ModelsOur services are delivered using a range of flexible contractual options. Our outsourced partnerships and managed services are long-term, recurring contracts. Our professional services usually comprise large team-based assignments with recurring revenue at market competitive prices. Our projects and specialised consultancy services are more ad-hoc in nature and command a premium due to additional risk and short-term nature of the work.
Our Staff As primarily a services business, our growth is largely dependent on increasing our billable capacity. We reduced staff attrition and grew our capacity by nearly 40 people during the year.
Our people have a major impact on all aspects of the business. They deliver our services and solutions and their daily decisions have a direct impact on clients, delivery and profitability.
We have an ongoing commitment to ensure we employ only the most skilled and versatile individuals with the right attitude and approach to their work. This means we continue to invest in recruitment, training and the well-being of staff.
This past year we introduced more flexibility into our employment model by hiring a greater percentage of professionals on a contractual rather than full-time employment basis.
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DTH | ANNUAL REPORT 2009
Our BrandDTH undertook a successful rebranding exercise during the course of FY09.
The change to “DTH Dynamic Technology Holdings Limited” better describes the business of the group and will allow the company to develop its operating brands without creating confusion with the holding company’s brand. The name “DVT” continues to be used as the brand of the first and largest operating subsidiary of the group.
Each operating business within the group is now identified with the byline “A Dynamic Company” below the company name and logo.
“Our overall strategy for long-term growth is to
combine strong organic growth and focused
acquisitions”
CORPORATE ACTIVITYAcquisitionsEmerald Consulting was acquired in October 2008, and has since proven to be stable and cash generative.
Share Buy-BackDTH undertook a limited share buy-back exercise throughout the latter half of the year under review. We believe that our share price consistently reflected good value during this period. The share buy-back exercise has a positive impact on earnings per share and ultimately on shareholder value.
PROSPECTSMarket ConditionsFor the latter half of 2008, the South African economy arguably traded on the momentum built up in the previous four years, and during the second half of our financial year we made sure we benefitted from this momentum.
We expect a general slowdown in business activity through our 2010 financial year, and this will impact us in different ways. Our trading conditions will be
characterised by longer lead times, downward pressure on rates, upward pressure on costs and additional effort will be required to retain existing clients.
AcquisitionsOur overall strategy for long-term growth is to combine strong organic growth and focused acquisitions.
Our acquisitions to date, although small, have been very successful. Using this experience, we will continue to look for well priced companies that will clearly benefit from the support of our experienced management team and inclusion into a focused, commercially driven environment.
ClientsWe have a diverse spread of large and medium sized clients across a number of sectors. This reduces our risk by limiting our exposure in any one client or sector, but does not remove the risks introduced by a general economic slowdown. Through financial year 2010 we will be focusing on retaining our large corporate clients, and finding additional business within the medium-sized segment.
Skills AvailabilityThe general slowdown in economic circumstances will ease some of the pressure on the availability of skilled staff. It will not however, significantly improve the overall shortage of competent technical and managerial staff in South Africa.
IT professionals remain one of the most mobile groups in the international economy. South Africa attracts extremely few talented IT professionals, and has a low graduate output rate. Many South African IT professionals are also still leaving the country for various reasons, and the shortage of suitable graduates in the industry will not disappear overnight.
Although we expect to compete successfully for the skills that we need, we do not expect the upward pressure on salaries to stop.
ServicesWe are responding to changing economic circumstances by shifting the emphasis across our existing service offerings. Having established ourselves in the outsourced partnerships, solutions and professional services space, DTH will spend time and effort growing our managed
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due to the nature of what we do; which is to provide software and services essential to the core business activities of our clients.
We are, however, expecting the downward pressure on our rates and margin to continue into 2010.
Our focus for the next year is to concentrate on those services mostly in demand through the expected tough times ahead, and continue to build a foundation for the next cycle of growth.
THANKSI would like to thank everyone involved in our tremendous success since listing.
To our committed and hard-working staff, some of whom have made great personal sacrifices to ensure our objectives were met, and without whom we could not have achieved our targets.
To our clients, who have been demanding but fair over the past year, and have remained flexible and understanding when we have asked it of them.
To our suppliers and service providers who have been reliable and predictable, leaving us to focus on our core business of technology and solutions.
To those shareholders who invested in DTH when we listed, and have supported and remained committed to us throughout tumultuous market conditions.
Finally, I would like to thank my fantastic management team which has provided a dynamic and stable platform on which to build our business over the next few years.
To all our investors, clients, management, and delivery teams at DTH, I wish you health, wealth and prosperity in the year ahead.
Chris WilkinsChief Executive Officer
services, our supplementary resourcing business, and our permanent placement services.
This will serve the dual purpose of providing leads for our established services offerings as well as giving us the opportunity for growth.
TechnologyDVT will continue to focus on being a specialist in Microsoft technologies. We will retain our Microsoft Gold Partner Certification and will consolidate and develop our relationship with the new senior management team at Microsoft SA.
“Our focus for the next year is to concentrate on
those services mostly indemand in the expected
tough times ahead”
We will also build and grow our ability to develop solutions on the Java™ platform.
Intellectual PropertyA natural extension of a custom software development business is the creation of useful IP. This IP comes in the form of an established competency and packaged and licensable software products. There is generally a premium available for this specialised IP and product knowledge.
DVT owns a number of such products and will continue to exploit its technological expertise and vertical industry experience by increasing recurring and annuity based license revenue associated with selling these products.
Our focus is in the Content Management, CRM, Loyalty and Incentive and Practice Management domain where DTH has an established client base, track record, and highly-skilled staff.
CONCLUSIONAt this early stage of our new financial year we remain cautious about our short and medium term prospects. We believe our services will continue to be in demand
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DTH | ANNUAL REPORT 2009
COMPLIANCE WITH THE KING CODEThe board of directors believes that good corporate governance is critical to the success of the group and is therefore committed to the concept and principles of effective corporate governance as articulated in the King Code.
The board is the focal point for corporate governance of the Group and remains ultimately responsible and accountable for the performance and affairs of the company.
“Compliance with theKing II Code was improved during the year in review”
Compliance with the King Code was improved during the year in review with the following notable changes:
• Appointment of an additional independent non-executive director• Changes to the composition of the audit and remuneration committees• Adoption of a board charter and audit committee charter• Drafting of a comprehensive set of policies for the Group• Suitable remuneration was put in place for all non-executive directors
ExceptionsThe Group has decided to partially adopt the King Code in line with the size, scale and risk of the Group. We therefore did not comply with all the principles of the King Code. The material items of partial or non-adoption are:
Remuneration Committee - is not chaired by an independent non-executive director.
Internal Audit – no separate internal audit function has been established. The board believes that given the size of the Group and the internal controls in place that a separate internal audit function cannot be cost justified. This decision will be reviewed annually.
Board Performance Appraisals – these are not formally conducted. The board intends to implement a formal process for appraisals in the coming year.
Risk Management – although the board takes responsibility for risk management and discusses risks that face the company and their mitigation or elimination, no formal risk management process is in place and no formal risk assessments were undertaken. The audit committee has been mandated with responsibility for risk management in the future.
Sustainability Reporting – no formal process was followed in this regard and no report is issued.
COMPOSITION OF THE BOARDThe board comprises 6 directors (a non-executive Chairman, 2 independent non-executive directors and 3 executive directors). The roles of Chairperson and CEO are clearly separate and the balance of executive and non-executive directors ensures a balance of power and adequate mix of skills to ensure that no one individual has unfettered decision making powers.
The executive directors are intimately involved in the day-to-day management and operation of the Group’s activities and are in the full-time salaried employ of the Group. Changes made to the board during the year:
• Derek Hughes changed from non-executive to executive director on 9 October 2008• Ashley de Klerk resigned as an executive director and Group COO on 6 November 2008• Rod Fehrsen was appointed as an independent non-executive director on 30 March 2009. Rod also chairs the Audit Committee and is a member of the Remuneration Committee.
Board AppointmentsAll board appointments are the responsibility of the board as a whole, assisted by the Remuneration Committee, which appointments are formal and transparent. Any appointments made by the board are required to be approved at the next annual general meeting of shareholders. In line with the Company’s Articles of Association one third of directors are subject to retirement by rotation each year. The re-election of such directors is subject to the approval by shareholders at the annual general
CORPORATE GOVERNANCE AND SUSTAINABILITY17
meeting. No director has a long-term service contract with the Group.
INTERNAL CONTROLThe board is responsible for and has implemented systems of internal control which are designed to detect and minimise the risk of fraud, potential liability, loss and material misstatement.
There are inherent limitations to the effectiveness of any systems of internal control, including the possibility of human error and the circumvention or overriding of controls. The systems are therefore designed to manage rather than eliminate risk of failure and opportunity risk. Nothing has come to the attention of the board to indicate that there has been a material breakdown in the internal systems of control during the year.
BOARD PROCESSESAll directors have access to the advice and services of the company secretary and, in appropriate circumstances, are entitled and authorised, at the company’s expense, to seek relevant independent professional advice.
The company secretary is responsible to ensure that board procedures and applicable rules and regulations are fully observed.
Share Dealings and Other InterestsDirectors and senior managers likely to have access to the company’s financial results and other price-sensitive information are prohibited from dealing in DTH’s shares during “closed periods” or “prohibited periods” as defined by the JSE Limited. All directors, managers and employees are informed of any closed periods.
In accordance with DTH’s internal policies, any directors’ dealings must first be approved by the Chairman, CFO or company secretary prior to execution. All directors’ dealings announcements are published on SENS.
Directors disclose their shareholdings, additional directorships and any potential conflicts of interest in writing at the commencement of each board meeting. See page 18 for details of director’s interest and page 55 for director’s emoluments.
BOARD RESPONSIBILITIESThe board is responsible for setting the direction of the group through the establishment of strategic objectives
and policies. It takes overall account-ability for the group by taking responsibility for its management. Although the board delegates the day-to-day management of the group to the CEO and executive management team, the board retains full and effective control over the group and decisions on material matters are reserved by the board, including:
• Approval of budgets and financial statements• Major capital expenditure• Mergers, acquisitions and disposals of businesses• Changes in share capital of the Company• Appointment of directors and the chief executive officer• Formulation and approval of policy• Managing the relationship with shareholders and investors
BOARD MEETINGSThe board is scheduled to meet each quarter and additional meetings can be convened when necessary. Directors are briefed timeously and comprehensively in advance of these meetings, and are supplied detailed written information to enable them to discharge their responsibilities.
Attendance at MeetingsThe table below shows the number of meetings attended out of the number eligible to attend.
Director Board Auditco Remco
H Ratshefola (Chair)1 4 of 4 2 of 2 1 of 1
C Wilkins (CEO) 4 of 4 n/a *2 of 2
G Fowler (CFO) 4 of 4 *2 of 2 n/a
D Hughes2 4 of 4 1 of 1 1 of 1
J Mamogale 4 of 4 2 of 2 2 of 2
A de Klerk3 2 of 3 n/a n/a
R Fehrsen4 n/a 1 of 1 1 of 1
Designated Advisor *4*of 4 2 of 2 n/a
Auditor n/a *1 of 1 n/a 1 resigned from Auditco on 30 March 2009 2 become executive director and resigned from Auditco and Remco on 9 Oct 2009 3 resigned on 6 November 2008 4 appointed to the board, chairman of Auditco and member of Remco on 30 March 2009 * by invitation
Attendance at general meetingsThe directors, both executive and non-executive, are strongly encouraged to attend all general meetings of
DTH | ANNUAL REPORT 2009
18
shareholders to foster improved interaction between the board and the shareholders. The Chairman’s attendance at general meetings is mandatory.
AUDIT COMMITTEERod Fehrsen (Chairman) (independent)Jackson Mamogale (independent)Hamilton Ratshefola (non-executive, by invitation)Graham Fowler (CFO, by invitation)Designated Advisor (by invitation)
The Audit Committee’s primary responsibilities are:• assisting the board to fulfil its responsibilities of ensuring that the system of internal controls, ccounting practices, management information systems, financial reporting systems and auditing processes are functioning effectively• recommending the appointment, determining the fees and assessing the independence and performance of the Group’s external auditors• reviewing and ensuring the credibility, objectivity and reliability of published financial reports and their compliance with IFRS• promoting and improving corporate governance• assessing the ethical conduct of the company• managing and reducing risk
The Audit Committee has:• assessed and is satisfied with the experience and ex pertise of the financial director• assessed and is satisfied with the indepen-dence and performance of the external auditors• determined what other services may or may not be provided by the company’s auditors.
REMUNERATION COMMITTEEHamilton Ratshefola (Chairman) (non-executive)Jackson Mamogale (independent)Rod Fehrsen (independent)Chris Wilkins (by invitation)
The Remuneration Committee is responsible for :• reviewing and approving the remuneration of directors and executive management• recommending the appointment of directors to the board• recommending fees for non-executive directors to the board for subsequent approval by shareholders• succession planning for executive directors• performance appraisal of the CEO and other
executive management• approval of the profit based incentive schemes for other management in the Group.
The Company’s philosophy is to set appropriate remuneration levels, taking into account levels of responsibility and the need to attract, motivate and retain directors, executives and managers of high calibre.
BLACK ECONOMIC EMPOWERMENTDuring the year under review the Group’s operating subsidiaries were all formally assessed for the first time by an official BBBEE accreditation agency. Three operating companies were rated as level 4 and one as level 2 contributors in terms of BBBEE Codes of Good Practice (“the Codes”) as gazetted in February 2007.
The Group’s operating subsidiaries are either
level 2 or level 3BBBEE contributors.
The board has tasked C Wilkins and D Hughes to oversee ongoing compliance and improvement.
ETHICSThe Group adheres to a code of ethics requiring it to act with honesty, responsibility and professional integrity in its dealings with employees, shareholders, customers, suppliers and society at large. In addition the Group strives to provide a work environment that is non-discriminatory with sound safety, health and environmental practices.
SOCIAL RESPONSIBILITYThe Group acknowledges its social responsibility towards the communities in which it operates and deserving institutions at large. The Group provides financial and non-financial support to a number of deserving charities.
For the Board of Directors
19
Shareholder Spread
As at 29 February 2009Number of
shareholders %Number of
Shares %
1-10,00010,001-100,000100,001-500,000500,001-1,000,0001,000,001-5,000,0005,000,001 and more
87109
204
131
37,1846,58
8,55 1,71 5,56 0,43
358 133 358 133
3 549 742 2 635 974
30 343 526 10 460 057
0,725,317,105,27
60,6920,92
Total 234 100,000 50 000 000 100,00
Public and Non-Public Shareholders
As at 29 February 2009Number of
shareholders %Number of
Shares %
Non-Public shareholdersMajor shareholders - Cornastone Technology Investments*Staff Trust and Treasury - DVT Employees Share Trust - DVT Gauteng (Pty) Ltd (treasury shares)Directors of the Company and its subsidiaries (di-rect and indirect) - C Wilkins* - D Hughes - The Shibumi Trust * - D Hughes* - The Hughes Trust - G Fowler* - J van der Merwe* - F de Klerk - J MamogaleOther Voting Pool Members - F de Klerk* - T Themistocleous* - V Diedrick* - A Gibbons* - F Luthango* - W Press*Non-Public Sub TotalPublic Shareholders - Liberty Life Assoc. of Africa Ltd - other non-material shareholders Public Sub Total
1
11
241211111
121111
20 1
213214
0,43
0,43 0,43
0,85 1,71 0,43 0,85 0,43 0,43 0,43 0,43 0,43
0,43 0,85 0,43 0,43 0,43 0,43
8,55
0,43 91,03 91,45
10 460 057
3 000 000 553 500
4 506 021 4 130 317
2 374 197 1 694 620
61 500 3 467 009 2 010 854
21 500 8 000
578 483 2 415 668 2 515 120 1 115 037
717 076 456 786
35 004 835
2 500 000 11 544 572 14 044 572
20,92
6,00 1,11
9,01 8,26 4,75 3,39 0,12
6,93 4,02 0,04 0,02
1,16 4,83 5,03 2,23 1,43 0,91
71,91
5,00 23,09 28,09
Total 234 100,000 50 000 000 100,00
* These shareholders, holding 64,4% of issued DVT shares, are party to a Voting Pool agreement.
Directors’ InterestsThe direct and indirect beneficial interests (no directors have a non-beneficial interest) of the directors in the Company’s securities as at 28 February 2009, as far as could be determined, is as follows:
As at 29 February 2009Direct
BeneficialIndirect
BeneficialTotal
Beneficial
J FoucheG FowlerD HughesJ MamogaleH RatshefolaJ van der MerweC Wilkins
21 5003 467 0091 694 620
8 000
2 010 8544 506 021
2 435 697
4 650 125
0.04 6.93 8.26 0.02 9.30 4.02 9.01
Total 11 708 004 7 085 822 37.59
Total February 2009 9 663 347 7 677 302 34.68
* There have been no changes to director’s interest at date of printing.
DTH | ANNUAL REPORT 2009
20SHAREHOLDER ANALYSIS
DM HughesCompany Secretary
The directors are required by the Companies Act of South Africa, 1973, as amended, to maintain adequate accounting records and are responsible for the content and integrity of the consolidated annual financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated annual financial statements fairly present the state of affairs of the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards and the Companies Act of South Africa, 1973, as amended. The external auditors are engaged to express an independent opinion on the consolidated annual financial statements.
The consolidated annual financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. These standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot be fully eliminated, the group endeavours to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.
The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.
The directors have reviewed the group’s cash flow forecast for the year to 28 February 2010 and, in the light of this review and the current financial position, they are satisfied that the group has or has access to adequate resources to continue in operational existence for the foreseeable future.
The external auditors are responsible for independently reviewing and reporting on the group’s consolidated annual financial statements. The consolidated annual financial statements have been examined by the group’s external auditors and their report is presented on page 22.
The consolidated annual financial statements set out on pages 26 to 60, which have been prepared on the going concern basis, were approved by the board on 20 May 2009 and were signed on its behalf by:
CERTIFICATION BY THE COMPANY SECRETARY In terms of section 268(G) of the Companies Act, 61 of 1973(Act), as amended, I certify that, to the best of my knowledge and belief, the company has, in respect of the financial year reported upon, lodged with the Registrar of Companies all returns required of a public company in terms of the Act and that all such returns are true, correct and up to date.
CJ WilkinsCEO
G FowlerCFO
Johannesburg20 May 2009
21 DIRECTORS’ RESPONSIBILITIES AND APPROVAL
DTH | ANNUAL REPORT 2009
22REPORT OF THE INDEPENDANT AUDITORS
TO THE SHAREHOLDERS OF DTH DYNAMIC TECHNOLOGY HOLDINGS LIMITED
We have audited the accompanying consolidated annual financial statements of DTH Dynamic Technology Holdings Limited, which comprise the directors’ report, the consolidated balance sheet as at 28 February 2009, the consolidated income statement, the consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 23 to 60.
Directors’ Responsibility for the Consolidated Annual Financial Statements The company’s directors are responsible for the preparation and fair presentation of these consolidated annual financial statements in accordance with International Financial Reporting Standards (IFRS), and the the Companies Act of South Africa, 1973, as amended. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated annual financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated annual financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated annual financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated annual financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the consolidated annual financial statements present fairly, in all material respects, the financial position of the group as at 28 February 2009, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa, 1973, as amended.
GreenwoodsRegistered Auditors
20 May 2009
THE DIRECTORS SUBMIT THEIR REPORT FOR THE YEAR ENDED 29 FEBRUARY 2008.
1. Review of activitiesMain business and operationsThe group is mainly engaged in software development and related professional services within the information technology industry and operates in South Africa. The operating results and state of affairs of the group are fully set out in the attached consolidated annual financial statements and do not in our opinion require any further comment. Net profit of the group including minority interest was R8,879,376 (2008: R6,167,309), after taxation of R3,008,504 (2008: R 2,409,656). Net profit of the company was R997,551 (2008: R20,729), after taxation of R380,620 (2008: Nil).
2. Post balance sheet eventsThe directors are not aware of any matter or circumstance arising since the end of the financial year until the date of the approval of the annual financial statements.
3. ContractsNo contracts, other than those disclosed in note 31, in which directors and officers of the company had an interest and that significantly affected the affairs or business of the company or any of its subsidiaries or which could have resulted in a conflict of interest were entered into during the year.
4. Authorised and issued share capital
The changes in the issued share capital of the group during the year under review were as follows:
Treasury Shares 621,230 shares with a par value of R0.005 each were purchased for cash by Dynamic Visual Technologies (Gauteng) (Pty) Ltd.375,593 shares with a par value of R0.005 each were purchased for cash by DVT Holdings Employee Share Trust.As a result of the above movements, share premium of R807,732 was utilised.
5. Borrowing limitationsIn terms of the Articles of association of the companies in the group, the directors may exercise all the powers to borrow money, as they consider appropriate.
6. Non-current assetsThere were no major changes in the nature of the non-current assets of the group during the year. Please refer to notes 4, 5, 6 and 7 of the financial statements for details regarding additions and disposals of non-current assets.
7. DividendsA dividend of 3 cents per share was declared and paid on 6 July 2009.
8. Directors
The directors of DTH Dynamic Technologies Holdings Limited during the year and to the date of this report are as follows:
Name: Changes:HMH Ratshefola* (Chairman) CJ WilkinsDM HughesG FowlerA de Klerk Resigned 6 November 2008MEJ Mamogale#
R Fehrsen# Appointed 30 March 2009
* Non-executive # Independent non-executive
23 DIRECTORS’ REPORT
9. Secretary G Fowler resigned as secretary of the company on 9 October 2008 and DM Hughes was appointed in his stead on 9 October 2008.
The secretary of DTH Dynamic Technology Holdings Limited is DM Hughes of:
Business address: Postal address:Ground Floor P O Box 408Victoria Gate South Gallo ManorHyde Park Lane 2052Sandton 2199
10. Interest in subsidiaries and special purpose entities
Name of subsidiaryShare
Captial
% Share-
Holding2009
% Share-
holding2008
Shares at cost
Amounts due (to)/
fromsubsidiaries
Dynamic Visual Technologies (Pty) Ltd 200 100 100 200 (6,075,729
Dynamic Visual Technologies Gauteng (Pty) Ltd 200 100 100 200 (30,870)
The Talent Exchange (Pty) Ltd 100 100 100 100 (90,000)
The Talent Exchange Cape (Pty) Ltd 1,000 100 100 3,975 (1,000)
Offline Digital (Pty) Ltd 1,609 66.7 66.7 1,073 -
J-Centric (Pty) Ltd 1,000 100 - 1,000 -
In so far as concerns the interest of the holding company in its subsidiaries, the aggregate net income after tax amounts to R 8,734,134 (2008 R 6 347 567).
In terms of SIC Interpretation 12: Consolidation - Special Purpose Entities, the DVT Holdings Employee Share Trust (“Share Incentive Trust”) was consolidated in the annual financial statements of the group.
11. AuditorsGreenwoods have indicated that they are willing to continue in office in accordance with section 270(2) of the Com-panies Act, as amended.
12. Special resolutionsThe following special resolutions were passed during the financial year under review:
• To change the name of the company from Dynamic Visual Technologies (Holdings) Limited to DTH Dynamic Technology (Holdings) Limited.
• Pursuant to a change in the Articles of the Company and any of its subsidiaries, the directors are authorised by way of general approval to from time to time acquire ordinary shares in the share capital of the company in accordance with section 85 of the Companies Act and the JSE listing requirements, provided that:
o The number of ordinary shares acquired in any one of the financial year shall not exceed 20% of the ordinary shares in issue at the date on which the resolution is passed.
o This authority shall lapse at the earliest of the date of the next Annual General Meeting or 15months after the date on which the resolutions was passed.
DTH | ANNUAL REPORT 2009
24
13. Directors’ shareholding The directors’ shareholding at year end was as follows:
Directors shareholding
2009Direct
Beneficial
2009Indirect
Beneficial
2008Direct
Beneficial
2008Indirect
Beneficial
HMH Ratshefola - 4,650,125 - 4,640,155
CJ Wilkins 4,506,021 - 4,499,072 -
DM Hughes 1,694,620 2,435,697 1,694,620 2,429,544
G Fowler 3,467,009 - 3,461,655 -
A de Klerk (resigned) n/a n/a - 607,604
MEJ Mamogale 8,000 - 8,000 -
Directors of subsidiaries:
J van der Merwe 2,010,854 -
J Fouche 21,500 - n/a n/a
Total 11,708,004 7,085,822 9,663,347 7,677,303
Share optionsThe following options were awarded to Directors:
DirectorNumber of
optionsGrantDate
Price peroption
HMH RatshefolaCJ WilkinsDM HughesG FowlerMEJ Mamogale Directors of subsidiaries: J van der Merwe J Fouche
100,000250,000200,000200,000
50,000
100,000100,000
26-Nov-0826-Nov-0826-Nov-0826-Nov-0826-Nov-08
26-Nov-0826-Nov-08
R0.75R0.75R0.75R0.75R0.75
R0.75R0.75
14. Employee share trust Please refer to note 38 the annual financial statements for detail regarding share based payments.
25
DTH | ANNUAL REPORT 2009
26BALANCE SHEETS
as at 28 February 2009(Amounts in R’000) Notes Group
2009Group
2008Company
2009Company
2008
ASSETS
Non-Current AssetsProperty, plant and equipmentInvestments in subsidiariesLoans to Group CompaniesLoans to shareholderGoodwillIntangible assetsDeferred Tax
Current AssetsTrade and other receivablesCash and cash equivalents
34
115678
910
12,4151,359
---
10,233526297
30,60016,84813,752
11,054887
---
9,751281136
22,33310,51511,818
14,3568
11,981-
2,340--
27
13,3872,279
11,108
14,72412
11,97890
2,644---
9,366-
9,366
Total Assets 43,015 33,387 27,743 24,090
EQUITY AND LIABILITIES
EquityEquity Attributable to Equity Holders of ParentShare CapitalReservesRetained incomeMinority interest
LiabilitiesCurrent LiabilitiesLoans from Group CompaniesCurrent tax payableOperating lease liabilityTrade and other payablesDeferred incomeDividend payable
11
12
13141525
33,27513,182
16819,925
38333,658
9,357-
1,82783
6,960487
-
25,25713,995
7211,191
23825,496
7,892-
1,37544
5,523900
50
20,77916,630
(438)4,587
-20,779
6,9656,198
104-
663--
20,29116,630
723,589
-20,291
3,7983,452
(23)-
370--
Total Equity and Liabilities 43,015 33,387 27,743 24,090
GROUP
For the year ended28 February 2009(Figures in R’000)
Share capital
Sharepremium
Totalshare
captial
Share Based
Payment Reserve
Retained income
Total attribut-
able to equity
holders of the group
Minorityinterest
Totalequity
Balance at 01 March 2007
Changes in equity Shares held by shareincentive trust Share based payment Minority on acquisition Derecognising of minority interest Capitalisation of listingexpenditure Issue of shares onextraction of minorities Share buy back Capitalisation of sharepremium Issue of new shares Net income (expenses)recognised directly in equity Profit for the year Total recognised incomeand expenses for the year Total changes
1
(13)--
-
-
0.2(22)
19872
236-
236236
4,254
(2,622)--
-
(1,445)
2,556(3,209)
(198)14,422
9,504-
9,5049,504
4,256
(2,635)--
-
(1,445)
2,557(3,232)
-14,494
9,739-
9,7399,739
-
-72
-
-
-
--
--
72-
7272
5,161
---
-
-
--
--
-6,029
6,0296,029
9,417
(2,635)72
-
-
(1,445)
2,557(3,232)
-14,494
9,8116,029
15,84115,841
358
--
190
(448)
-
--
--
(258)138
(120)(120)
9,775
(2,635)72
190
(448)
(1,445)
2,557(3,232)
-14,494
9,5546,167
15,72115,721
Balance at 01 March 2008 237 13,758 13,995 72 11,191 25,257 238 25,496
Changes in equityProfit for the year Shares held by ShareIncentive Trust Movement in treasury shares held by subsidiary -DVT Gauteng (Pty) Ltd Share based payments Total changes
-
(2)
(3)-
(5)
-
(298)
(509)-
(808)
-
(300)
(512)-
(813)
-
-
-9696
8,734
-
--
8,734
8,734
(300)
(512)96
8,017
145
-
--
145
8,879
(300)
(512)96
8,163
Balance at 28 February 2009 232 12,950 13,182 168 19,925 33,275 383 33,658
Note(s) 11
27 STATEMENTS OF CHANGES IN EQUITY
COMPANY
For the year ended28 February 2009(Figures in R’000)
Share capital
Sharepremium
Totalshare
captial
Share Based
Payment Reserve
Retained income
Total attribut-
able to equity
holders of the group
Minorityinterest
Totalequity
Balance at 01 March 2007
Changes in equity Profit for the year Issue of shares Issue of shares on extraction of minorities Share buy back Share based payment Capitalisation of share premium Listing costs offset to share premium Total changes
1
-72
0.2(22)
-198
-249
4,254
-14,422
2,556(3,209)
-
(198)
(1,445)12,126
4,256
-14,494
2,557(3,232)
-
-
(1,445)12,374
-
--
---
-
--
-
--
--
72
-
-72
-
--
--
72
-
-72
3,569
21-
---
-
-21
7,824
2114,494
2,557(3,232)
72
-
(1,445)12,467
Balance at 01 March 2008 250 16,380 16,630 - 72 72 3,589 20,291
Changes in equityShare based payments Net income (expenses) recognised directly in equity Profit for the year Total recognised income and expenses for the year Fair value adjustment on loan to shareholder Total changes
-
--
-
--
-
--
-
--
-
--
-
--
-
--
-
(606)(606)
96
96-
96
-96
96
96-
96
(606)(510)
-
-998
998
-998
96
96998
1,093
(606)487
Balance at 28 February 2009 250 16,380 16,630 (606) 168 (438) 4,587 20,779
Note(s) 11
DTH | ANNUAL REPORT 2009
28STATEMENTS OF CHANGES IN EQUITY
29 INCOME STATEMENTS
for the year ended 28 February 2009(Figures in R’000) Note(s)
Group2009
Group2008
Company2009
Company2009
RevenueCost of sales
1617
81,781(934)
58,601(764)
--
--
Gross profitOther incomeOperating expenses
80,84799
(70,251)
57,837261
(49,975)
-5,714
(5,493)
-2,142
(2,401)
Operating profitInvestment revenueFinance costs
181920
10,6951,250
(57)
8,123455
(2)
2211,158
(0.3)
(259)279
(0.01)
Profit before taxationTaxation 21
11,888(3,009)
8,577(2,410)
1,378(381)
21-
Profit for the year 8,879 6,167 998 21
Attributable to:Equity holders of the parentMinority Interest
Earnings per share (cents)BasicDiluted
3535
8,734145
17.517.5
6,029138
14.414.2
DTH | ANNUAL REPORT 2009
30CASH FLOW STATEMENTS
for the year ended 28 February 2009(Figures in R’000) Note(s) Group
2009Group
2008Company
2009Company
2008
Cash flows from operating activities
Cash generated from operationsInterest incomeDividends receivedFinance costsTax paid
2319
2024
6,1891,250
-(57)
(2,717)
6,907455
-(2)
(1,864)
(1,664)1,158
-(0.3)
(281)
576279450
(0.01)(23)
Net cash from operating activities 4,664 5,497 (788) 1,282
Cash flows from investing activities
Purchase of property, plant and equipmentLoan advanced to subsidiaryLoan advanced to share incentive trustProceeds on sale on investment in subsidiaryProceeds on sale of property, plant and equipmentPurchase of other intangible assetsAcquisition of businesses(Acquisition of shares) / receipt of share premium in holding company
3 37
26
(927)---
30(518)(503)
(808)
(438)---
16(296)
(1,650)
6,948
--
(302)---
(3)
-
(13)(90)
(650)203
--
(2,241)
-
Net cash from investing activities (2,725) 4,580 (305) (2,791)
Cash flows from financing activities
Proceeds on share issueProceeds on share issue - Share premiumLoans received from subsidiariesLoans repaid to subsidiariesShare buy backRepayment of other financial liabilities
----
(5)-
236----
(254)
--
55,358(52,522)
--
507,7742,991
---
Net cash from financing activities (5) (18) 2,836 10,815
Total cash movement for the yearCash at the beginning of the year
1,93411,818
10,0591,759
1,7439,366
9,30560
Total cash at end of the year 10 13,752 11,818 11,108 9,366
31 ACCOUNTING POLICIES
1 PRESENTATION OF CONSOLIDATED ANNUAL FINANCIAL STATEMENTS The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), and the Companies Act of South Africa, 1973, as amended. The consolidated annual financial statements have been prepared on the historical cost basis, except for certain financial instruments which are carried at fair value, and incorporate the principal accounting policies set out below.
These accounting policies are consistent with the previous period.
1.1 Underlying concepts The financial statements are prepared on the going concern basis using accrual accounting.
Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard or interpretation.
Financial assets and financial liabilities are offset, and the net amount reported only when a currently legally enforceable right to set off the amounts exists and the intention is either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Changes in accounting policies are accounted for in accordance with the transitional provisions in the standard. If no such guidance is given, they are applied retrospectively - unless it is impracticable to do so, in which case they are applied prospectively.
Changes in accounting estimates are recognised prospectively by including it in profit or loss in the period of the change and future periods, if the change affects both.
Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are applied prospectively.
Accounting policies are not applied when the effect of applying them would be immaterial.
1.2 Recognition of assets and liabilities Assets are only recognised if they meet the definition of an asset, it is probable that future economic benefits associated with the asset will flow to the group and the cost or fair value can be measured reliably.
Liabilities are only recognised if they meet the definition of a liability, it is probable that future economic benefits associated with the liability will flow from the group and the cost or fair value can be measured reliably.
Financial instruments are recognised when the group becomes a party to the contractual provisions of the instrument.
1.3 Derecognition of assets and liabilities Financial assets or parts thereof are derecognised when the contractual rights to receive cash flows have been transferred or have expired or if substantially all the risks and rewards of ownership have passed. Where substantially all the risks and rewards of ownership have not been transferred or retained, the financial assets are derecognised if they are no longer controlled. However, if control in this situation is retained, the financial assets are recognised only to the extent of the continuing involvement in those assets.
The gain or loss arising from the derecognition of an asset is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an asset is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
Financial liabilities are derecognised when the relevant obligation has either been discharged or cancelled or has expired.
1.4 Significant judgements The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts on assets and liabilities. Although estimates and associated assumptions are based on historical experience of the acquired business unit and various other factors that are believed to be reasonable under the circumstances (the results of which form the basis of making the judgements about carrying values of assets that are not readily apparent from other sources), the actual outcome may differ from these estimates. All significant assumptions and estimates are disclosed in the notes to the annual financial statements. Loans and Receivables The company assesses its loans and receivables for impairment at each balance sheet date. In determining whether an
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impairment loss should be recorded in the income statement, the company makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. Available-for-sale financial assets The group follows the guidance of IAS 39 (Financial Instruments: recognition and measurement) to determine when an available-for-sale financial asset is impaired. This determination requires significant judgment. In making this judgment, the group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.
Fair value estimation The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the group is the current bid price.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.
Impairment testing The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.
The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors.
Taxation Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
The group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the balance sheet date could be impacted.
Asset useful lives and residual values Property, plant and equipment is depreciated over its useful life taking into account residual values where appropriate. The actual useful lives of assets and residual values are assessed annually. In re-assessing asset useful lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
1.5 Property, plant and equipment Items of property, plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment losses.
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation is charged so as to write off the depreciable amount of the assets to their residual values over their estimated useful lives, using a method that reflects the pattern in which the asset’s future economic benefits are expected to be con-
33
sumed by the entity. The straight line method is used for all assets.
The depreciation methods, remaining useful lives and residual values are reviewed annually. The following rates were used during the year:
Item Average useful lifeFurniture and fixtures 5 to 10 yearsOffice equipment 5 to 10Computer equipment 3 yearsLeasehold improvements 2 years
The depreciation charge for each period is recognised in profit or loss.
1.6 GoodwillGoodwill is initially measured at cost, being the excess of the business combination over the group’s interest of the net fair value of the identifiable assets, liabilities and contingent liabilities.
Subsequently goodwill is carried at cost less any accumulated impairment.
The excess of the company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the business combination is immediately recognised in profit or loss.
1.7 Intangible assetsIntangible assets are initially recognised at cost if acquired separately or internally generated or at fair value if acquired as part of a business combination.
Research costs are recognised in profit or loss when they are incurred. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.
Development costs are capitalised only when they meet the criteria for capitalising development expenditure, i.e.
• it is technically feasible to complete the asset so that it will be available for use or sale. • there is an intention to complete and use or sell it. • there is an ability to use or sell it. • it will generate probable future economic benefits. • there are available technical, financial and other resources to complete the development and to use or sell the asset. • the expenditure attributable to the asset during its development can be measured reliably.
Costs include expenditure on materials, direct labour and an allocated proportion of project overheads. All other development expenditure is recognised in profit or loss.
Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets but they are tested at least annually for impairment. The assessment of the estimated useful life of these assets is reviewed at least annually. If assessed as having a finite useful life, they are amortised over their useful lives using a straight line basis and tested for impairment annually if there is an indication that they may be impaired.
The amortisation methods and estimated remaining useful lives are reviewed annually.
Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:
Item Useful lifeTrademarks IndefiniteComputer software 2 - 3 yearsDevelopment expenditure 3 years
1.8 Financial instruments Group financial statements The consolidated financial statements incorporate the assets, liabilities, income, expenses and cash flows of the company and its subsidiaries as if they are a single economic entity.
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The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date of acquisition or up to the date of disposal.
On acquisition the group recognises the subsidiary’s identifiable assets, liabilities and contingent liabilities at fair value, except for assets classified as held-for-sale, which are recognised at fair value less costs to sell.
Inter-company transactions and balances between group entities are eliminated on consolidation.
1.9 Financial instruments Initial recognition The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
Financial assets and financial liabilities are recognised on the group’s balance sheet when the group becomes party to the contractual provisions of the instrument.
Fair value determination The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.
Loans to shareholders, directors, managers and employees These financial instruments are classified as loans and receivables and are carried at amortised cost.
Subsequently these loans are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts.
On loans receivable an impairment loss is recognised in profit or loss when there is objective evidence that it is impaired. The impairment is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.
Trade and other receivables Trade receivables are measured at initial recognition at fair value plus direct transaction costs, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within operating expenses. When a trade receivable is uncollectible, it is written off.
Trade and other receivables are classified as loans and receivables.
Trade and other payables Trade payables are initially measured at fair value plus direct transaction costs, and are subsequently measured at amortised cost, using the effective interest rate method.
Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.
Financial assets at fair value through profit or loss Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned.
35
Investments are measured initially and subsequently at fair value, gains and losses arising from changes in fair value are included in profit or loss for the period.
Available for sale financial assets These financial assets are non-derivatives that are either designated in this category or not classified elsewhere.
Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned.
These investments are measured initially and subsequently at fair value. Gains and losses arising from changes in fair value are recognised directly in equity until the security is disposed of or is determined to be impaired.
The group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.
Impairment losses recognised in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognised in profit or loss for debt instruments classified as available for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss, while translation differences on non-monetary securities are recognised in equity. Changes in the fair value of monetary and nonmonetary securities classified as available-for-sale are recognised in equity.
Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of ‘other income’. Dividends on available-for-sale equity instruments are recognised in the income statement as part of ‘other income’ when the company’s right to receive payments is established.
Equity investments for which a fair value is not determinable are held at cost. Impairments on such investments are not reversed.
Held to maturity These financial assets are initially measured at fair value plus direct transaction costs.
At subsequent reporting dates these are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.
Financial assets that the group has the positive intention and ability to hold to maturity are classified as held to maturity.
1.10 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets and liabilities Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and li-abilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that, at the time of the transaction, affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.
Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period, directly in equity, or a business combination.
Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly to equity.
1.11 Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the lessee lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership to the lessee.
Operating leases - lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term except where another systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
1.12 Impairment of assets The group assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the group also:
• tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period. • tests goodwill acquired in a business combination for impairment annually.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.
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If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.
An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss.
Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.
An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order:
• first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and • then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.
The group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists the recoverable amounts of those assets are estimated.
The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.
A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss, unless the asset is carried at a revalued amount. Any reversal of an impairment loss of a revalued asset shall be treated as a revaluation increase.
1.13 Share capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
If the group reacquires its own equity instruments, the consideration paid, including any directly attributable incrementa costs (net of income taxes) on those instruments are deducted from equity until the shares are cancelled or reissued. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s own equity instruments. Consideration paid or received shall be recognised directly in equity.
1.14 Share based payments Goods or services received or acquired in a share-based payment transaction are recognised when the goods are received, or as the services are rendered. A corresponding increase in equity is recognised if the goods or services were received in an equity-settled share-based payment transaction or a liability if the goods or services were acquired in a cash-settled share-based payment transaction.
When the goods or services received or acquired in a share-based payment transaction do not qualify for recognition as assets, they are recognised as expenses.
For equity-settled share-based payment transactions, the goods or services received are measured, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably.
If the fair value of the goods or services received cannot be estimated reliably, their value and the corresponding increase in equity, indirectly, are measured by reference to the fair value of the equity instruments granted.
For cash-settled share-based payment transactions, the goods or services acquired and the liability incurred are measured at the fair value of the liability. Until the liability is settled, the fair value of the liability is re-measured at each reporting date and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.
If the share based payments granted do not vest until the counterparty completes a specified period of service, the group accounts for those services as they are rendered by the counterparty during the vesting period, (or on a straight line basis over the vesting period).
If the share based payments vest immediately the services received are recognised in full. For share-based payment transactions in which the terms of the arrangement provide either the group or the counterparty with the choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments, the components of that transaction are recorded, as a cash-settled share-based payment transaction if, and to the extent
37
that, a liability to settle in cash or other assets has been incurred, or as an equity-settled share-based payment transaction if, and to the extent that, no such liability has been incurred.
1.15 Employee benefits Short-term employee benefits The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vaca-tion leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.
The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.
The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.
1.16 Provisions and contingencies Provisions are recognised when:
• the group has a present obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the obligation.
The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.
Provisions are not recognised for future operating losses.
If the group has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.
Contingent liabilities acquired in a business combination are initially measured at fair value at the date of acquisition. At subsequent reporting dates, such liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37 Provisions, Contingent Liabilities and assets and the amount initially recognised less cumulative amortisation recognised in accordance IAS 18 Revenue.
1.17 Revenue Revenue from the sale of goods is recognised when all the following conditions have been satisfied:
• the group has transferred to the buyer the significant risks and rewards of ownership of the goods; • the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; • the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the group; • and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.
Service revenue is recognised by reference to the stage of completion of the transaction at balance sheet date. Stage of completion is determined by services performed to date as a percentage of total services to be performed.
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.
Interest income is accrued on a time basis by reference to the principal outstanding and the applicable interest rate. Dividends are recognised, in profit or loss, when the group’s right to receive payment has been established.
1.18 Cost of sales When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of
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inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
The related cost of providing services recognised as revenue in the current period is included in cost of sales.
1.19 Borrowing costs Borrowing costs are recognised as an expense in the period in which they are incurred.
1.20 Translation of foreign currencies A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
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 translated using the exchange rate at the date of the transaction; and • non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
1.21 Post-balance sheet events Recognised amounts in the financial statements are adjusted to reflect events arising after the balance sheet date that provide evidence of conditions that existed at the balance sheet date. Events after the balance sheet date that are indicative of conditions that arose after the balance sheet date are dealt with by way of a note.
1.22 Business Combinations The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3: Business Combinations, are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held for sale in accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the group’s interest in the net assets acquired exceeds the cost of the business combination, the excess is immediately recognised in profit and loss.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value, at the date of acquisition, of the assets, liabilities and contingent liabilities recognised.
1.23 Comparative figures Comparative figures are restated in the event of a change in accounting policy, prior period error or reclassification.
1.24 Earnings per shareBasic earnings per share represents the profit on ordinary activities after taxation attributable to the equity shareholders of the parent entity, divided by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share represents the profit on ordinary activities after taxation attributable to the equity shareholders, divided by the weighted average number of ordinary shares in issue during the year, plus any diluting shares resulting from share options and other potential shares outstanding during the year.
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DTH | ANNUAL REPORT 2009
40NOTES TO THE FINANCIAL STATEMENTS
2. NEW STANDARDS AND INTERPRETATIONS2.1 Standards and Interpretations not yet effective
The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group’s accounting periods beginning on or after 01 March 2009 or later periods.
The standards and interpretations not yet effective as listed below, will be adopted as per their commencement dates. The impact of the below-mentioned standards on the group’s annual financial statements has not been assessed. IAS 1 (Revised) Presentation of Financial StatementsThe main revisions to IAS 1 (AC 101): Require the presentation of non-owner changes in equity either in a single statement of comprehensive income or in an income statement and statement of comprehensive income.
Require the presentation of a balance sheet at the beginning of the earliest comparative period whenever a retrospective adjustment is made. This requirement includes related notes.
Require the disclosure of income tax and reclassification adjustments relating to each component of other comprehensive income. The disclosures may be presented on the face of the statement of comprehensive income or in the notes. Allow dividend presentations to be made either in the statement of changes in equity or in the notes only.
Have changed the titles to some of the financial statement components, where the ‘balance sheet’ becomes the ‘statement of financial position’, the ‘cash flow statement’ becomes the ‘statement of cash flows’ and the income statement becomes the statement of comprehensive income for the reporting period showing the components of profit and loss either; as part of a single statement of comprehensive income or in two separate statements comprising of a statement displaying components of profit and loss (separate income statement) and a second statement (statement of comprehensive income). These new titles will be used in International Financial Reporting Standards, but are not mandatory for use in financial statements.
The effective date of the standard is for years beginning on or after 01 January 2009.
IFRS 2 Amendment: IFRS 2 - Share-based Payment: Vesting Conditions and Cancellations The amendment clarifies that vesting conditions are only performance conditions or service conditions. All other conditions are non-vesting conditions. Non-vesting conditions are accounted for in the same manner as market conditions. It further clarifies that if either party can choose not to satisfy a non-vesting condition, then the arrangement is treated as a cancellation upon non fulfillment of that condition.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IFRS 7 Financial Instruments: Disclosures The amendment relates to changes in the Implementation Guidance of the Standard. ‘Total interest income’ was removed as a component of finance costs from paragraph IG13. This was to remove inconsistency with the requirement of IAS 1 (AC 101) Presentation of Financial Statements which precludes the offsetting of income and expenses.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 1 Presentation of Financial Statements The amendment is to clarify that financial instruments classified as held for trading in accordance with IAS39 (AC133).
Financial Instruments: Recognition and Measurement are not always required to be presented as current assets/liabilities.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors The amendment clarified that Implementation Guidance related to any Standard is only mandatory when it is identified as an integral part of the Standard.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 10 Events after the Reporting Period The amendment clarified that if dividends are declared (appropriately authorised and no longer at the discretion of the entity) after the reporting period but before the financial statements are authorised for issue, the dividends may not be
41
recognised as a liability as no obligation exists at the reporting date. hus clarifying that in such cases a liability cannot be raised even if there is a constructive obligation.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 16 Property, Plant and Equipment The term “net selling price” has been replaced with “fair value less cost to sell” in the definition of recoverable amount. The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 7 Statement of Cash Flows Cash payments to manufacture or acquire property, plant and equipment that entities routinely sell and which they have previously held for rentals to others, and cash receipts from rental and sale of such assets are to be included within operating activities.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 18 Revenue With regards to financial service fees, the term ‘direct costs’ have been replaced with ‘transaction costs’ as defined in IAS 39 (AC 133) Financial Instruments: Recognition and Measurement. This was in order to remove the inconsistency for costs incurred in originating financial assets and liabilities that should be deferred and recognised as an adjustment to the underlying effective interest rate.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 19 Employee Benefits With regards to curtailments and negative past service costs clarification has been made that:
When a plan amendment reduces benefits, the effect of the reduction for future service is a curtailment and the effect of any reduction for past service is a negative past service cost;
Negative past service cost arises when a change in the benefits attributable to past service results in a reduction in the present value of the defined benefit obligation; and
A curtailment may arise from a reduction in the extent to which future salary increases are linked to the benefits payable for past service.
The definition of ‘return on plan assets’ has also been amended to require the deduction of plan administration costs only to the extent that such costs have not been reflected in the actuarial assumptions used to measure the defined benefit obligation.
The term “fall due” in the definition of “short term employee benefits” has been replaced with “due to be settled”. The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 23 Borrowing Costs (as revised in 2007) The description of specific components of borrowing costs has been replaced with a reference to the guidance in IAS 39 (AC 133) Financial Instruments: Recognition and Measurement on effective interest rate.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 27 Consolidated and Separate Financial Statements The amendment requires that investments in subsidiaries, jointly controlled entities and associates accounted for in accordance with IAS 39 (AC 133) Financial Instruments: Recognition and Measurement in the parent’s separate financial statements should continue to be measured in accordance with IAS 39 (AC 133) when classified as held for sale (or included in a disposal group classified as held for sale), and not in accordance with IFRS 5 (AC 142) Non-current Assets held for Sale and Discontinued Operations.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 34 Interim Financial Reporting The amendment clarifies that the requirement to present information on earnings per share in interim financial reports applies only to entities within the scope of IAS 33 (AC 104) Earnings per Share.
The effective date of the amendment is for years beginning on or after 01 January 2009.
DTH | ANNUAL REPORT 2009
42
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 36 Impairment of Assets The amendment requires disclosures of estimates used to determine the recoverable amount of cash-generating units containing goodwill or intangible assets with indefinite useful lives. Specifically, the following disclosures are required when discounted cash flows are used to estimate fair value less costs to sell:
• The period over which management has projected cashflows; • The growth rate used to extrapolate cash flow projections; and • The discount rate(s) applied to the cash flow projections.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 38 Intangible Assets The amendments clarify the circumstances in which an entity can recognise a prepayment asset for advertising or promotional expenditure. Recognition of an asset would be permitted up to the point at which the entity has the right to access the goods purchased or up to the point of receipt of services.
In addition, wording perceived as prohibiting the use of the unit of production method if it results in a lower amount of accumulated amortisation than under the straight line method has been removed. Entities may use the unit of production method when the resulting amortisation charge reflects the expected pattern of consumption of the expected future economic benefits embodied in an intangible asset.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 39 Financial Instruments: Recognition and Measurement IAS 39 (AC 133) prohibits the classification of financial instruments into or out of the fair value through profit or loss category after initial recognition. The amendments set out a number of changes in circumstances that are not considered to be reclassifications for this purpose.
The amendments have also removed references to the designation of hedging instruments at the segment level.
The amendments further clarify that the revised effective interest rate calculated when fair value hedge accounting ceases, in accordance with paragraph 92 IAS 39 (AC 133) should be used for the re-measurement of the hedged item when paragraph AG8 of IAS 39 (AC 133) is applicable.
The effective date of the amendment is for years beginning on or after 01 January 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IAS 40 Investment Property and IAS 16 Property, Plant and Equipment Some terminology in the Standard has been amended to be consistent with other Standards and Interpretations. The effective date of the amendment is for years beginning on or after 01 January 2009.
IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements: Amendment for determining cost of investment in the separate financial statements on first time adoption The amendments:
• Allow for the purposes of first time adoption of IFRS, investors to use a deemed cost to measure the initial cost of investments in subsidiaries, jointly controlled entities, and associates in the separate financial statements. This deemed cost is either fair value or the carrying amount under previous accounting practice.• Require that, when a new parent is formed in a reorganisation, the new parent must measure the cost of its investment in the previous parent at the carrying amount of its share of the equity items of the previous parent at the date of the reorganization.
The effective date of the amendment is for years beginning on or after 01 January 2009.
IAS 18 Revenue: Consequential amendments Dividends paid out of pre-acquisition profits are no longer deducted from the cost of the investment. The effective date of the amendment is for years beginning on or after 01 January 2009.
43
IAS 36 Impairment of Assets: Consequential amendments Under certain circumstances, a dividend received from a subsidiary, associate or joint venture could be an indicator of impairment. This occurs when:
• Carrying amount of investment in separate financial statements is greater than carrying amount of investee’s net assets including goodwill in consolidated financial statements or • Dividend exceeds total comprehensive income of investee in period dividend is declared.
The effective date of the amendment is for years beginning on or after 01 January 2009.
IAS 27 (Amended) Consolidated and Separate Financial Statements The revisions require:
• Losses of the subsidiary to be allocated to non-controlling interest, even if they result in the non-controlling interest being a debit balance. • Changes in level of control without loss of control to be accounted for as equity transactions, without any gain or loss being recognised or any remeasurement of goodwill.
When there is a change in the level of control without losing control, the group is prohibited from making reclassification adjustments.
When control is lost, the net identifiable assets of the subsidiary as well as non-controlling interest and goodwill are to be derecognised. Any remaining investment is remeasured to fair value at the date on which control is lost, and a gain or loss on loss of control is recognised in profit or loss.
The effective date of the amendment is for years beginning on or after 01 July 2009.
IAS 7 Statement of Cash flows: Consequential amendments due to IAS 27 (Amended) Consolidated and Separate Financial Statements Cash flows arising from changes in level of control, where control is not lost, are equity transactions and are therefore accounted for as cash flows from financing transactions.
The effective date of the amendment is for years beginning on or after 01 July 2009.
IIFRIC 17: Distribution of Non-cash Assets to Owners The effective date of the amendment is for years beginning on or after 01 July 2009.
May 2008 Annual Improvements to IFRS’s: Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations The amendment clarifies that assets and liabilities of a subsidiary should be classified as held for sale if the parent is committed to a plan involving loss of control of the subsidiary, regardless of whether the entity will retain a non-controlling interest after the sale.
The effective date of the amendment is for years beginning on or after 01 July 2009.
Amendment to IAS 39 and IFRS 7: Reclassification of Financial Assets The amendment permits an entity to reclassify certain financial assets out of the fair value through profit or loss category if certain stringent conditions are met. It also permits an entity to transfer from the available for sale category to loans and receivables under certain circumstances. Additional disclosures are required in the event of any of these reclassifications.
The effective date of the amendment is for years beginning on or after 01 July 2009.
DTH | ANNUAL REPORT 2009
44
3. PROPERTY, PLANT AND EQUIPMENT
Figures in R’000 Cost
2009Accumulated Depreciation
CompanyValue Cost
2008Accumulated Depreciation
CompanyValue
GROUPFurniture and fixturesOffice equipmentComputer equipmentLeasehold improvements
578195
1,87033
(193)(52)
(1,040)(33)
386143830
-
41978
1,23633
(126)(36)
(694)(23)
29342
54210
Total 2,676 (1,318) 1,359 1,766 (879) 887COMPANYComputer equipment 13 (5) 8 13 (1) 12
Reconciliation of property, plant and equipment - 2008
Figures in R’000OpeningBalance Additions
Additions through business
combinations
Disposals and scrappings Depreciation Total
GROUPFurniture and fixturesOffice equipmentComputer equipmentLeasehold improvements
29342
54210
159126642
-
--
20-
-(2)
(15)-
(66)(23)
(359)(10)
386143830
-Total 887 927 20 (17) (458) 1,359COMPANYComputer equipment 12 - - - (4) 8
Reconciliation of property, plant and equipment - 2008
Figures in RandsOpeningBalance Additions
Additions through business
combinationsDisposals and
scrappings Depreciation TotalGROUPFurniture and fixturesOffice equipmentComputer equipmentLeasehold improvements
28154
42613
313
37926
32-
40-
--
(25)-
(52)(15)
(278)(29)
29342
54210
Total 774 438 72 (25) (373) 887COMPANYComputer equipment - 13 - - (1) 12
4. INVESTMENT IN SUBSIDIARIESCompany
Ownershipinterest
(%)2009
Company Ownership
interest(%)
2008
Company Carryingamount(R’000)
2009
Company Carryingamount(R’000)
2008NAME OF COMPANYDynamic Visual Technologies (Pty) LtdDynamic Visual Technologies (Gauteng) (Pty) LtdThe Talent Exchange (Pty) LtdOffline Digital (Pty) LtdThe Talent Exchange Cape (Pty) LtdJ-Centric (Pty) Ltd
100.0%100.0%100.0%
66.7%100.0%100.0%
100.0%100.0%100.0%
66.7%100.0%100.0%
7,4823,0250,0011,466
43
7,4823,0250,0011,466
4-
11,981 11,978
The carrying amounts of subsidiaries are shown net of impairment losses.
5. LOAN TO SHAREHOLDER
Figures in R’000Group
2009Group
2008Company
2009Company
2008Available for saleDVT Holdings Employee Share Trust - - 2,340 2,644
This loan is unsecured, interest free and was not subject to any fixed terms of repayment.
The credit quality of the loan to shareholder that is neither past due nor impaired can be assessed by reference to the financial position of the relevant entity, past experience and other factors.During the reporting period, there were no deviations by the entity from their agreement terms and there has not been a significant change in the financial position of the entity.
6. GOODWILL
Figures in R’000 Cost
2009Accumulated amortisation
Carryingvalue Cost
2008Accumulated amortisation
Carrying value
GROUP Goodwill 10,233 - 10,233 9,751 - 9,751
Reconciliation of goodwill - 2009
Figures in R’000 Cost
2009 Additions
through business
combina-tions Total
Openingbalance
2008 Additions
through business
combina-tions Total
GROUP Goodwill 9,751 482 10,233 5,840 3,912 9,751
Measurement of recoverable amounts of goodwill Management use the fair value less cost to sell to determine the recoverable amount of the goodwill. The value is determined by capitalising the entities maintainable earnings at an appropriate price earnings ratio.
The price earnings ratio is determined in accordance with the risks associated with the business operations of the company compared with those of a similar listed company on the AltX of the Johannesburg Securities Exchange and adjusted to reflect the risks associated with the business operations of an unlisted entity.
7. INTANGIBLE ASSETS
Figures in R’0000 Cost
2009Accumulated amortisation
Carrying Value Cost
2008Accumulated amortisation
Carrying Value
GROUPTrademarksComputer softwareDevelopment expenditure
21540882
-(504)(412)
2136
470
21503401
-(459)(185)
2144
216Total 1,443 (917) 526 925 (644) 281
Reconciliation of intangible assets - 2009
Figures in R’000Opening Balance Additions Amortisation Total
GROUPTrademarksComputer softwareDevelopment expenditure
2144
216
-37
481
-(45)
(228)
2136
470281 518 (273) 526
45
Reconciliation of intangible assets - 2008
Figures in R’000OpeningBalance Additions Amortistion Total
GROUPTrademarksComputer softwareDevelopment expenditure
214973
-69
226
-(74)(83)
2144
216143 296 (158) 281
Intangible assets with indefinite lives
Figures in R’000 Group2009
Group2008
Company2009
Company2008
Trademarks 21 21 - -
The useful lives of the trademarks are considered indefinite. They are not bound by any expiry period as there is no foreseeable limit to the period over which the assets are expected to generate net cash flows for the group.
Management assesses the useful lives of the trademarks as indefinite based on the fact that the trademarks relate to the names “DVT” and “Dynamic Visual Technologies” which generate future economic benefits for as long as the company is in operation.
8. DEFERRED TAXDeferred tax asset
Figures in R’000 Group2009
Group2008
Company2009
Company2008
Accelerated capital allowances for tax purposes Lease smoothing liability Provision for doubtful debts Accrued income Income received in advance Accruals Share option expense
(142)2384
-95
21027
(58)1220
(89)146104
-
(0,1)----
0,427
-------
297 136 27 -
Reconciliation of deferred tax asset
Figures in R’000Group
2009Group
2008Company
2009Comapny
2008At beginning of year Acquired through acquisition of subsidiary Changes in tax rate (Reversing) / originating temporary difference on income Received in advance and section 24C allowances Originating temporary difference on accruals Originating temporary difference on property, plant and equipment Originating temporary difference on lease smoothing Originating temporary difference on provision for doubtful debts Reversing temporary difference on accrued income Originating temporary difference on share option expense
136--0
(52)106
(85)11
64 8927
50(59)
(5)0
108
4(47)
0,3(2)
(13)-
-----
0,4
(0,1)-
--
27
-----
--
----
297 136 27 -
DTH | ANNUAL REPORT 2009
46
9. TRADE AND OTHER RECEIVABLES
Figures in R’000Group
2009Group
2008Company
2009Company
2008Trade receivablesDepositsSundry debtors
16,7183298
9,83240
643
2,270-9
---
16,848 10,515 2,279 -
Credit quality of trade and other receivables The average credit period granted to customers is 30 days. No interest is charged on overdue customers. Management evaluates credit risk relating to customers on a ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assess the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.
Of the trade receivables balance at the end of the year, R 5,526,034 (2008: R 4,993,973) is due from individual debtors who represents more than 20% of the total balance of trade and other receivables of the companies in the group.
The credit quality of trade and other receivables that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates:
CurrenciesThe carrying amount of trade receivables are denominated in the following currencies:
Figures in R’000Group
2009Group
2008Company
2009Company
2008
The carrying amount of trade receivables are denominated in the following currencies: UK Pound Rand
45216,265
--
--
--
16,718 - - -
Trade receivables Counterparties without external credit rating
Figures in R’000Group
2009Group
2008Company
2009Company
2008
New customers Existing customers with no defaults in the past Existing customers with some defaults in the past
5,4575,8222,144
1,4876,611
-
-2,279
-
---
13,423 8,098 2,279 -
The terms of trade debtors that are fully performing have not been renegotiated in the last year.
Fair value of trade and other receivables The fair values of trade and other receivables are equal to their carrying values.
Trade and other receivables past due but not impaired At 28 February 2009, receivables to the value of R 3,294,387 (2008: R 1,828,000) were past due but not impaired. These relate to customers for whom there is no history of default or there has not been significant change in credit quality and the amounts are still considered recoverable.
The ageing of amounts past due but not impaired is as follows:
Figures in R’000Group
2009Group
2008Company
2009Company
2008
The ageing of amounts past due but not impaired areas follows: 30-90 days past due 90-120 days past due 120+ days past due
1,4961,798
-
956845
27
2,279--
---
3,294 1,828 2,279 -
47
Trade and other receivables impairedAn impairment provision of R 343,280 (2008: R 94,087) was recognised against the trade receivables. The ageing of these impaired trade receivables are as follows:
Figures in R’000Group
2009Group
2008Company
2009Company
2008
0-30 days past due 30-90 days past due 90+ days past due
115228
-
-94
-
---
---
343 94 - -
Reconciliation of provision for impairment of trade and other receivables
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Opening balance Impairment losses recognised Impairment losses reversed Amounts written off as uncollectible
94343(94)
-
10494
(94)(10)
---
---
343 94 - -
The creation and release of provision for impaired receivables have been included in operating expenses in the income statement. When there is no expectation of recovering additional cash, amounts charged to the allowance account are generally written off.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of trade and receivables mentioned above. The group does not hold any collateral as security.
Trade receivables have been ceded to The Standard Bank of South Africa Ltd as security for overdraft facilities of R 3,000,000 (2008: R Nil).
10. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of:
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Cash and cash equivalents consist of: Bank balances 13,752 11,818 11,108 9,366
The fair value of cash and cash equivalents are equal to their carrying values.
11. SHARE CAPITAL
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Authorised 200,000,000 Ordinary shares of R0.005 each 1,000 1,000 1,000 1,000Reconciliation of share capital: Balance at the beginning of the year Share buy-back and cancellation Capitalisation issues Allotment and issue of shares - ordinary shares Treasury shares held by the DVT Holdings Employee Share Trust Treasury shares held by Subsidiaries
237---
(2)(3)
1(22)198
73
(13)-
250---
--
1(22)198
73
--
232 237 250 250IssuedOrdinaryShare premium
23212,950
23713,758
25016,380
25016,380
13,182 13,995 16,630 16,630
DTH | ANNUAL REPORT 2009
48
12. LOANS TO (FROM) GROUP COMPANIES
Figures in R’000Group
2009Group
2008Company
2009Company
2008
SUBSIDIARIES At amortised cost:Dynamic Visual Technologies (Pty) Ltd (1)
Dynamic Visual Technologies (Gauteng) (Pty) Ltd (1)
The Talent Exchange Cape (Pty) Ltd (1)
The Talent Exchange (Pty) Ltd (1)
Available for sale:The Talent Exchange (Pty) Ltd (2)
----
-
----
-
6,07631
190
-
2,728722
1-
(90)- - 6,198 3,362
Non-current assets Current liabilities
--
--
-6,198
(90)3,452
- - 6,198 3,362(1) The loan from subsidiary is unsecured, interest free and is not subject to any fixed terms of repayment. Disclosed as current, since the loan is repayable on demand by the user(2) The loan from subsidiary is unsecured, interest free and is not subject to any fixed terms of repayment. Disclosed as non-current, since the loan was not expected to be received within the next 12 months
The credit quality of the loans to group companies that are neither past due nor impaired can be assessed by reference to the financial position of the relevant companies, past experience and other factors.
During the reporting period, there were no deviations by the companies from their agreement terms and there has not been a significant change in the financial position of the companies.
13. OPERATING LEASE LIABILITY Operating lease payments represent rentals payable by the company for its office properties. The leases have fixed escalations of 8% and 10% per annum. Leases are negotiated for an average term of 3 years. Renewal of the lease agreements are to be negotiated on 1 September 2009 and 1 September 2012.
Guarantees have been issued by The Standard Bank of SA Ltd on behalf of DTH Dynamic Technology Holdings Limited in favour of Paramount Property Fund Limited in lieu of a rental deposit for the Cape Town premises. The guarantee expires on 1 December 2009.
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Guarantee 458 458 - -
Freestone Property Investments (Pty) Ltd in lieu of a rental deposit for the Gauteng premises. The guarantee expires on 30 November 2011.
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Guarantee 242 - - -
14. TRADE AND OTHER PAYABLES
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Trade payables Value added taxation Deposits received Leave pay accrual Other payables Accrued expenses
6251,723
-620
1,6332,358
1,0471,322
-372
1,1081,674
174127
--5
358
21133
1-
5571
6,960 5,523 663 370
49
The average terms of trade and other payables are 30 days. No interest was charged or paid in respect of any trade or other payables during the year.
No interest was charged or paid in respect of any trade or other payables during the year.
15. DEFERRED INCOME
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Deferred income consists of licensing and product development fees received in advance Current liabilities 487 900 - -
16. REVENUE
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Sale of goods Rendering of services
9,50472,278
5,33053,272
--
--
81,781 58,601
17. COST OF SALES
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Sale of goods Cost of goods sold 226 237 - -Rendering of services Cost of services 709 527 - -
934 764
18. OPERATING PROFIT Operating profit for the year is stated after accounting for the following: Operating lease charges
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Operating profit for the year is stated after accounting for the following: Operating lease charges Premises - Contractual amounts 1,774 1,632 - -Profit (loss) on sale of sale of property, plant and equipment Profit on sale of investment in subsidiary Negative goodwill on purchase of subsidiary Consulting and professional fees Amortisation of intangible assets and impairment loss Depreciation on property, plant and equipment Employee costs Impairment on trade and other receivables Staff welfare costsSecretarial fees
14--
3,185273458
58,574249532
85
(9)---
158373
41,93994
31942
------
3,7244--
-3333
---
1,1341--
DTH | ANNUAL REPORT 2009
50
19. INVESTMENT REVENUE Interest revenue
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Interest revenue Bank 1,250 455 1,158 279
Bank and cash has been categorised as available for sale.
20. FINANCE COSTS
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Finance costs Other and current borrowings 57 2 0.34 0.01
21. TAXATIONMajor components of the tax expense
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Major components of the tax expense Current Local income tax - current period 3,170 2,456 408 -Deferred Originating and reversing temporary differences (161) (47) (27) -
3,009 2,410 381 -
Reconciliation of the tax expenseReconciliation between applicable tax rate and average effective tax rate.
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Statutory tax rate
Prior year adjustment - Normal taxation Disallowable expenditure Change in tax rate Exempt income Unrecognised taxation loss Tax losses utilized Capital allowances
28.00%
0.13%0.17%0.00%
(1.03)%0.00%
(0.29)%(1.67)%
29.00%
(0.11)%0.09%0.60%
(1.49)%0.00%0.00%0.00%
28.00%
0.00%0.00%0.00%0.00%0.00%
(0.38)%0.00%
29.00%
0.00%0.00%0.00%0.00%
17.20%(46.20)%
0.00%25.31% 28.09% 27.62% 0.00%
22. AUDITORS’ REMUNERATION
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Fees 413 176 150 90
51
23. CASH GENERATED FROM OPERATIONS
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Profit before taxation Adjustments for: Depreciation and amortisation (Profit) / loss on sale of assets Profit on sale of investment in subsidiary Interest received Finance costs Non cash items Movement in operating lease assets and accruals Share based payment expense Movement in provision for doubtful debts Changes in working capital: Trade and other receivables Trade and other payables
11,888
731(14)
-(1,250)
57-
4096
249
(6,581)973
8,577
5319-
(455)2-1
72-
(4,404)2,576
1,378
4--
(1,158)0,3
--
96-
(2,279)294
21
1-
(33)(279)0,01429
-72
-
-365
6,189 6,907 (1,664) 576
24. TAX PAID
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Balance at beginning of the year Current tax for the year recognised in the income statement Acquisition of subsidiaries Balance at the end of the year
(1,375)(3,170)
-1,827
(769)(2,456)
(13)1,375
23(408)
-104
---
(23)
(2,717) (1,864) (281) (23)
25. DIVIDENDS PAID
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Balance at the beginning of the year Balance at the end of the year
--
(50)50
--
--
- - - -
26. ACQUISITION OF BUSINESSES
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Fair value of assets acquired: Property, plant and equipment Intangible assets Deferred Tax liabilities Deferred Tax asset Inventories Trade and other receivables Trade and other payables Tax liabilities Cash Loans receivable Loans payable
20----1-----
18714
(61)21
1801,524
(1,224)(98)5920,1
(91)
-----1-----
18714
(61)21
1801,524
(1,224)(98)592
0(91)
Total net assets acquired Less: Minority Less: Impairment Goodwill acquired
21--
482
1,042(190)
333,912
1---
1,042(190)
333,912
Purchase price 503 4,798 1 4,798
DTH | ANNUAL REPORT 2009
52
26. ACQUISITION OF BUSINESSES (continued)
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Total cash consideration made up as follows: Cash consideration paid Less: cash acquired Transaction costs paid and capitalised
503--
2,241(592)
-
1-2
2,241--
Net cash outflow on acquisition 503 1,650 3 2,241
Businesses acquiredName Emerald ConsultingPrincipal activity Practice Management Solutions
Transaction date
Proportion of business
acquiredCost of
acquisition Purchased
for cashPurchased for shares
Costs attributable to combination
1 October 2008 100% 500 500 - -
Name J-Centric (Pty) LtdPrincipal activity Software Development
Transaction date
Proportion of business
acquiredCost of
acquisition Purchased
for cashPurchased for shares
Costs attributable to combination
4 July 2008 100% 3 3 - 2
Fair values were determined by the directors of the group
Transaction Date 2009 2008Total paid for cash Total purchased for shares Total costs attributable to combination
501-2
2,1732,557
69
503 4,798
Information for the period as if the acquisition had been at the beginning of that period:
2009 2008Revenue Profit
83,4759,144
59,9896,456
27. COMMITMENTS2009 2008
Operating leases - as lessee (expense) Minimum lease payments due - within one year - in second to fifth year
1,1021,056
1,2521,120
2,158 2,373
Operating lease payments represent rentals payable by the company for certain part of its office properties. Leases are negotiated for an average term of 3 years and are subject to an 8% and 10% annual increase. No contingent rent is payable.
28. CONTINGENCIES
Figures in R’000Group
2009Group
2008Company
2009Company
2008
Tax consequences of undistributed reserves Secondary Tax on Companies on remaining reserves 1,861 1,046 417 326
53
29. FINANCIAL ASSETS BY CATEGORYThe accounting policies for financial instruments have been applied to the line items below:
2009Loans and
receivablesAvailable
for sale TotalTrade and other receivablesCash and cash equivalents
16,848-
-13,752
16,84813,752
16,848 13,752 30,600
2008Loans and
receivablesAvailable
for sale TotalTrade and other receivablesCash and cash equivalents
10,515-
-11,818
10,51511,818
10,515 11,818 22,333
30. FINANCIAL LIABILITIES BY CATEGORYThe accounting policies for financial instruments have been applied to the line items below:
2009Financial
liabilities at amortised
cost TotalTrade and other payables 5,237 5,237
2008Financial
liabilities at amortised
cost TotalTrade and other payables 4,201 4,201
31. RELATED PARTIES Subsidiaries During the year the company and its subsidiaries, in the ordinary course of business entered into various sale and purchase transactions with related parties. These transactions occurred under terms that are no less favourable than those arranged with third parties. Intergroup transactions have been eliminated on consolidation.
Details of the group’s subsidiaries are as follows:
• Dynamic Visual Technologies (Pty) Ltd • Dynamic Visual Technologies Gauteng (Pty) Ltd • Offline Digital (Pty) Ltd • The Talent Exchange (Pty) Ltd • The Talent Exchange (Cape) (Pty) Ltd – Currently dormant • J-Centric (Pty) Ltd – Currently dormant
Shareholders in subsidiaries other than Dynamic Visual Technologies Holdings Limited • Shareholder in Offline Digital (Pty) Ltd R Morrison G BarlowOther Entities controlled by Directors
• Cornastone Consulting Group (Pty) Ltd• IndigoCube (Pty) Ltd• Vistar (Pty) Ltd• Waterfront Window Cleaning cc
Directors Details relating to directors emoluments are disclosed in note 32.
DTH | ANNUAL REPORT 2009
54
31. RELATED PARTIES (continued)Shareholders The principal shareholders of the company are detailed in note 38.
Key Management personnel Key management personnel are those having responsibility for planning, directing and controlling activities directly or indirectly, including any director of that entity.
2009 2008Related party balancesLoan accounts owing by related parties Directors - 40
Amounts included in trade receivables / (payables) regarding related partiesSales to related parties Entities controlled by directors
-(81)
53(280)
Related party transactions Sales to related parties Entities controlled by directors (534) (813)
Operating expenses from related parties Entities controlled by directors 1,694 3,059
Share based payments to related parties Directors Key management
--
1421
Remuneration paid to key management personnel Directors - Executive 4,620 2,348Key management 2,876 1,730
Basic salaryTravel
allowanceBonus and performance
related paymentsManagement
Fees TotalKey management 2009 J van Der MerweJ FoucheR Morison
624531424
96105
60
765172100
---
1,485807584
1,579 261 1,037 - 2,876
32. DIRECTORS’ EMOLUMENTSExecutive2009
Basic salaryTravel
allowanceBonus and performance
related paymentsManagement
Fees TotalG Fowler C J Wilkins A De Klerk D M Hughes
9451,020
618792
60120132
-
162511244
15
----
1,1671,651
995807
3,375 312 932 - 4,620
2008
Basic salaryTravel
allowanceBonus and performance
related paymentsManagement
Fees Total
G Fowler C J Wilkins A De Klerk
540883149
45120
24
-299
-
287--
8721,303
173
1,572 189 299 287 2,348
55
Non-executive2009No fees were paid to non-executive directors during the year under review.
2008
DM Hughes 753 753
Share Options
DirectorNumber
of options GrantDate
Price per option
(cents)
Estimated fair value per option
at grant date (cents)
HMH RatshefolaCJ WilkinsDM HughesG FowlerMEJ Mamogale
Directors of subsidiaries: J van der Merwe J Fouche
100,000250,000200,000200,000
50,000
100,000100,000
26-Nov-0826-Nov-0826-Nov-0826-Nov-0826-Nov-08
26-Nov-0826-Nov-08
7575757575
7575
19.8719.8719.8719.8719.87
19.8719.87
33. RISK MANAGEMENT The group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. Management do not consider there to be any significant concentration of any of the above risks in the business.
Liquidity risk The group’s liquidity risk relates to ensuring that there are sufficient funds available to cover future commitments. The group manages liquidity risk through an ongoing review of such commitments and credit facilities.
The group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows.
The table below analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
At 29 February 2009
Figures in R’000Less than 6 months
Between 6 months
and 1 yearBetween
1 and 2 yearsBetween
2 and 5 years
Trade and other payables 6,339 620 - -
At 28 February 2008
Less than 6 months
Between 6 months
and 1 year
Between 1 and 2 years
Between 2 and 5 years
Trade and other payables 5,152 372 - -
Interest rate risk The sensitivity analysis below presents the interest rate risks in accordance with IFRS 7. It has been determined based on the exposure to interest rates for financial instruments at the balance sheet date and shows the effects of changes in market interest rates on interest payments, interest income and expenses and if appropriate, shareholders’ equity. For variable rate liabilities, the analysis is prepared assuming the average liability was outstanding for the whole year. A 300 basis point increase or decrease represents management’s assessment of the reasonable possible change in interest rate.
During the year ended 28 February 2009, if interest rates on Rand-denominated borrowings had increased/decreased by 300 basis points with all other variables held constant, the interest income for the year would have been R 272,707 (on group interest higher/lower, mainly as a result of higher/lower interest income on floating rate borrowings.
DTH | ANNUAL REPORT 2009
56
33. RISK MANAGEMENT (continued)Cash flow interest rate risk
Financial instrumentFigures in R’000
Current interest rate
Due in less than a year
Due in one to two years
Due in two to three years
Due in three to four years
Due after five years
Cash in current banking institutions 9.90% 13,752 - - - -
Credit risk Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The group only deposits cash with major banks with high quality credit standing and limits exposure to any counter-party.
Management evaluates credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.
At year-end, there is a concentration of credit risk as a single counterparty or group of counterparties having similar characteristics, exceeded 20% of gross monetary assets at year end.
Figures in R’000 2009 2008Financial assets exposed to credit risk at year end were as follows: Trade receivablesOther receivablesBank
16,718131
13,752
9,832683
11,818
Foreign exchange risk The group does not hedge foreign exchange fluctuations. Sensitivity analysis For the purpose of the sensitivity analysis a 10.00% movement in the value of the Rand against major foreign currencies is deemed to be reasonably possible. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10.00% change in foreign currency rates.
At 28 February 2009, if the Rand had weakened/strengthened by 10.00% against the UK pound with all other variables held constant, net profit for the year would have increased/decreased by R 33,003 mainly as a result of foreign exchange gains/losses on translation of UK pound denominated trade receivables.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year.
Foreign currency exposure at balance sheet date The group does not hedge foreign exchange fluctuations. The following items were uncovered:
Current assets Trade debtors GBP 32,843 (Rands 452,302)
Exchange rates used for conversion of foreign items were: 1 GBP = ZAR13.7716
The group reviews its foreign currency exposure on an ongoing basis.
34. POST BALANCE SHEET EVENTS The directors are not aware of any matter or circumstance arising between the end of the financial year and the date of approval of the financial statements.
57
35. EARNINGS PER SHAREBasic earnings per share (“EPS”)The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
2009 2008Profit for the year attributable to equity holders of the parentAdjustments
8,734-
6,029-
Earnings used in the calculation of basic earnings per share from continuing operations 8,734 6,029
Weighted average number of ordinary shares for the purposes of basic EPSBasic earnings per share
49,948,23117.5
41,946,84114.4
Diluted earnings per share The earnings used in the calculation of all diluted earnings per share measures are the same as those for the equivalent basic earnings per share measures, as outlined above.
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:
2009 2008Weighted average number of ordinary shares for the purposes of basic earnings per shareEmployee options
49,948,231-
41,946,841384,116
Weighted average number of ordinary shares used in the calculation of diluted EPS 49,948,231 42,330,957
Diluted earnings per share 17.5 14.2
Headline earnings per share (“HEPS”)The earnings used in the calculation of headline earnings per share reconciles to the earnings used in the calculation of basic earnings per share as follows:
2009 2008Profit for the year attributable to equity holders of the parentLess: Preference shares dividends and related taxes
8,734-
6,029-
Earnings used in the calculation of basic EPS from continuing operations(Less) / Add: (Profit on disposal of equipment) / Loss on disposal of equipmentLess: Profit on disposal of investment in subsidiary
8,734(14)
-
6,0299
(108)
Headline earnings 8,721 5,930
Weighted average number of sharesHeadline earnings per share
49,948,23117.5
41,946,84114.1
Diluted headline earnings per shareThe earnings used in the calculation of diluted headline earnings per share reconciles to the earnings used in the calculation of basic earnings per share as follows:
2009 2008Profit for the year attributable to equity holders of the parentLess: Preference shares dividends and related taxes
8,734-
6,029-
Earnings used in the calculation of basic EPS from continuing operations(Less) / Add: (Profit on disposal of equipment) / Loss on disposal of equipmentLess: Profit on disposal of investment in subsidiary
8,734(14)
-
6,0299
(108)
Headline earnings 8,721 5,930
Weighted average number of shares used in the calculation of diluted HEPSDiluted headline earnings per share
49,948,23117.5
42,330,95714.0
DTH | ANNUAL REPORT 2009
58
36. SEGMENT REPORTING Products and services from which reportable segments derive their revenuesInformation reported to the Group’s chief operating decision maker for the purposes of resource allocation and assessment of segment performance is focussed on the difference in product-based and services-based businesses.
The Group’s reportable segments under IFRS 8 are therefore as follows:
Product: Comprising the sale, implementation and customisation of licensed software products; Services: Comprising the delivery of software development projects, professional services and resources; and Central Ops: Which includes the central operation of the Group.
Segment revenues and results The following is an analysis of the Group’s revenue and results by reportable segment:
SEGMENTAL ANALYSIS 2009 2008Figures in Rand Product Services Central Ops Product Services Central Ops
Turnover 9,504 72,278 - 5,330 53,272 -
EBITDADepreciation and AmortizationNet interest
1,334(291)
29
9,873(436)
4
219(4)
1,160
216(95)
10
8,661(435)
162
(223)(1)
282Profit before taxTax
1,072285
9,441(2,913)
1,375(381)
130(4)
8,388(2,406)
58-
Profit after tax 1,357 6,528 995 126 5,983 58
Contribution 15.3% 73.5% 11.2% 2.0% 97.0% 0.9%
Segmental assets:
Assets 5,604 26,267 11,143 3,036 30,351 -
Geographical segments The company’s operations are located in South Africa.
Major customers2009 2008
Figures in Rand Product Services Central Ops Product Services Central OpsCustomer 1 Customer 2 Customer 3 Customer 4
----
10,64110,023
9,8497,752
----
----
7,38411,17111,024
4,505
----
37. ANALYSIS OF SHAREHOLDERSSee Shareholder Analysis on page 20 of the Annual Report.
38. SHARE BASED PAYMENTS Employee share option plan Terms of the scheme The scheme is an equity settled share option scheme.
The DVT Group allows certain employees to acquire shares in DVT Holdings Limited over a two to four year period, with options vesting in variable tranches of 25% to 50%. If the options remain unexercised after a period of 5 years from date of the grant, the options expire.
Should a scheme member cease to be an employee of the Group, any unexercised options are forfeited. The exercise price of the options is determined in accordance with the rules of the scheme, being the five day weighted average value per ordinary share immediately preceding the granting of the option.
These options are settled by means of the issue of shares by DVT Holdings Limited. Such equity-settled share based payments are measured at fair value at the date of the grant.
59
Employees’ share options • No options were exercised during the year. • No equity instruments, other than share options, were granted during the year and no arrangement has been modified during the year.
Options grantedThe number and weighted average exercise price of the share options for the options granted during the year were as follows:
2009 Number of options
2008 Number of options
Outstanding at the beginning of the year Granted during the year Forfeited during the year
3,074,1001,300,000
(1,541,000)
-3,127,100
(53,000)Outstanding at the end of the year 2,833,100 3,074,100Exercisable at the end of the year 616,700 -
Options outstandingThe share options outstanding at the end of the period were as follows:
Grant Date Number ofoptions
Exercise Price
Estimated fair value per option at
grant date5 November 20075 November 20075 February 20083 March 20082 June 200818 June 20081 August 200826 November 2008
879,000529,000125,100
75,00075,00075,00075,000
1,000,000
100100
9998
100968775
22.4918.8619.8919.7520.9321.0719.3319.87
Information on options granted during the year The group used the fair value of the equity instruments granted to disclose the share based payment transaction.
The fair value of options are measured using a Black-Scholes-Merton model, the inputs to which are as follows:
Description 2009 2008 Share price at grant date (cents)Weighted average exercise price (cents)Expected volatilityRisk free rateExpected dividend yield
86-10090.63
8.7% - 28.3%8.93% - 11.66%
1.0% - 2.50%
86 -10098.30
14% - 19.8%8.93 - 9.33%
1.0% - 2.50%
The expected volatility was determined by calculating the exponentially weighted moving average of the Company’s share price over time. No other features of the option grant were incorporated into the measurement of fair value.
Total expense of R95,846 (2008: R71,836) related to equity-settled share-based payments transactions was recognised in 2009.
DTH | ANNUAL REPORT 2009
60
61
DTH DYNAMIC TECHNOLOGY HOLDINGS LIMITED(Formerly Dynamic Visual Technologies Holdings Limited)(“the Company” or “the DVT Group” or “the Group”)Registration number: 2004/016984/06Share Code: DTH ISIN: ZAE000124681
Notice is hereby given that the second annual general meeting of DTH Dynamic Technologies Holdings Limited will be held in the boardroom of the company at Victoria Gate South, Hyde Park Lane, Hyde Park on Tuesday, 22 September 2009 at 13:00 for the purpose of transacting the following business:
ORDINARY RESOLUTIONSTo consider and, if deemed fit, to pass with or without modifications, the following ordinary resolutions:
Approval of annual financial statements1. To receive, consider and adopt the annual financial statements for the year ended 28 February 2009 together with the reports of the auditors and directors thereon.
Election of directors2. To re-elect Mr G Fowler who retires automatically in terms of the Company’s Articles of Association, and being eligible, offers himself for re-election.
3. To re-elect, Mr J Mamogale, who retires automatically in terms of the Company’s Articles of Association, and being eligible, offer himself for re-election.
4. To confirm the election of Mr R Fehrsen, who was appointed by the board on 30 March 2009 as director of the company.
Abbreviated curriculum vitae in respect of each director offering himself for re-election or election is contained on pages 9-10 of the annual report.
Approval of director’s fees5. To authorise the remuneration committee to determine the compensation of the directors for their services.
6. To approve the executive directors’ fees of R4 620 000 paid for the year ended 28 February 2009.
7. To approve the non-executive director’s fees for the year ended 28 February 2009 as follows:
DirectorsAnnual
RetainerBoard
MeetingAuditco
MeetingRemco Meetin
H Ratshefola (Chair)J MamogaleR Fehrsen
R180,000R60,000R90,000
R10,000R5,000R7,500
n/aR5,000R7,500
R7,500n/a
R5,000
Re-appointment of auditors8. To approve the re-appointment of Greenwoods Chartered Accountants as auditors of the company and the audit committee be authorized to determine the remuneration of the auditors.
Authority to place shares under control of the directorsOrdinary Resolution 9“RESOLVED by way of a general authority that the authorised but unissued ordinary shares in the capital of the Company be and are hereby placed under the control and authority of the directors of the company and that the directors be and are hereby authorised and empowered to allot and issue all or any of such ordinary shares, or to issue any options in respect of all or any of such ordinary shares, to such person/s on such terms and conditions and at such times as the directors may from time to time and in their discretion deem fit, subject to the provisions of sections 221 and 222 of the Companies Act (Act 61 of 1973), as amended, the articles of association of the company and the Listings Requirements of JSE Limited from time to time.”
NOTICE OF ANNUAL GENERAL MEETING
General authority to issue shares for cashOrdinary Resolution 10“RESOLVED that the directors of the company be and are hereby authorised, by way of a general authority, to issue all or any of the authorised but unissued ordinary shares of R0.005 each in the capital of the company for cash, at the discretion of the directors, as and when suitable opportunities arise, subject to the Listings Requirements of the JSE.”
The allotment and issue of shares for cash shall be subjected to the following limitations:
• that the securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue;• that this authority shall not be extended beyond the next annual general meeting or 15 (fifteen) months from the date of this annual general meeting, whichever date is earlier;• issues in terms of this authority in any one financial year shall not exceed 50% (fifty percent) in the aggregate of the number of shares in the company’s issued share capital in issue at the date of this notice of the annual general meeting. The 50% (fifty percent) shall also take into account the number of ordinary shares which may be issued and shall be based on the number of ordinary shares in issue, added to those that may be issued in future (arising from the conversion of options/convertibles) at the date of such application, less any ordinary shares issued, or to be issued in future arising from options/convertible ordinary shares issued during the current financial year, plus any ordinary shares to be issued pursuant to a rights issue which has been announced which is irrevocable and fully underwritten, or securities issued in terms of an acquisition which has had the final terms announced;• after the company has issued securities in terms of the approved general issue for cash representing, on a cumulative basis within a financial year, 5% (five percent) or more of the number of equity securities in issue prior to that issue, the company shall publish an announcement giving full details of the issue, including:
o the number of securities issued;o the average discount to the weighted average trading price of the securities over the 30 (thirty) days prior to the date that the issue was determined or agreed by the directors of the company; ando the impact on net asset value, net tangible asset value and on earnings and headline earnings per share, shall be published at the time of any issue representing, on a cumulative basis within a financial year, 5% (five percent) or more of the number of shares in issue, prior to such issue;
• in determining the price at which shares will be issued in terms of this authority, the maximum discount permitted shall be 10% (ten percent) of the weighted average traded price of such shares, as determined over the 30-day (thirty-day) business period prior to the date that the price of the issue is determined or agreed by the directors of the company. If no shares have been traded in the said 30-day (thirty-day) business period, a ruling will be obtained from the JSE; • any such issue will be made to public shareholders as defined in paragraph 4.25 to 4.27 of the JSE Listings Requirements and not to related parties.
As required by the JSE Listing Requirements, a majority of 75% (seventy five percent) of the votes cast by the shareholders present or represented by proxy at this annual general meeting (excluding the Designated Adviser and the controlling shareholders, together with their associates) is required for this ordinary resolution to be passed.
Authority to company secretary to implement resolutionsOrdinary Resolution 11RESOLVED that the company secretary of the Company be and is hereby individually authorised to sign all such documents and do all such things as may be necessary for or incidental to the implementation of those resolutions to be proposed at the annual general meeting convened to consider this resolution which are passed (in the case of ordinary resolutions) or are passed and registered by the Registrar of Companies (in the case of special resolutions).”
SPECIAL RESOLUTIONSTo consider and, if deemed fit, to pass with or without modifications, the following special resolutions:
General authority to the company to repurchase its own sharesSpecial Resolution Number 1“RESOLVED that the company, or a subsidiary, be and hereby is authorized, by way of general authority in terms of Ar-
DTH | ANNUAL REPORT 2009
62
ticle 3A of the company’s articles of association, to approve the purchase of shares issued by the company, subject to the requirements of section 85 and 89 of the Companies Act 1973, as amended, the Listings Requirements of the JSE Limited (“JSE”) and the articles of association of the company.
It is recorded that the Listings Requirements of the JSE require, inter alia, that the company or its subsidiary may make a general repurchase of shares issued by the company only if:
• the repurchase of the ordinary shares is effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counterparty;• at any point in time the company may only appoint one agent to effect any repurchases on its behalf;• this general authority shall only be valid until the next annual general meeting of the company, provided that it shall not extend beyond 15 (fifteen) months from the date of passing of the general authority to repurchase shares;• the maximum price at which the shares may be repurchased will be 10% (ten percent) above the weighted average market value at which such ordinary shares are traded on the JSE, for the 5 (five) business days immediately preceding the date on which the transaction is effected;• a repurchase of shares by a subsidiary of the company may not exceed 10% in aggregate of the number of issued shares of the company;• any such repurchase shall not, in any one financial year, exceed 20% (twenty percent) of the company’s issued ordinary shares as at the passing of the general authority;• the company or its subsidiary may not repurchase ordinary shares during any prohibited period as defined in paragraph 3.67 of the JSE Listings Requirements; • the repurchase may only be effected, if the shareholder spread requirements as set out in paragraphs 3.37 to 3.41 of the JSE Listings Requirements are still met after such repurchase;• should derivatives be used, such authority is limited to paragraphs 5.72 and (d) and 5.84(a) of the JSE Listings Requirements;• when the company has cumulatively repurchased 3% (three percent) of the initial number of the relevant class of securities, and for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter, an announcement must be made. Such announcement must be made as soon as possible and in any event by not later than 08:30 on the second business day following the day on which the relevant threshold is reached or exceeded.
Reason for and effectThe reason for and effect of this special resolution is to obtain an authority for, and to authorize the company and its subsidiaries, by way of a general authority to repurchase the company’s issued ordinary shares.
It is the intention of the directors of the company to use such authority should prevailing circumstances, such as market conditions, in their opinion warrant it.
Other DisclosureThe company may not enter the market to proceed with the repurchase until the company’s Designated Adviser, PSG Capital (Proprietary) Limited, has confirmed the adequacy of the company’s working capital for the purposes of undertaking a repurchase of shares, in writing to the JSE.
Shareholders are referred to the explanatory notes set out hereunder which apply mutatis mutandis to this resolution”
EXPLANATORY NOTESWorking capitalThe board is of the opinion that, after considering the maximum effect of the repurchase contemplated in special resolution number 2, for a period of at least 12 (twelve) months after the date of the notice of the annual general meeting:
• the Company and the DTH Group will be able to repay its debts in the ordinary course of business; • the consolidated assets of the company and the DTH Group fairly valued according to International Financial Reporting Standards and on a basis consistent with the last financial year of the company ended 28 February 2009, exceed its consolidated liabilities; • the Company and the DTH Group have adequate share capital and reserves; • the Company and the DTH Group have sufficient working capital for their requirements.
63
Material changesThis notice has been distributed with the annual financial statements of the group and no changes have therefore occurred since the publication thereof.
Directors’ responsibility statementThe directors of the Company as set out on pages 9-10 of these financial statements:
• have considered all statements of fact and opinion in the annual report to which this notice is attached;• accept, individually and collectively, full responsibility for the accuracy of such statements; and• declare that, to the best of their knowledge and belief, such statements are correct and no material facts have been omitted, the omission of which would make any such statements false or misleading and that they have made all reasonable enquiries to ascertain such facts.
Litigation statementNeither the company nor its subsidiaries is party to any legal or arbitration proceedings (including such proceedings which are pending or threatened), which may have or have had in the previous 12 (twelve) months a material effect on the group’s financial position.
Other disclosures in terms of paragraph 11.26 of the JSE Listings RequirementsThe JSE Listings Requirements require the following disclosures which are contained in the annual report.Disclosure references in the annual report:
1. Directors – Pages 9-102. Major shareholders – Page 203. Directors’ interests in securities – Page 204. Share capital of the company – Page 20
VOTING AND PROXIESA shareholder entitled to attend and vote at the annual general meeting is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need not be a member of the company. For the convenience of registered members of the company, a form of proxy is enclosed herewith.
The attached form of proxy is only to be completed by those ordinary shareholders who:
• hold ordinary shares in certificated form; or• are recorded on the sub-register in “own name” dematerialised form.
Ordinary shareholders who have authorized their ordinary shares through a CSDP or broker without “own name” registration and wish to attend the annual general meeting, must instruct their CSDP or broker to provide them with the relevant Letter of Representation to attend the meeting in person or by proxy and vote. If they do not wish to attend in person or by proxy, they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.
Proxy forms should be forwarded to reach the transfer secretaries, Link Market Services, 11 Diagonal Street, Johannesburg, 2001, P O Box 4844, Johannesburg, 2000 by not later than Friday, 18 September 2009 at 13:00.
By order of the board
Derek HughesCompany Secretary
Johannesburg20 August 2009
DTH | ANNUAL REPORT 2009
64
65 CORPORATE INFORMATION
Registered OfficeVictoria Gate SouthHyde Lane ParkHyde LaneHyde Park
Business addressAnnex ALongkloof StudiosDarters RoadGardensCape Town, 8001
Postal addressP O Box 408Gallor Manor2052
CORPORATE CALENDAR
Financial year-end 2009
Annual general meeting 2009
Half-year interim report
Financial year-end 2010
Abridged report
Annual report and financial statements
Annual general meeting 2010
Company SecretaryDerek Hughes
Transfer secretariesLink Market Services
AuditorsAndre GerbersGreenwoods Chartered Accountants
BankersStandard Bank of South Africa Ltd
Legal AdvisorsLeppan Beech Inc
Designated AdvisorPSG Capital (Proprietary) Limited
29 February 2009
23 September 2009
November 2009
28 February 2010
May 2009
August 2009
September 2010
DTH | ANNUAL REPORT 2009
66FORM OF PROXY
DTH DYNAMIC TECHNOLOGY HOLDINGS LIMITED(Formerly Dynamic Visual Technologies Holdings Limited)
(“the Company”) or (“the DTH Group”) or (“the Group”)Registration number: 2004/016984/06
Share Code: DTH ISIN: ZAE000124681
For use only by ordinary shareholders at the annual general meeting of ordinary shareholders of the company at Victoria Gate South, Hyde Lane, Hyde Park on Tuesday, 22 September 2009 at 13:00.
I/We (please print names in full)
Of (postal address)
being a member/s of Dynamic Visual Technologies (Holdings) Limited, holding shares in the Company, hereby appoint:
1. or, failing him/her,
2. or, failing him/her,3. the Chairman of the Annual General Meeting,
as my/our proxy to act for me/us at the annual general meeting convened for purposes of considering and, if deemed fit, passing, with or without modification, the resolutions (“resolutions”) to be proposed thereat and at each adjournment thereof and to vote for and/or against the resolutions, and/or to abstain from voting for and/or against the resolutions, in respect of the ordinary shares registered in my/our name in accordance with the following instructions:
My/our proxy shall vote as follows:
Number of ordinary shares
Resolutions For Against Abstain
1 - Approval of annual financial statements of the company
2 - Re-election of Mr G Fowler, being eligible, as a director of the Company
3 - Re-election of Mr J Mamogale, being eligible, as a director of the Company
4 - Confirmation of the election of Mr R Fehrsen, being eligible, as a director of the Company
5 - To authorise the remuneration committee to determine the compensation of the directors
6 - To approve the directors’ fees paid for the year ended 28 February 2009
7 - To approve the non-executive director’s fees for the year ended 28 Feb 2010
8 - To approve the re-appointment of Greenwoods Chartered Accountants as auditors of the company and authorize the directors to determine their remuneration
9 - Authority to place shares under control of directors
10 - General authority to issue shares for cash
11 - Authority to company secretary to implement resolutions
Special Resolution 1 – General authority to the company to repurchase its own shares
(Indicate instruction to proxy by way of a cross in space provided above)Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.
Signed this day of 2008 at
Signature
Please read the instructions on the reverse side hereof.
INSTRUCTIONS1. Dematerialised ordinary shareholders holding ordinary shares other than with “own-name” registration who wish to attend the annual general meeting must inform their Central Securities Depository Participant (“CSDP”) or broker of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the relevant Letter of Representation to attend the annual general meeting in person or by proxy and vote. If they do not wish to attend the annual general meeting in person or by proxy, they must provide their CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker. These ordinary shareholders must not use this form of proxy.
2. A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space/s provided, with or without deleting “the chairman of the general meeting”, but any such deletion must be initialled by the member. The person whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
3. Please insert an “X” in the relevant spaces according to how you wish your votes to be cast. However, if you wish to cast your votes in respect of a lesser number of shares than you own in the Company, insert the number of ordinary shares held in respect of which you desire to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the Annual General Meeting as he/she deems fit in respect of the entire member’s votes exercisable thereat. A member or his/her proxy is not obliged to use all the votes exercisable by the member or by his/her proxy, but the total of the votes cast and in respect whereof abstention is recorded may not exceed the total of the votes exercisable by the member or by his/her proxy.
4. Forms of proxy must be received by the Company’s transfer secretaries, Link Market Services (Pty) 11 Diagonal Street, Johannesburg, 2001 (P O Box 4844, Johannesburg, 2000) by not later than Friday, 18 September 2009 at 13:00
5. The completion and lodging of this form of proxy will not preclude the relevant member from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.
6. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the Company’s transfer secretaries or waived by the chairman of the Annual General Meeting.
7. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.
8. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries of the Company.
9. The chairman of the Annual General Meeting may reject or accept a form of proxy which is completed and/or received, other than in accordance with these notes, if the chairman is satisfied as to the manner in which the member wishes to vote.
10. The Chairman of the Annual General Meeting may in his absolute discretion, accept or reject any form of proxy, which is completed other than in accordance with these notes.
11. If required, additional forms of proxy are available from the transfer secretaries of the Company.
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