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A n n u a l R e p o r t 2 0 0 4
The power of X = creating value together
C o n t e n t s
3 Group Financial Highlights
4 Chairman’s Report
8 Directorate
10 Executive Committee
12 Business Connexion’s Footprint
13 Group Structure
14 Review of Operations
26 Corporate Governance
40 Value Added Statement
42 Administration
43 Annual Financial Statements
92 Directors’ Summary Curriculum Vitae
93 Shareholders’ Analysis
94 Shareholders’ Diary
95 Notice of Annual General Meeting
Form of Proxy
visionx
xA s a t r u l y S o u t h A f r i c a n c o m p a n y , t o b e t h e l e a d i n g
i n t e g r a t o r o f I C T b a s e d b u s i n e s s s o l u t i o n s t h a t
m a k e o u r c l i e n t s m o r e s u c c e s s f u l .
x
valuesx
T h e f o l l o w i n g v a l u e s u n d e r p i n t h e p u r s u i t o f o u r
m i s s i o n :
C l i e n t C e n t r i c i t y :
L o o k a t b u s i n e s s t h r o u g h t h e c l i e n t s ' e y e s !
F o r e s i g h t :
L o o k f o r w a r d a n d o u t w a r d t o c r e a t e t h e f u t u r e !
P o s i t i v e A t t i t u d e :
F o c u s o n s o l u t i o n s , n o t p r o b l e m s !
S y s t e m s T h i n k i n g :
U n d e r s t a n d t h a t y o u ' r e p a r t o f a b i g g e r p i c t u r e !
T r u s t w o r t h i n e s s :
T r u s t o t h e r s a n d k n o w t h a t o t h e r s r e l y o n y o u !
I n d i v i d u a l V a l u e :
T r e a t o t h e r s a s y o u w a n t t o b e t r e a t e d !
R e c o g n i t i o n :
R e w a r d s w i l l c o m e f r o m d o i n g t h e r i g h t t h i n g s r i g h t !
D e s c r i p t i o n o f B u s i n e s s
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Business Connexion Group Limited is one of the largest black empowered ICT
companies on the African continent with a proud 25-year track record. A leading
integrator of competitive, innovative business solutions based on Information and
Communications Technology (ICT), Business Connexion has offices in all major centres
throughout South Africa. The company employs more than 4 000 employees, 27% of
whom are from previously disadvantaged backgrounds.
Clients are firmly positioned at the centre of the Business Connexion world.
The group’s unique “Solutions Integration Model” represents the way in which the
integration of business solutions is configured. Business solutions are developed and
implemented by drawing on expertise from the Technology Infrastructure, Business
Applications and Professional and Outsourcing Services competencies.
Solutions are designed to meet clients’ strategic and operational business needs.
Business Connexion runs mission-critical ICT systems and manages products, services
and solutions for many JSE listed companies, key public sector organisations,
parastatal enterprises and a host of medium-sized emergent companies.
The company boasts unrivalled expertise across a range of vertical industry sectors
such as financial services, telecommunications, petrochemical, healthcare, automotive
and the public sector among others.
In our ongoing quest to deliver innovative solutions that add real business value to
our clients, Business Connexion combines our own expertise, tools, resources and
vertical sector knowledge with that of our partners. We nurture strong relationships
with many of the world’s leading ICT companies including Actuate, Avaya, Citrix,
Cisco Systems, Cognos, EMC2, GEAC, HP, IBM, Microsoft SA, Nortel Networks, Oracle,
Opentext, SAP, Sage, Stratus, Sun Microsystems, TTI-Telecom and Verity. Business
Connexion has attained top-level certification and received awards from many of
these partners.
The group believes that innovation will shape the sustainability of the 21st century
enterprise, and an innovation programme is a key element of the company’s internal
business improvement strategy.
2004 % 2003 % 2002 % 2001 % 2000R000 change R000 change R000 change R000 change R000
Operating results
Revenue 2 811 771 4 2 701 375 1 2 667 752 2 2 617 415 9 2 410 486
Operating profit 125 695 (12) 142 049 (13) 162 894 (14) 189 407 >100 (8 774)
Profit/(loss) attributable to shareholders 120 448 13 106 540 16 92 176 (22) 118 042 >100 (73 901)
Headline earnings 86 617 (22) 111 407
Cash generated from operations 123 877 (56) 284 536 87 151 762 (35) 232 419 12 207 302
Balance sheet
Shareholders’ equity 965 854 74 555 798 33 418 651 44 290 556 58 184 360
Total assets 2 067 316 48 1 400 268 9 1 279 630 4 1 225 485 6 1 157 970
Total liabilities 1 101 462 30 844 470 (2) 860 979 (8) 934 929 (4) 973 610
Interest bearing liabilities 293 843 7 273 969 (2) 280 289 280 804 (1) 283 514
Ordinary share performance
Weighted number of shares in issue (000) Note 1 253 551 253 425
Earnings per share (cents) 47,5 13 42,0
Headline earnings (cents) 34,2 (22) 44,0
Number of shares in issue at year endless treasury shares (000) 242 810 149 521
Net asset value per share (cents) 380,9 74 219,3
Financial ratios
Operating margin (%) 4,5 5,3 6,1 7,2 (0,4)
Return on shareholders’ equity (%) 9,0 20,0
Return on total assets (%) 4,2 8,0
Shareholders’ equity to total liabilities (%) 87,7 65,8 48,6 31,1 18,9
Interest bearing debt to equity (%) 30,4 49,3 67,0 96,6 153,8
DefinitionsShareholders’ equity Total shareholders’ equity and minority interests
Total assets Non-current assets and current assets
Total liabilities Non-current interest bearing liabilities, non-current interest free liabilities and current liabilities
Operating margin Operating profit expressed as a percentage of revenue
Return on shareholders’ equity Headline earnings expressed as a percentage of shareholders’ equity
Return on total assets Headline earnings expressed as a percentage of total assets
Interest bearing debt to equity ratio Interest bearing liabilities as a percentage of shareholders’ equity
Interest bearing liabilities Non-current interest bearing liabilities and short-term borrowings
Net asset value per share Shareholders’ equity divided by weighted number of shares in issue
Note 1
The number of shares includes both ordinary and preference shares in the comparative numbers as the preference shares are entitled to the same rights with respect to dividends as
the ordinary shares. The preference shares were converted to ordinary shares on the basis of one for one in the current year. The comparatives have only been included for 2003 as
the company was not listed in earlier years.
Note 2
2004 includes the adjustments required for the adoption of AC133. Comparative figures are not adjusted. PG3
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G r o u p F i n a n c i a l H i g h l i g h t s for the years ended 31 May
C h a i r m a n ’ s R e p o r t
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xW i t h t h e m e r g e r s u c c e s f u l l y c o m p l e t e d , m a n a g e m e n t
c a n n o w f o c u s o n r e a l i s i n g t h e c o n s i d e r a b l e
p o t e n t i a l t o b e d e r i v e d f r o m i t .
looking aheadx
The challenging business climate that prevailed
within the ICT industry for most of the previous
financial year, continued during the year under
review. In fact, it would be true to say that trading
conditions deteriorated somewhat and that the
last six months of the reporting period were amongst
the worst ever experienced within the local industry.
While these adverse conditions impacted on the
financial results for the period, I am happy to say
that they did not divert the company from its
plans to restructure the group and to transform it
into Africa’s leading black empowered ICT company.
Our longstanding search for an empowerment
partner was rewarded in October 2003, when
Business Connexion Investments was identified as
such a partner. The transformation process
then took a giant stride forward in January 2004,
when the businesses of Comparex Africa (Pty)
Limited and Business Connexion Solutions (Pty)
Limited were merged. Four months later, the
merged businesses adopted the Business Connexion
brandname, further reflecting management’s
commitment to transformation within the company.
In April 2004, Comparex Holdings Limited share-
holders approved the Board’s proposal to restructure
the group. The proposal was aimed at simplifying
the group’s structure and facilitating the promised
return to shareholders of R1,57 billion in surplus
cash, via a special dividend of R5,50 per share. As
part of the restructuring process, Comparex Holdings
Limited was liquidated and a further R1,00 a share
was paid to Comparex Holdings Limited shareholders
by way of a final liquidation dividend.
This paved the way for the listing of Business
Connexion Group Limited on the JSE Securities Exchange
on 24 May 2004, as the holding company of a 74,99%
interest in Business Connexion (Pty) Limited; the
holder of minority interests in Digital Healthcare
Solutions (Pty) Limited, Perago Financial System
Enablers (Pty) Limited and Mosaic Software Holdings
Limited; and the holder of cash reserves totalling
R782 million. Comparex Holdings Limited was
delisted from the JSE Securities Exchange on
1 June 2004.
The merger satisfied the demanding criteria set at
the outset of our search for an empowerment partner,
namely to identify one that would add value to the
intellectual capital and expertise within the business,
as well as assist us materially in transforming the
business fully over time.
Whilst the merger is still in its infancy, the positive
contribution from the management and staff of
our new partners has already made an impact.
They have filled key positions on the Boards of
Directors as well as several positions on our
executive management teams, not to mention many
important roles in the operational areas.
Their presence, together with other empowerment
initiatives underway within the business, has already
been recognised by the independent BEE research
company EmpowerDex, who has accorded us an
“A” rating as a black empowered enterprise.
Our resulting ability to meet the anticipated
requirements of the forthcoming ICT Charter, is already
proving advantageous to us in securing new business
within both the public and private sectors.
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C h a i r m a n ’ s R e p o r t (continued)
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Financial Performance
As mentioned earlier, the year under review was
one of the toughest on record for the local ICT
industry. In the face of a depressed local market
and an export dependent sector that was challenged
by a strong Rand, significant orders for ICT products,
solutions and services were scarce.
However, despite these difficult operating conditions
as well as the formidable task of restructuring and
re-branding the group in the wake of the merger,
revenue remained virtually unchanged at R2,8 billion
(2003: R2,7 billion). While competitive market
pressures constrained margins, management
maintained a tight rein on operating costs to
achieve a very creditable, albeit reduced, operating
profit of R125,7 million (2003: R142,1 million).
The reduction in operating profit for the year was
reflected in a commensurate decline in headline
earnings per share to 34,2 cents (2003: 44,0 cents).
Other than the funding for its properties, the
group has minimal debt funding its operating
activities. This remains a distinguishing factor
within the local ICT industry, where most competitors
are encumbered – some heavily – by debt.
It is important to note, however, that these results
are not directly comparable with those of Comparex
Holdings Limited for the previous financial year.
This is largely because interest earned on the
surplus cash prior to its distribution, together with
the results of Mosaic, Perago and Nanoteq for the
11 months prior to their acquisition by Business
Connexion from Comparex Holdings Limited,
were part of the results of Comparex and not of
Business Connexion.
Corporate Governance
This remains at the forefront of management’s
agenda and the group continues to pursue the
highest tenets of sound corporate governance, as
embodied in the King I and II Reports, and other
leading standards of ethical business excellence.
Future Outlook
With the merger successfully completed, manage-
ment can now focus on realising the considerable
potential to be derived from it. Not least of these
are the growing opportunities within the public
sector, where we believe there will be considerable
demand for ICT related solutions.
At the same time, we remain firmly committed to
our proven solutions orientated and client centric
business model. Founded on this model, more than
70% of our business continues to be services and
annuity based. In particular, we see our Outsourcing
business as an important growth area within the
private sector, as the business climate improves.
The impending introduction of the ICT Charter will
provide clarity with regard to the future outlook for
the local industry. We are fortunate to have
concluded a merger with our BEE partner of choice
and, with a road map towards transformation at all
levels of our business, we are positioned to meet or
exceed the anticipated requirements of the Charter.
Against this background, Business Connexion can
take advantage of any improvement in the general
business climate, and grow in line with the
improvement in market conditions.
Welcome and Appreciation
I welcome to the Board of Directors of Business
Connexion Group Limited, Mr Benjamin Mophatlane,
who joined as Deputy Chief Executive Officer. He
was formerly Chief Executive Officer of our merger
partner Business Connexion Solutions (Pty) Limited.
In the short time since his appointment, Mr
Mophatlane has made an important contribution to
the management of the group.
I would also like to express my thanks to Mr Jack
Mitchell, who served on the Board of Comparex
Holdings Limited until December 2003. I wish him
every success in his future endeavours.
I would like to express my personal appreciation to
all our stakeholders – our clients for their support
and loyalty; our suppliers and strategic partners
for their invaluable contribution to our success;
and our management and staff for their unwavering
commitment to achieving beyond the ordinary and
to maintaining the group’s position at the forefront
of the ICT sector in Africa.
Finally, I would like to thank my fellow directors
for their unstinting support during this difficult
year. I have no doubt that, as a team, we will
continue to rise successfully to the challenges and
opportunities that will undoubtedly confront us in
the year ahead.
Reginald Berkowitz
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John Frederick Buchanan (60)*CA(SA)
Non-executive Director
Appointed to the Board on 2 February 2004
Francois Johannes van der Merwe (47)*BA LLB (University of Stellenbosch), BA MA(University of Oxford)
Non-executive Director
Appointed to the Board on 2 February 2004
David Morris Nurek (54)*~Diploma in Law (UCT)Graduate Diploma in Company Law (UCT)
Deputy Chairman
Non-executive Director
Appointed to the Board on 2 February 2004
Reginald Selwyn Berkowitz (67)~Law Certificate (Natal)
Chairman
Non-executive Director
Appointed to the Board on 2 February 2004.
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*Member of the Audit Committee~Member of the Remuneration Committee#Member of the Executive Committee
Peter Anthony Watt (63)#BSc (Eng), MBL
Chief Executive Officer
Appointed to the Board on 1 June 1999
Leetile Benjamin Mophatlane (31)#BCom (University of Pretoria)
Deputy Chief Executive Officer
Appointed to the Board on 2 February 2004
Alan Charles Farthing (47)# (British)CA(SA)
Financial Director
Appointed to the Board on 2 December 2002
E x e c u t i v e C o m m i t t e e
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Chairman of the Executive Committee and Chief Executive Officer
Peter Watt
Deputy Chief Executive Officer
Benjamin Mophatlane
Group Executive:Special Projects
Matthew Blewett
Group Executive:Human Resources
Johann Burden
Group Executive:Marketing and Communication
Diana de Sousa
Group Executive:Finance
Alan Farthing
Group Executive:Business Applications
John Lagaay
Group Executive:Sales
Stuart Matthysen
Group Executive:Public Sector
Isaac Mophatlane
Group Executive:Technology Infrastructure and Africa
Tim Schumann
Group Executive:Strategic Positioning
Bridgman Sithole
Group Executive:International (UK)
Andre Vermeulen
Group Executive:Commercial
Marius Schoeman
Group Executive:Infrastructure Services and SMC
Mike Sewell
Group Executive:Strategy
Willem van Rensburg
Group Executive:Professional Services
Marthinus Wissing
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Regional Offices
South AfricaHead Office – Midrand, Gauteng
Cape Town, Western Cape
Durban, KwaZulu-Natal
East London, Border Kei
Johannesburg, Gauteng
Port Elizabeth, Eastern Cape
Pretoria, Gauteng
AfricaWindhoek, Namibia
InternationalLondon, United Kingdom
Service CentresBethlehem
Bloemfontein
Cape Town
Durban
East London
George
Johannesburg
Kimberley
Klerksdorp
Kuruman
Mbabane
Middelburg
Mossel Bay
Nelspruit
Newcastle
Pietermaritzburg
Polokwane
Port Elizabeth
Port Shepstone
Potchefstroom
Pretoria
Richards Bay
Rustenburg
Secunda
Swakopmund
Upington
Vereeniging
Vredendal
Welkom
Windhoek
Worcester
B u s i n e s s C o n n e x i o n F o o t p r i n t
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Business Connexion Investments (Pty) LtdReg. No. 2001/016929/07
Gadlex (Pty) Ltd
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G r o u p S t r u c t u r e (Main operating entities)
Comparex International (Pty) LtdReg. No. 1996/007425/07
Business Connexion Technology Holdings (Pty) Ltd
Comparex Africa Investments (Pty) LtdReg. No. 1994/002507/07
Business Connexion Investments (Pty) Ltd
Comparex Africa (Pty) LtdReg. No. 1993/003683/07
Business Connexion (Pty) Ltd
Comparex Africa Group LimitedReg. No. 1988/005282/06
Business Connexion Group Limited
Old name
Key
New name
74,99%
100%
75%
100%
39,13%
29,85%
37,17%
25,0%
100%
100%
100%100% 25,01%
Mosaic SoftwareHoldings Ltd
Perago Financial System Enablers
(Pty) Ltd
Nanoteq (Pty) Ltd
Digital HealthcareSolutions (Pty) Ltd
Intenda (Pty) Ltd
Q Data EuropeLimited
Business ConnexionNamibia (Pty) Ltd
Business ConnexionNamibia (Pty) Ltd
Comparex Namibia(Pty) Ltd
ECnet (Pty) Ltd
Business ConnexionSolutions (Pty) Ltd
xT h e “ P o w e r o f X ” p h i l o s o p h y e m b o d i e s t h e g r o u p ’ s
c o m m i t m e n t t o c r e a t e e x p o n e n t i a l r e a l b u s i n e s s
v a l u e f o r i t s c l i e n t s b y i n t e g r a t i n g t h e s t r a t e g i c
v a l u e o f I C T i n t o t h e i r b u s i n e s s s t r a t e g y .
solutionsx
R e v i e w o f O p e r a t i o n s
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Introduction
In October 2003, Comparex Holdings Limited
announced that it had identified a potential
BEE partner in the form of Business Connexion
Investments (Pty) Limited, and that negotiations
were in progress to formalise a relationship between
the two companies. These negotiations were
concluded successfully in December 2003 and,
following the necessary shareholder and regulatory
approval, the businesses of Comparex Africa
(Pty) Limited and Business Connexion Solutions
(Pty) Limited, were merged with effect from
2 January 2004.
In terms of the merger, Business Connexion
Investments (Pty) Limited acquired a 25,01% interest
in the merged businesses, while Comparex Holdings
Limited via its subsidiary, Comparex Africa Group
(Pty) Limited, retained a 74,99% interest.
With the publication of the group’s interim results,
the Board announced its intention to restructure
the group and declared a dividend in anticipation
of liquidation of R5,50 per share.
The restructure was considered necessary to
simplify the group structure, eliminate unnecessary
consolidation layers in the group and facilitate
the repayment of surplus cash to shareholders.
The proposed restructuring of the group was
approved by Comparex Holdings Limited share-
holders at a general meeting on 30 April 2004.
This approval included the distribution of a final
dividend of R1,00 a share; a dividend in specie
of Business Connexion Group Limited (formerly
Comparex Africa Group (Pty) Limited) shares; the
liquidation and delisting from the JSE of Comparex
Holdings Limited; the listing of Business Connexion
Group Limited; and the amendment and creation
of share trusts.
Business Connexion Group Limited was listed
on the “IT – Software and Computer Services”
sector of the JSE Securities Exchange on Monday,
24 May 2004 and Comparex Holdings Limited was
delisted on 1 June 2004.
While the transformation initiative and the
restructuring of the group, which facilitated the
return of R1,57 billion to Comparex Holdings
Limited shareholders, were highlights of the past
financial year, management’s attention remained
firmly focused on the group’s operations. Sound
progress was made on all fronts, not least of which
was the ongoing refinement of the group’s client-
centric business solutions model and the growth of
business activities into Africa north of our borders.
These will be dealt with in greater detail further on
in this review. It is, however, appropriate at this
juncture to elaborate on the group’s re-branding
that commenced in April 2004.
The Re-branding of the Group
and the “Power of X” Philosophy
In April 2004, the group announced that it had
decided to adopt the “Business Connexion” brand,
which was launched on 28 April 2004.
The decision to adopt the name of the black
empowerment partner reaffirmed management’s
commitment to embrace transformation. The brand
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R e v i e w o f O p e r a t i o n s (continued)
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was already established in the IT industry, had
commercial viability and was synonymous with
empowerment. It was also highly regarded in both
private and public sectors.
The brand was launched concurrently with the
“Power of X” campaign which has become a
philosophy, an approach and a way of working
that differentiates the company in the marketplace.
The ”X” symbolises a multiplier as the group believes
that the merger of the two companies was more
than a plus. The benefits are multiple as expressed
in the equation: (client-centric focus) x (unique
people) x (empowerment) x (innovative solutions)
= exponential value.
The philosophy embodies the group’s commitment
to create exponential real business value for its
clients by integrating the strategic value of ICT
into their business strategy.
The Solutions Integration Model
Clients are firmly positioned at the centre of the
Business Connexion world, and the group’s unique
and proven “Solutions Integration Model” represents
the way in which the group harnesses its depth
of skills, expertise and experience and configures
them in a way that delivers technology solutions
that best meet a client’s strategic business
requirements. It ensures a client-centric approach
that provides a unique blend of the flexibility and
close client contact of a small and mobile enterprise,
with the strength, resilience and diversity of a
large enterprise.
This disciplined yet flexible and proven approach to
solutions design and delivery is what sets Business
Connexion apart from its competitors.
The Business Connexion’s Strategic Solutions (SES)
team provides focus and co-ordination to define
Our “Solutions Integration Model” represents the way our integration of business solutions is configured around the client’s own business.
clients’ business problems and accesses and
integrates key competencies within Business
Connexion to provide thought leading solutions to
those business challenges.
Business Consulting
By definition, business consulting forms an integral
part of the SES team’s activities. Typically, these
activities range from solving the problem of
exchanging business critical information between
incompatible business software suites, to helping
businesses respond to competitive market pressures
by re-engineering and re-aligning their businesses.
Recognising that ICT deployment is conventionally
separated into three broad disciplines – planning,
building and running – the Business Consulting
unit operates within the planning phase, designing
processes and defining business practices to be
implemented within the building phase in order to
support business growth.
The Business Consulting unit also offers clients
support with the application of a number of other
global best practices. These include Information
Technology Infrastructure Library (ITIL), which specifies
ICT best practices; Total Cost of Ownership (TCO),
which takes a comprehensive, holistic view of
an organisation’s TCO issues; Theory of Constraints
(TOC), which looks at improving an organisation’s
productivity and revenues by eliminating
inefficiencies; and enterprise architecture, aligning
business requirements to IT enablement.
Looking back over the past year, market demand
was driven by cost-benefit procurement and value
sensitivity. IT suppliers responded by consolidating
their activities in the face of the heightened
competitiveness within the market. The IT consulting
industry responded similarly.
As a result, industries experienced a loss in revenue
during the review period as the market contemplated
the “perceived versus real benefits” gained from
previous investments in consulting, projects and
technology.
Looking forward, opportunity exists to capture
significant portions of the consulting and
technology market share – product and projects –
that will become available as a result of the
shift by IT consulting firms away from traditional
consulting to value delivery.
Management is confident that the company will
leverage on these opportunities, particularly in
the area of business improvement through
optimisation of business processes and enabling
technologies.
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Outsourcing
2004 2003R000 R000
External revenue 1 726,1 1 782,8
Operating profit 154,6 118,9
This competency, previously referred to as Managed
Services, comprises three separate focus areas:
Professional Services;
Infrastructure Services; and
Service Management Centre (SMC).
Professional Services
Business Connexion’s professional services competency
focuses on strategic, tactical, technical and
operational solutions using its broad skills base to
assist clients in extracting the best value from their
ICT investments. Skills offered include analysis and
design, project management and application
programming, amongst others.
The competency consolidated its leadership position
during the past year by acquiring more than 20 new
accounts. Many of these were secured by the
Local and Regional Authorities (LARA) business,
which has shown major growth during the review
period. Revenue is largely annuity based with
acceptable margins.
Although the market remains highly competitive,
management expects to maintain market leadership
during the year ahead.
The group’s UK office, Q Data Europe, provides
professional services based solutions to the
group’s multinational clients in the European
Union. A multi-lingual service management centre
was established during the year for a large petro-
chemical client, and further growth opportunities
exist in the telecommunications, financial services
and petrochemical industries. The office operated
profitably during the review period.
Infrastructure Services
Business Connexion is the leading infrastructure
outsourcing service provider in South Africa, providing
services to the Government, manufacturing, mining,
retailing, financial services, petrochemical and
telecommunications industries.
This competency’s activities include:
distributed systems management;
mainframe and data centre management
and consolidation;
communication network outsourcing and
management; and
desktop management and hosting.
The past year was a challenging one for the
competency centre’s major clients, particularly those
in the manufacturing, mining and petrochemical
industries, who were adversely affected by a strong
Rand/US dollar exchange rate. Clients looked towards
Business Connexion for superior service and
reduced costs and this placed considerable pressure
on margins.
During the year, the competency centre implemented
ITIL processes and improved its internal systems to
produce an enhanced desktop services model.
Management expects business conditions to improve
in the new financial year. Several outsourcing
contracts have been renewed and the competency
centre continues to maintain a contract renewal
rate of more than 90%.
Focus will continue to be on industries with which
it is familiar and in which it has an established
track record.
The Service Management Centre (SMC)
The SMC is a world-class service management
outsourcing provider, offering end-to-end support
for all IT assets from desktops to servers and
applications to networking infrastructure. By auto-
mating the process of responding to and resolving
customer problems, and through strict compliance
with internationally recognised best practices
(ITIL), the SMC is able to service the demanding IT
environments of South Africa’s biggest corporations.
The competency centre introduced various new
technologies during the year to enhance service
levels and refine processes. This had a positive
influence on profitability.
Specific achievements in this regard included the
implementation of a world class IVR system;
implementation of ITIL processes for service desk
operations; WEB access for clients; and satellite
SMCs in the UK and USA linked directly to the central
systems processes and policies in Midrand, to provide
a consistent approach to service delivery for all clients.
Call volumes doubled compared to the previous
financial year and management expects this trend
to continue in the year ahead.
Business Applications
2004 2003R000 R000
External revenue 269,0 167,3
Operating profit (2,9) 21,9
The Business Applications Competency is a high-end
reseller that implements supports and maintains
business applications software. The division partners
with leading local and global product vendors
such as SAP, Cognos and Actuate to provide a
comprehensive IT solution.
The competency comprises:
Combined Design Engineers, a service alliance
partner to SAP Africa;
Customer Orientated Applications, a business
intelligence, knowledge and CRM specialist;
Q Data Dynamique, a human resources and
payroll solutions provider;
Mainstream Tetra, a financial solutions service
provider;
Geographic Information Systems, a data and
analysis service provider;
Nanoteq, an ICT security solutions provider;
and
Microsoft, a licencing, infrastructure architecture
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Combined Design Engineers (CDE)
Most of this competency centre’s clients are
multinationals who derive the bulk of their revenues
and profits from offshore operations. The robustness
of the Rand impacted severely on their businesses
over the past year, resulting in cost pressures
which curtailed their demand for CDE’s services.
Fortunately, its ability to deliver innovative value-
adding SAP solutions enabled it to achieve several
important client successes. It developed and launched
its SAP Support Centre and has formed alliances to
deliver optimal solutions to meet the International
Financial Reporting Standard (IFRS) requirements,
which will become mandatory by 2005. CDE is able
to support businesses that have to comply with this
requirement.
Customer Orientated Applications (COA)
COA focuses on providing Business Connexion clients
with business intelligence and knowledge manage-
ment solutions. The competency centre experienced
a challenging year but sustained its revenue through
existing client support contracts.
The Remedy product set was discontinued and an
exclusive reseller agreement was concluded with
Zantaz to distribute their Exchange Email Archiving
Solution. The competency centre is well positioned
for the new financial year, based on the annuity
income provided by a significant number of
client service contracts, and on the major growth
opportunities in business intelligence and knowledge
management solutions available to it from Microsoft.
Q Data Dynamique (QDD)
QDD specialises in developing and implementing
complete human resources management (HRM)
solutions, including time keeping and payroll
functions. All solutions are developed in South
Africa for South African businesses, and QDD
solutions have been adapted to almost every
local industry sector. Nearly 40% of all local
pay-slips generated in South Africa are produced
using QDD products.
For the second year running, the competency centre
substantially exceeded its profit target based on its
existing annuity revenue and on securing new annuity
revenue due to sales of the UniQue and DynamiQue
1.0 software suites. Substantial additional HRM
functionality was successfully incorporated into
the DynamiQue 1.0 suite during the past year. This
allowed QDD to aggressively attack the high-end
market, where managing the HRM function has
become a critical business requirement. It will
continue to do so in the year ahead.
Mainstream Tetra
Mainstream Tetra provides its clients with best-of-
breed business management tools such as enterprise
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resource planning, financial reporting and business
intelligence. Profitability was curtailed significantly
over the past year due to high selling costs and a
reduction in new licence sales. However, major client
wins were achieved in Africa with new SmartStream
licence sales in Zimbabwe and Malawi, and an
annuity services contract at a financial institution.
The strategy for growth in the new financial year
will include a continued emphasis on introducing
SmartStream into the rest of Africa; introduction
of the Finacle Core Banking application – a product
from Infosys, an Indian consulting and software
development company; marketing of Sales Logix,
a CRM application; and a more aggressive
selling strategy in the mid-tier ERP sector. The
competency centre believes it is positioned to take
advantage of any upturn in the market, based to a
significant degree on its SmartStream reference
sites in Africa and its partnership with Infosys in
the banking sector.
Nanoteq
This competency provides ICT security solutions
designed to mitigate IT risks throughout the client
enterprise and across the Intranet, Extranet, IT
infrastructure and database applications. Nanoteq
also designs, develops and supplies custom encryption
products for use by government agencies, both
locally and abroad.
Tough trading conditions saw Nanoteq’s revenues
decline during the year, resulting in a trading loss
for the period.
Microsoft
The merger added this important competency to
the Business Connexion Group’s extensive offering
of ICT-related resources. During the year under
review, the competency met its financial targets
and maintained its position as the country’s top
revenue producer for Microsoft in the corporate
environment.
Several major achievements were recorded during
the year including installations at a number of
leading clients. As a result, Business Connexion
received the prestigious “Systems Integrator of the
Year Award” for 2003/2004 from Microsoft SA.
Looking to the year ahead, this competency aims to
improve its services to licence revenue ratio. As the
major supplier of Microsoft products in SA, it is in
an excellent position to grow its services revenue.
The focus will be in assisting clients to maximise
the value of their Microsoft investment by building
business solutions using their Microsoft technology,
thereby eliminating the need for additional “bolt
on” packages.
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Technology Infrastructure
2004 2003R000 R000
External revenue 816,7 751,3
Operating profit 14,7 30,3
Business Connexion partners with the most
successful global and local ICT companies to provide
clients with the foundation for their technology
infrastructure. The solutions it provides include
servers, storage, networking and the related services.
Networks
The Networks competency centre has a unique
blend of skills which, during the past year, were
instrumental in allowing it to gain an advantage
over its competitors, particularly in Africa where
growth arising out of the roll out of large
telecommunication networks was significant. The
competency centre increased its revenue while
making the transition from selling traditional
network infrastructure to providing fully converged
ICT solutions. New offerings include convergence,
broadband multimedia networking, IP telephony
and video conferencing.
Awards won during the year under review included:
Cisco Best First Tier Partner of the Year 2003; Cisco
IP Telephony Partner of the Year for Africa; Cisco
Customer Advocacy Award for Russia, Middle East
& Africa region (the only Cisco African partner to
achieve a regional award); the only Cisco solution
implementer and partner in Africa to obtain
Cisco IQ partnership (the highest level possible);
and the Top VCON audio and video conferencing
solutions provider.
Networks is positioned for growth in the next
financial year based on its extensive ICT skills,
strategic vendor relationships, specialisation, ability
to adapt to a changing market, and increased
focus on the public sector.
Persetel Q Vector
The Persetel Q Vector competency centre, which
focuses on enterprise systems, had a challenging
year in the wake of slow IT spending in the US
economy. This prompted their business partners
EMC2, IBM and SUN Microsystems, to dramatically
reduce their US dollar based prices to gain market
share. This resulted in an increase in hardware unit
sales but a decrease in turnover and profits due to
price erosion. Services growth continually adds to
the turnaround in the local market and management
expects this to take place in the year ahead.
The division was awarded the Top Systems Integrator
and Services Business Partner for IBM for 2003 in
South Africa; the EMC2 Sustained Income Partner in
Africa for 2003 and received a SUN Microsystems
High Volume Product Revenue Award.
R e v i e w o f O p e r a t i o n s (continued)
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In the year ahead, Persetel Q Vector’s main focus
will be to grow its technology solutions business
through the successful introduction of new
product lines such as Stratus, HP and Egenera,
which have broadened its solution offering.
Through this competency centre, Business Connexion
remains the largest provider of total enterprise
systems solutions in southern Africa.
Support Services (SS)
This competency centre provides an end-to-end
year round 24X7 maintenance service to Business
Connexion clients. It performed well during the
year winning several major accounts and exceeding
its target. Competitive pricing, together with high
service level agreement performance levels, were
key success factors in winning these accounts.
SS expects to continue its growth into the new
year based on its competitive advantage, which
lies in its wide range of skills that are successfully
deployed in 31 service offices nationwide.
Growth into Africa
Business Connexion grew its revenues in Africa by
107% during the review period. Building on the
success of previous projects in Ethiopia, Business
Connexion was awarded a number of smaller
contracts plus two more major contracts. These
included a nationwide multimedia communications
network contract (including IP telephony and
video-conferencing) and a core optical backbone
network contract in Ethiopia (the first of this type
of technology on the African continent). It also
implemented an IP telephony solution for a major
mining company in Angola and installed a billing
management systems for a major cellular operator
in Mozambique and in Tanzania.
As a result of the increased workload in Africa, the
Business Connexion Africa team has since been
expanded to accommodate further growth in this
territory. It is management’s intention to establish
footprints in the countries in collaboration with
local partners where the company has already
achieved sustainable revenues. While the past year
has shown very rapid growth of our African
business, we expect to maintain the current level
of business into the coming year.
Business Connexion’s Namibian business continued
to prosper although revenues declined marginally
due to the strong Rand. The business initiated the
first Livelink implementation in Namibia and
secured a reseller relationship with Dell and SUN
Microsystems. The primary focus for growth in
Namibia in the year ahead will be to ensure the
stability and continuity of recurring income.
Associates and Joint Venture
Digital Healthcare Solutions (Pty) Limited
– (DHS)
DHS, in which Business Connexion holds a
39,13% interest, specialises in the automation of
administrative and office processes, and leads the
healthcare market in electronic claims conveyance
and medical practice management software. Its
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products and services enable better cash flows,
improve efficiencies and reduce administration costs
for some 2 400 retail pharmacies, over 8 000 medical
practitioners and specialist businesses, and the two
largest private hospital groups.
DHS has over the past year consolidated its position
as the largest solutions provider in southern
Africa’s healthcare IT and e-commerce market.
Solid performances from all operations and
disciplined control of operating expenses enabled
the company to record a meaningful improvement
in operating profit for the year.
Achievements by DHS during the past year include:
Med-e-Mass growing its customer base by
over 10%.
introduction of a new flagship practice
management product, Elixir, at 350 practices
and a large primary healthcare network.
adding an average of 150 new switching
customers per month to the Digital Healthcare
Switch.
Current development projects are aimed at further
improving the efficiency of connectivity software
to create better flexibility and to make provision
for wireless and mobile communication technologies.
An innovative claims conveyance and adjudication
service, which will redefine the expectations of
customers for claims delivery, will be launched
during 2004.
In respect of the Competition Commission issue,
negotiations are currently under way with the
Commission to establish a plan that will ensure
compliance with the DHS merger conditions set
down in April 2001 and in this regard a satisfactory
resolution is anticipated. A consequence of this
plan is to allow a competing switch operator access
to the Med-e-Mass customer base on reasonable
terms. The DHS management team is well aware
of the fact that this increased competition may
impact its business and are well advanced in
formulating strategies to counter this.
Having analysed the market environment in some
detail, management is confident that the company
will be able to sustain and strengthen its leadership
position, and continue to produce good returns for
its shareholders.
Mosaic Software Holdings Limited (Mosaic)
Mosaic Software is a global EFT company providing
leading-edge software solutions to financial
institutions, mobile operators, retailers, portals, and
processors worldwide. Mosaic drives payments and
other financial transactions through ATMs, POS
terminals, phones, and Internet access points.
This multi-channel architecture provides EMV
enablement, debit card management, and loyalty
software solutions. It also enjoys a favourable cost
of ownership.
R e v i e w o f O p e r a t i o n s (continued)
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The company increased its revenue and earnings
before interest, tax and depreciation during the
year under review. Major successes included the
addition of 46 new clients worldwide, of which 26
were in the USA.
The primary strategy for growth for the year ahead
is to build on the new markets (both territories and
verticals) that were opened in the past year. Mosaic
is positioned to take advantage of the market as it
is the EFT software vendor that has added the
highest number of new clients in the past year. The
company now has more open systems installed
worldwide than all its competitors combined.
Perago Financial System Enablers
(Pty) Limited (Perago)
Perago is a provider of financial infrastructure
solutions and services that enable central banks
and other stakeholders in the financial system to
transform their financial infrastructures on an
organisational, national and regional level, thereby
enabling economies and financial system participants
to obtain optimal benefit. Business Connexion has
an effective 25% interest in Perago.
Despite the unprecedented and unexpected
strengthening of the Rand, Perago produced
positive results for the review period. In line with
its strategic objectives for the year, Perago
successfully broadened its revenue base and made
significant progress in building a new annuity
based revenue stream alongside its software
maintenance and support contracts.
Disposals
During the past year, the group disposed of its
interests in Q Data USA Inc, The Smartshed (Pty)
Limited and Phambili Information Technologies
(Pty) Limited.
The decision to dispose of Q Data USA was based
on the group’s inability to expand the operation’s
presence in the USA, the difficulties in managing a
small operation from a distance and the lack
of alignment between their business model and
the group’s business model. The investment in The
Smartshed was disposed of to one of the joint
venture partners following the discontinuation
of the project. Phambili, having been established
originally as an SMME, was sold to the joint
venture partner following the merger with Business
Connexion Solutions.
Peter Watt
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xT h e B u s i n e s s C o n n e x i o n G r o u p r e m a i n s f u l l y
c o m m i t t e d t o t h e p r i n c i p l e s o f e f f e c t i v e c o r p o r a t e
g o v e r n a n c e a n d a p p l i c a t i o n o f t h e h i g h e s t e t h i c a l
s t a n d a r d s i n t h e c o n d u c t o f i t s b u s i n e s s .
governancex
C o r p o r a t e G o v e r n a n c e
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Business Connexion Group applies the highest
ethical standards in the conduct of its business. In
doing so, it endorses the principles of transparency,
integrity and accountability advocated in the Code
of Corporate Practices and Conduct set out in the
second King Committee Report on corporate
governance (“the Code”). The group fundamentally
complies with the recommendations of the Code, as
it recognises its responsibility to all stakeholders to
conduct itself with prudence and integrity, thereby
protecting the interests of all its stakeholders.
Responsibility
The directors of the company are responsible for the
preparation, integrity and reliability of the Business
Connexion financial statements and all other infor-
mation contained in the annual report. Certain
responsibilities have been delegated to sub-committees,
but the Board accepts that it remains accountable
for the performance and affairs of the group.
Board of Directors
At the date of this report the Board consisted
of seven directors, four of whom were non-
executive directors. Of the non-executive directors,
John Buchanan and Francois van der Merwe are
currently considered to be independent in terms of
the definition contemplated in the Code. It is
acknowledged that the Board does not reflect the
demographics of South Africa and lacks a sufficient
number of independent non-executive directors.
The appointment of additional independent non-
executive directors remains a focus. The directors
collectively bring a wide range of experience and
expertise to the Board, thereby providing objectivity
to decision-making processes. All Board members
are aware of the requirements of the Code.
The roles of Chairman and Chief Executive Officer
are separate; ensuring that there is an appropriate
balance of power and authority, so that no individual
has unfettered powers of decision-making. Reginald
Berkowitz is the non-executive Group Chairman.
Peter Watt is the Chief Executive Officer, and the
Board has ensured that a succession plan is in
place for this position.
The Board has delegated the responsibilities of
a Nomination Committee to the Remuneration
Committee. Procedures for appointments to the
Board are formal and transparent, and nominees'
backgrounds are thoroughly investigated.
In terms of the Articles of Association, one third of
the directors retire by rotation annually. Directors
who are newly appointed during the course of any
financial year are required to stand down at the
annual general meeting, when they may be
re-appointed. Directors have no fixed term of
appointment and their contribution is subject to
ongoing review. The Board has established a process
of self-assessment to determine its effectiveness.
The non-executive directors receive no benefit
other than directors' fees, as follows:
basic fee as remuneration.
an additional fee for services rendered as
Chairman and Deputy Chairman of the Board.
an additional fee for services rendered as a
member of a Board committee.
These fees are recommended by the Remuneration
Committee and approved at the annual general
meeting.
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C o r p o r a t e G o v e r n a n c e (continued)
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In terms of its charter the Board of Directors is
responsible for directing and controlling the
activities of the group and provides leadership
and guidance to the Executive Management of
the group. The directors ensure that matters of
strategy, policy and performance are attended to
and appropriately acted upon. The Board, either
directly or through Board committees:
approves the annual budget and strategy.
continually assesses the quantitative and
qualitative aspects of the group’s performance
through reviews of the management reporting,
which includes financial and non-financial
information, and strategic and operational
updates from management.
reviews key risk areas and key performance
indicators.
monitors the group's compliance with all
relevant legislation and codes of business
practice.
oversees the monitoring of the procedures
that ensure that the group maintains an
effective system of internal control and risk
management.
reviews the group's communications with its
key stakeholders.
All directors have access to the services and advice
of the company secretary and to senior manage-
ment, and are entitled to seek independent
professional advice in connection with the group's
affairs at the group's expense.
The Board meets at least four times per year. Board
members use their best endeavours to attend
Board meetings and are expected to participate
frankly and constructively in Board discussions
and other activities.
Board meeting attendance
Board member 7 Aug 03 9 Oct 03 4 Dec 03 12 Feb 04 12 May 04
R S Berkowitz Y Y Y Y Y
J F Buchanan Y Y Y Y Y
A C Farthing Y Y Y Y Y
W J C Mitchell Y Y Y
D M Nurek Y Y Y Y Y
F J van der Merwe Y Y Y Y Y
P A Watt Y Y Y Y Y
Key:
Y – Present
The above table reflects attendance at Board meetings of Comparex Holdings Limited and Board meetings of
Business Connexion Group Limited from the date the Board members served during the financial year.
review of suggested improvements to
disclosure.
review of compliance with applicable legislation,
JSE Securities Exchange regulations, South
African Generally Accepted Accounting Practice,
King II and other relevant business practices.
review of the adequacy of internal control
processes and improvement mechanisms
thereto.
monitoring of risk management practices.
review of compliance with the group’s Code
of Ethics.
monitoring and evaluation of the performance
and independence of both the internal and
external audit function.
approving the engagement of the external
auditors for non-audit functions.
The heads of Internal Audit and External Audit
have unrestricted access to the Chairman of the
Audit Committee.
The group’s Internal Audit and Business Standards
Management functions operate in conjunction with
each other to ensure that the group’s financial,
operating and information technology policies and
systems are adequately monitored, updated and
reviewed.
Risk management is addressed by the Audit
Committee, with the group's exposure to risk being
identified, assessed, managed and monitored at
operational level.
Board Committees
The Board is authorised to establish Board
committees as and when necessary to facilitate
efficient decision-making by the Board in the
execution of its duties. Business Connexion has
three standing committees, namely the Audit
Committee, the Remuneration Committee, and the
Executive Committee. These committees all have
specific terms of reference that include roles and
responsibilities and are accountable to the Board.
The Board has established a process of evaluating
the performance and effectiveness of each
committee on a regular basis. The purpose and
membership of the committees are as follows:
Audit Committee
The Audit Committee is comprised of three non-
executive directors, one of whom serves as committee
chairman. The Chairman is John Buchanan, who is
an independent non-executive director. The other
members are David Nurek and Francois van der
Merwe. Various members of management are invited
to attend committee meetings. These include the
Chief Executive Officer and the heads of Finance,
Commercial and Internal Audit. The Audit Committee
meets formally at least twice per annum to assist
in the governance of Business Connexion. The terms
of reference of the Audit Committee have been
formalised and approved by the Board and in
summary include the following responsibilities:
review of accounting policies and changes
thereto.
review of interim and annual financial
statements.
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Audit Committee meeting attendance
Member 5 Aug 03 11 Feb 04
J F Buchanan Y Y
D M Nurek Y Y
F J van der Merwe Y Y
Key: Y – Present
The above table reflects attendance at AuditCommittee meetings of Comparex Holdings Limitedand Audit Committee meetings of Business ConnexionGroup Limited from the date the Board membersserved during the financial year.
C o r p o r a t e G o v e r n a n c e (continued)
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Remuneration Committee
The Remuneration Committee is responsible for
the remuneration and employment terms of senior
management. It is comprised of three non-executive
directors, including the Chairman of the Board.
There is currently one vacancy on this committee.
The members are Reginald Berkowitz and David
Nurek. The Chief Executive Officer may attend
meetings and provide input on the remuneration
of senior management. However, he recuses himself
from decisions regarding his own remuneration.
The Remuneration Committee's philosophy is to
ensure that the executive directors and senior
management are rewarded for their contribution
to the group’s operating and financial performance,
at levels which take account of both local and
international information technology market trends.
In order to align management actions with
shareholders’ interests, a share incentive scheme is
maintained.
The Remuneration Committee’s general responsi-
bilities include:
review of principal matters relating to
employment practices.
review of remuneration trends.
succession planning for senior management.
annual review of executives’ and senior
management’s remuneration ensuring that an
appropriate balance exists between basic and
performance based remuneration.
fulfilment of the role of a Nomination
Committee, to ensure that suitably qualified
persons are nominated to the Board for
appointment as executive or non-executive
directors.
ensuring that the group has a formalised
induction programme to familiarise new Board
appointees with the affairs of the group.
The Board has approved formal terms of reference
for the Remuneration Committee, which meets
formally at least twice per annum.
Remuneration Committee meeting attendance
Member 7 Aug 03 9 Oct 03 3 Oct 03 12 Feb 04 7 Apr 04
R S Berkowitz Y Y Y Y Y
D M Nurek A Y Y Y Y
W J C Mitchell Y Y Y
Key:
Y – Present A – Apology
The above table reflects attendance at Remuneration Committee meetings of Comparex Holdings Limited and
Remuneration Committee meetings of Business Connexion Group Limited from the date the Board members
served during the financial year.
Executive Committee
The group’s Executive Committee (EXCO) comprises
16 members, three of whom are Executive Directors,
responsible for the day-to-day running of the group.
Peter Watt, the Chief Executive Officer, is the
Chairman of the committee. The committee’s members
are responsible for the primary competencies
within the group including Business Applications:
Commercial, Finance, Human Resources, Infrastructure
Management and the Service Management Centre,
International, Marketing and Communication,
Professional Services, Public Sector, Sales, Strategy,
Strategic Positioning and Technology Infrastructure
and Africa. The committee meets at least once a
month. The members of the committee are
indicated on page 10 and 11 of this report.
The EXCO’s responsibilities include:
contributing to, evaluating, approving,
implementing and monitoring core business
strategies and policies and ensuring procedures
are in place pertaining to risk management,
internal controls, compliance and public
reporting.
monitoring agreed performance measures
linked to business strategies and comparing
these with those of other business units.
formulating annual budgets for each business
unit in terms of group budget guidelines, and
assumptions for submission to the Business
Connexion Board for approval.
managing the business and affairs of the
company and, so doing, enhancing the reputation
of the company in the marketplace and the
community.
prioritising the allocation of resources (capital,
technical and human).
reviewing business plans and proposals/tenders
for material transactions.
establishing the best management practices
and functional standards.
Risk Management
The Board accepts responsibility for the entire process
of risk management. Management is accountable
to the Board for designing, implementing and
monitoring the risk management process and
integrating it into the day-to-day activities of the
company. A Corporate Risk Co-ordinator has been
appointed during the year who will be primarily
responsible to assist management to implement a
risk management architecture, and then to ensure
that it is suitably reviewed and updated. The
Corporate Risk Co-ordinator will monitor the
company’s entire risk profile, ensuring that major
risks are identified and reported to the Board.
Company Secretary
The company secretary is suitably qualified and
experienced and plays an important role in ensuring
that the Board procedures are followed correctly
and reviewed regularly. He ensures that each member
of the Board is made aware of and provided with
guidance as to their duties, responsibilities and
powers. The company secretary is appropriately
empowered by the Board to fulfil these duties.
The company secretary is responsible for the duties
stipulated in section 268G of the Companies Act
and has signed the appropriate declaration as
contained elsewhere in this report.
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C o r p o r a t e G o v e r n a n c e (continued)
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Sustainability Reporting
The group is aware of the Code’s requirements that
an enterprise focuses on non-financial aspects of
corporate practice, which influence the businesses’
ability to survive, prosper and add value to the
communities within which it operates. Prior to the
publication of King II, the group had already
developed policies and practices relating to certain
non-financial issues that were considered important
to the future wellbeing of Business Connexion and
to the country as a whole. These are:
A Code of Ethics
The group subscribes to a corporate ethos, which
requires directors and employees to adopt the
highest personal ethical standards in their dealings
with all stakeholders in the conduct of the group’s
affairs. The principles to which each individual
subscribes include integrity, openness, accountability,
impartiality and honesty.
Fraud and Illegal Acts
The organisation is specifically supportive of the
requirement for ethical behaviour in modern
corporate society. As such, it actively pursues and
prosecutes perpetrators of fraudulent or other
illegal activities. To further enhance governance in
this area, the group has procured the services of
"Tip-offs Anonymous”, which allows employees
to report any incident of wrongdoing such as
workplace dishonesty, unethical behaviour, fraud,
theft or any other crime.
Health and Safety
The group has a well-developed occupational
health and safety programme in place, in terms of
which health and safety risks are identified and
monitored in accordance with the Occupational
Health and Safety Act. The programme aims to:
provide a safe and healthy working environment
for all employees and clients.
motivate and educate all levels of management
and employees to assume personal ownership
of health and safety issues.
ensure that sub-contractors enforce standards
and procedures that comply with healthy and
safe conduct.
Environment
The group’s impact on the environment is minimal
in comparison with most other industries. However,
it recognises that it can contribute positively to a
cleaner environment by considering power
consumption, paper consumption, water usage,
waste management and by sponsoring other
environmental initiatives.
The group has several internal initiatives such as a
paper recycling project and a printer cartridge
recycling project. The KwaZulu-Natal regional
office has also worked closely with eThekwini
Municipality and the Umhlanga branch of the
Wildlife and Environment Society to restore forest
land in La Lucia.
Transformation and Black Economic
Empowerment (BEE)
Business Connexion believes that successful
transformation is not about concepts – it is about
action. To this end, the group embarked on
a programme of transformation over five years
ago. This programme included the identification
of a black empowered equity party and the merger
during the year under review with Business
Connexion Solutions (Pty) Limited to form Business
Connexion achieved this objective. The group is
committed to channelling significant amounts of
time, effort, resources and funds into a range of
empowerment and economic enablement initiatives.
Business Connexion has a six-point approach to
transformation.
Business Connexion will continue to play a role in
addressing the huge social and economic challenges
that confront South Africa. New programmes
will be aimed at transforming the organisation to
reflect the demographics of the South African
society. The overview below summarises several
of Business Connexion’s initiatives illustrated in
the diagram.
Corporate Social Investment (CSI)
ICT has been recognised as an essential vehicle for
social change and economic development and is
a critical tool for developing countries such as
South Africa.
Our government has recognised the potential
benefits to be gained from harnessing the power
of ICT and has noted that it is the application and
diffusion of digital technologies that can drive
South Africa to achieve considerably higher levels
of social development and strong sustainable and
equitable growth.
To this end Business Connexion supports a host
of initiatives that take technology to the
previously disadvantaged masses.
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Creating value together
EQUITYOWNERSHIP
CORPORATESOCIAL
INVESTMENT
EMPLOYMENTEQUITY
ENTERPRISEDEVELOPMENT
TRAINING &DEVELOPMENT
PREFERENTIALPROCUREMENT
The company has twice been awarded an
“Impumelelo Top Company Award” for its contribution
to Corporate Social Investment. Business Connexion
commits a specific percentage of its turnover to
social investment annually.
Business Connexion’s Corporate Social Investment
Strategy continues to support and focus on three
specific areas:
ICT Education and Training;
ICT Infrastructure; and
HIV/AIDS.
These projects include:
Training
The Tshwane University of Technology (TUT)
advises Business Connexion on how best to
implement the Skills Development Act. In
return Business Connexion helps the TUT to
match curricula to corporate requirements
and the group places technology students
within the company during the practical
internship part of the programme.
The group has remained committed to its co-
sponsorship of the Information Technology
Banking Learnership Programme (ITBLP), that
was accredited by the Department of Labour
and the Bank Seta as the first IT and banking
learnership in the country. The programme
provides talented young people with free
technical ICT training and the estimated value
of this project is R2,6 million per annum.
The company continues to partner with the
Technology and Human Resources in Industry
Programme (THRIP) and Telkom to support
growth of telecommunications and information
technology skills in South Africa through the
Telkom Centre of Excellence at Rhodes and
Fort Hare University. The programme has been
recognised as a shining example of collaboration
between Telkom, the telecommunications
industry, universities and government, to help
ensure that South Africa’s brightest young
minds achieve their potential. Business
Connexion is a member of the steering
committee and offers high quality graduates
from the programme employment opportunities.
Business Connexion has partnered with SUN
Microsystems SA to offer black graduates a
sponsorship at the IT CoachLab Leadership
Programme. A joint venture between EPI-USE
Systems and The Innovation Hub, a Blue IQ
project of the Gauteng Government, provides
students invaluable working experience as
part-time EPI-USE employees. The students
will actively participate in mission-critical EPI-
USE projects, including offshore development
projects. These projects are aligned with the
Government’s export vision.
The group continues to offer ICT bursaries to
top Matric students from under-privileged
schools. Students are awarded bursaries
for achievement in Matric Higher Grade
mathematics and science so that they can
pursue ICT-related studies.
ICT Infrastructure Development
Business Connexion has targeted disadvantaged
schools and communities in Gauteng, KwaZulu-Natal
and the Eastern and Western Cape as recipients of
computer centres. Through the partnership with
C o r p o r a t e G o v e r n a n c e (continued)
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READ, McCarthy’s and Unilever, Business Connexion
supplied previously disadvantaged schools in
KwaZulu-Natal with computer centres.
HIV/AIDS Sponsorships
Business Connexion recognises that HIV/AIDS is one
of the most important CSI initiatives and the group
therefore continues to sponsor several initiatives
which include the Lambano Babies Sanctuary
(sponsorship of baby goods) and Ethembeni Place
of Hope (contribution to the fundraising effort).
Preferential Procurement
Currently, this expenditure is in excess of 40%
of discretionary spending. Business Connexion
recognises that if transformation and black
economic empowerment in South Africa is to be
successful, large businesses must actively support
the development of smaller enterprises. If successfully
implemented, preferential procurement will drive
the redistribution of income, develop skills and
assist with job creation. Business Connexion
commits to spend a minimum of 40% of its
discretionary spending with black-owned
enterprises in each financial year.
Enterprise Development
The group believes that project-specific sub-
contracting is based on the principle of partnering
where all parties apply their specific value
propositions to a project without duplication. On
this basis, the overall cost of a project remains
competitive and ensures that the partnership
delivers a best-of-breed solution.
Business Connexion continuously endeavours to
pro-actively identify and make available sub-
contracting opportunities to SMME companies to
participate in its core business.
Employment Equity
In line with the recommendations of the
Black Economic Empowerment Commission, the
Government’s broad-based BEE Strategy and
the Employment Equity Act of 1998, Business
Connexion has quantified its employment equity
aims and objectives in measurable terms. The
group’s five-year plan is to achieve a 35%
Historically Disadvantaged Individual (HDI) ratio by
2006. The current ratio is 27%.
Business Connexion has submitted its Employment
Equity (EE) reports to the Department of Labour, as
required by the EE Act, in October 2002. The report
reflected the progress made by the group in HDI
employment and skills development since the
previous submission in June 2000.
EE performance monitoring and evaluation:
Management Performance
Business Connexion is pleased to report that its
senior line managers are committed to meeting
their individual regional and business unit EE
targets in support of the group’s target. Each
business unit manager has entered into a personal
performance agreement which measures their
achievement against their employment equity goal.
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Recruitment Performance
Business Connexion has a preferred recruitment
partner who is measured monthly on the ability to
exceed the group’s EE targets. For the period June
2003 to May 2004, 68% of the total number of
employees that were recruited via the recruitment
partner, were HDI placements.
Employees
The group believes that it continues to be an
“employer of choice” in the Information,
Communication and Technology industry and has
an ongoing focus on investment in its people.
Several programmes in the organisation attest to
this commitment.
Training and Development
Business Connexion’s training and development
programme complies with the Skills Development
Act. A divisional manager is dedicated to ensuring
the co-ordination and development of programmes
that meet the needs of the entire organisation.
During the review period, Business Connexion
continued with its Management Advancement
Programme to advance the skills of promising
managers. 32% of the participants are previously
disadvantaged individuals.
HIV/AIDS in the Workplace
The high prevalence of HIV/AIDS in South Africa
has made it critical for every organisation to develop
an effective and sustainable response to the
pandemic. Business Connexion has in place a
definitive policy on HIV/AIDS which provides clear
direction on managing issues relating to HIV/AIDS.
Employee Share Incentive Scheme
The organisation operates an employee share option
scheme which allows employees to participate in
share ownership. Refer Annexure D for further
details.
Employee Workplace Forums
Business Connexion has established an Employee
Communication Forum (ECF) that is representative
of all employees. It holds monthly meetings and
the general functions of the forum include:
promoting the interest of all employees in the
workplace.
maximising efficiency in the workplace
by advising management on the feelings
and sentiments of employees, to exchange
information and discuss business-related
issues, thereby also enhancing the quality
of management decisions.
reaching consensus on certain issues and
participating in joint decision-making matters,
in accordance with the company’s business
practices.
Stakeholder Relations
Employee Relations
Business Connexion is acutely aware that its
expertise is reflected by its people. To this end, the
company has a well-established policy of investing
C o r p o r a t e G o v e r n a n c e (continued)
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in the education and development of its employees.
A comprehensive, structured internal communi-
cation programme, supported by an Employee
Communication Forum, ensures open and transparent
communication with employees at all times.
The group believes that this commitment has
helped to establish the company as an “employer
of choice" in the ICT sector. The group’s competitive
advantage is derived largely from the exceptional
quality of its people, and great emphasis is placed
on maintaining an internal environment where
employees can prosper.
Investor Relations
The group ensures that it has meaningful and
constructive dialogue with investors. Shareholders
are invited to attend the Annual General Meeting
and any Special General Meetings that may be
held. The group takes careful cognisance of the
regulatory and statutory obligations regarding the
dissemination of information.
The Investor Relations team comprises Peter Watt
(Chief Executive Officer), Alan Farthing (Group
Financial Director) and Diana de Sousa (Group
Executive: Marketing and Communication). The
team is pro-actively involved in communicating
with the investor community through financial
results presentations, one-on-one meetings and
road shows in South Africa.
The group’s website, www.bcx.co.za is a valuable
source of information for Investor Relations purposes.
Clients
The group’s structure includes several regional
offices that provide a single interface to the client
base. Business Connexion believes that every
business is as unique as a fingerprint and responds
to this uniqueness through a client-centric
integrated solutions business model, which offers
the flexibility and personal attention of a small and
mobile company, as well as the strength, resilience
and diversity of a large organisation.
Management and employees are wholly committed
to the group’s client-centric approach which
ensures that the client is placed at the centre of
the organisation. Several Client Satisfaction Surveys
are undertaken annually to ensure that the
organisation continues to improve its client service
and satisfaction levels.
Partnerships and Alliances
Business Connexion builds world-class ICT solutions
through its partnerships and alliances. These
relationships are nurtured in an environment of
long-term mutual gain and shared fundamental
business objectives. Through these partnerships,
Business Connexion draws on best-of-breed industry
strengths to offer clients unsurpassed solutions.
One of the group’s differentiators is its ability to
harness its own, and its alliance partners’ expertise,
tools, resources and vertical sector knowledge to
deliver superior client solutions allowing it to
“create value together”.
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C o r p o r a t e G o v e r n a n c e (continued)
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The chart below details the employee demographics of the group.
May 2004 May 2003
Total % Total %
Total Workforce 4 048 100 4 107 100
Employees outside South Africa 151 4 190 5
Employees in South Africa 3 897 96 3 917 95
Employee Profile (South Africa)
Race and Gender Profile
White Males 1 928 49 1 923 49
White Females 928 24 1 008 26
Black Males 647 17 607 15
Black Females 394 10 379 10
Occupational Level Profile
Management 395 10 388 10
Non-management 3 502 90 3 529 90
Management Profile by Gender
Female 66 17 58 15
Male 329 83 330 85
Management Profile by Race
Whites 385 91 355 91
Designated Groups 37 9 33 9
Non-Management Profile by Gender
Female 1 256 36 1 329 38
Male 2 246 64 2 200 62
Non-Management Profile by Race
African 501 14 499 14
Indian 312 9 274 8
Coloured 191 5 180 5
White 2 515 72 2 576 73
Disability Profile
Employees with disabilities in Management — —
Employees with disabilities in Non-management 6 7
Employees with Disabilities by Gender
Female 1 2
Male 5 5
Note: Comparatives include Nanoteq which was not a subsidiary of Business Connexion Group Limited in the prior year.
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Workforce Movement 2003 – 2004 2002 – 2003
Total Employees before Reporting Cycle – May 2003/2002 3 917 3 880
Less: Resignations (427) (420)
Deaths/Disabilities (17) (16)
Dismissals/Retrenchments (87) (103)
Retirement/Pension (14) (11)
Contract termination (443) (174)
Engagements 968 761
Total Employees as on Reporting Cycle – May 2004/2003 3 897 3 917
Note: Comparatives include Nanoteq which was not a subsidiary of Business Connexion Group Limited in the prior year.
Value added is a measure of the wealth created by the group and its employees by purchasing, processing and selling services and products.This statement shows how this wealth was distributed.
2004 2003Notes R000 % R000 %
Revenue 2 811 771 2 701 375
Cost of services and products 1 402 881 1 275 917
Value added 1 408 890 95 1 425 458 100
Investment income 45 023 3 35 496 2
Exceptional gains/(losses) 32 482 2 (29 168) (2)
Total wealth created 1 486 395 100 1 431 786 100
Distributed as follows:
Employees– Employee costs 1 1 188 068 80 1 169 615 82
Providers of capital– Interest paid 42 732 3 42 123 3
Governments 2 40 434 3 33 419 2
Retained in the group for future growth 215 161 14 186 629 13
– Depreciation 65 814 49 149
– Retained surplus 120 448 106 540
– Non-distributable reserve 30 856 30 856
– Foreign currency translation reserve (2 776) (797)
– Deferred tax 819 881
Total wealth distributed 1 486 395 100 1 431 786 100
Value added ratios
Average number of employees for the year 3 949 4 027
Revenue per employee (R000) 712 671
Wealth created per employee (R000) 376 356
Wealth created per employee before exceptional gains/(losses) (R000) 369 363
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2004 2003R000 R000
Notes
1. Paid to employees 1 090 351 1 096 850
Contributions paid on behalf of employees 97 717 72 765
1 188 068 1 169 615
2. Governments
Current taxes 14 581 4 931
Regional service levies and skills development levies 12 263 13 182
Rates and taxes paid to local authorities 4 278 3 799
Customs duties, import surcharges and excise taxes 9 312 11 507
40 434 33 419
South African government 36 853 31 343
Other governments 3 581 2 076
40 434 33 419
3. Additional amounts collected on behalf of governments
Value added tax 159 549 168 466
Employee tax deducted from remuneration paid 265 295 264 586
424 844 433 052
South African government 395 515 389 915
Other governments 29 329 43 137
424 844 433 052
A d m i n i s t r a t i o n
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Ad
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Name of CompanyBusiness Connexion Group Limited(formerly Comparex Africa Group (Pty) Limited)
Incorporated in the Republic of South Africa
Registration number: 1988/005282/06
Share code: BCX
ISIN code: ZAE000054631
SecretaryBusiness Connexion Management Services (Pty) Limited(formerly Comparex Management Services (Pty) Limited)
Registration number: 1994/003844/07
Registered OfficeBusiness Connexion Park North
789 16th Road, Randjespark
Midrand 1685
Postal AddressPrivate Bag X48
Halfway House 1685
Internet Addresshttp://www.bcx.co.za
Transfer Office and Transfer SecretariesComputershare Investor Services 2004 (Pty) Limited
9th Floor, 70 Marshall Street
Johannesburg 2001
Postal AddressPO Box 61051
Marshalltown 2107
Telephone (+27 11) 496-2222
Fax (+27 11) 496-1244
AuditorsDeloitte & Touche
Deloitte Place
The Woodlands
Woodmead
Sandton 2196
Private Bag X6
Gallo Manor 2052
Principal BankersABSA Bank Limited
First National Bank of Southern Africa Limited
Nedcor Bank Limited
The Standard Bank of South Africa Limited
SponsorRand Merchant BankA division of FirstRand Bank Limited
1 Merchant Place
Cnr Fredman Drive and Rivonia Road
Sandton 2196
Corporate Information
44 Directors’ Approval
44 Certificate by Company Secretary
45 Report of the Independent Auditors
46 Directors’ Report
52 Accounting Policies
60 Balance Sheets
61 Income Statements
62 Statements of Changes in Equity
63 Cash Flow Statements
64 Notes to the Cash Flow Statements
67 Notes to the Financial Statements
87 Annexure A – Principal Subsidiaries
87 Annexure B – Principal Associates
88 Annexure C – Details of Share Incentive
Scheme Options
90 Annexure D – Details of Directors’
Emoluments
91 Annexure E – Details of Directors’ Share
Options
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An
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A n n u a l F i n a n c i a l S t a t e m e n t s
D i r e c t o r s ’ A p p r o v a l
C e r t i f i c a t e b y C o m p a n y S e c r e t a r y
PG44
Dir
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The directors of the company are responsible for the integrity and objectivity of the financial statements and
other information contained in this report. The financial statements have been prepared in accordance with
South African Statements of Generally Accepted Accounting Practice and in the manner required by the
Companies Act, 1973 and are based on appropriate accounting policies consistently applied except for the adoption
of AC133. The group maintains suitable internal control systems to provide reasonable assurance that assets
are safeguarded and transactions are executed and recorded in accordance with group policies. Nothing has
come to the attention of the directors to indicate that any material breakdown in the functioning of these
controls, procedures and systems has occurred during the year under review.
The directors believe that the group has adequate resources to continue in operation for the foreseeable
future and the annual financial statements appearing on pages 46 to 91 have, therefore been prepared on the
going concern basis.
These financial statements were approved by the Board of Directors on page 8 and 9 on 10 November 2004
and are signed on its behalf by:
R S Berkowitz P A Watt A C Farthing
Chairman Chief Executive Officer Financial Director
I hereby certify that, in accordance with section 268G(d) of the Companies Act,1973, as amended, the company
has lodged with the Registrar of Companies, all such returns as are required of a public company in terms of
this Act and that all such returns are, to the best of my knowledge and belief, correct and up to date.
L C Marran
For and on behalf of
Business Connexion Management Services (Pty) Limited
10 November 2004
To the members of Business Connexion Group Limited
We have audited the annual financial statements and group annual financial statements of Business
Connexion Group Limited set out on pages 46 to 91 for the year ended 31 May 2004. These financial
statements are the responsibility of the company’s directors. Our responsibility is to express an opinion on
these financial statements based on our audit.
Scope
We conducted our audit in accordance with statements of South African Auditing Standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance that the financial statements are
free of material misstatement. An audit includes:
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements;
assessing the accounting principles used and significant estimates made by management; and
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
Audit opinion
In our opinion the financial statements fairly present, in all material respects, the financial position of the
company and the group at 31 May 2004, and the results of their operations and cash flows for the year then
ended in accordance with South African Statements of Generally Accepted Accounting Practice and in the
manner required by the Companies Act in South Africa.
Deloitte & Touche
Chartered Accountants (SA)
Registered Accountants and Auditors
Sandton
10 November 2004
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Re
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R e p o r t o f t h e I n d e p e n d e n t A u d i t o r s
D i r e c t o r s ’ R e p o r t
resultsx
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The Board of Directors hereby presents the results
of the company and of the group for the year
ended 31 May 2004.
Nature of business
The company is an Information Communication
Technology (ICT) investment holding company listed
on the JSE Securities Exchange South Africa.
The principal activities of the company’s subsidiaries,
joint ventures and associated companies are those
of an integrator of business solutions.
Corporate activity
The past year has been highlighted by the black
empowerment transaction concluded with the
former Business Connexion Investments group,
and the restructuring of Comparex Holdings Limited
(Comparex) which resulted in the liquidation of that
entity and the return of R1,57 billion (R6,50 per
share) of the surplus cash to shareholders.
Following receipt of the unconditional approval of
the Competition Authorities, the proposed merger
between Comparex Africa and Business Connexion
Solutions was concluded with an effective date of
2 January 2004. The merger has been well received
by all stakeholders.
Concurrently with the restructuring of Comparex,
it was announced that Comparex Africa would
adopt the brand of its BEE partner, and the group
was re-branded as Business Connexion Group
Limited during May 2004. The BEE partner has
re-named its investment holding company as
Gadlex (Pty) Limited (Gadlex).
The restructuring of Comparex was approved by
shareholders on 30 April 2004. Since that date
Comparex has:
declared and paid a dividend of R1,00 per share
in anticipation of liquidation. This follows the
R5,50 per share declared in February 2004;
transferred the remaining assets of Comparex
to Business Connexion, namely Business
Connexion Technology Holdings (BCTH), which
owns the interests in Mosaic, Perago, Corp
Invest 40 and Nanoteq;
increased the number of issued shares in
Business Connexion to facilitate a one for one
distribution of Business Connexion shares to
shareholders of Comparex. This was achieved
by the conversion of preference shares, a
share split and a subscription for new shares
by Comparex;
distributed as a dividend in specie the shares
in Business Connexion to shareholders of
Comparex;
listed Business Connexion in the “Information
Technology – Software and Computer Services”
sector of the JSE Securities Exchange; and
delisted and liquidated Comparex.
Due to the restructuring, the results of Business
Connexion are not comparable with the results of
Comparex for the previous year. Interest earned on
the surplus cash prior to its distribution, as well as
the results of Mosaic, Perago and Nanoteq for the
11 months prior to their acquisition by Business
Connexion, formed part of the results of Comparex
and not of Business Connexion.
The group has disposed of its interests in Q Data
USA, The Smartshed and Phambili Information
Technologies.
Operating results
Business Connexion reported a 4,1% increase in
revenue which is due to the expansion into Africa,
the merger with Business Connexion Solutions and
adoption of AC133. The group’s strategy of growth
into Africa has been successful with revenue
growth of 107% during the period. This was largely
due to contracts secured in Ethiopia for the supply
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D i r e c t o r s ’ R e p o r t (continued)
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Africa mitigated declining revenue in the depressed
South African market. Business Connexion’s revenue
in the South African market has been impacted by
the strengthening of the Rand versus the US dollar.
Imported products were landed at reduced prices
and this benefit was passed on to clients. In addition,
clients who are dependent on US dollar based
revenues have cut back on their local spending.
The expansion into Africa has had a dilutionary
effect on operating margins as the profit earned is
shared with local partners in the countries where
the business is conducted. Operating costs were
satisfactorily contained notwithstanding increased
spending on training and accreditation programs,
strengthening corporate governance and the re-
branding of Business Connexion. Operating profit
reduced to R125,7 million from R142,0 million in
the previous year for the above reasons.
Depreciation increased due to amortisation of
goodwill arising on the merger with Business
Connexion Solutions. This amounted to R9,8 million
for the five months since the merger.
To ensure that shareholders received a final dividend
of R1,00 per share from the liquidation of Comparex,
the selling price of BCTH was determined by Comparex
prior to the publication of its circular regarding the
restructuring of Comparex. This resulted in Business
Connexion acquiring BCTH for a value which was
R35,0 million less than its net asset value. This
amount has been included as an exceptional item
and excluded from headline earnings.
The significant increase in the tax charge is mainly
due to Digital Healthcare Solutions recognising a
deferred tax asset in respect of its assessed loss in
2003, thereby reducing the tax charge in that year.
Headline earnings per share of 34,2 cents were
achieved for the year (2003: 44,0 cents). The reduction
is due to lower operating profit as referred to above,
increased tax and an increase in the minority interests.
Business Connexion’s balance sheet has remained
strong with R782 million of cash resources. Cash
flow for the year was positive with R100,8 million
generated from operating activities.
Long-term loans and advances in 2003 represented
the advance made to Comparex International Trading,
the treasury company of Comparex. This would have
been represented as cash by Comparex and is now
represented in the cash balance of Business
Connexion in 2004.
With effect from 28 May 2004, Business Connexion
included the share purchase trusts in the consolidated
results, as the trusts are now effectively controlled
by the group. The 19,8 milion shares in Business
Connexion held by the trusts have been treated as
treasury stock.
Business Connexion has experienced a substantial
increase in the value of performance guarantees
issued during the past year. These relate mainly to
the contracts awarded in Ethiopia and will terminate
upon conclusion of the contracts which generally do
not extend beyond one year.
Other significant matters
Tax issue
As previously reported, the South African Revenue
Services (SARS) disallowed a trademark deduction
by a subsidiary company (“The Persetel Trademark”)
in the sum of R26,1 million in the 1995 year of
assessment. The company has lodged an appeal
to the Special Court against the disallowance of
the objection and the hearing of the matter in the
Appeal Court has again been postponed and a new
date is yet to be scheduled.
The same subsidiary has also objected to the
disallowance of a trademark deduction claimed
in the same amount with regard to the same
trademark, in respect of the 1996 to 2001 years of
assessment. To date, there has been no response
to this objection from SARS. SARS has also disallowed
the deduction made in the 1998 to 2001 tax
returns in respect of the Q Data trademark and has
reassessed these tax years. It is anticipated that
SARS will deal with subsequent years according to
the outcome of the hearing in respect of the 1995
assessment. Taking into account both the reasons
advanced by SARS for disallowing the objection in
the 1995 assessment and the opinion expressed by
Senior Counsel, the directors remain of the view
that the deduction will ultimately be allowed in
respect of the assessments mentioned above.
The subsidiary company involved has claimed
deductions totalling R889,4 million (May 2003:
R786,5 million) resulting in a reduction of tax of
R277 million to May 2004 (May 2003: R246,0 million).
Any amounts required to be paid to SARS will be
interest bearing.
Share capital
Authorised share capital
The company commenced the year with authorised
share capital of 127 868 850 ordinary shares of
one cent each and 63 114 760 redeemable convertible
preference shares of one cent each.
The company converted the 63 114 760 redeemable
convertible preference shares into the same number
of ordinary shares of one cent each. The ordinary
shares were increased by 309 016 390 to 500 000 000
in terms of a special resolution on 25 February 2004.
On 8 April 2004, the nominal value of the ordinary
shares was altered from one cent per share to 0,59
cents per share by way of special resolution. This
resulted in the closing authorised share capital being
847 457 627 ordinary shares of 0,59 cents per share.
Issued share capital
The company commenced the year with issued
share capital of 127 868 850 ordinary shares
of one cent each and 21 651 723 redeemable
convertible preference shares of one cent each.
On 25 February 2004, the 21 651 723 preference
shares were converted to the same number of
ordinary shares. On 8 April 2004, the nominal
value of the ordinary shares was amended from
one cent per share to 0,59 cents per share resulting
in the issue of a further 103 904 127 shares. On
26 May 2004, a futher 9 212 212 shares were
issued for R36,9 million. These changes resulted in
262 636 912 ordinary shares of 0,59 cents each
being in issue.
The changes in both the authorised and issued
share capital were undertaken to facilitate the
Comparex Holdings Limited shareholders receiving
Business Connexion Group Limited shares on a one
for one basis as agreed by the shareholders.
Dividends
No dividend will be declared in respect of the past
financial year. The Board’s intention is to implement
a dividend policy for the future.
Subsidiaries and associates
Annexures A and B to this report set out the
companies which the directors consider appropriate
for the shareholders to gain a proper appreciation
of the group’s affairs. A full list of the companies
forming the group will be made available to
shareholders on written request to the company
secretary.
The attributable interest of the company in the profits
and losses of the subsidiaries, joint venture and
associates for the year ended 31 May are as follows:
2004 2003R000 R000
Subsidiaries and joint venture profits 281 845 109 408
Subsidiaries and joint venture losses (4 394) (3 583)
Associates 5 411 715
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Acquisitions
During the year, the group acquired the following subsidiaries:
Effective Percentage CostName Method date holding R000s
Business Connexion Technology Holdings (Pty) Limited Purchase 1 May 2004 100 601 645
This acquisition included the following subsidiaries:
– Nanoteq (Pty) Limited
– Comparex International Trading (Pty) Limited
– Q Muzik (Pty) Limited
– Comparex Technology Services (Pty) Limited
Business Connexion Solutions Holdings (Pty) Limited Purchase 1 Jan 2004 100 107 071
This acquisition included the following subsidiaries:
– Business Connexion Solutions (Pty) Limited
– Unibis (Pty) Limited (Dormant)
– Atlantec (Pty) Limited (Dormant)
– Strathprop Nurseries (Pty) Limited (Dormant)
– Plantprop Farms (Pty) Limited (Dormant)
– Uni-Applications (Pty) Limited (Dormant)
D i r e c t o r s ’ R e p o r t (continued)
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Directorate and secretary
The names of the directors and secretary in office
at the date of this report are set out on pages 8, 9
and 42 respectively.
Messrs R S Berkowitz, J F Buchanan, N N Kekana,
L B Mophatlane, D M Nurek and F J van der Merwe
were all appointed on 2 February 2004.
Messrs R S Berkowitz, J F Buchanan, D M Nurek
and F van der Walt had previously served on the
Board of Comparex Holdings Limited.
Messrs M W Schoeman and N N Kekana resigned
on 3 February 2004 and 9 June 2004 respectively.
The company secretary remains Business Connexion
Management Services (Pty) Limited (formerly
Comparex Management Services (Pty) Limited)
represented by L C Marran.
Interests of the directors
On 31 May 2004, the directors beneficially held in
aggregate 25 000 ordinary shares in the company
(2003: 12 500). The directors have interests in
2 746 000 options (2003: 2 046 000) options relating
to Comparex Holdings Limited shares which were
converted to options in Business Connexion Group
Limited shares). For details refer Annexure E.
Messrs R S Berkowitz, J F Buchanan and D M Nurek
are trustees of the staff share purchase trust but
have no beneficial interest in the trust. Details of
the trust are set out in Annexure C.
Messrs R S Berkowitz and D M Nurek , both being
associated with the Investec Group, have declared
their interests in the contract whereby Investec
Corporate Finance assisted the group in regard to
the BEE deal and restructuring.
Mr L B Mophatlane has a significant interest in
Gadlex (Pty) Limited, which in turn holds 25,01%
of Business Connexion (Pty) Limited.
No director of Business Connexion Group holds
directly or indirectly, 1% of the issued share capital
of the company. There have been no major changes
in the above beneficial and non-beneficial interests
between 31 May 2004 and the date of this report.
Comparex Holdings Limited shareincentive schemes
The company operates a number of trusts whose
objective is to incentivise employees of the group
by enabling them to acquire shares in Business
Connexion Group Limited. These trusts are
empowered to operate a credit purchase scheme, a
cash purchase scheme and a share option scheme.
The trustees of the operational trust are Messrs
R S Berkowitz, J F Buchanan, R S Hislop and
D M Nurek, who were appointed as trustees of this
trust effective 21 August 2003. The total number
of shares available to these schemes is limited to
15% of the issued share capital of Business
Connexion Group Limited. Three of the trusts are
currently dormant and new trustees are in the
process of being appointed. These trusts are entitled
to acquire shares, which they require to meet their
commitments from time to time either by
purchasing those shares on the open market or by
subscribing for new shares. At 31 May 2004, the
trusts held 19 826 542 shares (2003: 25 074 444)
in order to fulfil their obligations.
Details of options granted in terms of the schemes
are set out in Annexure C.
Special resolutions
Special resolutions were passed during the period
with regard to:
the conversion of convertible redeemable
preference shares into ordinary shares in the
company;
an amendment to the company’s Articles of
Association to increase the authorised share
capital;
the conversion of the company from a
proprietary limited company to a public company
and changing the name of the company;
the cancellation of the Articles of Association
of the company in its entirety and the
replacement thereof with new Articles of
Association;
the sub-division of the authorised and issued
share capital of the company; and
effecting a change in the name of the company.
In respect of special resolutions passed by
subsidiaries, these were to effect name changes to
incorporate the brandname of Business Connexion
and to liquidate the subsidiary Comparex Technologies
(Pty) Limited.
Post balance sheet events
Business Connexion Group together with the other
shareholders in Mosaic Software Holdings Limited
(Mosaic), have entered into an agreement to
dispose of their shareholding in Mosaic to S1
Corporation, a company listed on the NASDEQ
Stock Market. The group has disposed of its
effective 37,17% shareholding for a maximum
potential purchase price of US$19,3 million,
subject to a number of conditions precedent.
The sale proceeds consist of a payment of US$10,5
million receivable within three days after the
conditions precedent have been fulfilled, an escrow
payment of US$3,25 million placed in an interest
bearing escrow account until 31 December 2005 to
cover potential claims against the warranties and a
potential earn out payment of US$5,57 million
based on the performance of Mosaic during the
year ending 31 May 2005. The investment in
Mosaic was carried at a value of R14,7 million at
31 May 2004.
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The principal accounting policies of the group and
the company are set out below. These accounting
policies are consistent with those applied in the
previous year except for the adoption of the South
African Statement of Generally Accepted Accounting
Practice AC133, Financial Instruments: Recognition
and Measurement. The adoption of this standard
has resulted in changes to the group’s policies and
modifications to the presentation of the financial
statements. Details of these changes are set out
in note 38.
1. Basis of preparation
The financial statements are prepared on the
historical cost basis of accounting as modified
by the fair valuation of certain financial
instruments. The financial statements are
prepared using the accounting policies set
out below and are in accordance with the
applicable South African Statements of
Generally Accepted Accounting Practice.
2. Basis of consolidation
Entities in which the group, directly or
indirectly, has the power to exercise control
over the operations are considered to be
subsidiaries. Control is achieved where an
entity in the group has the power to govern
the financial and operating policies of another
entity to obtain the benefits of its activities.
The investment in subsidiaries in its holding
entities’ financial statements are carried at
cost.
On acquisition, the assets and liabilities of a
subsidiary are, where possible, measured at
their fair value at the date of acquisition.
If fair value cannot be reasonably measured,
the historical cost of assets and liabilities are
used. Any excess (deficiency) of the cost of
acquisition over (below) the fair value or
cost of the identifiable net assets acquired is
recognised as goodwill (negative goodwill).
Operating results of subsidiaries acquired
are included from the date effective control
is transferred to the group. Operating results
of subsidiaries disposed of are included up
to the effective date of disposal.
All significant inter-company transactions and
balances are eliminated. Where necessary,
accounting policies of subsidiaries are amended
to ensure consistency with group policies.
Minority interests are separately disclosed.
3. Business combinations involvingentities under common control
A business combination involving entities
or businesses under common control is a
business combination in which the same
parties ultimately control all of the combining
entities or businesses before and after the
business combination.
In accounting for business combinations under
common control, the assets and liabilities
of the entities or businesses involved are
measured at the carrying amount at the date
of the combination. The excess (deficiency)
of the cost of such combination over the
carrying amount of the net assets (liabilities)
is recognised in the income statement at the
effective date of the combination.
4. Joint ventures
Joint ventures are those entities where there
is a contractual agreement, in terms of which
the group and one or more other venturers
undertake an economic activity subject to
joint control.
Joint ventures are accounted for by means
of the proportionate consolidation method. PG53
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The share attributable to the group of
assets, liabilities, income and expenses of
the joint venture are incorporated in the
financial statements by line item. Inter-group
transactions are eliminated to the extent of
the group’s interest in the joint venture.
Goodwill is amortised in terms of the policy
for intangible assets.
5. Associates
Associates are entities in which the group
exercises a significant influence through
participation in the financial and operating
policy decisions of the entity, but in which it
does not exercise control.
Associates are accounted for on the equity
method. The group’s investment comprises
the original cost, including any goodwill on
acquisition, and a proportionate share of
the associates’ distributable reserves after
accounting for dividends payable by those
associates. Goodwill is amortised in terms of
the policy for intangible assets.
Where the associate’s year end does not
coincide with the group’s year end, the
associate’s most recent unaudited results
are used.
6. Accounting for foreign entities
The balance sheets of consolidated foreign
subsidiaries are translated into South African
Rand at the rates of exchange ruling at
31 May. The income statements are translated
at the weighted average rates of exchange
for the year. Gains and losses on the translation
of foreign subsidiaries are taken directly to
reserves. On disposal of foreign subsidiaries
such translation differences are recognised
as part of the gain or loss on the sale.
Goodwill and fair value adjustments arising
on the acquisition of a foreign entity are
treated as assets and liabilities of the holding
entity and are translated at the historic rate.
7. Foreign currency transactions
Monetary assets and liabilities denominated
in foreign currency are translated into South
African Rands at rates of exchange ruling at
31 May. Transactions in foreign currency are
accounted for at the rate of exchange ruling
on the date of the transaction. Gains or losses
on foreign currency transactions are included
in the income statement.
8. Financial instruments
Financial instruments carried by the group
on the balance sheet include cash and bank
balances, long and short-term investments,
receivables, payables and long and short-
term liabilities. The particular recognition
and measurement policies adopted are
disclosed in the accounting policy statement
associated with the item.
Disclosure of the financial instruments that
the group is party to, is provided in note 37
to the financial statements.
– Derivative financial instruments
The group uses derivative financial instruments
(primarily foreign currency forward exchange
contracts) to manage its risks associated with
foreign currency fluctuations. Such derivatives
are initially recorded at cost, if any, and are
re-measured to fair value at subsequent
reporting dates with changes reflected
in the income statement. Where the fair
value of such derivatives cannot be reliably
measured, they are measured at cost.
Derivatives embedded in other financial
instruments or non-derivative host contracts
are treated as separate derivatives when their
risks and characteristics are not closely related
to those of host contracts and the host
contracts are not carried at fair value with
unrealised gains or losses reported in the
income statement.
– Borrowings
Interest bearing loans and overdrafts are
recorded at the proceeds received, net of
direct issue costs. Finance charges, including
premiums payable on settlement or redemption
and direct issue costs, are accounted for on
an accrual basis to the income statement
using the effective interest rate method and
are added to the carrying amount of the
instrument to the extent that they are not
settled in the period in which they arise.
– Equity instruments
Equity instruments issued by the company
are recorded at the proceeds received, net of
direct issue costs.
9. Property, furniture and fittings,equipment and vehicles
Property, furniture and fittings, equipment
and vehicles are stated at cost to the
group less accumulated depreciation and
accumulated impairment costs. Depreciation
is calculated on cost over the estimated useful
lives of the assets on the straight-line basis.
Leasehold improvements are depreciated over
their lease period or useful life, whichever is
the shorter.
Computer equipment purchased for specific
projects is depreciated over the shorter of
the contract or useful life.
The depreciation periods applicable are as
follows:
Buildings 50 years
Furniture and fittings 6 years
Equipment 3 to 6 years
Vehicles 4 to 5 years
Land is not depreciated as it is deemed to have
an indefinite useful life.
Gains and losses on disposals of property,
furniture and fittings, equipment and vehicles
are determined by reference to their net book
value at the date of sale and are taken into
account in operating profit.
10. Leased assets
Where the group is a lessee, leases of property,
equipment and vehicles where the group
assumes substantially all the benefits and
risks of ownership are classified as finance
leases. Finance leases are capitalised using
the net present value of the future lease
payments. The lease payments are allocated
between the liability and finance charges to
achieve a constant rate of return on the
balance outstanding. The outstanding lease
obligation, net of finance charges and
the following year’s liability, is included as
a non-current long-term interest bearing
liability. Lease finance costs are charged
against income as they become due.
The cost of the assets is depreciated over
the shorter of the lease period or the useful
life of the asset. The useful life, when longer
than the lease period, is used where there is
a reasonable prospect that ownership of the
asset will pass to the group.
The depreciation periods used are the
same as for property, furniture and fittings,
equipment and vehicles policy.PG55
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Leased assets where the benefits and risks
remain the owner’s are classified as operating
leases. Payments made under operating
leases are charged to the income statement
when payments are due. When an operating
lease is terminated before the expiry of
the lease any penalty due is recognised
immediately in the income statement.
Where a lease contract is deemed to be
onerous, a provision for the remaining lease
payments is raised. A lease is considered to be
onerous when the future costs are substantially
greater than the benefits receivable.
Where the group is the lessor, the rental
income from the operating leases is recognised
to income on a straight-line basis over the
term of the relevant lease.
Amounts due from the lessee under finance
leases are recorded as receivables. The
receivable is raised using the net present
value of the amount. If the period is for
greater than one year the receivable is
treated as long term with the current
portion reflected as trade receivables.
11. Investments
Investments are intially measured at cost,
including transaction costs.
At subsequent reporting dates, debt securities
that the group has the expressed intention
and ability to hold to maturity are measured
at amortised cost, less any impairment loss
recognised to reflect irrecoverable amounts.
The annual amortisation of any discount or
premium on the acquisition of a held-to-
maturity security is aggregated with other
investment income receivable over the term of
the instrument so that the revenue recognised
in each period represents a constant yield on
the investment.
Investments other than held-to-maturity
instruments are classified as either held-for-
trading or available-for-sale and are measured
at subsequent reporting dates at fair value.
Gains and losses on held-for-trading and
available-for-sale investments arising from
changes in fair value are included in the net
profit or loss for the period.
Listed investments are valued at market rates
at the balance sheet date.
12. Intangible assets
– Goodwill
Goodwill, being the excess of cost of shares
acquired over the fair value of identifiable
assets net of liabilities assumed, of each entity
at the date of acquisition, is written off over
its estimated useful life on a straight-line
basis as determined by the directors with
a maximum of 20 years. Amortisation is
included with depreciation in the income
statement. Where the net assets of a
subsidiary at date of acquisition exceeds the
cost of the shares acquired, the excess is
treated as negative goodwill.
– Other intangible assets
Expenditure on acquired patents, trademarks
and licences is capitalised and amortised
over their expected lives using the straight-
line method as depreciation in the income
statement. The period never exceeds 20 years.
13. Deferred tax
Deferred tax is provided using the balance
sheet liability method.
Deferred tax assets and liabilities are
recognised for all taxable temporary differences.
Such assets and liabilities are not recognised
if the temporary difference arises from
goodwill (or negative goodwill) or from the
initial recognition (other than in business
combinations) of other assets and liabilities
in a transaction that effects neither the
tax profit nor the accounting profit.
Deferred tax assets are recognised for all
deductible temporary differences where there
is reasonable certainty as to deductibility and
to the extent that it is probable that taxable
profit will be available against which the
deductible temporary differences can be
utilised.
Deferred tax liabilities are recognised for
taxable temporary differences arising from
investments in subsidiaries, associates and
joint ventures, except where the group is
able to control the reversal of the temporary
difference and it is probable that the
temporary difference will not reverse in the
foreseeable future.
Deferred tax assets are recognised for
capital losses to the extent that future gains
against which the loss can be offset will be
available.
Deferred tax is charged or credited in the
income statement, except when it relates to
items credited or charged directly to equity,
in which case the deferred tax is also dealt
with in equity.
Deferred tax assets and liabilities are offset
when they relate to income taxes levied by
the same taxation authority and the group
intends to settle its current tax assets and
liabilities on a net basis.
14. Inventories
Inventories are stated at the lower of cost or
estimated net realisable value. Slow-moving
inventory in excess of requirements or
obsolete inventory is fully provided for
when identified.
Parts inventory used in respect of maintenance
contracts is written off over the useful lives
of the inventory concerned.
Cost is determined using the average method.
The values of merchandise and work in progress
include direct costs and, where appropriate,
a proportion of overhead expenditure.
The basis for determining the net realisable
value is the selling price in the ordinary
course of business less selling costs.
15. Trade accounts receivable
Trade accounts receivable are carried at
anticipated realisable value on the amortised
cost basis. An estimate is made of the
realisable value at the year end after a
review of all outstanding amounts. Bad
debts are written off during the year in
which they are identified.
16. Retirement obligations
The group operates a number of defined
contribution retirement schemes in the
territories in which it operates. The assets of
these schemes are generally held in separate
trustee-administered funds. The schemes are
generally funded by payments from the
employees and by the relevant group entities,
taking into account the recommendations
of independent actuaries. The group’s
contributions to these schemes are charged
to the income statement when due.
– Post retirement healthcare obligations
For post retirement healthcare obligations,
the cost of providing benefits is determined
using the projected unit credit method.PG57
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All costs in respect of past services are
recognised immediately in the income
statement, as are any adjustments, required
in terms of the actuarial valuations.
The post retirement obligations, in the
balance sheet, represent the present value
of future obligations.
17. Provisions
A provision is recognised when there is a
present obligation for a past event for which
it is probable that a transfer of economic
benefits will be required to settle the
obligation and a reliable estimate of the
amount can be made.
18. Other accounts payable
A liability is raised when there is a present
obligation for a past event for which a
transfer of future economic benefits will be
required to settle the obligation. The group
accrues for employee entitlements to annual
leave and long service leave. Audit fees are
accrued for based on an estimate of the
costs in relation to the year in which the
work relates. Other accounts payable are
stated at nominal value.
19. Impairments
At each balance sheet date, the group reviews
the carrying amounts of its assets to
determine whether there is any indication
that those assets may be impaired. If any
such indication exists, the recoverable amount
of the asset is estimated. Where it is not
possible to estimate the recoverable amount
for an individual asset, the recoverable amount
is determined for the cash-generating unit
to which the asset belongs. If the recoverable
amount of an asset or cash-generating unit
is estimated to be less than the carrying
amount, the carrying amount of the asset or
cash generating unit is reduced to its
recoverable amount. The impairment losses
are recognised as an expense immediately.
Where an impairment loss subsequently
reverses, the carrying amount of the asset or
cash generating unit is increased to the
revised estimate of its recoverable amount,
but so that the increased carrying amount
does not exceed the carrying amount
that would have been determined had no
impairment loss been recognised for the
asset or cash generating unit in prior years.
A reversal of an impairment is recognised as
income immediately.
20. Dividends
Dividends to equity holders are included in
the statement of changes in equity in the
year in which they are declared. Tax costs
incurred on dividends are dealt with in the
income statement in the year in which the
related dividend is declared.
21. Revenue recognition
Revenue comprises net invoiced sales which
excludes value added tax. Revenue is
recognised as follows:
products – upon delivery of products and,
where necessary, customer acceptance;
installation – upon customer acceptance;
services – upon performance;
licence income and maintenance contracts
– over the period of the contract;
rental income – when the rental is due
and payable; and
profits on long-term contracts:
– where the long-term contract falls
over a financial period end and the
outcome of the contract can be
estimated reliably, revenue and costs
are recognised by reference to the
stage of completion of the contract
activity at the reporting date as
measured by the proportion that
contract costs incurred for work
performed to date bear to the
estimated total contract cost.
Variations in contract work are
included to the extent they have
been agreed with the customer.
– where the outcome of a contract
cannot be reliably estimated, contract
revenue is recognised to the extent
of contract costs incurred that it is
probable will be recovered. Contract
costs are recognised as expenses in
the period that they are incurred.
22. Other income recognition
Other income not included in revenue is
recognised as follows:
interest income – as it accrues, taking
the effective yield into account; and
dividend income – when the shareholder’s
right to receipt is established.
23. Exceptional items
Items of income and expense, which are of
such a size, nature or incidence that their
separate disclosure is relevant to explain the
performance of the group for the period
under review, are treated as exceptional.
Depending on the transaction, exceptional
items are included or excluded from operating
profit.
24. Research and development costs
Research and development costs are written
off to operating profit, except for costs
incurred on development projects, which are
recognised as intangible assets if:
a separately identifiable asset is created;
it is probable that such expenditure has
definite future economic benefits; and
the development costs can be reliably
measured.
Development costs initially written off as an
expense are not recognised as an asset in a
subsequent period.
Expenditure that enhances and extends the
benefits of computer software programmes
beyond their original specifications and lives,
is recognised as capital improvements and
added to the original cost of the software
and the useful life is reassessed. Computer
software development costs recognised as
assets are depreciated using the straight-line
method over their useful lives, not exceeding
three years.
Research and development costs incurred in
terms of a contract from a customer are
treated as work-in-progress up to the
agreed contracted value.
25. Tax
Income tax expense represents the sum of
the tax currently payable and deferred tax.
The tax currently payable is based on the
taxable profit for the year. Taxable profit
differs from net profit as reported in the
income statement because it excludes items
of income or expense that are taxable or
deductible in other years and it further
excludes items that are never taxable or
deductible. The group’s liability for current
tax is calculated using tax rates that have
been enacted or substantially enacted by the
balance sheet date. PG59
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B a l a n c e S h e e t s as at 31 May
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ASSETSNon-current assetsFurniture and fittings, equipment and vehicles 1 134 726 96 343Capitalised leased assets 2 181 877 185 688Rental assets 3 111 285Intangible assets – goodwill 4 103 987
2 478 699 2 050 668 Investment in subsidiaries 6Investment in associates 7 28 811 13 413
133 002 Other long-term investments 8 167 988Long-term loans and advances 9 17 168 374 337Deferred tax assets 10 1 264 473
2 478 699 2 183 670 635 932 670 539
Current assetsInventories 11 42 708 52 540Trade accounts receivable 12 438 644 393 566
4 580 Other accounts receivable 13 77 607 65 872Embedded derivative assets 25 846Prepayments 59 769 62 516Tax prepaid 4 416 485
299 Bank and cash balances 782 394 154 750
4 879 1 431 384 729 729
2 478 699 2 188 549 TOTAL ASSETS 2 067 316 1 400 268
EQUITY AND LIABILITIESCapital and reserves
4 560 377 4 597 278 Share capital and premium 250 618 285 093Trademark tax benefit reserve 94 132 63 276Foreign exchange reserves (177) 2 599
(2 081 678) (2 411 726) Distributable reserves 571 879 202 910
2 478 699 2 185 552 Total shareholders’ equity 14 916 452 553 878Minority interests 15 49 402 1 920
Non-current interest bearing liabilitiesLong-term liabilities 16 226 654 240 010Non-current interest free liabilitiesLong-term liabilities 17 124 517Post retirement obligations 18 6 229 1 161Deferred tax liabilities 10 369 397
357 769 241 568
Current liabilitiesShort-term borrowings 19 67 189 33 959Trade payables 181 557 218 274Other payables 419 291 317 813Provisions 20 38 644 30 954Embedded derivative liabilities 26 102
2 997 Tax 10 910 1 902
2 997 743 693 602 902
2 478 699 2 188 549 TOTAL EQUITY AND LIABILITIES 2 067 316 1 400 268
Company Group
2003 2004 2004 2003R000 R000 Notes R000 R000
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I n c o m e S t a t e m e n t s for the year ended 31 May
Revenue 21 2 811 771 2 701 375
Cost of sales 1 992 196 1 914 333
Margin 819 575 787 042
Administrative expenses 598 326 572 684
Foreign exchange and derivative losses 22 24 810 2 531
Operational exceptional losses 23 4 930 20 629
Operating profit before depreciation 191 509 191 198
Depreciation 65 814 49 149
Operating profit 24 125 695 142 049
14 570 Investment income 25 45 023 35 496
Associates’ share of profits 7 8 142 8 226
14 570 Profit before interest paid 178 860 185 771
Interest paid 26 42 732 42 123
14 570 Profit before exceptional items 136 128 143 648
(2 081 678) (341 621) Exceptional gains/(losses) 27 37 412 (8 539)
(2 081 678) (327 051) Profit/(loss) before tax 173 540 135 109
2 997 Tax 28 45 625 27 547
(2 081 678) (330 048) Profit/(loss) after tax 127 915 107 562
Minorities 15 7 467 1 022
(2 081 678) (330 048) Profit/(loss) attributable to shareholders 120 448 106 540
Earnings per share (cents) 29 47,5 42,0
Headline earnings per share (cents) 30 34,2 44,0
Company Group
2003 2004 2004 2003R000 R000 Notes R000 R000
S t a t e m e n t o f C h a n g e s i n E q u i t y for the year ended 31 May 2004
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GroupBalance at 31 May 2002 1 495 283 598 285 093 32 420 3 396 96 370 417 279
Foreign exchange loss arising on consolidation (797) (797)
Deferred tax transferred as a result of deductionsin respect of trademark related items 30 856 30 856
Attributable profit per the income statement 106 540 106 540
Balance at 31 May 2003 1 495 283 598 285 093 63 276 2 599 202 910 553 878
Adoption of AC133 (3 188) (3 188)
Restated balance at 31 May 2003 1 495 283 598 285 093 63 276 2 599 199 722 550 690
Share capital issued 55 36 938 36 993 36 993
Issue costs (92) (92) (92)
Treasury shares held by share purchase trusts (12) (71 364) (71 376) (71 376)
Reserves of share purchase trusts 251 709 251 709
Foreign exchange loss arising on consolidation (1 203) (1 203)
Foreign exchange reserve released on disposalof subsidiary (1 573) (1 573)
Deferred tax transferred as a result of deductionsin respect of trademark related items 30 856 30 856
Attributable profit per the income statement 120 448 120 448
Balance at 31 May 2004 1 538 249 080 250 618 94 132 (177) 571 879 916 452
CompanyBalance at 31 May 2002 1 495 4 558 882 4 560 377 4 560 377
Attributable loss per the income statement (2 081 678) (2 081 678)
Balance at 31 May 2003 1 495 4 558 882 4 560 377 (2 081 678) 2 478 699
Share capital issued 55 36 938 36 993 36 993
Issue costs (92) (92) (92)
Attributable loss per the income statement (330 048) (330 048)
Balance at 31 May 2004 1 550 4 595 728 4 597 278 (2 411 726) 2 185 552
Share Trademark Foreign TotalShare Share capital and tax benefit exchange Distributable shareholders’
capital premium premium reserve reserves reserves equityR000 R000 R000 R000 R000 R000 R000
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C a s h F l o w S t a t e m e n t s for the year ended 31 May
Cash flow from operating activities
Cash receipts from customers 2 791 486 2 788 172
Cash paid to suppliers and employees (2 667 609) (2 503 636)
Cash generated from operations A 123 877 284 536
9 990 Interest received 39 041 35 457
Dividends received 102 39
Interest paid (39 982) (39 470)
Dividends paid to minorities (685) (474)
Tax paid B (21 557) (1 873)
9 990 Net cash flow from operating activities 100 796 278 215
Cash flows from investing activities
(550 715) Acquisition/(disposal) of subsidiaries and entities C 772 086
(620 000) Investment in subsidiaries
Advances from group companies (81 028)
(133 002) Investment in preference shares (133 002)
Dividends from associates 5 870 16 000
Advances to associates (488) (2 000)
Additions to furniture and fittings, equipment and vehicles D (88 668) (74 193)
Intangible assets purchased (129) (1 737)
Proceeds from long-term loans and advances 7 842
Proceeds from sale of investment in associates 695
Proceeds from sale of furniture and fittings, equipment and vehicles, rental and leased assets 2 403 6 405
(1 303 717) Net cash flow from investing activities 477 044 (46 988)
Cash flows from financing activities
36 901 Proceeds from share capital E 36 901
Proceeds from long-term liabilities 2 703
(65 669) Repayments of long-term liabilities (7 134) (6 578)
Receipt of long-term loans and advances 1 235
Repayments of short-term borrowings (15 617)
Proceeds from short-term borrowings 37 291 672
1 257 125 Amounts received from/(paid to) previously related group companies (153 739)
Repayment of capital element of finance leases (5 575) (5 211)
1 294 026 Net cash flow from financing activities 49 804 (164 856)
299 Net changes in cash and cash equivalents 627 644 66 371
Cash and cash equivalents at begining of year 154 750 88 379
299 Cash and cash equivalents at end of year F 782 394 154 750
Company Group
2003 2004 2004 2003R000 R000 Notes R000 R000
N o t e s t o t h e C a s h F l o w S t a t e m e n t s for the year ended 31 May
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A. Reconciliation of profit/(loss) before tax to cash generated from operations:
(2 081 678) (327 051) Profit/(loss) before tax 173 540 135 109
(4 580) Dividends received (4 682) (39)
(9 990) Interest received (40 341) (35 457)
Interest paid 42 732 42 123
Adjustments for non cash items:
Depreciation and amortisation 65 814 49 149
Profit on disposal of furniture and fittings, equipment and vehicles (1 258) (899)
Movement on provisions 6 981 18 623
2 081 678 168 301 Impairments of loans and advances, investments and intangible assets 4 102 8 044
Associates’ share of profits (8 142) (8 226)
173 320 (Profit)/loss on disposal of investments (6 476) (457)
Share of partnership profits (1 738)
Post retirement obligations provided 5 068 476
Release of negative goodwill (35 038)
Unrealised foreign exchange losses (3 233) 983
Operating profit before working capital changes 197 329 209 429
Working capital changes:
Decrease in inventories 10 074 37 920
(Increase)/decrease in trade accounts receivable (18 532) 86 797
Increase in other accounts receivable (3 273) (9 539)
Decrease/(increase) in prepayments 2 712 (13 766)
(Decrease)/increase in trade payables (59 531) 14 027
Decrease in other payables (4 902) (40 332)
Cash generated from operations 123 877 284 536
B. Tax paid is reconciled to the amount shown in theincome statement as follows:
Amounts unpaid and accrued at beginning of year (1 417) 1 641
Accrued in respect of acquisition and disposal of subsidiaries (14 785)
(2 997) Income statement charge (45 625) (27 547)
Deferred tax movement 31 044 31 197
Share of associates’ tax 2 732 (8 581)
2 997 Amounts unpaid and accrued at end of year 6 494 1 417
(21 557) (1 873)
Company Group
2003 2004 2004 2003R000 R000 R000 R000
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C. Analysis of acquisitions and disposals of subsidiaries and entities
Acquisitions:
(601 645) Purchase of investment
Furniture and fittings, equipment and vehicles (3 161)
Investments (37 390)
Intangible assets (113 687)
Associates (17 551)
Long-term loans and advances (6 723)
Inventories (510)
Trade accounts receivable (29 645)
Other accounts receivable (7 195)
Deferred tax assets (1 276)
Long-term liabilities (27 404)
Short-term borrowings 4 407
Trade payables 23 130
Other payables 52 418
Provisions 709
Tax 14 788
Negative goodwill 35 038
Bank and cash balances (774 997)
Disposals:
224 250 Investments
Advance to associate 1 681
Furniture and fittings, equipment and vehicles 417
Trade accounts receivable 2 769
Other accounts receivable 861
Prepayments 32
Trade payables (316)
Other payables (3 539)
Tax (3)
Deferred tax liabilities 254
Bank and cash balances 10 088
(173 320) Profit/(loss) on sale net of foreign currency reserve release 4 903
(550 715) Gross acquisitions/disposals (871 902)
Non-cash settlement of inter-group loans and purchases 601 645
Treasury shares held by share purchase trusts (71 376)
Profit on sale of share of subsidiary 56 389
Minority interests 40 712
Bank and cash balances acquired 774 997
Cash relinquished (10 088)
Reserves of share purchase trusts 251 709
(550 715) 772 086
Company Group
2003 2004 2004 2003R000 R000 R000 R000
N o t e s t o t h e C a s h F l o w S t a t e m e n t s (continued)
for the year ended 31 May
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D. Additions to furniture and fittings, equipment and vehicles
Replacement (73 361) (52 757)
Expansion (15 307) (21 436)
(88 668) (74 193)
E. Proceeds on issue of share capital
36 993 Proceeds on share capital issued 36 993
(92) Share issue costs (92)
36 901 36 901 —
F. Cash and cash equivalents
Cash and cash equivalents consist of bank balances and cash on hand, and investment in money market instruments. Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:
299 Bank and cash balances 782 394 154 750
299 782 394 154 750
The group has undrawn facilities amounting to R502 million( 2003: R475 million).
Company Group
2003 2004 2004 2003R000 R000 R000 R000
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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s for the year ended 31 May
1. Furniture and fittings, equipment and vehicles
Cost
Cost – 31 May 2002 32 051 204 823 304 237 178
Additions 3 449 70 641 103 74 193
Transfer from inventories 21 21
Disposals (3 379) (14 099) (260) (17 738)
Currency translation differences 89 905 994
Cost – 31 May 2003 32 210 262 291 147 294 648
Subsidiaries purchased 841 2 267 53 3 161
Transfer from inventories 240 240
Additions 7 515 81 153 88 668
Joint venture and subsidiary sold (276) (1 025) (1 301)
Disposals (773) (10 355) (11 128)
Currency translation differences (343) (333) (676)
Cost – 31 May 2004 39 174 334 238 200 373 612
Accumulated depreciation
Depreciation – 31 May 2002 15 736 149 975 254 165 965
Depreciation 5 489 37 904 85 43 478
Disposals (3 239) (8 733) (260) (12 232)
Currency translation differences 180 914 1 094
Depreciation – 31 May 2003 18 166 180 060 79 198 305
Depreciation 5 739 46 217 16 51 972
Joint venture and subsidiary sold (104) (780) (884)
Disposals (671) (9 312) (9 983)
Currency translation differences (222) (302) (524)
Depreciation – 31 May 2004 22 908 215 883 95 238 886
Net book value – 2004 16 266 118 355 105 134 726
Net book value – 2003 14 044 82 231 68 96 343
Certain computer equipment with a cost of R35,6 million (2003: R35,6 million) which is fully depreciated is encumbered as reflected in note 16.
The insurable value of the group’s furniture and fittings, equipment and vehicles at 31 May 2004 is R483 million (2003: R337,8 million). The value is basedon the cost of replacement, except for vehicles which are at book value.
Group FurnitureR000 and fittings Equipment Vehicles Total
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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2. Capitalised leased assets
Cost
Cost – 31 May 2002 and 31 May 2003 206 255 21 493 227 748
Transfer to furniture and fittings, equipment and vehicles (7 179) (7 179)
Cost – 31 May 2004 206 255 14 314 220 569
Accumulated depreciation and impairment
Depreciation – 31 May 2002 17 807 18 703 36 510
Depreciation 3 286 2 264 5 550
Depreciation – 31 May 2003 21 093 20 967 42 060
Depreciation 3 286 525 3 811
Transfer to furniture and fittings, equipment and vehicles (7 179) (7 179)
Depreciation - 31 May 2004 24 379 14 313 38 692
Net book value – 2004 181 876 1 181 877
Net book value – 2003 185 162 526 185 688
Leased assets are encumbered as reflected in note 16.
The insurable value of the group’s leased assets at 31 May 2004, is R318,5 million (2003: R262,3 million).
A list of land and buildings is available to shareholders, on written request, from the registered office of the company.
Group Land andR000 buildings Equipment Total
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3. Rental assets
Cost
Opening cost 1 526 1 405
Transfer from inventories 28 280
Disposals (62) (159)
1 492 1 526
Accumulated depreciation
Opening depreciation 1 241 1 279
Depreciation 202 121
Disposals (62) (159)
1 381 1 241
Net book value 111 285
The insurable value of the group’s rental assets at 31 May 2004 and 2003is R0,8 million.
4. Intangible assets – goodwill
Cost
Opening cost 3 317 1 580
Additions 113 816 1 737
117 133 3 317
Accumulated amortisation and impairment
Opening amortisation 3 317 214
Amortisation 9 700
Impairment 129 3 103
13 146 3 317
Net book value 103 987
Goodwill is amortised over a period of five years.
Negative goodwill of R35 million arose on the purchase of Business ConnexionTechnology Holdings (Pty) Limited, which was released to the income statement as an exceptional item in terms of the group’s policy on business combinations involving entities under common control.
Company Group
2003 2004 2004 2003R000 R000 R000 R000
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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5. Joint ventures
The group had a 50% equity shareholding, with equivalent voting power, in Phambili Information Technologies (Pty) Limited, a joint venture established in South Africa. This equity holding was disposed of on 30 April 2004 to the joint venture partner.
The following amounts are included in the group’s financial statements as a result of the proportionate consolidation of the joint venture:
Revenue 30 563 44 618
Attributable profit 2 377 4 191
6. Investment in subsidiaries (Annexure A)
Investment value
3 161 878 3 161 878 Opening cost
620 000 Additional investment in subsidiaries
601 645 Acquisition of subsidiaries
(498 823) Disposal
3 161 878 3 884 700 Closing cost
Impairment of investment in subsidiaries
(2 081 678) Opening impairment
274 573 Disposal
(2 081 678) (168 301) Current year impairment
(2 081 678) (1 975 406) Closing impairment
1 080 200 1 909 294 Carrying value of investment in subsidiaries
1 398 499 373 351 Advances to subsidiaries
(231 977) Advances from subsidiaries
2 478 699 2 050 668
The increase in the impairment in the current year arises from the dilution in the shareholding in Business Connexion (Pty) Limited following the BlackEmpowerment transaction with Gadlex (Pty) Limited. The carrying value of the subsidiary reduced to R1,3 billion as valued by the directors.
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7. Investment in associates (Annexure B)
Investment value
Cost 8 045 8 283
Disposals (1 409) (238)
Additions 17 551
24 187 8 045
Share of results since acquisition
Opening balance 3 687 2 880
Associates’ share of profits 8 142 8 226
Tax (2 732) 8 581
Disposals 1 409
Dividends received (5 870) (16 000)
4 636 3 687
Carrying value of associates 28 823 11 732
Advances to associates 10 917 20 629
Interest accrued 1 383 573
Impairment of advances and interest (12 300) (19 521)
Advances from associates (12)
28 811 13 413
Directors’ valuation 55 496 24 946
The group’s share of unrecognised losses in associates amounts to R7,1 million(2003: R6,6 million).
The advances to/(from) associates carry interest at normal commercial rates, except a loan of R5,9 million which is interest free, are unsecured and repayable on demand.
Aggregate of associate companies:
Total assets 144 200 59 660
Total liabilities 84 623 85 035
Profit after tax 25 042 34 875
Company Group
2003 2004 2004 2003R000 R000 Notes R000 R000
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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8. Other long-term investments
Listed investments:
Dimension Data Holdings Plc 857234 862 ordinary shares at a market value of R3,65.
The listed investments are held by the share purchase trust in order to fulfil the obligations of the share purchase trust.
Unlisted investments:
Cost 5 664 5 664
133 002 Additions 169 535Impairments (8 068) (5 664)
133 002 167 131
133 002 167 988
Details of unlisted investmentsAvailable for sale investments:
Preference shares in a member of National Information Technology Acquisition Consortium (Nitac) 36 53370 cumulative, zero rated, compulsorily, redeemable, convertible preference shares in Bridging Technologies International (Pty) Limited 5 341 5 341
322 500 ordinary shares of R1 each in Business Partners Limited 323 323
Originating loans and receivables:
117 192 Gadlex (Pty) Limited – “A” preference shares 117 19215 810 Gadlex (Pty) Limited – “B” preference shares 15 810
133 002 175 199 5 664
Less impairments (8 068) (5 664)
133 002 167 131
The directors value the investments at cost less any impairment except for the investment in Nitac which is valued at the market value of the underlying investments. 167 131The terms of the preference shares in Gadlex (Pty) Limited include various “putoptions” and may be redeemed by Gadlex (Pty) Limited in a number of alternative ways. These alternatives have the effect of creating derivative instruments. Given the number of alternatives available and the length of time before anticipated redemption, it is currently not possible to reliably measure the value of these derivative instruments. Therefore the derivative instruments are carried at no value in the balance sheet. The group has not recognised the gain of R56,4 million on the disposal of 11,82% of Business Connexion (Pty) Limited to Gadlex (Pty) Limited. This amount is included in other payables and will be released upon redemption of the preference shares.
Gadlex (Pty) Limited – “A” preference shares
10 000 "A" Preference shares with a nominal value of R0,01 (one cent) each. The shares are redeemable, cumulative and have a coupon rate of 80% of the South African prime rate. The redemption date is approximately 31 March 2009.
Gadlex (Pty) Limited -“B” preference shares
1 000 “B” Preference shares with a nominal value of R0,01 (one cent) each. The shares are redeemable, cumulative and have a coupon rate of 80% of the South African prime rate and rank after the “A” preference shares. The redemption date is approximately 31 March 2009.
Interest accrued of R4,6 million has been included in other accounts receivable.
Company Group
2003 2004 2004 2003R000 R000 R000 R000
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9. Long-term loans and advances
Long-term trade accounts receivable 5 696 5 676
These amounts are repayable over periods not exceedingthree years and bear interest at 18,5%.
Loan to Indibano Business Services (Pty) Limited 2 989 2 989
Interest accrued 765 379
Impairment (3 754) (3 368)
This loan is repayable by 31 August 2004 and bears interest atthe South African prime lending rate.
Loan to Kumwe Information Technology (Pty) Limited 3 011The loan bears interest at the South African prime lending rate and is secured by a pledge of the shares in the Namibian subsidiary.
Loan to Gijima Support Services (Pty) Limited 8 461Initial funding loan and accrual of share of partnership results. The amount is interest free and repayable on demand.
Loans to Comparex International Trading (Pty) Limited 368 476
The loan was unsecured, had no fixed date of repayment and boreinterest at a rate linked to the South African prime lending rate.
Other minor interest free loans 185
17 168 374 337
10. Deferred tax
Total opening balance 76 (805)
Deferred tax assets 473 1 133
Deferred tax liabilities (397) (1 938)
Total movement 819 881
Charged in income statement (31 044) (31 197)
Charged in foreign exchange reserves (15) 1 447
Charged against trademark tax benefit reserve 30 856 30 856
Acquisition of subsidiaries 1 276Disposal of subsidiaries (254)Impairment of Q Data USA Inc deferred tax asset (225)
Total closing balance 895 76
Deferred tax assets 1 264 473
Deferred tax liabilities (369) (397)
Deferred tax balances consists of:Capital allowances (99) (93)
Provisions 603 488
Payments in advance (40) (20)
Consumables written off (238)Income received in advance 726 30
Allowances against income in advance (411)Tax losses 252 88
Other 102 (417)
895 76
Company Group
2003 2004 2004 2003R000 R000 R000 R000
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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10. Deferred tax (continued)
As at the balance sheet date, the group has unused tax losses of R218,9 million(2003: R239,9 million) available for offset against future pofits. A deferred tax asset has been recognised in respect of R0,8 million (2003: R0,3 million) of such losses. No deferred tax asset has been raised on R218,1 million (2003: R239,6 million) due to the unpredictability of future profit streams and the uncertainty of the outcome of the court case involving the deductibility of the trademarks.
11. Inventories
Cost
Maintenance parts, components and consumables 98 947 92 699
Merchandise 40 448 47 512
Work in progress 5 110 5 090
144 505 145 301
Impairments
Maintenance, components and consumables (78 920) (72 556)
Merchandise (19 983) (18 605)
Work in progress (2 894) (1 600)
(101 797) (92 761)
Net realisable value 42 708 52 540
12. Trade accounts receivable
Trade accounts receivable 446 769 408 077
Trade accounts receivable – associates 129 120
Inter-group receivables 220
Current portion of long-term trade accounts receivable 9 086 10 948
455 984 419 365Impairments (17 340) (25 799)
438 644 393 566
13. Other accounts receivable
Included in other accounts receivable is loans to employees amounting to R0,5 million (2003: R0,6 million).
Company Group
2003 2004 2004 2003R000 R000 R000 R000
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14. Share capital
Authorised share capitalOrdinary shares
127 868 850 1 279 31 May 2002 and 31 May 2003 – ordinary shares of one cent each 127 868 850 1 27963 114 760 631 Preference shares converted to ordinary shares of 1 cent each 25 February 2004 63 114 760 631
190 983 610 1 910 190 983 610 1 910Increase in authorised ordinary shares to
309 016 390 3 090 500 000 000 of 1 cent each 25 February 2004 309 016 390 3 090
500 000 000 5 000 500 000 000 5 000Conversion of authorised shares of 1 cent each to
347 457 627 ordinary shares of 0,59 cents each 8 April 2004 347 457 627
847 457 627 5 000 31 May 2004 – ordinary shares of 0,59 cents each 847 457 627 5 000
Preference shares31 May 2002 and 31 May 2003 – 63 114 760 redeemable
63 114 760 631 covertible preference shares of 1 cent each 63 114 760 631Peference shares converted to ordinary shares –
(63 114 760) (631) 63 114 760 preference shares of 1 cent each 25 February 2004 (63 114 760) (631)
31 May 2004
There were no changes in the authorised share capital in the previous year.
Issued share capitalOrdinary shares
127 868 850 1 279 31 May 2002 and 31 May 2003 – ordinary shares of 1 cent each 127 868 850 1 279Preference shares converted to ordinary shares
21 651 723 216 of 1 cent each (for no consideration) 25 February 2004 21 651 723 216
149 520 573 1 495 149 520 573 1 495Conversion of issued shares of 1 cent each to ordinary
103 904 127 shares of 0,59 cents each 8 April 2004 103 904 127
253 424 700 1 495 253 424 700 1 4959 212 212 55 Issued ordinary shares of 0,59 cents per share 26 May 2004 9 212 212 55
262 636 912 1 550 31 May 2004 – ordinary shares of 0,59 cents each 262 636 912 1 550
Preference shares31 May 2002 and 31 May 2003 – 21 651 723 redeemable covertible
21 651 723 216 preference shares of 1 cent each 21 651 723 216Preference shares converted to ordinary shares –
(21 651 723) (216) 21 651 723 preference shares of 1 cent each (21 651 723) (216)
31 May 2004
There were no changes in the issued share capital in the previous year.The preference shares were redeemable at any time before 31 May 2008 at their negotiated market value.Preference shares not redeemed shall be converted to ordinary shares on a one for one basis on 31 May 2008 or on liquidation.The preference shares rank pari passu with the ordinary shares in terms of dividends.
Number of shares in issue 262 636 912 1 550Less shares held by the share trust as treasury shares representing 7,5% 19 826 542 12
242 810 370 1 538
Company Group
Number Numberof shares R of shares R
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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15. Minority interests
Opening balance 1 920 1 372
Arising due to partial disposal of subsidiary 40 712Minority interest in subsidiary income 7 467 1 022
Minority interest in subsidiary dividends (685) (474)
Share of foreign currency translation reserve (12)
49 402 1 920
16. Long-term liabilities
Interest bearing loansSASOL Limited
The loan is repayable by 30 June 2006 in equal instalments and bears interest at a fixed rate of 10,7%. It is secured by equipment with a cost of R25,5 million as shown in note 1 15 819 20 066
Rentworks (Pty) Limited
The loan is repayable by 31 December 2004 and bears interest at a fixed rate of 22%. It is secured by equipment with a cost of R10,1 million as shown in note 1 3 262 5 156
Kumwe Information Technology (Pty) Limited
The loan is repayable in two to five years. It bears interest at the South African prime lending rate 1 072 1 072
IBM Global Finance (a division of IBM South Africa (Pty) Limited)
The loan is unsecured and repayable in December 2004 and bears interest at a fixed rate of 7,4%. 2 879
ABSA Bank Limited
The loan was repaid by 31 August 2003 and bore interest at a fixed rate of 14,5%. 119
Getronics Holdings EMEA B.V.
The loan is unsecured and bears interest at bank call rates currently 6,9% and is repayable on demand 4 536
Liabilities under finance leases Less than Between one one year and five years
R000 R00028 995 215 606 244 601 247 556
Minimum lease payments 61 008 302 242 363 250 398 963
Lease finance charges (32 013) (86 636) (118 649) (151 407)
These liabilities are repayable at fixed interest rates ranging between 11,77% and 17,27%. The liabilities in respect of the leased assets are secured by assets as shown in note 2. The group has an option to purchase these assets at the end of the lease.
Total long-term liabilities 272 169 273 969
Less amount transferred to short-term 45 515 33 959
226 654 240 010
Repayable within five years 226 654 121 128
Thereafter 118 882
226 654 240 010
Company Group
2003 2004 2004 2003R000 R000 R000 R000
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2003 2004 2004 2003R000 R000 R000 R000
17. Long-term liabilities
Interest free loans
Gadlex (Pty) Limited shareholder’s loan to Business Connexion (Pty) Limited 124 517
The loan is unsecured and interest free with no fixed date of repayment.
124 517
18. Post-retirement obligations
Post-retirement healthcare benefits
Opening balance 1 161 686
Amendment to accrual based on changes in assumptions and known increases in medical aid rates 659 578
Interest cost 487
Current service accruals for current year 124
Additional liabilities identified in current year relating to past acquisitions 4 122
Payments made on behalf of beneficiaries (324) (103)
6 229 1 161
It is not the group’s policy to provide post-retirement healthcare benefits.At 31 May 2004, 43 individuals have the right to post-retirement healthcare as a result of terms and conditions applicable in their service contracts priorto becoming part of the group through acquisition.
It is the group’s policy to provide in full for the future liabilities where the member is already retired and over the remaining period of employment wherethe individul is currently employed.
The method used to value the liabilities is the Projected Unit Credit Method. The most significant assumptions are outlined below:
Healthcare cost inflation 7,5% 9,8%
Discount rate 9,5% 11,5%
Average retirement age for in service members 63 63
Assumed rates of mortality as follows:
During employment SA85 – 90 (light) ultimate table
Post employment PA(90) ultimate table
19. Short-term borrowings
IBM Global Finance (a division of IBM South Africa (Pty) Limited) 21 674
Interest free loan repayable within one year.
Transfer from long-term liabilities (note 16) 45 515 33 959
67 189 33 959
20. Provisions
Balance 31 May 2002 12 331 4 871 5 716 6 1 738
Utilised (6 698) (3 228) (2 288) (6) (1 176)
Charged/released to income statement 25 321 21 865 1 871 1 585
Balance 31 May 2003 30 954 23 508 5 299 1 585 562
Utilised (5 281) (844) (2 885) (1 335) (217)
Increase due to purchase of entities 709 709
Released to income statement (6 755) (4 985) (1 423) (347)
Charged to income statement 19 017 820 6 795 9 093 2 309
Balance 31 May 2004 38 644 18 499 8 495 9 343 2 307
Group
2004 2003R000 R000
21. Revenue
For rendering of services 2 068 380 2 028 528
Arising on sale of goods 743 391 672 847
2 811 771 2 701 375
Continuing operations 2 667 888 2 701 375
Acquisitions of subsidiaries in current year 107 207
Disposals of subsidiaries in current year 36 676
2 811 771 2 701 375
Revenue has been increased as a result of the adoption of AC133 in the amount of (refer note 38) 37 678
22. Foreign exchange and derivative losses
Foreign exchange (gains)/losses (8 370) 3 606
Derivative losses/(gains) 1 043 (1 075)
Embedded derivative losses 32 137
24 810 2 531
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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Company
2003 2004 Onerous Closure R000 R000 Total Legal Warranties leases costs
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23. Operational exceptional losses
Re-branding costs 9 503
Provisions (released)/raised (4 573) 21 255
Restructuring costs (626)
4 930 20 629
24. Operating profit
– Continuing operations 123 154 142 144
– Acquisitions of subsidiaries in current year (852)
– Disposal of subsidiaries and joint venture in current year 3 393 (95)
125 695 142 049
Operating profit is stated after:
Administration, management and other fees 13 195 16 096
Auditors’ remuneration
– Audit fees 3 727 4 234
– Fees for other services 6 324 3 748
10 051 7 982
Depreciation
Furniture and fittings, equipment and vehicles
– Furniture and fittings 5 739 5 489
– Equipment 46 217 37 904
– Vehicles 16 85
51 972 43 478
Capitalised leased assests
– Buildings 3 286 3 286
– Equipment 525 2 264
Rental equipment 202 121
Intangible assets 9 829
65 814 49 149
Directors’ emoluments
Emoluments for services as directors
3 639 7 195 – the company
– subsidiaries
3 639 7 195
(3 639) (7 195) – Less paid by subsidiaries
— —
Company Group
2003 2004 2004 2003R000 R000 R000 R000
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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24. Operating profit (continued)
Made up as follows:
2 576 3 857 – Salaries
1 063 3 338 – Bonuses and performance-related payments
3 639 7 195
Profit on disposal of furniture and fittings, equipment and vehicles 1 258 899
Operating lease charges
– Land and buildings 27 251 19 941
– Equipment and vehicles 170 628 183 178
197 879 203 119
Employee costs
– Paid to employees 1 090 351 1 096 850
– Contributions paid on behalf of employees 97 717 72 765
1 188 068 1 169 615
Average number of employees 3 949 4 027
25. Investment income
Interest received
9 990 – Banks 13 274 5 902
– Loan advances and trade accounts receivable 1 279 6 998
– From subsidiaries of Comparex Holdings Limited 25 788 22 557
4 580 Dividends from unlisted investments 4 682 39
14 570 45 023 35 496
26. Interest paid
Interest paid on short-term liabilities 7 300 5 596
Interest paid on long-term liabilities 2 663 3 312
Interest paid on finance leases 32 769 33 215
42 732 42 123
27. Exceptional gains/(losses)
(2 081 678) (168 301) Impairment of investments (2 404) (4 117)
Impairment of loans and advances (1 698) (2 952)
(173 320) Profit/(loss) on sale of businesses 6 476 457
Release of goodwill 35 038 1 176
Impairment of goodwill (3 103)
(2 081 678) (341 621) 37 412 (8 539)
Company Group
2003 2004 2004 2003R000 R000 R000 R000
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28. Tax
2 997 South African tax 41 818 25 471
Foreign tax 3 807 2 076
2 997 45 625 27 547
Comprising
Tax
2 997 – Current 7 687 4 450
– Prior years 2 129 379
Deferred tax
– Current year movement 31 044 31 197
Share of associates’ tax 2 732 (8 581)
Withholding tax 220 102
Secondary tax on companies 250
Foreign tax credits 1 563
2 997 45 625 27 547
% Reconciliation of tax rate % %
(0,9) Effective rate of tax 26,3 20,4
Prior year tax (1,6) (0,3)
Share of associates’ tax (1,6) 6,4
Other corporate tax (1,2) (0,1)
Foreign tax paid (0,2) (0,2)
Reduction in tax charge due to exempt income, allowances 30,9 and estimated tax losses 8,3 3,8
30,0 South African normal tax rate 30,0 30,0
29. Earnings per share
Number of ordinary shares in issue – 31 May 127 868 850 127 868 850
Number of preference shares in issue– 31 May 21 651 723 21 651 723
149 520 573 149 520 573
Conversion of issued shares of 1 cent each to ordinary shares of 0,59 cents each (comparative restated) 103 904 127 103 904 127
253 424 700 253 424 700
9 212 212 ordinary shares issued on 26 May 2004 126 195
Weighted number of shares 253 550 895 253 424 700
Profit attributable to shareholders 120 448 106 540
Earnings per share (cents) 47,5 42,0
The preference shares rank pari passu with the ordinary shares in termsof dividends and were thus considered equivalent to ordinary shares for the purposes of earnings per share.
Company Group
2003 2004 2004 2003R000 R000 R000 R000
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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30. Headline earnings
Profit attributable to shareholders 120 448 106 540
Impairments of assets, loans and investments 120 4 117
Goodwill impairments and amortisation 9 829 1 927
Profit on sale of furniture and fittings, equipment and vehicles (1 258) (899)
Profit on sale of investments (6 476) (457)
Recognition of negative goodwill (35 038)
Associate adjustment 1 301 179
Tax effect on disposal of investment 425
Minority effect of headline earnings adjustments (2 734)
Headline earnings 86 617 111 407
Weighted average number of shares 253 550 895 253 424 700
Headline earnings per share (cents) 34,2 44,0
31. Commitments
Capital
– Contracted 4 115
– Authorised and proposed 466
4 581
Capital commitments will be financed out of existing group resources.
Operating lease commitments
Group >1 year 2 to 4 years >4 years
R000 R000 R000
Land and buildings 14 434 26 546 13 169 54 149 27 683
Equipment and vehicles 95 666 65 477 308 161 451 292 057
Total 101 100 92 023 13 477 215 600 319 740
32. Contingent liabilities
Guarantees
– Performance guarantees 84 162 12 222
– Other 1 514 3 917
85 676 16 139
The performance guarantees relate mainly to the contracts awarded in Ethiopia and will terminate upon conclusion of the contracts. Contracts generally do not extend beyond one year.
Company Group
2003 2004 2004 2003R000 R000 R000 R000
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33. Related party transactions
The group operations entered into the following transactions with related parties who are not members of the group:
Associates of Comparex Holdings Limited
Sales of services and goods 543 936
Purchases of services and goods 121
Net amounts due by related parties 109 120
The group operations also entered into transactions with subsidiaries of Comparex Holdings Limited. The transactions were all carried out on an arm’s length basis at appropriate market-related values.
Administrative recoveries 2 289
Administrative costs (3 300)
Interest received 25 788
The directors have certified that they were not materially interested in any transaction of any significance with the company or any of its subsidiaries, other than as set out in the directors’ report.
34. Borrowing powers
The Articles of Association of the company provide the following in relation to the borrowing powers:
The directors may from time to time:
– borrow for the purpose of the company such sums as they think fit; or
– secure the payment of any such sums or any other sums, as they think fit, whether by the creation and issue of debentures, mortgage bonds or chargeupon all or any of the property or assets of the company.
35. Retirement information
All eligible permanent employees, other than those required to join a fund established by statute, are required to join the Comparex Pension and ProvidentFunds as a condition of employment. The employees become members of both funds simultaneously. Business Connexion Group and certain of itssubsidiaries contribute to the Comparex Holdings Provident Fund and employees contribute to the Comparex Holdings Pension Fund. These Funds areregistered in the Republic of South Africa in terms of the Pension Funds Act, 1956 and are approved by the South African Revenue Services and aredefined contribution funds.
The Comparex Holdings Pension and Provident Funds are reviewed annually by an actuary at the Fund’s year end. At the last review date 29 February2004, the Funds were certified financially sound.
At the financial year end of the Funds, being 29 February 2004, the Funds had a membership of 2 634 (2003: 2 527) members. During the period the companycontributions to the Comparex Holdings Provident Fund amounted to R34 672 970 (2003: R33 128 861). The combined asset size of the ComparexHoldings Pension and Provident Funds at the end of the year was approximately R437 million (2003: R324 million).
The duties and responsibilities of administering the Comparex Holdings Funds are adequately segregated. Alexander Forbes Financial Services, a leadingfirm of benefit administrators, consultants and actuaries is responsible for the administration of the Funds. Investment Solutions Limited is primarilyresponsible for managing the assets of the Funds.
The Funds have fidelity guarantee insurance against negligence, theft, fraud and dishonesty on the part of any of the Funds’ officers. The auditors of theseFunds are Deloitte & Touche.
On 7 December 2001, the Pension Funds Second Amendment Act was promulgated. In terms of the Act (known as the surplus legislation) all pension andprovident funds having surpluses at their surplus apportionment date will be required to undertake a surplus apportionment investigation anddistribution. The surplus apportionment date is defined as the next statutory valuation of the Fund.
In the case of the Funds, the next statutory valuation was at 29 February 2004. 29 February 2004 thus becomes the Funds’ surplus apportionment date.The surplus apportionment scheme is currently in progress.
The Funds are in the process of being renamed as the Business Connexion Group Provident Fund and Business Connexion Group Pension Fund.
Company Group
2003 2004 2004 2003R000 R000 R000 R000
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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36. Segmental analysis (R million)
Business groupings analysis External revenue Depreciation Operating profit
2004 2003 2004 2003 2004 2003
Services 1 726,1 1 782,8 47,9 45,6 154,6 118,9
Technology infrastructure 816,7 751,3 2,4 3,4 14,7 30,3
Business applications 269,0 167,3 3,2 2,2 (2,9) 21,9
Central functions 12,3 (2,1) (40,7) (29,0)
Total 2 811,8 2 701,4 65,8 49,1 125,7 142,1
Capital expenditure Assets Liabilities
2004 2003 2004 2003 2004 2003
Services 94,0 72,4 580,8 570,3 537,3 536,2
Technology infrastructure 2,1 2,0 308,0 327,0 287,9 303,0
Business applications 3,2 1,8 129,0 86,5 141,8 71,8
Central functions (10,6) (2,0) 1 049,5 416,5 134,5 (66,5)
Total 88,7 74,2 2 067,3 1 400,3 1 101,5 844,5
Share of Associates’ (Impairments)/associates’ investment reversal of
profits impairments
2004 2003 2004 2003
Services 7,4 8,2 10,6 13,4
Business applications 0,7 18,2
Central functions 30,9 (9,0)
Total 8,1 8,2 28,8 13,4 30,9 (9,0)
Geographic segmental analysis Revenue Operating profit
2004 2003 2004 2003
South Africa 2 408,4 2 425,9 99,1 130,5
Rest of Africa 349,8 169,3 26,2 14,9
Other, principally the United Kingdom 53,6 106,2 0,4 (3,3)
2 811,8 2 701,4 125,7 142,1
Note: The income statement for the geographic segmental analysis is based on where the customer is situated.
Assets Liabilities Capital expenditure
2004 2003 2004 2003 2004 2003
South Africa 2 030,0 1 346,0 1 077,7 810,2 88,1 73,5
Rest of Africa 24,2 27,9 15,5 20,5 0,4 0,4
Other, principally the United Kingdom 13,1 26,4 8,3 13,8 0,2 0,3
2 067,3 1 400,3 1 101,5 844,5 88,7 74,2
Note: The balance sheet for the geographic segmental analysis is based on where the assets or liabilities are situated.
37. Financial risk management
The group’s financial instruments consist of cash and bank balances, long and short-term investments and receivables, and long and short-term liabilities.
Treasury risk managementThe group’s treasury function provides the group with access to local money markets and provide group entities with the benefits of bulk financing anddepositing.
Foreign currency managementThe group's policy is to cover forward all trade commitments where this is possible and, if not, the treasury purchases currency to match the exposures.Each operation manages its own trade exposure in consultation with the treasury. In this regard the group has entered into certain forward exchangecontracts which do not relate to specific items appearing in the balance sheet, but were entered into to cover known future foreign commitments. Therisk of having to close out the contracts is considered low and the amounts and currencies involved are set out below. There are no FECs for periodsbeyond 90 days:
2004 2003
Foreign currency Foreign currency Details of forward exchange contracts at year end rates: R000 value R000 value
United States Dollars 9 239 1 349 56 875 6 978
Euros 292 37 590 62
9 531 57 465
These financial instruments are designed to address exchange exposures and will be renewed on a revolving basis as required.
There are no significant uncovered foreign monetary items.
1< year 2 – 5 years >5 years TotalR000 R000 R000 R000
Maturity profile of financial instuments including finance lease liabilities2004Financial assetsNon-current assets 185 156 185 156Current assets 542 097 542 097Bank and cash balances 782 394 782 394
1 324 491 185 156 1 509 647
Financial liabilitiesNon-current liabilities 351 171 6 229 357 400Current liabilities 626 950 626 950Short-term borrowings 67 189 67 189
694 139 351 171 6 229 1 051 539
2003Financial assetsNon-current assets 5 861 368 476 374 337Current assets 459 438 459 438Bank and cash balances 154 750 154 750
614 188 5 861 368 476 988 525
Financial liabilitiesNon-current liabilities 17 803 103 325 118 882 240 010Current liabilities 536 087 536 087Short-term borrowings 33 959 33 959
587 849 103 325 118 882 810 056 PG85
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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s (continued)
for the year ended 31 May
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37. Financial risk management (continued)
The following are the methods and assumptions used by the group in determining fair value:
Financial assetsThe book value of bank and cash balances, trade and other accounts receivable approximates fair value.
Financial liabilitiesThe book value of short-term financial liabilities approximates fair value.
Credit risk managementPotential areas of credit risk consist of trade accounts receivable, other accounts receivable and short-term investments
Trade accounts receivable consist mainly of a large, widespread customer base. The group constantly monitors the customer base on an ongoing basisand where considered appropriate or where necessary, provision or write-off is made against the debtor. At the year end management do not considerthere to be any material exposure that has not been covered by an impairment. The risk of doing business in Africa is mitigated through advancepayments and the use of letters of credit.
It is group policy to deposit short-term cash with major banks.
Liquidity risk managementThe group manages liquidity risk by monitoring forecast cash flows and ensuring that untilised borrowing facilities are monitored. The group has R502 million unutilised facilities as opposed to R475 million in the previous year.
38. Adoption of accounting standard AC133
The accounting policies used in the preparation of these financial statements are consistent with those used in the annual financial statements for theyear ended 31 May 2003, with the exception of the adoption of AC133: Financial Instruments – Recognition and Measurement, by the group. Theadoption of this accounting standard has resulted in the following adjustments been made to the results:
CurrentOpening entry period effect
Rm RmOther receivables 28,9 25,9
Other payables (32,1) (26,1)
Derivative losses 3,2 32,1
Revenue (37,7)
Cost of sales 5,8
Comparative figures have not been restated for the adoption of AC133.
39. Comparative figures amended
The following comparative figures have been altered in the group column:
Balance sheetOther payables have been reduced by R1,1 million and the amount disclosed as post retirement obligations, with a corresponding adjustment to thecash flow statement. Prepayments have been reduced by R0,485 million and the amount disclosed as tax prepaid.
Income statement– The exceptional losses in the previous year have been amended to distinguish between operational and other exceptional gains/(losses). This has
resulted in the operating profit for the previous year being reduced by R20,7 million.
– The group was not a listed entity in the previous year and therefore was not required to reflect earnings per share nor headline earnings per share. Thesehave therefore been calculated as indicated in the notes above and inserted.
Cash flow statementNon-cash items representing interest capitalised of R2,7 million has been excluded from interest paid on the face of the cash flow statement. This waspreviously separately disclosed in the notes of the cash flow statements.
Notes– In note 21, revenue analysis between goods and services has been restated.
– In note 24, audit fees for other services include recruitment services.
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A n n e x u r e A – P r i n c i p a l S u b s i d i a r i e s
Direct holdings
South Africa
Business Connexion (Pty) Limited(formerly Comparex Africa (Pty) Limited) 74,99 100 43 371 200 1 307 595 1 080 146 271 479 1 383 808
Business Connexion Investments (Pty) Limited(formerly Comparex Africa Investments (Pty) Limited) 100 100 100 100 54 54 (11 107) 14 691
Business Connexion Technology Holdings (Pty) Limited(formerly Comparex International (Pty) Limited) 100 100 601 645 (118 998)
Indirect holdings through Business Connexion(Pty) Limited
South Africa
ECnet (Pty) Limited* 100 100
Business Connexion Solutions (Pty) Limited 100
Namibia
Business Connexion Namibia (Pty) Limited*(formerly Comparex Nambia (Pty) Limited) 75 75
United Kingdom
Q Data Europe Limited* 100 100
Indirect holdings through Business Connexion Technology Holdings (Pty) Limited
South Africa
Nanoteq (Pty) Limited 100
*Held by Business Connexion Investments (Pty) Limited at the same percentage in the previous year.
A full list of subsidiaries is available to shareholders, on written request, from the registered office of the company.
The group disposed of its 100% interest in Q Data USA Inc during the financial year.
A n n e x u r e B – P r i n c i p a l A s s o c i a t e sEffective
% holding
Name of associate Nature of business 2004 2003
South Africa
Perago Financial System Enablers (Pty) Limited# Application software provider 25,00
The Smartshed (Pty) Limited Service hub provider 30,00
Intenda (Pty) Limited Application software provider 29,85 29,85
Digital Healthcare Solutions (Pty) Limited Medical service hub provider 39,13 39,13
United Kingdom
Mosaic Software Holdings Limited# Application software provider 37,17
#Held as part of Comparex Holdings Limited in the previous year.
Percentage Number Amount Net amountholding of shares invested advanced
2004 2003 2004 2003 2004 2003 2004 2003% % R000 R000 R000 R000
A n n e x u r e C – D e t a i l s o f S h a r e I n c e n t i v eS c h e m e O p t i o n s
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In terms of the JSE rules and the interpretation of South African Statements of Generally Accepted Accounting Practice, the trust has been consolidated from 28 May 2004.The group assumed control of the trust with effect from this date, as Business Connexion Group Limited shares were substituted for Comparex Holdings Limited shares.
In terms of a general meeting of shareholders held on 28 April 2004, the meeting voted to create a new trust called Business Connexion Group Share Trust. At the 31 May 2004no activity has taken place in this trust.
The Comparex Holdings Share Purchase TrustThe Comparex Holdings Share Purchase Trust (“the Trust”) was formed in 1995, the object of which was to incentivise employees of the Comparex Group by enablingthem to acquire shares in Comparex Holdings Limited. In 1997, the share incentive schemes previously operated by the Q Data Limited Securities Purchase and OptionTrust were incorporated into the scheme. The Trust is empowered to operate a credit purchase scheme, a cash purchase scheme and a share option scheme, but atpresent only the share option scheme is in use. No futher issues in this trust will take place and the trust will remain in force until the last options expire in August 2010.
In terms of the shareholders’ meeting on 28 April 2004, permission was sought and received to reduce the option price to reflect the amount of the dividends paid outby Comparex Holdings Limited totalling R6,50 per share.
The total number of options which may be granted by the schemes operated by the Comparex Holdings Trust and the Business Connexion Group Trust is limited to 15%of the issued share capital of Business Connexion Group Limited. The Trusts are entitled to acquire the Business Connexion Group shares which they need to meet theircommitments from time to time either by purchasing those shares on the market or by subscribing for new shares in Business Connexion Group.
Options in issue as at 31 May 2004Options at Dimension Data
Option Amended Effective Expiry 31 May Additional Holdings plcIssue No price price option price Offer date Vesting dates date 2004 options shares
Issue 3/3B R32,07 R3,47 R0,79 16 Jul 97 One third July 1998,1999, 2000 Jul 07 439 752 1 496 893Issue 3D* R32,07 R25,57 R25,57 16 Jul 97 20% July 1999, 2000, 2001, 2002, 2003 Jul 07 265 294 132 652Issue 4/4B R24,90 (R3,70) (R0,84) 13 Jan 98 One third Jan 1999, 2000, 2001 Jan 08 1 489 828 5 065 150Issue 4D* R24,90 R18,40 R18,40 13 Jan 98 One third Jan 2001, 2002, 2003 Jan 08 127 214 63 607Issue 6/6B R40,85 R12,25 R2,78 01 Jun 99 One third June 2000, 2001, 2002 Jun 09 191 217 650 138Issue 7/7B R26,64 (R1,96) (R0,45) 13 Aug 99 One third Aug 2000, 2001, 2002 Aug 09 836 000 2 842 400Issue 8/8B* R53,44 R24,84 R5,65 01 Jun 99 One third June 2000, 2001, 2002 Jun 09 72 680 247 112Issue 8D* R53,44 R46,94 R53,44 01 Jun 99 One third June 2002, 2003, 2004 Jun 09 69 200 34 600Issue 9 R8,01 R1,51 R1,51 17 Apr 00 One third June 2001, 2002, 2003 Apr 10 4 055 200Issue 9.1 R8,01 R1,51 R1,51 17 Apr 00 One third June 2002, 2003, 2004 Apr 10 300 000Issue 9.2 R8,01 R1,51 R1,51 17 Apr 00 All 30 November 2000 Apr 10 75 000Issue 12 R8,68 R2,18 R2,18 31 Jan 01 One third Nov 2001 Nov 04 3 333
Nov 2002 Nov 05 3 333Nov 2003 Nov 06 3 334
Issue 14.1 R8,64 R2,14 R2,14 31 Jan 01 One third June 2002 Jun 05 33 333June 2003 Jun 06 33 333June 2004 Jun 07 33 334
Issue 14 R8,64 R2,14 R2,14 31 Jan 01 One third June 2002 Jun 05 33 333June 2003 Jun 06 33 333June 2004 Jun 07 33 334
Issue 15 R8,82 R2,32 R2,32 29 Mar 01 One third Aug 2002 Aug 05 1 681 418Aug 2003 Aug 06 1 681 418Aug 2004 Aug 07 1 681 418
Issue 18 R9,44 R2,94 R2,94 02 Feb 04 One third Aug 2005 Aug 08 2 128 333Aug 2006 Aug 09 2 128 333Aug 2007 Aug 10 2 128 334
Issue 18A R9,58 R3,08 R3,08 05 Mar 04 One third Aug 2005 Aug 08 233 333Aug 2006 Aug 09 233 333Aug 2007 Aug 10 233 334
Total options granted 20 260 639 10 301 693 230 859 Less options at prices above market value* (534 388) (247 112) (230 859)
Total options 19 726 251 10 054 581 —Add swop shares 10 054 581
29 780 832Shares on hand in Trusts 19 826 542
Shortfall to requirements 9 954 290
2004 2003
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Movement in the Trusts:Opening balance of options granted 29 075 251 56 582 319
Options forfeited (955 777) (12 198 704)
Options lapsed as a result of the sale of Comparex Europe (14 187 980)
Options exercised (5 097 142) (1 120 384)
New options granted 7 540 000
Total options outstanding to Business Connexion Group employees 30 562 332 29 075 251
Number of shares on hand in Trusts (19 826 542) (25 074 444)
Number of options not covered by shares held by the Trust 10 735 790 4 000 807
Details of options exercised during the year:Issue 2 110 000Issue 3/3B 702 624Issue 4/4B 2 395 870Issue 7/7B 586 960Issue 9 697 100Issue 9.2 75 000Issue 15 529 588
5 097 142
NotesB = Additional Comparex Holdings Limited options were offered to all participants in these issues (including rights to
Dimension Data Holdings Plc shares) as a result of the dividend in specie declared to all shareholders registered on 17 March 2000 at a rate of 6,8 Comparex Holdings Limited options per Dimension Data Holdings Plc share.
D = Dividend of Dimension Data Holdings Plc shares, not swopped for additional Comparex Holdings Limited options.
Closing price 31 May:Business Connexion Group (BCX) R3,60Comparex Holdings Limited (CPX) R5,71
Dimension Data Holdings Plc (DDT) R3,65 R3,35
Total fair value of shares held by the Trusts 71 375 551 143 175 075
Loan from the share trust to Business Connexion Technology Holdings (Pty) Limited amounts to R167 million.
Remunerat ion pa id to execut ive d i rectors
Performance Allowances Pension Total Rand Total Rand Name Period Basic salary bonuses and benefits contributions 2004 2003
A n n e x u r e D – D e t a i l s o f D i r e c t o r s ’ E m o l u m e n t s
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A C Farthing June 2003 – May 2004 655 364 880 485 311 048 67 228 1 914 125 865 057
L B Mophatlane* Jan 2004 – May 2004 291 206 520 583 81 531 38 955 932 275
M W Schoeman June 2003 – Jan 2004 274 756 250 000 238 030 30 630 793 416 661 332
P A Watt June 2003 – May 2004 1 246 798 1 686 660 458 103 163 653 3 555 214 2 112 841
Total 2 468 124 3 337 728 1 088 712 300 466 7 195 030 3 639 230
*Mr L B Mophatlane’s performance bonus includes amounts due from prior to his appointment with the group.
Executive directors’ service contracts are the same as for all employees in the group with a notice period of 30 days and no pre-determined retirement obligations.
Remunerat ion pa id to non-execut ive d i rectors
Directors’ Deputy Chairman of Member of TotalName Period fees Chairman Chairman Committee Committee Rand
R S Berkowitz~ June 2003 – May 2004 50 000 300 000 25 000 25 000 400 000
D M Nurek~* June 2003 – May 2004 50 000 150 000 50 000 250 000
J F Buchanan* June 2003 – May 2004 50 000 25 000 25 000 100 000
L Lambrechts* June 2003 – July 2003 4 167 4 167
W J C Mitchell~ June 2003 – Dec 2003 25 000 12 500 37 500
F J van der Merwe* June 2003 – May 2004 50 000 25 000 75 000
229 167 300 000 150 000 50 000 137 500 866 667
Note these payments were not borne by Business Connexion Group Limited but were paid by Comparex Holdings Limited. The previous year’s directors’ emoluments of Comparex
Holdings Limited amounted to R904 169.
*Member of the Audit Committee
~Member of the Remuneration Committee
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A n n e x u r e E – D e t a i l s o f D i r e c t o r s ’ S h a r eO p t i o n s
Executive directors:
A C Farthing 9 100 000 100 000
9 300 000 300 000
15 200 000 200 000
18A 200 000 200 000
600 000 200 000 800 000
P A Watt 7 300 000 300 000
7* 1 020 000 1 020 000
15 126 000 126 000
18A 500 000 500 000
1 446 000 500 000 1 946 000
Total 2 046 000 700 000 2 746 000
* Additional options arising from the dividend in specie on 13 March 2000 as per Annexure C.
BalanceBalance Options 31 May 2004
Name Issued 31 May 2003 granted carried forward
Reginald Selwyn Berkowitz (67)
Law Certificate (Natal)
Reginald Berkowitz was admitted as an attorney, a
notary public and conveyancer of the Natal High
Court. He was previously a partner in Moss-Morris
Greenberg Cohen & Berkowitz, and a senior partner
in Berkowitz Kirkel Cohen Wartski Greenberg.
Currently he is a consultant to Investec as a legal
advisor and a director of certain of Investec's
subsidiaries. He was the chairman and non-executive
director of Comparex Holdings Limited.
David Morris Nurek (54)
Diploma in Law (UCT)
Graduate Diploma in Company Law (UCT)
David Nurek is currently an executive of Investec
and a non-executive of a number of JSE listed
companies and was previously chairman of
Sonnenberg Hoffmann & Galombik and the deputy
chairman and a non-executive director of
Comparex Holdings Limited.
Peter Anthony Watt (63)
BSc (Eng), MBL
Peter Watt graduated from the university of the
Witwatersrand in 1964, with a Bachelor of Science
degree in Chemical Engineering and has completed
a Master of Business Leadership degree through
the University of South Africa. He has extensive
managerial experience and was appointed deputy
chairman of Altron in 1993, a position he held
until 1997, when he was appointed chief executive
officer of Dorbyl Automotive Technologies. He held
this position until 1999, when he was appointed
chief executive officer of Comparex Africa and a
director of Comparex Holdings Limited. In February
2003, following the disposal of the European
operations of Comparex, he was appointed chief
executive officer of Comparex. He is a founder
member of the National Economic Forum and
Business South Africa and a member of the
Presidential National Commission for ITC.
John Frederick Buchanan (60)
CA(SA)
John Buchanan qualified as a Chartered Accountant
in 1967 and completed the Executive Development
Programme at Columbia University in 1982.
He has extensive commercial experience at large
corporations, including Cadbury Schweppes (South
Africa) Limited and Nampak Limited. He is presently
a non-executive director at Aspen Pharmacare
Holdings Limited and chairman of the Audit
Committee at Business Connexion Group Limited.
Alan Charles Farthing (47)
CA(SA)
Alan Farthing is a Chartered Accountant and has
been in the IT industry for a number of years, all of
which have been spent at Business Connexion
(formerly Comparex Africa).
Francois Johannes van der Merwe (47)
BA LLB (University of Stellenbosch)
BA MA (University of Oxford)
Francios van der Merwe practises as an attorney
in Stellenbosch. He received a Rhodes Scholarship
to Oxford University and has a BA and a MA
(Jurisprudence) and a BA (Law) and LLB from
Oxford University and Stellenbosch University
respectively. He is curently serving as non-
executive director of several companies including
certain JSE listed companies.
Leetile Benjamin Mophatlane (31)
BCom (University of Pretoria)
In 1996, Benjamin Mophatlane founded the former
Business Connection, a computer reseller focused
on Government and parastatals. He holds a BCom
(Accounting ) degree from the University of Pretoria.
In 2001, the company merged with Seattle Solutions
to form Business Connexion, an integrator of
business solutions focused on Microsoft products.
Benjamin has served as managing director of the
company since inception. He is currently a member
of Black Management Forum, Electronic Industries
Federation of South Africa, Black Information
Technology Forum and The Western Cape
Investment and Trade Promotion. In 2000, he was
invited to join the Presidential visit to the United
States and was the winner of the Junior Chamber
South Africa – For Outstanding Young South
Africans. Benjamin was named the IT personality
of the year for 2002 by the Computor Society of
South Africa in association with the ITWeb and
Meta Group for his and the company’s contribution
to the transformation of the IT sector.
D i r e c t o r s ’ S u m m a r y C u r r i c u l u m V i t a e
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SHAREHOLDER SPREAD1 – 1 000 shares 5 362 57,85 1 703 562 0,65
1 001 – 10 000 shares 2 992 32,28 11 447 728 4,36
10 001 – 100 000 shares 716 7,73 20 596 763 7,84
100 001 – 1 000 000 shares 149 1,61 47 763 744 18,19
1 000 001 shares and over 49 0,53 181 125 115 68,96
9 268 100,00 262 636 912 100,00
DISTRIBUTION OF SHAREHOLDERSBanks 70 0,76 18 057 244 6,88
Close Corporations 158 1,70 1 609 993 0,61
Endowment Funds 21 0,23 1 397 898 0,53
Individuals 7 147 77,12 18 647 182 7,10
Insurance Companies 11 0,12 11 532 612 4,39
Investment Companies 22 0,24 12 755 373 4,86
Medical Aid Schemes 5 0,05 1 103 047 0,42
Mutual Funds 114 1,23 56 139 830 21,38
Nominees and Trusts 1 102 11,89 9 273 573 3,53
Other Corporations 153 1,65 3 624 273 1,38
Pension Funds 129 1,39 72 773 616 27,71
Private Companies 304 3,28 6 064 941 2,31
Public Companies 31 0,33 29 830 788 11,36
Share Trust 1 0,01 19 826 542 7,54
9 268 100,00 262 636 912 100,00
Number of Numbershareholdings % of shares %
PUBLIC/NON-PUBLIC SHAREHOLDERSNon-public shareholders 6 0,06 49 359 737 18,79
Directors of the Company 4 0,04 25 000 0,01
Strategic Holdings (more than10%) 1 0,01 29 508 195 11,24
Share Trust 1 0,01 19 826 542 7,54
Public shareholders 9 262 99,94 213 277 175 81,21
9 268 100,00 262 636 912 100,00
BENEFICIAL SHAREHOLDERS HOLDING 3% OR MOREPublic Investment Commissioner 29 731 113 11,32
Persetel Q Data Africa Holdings Limited 29 508 195 11,24
Comparex Holdings Share Purchase Trust 19 826 542 7,54
Investec 17 882 382 6,81
Sanlam 10 949 542 4,17
Investment Solutions 10 787 976 4,11
Number of Numbershareholders % of shares %
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S h a r e h o l d e r s ’ A n a l y s i s
Financial year-end May
Annual general meeting January
Reports Published
Interim for half-year to November February
Preliminary announcement of annual results August
Annual financial statements November
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N o t i c e o f A n n u a l G e n e r a l M e e t i n g
Notice is hereby given that the first Annual
General Meeting of the members of the company
will be held in the Business Connexion Auditorium,
Business Connexion Park North, 789 16th Road,
Randjespark, Midrand 1685, on Thursday, 13 January
2005 at 10:00 for the following purposes:
1. To receive and adopt the annual financial
statements for the year ended 31 May 2004.
2. To approve the remuneration to be paid
to non-executive directors for the year
commencing 1 June 2004, details of which
are as follows:
2.1 Chairman R300 000
2.2 Deputy Chairman R150 000
2.3 Chairman of the Audit Committee R28 000
2.4 Member of the Audit Committee R28 000
2.5 Chairman of the Remuneration
Committee R28 000
2.6 Member of the Remuneration
Committee R28 000
2.7 Fees for services as a
Non-executive Director R56 000
3. To re-elect the following directors in 4 by
way of a single resolution.
4.1 To re-elect Mr R S Berkowitz who retires in
accordance with the company’s Articles of
Association and being eligible, offers himself
for re-election.
4.2 To re-elect Mr J F Buchanan who retires in
accordance with the company’s Articles of
Association and being eligible, offers himself
for re-election.
4.3 To re-elect Mr A C Farthing who retires in
accordance with the company’s Articles of
Association and being eligible, offers himself
for re-election.
4.4 To re-elect Mr L B Mophatlane who retires in
accordance with the company’s Articles of
Association and being eligible, offers himself
for re-election.
4.5 To re-elect Mr D M Nurek who retires in
accordance with the company’s Articles of
Association and being eligible, offers himself
for re-election.
4.6 To re-elect Mr F J van der Merwe who retires
in accordance with the company’s Articles of
Association and being eligible, offers himself
for re-election.
4.7 To re-elect Mr P A Watt who retires in
accordance with the company’s Articles of
Association and being eligible, offers himself
for re-election.
5. To fix the remuneration of the auditors for
the past year’s audit.
6. To place the unissued shares under the control
of the directors – in order to achieve this
members are requested to consider and, if
deemed fit, to pass with or without modification
ordinary resolution number 1 set out below.
7. To transact such other business as may be
transacted at an Annual General Meeting.
Business Connexion Group Limited(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)ISIN: ZAE000054631 Share Code: BCX(“the company” or “Business Connexion”)
Ordinary resolution number 1
Resolved that the authorised but unissued 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 of
the company be and are hereby authorised and
empowered to allot, issue and otherwise dispose of
such shares to such person or persons on such
terms and conditions and at such times as the
directors of the company may from time to time
and in their discretion deem fit, subject to the
provisions of the Companies Act (Act 61 of 1973)
as amended (“the Act”), the Articles of Association
of the company and the Listings Requirements
of the JSE Securities Exchange South Africa,
where applicable.
Voting and proxies
A member entitled to attend and vote at the
meeting is entitled to appoint a proxy or proxies to
attend, speak, and on a poll, vote in his/her stead.
A proxy need not be a member of the company.
Nevertheless, any member who lodges a completed
form of proxy will be entitled to attend and vote in
person at the meeting should the member decide
to do so. Forms of proxy must be completed and
returned to Computershare Investor Services 2004
(Pty) Limited, 70 Marshall Street, Johannesburg 2001,
Republic of South Africa, not later than 48
(forty-eight) hours (excluding Saturdays, Sundays
and public holidays) prior to the meeting. For the
convenience of registered members of the
company, a form of proxy is enclosed herewith and
are also obtainable from the company secretary,
Business Connexion Management Services (Pty)
Limited, Business Connexion Park North, 789 16th
Road, Randjespark, Midrand 1685, telephone number
(+27 11) 266-6630.
On a show of hands, every member of the
company present in person or represented by
proxy shall have one vote only. On poll, every
member of the company shall have one vote for
every share held in the company by such member.
The attached form of proxy is only to be completed
by those shareholders who are:
holding Business Connexion ordinary shares in
certificated form; or
are recorded on the electronic sub-register in
“own-name” dematerialised form.
Members who have dematerialised their shares
and registered them in the name of a Central
Securities Depository Participant (CSDP) or broker
should instruct their CSDP or broker to provide
them with a Letter of Representation, or they must
provide the CSDP or broker with their voting
instructions in terms of the relevant custody
agreement/mandate entered into between them
and the CSDP or broker.
By order of the board
Business Connexion Management Services
(Pty) Limited
Secretaries
10 November 2004
Business Connexion Park North, 789 16th Road
Randjespark, Midrand 1685
Republic of South Africa
N o t i c e o f A n n u a l G e n e r a l M e e t i n g (continued)
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F o r m o f P r o x y
For use at the first Annual General Meeting of Business Connexion which will be held in the Business Connexion Auditorium, Business
Connexion Park North, 789 16th Road, Randjespark, Midrand 1685 on Thursday, 13 January 2005 at 10:00 and at any adjournment thereof.
Only for use by members who have not dematerialised their shares or who have dematerialised their shares and registered them intheir own name.
I/We
(Name/s in block letters)
of
(Address in block letters)
being a member/s of Business Connexion Group Limited, and entitled to vote, do hereby appoint (refer to note 1):
1. or, failing him/her,
2. or, failing him/her,
the chairman of the meeting, as my/our proxy/ies to vote on a poll on my/our behalf at the Annual General Meeting of the company for the
purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at each
adjournment thereof and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in
my/our name/s in accordance with the instructions/notes overleaf.
Please indicate with an “X” in the spaces below how you wish your proxy to vote in respect of the resolutions to be proposed, as contained
in the notice of the abovementioned Annual General Meeting.
*I/We desire my/our proxy to vote on the resolutions to be proposed, as follows:
For Against Abstain
1. Resolution to adopt the annual financial statements
2. To approve the remuneration to be paid to non-executive directors
2.1 Chairman R300 000
2.2 Deputy Chairman R150 000
2.3 Chairman of the Audit Committee R28 000
2.4 Member of the Audit Committee R28 000
2.5 Chairman of the Remuneration Committee R28 000
2.6 Member of the Remuneration Committee R28 000
2.7 Fees for services as a Non-executive Director R56 000
Continued overleaf
Business Connexion Group Limited(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)ISIN: ZAE000054631 Share Code: BCX(“the company” or “Business Connexion”)
F o r m o f P r o x y (continued)
Fo
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*I/We desire my/our proxy to vote on the resolutions to be proposed, as follows:
3. To re-elect the directors in 4 by way of a single resolution
4.1 Resolution to re-elect retiring director R S Berkowitz
4.2 Resolution to re-elect retiring director J F Buchanan
4.3 Resolution to re-elect retiring director A C Farthing
4.4 Resolution to re-elect retiring director L B Mophatlane
4.5 Resolution to re-elect retiring director D M Nurek
4.6 Resolution to re-elect retiring director F J van der Merwe
4.7 Resolution to re-elect retiring director P A Watt
5. Resolution to approve the remuneration of the auditors
6. Ordinary resolution number 1
Resolution to place the unissued shares under the control of the directors
Signed by me/us this day of 2004/2005
Signature
Assisted by me (where applicable) (refer to note 4)
Full name/s of signatory if signing in a representative capacity (refer to note 5)
*If this form of proxy is returned without any indication of how the proxy should vote, the proxy will exercise his/her discretion both as to
how he/she votes and as to whether or not he/she abstains from voting.
Notes
1. A member entitled to attend and vote at the abovementioned meeting is entitled to appoint one or more proxies to attend, speak and
upon a poll, vote in his stead or abstain from voting. The proxy need not be a member of the company.
2. To be valid this form of proxy must be completed and returned to Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg 2001, Republic of South Africa, not later than 48 (forty-eight) hours (excluding Saturdays, Sundays and public holidays) prior
to the meeting.
3. In case of a joint holding, the first-named only need sign.
4. A minor must be assisted by his/her guardian, unless proof of competency to sign has been recorded by the company.
5. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless that authority has already
been recorded by the company.
6. Any alteration or correction made to this form of proxy must be initialled by the signatory/(ies).
B u s i n e s s C o n n e x i o n G r o u p L i m i t e d [ 1 9 8 8 / 0 0 5 2 8 2 / 0 6 ]
B u s i n e s s C o n n e x i o n P a r k N o r t h | 7 8 9 1 6 t h R o a d | R a n d j e s p a r k | M i d r a n d | 1 6 8 5
P r i v a t e B a g X 4 8 | H a l f w a y H o u s e | 1 6 8 5
w w w . b c x . c o . z a
T e l e p h o n e ( + 2 7 11 ) 2 6 6 - 1 0 0 0 / 5 111 | F a x ( + 2 7 11 ) 2 6 6 - 5 5 3 7