The Board has conducted itself in a transparent and compliant manner and will continue to strive to do business in a sustainable and responsible fashion. I am pleased to present my first report as chairman of DigiCore Holdings Ltd and as the introduction to our maiden integrated annual report.
This was a year of diverse activities. Significant restructuring and consolidation took place to put the company on a platform from which it can continue to excel over the next five to ten years.
Despite a challenging global economy, strategic changes made to our sales model during the year allowed our annuity income to grow to 43% (R334 million) of our turnover, covering most of our fixed overheads. We also increased turnover during a year when some of our markets, such as Europe and the UK, were still fairly depressed.
While operating margins were under pressure, profits were generated for reinvestment to improve our opportunities for sustainable development in a low-growth economic environment and to capitalize when world markets are restored to health.
We have invested in the Minorplanet acquisition, its turnaround and consolidation into our existing operations in the United Kingdom.
We increased expenditure in our research and development division by 27% for the year, to create a ‘first-to-market’ advantage in proprietary software development
New regional hub offices in Mexico and Malaysia were opened during the year. In addition, a larger stake in our Australian business, VMS, will be finalised this year, creating new markets and increased profitability for the group in time.
The diversity of our markets and the 50 countries we trade in has enabled us to improve turnover and provided stability to our performance over the years.
Memorandums of understanding have been signed and transactions will be completed soon for a 51% stake in MotorOne that will give us access to a well-established channel into the motor dealer market, a market MotorOne has been successfully active in for some time now. Similarly, a 25% stake in software house Alchemist will give us more flexible products in future.
Working capital requirements increased due to higher turnover and the internal funding of equipment rental transactions to our clients.
Our EBITDA increased by 23% and HEPS by 10% to 22,4 cents per share.
During the year, 30 million shares were successfully offered to shareholders at R3,00 per rights offer share, fully underwritten by Coronation Fund Managers. The rights issue gave the group a cash injection of R86 million, allowing us to fund the Minorplanet acquisition and the increased internal rental book and required working capital for expansion initiatives.
I believe the board has performed its duties well during the period.
Board members have ensured that the group’s strategy for growth has been implemented. The board has also reviewed current amendments to legislation and governance requirements and has implemented changes to ensure compliance while maintaining the balance between managing profitability for shareholders and retaining skilled people in a recessionary period.
Sub-committees of the board performed their duties well. The audit and risk committee, under the chairmanship of Prof Ben Marx, again gave me the confidence of adhering to legislation, JSE requirements and the completeness and correctness of our financial statements for the year. Prof Marx also gave a presentation on the new Companies Act to all board members to ensure we comply and will continue to comply in future. My compliments and thanks to this team for steering and monitoring the company’s activities.
The board has also been involved in guiding management on expansion into various parts of the world to ensure that the company is not overextended regarding expenditure, software development, manpower and management control.
For more information please see the corporate governance report.
Barney Esterhuyzen took over as chief executive officer on 1 July 2011 after being appointed to the board in 2005 as non-executive director and actively serving as executive director of international since 2009 and group managing director since 2010
Nlhanlha Gasa stepped down as non-executive chairman after five years, but remains on the board as lead independent non-executive director. I thank him for his contribution to the group and, in particular, for his leadership role since 2005. I look forward to having him on the board for many years.
During the year, Gerrit Pretorius (former CEO of the Reunert group) was appointed as an independent non-executive director and Adv Jacob Wiese was appointed as non-executive director.
James Verster was appointed as an executive director. See the notice of annual general meeting for a brief curriculum vitae for new appointees to the board.
Governance, legislative and regularity changes were plentiful during the reporting period. The board has conducted itself in a transparent, ethical and compliant manner for years and will continue to strive to do business in a sustainable and responsible fashion. The directors are committed to ensuring the group applies the code of King III and corporate governance as set out in the JSE Listings Requirements.
The group firmly believes that successful companies in future will be those that integrate sustainability into the entire spectrum of their organisations.
Sustainability forms the cornerstone of our values and is part of our board’s mandate. We encourage sustainable development in our business as the formula to create business value that integrates evolving financial, social and environmental needs and expectations. This year is our first attempt at producing an integrated report and we are pleased to announce that we have prepared the report in accordance with GRI G3.1 guidelines and in terms of the GRI reporting requirements we have obtained an application level C+ report. Refer to the Sustainability report for further information.
I thank my co-directors for their hard work, commitment, insight and the will to ensure we trade ethically, adhere to corporate governance principles, manage risks and grow the business.
I also thank the entire management team and staff globally for their contributions in putting DigiCore back on a growth path.
Finally thank you to our suppliers and customers for their loyal support and for choosing to partner with Ctrack.
Nick Vlok Non-executive chairman 17 October 2011