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IDE - Ideco Group Limited - Unaudited consolidated results for the six months

Release Date: 31/05/2011 16:00
Code(s): IDE
Wrap Text

IDE - Ideco Group Limited - Unaudited consolidated results for the six months ended 28 February 2011 IDECO GROUP LIMITED (Incorporated in the Republic of South Africa) Registration number 2001/023463/06 Share Code: IDE ISIN: ZAE000107579 ("Ideco" or "the company" or "the group") Unaudited consolidated results for the six months ended 28 February 2011. CONDENSED CONSOLIDATED STATEMENT OF Unaudited Unaudited Audited FINANCIAL POSITION R`000 Notes 28 Feb 28 Feb 31 Aug 2011 2010 2010 Assets Non-current assets Property, plant and 1 10,033 9,720 10,771 equipment Investment in associate 2 533 333 533 Intangible assets 3 60,593 58,318 62,924 Deferred tax 11,001 7,997 9,821 82,160 76,368 84,049 Current assets Inventories 8,106 13,305 13,498 Trade and other 31,553 27,466 28,211 receivables Taxation receivable - 343 513 Cash and cash equivalents 4,376 4,080 4,468 44,035 45,194 46,690 Total assets 126,195 121,562 130,739
Equity and liabilities Equity Share capital 1 1 1 Share premium 21,286 21,286 21,286 (Accumulated (488) 7,680 608 loss)/Retained income 20,799 28,967 21,895 Liabilities
Non-current liabilities Long-term borrowings 4 42,296 37,871 40,875 Deferred tax 6,521 361 6,888 48,817 38,232 47,763
Current liabilities Current tax payable 826 950 316 Trade and other payables 22,264 17,221 26,515 Current portion of non- 4 287 250 266 current liabilities Bank overdraft 5,999 9,064 6,928 Provisions 1,840 1,514 1,693 Other financial 5 25,363 25,364 25,363 liabilities 56,579 54,363 61,081 Total liabilities 105,396 92,595 108,844 Total equity and 126,195 121,562 130,739 liabilities
Net asset value per share 10.29 14.32 10.83 (cents) Net tangible asset value per (21.89) (18.29) (21.74) share (cents) CONDENSED CONSOLIDATED STATEMENT OF Unaudited Unaudited Audited COMPREHENSIVE INCOME six six year months months ended
ended ended R`000 28 Feb 28 Feb 31 Aug 2011 2010 2010 Revenue 71,822 57,700 126,795 Cost of sales (23,336) (57,433) (33,554) Gross profit 38,268 34,364 69,362 Other income 140 82 519 Operating expenses (28,855) (61,706) (31,862) Earnings before interest, tax, 6,546 5,591 8,175 depreciation and amortisation Depreciation (899) (736) (1,700) Amortisation (2,450) (1,134) (5,069) Operating profit 3,197 3,721 1,406 Investment revenue 101 140 522 Finance costs 6 (3,369) (2,838) (7,883) (Loss)/profit before tax (71) 1,023 (5,955) Taxation (1,025) (837) (931) (Loss)/profit for the (1,096) 186 (6,886) period Other comprehensive income - - - Total comprehensive (loss)/profit (1,096) 186 (6,886) attributable to ordinary shareholders (Loss)/earnings per share 7
Basic and diluted basic (0.54) 0.09 (3.41) (loss)/profit per share (cents) CONDENSED CONSOLIDATED Unaudited Unaudited Audited STATEMENT OF CASH FLOWS six six year months months ended ended ended
R`000 28 Feb 28 Feb 31 Aug 2011 2010 2010 Cash generated/(utilised) 4,491 (1,446) 9,694 by operations Investment income 101 140 522 Finance costs (3,369) (2,838) (7,883)
Taxation paid (1,549) (728) (4,186) Net cash flow from (326) (4,872) operating activities (1,853) Net cash flow from (279) (1,307) investing activities (4,833) Acquisition of property, (161) (246) plant and equipment (2,643) Acquisition of (118) (728) intangible assets (1,999) Proceeds on disposal of - - 342 property, plant and equipment Investment in associated - (333) (533) company Net cash flows from 1,442 (7,052) (4,021) financing activities Repayment of long-term (129) (5,125) (2,093) borrowings Movement of other 1,571 (1,927) (1,928) financial liabilities Total cash movement for 837 (13,231) (10,707) the period Cash at the beginning of (2,460) 8,247 8,247 the period Total cash at end of (1,623) (4,984) (2,460) period CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unaudited Unaudited Audited year year year ended ended ended R`000 28 Feb 28 Feb 31 Aug 2011 2010 2010 Ordinary share capital Balance at beginning of 1 1 1 period Issue of shares - - - Balance at end of period 1 1 1
Share premuim Balance at beginning of 21,286 21,286 21,286 period Issue of shares - - - Balance at end of period 21,286 21,286 21,286 (Accumulated loss)/Retained income Balance at beginning of 608 7,494 7,494 period (Loss)/profit for the (1,096) 186 (6,886) period Balance at end of period (488) 7,680 608 Total shareholders equity at 20,799 28,967 21,895 end of period NOTES TO THE STATEMENT OF FINANCIAL POSITION AND CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME R`000 Feb-11 Feb-10 Aug 2010
1.Property, plant and equipment Land and buildings 7,329 6,999 7,350 Furniture and fixtures 379 544 481 Motor vehicles 3 378 4 Office equipment 201 200 235 IT equipment 2,121 1,599 2,701 10,033 9,720 10,771
2.Investment in associate Shares at cost * * * Loan to associate 533 333 533 533 333 533 * Less than R1 000. 3.Intangible assets Computer software 7,330 5,009 7,955 Right of use 13,847 15,209 14,528 Intellectual property 1,500 1,500 1,500 rights Trademark 6,930 7,700 7,187 Trade name 1,391 - 1,473 Customer base 11,669 - 12,355 Goodwill on acquisition 17,926 28,900 17,926 60,593 58,318 62,924 4.Long-term borrowings Secured at amortised cost: 2,269 2,521 2,398 Absa Bank Limited Less: Current portion included in current liabilities (287) (250) (266) 1,982 2,271 2,132 Cumulative redeemable 40,314 35,600 38,743 preference shares issued to NEF 42,296 37,871 40,875
5.Other financial liabilities Morpho South Africa (Pty) 25,363 25,364 25,363 Limited 6.Finance costs Interest (537) (1,390) (1,930) Dividends on "A" cumulative (1,261) (1,448) (2,810) redeemable preference shares Dividends on "B" cumulative (1,571) - (3,143) redeemable preference shares (3,369) (2,838) (7,883) 7.(Loss)/earnings per share Calculation of headline (loss)/earnings (R`000) Total comprehensive (1,096) 186 (6,886) (loss)/profit attributable to ordinary shareholders Adjusted for (net of tax): Loss on sale of property, - - 23 plant and equipment Headline (loss)/profit (1,096) 186 (6,863) Headline and diluted headline (0.54) 0.09 (3.39) (loss)/earnings per share (cents) Number of shares - Issued and weighted 202,222,222 202,222,222 202,222,222 SEGMENTAL ANALYSIS
R`000 Biometric Secure Biometric Corporate Total readers Credenti projects and -aling
solutions services Unaudited 28 February 2011 Revenue from 31,603 34,460 5,759 - 71,822 external customers Depreciation and (48) (2,835) (320) (146) (3,349) amortisation Operating 2,259 8,332 (1,567) (5,827) 3,197 profit/(loss) Investment - 101 - - 101 income Finance costs - (2,832) - (537) (3,369) Profit/(loss) 1,259 4,101 (1,567) (3,864) (71) before tax Taxation (515) (2,018) 439 1,069 (1,025) (expense)/credit Total assets 25,497 56,973 9,602 34,123 126,195 Total (13,549) (2,458) (9,709) liabilitiies (79,680) (105,396) Unaudited 28 February 2010 Revenue from 23,375 32,045 2,280 - 57,700 external customers Depreciation and (33) (1,203) (397) (237) (1,870) amortisation Operating 1,106 11,187 (1,181) (7,391) 3,721 profit/(loss) Investment - 134 - 6 140 income Finance costs - (2,392) - (446) (2,838) Profit/(loss) 106 7,929 (1,181) (5,831) 1,023 before tax Taxation (30) (2,770) 330 1,633 (837) (expense)/credit Total assets 21,859 55,083 7,840 36,780 121,562 Total (10,275) (259) (12,695) (92,595) liabilitiies (69,366) Audited 31 August 2010 Revenue from 52,544 63,068 11,183 - 126,795 external customers Depreciation and (75) (5,315) (935) (444) (6,769) amortisation Operating 1,846 14,290 (2,181) (12,549) 1,406 profit/(loss) Investment 30 218 123 151 522 income Finance costs (2) (6,913) - (968) (7,883) Profit/(loss) 873 4,596 (2,057) (9,367) (5,955) before tax Taxation (601) (3,389) 527 2,532 (931) (expense)/credit Total assets 27,341 63,857 6,859 32,682 130,739 Total (19,823) (2,117) (10,559) liabilitiies (76,345) (108,844) Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-makers. These chief operating decision-makers have been identified as the executive committee members who make strategic decisions. The chief operating decision-makers have organised the operations of the company based on the product lines and services and this has resulted in the creation of the following segments: * Biometric products: this segment focuses on selling biometric products to the private and public sectors; * Credentialing services: this segment provides criminal record checks and background screening services to employers; and * Biometric solutions and projects: this segment focuses on large biometric projects and related solutions in the public and private sectors. The accounting policies used for the above operating segments are the same as those described in the basis of preparation. Biometric products are almost exclusively sold within South Africa. The revenue of the credentialing services segment is generated by Ideco AFISwitch (Pty) Limited and Managed Integrity Evaluation ("MIE"). Approximately a quarter of the revenue generated by the biometric solutions and projects segment was generated in Namibia with the Namibian drivers licence contract. COMMENTARY INTRODUCTION Set out above are the unaudited condensed consolidated interim results of Ideco in respect of the six months ended 28 February 2011. BASIS OF PREPARATION The condensed consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS"), the AC500 standards as issued by the Accounting Practices Board and in accordance with the requirements of IAS 34: Interim Financial Reporting, the South African Companies Act and the JSE Limited Listings Requirements. The accounting policies adopted in the preparation of the unaudited financial information are consistent with those used to prepare the interim financial statements for the six months ended 28 February 2010. These interim results have not been audited or reviewed by the group`s auditors. The following new Standards and amendments to Standards were mandatory for the first time for the financial period beginning 1 September 2010: IAS 1 (revised), `Presentation of financial statements`: The revised Standard prohibits the presentation of items of income and expenses (that is `non-owner` changes in equity`) in the statement of changes in equity, requiring `non-owner changes in equity` to be presented separately from owner changes in equity. All `non-owner changes in equity` are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The group has elected to present one statement of comprehensive income. The unaudited condensed consolidated interim financial statements have been prepared under the revised disclosure requirements. IFRS 8, `Operating segments`: IFRS 8 replaces IAS 14, "Segment reporting`, extends the scope of segmental reporting, requiring additional disclosure. This Standard requires the company to adopt the `management approach` to reporting segment information under which segment information is presented on the same basis as that used for internal reporting purposes. FINANCIAL OVERVIEW Earnings before interest, tax, depreciation and amortisation ("EBITDA") of R6,5 million was achieved for the six months ended 28 February 2011, compared to R5,6 million for the comparative six months period ended 28 February 2010, this represents an increase of 17%. EBITDA for the full financial year ended 31 August amounted to R8,2 million. In spite of the increase in EBITDA, there was a total comprehensive loss attributable to ordinary shareholders of R1,1 million, compared to a profit of R186 000 for the corresponding six month reporting period. This can be mainly ascribed to higher amortisation charges (R1,3 million) and finance charges as a result of the acquisition of MIE. EBITDA of the biometric readers and solutions segment increased by 102% compared to the corresponding six months ended 28 February 2010, while the other two segments showed decreases of 9,9% (secure credentialing) and 59% (biometric projects) respectively. Corporate expenses were 20,5% lower than those of the comparable period ended 28 February 2010. EBITDA for the secure credentialing segment included once-off income of R6,6 million for the six months ended 28 February 2010 and R1,9 million for the six months ended 28 February 2011 respectively, in respect of work done for the SAPS AFIS upgrade. If this once- off income item is excluded, EBITDA for the secure credentialing segment would have increased by 62% compared to the corresponding six months period ended 28 February 2010. Group revenue increased by 24% from R57,7 million to R71,8 million. Revenue of biometric readers and solutions increased by R8,2 million (35%) as a result of a turn-around from the economic downturn experienced in respect of the six months ended 28 February 2010. Revenue of secure credentialing services increased marginally by R2,5 million (7,5%), however if the adjustment for once-off income, referred to above, had been made, the increase in revenue would have been 28%. Revenue of biometric projects increased by 153%, which can be ascribed to sales of Gautrain smartcards. The gross profit percentage decreased from 60% to 53% because biometric products and projects (with a lower gross profit percentage than secure credentialing services) made up a greater percentage of the sales mix compared to the six months ended 28 February 2010. Non-current assets increased by R5,7 million as at 28 February 2011 compared to 28 February 2010, mainly as a result of increases in intangible assets and deferred tax assets. Intangible assets increased by R2,3 million. The major addition to intangible assets consisted of computer software. The composition of the trade mark, the trade name, customer base and goodwill changed as indicated in note 3, as a result of the final purchase price allocation on the acquisition of MIE. The deferred tax asset increased by R3 million, mainly as a result of an additional provision of R2 million in Ideco. Trade and other receivables increased by R4,1 million (15%), which was in line with the increase in revenue. Inventories were managed more tightly, with the result that the investment in inventories was reduced by R5,2 million from R13,3 million to R8,1 million. Long-term borrowings increased by R4,4 million mainly as a result of the provision of R4,7 million for the dividend on the "B" cumulative preference share issued to the National Empowerment Fund ("NEF"). Deferred tax liabilities increased from R361 000 to R6,5 million as a result of the valuation of business combination balances with the acquisition of MIE. Trade and other payables increased by R5,2 million as a result of the increase in sales and a liability in the biometric projects segment in respect of the purchase of Gautrain smartcards. The other financial liability consists of an amount of R25,4 million due to Morpho South Africa (Pty) Limited ("Morpho") which was taken over in respect of the SAPS AFIS. In the 2010 annual report it was reported that the loan was being restructured to reflect the original intention of the parties, namely that the loan will be repaid from revenue flowing from criminal record checks performed by Ideco AFISwitch (Pty) Limited ("Ideco AFISwitch") . No agreement on the payment terms has been reached with Morpho and the payment terms are therefore in dispute. The agreement with Morpho contains an arbitration clause to settle disputes between the parties. PROSPECTS Biometric Products Management is confident that the growth in revenue will continue based on orders received and not yet executed. In the government sphere Ideco has been appointed as a sub-contractor to supply biometric components and systems to several suppliers who are contracted by government for various projects. The first delivery under one of these contracts has been executed and it is expected that there will be a steady flow of orders to be executed under this contract over the next twelve to twenty four months. Credentialing Services The criminal record checking service, conducted by Ideco AFISwitch, will continue to grow. This company has completed 66% of the implementation of the service to the Department of Transport for Professional Drivers Permits. Only 43% of the potential revenue from this source is currently being achieved, since all testing stations where the necessary hardware have been installed, are not yet making full use of the service. Management is currently addressing this problem, and is confident that it will be resolved soon. MIE has been experiencing increasing demand for its services and has also acquired new contracts that will further increase revenue during the remainder of the financial year and beyond. Biometric Projects In addition to the Namibian drivers licence project, Ideco is awaiting the adjudication of several public sector tenders which, if awarded, will enhance the results of this segment. Other Projects and Prospects As reported before, Ideco has concluded a three year ticketing agreement with the Bombela Operating Company in charge of operating the Gautrain service. An increase in revenue is expected from this contract in June 2011, when the rest of the Gautrain rail lines will be opened. CAPITAL COMMITMENTS There are no capital commitments that have been approved by the directors as at the date of this report. EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIOD It was previously reported that Ideco had concluded a memorandum of understanding with MorphoTrak Incorporated, the USA subsidiary of Safran Morpho, France, to explore the US market for the establishment of a joint venture to distribute Morpho biometric scanners in that market. Initial indications were that such a joint venture will be successful, but following Morpho`s pending acquisition of the US group, L1 Identity Solutions Inc, Morpho`s approach to the access control market in the USA has changed, which will result in the termination of the joint venture. The directors are not aware of any significant events that have occurred between 28 February 2011 and the date of this report that may materially affect the results of the group for the period under review or their financial position as at 28 February 2011 other than noted above. DIVIDEND No dividend has been declared for the period. CORPORATE GOVERNANCE The directors and senior managers of the company endorse the Code of Corporate Practices and Conduct as set out in the King III Report on Corporate Governance. By order of the board Vhonani Mufamadi H B Aucamp CEO CFO 31 May 2011 Designated advisor: Questco Sponsors (Pty) Ltd Date: 31/05/2011 16:00:12 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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