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Abridged audited results for the year ended 28 February 2013, dividend declaration and notice of AGM
ISA Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/009608/06)
Share code: ISA ISIN: ZAE000067344
(ISA or the Company or the Group)
Abridged audited condensed consolidated results for the financial year ended
28 February 2013, dividend declaration and notice of annual general meeting
ISA is today publishing its audited results for the financial year ended 28
February 2013.
28-Feb-13 29-Feb-12
year-ended year-ended
Audited Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 51,541 64,226
Turnover 50,925 62,946
Cost of sales (27,526) (32,498)
Profit before other income and
expenses 23,399 30,448
Other income 1 29
Selling and marketing costs (7,666) (7,113)
Administrative expenses (3,273) (5,062)
Finance income 615 1,251
Finance costs (2) (127)
Profit before taxation 13,074 19,426
Taxation (3,619) (6,566)
Profit for the year attributable to
equity shareholders 9,455 12,860
Total comprehensive income
attributable to equity shareholders 9,455 12,860
Earnings per share (cents) 5.2 7.0
Diluted earnings per share (cents) 5.2 7.0
COMMENTARY TO STATEMENTS OF
COMPREHENSIVE INCOME
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of
comprehensive income 9,455 12,860
Profit on sale of property, plant and
equipment (1) (4)
Tax effect on above - -
Headline earnings 9,454 12,856
Headline earnings per share (cents) 5.2 7.0
Diluted headline earnings per share
(cents) 5.2 7.0
Number of shares in issue at end of
year ('000s) 183,600 183,600
Weighted average number of shares in
issue ('000s) 183,600 183,600
Treasury shares held at end of year
('000s) 8,993 8,993
28-Feb-13 29-Feb-12
year-ended year-ended
Audited Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 15,645 5,202
Property, plant and equipment 11,454 471
Intangible assets 3,945 4,549
Deferred tax 246 182
Current assets 35,018 47,240
Cash and cash equivalents 24,250 42,733
Inventories 80 -
Current tax receivable 139 14
Trade and other receivables 10,549 4,493
Total assets 50,663 52,442
EQUITY AND LIABILITIES
Equity capital and reserves 43,623 47,020
Share capital and share premium 13,442 13,442
Reserves 30,181 33,578
LIABILITIES
Current liabilities 7,040 5,422
Trade and other payables 6,864 4,903
Current tax payable - 249
Provisions 176 270
Total equity and liabilities 50,663 52,442
28-Feb-13 29-Feb-12
year-ended year-ended
Audited Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 3,283 13,456
Cash flows from investing activities (11,210) 751
Cash flows from financing activities (12,854) (13,241)
Net (decrease)/increase in cash and
cash equivalents (20,781) 966
Revaluation of foreign cash balances 2,298 524
Cash and cash equivalents at beginning
of the year 42,733 41,243
Cash and cash equivalents at end of
the year 24,250 42,733
28-Feb-13 29-Feb-12
year-ended year-ended
Audited Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
Share capital
Balance at beginning and end of the
year 1,836 1,836
Share premium
Balance at beginning of the year 11,606 9,658
Reduction in share premium - capital
reduction - (1,948)
EmpowerGroup transaction maturation - 3,896
Balance at end of the year 11,606 11,606
Reserves
Balance at beginning of the year 33,578 31,970
Attributable profit for the year 9,455 12,860
Dividends paid during the year (12,852) (11,252)
Balance at end of the year 30,181 33,578
Total equity capital and reserves 43,623 47,020
OPERATIONAL REVIEW
The reporting period ended 28 February 2013 is now behind us and will likely
be thought of by our team in the years ahead as being one of our most
challenging. Despite performing well in many areas, such as those relating to
cash flow management and growth in recurring revenue and subscription based
sales, the consequence of lower New Solution Sales could not be countered,
culminating in disappointing results for the year.
FINANCIAL
Overall turnover declined by 19% to R 51 million. As referred previously,
this negative result can largely be attributed to the slowdown in New
Solution Sales, which represent a mere 22% of total sales for the period, as
opposed to the historic measure being closer to the 40% level. Although
dramatic at face value, it is important to note that New Solution Sales tend
to be bulky in value and if the recognition of only one or two are missed in
a specific reporting cycle, the impact on the overall result would be severe
on both turnover and gross profit levels, as is the current case. This
revenue mix dynamic is a reality for most small businesses, especially those
in the ICT industry and is likely to remain with us into the future.
On a more encouraging note, recurring revenue derived income increased by a
healthy 16% in real terms, now representing 78% of overall turnover for the
year. This is a credible performance, be it substantially concentrated in
percentage terms due to the falloff of New Solution Sales, and further
enhances the quality of earnings. Most pleasing is the 26% growth from our
subscription based Managed Security Services, which is underpinned by our
internally developed MSS Pulse security infrastructure management and
monitoring platform.
The modest decline in gross profit, from 48% to 46% of turnover during this
cycle, is largely a result of the shortfall in New Solution Sales, which
traditionally attracts higher margins than the more predictable recurring
revenues. If one extracted historic profits from these New Solution Sales for
comparative purposes and only reviewed profits derived from our recurring
revenue lines, one would appreciate the commendable effort by management to
contain the decline in gross profit levels in this systemic margin pressure
industry. Whilst management have limited control over margin pressure
affecting the resale of products, it was the increase in service based sales
that couched the overall effect on profit levels during this period. With
this said, management are concerned by the pace of product margin erosion and
revenue deflation and continue to enlist new and emerging technology lines
that are in their earlier lifecycle stages, which tend to retain their value
and margins far better than those technologies reaching commoditisation.
Operational expenditure increased by a nominal 3% before applying the gains
from our foreign cash revaluation of R 2.3 million, but decreased by 11% in
real terms due to these fortuitous gains. As fortuitously, taxation levels in
this reporting period normalised to an effective rate of 28% from the
previous lofty level of 34%. This decrease is as a result of the change in
dividend tax legislation, which included an STC charge of R 1.2 million in
the previous results. Earnings before interest, tax, depreciation and
amortisation (EBITDA) declined by 28% to R 13.9 million and profits declined
by 26% to R 9.4 million.
During the period under review, we moved into our newly acquired premises in
Woodmead. Not only does this transfer of low-yielding cash into higher-
yielding property enhance our investment structure, but it also gives us the
headroom to grow the breadth and depth of our service offerings for the
market. Cash reserves were further impacted by the abnormally high level of
trade receivables, but management are satisfied with their collection
processes and controls ascribing this anomalous level purely to the yearend
cut off, as the majority of these receivables were collected in the weeks
following the yearend.
MARKET AND PROSPECTS
We continue to be optimistic about our long term prospects as the key drivers
of the IT security market remains robust. With the continued evolution of
threats and attacks against organisations, together with the increased
regulatory and legislative compliance requirements, stakeholders continue to
elevate the importance of IT security within their organisations. However, we
do anticipate further erratic performance due to the heavy weighting of our
New Solution Sales on our overall results. Whilst our pipeline is stronger
than it was a year ago, one cannot anticipate the timing of these larger
deals and as such, we are unfortunately unable to offer better guidance for
shorter term reporting cycles.
Strategically, management remains determined to build a trusted information
security brand. Vigilant cost controls, cash management disciplines,
innovative offerings and a persistent focus on service delivery remain our
priority.
DIVIDENDS
Dividend number 9, comprising of an ordinary dividend of 7.0 cents per share,
was declared and paid during the period under review. Ordinary dividend
number 10, of 5.2 cents per share, for the year ended 28 February 2013, is
declared, to all shareholders recorded in the shareholders register on 26
July 2013 and payable on 29 July 2013. In terms of the dividend tax,
effective 1 April 2012, the following additional information is disclosed:
This is a dividend as defined in the Income Tax Act, 1962, and is payable
from income reserves.
The South African dividend tax (DT) rate is 15%.
No credits in terms of secondary tax on companies have been utilised.
Accordingly, the dividend to utilise in determining the DT is 5.2 cents
per share.
The DT to be withheld by the company amounts to 0.78 cents per share.
Therefore, the net dividend payable to shareholders who are not exempt
from DT is 4.42 cents per share, while the gross dividend of 5.2 cents per
share is payable to those shareholders who are exempt from DT.
The issued share capital of the company at the declaration date comprises
192 592 593 ordinary shares.
The companys income tax reference number is 9340/150/71/4.
The salient dates will be as follows:
Declaration date Friday, 24 May 2013
Last day to trade Friday, 19 July 2013
Shares trade ex-dividend Monday, 22 July 2013
Record date Friday, 26 July 2013
Payment date Monday, 29 July 2013
Share certificates may not be dematerialised or rematerialised between
Monday, 22 July 2013 and Friday, 26 July 2013, both days inclusive.
DIRECTORATE
Johan du Toit was appointed to the Board of ISA as an Executive Director with
effect from 7 February 2013 and became Financial Director on the same day,
replacing Tarryn Marks who had resigned with effect from 1 June 2012.
BASIS OF PREPARATION
The abridged financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC500 Standards as
issued by the Accounting Practices Board and contains the information as
required by IAS 34: Interim Financial Reporting and the Companies Act, 2008
(Act 71 of 2008), as amended (the Companies Act).
The report has been prepared using accounting policies that comply with IFRS
which, together with the methods of computation, are consistent with those
applied in the financial statements for the year ended 28 February 2013. The
preparation of the Group financial statements for the financial year ended 28
February 2013 was supervised by the Financial Director, Johan du Toit, and
have been audited in terms of all the applicable requirements of Section
29(1) of the Companies Act.
The auditors, Mazars, have issued their opinion on the Groups financial
statements for the year ended 28 February 2013. The audit was conducted in
accordance with International Standards on Auditing. They have issued an
unmodified audit opinion. A copy of their audit report is included in the
Annual Financial Statements or is available for inspection at the Companys
registered office.
These abridged financial statements have been derived from the consolidated
financial statements and are consistent in all material respects, with the
Group financial statements. There were no material subsequent events that
required disclosure.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of shareholders of ISA
will be held at 10:00 on Wednesday, 26 June 2013 at the Companys registered
office situated at Block 9, Pinewood Office Park, 33 Riley Road, Woodmead,
Sandton, for the purpose of considering, and, if deemed fit, passing, with or
without modification, the resolutions set out in the notice of annual general
meeting which is contained in the annual report.
The board of directors of ISA has determined that, in terms of section
62(3)(a), as read with section 59 of the Companies Act, the record date for
the purposes of determining which shareholders of the Company are entitled to
participate in and vote at the annual general meeting is Friday, 21 June
2013. Accordingly, the last day to trade ISA shares in order to be recorded
in the register to be entitled to vote will be Friday, 14 June 2013.
SPECIAL THANKS
On behalf of the Board, I would like to take this opportunity to thank the
ISA team for their continued dedication and hard work. My appreciation is
also extended to my colleagues on the Board for their wise counsel and
valuable input. Finally, I thank all stakeholders, customers and vendors for
their support and I look forward to meeting shareholders at the annual
general meeting.
For and on behalf of the Board.
Clifford Katz
Chief Executive Officer
Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), JG du Toit (Financial Director),AA Maren#, AJ Naidoo#, DR Perreira*
(Chairman), DS Seaton*, TA Matsabu*
# Non-executive
* Independent non-executive
Johannesburg
24 May 2013
Merchantec Capital
Designated Advisor
www.isaholdings.co.za
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