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ISA HOLDINGS LIMITED - Unaudited condensed results for the six months ended 31 August 2013

Release Date: 04/10/2013 11:00
Code(s): ISA     PDF:  
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Unaudited condensed results for the six months ended 31 August 2013

ISA Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/009608/06)
Share code: ISA ISIN: ZAE000067344
(ISA or Group)


UNAUDITED CONDENSED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2013


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                        31 Aug 13       31 Aug 12     28 Feb 13
                                       six months      six months
                                            ended           ended    year-ended
                                        Unaudited       Unaudited       Audited
                                            R'000           R'000         R'000

 Revenue                                   47 055          29 964        51 541
 Turnover                                  46 523          29 576        50 925
 Cost of sales                            (30 359)        (17 058)      (27 526)
 Profit before other income and
  expenses                                 16 164          12 518        23 399
 Other income                                   7               -             1
 Foreign exchange profit                    1 028           1 436         2 298
 Operating expenses                        (7 376)         (7 032)      (13 237)
 Finance income                               529             388           615
 Finance costs                                  -               -            (2)
 Profit before taxation                    10 352           7 310        13 074
 Taxation                                  (2 947)         (2 047)       (3 619)
 Profit for the period                      7 405           5 263         9 455

 Total comprehensive income
  attributable to equity shareholders       7 405           5 263         9 455


CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

                                            As at           As at         As at
                                        31 Aug 13       31 Aug 12     28 Feb 13
                                        Unaudited       Unaudited       Audited
                                            R'000           R'000         R'000
 
 ASSETS
 Non-current assets                        15 694          16 455        15 645
 Property, plant and equipment             11 268          11 800        11 454
 Intangible assets                          3 427           4 085         3 945
 Deferred tax                                 999             570           246

 Current assets                            48 240          27 907        35 018
 Cash and cash equivalents                 25 392          21 916        24 250
 Inventories                                    -               -            80
 Current tax receivable                         -              43           139
 Trade and other receivables               22 848           5 948        10 549

 Total assets                              63 934          44 362        50 663

 EQUITY AND LIABILITIES
 Equity capital and reserves               41 731          39 443        43 623
 Share capital and share premium           13 706          13 442        13 442
 Reserves                                  28 025          26 001        30 181

 LIABILITIES
 Current liabilities                       22 203           4 919         7 040
 Trade and other payables                  20 599           4 400         6 864
 Current tax payable                        1 359             125             -
 Provisions                                   245             394           176

 Total equity and liabilities              63 934          44 362        50 663


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW  

                                        31 Aug 13       31 Aug 12     28 Feb 13
                                       six months      six months
                                            ended           ended    year-ended
                                        Unaudited       Unaudited       Audited
                                            R'000           R'000         R'000

 Cash flows from operating
  activities                                8 965           1 701         3 283
 Cash flows from investing
  activities                                  443         (11 113)      (11 210)
 Cash flows from financing
  activities                               (9 294)        (12 841)      (12 854)
 Net increase/(decrease) in cash
  and cash equivalents                        114         (22 253)      (20 781)
 Revaluation of foreign cash
  balances                                  1 028           1 436         2 298
 Cash and cash equivalents at
  beginning of the period                  24 250          42 733        42 733
 Cash and cash equivalents at end
  of the period                            25 392          21 916        24 250


CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY   

                                        31 Aug 13       31 Aug 12     28 Feb 13
                                       six months      six months
                                            ended           ended    year-ended
                                        Unaudited       Unaudited       Audited
                                            R'000           R'000         R'000

 Share capital and reserves
 Balance at beginning of the
  period                                   43 623          47 020        47 020
 Attributable profit for the
  period                                    7 405           5 263         9 455
 Movement in share premium during 
  the period                                  265               -             -
 Dividends paid during the period          (9 562)        (12 841)      (12 852)
 Total equity capital and
  reserves                                 41 731          39 442        43 623


RECONCILIATION OF HEADLINE EARNINGS

 Earnings as per statement of  
  comprehensive income                      7 405           5 263         9 455
 Profit on sale of property,
  plant and equipment                          (7)              -            (1)
 Tax effect on above                            -               -             -
 Headline earnings                          7 398           5 263         9 454


ORDINARY SHARES

 Earnings per share (cents)                   4.0             2.9           5.2
 Diluted earnings per share
  (cents)                                     4.0             2.9           5.2
 Headline earnings per share
  (cents)                                     4.0             2.9           5.2
 Diluted headline earnings per
  share (cents)                               4.0             2.9           5.2
 Number of shares in issue at end
  of period ('000s)                       184 051         183 600       183 600
 Weighted average number of
  shares in issue ('000s)                 183 676         183 600       183 600
 Treasury shares held at end of
  period ('000s)                            8 535           8 993         8 993
 Net asset value per share at end
  of period (cents)                          22.7            21.5          23.8
 Net tangible asset value per
  share at end of period (cents)             20.8            19.3          21.6


OPERATIONAL REVIEW

I am pleased to present a good set of results for the six month period
ended 31 August 2013, which is underpinned by a high proportion of
recurring revenues, a robust balance sheet and strong cash flows.

Turnover increased by 57% compared to the previous corresponding reporting
period. This dramatic upturn is mainly attributed to the recognition of a
few large New Solution Sales achieved during the period. Whilst encouraging
at face value, it is important to appreciate that the timing of these large
deals is somewhat unpredictable and has an unnerving way of exaggerating
our figures to the upside if achieved in a specific reporting period; and
conversely to the downside if missed, as witnessed in our previous
reporting period.

More encouraging is the steady rate of growth achieved from our recurring
revenue structures, as well as from our higher-margin yielding services
derived sales. Recurring revenue, which is once again in our desired range
and currently at 58% of turnover, grew during this reporting period by a
pleasing 16%. Services derived sales, which include our Managed Security
Services offerings, also increased by a satisfactory 12% during the period
under review.

Gross margin pressure has unfortunately continued to plague our
profitability levels, which reduced profit before other income and expenses
from 42% to 35% of turnover during this reporting period. Whilst margin
erosion is systemic to the broader ICT industry, including the niche IT
security segment, management remains determined to combat the effects on
the business by focusing their efforts on further developing our higher
quality of earnings Managed Security Service revenue streams.

Against the backdrop of substantially higher turnover, we have successfully
contained the increase in operating expenses through this reporting period
to 5% over the previous corresponding period. Whilst this low level of
increase is unsustainable, because additional resources will be required to
sustain premium levels of service delivery to our clients, it is enjoyed
for now and rewarded the Group with a profit for the period of R7.4
million, a 41% improvement on the comparative period.

Most pleasing was the effectiveness of our cash management processes, which
delivered a strong cash flow performance for the period. Despite the higher
trade receivables and payables, which have largely been collected and paid
at the time of this review, cash flows from operating activities achieved a
level of 121% of profits generated for the period. This once again
illustrates the cash generative nature of our underlying business model,
and is pleasing.

DISTRIBUTION

During the reporting period, a final dividend of R9.6 million for the year
ended 28 February 2013 was declared and paid to all shareholders,
representing a distribution of 5.2 cents per share. The board has not
declared an interim dividend.

PROSPECTS

We remain optimistic about our long-term prospects, but do anticipate
further erratic performance in the short-term due to the heavy weighting of
our New Solution Sales on our overall results.

The drivers for the Information and IT security industry continue to
support our strategy and we have little doubt that the strength of the
underlying business, capital structures and market positioning will
continue to bode well for us in the years to come.

BASIS OF PREPARATION AND SUBSEQUENT EVENTS

The accounting policies applied in the preparation of these unaudited
condensed interim results for the six months ended 31 August 2013 (interim
results), which are based on reasonable judgements and estimates, are in
accordance with International Financial Reporting Standards (IFRS) and
are consistent with those applied in the annual financial statements for
the period ended 28 February 2013. These interim results as set out in this
report have been prepared in terms of IAS 34  Interim Financial Reporting,
The Companies Act, 2008 (Act 71 of 2008), as amended, the SAICA Financial
Reporting Guides, as issued by the Accounting Practises Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, and the Listings Requirements of the JSE Limited. These
interim results have not been reviewed or audited by the Groups auditors,
and have been prepared by Mr Johan du Toit, the Financial Director of the
Group.

There have not been any changes to the board of directors of ISA during the
period under review nor have there been any subsequent events up to and
including the date of this report.

SPECIAL THANKS

I take this opportunity to thank our customers, suppliers and staff for
their loyalty and continued support.

For and on behalf of the board.

Clifford Katz
Chief Executive Officer


Directors: CS Katz, PJG Green, JG du Toit, #AA Maren, #AJ Naidoo,
*DR Perreira, *DS Seaton, *TA Matsabu
# Non-executive
* Independent non-executive


Johannesburg
4 October 2013

Merchantec Capital
Designated Advisor


www.isaholdings.co.za

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