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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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