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SECUREDATA HOLDINGS LIMITED - Audited results for the twelve months ended 31 July 2013

Release Date: 18/10/2013 16:30
Code(s): SDH     PDF:  
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Audited results for the twelve months ended 31 July 2013

SECUREDATA HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/010017/06)
Share code: SDH ISIN: ZAE000096368
(“SecureData” or “the Group” or “the Company”)


AUDITED RESULTS FOR THE TWELVE MONTHS ENDED 31 JULY 2013



Condensed consolidated statement of comprehensive income for the twelve months ended
31 July 2013
                                                                           Audited      Audited
                                                                            twelve       twelve
                                                                      months ended months ended
                                                                      31 July 2013 31 July 2012
                                                                             R'000        R'000

Revenue                                                                    289 677      222 229

Earnings/(loss) before interest, taxation, depreciation and
amortisation (EBITDA) and other items                                           39     (44 961)

Depreciation and amortisation                                               (3 170)     (4 109)
- Depreciation                                                              (1 735)     (1 345)
- Amortisation                                                              (1 435)     (2 764)
Loss from operations                                                        (3 131)    (49 070)
Finance income                                                                2 208         161
Finance costs                                                                 (464)     (3 590)
Goodwill written off                                                              -     (2 359)
Fair value movements in derivatives                                           3 199       1 664
Profit/(loss) before taxation                                                 1 812    (53 194)
Taxation                                                                        571       5 469
Profit/(loss) on continuing operations                                        2 383    (47 725)
Discontinued operations (Note 1)                                                  -       9 631
Profit/(loss) for the year                                                    2 383    (38 094)
Attributable to:
- owners of the parent                                                        2 383    (39 395)
- non-controlling interest                                                        -       1 301
Profit/(loss) for the year                                                    2 383    (38 094)

Profit/(loss) for the year                                                    2 383    (38 094)
Other comprehensive income
Items that will be reclassified subsequently to profit /(loss)
   Foreign exchange conversion movements                                      (141)      25 440
   Reclassified to profit/(loss)                                                138           -
Other comprehensive (loss)/income for the year, net of tax                       (3)     25 440
Total comprehensive income/(loss) for the year                                2 380    (12 654)
Total comprehensive income/(loss) for the year attributable to:
- owners of the parent                                                        2 380    (14 809)
- non-controlling interest                                                        -       2 155
Total comprehensive income/(loss) for the year                                2 380    (12 654)
Earnings/(loss) per share (cents)                                               1.0      (17.3)
- Continued operations                                                          1.0      (20.9)
- Discontinued operations                                                         -         3.6
Diluted earnings/(loss) per share (cents)                                       1.0      (17.3)
- Continued operations                                                          1.0      (20.9)
- Discontinued operations                                                         -         3.6


Weighted average numbers of shares on which 
- earnings per share is based ('000)                                        227 129     228 395
- diluted earnings per share is based ('000)                                227 129     228 395
Number of ordinary shares in issue ('000)                                   246 320     246 320

Reconciliation between earnings and headline earnings
Profit/(loss) for the year attributable to owners of the parent               2 383    (39 395)
FCTR reclassified to profit/(loss)                                              138           -
Goodwill written off                                                              -       2 359
Loss on disposal of subsidiary                                                    -       1 112
Loss on disposal of property, plant and equipment net of tax                     50       1 161
Headline earnings/(loss)                                                      2 571    (34 763)

Headline earnings/(loss) per share (cents)                                      1.1      (15.2)
- Continued operations                                                          1.1      (19.4)
- Discontinued operations                                                         -         4.2

Note 1
Discontinued operations

Revenue                                                                           -    220 317

Earnings before interest, taxation, depreciation and
amortisation (EBITDA) and other financial items                                   -      17 360
Depreciation and amortisation                                                     -     (7 707)
- Depreciation                                                                    -     (1 402)
- Amortisation                                                                    -     (6 305)
Profit from operations                                                            -       9 653
Finance income                                                                    -          67
Finance costs                                                                     -       9 486
- Interest paid                                                                   -     (3 126)
- Foreign exchange gains on loan to subsidiary                                    -      12 612
Profit before taxation                                                            -      19 206
Taxation                                                                          -     (8 463)
- Normal taxation                                                                 -     (8 463)
Loss on sale of subsidiary                                                        -     (1 112)
Profit for the year                                                               -       9 631


Condensed consolidated statement of financial position at 31 July 2013

                                                                  Audited at     Audited at
                                                                31 July 2013   31 July 2012
                                                                       R'000          R'000
ASSETS
Non-current assets                                                    66 540         65 917
Property, plant and equipment                                          3 161          3 836
Goodwill                                                              37 459         37 459
Intangible assets                                                      4 182          5 084
Deferred tax asset                                                    21 738         19 538

Current assets                                                        91 904        139 415
Inventories                                                            3 720          7 482
Trade and other receivable's                                          73 359         41 207
Derivative financial instruments                                         492              -
Taxation prepaid                                                           6          1 139
Cash and cash equivalents                                             14 327         89 587

Total assets                                                         158 444        205 332

EQUITY AND LIABILITIES
Equity                                                                88 375        143 402
Share capital                                                            246            246
Share premium                                                         57 320        118 900
Treasury shares                                                     (19 163)        (23 336)
Share-based payment equity reserve                                         -          1 255
Foreign currency translation reserve                                      22             25
Retained earnings                                                     49 950         46 312

Non-current liabilities                                                1 018          1 301
Deferred tax liability                                                 1 018          1 301

Current liabilities                                                   69 051         60 629
Trade and other payables                                              68 440         56 459
Derivative financial instruments                                           -          2 707
Taxation                                                                 601          1 454
Bank overdrafts                                                           10              9

Total equity and liabilities                                         158 444        205 332

Net asset value per share (cents)                                       35.9           58.2
Net asset value per share net of treasury (cents)                       38.9           62.8




Condensed consolidated statement of cash flows for the twelve months ended 31 July 2013

                                                                    Audited         Audited
                                                                     twelve          twelve
                                                                     months          months
                                                                      ended           ended
                                                               31 July 2013    31 July 2012
                                                                     R'000            R'000

Cash flows from operating activities                                (16 277)        (53 358)
Profit/(loss) before taxation                                         1 812         (35 100)
Adjustments not affecting the flow of funds                          (1 952)          8 809
Operating loss before working capital changes                          (140)        (26 291)
Decrease in working capital                                         (16 409)        (18 459)
Cash (utilised in) operations                                       (16 549)        (44 750)
                                                                        272          (8 608)
Finance income                                                        2 208             228
Finance costs                                                          (326)         (6 716)
Taxation paid                                                        (1 610)         (2 120)
Cash flows from investing activities                                 (1 662)        155 406
Cash flows from financing activities                                (57 407)        (44 012)
Capital reduction of shares in issue                                (61 580)              -
Own shares acquired and capital reduction by subsidiary               4 173               -
Loans repaid                                                              -         (44 012)
(Decrease)/increase in cash equivalents                             (75 346)         58 036
Foreign exchange movements in cash balances                               85          4 382
Cash and cash equivalents at beginning of the year                    89 578         27 160
Cash and cash equivalents at end of the year                          14 317         89 578

Condensed consolidated statement of changes in equity for the twelve months ended
31 July 2013

                                                                    Audited          Audited
                                                                     twelve           twelve
                                                                     months           months
                                                                      ended            ended
                                                               31 July 2013     31 July 2012
                                                                      R'000            R'000

Share capital                                                           246              246

Share premium                                                        57 320          118 900
Balance at beginning of the year                                    118 900          118 900
Capital reduction                                                   (61 580)               -

Treasury shares                                                     (19 163)         (23 336)
Balance at beginning of the year                                    (23 336)         (23 336)
Capital reduction                                                     4 797                -
Own shares acquired by subsidiary                                      (624)               -

Share-based payment equity reserve                                        -            1 255
Balance at beginning of the year                                      1 255            3 322
Share based payment transactions during the year                          -               26
Transfer to retained earnings                                        (1 255)          (2 093)

Foreign currency translation reserve                                     22               25
Balance at beginning of the year                                         25          (24 561)
Foreign exchange movements during the year                               (3)          24 586

Retained earnings                                                     49 950          46 312
Balance at beginning of the year                                      46 312          83 614
Profit for the year                                                    2 383         (39 395)
Transfer from share-based payment equity reserve                       1 255           2 093
Equity attributable to owners of the parent                           88 375         143 402

Non-controlling interest                                                   -              -
Balance at beginning of the year                                           -          10 588
Recognised income for the year                                             -           1 301
Disposal of subsidiary                                                     -         (12 743)
Foreign exchange movements                                                 -             854

Total capital and reserves                                            88 375         143 402



Commentary

General review

Security of electronic information of all types is a constant and growing concern for enterprises.
SecureData is in the business of keeping the electronic data of our clients safe, available and reliable.
Appropriate products and services are supplied by highly trained and skilled personnel. We provide
products and services to almost every single one of the major corporations in South Africa, as well as
African businesses and governments, and provide specialised information security services in Europe
and USA.

After very disappointing trading results in the financial year ended 31 July 2012 (“the prior year”),
the period under review has seen a return to profitability. Group EBITDA from continued operations
improved to R0.039 million (2012: loss of R45 million) on revenues that increased to R289.7 million
(2012: R222.2 million) reflecting a break even EBITDA margin (2012: -20.2%). The increase in
revenue is due to focussing on the generation of new business in partnership with our channel
resellers.

The net cash position of the Group stood at R14.3 million (2012: R89.6 million following the sale of
SecureData Europe and before a capital reduction of 25 cents per share (R61.6 million) was paid to
shareholders on 24 December 2012).

Between May 2012 and the date of approval of these results, SecureData has undergone extensive
restructuring and a major overhaul of its leadership team. Group headcount has reduced from 140
to 104. Certain products and services were discontinued, and other new ones introduced.
Experienced senior personnel were hired to strengthen the team.

Technology renewal revenue is important to our business, but the focus turned to the generation of
new business in partnership with our channel resellers. This effort is starting to bear fruit and we are
seeing the beginnings of some material growth. Although growth is in some instances constrained by
the cash required to fund it, we focus on the highest gross margin opportunities.

Operational review

SecureData operates through two subsidiaries, SecureData Africa and SensePost.

SecureData Africa

SecureData Africa markets and distributes best-of-class information risk management products in
South Africa and across the rest of the continent.

 SecureData Africa
                                  12 months to                                      12 months to
                                  31 July 2013                    Growth            31 July 2012
                                         R'000                                             R'000
 Revenue                               252 965                     33.7%                 189 207
 EBITDA                                   (258)                    99.4%                 (45 897)
 EBITDA margin (%)                        (0.1)                       -                    (24.3)

SecureData Africa has seen a turnaround with an EBITDA loss of R0.3 million (2012: loss of R45.9
million) on revenue of R253.0 million (2012: R189.2 million). The revenue growth was 33.7%.
Significant growth was achieved from territories north of South Africa which now comprises
approximately 18% (2012: 10%) of the business.

We have seen major drivers for our products and services come from the emphasis on remote
device management, cloud computing, data loss protection and intrusion detection and recovery.
Our people have been retrained to address solutions to specific risks in enterprises. This has been
well received by our end-user customers. We always approach end-user customers in partnership
with channel resellers. This has introduced transparency and certainty into the market and gives
assurance to the procurement functions of end-user customers that they are buying from
competitive suppliers who fully understand their needs.

SensePost

SensePost provides independent information security assessment services. Based in South Africa,
the company is a recognised global leader in its niche market, and boasts a blue-chip client base
internationally.

 SensePost
                                12 months to                                     12 months to
                                 31 July 2013                    Growth           31 July 2012
                                        R'000                                            R'000
 Revenue                               36 577                       8.9%                33 576
 EBITDA                                 8 481                       5.0%                 8 075
 EBITDA margin (%)                       23.2                           -                 24.0

SensePost remained profitable with an EBITDA of R8.5 million (2012: R8.1 million) on increased
revenues of 8.9% to R36.6 million (2012: R33.6 million).

SensePost continues to keep our clients’ data and systems safe by performing complex and skilled
penetration testing, vulnerability assessments and training. Approximately a quarter of the revenues
were generated outside of South Africa, mainly in the USA and UK. We are continuing to invest in
the UK operations.

The table below reconciles the divisional results back to the consolidated Group results:
                                   12 months to                          12 months to
                                   31 July 2013                           31 July 2012
                                  Revenue        EBITDA               Revenue        EBITDA
                                    R'000        R'000                  R'000         R'000
 SecureData Africa                252 965         (258)               189 207       (45 897)
 SensePost                         36 577         8 481                33 576         8 075
 Head office costs                    135       (8 184)                     -        (7 139)
 Consolidation entries                  -            -                   (554)            -
 Continuing operations            289 677           39                222 229       (44 961)
 SecureData Europe                      -            -                221 314        20 482
 Head office costs                      -            -                      -        (3 122)
 Consolidation entries                  -            -                   (997)            -
 Discontinued operations                -            -                220 317        17 360
 Group results                    289 677           39                442 546        (27 601)

Prospects

We expect to maintain the present rate of growth in SecureData Africa. The changes to our team
and to our structures and focus areas were implemented steadily throughout the past financial year.
We have started the new year with these improved teams and structures. We have also started the
new year with favourable changes to our product mix.

We also expect to maintain the present more modest rate of growth in SensePost as we take
advantage of the market’s demand for highly technical expertise and training.

Basis of preparation

These provisional audited condensed consolidated financial statements have been prepared in
accordance with the recognition and measurement requirements of International Financial
Reporting Standards and the presentation and disclosure requirements 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 Practices Committee and Financial Reporting Pronouncements
as issued by Financial Reporting Standards Council, and with the JSE Listings Requirements. The
accounting policies applied in the preparation of these provisional audited condensed consolidated
financial statements conform to the requirements of International Financial Reporting Standards,
and are consistent with those applied in the prior year.

These results have been prepared on the going concern basis and have been prepared under the
supervision of Carlo Venter, the Financial Director of the Group.

Audit opinion

The Group’s auditors, Grant Thornton, have issued an unmodified opinion on the Group’s financial
results for the year ended 31 July 2013. The audit was conducted in accordance with International
Standards on Auditing. These condensed consolidated financial statements have been derived from
the Group financial statements and are consistent in all material respects with the Group financial
statements. A copy of the audit report is available for inspection at the Company’s registered office.
Any reference to future financial performance included in this announcement has not been
reviewed or reported on by the Company’s auditor.

Subsequent events

The board of directors of SecureData (“the Board”) are not aware of any material matter or
circumstance arising since the end of the financial year under review to the date of this report.

Directorate
Mr Lwazi Koyana and Mr Steve Midgley were appointed as independent non-executive directors of
SecureData with effect from 8 October 2012.
Mr Johan du Toit resigned as Financial Director with effect from 31 October 2012.
Mr Carlo Venter was appointed as Financial Director with effect from 1 November 2012.
Mr Andrew Aitken resigned as director on 24 January 2013.


For and on behalf of the Board


PR Pretorius                                                      MG Crisp
Chairman                                                          Chief Executive Officer
18 October 2013

Directors: PR Pretorius# (Chairman), M Crisp (Chief Executive Officer), C Venter (Financial Director), N
Mthembu#, P Sneddon(Lead)*, VJ Archer*, L Koyana*, S Midgley*
*Independent non-executive
#non- executive

Registered office: SecureData Holdings Limited, Building A, 3021 William Nicol Drive, Bryanston,
2021 (PO Box 4673, Rivonia, 2128)

Company secretary: Merchantec Proprietary Limited

Transfer secretaries: Computershare Investor Services Proprietary Limited

Auditors: Grant Thornton

Sponsor: Merchantec Capital

www.securedataholdings.com

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