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Abridged condensed consolidated audited results for the year ended 28 February 2014 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 condensed consolidated audited results for the year ended
28 February 2014 and notice of AGM
ISA is today publishing its audited results for the financial year ended
28 February 2014.
28-Feb-14 28-Feb-13
year-ended year-ended
Audited Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 76,757 51,541
Turnover 75,211 50,925
Cost of sales (45,807) (27,526)
Profit before other income and expenses 29,404 23,399
Other income 7 1
Selling and marketing costs (7,726) (7,666)
Administrative expenses (5,297) (3,273)
Finance income 1,546 615
Finance costs (296) (2)
Profit before taxation 17,638 13,074
Taxation (4,999) (3,619)
Profit for the period attributable to
equity shareholders 12,639 9,455
Total comprehensive income attributable
to equity shareholders 12,639 9,455
Earnings per share (cents) 7.0 5.2
Diluted earnings per share (cents) 7.0 5.2
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 38,326 15,645
Property, plant and equipment 11,067 11,454
Intangible assets 3,237 3,945
Loans receivable 23,148 -
Deferred tax 874 246
Current assets 15,578 35,018
Inventories 90 80
Trade and other receivables 4,286 10,549
Current tax receivable 319 139
Cash and cash equivalents 10,883 24,250
Total assets 53,904 50,663
EQUITY AND LIABILITIES
Equity capital and reserves 37,777 43,623
Share capital and share premium 4,279 13,442
Reserves 33,498 30,181
LIABILITIES
Long term liabilities 5,875 -
Interest bearing liability 5,875 -
Current liabilities 10,252 7,040
Interest bearing liabilities 1,308 -
Trade and other payables 8,942 6,864
Current tax payable 2 -
Provisions - 176
Total liabilities 16,127 7,040
Total equity and liabilities 53,904 50,663
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 19,164 3,896
Cash flows from investing activities (22,785) (11,825)
Cash flows from financing activities (11,598) (12,852)
Net decrease in cash and
cash equivalents (15,219) (20,781)
Revaluation of foreign cash balances 1,852 2,298
Cash and cash equivalents at beginning
of the year 24,250 42,733
Cash and cash equivalents at end
of the year 10,883 24,250
CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
Share capital - ordinary shares
Balance at beginning of the year 1,836 1,836
Shares repurchased during the year (220) -
Treasury shares bought during the year (3) -
Treasury shares sold during the year 4 -
Balance at end of the year 1,617 1,836
Share capital - share premium
Balance at beginning of the year 11,606 11,606
Shares repurchased during the year (8,971) -
Treasury shares bought during the year (233) -
Treasury shares sold during the year 260 -
Balance at end of the year 2,662 11,606
Reserves
Balance at beginning of the year 30,181 33,578
Attributable profit for the year 12,639 9,455
Dividends paid during the year (9,322) (12,852)
Balance at end of the year 33,498 30,181
Total equity capital and reserves 37,777 43,623
Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of
comprehensive income 12,639 9,455
Profit on sale of property, plant
and equipment (7) (1)
Tax effect on above - -
Headline earnings 12,632 9,454
ORDINARY SHARES
Headline earnings per share (cents) 7.0 5.2
Diluted headline earnings per share (cents) 7.0 5.2
Number of shares in issue at end of the year
('000s) 161,723 183,600
Weighted average number of shares in issue
('000s) 180,927 183,600
Treasury shares held at end of the year
('000s) 8,870 8,993
Net asset value per share at end of
the year (cents) 23.4 23.8
Net tangible asset value per share at end of
the year (cents) 21.4 21.6
OPERATIONAL REVIEW
I am pleased to present a strong set of results for the full year ending 28
February 2014. In contrast to our previous year’s uncharacteristically poor
performance, which was marred by disappointing New Solution Sales, we are
extremely pleased that our revenue mix has returned to desired levels. The
proportional ratios between New Solution Sales vs. Recurring Revenue and
Service Derived Income vs. Product Sales is once again at the level that
management believe is imperative to the business in order to achieve
consistent and above average growth rates.
The impact of the steady weakening of the Rand towards the latter part of
the reporting cycle had a nominal impact on these results due to its
weighted average through the year. As a substantial portion of our revenue
is derived from the Dollar price of goods translated to Rands at the time
of sale, a weaker currency would support higher Rand based revenues, be it
slightly deferred as customers adapt their budgets to the higher Rand value
of their security programme. Worth noting is that a brisk weakening of the
Rand may hamper the sales process in the short term.
Our continued focus on stringent cash and credit risk management
disciplines has once again borne pleasing results and underpins our strong
financial position and favourable liquidity dynamics. The retained cash
position in the business changed significantly during this period under
review, for two main reasons: Firstly, in order to retain EmpowerGroup as
our long-standing BEE partner, we assisted them with a loan of R30 million
to settle their obligations to their previous financier, whose funding
arrangement matured. Of this R30 million provided, R15 million was paid
from our own cash reserves and the balance of R15 million was borrowed from
our bank; secondly, we repurchased 22 million of our own shares from
EmpowerGroup for an amount of R8.8 million, which reduced the balance of
their interest bearing loan and better aligned their shareholding to the
level required by the ICT Charter.
FINANCIAL
Turnover increased by 48% to R75.2 million, of which Recurring Revenue made
up 62% and New Solution Sales made up the remaining 38%. Most pleasing was
the healthy contribution to revenue from the greater African region, with
meaningful security projects being delivered to enterprise customers in
Nigeria and Kenya. Service Derived Income increased by 19%, mainly as a
result of a few larger New Solution Sales completed during the period under
review and included a somewhat tempered level of growth from our recurring
Managed Security Services of 13% from the previous corresponding reporting
period.
Gross profit increased by 25% to R29.4 million, which was on the low side
of expectation, representing 39% of turnover. Negative pressure on
profitability levels continues to feature as an endemic reality in our
industry, especially against those product categories nearing
commoditisation, such as anti-virus and malicious code mitigation
technologies. Management is closely monitoring the effects of this gross
profit erosion in the industry and remains determined to dilute the effects
on the business by bringing to market innovative service offerings,
together with a broader product mix that includes higher margin pre-
commoditised technologies, such as compliance and governance monitoring
tools, data leak prevention and advanced application control solutions.
Operational expenditure, excluding the revaluation of foreign currencies
held by the Group, increased by 12% during the reporting period, which was
in line with expectation. EBITDA (earnings before interest, tax,
depreciation and amortization) increased by 29% to R17.9 million and after
tax profits for the year increased by 34% to R12.6 million.
DISTRIBUTION
During the reporting period, a final dividend of R9.3 million for the year
ended 28 February 2013 was declared and paid to shareholders, representing
a cash distribution of 5.2 cents per share. As management is determined to
settle the debt raised during the year as quickly as possible, as well as
to replenish cash resources – reference made to the R30 million cash loan
made to our BEE partners and the 22 million share buyback, discussed above
– we have not declared a final dividend for this year ended 28 February
2014.
MARKET AND PROSPECTS
I continue to be optimistic about our long term prospects, as the key
drivers of the IT security market remain robust. With the continued
evolution and persistence of threats and attacks against corporate
information and IT resources, together with the increased regulatory and
legislative compliance requirements, stakeholders continue to elevate the
importance of IT security within their organisations. By leveraging this
positive sentiment towards the information security market, as well as our
positioning as a thought leader in this market segment, our stakeholders
are likely to benefit from above average tangible returns over time.
Vigilant cost controls, innovation and a focus on higher value service
delivery remains our priority. Organic growth within the existing core
business is likely to be the principle route to achieving our growth
aspirations, but the possibility of acquisitive growth to complement our
strategy is not to be excluded, should the right opportunity present
itself.
DIRECTORATE AND SUBSEQUENT EVENTS
There have not been any changes to the Board of directors of the Company
during the period under review nor have there been any subsequent events up
to and including the date of this report.
REPORTING
These abridged financial statements have been derived from the consolidated
financial statements and are consistent in all material respects, with the
Group financial statements. This abridged report is extracted from audited
financial information but is not itself audited. The directors take full
responsibility for the preparation of the abridged report and that the
financial information has been correctly extracted from the underlying
financial statements. Any reference to future financial performance
included in this announcement, has not been reviewed or reported on by the
Company’s auditors. The auditor's report does not necessarily cover all the
information contained in this announcement. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the
auditor's work they should obtain a copy of that report together with the
accompanying financial information from the registered office of the
Company.
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 SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, the
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the information as required by IAS 34: Interim Financial
Reporting, the Companies Act of South Africa and the JSE Listings
Requirements.
This report has been prepared using accounting policies that comply with
IFRS which 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 2014 was supervised by
the Financial Director, Johan du Toit; and has been audited in terms of all
the applicable requirements of Section 29(1) of the Companies Act of South
Africa.
The auditors, Mazars Inc, have issued their opinion on the Group annual
financial statements for the year ended 28 February 2014. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. A copy of their audit report and the
Group annual financial statements are available for inspection at the
Company’s registered office.
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, 25 June 2014 at the Company’s
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 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, 20 June 2014.
Accordingly, the last day to trade ISA shares in order to be recorded in
the register to be entitled to vote will be Thursday, 12 June 2014.
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 to be held on Wednesday 25 June 2014.
For and on behalf of the Board.
Clifford Katz
Chief Executive Officer
Johannesburg
23 May 2014
Directors: CS Katz (CEO), 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
Designated Advisor: Merchantec Capital
www.isaholdings.co.za
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