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Unaudited Condensed Results for the Six Months Ended 31 August 2014
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”)
UNAUDITED CONDENSED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2014
31 Aug 14 31 Aug 13 28 Feb 14
six months six months year
ended ended ended
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 41,282 47,055 76,757
Turnover 40,103 46,523 75,211
Cost of sales (22,595) (30,359) (45,807)
Profit before other income and expenses 17,508 16,164 29,404
Other income - 7 7
Selling and marketing costs (4,062) (3,953) (7,726)
Administrative expenses (3,803) (2,395) (5,297)
Finance income 1,178 529 1,546
Finance costs (300) - (296)
Profit before taxation 10,521 10,352 17,638
Taxation (2,970) (2,947) (4,999)
Total comprehensive income for the period 7,551 7,405 12,639
Attributable to:
Owners of the parent 7,570 7,405 12,639
Minority interest (19) - -
Total comprehensive income for the period 7,551 7,405 12,639
Earnings per share (cents) 4.7 4.0 7.0
Diluted earnings per share (cents) 4.7 4.0 7.0
As at As at As at
31 Aug 14 31 Aug 13 28 Feb 14
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 39,077 15,694 38,326
Property, plant and equipment 10,912 11,268 11,067
Intangible assets 2,743 3,427 3,237
Loans receivable 24,197 - 23,148
Deferred tax 1,225 999 874
Current assets 24,014 48,240 15,578
Inventories 83 - 90
Trade and other receivables 8,625 22,848 4,286
Current tax receivable 25 - 319
Cash and cash equivalents 15,281 25,392 10,883
Total assets 63,091 63,934 53,904
EQUITY AND LIABILITIES
Equity capital and reserves 45,328 41,731 37,777
Share capital and share premium 4,279 13,706 4,279
Reserves 41,068 28,025 33,498
Equity attributable to owners of the parent 45,347 41,731 37,777
Minority interest (19) - -
LIABILITIES
Long term liabilities 5,182 - 5,875
Interest bearing liability 5,182 - 5,875
Current liabilities 12,581 22,203 10,252
Interest bearing liabilities 1,361 - 1,308
Trade and other payables 10,628 20,599 8,942
Provisions - 245 -
Current tax payable 592 1,359 2
Total liabilities 17,763 22,203 16,127
Total equity and liabilities 63,091 63,934 53,904
31 Aug 14 31 Aug 13 28 Feb 14
six months six months year
ended ended ended
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 5,298 8,965 19,164
Cash flows from investing activities 1,099 443 (22,785)
Cash flows from financing activities (1,904) (9,294) (11,598)
Net increase/(decrease) in cash
and cash equivalents 4,493 114 (15,219)
Revaluation of foreign cash balances (95) 1,028 1,852
Cash and cash equivalents at beginning of
the period 10,883 24,250 24,250
Cash and cash equivalents at end of
the period 15,281 25,392 10,883
31 Aug 14 31 Aug 13 28 Feb 14
six months six months year
ended ended ended
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
Share capital - ordinary shares
Balance at beginning of the period 1,617 1,836 1,836
Shares repurchased during the period - - (220)
Treasury shares bought during the period - - (3)
Treasury shares sold during the period - 4 4
Balance at end of the period 1,617 1,840 1,617
Share capital - share premium
Balance at beginning of the period 2,662 11,606 11,606
Reduction in share premium
shares repurchased during the period - - (8,971)
Treasury shares bought during the period - - (233)
Treasury shares sold during the period - 260 260
Balance at end of the period 2,662 11,866 2,662
Total share capital and share premium 4,279 13,706 4,279
Reserves - retained earnings
Balance at beginning of the period 33,498 30,181 30,181
Total comprehensive income – profit 7,570 7,405 12,639
Dividends paid during the period - (9,561) (9,322)
Balance at end of the period 41,068 28,025 33,498
Total equity capital and reserves 45,347 41,731 37,777
Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of
comprehensive income 7,570 7,405 12,639
Profit on sale of property, plant
and equipment - (7) (7)
Tax effect on above - - -
Headline earnings 7,570 7,398 12,632
ORDINARY SHARES
Headline earnings per share (cents) 4.7 4.0 7.0
Diluted headline earnings per share (cents) 4.7 4.0 7.0
Number of shares in issue at
end of period ('000s) 161,723 184,051 161,723
Weighted average number of shares
in issue ('000s) 161,723 183,676 180,927
Treasury shares held at
end of period ('000s) 8,870 8,535 8,870
Net asset value per share at
end of period (cents) 28.0 22.7 23.4
Net tangible asset value per share
at end of period (cents) 26.3 20.8 21.4
OPERATIONAL REVIEW
We are pleased to present our results for the six months ended 31 August
2014. Despite the increasingly challenging trading conditions in which we
operate, together with the continued pressure on the local economy, overall
performance remains satisfactory.
During the period under review, the recognition of large New Solution Sales
was lower than in the previous corresponding reporting period, resulting in a
decline in turnover by 14% to R40.1 million. As the timing of large New
Solution Sales is somewhat unpredictable, the isolated comparison of top line
performance from one reporting period to the next tends to be erratic.
On a more encouraging note, growth in higher-margin yielding service derived
turnover increased by a healthy 18% during the period under review, with
recurring and subscription based revenue constituting 70% of turnover. This
growth in service derived revenue is largely attributed to the continued
success of our Managed Security Services offering, which is underpinned by
our internally developed IT security infrastructure management and monitoring
platform, MSS Pulse.
Despite the decrease in turnover, gross profit increased by 8% to R17.5
million due to the increase in gross profit levels of 44% of turnover, from
35% recorded in the previous corresponding reporting period. While this
improvement is most pleasing, it should be seen in context of the increase in
higher-margin yielding service derived revenue and not a reversal of the
trend experienced over the last few years where gross margin on the sale of
products remains under pressure. It is for this reason that management remain
focused on improving the quality of their earnings in the years to come by
increasing the depth and breadth of their Managed Security Services offering
and ultimately, their service derived revenues.
Heightened exchange rate volatility during the period under review saw the
Rand strengthen slightly against most major currencies. As the Group retains
a large portion of their cash in these major foreign currencies, this
resulted in a nominal foreign currency revaluation loss, as opposed to the
gains of R1 million recorded in the previous corresponding reporting period.
An increase in operating expenses, excluding these foreign currency
revaluation gains and losses, has been successfully contained to 5% over the
previous corresponding reporting period.
Total comprehensive income for the period attributable to owners of the
parent increased by 2% to R7.6 million and, as a result of the specific share
buy-back effected in the prior financial year, earnings per share increased
by 17.5% to 4.7 cents.
Management delivered a strong cash flow performance for the period under
review, which remains one of their key focus areas. Cash balances increased
to R15.3 million and interest bearing debt was reduced to R6.5 million.
During the period under review, the Group provided financial assistance of
R1.8 million to the executive directors and certain key staff members to
purchase ISA shares as part of an incentive and retention programme.
DISTRIBUTION
The Board has not declared an interim dividend.
PROSPECTS
We remain 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.
BASIS OF PREPARATION
The accounting policies applied in the preparation of these unaudited
condensed interim results for the six months ended 31 August 2014 (“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 year
ended 28 February 2014.
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 Practices 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 Group’s auditors, and have been prepared by Johan du Toit
(CA (SA)), the Financial Director of the Group.
SUBSEQUENT EVENTS
There have been no material subsequent events up to and including the date of
this report.
CHANGES IN DIRECTORATE
Thapeli Matsabu’s function changed from independent non-executive director to
non-executive director of ISA, with effect from 1 August 2014. There have
been no other changes to the Board during the period under review.
SPECIAL THANKS
We 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
Johannesburg
10 October 2014
Directors: CS Katz (CEO), PJG Green (Chief Technical Officer), JG du Toit
(Financial Director),AA Maren#, AJ Naidoo#, TA Matsabu#, DR Perreira*
(Chairman), DS Seaton*
# Non-executive
* Independent non-executive
Designated Advisor: Merchantec Capital
www.isaholdings.co.za
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