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Abridged Audited Summarised Results for the Year Ended 28 February 2015, Cash Dividend 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 summarised consolidated audited results for the year ended 28
February 2015, cash dividend declaration and notice of AGM
ISA is today publishing its audited results for the financial year ended 28
February 2015
28 Feb 15 28 Feb 14
year year
ended ended
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 81,535 76,757
Turnover 79,065 75,211
Cost of sales (45,520) (45,807)
Profit before other income and expenses 33,545 29,404
Other income - 7
Selling and marketing costs (8,732) (7,726)
Administrative expenses (6,300) (5,297)
Finance income 2,470 1,546
Finance costs (578) (296)
Share of losses of equity-accounted investment (63) -
Profit before taxation 20,342 17,638
Taxation (5,760) (4,999)
Profit attributable to equity shareholders for the year 14,582 12,639
Total comprehensive income attributable to
equity shareholders 14,582 12,639
Earnings per share (cents) 9.0 7.0
Diluted earnings per share (cents) 9.0 7.0
As at As at
28 Feb 15 28 Feb 14
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 39,840 38,326
Property, plant and equipment 10,767 11,067
Intangible assets 2,445 3,237
Loans receivable 25,303 23,148
Equity accounted investment (63) -
Deferred tax 1,388 874
Current assets 38,985 15,578
Loan to joint venture 396 -
Cash and cash equivalents 27,464 10,883
Inventories 1,370 90
Trade and other receivables 9,751 4,286
Current tax receivable 4 319
Total assets 78,825 53,904
EQUITY AND LIABILITIES
Equity capital and reserves 51,755 37,777
Share capital and share premium 3,675 4,279
Reserves 48,080 33,498
LIABILITIES
Long term liabilities 4,461 5,875
Interest bearing liability 4,461 5,875
Current liabilities 22,609 10,252
Interest bearing liabilities 1,418 1,308
Trade and other payables 21,117 8,942
Current tax payable 74 2
Total liabilities 27,070 16,127
Total equity and liabilities 78,825 53,904
28 Feb 15 28 Feb 14
year year
ended ended
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 19,032 19,164
Cash flows from investing activities (755) (22,785)
Cash flows from financing activities (2,486) (11,598)
Net increase/(decrease) in cash
and cash equivalents 15,791 (15,219)
Revaluation of foreign cash 790 1,852
Cash and cash equivalents at beginning of
the year 10,883 24,250
Cash and cash equivalents at end of
the year 27,464 10,883
28 Feb 15 28 Feb 14
year year
ended ended
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
Share capital - ordinary shares
Balance at beginning of the year 1,617 1,836
Shares repurchased during the year - (220)
Treasury shares bought during the year (9) (3)
Treasury shares sold during the year - 4
Balance at end of the year 1 608 1,617
Share capital - share premium
Balance at beginning of the year 2,662 11,606
Reduction in share premium
shares repurchased during the year - (8,971)
Treasury shares bought during the year (595) (233)
Treasury shares sold during the year - 260
Balance at end of the year 2,067 2,662
Total share capital and share premium 3,675 4,279
Reserves - retained earnings
Balance at beginning of the year 33,498 30,181
Total comprehensive income – profit 14,582 12,639
Dividends paid during the year - (9,322)
Balance at end of the year 48,080 33,498
Total equity capital and reserves 51,755 37,777
Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of
comprehensive income 14,582 12,639
Loss/(profit) on sale of property, plant
and equipment 2 (7)
Tax effect on above - -
Headline earnings 14,584 12,632
Headline earnings per share (cents) 9.0 7.0
Diluted headline earnings per share (cents) 9.0 7.0
ORDINARY SHARES
Number of shares in issue at
end of year ('000s) 160,830 161,723
Weighted average number of shares
in issue ('000s) 161,661 180,927
Treasury shares held at
end of year ('000s) 9,763 8,870
Net asset value per share at
end of year (cents) 32.2 23.4
Net tangible asset value per share
at end of year (cents) 30.7 21.4
OPERATIONAL REVIEW
I am pleased to present our results for the full year ending 28 February
2015. Our robust financial position and healthy cash flows continue to
underpin the business framework, with a healthy revenue mix providing the
impetus for steady growth into the future. Overall performance fairly
reflects the hard work and devotion demonstrated by the ISA team, despite the
challenging economic landscape in which we operate.
A modest increase in turnover of 5% to R79.1 million was somewhat
disappointing and can once again be attributed to an inconsistent performance
in large New Solution Sales, which accounted for 12% of turnover during this
reporting cycle, compared to 21% during the previous corresponding period.
Despite the effect of tempered large New Solution Sales, our continued focus
on higher margin yielding Service Derived Income bore fruit and increased by a
healthy 20% during the period under review. This pleasing result, together
with a satisfactory increase in Recurring Revenue by 18% to R53 million, is a
direct result of robust growth from our Managed Security Services portfolio,
which is underpinned by our internally developed IT security infrastructure
management and monitoring platform, MSS Pulse.
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 Pattern Matching Malicious Code
Mitigation technologies. Management is closely monitoring the effects of this
gross profit erosion in the industry and remains determined to counter the
effects on the business by bringing to market innovative service offerings,
such as those within our Managed Security Services portfolio, together with a
broader product mix that includes higher margin pre-commoditised
technologies, such as Compliance, Risk and Governance monitoring systems,
Data Leak Prevention and Advanced Persistent Threat prevention solutions.
With this said, I am encouraged by the revenue mix achieved during the year
under review, resulting in an increase of 14% in Gross Profit to R33.5
million, which represents an on-target level of 42% of turnover. An increase
in operating expenses, excluding foreign currency revaluation gains, has been
successfully contained to 6% over the previous corresponding reporting period
and profit from operations increased by 13% to R18.5 million. Comprehensive
income for the year attributable to owners of the parent increased by a
pleasing 15% to R14.6 million and due to the concentration of shares
resulting from our specific buy-back concluded in the prior financial year,
earnings and headline earnings per share increased by 29% to 9.0 cents, from
7.0 cents in the prior reporting period.
Our continued focus on stringent cash and credit risk management disciplines
has once again delivered satisfactory results and underpins our strong
financial position and favourable liquidity dynamics. Cash balances increased
to R27.5 million, from R10.9 million in the previous corresponding period,
and includes a reduction of R1.8 million due to the Group providing financial
assistance to the executive directors and certain key staff members to
purchase ISA shares as part of an incentive and retention programme. Trade
and other receivables increased to R9.8 million, while trade and other
payables increased to R21.1 million, mainly as a result of timing of receipts
and payments on the back of New Solution Sales. Interest bearing debt reduced
to R5.9 million, from R7.2 million in the previous reporting period.
During the year under review, we entered into a green-fields joint venture
with Thapeli Matsabu, a former non-executive director of the Group, called
DataProof Communications. The joint venture, which is not consolidated into
our results, focuses on supplying secure converged networks and achieved
revenue of R1.6 million during their first 7 months of operation to 28
February 2015. Our share of losses from this joint venture for the period
under review amounted to R63 000.
DIVIDEND DECLARATION
No dividends were declared and paid during the year under review. As the
Group reduced their debt levels and replenished cash resources to levels
ahead of budget, the board is pleased to declare an ordinary dividend to
shareholders of 4.5 cents per share, for the year ended 28 February 2015,
representing half of the earnings per share achieved during the year, to all
shareholders recorded in the shareholders register on 24 July 2015 and
payable on 27 July 2015.
The salient dates will be as follows:
Declaration date Friday, 22 May 2015
Last day to trade Friday, 17 July 2015
Shares trade ex-dividend Monday, 20 July 2015
Record date Friday, 24 July 2015
Payment date Monday, 27 July 2015
Share certificates may not be dematerialised or rematerialised between
Monday, 20 July 2015 and Friday, 24 July 2015, both days inclusive.
In terms of the dividend tax, effective 1 April 2012, the following
additional information is disclosed:
- This is a dividend as defined in the Income Tax Act, 1962, and is payable
from income reserves.
- The South African dividend tax (DT) rate is 15%.
- The DT to be withheld by the Company amounts to 0.675 cents per share.
- Therefore, the net dividend payable to shareholders who are not exempt
from DT is 3.825 cents per share, while the gross dividend of 4.5 cents
per share is payable to those shareholders who are exempt from DT.
- The issued share capital of the Company at the declaration date comprises
170 592 593 ordinary shares.
- The Company’s income tax reference number is 9340/150/71/4.
PROSPECTS
I continue to be optimistic about our long term prospects, as the key drivers
of the information 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, we are likely to
deliver 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 primary 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.
REPORTING
These abridged summarised 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
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 2014. The preparation of the Group financial
statements for the financial year ended 28 February 2015 was supervised by
the Financial Director, Johan du Toit CA(SA), 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, have issued their opinion on the Group’s underlying
annual financial statements for the year ended 28 February 2015. 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 and on the Company’s website.
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. He resigned as
a non-executive director with effect from 30 January 2015. Njabulo Mthembu has
been appointed as an independent non-executive director with effect from 30
January 2015. There have been no other changes to the Board during the year
under review.
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, 24 June 2015 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, 19 June 2015. Accordingly,
the last day to trade ISA shares in order to be recorded in the register to
be entitled to vote will be Thursday, 11 June 2015.
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 24th of June 2015.
For and on behalf of the Board
Clifford Katz
Chief Executive Officer
Johannesburg
22 May 2015
Directors: CS Katz (CEO), PJG Green (Chief Technical Officer), JG du Toit
(Financial Director), AA Maren#, AJ Naidoo#, N Mthembu*, DR Perreira*
(Chairman), DS Seaton*
# Non-executive
* Independent non-executive
Designated Adviser: Merchantec Capital
www.isaholdings.co.za
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