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ISA HOLDINGS LIMITED - Unaudited Condensed Results for the Six Months Ended 31 August 2015

Release Date: 09/10/2015 08:00
Code(s): ISA     PDF:  
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Unaudited Condensed Results for the Six Months Ended 31 August 2015

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 2015

ISA is today publishing its unaudited condensed results for the six months
ended 31 August 2015

                                              31 Aug 15     31 Aug 14   28 Feb 15
                                             six months     ix months        year
                                                  ended         ended       ended
                                              Unaudited    Unaudited*     Audited
                                                  R'000         R'000       R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME

Revenue                                         46,656        41,155       81,535
Turnover                                        44,892        39,962       79,065
Cost of sales                                  (25,451)      (22,546)     (45,520)
Profit before other income and expenses         19,441        17,416       33,545
Other income                                       132             -            -
Selling and marketing costs                     (4,906)       (4,001)     (8,732)
Administrative expenses                         (2,753)       (3,719)     (6,300)
Finance income                                   1,534         1,178       2,470
Finance costs                                     (100)         (300)       (578)
Share of profits of
  equity-accounted investment                       52           (19)        (63)
Profit before taxation                          13,400        10,555      20,342
Taxation                                        (3,759)       (2,985)     (5,760)
Profit attributable to equity shareholders
  for the period                                 9,641         7,570      14,582

Total comprehensive income attributable to
  equity shareholders for the period             9,641         7,570      14,582

Earnings per share (cents)                         6.0           4.7         9.0
Diluted earnings per share (cents)                 6.0           4.7         9.0


                                                 As at         As at        As at
                                             31 Aug 15     31 Aug 14    28 Feb 15
                                             Unaudited    Unaudited*      Audited
                                                 R'000         R'000        R'000
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION

ASSETS
Non-current assets                              39,485        39,043       39,840
Property, plant and equipment                   10,914        10,912       10,767
Intangible assets                                2,016         2,743        2,445
Loans receivable                                24,646        24,197       25,303
Equity accounted investment                        (10)          (19)         (63)
Deferred tax                                     1,919         1,210        1,388
Current assets                                  30,538        23,871       38,985
Loan to joint venture                               44            18          396
Cash and cash equivalents                       18,836        15,281       27,464
Inventories                                        125            83        1,370
Trade and other receivables                     11,533         8,464        9,751
Current tax receivable                               -            25            4
Total assets                                    70,023        62,914       78,825

EQUITY AND LIABILITIES
Equity capital and reserves                     50,967        45,347       51,755
Share capital and share premium                  1,562         4,279        3,675
Reserves                                        49,405        41,068       48,080

LIABILITIES
Long term liabilities                                -         5,182        4,461
Interest bearing liability                           -         5,182        4,461

Current liabilities                             19,056        12,385       22,609
Interest bearing liabilities                         -         1,361        1,418
Trade and other payables                        17,941        10,432       21,117
Current tax payable                              1,115           592           74
Total liabilities                               19,056        17,567       27,070

Total equity and liabilities                    70,023        62,914       78,825


                                             31 Aug 15     31 Aug 14    28 Feb 15
                                            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             4,128         5,394       19,032
Cash flows from investing activities             1,445         1,081         (755)
Cash flows from financing activities           (15,725)       (1,982)      (2,486)
Net (decrease)/increase in cash
  and cash equivalents                         (10,152)        4,493       15,791
Revaluation of foreign cash balances             1,524           (95)         790
Cash and cash equivalents at beginning of
  the period                                    27,464        10,883       10,883
Cash and cash equivalents at end of
  the period                                    18,836        15,281       27,464


                                             31 Aug 15     31 Aug 14    28 Feb 15
                                            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               1,608         1,617        1,617
Treasury shares bought during the period           (46)           -            (9)
Balance at end of the period                     1,562         1,617        1,608

Share capital - share premium
Balance at beginning of the period               2,067         2,662        2,662
Treasury shares bought during the period        (2,067)            -         (595)
Balance at end of the period                         -         2,662        2,067

Total share capital and share premium            1,562         4,279        3,675
 
Reserves - retained earnings
Balance at beginning of the period              48,080        33,498       33,498
Total comprehensive income – profit              9,641         7,570       14,582
Treasury shares bought during the period        (1,169)            -            -
Dividends paid during the period                (7,147)            -            -
Balance at end of the period                    49,405        41,068       48,080

Total equity capital and reserves               50,967        45,347       51,755

Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of
  comprehensive income                           9,641         7,570       14,582
Profit on sale of property, plant
  and equipment                                    (12)            -            2
Tax effect on above                                  3             -            -
Headline earnings                                9,632         7,570       14,584

ORDINARY SHARES
Headline earnings per share (cents)                6.0          4.7          9.0
Diluted headline earnings per share (cents)        6.0          4.7          9.0
Number of shares in issue at
  end of period ('000s)                        156,271       161,723      160,830
Weighted average number of shares
  in issue ('000s)                             160,389       161,723      161,661
Treasury shares held at
  end of period ('000s)                         14,321         8,870        9,763
Net asset value per share at
  end of period (cents)                           32.6          28.0         32.2
Net tangible asset value per share
  at end of period (cents)                        31.3          26.3         30.7

*COMPARATIVE RESULTS
For the six month period to 31 August 2014, the results of the Group's 50%
investment in Dataproof Communications were consolidated. In terms of IFRS,
the above mentioned investment is accounted for as an equity investment and
accordingly, the Group has re-presented the comparative results for the
period to 31 August 2014 to reflect the results of Dataproof Communications
as an equity accounted investment. This re-presentation had no impact on the
profit attributable to equity shareholders, earnings per share or reserves.

OPERATIONAL REVIEW
The board of directors of ISA (“the Board”) is pleased to present another
respectable set of results for the six months ended 31 August 2015
(“reporting period”), which is underpinned by a high portion of recurring
revenues, a robust balance sheet and strong cash flows. Despite the
challenging trading conditions in which we operate, together with the
continued pressure on the local economy, overall performance remains
satisfactory.

Turnover and gross profit increased by 12% to R45 million and R19 million
respectively, compared to the previous corresponding reporting period, with a
healthy shift in revenue composition towards services. While margin pressure
on the sale of products and technologies continued through this reporting
period, which is an endemic reality in the IT security and broader ICT
industries, the negative effect thereof was perfectly offset by an impressive
30% increase in revenue from higher margin services. The continued success of
our Managed Security Service offerings, which are underpinned by our
internally developed IT security infrastructure management and monitoring
platform, MSS Pulse, lies at the centre of our service centric marketing
strategy.

Operating costs reduced marginally during the reporting period, due largely
to a substantial gain of R1.5 million from the revaluation of our foreign
cash reserves. If one were to exclude this gain, however operating costs
increased by 19% compared to the previous corresponding reporting period,
principally as a result of an increased investment in staff and human
resources.

Total comprehensive income attributable to equity shareholders increased by
27% to R9.6 million during the reporting period and as a result of our
continued share repurchase programme, earnings per share increased by 28% to
6.0 cents for the period.

Most pleasing was the effectiveness of our capital allocation and cash
management processes, which delivered a strong performance for the reporting
period. Despite higher working capital requirements, cash balances at the end
of the reporting period amounted to R18.8 million; this after interest
bearing liabilities of R5.9 million had been settled in full, R3.2 million
had been utilised in the repurchase of shares and the distribution of R7.1
million in cash to shareholders. This once again illustrates the cash
generative nature of our underlying business model, as well as our diverse
capital allocation philosophy aimed at maximising shareholder returns over
time.

DISTRIBUTION
As referred to previously, a final dividend of R7.1 million for the year
ended 28 February 2015 was declared and paid to shareholders during the
period under review, representing a distribution of 4.5 cents per share. 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.

In the shorter-term however, management is concerned that revenue and gross
profit levels may be negatively affected due to the dramatic increase in the
price of imported inventory. Whilst a gradual weakening in the local currency
is often factored into corporate budgets, few anticipated the dramatic
volatility and weakening of the Rand to current levels, and many customers
are finding it difficult to absorb the additional cost into their already
stretched budgets. Management is monitoring this situation closely and is
committed to working with their customers and suppliers to find creative ways
to minimise the effects on all concerned, while maintaining project and
operational momentum in the pipeline

BASIS OF PREPARATION
The accounting policies applied in the preparation of these unaudited
condensed consolidated interim results for the six months ended 31 August
2015 (“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 2015.

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
Andrew Maren resigned as a non-executive director with effect from 1 June
2015. There have been no other changes to the Board during the reporting
period.

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
9 October 2015

Directors: CS Katz (CEO), PJG Green (Chief Technical Officer), JG du Toit
(Financial Director), AJ Naidoo#, N Mthembu*, DR Perreira* (Chairman), DS
Seaton*

# Non-executive
* Independent non-executive

Designated Advisor: Merchantec Capital

www.isaholdings.co.za

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