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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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