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Abridged Consolidated Audited Results for the Year Ended 29 February 2016, 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
29 February 2016, cash dividend declaration and notice of Annual General Meeting
ISA is today publishing its audited results for the financial year ended
29 February 2016
29 Feb 16 28 Feb 15
year year
ended ended
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 93,774 81,535
Turnover 90,476 79,065
Cost of sales (51,352) (45,520)
Profit before other income and expenses 39,124 33,545
Other income 254 -
Selling and marketing costs (9,888) (8,732)
Administrative expenses (5,708) (6,300)
Finance income 3,044 2,470
Finance costs (100) (578)
Share of profit/(losses) of equity-accounted
investment 69 (63)
Profit before taxation 26,795 20,342
Taxation (7,480) (5,760)
Profit attributable to equity shareholders for the year 19,315 14,582
Total comprehensive income attributable to
equity shareholders 19,315 14,582
Earnings per share (cents) 12.2 9.0
Diluted earnings per share (cents) 12.2 9.0
As at As at
29 Feb 16 28 Feb 15
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 39,990 39,840
Property, plant and equipment 10,552 10,767
Intangible assets 1,734 2,445
Loans receivable 25,843 25,303
Equity accounted investment 6 (63)
Deferred tax 1,855 1,388
Current assets 43,682 38,985
Loan to joint venture 177 396
Cash and cash equivalents 19,294 27,464
Inventories 2,435 1,370
Trade and other receivables 21,773 9,751
Current tax receivable 3 4
Total assets 83,672 78,825
EQUITY AND LIABILITIES
Equity capital and reserves 60,551 51,755
Share capital and share premium 1,560 3,675
Reserves 58,991 48,080
LIABILITIES
Long-term liabilities - 4,461
Interest bearing liability - 4,461
Current liabilities 23,121 22,609
Interest bearing liabilities - 1,418
Trade and other payables 22,434 21,117
Current tax payable 687 74
Total liabilities 23,121 27,070
Total equity and liabilities 83,672 78,825
29 Feb 16 28 Feb 15
year year
ended ended
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 3,759 19,032
Cash flows from investing activities 1,550 (755)
Cash flows from financing activities (16,498) (2,486)
Net (decrease)/increase in cash
and cash equivalents (11,089) 15,791
Revaluation of foreign cash balances 3,019 790
Cash and cash equivalents at beginning of
the year 27,464 10,883
Cash and cash equivalents at end of
the year 19,294 27,464
29 Feb 16 28 Feb 15
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 1,608 1,617
Treasury shares bought during the year (48) (9)
Balance at end of the year 1 560 1,608
Share capital - share premium
Balance at beginning of the year 2,067 2,662
Treasury shares bought during the year (2,067) (595)
Balance at end of the year - 2,067
Total share capital and share premium 1,560 3,675
Reserves - retained earnings
Balance at beginning of the year 48,080 33,498
Total comprehensive income – profit 19,315 14,582
Treasury shares bought during the year (1,269) -
Dividends paid during the year (7,135) -
Balance at end of the year 58,991 48,080
Total equity capital and reserves 60,551 51,755
Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of
comprehensive income 19,315 14,582
(Profit)/loss on sale of property, plant
and equipment (14) 2
Tax effect on above 4 -
Headline earnings 19,305 14,584
Headline earnings per share (cents) 12.2 9.0
Diluted headline earnings per share (cents) 12.2 9.0
ORDINARY SHARES
Number of shares in issue at
end of year ('000s) 155,996 160,830
Weighted average number of shares
in issue ('000s) 158,290 161,661
Treasury shares held at
end of year ('000s) 14,596 9,763
Net asset value per share at
end of year (cents) 38.8 32.2
Net tangible asset value per share
at end of year (cents) 37.7 30.7
OPERATIONAL REVIEW
I am pleased to present another strong set of results for the year ended 29
February 2016 (“the reporting period”), which are underpinned by a high
portion of recurring revenues, a robust financial position 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 profit before other income and expenses increased by 14% to
R90.5 million and 17% to R39.1 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 third
party technologies continued through this reporting period, which is an
endemic reality in the IT security and broader ICT industries, especially
during periods of extreme Rand weakening and volatility, the negative effect
thereof was perfectly offset by an impressive 25% 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
heart of our service centric marketing strategy.
Revenues of a recurring nature, such as those derived from product
subscription sales and our Managed Security Service offerings, increased by
18% to R62.6 million and represents 69% of revenue recognised for the year.
While this impressive level of recurring revenue is higher than expected, it
highlights a somewhat disappointing result from the sale of our non-recurring
New Solution Sales, which management attributes largely to the aforementioned
Rand weakening and volatility.
Operating costs increased marginally by 2% during the reporting period, due
largely to a substantial gain of R3.0 million from the revaluation of our
foreign cash reserves. If one were to exclude this forex revaluation gain,
operating costs would have increased by 16% compared to the previous
corresponding reporting period, primarily as a result of an increased
investment in staff and human resources.
Total comprehensive income attributable to equity shareholders increased by a
healthy 32% to R19.3 million during the reporting period, from R14.6 million
in the previous year, and as a result of our continued share repurchase
programme, headline and earnings per share increased by 36% to 12.2 cents for
the year under review.
Most pleasing was the effectiveness of our capital allocation and cash
management processes, which delivered a strong performance for the reporting
period. Despite substantially higher working capital requirements, cash
balances at the end of the reporting period amounted to R19.3 million; this
after interest bearing liabilities of R5.9 million had been settled in full,
R3.4 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.
DIVIDEND DECLARATION
During the reporting period, a final dividend of R7.1 million for the year
ended 28 February 2015 was declared and paid to shareholders, representing a
cash distribution of 4.5 cents per share. As the Group reduced its debt and
replenished cash resources to levels ahead of budget, the board of directors
of ISA (“the Board”) is pleased to declare an ordinary dividend to
shareholders of 6.0 cents per share for the year ended 29 February 2016, to
all shareholders recorded in the shareholders register on 29 July 2016 and
payable on 1 August 2016.
The salient dates will be as follows:
Declaration date Friday, 27 May 2016
Last day to trade Tuesday, 26 July 2016
Shares trade ex-dividend Wednesday, 27 July 2016
Record date Friday, 29 July 2016
Payment date Monday, 1 August 2016
Share certificates may not be dematerialised or rematerialised between
Wednesday, 27 July 2016 and Friday, 29 July 2016, 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 0.9 cents per share.
- Therefore, the net dividend payable to shareholders who are not exempt
from DT is 5.1 cents per share, while the gross dividend of 6.0 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
continue delivering 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.
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
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the information as required by IAS 34: Interim Financial
Reporting, the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies
Act”) and the JSE Listings Requirements.
This abridged 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 2015. The preparation of the Group financial
statements for the financial year ended 29 February 2016 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.
The auditors, Mazars, have issued their opinion on the Group annual financial
statements for the year ended 29 February 2016. 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
On 24 March 2016, shareholders were advised that the Board has received a
non-binding expression of interest for the shares in ISA, which expression of
interest will be considered by the Board and which, if successfully
concluded, may have a material effect on the price of the Company’s
securities.
Accordingly, shareholders were advised in the announcement of 24 March 2016
and again in the subsequent Renewal of Cautionary Announcement of 11 May 2016
to exercise caution when dealing in the Company’s securities until a further
announcement is made.
Save for the above, the directors are not aware of any other reportable
matter or circumstance arising or material changes in the affairs or
financial position of the Company or the Group since the financial year-end
and the date of this abridged report.
CHANGES IN DIRECTORATE
Andrew Maren resigned as a non-executive director on 1 June 2015 and Roger
Pitt was appointed as an independent non-executive director on 24 March 2016.
Johan du Toit resigned as an executive director and Financial Director with
effect from 31 May 2016. Shareholders will be notified of developments
regarding Johan’s replacement in due course.
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, 29 June 2016 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 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, 24 June 2016. Accordingly,
the last day to trade ISA shares in order to be recorded in the register to
be entitled to vote will be Friday, 17 June 2016.
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. A special note of
appreciation to Johan du Toit who will be leaving us at the end of May 2016
to take up permanent residence abroad. Johan joined the Group during 2013 and
his invaluable contribution over the subsequent 3 years saw revenue and
earnings per share increase by 82% and 135% respectively. Thank you Johan,
your contribution to the Group will be missed and on behalf of all staff and
stakeholders, we once again wish you the very best abroad.
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, 29 June 2016.
For and on behalf of the Board
Clifford Katz
Chief Executive Officer
Johannesburg
27 May 2016
Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), JG du Toit (Financial Director), AJ Naidoo#, N Mthembu*, DR
Perreira* (Chairman), R Pitt*, DS Seaton*
# Non-executive
* Independent non-executive
Designated Adviser: Merchantec Capital
www.isaholdings.co.za
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