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Unaudited Condensed Results for the Six Months Ended 31 August 2016
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 2016
31 Aug 16 31 Aug 15 29 Feb 16
six months six months year
ended ended ended
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 78,665 46,656 93,774
Turnover 76,848 44,892 90,476
Cost of sales (44,643) (25,451) (51,352)
Profit before other income and expenses 32,205 19,441 39,124
Other income 60 132 254
Selling and marketing costs (5,717) (4,906) (9,888)
Administrative expenses (6,114) (2,753) (5,708)
Finance income 1,757 1,534 3,044
Finance costs (801) (100) (100)
Share of profits of
equity-accounted investment 15 52 69
Profit before taxation 21,405 13,400 26,795
Taxation (6,081) (3,759) (7,480)
Profit attributable to equity shareholders
for the period 15,324 9,641 19,315
Total comprehensive income attributable to
equity shareholders for the period 15,324 9,641 19,315
Earnings per share (cents) 9.8 6.0 12.2
Diluted earnings per share (cents) 9.8 6.0 12.2
As at As at As at
31 Aug 16 31 Aug 15 29 Feb 16
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 38,591 39,485 39,990
Property, plant and equipment 10,477 10,914 10,552
Intangible assets 1,327 2,016 1,734
Loans receivable 24,779 24,646 25,843
Equity accounted investment 20 (10) 6
Deferred tax 1,988 1,919 1,855
Current assets 64,585 30,538 43,682
Loan to joint venture 582 44 177
Cash and cash equivalents 42,830 18,836 19,294
Inventories 2,232 125 2,435
Trade and other receivables 18,935 11,533 21,773
Current tax receivable 6 - 3
Total assets 103,176 70,023 83,672
EQUITY AND LIABILITIES
Equity capital and reserves 66,516 50,967 60,551
Share capital and share premium 1,560 1,562 1,560
Reserves 64,956 49,405 58,991
LIABILITIES
Current liabilities 36,660 19,056 23,121
Trade and other payables 33,913 17,941 22,434
Current tax payable 2,747 1,115 687
Total liabilities 36,660 19,056 23,121
Total equity and liabilities 103,176 70,023 83,672
31 Aug 16 31 Aug 15 29 Feb 16
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 32,931 4,128 3,759
Cash flows from investing activities 12 1,445 1,550
Cash flows from financing activities (8,209) (15,725) (16,498)
Net (decrease)/increase in cash
and cash equivalents 24,734 (10,152) (11,089)
Revaluation of foreign cash balances (1,198) 1,524 3,019
Cash and cash equivalents at beginning of
the period 19,294 27,464 27,464
Cash and cash equivalents at end of
the period 42,830 18,836 19,294
31 Aug 16 31 Aug 15 29 Feb 16
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 1,560 1,608 1,608
Treasury shares bought during the period - (46) (48)
Balance at end of the period 1,560 1,562 1,560
Share capital - share premium
Balance at beginning of the period - 2,067 2,067
Treasury shares bought during the period - (2,067) (2,067)
Balance at end of the period - - -
Total share capital and share premium 1,560 1,562 1,560
Reserves - retained earnings
Balance at beginning of the period 58,991 48,080 48,080
Total comprehensive income – profit 15,324 9,641 19,315
Treasury shares bought during the period - (1,169) (1,269)
Dividends paid during the period (9,359) (7,147) (7,135)
Balance at end of the period 64,956 49,405 58,991
Total equity capital and reserves 66,516 50,967 60,551
Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of
comprehensive income 15,324 9,641 19,315
Profit on sale of property, plant
and equipment - (12) (14)
Tax effect on above - 3 4
Headline earnings 15,324 9,632 19,305
ORDINARY SHARES
Headline earnings per share (cents) 9.8 6.0 12.2
Diluted headline earnings per share (cents) 9.8 6.0 12.2
Number of shares in issue at
end of period ('000s) 155,996 156,271 155,996
Weighted average number of shares
in issue ('000s) 155,996 160,389 158,290
Treasury shares held at
end of period ('000s) 14,596 14,321 14,596
Net asset value per share at
end of period (cents) 42.6 32.6 38.8
Net tangible asset value per share
at end of period (cents) 41.8 31.3 37.7
OPERATIONAL REVIEW
The Company is pleased to present the interim results for the six month
period ended 31 August 2016, which continues to be underpinned by a high
proportion of recurring revenues, a robust balance sheet and strong cash
flows. Despite the challenging trading conditions in which the Company
operates, together with the continued pressure on the local and regional
economies, the Company’s performance during this reporting period was
commendable.
Turnover increased by an impressive 71% to R76.8 million compared to the
previous corresponding reporting period, due largely to the recognition of a
few large deals completed during the period. Whilst encouraging at face
value, it is important to note that the timing of these large deals is
somewhat unpredictable and has a way of positively exaggerating the Company’s
figures if achieved in a specific reporting period, or conversely negatively
if missed.
The Company is particularly encouraged by the steady rate of growth achieved
from its recurring revenue structures, as well as from its higher-margin
yielding services derived sales. Recurring revenue grew by a pleasing 14%
from the previous corresponding period and services derived sales, which
include the Company’s internally developed Managed Security Services
offerings and MSS Pulse technologies, increased by a healthy 19% during the
period under review.
Profit before other income and expenses increased by 66% to R32.2 million,
with a slight reduction in gross profit margin of 42% of turnover, from 43%
recorded in the prior corresponding reporting period.
Operating costs increased substantially to R11.8 million during this period
under review, which includes a foreign exchange revaluation charge to the
business of R1.2 million. This foreign exchange revaluation charge is in
steep contrast to the gain of R1.5 million recorded in the previous
corresponding reporting period and highlights the dramatic effect on our
results due to the substantial cash reserves that we hold in foreign
currencies, notably British Pounds and US Dollars. Operating costs during the
period under review, excluding foreign exchange revaluation, increased by 16%
compared to the previous corresponding reporting period. This increase is
largely a reflection of an increase in our payroll, as well as the costs
incurred by the Group relating to consideration by the Board of a non-binding
expression of interest received from a third party for the shares in ISA. The
anticipated transaction did not materialise, as announced to shareholders on
26 August 2016.
Total comprehensive income attributable to equity shareholders increased by
59% to R15.3 million during the reporting period, resulting in headline
earnings and earnings of 9.8 cents per share.
The Board notes the relatively high levels of cash, inventories, trade
receivables and trade payables recorded in our results for this reporting
period and explains that these atypical levels are almost entirely a factor
of the timing of the large deals received, rather than being a fundamental
shift in the Company’s cash and risk management disciplines. With this said,
the Board is monitoring the effects of larger deals on the business and will
likely be increasing their working capital levels in the future, in order to
avoid unnecessary liquidity pressures on the Group.
DISTRIBUTION
A final dividend of R9.3 million for the year ended 29 February 2016 was
declared and paid to shareholders during the period under review,
representing a gross distribution of 6.0 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.
BASIS OF PREPARATION
The accounting policies applied in the preparation of these unaudited
condensed consolidated interim results for the six months ended 31 August
2016 (“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 29 February 2016.
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 Clifford Katz,
the Chief Executive Officer of the Group.
SUBSEQUENT EVENTS
There have been no material subsequent events up to and including the date of
this report.
CHANGES IN DIRECTORATE
Roger Pitt was appointed (independent non-executive) effective 24 March 2016
and Johan du Toit resigned (financial director) effective from 31 May 2016.
Subsequent to this reporting period, Njabulo Mthembu resigned (independent
non-executive director and member of the Audit and Risk Committee) effective
10 October 2016.
SPECIAL THANKS
The Board takes 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
4 November 2016
Directors: CS Katz (CEO), PJG Green (Chief Technical Officer), AJ Naidoo#, DR
Perreira* (Chairman), DC Seaton*, R Pitt*
# Non-executive
* Independent non-executive
Designated Advisor: Merchantec Capital
www.isaholdings.co.za
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