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ISA HOLDINGS LIMITED - Abridged Summarised Consolidated Audited Results for the year ended 28 February 2017, Cash Dividend Declaration

Release Date: 22/05/2017 17:00
Code(s): ISA     PDF:  
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Abridged Summarised Consolidated Audited Results for the year ended 28 February 2017, Cash Dividend Declaration

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 2017, cash dividend declaration and notice of Annual General
Meeting

                                                       28 Feb 17     29 Feb 16
                                                            year          year
                                                           ended         ended
                                                         Audited       Audited
                                                           R'000         R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME

Revenue                                                 163 412         93 774
Turnover                                                159 712         90 476
Cost of sales                                           (88 977)       (51 352)
Profit before other income and expenses                  70 735         39 124
Other income                                                120            254
Selling and marketing costs                             (11 813)        (9 888)
Administrative expenses                                 (15 536)        (5 708)
Finance income                                            3 580          3 044
Finance costs                                              (994)          (100)
Share of losses of equity-accounted investment              269             69
Profit before taxation                                   46 361         26 795
Taxation                                                (16 612)        (7 480)
Profit attributable to equity shareholders
  for the year                                           29 749         19 315

Total comprehensive income attributable to
  equity shareholders                                    29 749         19 315

Earnings per share (cents)                                 19.1           12.2
Diluted earnings per share (cents)                         19.1           12.2


                                                           As at         As at
                                                       28 Feb 17     29 Feb 16
                                                         Audited       Audited
                                                           R'000         R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION

ASSETS
Non-current assets                                       39 667         39 990
Property, plant and equipment                            10 427         10 552
Intangible assets                                           920          1 734
Loans receivable                                         27 084         25 843
Equity accounted investment                                 275              6
Deferred tax                                                961          1 855
Current assets                                           73 460         43 682
Equity accounted investment: Loan                             -            177
Cash and cash equivalents                                36 115         19 294
Inventories                                               4 143          2 435
Trade and other receivables                              33 192         21 773
Current tax receivable                                       10              3

Total assets                                            113 127         83 672

EQUITY AND LIABILITIES
Equity capital and reserves                              80 940         60 551
Share capital and share premium                           1 560          1 560
Reserves                                                 79 380         58 991

LIABILITIES
Current liabilities                                      32 187         23 121
Trade and other payables                                 28 700         22 434
Current tax payable                                       3 487            687
Total liabilities                                        32 187         23 121

Total equity and liabilities                            113 127         83 672


                                                      28 Feb 17      29 Feb 16
                                                           year           year
                                                          ended          ended
                                                        Audited        Audited
                                                          R'000          R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF CASH FLOW

Cash flows from operating activities                     29 158          3 759
Cash flows from investing activities                      1 246          1 550
Cash flows from financing activities                     (9 360)       (16 498)
Net (decrease)/increase in cash
  and cash equivalents                                   21 044        (11 189)
Revaluation of foreign cash                              (4 223)         3 019
Cash and cash equivalents at beginning of
  the year                                               19 294         27 464
Cash and cash equivalents at end of
  the year                                               36 115         19 294


                                                      28 Feb 17      29 Feb 16
                                                           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                          1 560          1 608
Treasury shares bought during the year                        -            (48)
Balance at end of the year                                1 560          1 560

Share capital - share premium
Balance at beginning of the year                              -          2 067
Treasury shares bought during the year                        -         (2 067)
Balance at end of the year                                    -              -

Total share capital and share premium                     1 560          1 560

Reserves - retained earnings
Balance at beginning of the year                         58 991         48 080
Total comprehensive income – profit                      29 749         19 315
Treasury shares bought during the year                        -         (1 269)
Dividends paid during the year                           (9 360)        (7 135)
Balance at end of the year                               79 380         58 991

Total equity capital and reserves                        80 940         60 551

Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of comprehensive income        29 749         19 315
Profit on sale of property, plant and equipment               -            (14)
Tax effect on above                                           -              4
Headline earnings                                        29 749         19 305

Headline earnings per share (cents)                        19.1           12.2
Diluted headline earnings per share (cents)                19.1           12.2

ORDINARY SHARES
Number of shares in issue at end of year ('000s)        155 996        155 996
Weighted average number of shares in issue ('000s)      155 996        158 290
Treasury shares held at end of year ('000s)              14 596         14 596
Net asset value per share at end of year (cents)           51.9           38.8
Net tangible asset value per share at end of year (cents)  51.3           37.7

OPERATIONAL REVIEW
I am pleased to present another strong set of results for the financial year
ended 28 February 2017. 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 and
will likely be remembered, in the years to come, as being the year of "large
deals".

Turnover increased by an impressive 76.5% to R159.7 million compared to the
previous corresponding reporting period, due largely to the conclusion of
several large deals completed during the period, as referred to above. Whilst
encouraging, it is important to note that the timing and magnitude of these
large deals is somewhat unpredictable and has a way of positively
exaggerating our figures when achieved in a specific reporting period, or
conversely, negatively if missed.

Large deals aside, we are particularly encouraged by the continued rate of
growth achieved from our recurring revenue structures, as well as from our
higher-margin yielding services derived sales. Recurring revenue grew by a
pleasing 27% from the previous corresponding period and services derived
sales including the company’s Managed Security Services offerings –
underpinned by our internally developed MSS Pulse technology – increased by a
healthy 36% during the period under review.

Profit before other income and expenses increased by 81% to R71 million, with
a slight increase in gross profit margin to 44% of turnover, from 43%
recorded in the prior corresponding reporting period.

Company expenses increased substantially to R28.3 million during this period
under review, from R15.7 million in the prior corresponding reporting period,
which includes a foreign exchange revaluation charge to the business of
R4.2 million. This foreign exchange revaluation charge is in steep contrast
to the gain of R3.0 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, which make up 63% of our cash reserves. Another
notable contributor to this dramatic increase in expenses during the period
under review relates to an increase of R4.7 million in our payroll, to
R18.3 million, which increase is largely due to the payment of performance
and retention bonuses during the period.

Total comprehensive income attributable to equity shareholders increased by
54% to R29.8 million during the reporting period, resulting in headline
earnings and earnings per share of 19.1 cents.

The management team 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 levels are almost entirely a factor
of the timing of the large deals received, rather than being a fundamental
shift in the group’s cash and risk management disciplines. With this said, we
are monitoring the effects of larger deals on the business and on our working
capital levels in order to avoid unnecessary liquidity pressures on the
group.

DIVIDEND DECLARATION
Following the 2016 financial year, a final dividend of R9.4 million was
declared and paid to shareholders, representing a cash distribution of
6 cents per share. We are now pleased to declare a final dividend to
shareholders for the year ended 28 February 2017 of 10 cents per share, which
will be subject to the dividend tax legislation.

The salient dates will be as follows:

Declaration date                                    Monday,       22 May   2017
Last day to trade                                   Tuesday,     18 July   2017
Shares trade ex-dividend                            Wednesday,   19 July   2017
Record date                                         Friday,      21 July   2017
Payment date                                        Monday,      24 July   2017

Share certificates may not be dematerialised or rematerialised between
Wednesday, 19 July 2017 and Friday, 21 July 2017, both days inclusive.

In terms of the dividend tax legislation, 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 20%.
 -   The DT to be withheld by the company amounts to 2 cents per share.
 -   The net dividend payable to shareholders who are not exempt from DT
     is therefore 8 cents per share, while a gross dividend of 10 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 the long-term prospects of the group, as
the key drivers of the information security market remain robust. With the
continued evolution and persistence of threats and attacks against
organisational 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, we note that revenue and gross profit levels may
be negatively affected should there is a dramatic increase in the price of
imported inventory due to changes in the exchange rate from current levels.
Whilst a gradual weakening in the local currency is often factored into
organisational budgets, few are able to absorb substantial cost increases
into their already stretched budgets. The management team is monitoring this
business dynamic and will work closely with their customers and suppliers to
find solutions to minimise the effects on all concerned.

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 or on the company's website.

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 Listings Requirements of the JSE Limited.

This abridged report has been prepared using accounting policies that comply
with IFRS and which are consistent with those applied in the financial
statements for the year ended 28 February 2016. The preparation of the group
financial statements for the financial year ended 28 February 2017 was
supervised by the Financial Director, Roger Pitt 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 28 February 2017. 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
Johan du Toit resigned as an executive director and Financial Director of the
company with effect from 31 May 2016. Njabulo Mthembu resigned as a non-
executive director effective from 10 October 2016. Nhlanhla Maphothi was
appointed as an independent non-executive director with effect from
2 December 2016. Roger Pitt was appointed as an independent non-executive
director with effect from 24 March 2016 and his function changed to an
executive director and Financial Director (part-time) with effect from
1 January 2017.

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, 28 June 2017 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 integrated annual report.

The Board of directors of ISA ("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,
23 June 2017. Accordingly, the last day to trade ISA shares in order to be
recorded in the register to be entitled to vote will be Tuesday, 20 June
2017.

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, 28 June 2017

For and on behalf of the Board

Clifford Katz
Chief Executive Officer
Johannesburg
22 May 2017

Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), R Pitt (Financial Director), AJ Naidoo#, N Maphothi*,
DR Perreira* (Chairman), DS Seaton*
# Non-executive
* Independent non-executive

Designated Adviser: Merchantec Capital

www.isaholdings.co.za

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