Wrap Text
Unaudited Condensed Results for the Six Months Ended 31 August 2018
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 2018
Unaudited Unaudited Audited
for the for the for the
six months six months year
ended ended ended
31 Aug 18 31 Aug 17 28 Feb 18
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 55,117 53,665 112,692
Project derived turnover* 19,804 24,285 39,503
Subscription derived turnover* 33,043 27,220 68,802
Turnover 52,847 51,506 108,305
Cost of sales (28,046) (28,240) (61,204)
Profit before other income and expenses 24,801 23,266 47,101
Other income 195 60 238
Selling and marketing costs (6,597) (6,343) (12,503)
Administrative expenses (513) (4,215) (11,198)
Finance income 2,075 2,089 4,149
Finance costs (71) (135) -
Share of profits of
equity-accounted investment 1,015 200 491
Profit before taxation 20,905 14,922 28,273
Taxation (5,633) (4,260) (7,051)
Profit attributable to equity shareholders
for the period 15,272 10,662 21,222
Total comprehensive income attributable to
equity shareholders for the period 15,272 10,662 21,222
Earnings per share (cents) 9.8 6.8 13.6
Diluted earnings per share (cents) 9.8 6.8 13.6
Unaudited Unaudited Audited
As at As at As at
31 Aug 18 31 Aug 17 28 Feb 18
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 36,308 38,591 39,667
Property, plant and equipment 10,031 10,477 10,427
Intangible assets 35 568 211
Loans receivable 22,022 24,409 26,297
Equity accounted investment 1,781 475 766
Deferred tax 2,439 1,892 1,832
Current assets 69,029 62,520 73,966
Loan to joint venture - 40 -
Cash and cash equivalents 47,994 43,065 41,713
Inventories 6,079 4,133 5,370
Trade and other receivables 14,945 15,282 26,865
Current tax receivable 11 - 18
Total assets 105,337 100,122 113,234
EQUITY AND LIABILITIES
Equity capital and reserves 80,666 76,049 86,610
Share capital and share premium 1,560 1,560 1,560
Reserves 79,106 74,489 85,050
LIABILITIES
Current liabilities 24,671 24,073 26,624
Trade and other payables 22,272 21,158 25,613
Current tax payable 2,399 2,915 1,011
Total liabilities 24,671 24,073 26,624
Total equity and liabilities 105,337 100,122 113,234
Unaudited Unaudited Audited
for the for the for the
six months six months year
ended ended ended
31 Aug 18 31 Aug 17 28 Feb 18
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 16,277 18,522 20,539
Cash receipts from customers 64,887 70,102 115,510
Cash paid to suppliers and employees (47,494) (46,404) (86,445)
Cash generated from operations 17,393 23,698 29,065
Finance income 837 713 1,387
Finance costs (71) (135) -
Taxation paid (1,882) (5,754) (9,913)
Cash flows from investing activities 5,389 3,910 3,229
Purchase of property, plant and equipment (125) (100) (280)
Dividends received - - -
Proceeds on loan to joint venture - (40) 118
Proceeds on loans receivable 5,514 4,050 3,391
Cash flows from financing activities (21,216) (15,553) (15,552)
Dividends paid to ordinary shareholders (21,216) (15,553) (15,552)
Net increase in cash and cash equivalents 450 6,880 8,216
Revaluation of foreign cash balances 5,831 70 (2,618)
Cash and cash equivalents at beginning of
the period 41,713 36,115 36,115
Cash and cash equivalents at end of
the period 47,994 43,065 41,713
Unaudited Unaudited Audited
for the for the for the
six months six months year
ended ended ended
31 Aug 18 31 Aug 17 28 Feb 18
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 1,560 1,560
Balance at end of the period 1,560 1,560 1,560
Reserves - retained earnings
Balance at beginning of the period 85,050 79,380 79,380
Total comprehensive income – profit 15,272 10,662 21,222
Dividends paid during the period (21,216) (15,553) (15,552)
Balance at end of the period 79,106 74,489 85,050
Total equity capital and reserves 80,666 76,049 86,610
Notes to the statements:
ORDINARY SHARES
'000 '000 '000
Number of shares in issue at end of period 155,996 155,996 155,996
Weighted average number of shares in issue 155,996 155,996 155,996
Treasury shares held at end of period 14,596 14,596 14,596
Cents Cents Cents
Net asset value per share at end of period 51.7 48.8 55.5
Net tangible asset value per share at end
of period 51.7 48.4 55.5
Headline earnings per share** 9.8 6.8 13.6
Diluted headline earnings per share** 9.8 6.8 13.6
* Disaggregated turnover as consequence of IFRS 15 applied retrospectively
to prior year.
** There have been no reconciling items that would result in a change to the
Headline earnings per share and the Diluted headline earnings per share.
OPERATIONAL REVIEW
We are pleased to present another respectable set of results for the six
months ended 31 August 2018, which are 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 increased marginally by 3% to R52.8 million (2017: R51.5 million)
and includes a healthy shift in revenue composition towards our higher margin
Managed Security Service offerings, which are supported by our internally
developed IT security infrastructure management and monitoring platform, MSS
Pulse. This positive change in revenue composition was one of the core
factors that enabled us to achieve stronger gross profit margin of 47% (2017:
45%), as well as an increase of 21% in subscription derived turnover to R33.0
million (2017: R27.2 million), now contributing 63% (2017: 53%) of overall
turnover. On a less positive note, project derived turnover was unfortunately
lower than expected during the period under review, decreasing by 18% to
R19.8 million (2017: R24.3 million). Management attributes part of this
decline to the tough trading environment and to the rapid devaluation of the
Rand during the period under review which negatively impacted customer
budgets. Management is actively looking for complementary revenue lines to
bolster future project derived turnover.
If we exclude the effect of currency revaluation profits from our foreign
cash balances, operating expenses increased by 22% to R12.9 million (2017:
R10.6 million), due largely to higher headcount and payroll costs incurred in
the business. However, if we include the aforesaid currency revaluation
profits of R5.8 million (2017: R70 000), overall operating expenses decreased
by 33% to R7.1 million (2017: R10.6 million). Vigilant cost containment
remains the order of the day and despite being satisfied with current levels,
management continues to monitor expenditure to ensure that the heightened
level of efficiency achieved in the business over the last few years remains
intact.
Profit attributable to equity shareholders for the period under review
increased by 43% to R15.3 million (2017: R10.7 million), representing
earnings per share of 9.8 cents (2017: 6.8 cents).
DISTRIBUTION
A final dividend of R21.2 million for the year ended 28 February 2018 was
declared and paid to shareholders during the period under review,
representing a gross distribution of 13.6 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 on the sale of goods may be negatively affected by the dramatic
increase in the price of imported inventory. While 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
local customers are finding it difficult to absorb the additional cost into
their already stretched budgets. Management is monitoring this situation
closely and remains 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 results for the six months ended 31 August 2018 (“Interim
Results”), which are based on reasonable judgements and estimates, are in
accordance with International Financial Reporting Standards (“IFRS”).
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 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 Priscilla Mogoboya, the Financial
Director of the Group.
CHANGES IN SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted in the preparation of these Interim Results,
as well as the methods of computation are consistent with those followed in
the preparation of the annual financial statements for the year ended 28
February 2018, except for the adoption of new standards, effective 1 March
2018.
These new standards include:
IFRS 15 – Revenue from Contracts with Customers
IFRS 9 – Financial Instruments.
IFRS 15 – Revenue from Contracts with Customers
With the adoption of this standard, the Group has reviewed each contract that
it has with its customers to correctly assess the impact of IFRS 15. While
there is no impact on the measurement of revenue, the Group has disaggregated
its revenue retrospectively, as required. The following major revenue
categories are recognised:
Project derived turnover: this includes sales to customers that are non-
recurring in nature, typically once-off.
Subscription derived turnover: this includes sales to customers that are
recurring in nature, typically repeated annually.
Revenue is recognised when the risks and rewards of ownership have passed to
the customer, the performance obligations have been completed, the goods have
been delivered and when the services have been rendered, at either a point in
time or over time.
These major revenue categories include the following major product lines:
Firewalls
Anti-malware
Authentication
Remote access
Content Security
Intrusion Protection
Vulnerability Assessment
Virtual Private Networking
Messaging and Data Protection
Identity and access management
These major product lines are sold to customers who are in the following
major geographical regions:
South Africa: 76%
Rest of Africa: 22% (including all countries in Africa, excluding
South Africa)
Rest of World: 2% (including all countries in the world, excluding
those in Africa)
The Group does not have any additional operating segments and therefore the
measurement of revenue has not been impacted.
IFRS 9 – Financial Instruments
With the adoption of this standard, the classification of the financial
instruments was not impacted. The Group’s impairment model has been changed
from an incurred loss model, where objective evidence is used to determine
that a financial asset has been impaired, to an expected credit loss model,
where a probability weighted estimate is used to determine the credit losses
likely to be incurred.
The Group has elected to apply the simplified approach due to low default
risk to cash flow and historic loss patterns to the impairment of its trade
and other receivables, and the Group has elected to apply the general
approach to its loan’s receivable, in accordance with IFRS 9. The measurement
of the expected credit losses for items included in its trade and other
receivables have been grouped together, as they have the same risk
characteristics. The existing credit risk of our receivables has remained
consistent and therefore the impact of this standard is immaterial on the
financial statements and no restatements have been made.
SUBSEQUENT EVENTS
There have been no material subsequent events up to and including the date of
this report.
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, as well as to all stakeholders, customers and vendors for
their support.
For and on behalf of the Board,
Clifford Katz
Chief Executive Officer
Johannesburg
9 November 2018
Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), P Mogoboya (Financial Director), AJ Naidoo#, N Maphothi*, DR
Perreira* (Chairman), DC Seaton*
# Non-executive
* Independent non-executive
Designated Advisor: Merchantec Capital
www.isaholdings.co.za
Date: 09/11/2018 02:51:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
