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Provisional Reviewed Condensed Consolidated Annual Financial Results For the Year Ended 28 February 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”)
PROVISIONAL REVIEWED CONDENSED CONSOLIDATED ANNUAL FINANCIAL RESULTS FOR THE
YEAR ENDED 28 FEBRUARY 2018
28 Feb 18 28 Feb 17
year year
ended ended
Reviewed Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 112,692 163,412
Turnover 108,305 159,712
Cost of sales (61,204) (88,977)
Profit before other income and expenses 47,101 70,735
Other income 238 120
Selling and marketing costs (12,508) (11,813)
Administrative expenses (11,198) (15,536)
Finance income 4,149 3,580
Finance costs - (994)
Share of profits of
equity-accounted investment 491 269
Profit before taxation 28,273 46,361
Taxation (7,051) (16,612)
Profit attributable to equity shareholders
for the period 21,222 29,749
Total comprehensive income attributable to
equity shareholders for the period 21,222 29,749
Earnings per share (cents) 13.6 19.1
Diluted earnings per share (cents) 13.6 19.1
Notes:
- Revenue decreased by 31%, turnover decreased by 32%, cost of sale
decreased by 31% and profit before other income and expenses decreased
by 33%, mainly due to the fact that there were no large deals realised
in the current reporting period.
- Administrative expenses decreased by 28%, largely due to the reduced
amount of performance bonuses paid during the current reporting period.
- Finance income increased mainly due to the higher cash balances during
the current reporting period.
- Taxation decreased mainly because of a reversal of an over provision in
the prior reporting period, as well due to changes in deferred tax.
As at As at
28 Feb 18 28 Feb 17
Reviewed Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 39,268 39,667
Property, plant and equipment 10,162 10,427
Intangible assets 211 920
Loans receivable 26,297 27,084
Equity accounted investment 766 275
Deferred tax 1,832 961
Current assets 73,966 73,460
Cash and cash equivalents 41,713 36,115
Inventories 5,370 4,143
Trade and other receivables 26,865 33,192
Current tax receivable 18 10
Total assets 113,234 113,127
EQUITY AND LIABILITIES
Equity capital and reserves 86,610 80,940
Share capital and share premium 1,560 1,560
Reserves 85,050 79,380
LIABILITIES
Current liabilities 26,624 32,187
Trade and other payables 25,613 28,700
Current tax payable 1,011 3,487
Total liabilities 26,624 32,187
Total equity and liabilities 113,234 113,127
Notes:
- Property, plant and equipment (PPE) comprises largely the cost of the
building that is amortised over it’s useful life.
- Intangible assets comprise of computer software. The reduction of
intangibles is driven by amortization of trademarks and there were no
new additions to the intangible assets.
- Current tax payable decreased largely due to the over provision of tax
from prior year and this has been reversed in the current reporting
period.
28 Feb 18 28 Feb 17
year year
ended ended
Reviewed Audited
R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 20,539 29,158
Cash receipts from customers 115,510 147,797
Cash paid to suppliers and employees (86,445) (105,650)
Cash generated from operations 29,065 42,147
Finance income 1,387 929
Finance costs - (994)
Taxation paid (9,913) (12,924)
Cash flows from investing activities 3,229 (1,246)
Purchase of property, plant and equipment (280) (339)
Proceeds on loan to joint venture - 177
Advance to loan receivable - (1,000)
Proceeds on loans receivable 3,391 2,409
Cash flows from financing activities (15,552) (9,360)
Dividends paid to ordinary shareholders (15,552) (9,360)
Net increase in cash and cash equivalents 8,216 21,044
Revaluation of foreign cash balances (2,618) (4,223)
Cash and cash equivalents at beginning of
the period 36,115 19,294
Cash and cash equivalents at end of
the period 41,713 36,115
Notes:
- Cash flows from operating activities decreased mainly due to decline in
the turnover.
- Finance cost reduced because there were no borrowings and no interest
paid to third parties.
- Taxation paid reduced in the current year because of the top up payments
made in the prior year in respect of 2016 financial year as well as the
utilisation of assessed tax receivable in respect of the 2017 financial
year.
- There is a decrease in proceeds on loan to joint venture because there
were no borrowings to the joint venture at year end.
- Dividends paid to shareholders increased due to dividends declared at
10.0 cents per share against dividends of 6.0 cents per share paid in
the prior reporting period.
28 Feb 18 28 Feb 17
year year
ended ended
Reviewed Audited
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
Balance at end of the period 1,560 1,560
Total share capital and share premium 1,560 1,560
Reserves - retained earnings
Balance at beginning of the period 79,380 58,991
Total comprehensive income – profit 21,222 29,749
Dividends paid during the period (15,552) (9,360)
Balance at end of the period 85,050 79,380
Total equity capital and reserves 86,610 80,940
Notes to the statements:
ORDINARY SHARES
'000 '000
Earnings attributable to ordinary shareholders 21,222 29,749
Number of shares in issue at end of period 155,996 155,996
Weighted average number of shares in issue 155,996 155,996
Treasury shares held at end of period 14,596 14,596
Cents Cents
Net asset value per share at end of period 55.5 51.9
Net tangible asset value per share at end
of period 55.4 51.3
Earnings and diluted earnings per * 13.6 19.1
Diluted headline earnings per share* 13.6 19.1
ORDINARY SHARES
'000 '000
Headline earnings attributable to ordinary shareholders 21,222 29,749
Number of shares in issue at end of period 155,996 155,996
Weighted average number of shares in issue 155,996 155,996
Treasury shares held at end of period 14,596 14,596
Cents Cents
Net asset value per share at end of period 55.5 51.9
Net tangible asset value per share at end
of period 55.4 51.3
Headline and diluted headline earnings per share* 13.6 19.1
Diluted headline earnings per share* 13.6 19.1
* 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
I am pleased to present our results for the year ended 28 February 2018 (“current
reporting period”), which continues to be underpinned by a high portion of
recurring revenues, a robust financial position and strong cash flows. Despite
the increasingly challenging trading conditions in which we operate, together
with the continued pressure on the local economy, overall performance remains
satisfactory.
During the current reporting period three key factors marred our performance
when viewed against that of our previous corresponding reporting period (“prior
reporting period”), namely the recognition and timing of large deals, the
effects of a volatile and fluctuating exchange rate and the downgrade of our B-
BBEE certificate from an encouraging Level 3 achieved under the ‘old’ ICT sector
codes to a Level 8 achieved under the ‘new’ ICT sector codes (subsequent to the
current reporting period our Level 3 B-BBEE certificate was reinstated under
the ‘new’ ICT sector codes). While these factors are not new and have been
discussed in the past, I would like to make note of them once again to
contextualise our current performance.
Large deals are for us, those that individually make up in excess of 10% of
revenue, of which we usually recognise one or two in any given year. As it is
practically impossible to predict and influence the timing of these large deals,
our results tend to reflect exaggerated comparative growth and contraction from
one reporting period to the next. During the current reporting period we had no
large deals, compared to an atypical amount of revenue recognised from large
deals in the prior reporting period, which then made up 37% of turnover.
Exchange rate fluctuation and volatility is also a major factor in our business,
for two main reasons. Firstly, as the third-party products that we resell to
customers are sourced from abroad and priced in major world currencies, such as
Dollars, Pounds and Euros, our turnover and profit levels are directly impacted
by the effects of exchange rate volatility and fluctuation between these and
the Rand. Secondly, as most of our cash is held in Dollars and Pounds, currently
amounting to 74% of our R41.7 million cash reserve, the revaluation of this
foreign currency through the statements of comprehensive income can have a
material effect on the results in any one period.
Turnover decreased by 32% to R108.3 million compared to the prior reporting
period of R159.7 million, and similarly profit before other income and expenses
decreased by 33% to R47.1 million compared to the prior reporting period of
R70.7 million. While a decrease of this magnitude would usually trigger alarm
bells and a call for remedial action by management, I am satisfied with our
performance in the current reporting period, as it stands in contrast to the
exceptionally high increase in the prior reporting period, namely the increase
of 77% in turnover and 81% in profit before other income and expenses between
the reporting periods ending 2016 and 2017.
Operating costs decreased by 13% to R23.7 million during the current reporting
period, from R27.3 million in the prior reporting period, which improvement
includes a forex revaluation loss of R2.6 million compared to a forex
revaluation loss of R4.2 million in the prior reporting period. If we were to
exclude the effect of forex revaluation losses in both reporting periods,
operating costs would have decreased by 9%, which is substantially better than
anticipated.
Total comprehensive income attributable to equity shareholders decreased by 29%
to R21.2 million during the current reporting period, from R29.7 million in the
previous reporting period, representing a decline in headline earnings per share
and earnings per share to 13.6 cents, from 19.1 cents achieved in the prior
reporting period.
DISTRIBUTION
A final dividend of R15.6 million for the year ended 28 February 2017 was
declared and paid to shareholders during the period under review,
representing a gross distribution of 10.0 cents per share.
The Board is pleased to declare a final dividend to shareholders for the year
ended 28 February 2018 of 13.6 cents per share, to all shareholders recorded in
the shareholders register on 27 July 2018 and payable on 31 July 2018. The last
day to trade cum dividend is Tuesday, 24 July 2018 and the shares trade ex-
dividend as from Wednesday, 25 July 2018, which will be subject to the dividend
tax legislation.
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 2.72 cents per share.
- The net dividend payable to shareholders who are not exempt from DT
is therefore 10.88 cents per share, while a gross dividend of 13.6 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.
Share certificates may not be dematerialised or rematerialised between
Wednesday, 25 July 2018 and Friday, 27 July 2018, both days inclusive.
PROSPECTS
As our Level 3 B-BBEE certificate was reinstated under the ‘new’ ICT codes
subsequent to the current reporting period and as the key drivers of the
information security market remain robust, I continue to be optimistic about
the prospects of the group. 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.
BASIS OF PREPARATION
These provisional reviewed condensed consolidated annual financial results have
been prepared by Ms Priscilla Mogoboya, the Financial Director, 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 and the
Financial Reporting Pronouncements as issued by Financial Reporting Standards
Council, and contains at a minimum the information required by IAS 34, the
Listings Requirements of JSE Limited, and the Companies Act, 2008 (Act 71 of
2008), as amended.
The accounting policies applied in the presentation of these provisional
reviewed condensed consolidated annual financial results, which are based on
reasonable judgments and estimates, are consistent with those applied for the
year ended 28 February 2017.
These provisional reviewed condensed consolidated annual financial results have
been reviewed by the group’s auditor, Mazars, and their unmodified review report
is available for inspection at the registered office of ISA. The auditor’s
report does not necessarily report on all of the information contained in these
financial results. Shareholders may obtain further information regarding the
nature of the auditor’s engagement as per inspection of the report available at
the registered office of ISA. Any reference to future financial performance
included in this announcement has not been reviewed or reported on by the
group’s auditor.
CHANGES IN DIRECTORATE
Roger Pitt (Financial Director) resigned on 13 October 2017.
Priscilla Mogoboya (Financial Director) was appointed on 1 April 2018.
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. Finally, I thank all stakeholders, customers and vendors for their
support.
Clifford Katz
Chief Executive Officer
Johannesburg
29 May 2018
Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), PM 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
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