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Abridged summarised consolidated audited results for the year ended 28 February 2019
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 2019, cash dividend declaration and notice of Annual General
Meeting
28 Feb 19 28 Feb 18
year year
ended ended
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Project derived turnover* 34 777 39 503
Subscription derived turnover* 85 296 68 802
Revenue 120 073 108 305
Cost of sales (67 980) (61 204)
Profit before other income and expenses 52 093 47 101
Other income 8 188 238
Selling and marketing costs (12 885) (12 508)
Administrative expenses (10 998) (11 198)
Finance income 4 352 4 149
Finance costs (157) -
Share of losses of equity-accounted investment 905 491
Profit before taxation 41 498 28 273
Taxation (11 541) (7 051)
Profit attributable to equity shareholders
for the year 29 957 21 222
Total comprehensive income attributable to
equity shareholders 29 957 21 222
Earnings per share (cents) 19.2 13.6
Diluted earnings per share (cents) 19.2 13.6
* The group has disaggregated its turnover as a consequence of IFRS 15 being
applied and restated retrospectively to prior year.
As at As at
28 Feb 19 28 Feb 18
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 37 848 39 268
Property, plant and equipment 9 980 10 162
Intangible assets - 211
Loans receivable 24 101 26 297
Equity accounted investment 1 671 766
Deferred tax 2 096 1 832
Current assets 83 863 73 966
Cash and cash equivalents 63 047 41 713
Inventories 35 5 370
Trade and other receivables 19 490 26 865
Current tax receivable 1 291 18
Total assets 121 711 113 234
EQUITY AND LIABILITIES
Equity capital and reserves 95 354 86 610
Share capital and share premium 1 560 1 560
Reserves 93 794 85 050
LIABILITIES
Current liabilities 26 357 26 624
Trade and other payables 23 868 25 613
Current tax payable 2 489 1 011
Total liabilities 26 357 26 624
Total equity and liabilities 121 711 113 234
28 Feb 19 28 Feb 18
year year
ended ended
Audited Audited
R'000 R'000
SUMMARISED CONSOLIDATED STATEMENTS
OF CASH FLOW
Cash flows from operating activities 30 330 20 539
Cash receipts from customers 126 584 115 510
Cash paid to supplier and employees (86 553) (86 445)
Cash generated from operations 40 031 29 065
Finance income 2 056 1 387
Finance cost (157) -
Taxation paid (11 600) (9 913)
Cash flows from investing activities 4 844 3 229
Purchase of property, plant and equipment (149) (280)
Dividends received 500 118
Proceeds on loans receivable 4 493 3 391
Cash flows from financing activities (21 213) (15 552)
Dividends paid to ordinary shareholders (21 213) (15 552)
Net increase in cash and cash equivalents 13 961 8 216
Revaluation of foreign cash balances 7 373 (2 618)
Cash and cash equivalents at beginning of
the year 41 713 36 115
Cash and cash equivalents at end of
the year 63 047 41 713
28 Feb 19 28 Feb 18
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 1 560
Balance at end of the year 1 560 1 560
Total share capital and share premium 1 560 1 560
Reserves - retained earnings
Balance at beginning of the year 85 050 79 380
Total comprehensive income – profit 29 957 21 222
Dividends paid during the year (21 213) (15 552)
Balance at end of the year 93 794 85 050
Total equity capital and reserves 95 354 86 610
Notes to the statements:
RECONCILIATION OF HEADLINE EARNINGS
Earnings as per statement of comprehensive income 29 957 21 222
Headline earnings 29 957 21 222
Headline earnings per share (cents) 19.2 13.6
Diluted headline earnings per share (cents) 19.2 13.6
ORDINARY SHARES
Number of shares in issue at end of year ('000s) 155 996 155 996
Weighted average number of shares in issue ('000s) 155 996 155 996
Treasury shares held at end of year ('000s) 14 596 14 596
Net asset value per share at end of year (cents) 61.1 55.5
Net tangible asset value per share at end of year (cents) 61.1 55.4
OPERATIONAL REVIEW
I am pleased to present our results for the full year ended 28 February 2019
(“the current reporting period”), which continued to be underpinned by a high
proportion of recurring revenue, 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.
Revenue and profit before other income and expenses both increased by 11% to
R120.1 million and R52.1 million respectively, compared to the previous
corresponding reporting period (“the prior reporting period”), with a healthy
shift in revenue composition towards both managed and professional services.
While margin pressure on the sale of products and third-party technologies -
which is an endemic reality in the IT security and broader ICT industries -
continued through the current reporting period, the negative effect thereof
was offset by the 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 revenue derived from product
subscription sales and our Managed Security Solution and Service offerings,
increased by 24% to R85.3 million and represents 71% of revenue recognised
for the current reporting period. While this impressive level of subscription
derived turnover is higher than expected, it highlights the disappointing
result from sales of a non-recurring nature, such as those derived from
third-party products and our professional service offerings. Management
attributes this unsatisfactory result in project derived turnover to an
overly cautious approach to onboarding emerging ‘next generation’
technologies and brands that are required by our customers to address the
rapidly evolving information security threat landscape. Corrective steps have
already been taken, but unfortunately not in time to fully recover the ground
lost during the current reporting period.
Operating costs excluding the revaluation from foreign cash reserves
increased in line with expectation by 13% to R23.9 million in the current
reporting period, which increase is largely the result of a heightened
investment in staff and human resources.
Of notable significance is the swing of R10.0 million in revaluation from
foreign cash reserves, from a loss of R2.6 million in the prior reporting
period to a profit of R7.4 million in the current reporting period. This
swing, together with a pleasing 84% increase in profits from DataProof, our
business partner and equity-accounted investment, boosted total comprehensive
income attributable to equity shareholders to their highest levels yet, being
R30.0 million; representing a healthy 41% increase from the prior reporting
period and earnings of 19.2 cents per share, from 13.6 cents per share in the
prior reporting period.
Also pleasing was the effectiveness of our capital allocation and cash
management processes, which delivered a strong performance for the current
reporting period. Partly as a result of our reduced working capital
requirement, cash balances at the end of the reporting period amounted to
R63.0 million, which further illustrates the cash generative nature of our
underlying business. Trade receivables reduced by 27.5% to R19.5 million and
inventories reduced to R35 000, from R5.4 million in the prior reporting
period, which improvements are due to timing differences in receipts and
project delivery between the periods, and not a fundamental change to the
business process itself.
DIVIDEND DECLARATION
During the current reporting period a final ordinary dividend of R21.2
million for the year ended 28 February 2018 was declared and paid to
shareholders, representing a cash distribution of 13.6 cents per share. We
are now pleased to declare a final ordinary dividend to shareholders for the
year ended 28 February 2019 of 19.2 cents per share, as well as a special
dividend of 20.0 cents per share, both of which will be subject to the
dividend tax legislation. The reason for the special dividend is to reduce
the unnecessarily high level of cash in the business which was compounded by
further cash inflows resulting from the settlement of the loan by our
business partner, subsequent to the current reporting period (R21.6 million
as at 28 February 2019).
ISA has obtained the relevant South African Reserve Bank approval in respect
of the special dividend and the board of directors of ISA (“board”) has
reasonably concluded that the company will satisfy the solvency and liquidity
requirements immediately after distribution thereof and for the next 12
months.
The salient dates will be as follows:
Declaration date Monday, 27 May 2019
Last day to trade Tuesday, 23 July 2019
Shares trade ex-dividend Wednesday, 24 July 2019
Record date Friday, 26 July 2019
Payment date Monday, 29 July 2019
Share certificates may not be dematerialised or rematerialised between
Wednesday, 24 July 2019 and Friday, 26 July 2019, 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 in respect of the ordinary dividend
amounts to 3.84 cents per share.
- The net ordinary dividend payable to shareholders who are not exempt from
DT is therefore 15.36 cents per share, while a gross ordinary dividend
of 19.2 cents per share is payable to those shareholders who are exempt
from DT.
- The DT to be withheld by the company in respect of the special dividend
amounts to 4.0 cents per share.
- The net special dividend payable to shareholders who are not exempt from
DT is therefore 16.0 cents per share, while a gross special dividend of
20.0 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 attack vectors 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.
REPORTING
These abridged summarised consolidated 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 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 2018 save for the newly adopted
standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers. The preparation of the group financial statements for the
financial year ended 28 February 2019 was supervised by the Financial
Director, Priscilla Mogoboya, 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 underlying group
annual financial statements for the year ended 28 February 2019. 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
Save for the appointment of Priscilla Mogoboya as Financial Director of the
group on 1 April 2018, there have been no changes to the board during the
2019 financial year.
INTEGRATED ANNUAL REPORT
Shareholders are advised that the integrated annual report has been
distributed to shareholders and will be available on the company’s website at
www.isa.co.za.
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, 26 June 2019 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 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, 21 June 2019. Accordingly,
the last day to trade ISA shares in order to be recorded in the register to
be entitled to vote will be Tuesday, 18 June 2019.
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 tremendous support and I look forward to meeting shareholders at the
Annual General Meeting to be held on Wednesday, 26 June 2019.
For and on behalf of the board
Clifford Katz
Chief Executive Officer
Johannesburg
27 May 2019
Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), P Mogoboya (Financial Director), AJ Naidoo#, N Maphothi*,
DR Perreira* (Chairman), DS Seaton*
# Non-executive
* Independent non-executive
Designated Adviser: Merchantec Capital
www.isaholdings.co.za
Date: 27/05/2019 02:54:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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