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Unaudited Condensed Results for the Six Months Ended 31 August 2017
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 2017
31 Aug 17 31 Aug 16 28 Feb 17
six months six months year
ended ended ended
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
Revenue 53,655 78,665 163,412
Turnover 51,506 76,848 159,712
Cost of sales (28,240) (44,643) (88,977)
Profit before other income and expenses 23,266 32,205 70,735
Other income 60 60 120
Selling and marketing costs (6,343) (5,717) (11,813)
Administrative expenses (4,215) (6,114) (15,536)
Finance income 2,089 1,757 3,580
Finance costs (135) (801) (994)
Share of profits of
equity-accounted investment 200 15 269
Profit before taxation 14,922 21,405 46,361
Taxation (4,260) (6,081) (16,612)
Profit attributable to equity shareholders
for the period 10,662 15,324 29,749
Total comprehensive income attributable to
equity shareholders for the period 10,662 15,324 29,749
Earnings per share (cents) 6.8 9.8 19.1
Diluted earnings per share (cents) 6.8 9.8 19.1
As at As at As at
31 Aug 17 31 Aug 16 28 Feb 17
Unaudited Unaudited Audited
R'000 R'000 R'000
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
ASSETS
Non-current assets 37,602 38,591 39,667
Property, plant and equipment 10,258 10,477 10,427
Intangible assets 568 1,327 920
Loans receivable 24,409 24,779 27,084
Equity accounted investment 475 20 275
Deferred tax 1,892 1,988 961
Current assets 65,520 64,585 73,460
Loan to joint venture 40 582 -
Cash and cash equivalents 43,065 42,830 36,115
Inventories 4,133 2,232 4,143
Trade and other receivables 15,282 18,935 33,192
Current tax receivable - 6 10
Total assets 100,122 103,176 113,127
EQUITY AND LIABILITIES
Equity capital and reserves 76,049 66,516 80,940
Share capital and share premium 1,560 1,560 1,560
Reserves 74,489 64,956 79,380
LIABILITIES
Current liabilities 24,073 36,660 32,187
Trade and other payables 21,158 33,913 28,700
Current tax payable 2,915 2,747 3,487
Total liabilities 24,073 36,660 32,187
Total equity and liabilities 100,122 103,176 113,127
31 Aug 17 31 Aug 16 28 Feb 17
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 18,522 32,931 29,158
Cash receipts from customers 70,102 80,030 147,797
Cash paid to suppliers and employees (46,404) (42,539) (105,650)
Cash generated from operations 23,698 37,492 42,147
Finance income 713 398 929
Finance costs (135) (801) (994)
Taxation paid (5,754) (4,158) (12,924)
Cash flows from investing activities 3,910 12 (1,246)
Purchase of property, plant and equipment (100) (149) (339)
Proceeds on loan to joint venture (40) (405) 177
Advance to loan receivable - - (1,000)
Proceeds on loans receivable 4,050 565 2,409
Cash flows from financing activities (15,553) (8,209) (9,360)
Dividends paid to ordinary shareholders (15,553) (8,209) (9,360)
Net increase in cash and cash equivalents 6,880 24,734 21,044
Revaluation of foreign cash balances 70 (1,198) (4,223)
Cash and cash equivalents at beginning of
the period 36,115 19,294 19,294
Cash and cash equivalents at end of
the period 43,065 42,830 36,115
31 Aug 17 31 Aug 16 28 Feb 17
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 1,560 1,560
Treasury shares bought during the period - - -
Balance at end of the period 1,560 1,560 1,560
Share capital - share premium
Balance at beginning of the period - - -
Treasury shares bought during the period - - -
Balance at end of the period - - -
Total share capital and share premium 1,560 1,560 1,560
Reserves - retained earnings
Balance at beginning of the period 79,380 58,991 58,991
Total comprehensive income – profit 10,662 15,324 29,749
Treasury shares bought during the period - - -
Dividends paid during the period (15,553) (9,359) (9,360)
Balance at end of the period 74,489 64,956 79,380
Total equity capital and reserves 76,049 66,516 80,940
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 48.8 42.6 51.9
Net tangible asset value per share at end
of period 48.4 41.8 51.3
Headline earnings per share* 6.8 9.8 19.1
Diluted headline earnings per share* 6.8 9.8 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
We are pleased to present our results for the six months ended 31 August
2017, which continue to be underpinned by a high portion of recurring
revenues, a robust balance sheet 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 period under review, two factors have had a substantial effect on
our results when viewed against our previous corresponding results, namely
the recognition and timing of large deals and the effects of a volatile and
fluctuating exchange rate. While both of these factors are not new and have
been discussed many times in the past, we would like to make note of them
once again in the context of our current results.
Large deals are for us those that individually make up a large portion of our
revenues and profits, typically in excess of 10% of turnover, of which we
usually recognise one or two in any given year. As it is practically
impossible to accurately 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 this reporting period, our turnover decreased by 33% to R51.5 million
compared to the previous corresponding reporting period and notably lacks any
large deals, whereas previous corresponding results included an unprecedented
amount of these types of deals. The increase in gross margin to 45% of
turnover, from 42% in our previous corresponding reporting period, is
indicative of this nuance, as the large deals typically attract larger
discounts and tend to have proportionally less high-margin service-based
revenue components.
Exchange rate fluctuation and volatility is also a major factor in our
business, for two main reasons. Firstly, as almost all of the products that
we resell are sourced from abroad and priced in Dollars, our turnover and
gross profit levels are directly impacted by the effects of exchange rate
volatility and fluctuation between the Dollar and the Rand. During the
current reporting period, the weighted average value of the Rand against the
Dollar was about 10% stronger than in the previous corresponding reporting
period, resulting in us effectively receiving less Rands for our sales than
we would have if the Rand was weaker. Secondly, as most of our cash is held
in Dollars and Pounds, currently amounting to 78% of our R43 million cash
reserve, the revaluation of this foreign currency through our statements of
comprehensive income can have a material effect on our results. During the
current reporting period we accounted for a mere R70 000 gain, but this
compared to the R1.2 million loss recorded in the previous corresponding
reporting period.
Profit attributable to equity shareholders for the period under review
decreased by 30% to R10.7 million, representing earnings per share of 6.8
cents.
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 has not
declared an interim dividend.
PROSPECTS
Other than the two key factors affecting our turnover, as discussed above and
being permanent features of our business, a further important factor that may
have a negative effect on our business in the short term is that our B-BBEE
certificate was downgraded on 15 September 2017, from an encouraging Level 3
under the ‘old’ ICT sector codes to an untenable and disappointing Level 8
under the ‘new’ ICT sector codes. As such, attaining an improved B-BBEE
certificate level is of paramount importance and is receiving our immediate
attention.
Despite the above, we remain optimistic about our longer-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.
CHANGES IN DIRECTORATE
Roger Pitt (financial director) resigned effective 13 October 2017.
SUBSEQUENT EVENTS
There have been no material subsequent events up to and including the date of
this report.
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
3 November 2017
Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), AJ Naidoo#, N Maphothi*, DR Perreira* (Chairman), DC Seaton*
# Non-executive
* Independent non-executive
Designated Advisor: Merchantec Capital
www.isaholdings.co.za
Date: 03/11/2017 01:18:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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