| Fri 30 May 2008, 15:16 | | IDE - IDECO GROUP LIMITED - REVIEWED INTERIM RESULTS |
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IDE
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IDE - IDECO GROUP LIMITED - REVIEWED INTERIM RESULTS
IDECO GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 2001/023463/06
Share Code: IDE
ISIN: ZAE000107579
("Ideco" or "the company" or "the group")
REVIEWED INTERIM RESULTS
For the twelve months ended 29 February 2008
Condensed Balance Sheet
Reviewed Audited
Figures in Rand Notes 2008 2007
Assets
Non-current assets
Property, plant and equipment 13 496 085 3 711 758
Investment in associate 1 17 304 229 -
Intangible assets 2 18 797 716 -
Deferred tax 1 507 674 885 041
51 105 704 4 596 799
Current assets
Inventories 4 615 715 4 919 810
Trade and other receivables 33 430 184 19 998 078
Cash and cash equivalents - 26 177 094
38 045 899 51 094 982
Total assets 89 151 603 55 691 781
Equity and liabilities
Equity
Share capital and premium 21 286 681 100
Retained income 18 027 087 16 588 876
39 313 768 16 588 976
Liabilities
Non-current liabilities
Long-term borrowings 5 772 467 -
Current liabilities
Current tax payable 326 951 16 611 120
Trade and other payables 20 236 506 17 491 685
Bank overdraft 3 411 298 -
Dividend payable - 5 000 000
Other current liability 20 090 613 -
44 065 368 39 102 805
Total liabilities 49 837 835 39 102 805
Total equity and liabilities 89 151 603 55 691 781
Net asset value per share 19,44 66,36
(cents)
Net tangible asset value per 9,40 62,82
share (cents)
Condensed Income Statement
Reviewed Audited
Figures in Rand 2008 2007
Revenue 75 530 794 209 470 633
Cost of sales (57 966 779) (149 527
193)
Gross profit 17 564 016 59 943 440
Other income 315 097 97 129
Operating expenses (18 243 568) (28 724 110)
Operating profit/(loss) (364 455) 31 316 459
Investment revenue 1 689 362 1 901 553
Finance costs (494 485) (125 328)
Profit before taxation 830 422 33 092 684
Taxation (126 950) (10 880 578)
Profit for the period 703 472 22 212 106
Share of net profit of associate 734 739 -
company
Attributable profit for the period 1 438 211 22 212 106
Number of shares
- Issued 202 222 222 25 000 000
- Weighted 117 356 469 25 000 000
Headline earnings per share (cents) 1,23 88,84
Earnings per share (cents) 1,23 88,85
Calculation of headline earnings
Net profit attributable to 1 438 211 22 212 106
shareholders
Adjusted for:
Loss on sale of assets - (1 487)
Headline earnings 1 438 211 22 210 619
Condensed Cash Flow Statement
Reviewed Audited
Figures in Rand 2008 2007
Cash flows from operating activities
Cash generated from operations 11 069 931 13 760 476
Interest income 1 689 362 1 901 553
Finance costs (494 485) (125 328)
Tax paid (16 611 120) (4 800 540)
Net cash from operating activities (4 346 312) 10 736 161
Net cash flow from investing (46 316 217) (2 717 647)
activities
Net cash flows from financing 21 074 137 (12 767 104)
activities
Total cash movement for the year (29 588 392) (4 748 590)
Cash at the beginning of the year 26 177 094 30 925 684
Total cash at end of period (3 411 298) 26 177 094
Statement of Changes in Equity
Share Retained Total
Figures in Rand capital income equity
Balance at 1 March 2006 100 4 376 770 4 376 870
Changes in equity - - -
Profit for the year - 22 212 106 22 212 106
Dividends - (10 000 (10 000
000) 000)
Total changes - 12 212 106 12 212 106
Balance at 28 February 2007 100 16 588 876 16 588 976
Changes in equity 21 286 580 21 286 580
Profit for the year 1 438 211 1 438 211
Dividends - -
Total changes 21 286 580 1 438 211 22 724 791
Balance at 29 February 2008 21 286 680 18 027 087 39 313 767
Segmental analysis
Reviewed Audited
Figures in Rand 2008 2007
Revenue
Biometric readers and solutions 74 963 789 82 684 663
Biometric projects 567 005 126 785 970
Corporate and other - -
75 530 794 209 470 633
Operating profit/(loss)
Biometric readers and solutions 10 851 056 14 663 702
Biometric projects (1 483 24 703 694
938)
Corporate and other (9 731 (8 050 937)
573)
(364 455) 31 316 459
Notes to the balance sheet
Figures in Rand 2008 2007
1. Investment in associate
30% shareholding in Kroll Background 16 569 910 -
Screening (Pty) Limited
Share of profit since acquisition 734 739 -
17 304 649 -
2. Intangible assets
Acquisition of intellectual property 1 500 000 -
rights on biometric products
Long-term portion of pre-paid expenses 16 571 252 -
Capitalised development cost on new 726 464 -
products
18 797 716 -
COMMENTARY
INTRODUCTION
Set out above are the maiden reviewed financial results of Ideco as a listed
company in respect of the 12 months ended 29 February 2008. The group`s
financial year was changed on 16 August 2007 to the end of August, and therefore
the first audited results of the group will be for the eighteen month period
ending 31 August 2008.
BASIS OF PREPARATION
The interim financial statements have been prepared in accordance with IAS 34:
Interim Financial Reporting and the JSE Listing Requirements. The accounting
policies adopted in the preparation of these financial results are consistent
with those used to prepare the financial statements for the year ended 28
February 2007 and are in accordance with International Financial Reporting
Standards ("IFRS") and the South African Companies Act.
NATURE OF THE BUSINESS
Ideco is a South African company with over 40% black shareholding maintained
from its pre-listing days. The group provides customised identity management
("IDM") solutions, based on the French company Sagem`s world-leading biometric
technology.
Ideco is the exclusive distributor of Sagem`s fingerprint products in South
Africa. Furthermore, the group has successfully implemented IDM solutions in a
number of sub-Saharan African countries, including Botswana, Mozambique, Namibia
and the Ivory Coast.
Ideco`s solutions range from civil applications, such as national ID documents,
drivers` licences and fingerprint bureau services to physical and computer
access control. The group`s founders were instrumental in the supply of a
forensic Automated Fingerprint Indentification System ("AFIS") to the South
African Police Service ("SAPS"). On behalf of SAPS, Ideco has recently
implemented an automated criminal background checking service. The experience
gained from implementing large-scale civil and criminal identification projects
positions Ideco as Africa`s leader in the design and integration of biometric
solutions. These projects include the digital conversion of paper-based
fingerprint records for the South African Department of Home Affairs, during
which a world record of 135 000 conversions per day was achieved.
FINANCIAL OVERVIEW
Balance sheet
Property, plant and equipment increased from R3,7 million to R13,5 million
mainly due to the acquisition of office space in Bryanston and Centurion.
Details of the investment in an associate and intangible assets are contained in
a note to the interim financial statements. The prepaid expense of R16,6 million
referred to in note 2 is in respect of a liability to Sagem for maintenance cost
on the SAPS AFIS. The payment of this amount is part of Ideco`s agreement with
SAPS in order to perform the criminal background checking. This amount will be
amortised over the remaining period of the agreement with SAPS.
Inventories mainly consist of biometric readers held in Ideco Biometric Security
Solutions - a subsidiary focused on access control and time and attendance
business.
The increase in trade and other receivables can mainly be ascribed to the
increased level of sales by Ideco Biometric Security Solutions and a big order
received from a government department which was fulfilled in February 2008.
Non-current liabilities of R5,8 million consist of two bonds registered over the
two properties in Bryanston and Centurion. The directors estimate that the
current market value of these properties is in excess of R11,0 million.
Trade and other payables mainly increased as a result of a high volume of sales
and hence related purchases in Ideco Biometric Security Solutions and the
liability in respect of equipment supplied to a government department.
The other current liability of R20,1 million consists of the liability to Sagem
which was taken on in respect of the SAPS AFIS referred to above. This amount is
repayable over a period of ten months from cash flows generated with the
criminal background checking service.
Income statements
Ideco Biometric Security Solutions continued to show excellent growth. Revenue
was 77% higher than the previous year, while operating profit increased by 194%.
Tender related business was much lower than the previous year. The Back Record
Conversion project for the Department of Home Affairs was completed in May 2007,
which explains the decrease in revenue. Furthermore, other sales in terms of
tenders awarded to Ideco were lower than the previous reporting period, because
of a delay in the renewal of a government tender for the supply of biometric
equipment.
A major delay was experienced in the launching of the criminal record checking
service. The service was implemented in November 2007, but with a lower than
expected volume owing to a slow conversion to the electronic service by major
users. Most of these users preferred the integration of Ideco`s electronic
solution into their existing systems to the stand-alone offer made to them by
Ideco. The integration has commenced, and has also been completed with some of
the users with the result that all customers are expected to be on board from
August 2008.
CAPITAL COMMITMENTS
There are no capital commitments as approved by the directors. Provision has to
be made for capital expenditure estimated at R30,0 million to increase the
capacity of the system used by Ideco to perform the criminal background record
checking service. It is expected that this capacity increase will be required in
the first half of 2009 to cater for the growing demand for this service.
PROSPECTS
Ideco`s year-end was changed to August, and therefore the audited results for
the period ending August 2008 will be for an eighteen month period. The delays
experienced as described above will flow through to the August 2008 reporting
period.
The prospects for the year ending 31 August 2009, however, remain positive.
Ideco Biometric Security Solutions
It is expected that the strong growth in this division will continue. Organic
growth in revenue is budgeted at 45%. Various new products to enhance revenue
even further have also been launched, such as a fingerprint-based fleet
management system, where considerable interest from customers is evident.
Another new product, EVIM, which is an electronic visitor information management
system, is also making an impact in the market. An extended warranty option is
offered on all existing and new biometric readers sold through Ideco`s partner
channel. This source of revenue will provide growing annuity income to this
division.
Tender related business
Two five-year projects with an estimated total revenue of R200,0 million over
the period have been awarded to Ideco. A pilot for the bigger project is being
implemented, while production will commence in August 2008 for the second
project.
As was experienced for the 12 months ended 29 February 2008, other tender
related business can be erratic, and therefore projected income from this source
has been scaled down to the extent that should the forecast income not
materialise, the negative impact on the projected earnings per share will be
neutralised by other sources of income which have been excluded from the
projections for the financial period ending August 2009.
Ideco AFISwitch
It is expected that the criminal background checking service will run at full
capacity by September 2008. The current capacity of the system is 3 200 searches
per day, while firm demand for the service has been established at well over 4
000 searches per day. As mentioned above in respect of capital commitments, the
capacity of the system will be upgraded during the first six months of 2009 to
cater for the growing demand.
Furthermore, in response to demand, Ideco has developed a new business offering
in the form of fingerprint database hosting. This service is required by
customers who use the criminal background checking service on a regular basis
for large numbers of personnel. These customers opt for paying a fee per month
for Ideco to host the fingerprint data used in verifying the criminal record
status.
POST BALANCE SHEET EVENTS
The office space in Bryanston is no longer sufficient to house the growing staff
at Ideco and a new rental agreement for bigger office space has been concluded.
Ideco will occupy the new offices as from July 2008. As a result of this
relocation, it was decided to dispose of the Bryanston property. An offer to
purchase the property was accepted by Ideco in May 2008. Ideco will make a
profit of R4,0 million on the sale of the property.
DIVIDEND
No dividend has been declared for the period.
CORPORATE GOVERNANCE
The directors and senior managers of the company endorse the Code of Corporate
Practices and Conduct as set out in the King II Report on Corporate Governance.
The Board has, to date, formed an Audit Committee.
REVIEW OPINION
The results for the twelve months ended 29 February 2008 have been reviewed by
the company`s auditors, BDO Spencer Steward (Jhb) Inc., and their unmodified
review report is available for inspection at the company`s registered office.
By order of the board
Vhonani Mufamadi HB Aucamp
CEO CFO
CORPORATE INFORMATION
Executive directors: VG Mufamadi (CEO); HB Aucamp (CFO)
Non-executive directors: A Sisulu; M Kekana; R Troester (German)
Registration number: 2001/023463/06
Registered address: 13 Wellington Road, Parktown, Johannesburg 2193
Postal address: PO Box 130353, Bryanston 2021
Company secretary: H B Aucamp Telephone (011) 745 5600 Facsimile (011) 745 5615
Transfer secretaries: Computershare Investor Services (Pty) Limited
Legal advisors: Edward Nathan Sonnenbergs Inc
Designated advisor: QuestCo Sponsors (Pty) Limited
www.ideco.co.za
Date: 30/05/2008 15:16:01 Produced by the JSE SENS Department.
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