| Fri 17 Oct 2008, 16:01 | | SDH - SecureData - Reviewed Provisional Financial Results for the year |
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SDH
SDH
SDH - SecureData - Reviewed Provisional Financial Results for the year
ended 31 July 2008
SecureData Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1998/010017/06)
Share code: SDH & ISIN: ZAE000096368
("SecureData" or "the group")
Reviewed Provisional Financial Results for the year ended 31 July 2008
CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 31 July 2008
31 July 31 July
2008 2007
R`000 R`000
Revenue 271 347 148 221
Earnings before interest, taxation, 36 456 37 901
depreciation and amortisation (EBITDA)
Depreciation and amortisation (8 732) (1 020)
Depreciation (2 651) (1 020)
Amortisation (6 081) -
Profit from operations 27 724 36 881
Interest received 1 289 845
Finance costs (13 420) (28)
- Interest paid (5 376) (28)
- Foreign exchange losses on loan to (8 044) -
subsidiary
Profit before taxation 15 593 37 698
Taxation (6 654) (11 400)
Profit after taxation 8 939 26 298
Loss on disposal of discontinued (20 135)
operations
Profit attributable to minority (240) -
shareholders
Profit for the year attributable to equity 8 699 6 163
holders of the company
Earnings per share (cents) 5,0 3,9
Diluted earnings per share (cents) 4,7 3,6
Net asset value per share (cents) 71,5 30,9
Weighted average numbers of shares on
which
- earnings per share is based (`000) 173 219 159 227
- diluted earnings per share is based 183 409 168 867
(`000)
Number of ordinary shares in issue 242 102 180 102
Reconciliation between earnings and
headline earnings
Profit for the year attributable to 8 699 6 163
ordinary shareholders
Profit on disposal of business - (4 400)*
Profit on disposal of assets - (507)
Headline earnings 8 699 1 256*
Headline earnings per share (cents) 5,0 0,8*
Reconciliation between earnings and
adjusted earnings
- Profit for the year attributable to 8 699 6 163
ordinary shareholders
- Amortisation (after taxation) 4 354 -
- Foreign exchange losses on group loans 5 791 -
(after taxation)
- Profit on disposal of assets - (507)
- Discontinued operations - 20 135
Adjusted earnings 18 844 25 791
Adjusted earnings per share (cents) 10,9 16,2
* Amended headline earnings as explained in commentary
CONDENSED CONSOLIDATED BALANCE SHEET
at 31 July 2008
31 July 31 July
2008 2007
R`000 R`000
ASSETS
Non-current assets 291 630 44 378
Property, plant and equipment 7 495 3 889
Goodwill 120 975 37 123
Intangible assets 125 587 -
Deferred taxation 37 573 3 366
Current assets 131 586 77 325
Inventories 6 117 7 807
Trade and other receivables 83 236 46 977
Taxation 723 -
Cash and cash equivalents 41 510 22 541
Total assets 423 216 121 703
EQUITY AND LIABILITIES
Equity 161 617 49 367
Share capital 242 180
Share premium 115 234 12 039
Treasury share reserve (23 586) (30 187)
Share-based payment equity 2 482 615
Foreign currency translation reserve (8 174) -
Retained earnings 75 419 66 720
Outside shareholders` interest 21 770 -
Non-current liabilities 127 328 -
Long-term loans 92 167 -
Deferred taxation 35 161 -
Current liabilities 112 501 72 336
Trade and other payables 97 401 35 358
Owing to vendors - 32 000
Taxation 1 907 4 978
Short-term loans 13 193 -
Total equity and liabilities 423 216 121 703
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 July 2008
31 July 31 July
2008 2007
R`000 R`000
Cash flow from operating activities 40 650 (22 891)
Profit from operations 27 724 17 563
Adjustments not affecting the flow of funds 10 599 (1 980)
Operating income before working capital 38 323 15 583
changes
Increase/(decrease) in working capital 19 180 (7 447)
Cash generated from operations 57 503 8 136
Interest received 1 289 845
Finance costs (5 376) (28)
Taxation paid (12 766) (11 009)
Dividends paid - (8 966)
Net cash from continuing operations 40 650 (11 022)
Cash utilised to discontinue operations - (11 869)
Cash flow from investing activities (243 360) 5 275
Cash flow from financing activities 204 777 1
Proceeds from issue of shares 105 406 207
Share issue expenses (2 149) (4)
Own share acquired by subsidiary (411) (202)
Loans raised 101 931 -
Increase/(decrease) in cash equivalents 2 067 (17 615)
Cash and cash equivalents at beginning of 22 541 40 156
the year
Cash acquired with acquisitions 16 902 -
Cash and cash equivalents at end of the year 41 510 22 541
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 July 2008
31 July 31 July
2008 2007
R`000 R`000
Share capital 242 180
Balance at beginning of the year 180 179
Issued during the year 62 1
Share premium 115 234 12 039
Balance at beginning of the year 12 039 11 837
Issued during the year 105 344 206
Share issue expenses (2 149) (4)
Treasury share reserve (23 586) (30 187)
Balance at beginning of the year (30 187) (29 985)
Own shares acquired by subsidiary (411) (202)
Own shares sold by subsidiary 7 012 -
Share-based payment equity 2 482 615
Balance at beginning of the year 615 -
Share-based payment transactions during 1 867 615
the year
Foreign currency translation reserve (8 174) -
Balance at beginning of the year - -
Foreign exchange movements during the year (8 174) -
Retained earnings 75 419 66 720
Balance at beginning of the year 66 720 69 523
Profit for the year 8 699 6 163
Dividends paid - (8 966)
Total capital and reserves 161 617 49 367
COMMENTARY
GENERAL REVIEW
During the year under review, SecureData made significant progress towards
achieving its vision of becoming a dominant provider of Information Risk
Management (IRM) solutions and services. Although marred by a weaker than
expected earnings performance by the SecureData Africa division, the year had
many highlights including significant market share gains in South Africa, an
excellent financial and operational performance by SensePost and the
completion of our R196 million acquisition of MIS-CDS in the United Kingdom
(UK) effective June 2008.
Group revenue increased by 83% to R271 million of which R29 million (11%)
constitutes MIS-CDS` two-month contribution. Group EBITDA remained static at
R36 million resulting in an EBITDA margin of 14%. Net borrowings at the end of
the year were R64 million. The group will meet its debt obligations.
In order to acquire MIS-CDS, SecureData advanced an amount to a UK subsidiary
for a portion of the acquisition price. By year end the Rand had strengthened
relative to Sterling. International Financial Reporting Standards requires
that the exchange loss of R8 million be reflected as interest cost, and be
recognised through the income statement although it is unrealised and has no
impact on group cash flow. The weakening of the Rand relative to Sterling
subsequent to year end could well cause this amount to reverse in the next
reporting period. In addition the intangible assets of all acquired companies
are amortised over their estimated useful lives. This resulted in an
amortisation charge in this period of R6 million. The combined negative effect
of these non-cash, non-operational items on earnings per share is 5,9 cents.
An `adjusted EPS` calculation that ignores these non-cash items but includes
cash expenses such as interest would have resulted in an `adjusted EPS` of
10,9 cents per share.
The headline earnings per share for the prior year have been amended from 16,2
cents to 0,8 cents as a result of the reclassification of operating costs and
profit on disposal of discontinued operations. This adjustment has no effect
on the results of continuing operations or on earnings per share for the prior
year.
Working capital management improved somewhat with inventories reducing from R8
million to R6 million, R2 million of which is attributable to MIS-CDS, and
debtors reducing to 73 days from 94 days at the end of the prior year.
Management is aware of the importance of these metrics and will continue to
put particular emphasis on working capital management over the next period.
OPERATIONAL REVIEW
SecureData operates subsidiaries in three major groupings:
SecureData Africa
Revenue R225 million
EBITDA R24,5 million
EBITDA margin 11%
SecureData Africa markets and distributes category leading IRM products in
South Africa and on the rest of the continent.
For a number of years, SecureData Africa has successfully expanded its product
portfolio to the extent that it now represents products in every strategic
area within the IRM market. Despite a clear understanding of the relationship
between product mix and earnings performance, this year the company failed to
control the product mix in the requisite manner. This imbalance in product
mix, combined with increased operating costs required to support revenue
increases, and foreign exchange losses as a result of Rand volatility,
resulted in an incongruous 32% reduction in EBITDA on a robust revenue
increase of 52% to R225 million.
Management has put in place strategic initiatives to balance the product mix
in future. In addition the risks inherent in currency exposure have been
somewhat mitigated by means of forward exchange contracts.
We are confident of an improved performance from SecureData Africa in the
coming period albeit during a period of potentially slower revenue growth.
MIS-CDS (two months)
Revenue R29 million
EBITDA R5,3 million
EBITDA margin 18,3%
MIS-CDS is one of the largest and longest established independent information
security solution providers in the United Kingdom.
The acquisition of MIS-CDS became effective June 2008 and the results reflect
a two-month operating performance.
In comparison to the previous year MIS-CDS achieved a 15% increase in both
revenue and EBITDA.
SecureData acquired a 75,8% interest in MIS-CDS in June 2008 for a
consideration of R196 million. The purchase was funded by the issue of 62
million shares at R1,70 each (R105 million), raising a loan facility of R100
million, of which R30 million was used to repay existing debt.
The table below indicates the effect on results had the results for MIS-CDS
been included in the group results for the full year.
Pro forma with
Reported MIS-CDS
Revenue 271 347 426 960
Earnings before interest, taxation, 36 456 52 202
depreciation and amortisation (EBITDA)
Profit after taxation 8 939 4 787
Adjusted earnings per share 10,9 9,9
Earnings per share (cents) 5,0 0,0
Weighted average numbers of shares on 173 219 225 385
which earnings per share is based
(`000)
Net assets acquired in MIS-CDS R`000
Property, plant and equipment 3 768
Intangible assets 120 750
Goodwill 80 989
Deferred taxation 36 701
Inventories 610
Trade and other receiveables 38 056
Cash and cash equivalents 15 778
Deferred taxation (35 017)
Trade and other payables (43 609)
Outside shareholders` interest (21 529)
Cost of investment 196 497
SensePost
Revenue R18,1 million
EBITDA R6,8 million
EBITDA margin 37,6%
SensePost provides independent information security assessment services. Based
in South Africa the company is a recognised leader in this niche market and
boasts a blue-chip client base spanning five continents.
SensePost posted revenue of R18 million with a pleasing 38% EBITDA margin
reflecting the specialist, high value nature of the company`s service
offering. Approximately a quarter of SensePost revenues were generated outside
South Africa and in future we intend utilising our UK presence to increase
SensePost`s offshore revenues. Early indications of success are encouraging.
STRATEGIC REVIEW
With the inclusion of MIS-CDS for the full year, the group expects both
Revenue and EBITDA to increase significantly in the coming financial year,
making SecureData a significant IRM presence in the Europe/Africa region.
The IRM market has historically proved to be quite resilient during downturns
in the economic cycle although it is clearly not immune to changes in the
cycle. It is difficult at this stage to predict to what extent current
financial market turmoil will impact buyer activity. The board believes the
group is well positioned to take advantage of attractive opportunities within
the IRM sector well into the future.
BASIS OF PREPARATION
These provisional condensed consolidated financial statements have been
prepared in accordance with the recognition and measurement requirements of
International Financial Reporting Standards and the presentation and
disclosure requirements of
IAS 34 - Interim Financial Reporting, the Companies Act (Act 61 of 1973), as
amended, and with the Listings Requirements of the JSE Limited. The accounting
policies applied in the preparation of these condensed financial statements
conform with the requirements of International Financial Reporting Standards,
and are consistent with those applied in the prior year.
INDEPENDENT REVIEW
KPMG Inc., SecureData`s independent auditor, has reviewed the condensed
financial statements contained in this provisional report and has expressed an
unmodified conclusion on the provisional financial statements. Their review
report is available for inspection at the company`s registered office.
DIRECTORATE
Subsequent to the MIS-CDS acquisition and the claw-back offer, which details
are set out in the circulars sent to SecureData shareholders dated 27 May and
30 June 2008 respectively, Mr R Pretorius and Mr S Murray have been appointed
to the board, as non-executive directors, with effect from 15 October 2008.
Mr JG du Toit, currently the Chief Financial Officer, has assumed the role of
Financial Director, with effect from 15 October 2008.
For and on behalf of the board
P Sneddon DTK Brazier
Chairman Chief Executive Officer
17 October 2008
Directors:
P Sneddon* (Chairman), DTK Brazier (Chief Executive Officer), JG du Toit
(Financial Director), TN Mali*, YT Moerane*, S Murray+, B Parker, R Pretorius+
*Independent non-executive director +Non-executive director
Company secretary:
K Rossam (email: krossam@telkomsa.net)
Registered office:
Medscheme Building South, 10 Muswell Road South, Bryanston, 2021.
(PO Box 4673, Rivonia, 2128)
www.securedataholdings.com
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
Registration number 2004/003647/07
70 Marshall Street, Johannesburg, 2001.
(PO Box 61051, Marshalltown, 2107)
Sponsor:
Merchantec (Proprietary) Limited
Date: 17/10/2008 16:01:56 Produced by the JSE SENS Department.
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