| Fri 28 Nov 2008, 16:30 | | IDE - Ideco - Reviewed Provisional Financial Information |
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IDE
IDE
IDE - Ideco - Reviewed Provisional Financial Information
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 PROVISIONAL FINANCIAL INFORMATION
Condensed Balance Sheet
Reviewed Reviewed Audited
Figures in Rand Notes Aug 2008 Feb 2008 Feb 2007
Assets
Non-current assets
Property, plant and 1 6 827 951 11 120 860 3 711 758
equipment
Investment in 2 19 074 961 17 304 229 -
associate
Intangible assets 3 23 337 404 23 100 509 -
Deferred tax 1 829 182 1 507 674 885 041
51 069 498 53 033 272 4 596 799
Current assets
Inventories 11 136 310 4 615 715 4 919 810
Trade and other 18 949 436 29 127 391 19 998 078
receivables
Current tax receivable 285 804 - -
Cash and cash - - 26 177 094
equivalents
30 371 549 33 743 106 51 094 982
Non-current assets 4 334 716 2 375 225 -
held for sale
34 706 265 36 118 331 51 094 982
Total assets 85 775 763 89 151 603 55 691 781
Equity and liabilities
Equity
Share capital and 21 286 681 21 286 681 100
premium
Retained income 19 584 540 18 027 087 16 588 876
40 871 221 39 313 768 16 588 976
Liabilities
Non-current
liabilities
Long-term borrowings 2 639 124 5 772 467 -
Current liabilities
Current tax payable 392 742 326 951 16 611 120
Trade and other 17 945 669 19 903 935 17 491 685
payables
Current portion of 172 318 332 571 -
long-term borrowings
Bank overdraft 2 793 189 3 411 298 -
Dividend payable - - 5 000 000
Other current 20 961 499 20 090 613 -
liability
42 265 418 44 065 368 39 102 805
Total liabilities 44 904 542 49 837 835 39 102 805
Total equity and 85 775 763 89 151 603 55 691 781
liabilities
Net asset value per 20,21 19,44 66,36
share (cents)
Net tangible asset 7,77 9,40 62,82
value per share
(cents)
Condensed Income Statement
Reviewed Reviewed Audited
Figures in Rand Aug 2008 Feb 2008 Feb 2007
Revenue 113 644 767 75 530 794 209 470 633
Cost of sales (80 953 573) (57 966 779) (149 527 193)
Gross profit 32 691 194 17 564 016 59 943 440
Other income 289 148 315 097 97 129
Operating expenses (37 660 059) (18 243 568) (28 724 110)
Operating (4 679 718) (364 455) 31 316 459
profit/(loss)
Investment revenue 1 747 202 1 689 362 1 901 553
Finance costs (1 212 959) (494 485) (125 328)
Profit on sale of 4 116 251 - -
property
Share of net profit of 2 462 847 734 739 -
associate company
Profit before taxation 2 433 622 1 565 161 33 092 684
Taxation 562 042 (126 950) (10 880 578)
Profit for the period 2 995 664 1 438 211 22 212 106
Number of shares
- Issued 202 222 222 202 222 222 25 000 000
- Weighted 127 550 685 117 356 469 25 000 000
Headline (0,88) 1,23 88,84
earnings/(loss) per
share (cents)
Earnings per share 2,35 1,23 88,85
(cents)
Calculation of
headline earnings
Net profit 2 995 664 1 438 211 22 212 106
attributable to
shareholders
Adjusted for:
(Profit) on sale of (4 116 251) - (1 487)
assets
Headline (1 120 586) 1 438 211 22 210 619
earnings/(loss)
Condensed Cash Flow Statement
Reviewed Reviewed Audited
Figures in Rand Aug 2008 Feb 2008 Feb 2007
Cash flows from
operating activities
Cash generated from 10 732 142 11 069 931 13 760 476
operations
Interest income 1 747 202 1 689 362 1 901 553
Finance costs (1 212 959) (494 485) (125 328)
Tax paid (16 218 378) (16 611 120) (4 800 540)
Net cash from (4 951 993) (4 346 312) 10 736 161
operating activities
Net cash flow from (41 959 084) (46 316 217) (2 717 647)
investing activities
Net cash flows from 17 940 794 21 074 137 (12 767 104)
financing activities
Total cash movement (28 970 283) (29 588 392) (4 748 590)
for the year
Cash at the beginning 26 177 094 26 177 094 30 925 684
of the year
Total cash at end of (2 793 189) (3 411 298) 26 177 094
period
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
Profit for the year - 22 212 106 22 212 106
Dividends - (10 000 000) (10 000 000)
Total changes - 12 212 106 12 212 106
Balance at 28 February 100 16 588 876 16 588 976
2007
Issue of share capital 21 286 580 21 286 580
Profit for the period 2 995 664 2 995 664
Total changes 21 286 580 2 995 664 24 282 245
Balance at 31 August 2008 21 286 680 19 584 540 40 871 221
Segmental analysis
Figures in Rand Aug 2008 Feb 2008 Feb 2007
Revenue
Biometric readers and 111 420 670 74 963 789 82 684 663
solutions
Biometric projects 2 224 097 567 005 126 785 970
113 644 767 75 530 794 209 470 633
Operating profit/(loss)
Biometric readers and 12 812 076 10 851 056 14 663 702
solutions
Biometric projects (2 067 538) (1 483 938) 24 703 694
Corporate and other (15 424 255) (9 731 573) (8 050 937)
(4 679 718) (364 455) 31 316 459
Notes to the balance sheet
Figures in Rand Aug 2008 Feb 2008 Feb 2007
1. Property, plant and
equipment
Land and buildings 4 678 256 8 996 488 -
Furniture and fixtures 649 525 516 619 561 561
Motor vehicles 505 765 549 050 635 619
Office equipment 56 163 51 790 81 707
IT equipment 938 242 1 006 913 2 226 153
Leasehold improvements - - 206 718
6 827 951 11 120 860 3 711 758
2. Investment in
associate
Shares at cost 16 612 534 16 569 910 -
Share of profit since 2 462 847 734 739 -
acquisition
19 075 381 17 304 649 -
3. Intangible assets
Computer software 4 585 141 1 355 600 -
Intellectual property 1 500 000 1 500 000 -
rights
Licence fees 17 252 263 20 244 909 -
23 337 404 23 100 509 -
COMMENTARY
INTRODUCTION
Set out above are the maiden reviewed financial results of Ideco as a listed
company in respect of the eighteen months ended 31 August 2008. The group`s
financial year was changed on 16 August 2007 from the end of February to the end
of August, and therefore these provisional results cover an eighteen month
period.
BASIS OF PREPARATION
The provisional financial information has been prepared in accordance with, and
containing the information required by, IAS 34: Interim Financial Reporting,
International Financial Reporting Standards, the International Financial
Reporting Interpretations Committee interpretations adopted by the Accounting
Practices Board, the South African Companies Act and the JSE Limited Listing
Requirements. The accounting policies adopted in the preparation of the
provisional financial information are consistent with those used to prepare the
financial statements for the year ended 28 February 2007 and the eighteen months
ended 31 August 2008.
The provisional financial information has been reviewed by BDO Spencer Steward
(Johannesburg) Incorporated and their unmodified review report is available for
inspection at the company`s registered office.
NATURE OF THE BUSINESS
Ideco is a South African company with over 40% black shareholding which has been
maintained from the company`s pre-listing days. The group business combines the
distribution of biometric devices and the provision of customised identity
management 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. Since the beginning of this business Ideco has maintained its market
position as number one distributor of biometrics in South Africa. In the last
few years, Ideco has been extending its reach throughout Sub-Saharan Africa with
direct sales to countries like Botswana, Ghana, Ivory Coast, Mozambique,
Namibia, Nigeria and Zimbabwe. The interest stimulated in these markets is
leading to the establishment of solid distribution channels for Ideco`s products
and solutions.
Ideco`s solutions range from systems such as forensic Automated Fingerprint
Identification System ("AFIS"), national identity and travel documents, drivers`
licences and fingerprint bureau services to physical and computer access
control.
Ideco runs its operations through four wholly owned subsidiaries:
* Ideco Biometric Security Solutions (Pty) Limited ("IBSS") is the sole supplier
of Sagem biometric products in South Africa. IBSS distributes and supports
Sagem`s fingerprint scanners for access control and time-and-attendance
solutions through its partner network which covers the entire country.
* Ideco Technologies (Pty) Limited delivers large-scale biometric and identity
management projects which typically range from 12 to 60 months in duration.
* Ideco Biometrix (Pty) Limited supplies biometric equipment to the public
sector on contracts administered by the State Information Technology Agency and
the Electronic Communications Security Company. This equipment ranges from
physical and logical access control scanners to forensic fingerprint acquisition
stations.
* Ideco AFISwitch (Pty) Limited operates a system developed by Ideco to provide
automated criminal background checks to the private sector and members of the
public in terms of an agreement with the South African Police Service ("SAPS").
Ideco also has an investment (30%) in South Africa`s biggest background
screening business - Kroll Background Screening (Pty) Limited ("Kroll"). Kroll
has been providing personnel screening services for the last 20 years to
recruitment agencies, industry and government departments.
FINANCIAL OVERVIEW
Balance sheet
Property, plant and equipment increased from R3,7 million at 28 February 2007 to
R6,8 million at 31 August 2008, mainly due to the acquisition of office space in
Centurion. Details of the investment in an associate and intangible assets are
contained in a note to the interim financial statements. The licence fees of
R17,3 million referred to in note 3 is in respect of a liability to Sagem, which
entitles Ideco AFISwitch to make use of the SAPS AFIS. The payment of this
amount is part of Ideco Afiswitch`s agreement with SAPS regarding the criminal
background checking service. This amount will be amortised over the remaining
period of the agreement with SAPS.
Inventories mainly consist of biometric readers held in IBSS - the subsidiary
focused on the access control and time & attendance business. The inventory
increased at 31 August 2008 compared to 28 February 2007 to R11,1 million due to
the higher trading activity in IBSS.
The non-current liability of R2,6 million is a bond registered over the
property in Centurion. The directors estimate that the current market value of
this property is in excess of R3,0 million.
Trade and other payables remained constant in comparison to 28 February 2007.
The other current liability of R20,9 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 by the criminal
background checking service. It is expected that repayment will commence in the
first quarter of 2009.
Income statements
IBSS continued to show excellent growth. Annualised revenue was 103% higher than
the previous year. Annualised operating profit increased by 187%, despite lower
margins being achieved due to the weakening of the Rand against the Euro.
Revenue generated by Ideco Technologies, 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.
Revenue earned by Ideco Biometrix was lower than the previous reporting period,
due to a delay in government procurement.
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 in the
first quarter of 2009.
CAPITAL COMMITMENTS
There are no capital commitments that have been approved by the directors as at
the date of this report.
PROSPECTS
Ideco Biometric Security Solutions
It is expected that the strong growth in this division will continue fuelled by
growing demand in South Africa and sales extension in Sub-Saharan Africa.
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 a positive 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.
Ideco Technologies
Two five-year projects that is expected to contribute significantly to revenue
over the contract periods have been awarded to Ideco. A pilot for the bigger
project was successfully completed in September 2008. It is expected that the
further roll-out of this project will commence at the end of the second quarter
of 2009. The second project, which is the issuing of drivers` licences in
Namibia, will commence in January 2009. It is estimated that a total of 200 000
drivers` licences will be issued over the initial contract period of five years.
Ideco Technologies is awaiting the adjudication of several large tenders, which,
if awarded to Ideco, will increase the budgeted earnings for the years ending 31
August 2009 and beyond.
Ideco Biometrix
Revenue from biometric equipment supplied to Government departments is expected
to show modest growth compared to the 18 months ended 31 August 2008. The
majority of these sales will only reflect in the second half of Ideco`s
financial year ending 31 August 2009.
Ideco AFISwitch
It is expected that the criminal background checking service will run at full
capacity by April 2009. The full implementation of the service has been hampered
by delays, but the directors are confident that major matters delaying the
implementation have been addressed. The roll-out of the service to re-sellers
and to more than 350 drivers` licence testing stations across South Africa is
currently in progress for the criminal background screening of applicants for
Professional Drivers Permits. On average, a total of 1 700 such criminal record
checks is required per day, which takes up more than 50% of the system`s current
capacity.
As a result of the further delays in implementing the service, Ideco AFISwitch
will produce the major part of its budgeted profit for the year ending 31 August
2009 in the second half of the financial year.
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. The
capacity of the system will be upgraded during the first six months of 2009 to
cater for the established and growing demand.
Furthermore, in response to demand, Ideco has established 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.
Longer term prospects
At the time of listing, it was expected that the financial year ending 31 August
2009 would be the first full year of reporting on all Ideco`s business
offerings. In Ideco`s trading statement dated 15 April 2008, it was reported
that the directors were confident that forecast earnings per share for the year
ending 31 August 2009 will be met. As a result of delays referred to in the
trading statement and above, it is now expected that only the second half of the
year ending 31 August 2009 will reflect the full impact of all services and
products offered by Ideco. The biometric infrastructure roll-out will be
completed by the end of the first quarter of 2009. The longer term outlook for
the year ending 31 August 2010, remains very positive, without taking into
account any new products and projects currently under development.
POST BALANCE SHEET EVENTS
There are no significant events to report on.
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.
By order of the board
Vhonani Mufamadi HB Aucamp
CEO CFO
CORPORATE INFORMATION
Executive directors: V Mufamadi (CEO); HB Aucamp (CFO)
Non-executive directors: AX Sisulu; MF 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: DLA Cliffe Dekker Hofmeyr Inc
Designated advisor: QuestCo Sponsors (Pty) Limited
www.ideco.co.za
Date: 28/11/2008 16:30:01 Produced by the JSE SENS Department.
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