| Wed 12 Oct 2011, 12:50 | | SDH - SecureData Holdings Limited - Reviewed provisional financial results for |
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SDH
SDH
SDH - SecureData Holdings Limited - Reviewed provisional financial results for
the year ended 31 July 2011
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 2011
Revenue by geography
South Africa 47%
UK 45%
Others 8%
Revenue by business activity
Services 24%
Software 42%
Hardware 34%
Annuity revenue vs New
Annuity 54%
New 46%
Condensed Consolidated Statement of Comprehensive Income
(for the twelve months ended 31 July 2011)
Reviewed Audited
twelve months twelve months
ended ended
31 July 2011 31 July 2010
R`000 R`000
Revenue 406 558 458 953
Earnings before interest, taxation,
depreciation and amortisation (EBITDA)
and other financial items 17 563 57 170
Depreciation and amortisation (12 791) (14 342)
- Depreciation (3 139) (4 044)
- Amortisation (9 652) (10 298)
Profit from operations 4 772 42 828
Finance income 548 400
Finance costs (10 161) (22 079)
- Interest paid (7 197) (11 588)
- Foreign exchange losses on loan to subsidiary (2 964) (10 491)
Other financial items (90) 2 793
(Loss)/Profit before taxation (4 931) 23 942
Taxation 912 (7 994)
- Normal taxation 2 144 (7 994)
- Secondary Taxation on Companies (1 232) -
(Loss)/Profit for the year (4 019) 15 948
Attributable to:
- owners of the parent (3 923) 17 044
- minority interest (96) (1 096)
(Loss)/Profit for the year (4 019) 15 948
(Loss)/Profit for the year (4 019) 15 948
Foreign exchange conversion movements (2 537) (9 884)
Total comprehensive (loss)/income for the year (6 556) 6 064
Attributable to:
- owners of the parent (6 053) 8 999
- minority interest (503) (2 935)
Total comprehensive (loss)/income for the year (6 556) 6 064
Earnings per share (cents) (1,7) 7,5
Diluted earnings per share (cents) (1,7) 7,5
Weighted average number s of shares on which
- earnings per share is based (`000) 229 900 228 700
- diluted earnings per share is based (`000) 229 900 228 700
Number of ordinary shares in issue (`000) 246 320 246 320
Reconciliation between earnings and headline
earnings
(Loss)/Profit for the year attributable to
ordinary shareholders (3 923) 17 044
Loss on disposal of assets 11 26
Headline earnings (3 912) 17 070
Headline earnings per share (cents) (1,7) 7,5
Reconciliation between earnings and adjusted earnings
- (Loss)/Profit for the year attributable to
ordinary shareholders (3 923) 17 044
- Amortisation (after taxation) 6 949 7 414
- Derivatives (after taxation) 65 (2 011)
- Foreign exchange losses on group loans
(after taxation) 2 134 7 554
Adjusted earnings 5 225 30 001
Adjusted earnings per share (cents) 2,3 13,1
Condensed Consolidated Statement of Financial Position
(at 31 July 2011)
Reviewed Audited at
31 July 2011 31 July 2010
R`000 R`000
ASSETS
Non-current assets 208 467 221 607
Property, plant and equipment 6 016 7 895
Goodwill 126 562 129 541
Intangible assets 38 640 48 645
Deferred taxation 37 249 35 526
Current assets 172 147 202 037
Inventories 6 088 3 592
Trade and other receivables 128 484 129 775
Taxation 736 634
Cash and cash equivalents 36 839 68 036
Total assets 380 614 423 644
EQUITY AND LIABILITIES
Equity 168 773 191 157
Share capital 246 246
Share premium 118 900 118 900
Treasury share reserve (23 336) (19 699)
Share-based payment equity 3 322 3 957
Foreign currency translation reserve (24 561) (22 431)
Retained earnings 83 614 99 093
Equity attributable to owners of the parent 158 185 180 066
Minority interest 10 588 11 091
Non-current liabilities 13 202 59 806
Long-term loans 2 691 46 664
Deferred taxation 10 511 13 142
Current liabilities 198 639 172 681
Trade and other payables 139 108 138 700
Taxation 1 264 10 828
Derivative financial instruments 4 372 4 282
Bank overdrafts 9 679 -
Short-term loans 44 216 18 871
Total equity and liabilities 380 614 423 644
Net asset value per share (cents) 64,2 73,1
Net asset value per share net of treasury (cents) 69,3 77,5
Condensed Consolidated Statement of Changes in Equity
(for the twelve months ended 31 July 2011)
Reviewed Audited
twelve months twelve months
ended ended
31 July 2011 31 July 2010
R`000 R`000
Share capital 246 246
Balance at beginning of the year 246 242
Issued during the year - 4
Share premium 118 900 118 900
Balance at beginning of the year 118 900 115 234
Issued during the year - 3 666
Treasury share reserve (23 336) (19 699)
Balance at beginning of the year (19 699) (22 215)
Own shares acquired by subsidiary (3 637) -
Own shares sold by subsidiary - 2 516
Share-based payment equity 3 322 3 957
Balance at beginning of the year 3 957 3 096
Share-based payment transactions during the year (635) 861
Foreign exchange conversion reserve (24 561) (22 431)
Balance at beginning of the year (22 431) (14 386)
Foreign exchange movements during the year (2 130) (8 045)
Retained earnings 83 614 99 093
Balance at beginning of the year 99 093 82 049
(Loss)/Profit for the year (3 923) 17 044
Dividends paid (11 556) -
Equity attributable to owners of the parent 158 185 180 066
Minority interest 10 588 11 091
Balance at beginning of the year 11 091 17 080
Recognised loss for the year (96) (1 096)
Reduction due to purchase by the parent - (3 054)
Foreign exchange movements (407) (1 839)
Total capital and reserves 168 773 191 157
Condensed Consolidated Statement of Cash Flow
(for the twelve months ended 31 July 2011)
Reviewed Audited
twelve months twelve months
ended ended
31 July 2011 31 July 2010
R`000 R`000
Cash flow from operating activities (3 641) 40 834
(Loss)/Profit before taxation (4 931) 23 942
Adjustments not affecting the flow of funds 21 977 33 962
Operating income before working capital changes 17 046 57 904
(Decrease)/Increase in working capital (443) 1 650
Cash generated from operations 16 603 59 554
(20 244) (18 720)
Finance income 548 400
Finance costs (7 197) (11 588)
Taxation paid (13 595) (7 532)
Cash flow from investing activities (2 380) (8 512)
Cash flow from financing activities (33 724) (18 537)
Proceeds from issue of shares - 3 670
Dividends paid (11 556) -
Own shares acquired by subsidiary (3 637) -
Own shares sold by subsidiary - 2 516
Loans repaid (18 531) (24 723)
(Decrease)/Increase in cash equivalents (39 745) 13 785
Foreign exchange movements in cash balances (1 131) (3 354)
Cash and cash equivalents at beginning of the year 68 036 57 605
Cash and cash equivalents at end of the year 27 160 68 036
Commentary
General Review
The group had a disappointing year as a result of a weak performance from
SecureData Africa which posted a loss in the second six months of the financial
year. SensePost performed according to expectation, and SecureData Europe
performed better than expected despite the continued uncertainty in the markets
in which both entities operate.
Group EBITDA reduced to R17,6 million (2010: R57,2 million) on revenues that
dipped to R406,6 million (2010: R459,0 million) reflecting an EBITDA margin of
4,3% (2010: 12,5%). The reduction in revenue and EBITDA was due to a poor sales
performance in SecureData Africa. Rand strength negatively impacted the group`s
revenues and earnings, affecting not only the rand translation of the group`s
sterling-based income but also by reducing the selling unit cost of products
sold in South Africa which are foreign-currency denominated.
Services revenues, the bulk of which are managed services, accounted for a
greater share of revenue (24%) than any other technology or product. Revenue
generated outside of South Africa increased to 53%, and annuity revenue
increased to 54%.
The calculation of earnings per share ("EPS") and headline earnings per share
("HEPS") incorporates the following items:
- a R9,6 million (2010: R10,3 million) charge for amortisation of intangible
assets created by the group`s prior acquisitions. This charge has no effect on
group cash flow;
- a R3,0 million (2010: R10,5 million) foreign exchange loss on intra-group
loans reflecting the difference in rand to sterling exchange rate between the
previous and current reporting closing dates. This expense is unrealised and has
no effect on group cash flow; and
- the net movement in derivative financial instruments of a R0,09 million loss.
(2010: R2,8 million profit) This includes unrealised foreign exchange forward
contracts, entered into to settle outstanding creditor payments by the group at
a time of great rand volatility.
Together, these non-operational and non-cash items affected EPS and HEPS by 4,0
cents. Adjusted EPS, which ignores these items but includes cash expenses such
as interest, reflects 2,3 cents per share (2010: 13,1 cents per share).
As reported in the 2010 annual report the company paid a dividend of 5 cents per
share on 22 November 2010 for a total cash outlay including STC of R12,8
million. The STC payable affected the EPS, HEPS and adjusted EPS by 0,5 cents.
During the year the group repurchased 3 820 277 shares in the market at a cost
of R3,6 million. This brings the total number of shares held in treasury to 17
925 000.
The combination of lower profits and problems with debtor collections in
SecureData Africa caused the group to breach one of the financial covenants
implemented by the long-term financier at 31 July 2011. The group paid all its
instalments on the loan when they became due. Through correspondence with the
financier they indicated it is unlikely that they will recall the total loan
while the group is up to date with instalments, however it is possible that they
may charge a penalty interest of up to 2% above the normal interest rate payable
on the loan, for the period during which the loan covenant is in breach. The
directors are confident the group will continue to meet all payments when they
become due over the remainder of the term of the loan.
At the end of July 2011 the group ended with R27 million in net cash and cash
equivalents, after the dividend payment and share buy-back, and total borrowing
of R46,9 million. In comparison with the six months ended 31 January 2011
inventory increased to R6,1 million on the back of a project in SecureData
Europe and debtors` days remained flat around 82 days. Management continues to
place particular emphasis on effective working capital management especially
debtors` collections in SecureData Africa.
No dividends have been declared for the year ended 31 July 2011.
Operational Review
SDH conducts operations through : SecureData Africa, SecureData Europe
(previously MIS-CDS) and SensePost. Previously the results of operations were
reported after a head office allocation but the results included herewith are
before any head office cost allocation. The comparative results have also been
similary restated, the effect of which is insignificant.
SecureData Africa
12 months to 12 months to
31 July 2011 Growth 31 July 2010
R`000 % R`000
Revenue 210 309 (21,6) 268 350
EBITDA (1 087) (102,5) 43 676
EBITDA margin (%) (0,5) (103,1) 16,3
SecureData Africa markets and distributes best-of-class information risk
management products in South Africa and across the rest of the continent.
As mentioned previously, SecureData Africa had a very tough year. Revenue
declined almost 22% with the concomitant decline in EBITDA and EBITDA margin. In
particular the Public Sector and Financial Services business units
underperformed as Government departments delayed the award of tenders and
financial institutions cut back on expenditure for new security projects. The
board took corrective measures including a full strategic and operational review
and instituting management changes at both the group and subsidiary level to
return the unit back to profitability. There is current evidence that demand is
improving in Financial Services, but the timing of Public Sector recovery
remains uncertain.
SecureData Europe
12 months to 12 months to
31 July 2011 Growth 31 July 2010
R`000 % R`000
Revenue 179 611 6,4 168 780
EBITDA 21 141 28,1 16 508
EBITDA margin (%) 11,8 20,3 9,8
12 months to 12 months to
31 July 2011 Growth 31 July 2010
GBP`000 %
GBP`000
Revenue 16 181 15,5 14 006
EBITDA 1 905 39,1 1 370
SecureData Europe remains one of the largest and independently-managed
information security solution providers in the United Kingdom.
In sterling SecureData Europe posted a credible 15,5% increase in revenue with a
strong 39,1% improvement in EBITDA with the EBITDA margin getting back into
double figures at 11,8%. This strong performance is not all reflected in the
rand results of the company due to the strengthening of the rand in relation to
sterling.
Management is confident that the company will continue to show sustainable
margin and earnings performance in the coming period.
SensePost
12 months to 12 months to
31 July 2011 Growth 31 July 2010
R`000 % R`000
Revenue 26 136 12,3 23 281
EBITDA 7 707 5,4 7 312
EBITDA margin (%) 29,5 (6,1) 31,4
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 internationally.
SensePost boosted revenue to R26,1 million and EBITDA to R7,7 million with a
slightly reduced EBITDA margin of 29,5% reflecting the specialist, high-value
nature of the company`s service offering. Almost a third of SensePost revenues
were generated outside of South Africa. The company continue to invest in the UK
operations.
The table below reconciles the divisional results back to the consolidated group
results:
12 months to 31 July 2011 12 months to 31 July 2010
Revenue EBITDA Revenue EBITDA
R`000 R`000 R`000 R`000
SecureData Africa 210 309 (1 087) 268 350 43 676
SecureData Europe 179 611 21 141 168 780 16 508
SensePost 26 136 7 707 23 281 7 312
Head office costs - (10 198) - (8 819)
Consolidation entries (9 498) - (1 458) (1 507)
Group results 406 558 17 563 458 953 57 170
Strategic Review
The Board has commenced with a strategic review of the group which should be
completed prior to the announcement of the next interim results. There is early
evidence that the management changes and corrective measures taken to restore
SecureData Africa to profitability will bear fruit.
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, 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. The results have been prepared on the
going concern basis.
Independent Review
Grant Thornton, SecureData`s independent auditor, has reviewed the condensed
consolidated financial statements contained in this provisional report and have
expressed an unmodified opinion on the provisional statements. Their review
report is available for inspection at the company`s registered office.
Post-Balance Sheet Events
The directors are not aware of any material matter or circumstance arising since
the end of the financial year-end up to the date of this report.
Directorate
Dean Brazier resigned as Chief Executive Officer of the group on 9 June 2011 and
Thabiso Moerane resigned as an independent non-executive director on 13 June
2011. Johan du Toit will fulfil the post of interim chief executive officer
until a permanent appointment is made.
For and on behalf of the Board
P R Pretorius J G du Toit
Chairman Financial Director and Interim Chief Executive Officer
12 October 2011
Directors
P R Pretorius# (Chairman), J G du Toit (Financial Director and Interim CEO),
A Aitken#, N Mthembu#, P Sneddon*
*Independent non-executive #Non-executive
Company secretary
Merchantec (Proprietary) Limited
Registered office
Nicol Main Office Park, 4 Bruton Road, Bryanston, 2021
(PO Box 4673, Rivonia, 2128)
Transfer secretaries
Computer share Investor Services (Proprietary) Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Sponsor
Merchantec Capital
www.securedataholdings.com
Date: 12/10/2011 12:50:35 Produced by the JSE SENS Department.
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