| Wed 14 Mar 2001, 0:00 | | Idion - Financial Results 10 Months Ended 31 Decem |
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IDION Technology Holdings Limited
Registration number 1998/ 013846/ 06
("IDION" or "the Group")
Financial Results for the ten months ended 31 December 2000
Highlights:
Period under review is for ten months, including nine months of Vision
Solutions. Comparative figures have been restated pro rata to reflect a
ten-month trading period.
* Excellent performance from Vision Solutions
* Management team further strengthened
* Adjusted headline earnings
per share Up 54% to 33,0c (comparative:21,4c)
* Turnover Up 358% to R196,4m (comparative:R42,9m)
* EBITDA Up 115% to R38,0m (comparative:R17,6m)
* Operating profit before
goodwill amortisation Up 96% to R33,2m (comparative:R16,9m)
* 89% of turnover generated offshore (comparative: 55%)
* Post year-end: launch of SYMBIATOR v3.0 on 15 March
Nicolaas Vlok, CEO of IDION, commented:
"IDION's first year in the global arena was marked by significant growth and
pleasing results. March 2000 marked a new era for the IDION Group, as it made
the transition from an international company to a global player through its
acquisition of Vision Solutions. I am delighted with Vision Solutions'
excellent contribution to the Group and am confident that the strategies now in
place are set to positively impact the Group's future."
14 March 2001
Enquiries:
IDION Technology Holdings Ltd. Tel: +27 (0)11 517 1500
Nicolaas Vlok, CEO
Willem Richard, Group Financial Director
Corni Arnold, Corporate Communications Director
College Hill Tel: +27 (0)11 447 3030
Tom Allison
Julia Kerr
Background Information
IDION Technology Holdings is a listed enterprise software company, consisting
of two main operating subsidiaries, namely Vision Solutions Inc. ("Vision
Solutions") and IDION.Business Solutions Group (Pty) Ltd. ("IDION.BSG").
Vision Solutions is a leader in the information availability market, providing
information availability solutions which allow continuous access to
mission-critical information.
IDION.BSG is an enterprise software e-services business focused on the
development and implementation of solutions designed to enable organisations to
extract, manipulate and present information to its internal processes and
external clients through a multitude of electronic interfaces.
Chairman and Chief Executive Officer's Review:
IDION's first year in the global arena was marked by excellent growth and
pleasing results following the successful acquisition and integration of Vision
Solutions. During the ten-month period under review, including only nine
months of Vision Solutions ("the period under review") the businesses of IDION
Software and Vision Solutions were successfully merged, realising significant
benefits.
Group turnover during the period increased by 358% to R196,4m (comparative:
R42,9m). Operating profit, before goodwill amortisation, was up 96% to R33,2m
(comparative: R16,9m), generating adjusted headline earnings (see definition
under Key Financial Highlights, Taxation) for the ten-month period of R36,0m
(comparative: R15m), a 140% increase on the comparative ten-month period. The
adjusted headline earnings per share is up 54% to 33,0c from 21,4c for the
comparative period.
Global alignment of IDION's businesses was achieved, by refining strategy,
relocating and appointing key management to the Group's global operations and
winning further contracts with international, blue-chip companies. In
addition, IDION has aligned the financial year-end of its global businesses to
31 December. In summary, the ten months under review have been another
successful period of global expansion for the IDION Group despite challenging
market conditions.
Vision Solutions brought significant proprietary technology and a
well-established international sales channel to the Group. This combined with
the successful implementation of the new management strategies resulted in
Vision Solutions' remarkable return to profitability. Today more than 1,500
customers worldwide, including 44% of the US Fortune 100 companies are
utilising Vision Solutions' products and services. Vision Solutions has to
date sold more than 4,000 licenses in more than 40 countries.
Vision Solutions won several awards during the period under review.
Significantly it was included in the prestigious Deloitte & Touche 2000
Technology Fast 50 list for the fourth consecutive year for Southern
California. The Group strongly believes this award reflects its commitment and
dedication to providing superior technology, combined with providing innovative
products to global customers.
In line with the Group's strategy, the management team has been strengthened
and a dynamic and global team is in place. In the period IDION appointed
Willem Richard as the Group Financial Director and at Vision Solutions Tim
Keithahn as Chief Financial Officer, Alan Arnold as Executive Vice President
Engineering and Rob Dobson as Executive Vice President Marketing and Business
Development. The management team at IDION is recruited from world-class
companies including Hewlett-Packard, Intel, PriceWaterhouseCoopers, Naspers,
Arthur Andersen, Cap Gemini and Ernst & Young.
The Group would like to thank all employees for their commitment and endeavours
during the period under review, and all stakeholders for their support.
Key Financial Highlights:
Turnover:
Group turnover increased by 358% to R196,4m (comparative: R42,9m).
Offshore-generated turnover has exceeded the Group's forecasts to 89% of Group
turnover and IDION continues to offer a strong hedge against the Rand. During
the period annuity-based income contributed 22% to the Group's turnover.
Breakdown of Turnover ( R '000 )
Americas EMEA Asia-Pacific Total
Product Licence Revenue 75,415 34,281 8,227 117,923
Support & Maintenance
(on product licence
revenue) 34,271 9,589 2,730 46,590
Professional Services
& Education 6,856 24,311 686 31,853
Total 116,542 68,181 11,643 196,366
Operating profit before goodwill amortisation:
Group operating profit, before goodwill amortisation, increased by 96% to
R33,2m. As a result of the acquisition of Vision Solutions, the Group sales
model and product mix has changed. Compared with the prior period, the gross
margin percentage increased from 79% to 86% and the net operating profit
percentage reduced from 39% to 17%.
Goodwill amortisation:
In previous Group acquisitions, IDION recorded purchased goodwill by way of a
reduction against share premium. In line with international accounting
practice and as stated in the Group's last interim results, goodwill is now
amortised and charged against income over periods ranging from one to seven
years. In the period under review, goodwill of R115,0m, mainly arising from
the acquisition of Vision Solutions, was amortised. A one-time charge of
R58,8m of the R115,0m was written off in the period under review in accordance
with prescribed accounting standards.
Taxation:
Changes in accounting standard 'AC 102-Income Taxes' has affected the
accounting treatment of deferred tax on the acquisition of subsidiaries with
assessed tax losses. While this has no impact on the cash position of the
Group, a deferred tax charge of R13,1m has been rewarded in the income
statement on the realisation of the assessed loss. As at 31 December 2000 the
Group has available assessed losses of R20,5m in respect of Vision Solutions.
To reflect the impact of the accounting changes for assessed losses on the
financial results, an adjusted headline earnings per share number (headline
earnings, excluding the effect described above) for the ten months ended 31
December 2000 has been calculated. The adjusted headline earnings per share
number amounted to 33,0 cents (comparative 21,4 cents).
The Group's effective tax rate for the period under review, after adding back
the amortisation of goodwill was 16%.
Profit/(Loss) for the financial period:
After goodwill amortisation of R115,0m, an attributable loss of R83,9m was
incurred for the ten months to 31 December 2000. Adjusted headline earnings
amounted to R36,0m, an increase of 140% over the comparative period.
Research and development:
Research and development costs comprised 15% (R28,8m) of turnover. The Group
has further continued its conservative approach of not capitalising any
research and development costs.
Debtors:
As previously stated, Vision Solutions' historically has high December sales.
As a result, trade debtors was R109,5m at 31 December 2000. However, in
January and February 2001 R53,5m was collected and the debtor days figure has
significantly improved to currently stand at 105 days.
Business drivers:
Gartner research claims that the computer system at a typical Fortune 1000
company goes down an unpredicted, or unscheduled, nine times per year. On an
average "outage" the system is inoperable for four hours, at an average cost of
$330,000. This unscheduled downtime can cost companies nearly $3m per year.
Vision Solutions focuses on delivering high availability and data
transformation solutions that address these problems.
META Group forecasts that by 2004/2005, 40% (currently 7%) of Global 2000
companies will have transformed into information driven businesses.
Furthermore, Forrester estimates that online business will grow to $1.3
trillion by 2003, which puts into perspective the potential global market for
Vision Solutions.
IDION's future as a global business focused on the high availability and data
transformation arena is closely linked to increasing dependence on computer
resources in all aspects of today's business environment. IDION is committed
to achieving its goal of sustaining its position as a market leader, and is
confident that it will increase its market share.
In today's global business environment, accurate and up-to-date information is
vital. Disparate islands of information exist within large enterprises and the
need for application integration and collaboration will lead to substantial
growth in this market. IDION.BSG is well poised to benefit from this.
Operational Review:
Vision Solutions Inc.:
Vision Solutions' significant increase in revenue and return to profitability
was achieved as a result of an increased demand for Vision Solutions' products,
continued product enhancement and innovation, a dedicated approach to sales and
marketing, a focused approach on customer support, a disciplined approach to
cost management and the dedicated commitment of the strengthened management
team.
Vision Solutions' turnover in the nine-month period under review increased by
US$6.4m to US$23.3m, an increase of 38% compared to the previous nine-month
period. Net operating profit, before amortisation and tax, increased to
US$4.8m from a loss making position of US$690,000.
Vision Solutions retained its IBM Premier Business Partner status and the
strategic relationship with IBM continues to flourish. Vision Solutions is
also an All Star partner in development with IBM. IBM currently distributes
Vision Solutions' products in 16 countries. Other strategic alliances include
Microsoft, J.D. Edwards, Oracle, Informix Software, Midas-Kapiti, Sybase and
Baan.
Vision Solutions' high availability and data transformation offering is
currently available on the iSeries (AS/400) and the Group intends to have UNIX
and LINUX offerings available during 2001. Vision Solutions' product offering
on Microsoft Windows Server platform is scheduled for release in the first half
of 2002. These will considerably enhance the Group's offerings in the high
availability and data transformation marketplace.
Sales and Marketing:
Vision Solutions has prioritised its sales and marketing disciplines within its
sales channel and as a result, has enjoyed considerable success in the period
under review. This has lead to further international expansion with regional
offices now in Luxembourg, Italy, Germany, United Kingdom, South Africa,
Panama, Malaysia, Japan and the USA.
Further emphasis was placed on the channel sales model thereby enhancing
service to customers, and changes will continue to be implemented throughout
2001 to increase revenues.
Professional Services: Consulting, Support and Educational Services:
Throughout 2000, the Professional Services team focused on improving its
offering to Vision Solutions' customers and channel partners. The organisation
guides companies through the jungle of data management by providing the
expertise necessary for integration of Information Availability Management into
its business while offering turnkey solutions for on-going management.
Engineering and Research:
During the period under review, the Engineering and Research Technology teams,
under the new leadership of Alan Arnold, EVP of Engineering, experienced
significant improvements. These include new and robust development processes,
additional management and developers, and a significant investment in the
Quality Assurance organisation.
Products:
Vision Solutions offers a complete range of innovative products focused on high
availability and data transformation. High availability eliminates the lost
productivity from scheduled and unscheduled system outages. Risk management is
a key driver in many organisations today, and Vision Solutions' software helps
to mitigate against this risk.
Vision Suite - Enterprise High Availability:
Vision Suite clears a path for information to be shared throughout the company,
enabling a continuous availability strategy. In the past, this strength was
focused on the iSeries (AS/400) systems from IBM. Vision Solutions is
currently developing single and cross platform High Availability solutions that
will work on multiple platforms, operating systems and databases. This will
further enhance Clustering initiatives. Vision Solutions is pleased with the
results of the research and development carried out during the period under
review for these advanced solutions.
SYMBIATOR(r) v.3.0 - Enterprise Data Sharing:
SYMBIATOR(r) v.3.0 has a cross-industry focus; it can be used in any
environment where there is a need to share data between disparate, or
non-disparate, systems or databases. It enables more business opportunity and
efficiency by facilitating bi-directional, cross platform sharing of
information between most e-commerce servers, data warehouses/datamarts, or
application servers. It works across all major databases, including IBM,
Microsoft, Oracle, Progress Software, Informix and Sybase. SYMBIATOR(r) v.3.0
is a powerful, scalable tool that can bridge multiple relational databases with
heterogeneous environments for access to mission and business-critical data.
Management:
Vision Solutions has created a seasoned management team, with an average of 20
years of experience. New additions to the team during the period under review
include Tim Keithahn, Chief Financial Officer, 10 years of corporate finance
experience; Rob Dobson, EVP Marketing and Business Development, 20 years
experience in technology marketing and Alan Arnold, EVP Engineering, previously
at Cap Gemini, Ernst & Young U.S. LLC with 20 years of experience. In addition
to this, Dick Bains was appointed as a Technical Strategist. Dick is one of
iSeries' (AS/400) original developers and foremost technology executives from
IBM.
IDION.BSG:
During the period under review the South African services division, IDION.BSG,
did not perform in line with forecasts.
IDION.BSG concluded its transition from a third party product implementation
business to a dedicated enterprise software e-services business. It has taken
longer than expected to implement this process, but the skills set within the
division is now e-services focused. In Gauteng, the division's results were
affected by the integration of the business' new management team and
non-recurring project management difficulties. As a result, the operating loss,
before goodwill amortisation, amounted to R800,000.
Turnover was negatively impacted by the discontinuation of hardware and third
party software products. The turnover for the division was R22,1m, however, if
hardware and third party software products are excluded from the comparative
period, turnover for the services unit would have increased by 38%.
The client base was strengthened by the commitment to and focus on process and
methodology maturity within the business. The appointment of IDION.BSG as a
Microsoft Certified Solution Provider (MCSP) with partner status in July 2000
was a significant milestone. IDION.BSG continues to retain one of the highest
densities of Microsoft certified skills in Africa and some significant
contracts wins during the period include Ernst & Young and Accenture.
The company has aligned its e-services offering with Microsoft's
(Microsoft.NET) strategy and management is confident that the group's existing
understanding of Microsoft will best position IDION.BSG to become a significant
player in the e-services environment.
IDION.BSG has developed Neptune software for the global shipping marketplace,
cargosuite.com, which offers a logistics delivery platform and global network.
In line with the Group's stated objective of developing profitable
partnerships-based revenue streams, this synergistic venture will provide
annuity revenue and international opportunities. IDION.BSG also developed an
integrated document management, work flow and call centre application for part
of the Naspers group, resulting in substantial cost savings and improved
customer service.
The company has identified the problem areas within the division and has taken
corrective actions. The announcement of a new Managing Director for the South
African operations will be made shortly.
Group Prospects for 2001:
The slowdown in the global economy remains a concern. The IDION board is
confident that the significant progress at Vision Solutions will enable the
business to grow in line with the prevailing economic climate. However, while
the current business pipeline indicates a positive outlook, our ability to
close potential licence sales could be delayed if the economic climate further
deteriorates.
Management is confident that the company's new focus and initiatives, combined
with its existing understanding of Microsoft's technology will best position
IDION.BSG to grow in the e-services environment.
The Group is committed to further growth from utilising its intellectual
capital, strengthening and adding to its strategic industry and customer
partnerships/alliances, and thereby, continuing to position itself as an
innovative industry leader in its specific areas of focus.
Financial Statements:
An unqualified audit report has been issued on the financial position of the
Group at 31 December 2000 and the results of its operations and cash flow for
the year ended.
The financial statements are prepared in accordance with and comply with the
statements of generally accepted accounting practice.
The accounting policies of the Group are consistent in all material respects
with those applied in the previous year.
Key Financial Statements
CONSOLIDATED INCOME STATEMENT
31 December Previous 29 February
2000 year 2000
pro rata
R'000 R' 000 R'000
Audited Unaudited Audited
(10 months) (10 months) (12 months)
Revenue 196,366 42,860 51,432
- Bought-in Software 2,730 11,707 14,048
- Licenses
(Proprietary software) 120,926 14,939 17,927
- Services & Consultation 72,710 16,214 19,457
Cost of sales 28,079 10,366 12,439
- Bought-in Software 2,113 9,023 10,828
- Licenses
(Proprietary software) 1,451 193 232
- Services & Consultation 24,515 1,150 1,379
Gross profit 168,287 32,494 38,993
Distribution & marketing
costs 30,819 2,794 3,353
Administrative expenses 67,948 8,799 10,559
Research and development 28,815 2,938 3,526
Other operating expenses 7,527 1,036 1,243
Operating profit before
Amortisation 33,178 16,927 20,312
Amortisation of Goodwill 114,986 - -
Operating profit/(loss) (81,808) 16,927 20,312
Net investment income 1,554 716 859
Profit/(loss) before
taxation (80,254) 17,643 21,171
Taxation 3,672 2,602 3,122
Net profit/(loss)
for the period (83,926) 15,041 18,049
Earnings per share (cents)
- Basic (77.00) 21.39 25.67
- Fully diluted (74.54) 13.48 16.17
Headline earnings per
share (cents)
- Basic 21.01 21.39 25.67
- Fully diluted 20.35 13.48 16.17
Adjusted Headline
earnings per share
(cents)* 33.02 21.39 25.67
Weighted average number
of shares 108,998,645 - 70,327,424
Fully diluted
number of shares 115,586,451 - 111,644,689
* Includes the elimination of deferred tax charged on the realisation of
acquired assessed losses per AC102-Income Taxes
CONSOLIDATED BALANCE SHEET
31 December 29 February
2000 2000
R'000 R'000
Audited Audited
Assets
Non-current assets 404,056 16,681
Property, plant and equipment 14,769 3,627
Goodwill 380,453 10,661
Deferred taxation - 176
Loans granted 8,834 2,217
Current assets 151,068 32,425
Taxation asset 5,261 359
Short term advances 353 611
Prepayments and deposits 6,335 2,415
Trade and other receivables 109,548 18,743
Cash and cash equivalents 29,571 10,297
Total assets 555,124 49,106
Equity and liabilities
Capital and reserves 421,919 35,421
Share capital 1,126 856
Share premium 421,480 10,518
Other reserves 59,192 -
Retained earnings (59,879) 24,047
Non current liabilities 39,513 -
Deferred tax liabilities 38,587 -
Interest-bearing borrowings 926 -
Current liabilities 93,692 13,685
Trade accounts payable and
provisions 37,091 3,598
Current portion of long-term
borrowings 430 -
Short term borrowings 12,008 -
Amounts due to vendors - 9,500
Taxation 69 -
Net deferred income 44,094 587
Total equity and liabilities 555,124 49,106
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Other Retained Total
capital premium reserves earnings
Balance at 1 March 1999 662 9,054 - 5,998 15,714
Net profit for the period - - - 18,049 18,049
Issue of shares during
the period 126 31,533 - - 31,659
Issue of preference shares
during the period 68 16,932 - - 17,000
Write-off of goodwill - (47,000) - - (47,000)
Balance at 29 February 2000 856 10,519 - 24,047 35,422
Net profit/(loss) for
the period - - - (83,926) (83,926)
Issue of shares during
the period 338 427,893 - - 428,231
Currency translation reserve - - 59,192 - 59,192
Preference shares redeemed (68) (16,932) - - (17,000)
Balance at 31 December
2000 1,126 421,480 59,192 (59,879) 421,919
CONSOLIDATED CASH FLOW STATEMENT
31 December 2000 29 February 2000
R'000 R'000
Audited Audited
Cash flows from operating activities
Cash generated from/
(utilised in) operations (10,951) 11,246
Interest received 2,464 1,004
Interest paid (910) (145)
Normal tax paid (1,652) (5,888)
Translation difference 332 -
Net cash inflow/(outflow) from
operating activities (10,717) 6,217
Cash flows from investing activities
Additions to property,
plant and equipment (7,715) (3,010)
Proceeds from sale of assets - 25
Acquisition of subsidiary (365,268) (277)
Investments - -
Loans granted (6,475) (97)
Net cash outflow from
investing activities (379,458) (3,359)
Cash flows from financing activities
Proceeds from issue of
ordinary shares 411,231 1,195
Repayment of long-term borrowings (1,780) -
Net cash inflow from financing
activities 409,451 1,195
Net increase in cash and
cash equivalents 19,276 4,053
Cash and cash equivalents at
beginning of the period 10,296 6,243
Cash and cash equivalents at
end of the period 29,572 10,296
CASH FLOWS GENERATED FROM/(UTILISED IN) OPERATIONS
31 December 2000 29 February 2000
R'000 R'000
Audited Audited
(10 months) 12 months)
Profit/(loss) before taxation (80,254) 21,172
Adjustments for:
Depreciation 4,782 865
Profit on sale of fixed assets 126 (8)
Amortisation 114,986 -
Net investment and finance income (1,554) (859)
Unrealised exchange profits (942) -
Operating income before working
capital changes 37,144 21,170
Working capital changes (48,095) (9,924)
Net movement in deferred
income/expenses (1,425) 412
Net movement in trade and
other receivables (28,523) (9,868)
Net movement in trade and other
payables (18,147) (468)
Cash generated from/(utilised in)
operations (10,951) 11,246
