| Tue 7 Aug 2001, 0:00 | | Idion - Interim Results To 30 June 2001 |
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IDION Technology Holdings Limited
1998/ 013846/ 06
("IDION" or "the Group")
Interim Results for the Six Months Ended 30 June 2001
("the period under review")
Revenue up 6 % to R94,3m (R89,0m)
HEPS down 13% to -19,5c (loss17,3c)
R&D spend 25% of revenues (19%) up 37% to R23,7m (R17,3m)
Deferred revenue up 96% to R68,5m (R34,9m)
Maintenance revenue (annuity income) up 58% to R36,0m (R22,8m)
Offshore revenue 90% of total revenue (84%)
Goodwill written off R39,1m
Group cash generative from operations for the period
Pro-forma results have been prepared, for ease of comparison, to reflect the
full six-month reporting period, January to June 2000.
Interim results for the period ending June 2000:
included Vision Solutions results from 28 March 2000,
four months of the traditional IDION businesses and,
excluded Vision Solutions traditional weakest quarter, Q1
Nicolaas Vlok, Executive Director: Group CEO, commented:
"IDION announces these financial results in the most challenging information
technology spending environment in a decade. IDION, in conjunction with its
partners, made progress by achieving its business objectives during the
first half of the year. We continued to gain market share in our core high-
availability and replication markets and saw significant customer adoption
of our new product releases. The Group's primary focus is to ensure that
IDION continues to build a strong foundation for sustainable long-term
growth."
Willem Richard, Executive Director: Group Finance, commented:
"The Group achieved the lower end of its revised forecast range, generated
positive cash flows from operations and delivered comparative revenue growth
during a period which experienced lengthened customer sales cycles."
7 August 2001
Enquiries:
IDION Technology Holdings Ltd. Tel: +27 (0) 11 517 1510
Nicolaas Vlok, Executive Director: Group CEO
Willem Richard, Executive Director: Group Finance
Corn Arnold, Executive Director: Corporate Communications
ir@idion.com
www.idion.com
College Hill Tel: +27 (0) 11 447 3030
Julia Kerr
John Paul Waites
PROFILE AND GROUP STRUCTURE
IDION Technology Holdings is an information technology company listed on the
main board of the JSE Securities Exchange, South Africa. The company
consists of two wholly owned subsidiaries: Vision Solutions Inc. ("Vision")
and IDION Solutions (Pty) Ltd. ("IDION Solutions"), formerly named
IDION.BSG. Vision is a global leader in the development and marketing of
Enterprise Information Availability Management Solutions predominantly on
the IBM iSeries Server. IDION Solutions is a leading provider of business
optimisation, solutions and services using Microsoft technology.
INTRODUCTION
Group results, as previously announced, reflect the weakness in the global
economy and the resulting slow down in IT expenditure.
Staff retention levels remain high while a number of strategic appointments
were made during the period.
Due to the historic seasonality of Vision's operations only 30%-35% of
revenue is generated in the first half of the year.
Weighted average conversion rates have been calculated at R7.90/US$1 (2000
pro-forma: R6.68/US$1). The closing rate used for conversion purposes was
R8.05/US$1 (2000 pro-forma: R6.80/US$1).
FINANCIAL REVIEW
In line with management's revised expectations and historical first half
performance, the Group recorded a headline earnings loss of 19,5c (pro-
forma: loss 17,3c) during the period under review. Excluding currency
differentials, headline earnings would have shown a 0,2c improvement on the
pro-forma loss to 17,1c.
The Group revenue increased by 6% to R94,3m (pro-forma: R89,0m), including
Vision's international dollar-based revenue growth of 3%. Deferred revenue
rose by 96% to R68,5m (pro-forma: R34,9m). This is particularly pleasing as
it reflects the substantial increase in Vision's customer base and the
division's ability to grow annuity-based maintenance revenue.
Base annual annuity income (excluding any future new licence sales) is
currently estimated at R90m, at current exchange rates, for the next 12
months, representing a 29% increase over the comparative period. IDION
Solutions reported an 11% decline in service and third party product revenue
to R12,2m.
During the period, cost of sales increased by 35% to R20,1m (pro-forma:
R14,9m). This was largely attributable to the necessary investment in
additional key staff at Vision Solutions in the areas of support and
professional services, strengthening Vision's competitive advantage to
deliver superior customer service. It is anticipated that this investment
will better position the Group going forward.
Certain cost control measures were enhanced during the period and operating
expenses were below budget in most areas of the business. Nevertheless,
operating expenses for the period grew by 17% to R108,0m (pro-forma: R92,6m)
largely as a result of the planned expenditure on marketing initiatives at
Vision, certain once-off operating expenses and an increase in staff
necessary to support growth in line-of-business development activities in
the South African operations. In line with the Group's stated objective,
research and development (R&D) remained a key focus during the period and
IDION is committed to further investment in this area.
The Group generated cash from operations of R6,7m and management is
confident that IDION's positive cash position of R22,7m at 30 June 2001 is
sufficient to fund ongoing operational requirements for the foreseeable
future.
While management is satisfied with the recoverability of trade debtors,
currently at R96,7m, this position reflects a strong close to the period
when compared to June 2000.
SEGMENTAL ANALYSIS
Vision Solutions IDION Solutions
Rand Rand
30/06/2001 30/06/2000 30/06/2001 30/06/2000
6 months 6 months 6 months 6 months
Unaudited Pro-forma Unaudited Pro-forma
Revenue 84,859,888 69,441,606 12,173,602 19,526,174
HEPS contribution
(cents) -15,3 -21,1 -4,2 3,8
DIVISIONAL REVIEW
VISION SOLUTIONS
Management is pleased to report that the continued turnaround at Vision has
progressed amidst difficult trading conditions, with results in line with
the Group's June 2001 shareholder update. Vision achieved revenue growth of
3% to US$10,7m (pro-forma: US$10,4m) including maintenance revenue of
US$4,6m (pro-forma: US$3,4m).
The period was characterised by delayed decision-making, which resulted in a
lengthening of sales cycles, a trend consistent across the industry.
However, slow license sales during the period were largely offset by strong
annuity-based maintenance revenue as Vision's customer base increased
substantially over the past 12 months. The sales pipeline for the remainder
of the financial year is strong but Vision's ability to close these deals
will be dependent on the prevailing economic environment.
During the period under review, operating activities continued to yield
significant accomplishments and progress toward strategic objectives. While
cost control measures were enhanced, Vision continued the investment in
certain key focus areas, which resulted in the further enhancement of both
Vision's infrastructure and staff. In addition, further product
enhancements were completed, including the launch of SYMBIATOR V3.0 and the
alignment of Vision Suite with IBM's most recent OS/400 operating system
V5R1 - the first IBM High Availability business partner to achieve this.
Vision Solutions' Prospects
These initiatives combined with the continued strength of Vision's
partnership and strategic relationships, in particular IBM, positions Vision
well to capitalise on the increasing demand for information availability
worldwide. Vision continues to make progress towards its multiple platform
high availability solution and is geared for any improvement in the current
economic conditions and long-term growth in market share as the vendor of
choice for enterprise information availability.
IDION SOLUTIONS
IDION Solutions under performed for the period. Revenue and EBITDA
decreased respectively to R12,2m (pro-forma: R13,8m from services and R5,8m
of proprietary software sales and third party products from IDION Software)
and a loss of R6,1m (pro-forma: R6,5m). This was largely attributable to
weak sales combined with non-recurring project management difficulties.
Despite the disappointing financial performance, the period under review was
marked by a number of strategic achievements including: the further
implementation of the solutions framework, the introduction of strong
project management disciplines, incentive programmes, and the significant
strengthening of the management and sales teams.
Towards the latter half of the period, the South African operations were
consolidated into one reporting entity operating under one clearly defined
strategy. This has been positively received and positions IDION Solutions
well for the remainder of the current financial year.
IDION Solutions' Prospects
IDION Solutions' significantly enhanced and repositioned strategy is focused
on three key objectives: the importance of partnerships, annuity income and
solutions enhancement through research and development. This strategy is
aligned with Microsoft's new line of business model.
Through IDION Solutions' partnership initiative, the existing relationship
with Microsoft continues to strengthen. The return to R&D and the
identification of specific market focus solutions will result in substantial
value add.
A number of strong partnerships and strategic relationships have recently
been established, specifically MTN and IBM. In recognition of the growing
acceptance of handheld devices and the predominance of cellular phone
technology, the MTN partnership will unlock IDION Solutions' innovative
mobile information management offerings. The IBM partnership is focused on
IDION Solutions' ISO 9000 certification management tool and will be co-
marketed with IBM providing the hardware platform.
In view of IDION Solutions' revised solutions offering, annuity based income
is set to increase substantially in the medium-to-long term.
GROUP PROSPECTS
IDION's market gains are largely attributable to the strategic decisions and
acquisitions made during recent years, combined with the Group's
technological leadership in both services and software solutions.
Management believes that the economic problems impacting the industry are
unrelated to the fundamental shift in customer buying behaviour that
foretells an industry driven by information, built on an infrastructure
dominated by powerful, available servers, with application integration
provided by middleware software and services tied to the solution.
The IDION board is confident that the Group's progress towards sustainable
long-term growth will continue albeit under difficult trading conditions.
While some signs of improvement in the worldwide economic climate were
evident towards the end of the second quarter, management maintains a
cautious outlook and will continue with cost control measures. The Group
expects to achieve the lower end of its revised full year revenue guidance,
resulting in a slight to modest profit position by year-end.
STRATE
IDION is scheduled to move to the STRATE system on 13 August 2001.
Dematerialisation will begin on 13 August 2001, with electronic trading
commencing on 3 September 2001 and the first electronic settlement will be
taking place on 10 September 2001. From 10 September 2001 no paper scrip
will be accepted for settlement and therefore shareholders who have not yet
entered the STRATE environment should appoint a Central Securities
Depository Participant as soon as possible.
ACCOUNTING POLICIES
The consolidated interim financial statements have been compiled in
accordance with IAS 34 Interim Financial Reporting. The accounting policies
applied in the preparation of the interim financial statements are
consistent with the policies adopted with the audited financial statements
for the period ending 31 December 2000.
Revenue Breakdown
Rand
Americas EMEA Asia-Pacific Total
Proprietary Software 24,011,805 15,268,556 3,248,741 42,529,102
Maintenance Revenue 27, 013,971 6,483,356 2,521,301 36,018,628
Services and
Consultation 5,163,717 9,695,128 290,963 15,149,808
Third Party Products - 567,508 - 567,508
Total 56,189,493 32,014,548 6,061,005 94,265,046
INCOME STATEMENT
For the six months ended 30 June 2001
30/06/2001 30/06/2000 30/06/2000
6 months 6 months 4 months
Unaudited Pro-forma Unaudited
R R R
Revenue 94,265,046 88,967,780 60,162,632
- Proprietary software 42,529,102 47,799,819 34,686,328
- Maintenance revenue 36,018,628 22,776,850 13,717,093
- Services and consultation 15,149,808 16,191,498 9,889,770
- Third party products 567,508 2,199,613 1,869,441
Cost of sales 20,100,798 14,917,622 11,811,411
- Proprietary software 959,576 1,147,634 523,637
- Maintenance revenue 10,258,861 6,605,286 3,977,957
- Services and consultation 8,360,823 5,181,246 6,044,864
- Third party products 521,538 1,983,456 1,264,953
Gross profit 74,164,248 74,050,158 48,351,221
Operating expenses 108,009,250 92,561,572 36,892,016
- Administrative and general
costs 36,842,568 39,463,339 4,822,722
- Research and development
costs 23,670,978 17,290,736 10,633,493
- Sales and marketing costs 47,495,704 35,807,497 21,435,801
Operating profit/(loss) -33,845,002 -18,511,414 11,459,205
Net investment income/
(interest expense) -471,709 -83,192 282,234
-34,316,711 -18,594,606 11,741,439
Amortisation of goodwill -39,075,518 -67,452,102 -13,577,000
Profit on sale of business - 312,500 316,605
Loss before taxation -73,392,229 -85,734,208 -1,518,956
Taxation -19,308,502 -3,463,526 148,026
Net loss for the period -54,083,727 -82,270,682 -1,666,982
Basic earnings per share
(cents) -48.0 -78.6 -1.6
Headline earnings per share
(cents) -19.5 -17.3 11.1
Fully diluted headline
earnings per share -19.5 -16.0 10.3
Calculation of Headline
Earnings:
Net loss for the period
(Basic earnings) -54,083,727 -82,270,682 -1,666,982
Add back:
- Amortisation of goodwill
after taxation 32,140,898 64,520,250 13,577,000
- Profit on sale of business - -312,500 -316,605
Headline earnings -21,942,829 -18,062,932 11,593,413
Number of weighted average
shares 112,585,423 104,635,946 104,635,946
Number of diluted average
number of shares 112,585,423 112,746,164 112,746,164
BALANCE SHEET
As at 30 June 2001
30/06/2001 31/12/2000 30/06/2000
6 months 10 months 4 months
Unaudited Audited Unaudited
R R R
Assets
Non-current assets 416,221,885 404,629,403 406,127,141
Property, plant and equipment 21,718,827 14,768,757 11,292,113
Goodwill 368,300,379 380,452,543 391,461,092
Deferred taxation 17,276,489 573,405 175,965
Loans granted 8,926,190 8,834,698 3,197,971
Current asset 126,996,363 151,067,981 100,074,408
Trade and other receivables 96,656,682 109,548,490 61,318,797
Taxation 2,909,583 5,261,191 160,011
Short term advances - 353,453 413,928
Prepayments and deposits 4,756,989 6,334,617 2,259,013
Cash and cash equivalents 22,673,109 29,570,230 35,922,659
Total Assets 543,218,248 555,697,384 506,201,549
Equity and liabilities
Capital and reserves 388,299,351 421,917,967 439,827,742
Issued share capital 422,606,160 422,606,160 417,293,396
Non-distributable reserves 79,655,720 59,190,609 155,146
Retained earnings -113,962,529 -59,878,802 22,379,200
Non-current liabilities 35,789,649 40,086,318 -
Long term liabilities 1,689,785 925,518 -
Deferred taxation 34,099,864 39,160,800 -
Current liabilities 119,129,248 93,693,099 66,373,807
Trade payables and other
provisions 40,119,242 35,021,837 29,016,610
Short term borrowings 8,055,522 12,008,202 -
Amounts due to vendors 2,500,000 2,500,000 2,500,000
Taxation - 68,644 -
Net deferred income 68,454,484 44,094,416 34,857,197
Total Equity and Liabilities 543,218,248 555,697,384 506,201,549
STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2001
Share Share Retained Non- Total
capital premium earnings distributable
reserves
Balance at
01/03/00 856,319 10,519,292 24,046,182 - 35,421,793
Net loss for
the period - - -83,924,984 - -83,924,984
Currency
translation
reserve - - - 59,190,609 59,190,609
Issue of
shares 338,200 427,894,791 - - 428,232,991
Preference
shares
redeemed -68,665 -16,933,777 - - -17,002,442
Balance at
31/12/00 1,125,854 421,480,306 -59,878,802 59,190,609 421,917,967
Net loss for
the period - - -54,083,727 - -54,083,727
Currency
translation
reserve - - - 20,465,111 20,465,111
Balance at
30/06/01 1,125,854 421,480,306 -113,962,529 79,655,720 388,299,351
CASH FLOW STATEMENT
For six months ended 30 June 2001
30/06/2001 30/06/2000 30/06/2000
6 months 6 months 4 months
Unaudited Pro-forma Unaudited
R R R
Cash flow from operating activities
Cash receipts from customers 128,470,632 101,944,846 52,366,408
Cash paid to suppliers and employees 121,775,036 94,778,357 28,743,625
Cash generated from operations 6,695,596 7,166,489 23,622,783
Interest received/(paid) -429,098 -21,476 282,234
Taxation received/(paid) -2,219,784 1,373,979 51,889
Net cash inflow from operating
activities 4,046,714 8,518,992 23,956,906
Cash flow from investing activities
Additions to property, plant
and equipment -7,354,668 -3,018,283 -9,206,941
Proceeds from sale of fixed assets 29,117 4,105 4,105
Proceeds from sale of business - 312,500 312,500
Loans granted -91,830 1,093,906 -980,925
Acquisition of subsidiary -
Goodwill -4,567,703 -363,850,972 -394,377,291
Net cash outflow from investing
activities -11,985,084 -365,458,744 -404,248,552
Cash flow from financing activities
Proceeds from issue of ordinary
shares - 387,891,349 405,917,787
Proceeds from/(repayment of)
long term borrowings 661,411 -12,288,642 -
Net cash inflow from financing
activities 661,411 375,602,707 405,917,787
Net increase/(decrease) in cash
and cash equivalents -7,276,959 18,662,955 25,626,141
Cash and cash equivalents at
the beginning of the period 29,570,230 16,901,114 10,296,518
Effect of foreign exchange
rate changes 379,838 358,590 -
Cash & cash equivalents at
close of period 22,673,109 35,922,659 35,922,659
-ENDS-
