| Tue 4 Mar 2003, 9:53 | | Idion - Audited Financial Results For The Financia |
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IDION - Audited financial results for the financial year ended 31 December 2002
IDION Technology Holdings Limited
1998/ 013846/ 06
("IDION" or "the Group")
ISIN Code: ZAE000022513
Share code: IDI
Audited financial results for the financial year ended 31 December 2002 ("the
period")
Highlights
Group headline earnings of R1,6 million (Headline Earnings Per Share ("HEPS") of
1,4 cents) compared to Group headline loss in 2001 of R64,3 million (Headline
Loss Per Share ("HLPS") of 57,1 cents). Return to headline profitability as
forecast due to strong performance of its primary subsidiary Vision Solutions
International, Inc ("Vision")
Continuing operations:
HEPS of 14,6 cents, (31 December 2001: HLPS 45,9 cents);
Revenue increased by 30% to R299,6 million (17% in US$);
Cash generated from operations was R47,6 million (US$4,7 million) (2001: R20,7
million) (US$2,2 million);
Off-shore cash position continued to improve to US$5,2 million (2001: US$3,6
million);
Annuity-based income, representing 41% of total revenue increased 39% in Rand
over comparable period (26% in US$);
Significant customer wins including major multi-nationals;
Discontinued operations:
HLPS of 13,2 cents (2001: 11,2 cents)
Completion of IDION Solutions (Pty) Ltd ("IDION Solutions") sale
IDION is a technology investment holding company listed on the JSE Securities
Exchange South Africa. Through its wholly owned subsidiary, Vision, it provides
solutions for assuring the availability of a corporation`s mission-critical
applications and data. With more than 1,800 customers and over 8,500 licences in
70 countries worldwide, Vision is a leading managed availability vendor for the
IBM eServer iSeries with solutions for virtually every industry.
GROUP OVERVIEW
IDION is pleased to report a return to headline profitability during the year
under review. This follows record revenues and increases in new customers at its
primary subsidiary Vision, combined with a continued focus on cost management.
Despite challenging worldwide market conditions, IDION`s positive financial
results and gains in market share show that the Group is well positioned for the
new year as it continues to expand its partner channel, technology portfolio and
solution offerings.
During the year under review the Group took a strategic decision to disinvest
from its loss-making South African subsidiary IDION Solutions and to focus on
further expanding Vision`s managed availability solutions to other technology
platforms in addition to its traditional IBM eServer iSeries managed
availability market. The Board approved the sale of IDION Solutions and on 3
July 2002 announced the sale of the business with effect 1 September 2002.
Following the sale of IDION Solutions, Vision comprises 100% of the Group`s
current focus.
In light of the IDION Solutions sale, IDION`s results for 2002 have been
prepared to distinguish between the Group`s continuing operations, Vision and
IDION Corporate, and its discontinued operations, IDION Solutions.
EXCHANGE RATES FOR CONVERSION
During the period under review, the SA Rand/US Dollar weighted average
conversion rate decreased by 10% from ZAR9.21/US$1 to ZAR10.16/US$1. The closing
conversion rate increased by 29% from ZAR12.00/US$1 to ZAR8.58/US$1, resulting
in material variances when comparing the Rand results with the previous year.
As the majority of the Group`s activities are concluded in US Dollars, reference
to US Dollar performance is made, where relevant.
FINANCIAL REVIEW
CONTINUING OPERATIONS
During the year the Group`s continuing operations recorded headline earnings of
R16,5 million (Headline earnings per share ("HEPS") of 14,6 cents), a
substantial improvement on the headline loss of R51,6 million (Headline loss per
share ("HLPS") of 45,9 cents) in the prior year. The Group`s licence revenue at
Vision has traditionally been more heavily weighted towards the second half of
the financial year as a result of the sales cycles of IBM`s hardware. While this
seasonality continued in 2002, management minimised the impact that seasonality
had on reported profits through the alignment of the Group`s cost structure with
revenues.
Revenue increased by 30% to R299,6 million (17% in US$) with licence revenue
increasing by 20% to R153,9 million (8% in US$). The growth in licence revenue
was mainly achieved through a strong increase in Europe, Middle East and Africa
("EMEA") and in the Asia Pacific region, offset by some softness in North
America. The Group further experienced strong growth in maintenance revenues,
which increased by 39% to R123,0 million (26% in US$), and services revenue,
which increased by 63% to R22,6 million (52% in US$). Despite difficult economic
conditions, 2002 saw increased adoption of the Group`s solution offerings by new
customers. During the past year, Vision recorded 291 new customer wins,
including some of the world`s leading financial institutions and gaming resorts.
This is largely attributable to growing market demand for the Group`s managed
availability solutions, market share gains from competitors due to improved
partnerships as well as numerous feature and functionality enhancements to the
Group`s core products resulting from a period of focused investment by Vision.
The geographical revenue breakdown per product type is illustrated in the
following table:
Revenue breakdown: Continuing Operations
Revenue type %
Americas EMEA Asia- Total
Pacific
Licences 25 21 5 51
Maintenance 29 8 4 41
Services 8 0 0 8
TOTAL 62 29 9 100
Gross profit margin improved to 82% (2001: 78%) largely attributable to the
efficiencies realised as a result of investments over the past two years in call
centre automation and a customer relationship management system.
Headline profitability was further enhanced by continued attention to managing
operating expenses, which was 42% lower at R277,7 million (48% decline in US$).
Operating expenses include amortisation of goodwill, intangibles assets and
depreciation which amounted to R72,4 million, 9% lower than 2002. Additionally,
goodwill impairment charges of R183,8 million were made in 2001. It is
anticipated that the amortisation of goodwill, intangible assets and
depreciation will decline in 2003 as the Group`s intangible assets will be fully
amortised in March 2003 (balance at 31 December 2002: R6,3 million compared to
balance at 31 December 2001: R42,0 million).
In accordance with its stated direction of expanding its managed availability
solutions to other technology platforms the Group kept its solid investment in
R&D constant as a percentage of revenue (20%), enhancing its current solutions
offerings and increasing its investment in ORION, its multi-platform managed
availability initiative. ORION is the first multi-platform based software
solution that enables users to predictably manage the functional availability of
servers, data and applications across an enterprise, regardless of platform,
supporting OS/400, Windows and Linux. Distribution and marketing costs decreased
over the previous year as a result of the efficiencies derived from the Group`s
investment in its sales distribution channel. Administrative and general costs
were lower than the previous year due to savings achieved at both IDION`s
corporate head office and Vision.
Net finance costs of R3,2 million include non-cash foreign currency conversion
losses of R1,8 million, arising from the conversion of inter company loans due
to the strengthening of the Rand to the US dollar during this period. The
effective tax rate was 43%. This tax rate is derived mainly from prevailing tax
rates in the US.
DISCONTINUED OPERATIONS
Discontinued operations recorded a headline loss of R15,0 million (13,2 cents
HLPS), compared to R12,6 million headline loss (11,2 cents per share) the
previous year. At the effective date, 1 September 2002, IDION Solutions, with
net assets of R13,4 million was sold for R6,7 million resulting in a once-off
non-cash loss of R6,7 million. In addition, discontinuance costs of R5,3 million
were incurred in selling the entity resulting in the discontinued operations
using R24,7 million in operations. The discontinuance costs primarily include
severance packages of retrenched employees at the date of the sale, lease
cancellation commitments and professional fees. No further costs as a result of
the sale of the business are expected.
SEGMENTAL ANALYSIS
Segmental Analysis
Continuing Operations Discontinued
(R` Operations
million)
Vision Solutions IDION Corporate IDION Solutions
31/12/2002 31/12/2001 31/12/2002 31/12/2001 31/12/2002 31/12/
2001
Revenue 299,6 231,2 - - 5,9 18,6
EBITDA 39 341 -28 329 -12 470 -8 880 -26 225 -18 518
EBITDA: "Earnings Before Interest, Tax, Depreciation and Amortisation"
Note: Inter-company transactions have been eliminated in the above table.
FINANCIAL POSITION
For the year, the Group`s continuing operations generated R47,6 million cash
from operations (2001: R20,7 million) and the Group`s total net cash on hand
amounted to R39,9 million (2001: R43,4 million) at year-end exchange rates. The
Group`s off-shore cash position continued to improve to US$5,2 million (2001:
US$3,6 million) and the Group`s working capital levels further improved despite
funding the defence of a hostile bid and the losses of the discontinued
operations incurred prior to the sale of IDION Solutions.
Trade and other receivables were R92,8 million (2001: R107,5 million), and days
sales outstanding rose slightly to 102 days (weighted) (2001: 98 days).
The increased cash flow from operations by the Group`s continuing operations,
the resulting cash reserves and available credit facilities at 31 December 2002
position the Group well to continue financing its operations and planned R&D
activities in the foreseeable future.
DEFERRED REVENUE
Deferred revenue, primarily representing contracted future maintenance revenue,
amounted to R98,4 million (US$11,4 million) (2001: R93,2 million
(US$7,8 million). This represents a 5% increase over the prior year (46%
increase in US$) as a result of Vision`s increasing customer base and its high
customer retention rate.
HOSTILE BID
The Group was subject to a hostile bid launched during March 2002. The cost of
defending the hostile bid amounted to R4,5 million.
BOARD CHANGES
Dave de Beer was appointed as a non-executive director in March 2002. Ken Jarvis
resigned as executive director following the sale of IDION Solutions, effective
1 September 2002. Philip McDonald informed IDION that he will retire from
office in his capacity as non-executive director and chairman with effect 31
March 2003 and Dave de Beer will succeed him as chairman.
AUDITED FINANCIAL STATEMENTS
The financial statements have been audited by Deloitte & Touche and are prepared
in accordance with the statements on International Financial Reporting
Standards. The accounting policies adopted in the preparation of these
financial statements are consistent with the policies used in the previous
reporting period. In addition the Group has incorporated the requirements of
Circular 7/2002 - Headline Earnings issued by the South African Institute of
Chartered Accountants. This circular provides guidance for specific treatment
of identified headline earnings items and was incorporated with immediate
effect. The results of 2001 have also been adjusted according to the
requirements of the circular. The full impact of the requirements has been
incorporated in the audited annual financial statements. A copy of the audit
report is available for inspection at the Company`s registered head office.
PROSPECTS
The Group`s focus for the year ahead is to continue to execute its long-term
strategy to diversify and expand its target marketplace and provide multi-
platform managed availability solutions through its investment in Vision. As
always, IDION`s activities and decisions will be driven by the pursuit of long-
term revenue growth, sustainable profits and improved shareholder value.
The Board expects that while the economic environment for IT spending in 2003
will continue to be challenging, the long-term prospects for the Group remain
positive due to an increasing market demand for managed availability solutions,
investments made in Vision`s products and an improved sales distribution
channel. For 2003, the Group again expects to generate positive cash flows from
operations and to be profitable on a full-year basis, before considering the
effects of amortisation of goodwill and intangible assets. Consistent with
historical results, the Group expects that the majority of its licence revenues
will be achieved in the second half of the year.
The general availability of ORION is scheduled for the second half of 2003,
which will position the Group to take a leadership role in the next generation
of managed availability solutions.
By order of the Board
Chairman Managing Director
PL McDonald N Vlok
4 March 2003
IDION TECHNOLOGY HOLDINGS LIMITED
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2002
Audited Audited
CONTINUING OPERATIONS 31/12/2002 31/12/2001
R`000 R`000
Revenue
- Licences 153 938 128 654
- Maintenance 123 040 88 702
- Services 22 576 13 867
299 554 231 223
Cost of sales
- Licences 1 159 1 750
- Maintenance and services 52 191 48 423
53 350 50 173
Gross profit 246 204 181 050
Operating expenses
- Administrative and general 40 370 52 338
expenses
- Research and development expenses 60 964 49 946
- Distribution and marketing 104 094 116 456
expenses
- Depreciation and amortisation 72 314 79 018
expenses
- Impairment of goodwill - 182 757
277 742 481 515
Operating loss -31 538 -300 465
Net finance (costs)/income -3 208 10 257
Impairment of share trust 124 8 301
Hostile bid defence costs 4 489 -
Net loss before taxation -39 359 -298 509
Taxation benefit -16 862 -14 697
Net loss for the year - Continuing -22 497 -283 812
Operations
Headline Earnings (loss) - 16 538 -51 646
Continuing Operations
A weighted average conversion rate of R10.16/US$1 (2001: R9.21/US$1)
was used.
IDION TECHNOLOGY HOLDINGS LIMITED
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2002
Audited Audited
31/12/2002 31/12/2001
DISCONTINUED OPERATIONS R`000 R`000
Revenue
- Licences - 137
- Maintenance 1 220 -
- Services 4 643 18 425
5 863 18 562
Cost of sales
- Licences - 77
- Maintenance and services 12 378 17 054
12 378 17 131
Gross (loss)/profit -6 515 1 431
Operating expenses
- Administrative and general 9 286 14 330
expenses
- Research and development expenses 625 831
- Distribution and marketing 1 637 4 462
expenses
- Depreciation and amortisation 1 244 2 801
expenses
- Impairment of Goodwill - 9 234
12 792 31 658
Operating loss -19 307 -30 227
Net finance income 105 1 809
Loss on sale of fixed assets 6 693 -
Impairment of fixed assets 5 469 -
Discontinuance cost 5 294 -
Net loss before taxation -36 658 -28 418
Taxation benefit -4 228 -5 413
Net loss for the year - Discontinued -32 430 -23 005
Operations
Headline loss - Discontinued -14 974 -12 629
Operations
Net loss for the year - Continuing -22 497 -283 812
Operations
Net loss for the year - Discontinued -32 430 -23 005
Operations
Total net loss for the year -54 927 -306 817
Audited Audited
31/12/2002 31/12/2001
R`000 R`000
Calculation of Headline
Earnings/(Loss):
Net loss for the year - continuing -22 497 -283 812
operations
+ Amortisation of goodwill 34 635 48 409
+ Impairment of goodwill - 183 757
+ Hostile bid costs 3 143 -
+ Realised currency loss on foreign 1 258 -
equity loan
Headline earnings/(loss): Continuing 16 538 -51 646
operations
Effect of Circular 7/2002 28 427
Amortisation of intangible assets 20 126
Impairment of loan to share purchase 8 301
trust
16 538 -23 219
Net loss for the period - -32 430 -23 005
discontinued operations
+ Loss on sale of fixed assets 6 693 -
+ Impairment of goodwill - 9 234
+ Impairment of fixed assets 5 469 -
+ Amortisation of goodwill - 1 142
+ Discontinuance costs 5 294 -
Headline loss: Discontinued -14 974 -12 629
operations
Headline profit/(loss) 1 564 -64 275
Less: Headline loss from 14 974 12 629
discontinued operations
Headline earnings/(loss) from 16 538 -51 646
continuing operations
Effect of dilutive potential 323 -260
ordinary shares
Diluted headline earnings/(loss) 16 861 -51 386
from continuing operations
Number of shares in issue 113 270 423 112 585 423
Weighted average number of shares 112 958 012 112 585 423
Fully diluted number of shares 119 108 012 118 490 423
Loss per share (cents)
- Basic -48,6 -272,5
- Fully diluted -45,8 -258,7
Headline earnings/(loss) per share
(cents)
- Basic 1,4 -57,1
- Fully diluted 1,6 -54,0
Headline earnings/(loss) per share
(cents): Continuing operations
- Basic 14,6 -45,9
- Fully diluted 14,2 -43,4
Headline loss per share (cents):
Discontinued operations -
- Basic -13,2 -11,2
- Fully diluted -12,6 -10,6
IDION TECHNOLOGY HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEET
As at 31 December 2002
Audited Audited
31/12/2002 31/12/2001
R`000 R`000
ASSETS
Non-current assets
Property, plant and 13 860 30 404
equipment
Goodwill 79 674 148 155
Intangible assets 6 305 41 983
Deferred taxation 44 789 58 496
Other assets 738 733
145 366 279 771
Current assets
Trade and other receivables 92 805 107 547
Prepayments and deposits 4 443 4 048
Cash and cash equivalents 44 554 43 833
141 802 155 428
Total Assets 287 168 435 199
EQUITY AND LIABILITIES
Capital and reserves
Issued share capital and 422 993 422 606
premium
Currency translation reserve 121 296 175 634
Accumulated losses -421 623 -366 696
122 666 231 544
Non-current liabilities
Long term liabilities 3 120 5 409
Deferred taxation 5 242 18 459
Deferred revenue - long term 13 151 17 558
21 513 41 426
Current liabilities
Trade payables and other 45 797 66 193
provisions
Short term borrowings 5 553 17 849
Taxation 1 800 2 060
Deferred revenue - current 85 232 75 655
Bank overdraft 4 607 472
142 989 162 229
Total Equity and Liabilities 287 168 435 199
A closing conversion rate of R8.58/US$1 (2001: R12.00/US$1) was used.
Issued number of shares 113 270 112 585 423
423
Net asset value per share 108 206
(cents)
Net tangible asset value per 32 37
share (cents)
IDION TECHNOLOGY HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2002
Share Share Accumula Transla Total
capit Premium ted tion
al (losses) reserve
R`000 profits R`000
R`000 R`000 R`000
GROUP
Balance at 1 126 421 480 -59 879 59 192 421 919
1 January
2001
Net loss for - - -306 817 - -306
the year 817
Exchange - - - 116 442 116 442
differences
on
conversion
of foreign
entity
Balance at 1 126 421 480 -366 696 175 634 231 544
1 January
2002
Issue of 7 424 - - 431
ordinary
shares -
share option
scheme
Costs - -44 - - -44
written off
against
share
premium
Net loss for - - -54 927 - -54 927
the year
Exchange - - - -54 338 -54 338
differences
on
conversion
of foreign
entity
Balance at 1 133 421 860 -421 623 121 296 122 666
31 December
2002
IDION TECHNOLOGY HOLDINGS LIMITED
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31
December 2002
Audited Audited
31/12/2002 31/12/2001
R`000 R`000
Operating activities
Cash receipts from customers 282 937 299 333
Cash paid to suppliers -260 047 283 166
Cash generated from 22 890 16 167
operations
Interest paid -3 103 -2 358
Income taxes paid -3 193 -1 686
Net cash generated from 16 594 12 123
operating activities
Investing activities
Additions to fixed assets -6 462 -15 913
Loans repaid 6 087 1 493
Proceeds from sale of 3 280 -
business
Proceeds from sale of fixed - 219
assets
Additions to goodwill and -426 -
intangibles
Net cash from (used in) 2 479 -14 201
investing activities
Financing activities
Shares issued 387 -
(Decrease) increase in long -887 3 621
term liabilities
(Decrease) in short term -7 210 -1 070
borrowings
Increase in bank overdraft 4 135 472
Net cash (used in) from -3 575 3 023
financing activities
Net increase (decrease) in 15 498 945
cash and cash equivalents
Cash and cash equivalents at
the beginning of the period 43 833 29 571
Effect of exchange rate -14 777 13 317
changes
Cash and cash equivalents at 44 554 43 833
the end of the period
Date: 04/03/2003 07:00:02 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
