| Wed 6 Aug 2003, 9:35 | | Interim results for the 6 months ended 30 Jun 03 |
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Idion Technology Holdings Limited - Financial Report
Release Date: 06/08/2003 07:15:04 Code(s): IDI
Idion Technology Holdings Limited - Financial Report
IDION TECHNOLOGY HOLDINGS LIMITED
1998/ 013846/ 06
("IDION" or "the Group")
ISIN Code: ZAE000022513
Share code: IDI
Unaudited interim financial results for the six months ended 30 June 2003 ("the
period")
HIGHLIGHTS
Group headline earnings of R0,6 million (Headline Earnings Per Share ("HEPS") of
0,5 cents) compared to Group headline loss in June 2002 of R16,6 million
(Headline Loss Per Share ("HLPS") of 14,7 cents)
Revenue increased by 18% (in US$) to a record $15,3 million (Continuing
operations)
Cash generated from operations of R25,8 million (2002: R17,2 million)
Off-shore cash position continued to improve to $7,2 million (31 December 2002:
$5,2 million)
Annuity-based income, representing 48% of total revenue, increased 27% (in $) to
$7,3 million
IDION is a technology investment holding company listed on the JSE Securities
Exchange South Africa. Its wholly owned subsidiary, Vision Solutions, Inc.
("Vision"), is a leading managed availability vendor for the IBM eServer iSeries
(AS/400). It has offices in North and South America, Europe, Africa and the
Asia-Pacific region, with more than 1,850 customers and over 10,000 licenses in
70 countries. The company is also extending its reach by launching ORION, the
industry"s first multi-platform solution to support application availability
across multiple operating systems and databases.
UNAUDITED INTERIM FINANCIAL STATEMENTS
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED INCOME STATEMENT
CONTINUING OPERATIONS % Unaudited Unaudited
change R"000 R"000
For the six months ended: 30 June 03 30 June 02
Revenue
Licenses (21) 51,944 66,107
Maintenance (7) 57,273 61,568
Services (7) 10,377 11,142
(14) 119,594 138,817
Cost of sales
Licenses 40 359 600
Maintenance and services 18 22,118 26,939
18 22,477 27,539
Gross profit (13) 97,117 111,278
Expenses
Administrative and general 20 18,749 23,446
Research and development 14 24,479 28,333
Distribution and marketing 14 43,842 51,012
Depreciation and amortisation 48 16,804 32,488
Loss before investment (income) 72 (6,757) (24,001)
cost
Net investment (income) cost (74) 2,666
Net loss before taxation 75 (6,683) (26,667)
Taxation expense (benefit) 415 (5,186)
Net loss for the year - 67 (7,098) (21,481)
Continuing Operations
Headline earnings (loss) - 612 (6,755)
Continuing Operations
Weighted average conversion rate 7.84 10.73
(R:$)
DISCONTINUING OPERATIONS % Unaudited Unaudited
change R"000 R"000
For the six months ended: 30 June 03 30 June 02
Revenue
Maintenance - 732
Services - 6,310
- 7,042
Cost of sales
Maintenance and services - 9,574
- 9,574
Gross (loss) - (2,532)
Expenses
Administrative and general - 9,915
Research and development - 596
Distribution and marketing - -
Depreciation and amortisation - 939
Loss before investment cost - (13,982)
Net investment cost - 108
Net loss before taxation - (14,090)
Taxation benefit - (4,227)
Net loss for the year - - (9,863)
Discontinuing Operations
Headline loss - Discontinuing - (9,863)
Operations
Net loss for the year - 67 (7,098) (21,481)
Continuing Operations
Net loss for the year - 100 - (9,863)
Discontinuing Operations
Total net loss for the year 77 (7,098) (31,344)
Note: During 2002 the Group disposed of its South African operating subsidiary
IDION Solutions (Pty) Ltd and disclosed its results during 2002 under
Discontinuing Operations. Although no further activities are reported under
"Discontinuing Operations", the financial results have been prepared consistent
with 2002 for ease of comparison.
IDION TECHNOLOGY HOLDINGS LTD
CALCULATION OF HEADLINE EARNINGS
Unaudited Unaudited
R"000 R"000
For the six months ended: 30 June 03 30 June 02
Continuing Operations:
Net loss for the period - (7,098) (21,481)
Continuing Operations
+ Amortisation of goodwill 7,710 12,976
+ Hostile bid costs - 1,750
Headline earnings (loss): 612 (6,755)
Continuing Operations
Discontinuing Operations:
Net loss for the period - - (9,863)
Discontinuing Operations
Headline loss: Discontinuing - (9,863)
Operations
Headline earnings (loss) 612 (16,618)
ADDITIONAL INFORMATION
Number of shares in issue 113,370,423 113,270,423
Weighted average number of shares 113,318,489 112,708,627
Fully diluted number of shares 117,883,750 112,708,627
Loss per share (cents):
Basic (6,3) (27,8)
Fully diluted (6,0) (27,8)
Headline earnings (loss) per share
(cents):
Basic 0,5 (14,7)
Fully diluted 0,5 (14,7)
Headline earnings (loss) per share
(cents) - Continuing Operations:
Basic 0,5 (6,0)
Fully diluted 0,5 (6,0)
Headline loss per share (cents) -
Discontinuing Operations:
Basic - (8,8)
Fully diluted - (8,8)
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED BALANCE SHEET
Unaudited Audited
R"000 R"000
At: 30 June 03 31 Dec 02
ASSETS
Non-current assets
Equipment 10,065 13,860
Goodwill 62,433 79,674
Intangible assets 211 6,305
Deferred taxation 38,946 44,789
Other assets 1,959 738
113,614 145,366
Current assets
Trade and other receivables 63,716 92,805
Prepayments and deposits 2,887 4,443
Cash and cash equivalents 53,919 44,554
120,522 141,802
Total Assets 234,136 287,168
EQUITY AND LIABILITIES
Capital and reserves
Issued share capital and 423,056 422,993
premium
Currency translation reserve 105,117 121,292
Accumulated losses (428,717) (421,619)
99,456 122,666
Non-current liabilities
Long term liabilities 2,610 3,120
Deferred taxation 3,220 5,242
Deferred revenue - long term 10,471 13,151
16,301 21,513
Current liabilities
Trade payables and other 32,507 48,848
provisions
Short term borrowings 681 2,502
Taxation 1,760 1,800
Deferred revenue - current 83,239 85,232
Bank overdraft 192 4,607
118,379 142,989
Total Equity and Liabilities 234,136 287,168
Net asset value per share 88 109
(cents)
Net tangible asset value per 33 33
share (cents)
Closing conversion rate (R:$) 7.49 8.58
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
R"000 R"000
For the six months ended: 30 June 03 30 June 02
OPERATING ACTIVITIES
Cash from operations 25,808 17,160
Net investment income (cost) 74 (630)
Income taxes paid (1,450) (1,164)
Net cash from operating activities 24,432 15,366
INVESTING ACTIVITIES
Additions to equipment (1,633) (1,971)
Proceeds from sale of equipment - 801
Loans granted (264) -
Net cash used in investing (1,897) (1,170)
activities
FINANCING ACTIVITIES
Proceeds from issue of ordinary 63 -
shares
Decrease in long term borrowings (647) (331)
Decrease in short term borrowings (1,824) (8,130)
Net cash used in financing (2,408) (8,461)
activities
NET INCREASE IN CASH AND CASH 20,127 5,735
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 39,947 43,361
BEGINNING OF PERIOD
Effect of exchange rate changes (6,347) (2,009)
CASH AND CASH EQUIVALENTS AT END OF 53,727 47,087
PERIOD
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
Unaudited Audited
R"000 R"000
For the period ended: 30 June 03 31 Dec 02
Balance at beginning of the period 122,666 231,544
Net loss for the period (7,098) (54,927)
Transfer from translation reserve (16,175) (54,338)
Issue of share capital 63 387
Balance at the end of the period 99,456 122,666
GROUP OVERVIEW
Although the global economy experienced continued weakness IDION is pleased to
report another period of headline earnings growth from its wholly owned
subsidiary Vision. This has been achieved despite the extent of the license
revenue seasonality the Group has experienced over the past few years, with the
bulk of Group license revenue recorded in the second half of the year. In the
first half of 2003 the Group has achieved record dollar revenues and increases
in new customers, while containing expenses through a continued focus on cost
management.
In addition, IDION continued to generate significant cash flow from operations
during the reporting period thus further increasing its cash reserves and
working capital levels. The investments the Group has made over the past 24
months to enhance Vision"s indirect sales distribution model and operating
infrastructure continue to yield favourable results.
IDION also continued to make progress with the development and commercialisation
of its multi-platform managed availability initiative, ORION. The first
components of ORION will become available in a limited release during the third
quarter of this year.
Given that Vision traditionally has stronger license revenues in the second half
of its financial year, the Group is well positioned to continue on the solid
first half performance.
EXCHANGE RATES FOR CONVERSION
During the period under review, the SA Rand/US Dollar weighted average
conversion rate improved by 27% in rand terms from R10.73/$1 for the
corresponding period in 2002 to R7.84/$1. The closing conversion rate improved
by 13% in rand terms from R8.58/$1 at 31 December 2002 to R7.49/$1 at 30 June
2003, resulting in material variances when comparing the Rand results with the
previous year.
As the majority of the Group"s activities are concluded in dollar, reference to
dollar performance is made, where relevant. In addition, to enable comparison
on real trading performance, a pro-forma dollar based income statement and
balance sheet have been presented for convenience of users.
FINANCIAL REVIEW
License revenue from continuing operations grew stronger in the Europe, Middle
East and Africa ("EMEA") region with the Americas and Asia-Pacific achieving
moderate license revenue growth. The market for software and other technology
solutions remains challenging worldwide, but despite these adverse economic
conditions, the Group has been successful in achieving positive license revenue
growth and continues to attract new customers with our solution offerings.
During the period Vision recorded 134 new customer wins, many of which were
large multinationals.
The Group continued to experience significant growth in maintenance revenue,
largely driven by the addition of new customers and continued high customer
retention rates. Services revenue also grew strongly as a result of higher
demand for our enhanced services and training offerings.
The geographical revenue breakdown per product type is illustrated in the
following table:
Revenue breakdown (%)
Revenue type/Region Americas EMEA Asia- Total
Pacific
Licences 22,3 15,9 5,7 43,9
Maintenance 33,7 9,9 4,7 48,3
Services 7,6 0,2 0 7,8
TOTAL 63,6 26,0 10,4 100,0
Gross profit margin increased to 81% as a result of improved efficiencies in our
maintenance and services divisions.
Operating expenses grew in line with revenue growth with notable efficiencies
derived in the Group"s administration where expenses increased only 9% in $
terms.
Depreciation and amortisation expenses (all non-cash charges) comprise the
following:
Continuing Operations (R"000)
For the six months ended: 30 June 03 30 June 02
Amortisation of intangible assets 5,304 15,022
Amortisation of goodwill 7,710 12,976
Depreciation 3,790 4,490
Total per income statement 16,804 32,488
The amortisation of the intangible assets which were acquired at 28 March 2000
(the effective date of the Vision acquisition) has been completed. The
remaining intangible assets of R211 000, will be amortised over the remaining
useful life with no further material amortisation charges anticipated. The
amortisation of goodwill, which also arose from the acquisition of Vision, will
continue for a further 4 years under the current accounting conventions.
Depreciation is charged over the estimated useful lives of the Group"s tangible
assets.
Net investment income amounted to R74 000 (2002: R2,7 million expense on
continuing operations) as a result of higher cash balances and lower balances on
credit facilities during the period.
The effective tax rate (excluding amortisation of goodwill) was 40%. This tax
rate is derived mainly from prevailing tax rates in the US. The income tax
charge consists primarily of the part utilisation of the Group"s deferred tax
assets and does not represent any cash taxation commitments as the Group has
unused historical accumulated income tax losses against which future taxable
income will be offset.
SEGMENTAL ANALYSIS
Segmental Analysis
Continuing Operations Discontinuing
(R"000) Operations
Vision Solutions IDION Corporate IDION Solutions
30 June 30 June 30 June 30 June 30 June 30 June
03 02 03 02 03 02
Revenue 119,594 138,817 - - - 7,042
EBITDA 10,104 9,677 (58) (1,190) - (13,043)
EBITDA: "Earnings Before Interest, Tax, Depreciation and Amortisation"
Note: Inter-company transactions have been eliminated in the above table.
FINANCIAL POSITION
Cash reserves and debtors
Despite the strengthening of the rand against the dollar, the Group"s cash
position further improved to R53,7 million (31 December 2002: R39,9 million)
(off-shore cash position of $7,2 million compared to $5,2 million at 31 December
2002). The cash reserves were bolstered by cash generated from operating
activities of R25,8 million (cash generated of 22,8 cents per share).
Trade and other receivables were R63,7 million (31 December 2002: R92,8 million)
with days sales outstanding ("DSO") amounting to 91 days (weighted) (31 December
2002: 102 days). DSO is materially impacted by the cyclical nature of the
Group"s sales. The Group, as with many other software companies, experiences a
relatively high percentage of its sales in the last month of each quarter, which
tends to result in higher levels of reported DSO at the end of the Group"s
respective reporting periods.
As cash collections occur after the end of a quarter, DSO declines materially,
increasing again at each quarter end. As a result and considering the Group"s
established business model, its reported DSO is in line with management
expectations, and is consistent with historical results. As evidenced by the
Group"s strong cash flow from operations and minimal bad debt experience, the
Group has been highly successful historically in collecting its trade and other
receivables.
The increased cash flow from operating activities, the resulting cash reserves
and available credit facilities, positions the Group well to continue financing
its operations and planned research and development activities in the
foreseeable future.
Deferred revenue
Deferred revenue, primarily representing contracted future maintenance revenue,
amounted to R93,7 million (31 December 2002: R98,4 million), ($12,2 million
compared to $11,4 million at 31 December 2002). The Group"s deferred revenue
continued to increase in line with Vision"s increasing customer base and its
high customer retention rate.
CORPORATE GOVERNANCE
The Board of Directors and senior management affirm their commitment to
achieving and upholding accepted standards of corporate governance. In adhering
to these standards, it ensures that the Group"s business is conducted, where
practical, in accordance with the second King Code of Corporate Practices and
Conduct ("King II").
BOARD CHANGES
Philip McDonald retired as chairman on 31 March 2003 and was succeeded by Dave
de Beer. Leen van der Bijl was appointed an independent director on 1 April
2003.
ACCOUNTING POLICIES
The consolidated interim financial statements have been compiled in accordance
with the statements on International Financial Reporting Standards and in
particular International Accounting Standard ("IAS") 34 - Interim Financial
Reporting. The accounting policies in the preparation of the interim financial
statements are consistent with the policies adopted with audited financial
statements for the year ended 31 December 2002. The comparative results have,
where required, been restated to give effect to Circular 7/2002 - Headline
Earnings, issued by the South African Institute of Chartered Accountants. In
addition, the Group continued to recognise its software revenue in terms of
Statement of Position ("SOP") 97-2: Software Revenue Recognition issued by the
American Institute of Certified Public Accountants, in conjunction with IAS 18 -
Revenue.
PROSPECTS
While the Board is encouraged by Vision"s results for the first half of 2003,
the Board is of the opinion that conditions are likely to remain challenging for
IT spending for the balance of 2003. The long-term prospects for the Group
remain positive and despite the current economic environment, the Group expects
to continue to generate positive cash flows from operations and to be profitable
on a full-year basis.
The Group"s focus for the remainder of the year is to continue to execute its
long-term strategy to diversify and expand its target marketplace by delivering
the first components of its multi-platform managed availability solution, ORION.
As always, IDION"s activities and decisions will be driven by the pursuit of
sustainable profit growth and improved shareholder value.
By order of the Board
Dave de Beer Nicolaas Vlok
Chairman Managing Director
Johannesburg
6 August 2003
EXECUTIVE DIRECTORS: N Vlok (Managing), C Arnold, WA Richard, JJD Vlok
INDEPENDENT DIRECTORS: DD de Beer (Chairman), Dr DC Cronje, L van der Bijl
COMPANY SECRETARY: JJD Vlok
REGISTERED ADDRESS: IDION House,11 Naivasha Road, Sunninghill, 2157,
Gauteng, South Africa
SUPPLEMENTARY INFORMATION FOR THE CONVENIENCE OF USERS
IDION TECHNOLOGY HOLDINGS LTD
PRO FORMA US DOLLAR CONSOLIDATED % Unaudited Unaudited
INCOME STATEMENT: CONTINUING change $"000 $"000
OPERATIONS
For the six months ended: 30 June 03 30 June 02
Revenue
Licenses 8 6,626 6,161
Maintenance 27 7,305 5,738
Services 27 1,323 1,038
18 15,254 12,937
Cost of sales (12) 2,867 2,567
Gross profit 19 12,387 10,370
Expenses
Administrative and general (9) 2,391 2,185
Research and development (18) 3,121 2,640
Distribution and marketing (18) 5,592 4,754
Depreciation and amortisation 29 2,143 3,028
Loss before investment (income) 62 (860) (2,237)
cost
Net investment (income) cost (9) 249
Net loss before taxation 66 (851) (2,486)
Taxation expense (benefit) 53 (483)
Net loss for the year - 55 (904) (2,003)
Continuing Operations
Weighted average conversion rate 7.84 10.73
(R:$)
IDION TECHNOLOGY HOLDINGS LTD
SUPPLEMENTARY INFORMATION FOR THE CONVENIENCE OF USERS
PRO FORMA US DOLLAR CONSOLIDATED Unaudited Unaudited
BALANCE SHEET $"000 $"000
At: 30 June 03 31 Dec 02
ASSETS
Non-current assets 15,167 16,942
Current assets 16,091 16,527
Other current assets 8,892 11,334
Cash and cash equivalents 7,199 5,193
Total Assets 31,258 33,469
EQUITY AND LIABILITIES
Capital and reserves 13,279 14,296
Non-current liabilities 2,176 2,508
Current liabilities 15,803 16,665
Other current liabilities 15,777 16,128
Bank overdraft 26 537
Total Equity and Liabilities 31,258 33,469
Closing conversion rate (R:$) 7.49 8.58
Date: 06/08/2003 07:18:57 AM
Produced by the JSE SENS Department
