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Idion Technology Holdings Limited - Audited Financial Results For The Financial
Release Date: 17/03/2004 07:15:02 Code(s): IDI
Idion Technology Holdings Limited - Audited financial results for the financial
year ended 31 December 2003 ("the period")
Idion Technology Holdings Limited
1998/ 013846/ 06
("IDION" or "the Group" or "the Company")
ISIN Code: ZAE000022513
Share code: IDI
Audited financial results for the financial year ended 31 December 2003 ("the
period")
HIGHLIGHTS
Group headline earnings R11,7 million (Headline Earnings Per Share ("HEPS") of
10.5 cents), compared to Group headline earnings in 2002 of R1,6 million (HEPS
of 1.4 cents);
Headline earnings: Continuing operations R11,7 million (HEPS of 10.5 cents)
compared to R16,5 million (HEPS of 14.9 cents) with discontinuing operations
having no further effect (2002: Headline Loss of R15,0 million (HLPS of 13.5
cents);
Effect of strength of the Rand against the US Dollar resulted in an HEPS
reduction of 3.9 cents;
Cash generated from operations of R51,0 million (US$6,9 million);
Net cash position at year end increased to R69,4 million (US$10,4 million) (31
December 2002: R39,9 million) (US$4,7 million);
11% increase in US dollar based revenue from $29,5 million to $32,8 million;
EBITDA of US$3,7 million;
Launch of ORION, the industry"s first multi-platform managed availability
solution.
IDION is a technology investment holdings 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 a presence in North and South America, Europe, Africa and the
Asia-Pacific region, with more than 1,850 customers and over 10,000 licences in
70 countries. The company is also extending its reach through ORION, the
industry"s first multi-platform solution to support application availability
across multiple operating systems and databases.
EXCHANGE RATES FOR CONVERSION
The measurement currency used to prepare the financial statements is South
African Rand. The SA Rand/US Dollar weighted average conversion rate
strengthened by 28% from R10.16/$1 in 2002 to R7.34/$1. The closing conversion
rate strengthened by 22% from R8.58/$1 at 31 December 2002 to R6.67/$1 at 31
December 2003, resulting in material variances when comparing the Rand results
with the previous year. As the majority of the Group"s revenues are earned and
expenses incurred in US Dollars, an audited US Dollar based income statement and
balance sheet have been presented as supplementary information for the
convenience of users. Although the stronger rand negatively impacted the
Group"s reported Rand converted revenue, it had an off-setting positive effect
on its reported Rand converted expenses.
Note: During 2002, the Group disposed of its South African operating subsidiary,
IDION Solutions (Pty) Ltd and disclosed its results during 2002 under
Discontinuing Operations. Although no further activities are reported under
"Discontinuing Operations", the financial results have been prepared
consistently with 2002 for ease of comparison.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
IDION TECHNOLOGY HOLDINGS LTD
SUPPLEMENTARY INFORMATION FOR THE CONVENIENCE OF USERS
% Audited Audited
CONSOLIDATED INCOME STATEMENT IN change US$"000 US$"000
US$ - CONTINUING OPERATIONS -
For the year ended: 31 Dec 03 31 Dec 02
Revenue
Licences 1 15,283 15,151
Maintenance 25 15,081 12,110
Services 9 2,434 2,223
11 32,798 29,484
Cost of sales
Licences 2 (112) (114)
Maintenance and services (15) (5,660) (4,933)
(14) (5,772) (5,047)
Gross profit 11 27,026 24,437
Expenses 2 (26,942) (27,553)
Administrative and general (19) (5,657) (4,745)
Research and development (18) (6,760) (5,711)
Distribution and marketing (8) (10,805) (9,973)
Depreciation and amortisation 48 (3,720) (7,124)
Profit (loss) before investment 103 84 (3,116)
(income) cost
Net investment income (cost) 41 (316)
Hostile bid defence costs - (442)
Net profit (loss) before taxation 103 125 (3,874)
Taxation (expense) benefit (679) 1,660
Net loss for the year - 75 (554) (2,214)
Continuing Operations
Reconciliation to headline
earnings:
Net loss for the year (554) (2,214)
Add back (net of tax where 2,142 3,842
applicable)
Amortisation of goodwill 2,095 3,409
Hostile bid costs - 309
Realised currency loss on foreign - 124
equity loan
Loss on sale of fixed assets 47 -
Headline earnings - Continuing (2) 1,588 1,628
Operations
Weighted average conversion rate 7.34 10.16
(R:$)
IDION TECHNOLOGY HOLDINGS LTD
SUPPLEMENTARY INFORMATION FOR THE CONVENIENCE OF USERS
CONSOLIDATED INCOME STATEMENT IN % Audited Audited
US$ (cont.) - DISCONTINUING change US$"000 US$"000
OPERATIONS
For the year ended: 31 Dec 31 Dec 02
03
Revenue
Maintenance - 121
Services - 456
- 577
Cost of sales - (1,218)
Maintenance and services - (1,218)
Gross (loss) (641)
Expenses - (1,260)
Administrative and general - (914)
Research and development - (62)
Distribution and marketing - (161)
Depreciation and amortisation - (123)
Loss before investment cost - (1,901)
Net investment income 11
Loss on sale of discontinuing - (659)
operation
Impairment of equipment - (538)
Discontinuance costs - (479)
Net loss before taxation - (3,566)
Taxation benefit - 416
Net loss for the year - - (3,150)
Discontinuing Operations
Reconciliation to headline loss:
Net loss for the year - (3,150)
Add back (net of tax where - 1,676
applicable)
Loss on sale of discontinuing - 659
operation
Impairment of equipment - 538
Discontinuance costs - 479
Headline loss - Discontinuing - (1,474)
Operations
Headline earnings - Continuing 1,588 1,628
Operations
Headline loss - Discontinuing - (1,474)
Operations
Headline earnings 1,588 154
IDION TECHNOLOGY HOLDINGS LTD
SUPPLEMENTARY INFORMATION FOR THE CONVENIENCE OF USERS
CONSOLIDATED BALANCE SHEET IN Audited Audited
US$ US$"000 US$"000
At: 31 Dec 03 31 Dec 02
ASSETS
Non-current assets
Equipment 1,130 1,616
Goodwill 7,224 9,289
Intangible assets 21 735
Deferred taxation 4,750 4,656
13,125 16,296
Current assets
Trade and other receivables 8,634 10,820
Prepayments and deposits 593 525
Cash and cash equivalents 10,412 5,194
19,639 16,539
Total Assets 32,764 32,835
EQUITY AND LIABILITIES
Capital and reserves
Issued share capital and 62,011 48,211
premium
Currency translation reserve 13,850 26,352
Accumulated losses (62,448) (60,341)
13,413 14,222
Non-current liabilities
Long term liabilities 329 364
Deferred taxation 43 45
Deferred revenue - long term 2,023 1,533
2,395 1,942
Current liabilities
Trade payables 3,569 3,614
Provisions 1,848 1,726
Short term borrowings 56 647
Taxation 685 210
Deferred revenue - current 10,798 9,937
Bank overdraft - 537
16,956 16,671
Total Equity and Liabilities 32,764 32,835
Net asset value per share 12 13
(cents)
Net tangible asset value per 6 4
share (cents)
Closing conversion rate (R:$) 6.67 8.58
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED INCOME STATEMENT
CONTINUING OPERATIONS % Audited Audited
change R"000 R"000
For the year ended: 31 Dec 03 31 Dec 02
Revenue
Licences (27) 112,174 153,938
Maintenance (10) 110,696 123,040
Services (21) 17,869 22,576
(20) 240,739 299,554
Cost of sales
Licences 29 (822) (1,159)
Maintenance and services 17 (41,548) (50,114)
17 (42,370) (51,273)
Gross profit (20) 198,369 248,281
Expenses (197,752) (279,943)
Administrative and general 14 (41,516) (48,206)
Research and development 14 (49,619) (58,026)
Distribution and marketing 22 (79,312) (101,329)
Depreciation and amortisation 62 (27,305) (72,382)
Profit (loss) before investment 102 617 (31,662)
(income) cost
Net investment income (cost) 109 302 (3,208)
Hostile bid defence costs 100 - (4,489)
Net profit (loss) before taxation 102 919 (39,359)
Taxation (expense) benefit (130) (4,981) 16,862
Net loss for the year - 82 (4,062) (22,497)
Continuing Operations
Reconciliation to headline earnings - Continuing Operations:
Net loss for the year (4,062) (22,497)
Add back (net of tax where 15,717 39,035
applicable)
Amortisation of goodwill 15,374 34,635
Hostile bid costs - 3,142
Realised currency loss on foreign - 1,258
equity loan
Loss on sale of fixed assets 343 -
Headline earnings - Continuing 11,655 16,538
Operations
Weighted average conversion rate 7.34 10.16
(R:$)
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED INCOME STATEMENT
(cont.)
DISCONTINUING OPERATIONS % Audited Audited
change R"000 R"000
For the year ended: 31 Dec 31 Dec 02
03
Revenue
Maintenance - 1,220
Services - 4,643
- 5,863
Cost of sales
Maintenance and services - 12,378
Gross (loss) - (6,515)
Expenses - (12,792)
Administrative and general - (9,286)
Research and development - (625)
Distribution and marketing - (1,637)
Depreciation and amortisation - (1,244)
Loss before investment cost - (19,307)
Net investment income - 105
Loss on sale of discontinuing - (6,693)
operation
Impairment of equipment - (5,469)
Discontinuance costs - (4,866)
Net loss before taxation - (36,230)
Taxation benefit - 4,228
Net loss for the year - - (32,002)
Discontinuing Operations
Reconciliation to headline loss - Discontinuing Operations:
Net loss for the year - (32,002)
Add back - 17,028
Loss on sale of discontinuing - 6,693
operation
Impairment of fixed assets - 5,469
Discontinuance costs - 4,866
Headline loss - Discontinuing - (14,974)
Operations
Loss - Continuing Operations 107 (4,062) (22,497)
Loss - Discontinuing Operations 100 - (32,002)
Loss - Total Operations 93 (4,062) (54,499)
Headline earnings - Continuing (30) 11,655 16,538
Operations
Headline loss - Discontinuing 100 - (14,974)
Operations
Headline earnings - Total >100 11,655 1,564
Operations
Basic loss per share (cents) (3.6) (49.1)
Diluted basic loss per share (4.0) (49.1)
(cents)
Headline earnings per share 10.5 1.4
(cents)
Diluted headline earnings per 9.6 1.4
share (cents)
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED BALANCE SHEET
Audited Audited
R"000 R"000
At: 31 Dec 03 31 Dec 02
ASSETS
Non-current assets
Equipment 7,536 13,860
Goodwill 48,185 79,674
Intangible assets 142 6,305
Deferred taxation 31,681 39,937
87,544 139,776
Current assets
Trade and other receivables 57,591 92,805
Prepayments and deposits 3,956 4,507
Cash and cash equivalents 69,449 44,554
130,996 141,866
Total Assets 218,540 281,642
EQUITY AND LIABILITIES
Capital and reserves
Issued share capital and 413,617 413,531
premium
Currency translation reserve 92,746 121,296
Accumulated losses (416,897) (412,835
89,466 121,992
Non-current liabilities
Long term liabilities 2,193 3,120
Deferred taxation 285 390
Deferred revenue - long term 13,496 13,151
15,974 16,661
Current liabilities
Trade payables 23,804 30,996
Provisions 12,328 14,801
Short term borrowings 376 5,553
Taxation 4,569 1,800
Deferred revenue - current 72,023 85,232
Bank overdraft - 4,607
113,100 142,989
Total Equity and Liabilities 218,540 281,642
Net asset value per share 80 110
(cents)
Net tangible asset value per 37 32
share (cents)
Closing conversion rate (R:$) 6.67 8.58
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
R"000 R"000
For the year ended: 31 Dec 03 31 Dec 02
OPERATING ACTIVITIES
Cash from operations (see note 1) 50,948 22,890
Interest received (paid) 302 (3,103)
Income taxes paid (2,642) (3,193)
Net cash from operating activities 48,608 16,594
INVESTING ACTIVITIES
Additions to equipment (3,314) (6,462)
Proceeds from sale of equipment 128 -
Loans repaid - 6,087
Proceeds from sale of business 2,572 3,280
Additions to intangible assets - (426)
Net cash (used in) from investing (614) 2,479
activities
FINANCING ACTIVITIES
Proceeds from issue of ordinary shares 63 387
(Decrease) in long term borrowings (3,706) (887)
(Decrease) in short term borrowings (1,523) (7,210)
(Decrease) increase in bank overdraft (4,607) 4,135
Net cash (used in) financing activities (9,773) (3,575)
NET INCREASE IN CASH AND CASH 38,221 15,498
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING 44,554 43,833
OF PERIOD
Effect of exchange rate changes (13,326) (14,777)
CASH AND CASH EQUIVALENTS AT END OF 69,449 44,554
PERIOD
Note 1:
Operating cash flows before working 27,802 13,426
capital movements
Working capital movements 23,146 9,464
Trade and other receivables 13,760 (22,908)
Trade and other payables (255) (5,301)
Net movement in deferred revenue 9,641 37,673
Cash from operations 50,948 22,890
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Audited Audited
R"000 R"000
For the year ended: 31 Dec 03 31 Dec 02
Balance at beginning of the period - 231,544
as previously stated
Consolidation of employee share - (674)
incentive trust
Balance at beginning of the period 121,992 230,870
Net loss for the year (4,062) (54,499)
Share options converted 63 903
Scheme shares released 23 -
Pre-emption rights exercised - (900)
Issue costs written off - (44)
Transfer from translation reserve (28,550) (54,338)
89,466 121,992
ADDITIONAL INFORMATION
Audited Audited
For the year ended: 31 Dec 03 31 Dec 02
(million)
Number of shares in issue (less 111,5 111,1
treasury shares)
Weighted average number of shares 111,5 111,1
Fully diluted number of shares 115,5 113,4
Loss per share (cents):
Basic (3.6) (49.1)
Fully diluted (4.0) (49.1)
Headline earnings per share (cents):
Basic 10.5 1.4
Fully diluted 9.6 1.4
Headline earnings per share (cents)
- Continuing Operations:
Basic 10.5 14.9
Fully diluted 9.6 14.6
Headline loss per share (cents) -
Discontinuing Operations:
Basic - (13.5)
Fully diluted - (13.2)
GROUP OVERVIEW
It is with pleasure that the board presents the audited results for the year
ended 31 December 2003 to shareholders. IDION"s decision to focus all of its
current efforts on Vision was rewarded with another record year in dollar
revenues and cash generation as well as continued profitability. Investments
made over the past 24 months in Vision"s infrastructure, indirect sales
distribution channel, human capital and new product initiatives, in particular
ORION and the Group"s selected focus on multi-platform managed availability,
continued to yield favourable results.
The Group further continued to generate substantial positive cash flows from
operations (Vision has in its period under the control of IDION, generated $13,5
million in cash from operations) and released ORION.
FINANCIAL REVIEW
Continuing Operations (all references to growth in US dollar terms unless stated
otherwise):
Revenue growth remained solid at 11% and was particularly bolstered by growth in
maintenance revenue of 25%. This growth in maintenance revenue continued to
reflect Vision"s strong customer retention rate combined with new customer wins
from 2002. Services revenue grew by 9%, driven by the successful delivery of
several significant consulting engagements with key customers. Licence revenue
was subject to competitive pricing pressure and the weak global economy during
2003. While the Group recorded 256 new customer wins during the year, licence
revenue growth was limited to 1% over 2002 under these challenging conditions.
Geographical revenue breakdown per product type:
Revenue breakdown (%)
Revenue type/Region Americas EMEA Asia- Total
Pacific
Licences 24 18 5 47
Maintenance 33 11 3 47
Services 5 1 0 6
TOTAL 62 30 8 100
Gross profit margin was 82% for the year, virtually unchanged from 2002.
Operating expenses, comprising administrative and general costs, research and
development costs and distribution and marketing costs, increased by 14% over
2002. This increase was as a result of continued investments in infrastructure,
human capital, sales channel partner development, the launch of ORION and
continued costs related to activities following the unsuccessful hostile bid
launched against the Company in 2002. The Group"s investment in research and
development was approximately 21% of revenue, consistent with 2002.
Depreciation and amortisation expenses reduced by 48% to US$3,7 million (62% in
rand terms from R72,4 million to R27,3 million). The reduction in the expense
is due to the completion of the amortisation programme on intangible assets
recognised at the time of the acquisition of Vision, and amortisation on
goodwill.
Depreciation and amortisation
(R"million) 31 Dec 03 31 Dec 02
Amortisation of intangible assets 5,0 28,8
Amortisation of goodwill 15,4 34,6
Depreciation 6,9 9,0
Total per income statement 27,3 72,4
Net investment income amounted to R0,3 million (2002: expense of R3,1 million)
and consists of interest and unrealised foreign currency gains. The effective
tax rate for the Group (before amortisation of goodwill) amounted to 31% and the
Group continued to enjoy favourable tax credits for Vision"s sales recorded
outside of the United States.
SEGMENTAL ANALYSIS
Segmental Analysis
Continuing Operations Discontinuing
Operations
(R"000)
Vision Solutions IDION Corporate IDION Solutions
31 Dec 31 Dec 31 31 Dec 02 31 Dec 31 Dec
03 02 Dec 03 02
03
Revenue 240,739 299,554 5,966 7,856 - 5,863
(Loss) (4,154) (18,127) 92 (4,370) - (32,002)
Profit
EBITDA 27,922 39,391 (829) (47,788) - (26,225)
(US$"000)
Revenue 32,798 29,484
EBITDA 3,917 3,887
EBITDA: "Earnings Before Interest, Tax, Depreciation and Amortisation"
Note: Inter-company transactions have been eliminated in the above table.
FINANCIAL POSITION
The Group"s net cash position further improved to R69,4 million at year end
(2002: R39,9 million) despite continued strengthening of the rand. In dollar
terms the Group increased its net cash on hand to $10,4 million (2002: $4,7
million). This increase in cash on hand is attributable to sustained focus on
its working capital management as well as satisfactory sales performance by
Vision. Debtor days (weighted) improved to 76 days (2002: 102 days) following
further concerted efforts by management to improve the Group"s working capital
levels.
Deferred revenue (contracted maintenance revenue awaiting amortisation to the
income statement as income) further continued its historical growth to reflect
the quality and expansion of Vision"s contracted customer base and the product
offering to its customers.
The Group"s deferred tax assets mainly comprise the unused assessed losses
acquired at acquisition of Vision, recognition for its research and development
programmes in the US and foreign tax credits. A combination of these items will
continue to provide the Group with income tax savings for the foreseeable
future.
ORION
ORION, the first multi-platform managed availability solution in the industry,
was released during September 2003. The first two ORION components that were
launched in limited release ("LR") availability were ORION for iSeries and ORION
for Windows. The third ORION component, ORION for Linux was released in LR
availability during December 2003. All three ORION components were well
received and started to gain traction in the fourth quarter of 2003.
General availability ("GA") of the first two components is expected early in the
second quarter of 2004 and ORION for Linux"s GA is scheduled for the second half
of 2004. It is anticipated that these ORION components will start to contribute
more substantially to revenues during the second half of 2004.
CORPORATE GOVERNANCE
The Board of Directors and senior management affirm their commitment to
achieving and upholding accepted standards of corporate governance. Adhering to
these standards ensures that the Group"s business is conducted, where
applicable, in accordance with the second King Code of Corporate Practices and
Conduct ("King II").
DIVIDENDS
The Board proposed that no dividend be declared in order to support future
expansion in the Group.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements were audited by Deloitte & Touche and have
been compiled in accordance with the statements on International Financial
Reporting Standards ("IFRS"). The accounting policies used in the preparation
of the consolidated financial statements are, with the exception of the
consolidation of the IDION employee share trust, consistent with the policies
applied to the audited financial statements for the year ended 31 December 2002.
The IDION employee share trust has been consolidated into the results with
retrospective effect and with no material effect on earnings. A copy of the
unqualified signed audit report is available for inspection at IDION"s
registered office. This announcement of results has been prepared in compliance
with the disclosure requirements of IFRS statement IAS 34: Interim Financial
Reporting.
PROSPECTS
Whilst the Board is encouraged by the financial results for 2003, it is
nevertheless of the opinion that economic conditions are likely to remain
challenging in 2004. However, it is of the view that the Group is well
positioned to take advantage of any improvements in the economic climate and IT
spending. The Board is further encouraged by the initial acceptance of ORION and
remains confident that the rate of acceptance will continue to increase in 2004.
However, given the historic business model of the Group, revenue seasonality is
expected to continue in 2004 where the majority of the Group"s revenue and
profits are likely to be recorded during the second half of the year. The long-
term prospects for the Group remain positive and IDION"s activities and
decisions will continue to 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
16 March 2004
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
www.idion.com
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