| Wed 18 Aug 2004, 8:27 | | IDION - UNAUDITED FINANCIAL RESULTS FOR THE SIX MO |
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IDION - UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
IDION TECHNOLOGY HOLDINGS LIMITED
1998/ 013846/ 06
(`IDION` or `the Group` or `the Company`)
ISIN Code: ZAE000022513
Share code: IDI
Unaudited financial results for the six months ended 30 June 2004 (`the period`)
Results denominated in United States (`US`) Dollars (`$`)
OVERVIEW
- Introduction of strategic long-term shareholder, VenFin Limited;
- Group headline earnings $302 000 (Headline Earnings Per Share (`HEPS`) of
0.3 US cent), compared to Group headline earnings in 2003 of $78 000 (HEPS
of 0.1 US cent);
- Net cash position remained strong at $10,2 million (31 December 2003: $10,4
million);
- EBITDA of $897 000 (30 June 2003 $1,3 million);
- Despite revenue decline of 7%, annuity-based income, representing 57% of
total revenue, increased 11% to $8,1 million;
- Substantial long-term contract signed with large multi-national financial
institution;
- ORION gaining market acceptance in key accounts.
IDION is a technology investment holding company listed on the JSE Securities
Exchange South Africa. Its operating subsidiary, Vision Solutions, Inc.
(`Vision`), is a leading vendor of managed availability software and services
principally for the IBM eServer iSeries. Managed availability software enables
an enterprise`s applications and information to be continuously accessible
without interruption across computing platforms and database boundaries.
Vision`s range of innovative products are used to maintain the integrity and
availability of data and mission critical applications in a wide variety of
industries such as banking, finance, government, education, healthcare,
distribution, manufacturing, transportation and telecommunications.
Vision has a presence in North and South America, Europe, Africa and the Asia-
Pacific region, with more than 1 850 customers and over 10 000 licences in 70
countries. Vision is also extending its reach through ORION, the industry`s
first multi-platform solution to support application availability across
multiple operating systems and databases.
UNITED STATES DOLLAR FINANCIAL REPORTING
IDION has changed its measurement currency to US$ as 100% of the Group`s revenue
is derived in US$ and in excess of 97% of the Group`s expenses are incurred in
US$. This change ensures that financial information is presented consistent
with the economic substance of the underlying events and circumstances of the
Group`s business. The Group has also changed its reporting currency to US$ but,
for the convenience of stakeholders, has prepared a South African Rand
denominated income statement and balance sheet as supplementary information.
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED INCOME STATEMENT
$`000 $`000 $`000
Unaudited Unaudited Audited
Ended: % 30 Jun 04 30 Jun 03 31 Dec 03
change 6 months 6 months 12 months
Revenue (7) 14,146 15,254 32,798
Licences (24) 5,008 6,626 15,283
Maintenance 11 8,116 7,305 15,081
Services (23) 1,022 1,323 2,434
Cost of sales 18 (3,391) (2,867) (5,772)
Licences 80 (83) (46) (112)
Maintenance and services 17 (3,308) (2,821) (5,660)
Gross profit (13) 10,755 12,387 27,026
Expenses (14) (11,363) (13,249) (26,937)
Administrative and general (12) (2,171) (2,459) (5,652)
Research and development 2 (3,170) (3,122) (6,760)
Distribution and marketing (18) (4,517) (5,525) (10,805)
Depreciation and (30) (1,505) (2,143) (3,720)
amortisation
(Loss) profit before (29) (608) (862) 89
investment income
Net investment income 47 10 40
Net (loss) profit before (34) (561) (852) 129
taxation
Taxation - (248) (53) (682)
Net loss for the period/year (11) (809) (905) (553)
Reconciliation to headline
earnings:
Net loss for the period/year (809) (905) (553)
Add back: 1,111 983 2,138
Amortisation of goodwill 1,111 983 2,094
Loss on sale of fixed - - 44
assets
Headline earnings 287 302 78 1,585
Loss per share - basic (cent) (0.7) (0.8) (0.5)
- (cent) (0.7) (0.8) (0.5)
diluted
Headline earnings per share - (cent) 0.3 0.1 1.4
basic
(cent) 0.3 0.1 1.4
- diluted
Weighted average conversion 6.62 8.26 7.64
rate (R:$)
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED BALANCE SHEET $`000 $`000 $`000
Unaudited Unaudited Audited
At: 30 Jun 04 30 Jun 03 31 Dec 03
ASSETS
Non-current assets 11,875 14,698 13,293
Equipment 900 1,344 1,130
Goodwill 6,113 8,336 7,224
Intangible assets 14 28 21
Deferred taxation 4,848 4,990 4,918
Current assets: 17,759 16,250 19,640
Trade and other receivables 7,044 8,510 8,635
Prepayments and deposits 501 541 593
Cash and cash equivalents 10,214 7,199 10,412
TOTAL ASSETS 29,634 30,948 32,933
EQUITY AND LIABILITIES
Capital and reserves 12,938 13,542 13,787
Issued share capital and 48,227 48,207 48,207
premium
Currency translation 12,987 13,153 13,047
reserve
Accumulated losses (48,276) (47,818) (47,467)
Non-current liabilities 2,022 1,798 2,395
Long term liabilities 303 348 329
Deferred taxation 44 52 43
Deferred revenue - long 1,675 1,398 2,023
term
Current liabilities 14,674 15,608 16,751
Trade payables 1,942 2,724 2,809
Provisions 1,128 1,419 2,402
Short term borrowings 203 91 57
Taxation 603 235 685
Deferred revenue - current 10,798 11,113 10,798
Bank overdraft - 26 -
TOTAL EQUITY AND LIABILITIES 29,634 30,948 32,933
Net asset value per share 12 12 12
(cents)
Tangible net asset value per 6 5 6
share (cents)
Closing conversion rate (R:$) 6.46 7.49 6.67
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED CASH FLOW $`000 $`000 $`000
STATEMENT Unaudited Unaudited Audited
Ended: 30 Jun 04 30 Jun 03 31 Dec 03
6 months 6 months 12 months
OPERATING ACTIVITIES
Cash from operations (see 26 3,221 6,935
note 1)
Net investment income 47 10 40
Income taxes paid (230) (185) (334)
Net cash (used in) generated
from operating activities (157) 3,046 6,641
INVESTING ACTIVITIES
Additions to equipment (156) (208) (451)
Proceeds from sale of fixed - - 1
assets
Proceeds from sale of 18 - 336
business
Net cash used in investing (138) (208) (114)
activities
FINANCING ACTIVITIES
Proceeds from issue of - 8 8
ordinary shares
Increase (decrease) in short
term borrowings 92 (382) (733)
Decrease in bank overdraft - (483) (598)
Net cash from (used in) 92 (857) (1,323)
financing activities
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (203) 1,981 5,204
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10,412 5,194 5,194
Effect of exchange rate 5 (2) 14
changes
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 10,214 7,173 10,412
Note 1
Net (loss) profit before (561) (852) 129
taxation
Net investment income (47) (10) (40)
Amortisation and depreciation 1,505 2,143 3,720
Working capital movements (871) 1,940 3,126
Trade and other receivables 1,665 2,288 1,866
Trade and other payables (2,182) (1,352) (52)
Net movement in deferred (354) 1,004 1,312
revenue
Cash from operations 26 3,221 6,935
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED STATEMENT OF $`000 $`000 $`000
CHANGES IN EQUITY Unaudited Unaudited Audited
Ended: 30 Jun 04 30 Jun 03 31 Dec 03
6 months 6 months 12 months
Balance at the beginning of
the period (as previously 13,787 14,218 14,218
stated)
Prior year adjustment - 485 485
Balance at beginning of the
period (restated) 13,787 14,703 14,703
Net loss for the period/year (809) (905) (553)
Issue of share capital - 7 7
Scheme shares released - 3 3
Transfer from translation (60) (266) (373)
reserve
Consolidation of share trust
- movement in share capital 20 - -
and premium
12,938 13,542 13,787
ADDITIONAL INFORMATION Unaudited Unaudited Audited
Ended: 30 Jun 04 30 Jun 03 31 Dec 03
6 months 6 months 12 months
Share information (million):
Number of shares in issue 113,4 113,4 113,4
Number of shares in issue
(less treasury shares) 111,6 111,5 111,5
Weighted average number of 111,6 111,5 111,5
shares
Fully diluted number of 114,6 115,0 115,5
shares
Loss per share (cents):
Basic (0,7) (0,8) (0,5)
Fully diluted (0,7) (0,8) (0,5)
Headline earnings per share
(cents):
Basic 0.3 0.1 1.4
Fully diluted 0.3 0.1 1.3
GROUP OVERVIEW
The Board of directors presents the unaudited results to shareholders for the
six months ended 30 June 2004. Whilst IDION did not escape the continued global
weakness in enterprise software spending, the Company, through continued focus
on its core managed availability products and cost containment, nevertheless
recorded a positive set of results in the traditionally weaker first half of the
year. The Group also benefited from a once-off adjustment to a provision for
referral fees. IDION further continued to maintain healthy cash resources and
sound working capital levels.
On a strategic level, IDION`s shareholder profile was considerably enhanced with
the introduction of VenFin Limited (`VenFin`) as a strategic long-term
shareholder. During the period under review, VenFin increased its shareholding
to 34.99% following the decision by DataMirror Corporation to dispose of its
investment in IDION.
During the period under review, Vision recorded 106 new customer wins and
successfully negotiated a substantial long-term enterprise agreement with an
existing customer for further ORION for OS/400 software licenses, continued
software support and professional services with a very large multi-national
financial institution spanning all their global data centres and operations.
FINANCIAL REVIEW
Overall revenue decreased by 7% over the comparable period and licence sales
were challenging, particularly for transactions near the end of the reporting
period. Consistent with many other software vendors in the US, the Company
experienced a slowdown of deal closure, particularly in its highly important
North America region. Revenue was further impacted by IBM`s i5 product
transitioning where a delayed release of its 2004 i5 server models had
prospective customers delaying buying decisions. This specifically delayed
medium and large orders for the new i5 servers, as managed availability software
is usually purchased in conjunction with the purchase of a new server. Although
most of the IBM shipment issues are expected to be addressed during the second
half of 2004, it could have a temporary effect on Vision`s software license
orders leading into 2005. Services revenue also recorded soft results following
lower first half licence revenue but maintenance revenue continued its solid
growth (11%), testament to the Group`s stable and satisfied customer base.
Geographical revenue breakdown per product type:
Revenue breakdown (%)
Revenue type/Region Americas EMEA Asia- Total
Pacific
Licences 12 15 8 35
Maintenance 39 14 5 58
Services 6 1 0 7
TOTAL 57 30 13 100
Gross profit margin was 76% for the period, down from 81% in the comparative
2003 period, resulting from the lower licence revenues.
Operating expenses, comprising administrative and general costs, research and
development costs and distribution and marketing costs, decreased by 11% to $9,9
million. Management continued to control expenditures in all areas of the
business with the exception of its investment in research and development, which
increased marginally over the comparative 2003 period. Including a once-off
benefit of a reversal of a provision for referral fees ($332 000), operating
expenses were $1,2 million lower than the comparative period.
Depreciation and amortisation expenses decreased by 30% to $1,5 million. The
reduction in these expenses is due to the completion of the amortisation
programme on intangible assets recognised at the time of the acquisition of
Vision.
Net investment income amounted to $47 000 (2003: $10 000) and consists of
interest earned and unrealised foreign currency gains. The effective tax rate
for the Group (before amortisation of goodwill) amounted to 45%, slightly higher
than the statutory charge of 40% as a result of having incurred certain once-off
non tax deductible expenses.
SEGMENTAL ANALYSIS
($`000) Vision Solutions IDION Corporate
30 Jun 04 30 Jun 03 30 Jun 04 30 Jun 03
Revenue 14,146 15,254 - -
Net loss after tax (739) (901) (70) (4)
EBITDA 989 1,289 (92) (7)
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 was $10,2 million at 30 June 2004, virtually
unchanged from $10,4 million at 31 December 2003 and is attributable to
sustained focus on its working capital management. Debtor days (weighted) were
reduced to 83 days (30 June 2003: 91 days).
Deferred revenue (contracted maintenance revenue awaiting recognition in the
income statement as revenue) was $12,2 million at 30 June 2004, reflecting the
quality 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.
ORION
ORION continues to show excellent progress, and the Company now has customers
that are running the full OS/400, Windows, and Linux suite of solutions. Vision
continues to get positive feedback on its ORION strategy from IBM and industry
analysts and customers and has continued to work closely with its partner and
customer network to build the next generation of ORION. Vision`s investment in
its ORION for OS/400 solution continues to differentiate it from its competition
in their core business. Continued investments in research and development,
channel development and sales programmes are beginning to result in the
expansion of Vision`s core business beyond its iSeries market. Vision is well-
aligned with the IBM eServer strategy and the recent announcement of the IBM
Power 5 platforms (i5 and p5 servers) is likely to present future opportunities
for the Company and its ORION managed availability solutions.
ACCOUNTING POLICIES
The unaudited consolidated financial statements have been compiled in accordance
with International Financial Reporting Standards and in particular in compliance
with the disclosure requirements of IAS34: Interim Financial Reporting. The
accounting policies used in the preparation of the consolidated financial
statements are consistent with the policies applied to the audited financial
statements for the year ended 31 December 2003. The consolidation of the IDION
employee share trust at 31 December 2003 resulted in the re-composition of the
unaudited interim results for the six months ended 30 June 2003, which had no
material impact on the previously reported comparative results.
PROSPECTS
The Board is of the opinion that economic conditions are likely to remain
challenging for the remainder of 2004 as it relates to enterprise software
spending. However, it is of the view that the Group`s business model remains
sound and Vision is well positioned to take advantage of any improvements in
enterprise software 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 the second half of 2004 and that Vision will continue to
gain market share.
Given the historic business model of the Group, revenue seasonality is expected
to continue where more of the Group`s licence revenue is expected to be recorded
during the second half of 2004. 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
18 August 2004
EXECUTIVE DIRECTORS:
N Vlok, C Arnold, WA Richard, JJD Vlok
NON-EXECUTIVE DIRECTORS:
DD de Beer (independent), Dr DC Cronje (independent), PJ Liddiard, L van der
Bijl (independent)
COMPANY SECRETARY:
JJD Vlok
REGISTERED ADDRESS:
IDION House, 11 Naivasha Road, Sunninghill, 2157, Gauteng, South Africa
www.idion.com
SUPPLEMENTARY INFORMATION FOR THE CONVENIENCE OF USERS
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED INCOME STATEMENT R`000 R`000 R`000
IN RAND Unaudited Unaudited Audited
Ended: 30 Jun 04 30 Jun 03 31 Dec 03
6 months 6 months 12 months
Revenue 92,517 119,594 240,739
Licences 32,754 51,944 112,174
Maintenance 53,077 57,273 110,696
Services 6,686 10,377 17,869
Cost of sales (22,179) (22,476) (42,370)
Licences (541) (359) (822)
Maintenance and services (21,638) (22,117) (41,548)
Gross profit 70,338 97,118 198,369
Expenses (74,313) (103,870) (197,717)
Administrative and general (14,196) (19,275) (41,483)
Research and development (20,735) (24,479) (49,619)
Distribution and marketing (29,539) (43,315) (79,312)
Depreciation and (9,843) (16,801) (27,303)
amortisation
(Loss) profit before (3,975) (6,752) 652
investment income
Net investment income 307 71 291
Net (loss) profit before (3,668) (6,681) 943
taxation
Taxation (1,623) (416) (5,009)
Net loss for the period/year (5,291) (7,097) (4,066)
Reconciliation to headline
earnings
Net loss for the period/year (5,291) (7,097) (4,066)
Add back: 7,269 7,710 15,703
Amortisation of goodwill 7,269 7,710 15,374
Loss on sale of fixed assets - - 329
Headline earnings 1,978 613 11,637
Loss per share - basic (cent) (4.7) (6.4) (3.6)
- (cent) (4.7) (6.2) (4.0)
diluted
Headline earnings per share - (cent) 1.8 0.5 10.4
basic
(cent) 1.6 0.5 9.6
- diluted
Weighted average conversion 6.54 7.84 7.34
(R:$)
SUPPLEMENTARY INFORMATION FOR THE CONVENIENCE OF USERS
IDION TECHNOLOGY HOLDINGS LTD
CONSOLIDATED BALANCE SHEET R`000 R`000 R`000
IN RAND Unaudited Unaudited Audited
At: 30 Jun 04 30 Jun 03 31 Dec
03
ASSETS
Non-current assets 76,714 110,091 88,665
Equipment 5,813 10,066 7,536
Goodwill 39,488 62,433 48,185
Intangible assets 92 217 142
Deferred taxation 31,321 37,375 32,802
Current assets 114,723 121,713 130,997
Trade and other receivables 45,506 63,742 57,591
Prepayments and deposits 3,234 4,052 3,957
Cash and cash equivalents 65,983 53,919 69,449
TOTAL ASSETS 191,437 231,804 219,662
EQUITY AND LIABILITIES
Capital and reserves 83,582 101,433 91,960
Issued share capital and 311,546 361,071 321,541
premium
Currency translation reserve 83,897 98,519 87,022
Accumulated losses (311,861) (358,157) (316,603
)
Non-current liabilities 13,060 13,470 15,974
Long term liabilities 1,953 2,610 2,193
Deferred taxation 285 390 285
Deferred revenue - long term 10,822 10,470 13,496
Current liabilities 94,795 116,901 111,728
Trade payables 12,544 20,399 18,737
Provisions 7,287 10,629 16,023
Short term borrowings 1,310 682 376
Taxation 3,894 1,760 4,569
Deferred revenue - current 69,760 83,239 72,023
Bank overdraft - 192 -
TOTAL EQUITY AND LIABILITIES 191,437 231,804 219,662
Net asset value per share 74 90 82
(cents)
Tangible net asset value per 39 34 39
share (cents)
Closing conversion rate (R:$) 6.46 7.49 6
