| Tue 1 Feb 2005, 13:39 | | Results For The Six Months Ended 31 December 2004 |
|
Prism - Unaudited Interim Results For The Six Months Ended 31 December 2004
PRISM HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1998/018949/06
Share code: PIM
ISIN: ZAE000022257
(`Prism` or `the Group`)
Unaudited Interim Results For The Six Months Ended 31 December 2004
* Continued profit growth despite Rand strength
* Diluted headline earnings per share: + 25%
* Empowerment transaction announced
The Board of Directors of Prism is pleased to announce the Group`s interim
results for the six months ended 31 December 2004. The Group continues to
experience increased demand for SIM products and software, which to some extent
is offset by a reduction in global pricing and the effects of an appreciation in
the South African Rand relative to the United States (`US`) Dollar.
Financial Review
60% of the Group`s revenue for the period under review was denominated in US
Dollars and as a result, the stronger Rand has had an adverse impact on the
Group`s earnings. During this period the average exchange rate of R6.18 to the
US Dollar was 12% stronger than the average exchange rate of R7.06 to the US
Dollar in the previous corresponding financial period.
The Group`s Rand revenues, for the period under review, increased by 12% when
compared against the previous corresponding financial period`s revenues. In US
Dollar terms, revenues increased by 28% during this period.
The Group continues to experience pricing pressures on SIM cards as a result of
excess global manufacturing capacity and a reduction in silicon costs. The
effect of pricing pressure has been compensated for by growth in unit volumes of
both SIM card software licensing and SIM card production.
The Group has maintained gross profit margins of 60%. The proportionate
contribution to revenues from the sale of software and services has increased
and this has served to counteract the reduced margins on SIM card sales.
Cost increases for the period were contained at 8% and reflect a measured policy
of expansion, given the uncertainty created by the continued Rand strength.
Exceptional items of R3.3 million are reported. This comprises a profit on the
disposal of the Group`s 30% equity investments in Telekom Applied Business
Sendirian Berhad and Telekom Technologies Sendirian Berhad to Telekom Malaysia.
Both investments were written off in full in prior years and these disposals
complete the disinvestment process resulting from the asset review undertaken in
2002.
Interest income of R1.1 million is reported. A substantial portion of the
Group`s cash resources are denominated in US Dollars, and earn the associated US
Dollar deposit interest rates.
Headline earnings have increased by 23% from R7.4 million to R9.2 million, and
the corresponding diluted headline earnings per share has increased by 25% from
1.2 cents to 1.5 cents in comparison to the previous corresponding period.
The Group continued to experience strong cash generation from trading
activities. The Group invested R8 million in the acquisition of plant and R14
million was applied to share repurchases as discussed below. The Group ended the
period with a cash balance of R53 million, a net reduction of R7 million
compared to the opening cash position.
The winding up of the Archway Technology Venture Capital Fund (`Fund`) presented
a once-off opportunity to buy back certain shares distributed in specie to the
Fund`s investors, and to reduce the impact of the dilution in earnings per share
that arose as a consequence of the rights issue undertaken in January 2003. To
this end, the Group`s share trust acquired a total of 45 million shares at an
average price of 32 cents during the period under review.
Business unit review
Chip and Wireless Products and Software:
There is increasing demand for value-added SIMs, the associated SIM software and
back-end mobile transaction software, which allows for mobile operators to
increase subscriber revenues. The business unit is continuing to expand its
model of providing card manufacturers with Prism SIM card software under
licence.
Prism`s `Voucherless Top-Up` (`VTU`) system was awarded a Department of Science
and Technology`s Technology Top 100 Award for commercial product innovation.
This system facilitates cellular phone based pre-paid airtime vending. The VTU
is presently operating in two countries with good prospects for further growth.
Paypoint:
The imminent Europay, MasterCard and Visa (`EMV`) deadlines will continue to be
a catalyst for demand for Prism`s products and services. A number of EMV
solutions have been implemented at major retailers during the period under
review.
Transaction Security Products and Software:
Demand for encryption hardware and software continues to grow, and prospects for
further growth are favourable. A notable achievement during the period was the
delivery of the first batch of EMV `type 2` approved Outdoor Payment Terminals
(`OPTs`) to Radiant Systems Inc. These OPTs form an integral part of an advanced
forecourt solution for ExxonMobil in Asia. Although current volumes are small,
the EMV certification of the product bodes well for further sales growth.
Services:
Prism TranSwitch Services (Pty) Ltd (`PTSS`), which is in the process of being
re-branded as EasyPay, has continued to show growth on the back of a buoyant
retail environment. Outside of PTSS, Services revenue for the period was
adversely affected by the loss of a maintenance contract in Malaysia.
Prospects
The Board of Directors is confident that prospects for earnings per share growth
for the full year remain favourable. The current level of the Rand however, is a
cause for concern, and has necessitated a re-evaluation of certain initiatives
and expansion plans.
Empowerment Transaction
On 9 December 2004 Prism announced the intention to conclude a Black Economic
Empowerment (`BEE`) transaction whereby approximately 17% of its issued ordinary
shares would be sold to the Mineworkers Investment Company (Proprietary) Limited
(`MIC`). This announcement is expected to be updated shortly.
This transaction is an important step in ensuring that the Group complies with
the letter and spirit of the Information Communication Technology Sector Charter
(`ICT Charter`). Steps are being taken towards achieving the other empowerment
components laid out in the ICT Charter in order to ensure the Group`s
appropriate participation in the South African economy, and to position the
Group to benefit from the full range of business opportunities that may present
themselves in the future.
Board composition
There were no changes to the composition of the Board of Directors during the
period under review. Upon conclusion of the empowerment transaction referred to
above, it is anticipated that MIC will appoint two further directors to the
Board.
Accounting policies
The financial information has been presented in accordance with the South
African Statements of Generally Accepted Accounting Practice. The accounting
policies applied are consistent with those applied in the corresponding previous
reporting period with the exception of the consolidation of the Prism Holdings
Limited Share Incentive Scheme. The effect of this change was not material.
Dividends
No dividends have been declared for the interim period ended 31 December 2004.
Given the steadily improved financial position of the Group over the last two
years and the BEE transaction announced, the Board has reviewed the dividend
policy and intends to pay a dividend on an annual basis in future. This will be
declared in the year-end results announcement.
For and on behalf of the board
I.N. Matthews (Chairman)
A.W. Els (Chief Executive Officer)
1 February 2005
Consolidated Income Statement
6 months ended 6 months ended Year ended
31 December 2004 31 December 2003 Percentage 30 June 20
R` 000 Unaudited Unaudited Change Audited
Revenue 139,902 124,403 12.5% 263,130
Material costs (56,346) (49,189) (102,864)
Gross profit 83,556 75,214 11.1% 160,266
Operating costs (61,029) (56,375) 8.3% (105,811)
Depreciation (5,155) (5,231) (9,967)
Amortisation of other - (2,585) (5,171)
intangible assets
Foreign exchange losses (1,139) (709) (2,251)
Operating profit 16,233 10,314 57.4% 37,066
Amortisation of (6,253) (6,253) (12,506)
goodwill
Exceptional items 3,253 3,242 9,667
Net finance 1,055 (109) 1,149
income/(expense)
Profit before taxation 14,288 7,194 98.6% 35,376
Taxation (6,186) (2,794) (10,265)
Profit after taxation 8,102 4,400 25,111
Minority interest (1,937) - (1,120)
Earnings attributable 6,165 4,400 40.1% 23,991
to ordinary
shareholders
Number of ordinary
shares in issue (`000)
Shares * 537,878 580,289 580,643
Weighted average shares 546,650 579,252 579,522
Weighted fully diluted 608,065 634,681 631,446
shares
Earnings per share
(cents)
- basic 1.1 0.8 37.5% 4.1
- headline 1.7 1.3 30.8% 4.6
Diluted earnings per
share (cents)
- basic 1.0 0.7 42.9% 3.8
- headline 1.5 1.2 25.0% 4.3
The following
adjustments to earnings
attributable
to ordinary
shareholders were taken
into account
in the calculation of
headline earnings:
Earnings attributable 6,165 4,400 23,991
to ordinary
shareholders
Amortisation of 6,253 6,253 12,506
goodwill
Loss on disposal of 3 13 31
plant and equipment
Exceptional items (3,253) (3,242) (9,667)
Headline earnings 9,168 7,424 23.5% 26,861
Rand/US Dollar exchange
rates
Opening rate 6.27 7.44 7.44
Closing rate 5.62 6.59 6.27
Weighted average rate 6.18 7.06 6.85
* In terms of the listing requirements of the JSE Securities Exchange South
Africa, companies are obliged to consolidate their share incentive trusts under
certain circumstances. Comparative figures have been restated accordingly. The
54 312 767 (2004 Interim: 11 902 254, 2004 Final: 11 547 563) ordinary shares
held in the trust for participants are accounted for as treasury shares and are
deducted from the number of shares in issue in determining the weighted average
number of shares. The cost price of these treasury shares has been deducted from
the Group`s equity.
Consolidated Balance Sheet
31 December 2004 31 December 2003 30 June 200
R` 000`s Unaudited Unaudited Audited
ASSETS
Non-current assets 67,671 97,225 72,576
Plant and equipment 21,318 19,777 18,522
Intangible assets 11,116 26,208 17,369
Investment in associates - 12,706 -
Deferred taxation 33,702 38,534 35,150
Proceeds on disposal of 1,535 - 1,535
investments
Current assets 104,367 62,252 112,894
Inventories 13,407 7,707 5,778
Trade and other receivables 38,045 26,869 45,263
Proceeds on disposal of - - 1,612
investments
Cash resources 52,915 27,676 60,241
Total assets 172,038 159,477 185,470
EQUITY AND LIABILITIES
Capital and reserves 109,151 100,122 119,496
Shareholders` interest 108,374 100,122 118,648
Minority interest 777 - 848
Current liabilities 62,887 59,355 65,974
Trade payables and accruals 55,820 35,939 58,034
Provisions 3,000 17,655 3,000
Interest bearing borrowings - 1,151 -
Taxation 4,067 4,610 4,940
Total equity and liabilities 172,038 159,477 185,470
Net asset value per ordinary 20 17 20
share (cents)
Cash Flow Statement
6 months ended 6 months ended Year ended
31 December 2004 31 December 2003 30 June 2004
R` 000 Unaudited Unaudited Audited
Cash flows from operating 12,227 3,063 24,308
activities
Cash generated by operations 16,644 10,892 34,397
Net finance income/(expense) 1,055 (109) 1,149
Taxation paid (5,472) (7,720) (11,238)
Cash flows from investing (3,086) 504 15,014
activities
Acquisitions of property, plant (10,457) (10,457) (10,457)
and equipment
Proceeds from disposal of 5 5 5
property, plant and equipment
Investment in intangible assets (4,277) (4,277) (4,277)
Net acquisition of (46,479) (46,479) (46,479)
subsidiaries, associates and
investments
(Decrease)/increase in share (1,059) (1,059) (1,059)
trust loan
Decrease in proceeds on 1,932 1,932 1,932
disposal of investments
Decrease in amounts owing by - - -
affiliates
Deferred purchase consideration - - -
paid
Cash flows from financing (16,467) (370) (3,560)
activities
Proceeds from the issue of 58,645 58,645 58,645
share capital
Net borrowings (repaid)/raised (37,895) (37,895) (37,895)
Net (decrease)/increase in cash (7,326) 3,197 35,762
and cash equivalents
Cash and cash equivalents at 60,241 24,479 24,479
beginning of the period
Cash and cash equivalents at 52,915 27,676 60,241
end of the period
Statement of Changes in Shareholder`s Interests
6 months ended 6 months ended Year ended
31 December 2004 31 December 2003 30 June 2004
R` 000 Unaudited Unaudited Audited
Shareholders` interest at the 118,648 100,178 100,178
beginning of the period
Shares issued - 11 11
Share premium arising on shares - 1,807 1,807
issued
Treasury shares movements (14,179) (967) (1,011)
Currency translation (2,260) (5,307) (6,328)
differences
Earnings attributable to 6,165 4,400 23,991
ordinary shareholders
Shareholders` interest at the 108,374 100,122 118,648
end of the period
Segmental Analysis
Primary basis - business
segments
Revenue 6 months ended 6 months ended Year ended
31 December 2004 31 December 2003 30 June 2004
R` 000 Unaudited Unaudited Audited
Chip and Wireless Products and 72,344 55,041 116,085
Software
Secure solutions and third 17,508 16,175 43,442
party payment terminals
Transaction Security Products 11,395 13,325 21,998
and Software
Services 38,655 39,862 81,605
139,902 124,403 263,130
Secondary basis - geographical
segments
Revenue
Africa 81,601 85,594 173,649
South-East Asia 57,347 37,961 87,192
Europe 954 848 2,289
139,902 124,403 263,130
Net operating assets
Africa 89,359 58,384 91,958
South-East Asia 19,792 41,738 27,538
109,151 100,122 119,496
Plant and equipment additions
Africa 7,951 2,722 6,247
South-East Asia - 2 33
7,951 2,724 6,280
Registered office: Building 1, Prism Business Park, Ruby Close, Fourways, 2068,
Gauteng, South Africa
Transfer Secretaries: Ultra Registrars (Pty) Ltd, PO Box 4844, Johannesburg,
2000, Gauteng
Executive Directors:
AW Els (CEO), J Hnizdo, GR McKay, MP Serrao
Non-Executive Directors:
RAR Bicker-Caarten, RDS Came, ORJ da Silva, RMJ Flett, IN Matthews (Chairman),
KM Pocock
Company Secretary: EC de Villiers
Sponsor:
Standard Bank
(Registration number 1962/000738/06)
Date: 01/02/2005 12:25:39 PM Supplied by
Produced by the JSE SENS Department
