| Wed 16 Mar 2005, 7:26 | | Audited financial results for the year ended |
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Idion Technology Holdings Limited - Audited financial results for the year ended
31 December 2004 (`the period`)
IDION TECHNOLOGY HOLDINGS LIMITED
Registration number 1998/013846/06
ISIN Code: ZAE000022513
Share code: IDI
(`IDION` or `the Group` or `the Company`)
Audited financial results for the year ended 31 December 2004 (`the period`)
Results denominated in United States Dollars (`$`)
OVERVIEW
- Group headline earnings $1,48 million (Headline Earnings Per Share (`HEPS`)
of 1,3 US cent), compared to Group headline earnings in 2003 of $1,59 million
(HEPS of 1,4 US cent);
- Net cash position remained strong at $10,25 million (31 December 2003:
$10,41 million);
- EBITDA of $3,48 million (31 December 2003 $3,81 million);
- Annuity-based income increased 11% to $16,74 million despite an overall
revenue decline of 5%;
- ORION continues to gain market acceptance.
IDION is a technology investment holding company listed on the JSE Securities
Exchange South Africa. Its operating subsidiary, Vision Solutions International,
Inc. (`Vision`), is a leading vendor of High Availability (`HA`) software and
services principally for the IBM eServer iSeries platform. Vision is also
extending its reach through ORIONTrade Mark, the industry`s first multi-platform
solution to support application and data availability on additional IBM eServer
platforms (excluding zSeries). HA software enables an enterprise`s applications
and information to be continuously accessible without interruption across
separate computing platforms and database boundaries. Vision`s range of
innovative products is used to maintain the integrity and availability of data
and of 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.
UNITED STATES DOLLAR FINANCIAL REPORTING
IDION`s measurement currency is dollars given that 100% of the Group`s revenue
is derived in dollars and in excess of 95% of the Group`s expenses are incurred
in dollars. The Group`s South African results, comprising the investment holding
company, are converted to dollars from South African Rand at the rates indicated
in the attached financial statements. For the convenience of stakeholders, the
Group has prepared a South African Rand denominated income statement and balance
sheet as supplementary information.
CONSOLIDATED INCOME STATEMENT
For the year ended: 31 Dec 31 Dec
04 03
% Audited Audited
Change $`000 $`000
Revenue (5) 31,298 32,798
Licences (16) 12,799 15,283
Maintenance 11 16,737 15,081
Services (28) 1,762 2,434
Cost of sales - 6,118 6,102
Licences 62 181 112
Maintenance and services (1) 5,937 5,990
Gross profit (6) 25,180 26,696
Expenses 24,607 26,607
Administrative and general (5) 5,481 5,789
Research and development 1 7,081 6,993
Distribution and marketing (11) 9,808 11,047
Amortisation (19) 2,237 2,778
Profit from operations 544 573 89
Interest paid 49 (64) (126)
Interest received 55 99 64
Foreign exchange gains 22 124 102
Net profit before taxation 467 732 129
Taxation 120 1,503 682
Net loss for the year (39) (771) (553)
Reconciliation to headline
earnings:
Net loss for the year (771) (553)
CONSOLIDATED INCOME STATEMENT
For the year ended: 31 Dec 31 Dec
04 03
% Audited Audited
Change $`000 $`000
Add back:
Amortisation of goodwill 2,223 2,094
Loss on sale of subsidiary 28 45
Headline earnings (7) 1,480 1,586
Loss per share - basic (cent) (0.7) (0.5)
- (cent) (0.8) (0.5)
diluted
Headline earnings per share - (cent) 1.3 1.4
basic
(cent) 1.2 1.3
- diluted
Weighted average conversion rate 6.42 7.64
(R:$)
CONSOLIDATED BALANCE SHEET
At: 31 Dec 04 31 Dec 03
Audited Audited
$`000 $`000
ASSETS
Non-current assets 9,582 13,293
Equipment 820 1,130
Goodwill 5,001 7,224
Intangible assets 7 21
Deferred taxation 3,754 4,918
Current assets: 20,398 19,640
Trade and other receivables 9,580 8,635
Prepayments and deposits 567 593
Cash and cash equivalents 10,251 10,412
TOTAL ASSETS 29,980 32,933
EQUITY AND LIABILITIES
Capital and reserves 12,761 13,787
Issued share capital and 48,215 48,207
premium
Currency translation reserve 12,783 13,047
Accumulated losses (48,238) (47,467)
Outside shareholders` 1 -
interest
Non-current liabilities 1,899 2,395
Long-term liabilities 265 329
Deferred taxation 41 43
Deferred revenue - long-term 1,593 2,023
Current liabilities 15,320 16,751
Trade and other payables 2,496 3,363
Provisions 1,289 1,848
Short-term borrowings 54 57
CONSOLIDATED BALANCE SHEET
At: 31 Dec 04 31 Dec 03
Audited Audited
$`000 $`000
Taxation 756 685
Deferred revenue - current 10,725 10,798
TOTAL EQUITY AND LIABILITIES 29,980 32,933
Net asset value per share 11 12
(cents)
Tangible net asset value per 7 6
share (cents)
Closing conversion rate (R:$) 5.62 6.67
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2004
31 Dec 31 Dec
04 03
Audited Audited
$`000 $`000
OPERATING ACTIVITIES
Cash from operations (see note 1) 499 6,935
Interest paid (24) (126)
Interest received 99 64
Income taxes paid (359) (334)
Net cash generated from operating 215 6,539
activities
INVESTING ACTIVITIES
Additions to equipment (359) (451)
Proceeds from sale of business 18 337
Net cash used in investing activities (341) (114)
FINANCING ACTIVITIES
Proceeds from issue of ordinary - 8
shares
Proceeds from issue of ordinary 1 -
shares in subsidiary
Decrease in long-term borrowings - (505)
Decrease in short-term borrowings (60) (126)
Decrease in bank overdraft - (598)
Net cash used in financing activities (59) (1,221)
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS (185) 5,204
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 10,412 5,194
Effect of exchange rate changes 24 14
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR 10,251 10,412
Note 1
Net profit before taxation 732 129
Amortisation and depreciation 2,908 3,720
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2004
31 Dec 31 Dec
04 03
Audited Audited
$`000 $`000
Loss on disposal of subsidiary 28 45
(Decrease)/increase in provisions (583) 100
Interest paid 64 126
Interest received (99) (64)
Foreign exchange gains (124) (102)
Operating cash flows before working 2,926 3,954
capital movements
Working capital movements (2,427) 2,981
Trade and other receivables (965) 1,821
Trade and other payables (916) (153)
Net movement in deferred revenue (546) 1,313
Cash from operations 499 6,935
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2004
$`000 $`000
Audited Audited
31 Dec 31 Dec
04 03
Balance at the beginning of the 13,787 14,217
year
Prior year adjustment* - 485
Net loss for the year (771) (553)
Share options exercised 8 8
Shares issued in subsidiary 1 -
Incentive plan shares released - 3
Exchange differences (264) (373)
12,761 13,787
* Correction: overstatement of
goodwill amortisation charged in
2001
ADDITIONAL INFORMATION
Share information (million):
Number of shares in issue 113.4 113.4
Number of shares in issue (less 111.6 111.5
treasury shares)
Weighted average number of shares 111.6 111.5
Fully diluted number of shares 114.9 115.5
Loss per share (cents):
Basic (0.7) (0.5)
Fully diluted (0.8) (0.5)
Headline earnings per share
(cents):
Basic 1.3 1.4
Fully diluted 1.2 1.3
GROUP OVERVIEW
IDION recorded headline earnings for the year of $1,48 million, as it continued
to invest and launch its core multi-platform HA and data integration products,
with a dedicated focus on the IBM eServer platform, while maintaining a proper
balance of its cost structure to its revenues. The Group continued to maintain
healthy cash resources and sound working capital levels.
Despite IBM experiencing a decline in IBM iSeries hardware revenue for the year,
Vision continued to post solid growth in its customer base through the addition
of more than 290 new customers. Vision concluded new contracts with existing
customers, the most notable being a substantial long-term global contract with
HSBC for additional software licences, continued software support and
professional services spanning all their global data centres and operations.
IDION`s shareholder profile was considerably enhanced during the year through
the introduction of VenFin Limited (`VenFin`) as a strategic long-term
shareholder. VenFin increased its shareholding to 34.99% in May 2004, following
the decision by DataMirror Corporation to dispose of its investment in IDION.
Vision also strengthened its management team and made a commitment to improve
its sales organisation, through the appointment of Stephen Massey as Executive
Vice President of Worldwide Sales in September 2004. Vision further
strengthened its investment in research and development, by appointing Henry
Martinez in March 2004 as the new Vice President of Engineering.
FINANCIAL REVIEW
Although total revenue decreased by 5% in 2004, maintenance revenue increased by
11% as a result of solid customer retention rates and new customer additions.
Licence revenue declined by 16% as a result of a soft market for enterprise
software spending and pricing pressures associated with customer buying
patterns, particularly in North America. The weakness in North America was
partially offset by increases in the Asia Pacific market and certain geographies
in Europe. Licence revenues were also impacted throughout much of 2004 by IBM`s
gradual transition to a new version of its iSeries servers. However, IBM
addressed these product transitioning issues during the latter part of the year,
which contributed to Vision recording a sound fourth quarter. Services revenue
was negatively impacted by the decline in software implementations due to
licence revenue softness in North America. The Group has taken corrective
action to improve its sales in the North American market, including the
recruitment of additional resellers and the restructuring of certain
underperforming sales territories.
Geographical revenue breakdown per product type:
Revenue breakdown (%)
Revenue type/Region Americas *EMEA Asia- Total
Pacific
Licences 15,5 17,3 8,1 40,9
Maintenance 34,8 13,7 5,0 53,5
Services 4,9 0,5 0,2 5,6
TOTAL 55,2 31,5 13,3 100,0
* Europe, Middle East and Africa
Gross profit margin was 80%, slightly down from 81% in 2003. Despite the
decline in licence and service revenues, gross profit margins were stable as a
result of higher margins in Vision`s CustomerCare organisation and operating
efficiencies in its services division.
Operating expenses, comprising administrative and general, research and
development and distribution and marketing costs, saw an overall decrease of 6%
to $22,37 million due primarily to lower variable compensation, sales
commissions and marketing expenses as well as a once-off benefit of a reversal
of a provision for referral fees ($332 000). Management also continued to
control expenditures in all other areas of the business and increased
operational efficiencies. Despite overall declines in expenses, the Group
nevertheless maintained its commitment to research and development, which
increased to $7,08 million (23% of revenue) as investment in ORION continued.
Amortisation expenses decreased by 19% to $2,24 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 increased to $159 000 (2003: $40 000) and consists of
interest earned, interest paid and unrealised foreign currency gains. The
effective tax rate for the Group (calculated on profit before amortisation of
goodwill) amounted to 51% (2003: 31%). The increase in the tax rate in 2004 was
due to a non cash charge of approximately $328 000 relating to the reversal of
deferred tax assets on assessed losses attributable to the South African
operations.
SEGMENTAL ANALYSIS
($`000) Vision Solutions IDION Corporate
31 Dec 04 31 Dec 03 31 Dec 04 31 Dec 03
Revenue 31,298 32,798 0 0
Net loss/income (216) (566) (555) 13
after tax
EBITDA 3,849 3,917 (369) (108)
EBITDA: `Earnings Before Interest, Tax, Depreciation and Amortisation`
Note: Inter-company transactions have been eliminated in the above table.
FINANCIAL POSITION
The Group had $10,25 million in cash reserves at 31 December 2004, compared to
$10,41 million at 31 December 2003. Debtor days (weighted) was 87 days (31
December 2003: 76 days), which is within an acceptable range given the seasonal
nature of sales activities that transpire near year end. Total deferred revenue
(primarily contracted maintenance revenue) was marginally lower at $12,32
million (2003: $12,82 million). The Group`s deferred tax assets are mainly
comprised of unused assessed losses acquired at the acquisition of Vision, tax
credits for research and development programmes in the US and foreign tax
credits. IDION`s balance sheet remains strong, with virtually no debt.
ACQUISITION
On 28 February 2005 IDION announced that an agreement had been reached for
Vision to acquire the business of UK-based OS Solutions Limited (`OS
Solutions`), a provider of advanced systems management, disk and data
optimization and iSeries HA for the Small to Medium Business (`SMB`) market.
The acquisition will significantly contribute to the Group`s strategy to broaden
its product offering in its core iSeries market and provide an excellent
opportunity for the Group to cater to the SMB market, as well as cross-sell
certain new products to Vision`s customer base.
The combined companies will share more than 2,200 customers and leverage their
respective unique technologies and channel partnerships to offer the most
complete availability solutions in the iSeries market, from SMB to large
multinational corporations. The new solution line up will also strengthen
Vision`s industry-leading ORION solution offerings and further complement
Vision`s strategic positioning as the industry standard in IBM eServer HA. The
acquisition is expected to be completed during April 2005.
ORION
Vision continued its investment in its cross platform solutions offering ORION,
its channel development and sales programmes. The Group is preparing for further
expansion in the years ahead, and is implementing a multi-pronged and long-term
growth strategy:
When IDION acquired Vision in 2000, Vision`s products were aimed almost
exclusively at the IBM iSeries server market. The Group has already expanded its
product offering and will continue to diversify its technology offering across
the IBM eServer platform. This will allow Vision to compete in a significantly
larger market as it continues to serve the iSeries, Vision`s historical strength
and in addition, provide HA products for the IBM eServer platform.
The development of ORION offers Vision`s IBM eServer customers HA across
multiple platforms and operating systems including Windows, Linux and UNIX.
Vision`s primary HA product, Vision Suite, and now the industry standard ORION,
have focused on the needs of large corporations. However, there is also a
growing need to service the SMB market. The OS Solutions acquisition is Vision`s
entry into this market, and the Group through this acquisition, offers the most
complete range of HA solutions and complementary systems management software in
the iSeries industry for SMB to large multinational corporations.
Renewed focus on ORION Data Integrator (formerly known as Symbiator) as an
emerging product line.
During the year Vision further strengthened its customer base through the
completion of a number of notable ORION transactions and is making progress on
the development of the next components of its ORION offering. Vision was ranked
in the top 15 of Orange County Business Journal`s Top Software Companies list
and included in the top 300 on Software Magazine`s 500 Top Worldwide Software
Companies listing. The following major software releases are scheduled during
2005:
ORION for AIX v1.1.
ORION Data Integrator v2.0.
ORION Navigator v2.0.
CORPORATE GOVERNANCE
The Board of Directors and senior management affirm their commitment to
achieving and upholding accepted standards of corporate governance. Adherence to
these standards ensures that the Group`s business is conducted, where practical,
in accordance with the second King Report on Corporate Governance for South
Africa 2002 (`King II`).
BOARD CHANGES
Mr Peter Liddiard, an executive management member of VenFin was appointed as a
non-executive director on 4 August 2004. Mr Tim Keithahn, chief financial
officer of Vision was appointed as an executive director to the Board with
effect from 14 March 2005. Mr Willem Richard, IDION Group Financial Director
will be leaving the Group on 30 April 2005 and Mr Keithahn will succeed Mr
Richard as IDION Group Financial Director, with effect from 1 May 2005. The
Board would like to take this opportunity to thank Mr Richard for his
significant contribution during the past four years and wishes him well for the
future.
ACCOUNTING POLICIES
The consolidated abridged financial statements for the year ended 31 December
2004 are prepared in accordance with International Financial Reporting Standards
applicable to interim financial reporting (IAS 34). The accounting policies
used in the preparation of the consolidated financial statements are consistent
with the policies applied to the audited annual financial statements for the
year ended 31 December 2003.
AUDIT REPORT
The consolidated financial statements for the year ended 31 December 2004 have
been audited by Deloitte & Touche and their accompanying unqualified audit
report as well as their unqualified audit report on this set of summarised
financial information is available for inspection at IDION`s registered office.
PROSPECTS
The Board is encouraged by Vision`s positive headline earnings for 2004 and it
believes that Vision`s focus on the IBM eServer platform continues to present
significant growth prospects, which Vision will be addressing through the
introduction of new products and creating new and alternate distribution
channels. The Group`s long-term prospects remain positive as its ORION products
continue to gain market acceptance.
As part of the Group`s long-term growth strategy, it will continue to make
investments in its subsidiary Vision in order to solidify the foundation for
future revenue and profit growth. In addition to its continued investment in
research and development, the Group intends to make several incremental
strategic investments in 2005, primarily around sales and marketing activities
as well as accelerated new product initiatives in connection with the
acquisition of OS Solutions. These incremental investments are expected to
enhance the Group`s future strategic position as a leader in the IBM eServer HA
market and its ability to generate sustainable revenue and profit growth. These
investments and the integration costs of the OS Solutions acquisition will
impact profitability during 2005. As a result of the historic business model of
the Group, revenue seasonality is expected to continue in 2005 where the
majority of the Group`s revenue and profits are likely to be recorded during the
second half of the year.
Given the strength of the business and the energy and capability of its people,
the Group is confident that it will emerge even stronger in 2005, as it executes
its growth strategy. IDION`s activities and decisions will be driven by the
pursuit of sustainable long term profit growth and improved shareholder value.
We are excited by the possibilities that lie ahead.
By order of the Board
Dave de Beer Nicolaas Vlok
Chairman Managing Director
Johannesburg
16 March 2005
NON-EXECUTIVE DIRECTORS: DD de Beer (Chairman-independent), DC Cronje
(independent) PJ Liddiard, L van der Bijl (independent)
EXECUTIVE DIRECTORS: N Vlok (Managing), C Arnold, TJ Keithahn*, WA Richard,
JJD Vlok
COMPANY SECRETARY: JJD Vlok
REGISTERED ADDRESS: IDION House, 11 Naivasha Road, Sunninghill, 2157, Gauteng,
South Africa
* United States of America
SUPPLEMENTARY INFORMATION, FOR CONVENIENCE PURPOSES
- CONSOLIDATED INCOME STATEMENT PRESENTED IN RAND
For the year ended 31 Dec 31 Dec
04 03
% Audited Audited
change R`000 R`000
Revenue (18) 198,428 240,739
Licences (28) 81,149 112,174
Maintenance (4) 106,107 110,696
Services (27) 11,172 17,869
Cost of sales (13) 38,787 44,789
Licences 40 1,150 822
Maintenance and services (14) 37,637 43,967
Gross profit (19) 159,641 195,950
Expenses (20) 156,009 195,297
Administrative and general (18) 34,750 42,491
Research and development (13) 44,894 51,329
Distribution and marketing (23) 62,184 81,084
Amortisation (30) 14,181 20,393
Profit from operations 456 3,632 653
Interest paid (56) (407) (928)
Interest received 34 631 470
Foreign exchange gains 5 787 749
Net profit before taxation 392 4,643 944
Taxation 90 9,529 5,009
Net loss for the year 20 (4,887) (4,065)
Reconciliation to headline
earnings:
Net loss for the year (4,887) (4,065)
Add back:
Amortisation of goodwill 14,093 15,373
SUPPLEMENTARY INFORMATION, FOR CONVENIENCE PURPOSES
- CONSOLIDATED INCOME STATEMENT PRESENTED IN RAND
For the year ended 31 Dec 31 Dec
04 03
% Audited Audited
change R`000 R`000
Loss on sale of subsidiary 174 329
Headline earnings (19) 9,380 11,637
Loss per share - basic (cent) (4.4) (3.6)
- diluted (cent) (4.8) (4.0)
Headline earnings per share - (cent) 8.4 10.4
basic
- diluted (cent) 7.6 9.6
Weighted average conversion rate 6.34 7.34
(R:$)
SUPPLEMENTARY INFORMATION, FOR CONVENIENCE PURPOSES
- CONSOLIDATED BALANCE SHEET PRESENTED IN RAND
At 31 Dec 04 31 Dec 03
Audited Audited
R`000 R`000
ASSETS
Non-current assets 54,621 88,665
Equipment 4,675 7,536
Goodwill 28,507 48,185
Intangible assets 41 142
Deferred taxation 21,398 32,802
Current assets: 116,270 130,998
Trade and other receivables 54,605 57,592
Prepayments and deposits 3,237 3,957
Cash and cash equivalents 58,428 69,449
TOTAL ASSETS 170,891 219,663
EQUITY AND LIABILITIES
Capital and reserves 72,742 91,959
Issued share capital and 274,822 321,541
premium
Currency translation 72,871 87,021
reserve
Accumulated losses (274,954) (316,603)
Outside shareholders` 3 -
interest
Non-current liabilities 10,823 15,974
Long term liabilities 1,509 2,193
Deferred taxation 236 285
Deferred revenue - long 9,078 13,496
term
Current liabilities 87,326 111,730
Trade payables 14,228 22,433
Provisions 7,348 12,328
Short term borrowings 309 376
SUPPLEMENTARY INFORMATION, FOR CONVENIENCE PURPOSES
- CONSOLIDATED BALANCE SHEET PRESENTED IN RAND
At 31 Dec 04 31 Dec 03
Audited Audited
R`000 R`000
Taxation 4,308 4,569
Deferred revenue - current 61,133 72,024
TOTAL EQUITY AND LIABILITIES 170,891 219,663
Net asset value per share 65 82
(cents)
Tangible net asset value per 40 39
share (cents)
Closing conversion rate (R:$) 5.62 6.67
Date: 16/03/2005 07:15:51 AM
Produced by the JSE SENS Department
