| Tue 16 Aug 2005, 12:31 | | Prism: Reviewed Results And Dividend Announcement |
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Prism: Reviewed Results And Dividend Announcement To 30 June 2005
PRISM HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1998/018949/06
Share code: PIM
ISIN: ZAE000022257
(`Prism` or `the Group`)
* Growth in revenue and headline earnings
* Strong cash generation
* BEE transaction complete
* Maiden dividend of 2.3 cents per share declared
REVIEWED RESULTS AND DIVIDEND ANNOUNCEMENT FOR THE YEAR ENDED 30 JUNE 2005
The Board of Directors is pleased to announce results for a year of enhanced
profitability and cash generation by the Group. Increased volumes and growth in
United States (`US`) Dollar denominated revenues were offset by declining global
prices for SIMs and the effects of a firmer South African Rand. Notwithstanding
the Rand`s strength, headline earnings per share increased by 22% compared to
the previous year, and cash generated from operations amounted to R71 million.
Financial Review
During the year the Group experienced an average exchange rate of R6.18 to the
US Dollar, 10% firmer than the average exchange rate of R6.85 to the US Dollar
in the previous financial year. The Group`s financial results are particularly
sensitive to fluctuations in the local currency relative to the US Dollar, as
55% (2004: 60%) of the Group`s revenues for the year under review were
denominated in US Dollars.
The Group`s revenues stated in South African Rands increased by 14% compared to
the previous financial year, and in US Dollar terms revenues increased by 27%.
The Group continues to experience pricing pressure on SIM cards as a result of
excess global manufacturing capacity and a reduction in raw material input
costs. Sales volumes however were buoyant with a 68% increase in combined unit
sales volumes of SIM card software licences and physical SIM cards over the
previous financial year.
The Group`s gross profit margins have decreased marginally to 59%, largely as a
result of reduced margins on the sale of SIM cards.
An increase in operating costs of 15% for the year under review reflects the
Group`s policy of measured expansion. During the year, the headcount increased
by 9% from 253 employees to 275 employees. Increases in staffing levels were
necessary to increase production capacity and to expand the Group`s sales reach.
R32 million (2004: R31 million) was spent on continued research and development,
which amounts to 11% (2004: 12%) of revenue. The expenditure was primarily
focused on chip card developments in the areas of 3G, SIM browsers and USIM,
continued certification and product enhancement for the Outdoor Payment Terminal
(`OPT`), development of a EuroPay MasterCard and Visa (`EMV`) type approved
payment software and ongoing development of payment solutions.
The exceptional item of R3.3 million comprises the 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.
Net interest income of R2.6 million reflects the positive cash position
maintained throughout the year.
Headline earnings have increased from R26.9 million to R29.8 million, and the
corresponding headline earnings per share has increased by 22% from 4.6 cents to
5.6 cents in comparison to the prior year.
The Group continued to experience strong positive cash flows. Cash generated by
operating activities amounted to R68 million for the year.
The Group invested a total of R70 million during the year, which was utilised
for plant expansions and upgrades to computer systems (R22 million),
facilitation funding for the Mineworkers Investment Company (`MIC`) BEE
transaction (R22 million) and purchases by the Staff Trust of Prism shares to
cover outstanding share options granted (R26 million). The Group`s share trust
acquired 73 million Prism shares during the year at an average price of 35 cents
per share. Notwithstanding these significant investments, the Group ended the
year with cash balances of R63 million compared to R60 million at the
commencement of the year under review.
Business unit review
Chip and Wireless:
The Chip and Wireless division recorded strong sales growth during the year. As
a result of Rand strength and continued product price declines, revenue growth
of 34% masked significant unit volume increases during the year. The volume of
Prism`s SIM sales - directly through local manufacture and indirectly through
SIM card licensing - grew by a significant 68% in a global market that
experienced approximately 20% growth. This growth is attributed to an increase
in the customer base in conjunction with the expansion of the SIM card software-
licensing model.
Prism currently has approximately 5% global market share of the SIM card market.
A move to high-end memory and functionality cards underpinned sales within the
division, and Prism`s first volume sale of 3G 128k cards was made during the
year.
Prism`s Voucherless Top-Up (`VTU`) solution, which facilitates vending of mobile
phone based pre-paid airtime, was successfully introduced to several cellular
network operators on the African continent during the year. There has been a
high degree of interest in the solution from both cellular network operators and
airtime vendors. During the year the VTU solution was awarded the 2004
Technology Top 100 Large Enterprise Category Innovation Award for companies
operating in the ICT Software, Services and Solutions sector.
Services:
EasyPay is South Africa`s premier bank-independent transactional payment switch.
EasyPay has continued to show satisfactory revenue growth arising from buoyant
conditions in the retail environment, new customers and consistent increases in
volumes of electronic bill payments processed. The scope of payment services was
expanded during the year to include the payment of TV licences and traffic fines
at EasyPay enabled outlets. During the year EasyPay processed 286 million (2004:
230 million) transactions on behalf of retailers, bill issuers and financial
institutions in South Africa.
Other revenues in the Services division were adversely affected by the loss of a
maintenance contract in Malaysia.
Payment Solutions:
Focus within the Payment Solutions division has been on completing EMV
implementations started during 2004 for major retailers and banks, and further
enhancing existing payment technologies. Successful solution and terminal
implementations during the year contributed to a broadening of the customer base
which now includes, inter alia: - Shoprite Holdings, Pick `n Pay, Edcon, Caltex,
Clicks, DHL, Makro, SAPO, BP, TaxiFone, First National Bank and Nedbank Limited.
Despite the progress made in implementations mentioned previously, the slower
than anticipated rollout of payment devices in certain sectors resulted in the
division`s revenues decreasing by 16% from R43.4m to R36.4m.
Transaction Security:
The Transaction Security division`s sales grew by 33% for the year, underpinned
by the sale of Prism`s Incognito Transaction Security Modules (encryption
devices) and EMV related software to financial institutions, including the `big
four` banks in South Africa.
Sales of the EMV `type 2 certified` Outdoor Payment Terminal (`OPT`) to Prism`s
channel partner Radiant Systems Inc. (`Radiant`), were lower than expected due
to deployment delays experienced during the year. Greater sales volumes, coupled
with higher margins, are expected in the ensuing year as a result of outsourcing
the manufacture of the OPT to a lower-cost contract manufacturer in Malaysia.
The OPT forms an integral part of Radiant`s advanced forecourt solution that has
been sold to an international petroleum company in Asia.
Prospects
Prospects for most business units appear favourable considering the prevailing
market and economic conditions. Trading in the Chip and Wireless division,
however, will remain difficult due to continued pricing and competitive
pressures. Management considers that overall these conditions are likely to give
rise to further real growth in earnings per share.
Empowerment
In April 2005 a Black Economic Empowerment transaction with MIC was successfully
concluded. This transaction was 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.
Board composition
Mr. Kevin Pocock resigned as a director on 2 March 2005. Mr. Keshan Pillay and
Ms. Mahlatse Kabi, both representatives of MIC, were appointed as non-executive
directors on 18 April 2005.
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 prior year except for
the adoption of AC140 in regard to goodwill, the carrying amount of which is
tested annual for impairment and no longer amortised.
The Group`s auditors, PricewaterhouseCoopers Inc., have reviewed the preliminary
financial information and their unqualified opinion is available for inspection
at Prism`s registered office.
Dividend
The Board of Directors is pleased to announce the declaration of the Group`s
maiden dividend on the following basis:
Notice is hereby given that ordinary share dividend No. 1 of 2.3 cents per share
has been declared by the directors for the year ended 30 June 2005.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last day to trade (cum dividend) Friday, 16 September 2005
Securities commence trading ex-dividend Monday, 19 September 2005
Record date Friday, 23 September 2005
Payment date Monday, 26 September 2005
Shareholders may not dematerialise or rematerialise their share certificates
between Monday, 19 September 2005 and Friday, 23 September 2005, both days
inclusive.
For and on behalf of the board
I.N. Matthews (Chairman)
A.W. Els (Chief Executive Officer)
Fourways
16 August 2005
Consolidated income statement
Year ended Year ended
30 June 2005 30 June 2004
R` 000 Reviewed Change Audited
Revenue 301,066 14.4% 263,130
Material costs (122,317) (102,864)
Gross profit 178,749 11.5% 160,266
Operating costs (122,179) 15.5% (105,811)
Depreciation (10,756) (9,967)
Amortisation of other intangible
assets - (5,171)
Foreign exchange losses (1,186) (2,251)
Operating profit 44,628 20.4% 37,066
Goodwill impairment/amortisation (12,793) (12,506)
Exceptional item 3,253 9,667
Net finance income 2,639 1,149
Profit before taxation 37,727 6.6% 35,376
Taxation (13,054) (10,265)
Profit after taxation 24,673 25,111
Minority interest (4,367) (1,120)
Earnings attributable to ordinary
Shareholders 20,306 -15.4% 23,991
Number of ordinary shares in issue (`000)
Shares * 472,528 580,643
Weighted average shares 536,119 579,522
Weighted fully diluted shares 585,281 631,446
Earnings per share (cents)
- basic 3.8 -7.3% 4.1
- headline 5.6 21.7% 4.6
Diluted earnings per share (cents)
- basic 3.5 -7.9% 3.8
- headline 5.1 18.6% 4.3
Dividend declared per share (cents) 2.3 -
The following adjustments to earnings attributable to ordinary shareholders were
taken into account in the calculation of headline earnings:
Earnings attributable to ordinary
Shareholders 20,306 23,991
Goodwill impairment/amortisation 12,793 12,506
(Profit)/loss on disposal of plant
and equipment (9) 31
Exceptional item (3,253) (9,667)
Headline earnings 29,837 11.1% 26,861
Rand/US Dollar exchange rates
Opening rate 6.27 7.44
Closing rate 6.63 6.27
Weighted average rate 6.18 6.85
* In terms of the listing requirements of JSE Limited, companies are obliged to
consolidate their share incentive trusts under certain circumstances. The 64 662
791 (2004: 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.
The preference share investment related to the funding of the BEE transaction
with MIC is not recognised as an asset but is accounted for as a reduction in
equity. Equity will be restated in future to the extent that the preference
share investment has been redeemed. Accordingly, the 55 000 000 (2004: nil) BEE
deal Prism funded shares have been treated as treasury shares.
Consolidated balance sheet
30 June 2005 30 June 2004
R` 000`s Reviewed Audited
ASSETS
Non-current assets 64,526 72,576
Plant and equipment 29,518 18,522
Intangible assets 4,576 17,369
Deferred taxation 30,432 35,150
Proceeds on disposal of investment - 1,535
Current assets 121,825 112,894
Inventories 9,333 5,778
Trade and other receivables 47,344 45,263
Proceeds on disposal of investment 1,690 1,612
Cash resources 63,458 60,241
Total assets 186,351 185,470
EQUITY AND LIABILITIES
Capital and reserves 96,282 119,496
Shareholders` interest 94,079 118,648
Minority interest 2,203 848
Current liabilities 90,069 65,974
Trade payables and accruals 77,328 58,034
Provisions 5,000 3,000
Taxation 7,741 4,940
Total equity and liabilities 186,351 185,470
Net asset value per ordinary share
(cents) 19.9 20.4
Consolidated cash flow statement
Year ended Year ended
30 June 2005 30 June 2004
R` 000 Reviewed Audited
Cash flows from operating activities 68,240 24,308
Cash generated by operations 71,124 34,397
Net finance income 2,639 1,149
Taxation paid (5,523) (11,238)
Net cash flows from investing activities (17,021) 15,014
Net cash flows from financing activities (48,002) (3,560)
Net increase in cash and cash equivalents 3,217 35,762
Cash and cash equivalents at beginning
of the year 60,241 24,479
Cash and cash equivalents at end of
the year 63,458 60,241
Statement of changes in shareholders` interest
Year ended Year ended
30 June 2005 30 June 2004
R` 000 Reviewed Audited
Shareholders` interest at the beginning
of the year 118,648 100,178
Shares issued - 11
Share premium arising on shares issued - 1,807
Treasury shares movements * (22,120) (1,011)
BEE Transaction funding * (22,000) -
Share repurchase expenses (870) -
Currency translation differences 115 (6,328)
Earnings attributable to ordinary
Shareholders 20,306 23,991
Shareholders` interest at the end of the
year 94,079 118,648
Segmental analysis
Primary basis - business segments
Revenue Year ended Year ended
30 June 2005 30 June 2004
R` 000 Reviewed Audited
Chip and Wireless 155,040 116,085
Services 80,783 81,605
Payment Solutions 36,420 43,442
Transaction Security 28,823 21,998
301,066 263,130
Secondary basis - geographical segments
Revenue
R` 000
Africa 220,111 173,649
South-East Asia 79,160 87,192
Europe 1,795 2,289
301,066 263,130
Net operating assets
R` 000
Africa 91,151 91,958
South-East Asia 5,131 27,538
96,282 119,496
Plant and equipment additions
R` 000
Africa 21,644 6,247
South-East Asia 103 33
21,747 6,280
Fourways
16 August 2005
Sponsor
Standard Bank
