| Thu 2 Feb 2006, 12:44 | | Prism Holdings Limited-Interim results for the six |
|
PIM
PIM
Prism Holdings Limited-Interim results for the six months ended 31 December 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")
69% increase in diluted headline earnings per share
Positive impact of share purchases made last year
Roll-out of Outdoor Payment Terminal ("OPT") internationally
INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2005
Buoyant sales in the Transaction Security and Services divisions, a marginally
weaker South African Rand relative to the United States ("US") Dollar and share
purchases conducted last year by the Staff Trust, have resulted in diluted
headline earnings per share increasing by 69% compared to the previous
corresponding period.
Financial Review
Strong sales in the Transaction Security and Services divisions have contributed
to an increase of 23% in the Group"s revenues. The Group"s gross profit margins
have decreased marginally from 59.7% to 59.2%, as a result of a relatively
stronger sales growth performance from lower margin products, specifically the
OPT.
During the period the Group experienced an average exchange rate of R6.49 to the
US Dollar, 5% weaker than the average exchange rate of R6.18 to the US Dollar in
the previous financial period. The marginally weaker Rand has had a positive
impact on earnings as 57% (2005 interim: 60%) of the Group"s revenues for the
period under review were denominated in US Dollars.
Operating costs increased by 19% for the period. This is the direct result of an
increase in investment in software development and selling and marketing
activities. Headline earnings have increased by 48% from R8.2 million to R12.1
million. The Group has benefited from the shares purchased by the Staff Trust
last year, with the number of fully diluted shares in issue decreasing to 551
million (2005 interim: 608 million). Diluted headline earnings per share have
increased accordingly by 69% from 1.3 cents to 2.2 cents.
Business unit review
Chip and Wireless:
The Chip and Wireless division continues to experience pricing pressure on SIM
cards and SIM card licences as a result of excess global manufacturing capacity,
excess semi-conductor inventory at card manufacturers and aggressive
competition. Global industry SIM card volume growth, however, has been strong,
and is forecast to remain as such for the foreseeable future.
The consolidation taking place in the international smart card industry is
likely to result in improved business opportunities arising for the Group.
Services:
The Services division has delivered solid revenue growth as a result of growth
in the customer base, the introduction of new electronic payment services, the
buoyant retail environment, a record increase in bill payment volumes and higher
revenues from systems support activities.
Payment Solutions:
The Payment Solution division"s performance was in line with expectations.
Substantial investment was made during the period in developing the new
integrated FlexiLANE payment solution and a contract to sell this solution has
been finalised with a South African bank. The delivery of this solution is
expected to commence in the second half of the current financial year. This
solution enables secure payment across multiple payment devices in a retail
petroleum forecourt environment, in addition to providing detailed transaction
and reconciliation information to the merchant.
Transaction Security:
The Transaction Security division"s sales grew significantly during the period,
underpinned by sales of the OPT to Prism"s channel partner, Radiant Systems Inc.
("Radiant"). The OPT forms an integral part of Radiant"s advanced forecourt
solution that has been sold to an international petroleum company in South East
Asia. The business unit has also supplied a large number of Prism developed
Transaction Security Modules ("TSM410") to major banks which enable them to
process EMV transactions.
In addition to awards won in 2003 and 2004, Prism was awarded first place for
the TSM410 in this year"s Department of Science and Technology"s Technology Top
100 Award programme for commercial product innovation. The TSM410 cryptographic
platform offers high-performance and high-security services used in financial
switches, banking security, mobile payment security, online prepaid electricity
vending and in trusted centres. It complies with the international Federal
Information Processing Standards ("FIPS") security certification. Prism is the
first company in Africa and the second in the Southern Hemisphere to achieve the
FIPS 140-2 certification, which is a requirement for entry into several markets
including the US and Europe. This noteworthy achievement places Prism within an
exclusive group of the world"s top security module suppliers.
Prospects
Trading conditions in the Chip and Wireless division are expected to remain
difficult due to continued pricing pressures in an increasingly competitive
marketplace. Prospects for the remaining business units continue to appear
favourable considering the prevailing market and economic conditions. The Board
of Directors considers that these conditions are likely to result in real growth
in headline earnings per share for the remainder of the financial year compared
to the corresponding period last year, provided that the Rand does not
strengthen materially against the US Dollar.
Basis of preparation and accounting policies
The Group has adopted International Financial Reporting Standards ("IFRS") from
1 July 2005. The interim results have been prepared in accordance with the
Group"s accounting policies which comply with IFRS, IAS34 - Interim financial
reporting, the Listings Requirements of the JSE and the Companies Act of South
Africa. Comparative figures have been restated where applicable as required by
IFRS. These standards are subject to on-going review and interpretation by the
International Accounting Standards Board. Consequently, IFRS information at
year-end may differ from the information contained herein.
In compliance with IFRS, comparative information has been restated and the
following accounting policy changes made:
1. IFRS 1: Transitional Arrangements (1 July 2004)/Cumulative Translation
Differences
The foreign currency translation reserve arising on consolidation of the foreign
entity has been reset to zero in the opening balance sheet by an adjustment
within equity comprising a transfer from non-distributable reserves to
distributable reserves. There is no net effect on equity as previously reported
at 1 July 2005.
2. IFRS 2: Share-based payments
The Group grants share options and deferred delivery shares to employees under
the Prism Holdings Limited Share Incentive Scheme. Under SA GAAP, other than
costs incurred in administering the scheme, which were expensed as incurred, the
scheme did not result in any adjustment besides a dilution in earnings per share
when the shares were issued. In accordance with the requirements of IFRS 2, the
Group has recognised an expense in the income statement, with a corresponding
credit to equity, representing the fair value of outstanding employee share
options and deferred delivery shares. The fair value at the date of granting
the options and deferred delivery shares is charged to income over the relevant
vesting periods, adjusted to reflect actual and expected vesting levels.
3. IAS 16: Property, Plant and Equipment
Past interpretation and practice, generally accepted in South Africa, did not
take into account a separate depreciation of significant components of property,
plant and equipment, or the re-assessment of an asset"s useful life on a regular
basis. The revised version of IAS 16 requires significant components of an asset
with useful lives that differ significantly from the asset as a whole, to be
depreciated separately over their useful lives and also requires the useful and
residual value of an asset to be reviewed at least each financial year end.
There were no material adjustments made in this regard.
Dividend
The Group intends declaring an annual dividend following the reporting of the
Group"s full year results.
For and on behalf of the board
I.N. Matthews (Chairman)
A.W. Els (Chief Executive Officer)
2 February 2006
Consolidated Income Statement
Six months Year ended
ended
Six months 31 December 30 June
ended 2004 2005
31 December Restated Restated
2005 for IFRS for IFRS
R" 000 Unaudited Unaudited Change Unaudited
Revenue 171,689 139,902 22.7% 301,066
Material costs (70,010) (56,346) (122,317)
Gross profit 101,679 83,556 21.7% 178,749
Operating costs (72,593) (61,029) 18.9% (122,179)
Depreciation (6,226) (5,155) 20.8% (10,756)
Share-based payments (1,093) (1,015) (2,169)
Foreign exchange losses (710) (1,139) (1,186)
Operating profit 21,057 15,218 38.4% 42,459
Goodwill impairment/amortisation - (6,253) (12,793)
Exceptional item - 3,253 3,253
Net finance income 1,160 1,055 2,639
Profit before taxation 22,217 13,273 67.4% 35,558
Taxation (7,575) (6,186) (13,054)
Profit after taxation 14,642 7,087 22,504
Minority interest in subsidiary (2,520) (1,937) (4,367)
Earnings attributable to 12,122 5,150 135.4% 18,137
ordinary shareholders
Number of ordinary shares ("000)
In issue 592,190 592,190 592,190
Net of treasury shares* 483,715 537,878 472,528
Weighted average shares 484,984 546,650 536,119
Fully diluted weighted average 550,779 608,065 585,281
shares
Earnings per share (cents)
- basic 2.5 0.9 177.8% 3.4
- headline 2.5 1.5 66.7% 5.2
Diluted earnings per share
(cents)
- basic 2.2 0.8 175.0% 3.1
- headline 2.2 1.3 69.2% 4.7
Dividend declared per share - - 2.3
(cents)
The following adjustments to earnings attributable to ordinary shareholders
were taken into account in the calculation of headline earnings:
Earnings attributable to 12,122 5,150 18,137
ordinary shareholders
Goodwill impairment/amortisation - 6,253 12,793
Loss/(profit) on disposal of 2 3 (9)
plant and equipment
Exceptional item - (3,253) (3,253)
Headline earnings 12,124 8,153 48.7% 27,668
Rand/US Dollar exchange rates
Opening rate 6.63 6.27 6.27
Closing rate 6.32 5.62 6.63
Weighted average rate 6.49 6.18 6.18
* In terms of the listing requirements of JSE Limited, companies are obliged
to consolidate their share incentive trusts under certain circumstances. The
53 476 239 (2005 Interim: 54 312 767; 2005 Final: 64 662 791) 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 (2005
Interim: Nil; 2005 Final: 55 000 000) BEE deal Prism funded shares have been
treated as treasury shares.
CONSOLIDATED BALANCE SHEET
31 December 30 June 2005
2004
31 December Restated for Restated for
2005 IFRS IFRS
R" 000"s Unaudited Unaudited Unaudited
ASSETS
Non-current assets 60,377 67,671 64,526
Plant and equipment 27,842 21,318 29,518
Intangible assets 4,576 11,116 4,576
Deferred taxation 27,959 33,702 30,432
Proceeds on disposal of investment - 1,535 -
Current assets 99,193 104,367 121,825
Inventories 13,844 13,407 9,333
Trade and other receivables 32,379 38,045 47,344
Proceeds on disposal of investment - - 1,690
Cash resources 52,970 52,915 63,458
Total assets 159,570 172,038 186,351
EQUITY AND LIABILITIES
Equity 93,775 109,151 96,282
Share capital and reserves 90,056 108,374 94,079
Minority interest in subsidiary 3,719 777 2,203
Current liabilities 65,795 62,887 90,069
Trade payables and accruals 53,973 55,820 77,328
Provisions 5,000 3,000 5,000
Taxation 6,822 4,067 7,741
Total equity and liabilities 159,570 172,038 186,351
Net asset value per ordinary share 18.6 20.1 17.5
(cents)
CONSOLIDATED CASH FLOW STATEMENT
Six months Year ended
ended
Six months 31 December 30 June 2005
ended 2004
31 December Restated for Restated for
2005 IFRS IFRS
R" 000 Unaudited Unaudited Unaudited
Cash flows from operating (2,330) 12,227 68,240
activities
Cash generated by operations 15,122 16,644 71,124
Net finance income 1,160 1,055 2,639
Taxation paid (6,021) (5,472) (5,523)
Dividend paid (12,591) - -
Net cash flows from investing (2,860) (3,086) (17,021)
activities
Net cash flows from financing (5,298) (16,467) (48,002)
activities
Net (decrease)/increase in cash and (10,488) (7,326) 3,217
cash equivalents
Cash and cash equivalents at 63,458 60,241 60,241
beginning of the period
Cash and cash equivalents at end of 52,970 52,915 63,458
the period
STATEMENT OF CHANGES IN EQUITY
Six months Year ended
ended
Six months 31 December 30 June 2005
ended 2004
31 December Restated for Restated for
2005 IFRS IFRS
R" 000 Unaudited Unaudited Unaudited
Balance at the beginning of the 94,079 118,648 118,648
period as previously reported
Effect of transition to IFRS - - -
Restated balance 94,079 118,648 118,648
Treasury shares movements * (4,294) (14,179) (22,173)
Share Trust trading results - - 53
BEE Transaction funding * - - (22,000)
Share repurchase expenses - - (870)
Translation of foreign entities (353) (2,260) 115
Share based payment reserve 1,093 1,015 2,169
movement
Dividends paid (12,591) - -
Earnings attributable to ordinary 12,122 5,150 18,137
shareholders
Balance at end of the period 90,056 108,374 94,079
Comprising:
Share capital 592 592 592
Share premium 282,825 282,825 282,825
Accumulated loss (149,334) (161,035) (148,865)
Treasury shares (50,264) (15,976) (45,970)
Share-based payments reserve 6,475 4,228 5,382
Foreign currency translation (238) (2,260) 115
reserve
90,056 108,374 94,079
RECONCILIATION OF PREVIOUS SA GAAP
TO IFRS
Year ended Six months IFRS
ended Transition
Date
30 June 2005 31 December 1 July 2004
2004
R" 000 Unaudited Unaudited Unaudited
Equity
As previously reported 94,079 108,374 118,648
Share based payment reserve 2,169 1,015 3,213
Foreign currency reserve - - 18,946
Adjustment to accumulated loss (2,169) (1,015) (22,159)
As reported under IFRS 94,079 108,374 118,648
Atttibutable profit
As previously reported 20,306 6,165
Share based payment (2,169) (1,015)
Net profit attributable to equity 18,137 5,150
holders restated - IFRS
SEGMENTAL ANALYSIS
Primary basis - business segments
Revenue Half-year Half-year Year ended
31 December 31 December 30 June 2005
2005 2004
R" 000 Unaudited Unaudited Audited
Chip and Wireless 59,038 72,344 155,040
Services 47,783 38,655 80,783
Payment Solutions 17,419 17,508 36,420
Transaction Security 47,449 11,395 28,823
171,689 139,902 301,066
Secondary basis - geographical
segments
Revenue
R" 000
Africa 123,901 81,601 220,111
South-East Asia 47,472 57,347 79,160
Europe 316 954 1,795
171,689 139,902 301,066
Net operating assets
R" 000
Africa 80,427 89,359 91,151
South-East Asia 13,348 19,792 5,131
93,775 109,151 96,282
Plant and equipment additions
R" 000
Africa 4,527 7,951 21,644
South-East Asia 23 - 103
4,550 7,951 21,747
Date: 02/02/2006 12:44:18 PM Produced by the JSE SENS Department
