| Wed 23 Aug 2006, 7:30 | | Idion - Unaudited financial results for the six mo |
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IDI
IDI
Idion - Unaudited financial results for the six month period ended
30 June 2006 and further cautionary announcement
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 month period ended 30 June 2006 and
further cautionary announcement
Results denominated in United States Dollars ("$")
OVERVIEW
ú Group headline loss $777 000 (Headline Loss Per Share ("HLPS") of 0,7 US
cent), compared to Group headline loss for the six month period ended 30 June
2005 of $1,1 million (HLPS of 1,0 US cent);
ú Total revenue increased by 11% to $16,0 million and licence revenues
increased 22% to $5,9 million;
ú Maintenance revenue continued to be strong at $8,9 million compared to
$8,5 million for the six month period ended 30 June 2005;
ú Total operating expenses (excluding amortisation and cost of sales)
increased by 9% from $12,1 million to $13,2 million;
ú Net cash position remained healthy at $7,4 million (31 December 2005:
$7,9 million);
ú EBITDA loss of $453 000 (30 June 2005: EBITDA loss of $923 000).
IDION is a technology investment holding company listed on the JSE Limited
South Africa. Its operating subsidiary, Vision Solutions International, Inc.
("Vision"), is a leading High Availability ("HA") solution provider to the
Global 5000. With ORION software, services and support, the company delivers
solutions for protecting a company"s mission-critical applications and
information from planned and unplanned downtime. With more than 2 000
customers and 12 000 licences around the world, the company works closely with
a world wide network of channel partners and IBM to deliver world-class
solutions. Vision is an IBM Premier Business Partner and an IBM High
Availability Business Partner. The company operates through offices in the
United States, Europe and Asia-Pacific markets.
CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited Audited
For the period/year ended: 30 Jun 06 30 Jun 05 31 Dec 05
% 6 months 6 months Year
change $"000 $"000 $"000
Revenue 11 15 977 14 394 33 257
Licences 22 5 925 4 838 13 952
Maintenance 4 8 855 8 491 17 191
Services and consultation 12 1 197 1 065 2 114
Cost of sales 1 3 476 3 443 6 661
Licences (19) 70 86 174
Maintenance, services and
consultation 1 3 406 3 357 6 487
Gross profit 14 12 501 10 951 26 596
Operating expenses 9 13 393 12 238 26 023
Administrative and general 15 3 511 3 049 6 358
Research and development 28 4 620 3 612 7 702
Distribution and marketing (7) 5 076 5 476 11 690
Amortisation of intangible
assets 84 186 101 273
Operating (loss)/profit (31) (892) (1 287) 573
Interest paid >100 (44) (1) (37)
Interest received 19 118 99 227
Foreign exchange losses, net (34) (137) (207) (114)
(Loss)/profit before tax (32) (955) (1 396) 649
Income tax benefit (38) (178) (286) (80)
(Loss)/profit for the
period/year (30) (777) (1 110) 729
(Loss)/earnings per
share (cents):
- basic (0,7) (1,0) 0,6
- diluted (0,7) (1,0) 0,6
Weighted average conversion
rate (R:$) 6,27 6,17 6,42
Reconciliation to headline
earnings/(loss):
(Loss)/profit for the period/year (30) (777) (1 110) 729
Add back:
Gain on sale of equipment - - (66)
Headline (loss)/earnings (30) (777) (1 110) 663
Headline (loss)/earnings
per share (cents):
- basic (0,7) (1,0) 0,6
- diluted (0,7) (1,0) 0,6
Weighted average conversion
rate (R:$) 6,27 6,17 6,42
CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
At: 30 Jun 06 30 Jun 05 31 Dec 05
6 months 6 months Year
$"000 $"000 $"000
ASSETS
Non-current assets 13 717 14 975 13 602
Equipment 798 709 865
Goodwill 7 164 8 087 7 169
Intangible assets 1 236 2 031 1 434
Deferred tax assets 4 519 4 148 4 134
Current assets 19 515 17 236 17 767
Trade and other receivables 11 849 7 931 9 379
Prepayments and deposits 308 509 451
Bank balances and cash 7 358 8 796 7 937
TOTAL ASSETS 33 232 32 211 31 369
EQUITY AND LIABILITIES
Capital and reserves 14 146 13 526 14 529
Issued share capital and premium 48 729 48 377 48 518
Warrants issued to vendors 630 1 500 630
Foreign currency translation reserve 13 169 13 093 12 986
Accumulated losses (48 383) (49 445) (47 606)
Minority interest 1 1 1
Non-current liabilities 2 289 1 631 1 957
Long-term borrowings 166 223 192
Deferred tax liabilities - 27 39
Deferred revenue 2 123 1 381 1 726
Current liabilities 16 797 17 054 14 883
Trade and other payables 3 964 2 630 3 430
Provisions 664 1 239 1 214
Acquisition consideration
due to vendors - 837 232
Short-term borrowings 10 57 39
Tax liabilities 441 312 377
Deferred revenue 11 718 11 979 9 591
TOTAL EQUITY AND LIABILITIES 33 232 32 211 31 369
Net asset value per share (cents) 13 12 13
Closing conversion rate (R:$) 7,12 6,63 5,62
CONSOLIDATED CASH FLOW STATEMENTS
Unaudited Unaudited Audited
For the period/year ended: 30 Jun 06 30 Jun 05 31 Dec 05
6 months 6 months Year
$"000 $"000 $"000
OPERATING ACTIVITIES
Cash (used in)/generated from
operations (see note 1) (182) 1 760 1 203
Interest received 118 99 227
Interest paid - (1) (37)
Income taxes paid (220) (515) (377)
Net cash (used in)/generated from
operating activities (284) 1 343 1 016
INVESTING ACTIVITIES
Additions to equipment (187) (165) (582)
Proceeds from sale of equipment - - 68
Net cash paid for acquisition (143) (2 597) (2 730)
Net cash used in investing activities (330) (2 762) (3 244)
FINANCING ACTIVITIES
Net proceeds from exercise
of share options 7 - 59
Net (decrease)/increase in
short-term borrowings (29) 15 (54)
Net cash (used in)/provided by
financing activities (22) 15 5
NET DECREASE IN CASH AND
CASH EQUIVALENTS (636) (1 404) (2 223)
CASH AND CASH EQUIVALENTS AT
THE BEGINNING OF PERIOD/YEAR 7 937 10 251 10 251
Effect of foreign exchange rate
changes 57 (51) (91)
CASH AND CASH EQUIVALENTS AT
END OF PERIOD/YEAR 7 358 8 796 7 937
Note 1
Net (loss)/profit before taxation (955) (1 396) 649
Adjusted for:
Amortisation of intangibles 186 101 273
Depreciation of equipment 253 264 531
Waiver of inter-group loan accounts (15) - -
Gain on sale of equipment - - (66)
Change in provisions (551) - (75)
Net interest and foreign exchange
gains/(losses) 19 109 (76)
Share-based compensation 219 - 146
Operating cash flows before working
capital movements (844) (889) 1 382
Working capital movements 662 2 649 (179)
Trade and other receivables (2 228) 1 888 478
Trade and other payables 388 64 642
Deferred revenue 2 502 697 (1 299)
Cash (used in)/generated
from operations (182) 1 760 1 203
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Period/year ended: 30 Jun 06 30 Jun 05 31 Dec 05
6 months 6 months Year
$"000 $"000 $"000
Balance at the beginning of
the period/year 14 529 12 761 12 761
Net (loss)/profit for the period/year (777) (1 110) 729
Provision for equity-settled share
option expense 219 33 146
Share options exercised 7 35 59
Warrants issued for acquisition - 1 500 631
Disposal/liquidation of dormant
subsidiaries (15) - -
Exchange differences on consolidation
of foreign entities 183 307 203
14 146 13 526 14 529
ADDITIONAL INFORMATION
Share information (million):
Number of shares in issue 113,4 113,4 113,4
Number of shares in issue
(less treasury shares) 112,4 112,1 112,4
Weighted average number of shares 112,4 111,7 112,2
Fully diluted number of shares 114,8 113,9 114,4
GROUP OVERVIEW
The Board of Directors is pleased to present the results to shareholders for
the six months ended 30 June 2006. IDION recorded a headline loss for the
period of $777 000, (30 June 2005: headline loss $1,1 million), reflecting the
Group"s historical licence revenue seasonality and continued investments at
Vision in
order to solidify the foundation for future revenue and profit growth. The
Group continued its commitment to research and development ("R&D") in line
with the Group"s strategy to further expand its core multi-platform HA, system
and data management products, with a dedicated focus on the IBM eServer
platform.
As previously disclosed to shareholders, the Group made several other
incremental strategic investments in 2005 to accelerate Vision"s revenue
growth. The Board is pleased to report that tangible results of these
investments are preliminarily evident in a 22% increase in licence revenue
growth in the six month period ended 30 June 2006 compared to the comparative
period during 2005. In addition, the Group continued to enjoy a strong
recurring maintenance stream from its core products.
Other highlights during the period included:
úCompletion of the integration of the UK-based OS Solutions acquisition
úVision Solutions" ORION for AIX was named 2006 "High Availability Product of
the Year" by Tech Target"s Search 400.com
úSeveral new customer wins and significant transactions with existing
customers
FINANCIAL REVIEW
Overall revenue increased by 11% over the comparative six month period mainly
as a result of a 22% increase in licence revenues. The strong increase in
licence revenues was largely driven by continued new customer gains in
Vision"s European and Asia-Pacific markets, as well as several large
transactions with existing Vision customers. In addition, revenues were
enhanced by approximately $411 000 in licence revenues from Vision"s data-
archiving and system management products.
The results for the six month period showed that the North American market
continued to perform below expectations. However, the Group took action in
early 2006 to make changes in Vision"s sales and marketing model to better
serve this very competitive market. Sales pipelines continue to improve, and
these actions are expected to yield improved results for this region in the
second half of this year.
Vision"s recurring maintenance revenue stream continued to be strong and
increased by 4% relative to the comparative period in 2005 with solid customer
retention rates. Vision"s services and consultation business increased by 12%
during the period as the Group continued to deliver on several large projects
with key customers.
Geographical revenue breakdown per revenue type:
Six month period ended 30 June 2006 - Revenue breakdown (%)
Revenue type/Region Americas EMEA* Asia-Pacific Total
Licences 10,7 16,6 9,8 37,1
Maintenance 31,1 18,1 6,2 55,4
Services 3,7 2,6 1,2 7,5
Total 45,5 37,3 17,2 100,0
Six month period ended 30 June 2005 - Revenue breakdown (%)
Revenue type/Region Americas EMEA* Asia-Pacific Total
Licences 11,5 17,8 4,3 33,6
Maintenance 36,7 16,5 5,8 59,0
Services 5,4 1,3 0,7 7,4
Total 53,6 35,6 10,8 100,0
* Europe, Middle East and Africa
Gross profit margin was 78% for the period, slightly higher than the 76% for
the comparative period resulting from an increased mix of higher margin
licence revenues. In addition, the Group continues to enjoy increased
efficiencies in Vision"s customer support centre, as well as better
utilisation of service staff compared to the prior year.
Operating expenses, comprising administrative and general, research and
development and distribution and marketing costs, saw an overall increase of
9% to $13,2 million, primarily as a result of increased headcount throughout the
Vision business to support future growth. The Group maintained its commitment to
R&D, which increased by $1,0 million to $4,6 million (29% of revenue) as
Vision"s investment in ORION and its newly acquired data-archiving and system
management products continued.
SEGMENTAL ANALYSIS
($"000) Vision Solutions IDION Corporate
30 Jun 06 30 Jun 05 30 Jun 06 30 Jun 05
Revenue 15 977 14 394 - -
Net loss after tax (606) (800) (171) (310)
EBITDA loss (465) (822) 12 (101)
EBITDA: "Earnings Before Interest, Tax, Depreciation and Amortisation"
Note: Inter-company transactions have been eliminated in the above table.
The effective tax rate of the Group (calculated on profit before amortisation
of intangibles) amounted to a benefit of 23% (30 June 2005: 22% benefit).
FINANCIAL POSITION
The Group had $7,4 million in cash reserves at 30 June 2006 (31 December 2005:
$7,9 million). Cash used in operations of $182 000 declined from prior year"s
cash generated of $1,76 million as a result of the Groups trade receivables at
30 June 2006 being higher than normalised levels. Trade receivables grew due to
the timing of sales transactions as well as customer support billings towards
the end of the second quarter. Cash was also impacted by final payments to the
vendors of OS Solutions for the earn out that expired in March 2006. As a result
debtor days (weighted) were 117 days (30 June 2005: 89 days).
Total deferred revenue (primarily contracted maintenance revenue) increased
slightly to $13,8 million (30 June 2005: $13,4 million). The Group"s deferred
tax assets mainly comprised unused assessed losses acquired at the acquisition
of Vision, tax credits for research and development programmes in the US and
foreign tax credits. The Group"s balance sheet remains strong, with no third-
party debt.
VISION"S PRODUCT OFFERINGS
Vision develops and distributes leading software solutions which offer
business continuity of mission critical applications and the management of
data. Many enterprise software applications have become so critical to
business operations that even minor downtime is unacceptable. Slow recovery
from planned or unplanned downtime can have serious consequences for a
business, which generally leads directly to significant lost revenue and/or
increased expense. With increased regulatory pressures, such as Sarbanes-
Oxley, HIPAA and Basel II, and the significance of this business issue, HA and
disaster recovery are now board level issues as businesses have become
increasingly dependent on their critical systems.
Vision"s products ensure that data and applications are available and
accessible 24x7 by replicating and backing up applications and data from one
server to another and by providing reliable and fast restart or failover in
the event of planned or unplanned downtime. In addition, Vision offers system
management (OS Director) and data-archiving (OS Data Manager) products that
further enhance the quality of the end-user"s highly available applications.
At the core of Vision"s product offerings is its ORION HA solution which
enables customers to provide real-time redundancy and availability at the data
and application layers to ensure continued operations for mission critical,
transaction intensive on-demand applications. The solution enables enterprises
to maximise systems availability on multiple computing platforms namely i5/OS,
Windows, Linux, and AIX.
ORION"s unique value proposition is that all functionality from data
replication through HA is delivered through a common interface, which results
in lower costs to operate and administer the products. This translates into a
lower total cost of ownership and improved return on investment ("ROI") for
companies that adopt the solutions and value propositions that resonate in
today"s market place.
Vision plans to actively market its UNIX version for the IBM AIX operating
system (ORION for AIX) as well as its OS Director and OS Data Manager products
during the remainder of 2006. The Group believes that these product offerings
represent significant market opportunities in the medium to long term.
ACCOUNTING POLICIES
The unaudited consolidated interim financial statements have been compiled in
accordance with the statements on 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
2005.
FURTHER CAUTIONARY
The Company refers shareholders to the cautionary announcements
of 26 June 2006 and 3 August 2006. In these announcements shareholders were
advised that the Company is in discussions, which if successfully concluded
may have a material effect on the price of the Company"s securities.
Shareholders should therefore continue to exercise caution in dealing in their
shares until a further detailed announcement is made.
PROSPECTS
The Board is satisfied with the progress in key investment initiatives at
Vision and believes that the Group"s focus on the IBM eServer platform
continues to present revenue growth opportunities. The Group"s prospects remain
positive as Vision"s products continue to gain market acceptance.
As a result of the historic business model of the Group, revenue seasonality
is expected to continue in 2006 during which the majority of the Group"s revenue
and
profits are likely to be recorded in the second half of the year.
The momentum of the Group which built up in 2005 progressed through the first
half of 2006 and is
expected to continue for the remainder of the year.
By order of the Board
Dave de Beer Chairman Nicolaas Vlok Managing Director
Johannesburg
23 August 2006
EXECUTIVE DIRECTORS:
N Vlok (Managing), C Arnold, TJ Keithahn (US citizen), 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:
Building 6, Central Park, 13 Esdoring Street, Highveld Techno Park, Centurion
Date: 23/08/2006 07:30:14 AM Produced by the JSE SENS Department
