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ISA HOLDINGS LIMITED - Unaudited Condensed Results for the Six Months Ended 31 August 2020

Release Date: 13/11/2020 10:22
Code(s): ISA     PDF:  
Wrap Text
Unaudited Condensed Results for the Six Months Ended 31 August 2020

ISA Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1998/009608/06)
Share code: ISA
ISIN: ZAE000067344
(“ISA” or “the Company” or “the Group”)


                                            Unaudited    Unaudited     Audited
                                           six months   six months        year
                                                ended        ended       ended
                                            31 Aug 20    31 Aug 19   29 Feb 20
                                  Change        R'000        R'000       R'000
Highlights from Statement
of Comprehensive Income

Turnover                            -44%       29,555       53,135     101,219
Profit before
other income and expenses           -25%       18,991       25,350      46,248
Profit after tax                    -44%        7,737       13,729      23,425
Earnings per share (cents)          -44%          5.0          8.8        15.0

Highlights from Statement of
Financial Position

Total assets                          7%       81,883       76,311      80,610
Cash and cash equivalents            68%       53,277       31,727      45,929
Equity                               36%       65,363       47,925      57,627
Total liabilities                   -42%       16,520       28,386      22,983

Dividends and distribution
Ordinary dividend per share
declared for the period (cents)     100%         5.0            -             -
Ordinary dividend per share
Paid during the period (cents)       0%             -           -         19.2

Net asset value per share
at end of period (cents)             36%         41.9         30.7        36.9
Headline earnings per
share (cents)*                      -44%          5.0          8.8        15.0
Diluted headline earnings per
share (cents)*                      -44%          5.0          8.8        15.0

* There have been no reconciling items that would result in a change to the
  Headline earnings per share and the Diluted headline earnings per share.

Operational Review
I am pleased to present our results for the six months ended 31 August 2020
("the current reporting period"), which continue to be underpinned by a high
portion of recurring revenue, a robust balance sheet and strong cash flows.
Despite having to navigate the business through one of the most difficult six
months in our history, I am particularly pleased with our performance,
immeasurably proud of our team’s resolve and humbled by the tremendous
support that we have received through this challenging time from our
customers, suppliers and vendor partners.

Due largely to the fallout that we had with one of our key vendor partners
towards the end of 2019, turnover decreased during the current reporting
period by 44% to R29.6 million compared to the previous corresponding
reporting period (“the prior reporting period”), as we had to abandon most of
our sales pipeline derived from our historic Check Point Software
Technologies Limited customer base, which accounted for as much as 90% of our
turnover in the financial year prior to the vendor relationship failure.
Despite the COVID-19 lockdown that followed shortly thereafter, as well as
the economic meltdown that ensued,
we remain encouraged by the support that we have received from our customers
for the ‘next generation’ security technologies that we have recently
onboarded to help protect them from the sophisticated and ever-changing IT
security threat landscape.

Profit before other income and expenses during the current reporting period
declined by 25% to R18.9 million representing a gross margin of 64% compared
to the prior reporting period’s gross margin of 48%. This seemingly dramatic
increase is due to the strong concentration of and continued growth in our
higher margin Managed Security Service and Managed Security Solution
offerings, which feature our internally developed security infrastructure
management and monitoring framework platform, MSS Pulse.

Foreign exchange fluctuation and volatility continues to be a major factor in
our business for two main reasons. Firstly, when the Rand price of imported
goods increases rapidly due to exchange rate fluctuation or volatility,
customer budgets are negatively affected and seldom have the flexibility
needed to absorb the impact of the change, which then adds pressure on
anticipated deal-flows and margin. Secondly, as 66% of the R53.3 million cash
reserves is held in Dollars and Pounds, the revaluation of this foreign
currency through the statement of comprehensive income can have a material
effect on our results. During the current reporting period the profit from
the revaluation of our foreign cash balances amounted to R2.1 million
compared to R1.3 million during the prior reporting period.

Finance income reduced to R387 000 during the current reporting period
compared to R3.3 million during the prior reporting period. This decline is
largely a result of our business partner no longer having to pay interest on
the loan that they settled during the prior reporting period. Total
comprehensive income decreased to R7.7 million during the current reporting
period, from R13.7 million, which represents a decline of 44% in headline and
earnings per share to 5.0 cents from 8.8 cents achieved in the prior
reporting period.

Dividend Declaration
Despite it being somewhat untraditional for us to distribute surplus cash
reserves midway through our financial year, I am pleased to announce that the
board has decided to declare an interim dividend to shareholders for the six
months ended 31 August 2020 of 5.0 cents per share, which will be subject to
the dividend tax legislation. The main reason for deciding to declare this
interim dividend is due to the realisation of a healthy profit during the
current reporting period and the resultant unnecessarily high level of
surplus cash, notwithstanding our continued focus on preserving the strength
of our balance sheet through these uncertain times and commitment to give
management the headroom needed to focus on building a robust and sustainable
revenue structure around the recently onboarded security brands and

The salient dates will be as follows:
Declaration date                  Friday, 13   November   2020
Last day to trade                 Tuesday, 1   December   2020
Shares trade ex-dividend        Wednesday, 2   December   2020
Record date                        Friday, 4   December   2020
Payment date                       Monday, 7   December   2020

Share certificates may not be dematerialised or rematerialised between
Wednesday, 2 December 2020 and Friday, 4 December 2020, both days inclusive.

In terms of the dividend tax legislation, effective 1 April 2012, the
following additional information is disclosed:

-   This is a dividend as defined in the Income Tax Act, 1962, and is payable
    from income reserves.
-   The South African dividend tax (“DT”) rate is 20%.
-   The DT to be withheld by the Company in respect of the ordinary dividend
    amounts to 1.0 cents per share.
-   The net ordinary dividend payable to shareholders who are not exempt from
    DT is therefore 4.0 cents per share, while a gross ordinary dividend
    of 5.0 cents per share is payable to those shareholders who are exempt
    from DT.
-   The issued share capital of the Company at the declaration date comprises
    170 592 593 ordinary shares.
-   The Company’s income tax reference number is 9340/150/71/4.


This short-form announcement is the responsibility of the directors of the
Company. It contains only a summary of the information in the full
announcement (“Full Announcement”) and does not contain full or complete
details. Any investment decisions by investors or shareholders should be
based on the consideration of the Full Announcement. The Full Announcement is
available at:

and is also published on the Company’s website at

Both the short-form announcement and the Full Announcement are also available
for inspection at the registered offices of ISA and the Designated Adviser,
Merchantec Capital, during business hours, and copies may be obtained at no
cost on request from the Company Secretary who is contactable on
+27 11 325 6363 or

On behalf of the board, I would like to take this opportunity to thank the
ISA team for their continued dedication and hard work. My appreciation is
also extended to my colleagues on the board for their wise counsel and
valuable input, as well as to all stakeholders, customers and vendors for
their support.

For and on behalf of the board,

Clifford Katz
Chief Executive Officer

13 November 2020

Directors: CS Katz (Chief Executive Officer), PJG Green (Chief Technical
Officer), P Mogoboya (Financial Director), AJ Naidoo#, C. Pillay#, DC
Seaton*, N Maphothi*, O Seku*(Chairperson)

# Non-executive
* Independent non-executive

Designated Adviser: Merchantec Capital

Date: 13-11-2020 10:22:00
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