DirectorateMr S Murray resigned as a non-executive director with effect from 21 July 2010. For and on behalf of the board.
7 October 2010 SecureData Holdings LimitedIncorporated in the Republic of South Africa Directors:PR Pretorius† (Chairman); DTK Brazier (Chief Executive Officer); Company secretary:Merchantec Capital Registered office:Medscheme Building South Transfer secretaries:Computershare Investor Services (Proprietary) Limited (Registration number 2004/003647/07) Sponsor:Merchantec Capital | General ReviewDuring the year under review, SecureData Holdings (“SDH”) continued its progress towards becoming a significant provider of Information Risk Management (“IRM”) solutions and services in the geographies in which it operates. The group achieved solid results despite a difficult operating environment characterised by currency uncertainty, a poor economic climate, and interruped by the FIFA World Cup in South Africa and general elections in the United Kingdom. Group EBITDA remained static at R57,2 million on revenues that dipped slightly to R459,0 million reflecting an improvement in EBITDA margin to 12,5%. Rand strength negatively impacted the group’s revenues and earnings, affecting not only the Rand translation of the group’s Sterling based income but also reducing the unit cost of products sold in South Africa which are foreign currency denominated. Revenue was evenly split between the first and second halves of the financial year, and 58% of EBITDA was achieved during the second half. This cyclicality is normal and can be attributed to the product and annuity revenue profile of the different periods. Services revenues, the bulk of which are monthly billed managed services, remained strong above R90 million and account for a greater share (20%) of revenue, than any other technology or product. Revenue generated outside of South Africa climbed to 45% and annuity revenue remained strong at 41%. The calculations of earnings per share (“EPS”) and headline earnings per share (“HEPS”) incorporate the following items;
Together these non-operational and unrealised non-cash items reduced EPS and HEPS by 5,6 cents per share, making both EPS and HEPS poor indicators of the group’s operational performance. Adjusted EPS, which ignores these items but includes cash expenses such as interest, is 13,1 cents per share. The group was net cash positive as at 31 July 2010 with R68 million in cash and cash equivalents and total borrowings of R65,5 million. In comparison with the six months ended 31 January 2010, inventory remained flat around R4 million and debtors days improved to 80 from 94. Management continues to place particular emphasis on effective working capital management and is pleased to announce the re-instatement of the group’s dividend policy as detailed below. Operational ReviewSDH operates subsidiaries in three major groupings: SecureData Africa, MIS-CDS and SensePost. Both revenue and EBITDA details below are gross of R1,5 million of inter-group sales that eliminate on consolidation.
SecureData Africa markets and distributes best of class IRM products in South Africa and across the rest of the continent. SecureData Africa stood firm in a period of significant economic turmoil with increases in revenue, EBITDA and EBITDA margin. As anticipated the second six month performance was slightly better than the first six month period. During the course of the year the operations of New Generation Solutions were integrated into those of SecureData Africa. In the coming year SecureData Africa will continue to focus on improving existing operations as well as organic expansion into Africa outside of Southern Africa. Management is confident that despite difficult trading conditions, the company will be able to continue to show revenue growth, and will focus on margin improvement into the future.
MIS-CDS is one of the largest independent information security solution providers in the United Kingdom. In Sterling MIS-CDS posted a credible 15% increase in revenue with a 24% improvement in EBITDA and a firming of the EBITDA margin to 8,5%. This strong performance is not reflected in the Rand results of the company due to the strengthening of the Rand in relation to Sterling. Management is confident that the company will continue to show improving margin and earnings performance in the coming period despite ongoing economic uncertainty in the United Kingdom.
SensePost provides independent information security assessment services. Based in South Africa, the company is a recognised leader in this niche market and boasts a blue-chip client base spanning five continents. SensePost posted revenue of R23,3 million with a pleasing 27,3% EBITDA margin reflecting the specialist, high value nature of the company’s service offering. Almost a third of SensePost revenues were generated outside of South Africa. The company has invested significant resources in its R&D arm, SensePost Laboratories, and it continues to invest in its offshore expansion programme. Strategic ReviewThe group continues to gain market share in the markets in which it trades, and has established a significant IRM presence in the Europe/Africa region. The group remains cash generative and, having substantially reduced debt obligations incurred in acquisitions, has re-instated its dividend policy. Working capital management remains a key focus area. Although the economic and competitive landscape remains challenging the IRM market has historically proved to be resilient in the face of market turbulence. The board of directors of SDH (“the board”) believes the group is well positioned to take advantage of attractive opportunities within the IRM sector well into the future. Basis of PreparationThese provisional condensed consolidated financial statements have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards and the presentation and disclosure requirements of IAS 34 – Interim Financial Reporting, the Companies Act, 1973 (Act 61 of 1973), as amended, and with the Listings Requirements of the JSE Limited. With the exception of the implementation of the new and revised standards noted below the same accounting policies, presentation and measurement principles have been followed in the preparation of the condensed financial information as were applied in the preparation of the group’s annual financial statements for the year ended 31 July 2009. The group has implemented the revised IAS 1, “Presentation of Financial Statements” and IFRS 8 “Operating segments”. The changes to both standards are of a presentation and disclosure nature only. Comparative information has been represented to conform with the revised standards. Independent ReviewGrant Thornton, SecureData’s independent auditor, have reviewed the condensed consolidated financial statements contained in this provisional report and have expressed an unmodified conclusion on the provisional statements. Their review report is available for inspection at the company’s registered office. Post Balance Sheet EventsThe board is not aware of any material matter or circumstance arising since the end of the financial year end up to the date of this report. Dividend DeclarationThe board has resolved to declare a final dividend of 5 cents per share for the year ended 31 July 2010 to be paid to all ordinary shareholders recorded in the share register on the record date. In compliance with the requirements of Strate and Schedule 24 of the JSE Listings Requirements, the following dates are applicable: |
