General Review
The six months to January 2011 was a difficult period for the group and particularly for SecureData Africa. Group EBITDA reduced to R15,4 million (2010: R24,2 million) on revenues that dipped to R199,0 million (2010: R220,2 million) reflecting an EBITDA margin of 7,8% (2010: 11,0%). 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 by reducing the selling unit cost of products sold in South Africa which are foreign currency denominated.
Services revenues, the bulk of which are monthly billed managed services, remained strong and accounted for a greater share of revenue (27%), than any other technology or product. Revenue generated outside of South Africa climbed to 44% from 37% in the prior year, and annuity revenue remained solid at 42%.
The calculation of earnings per share ("EPS") and headline earnings per share ("HEPS") incorporate the following items:
- a R4,9 million (2010: R6,0 million) charge for amortisation of intangible assets created by the group's prior acquisitions. This charge is unrealised and has no effect on group cash flow;
- a R253 000 (2010: R6,0 million loss) foreign exchange gain on inter-group loans reflecting the difference in Rand to Sterling exchange rate between the previous and current reporting closing dates. This charge is unrealised and has no effect on group cash flow; and
- a R112 000 (2010: R0,75 million) loss on foreign exchange forward contracts, entered into to settle outstanding creditor payments by the group at a time of great Rand volatility. As at 31 January 2011 these losses were unrealised. Although the contracts will be crystallised during the course of 2011, these unrealised losses could be recognised as profits, should the Rand exchange rate weaken sufficiently at the time the contracts are recognised.
Together these non-operational and unrealised non-cash items reduced EPS and HEPS by 1,5 cents per share. Adjusted EPS, which ignores these items but includes cash expenses such as interest, reflects 2,6 cents per share (2010: 4,8 cents per share).
As reported in the 2010 annual report the company paid a dividend of 5 cents per share on 22 November 2010 for a total cash outlay including STC of R12,8 million. The STC payable reduced the EPS, HEPS and Adjusted EPS by 0,5 cents per share.
During the reporting period the group repurchased 2 870 277 shares in the market at a cost of R2,8 million. This brings the total number of shares held in treasury to 16 975 000.
The statement of financial position remained comfortable at end January 2011 with R29,6 million in cash and cash equivalents, after the dividend payment and share-buy-back, and total borrowing of R56,6 million. In comparison with the six months ended 31 January 2010 inventory and debtors days remained flat around R4 million and 79 days respectively. Management continues to place particular emphasis on effective working capital management.
Operational Review
SDH operates subsidiaries in three major groupings: SecureData Africa, SecureData Europe (previously MIS-CDS) and SensePost.
SecureData Africa markets and distributes best of class IRM products in South Africa and across the rest of the continent. Revenue declined almost 13% with the concomitant decline in EBITDA and EBITDA margin. In particular the Public Sector and Financial Services business units underperformed as government departments delayed transactions and financial institutions cut back on expenditure for new security projects. There is current evidence that the Financial Services unit will return to normal in the near future but the timing of Public Sector recovery remains uncertain. In the year to come SecureData Africa will continue to focus on improving existing operations as well as continued organic expansion into the rest of Africa.
Strategic Review
Historically the second half of the year has proven to be stronger than the first half for the group. Despite current difficulties in SecureData Africa the group remains a significant player in the information risk management market. The group’s operations are cash generative and continue to reduce the debt obligations incurred in acquisitions three years ago. Working capital management remains a key focus area.
Basis of Preparation
These condensed interim 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 JSE Limited. The accounting policies applied in the preparation of these condensed interim financial statements conform to the requirements of International Financial Reporting Standards, and are consistent with those applied in the prior year. These interim financial statements have not been audited or reviewed by the group’s auditors.
Subsequent Events
The directors are not aware of any material matter or circumstance arising since the end of the interim period and up to the date of this report.
Directorate
There has been no change to the board of directors during the period under review.
For and on behalf of the board.
PR Pretorius - Chairman
DTK Brazier - Chief Executive Officer
17 March 2011
SecureData Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1998/010017/06)
Share code: SDH ISIN: ZAE000096368
(“SecureData” or “the group”)
Directors:
PR Pretorius† (Chairman); DTK Brazier (Chief Executive Officer);
JG du Toit (Financial Director); A Aitken†;
N Mthembu†; YT Moerane*; P Sneddon*
*Independent non-executive director †Non-executive director
Company secretary:
Merchantec (Proprietary) Limited
Registered office:
Medscheme Building South
10 Muswell Road South, Bryanston, 2021 (PO Box 4673, Rivonia, 2128)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited (Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Sponsor:
Merchantec Capital