ISA H1 earnings disappoint

Information Security Architects (ISA) on Monday (8 October) announced a decline in revenue for the six months ended August 2012, to R29.96 million, from R36.39 million before.

ISA provides information security solutions that enable companies to better manage the confidentiality, integrity and availability of their mission-critical IT resources.

Profit before taxation slipped to R7.31 million, from R9.37 million.

Diluted Headline earnings per share dropped to 2.9 cents from 3.2 cents in the prior reporting period.

Clifford Katz, ISA CEO said: “We are pleased to present our results for the six month reporting cycle ended 31 August 2012, be they disappointing and short of expectation.

“The highlight during the period under review has come from two external factors, both of which management unfortunately have no control over. The weakening of the rand, which contributed R1.4 million in foreign currency revaluation gains; as well as the saving of last year’s R1.2 million STC charge, due to the change in dividend tax legislation.

“Without these fortuitous gains, the business would have reported a substantial decline in earnings of 48%, to R3.0 million, as opposed to the actual 11% decline.”

Katz said that a slowdown in new solution sales was a major cause of the setback, which declined by 63% when viewed against the previous comparative reporting period. “Although dramatic at face value, it is important to note that new solution sales tend to be bulky in value and if the realisation of only one or two are missed in a specific reporting cycle, the impact on the result would be severe, as is the current case.”

On a more positive note, Katz said that recurring revenue levels increased by a healthy 24% from the previous comparative reporting period, making up 79% of turnover. “This growth is attributed largely to the success of our Managed Security Services strategy, underpinned by our internally developed MSS Pulse security infrastructure management and monitoring platform.”

During the period under review, ISA moved into its newly acquired premises in Woodmead. “Not only does this transfer of low-yielding cash into higher-yielding property enhance our investment structure, but it also gives us the headroom to grow the breadth and depth of our service offerings for the market. This objective is viewed by management as being their most pressing challenge for the longer-term sustainable growth of the business,” Katz said.

During the period under review, a dividend of R12.8 million was declared and paid to all shareholders, representing 7.0 cents per share. The Board did not declare an interim dividend.

Looking ahead, the company chief said that the group remains optimistic about its long-term prospects, but does anticipate continued pressure on the level of new solution sales and margin in the short-term.

“The drivers for the Information and IT security industry continue to support our strategy and we have little doubt that the strength of the underlying business, capital structures and market positioning will continue to bode well for us in the years to come,” Katz said.

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ISA H1 earnings disappoint