SILVERBRIDGE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration NUMBER 1995/006315/06)
Share code: “SVB” ISIN: ZAE000086229
(“SilverBridge” or “the Group” OR “THE COMPANY”)
Summarised audited consolidated RESULTS FOR THE year ENDED 30 June 2016 AND Notice of annual general meeting
GROUP PROFILE
SilverBridge offers reliable solutions that support the operations of companies offering financial products and services. Our understanding of contract administration processes helps our clients to improve and simplify their business processes. We achieve this by implementing our system platforms and customising them to meet product and process needs. In the last year we have extended our services to include cloud hosted solutions. This is a result of experience gained over many years.
Exergy is our flagship platform that enables core back office policy administration in the life assurance industry. The Exergy solution package can be customised to suit the needs of a life assurer’s on-premise software requirements. We have extended our portfolio to include group scheme administration, pension fund administration as well as elements of medical and short-term insurance. This caters for clients wanting to offer a wider range of financial services offerings.
We use a project approach to help our clients translate business objectives into IT requirements. We then implement sustainable solutions. Our software products and hosted services are rented to our customers on a usage basis.
Summarised audited consolidated statement of comprehensive income for the year ended 30 June 2016
|
Notes |
2016
R’000 |
2015
R’000 |
|
| Revenue | 1.5 | 86 442 | 80 943 |
| Other income | 152 | 15 | |
| Personnel expenses | (57 527) | (55 161) | |
| Depreciation and amortisation | (1 395) | (1 699) | |
| Professional fees paid for services | (5 666) | (4 246) | |
| Other expenses | (9 969) | (8 840) | |
| Results from operating activities | 12 037 | 11 012 | |
| Finance income | 1 367 | 468 | |
| Finance expenses | (250) | (1) | |
| Profit before income tax | 13 154 | 11 479 | |
| Income tax | (3 064) | (3 136) | |
| Profit and total comprehensive income for the year | 10 090 | 8 343 | |
| Earnings per share | |||
| Basic earnings per share | 1.3 | 29.1 | 24.1 |
| Diluted earnings per share | 1.3 | 27.5 | 23.7 |
Summarised audited consolidated statement of FINANCIAL Position as at 30 June 2016
|
Notes |
2016
R’000 |
2015
R’000 |
|
| ASSETS | |||
| Non-current assets | 15 810 | 14 766 | |
| Equipment | 983 | 992 | |
| Intangible assets and goodwill | 12 371 | 11 286 | |
| Deferred tax assets | 1 266 | 441 | |
| Withholding tax rebates receivable | 1 190 | 2 047 | |
| Current assets | 4 7229 | 37 191 | |
| Withholding tax rebates receivable | 1 312 | 1 511 | |
| Income tax receivable | 802 | – | |
| Revenue recognised not yet invoiced | 1.4 | 4 737 | 2 684 |
| Trade and other receivables | 13 422 | 14 782 | |
| Cash and cash equivalents | 26 956 | 18 214 | |
| Total assets | 63 039 | 51 957 | |
| EQUITY AND LIABILITIES | |||
| Equity | 47 988 | 39 188 | |
| Share capital | 348 | 348 | |
| Share premium | 11 871 | 11 871 | |
| Treasury shares | (197) | (197) | |
| Share based payment reserve | 910 | 462 | |
| Retained earnings | 35 056 | 26 704 | |
| Non-current liabilities | 1 098 | 308 | |
| Deferred tax liabilities | 1 098 | 308 | |
| Current liabilities | 13 953 | 12 461 | |
| Income tax payable | 1 791 | 1 785 | |
| Trade and other payables | 1.2 | 11 764 | 10 048 |
| Deferred revenue | 1.4 | 398 | 628 |
| Total liabilities | 15 051 | 12 769 | |
| Total equity and liabilities | 63 039 | 51 957 | |
| Net asset value per share (cents) | 138.4 | 113.0 | |
| Net tangible asset value per share (cents) | 102.7 | 80.5 |
Summarised audited consolidated STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2016
| Share capital R’000 |
Share premium R’000 | Treasury shares
R’000 |
Share based
payment reserve R’000 |
Retained
earnings R’000 |
Total
equity R’000 |
|
| Balance at 1 July 2014 | 348 | 11 871 | (197) | 512 | 17 967 | 30 501 |
| Total comprehensive income for the year | ||||||
| Profit for the year | – | – | – | – | 8 343 | 8 343 |
| Total comprehensive income for the year | – | – | – | – | 8 343 | 8 343 |
| Transactions with owners, recorded directly in equity: | ||||||
| Contributions by and distributions to owners | ||||||
| Equity settled share based payment | – | – | – | 344 | – | 344 |
| Transfer of reserve of share options that did not vest | – | – | – | (394) | 394 | – |
| Total transactions with owners | – | – | – | (50) | 394 | 344 |
| Balance at 30 June 2015 | 348 | 11 871 | (197) | 462 | 26 704 | 39 188 |
| Total comprehensive income for the year | ||||||
| Profit for the year | – | – | – | – | 10 090 | 10 090 |
| Total comprehensive income for the year | – | – | – | – | 10 090 | 10 090 |
| Transactions with owners, recorded directly in equity: | ||||||
| Dividend paid | (1 738) | (1 738) | ||||
| Equity settled share based payment | – | – | – | 448 | – | 448 |
| Total transactions with owners | – | – | – | 448 | (1 738) | (1 290) |
| Balance at 30 June 2016 | 348 | 11 871 | (197) | 910 | 35 056 | 47 988 |
Summarised audited consolidated CASH FLOW STATEMENT for the year ended 30 June 2016
| 2016
R’000 |
2015
R’000 |
|
| Cash generated from operations | 15 455 | 12 817 |
| Interest received | 1 367 | 468 |
| Interest paid | – | (1) |
| Taxation paid | (3 894) | (1 362) |
| Net cash inflow from operating activities | 12 928 | 11 922 |
|
Cash flows from investing activities |
||
| Equipment acquired to maintain operations | (585) | (476) |
| Proceeds from sale of equipment | 23 | – |
| Cash outflow from capitalisation of development costs | (1 886) | (1 166) |
| Net cash used in investing activities | (2 448) | (1 642) |
|
Cash flows from financing activities |
||
| Dividend paid | (1 738) | – |
| Net increase in cash and cash equivalents | 8 742 | 10 280 |
| Cash and cash equivalents at the beginning of the year | 18 214 | 7 934 |
| Cash and cash equivalents at the end of the year | 26 956 | 18 214 |
Summarised audited consolidated SEGMENT REPORTS for the year ended 30 June 2016
Business segments
In the prior financial year, Connect support and Rubix support were reported separately. This has now been consolidated in to one Support services segment for the current and prior year since the Rubix support segment was relatively small.
A new business has been started during the year and therefore the additional segment, Hosting and outsourcing services, was established. This segment provides a range of complimentary managed services to our clients. The services include cloud-based hosting, outsourced technical services and full business process outsourcing. This represents a new initiative for the Group. It enables us to offer additional services to existing clients as well as make our offerings appeal to a wider range of potential clients. It will also help keep our offerings relevant with regard to technology trends. There are no comparative figures since it is a new segment.
Except for the above, the segment report has been prepared consistently with the previous year.
| 2016 | Imple-
mentation services R’000 |
Support services R’000 | Hosting and out-sourcing services
R’000 |
Rental and main-tenance
R’000 |
Research &
Develop-ment R’000 |
Total R’000 |
| Segment revenue | 11 027 | 38 145 | 3 060 | 37 217 | – | 89 449 |
| Segment revenue inter-group | – | (1 900) | (867) | (240) | – | (3 007) |
| Segment revenue external | 11 027 | 36 245 | 2 193 | 36 977 | – | 86 442 |
| Direct segment cost | (5 775) | (19 775) | (3 562) | (6 894) | (6 603) | (42 609) |
| Cost capitalised | – | – | – | 1 885 | 1 885 | |
| Segment gross profit | 5 252 | 16 470 | (1 369) | 30 083 | (4 718) | 45 718 |
| Indirect segment cost | (4 568) | (14 458) | (558) | (7 002) | (7 095) | (33 681) |
| Segment result | 684 | 2 012 | (1 927) | 23 080 | (11 813) | 12 037 |
| Net finance income | 1 117 | |||||
| Income tax | (3 064) | |||||
| Profit for the year | 10 090 |
| 2015 | Imple-
mentation services R’000 |
Support services R’000 | Rental and main-tenance
R’000 |
Research &
Develop-pment R’000 |
Total R’000 |
| Segment revenue | 19 678 | 30 841 | 33 494 | – | 84 013 |
| Segment revenue inter-group | – | (3 019) | (51) | – | (3 070) |
| Segment revenue
external |
19 678 | 27 822 | 33 443 | – | 80 943 |
| Direct segment cost | (9 862) | (15 744) | (8 007) | (5 663) | (39 276) |
| Cost capitalised | – | – | – | 1 167 | 1 167 |
| Segment gross profit | 9 816 | 12 078 | 25 436 | (4 496) | 42 834 |
| Indirect segment cost | (8 934) | (13 142) | (5 302) | (4 444) | (31 822) |
| Segment result | 882 | (1 064) | 20 134 | (8 940) | 11 012 |
| Net finance income | 467 | ||||
| Income tax | (3 136) | ||||
| Profit for the year | 8 343 |
COMMENTARY
- Notes to the summarised audited consolidated financial statements
- Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listing Requirements for abridged reports, and the requirements of the Companies Act applicable to summary financial statements. The listing requirements require abridged reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from which the summary consolidated financial statements were derived, are in terms of International Financial Reporting Standards and are consistent with the accounting policies applied in the preparation of the previous consolidated annual financial statements.
The consolidated abridged report is extracted from audited information, but is not itself audited. PricewaterhouseCoopers Inc audited the financial statements for the year ended 30 June 2016 and expressed an unmodified opinion on those financial statements. For a better understanding of the Group’s financial position and results of operations, these abridged financial statements must be read in conjunction with the Group’s audited financial statements for the year ended 30 June 2016 which include all disclosures required by IFRS, and which are expected to be released on or about 19 September 2016. The Group’s integrated report which incorporates the Annual Financial Statements can be obtained from our website or by contacting the Company directly. These abridged financial statements were prepared by the Head of Finance and Shared Services, Petro Mostert CA (SA), under the supervision of the Financial Director, Lee Kuyper CA (SA).
The directors take full responsibility for the preparation of the abridged report and the financial information has been correctly extracted from the underlying annual financial statements.
1.2 Trade and other payables
Trade and other payables comprised of the following:
| 2016
R’000 |
2015
R’000 |
|
| Trade payables | 2 094 | 671 |
| Other payables (accruals) | 3 306 | 2 681 |
| VAT payable | 480 | 1 069 |
| Incentive accrual | 3 342 | 3 182 |
| Leave accrual | 2 542 | 2 445 |
| Total trade and other payables | 11 764 | 10 048 |
1.3 EARNINGS per share
Basic earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent, of R10.1 million (2015: R8.3 million) by the weighted average number of ordinary shares outstanding during the year of 34.7 million (2015: 34.7 million).
| 2016 | 2015 | |
| Reconciliation of the weighted average number of shares in issue | ||
| Shares in issue at the beginning of the year (‘000) | 34 781 | 34 781 |
| Effect of treasury shares acquired on 1 March 2007 (‘000) | (106) | (106) |
| Shares in issue at the end of the year (‘000) | 34 675 | 34 675 |
| Weighted average number of shares in issue at the end of the year (‘000) | 34 675 | 34 675 |
| Earnings attributable to ordinary shareholders (R’000) | 10 090 | 8 343 |
| Basic earnings per share (cents) | 29.10 | 24.06 |
Diluted earnings per ordinary share
Diluted earnings per ordinary share is calculated by dividing the diluted profit attributable to ordinary equity holders of the parent of R10.1 million (2015: R8.3 million) by the diluted average number of ordinary shares of 36.7 million (2015: 35.2 million).
| 2016 | 2015 | |
| Reconciliation between weighted average number of shares in issue and weighted average number of shares in issue used for diluted earnings per share | ||
| Weighted average number of shares in issue | 34 675 | 34 675 |
| Effect of diluted amount of shares | 1 985 | 577 |
| Weighted average number of shares in issue used for diluted earnings per share | 36 660 | 35 252 |
| Earnings attributable to ordinary shareholders used for diluted earnings (R’000) | 10 090 | 8 343 |
| Diluted earnings per share (cents) | 27.52 | 23.67 |
The dilutive effect resulted from share options issued.
Headline earnings per ordinary share
Headline earnings per ordinary share is calculated by dividing the headline earnings attributable to ordinary equity holders of the parent of R10.1 million (2015: R8.3 million) by the weighted average number of ordinary shares outstanding during the year of 34.7 million (2015: 34.7 million).
| 2016 | 2015 | |
| Weighted average number of shares in issue (‘000) | 34 675 | 34 675 |
| Reconciliation between basic earnings and headline earnings | ||
| Basic earnings (R’000) | 10 090 | 8 343 |
| Adjusted for: | ||
| – Loss/(Profit) on disposal of equipment (R’000) | (17) | 14 |
| Headline earnings (R’000) | 10 073 | 8 357 |
| Headline earnings per share (cents) | 29.05 | 24.10 |
Diluted Headline earnings per ordinary share
Diluted headline earnings per ordinary share is calculated by dividing the diluted headline earnings attributable to ordinary equity holders of the parent of R10.1 million (2015: R8.3 million) by the diluted weighted average number of ordinary shares outstanding during the year of R36.7 million (2014: 35.2 million).
| 2016 | 2015 | |
| Weighted average number of shares in issue used for diluted earnings per share (‘000) | 36 660 | 35 252 |
| Headline earnings (R’000) | 10 073 | 8 343 |
| Diluted headline earnings per share (cents) | 27.48 | 23.71 |
The dilutive effect resulted from share options issued.
1.4 Deferred revenue and revenue recognised BUT not yet invoiced
Deferred revenue and revenue recognised but not yet invoiced refers to the timing difference between recognition of revenue and invoicing to the client.
| 2016 | 2015 | |
| R’000 | R’000 | |
| Current asset | ||
| Revenue recognised not yet invoiced | 4 737 | 2 684 |
| Current liability | ||
| Deferred revenue | (398) | (628) |
| Net asset/(liability) | 4 339 | 2 056 |
1.5 Revenue per geographical segment
|
|
Group | |
| 2016 | 2015 | |
| R’000 | R’000 | |
| South Africa | 45 542 | 36 153 |
| Swaziland | 8 232 | 3 114 |
| Zimbabwe | 7 860 | 6 769 |
| Namibia | 7 346 | 18 553 |
| Lesotho | 6 242 | 1 430 |
| Kenya | 3 022 | 3 505 |
| Other African countries* | 8 198 | 11 419 |
| 86 442 | 80 943 | |
* Other African countries include Angola, Botswana, Malawi, Mauritius, Ghana,
1.6 FAIR VALUES
The carrying amounts of all financial assets and liabilities are a reasonable approximation of their fair value.
- CORPORATE ACTIVITY
2.1. Dividend
The directors have declared and approved a final gross dividend of 6 cents per share for the year ended 30 June 2016 from income reserves.
The following dates will apply to the abovementioned final dividend:
Last day to trade cum dividend: Tuesday, 11 October 2016
Trading ex-dividend commences: Wednesday, 12 October 2016
Record date: Friday, 14 October 2016
Dividend payment date: Monday, 17 October 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 12 October 2016 and Friday, 14 October 2016, both days inclusive.
In determining the dividends tax (DT) of 15% to withhold in terms of the Income Tax Act (No. 58 of 1962) for those shareholders who are not exempt from the DT. Shareholders who are not exempt from the DT will therefore receive a dividend of 5.1 cents per share (dividend multiplied by 85%) net of DT. The company has 34 781 471 ordinary shares in issue as at 30 June 2016 and its income tax reference number is 9841087647.
Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders` bank accounts on the payment date. In the absence of specific mandates, dividend cheques will be posted to shareholders. Ordinary shareholders who hold dematerialised shares will have their accounts at their CSDP or broker credited/updated on Monday, 17 October 2016.
- AUDIT REPORT
The financial statements for the year ended 30 June 2016 have been audited by PricewaterhouseCoopers Inc. with Deon Storm as the designated partner. Their unmodified audit report is available for inspection at the Company’s registered office.
- Notification of a change in auditors
The board of directors recommend the re-appointment of PWC Incorporated, as the independent external auditors for the 2016/2017 financial year.
- Subsequent EVENTS
No events occurred subsequent to the year end that would require the summarised consolidated financial statements to be adjusted or disclosure thereof in the summarised consolidated financial statements.
- FINANCIAL RESULTS AND PERFORMANCE
We are pleased with the continued improvement in our results and the ability to declare another dividend. Net profit increased by 21% compared to the prior year. Revenue was up 7% (an improvement over last year’s small decline) with good growth in the annuity areas of support and software rental making up for a decline in implementation revenue. Total costs increased by 7% leading to a 9% increase in operating profit. Net profit was assisted by higher finance income from healthier cash balances. HEPS was up 21% to 29.1 cents from 24.1 cents in the prior year.
Cash flow from operations improved to R12.9 million from R11.9 million in the prior year. This was a function of the operating performance. We maintained good working capital control during the year and this continues to be a focus. The cash position of the Group improved to R27.0 million compared to R18.2 million at the previous year end. The balance sheet remains healthy and debt free.
Our client relationships remain healthy. Our efforts into higher value-added offerings for existing clients have been successful. We have also launched new products in adjacent industry verticals as well as offerings in cloud-based hosting and managed services.
Overall, we are pleased with the performance and we are starting to see revenue growth from our efforts. We remain focused on efforts to enable ongoing growth.
Segmental review
Implementation services
This segment implements our solutions for clients and is project based.
Although revenue declined by 44%, the segment result margin improved to 6%.
The revenue decline is a function of the intended strategic transition toward smaller and mid-sized projects as well as an improvement in delivery efficiencies. We have implemented projects faster and more efficiently to enable better growth in the support and software rental segments.
We are happy with our implementation delivery model and continue to secure new contracts in the small to medium sized market in South Africa and the rest of Africa.
Support services
Support is contracted on a monthly basis and is annuity based.
Revenue increased by 30% demonstrating good progress in our transition toward higher value-added support offerings. The gross profit margin improved and the segment result improved significantly to a profit of R2 million compared to a loss of R1.1 million in the prior year.
We are pleased with the result and continue to drive additional higher value-added offerings in this segment.
Hosting and outsourcing services
This is a new segment, which provides a range of complimentary managed services to our clients. The services include cloud based hosting, outsourced technical services and full business process outsourcing.
This segment represents a new initiative for the Group. It enables us to offer additional services to existing clients as well as make our offerings appeal to a wider range of potential clients. It will also help keep our offerings relevant with regard to technology trends.
For the year, the segment generated revenue of R2.2 million with a loss of R1.9 million. There was an investment to set up this business within the first 6 months without any associated revenue. We are satisfied with the progress thus far and envisage the segment becoming profitable as it achieves more scale.
Software rental and maintenance
Software rental is annuity based. It depends on usage, increasing with the number of contracts or policies administered.
We are pleased with the 11% revenue growth. We have introduced complimentary products which contributed to the growth. Price increases also played a role. After the allocation of direct costs related to warranty and maintenance as well as indirect costs, the segment made a profit of R23.1 million, compared to R20.1 million in the prior year. The overall margin increased to 62% from 60% in the prior year.
Our software and the growth of our annuity rental stream remain a core focus going forward.
Research and development (“R&D”)
Over the past year there has been an increased focus on developing new products that can generate future annuity revenue. We have developed and launched several new products and will continue in this regard.
We still continue with R&D efforts on the Eco-Suite and keeping our existing assets relevant in terms of technology and market trends.
During the period, total direct costs were R6.6 million, of which R1.9 million was capitalised.
- GROUP OUTLOOK
Overall we remain positive about the outlook for the Group. We continue to build our core annuity streams and we are improving our revenue growth.
We have made good progress with higher value-added offerings in our support area. We have developed products for adjacent vertical market segments and have launched new offerings in the cloud-based hosting and managed services. We are optimistic that our efforts will help improve future growth.
The financial services industry continues to adapt to meet its customers’ changing needs in an increasingly digital world. Financial services providers are driving change in their business. They are differentiating their products and services in order to remain relevant in a rapidly changing world. SilverBridge remains well positioned to meet these needs. It presents us with opportunities to create platforms that can help the industry to adapt and continues guiding our new product development initiatives.
- NOTICE OF THE Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held at 11:00 on Wednesday 26 October 2016 at the registered office of SilverBridge, 495 Prieska Street, Erasmuskloof, Pretoria, to transact the business as stated in the notice of the Annual General Meeting, which is contained in the Integrated Annual Report to be distributed on or about 19 September 2016.
The board of directors of SilverBridge (“the Board”) has determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act, 2008 (Act 71 of 2008), the record date for the purposes of determining which shareholders of the Company are entitled to participate in and vote at the Annual General Meeting is Friday, 16 October 2015. Accordingly, the last day to trade in SilverBridge shares in order to be recorded in the Register to be entitled to vote at the Annual General Meeting will be Friday, 14 October 2016.
- DIRECTORATE
No changes to the Board for the period under review.
On behalf of the Board
Robert Emslie Jaco Swanepoel
Chairman Chief Executive Officer
Pretoria
19 September 2016
CORPORATE INFORMATION
DIRECTORS OF SILVERBRIDGE:
Robert Emslie (Chairman)**, Jaco Swanepoel (CEO), Jeremy de Villiers**, J Chikaonda*, Hasheel Govind*, Tyrrel Murray*, Lee Kuyper (Financial Director), Stuart Blyth.
(All the directors are South African citizens).
* Non-executive
**Independent non-executive
SilverBridge Registered offices:
First Floor, Castle View North
495 Prieska Street, Erasmuskloof,
Pretoria, 0048
(PO Box 11799, Erasmuskloof, 0048)
Company Secretary:
Fusion Corporate Secretarial Services Proprietary Limited
represented by Melinda Gous
Unit 2, Corporate Corner, Marco Polo Street, Highveld
Centurion, Gauteng
(PO Box 68528, Highveld, 0169)
LEGAL ADVISERS:
Gildenhuys Malatji Attorneys Inc.
(Registration number: 1997/002114/21)
GLMI House
Harlequins Office Park,
164 Totius Street,
Groenkloof
(PO Box 619, Pretoria, 0001)
Group Auditors:
PricewaterhouseCoopers Inc.
(Registration number: 1998/012055/21)
Eglin Road, Sunninghill, Johannesburg
(Private Bag X36, Sunninghill, Johannesburg, 2157)
Transfer secretaries:
Computershare Investor Services Proprietary Limited
(Registration number: 2004/003647/07)
70 Marshall Street,
Johannesburg,
(Call centre: 0861 100 634)
(PO Box 61051, Marshalltown, 2107)
Designated adviser:
PSG Capital
(Registration number: 2006/015817/07)
First Floor, Building 8,
Inanda Greens Business Park,
54 Wierda Road West, Wierda Valley, Sandton, 2196
(PO Box 650957, Benmore, 2010)