UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS for the six month period ended 31 December 2015

SILVERBRIDGE HOLDINGS LIMITED

Incorporated in the Republic of South Africa

(Registration NUMBER 1995/006315/06)

Share code: SVB     ISIN: ZAE000086229

(“SilverBridge” or “the Group”)

 

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

for the six month period ended 31 December 2015

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 six months 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.

 

Unaudited Condensed Consolidated Interim Statement of Comprehensive Income for the six month period ended December 2015

 

Unaudited

six months

ended

31 December

2015

Unaudited

six months

ended

31 December

2014

Audited

12 months

ended

30 June

2015

Percentage

Change

Notes R’000 R’000 R’000 %
Revenue 39 646 38 342 80 943 3
Other income 88 11 15 700
Operating expenses (34 657) (34 440) (69 946) 1
Operating profit 5 077 3 913 11 012 30
Finance income 634 164 468 287
Finance expense (1)
Profit before taxation 5 711 4 077 11 479 40
Taxation (1 692) (1 166) (3 136) 45
Profit and total comprehensive income for the period 4 019 2 911 8 343 38
Number of shares in issue (‘000) 1.2 34 871 34 781 34 781
Weighted average number of shares in issue (‘000) 1.2 34 675 34 675 34 675
Diluted weighted average number of shares (‘000) 1.2 35 610 34 675 35 252
Basic earnings per share (cents) 1.2 11.6 8.4 24.1 38
Diluted earnings per share (cents) 1.2 11.3 8.4 23.7 35

 

 

Unaudited Condensed Consolidated Interim Statement of Financial Position as at 31 December 2015

Unaudited

as at

31 December

2015

Unaudited

as at

31 December

2014

Audited

as at

30 June

2015

Notes R’000 R’000 R’000
ASSETS
Non-Current Assets
Equipment 813 1 133 992
Intangible assets 11 740 10 795 11 286
Deferred tax assets 1 158 423 441
Withholding tax rebates receivable 2 206 1 968 2 047
Total Non-Current Assets 15 917 14 319 14 766
Current Assets
Withholding tax rebates receivables 558 1 192 1 511
Revenue recognised not yet invoiced 1.3 1 022 1 443 2 684
Trade and other receivables 10 959 12 468 14 782
Cash and cash equivalents 24 471 14 374 18 214
Total Current Assets 37 010 29 477 37 191
Total Assets 52 927 43 796 51 957
EQUITY AND LIABILITIES
Capital and Reserves
Issued capital 348 348 348
Share premium 11 871 11 871 11 871
Treasury shares (197) (197) (197)
Share based payment reserve 747 959 462
Retained earnings 28 984 20 878 26 704
Total Equity 41 753 33 859 39 188
Non-Current Liabilities
Deferred tax liability 817 308
Total Non-Current Liabilities 817 308
Current Liabilities
Deferred revenue 1.3 1 213 834 628
Income tax payable 2 888 1 146 1 785
Trade and other payables 1.4 6 256 7 607 10 048
Provisions 350
Total Current Liabilities 10 357 9 937 12 461
Total Liabilities 11 174 9 937 12 769
Total Equity and Liabilities 52 927 43 796 51 957
Net asset value per share (cents) 120.4 97.6 113.0
Net tangible asset value per share (cents) 86.6 66.5 80.5

 

 

Unaudited Condensed Consolidated Interim Statement of Changes in Equity for the six month period ended 31 December 2015

Issued capital Share premium Treasury shares Share based payment reserve Retained earnings Total equity
R’000 R’000 R’000 R’000 R’000 R’000
Balance at 1 July 2014 348 11 871 (197) 512 17 967 30 501
Total comprehensive income for the period
Profit or loss 2 911 2 911
Total comprehensive income for the period 2 911 2 911
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity settled share based payment 447 447
Total contributions by and distributions to owners 447 447
Total transactions with owners 477 477
Balance at 31 December 2014 348 11 871 (197) 959 20 878 33 859
Total comprehensive income for the period
Profit or loss 5 432 5 432
Total comprehensive income for the period 5 432 5 432
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity settled share based payment overprovision (103) (103)
Transfer of reserve of share options that did not vest (394) 394
Total contributions by and distributions to owners (497) 394 (103)
Changes in ownership interests in subsidiaries that do not result in a loss of control
Total transactions with owners (497) 394 (103)
Balance at 30 June 2015 348 11 871 (197) 462 26 704 39 188
Total comprehensive income for the period
Profit or loss 4 019 4 019
Total comprehensive income for the period 4 019 4 019
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends paid (1 739) (1 739)
Equity settled share based payment 285 285
Total contributions by and distributions to owners 285 (1 739) (1 454)
Total transactions with owners 285 (1 739) (1 454)
Balance at 31 December 2015 348 11 871 (197) 747 28 984 41 753

 

 

Unaudited Condensed Consolidated Interim Statement of Cash Flows for the six month period ended 31 December 2015

 

Unaudited

six months

Ended

31 December

2015

Unaudited

six months

ended

31 December

2014

Audited

12 months

ended

30 June

2015

R’000 R’000 R’000
Cash generated from operations 9 153 7 306 12 817
Interest received 634 164 468
Interest paid (1)
Taxation paid (797) (322) (1 362)
Net cash inflow from operating activities 8 990 7 148 11 922
Cash flows from investing activities
Equipment acquired to maintain operations (117) (246) (476)
Proceeds from disposal of equipment 32
Cash outflow from capitalisation of development costs (909) (462) (1 166)
Net cash outflow from investing activities (994) (708) (1 642)
Cash flows from financing activities
Dividends paid to equity holders (1 739)
Net cash outflow from financing activities (1 739)
Net increase in cash and cash equivalents 6 257 6 440 10 280
Cash and cash equivalents at the beginning of the period 18 214 7 934 7 934
Cash and cash equivalents at the end of the period 24 471 14 374 18 214

 

Unaudited Condensed Consolidated Interim Segment Reports for the six month period ended 31 December 2015

Reportable Segment Report

 

As reported at the year ended June 2015, there were changes made to our segment reporting. The current interim results for the 6 months ended 31 December 2015 are consistent with these changes and in addition the comparative period (6 months to December 2014) has been restated to reflect these changes. No further changes to the segment report has been noted in the current reporting period.

The following is a reminder of the changes that were made and communicated at the full year to June 2015:

 

The basis on which costs were allocated to the business segments was reviewed. The changes that were made provide a more accurate view of the segment performance and a more accurate comparison from year to year.

 

Previously, costs from unutilized capacity were reflected as indirect costs. These costs are now allocated as direct costs to the segment where the relevant staff member is allocated.

 

Previously, indirect costs were allocated to the segments in the ratio of their direct costs. They are now allocated on a consumption basis, consistent with the way the business segments are budgeted and reported on from month to month.

 

Previous unallocated costs have now been allocated to the segments as part of indirect costs.

 

 

 

Total Connect

implemen-

tation services

Connect

support services

Rubix

support services

R’000 R’000 R’000 R’000
Unaudited six months ended 31 December 2015
Total revenue 40 652 4 846 16 722 994
Inter-group revenue (1 006) (201) (510)
Net revenue 39 646 4 846 16 521 484
Direct segment cost (18 991) (2 845) (8 552) (480)
Cost capitalised 909
Segment gross profit 21 564 2 001 7 969 4
Indirect segment cost (16 487) (2 372) (6 738) (527)
Segment result 5 077 (371) 1 231 (523)
Finance income 634
Finance expense
Income tax expense (1 692)
Profit for the period 4 019

 

Total Cirrus hosting and outsourcing Rubix

research & development

Rubix

software rental & maintenance

R’000 R’000 R’000 R’000
Unaudited six months ended 31 December 2015
Total revenue 40 652 175 17 915
Inter-group revenue (1 006) (175) (120)
Net revenue 39 646 17 795
Direct segment cost (18 991) (1 013) (2 943) (3 158)
Cost capitalised 909 909
Segment gross profit 21 564 (1 013) (2 034) 14 637
Indirect segment cost (16 487) (212) (3 378) (3 260)
Segment result 5 077 (1 225) (5 412) 11 377
Finance income 634
Finance expense
Income tax expense (1 692)
Profit for the period 4 019

 

Total Connect

implemen-

tation

services

Connect

support services

Rubix

support services

Rubix

research & develop-ment

Rubix

software rental & main-tenance

R’000 R’000 R’000 R’000 R’000 R’000
Unaudited six months ended 31 December 2014
Total revenue 39 857 7 293 13 268 2 573 16 723
Inter-group revenue (1 515) (1 515)
Net revenue 38 342 7 293 13 268 1 058 16 723
Direct segment cost (18 396) (4 965) (5 555) (794) (2 019) (5 063)
Cost capitalised 462 462
Segment gross profit 20 408 2 328 7 713 264 (1 557) 11 660
Indirect segment cost (16 495) (4 600) (4 762) (728) (1 608) (4 797)
Segment result 3 913 (2 272) 2 951 (464) (3 165) 6 863
Finance income 164
Finance expense
Income tax expense (1 166)
Profit for the period 2 911

 

 

 

Total Connect

implemen-

tation services

Connect

support services

Rubix

support services

Rubix

research & develop-ment

Rubix

software rental & mainte-nance

R’000 R’000 R’000 R’000 R’000 R’000
Audited 12 months ending 30 June 2015
Total revenue 84 013 19 678 26 067 4 774 33 494
Inter-group revenue (3 070) (50) (2 969) (51)
Net revenue 80 943 19 678 26 017 1 805 33 443
Direct segment cost (39 276) (9 862) (14 004) (1 740) (5 663) (8 007)
Cost capitalised 1 167 1 167
Segment gross profit 42 834 9 816 12 013 65 (4 496) 25 436
Indirect segment cost (31 822) (8 934) (11 772) (1 370) (4 444) (5 302)
Segment result 11 012 882 241 (1 305) (8 940) 20 134
Finance income 467
Finance expense
Income tax expense (3 136)
Profit for the period 8 343

 

Assets and liabilities

 

The assets and liabilities of the Group are organised and managed at a corporate business support level. As the assets and liabilities contribute at a corporate level, it is not practical to determine a reasonable allocation of the assets and liabilities to the business segments.

 

 

 

commentary

 

  1. Notes to the CONDENSED Consolidated INTERIM financial statements

 

  • Basis of preparation

 

The condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard 34 (“IAS 34”), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of JSE Limited (“the Listings Requirements”) and the requirements of the Companies Act of South Africa (Act 71 of 2008) as amended (“the Companies Act”).

 

The accounting policies applied in the preparation of these condensed consolidated interim financial statements, which are based on reasonable judgment and estimates, are in accordance with International Financial Reporting Standards (“IFRS”) and are consistent with those applied in the annual financial statements for the year ended 30 June 2015.

 

These condensed consolidated interim financial statements have been prepared by Petro Mostert CA(SA), Head of Finance and Shared Services, under the supervision of the Financial Director, Lee Kuyper CA(SA).

 

The directors take full responsibility for the preparation of these interim financial statements and the financial information has been correctly extracted from the underlying financial information. These interim results have not been audited or reviewed by the Group’s auditors.

 

  • Earnings per share

Basic and diluted earnings per ordinary share

 

Basic earnings per ordinary share is calculated by dividing the earnings for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

 

 

 

Unaudited

six months

as at

31 December 2015

Number

of shares

Unaudited

six months

as at

31 December 2014

Number

of shares

Audited

12 months

as at

30 June

2015

Number

of shares

‘000 ‘000 ‘000
Reconciliation of the weighted average number of shares in issue
Shares in issue at the beginning of the period 34 781 34 781 34 781
Effect of treasury shares acquired on 1 March 2007 (106) (106) (106)
Weighted average number of shares in issue at the end of the period 34 675 34 675 34 675
Earnings attributable to ordinary shareholders (R’000) 4 019 2 911 8 343
Basic earnings per share (cents) 11.6 8.4 24.1

 

 

Diluted earnings per ordinary share is calculated by dividing the diluted earnings for the period attributable to ordinary equity holders of the parent by the diluted weighted average number of ordinary shares outstanding during the period.

 

 

 

Unaudited

six months

as at

31 December 2015

Number

of shares

Unaudited

six months

as at

31 December 2014

Number

of shares

Audited

12 months

as at

30 June

2015

Number

of shares

‘000 ‘000 ‘000
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 34 675
Diluted amount of shares due to share options in issue 935 577
Weighted average number of shares in issue used for diluted earnings per share 35 610 34 675 35 252
Earnings attributable to ordinary shareholders (R’000) 4 019 2 911 8 343
Diluted earnings per share (cents) 11.3 8.4 23.7

 

Headline and diluted 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 by the weighted average number of ordinary shares outstanding during the period.

 

 

 

Unaudited

six months

as at

31 December 2015

Number

of shares

Unaudited

six months

as at

31 December 2014

Number

of shares

Audited

12 months

as at

30 June

2015

Number

of shares

‘000 ‘000 ‘000
Weighted average number of shares in issue 34 675 34 675 34 675
R’000 R’000 R’000
Reconciliation between basic earnings and headline earnings
Basic earnings 4 019 2 911 8 343
Adjusted for:
– (Profit)/Loss on disposal of equipment (23) 14
Headline earnings 3 996 2 911 8 357
Headline earnings per share (cents) 11.5 8.4 24.1

 

Diluted headline earnings per ordinary share is calculated by dividing the headline earnings attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

 

Unaudited

six months

as at

31 December 2015

Number

of shares

Unaudited

six months

as at

31 December 2014

Number

of shares

Audited

12 months

as at

30 June

2015

Number

of shares

‘000 ‘000 ‘000
Weighted average number of shares in issue used for diluted earnings per share 35 610 34 675 35 252
R’000 R’000 R’000
Diluted headline earnings 3 996 2 911 8 357
Diluted headline earnings per share (cents) 11.2 8.4 23.7

 

  • 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 based on the contracts.

 

Unaudited

six months

Ended

31 December

2015

Unaudited

six months

ended

31 December

2014

Audited

12 months

ended

30 June

2015

R’000 R’000 R’000
Current asset
Revenue recognised not yet invoiced 1 022 1 443 2 684
Current liability
Deferred revenue (1 213) (834) (628)
Net asset/(liability) (191) 609 2 056

 

  • Trade and other payables

 

Trade and other payables comprised of the following:

 

Unaudited

six months

as at

31 December

2015

Unaudited

six months

as at

31 December

2014

Audited

12 months

as at

30 June

2015

R’000

R’000 R’000
Trade payables 732 809 671
Leave accrual 1 727 1 744 2 445
Incentive accrual 2 500 1 400 3 182
Other payables (accruals) 1 297 3 654 3 750
Total 6 256 7 607 10 048

 

1.5 Revenue per geographical region

Total South Africa Other African countries*
R’000 R’000 R’000
6 Months ended 31 December 2015 39 646 23 916 15 730
6 Months ended 31 December 2014 38 342 16 919 21 423
12 Months ended 30 June 2015 80 943 36 153 44 790

* Other African countries include Angola, Botswana, Kenya, Malawi, Mauritius, Nigeria, Ghana, Namibia, Lesotho and Zimbabwe

 

 

 

  1. CORPORATE ACTIVITY

 

  • Dividends and capital distribution

 

No dividend was declared for the period under review.

 

  • Rubix Digital Solutions

 

SilverBridge Software Solutions was rebranded and renamed as Rubix Digital Solutions in the current reporting period.

 

  • Subsequent events

 

No events occurred subsequent to the period end that would require the interim financial statements to be adjusted.

 

  • Changes to the board of directors

 

No changes to the board of directors took place during the current reporting period.

 

  1. FINANCIAL RESULTS AND PERFORMANCE

 

We are pleased to report a continued improvement with net profit increasing 38% compared to the comparative period. Revenue was up 3% with good growth in the annuity areas of Support and Software Rental making up for a decline in Implementation. The gross profit margin was slightly higher from continued focus on efficient delivery. Overhead costs were kept stable. Operating profit was up by 30%. Net profit was further assisted by higher finance income from healthier cash balances. HEPS was up 37% to 11.5c from 8.4c in the comparative period.

 

Cash flow from operations improved to R9 million from R7.1 million in the comparative period. This was a function of the operating performance combined with careful working capital management, which will continue to be a priority. Net cash flow of R6.3 million was similar to the comparative period but included the dividend payment of R1.7 million. The cash position of the Group improved to R24.5 million compared to R18.2 million at the June 2015 year end. The balance sheet remains healthy and debt free.

 

Our client relationships remain healthy. We have invested further efforts into higher value-added offerings for our existing clients and this is starting to show signs of success. We are also making progress with new offerings, particularly in the managed services and cloud space.

 

Overall, we are pleased with the performance and remain focused on efforts to enable ongoing growth.

 

Segmental review

 

Connect implementation services

 

This segment implements our solutions for clients and is project based.

 

Although revenue declined by 34%, the gross profit declined by 14% and the segment result improved significantly to a small loss of R0.4 million compared to a loss of R2.3 million in the comparative period.

 

The transition to smaller projects has impacted revenue. However, we are now implementing projects faster and more efficiently to enable better growth in the support and software rental segments. To an extent there has also been a slight slowdown in spend on financial services software.

 

Connect support services

 

Support services are contracted on a monthly basis and is annuity based.

 

Revenue increased by 25% from new clients as well as selling additional value-added offerings to existing clients. The gross profit margin declined since we invested significant effort in our existing client base to position favourably for the value-added offerings. The additional effort led to this segment carrying more of the indirect costs, which impacted the segment result. The segment posted a profit of R1.2 million compared to R3.0 million in the comparative period.

 

Nevertheless, we are pleased with the progress so far and believe that the transition toward more value-added support offerings is progressing well.

 

Rubix support services

 

This remains a relatively small segment that provides expert level software support and training services to clients and partners, including Connect.

 

The segment posted a loss of R0.5 million for the reporting period.

 

Cirrus management services

 

This is a new segment, which provides a range of complementary 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 period under review to December 2015, no revenue was reported. It is expected to start flowing through in the second half to June 2016. The segment had direct costs of R1 million and carried R0.2 million of indirect costs.

 

 

Rubix software rental

 

Software rental is annuity based. It depends on usage, increasing with the number of contracts or policies administered.

 

We are pleased with the 6% revenue growth. It came from new clients and additional complimentary products that were previously developed. The gross profit margin improved and the net result improved significantly to R11.4 million from R6.9 million in the comparative period.

 

Our software and the growth of our annuity rental stream remain a core focus going forward.

 

 

Rubix research and development (“R&D”)

 

Our R&D efforts continued with ongoing development of the Eco-Suite and keeping existing assets relevant in terms of technology and market trends.

 

We also continue to develop new products that can generate future revenue.

 

During the period, total direct R&D costs were R2.9 million, of which R0.9 million was capitalised.

 

 

 

 

  1. GROUP OUTLOOK

 

Overall we remain positive about the outlook for the group. We continue to build our core annuity revenue and we are making progress with new areas for revenue growth.

 

We have made progress in adjacent vertical market segments and have commenced with our additional managed services offerings. We are also moving into more value-added offerings in our support area, which has progressed well thus far. We will continue to invest effort in these areas to help sustain future growth.

 

The financial services industry continues to adapt to meet their 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 is guiding our new product development initiatives.

 

 

On behalf of the board of directors

 

 

 

Robert Emslie                 Jaco Swanepoel

Chairman                      Chief Executive Officer

 

Pretoria

15 February 2016

 

 

CORPORATE INFORMATION

 

SILVERBRIDGE HOLDINGS LIMITED

(Incorporated in the Republic of South Africa)

(Registration No. 1995/006315/06)

JSE SHARE CODE: “SVB”  ISIN CODE: ZAE000086229

(“SilverBridge” or “the Group”)

 

Directors of SilverBridge holdings

Robert Emslie (Chairman)**, Jaco Swanepoel (CEO), Jeremy de Villiers **, Jacobeth Chikaonda*, Hasheel Govind *, Tyrrel Murray*, Lee Kuyper (Financial Director), Stuart Blyth

 

(All the directors are South African citizens)

* Non-executive

**Independent non-executive

 

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

First Floor, The Greens Office Park

Charles de Gaulle Avenue, 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)

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