Idion`s investments 'bearing fruit`

By Iain Scott for Idion Technology Holdings
Johannesburg, 22 Mar 2006

Idion Technology Holdings has reported an increase in full-year profit, but a decline in headline earnings.Revenue for the period rose 6.3% from $31.3 million to $33.26 million, helped mainly by a 9% increase in licence revenue from $12.8 million to $13.95 million. This was driven by new customer gains in Europe and the Asia-Pacific region.

Idion`s sole operating asset is US-based subsidiary Vision Solutions, which operates in the high availability, systems and data management markets.

Group financial director Tim Keithahn says this is the first time that Vision has seen growth in all lines of revenue - services, maintenance and licences - since the hostile bid by a Canadian-based rival, Datamirror.

Datamirror launched its hostile bid for Idion in March 2002, amassing a 42.58% shareholding in the JSE-listed group before selling it in May 2004.

Maintenance revenue grew 3% from $16.74 million to $17.19 million, while revenue from services and consultation grew from $1.76 million to $2.1 million.

Pressures

Keithahn says the North American System i5 (formerly known as the IBM eServer iSeries) market continued to experience pricing pressures as competitors discounted licence fees.

However, he says Vision`s key differentiators - customer support, product quality and product performance - allowed it to compete on a basis other than price. Margins remained constant despite the pricing pressures, he adds.

CEO Nicolaas Vlok says the 2005 financial year saw a board decision to take some profit and invest in sales and marketing, new product development, and integrating and expanding the OS Solutions (now Vision Solutions UK) acquisition into Europe and Asia.

"This had a short-term profit impact," he comments.

Profit of $0.65 before tax compares with a prior figure of $0.66, while an income tax benefit of $0.08 million resulted in the $0.73 million profit for the year.

Headline earnings per share fell from 1.3 US cents to 0.6 US cents, while basic earnings of 0.6 US cents a share compare with a loss of 0.8 US cents previously.

Vlok says Idion management is pleased with the results, as the group is seeing benefits from investments starting to come through.

"We made good progress and saw some traction in the back half of the year, and that is continuing in 2006," he adds.

"There will still be some costs in the first half, but we covered the bulk of investments last year."

Vlok says the board is confident that 2006 will see a growth in profitability. He says the group`s focus on the IBM eServer platform continues to present growth opportunities and Vision`s Orion and newly acquired OS Solutions products continue to gain market acceptance.

Vlok says the group will continue to assess the market and consider "additional investment opportunities" if appropriate. However, he says while it is open to further acquisitions, it is not actively seeking them at present.