Information security solutions provider ISA Holdings says its results for the first half of the year were disappointing and fell short of expectations.
The group on Friday reported revenue down to R30 million in the six months to August, compared with R36.4 million last year. It made a profit of R5.3 million, compared with R5.9 million in the first half of last year.
However, without two external gains, the company's earnings would have slumped 48%, to R3 million, instead of an 11% decline, it says. ISA adds that it is “pleased” to present its results for the half-year, “be they disappointing and short of expectation”.
ISA says the external factors, over which management had no control, includes the weaker rand, which added R1.4 million in foreign currency revaluation gains, as well as a R1.2 million dividend tax charge as the law on dividend tax has changed.
“Without these fortuitous gains, the business would have reported a substantial decline in earnings of 48%, to R3 million, as opposed to the actual 11% decline as reported,” the group says.
Takes time
ISA says a slowdown in new solution sales is at the centre of the setback. New solution sales dropped 63% year-on-year.
“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.”
CEO Clifford Katz explains that the first half of 2011 included a large deal that did not reoccur in 2012. He says the challenge the group faces is that as it is gaining traction, its numbers are becoming granulated as the big paydays take time to sign off on.
Katz says the business is fundamentally sound, but the economy is giving it a “tough time” as companies, especially the financial institutions ISA deals with, cut back. “The market is in a tight place.”
ISA is holding tight and working with its clients to manage the business and their need to trim costs through the tough period, says Katz.
The group adds that recurring revenue levels increased by a healthy 24%, compared with last year. This figure makes up 79% of revenue and its growth is mostly thanks to the success of its managed security services strategy, underpinned by its internally developed MSS Pulse security infrastructure management and monitoring platform.
ISA is optimistic about its long-term prospects, but expects continued pressure on the level of new solution sales and margin in the short-term. During the half-year, ISA moved into new premises in Woodmead, Johannesburg, which enhances its investment structure and gives it space to grow its service offerings for the market.
Katz adds that investing its cash into a building also trims operational expense as the group no longer has to pay rent.
The group's share price closed flat at 62c on Friday.
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