B> Balance Sheet
Highlights
Compared to pre-listing forecast:
- Earnings per share up 231% to 16,46 cents
- Turnover up 153% to R108,9 million
- Operating income up 220% to R 14,8 million
The audited group results for the year ended 30 September 1998 are as follows:
Comments
Achievements
We look back on a year of achievement. Complementing our acquisitive growth, ITI has also expanded the business vertically. To support a growing client base, we have strengthened our management team and staff complement. Over the past 12 months, the group has diversified into stronger service revenue activities. Our self developed software products have found a receptive market and as a whole the ITI group has made substantial progress towards extending our markets internationally.
Headline earnings
In our prospectus dated 30 November 1997, we forecast earnings per share of 4,98 cents. We are proud to report an earnings per share increase to 16,46 cents per share.
Included in the headline earnings substantial development expenses were incurred by the company to enhance the functionality of its business software applications. The cost of integration and the national expansion program which included the establishment of 18 service centres throughout South Africa have also been expensed through the income statement.
A profit of R5,1 million was generated with the merger of the business of Reftec (an ITI subsidiary) and Logical Network Systems (a subsidiary of Datatec Limited) to form a formidable force in the Lotus Notes development arena in South Africa. By effecting this strategic transaction ITI forfeited headline earnings exceeding R5 million for the year under review.
Due to the nature of this transaction the current earnings per share of ITI reflect a much more realistic picture of its operational results for the year under review.
Operations
ITI`s core business centres around providing Business Solutions (own software products), Business Systems (workstation to mainframe hardware technology) and Interactive Services (internet and electronic commerce software products).
The group expects its own Enterprise Wide software product (ERP Solution), now ready to be commercialised, to contribute strongly in the next financial year. Our software products in the Human Resources and Payroll arena, our financial and distribution suites and our embedded technology effectiveness control software contributed satisfactorily to this financial year. Continuous efforts to develop and enhance our software products will keep ITI competitive over the long term.
A decision was taken to organically grow Business Solutions' support service infrastructure on a national basis. This made it possible for the group to increase its network of service centres throughout the country to 18 centres. ITI Systems forms the backbone for both our Business Solutions and Interactive divisions. Our single-point-of-contact and our enhanced communication centre application render improved service levels to our clients.
Within Interactive Services is housed the fourth largest dial-up ISP in South Africa, Corporate Internet Access Services, an internet enablement partner for electronic business and consultative services. All our Internet services are focused in niche markets such as the medical, dental and agricultural industry. Our Virtual Private Network has experienced exponential growth and currently manages 350 customer networks, and provides access to approximately 20 000 dial-up subscribers, both professional and consumer market users.
ITI's workflow software development arm assists the corporate market to disseminate vast amounts of data through our international partnership with Lotus Corporation. ITI currently employs the largest number of certified Lotus development engineers in South Africa.
Investment activities
During the period, ITI made a strategic investment in Labat Anderson to allow the group to penetrate its products and services into the government sector.
ITI has taken its first step offshore by investing in the Miami-based Internet Services group, Webworks. This enabled ITI to capitalise on international development projects. In addition, this provided us with a high-speed access hosting facility for our e-commerce products developed for the 500 companies within the Centurion-Mabopane corridor.
Our acquisition of the mining productivity application, Centrocen, proved highly successful. The vast potential its integration holds with the rest of our software products, will further enhance future revenues.
Camelot Business Solutions forms the cornerstone in our relationship with IBM and posted a good return for our investors, particularly through the expansion programme into Namibia.
We expect ITI's applications for the agricultural industry to contribute significantly during the next financial year. At present we deliver software products to a client base of 6000 farmers, commercial businesses, and 20 of the 21 fresh produce markets. The combination of the acquisitions made in this sector, positions ITI to be the largest supplier of information technology to the agricultural industry.
Research and development
We have made substantial progress in ensuring that ITI continues to add functionality to our software applications during this period. We added a schedule of functionality to our TOPP suite of financial software and restructured our ERP Solution (Enterprise Wide Business Solution) ("TICS"), to be completely modular. By making the product more customer friendly, product sales will be boosted. Our CRS Payroll application completed the development of the electronic IRP5 module, resulting in earlier implementation at client level. Our Human Resources application has also been ported to be included in TICS, and we have partly completed the task of porting the CRS suite of HR applications to Lotus Notes for the international market. Several other smaller developments were successfully completed and all our software applications are currently year 2000 certified. The major part of these development costs have been expensed through the income statement for the year under review.
Intangible assets
An amount of R 72,3 million relating to trademarks and goodwill have been set-off against the share premium account to reflect the directors' intention to write-off such trademarks and goodwill through the reduction of capital in terms of the Companies Act. This reduction of capital is subject to a special resolution from the shareholders of ITI.
Prospects
Our prospects for the coming year look set to sustain an aggressive growth path. Our business outlook remains positive and very exciting.
The group is well positioned with its national infrastructure and more than 600 employees to support our growing customer base. Our inroads into the international markets will substantially increase the earnings potential for the group in the coming year. A further announcement in this regard is expected shortly.
It is further anticipated that ITI will be transferred to the main board of the Johannesburg Stock Exchange.
Dividends
No dividends will be paid by ITI until mature growth has been achieved. All cash generated by the group will be utilised to fund future growth and development.
On behalf of the board
G Coetzee (Chief executive officer)
R Botha (Financial director)
Pretoria - 8 December 1998DirectorsD Farenhem (Chairman)*, G Coetzee (Chief executive officer), R Botha, C de Villiers, A Janse van Rensburg, A Reyneke, A Smith, S Zungu*
* Non-executive
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