Trusted transactions technology and services company, Prism Holdings Limited, has weathered the impact of the strengthening rand on its dollar-based earnings, as well as global pricing pressure on SIM cards, to end the six-month reporting period to 31 December 2003 profitable and with cash in the bank.
CEO Alvin Els says Prism`s ability to remain profitable despite generally unfavourable trading conditions can be attributed to the sustainability of the turnaround measures implemented over the past 18 months and the increased contribution of rand-based operations to half-year revenues.
"With 55% of Prism`s revenue for the six-months under review denominated in US dollars, the stronger rand placed significant pressure on the group`s earnings. The average exchange rate of R7.06 to the US dollar that prevailed during the period was 29% lower than the average rate that prevailed during the six-months to December 2002. If one adjusts for the impact of the strengthened rand, turnover in fact declined by only 6%.
"The 6% decline is attributable to excess international SIM card manufacturing capacity and the resultant downward pressure on global SIM prices. Even with our SIM volumes up, the depressed selling prices had a negative impact on the group`s half-year earnings," Els explains.
While the numbers show a decline in turnover, Prism`s gross profit margins for the six-month period have increased from 51% to 60%. This is as a result of the group`s increased focus on higher-margin business opportunities including software sales and services.
Looking forward Els anticipates a stabilising in SIM prices during the next reporting period.
"There is clear evidence that the SIM market is starting to turn and that SIM prices will stabilise during the next reporting period. Wireless service providers are showing renewed interest in the delivery of advanced applications and data-services to their subscribers. The demand for higher-end SIM cards with increased memory capacity and improved Over-The-Air (OTA) application download and management functionality is growing steadily."
As an independent software vendor this trend bodes well for Prism, a company that has proven abilities within this technology area.
"The Prism 72K SIM card has been launched and we will start shipping commercial quantities to customers in our South-East Asian region in February this year. Our 128K product has also been developed and we are about to introduce pilot samples of the card to the market," he adds.
In order to facilitate its entry into a wider variety of offshore markets, Prism is appointing channel partners in new territories. According to Els, revenues from the first of these partners, although not yet significant, is starting to flow.
Els says there has been a growing adoption of Prism`s EFT (Electronic Funds Transfer) and EMV (EuroPay, MasterCard, Visa) solutions and services by an increasing number of local organisations including Caltex, Edcon, Shoprite and Pick `n Pay. This has contributed to the marked upturn for the group`s rand-based operations.
"Additional growth in this area is anticipated as local retailers and financial institutions prepare for the EMV standard deadline on 1 January 2005. We further anticipate increased demand for our EMV offerings from other regions as the EMV deadlines roll-out globally," he explains.
Prism`s services revenues from its subsidiary, Prism TranSwitch Services (PTSS) continued to grow during the review period. Els believes that opportunities which will become available to Prism through the sale of 25.1% of PTSS to the black-owned IT company, Gijima Technologies, will more than offset any potential drop in revenues to the group as the result of the partnership. Competition Board approval on the Gijima deal is expected to be attained shortly.
Looking to the future, Els says he is satisfied that Prism will continue to hold its own in market conditions that are likely to remain tough given ongoing rand volatility and market uncertainties.
"We are moving into new territories, increasing our focus on high-margin software and services opportunities, and continuing to invest in our IP. Cost containment measures previously implemented are bearing fruit and we will keep our expansionary plans on hold until market conditions stabilise. Barring any major external factors, such as a significant and sustained decline in the value of the dollar, I believe Prism will at least be able to deliver on the previous years` 40/60 profit split over the next six months," he concludes.
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JSE-listed Prism Holdings Limited is a leader in the field of secure electronic transaction products, solutions and services. The group has a strong presence in SA and an established and expanding footprint across Africa and South-East Asia.
Prism has a proven track record in the delivery of secure electronic payment technologies and end-to-end solutions for the retail, utilities, banking, cellular and petroleum industries. The group has developed and implemented innovative payment-centric intellectual property that bridges the following technologies:
* Chip cards including SIM cards, financial smart cards and telephone cards.
* Point-of-sale frameworks, applications and devices.
* OEM transaction modules including PINpads, card readers and self-service terminals.
* Transaction security modules and servers.
* Payment servers, messaging gateways and value-added-services gateways.
* End-to-end secure electronic payment architectures for wired and wireless networks.