SILVERBRIDGE HOLDINGS LIMITED

Incorporated in the Republic of South Africa

(Registration NUMBER 1995/006315/06)

Share code: SVB     ISIN: ZAE000086229

(“SilverBridge” or “the Group” OR “THE COMPANY”)

 

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

for the six month period ended 31 December 2016

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. 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 31 December 2016

 

   
  Unaudited Unaudited Audited
    six months six months 12 months  
  ended ended ended  
  31 December 31 December 30 June Percentage
  2016 2015 2016 change
    Notes R’000 R’000 R’000  %
Revenue 1.5 46 158 39 646 86 442 16
Other income   434 88 152 393
Operating expenses   (40 395) (34 657) (74 557) 17
Operating profit     6 197 5 077 12 037 22
Finance income   675 634 1 367 6
Finance expense     (250)
Profit before taxation   6 872 5 711 13 154 20
Taxation   (1 982) (1 692) (3 064) 17
Profit and total comprehensive income for the period     4 890 4 019 10 090 22
       
Number of shares in issue (‘000) 1.2 34 781 34 781 34 781  
Weighted average number of shares in issue (‘000) 1.2 33 696 34 675 34 675  
Diluted weighted average number of shares (‘000)   1.2 37 261 35 610 36 680  
Basic earnings per share (cents) 1.2 14.5 11.6 29.1 25
Diluted earnings per share (cents) 1.2 13.1 11.3 27.5 16
         
             
             
             
             
Unaudited condensed consolidated interim statement of financial position
as at 31 December 2016      
 

 

  Unaudited Unaudited Audited  
  as at as at  as at  
  31 December 31 December 30 June  
  2016 2015 2016  
    Notes R’000 R’000  R’000  
ASSETS          
Non-Current Assets          
Equipment   4 380 813 983  
Intangible assets   13 393 11 740 12 371  
Deferred tax assets   1 306 1 158 1 266  
Withholding tax rebates receivable     1 502 2 206 1 190  
Total Non-Current Assets     20 581 15 917 15 810  
Current Assets          
Withholding tax rebates receivables     1 312 558 1 312  
Income tax receivable     802  
Revenue recognised not yet invoiced 1.3 3 243 1 022 4 737  
Trade and other receivables   13 731 10 959 13 422  
Cash and cash equivalents   10 104 24 471 26 956  
Total Current Assets     28 390 37 010 47 229  
Total Assets     48 971 52 927 63 039  
         
EQUITY AND LIABILITIES          
Capital and Reserves          
Issued capital   348 348 348  
Share premium   11 871 11 871 11 871  
Treasury shares   (11 948) (197) (197)  
Share based payment reserve   1 107 747 910  
Retained earnings     37 860 28 984 35 056  
Total Equity     39 238 41 753 47 988  
Non-Current Liabilities          
Deferred tax liability   1 692 817 1 098  
Total Non-Current Liabilities     1 692 817 1 098  
Current Liabilities          
Deferred revenue 1.3 1 078 1 213 398  
Income tax payable     1 245 2 888 1 791  
Trade and other payables 1.4 5 718 6 256 11 764  
Total Current Liabilities     8 041 10 357 13 953  
Total Liabilities     9 733 11 174 15 051  
Total Equity and Liabilities     48 971 52 927 63 039  
         
Net asset value per share (cents) 1.6 136.2 120.4 138.4  
Net tangible asset value per share (cents) 1.6 89.7 86.6 102.7  

 

Unaudited condensed consolidated interim statement of changes in equity
for the six month period ended 31 December 2016

 

       
  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 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            
Dividend paid (1 739) (1 739)
Equity settled share based payment 285 285
Total transactions with owners 285 (1 739) (1 454)
Balance at 31 December 2015 348 11 871 (197) 747 28 984 41 753
Total comprehensive income for the period            
Profit or loss 6 072 6 072
Total comprehensive income for the period 6 072 6 072
Transactions with owners, recorded directly in equity            
Contributions by and distributions to owners            
Equity settled share based payment 163 163
Total transactions with owners 163 6 235
Balance at 30 June 2016 348 11 871 (197) 910 35 056 47 988
Total comprehensive income for the period            
Profit or loss         4 890 4 890
Total comprehensive income for the period         4 890 4 890
Transactions with owners, recorded directly in equity            
Contributions by and distributions to owners            
Dividend paid (note 2.1) (2 086) (2 086)
Purchase of treasury shares by Employee Share Trust (note 3) (11 751) (11 751)
Equity settled share based payment 197 197
Total contributions by and distributions to owners (11 751) 197 2 804 (8 750)
Total transactions with owners            
Balance at 31 December 2016 348 11 871 (11 948) 1 107 37 860 39 238

 

Unaudited condensed consolidated interim statement of cash flows
for the six month period ended 31 December 2016

 

 
Unaudited Unaudited Audited
six months six months  12 months
Ended ended  ended
31 December 31 December 30 June
2016 2015 2016
Notes R’000 R’000  R’000
 
Cash generated from operations 2 774 9 152 15 455
Interest received 675 634 1 367
Taxation paid (1 172) (797) (3 894)
Net cash inflow from operating activities   2 277 8 989 12 928
Cash flows from investing activities      
Equipment acquired to maintain operations (3 802) (117) (585)
Proceeds from disposal of equipment 65 32 23
Purchase of treasury shares 3 (11 751)
Cash outflow from capitalisation of development costs   (1 555) (909) (1 886)
Net cash outflow from investing activities   (17 043) (994) (2 448)
Cash flows from financing activities      
Dividends paid to equity holders   (2 086) (1 738) (1 738)
Net cash outflow from financing activities   (2 086) (1 738) (1 738)
     
Net increase/(decrease) in cash and cash equivalents (16 852) 6 257 8 742
Cash and cash equivalents at the beginning of the period 26 956 18 214 18 214
Cash and cash equivalents at the end of the period   10 104 24 471 26 956

 

Unaudited condensed consolidated interim segment reports
for the six month period ended 31 December 2016
 

Reportable Segment Report

 

As reported at the year ended June 2016, there were changes made to our segment reporting. The current unaudited interim results for the 6 months ended 31 December 2016 are consistent with these changes. The unaudited comparative period (6 months to December 2015) already reflected these changes. No further changes to the segment report have been made in the current reporting period.

 

The following is a reminder of the changes that were made and communicated for the year ended June 2016:

·         Connect support and Rubix support are now reported as one Support services segment.

·         A new segment, Hosting and outsourcing services was established.

 

 

Total Implemen-

tation services

Support services Hosting and outsourcing services Software rental & maintenance Research & develop-ment
  R’000  R’000  R’000 R’000   R’000   R’000
Unaudited six months ended 31 December 2016            
Total revenue 46 473 4 508 18 716 1 575 21 674
Inter-group revenue (315) (196) (119)
Net revenue 46 158 4 508 18 520 1 456 21 674
Direct segment cost (24 494) (2 731) (11 761) (1 981) (2 756) (5 265)
Cost capitalised 1 555 1 555
Segment gross profit 23 219 1 777 6 759 (525) 18 918 (3 710)
Indirect segment cost (17 022) (1 417) (6 445) (2 172) (1 671) (5 317)
Segment result 6 197 360 314 (2 697) 17 247 (9 027)
Finance income 675          
Finance expense          
Income tax expense (1 982)          
Profit for the period 4 890          
           

 

 

         
Total Implemen-

tation services

Support services Hosting and outsourcing services Software rental & maintenance Research & develop-ment
  R’000  R’000  R’000  R’000   R’000   R’000
Unaudited six months ended 31 December 2015  
Total revenue 40 652 4 846 17 716 175 17 915
Inter-group revenue (1 006) (711) (175) (120)
Net revenue 39 646 4 846 17 005 17 795
Direct segment cost (18 991) (2 845) (9 032) (1 013) (3 158) (2 943)
Cost capitalised 909 909
Segment gross profit 21 564 2 001 7 973 (1 013) 14 637 (2 034)
Indirect segment cost (16 487) (2 372) (7 265) (212) (3 260) (3 378)
Segment result 5 077 (371) 708 (1 225) 11 377 (5 412)
Finance income 634          
Finance expense          
Income tax expense (1 692)          
Profit for the period 4 019          
 

 

         
Total Implemen-

tation services

Support services Hosting and outsourcing services Software rental & maintenance Research & develop-ment
  R’000  R’000  R’000  R’000   R’000   R’000
Audited 12 months ending 30 June 2016            
Total revenue 89 449 11 027 38 145 3 060 37 217
Inter-group revenue (3 007) (1 900) (867) (240)
Net revenue 86 442 11 027 36 245 2 193 36 977
Direct segment cost (42 609) (5 775) (19 775) (3 562) (6 894) (6 603)
Cost capitalised 1 885 1 885
Segment gross profit 45 718 5 252 16 470 (1 369) 30 083 (4 718)
Indirect segment cost (33 681) (4 568) (14 458) (558) (7 002) (7 095)
Segment result 12 037 684 2 012 (1 927) 23 081 (11 813)
Finance income 1 367          
Finance expense (250)          
Income tax expense (3 064)          
Profit for the period 10 090          
 

 

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 UNAUDITED Consolidated INTERIM financial statements For the period ended 31 December 2016
  • Basis of preparation

The condensed unaudited 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 unaudited 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 audited financial statements for the year ended 30 June 2016.

These condensed unaudited 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 condensed unaudited consolidated 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 2016

Unaudited  

six months

as at

31 December 2015

Audited

12 months

as at

30 June

2016

  Number

of shares

Number

of shares

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)
Effect of treasury shares acquired on 30 Nov 2016 (979)
Weighted average number of shares in issue at the end of the period 33 696 34 675 34 675
       
Earnings attributable to ordinary shareholders (R’000) 4 890 4 019 10 090
Basic earnings per share (cents) 14.51 11.59 29.10

 

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 2016

Unaudited  

six months

as at

31 December 2015

Audited

12 months

as at

30 June

2016

  Number

of shares

Number

of shares

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 33 696 34 675 34 675
Diluted amount of shares due to share options in issue 3 565 935 1 985
Weighted average number of shares in issue used for diluted earnings per share  

37 261

35 610 36 660
       
Earnings attributable to ordinary shareholders (R’000) 4 890 4 019 10 090
Diluted earnings per share (cents) 13.12 11.29 27.52

 

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 2016

Unaudited

six months

as at

31 December 2015

Audited

12 months

as at

30 June

2016

  Number

of shares

Number

of shares

Number

of shares

  ‘000 ‘000 ‘000
Weighted average number of shares in issue 33 696 34 675 34 675
  R’000 R’000 R’000
Reconciliation between basic earnings and headline earnings      
Basic earnings 4 890 4 019 10 090
Adjusted for:      
– Profit on disposal of equipment (47) (23) (17)
Headline earnings (R’000) 4 843 3 996 10 073
Headline earnings per share (cents) 14.37 11.52 29.05

 

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 2016

Unaudited

six months

as at

31 December 2015

Audited

12 months

as at

30 June

2016

  Number

of shares

Number

of shares

Number

of shares

  ‘000 ‘000 ‘000
Weighted average number of shares in issue used for diluted earnings per share 37 261 35 610 36 660
  R’000 R’000 R’000
Diluted headline earnings (R’000) 4 843 3 996 10 073
Diluted headline earnings per share (cents) 13.00 11.22 27.48
  • 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 contracts.

Unaudited Unaudited Audited
six months six months  12 months
Ended ended  ended
31 December 31 December 30 June
2016 2015 2016
    R’000 R’000  R’000
Current asset    
Revenue recognised not yet invoiced 3 243 1 022 4 737
Current liability      
Deferred revenue (1 078) (1 213) (398)
Net asset/(liability)   2 165 (191) 4 339

 

  • Trade and other payables

Trade and other payables comprised of the following:

Unaudited Unaudited Audited
six months six months  12 months
 as at  as at  as at
31 December 31 December 30 June
2016 2015 2016
    R’000 R’000  R’000
Trade payables 579 732 2 094
Leave accrual 808 1 727 2 542
Incentive accrual 2 500 3 342
Other payables (accruals)   4 331 1 297 3 786
Total 5 718 6 256 11 764

 

1.5 Revenue per geographical region

Total South Africa Other African countries*
    R’000 R’000  R’000
Unaudited 6 Months ended 31 December 2016 46 158 30 080 16 078
Unaudited 6 Months ended 31 December 2015 39 646 23 916 15 730
Audited 12 Months ended 30 June 2016 86 442 45 542 40 900

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

1.6 Net asset and tangible net asset value per share

Unaudited Unaudited Audited
six months six months  12 months
 as at  as at  as at
31 December 31 December 30 June
2016 2015 2016
    Number

of shares

Number

of shares

Number

of shares

    ’000 ’000  ’000
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)
Effect of treasury shares acquired on 30 Nov 2016 (5 875)
Shares at the end of the period   28 800 34 675 34 675
Net asset value per share (cents) 136.24 120.41 138.39
Tangible asset value per share (cents)   89.74 86.56 102.71

 

  1. CORPORATE ACTIVITY
  • Dividends and capital distribution

No dividend was declared for the period under review. The directors declared and approved a final gross dividend of 6 cents on 14 September 2016 for the year ended 30 June 2016 from income reserves and the payment distributions were made during the period under review.

  • 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

Ms. Jocobeth Chikaonda has resigned as a non-executive director of the Company with effect 24 January 2017. Her resignation is in line with disposal of Kagiso Tiso Holdings shareholding in SilverBridge.

  1. PURCHASE OF TREASURY SHARES

The SilverBridge Employee Share Trust concluded an agreement with C Shell 448 Proprietary Limited for the purchase of shares during the period under review. The SilverBridge Employee Share Trust purchased and paid for 5 874 923 ordinary shares for the consideration of R11.7m on 30 November 2016. Although these shares remain in issue, they are treated as treasury shares resulting in the total issued number of shares of R34.8 million being reduced to R28.8 million when considered net of treasury shares.

The purchase of the treasury shares has been disclosed accordingly in the Unaudited Condensed Consolidated Interim Statement of Financial Position, Unaudited Condensed Consolidated Interim Statement of Changes in Equity and Unaudited Condensed Consolidated Interim statement of Cash Flows. The effect on the weighted number of shares in issue and the resulting Earnings per Share has been disclosed in note 1.2

  1. FINANCIAL RESULTS AND PERFORMANCE

We are pleased to report a continued improvement in our results. Net profit increased by 22% compared to the comparative period. Revenue was up 16%, driven by good growth in annuity Software rental. Careful management of indirect cost helped to increase operating profit by 22%. Headline earnings per share was up 25% to 14.4 cents from 11.5 cents in the comparative period.

The cash position reduced to R10.1m from R27.0m at 30 June 2016. This was mainly a result of the treasury share purchase, mentioned in note 3.

Our client relationships remain healthy. We continued with efforts into higher value-added offerings for existing clients as well as further developing our new offerings in cloud-based hosting and managed services. We are pleased with the performance and that our efforts have translated into revenue growth. We remain focused on efforts to enable ongoing growth.

Segmental review

Implementation services

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

Although revenue declined by 7%, the segment posted a small profit versus a small loss in the comparative period.

The revenue decline is a result of further improvement in delivery efficiencies. We are implementing projects faster and more efficiently to enable better growth in the support and software rental segments.

We are happy with our implementation delivery model and continue to secure new contracts in the small to medium sized market in South Africa and the rest of Africa.

Support services

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

Revenue increased by 9%, helped by new offerings in data analytics.  The segment result decreased to a profit of R314k compared to a profit of R708k in the comparative period.

The gross profit margin and segment result was impacted by the hiring of additional staff in this area to cater for the growth. We expect the margin to improve as new staff get up to speed.

We continue to focus on additional higher value-added offerings in this segment.

Hosting and outsourcing services

This segment provides a range of complimentary managed services to our clients. The services include cloud based hosting, outsourced technical services and full business process outsourcing.

This is a relatively 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 also helps keep our offerings relevant with regard to technology trends.

For the period, the segment generated revenue of R1.5 million with a loss of R2.7 million. We remain satisfied with the progress thus far and the opportunities that lie ahead. We envisage the segment becoming profitable as it achieves more scale.

Software rental and maintenance

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

Revenue was up 22%. New customers and complimentary products contributed to the growth. The segment made a profit of R17.2 million, compared to R11.4 million in the prior year. The overall margin increased to 80% from 64% in the comparative period.

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

Research and development (“R&D”)

Our efforts have continued on developing new products that can generate future annuity revenue. Several new products have been launched and are contributing to revenue. We have also put effort into offerings for the new Hosting and outsourcing services segment.

We continue with R&D efforts in order to keep our existing assets relevant in terms of technology and market trends.

During the period, total direct costs were R5.3 million, of which R1.6 million was capitalised.

  1. GROUP OUTLOOK

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

We are pleased to see that new initiatives are starting to pay off. In particular, the higher value-added offerings and the new cloud-based hosting and managed services. We remain optimistic that our efforts will help enable sustained growth.

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

On behalf of the board of directors

Robert Emslie                                                                           Jaco Swanepoel

Chairman                                                                                  Chief Executive Officer

Pretoria

15 February 2017

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 **, Hasheel Govind *, Tyrrel Murray*, Lee Kuyper (Financial Director), Stuart Blyth.

(All the directors are South African citizens).

* Non-executive

**Independent non-executive

 

REGISTERED OFFICES

Castle Walk Corporate Park, Block D

Corner of Nossob & Swakop 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 Incorporated

(Registration number: 1998/012055/21)

2 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)