Understanding disruption in insurance

Disruption is a term used increasingly often in a digital environment. But what does it mean for insurers looking to differentiate themselves from the rise of agile insurtechs and fintechs? Jaco Swanepoel, founder and CEO of SilverBridge, examines the impact of disruption in insurance.

Disruption refers to a process that breaks or interrupts the normal course of action or the continuation of some activity. And when it comes to defining it in a digital context, it talks to the use of technology to shake-up an industry with ground-breaking new products and processes. Sometimes, it can even result in the creation of an entirely new industry segment.

For example, think about how mobile devices have disrupted the television industry. Some people have become so comfortable to stream video content to their mobile phones and tablets, that many millennials prefer these over big screen televisions. This has resulted in TV manufacturers being ‘forced’ to become more innovative in how they package screens and displays.

“Of course, in insurance, this involves more than just hardware, software, and the bits and bytes of what is happening around us. Meaningful digital transformation requires combining technology with powerful ideas that was not possible before and thereby creating new opportunities,” says Swanepoel.

In practice

At their core, insurers focus on meeting customer expectations to manage their risks. In a digital world, people want increasingly more intuitive, user-friendly options to fit into their real-time lifestyles. Whether that is 24-hour access to relevant information to manage their risk or use mobile apps to submit and resolve claims that are processed automatically with no agent interference, the ways insurers deal with people and manage the business have changed.

Research has shown by introducing automation, an insurer can reduce the cost of a claims journey by as much as 30%. Considering how tight budgets have become and the importance by finding subtle ways of improving the customer journey, this is a significant number. Furthermore, the reduction in size of devices have turned mobile phones into what can be considered portable computers.”

This means insurers (and consumers) can harness new opportunities to reinvent what has come before. An entirely new ecosystem is emerging that is driven by digital customer engagement. No longer do insurers have to exclusively rely on agents for user interaction. They can leverage mobile apps to provide a continually evolving set of products and services catering for more innovative ways of analysing customer data and market trends.”

People first

Much, if not all, of this is centred around a people-centric design. Customers want ease of use and want insurance to become a significantly more intuitive experience.

“So, even though technology is making all this possible, it only enables insurers to embrace disruption. It should never be the be-all and end-all of everything. The person remains at the core of the insurance experience.”

Another example is how some insurers rely on automation for the customer sign up process. By simply providing basic information, a user can have immediate access to full personal cover and submit photos of their insured items from an insurance app. From quotes to claims, the bulk of the insurance journey becomes automated thanks to better data analysis and artificial intelligence that deliver a more efficient way of customising products on a per user basis,” adds Swanepoel.

However, Swanepoel advises that the insurance approach must remain cognisant of identifying new opportunities instead of simply overhauling traditional processes.

“It is all about taking digital disruption and making it concrete and measurable in the hearts and minds of people. The customer should experience this as an improvement and not as a shock unless it is a positive one. It must demonstrate returns to all stakeholders and not just be technology for its own sake. Only then will companies be empowered to start reinventing how they manage insurance,” concludes Swanepoel.

About SilverBridge

SilverBridge has over 24 years’ experience as a leading provider of insurance software solutions in the African financial services industry. Our experience includes working with over 60 customers across 16 African countries. SilverBridge’s digital insurance suite allows financial services companies the opportunity to respond quickly to changing markets. With customers throughout Africa, SilverBridge has the knowledge, experience, and technology capabilities to help its clients do better business.

2020/02/17/Interim2020

SILVERBRIDGE HOLDINGS LIMITED

Incorporated in the Republic of South Africa

(Registration NUMBER 1995/006315/06)

Share code: “SVB”

ISIN: ZAE000086229

Legal entity number (LEI): 3789001E59A77A6B9938

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

 

UNAUDITED abridged CONSOLIDATED INTERIM GROUP FINANCIAL STATEMENTS for the six month period ended 31 December 2019

 

GROUP PROFILE

SilverBridge offers solutions that support the operations of companies offering financial products and services. We have experience in this area for more than 20 years. Our understanding of financial services processes helps our clients improve and simplify their business. We achieve this by implementing our software and by providing services related to the software. Our offerings are also offered as cloud solutions.

 

Exergy is our flagship platform that enables core back office policy administration in the life assurance and pension fund industry. The Exergy solution can be customised to suit the needs of a customer. The solution also extends to offer group scheme administration, as well as elements of medical and short-term insurance. This caters for clients wanting to offer a wider range of financial services products on a single platform.

 

Our software products and hosted services are rented to our customers on a monthly basis.

 

Unaudited abridged consolidated interim statement of comprehensive income
for the six month period ended 31 December 2019
   
  Unaudited Unaudited Audited
    six months six months twelve months
  ended ended ended
  31 December 31 December 30 June Percentage
  2019 2018 2019 change
  Notes R’000 R’000 R’000  %
Revenue from contracts with customers 1.5 45 029 45 714 87 696 (1)
Other income   111 143 274 (22)
Operating expenses   (43 057) (47 520) (96 393) (9)
Results from operating activities   2 083 (1 663) (8 423) 225
Finance cost   (430) (991) 57
Finance income   515 262 492 97
Profit/(Loss) before income tax   2 168 (2 392) (7 931) 191
Income tax   (623) 560 392 (211)
Profit/(loss) and total comprehensive income for the period   1 545 (1 832) (7 539) 184
   
Earnings per share  
Number of shares in issue (‘000) 1.2 34 634 34 781 34 781
Weighted average number of shares in issue (‘000) 1.2 29 145 29 000 29 170
Diluted weighted average number of shares (‘000) 1.2 29 206 29 632 29 170
Basic earnings per share (cents) 1.2 5.30 (6.32) (25.85)
Diluted earnings per share (cents) 1.2 5.29 (6.18) (25.85)
     
       
     
     
     

 

Unaudited abridged consolidated interim statement of financial position as at 31 December 2019
       
 

 

  Unaudited Unaudited Audited
  as at as at  as at
  31 December 31 December 30 June
  2019 2018 2019
    Notes R’000 R’000  R’000
ASSETS
Non-current assets
Property and equipment   1 239 1 871 1 513
Right-of-use property asset 1.7 4 137
Intangible assets and goodwill 19 737 20 524 19 874
Deferred tax assets 2 240 2 499 2 850
Withholding tax rebates receivable 1 958 512 1 952
Total Non-current Assets 29 311 25 406 26 189
   
Current assets  
Withholding tax rebates receivables 989 6
Income tax receivable 1 470 19
Contract assets 1.3 4 079 4 886 4 342
Trade and other receivables 24 977 15 287 19 674
Cash and cash equivalents 3 795 14 460 7 044
Total current assets 32 852 36 092 31 085
Total assets 62 163 61 498 57 274
 
EQUITY AND LIABILITIES  
Equity  
Issued capital 346 348 348
Share premium 11 780 11 871 11 871
Treasury shares (8 755) (9 840) (9 010)
Share based payment reserve 3 481 3 620 3 465
Retained earnings 42 065 46 490 40 520
Total Equity   48 917 52 489 47 194
   
Non-current Liabilities  
Deferred tax liability 3 061 2 745 3 061
Lease liability 1.7 1 664
Total Non-current Liabilities 4 725 2 745 3 061
   
Current Liabilities  
Contract liabilities 1.3 1 071 1 075 1 162
Lease liability 1.7 2 891
Income tax payable                       – 55
Trade and other payables 1.4 4 559 5 189 5 802
Total current liabilities 8 521 6 264 7 019
Total liabilities 13 246 9 009 10 080
Total equity and liabilities 62 163 61 498 57 274
   
Net asset value per share (cents) 1.6 167.85 181.00 162.06
Net tangible asset value per share (cents) 1.6 100.12 110.22 93.93

 

Unaudited abridged consolidated interim statement of changes in equity
for the six month period ended 31 December 2019
  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 30 June 2018 348 11 871 (10 476) 3 643 49 740 55 126
Impact of initial adoption of IFRS 9 (note 26) (31) (31)
Restated opening balance at 1 Jul 2018 348 11 871 (10 476) 3 643 49 709 55 095
Total comprehensive income for the period            
Profit or loss (1 832) (1 832)
Total comprehensive income for the period (1 832) (1 832)
Transactions with owners, recorded directly in equity  
Dividend paid (1 650) (1 650)
Share options exercised by employees 260 (459) (199)
Repayment of share ownership programme loans 391 391
Equity settled share based payment 421 421
Total contributions by and distributions to owners 651 (38) (3 482) (2 869)
Balance at 31 December 2018 348 11 871 (9 825) 3 605 46 227 52 226
Total comprehensive income for the period            
Profit or loss (5 707) (5 707)
Total comprehensive income for the period (5 707) (5 707)
Transactions with owners, recorded directly in equity            
Shares awarded under the share ownership programme 499 499
Repayment of share ownership programme loans 316 316
Equity settled share based payment (140) (140)
Total contributions by and distributions to owners 815 (140) (5 707) (5 032)
Balance at 30 June 2019 348 11 871 (9 010) 3 465 40 520 47 194
Total comprehensive income for the period            
Profit or loss 1 545 1 545
Total comprehensive income for the period 1 545 1 545
Transactions with owners, recorded directly in equity            
Repayment of share ownership programme loans 255 255
Shares repurchased and cancelled (2) (91) (93)
Equity settled share based payment 16 16
Total contributions by and distributions to owners (2) (91) 255 16 1 545 1 723
Balance at 31 December 2019 346 11 780 (8 755) 3 481 42 065 48 917

 

Unaudited abridged consolidated interim statement of cash flows
for the six month period ended 31 December 2019
   
Unaudited Unaudited Audited
six months six months  12 months
Ended Ended  ended
31 December 31 December 30 June
2019 2018 2019
R’000 R’000  R’000
 
Cash (used in)/generated from operations (1 717) 1 568 (6 818)
Interest received 515 262 492
Finance cost (430)
Taxation received/(paid) (50) 410 713
Net cash (used in)/generated from operating activities (1 682) 2 240 (5 613)
Cash flows from investing activities  
Equipment acquired to maintain operations (145) (202) (285)
Repurchase and cancellation of share capital (93)
Proceeds from disposal of equipment 99 119 56
Cash outflow from capitalisation of Development costs (513)
Net cash (used in)/generated from investing activities (652) (83) (229)
Cash flows from financing activities  
Proceeds received from repayment of share ownership programme loans 255 391 707
Proceeds from shares awarded under the share ownership programme 499
Buy-back of treasury shares (199) (199)
Repayment of lease liability (1 170)
Dividends paid to equity holders (1 418) (1 650)
Net cash outflow from financing activities (915) (1 226) (643)
 
Net increase/(decrease) in cash and cash equivalents (3 249) 931 (6 485)
Cash and cash equivalents at the beginning of the period 7 044 13 529 13 529
Cash and cash equivalents at the end of the period   3 795 14 460 7 044

 

Unaudited abridged consolidated interim segment reports
for the six month period ended 31 December 2019
 

Operating Segment Report

 

 
Unaudited six months ended 31 December 2019 Total Implemen-

tation

services

Support services Hosting and outsourcing services Rental and maintenance Research & development
  R’000  R’000  R’000 R’000   R’000   R’000
Revenue from implementation services, support services and hosting and outsourcing services recognised over time 26 542 2 158 22 296 2 088
Revenue from software rental recognised at a point in time 18 658 18 658
Segment revenue inter-group (171) (81) (90)
Segment revenue external 45 029 2 158 22 215 2 088 18 568
Direct segment cost (21 850) (1 509) (11 639) (1 383) (2 116) (5 203)
Cost capitalised 513 513
Segment gross profit 23 692 649 10 576 705 16 452 (4 690)
Indirect segment cost (20 755) (2 268) (7 796) (479) (3 639) (6 573)
Provision for expected credit loss on debtors credit impaired (854) (93) (321) (19) (150) (271)
Segment result 2 083 (1 712) 2 459 207 12 663 (11 534)
Finance cost (430)          
Finance income 515          
Income tax (623)          
Profit for the period 1 545
 

 

Operating segment reclassification
During the current period the Group reclassified the revenue and related costs from managed services, which were previously included in the hosting and outsourcing segment, under the support segment. This classification is a better representation of the nature of the work being done and the revenue earned. The comparative period results were reclassified to account for this change consistently. The amounts included in the current period are R1.6 million of revenue and R0.6 million of direct costs and the amounts included in the comparative period are R0.4m of revenue and R0.1 million of direct costs.

 

Assets and liabilities
The Group controls and manages all assets and liabilities on a central basis and recovers these costs as well as corporate overheads through a recovery model based on income generation. Segment results include only cost items directly or indirectly attributable to a segment.
Unaudited six months ended 31 December 2018 Total Implemen-tation

Services

Support services Hosting and outsourcing services Rental and maintenance Research & development
  R’000  R’000  R’000 R’000   R’000   R’000
Revenue from implementation services, support services and hosting and outsourcing services recognised over time 23 383 1 179 20 458 1 746
Revenue from software rental recognised at a point in time 23 536 23 536
Segment revenue inter-group (1 205) (1 155) (50)
Segment revenue external 45 714 1 179 19 303 1 746 23 486
Direct segment cost (25 306) (908) (15 092) (2 357) (3 027) (3 922)
Segment gross profit 20 408 271 4 211 (611) 20 459 (3 922)
Indirect segment cost (22 071) (2 650) (8 390) (662) (3 087) (7 282)
Provision for expected credit loss on debtors credit impaired (991) (119) (377) (30) (139) (327)
Segment result (2 654) (2 498) (4 556) (1 303) 17 233 (11 531)
Finance income 262
Income tax 560
Profit for the period (1 832)
 
Audited twelve months ended 30 June 2019 Total Implemen-tation

Services

Support services Hosting and outsourcing services Rental and maintenance Research & development
  R’000  R’000  R’000 R’000   R’000   R’000
Revenue from implementation services, support services and hosting and outsourcing services recognised over time 44 194 1 868 38 310 4 016
Revenue from software rental recognised at a point in time 45 119 45 119
Segment revenue inter-group (1 617) (1 475) (142)
Segment revenue external 87 696 1 868 36 835 4 016 44 977
Direct segment cost (50 217) (1 155) (28 437) (4 961) (7 588) (8 076)
Segment gross profit 37 479 713 8 398 (945) 37 389 (8 076)
Indirect segment cost (42 219) (4 913) (15 900) (1 518) (5 819) (14 069)
Provision for expected credit loss on debtors not credit impaired (26) (3) (10) (1) (4) (8)
Provision for expected credit loss on debtors credit impaired (3 657) (100) (1 333) (2 224)
Segment result (8 423) (4 303) (8 845) (2 464) 29 342 (22 153)
Finance income 492          
Income tax 392          
Profit for the period (7 539)          

 

commentary

 

  1. Notes to the ABRIDGED UNAUDITED Consolidated INTERIM financial statements For the period ended 31 December 2019

 

  • Basis of preparation

 

The abridged unaudited consolidated interim financial statements are prepared in accordance with the requirements of the JSE Limited Listing Requirements for abridged reports, and the requirements of the Companies Act applicable to summary financial statements. The listing requirements require abridged reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

 

The accounting policies applied in the preparation of these abridged unaudited consolidated interim financial statements, which are based on reasonable judgment and estimates, are in accordance with International Financial Reporting Standards (“IFRS”). The accounting policies, with the exception of the new standards and amendments adopted during the current period, have been applied consistently with those applied in the annual audited financial statements for the year ended 30 June 2019. The new accounting policies adopted and applied in the preparation of the abridged unaudited consolidated interim financial statements is IFRS 16 Leases.

 

These abridged unaudited consolidated interim financial statements have been prepared by Freddie van Heerden, Group Financial Manager, under the supervision of the Group Financial Director, Lee Kuyper CA(SA).

 

The directors take full responsibility for the preparation of these abridged 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/(loss) per ordinary share

 

Basic earnings/(loss) per ordinary share is calculated by dividing the earnings/(loss) 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 2019

Unaudited  

six months

as at

31 December 2018

Audited

12 months

as at

30 June

2019

Reconciliation of the weighted average number of shares in issue      
Shares in issue at the beginning of the period (‘000) 34 781 34 781 34 781
Shares repurchased and cancelled during the period (25)
Effect of treasury shares acquired (5 612) (5 781) (5 611)
Weighted average number of shares in issue during the period (‘000) 29 144 29 000 29 170
   
Earnings/(loss) attributable to ordinary shareholders (R’000) 1 545 (1 832) (7 539)
Basic earnings/(loss) per share (cents) 5.30 (6.32) (25.85)

 

Diluted earnings/(loss) per ordinary share is calculated by dividing the diluted earnings/(loss) 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 2019

Unaudited  

six months

as at

31 December 2018

Audited  

12 months

as at

30 June
2019

Reconciliation between weighted average number of shares in issue and weighted average number of shares in issue used for diluted earnings/(loss) per share    
Weighted average number of shares in issue (‘000) 29 144 29 000 29 170
Diluted number of shares due to share options in issue (‘000) 60 632
Weighted average number of shares in issue used for diluted earnings per share (‘000) 29 204 29 632 29 170
 
Earnings/(loss) attributable to ordinary shareholders (R’000) 1 545 (1 832) (7 539)
Diluted earnings/(loss) per share (cents) 5.29 (6.18) (25.85)

 

Headline and diluted headline earnings/(loss) per ordinary share

 

Headline earnings/(loss) per ordinary share is calculated by dividing the headline earnings/(loss) 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 2019

Unaudited  

six months

as at

31 December 2018

Audited

12 months

as at

30 June

2019

Weighted average number of shares in issue 29 144   29 170
Reconciliation between basic earnings/(loss) and headline earnings/(loss)    
Basic earnings/(loss) (R’000) 1 545 (1 832) (7 539)
Adjusted for:    
– Profit on disposal of equipment (R’000) (99) (13) 10
Headline earnings/(loss) (R’000) 1 446 (1 845) (7 529)
Headline earnings/(loss) per share (cents) 4.96 (6.36) (25.81)

 

Diluted Headline earnings/(loss) per ordinary share is calculated by dividing the headline earnings/(loss) 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 2019

Unaudited  

six months

as at

31 December 2018

Audited

12 months

as at

30 June

2019

Weighted average number of shares in issue used for diluted earnings/(loss) per share (‘000) 29 204 29 632 29 170
Diluted headline earnings/(loss) (R’000) 1 446 (1 845) (7 529)
Diluted headline earnings/(loss) per share (cents) 4.95 (6.23) (25.81)

 

  • Assets and liabilities related to contracts with customers

 

Contract liabilities (Deferred revenue) and contract assets (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
2019 2018 2019
    R’000 R’000  R’000
Contract assets
Revenue recognised not yet invoiced 4 079 4 886 4 342
Contract liability    
Deferred revenue (1 071) (1 075) (1 162)
Net asset 3 008 3 811 3 180

 

  • 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
2019 2018 2019
    R’000 R’000  R’000
Trade payables 481 881 474
Incentive accrual 1 500
Other payables (accruals) 2 578 4 308 5 328
Total 4 559 5 189 5 802

 

  • Revenue per geographical region
   
Unaudited 6 months ending 31 Dec 2019 Unaudited 6 months ending 31 Dec 2018 Audited 12 months ending 30 Jun 2019
R’000 R’000 R’000
South Africa 16 403 17 177 33 194
Namibia 12 037 11 489 23 258
Kenya 3 695 2 450 5 309
Zimbabwe 2 836 4 202 6 569
Ghana 2 304 2 420 3 989
Botswana 1 986 2 185 4 365
Lesotho 1 981 1 975 3 873
Mauritius 1 613 1 278 2 680
Nigeria 1 005 457 912
Zambia 751 675 1 330
Mozambique 418 447
Malawi 1 368 1 762
Tanzania 38 8
Total 45 029 45 714 87 696

 

  • 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
2019 2018 2019
    Number

of shares

Number

of shares

Number

of shares

      ’000  ’000
Shares in issue at the beginning of the period 34 781 34 781 34 781
Shares repurchased and cancelled during the period (25)
Effect of treasury shares acquired (5 612) (5 781) (5 611)
Shares at the end of the period 29 144 29 000 29 170
Net asset value per share (cents) 167.85 181.00 162.06
Tangible asset value per share (cents) 100.12 110.22 93.93

 

  • Recognition of assets and liabilities for long term leases

The new standard has been applied for the first time in the current financial period, as a result of the adoption of IFRS 16. The Group has recognised a right-of-use asset of R5.3 million representing its right to use the underlying leased asset and a lease liability of R6 million representing its obligation to make lease payments.

In accordance with this, depreciation of R1.2 million has been recognised on the right-of-use asset and interest of    R0.3 million has been recognised on the lease liability. Cash repayments of the lease liability have also been classified into a principal portion and an interest portion and have been presented in the statement of cash flows by applying        IAS 7 Statement of Cash Flows.

  • Fair values

 

The carrying amounts of all financial assets and liabilities are a reasonable approximation of their fair value.

 

 

  1. CORPORATE ACTIVITY

 

  • Dividends and capital distribution

 

The directors have resolved that there would be no gross dividend declared for the year ended 30 June 2019, on 11 September 2019. The directors approved a final dividend of 4.5 cents per share on 10 September 2018 for the year ended 30 June 2018 and these distributions were paid out during the previous year.

 

  • 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

There were no changes to the board of directors during the period under review.

 

  1. FINANCIAL RESULTS AND PERFORMANCE

 

The past six months remained challenging, with continued uncertainty in our markets. We are however pleased with a return to profitability as a result of actions taken in the prior year and some progress made from new initiatives. We continue to strengthen our relationships with our existing customers with broader value being added to their business. We have also secured three new customers during the period. This has been assisted by strong relationships with key partners, such as Microsoft.

Despite our contract with Nedbank Insurance coming to an end in the prior year, which resulted in a drop in software rental revenue, we managed to replace most of the revenue with growth in the other revenue segments. This was from both growth in existing client contracts and the addition of new contracts. Our overall revenue was down by 1% when compared with the comparative period.

Profit increased by 184% from a prior year loss of R1.8 million to a profit of R1.5 million. This was achieved from a reduction in direct costs related to the exit of our FSCA registered outsourcing business, as well as the restructuring of our insurtech investment to a minority stake. Indirect costs were also decreased to align with the decrease in direct costs and revenue in the business.

Our cash position decreased to R3.8 million from R7 million at year end. This was as a direct result of the             R5 million increase in our debtors’ balance at the end of the period. This increase was driven by a number of large South African debtors paying in the two weeks after period end as opposed to by the last day of the month, which is normally the case. The balance sheet remains healthy and debt free.

 

Segmental review

 

Implementation services

 

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

 

Revenue increased by 83% due to an increase in the number of new implementations when compared to the comparative period. This included two implementations for our new AI offering in banking and fraud management, which contributed 55% of the revenue. The segment incurred a gross profit of 30%, compared to a gross profit of 23% in the comparative period, due to the more efficient delivery of the implementation projects in the current period. After the allocation of indirect costs, the segment posted a loss.

 

We remain happy with our implementation delivery model, with it proving valuable not only in the implementation of our own software but also those of third parties.

 

Support services

 

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

 

Revenue increased by 15% from increased demand from existing clients. These have resulted in higher renegotiated contracts. The segment posted a profit of R2.5 million compared to a loss of R4.6 million in the comparative period. The comparative period included excess unutilised capacity which in this period was either used to execute on the increased amount of support or the increased implementation revenue.

 

Hosting and outsourcing services

 

This segment provides cloud-based hosting and full business process outsourcing services to our customers.

 

Revenue increased by 20% from R1.7 million to R2.1 million as a result of the addition of new hosting contracts. The segment posted a profit of R0.2 million compared to a loss of R1.3 million as a result of the increase in hosting revenue but also the reduction of costs related to the business process outsourcing part of the segment.

 

We decided to close our FSCA registered business process outsourcing business in the prior year given the lack of progress in growing revenue.

 

We remain satisfied with the cloud-based hosting part of the segment where we expect growth in the future.

 

Software rental and maintenance

 

Software rental is annuity based.

 

Revenue was down 21% due to our Nedbank Insurance contract coming to an end in the prior year. The segment posted a profit of R12.7 million compared to R17.2 million in the comparative period. While we continued to invest in the maintenance of our products, we were able to do so at a comparatively lower cost in this period.

 

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

 

Research and development (“R&D”)

 

Total direct costs were R5.2 million compared to R3.9 million in the comparative period. The increase is as a result of the research and development being done on our new AI offering. Costs of R0.5 million related to the development of a digital onboarding portal, which has already been implemented at a few customers, has been capitalised.

 

The investment into new products remains an important part of our business for the future.

  1. GROUP OUTLOOK

We remain positive about the future despite the challenges in our environment still largely being present. By consolidating our focus, we have ensured a healthy core business, and are well positioned to use this as a basis to grow.

 

This growth will come by delivering value in the context of our clients’ digital transformation objectives. Our software assets and solutions are well positioned to enable the digital objectives of an insurer, but also have relevance in other industries.

 

Our clients continue to face significant challenges and increased competition to meet their customers’ changing needs in an increasingly digital world. This results in many of our existing and potential clients searching for solutions to enable them to adapt quickly and more effectively. SilverBridge remains well positioned to meet these needs.

 

Although we expect decision-makers to remain wary of making too many significant moves until conditions stabilise, we can see and expect positive opportunities in the future.

 

On behalf of the board of directors

 

Robert Emslie                                                                                                 Jaco Swanepoel

Chairman                                                                                                        Chief Executive Officer

 

Pretoria

17 February 2020

 

CORPORATE INFORMATION

 

SILVERBRIDGE HOLDINGS LIMITED

(Incorporated in the Republic of South Africa)

(Registration No. 1995/006315/06)

JSE SHARE CODE: “SVB”   ISIN CODE: ZAE000086229

Legal entity number (LEI): 3789001E59A77A6B9938

(“SilverBridge” or “the Group”)

 

Directors of SilverBridge holdings

Robert Emslie (Chairman)**, Jaco Swanepoel (CEO), Jeremy de Villiers **, Hasheel Govind *, Tyrrel Murray**, Lee Kuyper (Group Financial Director), Lulama Booi*.

(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

Unit 7, Block C, Southdowns Office Park, 22 Karee Street

Irene, 0062

(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)

4 Lisbon Lane, Waterfall City, Jukskei View, 2090

(Private Bag X36, Sunninghill, 2157, South Africa)

 

TRANSFER SECRETARIES

Computershare Investor Services Proprietary Limited

(Registration number: 2004/003647/07)

Rosebank Towers, 15 Biermann Avenue, Rosebank, 2107

(Call centre: 0861 100 634)

(PO Box 61051, Marshalltown, 2107)

 

Designated Adviser

PSG Capital

(Registration number: 2006/015817/07)

Second Floor, Building 3, 11 Alice Lane, Sandton, 2196

(PO Box 650957, Benmore, 2010)

 

www.silverbridge.co.za