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IFC
IFC
IFC - IFCA Tech - Unaudited results for the 6 months ended 30 June 2007
IFCA TECHNOLOGIES LIMITED
Incorporated in the Republic of South Africa)
(Registration number 2006/030759/06)
Share code: IFC & ISIN: ZAE000088555
("IFCA Tech" or "the company")
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007
The unaudited results set out below represent the first interim results of IFCA
Tech group since its listing on the Alternative Exchange of the JSE Limited on
08 December 2006.
Balance Sheets
Figures in Rand 30 June 2007 31 Dec 2006
R R
ASSETS
Non-Current Assets 43 111 940 39 315 289
Property, plant and equipment 5 748 962 2 679 882
Intangible assets 37 362 978 36 635 407
Current Assets 8 578 447 10 700 670
Inventory 153 550 -
Trade and other receivables 5 928 417 5 995 031
Cash and cash equivalents 2 496 480 4 705 639
Non-Current asset held for sale - 740 839
Total Assets 51 690 387 50 756 798
EQUITY AND LIABILITIES
Equity and reserves 45 199 942 46 493 906
Share capital 42 825 099 42 825 099
Retained income 2 374 844 3 668 807
Minority interest (74 760) --
Non-Current Liabilities 3 048 602 1 266 514
Other financial liabilitie 2 479 377 511 116
Deferred tax 569 225 755 398
Current Liabilities 3 516 603 2 996 378
Other financial liabilities -- 82 006
Current tax payable 183 034 320 565
Trade and other payables 2 132 356 2 014 850
Deferred income 1 201 213 578 957
Total Equity and Liabilities 51 690 387 50 756 798
Net asset value per share 45.20 46.49
(cents per share)
Net tangible asset value per share 7.84 9.86
(cents per share)
Number of shares in issue at period end 100 000 000 100 000 000
Income statements
Figures in Rand 6 months 10 months
ended ended
30 June 2007 31 Dec 2006
R R
Revenue 5 485 845 14 750 428
Cost of sales (3 215 936) (4 882 476)
Gross profit 2 269 909 9 867 952
Other income 409 378 26 922
Operating expenses (4 201 118) (5 009 133)
Operating (loss)/profit (1 521 831) 4 885 741
Investment revenue 108 315 85 450
Finance costs (42 660) (145 891)
(Loss)/Profit before taxation (1 456 176) 4 825 300
Taxation 87 452 (1 156 493)
(Loss)/Profit for the period (1 368 724) 3 668 807
Attributable to minorities (74 760) --
Attributable to ordinary equity holders (1 293 964) 3 668 807
Adjustments for headline earnings:
- Profit on disposal of asset (409 378) (461)
- Impairment of loans -- 1 277
Headline (loss)/earnings for the period ( 1 703 342) 3 669 623
(Loss)/Earnings per share (cents per -1.29 4.04
share)
Headline (loss)/earnings per share -1.70 4.04
(cents per share)
Weighted average number of shares in 100 000 000 90 751 634
issue
Statement of Changes in Equity
Figures in Share Share Retained Sub-total Minority Total
Rand capital premium Income R Interests equity
R R R R R
Balance at 28 -- -- -- -- -- --
February 2006
Issue of 100 000 43 533 370 -- 43 633 370 -- 43 633 370
shares
Profit for -- (808 271) 3 668 807 3 668 807 -- 3 668 807
the period
Balance at 31 100 000 42 725 099 3 668 807 46 493 906 -- 46 493 906
December 2006
Loss for the -- -- (1 368 724) (1 368 724) (74 760) (1 293 964)
period
Balance at 30 100 000 42 725 099 2 374 843 45 199 942 (74 760) 45 125 182
June 2007
Abridged Cash Flow Statements
Figures in Rand 30 June 2007 31 Dec 2006
R R
Cash flows (utilised in)/generated from (1 030 885) 1 637 887
operating activities
Cash flows utilised in investing (3 064 530) (1 818 137)
activities
Cash flows from financing activities 1 886 255 2 394 761
Total cash movement for the period (2 209 159) 2 214 511
Cash at the beginning of the period 4 705 639 2 491 128
Total cash at end of the period 2 496 480 4 705 639
COMMENTARY
The board of directors presents the company`s results for the 6 month period
ended 30 June 2007, reflecting the first interim results since the company`s
listing on 08 December 2006. The directors are reporting a loss in the first
six month period due to a number of factors as outlined below, most of which
have been, or are being, addressed.
These unaudited interim results have been prepared in accordance with IAS 34 -
Interim Financial Reporting on the basis of consistent accounting policies that
comply with International Financial Reporting Standards ("IFRS").
BACKGROUND, INCORPORATION AND NATURE OF BUSINESS
IFCA Technologies Limited was registered and incorporated as a public company in
the Republic of South Africa on 03 October 2006. IFCA Tech was incorporated to
act as the investment holding company for IFCA sWare (Proprietary) Limited
("IFCA sWare"), being the main operating company of the IFCA group for the 10
months ended 31 December 2006 and IFCA hWare (Proprietary) Limited ("IFCA
hWare"), a shelf company, which company was dormant and conducted no business
from incorporation until 31 December 2006, but which company commenced with the
sale of Computerised Business Equipment solutions from 01 January 2007 onwards.
The company listed on the Alternative Exchange of the JSE Limited on 08 December
2006.
INDUSTRY AND BUSINESS OVERVIEW
IFCA sWare first commenced business in August 1999 as MBS Software (Pty) Limited
and was founded by Andy Moolman, Brian Schultz and Chris Boshoff, who remain as
directors on the board of IFCA sWare. IFCA sWare was originally formed for the
sole purpose of marketing and supporting the IFCA MSC Berhad ("IFCA MSC")
Malaysian Group`s suite of software products in Africa under license. The
business paid 50% of its software revenue to IFCA MSC in Malaysia in terms of
its license agreement and the business grew primarily through the use of
Malaysian consultants at a very high cost to the South African business.
In September 2004, the IFCA Group in Malaysia vended in the Intellectual
Property to the suite of software products for the African continent and in
return, took up a 49.07% equity interest in IFCA sWare through its Malaysian
listed company, IFCA MSC. The company then changed its name to IFCA MBS
Software (Pty) Limited. BK Wong was relocated from Malaysia to take up the
position of Managing Director in January 2005 and the name of the company was
changed to IFCA sWare on 09 October 2006 in order to house the group`s software
solutions going forward. All of the founding shareholders remain actively
involved in the operations of the company as executive directors of IFCA sWare.
IFCA sWare is an enterprise-wide integrated business solutions provider
providing industry specific software solutions for four business segments,
namely:
- Property Development and Management (known as Property+);
- Project Management, Engineering and Construction (known as Contract+);
- Hospitality (known as Resorts+, D`Hotel and D`Club); and
- Finance & Leasing (Loans+).
IFCA sWare`s solutions encompass the functionalities and features of products
that have been nurtured and matured for almost 20 years by the IFCA group
worldwide, from meeting the business needs of more than 1 200 customers and 16
000 registered users spread across four continents. IFCA sWare`s customers
include Transnet Housing, The Country Club Johannesburg, Blair Atholl,
Maccauvlei Learning Academy, Arivia.kom, Kopanong Hotel and Conference Centre,
Eagle International Group Holding (Eagle Canyon), Atlantic Beach Golf Club in
Cape Town, The Botswana Housing Corporation, National Housing Enterprise
(Namibia) and the Swaziland National Housing Corporation.
The marketing and distribution of Computerised Business Equipment solutions only
commenced during the period under review as a division of IFCA sWare. As from 01
January 2007, these operations have been conducted through IFCA hWare. The two
products being marketed by IFCA hWare are the mimio Xi and the TOTalizer. The
mimio Xi is a portable interactive whiteboard system that captures and records
writing off a whiteboard and, when in use with a computer and projector,
converts an ordinary whiteboard into a touch screen interactive whiteboard. The
TOTalizer utilises both hardware and software and is a revolutionary stock
taking system that can electronically measure the quantity of items in any
container in a pre-set unit of measure by simply placing the item on the
TOTalizer, such as liquor bottles in a bar or a bottle or box of pills in a
pharmacy. The TOTalizer then uploads the electronic count directly to the
TOTalizer`s proprietary software and onwards to any other third party`s
inventory software system. The TOTalizer comes in several models for measuring
the lightest of items such as pills to items as heavy as those packed in pallets
and kegs.
FINANCIAL OVERVIEW
The results for the 6 months ended 30 June 2007 reflect a decline in earnings
compared to those originally anticipated in the company`s monthly projections
and profit forecast as contained in the company`s prospectus dated 29 November
2006 and steps have been, and are being, taken to address problem areas and it
is expected that the group will still record a profit after taxation for the
year ending 31 December 2007, although it is expected that the group will not
meet the company`s profit forecast as contained in that prospectus.
Loss and headline loss attributable to ordinary shareholders is R1 293 964 and
R1 703 342 respectively for the period under review. The loss and headline loss
per share for the 6 month period ended 30 June 2007 is 1.29 and 1.70 cents per
share.
Income statement review
The directors have presented commentary on the income statement results in
comparison to the prior period results of IFCA Tech as there are no comparable
interim numbers available. It should be noted that the prior period results are
for a 10 month period compared to a 6 month period being reported on.
Turnover growth in IFCA sWare was negatively impacted by the reduction of one of
the company`s large contracts due to the impending sale of the customer`s loan
book, following which ongoing development was cancelled. In addition, the
company suddenly lost a number of its Malaysian and Filipino contractors due to
crime incidents in South Africa. This initially caused problems at certain
customers, requiring the strengthening of the local staff complement. However,
on a positive note, this will have the longer-term future benefit of reducing
costs through use of local employees as opposed to funding the costs of more
expensive international consultants and fast tracks the company`s stated
intention of promoting local training, expertise and hiring.
Turnover in IFCA hWare was much lower than anticipated due to a delay in the
uptake of international TOTalizer sales. However, during June 2007, IFCA hWare
signed a distribution agreement to appoint Digitot International (Proprietary)
Limited ("Digitot`) as the exclusive distributor of the TOTalizer inventory
control product to the hospitality industry in South Africa and 13 other
countries in Europe, South America, Africa and the Middle East. Under the terms
of the agreement, Digitot will be marketing the TOTalizer products through its
subsidiaries and distribution channels located in these countries under the
brand name, `DigiTag`. IFCA hWare will continue to directly market the TOTalizer
under its current name to the manufacturing and pharmaceutical industries in
South Africa and will also continue to seek distributors to market to these
industries, as well as the hospitality industries internationally, in countries
not covered by Digitot.
Operating expenses for the 6 months amounted to R4.2 million or about 76% of
revenue as opposed to 34% in the prior year. The higher percentage of operating
expenses in relation to revenue resulted primarily from the disproportionate
percentage of staff costs in relation to the revenue lost on the account
referred to above. The higher operating expenses are also attributable to
increases in staffing as the company prepared itself to support sales growth and
to replace the overseas staff, as well as costs incurred as a listed company.
However, operating expenses are expected to reduce over the second half of the
year as the overseas staff are replaced by local staff in the coming months.
The profit on disposal of assets arose on the disposal of the company`s
operating premises during the period under review, with the company relocating
to larger premises during April 2007.
Balance sheet review
Property, plant and equipment increased following the company`s relocation to
larger premises through the acquisition of Erf 235 Woodmead Extension 1 for a
purchase consideration of R3 125 000. The company acquired larger premises to
accommodate an increased staff complement and relocated its operations during
April 2007, which has resulted in an increase in long-term liabilities.
In turn, cash and cash equivalents have reduced as capital raised from the
listing has been applied towards the acquisition of the new property and
reducing interest bearing bond finance, until required for expansion of the
group as disclosed in the company`s prospectus.
Intangible assets increased in accordance with the accounting policy of
capitalising development costs and then amortising these costs over 5 years.
This policy is consistent with that of the controlling shareholder, which is
listed in Malaysia. In addition, intangible assets increased following the
acquisition of LodgeMan, a software product tailored for the boutique hotel,
guest house and bed and breakfast market.
Trade and other receivables include approximately R780 000 of non-trade
receivables as well as R900 000 of older accounts receivable that have been
received subsequent to the period end. The board considers that the accounts
receivable are adequately provided, considering the longer term nature of its
projects and the quality of its customer base.
The increase in deferred income is due to the signing of a significant annuity
software support agreement commencing March 2007.
The non-current asset held for sale in the prior period represented the carrying
value of the property previously occupied by IFCA Tech, which has been sold
during the period under review. IFCA Tech, through its 100% subsidiary BJS
(Proprietary) ("BJS"), disposed of a property known as Erf 1935 Houghton Estates
for a sale consideration of R1 150 000. No commission was payable on the
disposal and a profit after taxation of R409 378 was realised on the disposal of
the property.
Cash Flow Statement review
As mentioned earlier, cash flow has been applied to reduce interest bearing debt
at period end.
DIVIDENDS
In line with information contained in the prospectus, the directors have decided
not to declare an interim dividend.
SEGMENTAL REPORTING
The company has presented segmental information for the revenue relating to the
Software Solutions and Computerised Business Equipment as follows:
Revenue 6 months 10 months
ending ending
30 June 2007 31 December 2006
R R
Software Solutions 5 077 479 14 095 543
Computerised Business Equipment 408 366 654 885
Total 5 485 845 14 750 428
ACQUISITIONS AND ISSUE OF SHARES FOR CASH
During the period under review the group acquired a new property for its
operations, which is held through Erf 235 (Proprietary) Limited, which
consideration was settled through cash and bond finance. Other than this
acquisition, there were no acquisitions or issues of shares during the period
under review.
SUBSEQUENT EVENTS
There have been no significant subsequent events that require reporting.
DIRECTOR CHANGES
During the period under review Mr Leong Nyu Kuan was appointed as alternate
director to Mr Ken Yong. No other changes were made.
LITIGATION
There is no litigation pending against the company.
FUTURE PROSPECTS
The directors consider that the business prospects are sound based on the
existing and expanding client base, new contracts signed after 30 June 2007 and
prospects in the pipeline, which are growing as a result of the excellent
integrated product offering of the group. It is the group`s intention to
rebuild the levels of annuity income to those existing before the reduction in
the large contract mentioned earlier. In addition, the signing of the
distribution agreement with Digitot and the recent acquisition of LodgeMan
software has started to positively impact on the revenue stream of the group.
The board is also in the process of formulating a strategy for furthering the
empowerment of the group.
By order of the Board
Chairman:
Dr CT Ndlovu
Chief Executive Officer:
BK Wong
22 August 2007
Johannesburg
Registered Office
Arcay House, Number 3 Anerley Road, Parktown, Johannesburg, 2193
PO Box 62397, Marshalltown, Johannesburg, 2107
Directors
Dr CT Ndlovu*(Chairman), BK Wong= (CEO), CH Boshoff, MR Gahaganv*, KC Yong=*, KK
Yong=*, NK Leong=#
* Non-executive, # Alternate, = Malaysian, vBritish
Designated Advisor
Transfer Office
Arcay Moela Sponsors (Proprietary) Limited Link Market Services (Proprietary)
Limited
Date: 23/08/2007 09:05:03 Produced by the JSE SENS Department.
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