| Mon 11 Feb 2008, 10:52 | | FRT - Faritec Holdings - Unaudited Interim Results For The Six Months Ended |
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FRT
FRT
FRT - Faritec Holdings - Unaudited Interim Results For The Six Months Ended
31 December 2007
Faritec Holdings Limited
Incorporated in the Republic of South Africa
Registration number 1998/004872/06
Share code FRT
ISIN ZAE000016838
("Faritec" or "the company" or "the group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Unaudited Growth Unaudited
6 months % 6 months
December 2007 December 2006
Revenue (R`000) 502 389 6% 472 568
EBIT (R`000) 26 965 18% 22 809
Attributable earnings
(R`000) 17 746 44% 12 293
EPS (cents) 7,0 4% 6,7
Cash on hand (R`000) 42 633 536% (9 776)
INTRODUCTION
The Faritec Board of Directors is pleased to announce the results for the six
months ended 31 December 2007. After the challenges experienced during the
second half of our last financial year, we are happy to report that management
interventions are working as planned - the business has successfully solved the
issues that temporarily stalled our growth and, as can be seen from the results,
our strategy is back on track. During the period under review the focus has been
on bedding down our acquisitions, improving trading conditions and creating a
strong foundation for future growth. This is being done through training and
developing our people, implementing new processes and systems, improving our
facilities and infrastructure, and implementing stronger financial controls. We
have made significant progress on all the above and will continue to roll out
our plans in these areas over the next few years.
The increase in infrastructure investment in South Africa has given further
impetus to the growth of the IT sector. Despite the current overall turbulent
market conditions, Faritec remains confident that we are back on track and that
demand for our products and services continues to be strong.
OVERVIEW OF THE RESULTS
Faritec achieved revenue of R502 million compared to revenue of R473 million for
the comparative six month period in 2006, a stable increase of 6% year on year.
This reflects year-on-year organic revenue growth, one month`s revenue from the
acquisition of the Software Futures business, as well as a change in
geographical revenue mix with the Western Cape region`s contribution increasing
to 20%. The group`s gross profit margins have increased to 24,3% (2006: 22,8%)
with software and services revenue contribution decreasing from 41% to 40%,
mainly as a result of the slow uptake of the services business.
The trading results reflect an increase in the net profit before tax margin to
5% (2006: 3,7%) and a resultant increase in attributable earnings of 44%, to
R17,7 million, with strong operational performances recorded by most of the
Group`s business units.
Interest paid increased to R2,5 million (2006: R1,9 million) and includes the
interest incurred on the financing of the Enterprise Connection acquisition and
finance lease interest charges for the financing of the ERP and call centre
systems that were implemented in the business.
The tax charge for the period has increased to R7,3 million, in line with the
improved operating performance of the Group, from R5,6 million in 2006. The
effective rate of tax on profit before taxation is 29%.
Headline earnings per share decreased from 7,1 cents in 2006 to 7,0 cents in
2007. Basic earnings per share increased from 6,7 cents in 2006 to 7,0 cents in
2007. The weighted average number of shares in issue for the year is 255
million, which increased from last year`s 193 million due to the additional
shares issued in terms of the Faritec Share Incentive Scheme and shares issued
in terms of the unwinding of the J&J BEE option in May 2007.
The group remained cash positive with cash generated from operations of R34,9
million, before tax paid of R7,6 million. Cash generation has been significant,
ending the half year with a net surplus of R42,6 million.
The group incurred capital expenditure of R8 million during the period under
review, the majority of which relates to the upgrade of the network
infrastructure and telephony systems.
Ordinary shareholders` funds at the half year amounted to R173 million,
representing a R26 million increase from R147 million in December 2006. The
increase is mainly attributable to the profits generated for the period as well
as shares issued at the unwinding of the J&J option in May 2007. Tangible net
asset value per share decreased to 3,8 cents (2006: 4,7 cents) which was caused
by the goodwill arising on the acquisition of the Software Futures sale assets
and liabilities of R12 million.
The purchase price allocation for the acquisition of Software Futures has not
yet been finalised. The closing date of the acquisition was 26 November 2007. As
a result of significant time limitations between the acquisition date and the
issue of these interim financial statements, we have made a provisional
allocation, which it is impractical to disclose, at this stage. This will be
disclosed in the annual financial statements for the year ended 30 June 2008.
ACCOUNTING POLICIES
The accounting policies and methods of computation used in the preparation of
this report are consistent with those applied in the annual financial statements
of the group for the year ended 30 June 2007, and this report has been prepared
in terms of International Financial Reporting Standards (IFRS), including IAS 34
(Interim Financial Reporting). These interim results have not been audited or
reviewed by the company`s auditors, Charles Orbach & Company.
OPERATIONS
Due mainly to the efforts of management and staff the Faritec operations have
managed to return our trading back to the expected levels. Compared with the
same period last year revenue grew by 6% from R473 million to R502 million,
hardware revenue increased by 6,8% from R281 million to R300 million, software
revenue also increased by 31,1% from R61 million to R80 million and our services
revenue declined by 6,9% from R131 million to R122 million. We continue to
strive to grow our software and services businesses in line with our stated
strategy of improving our revenue mix. As a result of our focus on improving our
revenue mix and solution selling our margins improved from 22,8% to 24,3% when
compared to the same period last year.
Our people are core to the achievement of our targets and our strategy, and with
this in mind we continue to focus on and invest in training and development. Our
relationship with our strategic partners continues to improve and we are
evaluating new partnerships in line with our strategic focus. Our market share
in our chosen solution areas is growing and we are investigating new technology
solutions that compliment our strategy. While our hardware business, which is
IBM and HP based, continues to be the biggest revenue contributor, our software
and services businesses now account for a larger percentage of the gross margin
earned. The security, availability, system integration, and service delivery
business units are all performing ahead of budget. Our customer base continues
to grow and we are striving to strike a balance between new customer acquisition
and current customer retention; with this in mind we are evaluating CRM as a
tool to assist in this process. Faritec`s footprints in the corporate and SMB
sectors continue to grow and we are increasing the number of solutions we are
providing to these customers. We are also making good progress in the public
sector and expect to show significant growth in this sector compared with last
year.
The Faritec business has achieved a lot in the last six months, and the
transformation of the business is on track. Our people have been through a lot
of change and we have been successful in creating a far stronger platform for us
to grow on into the future.
BEE AND TRANSFORMATION
Faritec continues its sustainable transformation plans as approved by the Board
in 2005. All the pillars of the Codes of Good Practice have been systematically
entrenched throughout the operations, each pillar managed and owned by a Faritec
Exco member.
Our existing Empowerdex rating as a Level Four Contributor is an indicator of
the ability of the operations to meet the expectations of our stakeholders;
future rating exercises are closely monitored to maintain a culture of
continuous improvement.
In this financial year systems and processes were implemented to ensure that
employment equity, skills development and procurement pillars of the codes were
reported on by using the now-embedded financial reporting tools provided by the
SAP system that Faritec has implemented.
The above clearly demonstrates that Faritec`s transformation efforts are driven
and owned by our operations, which creates a platform for sustainability.
Our CSI efforts, a partnership with the SOS organisation as a contribution to
bridging the digital divide, is an innovative practice of meaningful
contribution that involves our staff and our business partners.
Faritec continues to invest in our people, and our skills developments efforts
ensure that we maintain and grow our pool of technical and diverse employees
that is the intellectual property driving our business forward.
Faritec`s ability to achieve further exponential progress in the BEE and
Transformation sphere is now increasingly dependent on the overall socio-
economic environment, the industry and our customers and partners. Faritec plans
to engage role players and influence further efforts in the national agenda and
transformation.
DIVIDEND
No dividend has been declared as funds are being retained to assist with the
group`s future growth.
PROSPECTS
Faritec is not immune to the energy crisis that is gripping the country, but we
have alternative sources in place to ensure continued trading and productivity,
albeit at a cost.
The impact of the energy crisis on some of our customers may be a little more
severe and we may experience some slowing down of spend due to this. The
economic outlook, currency and interest rates may also make trading conditions a
little more difficult, but we are not significantly exposed to either the
weakening of the currency or the increase in interest rates.
The foundation has now been laid for further growth into the future and we are
confident that the business is well positioned to meet expectations. We have a
strong sales pipeline and the outlook for the remainder of this financial year
remains positive. We will continue to grow the business both organically and
through acquisition into areas that support our stated strategy. Our business
continues to add blue-chip customers to its client base, and our greater scale
and product mix has allowed us to compete more favourably across all sectors.
For and on behalf of the Board
Dr CR Jardine SM Tomlinson
Chairman Chief Executive Officer
Johannesburg
11 February 2008
Faritec Holdings Limited
GROUP INCOME STATEMENT
Audited
Six months to Six months to 12 months to
December 2007 December 2006 June 2007
Rand (`000) Rand (`000) Rand (`000)
Revenue 502 389 472 568 858 349
Operating expenses
before depreciation
and amortisation (470 027) (443 060) (831 842)
Depreciation and
amortisation (5 397) (5 436) (6 977)
Profit from operations 26 965 24 072 19 530
Finance costs (2 461) (1 987) (3 297)
Investment income 727 2 196 5 392
Impairment of assets - (1 263) (1 263)
Profit before taxation 25 231 23 018 20 362
Taxation (7 311) (5 629) (6 120)
Net profit
for the period 17 920 17 389 14 242
Attributable to:
Minorities 174 5 096 (2 218)
Ordinary shareholders 17 746 12 293 16 460
17 920 17 389 14 242
Reconciliation of
headline earnings:
Attributable earnings
for the period 17 746 12 293 16 460
Impairment of assets - 628 628
Headline earnings
for the period 17 746 12 921 17 088
Number of ordinary
shares in issue (`000) 257 804 188 416 254 993
Weighted average
number of ordinary
shares in issue (`000) 254 993 182 878 192 962
Fully diluted ordinary
shares in issue (`000) 262 225 196 893 205 039
Earnings per share
(cents) 7,0 6,7 8,5
Headline earnings per
share (cents) 7,0 7,1 8,9
Fully diluted earnings
per share (cents) 6,8 6,2 8,0
Fully diluted headline
earnings per share
(cents) 6,8 6,6 8,3
GROUP BALANCE SHEET
Audited
At 31 At 31 At 30
December 2007 December 2006 June 2007
Rand (`000) Rand (`000) Rand (`000)
ASSETS
Non-current assets 182 708 156 655 170 950
Equipment 13 233 10 114 11 863
Software 12 574 2 435 9 160
Development costs
capitalised 7 712 10 108 8 546
Goodwill 105 296 86 962 92 994
Trademarks 38 204 38 204 38 204
Loans receivable 2 080 2 503 6 331
Deferred taxation 3 609 6 329 3 852
Current assets 292 640 290 419 205 515
Inventories 6 941 8 514 9 511
Investments - 13 229 -
Trade receivables 239 521 240 397 157 081
Other receivables 3 545 17 278 5 481
Taxation - - 1 276
Cash and cash
equivalents 42 633 11 001 32 166
- - -
Total assets 475 348 447 074 376 465
EQUITY AND
LIABILITIES
Total equity 171 449 163 836 152 149
Shareholders`interest 173 481 146 615 154 323
Minority interest (2 032) 17 221 (2 174)
Non-current
liabilities 28 066 30 633 35 190
Interest-bearing
borrowings 20 514 21 403 26 103
Operating lease
liabilities 5 500 6 396 6 253
Non-interest-bearing
borrowings 2 052 2 834 2 834
Current liabilities 275 833 252 605 189 126
Trade payables 227 759 171 187 147 309
Other payables 34 895 46 643 26 567
Taxation 3 212 6 277 5 004
Bank overdrafts - 20 777 -
Interest-bearing
borrowings 9 233 6 784 9 548
Operating lease
liabilities 734 937 698
Total equity and
liabilities 475 348 447 074 376 465
Total number of
ordinary shares in
issue (`000) 257 804 188 416 254 993
Net asset value
(R `000) 173 481 146 616 150 311
Net asset value per
share (cents) 67,3 77,8 58,9
Tangible net asset
value (R `000) 9 695 8 907 738
Tangible net asset
value per share
(cents) 3,8 4,7 0,3
GROUP STATEMENT OF CHANGES IN EQUITY
Audited
Six months to Six months to 12 months to
December 2007 December 2006 June 2007
Rand (`000) Rand (`000) Rand (`000)
Share capital 258 188 255
Balance at
beginning of period 255 181 181
Issued during
the period 3 7 74
Share premium 158 644 70 119 157 607
Balance at
beginning of period 157 607 64 826 64 826
Issued during
the period 1 037 5 293 92 854
Write off of share
issue costs - - (73)
Acquisition
equity adjustment (85 455) - (85 455)
Balance at
beginning of period (85 455) - -
Issued during
the period - - (97 536)
Derecognition of
minority interest - - 12 081
Share-based
payments reserve 4 518 2 705 4 146
Balance at
beginning of period 4 146 2 705 2 705
Increase for the
period 372 - 1 441
Accumulated profits 95 516 73 603 77 770
Balance at
beginning of period 77 770 61 310 61 310
Net income for the
period 17 746 12 293 16 460
Total shareholders`
interest 173 481 146 615 154 323
ABRIDGED GROUP CASH FLOW STATEMENT
Audited
Six months to Six months to 12 months to
December 2007 December 2006 June 2007
Rand (`000) Rand (`000) Rand (`000)
Cash flow from
operating
activities 33 591 (39 986) 8 884
Cash flow from
investing
activities (17 186) (7 427) (21 901)
Cash flow from
financing
activities (5 938) (1 716) 5 830
Net movement in
cash and cash
equivalents 10 467 (49 129) (7 187)
Cash and cash
equivalents at
beginning of period 32 166 39 353 39 353
Cash and cash
equivalents at end
of period 42 633 (9 776) 32 166
Registered address
Faritec House
150 Kelvin Drive
Woodmead Sandton 2148
PO Box 76784 Wendywood 2144
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd
70 Marshall Street Johannesburg 2001
PO Box 61051 Marshalltown 2107
Sponsor
Java Capital (Proprietary) Limited
Date: 11/02/2008 10:52:49 Produced by the JSE SENS Department.
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