| Mon 22 Sep 2008, 10:52 | | FWX - Foneworx Holdings Limited - Group audited results for the year ended 30 |
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FWX
FWX
FWX - Foneworx Holdings Limited - Group audited results for the year ended 30
June 2008 and dividend declaration
FONEWORX HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1997/010640/06)
Share code: FWX ISIN: ZAE000086237
("FoneWorx" or "the group" or "the company")
GROUP AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2008 AND DIVIDEND DECLARATION
Revenue up by 22%
Profit before tax up by 67%
Earnings per share up by 65%
Headline earnings per share up by 56%
Net asset value up by 212%
The FoneWorx board is proud to announce another record breaking set of results
for the year ended 30 June 2008.
During the year under review the group`s BEE transaction with Kabo Capital
(Proprietary) Limited ("Kabo") was finalised. Kabo now owns 30% (thirty percent)
in the group and the group`s overall BEE equity status is 43% (forty three
percent). We look forward to a positive relationship with Kabo as well as the
introduction of two non-executive directors nominated by Kabo to the main board
of the group.
NATURE OF THE BUSINESS
The group is a telecommunications value-added service provider and has developed
its own technology platform for the purposes of hosting all the various
operating divisions. It has service provider agreements with Telkom, MTN,
Vodacom and Cell C. The platform currently comprises in excess of 1 260 channels
of digital voice and data, which makes it one of the largest independent
platforms in South Africa.
FINANCIAL PERFORMANCE
Earnings before net interest, tax, depreciation and amortisation ("EBITDA")
improved to R19.8 million (2007: R13.1 million), an increase of 51% and profit
before tax was R20 million (2007: R11.9 million), an increase of 67% versus the
previous year.
Earnings per share ("EPS") grew by 65% to 13.00 cents per share from 7.89 cents
per share in the previous reporting period. Headline earnings per share ("HEPS")
grew 56% from 8.20 cents per share in the previous period to 12.75 cents per
share.
Profit before tax, expressed as a percentage of revenue, improved to 28% (2007:
21%). Gross profit was R39.0 million (2007: R30.5 million), which is 55% of
revenue (2007: 52%).
Profit for the year improved by 65% to R14.9 million (2007: R9.0 million). The
profit for the year has increased by an average of 159% per annum over the past
four years.
During the year under review the net asset value of the group increased by 212%
from R17.2 million (15.1 cents per share) to R53.6 million (39.9 cents per
share). R21.6 million of the growth in net asset value relates to the cash
received from the issue of 20 330 612 shares on 23 June 2008 to Kabo. The
increase in net asset value, without taking into account the issue of the shares
to Kabo is 86%.
OPERATIONAL PERFORMANCE
FoneWorx has redefined its operating divisions with the emphasis on providing
more focus on additional operational and strategic depth. These divisions
incorporate Infotainment Services, Business Services and Switching Services. An
overview on each division follows:
Infotainment
FoneWorx remains a strong brand in this industry and continues to provide a
variety of interactive services to advertising agencies and corporates using
Short Message System ("SMS") and Interactive Voice Response ("IVR") as the
primary bearer technologies. Our proprietary data and voice platform currently
operates over 1 260 channels and enables FoneWorx to have a distinct advantage
of complete control in offering turnkey solutions in this industry.
FoneWorx continues to be the preferred service provider for mobile services for
the SABC as well as to MultiChoice ("MMobile") for services into Africa.
FoneWorx has established contractual and operational relationships with 65
cellular networks in 31 countries in Africa.
FoneWorx continues to add new and innovative services to its portfolio of
Infotainment Services and in the last year we introduced SMS to Email and Multi
Messaging Services ("MMS"). We believe these services will add significant
revenue to this division in the years ahead particularly as there is a conscious
move within marketing and media circles to adopt one-to-one marketing
strategies.
Business Services
This division`s broad range of services continued to show good growth,
particularly our stalwart service Fax2Email, which has shown excellent growth
with subscriptions up by 15% and fax minutes processed up by 63%.
The number of dealers has grown to 367 with 268 being individual PostNet stores.
Our Virtual Business Centre ("VBC"), which is a combination of 15 services with
a prepaid back-end billing engine, continues to show steady growth with a number
of large corporates evaluating the potential to private label this product and
offer it to their clients, particularly small, medium and micro enterprises.
Switching Services
This division has been structured into two distinct business opportunities which
over time, depending on growth, could possibly have distinct structures and
their own management. These are FoneWorx Compliance and Loyalty Services.
FoneWorx Compliance incorporates identity access management ("IAM") and includes
our exciting and innovative authentication solution for compliance of the
Financial Intelligence Centre Act, No. 38 of 2001 ("FICA") and Regulation of
Interception of Communications and Provision of Communication-related
Information Act, No. 70 of 2002 ("RICA"). This application is aimed at natural
and juristic persons and will provide invaluable assistance to accountable
institutions such as banks, attorneys, financial institutions and casinos to
mention a few. In addition natural persons and legal entities will enjoy great
benefit and convenience from the use of the card.
This FICA solution has been developed over the last two years and has been
designed in line with the international Financial Action Task Force ("FATF")
recommendation as well as a number of international standards. Accordingly, our
research indicates the opportunity to introduce this solution to a number of
countries around the world which conform to the FATF recommendations is very
good. The prospects for this product, both in South Africa and internationally,
are extremely good. FoneWorx has been approached by a number of interested
parties in countries outside South Africa to adopt this solution.
Loyalty Services is a fully fledged customer differentiation programme, which
incorporates a Customer Relationship Programme ("CRM") and incorporates all the
bearer services offered in Infotainment Services such as SMS, IVR, MMS and
email, to mention a few.
FoneWorx has developed its own proprietary software to manage the programme and
will leverage off a number of its clients within the Infotainment division.
Both the Loyalty and FoneWorx Compliance solutions operate off the much enlarged
state-of-the-art innovation and hosting centre which the group owns and
operates. Additional infrastructure has been developed in the innovation centre
as well as the off-site back-up environment to cater for these new solutions.
PROSPECTS
Extract from Chief Executive Officer`s report.
"I am confident about the outlook for the ensuing year to June 2009 and I am
particularly positive about the potential for our loyalty and FICA solutions.
Most of our anticipated growth is expected to come from organic growth, however
management will constantly look at acquisitive opportunities to either open new
revenue streams or fast-track any of our operating divisions.
We look forward to the contribution that Kabo will make in working with us at a
strategic level and we welcome them on board.
The group has a much stronger balance sheet, with enhanced cash flows which will
clearly assist us in our future growth.
There are tremendous opportunities within our FoneWorx Compliance division,
particularly with the FICA/RICA solution with a strong emphasis on territories
outside South Africa that have adopted the FATF guidelines."
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008
Notes 2008 2007
R `000 R `000
ASSETS
Non-current assets 18 559 6 782
Property, plant and equipment 2 17 251 5 927
Intangible assets 196 46
Deferred tax asset 1 112 -
Investment in associate and joint 3 - 809
venture
Current assets 66 356 29 354
Inventory 14 30
Loan to director 60 -
Current tax receivable - 256
Trade and other receivables 14 069 14 421
Cash and cash equivalents 4 52 213 14 647
Total assets 84 915 36 136
EQUITY AND LIABILITIES
Capital and reserves 53 625 17 187
Share capital 5 134 114
Share premium 5 35 575 14 044
Accumulated profits 17 916 3 029
Non-current liabilities 10 696 2 930
Instalment sale agreements 788 1 905
Long-term loan 2 9 437 -
Deferred tax liability - 554
Loans payable 471 471
Current liabilities 20 594 16 019
Trade and other payables 13 495 12 372
Provisions 4 236 2 651
Tax payable 1 374 -
Current portion of non-current 1 489 996
liabilities
Total equity and liabilities 84 915 36 136
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008
2008 2007
Growth R `000 R `000
Revenue 22.3% 71 206 58 241
Cost of Sales (32 227) (27 731)
Gross profit 27.8% 38 979 30 510
Other operating income 644 319
Share of profits from Joint Venture 133 -
Staff costs (13 133) (11 565)
Depreciation and amortisation (2 106) (1 764)
expense
Other operating expenses (6 826) (6 152)
Profit from operations 55.9% 17 691 11 348
Finance costs (308) (256)
Investment income 2 569 845
Profit before tax 67.1% 19 952 11 937
Income tax expense (5 065) (2 933)
Profit for the year 65.3% 14 887 9 004
Basic earnings per share (note 6) 64.7% 13.00 7.89
cents cents
Diluted earnings per share (note 6) 64.5% 12.8 7.78
cents cents
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008
2008 2007
R `000 R `000
Share capital 134 114
Balance at beginning of year 114 114
Issued during the year 20 -
Share premium 35 575 14 044
Balance at beginning of year 14 044 14 044
Issued during the year 21 531 -
Accumulated profits 17 916 3 029
Balance at beginning of year 3 029 (5 975)
Profit for the year 14 887 9 004
53 625 17 187
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008
2008 2007
Notes R `000 R `000
Cash flow from operating
activities 20 954 12 998
Net cash generated from operations 24 031 15 044
Finance costs (308) (256)
Investment income 2 569 845
Normal tax paid (5 338) (2 635)
Cash flow from investing
activities (3 124) (3 495)
Decrease / (Increase) in investment
in joint venture and associates 3 811 (59)
Procurement of subsidiary (1 912) -
Purchase of property, plant and (1 976) (3 512)
equipment
Proceeds on disposal of property, 131 93
plant and equipment
Purchase of intangible assets (178) (17)
Cash flow from financing activities 19 736 615
Share capital and share premium 21 551 -
introduced
(Decrease) / Increase in non-current (1 724) 421
liabilities
(Decrease) / Increase in current portion of (91) 194
non-current liabilities
Net increase in cash and cash 37 566 10 118
equivalents
Cash and cash equivalents at 14 647 4 529
beginning of year
Cash and cash equivalents at
end of year 52 213 14 647
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of preparation
1. The group annual financial statements from which these condensed financial
statements were derived have been prepared on the historical cost basis
excluding financial instruments which are fair valued and conform to
International Financial Reporting Standards ("IFRS"). The accounting policies
are consistent with those applied in the annual financial statements for the
year ended 30 June 2007. These condensed financial statements set out in this
report have been prepared in terms of IAS 34 - Interim Financial Reporting, the
1973 Companies Act of South Africa and the Listings Requirements of JSE Limited.
2. Property, plant and equipment
During the year under review the group procured land and building to the value
of R9.7 million that is now being occupied by the group`s head office. This
property is encumbered with a bond to the value of R10.0 million of which R0.6
million is payable within the next financial year. In addition, computer
equipment to the value of R1.9 million was procured during the financial year.
3. Investments in associates and joint venture
The group sold its investment in Alto Network (Proprietary) Limited during the
year under review and procured the remaining 50% shareholding in Four Rivers
Trading 123 (Proprietary) Limited, a company holding the land and building as
disclosed in note 2, for R2.6 million. This procurement has led to an increase
in the group`s assets of R11.3 million and liabilities of R10.4 million.
4. Cash and cash equivalents
Cash and cash equivalents increased 256% during the year under review. Of this,
R21.6 million relates to the issue of new shares as disclosed in note 5. The
remaining increase of R16.0 million (110% increase) was generated through normal
operations of the group.
5. Share capital and share premium
FoneWorx issued 20 330 612 new shares in terms of a BEE deal with Kabo during
the year under review at R1.06 per share. The total issued shares at year end
was 134 402 041 (2007: 114 071 429).
6. Earnings per share
The calculation of earnings per share is based on profits of R14 887 141 (2007:
R9 004 380) and a weighted average of 114 515 814 (2007: 114 071 429) ordinary
shares issued during the year.
The calculation of headline earnings per share is based on profits of R14 887
141 adjusted to R14 596 016 (2007: R9 004 380 adjusted to R9 354 380) and a
weighted average of 114 515 814 (2007: 114 071 429) ordinary shares issued
during the year.
2008 2007
12.75 8.20
cents cents
Reconciliation between earnings and
headline earnings
Profit attributable to ordinary 14 887 9 004
shareholders
Items included in other operating
expenses:
Intellectual property amortised - 350
Profit on the sale of associate (270) -
Profit on disposal of property, (38) -
plant and equipment
Tax effect of the sale of associate 17 -
and disposal of property, plant and
equipment.
Headline earnings 14 596 9 354
The calculation of diluted earnings per share is based on profits of R14 887 141
(2007: R9 004 380) and a weighted average of 116 115 814 (2007: 115 671 429)
ordinary shares issued during the year.
2008 2007
12.8 7.78
cents cents
Reconciliation between earnings and
diluted earnings per share:
Weighted average number of shares 114 515 114 071
used in the calculation of earnings 814 429
per share
Shares deemed to be issued in
respect of:
Employee options 1 600 000 1 600 000
Weighted average number of shares 116 115 115 671
used in the calculation of diluted 814 429
earnings per share.
The calculation of diluted headline earnings per share is based on profits of
R14 887 141 adjusted to R14 596 016 (2007: R9 004 380 adjusted to R9 354 380)
and the diluted weighted average of 116 115 814 (2007: 115 671 429) ordinary
shares issued during the year.
2008 2007
12.57 8.09 cents
cents
Segmental reporting
The group has not reported on segments, as all activities are classed as being
in the information technology system sector. The business of the group is mainly
transacted in South Africa. Therefore no segmental reporting is necessary.
Subsequent events
There have been no significant events subsequent to year-end and up to the date
of this report, that would require adjustment.
Audit report
The group`s consolidated financial statements for the year ended 30 June 2008
have been audited by Deloitte & Touche, registered auditors. The board has
approved these consolidated annual financial statements that have been condensed
for purposes of this report. The auditors` unmodified report on the annual
financial statements and the set of condensed financial statement is available
for inspection at the company`s registered address.
Corporate Governance
The directors recognise the need to conduct the affairs of the company with
integrity and in compliance with the principles of the King II report, while
recognising the practicalities of the environment in which it operates, and the
need to take action as appropriate.
Dividend announcement
Notice is hereby given that the board has declared a maiden cash dividend of 2.7
cents per share, which is payable to shareholders recorded in the register at
the close of business on Friday, 17 October 2008. Shareholders are advised that
the last day to trade "cum" the dividend will be Friday, 10 October 2008. The
shares will trade "ex" the dividend as from Monday, 13 October 2008. Payment
will be made on Monday, 20 October 2008. Share certificates may not be
dematerialised or rematerialised during the period Monday, 13 October 2008 to
Friday, 17 October 2008, both days inclusive.
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
22 September 2008
Business and Registered Office:
1st Floor, Corner of Bram Fischer Drive and Will Scarlet Road, Ferndale,
Randburg, 2194
PO Box 3386, Pinegowrie, 2123
Telephone +27-11-293-0000
Fax 086-610-1000 / +27-11-787-2137
Directors: Ronald Graver, Ashvin Govan Mancha B Proc * - Chairman, Gaurang
Mooney BA * (Botswana), Robert Russell, Mark Smith BA LLB - Chief Executive
Officer, Pieter Scholtz CA (SA) - Financial Director (* Independent)
Company Secretary: P A Scholtz CA (SA)
Auditors: Deloitte & Touche
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Designated Adviser: Merchantec (Proprietary) Limited
Date: 22/09/2008 10:52:01 Produced by the JSE SENS Department.
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