| Fri 13 Feb 2009, 17:02 | | FRT - Faritec - Faritec interim results for the six months ended 31 December |
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FRT
FRT
FRT - Faritec - Faritec interim results for the six months ended 31 December
2008
Faritec Holdings Limited
(Registration number 1998/004872/06)
Share code: FRT
ISIN: ZAE000016838
("Faritec" or "the company")
FARITEC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
INTRODUCTION
The Board hereby announces the results for the six months ended 31 December
2008. We are disappointed by the performance and the results for the period.
Although the current economic situation has contributed to the underperformance
at a trading level, the real concern lies in the cost base. This is being
addressed by management and the board, but will take some time to reflect in the
results.
OPERATIONS
As can be seen from the decline in our revenue, this was a difficult trading
period. The slowdown in trade has impacted almost all areas of our business with
our coastal and Africa regions being least impacted. Our three traditional areas
of business namely Hardware, Software and Services declined by 21%, 23% and 6%
respectively. This is mainly due to market conditions and a slowdown in spend
across our customer base. Whilst margins have remained fairly consistent mainly
due to our revenue mix diversity, operating cost excluding cost of sales, rose
by approximately 17% during the period.
Management has embarked on a major cost-cutting exercise and is evaluating the
viability of all of our areas of business. This exercise is being done to align
our cost base with the lower trading levels and to make sure we focus on areas
of business that are profitable. The cost-cutting exercise is an ongoing process
and whilst we have already realised significant savings we expect this to
continue through to our year-end in June. Our objective is to reduce our cost
base by approximately R4 million per month, whilst ensuring that we do not
impact on revenue streams, service levels and stakeholder commitments.
PROSPECTS
As stated in our trading statement we do not expect trading conditions to
improve significantly during the next six months. However, the cost-cutting
exercise will have more impact during these six months and we should be
profitable during the second half of the year. Whilst we are not expecting any
significant improvement in trading conditions in our new financial year, we feel
that due to the cost-cutting exercises being implemented for the full year from
July 09 to June 10 the business should return to profitability over the medium
term.
OVERVIEW OF THE RESULTS
During the six months to 31 December 2008 revenue has declined by 18% from R502
million to R414 million compared to the same period last year. The contraction
in revenue growth has been experienced in our Gauteng and Public Sector regions,
with the coastal and Africa regions reporting a flat growth year-on-year.
The Group`s gross profit margins have deteriorated slightly from 24% in the
previous year to 23%, mainly a result of the Hardware margins that have come
under significant pressure.
Operating margins have come under pressure due to the difficult trading
conditions experienced in the first half. Net operating expenses excluding cost
of sales before depreciation and amortisation have increased by 17% year-on-
year, mainly as a result of slower than anticipated sales cycles in some of the
businesses, whilst costs were already being incurred, as well as investment in
Public Sector and new business ventures. EBITDA decreased to a loss of R11,6
million. Included in operating costs are costs of approximately R4 million in
the current period relating to provision for credit notes and settling of
unresolved liabilities.
Net interest paid increased to R9,7 million (2007: R1,5 million) and includes
the interest incurred in the R100 million raised through securitisation in
September 2008, as well as interest charge incurred from the trade facilities in
place at the beginning of the financial year in order to support new
initiatives.
The Group raised a deferred tax asset for the period of R10 million. The
recognition of the deferred tax asset has resulted in the difference in the
actual loss per share and headline loss per share of (8,3) cents from (11,6)
cents as included in the trading statement released on 29 January 2009. Headline
earnings per share decreased from 7,0 cents in 2007 to a headline loss of 8,3
cents in 2008.
The Group remained cash positive, reporting closing cash balance of R42 million
with a cash deficit from operations of R52 million. The trade facilities put in
place in order to support the growth experienced in the last two years has
affected cash generation capability. This gave rise to significant finance
costs, a shift in the profile of some customers, tight trading conditions and
increased tax payments.
The Group incurred capital expenditure of R6 million during the period under
review, the majority of which relates to the investment in CRM systems.
As mentioned above, the Group raised R100 million through a securitisation
programme with investors in the capital markets at fixed rates for an initial
period of five years. The change in the funding arrangements has improved
headline earnings per share and earnings per share by 6%.
BASIS OF PREPARATION
The preliminary report has been prepared on the historical cost basis, except
for certain financial instruments at fair value, using the Group`s accounting
policies, which comply with International Financial Reporting Standards, and
methods of computation, as used in the annual financial statements of the Group
for the period ended 31 December 2008 and has been prepared in accordance with
IAS 34, Interim Financial Reporting. These interim results have not been audited
or reviewed by the company`s auditors, Charles Orbach & Company.
The adoption of IFRS 8 operating segments have retrospectively been applied to
the 2008 and 2007 interim results for comparative purposes.
SUBSEQUENT EVENTS
Subsequent to the reporting period, UBUSHA Technologies (Pty) Limited ("UBUSHA")
and Faritec Holdings Limited mutually agreed not to pursue the fulfilment of the
suspensive conditions of the acquisition agreement. UBUSHA results have not been
consolidated into the Group`s results.
DIVIDEND
No dividend has been declared as funds are being retained to assist with the
Group`s future growth.
GROUP INCOME STATEMENT
Actuals Actuals Audited
6 months to 6 months to 12 months
December December to June
2008 2007 2008
Total Total Total
(IFRS) (IFRS) (IFRS)
Rands Rands Rands
(`000) (`000) (`000)
Revenue 414 153 502 389 1 041 072
Cost of sales 320 560 380 374 782 622
Gross profit 93 593 122 015 258 450
Operating expenses before
depreciation and amortisation 105 202 89 653 202 924
Depreciation and amortisation 5 870 5 397 9 366
Profit/(loss) from operations (17 479) 26 965 46 160
Finance costs (10 727) (2 375) (7 610)
Investment income 1 046 727 1 245
Finance costs arising from
fair value adjustments (15 715) (8 982) (12 900)
Investment income arising from
fair value adjustments 11 972 8 896 10 545
Profit/(loss) before taxation (30 903) 25 231 37 440
Taxation (9 439) 7 311 8 332
Net profit/(loss) for the period (21 464) 17 920 29 108
Attributable to:
Minorities 39 174 244
Ordinary shareholders (21 503) 17 746 28 864
(21 464) 17 920 29 108
Reconciliation of headline
earnings/(loss):
Attributable earnings/(loss) for
the period (21 503) 17 746 28 864
Write off of liability - - -
Impairment of assets - - -
Profit on sale of business - - -
Headline earnings/(loss) for the (21 503) 17 746 28 864
period
Total number of ordinary shares
in issue (`000) 258 211 257 804 258 211
Weighted average number of ordinary
shares in issue:
Faritec shares (`000) 258 211 254 993 254 993
New options - - 1 406
Weighted average number
of ordinary shares in issue (`000) 258 211 254 993 256 399
Options (diluted no, which affects
diluted shares in issue) 2 569 7 232 531
Fully diluted shares in issue
(`000) 260 780 262 225 256 930
Earnings per share (cents) (8,3) 7,0 11,3
Headline earnings per share (cents) (8,3) 7,0 11,3
Fully diluted earnings per share (8,2) 6,8 11,2
(cents)
Fully diluted headline earnings
per share (cents) (8,2) 6,8 11,2
GROUP CASH FLOW STATEMENT
Actuals Actuals Audited
6 months to 6 months to 12 months
December December to June
2008 2007 2008
Total Total Total
(IFRS) (IFRS) (IFRS)
Rands Rands Rands
(`000) (`000) (`000)
Cash from operations before
working capital changes (4 791) 33 581 55 745
Working capital changes (23 362) 10 634 (21 238)
Taxation and finance charges (24 012) (10 624) (21 543)
Cash flow from operating activities (52 165) 33 591 12 964
Cash flow from investing activities (6 030) (17 186) (14 528)
Cash flow from financing activities 81 309 (5 938) (11 851)
Net movement in cash and cash
equivalents 23 114 10 467 (13 415)
Cash and cash equivalents at
beginning of period 18 753 32 166 32 166
Cash and cash equivalents at
end of period 41 865 42 633 18 751
GROUP BALANCE SHEET
Actuals Actuals Audited
6 months to 6 months to 12 months
December December to June
2008 2007 2008
Total Total Total
(IFRS) (IFRS) (IFRS)
Rands Rands Rands
(`000) (`000) (`000)
ASSETS
Non-current assets 207 026 182 708 196 553
Equipment 22 571 13 233 24 270
Software 12 858 12 574 10 189
Development costs capitalised 7 310 7 712 8 057
Goodwill 106 866 105 296 106 866
Trademarks 38 204 38 204 38 204
Investment in associate - - -
Loans receivable 2 712 2 080 2 688
Deferred taxation 16 505 3 609 6 279
Current assets 279 073 292 640 329 361
Inventories 13 482 6 941 7 106
Trade receivables 218 414 239 521 302 257
Other receivables 5 312 3 545 899
Taxation - - -
Cash and cash equivalents 41 865 42 633 19 099
Total assets 486 099 475 348 525 914
EQUITY AND LIABILITIES
Total equity 161 130 171 449 182 430
Shareholders` interest 163 022 173 481 184 360
Minority interest (1 892) (2 032) (1 930)
Non-current borrowings 119 680 28 066 34 336
Interest-bearing borrowings 110 142 20 514 26 939
Operating lease liabilities 7 683 5 500 5 391
Non-interest-bearing borrowings 1 855 2 052 2 006
Current liabilities 205 289 275 833 309 148
Trade payables 175 522 227 759 244 801
Other payables 17 346 34 895 44 275
Taxation 1 188 3 212 3 494
Bank overdrafts - - 348
Interest-bearing borrowings 10 394 9 233 12 301
Operating lease liabilities 839 734 1 779
Total equity and liabilities 486 099 475 348 525 914
Total number of ordinary shares
in issue (`000) 258 211 257 804 254 993
Net asset value (R`000) 163 022 173 481 154 324
Net asset value per share (cents) 63,1 67,3 61
Tangible net asset value (R`000) (2 216) 9 695 5 420
Tangible net asset value per share
(cents) (0,9) 3,8 2
GROUP STATEMENT OF CHANGES IN EQUITY
Actuals Actuals Audited
6 months to 6 months to 12 months
December December to June
2008 2007 2008
Total Total Total
(IFRS) (IFRS) (IFRS)
Rands Rands Rands
(`000) (`000) (`000)
Share capital 258 258 258
Balance at beginning of period 258 255 255
Issued during the period - 3 3
Share premium 158 941 158 644 158 777
Balance at beginning of period 157 607 157 607 157 607
Issued during the period 1 335 1 037 1 178
Write off of share issue costs - - (8)
Acquisition equity adjustment (85 455) (85 455) (85 455)
Balance at beginning of period (85 455) (85 455) (85 455)
Issued during the period
(J&J transaction) - - -
Share-based payments reserve 4 146 4 518 4 146
Balance at beginning of period 4 146 4 146 4 146
(restated)
Increase for the period - 372 -
Accumulated profits 85 131 95 516 106 634
Restated balance at beginning
of period 106 634 77 770 77 770
Net income for the period (21 503) 17 746 28 864
Total capital and reserves 163 022 173 481 182 430
All the group`s activities are conducted within Africa. For reporting purposes,
the group is organised into regions and subsidiaries. These regions are the
basis on which the group reports its primary segmental information. Principal
activities are as follows:
SEGMENTAL ANALYSIS
Inter
2008 Jhb Segment Wcpt Icp
Segment revenue 292 882 (2 163) 91 423 2 109
% Contribution 71% (1%) 22% 1%
Depreciation (1 609) - (135) -
Amortisation (247) - - (674)
Segment results (15 402) (279) 4 040 418
Capital expenditure -
property, equipment and
intangible assets 113 - 344 -
Segment assets 341 686 - 45 292 6 439
Segment liabilities (151 676) - (34 192) (1 525)
2007 - R`000
Segment revenue 383 548 - 91 602 3 574
% Contribution 76% - 18% 1%
Depreciation (1 817) - (25) -
Amortisation - - - (1 357)
Segment results 36 504 - 3 359 474
Capital expenditure -
property, equipment and
intangible assets 865 - 558 -
Segment assets 316 523 - 83 271 7 532
Segment liabilities (199 218) - (64 374) (2 592)
SEGMENTAL ANALYSIS CONTINUE
2008 Farimed Ebis Gms Total
Segment revenue 5 015 27 050 (2 163) 414 153
% Contribution 1% 7% (1%) 100%
Depreciation (3) (33) (3 169) (4 949)
Amortisation - - - (921)
Segment results 1 438 1 425 (9 119) (17 479)
Capital expenditure -
property, equipment and
intangible assets 359 82 4 995 5 893
Segment assets 5 133 25 149 45 895 469 594
Segment liabilities (2 027) (14 950) (119 411) (323 781)
2007 - R`000
Segment revenue - 23 665 - 502 389
% Contribution - 5% - 100%
Depreciation (7) (25) (2 166) (4 040)
Amortisation - - - (1 357)
Segment results (384) 863 (13 851) 26 965
Capital expenditure -
property, equipment and
intangible assets - 14 6 748 8 185
Segment assets 533 15 091 48 789 471 739
Segment liabilities (47) (9 840) (24 616) (300 687)
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: 13/02/2009 17:02:03 Produced by the JSE SENS Department.
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