| Wed 25 Mar 2009, 8:49 | | FWX - Foneworx Holdings Limited - Unaudited Interim Results For The Six |
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FWX
FWX
FWX - Foneworx Holdings Limited - Unaudited Interim Results For The Six
Months Ended 31 December 2008
FONEWORX HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration Number: 1997/010640/06)
Share Code: FWX ISIN number: ZAE000086237
("FoneWorx" or "the group" or "the company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
- Revenue up 12.5%
- Profit before tax up 14.3%
- Cash reserves up 117.5%
- Profit for the period up 24.2%
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008
Unaudited Unaudited Audited
31 31 30 June
December December 2008
2008 2007
R`000 R`000 R`000
ASSETS
Non-current assets 18 936 11 032 18 559
Property, plant and 17 369 10 458 17 251
equipment
Intangible assets 730 44 196
Deferred tax asset 837 - 1 112
Investment in associate - 530 -
and joint venture
Current assets 67 920 37 187 66 356
Inventory 240 30 14
Loan to director - 12 60
Current tax receivable - - -
Trade and other 12 129 11 610 14 069
receivables
Cash and cash equivalents 55 551 25 535 52 213
Total assets 86 856 48 219 84 915
EQUITY AND LIABILITIES
Capital and reserves 58 679 24 179 53 625
Share capital 134 114 134
Share premium 35 575 14 044 35 575
Accumulated profits 22 970 10 021 17 916
Non-current liabilities 9 913 6 977 10 696
Instalment sale agreements 322 1 266 788
Long-term loan 9 120 5 338 9 437
Deferred tax liability - 373 -
Loans payable 471 - 471
Current liabilities 18 264 17 063 20 594
Trade and other payables 12 382 12 331 13 495
Provisions 3 980 3 135 4 236
Tax payable 377 324 1 374
Current portion of non- 1 525 1 273 1 489
current liabilities
Total equity and 86 856 48 219 84 915
liabilities
Number of shares in issue 134 402 114 071 134 402
041 429 041
Net asset value per share 43.66 21.20 39.90
(cents)
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Growth Unaudited Unaudited Audited
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Revenue 12.5% 39 420 35 045 71 206
Cost of Sales (16 317) (15 406) (32 227)
Gross profit 17.6% 23 103 19 639 38 979
Other operating income 8 87 644
Share of profits from - - 133
joint venture
Staff costs (7 722) (6 495) (13 133)
Depreciation and (1 489) (967) (2 106)
amortisation expense
Other operating expenses (5 291) (3 240) (6 826)
Profit from operations (4.6%) 8 609 9 024 17 691
Finance costs (827) (384) (308)
Investment income 3 155 932 2 569
Profit before tax 14.3% 10 937 9 572 19 952
Income tax expense (2 255) (2 580) (5 065)
Profit for the period 24.2% 8 682 6 992 14 887
Weighted average number 134 402 041 114 071 429 114 515 814
of shares in issue
Basic earnings per share 5.4% 6.46 6.13 13.00
(cents)
Headline earnings per 5.4% 6.46 6.13 12.75
share (cents)
Diluted basic earnings 5.4% 6.46 6.13 12.80
per share (cents)
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Profit attributable to 8 682 6 992 14 887
ordinary shareholders
Items included in other
operating expenses:
Profit on the sale of - - (270)
associate
Profit on disposal of - - (38)
property, plant and
equipment
Tax effect of the sale of - - 17
associate and disposal of
property, plant and
equipment.
Headline earnings 8 682 6 992 14 596
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 DECEMBER
2008
Unaudited Unaudited Audited
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Share capital 134 114 134
Balance at beginning of 134 114 114
the period
Issued during the - - 20
period
Share premium 35 575 14 044 35 575
Balance at beginning of 35 575 14 044 14 044
the period
Issued during the - - 21 531
period
Accumulated profits 22 970 10 021 17 916
Balance at beginning of 17 916 3 029 3 029
period
Profit for the period 8 682 6 992 14 887
Dividend paid to (3 628) - -
shareholders
58 679 24 179 53 625
CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 DECEMBER
2008
Unaudited Unaudited Audited
31 31 30 June
December December 2008
2008 2007
R`000 R`000 R`000
Cash flow from operating 6 227 11 564 20 954
activities
Net cash generated from 10 504 13 196 24 031
operations
Finance costs ( 827) ( 384) ( 308)
Investment income 3 155 933 2 569
Normal tax paid (2 977) (2 181) (5 338)
Dividend paid (3 628) - -
Cash flow from investing (2 142) (5 181) (3 124)
activities
Cash flow from financing ( 747) 4 505 19 736
activities
Net increase in cash and cash 3 338 10 888 37 566
equivalents
Cash and cash equivalents at 52 213 14 647 14 647
beginning of the period
Cash and cash equivalents at 55 551 25 535 52 213
end of the period
FINANCIAL COMMENTARY
The directors of FoneWorx are pleased to present the unaudited interim
results for the six months ended 31 December 2008. These results reflect
continued positive growth in all key performance areas.
Revenue for the group increased by 12.5% to R39.4 million compared to R35
million for the previous corresponding period and also improved gross profit
from R19.6 million to R23.1 million, an increase of 17.6% from the previous
corresponding period. The profit after tax for the period grew by 24.2% to
R8.7 million from R7 million. Earnings per share did not display the same
growth as a result of the issue of 20 333 612 shares to Kabo Capital
(Proprietary) Limited prior to the start of this financial period, which
increased the weighted average number of shares, thus diluting earnings per
share.
The increase in revenue can largely be attributed to the group`s Business
Services which continue to show good growth. In addition, improved margins
from both the Infotainment Services and Business Services have contributed to
the bottom line.
The group`s cash position improved to cash on hand of R55.5 million compared
to R25.5 million in the previous corresponding period, which represents an
increase of 117.6%. The group remains debt free, except for short-term
finance for vehicles and capital equipment, and a ten year bond of R9.2
million on the head office building in Randburg.
During the period under review the staff complement was increased to cater
for the development of a number of new solutions resulting in an increase in
staff expenditure of 18.9% when compared to the previous corresponding
period. This expenditure was essential for the group to continue to support
and enhance existing services reflecting growth as well as the introduction
of new services.
The operating space at the group`s head office was doubled as we acquired
ownership of the remaining 50% of the building to cater for new training
facilities and our new Disaster Recovery and Work Continuity offering.
Similarly with the additional space, investment in capital goods increased
which resulted in a 54% increase in depreciation charged for the period.
BUSINESS OVERVIEW
The group is structured in four distinct divisions namely: Infotainment
Services, Business Services, Switching Services (Identity Access Management /
Financial Intelligence Centre Act, 2001 (Act 38 of 2001) ("FICA")) and
Disaster Recovery (Work Continuity) Services.
Infotainment Services incorporates above and below the line interactive
services incorporating Short Message Services ("SMS"), Interactive Voice
Response ("IVR") and Multi Media Solutions ("MMS"). This division`s revenue
continued to grow during the period under review and over 450 campaigns were
managed. Our clients in this division typically include advertising agencies,
Fast Moving Consumer Goods companies ("FMCG") and corporates. Media clients
include the SABC and MultiChoice for African services. FoneWorx Infotainment
Services are offered in 32 countries over 56 distinct networks. Content
services have been incorporated into this division.
Business Services continued to show good growth during the period under
review. The bouquet of services in this division includes: Fax2Email, PC2Fax,
Document Storage, Fax On Demand, Auto Receptionist and bespoke services
designed specifically to meet our clients` needs. The typical clients for
these services include small, medium and large corporates. The uptake and
growth in these services has been exceptionally good and we expect this trend
to continue.
Switching Services incorporates Identity Access Management ("IAM"), secure
document storage and Anti-Money Laundering ("AML") solutions incorporating
products for South Africa and the rest of the globe. In South Africa the
solution is orientated around FICA and Regulation of Interception of
Communications and Provision of Communication Related Information Act, 2002
(Act 70 of 2002) ("RICA").
The FICA solution was successfully trialled with a division of a large bank
from October 2008 to December 2008 and the outcome was very positive. Over
one hundred attorneys and other professionals have been exposed to and
trained on the system.
FoneWorx Academy was launched, which incorporates a state-of-the-art
interactive training facility to train Commissioners of Oaths and Accountable
Institutions. The training is provided by specialist trainers and enables
participants to be trained on the FoneWorx AML solution as well as on the
legislation pertaining to all AML initiatives. The solution has been exposed
to a number of Accountable Institutions and supervisory bodies and it is
anticipated that a number of pilot projects will commence within the next few
months.
The solution will result in a national database of prescribed documents being
developed in a digital format using secure Public Key Infrastructure. In
addition, FoneWorx incorporated innovative finger vein biometrics into the
solution which dramatically enhances the security profile of the product.
The finger vein biometrics was developed by Hitachi in association with
FoneWorx`s programming staff. FoneWorx has been appointed as a re-seller of
this technology by Hitachi and will offer this solution exclusively
throughout Africa.
FoneWorx has received very positive interest from Nigeria, Kenya, Ghana and
Tanzania for the AML solution and we are commencing discussions with such
interested parties.
The solution is transaction based and it is anticipated that this application
can generate large volumes.
Disaster Recovery (Work Continuity) is a new division and is primarily
targeted at a niche market for Disaster Recovery (Work Continuity). FoneWorx
has developed a state-of-the-art hosting environment specifically aimed and
geared at the stockbroking and trading fraternity. The facility will provide
back-ups, storage and complete work continuity facilities to enable
stockbrokers and allied companies to continue working in the event of a
disaster at their primary place of business; this could include: power
outages, communication failures, fires, Acts of God and the like.
PROSPECTS
The outlook for the full financial year to June 2009 remains positive
particularly with the positive response to our FICA solutions and Disaster
Recovery (Work Continuity) services. As mentioned in the business overview
above, the group has spent both time and resources in the gearing up of our
AML and work continuity services which will bode well for future growth and
also provide the group with new revenue streams not traditionally associated
to the group.
We would like to thank all our management, employees, partners, dealers and
other business stakeholders, customers and shareholders for their support.
DIVIDEND POLICY
It is the board`s policy to pay annual dividends and therefore no interim
dividend is declared.
BASIS OF PREPERATION
The accounting policies applied in the preparation of these condensed
financial statements which are based on reasonable judgments and estimates
are in accordance with International Financial Reporting Standards ("IFRS")
and are consistent with those applied in the annual financial statements for
the year ended 30 June 2008. These condensed financial statements as set out
in this report have been prepared in terms of IAS 34 - Interim Financial
Reporting, the Companies Act, 1973 (Act 61 of 1973), as amended, and the
Listings Requirements of JSE Limited.
The interim results have not been audited or reviewed by the company`s
auditors.
SEGMENTAL REPORTING
The company has not elected early adoption of IFRS 8: Segmental Reporting,
and will only implement IFRS 8 for the period commencing on 1 July 2009.
Management has therefore not presented segmental reporting during the period
being reported on.
The group is engaged in the Information and Communications Technology ("ICT")
sector. As these activities comprise an integrated operation, the group
regards this as a single primary business segment, on which all information
is disclosed in this results announcement.
POST BALANCE SHEET EVENTS
On Saturday, 21 February 2009 a fraud was committed through the company`s
bank accounts, held at ABSA Bank Limited ("the Bank").
It is understood that unauthorised person/s, unknown to FoneWorx, accessed
the company`s bank accounts and made unauthorised transfers from eight
company accounts and unlawfully transferred R3.1 million into unknown
accounts held at the Bank. Funds were subsequently withdrawn from the unknown
accounts via Autotellers, retail banks etc.
In our opinion the Bank has conducted an incomplete forensic audit and
despite this they have thus far declined any liability and they have been
unable or unwilling to supply to FoneWorx critical information as to how the
fraud was effected.
FoneWorx, assisted by an independent third party, has conducted its own due
diligence in respect of the fraud committed, the results of which have
cleared the company`s staff of any involvement.
The Bank has subsequently indicated that they can recover an amount of R1 549
958, leaving a shortfall of R1 550 042 of which the Bank has to date declined
to refund. FoneWorx intends to continue its discussions with the Bank in the
attempt to recover the shortfall, but may need to resort to litigation if
such discussions fail.
Other than as set out above, the directors are not aware of any other matter
or circumstance arising since the end of the six months ended 31 December
2008.
DIRECTORATE
There have been no changes to the directorate during the period under review.
Directors: Ronald Graver, Ashvin Govan Mancha* (Chairman), Gaurang Mooney*
(Botswana), Robert Russell, Mark Smith (Chief Executive Officer), Pieter
Scholtz (Financial Director) Andrew Connie Molusi*, April Masitwe*
* Independent non-executive
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
25 March 2009
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
Company Secretary: P A Scholtz CA(SA)
Auditors: Deloitte & Touche
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Designated Adviser: Merchantec (Proprietary) Limited
Website: www.foneworx.co.za
Date: 25/03/2009 08:49:07 Produced by the JSE SENS Department.
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