| Mon 28 Sep 2009, 11:55 | | FWX - Foneworx Holdings - Group Audited Condensed Financial Results For The |
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FWX
FWX
FWX - Foneworx Holdings - Group Audited Condensed Financial Results For The
Year Ended 30 June 2009 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 CONDENSED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2009 AND
DIVIDEND DECLARATION
The FoneWorx board is proud to announce their results for the year ended 30
June 2009.
Net profit after tax up by 22.1% from R14.9 million to R18.2 million.
Net asset value per share increased by 27.5% from 40 cents per share to 51
cents per share.
Cash and cash equivalents up by 15.33% from R52.2 million to R60.2 million.
Net profit after tax as a percentage of revenue up 9.5% from 21% to 23%.
CONDENSED GROUP BALANCE SHEET AS AT 30 JUNE 2009
Figures in Rand Notes 2009 2008
Assets
Non-current assets
Property, plant and equipment 18 691 441 17 250 845
Intangible assets 3 137 652 196 206
Deferred tax 671 930 1 112 231
22 501 023 18 559 282
Current assets
Inventories 649 139 14 027
Loans to director - 60 000
Current tax receivable 281 678 -
Trade and other receivables 18 339 379 14 069 266
Cash and cash equivalents 2 61 273 411 52 213 198
80 543 607 66 356 491
Total Assets 103 044 630 84 915 773
Equity and Liabilities
Equity
Share capital 35 709 029 35 709 029
Retained income 32 486 829 17 916 105
68 195 858 53 625 134
Liabilities
Non-current liabilities
Loan payable 471 975 471 974
Instalment sale agreements and 908 785 787 571
long term loan
Long term loan 8 670 459 9 437 157
10 051 219 10 696 702
Current liabilities
Current tax payable 917 146 1 373 607
Current portion of instalment 1 941 728 1 489 266
sale agreements and long term
loan
Trade and other payables 16 025 211 13 494 855
Other accruals 4 789 971 4 236 209
Unclaimed dividends 5 327 -
Bank overdraft 2 1 118 170 -
24 797 553 20 593 937
Total Liabilities 34 848 772 31 290 639
Total Equity and Liabilities 103 044 630 84 915 773
CONDENSED GROUP INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2009
Figures in Rand Notes 2009 2008
Revenue 79 288 057 71 205 978
Cost of sales (31 558 081) (32 227 612)
Gross profit 47 729 976 38 978 366
Other income 182 471 644 362
Operating expenses (9 378 606) (6 832 082)
Staff costs (14 056 300) (13 132 902)
Depreciation and (3 201 048) (2 099 376)
amortisation expense
Operating profit 21 276 493 17 558 368
Investment income 5 856 548 2 569 481
Income from equity accounted - 132 914
investments
Finance costs (1 610 989) (307 846)
Profit before taxation 25 522 052 19 952 917
Taxation (7 322 473) (5 065 778)
Profit for the year 18 199 579 14 887 139
Basic earnings per share 3 13.54 13.00
(cents)
Diluted earnings per share 3 13.38 12.82
(cents)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2009
Figures in Rand Share Share Total share Retained Total equity
capital premium capital income
Balance at 1 134 402 35 574 627 35 709 029 3 028 966 38 737 995
July 2007
Changes in
equity
Profit for the - - - 14 887 139 14 887 139
year
Total changes - - - 14 887 139 14 887 139
Balance at 1 134 402 35 574 627 35 709 029 17 916 105 53 625 134
July 2008
Changes in
equity
Profit for the - - - 18 199 579 18 199 579
year
Dividends - - - (3 628 855) (3 628 855)
Total changes - - - 14 570 724 14 570 724
Balance at 30 134 402 35 574 627 35 709 029 32 486 829 68 195 858
June 2009
CONDENSED GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2009
Figures in Rand Notes 2009 2008
Cash flows from operating
activities
Cash generated from 22 694 381 24 031 948
operations
Interest income 5 856 548 2 569 481
Finance costs (1 610 989) (307 846)
Tax paid (7 620 311) (5 338 095)
Net cash from operating 19 319 629 20 955 488
activities
Cash flows from investing
activities
Purchase of property, plant (4 671 537) (1 976 428)
and equipment
Proceeds on disposal of 175 922 131 859
fixed assets
Purchase of intangible (573 177) (178 153)
assets
Expenditure on product (2 524 576) -
development
Proceeds on disposal of 32 331 -
intangible assets
Decrease in investment in - 809 210
joint venture
Acquisition of subsidiary - (1 912 000)
Net cash from investing (7 561 037) (3 125 512)
activities
Cash flows from financing
activities
Proceeds on share issue - 21 550 449
Finance lease payments (193 021) (1 813 964)
Dividends paid (3 623 528) -
Net cash from financing (3 816 551) 19 736 485
activities
Total cash movement for the 7 942 043 37 566 461
year
Cash at the beginning of the 52 213 198 14 646 737
year
Total cash at the end of the 60 155 241 52 213 198
year
NOTES TO THE CONDENSED GROUP FINANCIAL RESULTS
BASIS OF PREPARATION
The group annual financial statements from which these condensed group annual
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 group annual financial statements for
the year ended 30 June 2008. 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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased by 15.3% during the year under review to
R60.2 million (2008: R52.2 million).
EARNINGS PER SHARE
Figures in Rand 2009 2008
The calculation of earnings per share is based
on profits of R18 199 579 attributable to
shareholders of the parent (2008: R14 887 139) 13.54 cents 13.00 cents
and a weighted average of 134 402 041 (2008:
114 515 814) ordinary shares in issue during
the year
The calculation of headline earnings per share
is based on profits of R18 199 579
attributable to shareholders of the parent
adjusted to R18 183 701 (2008: R14 887 139 13.53 cents 12.75 cents
adjusted to R14 596 014) and a weighted
average of 134 402 041 (2008: 114 515 814)
ordinary shares in issue during the year
Reconciliation between earnings and headline
earnings
Profit attributable to ordinary shareholders 18 199 579 14 887 139
of the parent
Profit on sale of associate - (270 000)
Profit on disposal of property, plant and (22 053) (38 125)
equipment
Tax effect of the sale of associate and 6 175 17 000
disposal of property, plant and equipment
equipment
Headline earnings 18 183 701 14 596 014
The calculation of diluted earnings per share 13.38 cents
is based on profits of R18 199 579 (2008: R14
887 139) and a weighted average of 136 002 041 12.82 cents
(2008: 116 115 814) ordinary shares issued
during the year.
Reconciliation between earnings and diluted
earnings per share:
Weighted average number of shares used in the 134 402 041 114 515 814
calculation of earnings per share per share
Shares deemed to be issued in respect of:
Employee options 1 600 000 1 600 000
136 002 041 116 115 814
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.
NATURE OF THE BUSINESS
FoneWorx is an investment holding company whose subsidiaries provide
interactive telecommunication, switching and business services, orientated
around fixed and mobile networks. These include a broad range of services to
the FMCG market, business and financial community as well as media groups.
FINANCIAL PERFORMANCE
Earnings before net interest, tax, depreciation and amortisation ("EBITDA")
improved by 23.8% to R24.4 million (2008: R19.7 million).
The dilution of shareholding brought on by the BEE transaction with Kabo
Capital (Proprietary) Limited that took place eight days before the end of the
previous financial period has had an impact on the earnings per share ("EPS")
and the headline earnings per share ("HEPS") of the group. The group used the
weighted average number of shares issued, as is required in terms of
International Financial Reporting Standards ("IFRS"), to calculate the
earnings per share. If the full shareholding was used to calculate the
earnings per share for the previous period it would have been 11.07 cents per
share and EPS would have increased by 22.3% to 13.54 cents per share. However
the earnings per share, based on the weighted average number of shares in
issue, was 13 cents per share for the previous corresponding period and it
grew by 4.2% to 13.54 cents. Headline earnings per share increased to 13.53
cents from 12.75 cents, a growth of 5.9%.
Profit before tax has increased by 28% to R25.5 million (2008: R19.9 million)
and gross profit has improved by 22.6% to R47.7 million (2008: R38.9 million)
which is 60.2% of revenue (2008: 54.7%).
Profit for the year improved to R18.2 million (2008: R14.9 million) which is
an increase of 22.1%.
The net asset value of the group has increased to R68.2 million (2008: R53.6
million) during the past year, an increase of 27.2%.
OPERATIONAL PERFORMANCE
In previous reports, reference was made to our three re-defined operating
divisions being: Infotainment Services, Business Services and Switching
Services.
These divisions have been further streamlined from an operational and a
branding perspective. This will provide a more internalised focus and will
provide our stakeholders with greater clarity on our products and services.
The company has been encouraged by our pilot phase in Identity Verification
which has shown positive results and illustrates the opportunity to fully
divisionalise this service for opportunities both inside and outside of South
Africa under the name of IdWorx.
Similarly, the substantial development made in the IdWorx division, together
with our loyalty ("CRM") applications, has created the foundation and
architecture for a new and exciting product within the carbon abatement arena
which we will divisionalise as CarbonWorx. The skill sets that FoneWorx has
developed in hosting our own multi-faceted solutions over the past 13 years
has enabled FoneWorx to offer managed disaster recovery and workflow
continuity services to niche markets managed under the division DRWorx. Our
structures and potential for growth is now clearly demarcated and provides for
vertical growth whilst using a horizontal technical infrastructure and
intellectual property which flows across all vertical silos.
INFOTAINMENT SERVICES
MediaWorx
FoneWorx continues to provide a broad range of interactive services (such as
SMS, IVR, MMS, VMail) to our media stakeholders, South Africa Broadcasting
Corporation ("SABC") and MultiChoice Africa(Proprietary) Limited ("M Mobile -
Africa"). Our proprietary voice and data platform provides over 1 300
simultaneous channels and allows FoneWorx to have a distinct advantage over
its competitors.
Our focus has been on providing all our stakeholders in this division with
enhanced customer care and the best of breed service levels. Our footprint in
Africa has now grown to 73 networks in 32 countries. Brand name campaigns
managed by this division include: Telkom Charity Cup, Big Brother Africa III,
Telkom Phone Card 2009, Telkom Teacher Of The Year, Clover, Ola Magilika, Ola
Magnum Competition, Lucky Star Namibia and Botswana, Lucky Star 50th birthday,
various PEP campaigns, Dekat, Noot Vir Noot, SABC1 Generations, So You Think
You Can Dance and Strictly Come Dancing.
BUSINESS SERVICES
BizWorx
This division`s broad range of services continues to show consistent growth
and once again our Fax2Email has shown positive growth. Over 22 million faxes
were processed through our platform during the period under review.
Our Virtual Business Centre ("VBC") was completely revamped and new services
added to this exciting menu of prepaid services. The VBC offering now
incorporates 25 distinct services. A business management course specifically
orientated around the VBC services has been developed and was introduced
during September 2009, in order to assist small, medium and micro enterprises
("SME") in growing their businesses and becoming more competitive. This
initiative will enable SMEs to have a better understanding of how to use the
VBC services whilst obtaining a good academic foundation to sound business
principles.
Incorporated in our Business Services offering is our External Sales Agent
("ESA") status with Telkom which enables FoneWorx to sell a range of Telkom
services. For the second year in succession, FoneWorx achieved the highest
sales amongst its ESA competitors and our future sales in this domain look
promising. We anticipate continued growth in this division.
Although FoneWorx only employs 47 full-time staff members, it also has a
dealership program which constitutes around 370 dealers. During the period
under review dealership commissions paid was in excess of R20 million. This
model demonstrates the effective footprint and market presence that FoneWorx
has created, which ensures that we have access to most parts of the country to
channel our existing and new products. In addition, the sizeable commission
paid further illustrates the group`s commitment in supporting the growth of
SMEs.
SWITCHING SERVICES
IdWorx
The pilot phase of IdWorx in South Africa has been extremely positive. We have
been able to refine and enhance the identity verification system whilst in a
live environment and also gather tremendous knowledge around the deployment of
enrolment centres, customer expectations, maintenance, customer care and the
employment and training of Commissioners of Oaths. This knowledge will be of
great benefit to FoneWorx for its future deployment of the identity
verification system, particularly in territories outside of South Africa.
The company`s anti-money laundering solution, "YourIdentity" ("FICA" in the
South African context), has clearly demonstrated the many ancillary solutions
applicable to this product, primarily around identity verification systems,
which are capable of being deployed in South Africa. We believe that this will
provide a number of new markets to the group and commensurate new revenue
streams. FoneWorx, in association with PricewaterhouseCoopers Inc ("PwC")
opened enrolment stations for the issuing of our "YourIdentity" verification
cards in Durban, Cape Town, Port Elizabeth, Nelspruit, Sandton, Randburg,
Tshwane and Bloemfontein. These stations were effectively used for our pilot
with a government institution, CIPRO.
CarbonWorx
We are very excited about this new division, which will leverage off our
existing technical platform thus enabling us to enter the market relatively
quickly. The development commenced during the period under review and we are
anticipating launching this product around November 2009. CarbonWorx focuses
on the various means of abating Greenhouse Gas ("GHG") emissions with an
initial focus on methodologies of reducing carbon dioxide ("CO2"). This
initiative will initially incorporate carbon sinks
(reforestation/aforestation) incorporating carbon credits that have been
generated from either Voluntary Emission Reduction ("VER") initiatives or
Clean Development Mechanisms ("CDMs").
The product and solution will be offered to natural and juristic persons and
will be a card-based program where credits for carbon abatement can be
acquired via various channel partners. Our launch of this product will be
timeous and coincide with the World Cup in 2010, and we would hope to capture
some of the transient market visiting South Africa.
DRWorx
FoneWorx has, over the last 13 years, acquired proficient skills in
development, hosting and maintaining its own telecommunications and hosting
environment. Based on this history we have identified opportunities to provide
niche back-up facilities for the stockbroking fraternity and small to medium
businesses. A dedicated computer hosting environment has been built
specifically for this initiative and we anticipate the launch of this service
in November 2009. To accommodate the expansion in our various switching
service divisions, FoneWorx now occupies the entire building premises in
Randburg. The entire building has now been refurbished and the second "state-
of-the art" hosting environment has been built.
PROSPECTS
Extract from Chief Executive Officer`s report.
"I am confident about the outlook for the ensuing year to June 2010 and in
particular very excited about our prospects with our Identity Verification
Services, CarbonWorx and Disaster Recovery Services which will create new
revenue streams for the group. Revenue streams for the latter have commenced
in the first quarter of the current financial year.
The launch of our training academy is also very exciting and to this end we
have developed a 25 seater, fully equipped training room and have commenced
the training of Commissioners of Oaths for our Identity Verification Services
and also launched our VBC Business Management Course for SMMEs.
Most of our anticipated growth is expected to come from organic growth,
however management will continue to look at acquisitive opportunities to
complement any of our existing divisions.
The group has a strong balance sheet, with enhanced cash flows which will
assist us in our future growth.
I would like to thank our customers and suppliers and express my appreciation
to my co-directors, staff and dealers for the part they have played over the
past year.
I would also like to thank all our shareholders for their continued support."
ABSA BANK LIMITED ("ABSA") - LEGAL MATTER
The company has made use of Absa Cash Focus Banking ("Cash Focus") for third
party payments. Only designated parties are authorised to enable payments to
be authorised and processed. On Saturday, 21 February 2009, unauthorised
person/s, unknown to FoneWorx, accessed Cash Focus and made unauthorised
transfers from FoneWorx`s 8 registered accounts and unlawfully transferred R3
014 900 into 183 unknown Absa accounts. From these latter accounts funds were
withdrawn from Autotellers, retail banks etc. Despite an incomplete forensic
audit on the part of Absa, Absa has denied any liability. Absa however, has
been unwilling to supply critical information to FoneWorx, including IP
addresses and other salient facts used in the transfer process, or how
authorities to process payments were changed.
FoneWorx conducted its own due diligence, including contracting an independent
polygraph forensic investigator and placed its own staff on polygraph
examinations. All relevant staff were cleared and no deception was indicated.
This matter has been reported to the South African Police.
Absa has subsequently recovered R1 555 781 and paid it to FoneWorx, leaving a
shortfall of R1 459 119. Despite FoneWorx showing Absa many inaccuracies and
shortcomings in their responses to FoneWorx and/or their systems, Absa have
declined to refund the balance.
Subsequent to Absa refunding the recovered amounts, an additional amount of R1
555 781 was deposited into the trust account of the company`s attorney. Absa
has subsequently attempted to recover this amount from the attorney, claiming
that it was a duplicate payment. The board of directors believe that FoneWorx
has an enforceable claim against Absa and therefore have instructed its
attorney to hold the disputed amount in trust until such time as this matter
has been resolved.
SUBSEQUENT EVENTS
There have been no significant events subsequent from year end and up to the
date of this report, that would require adjustment.
AUDIT REPORT
The group`s consolidated annual financial statements for the year ended 30
June 2009 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 audit
report on the group annual financial statements and the set of condensed group
annual financial statements is available for inspection at the company`s
registered address.
CORPORATE GOVERNANCE
The board of directors recognise the need to conduct the affairs of the
company with integrity and in compliance with the principles of the King II
report. Throughout the period under review the company has complied with the
principles as set out in the King II report.
DIVIDEND ANNOUNCEMENT
Notice is hereby given that the board have resolved to declare a final
dividend of 4 cents per share relating to the year ended 30 June 2009 (2008:
2.72 cents per share) to be paid to all ordinary shareholders recorded in the
share register on the record date. The dividend is declared out of
consolidated current year profits of R18.2 million. In compliance with the
requirements of Strate and Schedule 24 of the JSE Listings Requirements, the
following dates are applicable:
Last day to trade cum the dividend Friday, 16 October 2009
Date trading commences ex the Monday, 19 October 2009
dividend
Record date Friday, 23 October 2009
Date of payment Monday, 26 October 2009
Share certificates may not be dematerialised or rematerialised between Monday,
19 October 2009 and Friday, 23 October 2009, both dates inclusive.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 11th annual general meeting of shareholders of
the company will be held at the offices of the company, First Floor, Corner
Bram Fischer Drive and Will Scarlet Road (entrance on Will Scarlet Road),
Ferndale, Randburg, at 10:00, on Thursday, 19 November 2009, to transact the
business stated in the notice of the annual general meeting, which is
contained in the Annual Report.
Shareholders are advised that the Annual Report for the year ended 30 June
2009 was dispatched today.
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
28 September 2009
Business and Registered Office:
FoneWorx House,
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: Ashvin Govan Mancha B Proc * - Chairman, Mark Smith BA LLB - Chief
Executive Officer, Pieter Scholtz CA(SA) - Financial Director, Ronald Graver,
Robert Russell, Gaurang Mooney BA * (Botswana), Andrew Molusi*, April Masitwe*
(* Independent non-executive)
Company Secretary: P A Scholtz CA(SA)
Auditors: Deloitte & Touche
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Designated Adviser: Merchantec (Proprietary) Limited
Date: 28/09/2009 11:55:02 Produced by the JSE SENS Department.
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