| Wed 22 Sep 2010, 12:00 | | FWX - Foneworx Holdings Limited - Abridged condensed consolidated audited |
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FWX
FWX
FWX - Foneworx Holdings Limited - Abridged condensed consolidated audited
financial results for the year ended 30 June 2010, dividend declaration and
notice of annual general meeting
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")
ABRIDGED CONDENSED CONSOLIDATED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30
JUNE 2010, DIVIDEND DECLARATION AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS:
* Group revenue up 15.9% to R91.9 million (2009: R79.3 million).
* Profit attributable to equity holders of the parent up by 10.8% from R18.2
million to R20.1 million.
* Earning before net interest, tax, depreciation and amortisation up by 19.2%
to R29.1 million.
* Headline earnings per share up by 11.6% from 13.53 cents to 15.10 cents per
share.
* Cash and cash equivalents up by 23.1% from R60.2 million to R74.1 million.
* Net asset value per share increase by 21.6% from 51.74 cents per share to
61.70 cents per share.
* Dividend declaration of 4.50 cents.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Figures in Rands Audited as Audited as at
at 30 June 30 June 2009
2010
Assets
NonCurrent Assets
Property, plant and equipment 17 642 522 18 691 441
Intangible assets 4 015 774 3 137 652
Deferred tax 658 279 671 930
22 316 575 22 501 023
Current Assets
Inventories 784 115 649 139
Current tax receivable 207 657 281 678
Trade and other receivables 15 574 468 18 339 379
Cash and cash equivalents 74 137 785 61 273 411
90 704 025 80 543 607
Total Assets 113 020 600 103 044 630
Equity and Liabilities
Equity
Share capital 35 709 029 35 709 029
Retained income 47 212 075 32 486 829
82 921 104 68 195 858
Liabilities
NonCurrent Liabilities
Loan payable - 471 975
Interest bearing liabilities 8 430 556 9 579 244
8 430 556 10 051 219
Current Liabilities
Current tax payable 23 927 917 146
Interest bearing liabilities 1 142 287 1 941 728
Trade and other payables 14 951 247 16 025 210
Provisions 5 537 804 4 789 971
Unclaimed dividends 13 675 5 327
Bank overdraft - 1 118 170
21 668 940 24 797 553
Total Liabilities 30 099 496 34 848 772
Total Equity and Liabilities 113 020 600 103 044 630
Net asset value per share (cents) 61.70 51.74
Net tangible asset value per 58.71 48.41
share (cents)
Number of shares in issue 134 402 041 134 402 041
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Figures in Rands Note Audited year Audited year
ended 30 June ended 30 June
2010 2009
Revenue 91 921 685 79 288 057
Cost of sales (34 232 391) (31 558 081)
Gross profit 57 689 294 47 729 976
Other income 661 274 182 471
Operating expenses (10 819 137) (9 378 606)
Staff costs (18 416 563) (14 056 300)
Depreciation and amortisation (3 826 729) (3 201 048)
expense
Operating profit 25 288 139 21 276 493
Investment income 4 702 705 5 856 548
Finance costs (1 272 598) (1 610 989)
Profit before taxation 28 718 246 25 522 052
Taxation (8 552 918) (7 322 473)
Profit for the year attributable 20 165 328 18 199 579
to the equity holders of the
parent
Other comprehensive income - -
Total comprehensive income 20 165 328 18 199 579
attributable to the equity
holders of the parent
Basic earnings per share (cents) 2 15.00 13.54
Headline earnings per share 2 15.10 13.53
(cents)
Diluted earnings per share 2 14.96 13.38
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Figures in Share Share Total share Retained Total equity
Rands capital premium capital income
Balance at 1 134 402 35 574 627 35 709 029 17 916 105 53 625 134
July 2008
Changes in
equity
Total - - - 18 199 579 18 199 579
comprehensive
income for the
year
Dividends - - - (3 628 855) (3 628 855)
Total changes - - - 14 570 724 14 570 724
Balance at 1 134 402 35 574 627 35 709 029 32 486 829 68 195 858
July 2009
Changes in
equity
Total - - - 20 165 328 20 165 328
comprehensive
income for the
year
Dividends - - - (5 440 082) (5 440 082)
Total change - - - 14 725 246 14 725 246
Balance at 30 134 402 35 574 627 35 709 029 47 212 075 82 921 104
June 2010
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Figures in Rands Audited Audited
year ended year ended 30
30 June June 2009
2010
Cash flows from operating
activities
Cash generated from operations 31 217 067 22 694 381
Interest income 4 702 705 5 856 548
Finance costs (1 272 598) (1 610 989)
Tax paid (9 358 465) (7 620 311)
Net cash from operating 25 288 709 19 319 629
activities
Cash flows from investing
activities
Purchase of property, plant and (1 812 598) (4 671 537)
equipment
Proceeds on disposal of property, 7 175 922
plant and equipment
Purchase of intangible assets (27 683) (573 177)
Expenditure on product (1 614 053) (2 524 576)
development
Proceeds on disposal of - 32 331
intangible assets
Net cash from investing (3 454 327) (7 561 037)
activities
Cash flows from financing
activities
Repayment of loan payable (471 975) -
Repayment of interest bearing (1 948 130) (193 021)
liabilities
Dividends paid (5 431 734) (3 623 528)
Net cash from financing (7 851 839) (3 816 549)
activities
Total cash and cash equivalents 13 982 543 7 942 043
movement for the year
Cash and cash equivalents at the 60 155 242 52 213 199
beginning of the year
Total cash and cash equivalents 74 137 785 60 155 242
at end of the year
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL RESULTS
BASIS OF PREPARATION
The group annual financial statements from which these condensed consolidated
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 2009. These condensed consolidated 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 ("JSE").
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
The calculation of earnings per share is
based on profits of R20 165 328
attributable to shareholders of the parent 15.00 cents 13.54 cents
(2009: R18 199 579) and a weighted average
of 134 402 041 (2009: 134 402 041)
ordinary shares in issue during the year
The calculation of headline earnings per
share is based on profits of R20 165 328
attributable to shareholders of the parent
adjusted to R20 289 439 (2009: R18 199 579 15.10 cents 13.53 cents
adjusted to R18 183 701) and a weighted
average of 134 402 041 (2009: 134 402 041)
ordinary shares in issue during the year
Reconciliation between earnings and
headline earnings
Profit attributable to ordinary 20 165 328 18 199 579
shareholders of parent
Loss/(Profit) on disposal of 172 377 (22 053)
property, plant and equipment
Tax effect of the sale of associate (48 266) 6 175
and disposal of property, plant and
equipment
Headline earnings 20 289 439 18 183 701
The calculation of diluted earnings per
share is based on profits of R 20 165 328
(2009: R 18 199 579) and a weighted 14.96 cents 13.38 cents
average of 134 812 910 (2009: 136 002 041)
ordinary shares issued during the year
Reconciliation between weighted average
number of share in issue and diluted
weighted average number of share in issue:
Weighted average number of shares used in
the calculation of earnings per share 134 402 041 134 402 041
Shares deemed to be issued in respect
of:
Employee options 410 869 1 600 000
Diluted weighted average number of shares 134 812 136 002
in issue 910 041
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision makers. These chief operating
decision makers ("CODM") have been identified as the executive committee members
who make strategic decisions.
The CODM have organised the operations of the company based on its brands, and
this has resulted in the creation of the following segments:
BizWorx: the segment focusing on business related products;
MediaWorx: the segment focusing on information and entertainment services; and
Development: consisting of the three brands that are still within the
development and piloting phase being, CarbonWorx, DRWorx and IDWorx.
The accounting policies of the operating segments are the same as those
described in the Basis of Preparation above. MediaWorx provides services within
South Africa as well as in 36 African countries ("Africa sales"). Within the
period under review 3.5% (12 months 2009: 2.4%) of MediaWorx revenue can be
attributed to Africa sales. The company allocates revenue to each country based
on the domicile of the related customer. All of the company`s assets are located
in South Africa.
MediaWorx currently generates 36.8% and 17.9% (2009: 34.6% and 27.7%) of its
revenue through two customers respectively, being two mobile network providers
aggregating collection for a multitude of services. BizWorx generated 94.4%
(2009: 93.1%) through one single customer, being a fixed line network operator
in respect of Fax2Email services.
The reconciliation of gross profit to profit before taxation is provided in the
Statement of Comprehensive Income. The CODM reviews these income and expense
items on a group basis and not per individual segment.
All assets and liabilities are reviewed on a group basis by the CODM.
Figures in Rands Audited year Audited year
ended 30 June ended 30 June
2010 2009
Revenue
BizWorx 64 245 676 58 231 141
MediaWorx 26 080 018 20 105 047
Development 1 595 991 951 869
91 921 685 79 288 057
Cost of sale
BizWorx (21 452 155) (20 235 141)
MediaWorx (12 134 496) (10 895 004)
Development (645 740) (427 936)
(34 232 391) (31 558 081)
Gross profit
BizWorx 42 793 521 37 996 000
MediaWorx 13 945 522 9 210 043
Development 950 251 523 933
57 689 294 47 729 976
COMMENTARY
The board of directors of FoneWorx ("the board") is proud to announce their
results for the year ended 30 June 2010.
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 Fast Moving
Consumer Goods ("FMCG") market, business and financial community, as well as
media groups.
FINANCIAL PERFORMANCE
The group has continued to deliver steady growth in revenue despite the
prevailing economic conditions. Revenue has grown to R91.9 million (2009: R79.3
million), an increase of 15.9%.
Earning before net interest, tax, depreciation and amortisation improved by
19.2% to R29.1 million (2009: R24.4 million).
Earnings per share ("EPS") of the group, based on the weighted average number of
shares in issue, grew by 10.8% to 15.00 cents from 13.54 cents in the previous
corresponding period. Headline earnings per share ("HEPS") increased to 15.10
cents from 13.53 cents, a growth of 11.6%.
Profit before tax increased by 12.5% to R28.7 million (2009: R25.5 million) and
gross profit improved by 20.9% to R57.7 million (2009: R47.7 million), equating
to a gross profit margin of 62.7% (2009: 60.3%).
Net profit for the year improved to R20.2 million (2009: R18.2 million)
reflecting a 10.8% increase.
The net asset value of the group has increased to R82.9 million (2009: R68.2
million) over the past year, an increase of 21.5%. Cash and cash equivalent has
increased by 23.2% to R74.1 million (2009: R60.2 million).
OPERATIONAL PERFORMANCE
The year under review was an important period in terms of refining the
fundamental offerings for the three newest operating divisions within the group,
IDWorx, DRWorx and CarbonWorx.
The capacity to grow these new divisions is based on the technological platform
that the group has developed over the last 14 years. The technical platform has
been designed on a modular basis with layers of different bearer technologies or
modules added from time to time. This enables the group to design new products
and services at a rapid rate by aggregating historically designed or developed
software for a bespoke solution.
Channels to market all new products and solutions are always deployed on a
cautious and measured basis. Once there is an indication of a positive market
response, the new divisions are systematically leveraged and geared up to meet
market demand.
FoneWorx` philosophy is to maintain a horizontal technical platform with new
bearer services added from time to time, which provides the architecture and
backbone for each vertical service offering.
DIVISIONAL OVERVIEW
FoneWorx (Proprietary) Limited, being the main trading subsidiary of FoneWorx,
contributes the majority of the group`s revenue. FoneWorx (Proprietary) Limited
has five broad divisions, each of which has defined brand names as set out
hereunder:
MediaWorx
MediaWorx provides a broad array of interactive services such as SMS, IVR,
VMail, MMS and USSD as the bearer technologies to enable clients to offer
interactive promotions and customer relationship applications for database
compilation and management.
MediaWorx has sales teams based in Gauteng, Durban and Cape Town which provide
services to a broad range of FMCG suppliers as well as advertising agencies and
corporates.
Each campaign is individually managed by a sales executive from inception to
conclusion, where a "post-campaign" analysis is provided to the client with all
the attributes of the campaign measured and analysed.
Due to the nature of the majority of the company`s FMCG clients, an important
element of their campaigns or promotions is typically prize fulfillment, for
which MediaWorx provides a complete fulfillment service. This value add has
created a new and sustainable revenue stream for this division.
MediaWorx has a full-time African desk which has established relationships with
86 mobile networks in Africa covering 36 countries. This African footprint
enables MediaWorx to manage and host SMS services for big brand campaigns such
as Big Brother Africa. This division also provides services to the SABC and
MultiChoice Africa.
During the period under review, the following large well-known campaigns were
managed by MediaWorx: Telkom Charity Cup, Noot Vir Noot, OMO, PEP - Rica Riches,
Cornetto - Strike It Rich, Magnum Gold, Lucky Star - 50th Birthday campaign,
Bokomo - Pronutro and Sony - World Cup Living It.
BizWorx
BizWorx incorporates Fax2Email and PC2Fax which are both offered as individual
services, as well as the Virtual Business Centre ("VBC") which incorporates 25
distinct services offered via one portal on a pay-as-you-use basis. The services
offered via VBC include:
Fax2Email PC2Fax IVR
Mobi Website Disaster Recovery Conference Call
Hosting
MMS Telco Services Auto Receptionist
SurveyOnline Airtime Address Book
Email Diary Business Cards
SMS Accounting Business Plans
Business and Legal Business Management
Forms
Credit Card Classifieds
Processing
Fax2Email continues to be an important revenue earner, not only for BizWorx, but
also for the group.
Fax2Email and PC2Fax are digital solutions used by both large and small
enterprises, whilst the VBC is orientated more specifically to small, medium and
micro enterprises ("SMME").
All BizWorx services are marketed and sold via two distinct channels: internal
sales being those persons employed by the group and, independently owned
dealers, of which there are approximately 370. The dealer channel is composed of
individuals or entities that have their own products and services and channel to
market, and supplement their existing offering with the BizWorx suite of
services.
The FoneWorx Training Academy has successfully trained over 100 business owners
over the last 18 months and continues to be an important channel to train
business owners to fully utilise the VBC suite of services.
BizWorx incorporates the External Sales Agent ("ESA") status with Telkom, which
enables FoneWorx to sell a defined range of Telkom services or products. This
service offering enables the group to enhance its range of communication
services without managing an expensive infrastructure and is marketed via a
distinct group of trained dealers.
BizWorx intends expanding its Fax2Email and PC2Fax footprint to other countries
on the African continent and to this end has spent considerable time researching
the market opportunities in Kenya, Ghana, Nigeria, Zambia, Zimbabwe, Namibia and
Botswana. BizWorx intends deploying Fax2Email platforms in at least three of
these territories within the current calendar year and the balance the year
thereafter. This is expected to considerably increase Fax2Email traffic and
highlight FoneWorx as a dominant brand and player in Africa.
IDWorx
IDWorx provides bespoke identity verification services to corporate and
governmental institutions. These services enable the institution to comply with
the "Know Your Client" component of legislations such as the Financial
Intelligence Centre Act, No. 38 of 2001 and the Regulation of Interception of
Communications and Provision of Communication-related Information Act, No. 70 of
2002. In addition, new legislation such as the Consumer Protection Act, No 68 of
2008 and the Protection of Personal Information Bill will require institutions
to manage their data in a secure and regulated manner.
The services offered by IDWorx, using its bespoke proprietary software, will
assist institutions in their compliance with the above mentioned legislation.
IDWorx` pilot project with Companies and Intellectual Property Registration
Office ("CIPRO") has gone extremely well and has been extended to February 2011.
In addition, FoneWorx` partner for its FICA solution, Law Compliance
(Proprietary) Limited ("Law"), has secured a solution for ABSA Bank Limited`s
home loans division ("ABSA Home Loans"), which will require a roll-out to over
600 attorneys within the next twelve months. These attorneys will use the
identity verification solution developed by FoneWorx and Law relating to ABSA
Home Loans.
The board is of the view that as more legislation which requires the secure
management of data is passed, more markets will be opened for IDWorx.
DRWorx
DRWorx has been designed as a niche disaster recovery and work-flow continuity
solution for the stock broking fraternity. This division concluded its first
agreement with an independent stockbroker during the period under review and now
provides a hosted disaster recovery back-up infrastructure and work desks for
this stockbroker. The facility that DRWorx has developed is a shared
infrastructure for trading service providers as defined by the JSE. The JSE has
recently developed an accreditation policy for Shared Infrastructure Providers
("SIPs") and DRWorx is in the process of evaluating these requirements to
determine its future strategy.
CarbonWorx
CarbonWorx is a very exciting division which has been exceptionally well
received by individuals, corporates and government.
The primary objectives of CarbonWorx can be defined as:
the restoration of local eco systems, particularly in rural areas or urban areas
where land has been deforested. These identified areas are reforested with
endemic or indigenous trees;
carbon offsetting on a voluntary basis;
education of scholars and rural populations to develop and maintain indigenous
forests;
the creation of jobs by virtue of the forestation projects;
food security, incorporating vegetable planting schemes aligned to the
forestation projects; and
the planting of indigenous fruit bearing or medicinal trees to provide a purpose
for forestation from a social perspective, which includes cultural, religious
and leisure.
CarbonWorx has formed solid relationships with a number of influential role
players in order to execute this strategy. Partnerships have been established
with Champions of the Environment Foundation, the Department of Environmental
and Water Affairs, Contralesa (traditional leaders of SA) and SABC3.
The CarbonWorx programme enables individuals and corporates to purchase trees
via an innovative card-based programme using the group`s technology platform.
The programme commences with the purchase of a "starter kit", being a hi-co
magstripe card containing details of the cardholder`s first tree planted.
Thereafter, the cardholder can accumulate points from participating retail or
service outlets, which can be redeemed for additional trees.
CarbonWorx is in the process of signing up points partners to ensure cardholders
can accumulate points from as many points of presence throughout South Africa as
possible.
Designated land around South Africa is secured via long-term lease agreements to
ensure the project has longevity, sustainability and can be verified in line
with the guidelines set out by the United Nations Framework Convention on
Climate Change ("UNFCCC"). It is expected that CarbonWorx will show tremendous
growth over the next few years when more clarity is available from Government`s
Green and White Papers setting out goals for business. The requirements on
listed entities to comply with additional reporting standards such as social and
sustainable issues will also provide greater impetus to the objectives of
CarbonWorx.
PROSPECTS
The board remains confident about the outlook for the ensuing year to June 1011
and is especially positive about the prospects of IDWorx and CarbonWorx. It is
anticipated that these two divisions will provide new revenue streams for the
group and open up new channels for leveraging previously untapped sectors of the
economy.
The launch of CarbonWorx has been well timed and provides the group with some
proverbial "white space" which is difficult to find. We believe that corporates
are beginning to understand the need to embrace sustainable issues and see this
as an enabler for providing a competitive edge. The board has been encouraged by
the positive response to the unique and innovative offering and believe that
CarbonWorx can leverage new markets for the group.
The group continues to build a strong balance sheet and Fax2Email provides solid
cash flows. With the deployment of Fax2Email in other territories in Africa,
cash flows should be materially enhanced.
The board wishes to thank all staff and dealers for the part they have played
over the past year and to also thank its clients, suppliers and shareholders for
their continued support.
SUBSEQUENT EVENTS
There have been no significant events subsequent from year end, and up to the
date of this report, that would require adjustment.
CHANGE OF AUDITORS
During the year the Audit Committee of the group reviewed the proposed audit fee
of Deloitte & Touche for the audit of the group but unfortunately could not
agree on a fair and reasonable audit fee that was acceptable to all parties.
Consequently, Deloitte & Touche resigned as auditors and the Audit Committee
recommended and appointed PKF (Jhb) Inc. as the external auditors of the group.
AUDIT REPORT
The condensed consolidated annual financial statements for the year ended 30
June 2010 have been audited by PKF (Jhb) Inc. 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 condensed consolidated annual financial
statements is available for inspection at the company`s registered address.
CORPORATE GOVERNANCE
The board recognises 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 DECLARATION
Notice is hereby given that the board have resolved to declare a final dividend
of 4.5 cents per share relating to the year ended 30 June 2010 (2009: 4 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 R20.1 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, 8 October 2010
Date trading commences ex the Monday, 11 October 2010
dividend
Record date Friday, 15 October 2010
Date of payment Monday, 18 October 2010
Share certificates may not be dematerialised or rematerialised between Monday,
11 October 2010 and Friday, 15 October 2010, both dates inclusive.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 12th 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, 11 November 2010, 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 2010
was dispatched today.
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Financial Director
Officer
Johannesburg
22 September 2010
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: Pieter Scholtz CA(SA)
Auditors: PKF (Jhb) Inc.
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Designated Adviser: Merchantec Capital
Date: 22/09/2010 12:00:05 Produced by the JSE SENS Department.
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