| Wed 16 Mar 2011, 7:15 | | FWX - Foneworx Holdings Limited - Unaudited consolidated interim results for the |
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FWX
FWX
FWX - Foneworx Holdings Limited - Unaudited consolidated interim results for the
six months ended 31 December 2010
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")
Unaudited consolidated interim results for the six months ended 31 December 2010
NAV up 19%
Dividends paid up 11%
Revenue up 1%
Cash reserves up 9%
EPS up 1%
HEPS up 6%
COMMENTARY
The board of directors of FoneWorx ("the board") is pleased to present the
unaudited consolidated interim results for the six months ended 31 December 2010
("the interim period").
Revenue for the group increased by 0.9% to R46.2 million from R45.8 million in
the previous corresponding period, while gross profit decreased from R28.8
million to R27.2 million, a 5.6% decrease from the previous corresponding
period. This decrease is attributed to the higher cost of sales within the
product mix of the MediaWorx business segment.
Operating expenditure increased by 16.0% from R5.0 million to R5.8 million,
primarily due to the costs of setting up our new Fax2Email platforms in Kenya,
Zambia and Nigeria. Staff costs reduced from R9.7 million to R7.5 million, a
22.7% reduction. This is due to a reduction in average cost per head and other
staff related costs.
Profit after tax grew by 1.0% to R9.8 million from the previous corresponding
period`s R9.7 million.
During the interim period, all the share options held by the Interconnective
Solutions Share Incentive Trust were taken up by the option holders with the
result that, as at reporting date, the number of shares in issue increased by
1.2% from 134 402 041 to 136 002 041, with the weighted average number of shares
in issue during the interim period being 134 533 189.
Cash on hand increased by 9.0% when compared to the previous corresponding
period; up from R66.9 million to R72.9 million. During the interim period, the
company declared and paid a dividend of R6.0 million (4.5 cents per share),
11.1% up from the previous dividend of R5.4 million (4 cents per share). Net
asset value per share increased from 53.9 cents in December 2009 to 64.3 cents,
a 19.3% increase.
The group`s interim earnings are flat primarily due to the negative impact of
the 2010 Soccer World Cup ("World Cup") on the earnings of BizWorx and MediaWorx
between June 2010 and August 2010.
BizWorx`s services, such as Fax2Email, PC2Fax, document storage, fax on demand
and auto receptionist, are premised on subscribers being in the office in the
context of "business as usual". However, the World Cup had a negative impact on
"office occupancy" with a vastly reduced presence. Many office-goers were either
at stadiums, fan parks or out of the country thus reducing our business traffic.
The MediaWorx offerings were also negatively impacted by the delay in services
being launched or decisions being held off until after the end of the World Cup.
One such example is the Telkom Charity Cup which the group has managed for the
last seven years and which traditionally commences in June and runs for eight
weeks. Due to the World Cup, the Telkom Charity Cup was delayed by two weeks and
ended one week early, thus reducing revenue from this campaign.
Disaster Recovery for the group
A number of the group`s services are critical to FoneWorx` clients, namely
business subscribers and media houses, and therefore minimum downtime is crucial
to maintain best of class service.
Accordingly, in line with the guidelines set out in the third report on
Corporate Governance in Southern Africa ("King III") pertaining to risk, and in
association with the internal audit committee`s input on the management of risk
relating to group operations, FoneWorx has embarked on the development of a
comprehensive disaster recovery programme incorporating contingency and
diversification plans in operating sites and with regards to telecommunications.
To achieve its objectives, an amount of R2.6 million has been earmarked for this
programme, R2.0 million of which was expensed during the interim period. The
programme is expected to be completed by June 2011. The assets in the statement
of financial position reflect this increase.
This strategy will enable the group`s critical services to operate from diverse
sites. In the event of a complete disaster occurring at head office where the
majority of the server farm currently resides, FoneWorx` operating divisions
will be able to operate fully from alternate sites with minimal to no disruption
to client services.
Business Overview
The group has five brands: MediaWorx (infotainment), BizWorx (business
services), IDWorx (identity access management), DRWorx (disaster recovery) and
CarbonWorx (restoration of ecosystems). These brands are divided into three
segmental divisions for reporting purposes, and are discussed in detail in
"segmental reporting" below.
MediaWorx
The MediaWorx brand provides a broad range of infotainment services, including
short message services, interactive voice response, multimedia services and
fulfillment.
MediaWorx services are offered both in South Africa and on the rest of the
continent, and include 36 countries across 86 mobile networks. Clients include
Media groups such as the SABC for local services and Multichoice for services to
the continent, Fast Moving Consumer Goods enterprises and general corporate
clients.
Significant inroads, for new services that will launch in the group`s next
reporting period, have been made into Africa.
BizWorx
The BizWorx brand incorporates a broad range of business services including
Fax2Email, PC2Fax, document storage, fax on demand and auto receptionist, which
are either sold as stand alone products or are bundled in a product called The
Virtual Business Centre ("VBC"). Except for the decline experienced during the
World Cup, BizWorx` services continued to grow in numbers with Fax2Email
subscribers listed at 310,000 with monthly growth around 4,000 new subscribers.
Substantial progress has been made with our expansion into Africa. During the
period under review, extensive work was done in Zambia, Kenya and Nigeria, where
trading entities were formed under the name and style; FoneWorx Zambia, FoneWorx
Kenya and FoneWorx Nigeria.
The group`s proprietary equipment for Fax2Email and PC2Fax has been deployed in
Zambia and Kenya. Equipment will be deployed in Nigeria during April 2011.
Our Fax2Email and PC2Fax services will commence commercially in Zambia during
March 2011 and in Kenya during April 2011. It is anticipated that services will
commence in Nigeria some time during May or June 2011.
IDWorx
The IDWorx brand provides identity access management ("IAM") solutions,
incorporating secure document storage and biometrics. These applications can be
used for local Anti-Money Laundering applications ("AML") such as FICA, as well
as similar AML legislation in other countries.
The brand "YourIdentity" was successfully deployed in the Companies and
Intellectual Property Registration Office ("CIPRO") over the last 18 months and
has become the de facto standard for agents wishing to access the CIPRO website
for certain applications.
During the interim period, a new IAM application was written and commercialised
for the security industry. This application will provide an identity card for
security officers and will be managed via a secure central portal. The launch of
this application is anticipated to take place during April 2011.
A bespoke FICA application was also developed and tested for the stockbroking
fraternity and the first system was deployed during March 2011.
DRWorx
The DRWorx brand provides disaster recovery and workflow continuity for targeted
niche clients such as stockbrokers. The first stockbroker occupied FoneWorx`
hosting environment approximately 12 months ago for testing and quality control
purposes to meet the JSE Limited`s ("JSE") requirements.
FoneWorx/DRWorx was required to obtain prior accreditation from the JSE as the
hosted environment on shared services was a new concept to both the JSE and to
stockbrokers. Final approval and accreditation was provided by the JSE during
January 2011, and accordingly the FoneWorx/DRWorx site is now recognised as an
approved JSE site.
CarbonWorx
The CarbonWorx brand is primarily focused on the restoration of ecosystems
(afforestation projects), greenhouse gas ("GHG"), corporate footprint analysis
and carbon offsets.
Electronic mechanisms and transformation projects have been developed for
sequestering carbon dioxide through voluntary offset projects which are
developed in association with local land owners throughout South Africa. These
transformation projects have a multi-faceted approach including job creation,
restoration of ecosystems, transfer of skills and GHG offsets.
The official launch of CarbonWorx was held in the Eastern Cape on 2 August 2010
and was attended by various members of parliament, including the Minister of
Environmental Affairs. The first afforestation site in Mthatha, Eastern Cape was
opened with the first few thousand trees planted.
PROSPECTS
The financial year to June 2011 is expected to be challenging as a result of the
difficult first six months. However, we remain positive, particularly with
regard to the launching of our BizWorx Fax2Email platforms in Zambia, Kenya and
Nigeria. Furthermore, an additional three countries on the African continent
have also been identified and preliminary work continues for launch in these
territories later in this calendar year. These launches require low capital
investment due to the fact that FoneWorx has developed these platforms and the
software is proprietary. In addition, they are annuity based services with very
low maintenance.
With sustainability and climate change issues continuously gaining momentum we
are also confident that CarbonWorx will grow from strength to strength,
particularly in view of the launch of the South African National Green Paper
2010 and The 17th Conference of the Parties of the United Nations Framework
Convention on Climate Change being held in South Africa in November 2011.
We would like to thank our directors, management, employees, partners, dealers
and other stakeholders, including staff, customers and shareholders for their
support during the interim period.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
Growth as at as at as at
31 31 30 June
December December
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non-current assets 26 276 21 455 22 317
Property, plant and 21 253 18 089 17 643
equipment
Intangible assets 5 023 3 207 4 016
Deferred tax asset - 159 658
Current assets 90 393 83 406 90 704
Inventory 1 767 764 784
Current tax receivable 194 - 208
Trade and other 15 483 15 693 15 574
receivables
Cash and cash 72 949 66 949 74 138
equivalents
Total assets 116 669 104 861 113 021
EQUITY AND LIABILITIES
Capital and reserves 87 441 72 441 82 921
Share capital 136 134 134
Share premium 36 373 35 575 35 575
Accumulated profits 50 932 36 732 47 212
Non-current 9 769 9 029 8 431
liabilities
Interest bearing 9 064 9 029 8 431
liabilities
Deferred tax liability 705 - -
Current liabilities 19 459 23 391 21 669
Trade and other 16 088 15 202 14 951
payables
Provisions 1 402 4 976 5 538
Tax payable 340 388 24
Unclaimed dividends 13 5 14
Bank overdraft - 1 433 -
Current portion of non- 1 616 1 387 1 142
current liabilities
Total equity and 116 669 104 861 113 021
liabilities
Net asset value per 19.3% 64.3 53.9 61.7
share (cents)
Net tangible asset 17.7% 60.6 51.5 58.7
value per share
(cents)
Number of shares in 136 002 134 402 134 402
issue 041 041 041
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Growth six six months 12
months ended months
ended ended
31 31 30 June
December December
2010 2009 2010
R`000 R`000 R`000
Revenue 1% 46 230 45 800 91 921
Cost of sales (18 986) (17 026) (34 232)
Gross profit (5%) 27 244 28 774 57 689
Other operating income 285 473 661
Staff costs (7 499) (9 720) (18 417)
Depreciation and (1 935) (1 980) (3 827)
amortisation expense
Other operating (5 820) (5 027) (10 819)
expenses
Finance costs (453) (620) (1 272)
Investment income 2 222 2 284 4 703
Profit before tax (1%) 14 044 14 184 28 718
Income tax expense (4 275) (4 498) (8 553)
Profit for the period 1% 9 769 9 686 20 165
Other comprehensive - - -
income
Total comprehensive 9 769 9 686 20 165
income for the period
Profit attributable to 9 769 9 686 20 165
the equity holders of
the parent company
Headline earning
reconciliation
Adjustment for:
Net after tax loss on 42 (471) 124
sale of property,
plant and equipment &
shares in subsidiary
Headline earnings 6.5% 9 811 9 215 20 289
Weighted average 134 533 134 402 134 402
number of shares in 189 041 041
issue
Basic earnings per 0.7% 7.26 7.21 15.00
share (cents)
Headline earnings per 6.3% 7.29 6.86 15.10
share (cents)
Diluted earnings per 0.7% 7.26 7.21 14.96
share (cents)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
six six months 12
months ended months
ended ended
31 31 30 June
December December
2010 2009 2010
R`000 R`000 R`000
Share capital 136 134 134
Balance at beginning 134 134 134
of period
Share options taken up 2 - -
by staff
Share premium 36 373 35 575 35 575
Balance at beginning 35 575 35 575 35 575
of period
Share options taken up 798 - -
by staff
Accumulated profits 50 932 36 732 47 212
Balance at beginning 47 212 32 486 32 487
of period
Profit for the period 9 769 9 686 20 165
Dividend paid to (6 049) (5 440) (5 440)
shareholders
87 441 72 441 82 921
Dividend declared 4.5 4 4
(cents per share)
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six six months 12
months ended months
ended ended
31 31 30 June
December December
2010 2009 2010
R`000 R`000 R`000
Cash flow from
operating
activities 9 565 13 824 25 289
Net cash generated from 10 379 16 393 31 217
operations
Finance costs (453) (620) (1 273)
Investment income 2 222 2 284 4 703
Normal tax paid (2 583) (4 233) (9 358)
Cash flow from
investing
activities (6 613) (1 448) (3 454)
Purchase of (728) - (27)
intangible asset
Procurement of - - -
subsidiary
Purchase of property, plant (4 109) (1 001) (1 813)
and equipment
Proceeds on disposal of - - -
property, plant and
equipment
Proceeds on disposal of - - -
intangible assets
Expenditure on product (1 776) (447) (1 614)
development
Cash flow from financing 1 909 (1 576) (2 420)
activities excluding
dividends paid
Dividends paid (6 049) (5 440) (5 435)
Net increase in cash and (1 188) 5 360 13 983
cash equivalents
Cash and cash equivalents at 74 138 60 156 60 155
beginning of period
Cash and cash
equivalents at
end of period 72 950 65 516 74 138
BASIS OF PREPARATION
The accounting policies applied in the preparation of these unaudited
consolidated interim results, which are based on reasonable judgements and
estimates, are in accordance with International Financial Reporting Standards
and are consistent with those applied in the annual financial statements for the
year ended 30 June 2010. These unaudited consolidated interim results 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, AC500 series of
interpretations as issued by the Accounting Principles Board, and the Listings
Requirements of the JSE.
The interim results have not been audited or reviewed by the group`s auditors.
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-makers ("the CODM"). The 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, namely CarbonWorx, DRWorx and IDWorx.
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 31 30 June
December December
2010 2009 2010
R`000 R`000 R`000
Revenue
BizWorx 31 537 32 252 64 246
MediaWorx 13 562 12 552 26 080
Development 1 131 996 1 596
46 230 45 800 91 922
Cost of sales
BizWorx (10 569) (10 745) (21 452)
MediaWorx (8 180) (6 003) (12 134)
Development (237) (278) (646)
(18 986) (17 026) (34 232)
Gross Profit
BizWorx 20 968 21 507 42 793
MediaWorx 5 382 6 549 13 946
Development 894 718 950
27 244 28 774 57 689
The accounting policies applied to the operating segments are the same as those
described in the basis of preparation. MediaWorx provides services within South
Africa as well as in 34 African countries ("Africa sales"). Within the period
under review, 4.5% (six months 2009: 2.0%; 12 months 2010: 3.5%) of MediaWorx`
revenue can be attributed to Africa sales. The company allocates revenue to each
country based on the relevant domicile of the customer. All of the company`s
assets are located in South Africa.
MediaWorx currently generates 63.7% (2009: 73.4%) of its revenue through two
large network service providers and BizWorx generated 98.1% (2009: 94.3%)
through one single land line service provider.
The reconciliation of the 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.
DIVIDEND POLICY
It is the board`s policy to pay annual dividends and therefore no interim
dividend has been declared for this interim period. Dividends paid during the
period relate to dividends declared in prior periods.
POST BALANCE SHEET EVENTS
The board is not aware of any material events that have occurred between the end
of the interim period and the date of this report.
DIRECTORATE
Between 30 June 2010 and the date of this report, Messrs Andrew Conway Molusi
and Mr April Masitwe resigned as independent non-executive directors, with
effect from 17 November 2010.
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
16 March 2011
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 non-
executive)
Website: www.foneworx.co.za
Company Secretary: P A Scholtz (CA (SA))
Designated Adviser: Merchantec Capital
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Date: 16/03/2011 07:15:01 Produced by the JSE SENS Department.
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