| Fri 23 Sep 2011, 12:35 | | FWX - Foneworx Holdings Limited - Abridged condensed consolidated |
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FWX
FWX
FWX - Foneworx Holdings Limited - Abridged condensed consolidated
audited financial results for the year ended 30 June 2011, 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 2011, DIVIDEND DECLARATION AND NOTICE OF ANNUAL GENERAL
MEETING
HIGHLIGHTS:
- An increase of 17.1 % in net asset value to R97.1 million from
R82.9 million.
- Cash and cash equivalents up by 10.7% from R74.1 million to R82.0
million.
- Group revenue steady at R91.5 million (2010: R91.9 million).
- Earnings before interest, tax, depreciation and amortisation
("EBITDA") decreased by 1.3% to R28.7 million (2010: R29.1
million).
- Dividend to be paid up 22.2% to 5.5 cents per share from 4.5 cents
per share.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Figures in Rands Audited as at Audited as at
30 June 2011 30 June 2010
Assets
Non-Current Assets
Property, plant and equipment 18 722 811 17 642 522
Intangible assets 6 117 771 4 015 774
Investments in subsidiaries - -
Deferred tax asset - 658 279
24 840 582 22 316 575
Current Assets
Inventories 1 773 441 784 115
Loans to group companies - -
Current tax receivable 953 128 207 657
Trade and other receivables 17 870 247 15 574 468
Cash and cash equivalents 82 066 745 74 137 785
102 663 561 90 704 025
Total Assets 127 504 143 113 020 600
Equity and Liabilities
Equity
Share capital 36 509 029 35 709 029
Retained income (accumulated loss) 60 616 201 47 212 075
97 125 230 82 921 104
Liabilities
Non-Current Liabilities
Interest bearing liabilities 8 189 139 8 430 556
Deferred tax liability 744 784 -
8 933 923 8 430 556
Current Liabilities
Current tax payable 62 754 23 927
Interest bearing liabilities 1 691 658 1 142 287
Trade and other payables 18 011 715 14 951 247
Provisions 1 651 175 5 537 804
Unclaimed dividends 27 688 13 675
21 444 990 21 668 940
Total Liabilities 30 378 913 30 099 496
Total Equity and Liabilities 127 504 143 113 020 600
Net asset value per share (cents) 71.4 61.7
Net tangible asset value per share 66.9 58.7
(cents)
Number of shares in issue 136 002 041 134 402 041
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Figures in Rands Audited Audited year
year ended ended 30 June
30 June 2011 2010
Revenue 91 579 433 91 921 685
Cost of sales (36 054 678) (34 232 391)
Gross profit 55 524 755 57 689 294
Other income 506 191 661 274
Operating expenses (10 088 985) (10 819 137)
Staff costs (17 235 800) (18 416 563)
Depreciation and amortisation expense (4 217 151) (3 826 729)
Operating profit 24 489 010 25 288 139
Investment income 4 229 316 4 702 705
Finance costs ( 913 903) (1 272 598)
Profit before taxation 27 804 423 28 718 246
Taxation (8 280 205) (8 552 918)
Profit for the year attributable to 19 524 218 20 165 328
the equity holders of the parent
Other comprehensive income - -
Total comprehensive income for the 19 524 218 20 165 328
year attributable to equity holders
of the parent
Basic earnings per share (cents) Note 14.4 15.0
2
Diluted earnings per share (cents) Note 14.4 15.0
2
Headline earnings per share (cents) Note 14.4 15.1
2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Figures in Rands Share Share Total Retained Total equity
capital premium share income
capital
Balance at 01 July 134 35 574 35 709 32 486 829 68 195 858
2009 402 627 029
Changes in equity
Total comprehensive - - - 20 165 328 20 165 328
income for the year
Dividends - - - (5 440 082) (5 440 082)
Total changes - - - 14 725 246 14 725 246
Balance at 01 July 134 35 574 35 709 47 212 075 82 921 104
2010 402 627 029
Changes in equity
Total comprehensive - - - 19 524 218 19 524 218
income for the year
Employee share 1 600 798 800 - 800,000
option scheme 400 000
Dividends - - - (6 120 092) (6 120 092)
Total changes 1 600 798 800 13 404 626 14 204 126
400 000
Balance at 30 June 136 36 373 36 509 60 616 201 97 125 230
2011 002 027 029
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Figures in Rands Audited Audited year
year ended ended 30 June
30 June 2011 2010
Cash flows from operating activities
Cash generated from operations 24 649 918 31 217 067
Interest income 4 229 316 4 702 705
Dividends received
Finance costs ( 913 903) (1 272 598)
Tax paid (7 583 785) (9 358 465)
Net cash from operating activities 20 381 546 25 288 709
Cash flows from investing activities
Purchase of property, plant and (4 432 306) (1 812 598)
equipment
Proceeds on disposal of property, 263 496 7
plant and equipment
Purchase of intangible assets ( 902 046) ( 27 683)
Repayment of (loan advanced to) group - -
companies
Expenditure on product development (2 383 605) (1 614 053)
Net cash from investing activities (7 454 461) (3 454 327)
Cash flows from financing activities
Movement in share trust shares 800 000 -
Advance (repayment) of loan payable - ( 471 975)
Advance in (repayment of) interest 307 954 (1 948 130)
bearing liabilities
Dividends paid
(6 106 079) (5 431 734)
Net cash from financing activities (4 998 125) (7 851 839)
Total cash and cash equivalents 7 928 960 13 982 543
movement for the year
Cash and cash equivalents at the 74 137 785 60 155 242
beginning of the year
Total cash and cash equivalents at 82 066 745 74 137 785
end of the year
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL RESULTS
1. BASIS OF PREPARATION
The Group annual financial statements from which these abridged
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 applied in the
preparation of these abridged condensed consolidated financial results,
which are based on reasonable judgements and estimates, are in
accordance with IFRS and are consistent with those applied in the Group
annual financial statements for the year ended 30 June 2010. These
abridged condensed consolidated financial statements set out in this
report have been prepared in terms of IAS 34 - Interim Financial
Reporting, the AC500 series, the Companies Act 2008, (Act 71 of 2008)
and the Listings Requirements of JSE Limited ("JSE").
2. RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Figures in Rands Audited Audited
year ended year ended
30 June 2011 30 June 2010
The calculation of earnings per share is 14.4 cents 15.0 cents
based on profits of R19 524 218
attributable to shareholders of the parent
(2010: R 20 165 328) and a weighted average
of 135 202 041 (2010: 134 402 041) ordinary
shares in issue during the year
The calculation of headline earnings per 14.4 cents 15.1 cents
share is based on profits of R19 524 218
attributable to shareholders of the parent
adjusted to R19 563 835 (2010 R 20 165 328
adjusted to R 20 289 439) and a weighted
average of 135 202 041 (2010: 134 402 041)
ordinary shares in issue during the year
Reconciliation between earnings and
headline earnings
Profit attributable to ordinary shareholders 19 524 218 20 165 328
of parent
Loss on disposal of property, plant and 55 024 172 377
equipment
Tax effect of the sale of associate and ( 15 407) ( 48 266)
disposal of property, plant and equipment
Headline earnings 19 563 835 20 289 439
The calculation of diluted earnings 14.4 cents 15.0 cents
per share is based on profits of R 19
524 218 (2010: R 20 165 328) and a
weighted average of 135 202 041
(2010: 134 812 910) ordinary shares
issued during the year
Reconciliation between earnings and
diluted earnings per share:
Weighted average number of shares used in 135 202 041 134 402 041
the calculation of earnings per share
Shares deemed to be issued in respect of - 410 869
Employee Options
135 202 041 134 812 910
3. 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: consists 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. MediaWorx provides services
within South Africa as well as in 36 African countries ("Africa sales").
Within the period under review, 4.8% (2010: 3.5%) 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 32.1% and 21.2% (2010: 36.8% and 17.9%) of
its revenue through two customers respectively. BizWorx generated 95.5%
(2020: 94.4%) through one single customer.
The reconciliation of gross profit to profit before taxation is provided
in the Condensed 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 Audited year
year ended ended
30 June 2011 30 June 2010
Revenue
BizWorx 64 369 424 64 245 676
MediaWorx 24 626 667 26 080 018
Development 2 583 342 1 595 991
91 579 433 91 921 685
Cost of sale
BizWorx (20 259 924) (21 452 155)
MediaWorx (14 368 085) (12 134 496)
Development (1 426 669) ( 645 740)
(36 054 678) (34 232 391)
Gross Profit
BizWorx 44 109 500 42 793 521
MediaWorx 10 258 582 13 945 522
Development 1 156 673 950 251
55 524 755 57 689 294
COMMENTARY
The board of directors of FoneWorx ("the Board") is proud to announce
their results for the year ended 30 June 2011.
NATURE OF THE BUSINESS
The Group provides 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
Although the Group is marginally down on last year`s revenue and net
profit before tax, the Board is satisfied with the Group`s overall
performance and it believes that a positive platform was established for
the next reporting period.
The downturn in revenue and net profit before tax materialised mainly
due to:
* the negative impact which the 2010 World Cup had on the first
six months of the financial year ended 30 June 2011;
* a slow-down in MediaWorx campaigns as a result of uncertainty
around the introduction of the Consumer Protection 2008, (Act
No. 68 of 2008) ("Consumer Protection Act") and relevant
regulations, which has subsequently been clarified with the
publication of the regulations;
* the cancellation of the Telkom Charity Cup;
* timing delays in certain client campaigns, which have rolled
over into the new financial period; and
* generally poor prevailing economic conditions resulting in
protracted deal cycles.
Despite the abovementioned factors, FoneWorx has a positive inflow of
cash.
The Group constantly strives to improve its products and service
offering to its customers and dealers, and we are pleased that great
strides were made in this regard during the year under review, thereby
establishing a solid platform for our next financial year.
The net asset value of the Group has increased to R97.1 million (2010:
R82.9 million) over the past year, an increase of 17.1%. Cash and cash
equivalents have increased by 10.7% to R82.0 million (2010: R74.1
million).
The Group consistently looks for value adding acquisitions that
complement its five divisions and cash on hand would be used for an
appropriate acquisition.
In addition, a portion of the Group`s cash resources will be used in
deploying the Africa BizWorx Fax2Email expansion.
Earnings per share ("EPS") of the Group, based on the weighted average
number of shares in issue, decreased by 3.7% to 14.4 cents from 15.0
cents in the previous corresponding period. Headline earnings per share
("HEPS") decreased to 14.4 cents from 15.1 cents, a decline of 4.2%.
Profit before tax decreased by 3.2% to R27.8 million (2010: R28.7
million) and gross profit reduced by 3.5% to R55.5 million (2010: R57.7
million), equating to a gross profit margin of 60.6% (2010: 62.7%).
Net profit for the year under review decreased to R19.5 million (2010:
R20.2 million) reflecting a 3.5% decrease.
Operational Performance
FoneWorx is predominantly an information, communication and technology
company that focusses on switching various formats of voice and data
through its distributed proprietary technology platform. The Group`s
extensive intellectual platform embedded in its technology enables it to
provide a broad range of products and services which have been
divisionalised and branded as follows:
MediaWorx
This division is the most mature and continues to perform well with its
diverse range of bearer technologies incorporating, Interactive Voice
Response ("IVR"), Short Message Services ("SMS"), Multi Media Services
("MMS"), Unstructured Supplementary Services Data ("USSD") and mobi
applications.
This division was exposed to the effects of uncertainty pertaining to
the implementation of the Consumer Protection Act which was occasioned
by the delay in the publication of the regulations. This caused a
slowdown in a number of promotions and competitions as media houses,
advertising agencies and FMCG brands were uncertain as to the regulated
SMS rates and tariffs. Post the release of the regulations, clarity in
the process and tariffs has resulted in a marked improvement in the
number of campaigns. Although the maximum rate for promotions and
competitions has been limited to R1.50 per SMS, the division has seen an
increase in volumes which has mitigated revenue reductions.
During the year under review, this division successfully managed 750
campaigns for a number of established brands such as: Telkom Win Your
Share, Telkom Charity Cup, Telkom Knockout, Cornetto, Top Billing, SA`s
Got Talent, SATMA Awards, Metro FM Awards, SA Sports Awards and PepTxt.
It was unfortunate that the Telkom Charity Cup was cancelled by Telkom
as FoneWorx has run this event for the past eight years. However, the
division continues to host and manage the Telkom Knock-Out which is much
bigger this year and starts on 4 October 2011.
The Cape Town office moved into new leased premises on 21 July 2011.
This move has improved the branding in Cape Town and places FoneWorx in
a good position to manage the increase in work for the region.
MediaWorx Africa
MediaWorx Africa has a presence in 37 countries in Africa comprising 88
mobile networks. It manages numerous SMS interactive campaigns,
including well-known brands such as Big Brother Africa. During the year
under review, 14 campaigns were managed for major brands such as Big
Brother Africa, Face of Africa, and Naija Singhs.
This division hosts and manages a system for Samsung which maintains a
database to register mobile handsets for warranty purposes and to
distinguish between grey imports and genuine devices.
BizWorx
BizWorx is the business service arm of FoneWorx, providing a broad range
of business applications orientated around small, medium and micro
enterprises ("SMMEs") and also incorporates facilities designed
specifically for larger corporations or Non-Government Organisations
("NGO`s"). BizWorx incorporates a broad range of applications including,
but not limited to:
Fax2Email Web2Fax IVR
Mobi Website Hosting Disaster Recovery Conference Call
MMS Telco Services Auto Receptionist
SurveyOnline Airtime Address Book
Email Diary Classifieds
SMS Accounting Business Plans
Business and Legal Forms Business Management Credit Card
Processing
During the year under review three independent technical platforms were
deployed in Zambia, Nigeria and Kenya, following the formation of
operating legal entities in these same three countries.
The installations of the technical platforms came with a number of
logistical, regulatory, cultural and operational challenges, which
required BizWorx to adapt its South African offering of Fax2Email and
Web2Fax to meet the local requirements of these territories. The
offering in these territories includes a pre-paid scratch card offering
which minimises any bad debt and is very simple and easy to use. The
technical platforms are running well and all the technical architecture,
including the Voice Over IP ("VOIP") routing to the Group`s Randburg
Call Centre for customer care, is working well.
The Africa division has a number of challenges in the marketing roll-out
in these territories, but remains very positive about these markets and
revenue opportunities.
IDWorx
This division develops and manages bespoke identity verification and
image storage systems to corporate and governmental institutions.
The software and intellectual property is proprietary and can be
effectively applied to meet the requirements of various forms of
legislation, such as FICA, RICA and the Consumer Protection Act.
IDWorx continues to pilot one of these applications with Companies and
Intellectual Property Commission ("CIPC") (formerly the Companies and
Intellectual Property Registration Office), which is used by agents who
are required to manage on-line changes to certain company forms. IDWorx
has also successfully developed a FICA application for the stockbroking
industry and has piloted the application with a private stockbroking
firm.
A new application for the security and leisure industry has been
developed which will assist this sector with the identity management of
its staff. This application will also be piloted in both the security
industry (security officers / manned guarding) and tourism industry
during the latter half of 2011.
Should the Protection of Personal Information Bill ("POPI") be passed
into legislation, then the IDWorx application will provide a solution
for a number of affected industries.
DRWorx
DRWorx is a niche disaster recovery and work-flow continuity solution
aimed at the stockbroking fraternity and small businesses. During the
year under review, the FoneWorx hosting and infrastructure environment
was approved by the JSE as an approved hosting site. Currently, three
stockbroking firms have availed themselves of this facility as part of
the Shared Infrastructure Providers ("SIPs") JSE accreditation policy.
CarbonWorx
This division has four main drivers which incorporate:
Carbon Footprint Evaluation
Many corporates are becoming more aligned to sustainability reporting
and are conscious of the need to understand their own corporate
footprint. CarbonWorx will assist companies to quantify their footprint
in line with international standards ISO 14064 and the Greenhouse Gas
Protocols.
Training
Understanding the impact of global warming and climate change is
becoming an essential element of strategy and in understanding
sustainability. The CarbonWorx two day training course will assist
corporates to train staff in having a better understanding of the
challenges being faced.
Afforestation and Carbon Sequestration
The primary driver is the restoration of eco systems, the creation of
"green jobs" and the transfer of skills and education.
CarbonWorx` strategy is aligned with the National Climate Change
Response Green Paper of 2010 which, inter alia: "encourages agro-
forestry and indigenous tree production as a potential socio economic
benefit of environmentally integral planting regimes and tree breeding
as an adaptive response to changing landscape conditions."
CarbonWorx has formed a working relationship with The Champions of the
Environment Foundation (Bantu Holomisa, Chairperson), Contralesa
(Phatekile Holomisa) and the Department of Environmental and Water
Affairs for the various afforestation initiatives. The first site in
Mthatha, Eastern Cape was completed in the latter half of the year under
review with the planting of over 3 000 indigenous trees in a fully
verified site. Three larger sites are currently being developed and will
create 76 jobs for members of the local communities for a minimum
period of two years for the development of these sites.
New sites in KwaZulu-Natal are currently being planned for similar
community projects.
All CarbonWorx` projects follow the guidelines of the Clean Development
Mechanism ("CDM") as developed by the United Nations Framework
Convention on Climate Change ("UNFCCC").
With the build-up to the Conference of the Parties (COP 17) which will
take place in Durban in November 2011, it is anticipated that this
division will receive more traction.
Point Accumulation Programme
This division is currently signing up retail outlets which will provide
green points to CarbonWorx cardholders who purchase goods or services
from them. The cardholder can then redeem the points for trees via the
CarbonWorx website.
Prospects
The Board remains confident about the outlook for the ensuing financial
year to 30 June 2012. The beginning of the new financial year has been
positive and the Board is hopeful that all the energy and work that was
deployed in the year under review will reap rewards going forward.
Despite its marketing challenges in various African territories, the
Board believes that the development of the Fax2Email and Web2Fax
services into Africa will render positive rewards.
MediaWorx and BizWorx continue to provide solid annuity income and the
Board is positive that the development division will provide new revenue
streams to the Group and open up new channels for leveraging relatively
untapped sectors of not only the South African economy, but also those
in the rest of Africa.
A special thanks to all our staff and dealers for the part they have
played over the past year.
In addition, the Board would like to thank our customers, suppliers and
shareholders for their continued support.
SUBSEQUENT EVENTS
No significant events have occurred between the financial year end, and
the date of this report.
AUDIT REPORT
The abridged condensed consolidated annual financial statements for the
year ended 30 June 2011 have been audited by PKF (Jhb) Inc. registered
auditors. The Board has approved these abridged consolidated annual
financial statements which have been condensed for purposes of this
report. The auditors` unmodified audit report on the Group annual
financial statements and the abridged condensed consolidated annual
financial statements are 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 III report.
Throughout the period under review the Company has complied with the
principles as set out in the King III report except where the Board
believes that the cost and practicality of compliance is not beneficial
to the Group.
FINAL AND SPECIAL DIVIDEND DECLARATION
Notice is hereby given that the Board has resolved to declare a dividend
of 5.5 cents per share. This dividend comprises of a regular dividend of
4.3 cents per share relating to the year ended 30 June 2011 (2010: 4.5
cents per share) and a special dividend of 1.2 cents per share. The
special dividend, which is subject to approval by the Exchange Control
Department of the South African Reserve Bank ("SARB"), is paid to
provide the shareholders of the Group with dividend growth on last year
and because the Company has surplus cash reserves.
The dividend is to be paid to all ordinary shareholders recorded in the
share register on the record date as set out below. 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, 7 October 2011
Date trading commences ex the Monday, 10 October 2011
dividend
Record date Friday, 14 October 2011
Date of payment Monday, 17 October 2011
Share certificates may not be dematerialised or rematerialised between
Monday, 10 October 2011 and Friday, 14 October 2011, both dates
inclusive.
A further announcement regarding the receipt of SARB approval will be
made in due course.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 13th Annual General Meeting of
shareholders of the Company will be held at the offices of the Company,
FoneWorx House, Corner Bram Fischer Drive and Will Scarlet Road
(entrance on Will Scarlet Road), Ferndale, Randburg, at 10:00, on
Thursday, 10 November 2011, to transact the business stated in the
notice of Annual General Meeting, which is contained in the Annual
Report.
Shareholders are advised that the Annual Report for the year ended 30
June 2011 was dispatched today.
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Financial Director
Officer
Johannesburg
23 September 2011
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)
(* 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: 23/09/2011 12:35:02 Produced by the JSE SENS Department.
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