| Wed 29 Feb 2012, 10:05 | | FWX - Foneworx Holdings Limited - Unaudited consolidated interim results for the |
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FWX
FWX - Foneworx Holdings Limited - Unaudited consolidated interim results for the
six months ended 31 December 2011
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 2011
Revenue up 14%
Gross profit up 17%
EPS up 8%
NAV up 14%
Cash reserves up 17%
COMMENTARY
The board of directors of FoneWorx ("the board") present the unaudited
consolidated interim results for the six months ended 31 December 2011 ("the
interim period").
Group revenue increased by 14% to R52.5 million from R46.2 million in the
previous corresponding period, while gross profit increased from R27.2 million
to R31.8 million, a 17% increase from the previous corresponding period.
Group operating expenditure decreased by 4% from R5.8 million to R5.5 million
and staff costs increased from R7.5 million to R9.9 million, a 33% increase.
This 33% increase is due to an increase in the average cost per head as well as
other staff related costs including the provision for staff bonuses, which
provision was not applicable in the previous corresponding period as, in terms
of the group`s remuneration policy, no bonuses are paid if financial performance
targets are not met.
Profit before tax increased by 15% from R14.0 million to R16.1 million and
profits after tax grew by 10% to R10.7 million from the previous corresponding
period`s R9.8 million.
Cash on hand increased by 17% when compared to the previous corresponding
period; up from R72.9 million to R85.6 million. During the interim period, the
company declared and paid a dividend of R7.5 million (5.5 cents per share)
relating to the year ended 30 June 2011, 22% up from the previous dividend of
R6.0 million (4.5 cents per share) relating to the year ended 30 June 2010. Net
asset value per share increased from 64.3 cents in December 2010 to 73.8 cents,
a 14% increase.
The growth in revenue and earnings for this interim period is primarily from
organic growth, although we are looking at possible acquisitions that could
enhance the group`s growth.
BUSINESS OVERVIEW
The group has five brands: MediaWorx (infotainment), BizWorx (business
services), IDWorx (identity access and verification), DRWorx (disaster recovery)
and CarbonWorx (carbon footprint evaluation and eco system restoration).
MediaWorx
This division provides a broad spectrum of interactive services targeted
primarily at the Fast Moving Consumer Goods ("FMCG") sector for competitions and
promotions using short message services ("SMS"), multi-media services ("MMS"),
unstructured supplementary service data ("USSD") and web-based applications
integrated to social media services. Our route to market is via advertising
agencies and large electronic media players including the SABC and DSTV
(Africa).
With greater clarity obtained on the new Consumer Protection Act ("CPA"),
MediaWorx was able to achieve positive growth in the period under review,
particularly in the area of USSD where a successful application was written and
hosted for the Pep chat service. The Pep chat service is an interactive message
system used by over two million Pep Stores customers to send messages to each
other, which also provides them with access to value added services such as
purchasing airtime.
MediaWorx has strengthened its relationship with 86 mobile networks across 36
countries in Africa and continues to provide services to blue chip clients such
as DSTV for services like Big Brother Africa.
We have made positive inroads in obtaining new clients and in particular in the
Western Cape. Revenue in the Kwazulu-Natal region has also showed improved
results.
We anticipate that MediaWorx will grow steadily with new agencies signing up in
order for us to manage services on behalf of their clients.
BizWorx
This division provides a broad range of services for small, medium and micro
enterprises ("SMMEs") and larger corporates. These services include Fax2Email,
PC2Fax, Web2Fax, auto receptionist and bespoke services designed to meet our
clients` specific requirements.
We have been extremely satisfied with the uptake of certain new services such as
Web2Fax, and believe these new services will improve revenue for BizWorx going
forward. Our strategy is to provide every Fax2Email user with a Web2Fax
application thereby enabling them to both send and receive faxes digitally.
We are systematically making progress with our Fax2Email services in Zambia,
Nigeria and Kenya. Whilst there are still challenges in these territories, we
believe that we have made significant inroads and the faxing services which have
been deployed in each of these territories are gradually being processed via our
technical fax platforms.
IDWorx
This division provides broad based identity access management ("IAM") and
identity verification services ("IVS"). These applications are used for the
verification and secure storage of documents for Anti-Money Laundering
applications ("AML") such as FICA and RICA. Our focus for IDWorx will be on
those companies required to verify the authenticity of documents such as
Identity Books, and to securely store them, together with ancillary documents
relating to their industry, thereby enabling them to be retrieved with secure
access and audit trails. This application will be well suited for companies who
are required to comply with current legislation (FICA, FAIS, RICA) and future
anticipated legislation ("POPI").
DRWorx
This division provides disaster recovery and workflow continuity for targeted
niche clients such as stockbrokers. DRWorx is approved by the JSE Limited
("JSE") as a site for disaster recovery.
CarbonWorx
This division focuses on providing corporates with a professional service to
calculate their carbon footprint in line with ISO 14064 standards. Once this
footprint is calculated, corporates are then encouraged to embark on a strategy
to reduce their footprint over a defined period. In addition, CarbonWorx enables
those corporates to offset a portion or their entire footprint via our tree
planting sites, which operate as carbon sinks. Trees are planted in verified and
protected sites where the carbon sinks are regularly evaluated and certificates
are issued to clients. These sites are operated and maintained in association
with the Department of Environmental Affairs. In essence, CarbonWorx provides a
consultancy service and also provides linkage to a number of services provided
by MediaWorx.
The momentum in CarbonWorx will largely be driven by external factors: primarily
the pace at which the United Nations Framework Convention on Climate Change is
able to develop a new protocol or legal instrument when the current Kyoto
Protocol expires. This will create the impetus on corporates to align themselves
with sound sustainable strategies including carbon calculations and offsetting.
Prospects
We are positive about the next six months to our financial year ending June
2012. We believe that there will be positive growth in the entertainment and
media sector, particularly with regard to digital spending incorporating mobile
and wireless applications. Our two main revenue generators, MediaWorx and
BizWorx, operate in an industry where behaviour patterns are moving from
outdated or traditional business to a growing digital element. This rapid and
accelerating digitisation of elements, including content, business processes and
product innovation will work well for the group. Social media and mobile
applications will also have a positive impact on the group. With the growth of
digitised content, web access and mobile applications, clients will require the
capacity to mine and analyse detailed and granular information not previously
available. The group is well placed to be in this innovation space.
We remain optimistic about the roll-out of our fax services in Zambia, Nigeria
and Kenya and anticipate traction in the latter half of this calendar year.
We would like to thank our directors, management, employees, partners, dealers
and other stakeholders, including staff, clients and shareholders for their
continued support during the interim period.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2011 2010 2011
Change R`000 R`000 R`000
ASSETS
Non-current assets 23 772 26 276 24 841
Property, plant and 18 278 21 253 18 723
equipment
Intangible assets 5 494 5 023 6 118
Current assets 104 850 90 393 102 663
Inventory 1 656 1 767 1 773
Current tax receivable 1 062 194 953
Trade and other 16 492 15 483 17 870
receivables
Cash and cash 85 640 72 949 82 067
equivalents
Total assets 128 622 116 669 127 504
EQUITY AND LIABILITIES
Capital and reserves 100 354 87 441 97 125
Share capital 136 136 136
Share premium 36 373 36 373 36 373
Accumulated profits 63 845 50 932 60 616
Non-current 7 582 9 769 8 934
liabilities
Interest bearing 7 333 9 064 8 189
liabilities
Deferred tax liability 249 705 745
Current liabilities 20 686 19 459 21 445
Trade and other 15 949 16 088 18 012
payables
Provisions 2 994 1 402 1 651
Tax payable - 340 63
Unclaimed dividends 27 13 27
Current portion of 1 716 1 616 1 692
interest bearing
liabilities
Total equity and 10.25% 128 622 116 669 127 504
liabilities
Net asset value per 14.76% 73.8 64.3 71.4
share (cents)
Net tangible asset 15.10% 69.7 60.6 66.9
value per share
(cents)
Number of shares in 136 002 041 136 002 041 136 002 041
issue
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2011 2010 2011
Change R`000 R`000 R`000
Revenue 14% 52 561 46 230 91 579
Cost of sales (20 776) (18 986) (36 054)
Gross profit 17% 31 785 27 244 55 525
Other operating income 173 285 506
Staff costs 33% (9 963) (7 499) (17 236)
Depreciation and (2 175) (1 935) (4 217)
amortisation expense
Other operating (4%) (5 590) (5 820) (10 089)
expenses
Finance costs (390) (453) (914)
Investment income 2 264 2 222 4 229
Profit before tax 15% 16 104 14 044 27 804
Income tax expense (5 395) (4 275) (8 280)
Profit for the period 10% 10 709 9 769 19 524
Other comprehensive - - -
income
Total comprehensive 10 709 9 769 19 524
income for the period
Profit attributable to 10 709 9 769 19 524
the equity holders of
the parent company
Headline earnings
reconciliation
Adjustment for:
Net after tax (51) 42 40
(profit)/loss on sale
of property, plant and
equipment & shares in
subsidiary
Headline earnings 9% 10 658 9 811 19 564
Weighed average number 136 002 041 134 533 189 135 202 041
of shares in issue
Basic earnings per 8.44% 7.87 7.26 14.44
share (cents)
Headline earnings per 7.46% 7.84 7.29 14.47
share (cents)
Diluted earnings per 8.44% 7.87 7.26 14.44
share (cents)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Share capital 136 136 136
Balance at beginning 136 134 134
of period
Share options taken up - 2 2
by staff
Share premium 36 373 36 373 36 373
Balance at beginning 36 373 35 575 35 575
of period
Share options taken up - 798 798
by staff
Accumulated profits 63 845 50 932 60 616
Balance at beginning 60 616 47 212 47 212
of period
Total comprehensive 10 709 9 769 19 524
income for the period
Dividend paid to (7 480) (6 049) (6 120)
shareholders
Total equity 100 354 87 441 97 125
Dividend declared 5.5 4.5 4.0
(cents per share)
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Cash flow from operating
activities 12 939 9 565 20 381
Net cash generated from 17 128 10 379 24 650
operations
Finance costs (390) (453) (914)
Investment income 2 264 2 222 4 229
Normal tax paid (6 063) (2 583) (7 584)
Cash flow from investing
activities (1 056) (6 614) (7 454)
Purchase of intangible (48) (728) (902)
asset
Purchase of property, plant (1 059) (4 109) (4 432)
and equipment
Proceeds on disposal of 51 - 264
property, plant and
equipment
Expenditure on product - (1 777) (2 384)
development
Cash flow from financing (830) 1 909 1 108
activities
Dividends paid (7 480) (6 049) (6 106)
Net increase / (decrease) 3 573 (1 189) 7 929
in cash and cash
equivalents
Cash and cash equivalents 82 067 74 138 74 138
at beginning of period
Cash and cash equivalents
at
end of period 85 640 72 949 82 067
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 2011. 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, 2008 (Act 71 of 2008), as amended, AC500 series of
interpretations as issued by the Accounting Principles Board, and the Listings
Requirements of the JSE.
These financial statements have been prepared under the supervision of Mr Pieter
Scholtz CA(SA): Financial Director.
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 group 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 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Revenue
BizWorx 32 900 31 537 64 369
MediaWorx 18 592 13 562 24 627
Development 1 069 1 131 2 583
52 561 46 230 91 579
Cost of sales
BizWorx (9 988) (10 569) (20 259)
MediaWorx (10 498) (8 180) (14 368)
Development (290) (237) (1 427)
(20 776) (18 986) (36 054)
Gross profit
BizWorx 22 912 20 968 44 110
MediaWorx 8 094 5 382 10 259
Development 779 894 1 156
31 785 27 244 55 525
The accounting policies applied to the operating segments is the same as those
described in the basis of preparation paragraph above. MediaWorx provides
services within South Africa as well as in 36 African countries ("Africa
sales"). Within the period under review, 4.5% (six months 2010: 4.5%; 12 months
2011: 4.8%) of MediaWorx` revenue can be attributed to Africa sales. The company
allocates revenue to each country based on the relevant domicile of the client.
All of the company`s assets are located in South Africa.
MediaWorx currently generates 40.3% (2010: 63.7%) of its revenue through two
large network service providers and BizWorx generated 96.5% (2010: 98.1%)
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
interim period relate to dividends declared in prior periods.
SUBSEQUENT 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
There have been no changes in the directorate during the period under review.
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
29 February 2012
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: 29/02/2012 10:05:02 Produced by the JSE SENS Department.
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