| Wed 25 Feb 2004, 13:29 | | INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMB |
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FARITEC HOLDINGS LIMITED - INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER
2003
Faritec Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/004872/06)
("Faritec" or "the Group")
(Share code: FRT)
(ISIN number: ZAE000016838)
Interim results for the six months ended 31 December 2003
Abridged group income statement
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
2003 2002 2003
R"000 R"000 R"000
Revenue 183 227 125 604 282 478
Operating expenses before
depreciation 185 563 126 587 275 962
Depreciation 729 895 1 906
(Loss)/profit from operations (3 065) (1 878) 4 610
(Loss)/income from associate (74) - 54
Net finance income 259 945 2 054
Revaluation of capital liability - - 6 312
Revaluation of trademarks - - (12 286)
(Loss)/profit before taxation (2 880) (933) 744
Taxation 547 (329) (223)
Net (loss)/profit for the period (2 333) (1 262) 521
Attributable from/(to) minorities 1 146 - (7)
Attributable earnings for the
period (1 187) (1 262) 514
Goodwill amortised 35 25 88
Revaluation of capital liability - - (6 312)
Revaluation of trademarks - - 12 286
Profit on redemption of asset - - (266)
Headline earnings for the period (1 152) (1 237) 6 310
Weighted average number of
ordinary shares in issue ("000) 129 629 125 989 125 938
Number of ordinary shares in
issue ("000) 129 629 125 989 125 989
Fully diluted shares in
issue ("000) 140 667 142 585 140 667
Basic earnings per share (cents) (0,9) (1,0) 0,4
Headline earnings per share
(cents) (0,9) (1,0) 5,0
Fully diluted earnings per share
(cents) (0,8) (0,9) 0,4
Abridged group cash flow statement
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
2003 2002 2003
R"000 R"000 R"000
Cash flow from operating
activities 1 459 (8 173) (11 209)
Cash flow from investing
activities (11 313) (2 973) (53 359)
Cash flow from financing
activities 204 (139) -
Net movement in cash and cash
equivalents (9 650) (11 285) (64 568)
Cash and cash equivalents at
beginning of period 18 370 82 938 82 938
Cash and cash equivalents at end
of period 8 720 71 653 18 370
Cash and cash equivalents
comprise: 8 720 71 653 18 370
Bank balances 8 720 27 943 18 370
Cash equivalents - 43 710 -
Abridged group balance sheet
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2003 2002 2003
R"000 R"000 R"000
Assets
Non-current assets 82 078 20 344 58 045
Equipment 8 629 3 872 4 088
Development costs capitalised 13 252 7 350 11 324
Goodwill 517 425 553
Trademarks 39 210 - 40 215
Licence rights 3 667 - -
Investments 13 296 7 700 119
Loans receivable 2 055 997 1 023
Deferred taxation 1 452 - 723
Current assets 61 041 129 244 105 703
Inventories 5 993 6 318 5 313
Trade and other receivable 46 328 51 273 81 564
Cash and cash equivalents 8 720 71 653 18 826
Total assets 143 119 149 588 163 748
Equity and liabilities
Capital and reserves 86 334 85 404 87 180
Minority interests 11 770 - 7
Non-current borrowings 3 665 1 307 1 307
Current liabilities 41 350 62 877 75 254
Trade and other payables 41 222 57 825 74 668
Taxation 128 188 130
Bank overdraft - - 456
Non-interest-bearing borrowings - 4 864 -
Total equity and liabilities 143 119 149 588 163 748
Total number of ordinary shares
in issue ("000) 129 629 125 989 125 989
Net asset value per share (cents) 66,6 67,8 69,2
Group statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
2003 2002 2003
R"000 R"000 R"000
Share capital 133 133 133
Balance at beginning of period 133 133 133
Share premium 27 494 27 153 27 153
Balance at beginning of period 27 153 27 153 27 153
Issued during the period 1 088 - -
Share issue costs (747) - -
Accumulated profits 58 707 58 118 59 894
Balance at beginning of period 59 894 59 380 59 380
Net (loss)/profit for the
period (1 187) (1 262) 514
Total capital and reserves 86 334 85 404 87 180
Comments
Introduction
The Faritec board is satisfied with the results for the first six months ended
31 December 2003. Market conditions continue to be tough, and the transformation
of the Faritec business is progressing according to plan.
Results
Revenue for the Group increased by 45,9% on the same period last year. Product
related revenue grew by 59% on a disappointing performance for the comparative
period, while services related revenue continued to grow, by 19%.
The Group posted a loss from operations of R3,1 million, which was an increase
of 63% on the loss of R1,9 million posted for the same period last year.
Headline earnings, at (R1,2 million) improved by 6,9%. Operating expenses grew
by 47,7% on the same period last year, due to, some of the new businesses, which
were still in set-up phase, experiencing slower than anticipated sales cycles,
while certain operating and salary expenses, needed for the future growth of the
new businesses, were being incurred. A decline in product revenue margins also
influenced the period"s figures, and management expects operating margins to
improve during the second half of the year.
The Group invested R11,3 million in the business, which included R5,3 million in
the construction of its new security operations centre, which is now complete;
R2 million in development costs for ICP"s new business opportunities; and R4
million in acquiring the licence fees for the Gizmoz mobile application and
content offerings for Africa.
The Group"s investing activities resulted in a decrease in cash on hand for the
period under review. However, the Group generated cash from operating
activities, despite the loss from operations, by focusing on working capital
management. Cash generated from financing activities included the financing of
some of the costs of the security operations centre, which led to the increase
of R2,4 million in interest-bearing borrowings.
The increase in investments relates to the increase in minority interests, which
is as a result of the empowerment transaction, effective from 1 July 2003 with
the J&J Consortium.
The balance sheet remains strong. The Group expects to generate cash in the
second half of the year, as the investment phase is now complete.
Accounting policies
The financial statements have been prepared in accordance with South African
statements of Generally Accepted Accounting Practice and the policies are
consistent with those used in the preparation of the audited financial
statements for the year ended 30 June 2003.
Operations
The review of the first six months of the year is characterised in three main
areas, firstly a significant increase in revenue, secondly, a substantial
investment in new businesses and, finally, an increase in operating expenses.
All of these are as a result of Faritec"s strategy to move to Managed Services.
The Faritec operations underwent a structural change during the period under
review. The new structure is part of the transformation process and will help
facilitate the move from an offering-focused business to a customer-focused
business.
The Infrastructure area of Faritec"s business exceeded expectations, as a result
of an upturn in customer spend and a concerted effort from the management team.
Faritec continues to lead in the IBM server and storage space in South Africa.
Infrastructure provision and management will continue to be an important part of
our business, but the overall contribution from this business will change as our
managed services business develops.
Our African value added distribution business had an extremely difficult six
months, with both market conditions and currency fluctuations causing a
significant decline in revenues and profits.
The Faritec contracting business, once again grew both in terms of contractors
and financially. We have won a number of contracts to resource management
services, to new corporate customers.
The Managed Services area of the business continued to grow. All of our new
offerings are now gaining market acceptance, have a number of customers, are
generating revenue and showing growth. Faritec ICP has now signed up its first
customer, a five-year contract with Telkom. This is a significant milestone in
the success of the ICP business. The ICP software solution, Optifin, is growing
in functionality and stability, and we expect this business to become an
important component of Faritec"s future strategy and growth. Faritec"s Managed
Security Services division has made inroads towards becoming a dominant force in
this market space and the completion of Faritec"s Security Operations Centre has
aided in rapid market acceptance of this service. FariMed, Faritec"s medical aid
administration system, which is operated on an ASP basis, targeting medical aid
administrators, has also increased in terms of members using the service, and we
expect to see significant growth in this area of the business.
Transformation and BEE
Faritec and its empowerment consortium partners (J&J Group and Lesaka Holdings)
have entrenched an excellent working relationship that is yielding dividends and
thus meeting one of the criteria set out early when Faritec decided to undertake
a BEE transaction - immediate economic value. Management in Faritec and the J&J
Group have now established a virtual team and strategic steps are being
undertaken jointly to achieve a number of objectives:
1. Diversity based on gender and race is being introduced in a managed way in
the:
a. Board of directors - The diversity of the board is being further enhanced and
additional black non-executives will shortly be joining the board.
b. Management Team - Several black executives have been appointed at all levels
of the company, with more senior executives set to join as their appointments
are finalised.
c. Middle Management - Our senior client-facing executives have been expanded by
the enlistment of senior black business development managers.
2. Expanding the opportunity base of clients.
3. Supporting and advising on Faritec"s initiatives to move up the value chain
in terms of offerings and services.
Faritec is also revamping its internal policies to ensure holistic treatment of
employment equity, skills development, procurement policy and support for small
businesses.
Faritec is now embarking on an implementation plan that allows us to progress on
each of the above key indicators of transformation. We are firmly committed to
achieving the status of a truly new South African company. One of our executives
is a key member of the ICT Charter Task Team and Working Group. This allows
Faritec to remain current in the trends and expectations that the ICT sector
will set for BEE and Transformation.
Prospects
The transformation of Faritec is progressing according to plan. We are
transforming the business in the following areas: strategic direction, business
and go to market model, BEE, and structure. The transformation will create a
new Faritec that will emerge as the leader in the managed services market in
Africa. We have invested a significant amount of time and money into this
transformation process and we are starting to see the first signs of success in
our revenue growth. We expect to see a slowdown in investment activity and a
flattening of our operating expenses as we enter the consolidation phase of our
strategy.
Although we are satisfied that the strategy is progressing well, we still
believe that the financial benefits of the transformation will only be felt over
the next two to three years. The second half of the year is however expected to
be an improvement over the first half.
Dividend
No dividends have been declared as funds are being retained to assist with the
Group"s future growth.
For and on behalf of the board
C Jardine SM Tomlinson Johannesburg
Chairman Chief executive officer 25 February 2004
Registered address: Faritec House, 150 Kelvin Drive, Woodmead
(PO Box 76784, Wendywood 2144)
Transfer secretaries: Computershare Limited, 70 Marshall Street, Marshalltown
2001 (PO Box 61051, Marshalltown 2107)
Directors: Dr C Jardine* (Chairman), SM Tomlinson (Chief executive officer), Dr
H Gajjar, D Masson*, J Naidoo*, AR Timm, PJ Winn
*Non-executive
Company secretary: DA Nieuwoudt CA(SA)
www.faritec.com
Date: 25/02/2004 01:00:14 PM Supplied by www.sharenet.co.za
