| Mon 14 Feb 2005, 12:57 | | Interim results for the six months ended 31 Dec 04 |
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Faritec - Interim results for the six months ended 31 December 2004
Faritec Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1998/004872/06
(`Faritec` or `the Group`)
Share code: FRT
ISIN: ZAE000016838
Interim results for the six months ended 31 December 2004
ABRIDGED GROUP INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
2004 2003 2004
R`000 R`000 R`000
Revenue 204 351 183 227 329 980
Operating expenses
before depreciation 200 074 184 162 340 303
Depreciation 2 169 729 2 712
Profit/(loss) from
operations 2 108 (1 664) (13 035)
Loss from associate - (74) -
Net finance (costs)/income (253) 259 148
Amortisation of trademarks (1 005) (1 005) (2 011)
Amortisation of licence fee (1 038) (396) (1 383)
Amortisation of capitalised
development costs (265) - -
Impairment of asset - - (314)
Profit on sale of business 5 061 - -
Fair value adjustment
of investment 1 401 - (3 467)
Profit/(loss) before taxation 6 009 (2 880) (20 062)
Taxation (940) 547 3 565
Net profit/(loss) for the
period 5 069 (2 333) (16 497)
Attributable (to)/from
minorities (416) 1 146 4 941
Attributable earnings/(loss)
for the period 4 653 (1 187) (11 556)
Weighted average number of
ordinary shares in issue (`000) 129 629 129 629 129 629
Number of ordinary shares
in issue (`000) 129 629 129 629 129 629
Fully diluted shares
in issue (`000) 149 888 140 667 141 390
Basic earnings per share (cents) 3,6 (0,9) (8,9)
Headline earnings per share (cents) 0,9 (0,9) (8,6)
Fully diluted earnings
per share (cents) 3,1 (0,8) (8,2)
Reconciliation of headline earnings:
Attributable earnings/(loss)
for the period 4 653 (1 187) (11 556)
Goodwill amortised 17 35 69
Impairment of asset - - 314
Profit on sale of business (3 543) - -
Headline earnings for
the period 1 127 (1 152) (11 173)
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
2004 2003 2004
R`000 R`000 R`000
Cash flow from operating
activities 10 411 1 459 (7 334)
Cash flow from investing
activities 3 862 11 313) (16 646)
Cash flow from financing
activities 524 204 2 128
Net movement in cash and
cash equivalents 14 797 (9 650) (21 852)
Cash and cash equivalents at
beginning of period (3 482) 18 370 18 370
Cash and cash equivalents
at end of period 11 315 8 720 (3 482)
Cash and cash equivalents
comprise:
Bank balances 11 315 8 720 (3 482)
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 June
2004 2003 2004
R`000 R`000 R`000
Share capital 133 133 133
Balance at beginning of period 133 133 133
Share premium 27 483 27 494 27 483
Balance at beginning of period 27 483 27 153 27 153
Issued during the period - 1 088 1 088
Write-off of share issue costs - (747) (758)
Accumulated profits 52 991 58 707 48 338
Balance at beginning of period 48 338 59 894 59 894
Net income/(loss) for the period 4 653 (1 187) (11 556)
Total capital and reserves 80 607 86 334 75 954
GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2004 2003 2004
R`000 R`000 R`000
ASSETS
Non-current assets 81 099 82 078 82 917
Equipment 9 052 8 629 9 973
Development costs capitalised 15 221 13 252 15 109
Goodwill - 517 484
Trademarks 37 199 39 210 38 204
Licence fees 1 579 3 667 2 617
Investments 11 489 13 296 9 946
Loans receivable 2 055 2 055 2 055
Deferred taxation 4 504 1 452 4 529
Current assets 82 111 61 041 59 939
Inventories 5 504 5 993 2 528
Trade and other receivables 65 053 46 328 52 681
Taxation 239 - 145
Cash and cash equivalents 11 315 8 720 4 585
Total assets 163 210 143 119 142 856
EQUITY AND LIABILITIES
Capital and reserves 80 607 86 334 75 954
Shareholders` interest 80 607 86 334 75 954
Minority interests 8 400 11 770 7 970
Non-current borrowings 3 735 3 665 3 683
Interest-bearing borrowings 1 138 2 209 1 562
Non-interest-bearing borrowings 2 597 1 456 2 121
Current liabilities 70 468 41 350 55 249
Trade and other payables 68 707 41 222 46 205
Taxation 940 128 198
Bank overdraft - - 8 067
Non-interest-bearing borrowings 821 - 779
Total equity and liabilities 163 210 143 119 142 856
Total number of ordinary
shares in issue (`000) 129 629 129 629 129 629
Net asset value per share (cents) 62,2 66,6 58,6
COMMENTS
INTRODUCTION
The Faritec Board is satisfied with the results for the first six months ended
31 December 2004. The first signs that our new strategy, transformation and
investments are starting to show the expected returns can be seen. This has
resulted in a profit for the period and an improvement in the Group`s cash
position, as referred to in the trading statement of 26 January 2005.
RESULTS
Revenue for the Group increased by 11,5% on the corresponding period last year.
Hardware related revenue declined by 10% on a very strong performance for the
same period last year, software related revenue grew by 145% off a low base, and
services related revenue continued to grow well, by 44%, on the same period last
year.
For the six months ended December 2004, hardware related revenue comprised 55%,
software related revenue comprised 10%, and services related revenue comprised
35% of the Group`s total revenue; this changed from 68%, 5% and 27% respectively
for the corresponding period last year.
Attributable earnings were R4,7 million, which was an improvement on the loss of
R1,2 million posted for the corresponding period last year.
Headline earnings improved to R1,1 million, compared to the loss of R1,2 million
for the corresponding period last year. This was attributable to improved
trading margins in the growing managed services businesses, continued strong
demand in the product related business, and on-going control of operating
expenses. Operating expenses grew by 8,6% on the same period last year.
Cash generated from operating and investing activities resulted in an increase
in cash on hand for the period under review, of R14,8 million. Cash flow from
investing activities included the profit from the sale of the contracting
business to Paracon in October 2004, of R5,1 million, and R1,1 million
investment in new equipment. Cash flow from financing activities included
repayment of interest-bearing borrowings, loans raised from minority
shareholders and minority interests.
The Group expects to continue to generate cash in the second half of the year,
as the investment phase of the transformation of Faritec`s business is now
coming to an end, and operating margins are expected to continue to improve.
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 2004.
OPERATIONS
The first six months of the year marked the return to profitability for the
Group. This was made possible thanks to a significant effort from all our people
and improved teamwork and integration between all areas of the operations.
The operations continue to focus in two core areas, namely Infrastructure
Solutions and Managed Services. This focus has resulted in remarkable growth in
our software and services revenues and, whilst our hardware revenues declined
compared to the same period last year, we do expect to show growth in this area
at year-end.
Whilst the Group offers its products and services to the entire market our
Enterprise Accounts division is focused on three industries, namely Financial,
Government and Telecommunications. This customer focused strategy and the
related structure has proved to be a success and we are experiencing strong
revenue growth in these industries.
The investments into new Managed Service solutions are now all showing a return,
most of them are profitable and the others will be in the near future. This
coupled with our more mature core business has resulted in a Group of companies
well positioned to provide value-added solutions to the market and returns for
our shareholders. Our revenue mix is becoming far more balanced with software
and services representing 45% compared to 32% last year. This improvement
creates a more predictable revenue stream and higher operating margins.
We have disposed of one non-core asset in the last six months, namely our
contracting business. This process of disposing of non-core assets will continue
into the future.
TRANSFORMATION AND BEE
Faritec continues to execute its strategy and adopted policies on transforming
the Group into a representative South African company. Ten candidates from our
own mentorship program for previously disadvantaged individuals successfully
completed their learnership. Of these ten, six were employed by Faritec and are
now exposed and integrated into the Faritec operation.
Faritec has also established an Executive Management team of twelve people, four
of whom are previously disadvantaged individuals. Faritec has also appointed a
new chief financial officer with effect from 1 April 2005 that will bolster our
black and gender representation.
PROSPECTS
The outlook for the next six months is positive and management expects to show
further improvement and growth. The focus in the second half of the year will be
on:
- Revenue growth
- Continued BEE transformation
- Cost containment
- Staff development
- Improved operating margins
- Higher profitability
- Cash generation
- Disposal of non-core assets
- Customer focus
- Investment in strategic focus areas
Whilst we have completed the majority of our investment process, we will
continue to invest in our current businesses, investigate new business
opportunities and strategic acquisitions.
DIVIDEND
No dividends have been declared as funds are being retained to assist with the
Group`s future growth.
For and behalf of the Board
C Jardine SM Tomlinson
Chairman Chief executive officer
Johannesburg
14 February 2005
Registered address: Faritec House, 150 Kelvin Drive, Woodmead, Sandton 2148
PO Box 76784, Wendywood 2144
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Directors: Dr C Jardine* (Chairman), SM Tomlinson (Chief executive officer), Dr
H Gajjar, D Masson*, J Naidoo*, P Noxaka*, AR Timm, PJ Winn - *Non-executive
Company secretary: DA Nieuwoudt CA(SA)
www.faritec.com
Date: 14/02/2005 12:47:07 PM
Produced by the JSE SENS Department
