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Interconnective - Audited financial results for the year ended 30 June 2005
Interconnective Solutions Limited
COMPANY REGISTRATION NUMBER
1997/010640/06
SHARE CODE ILT
ISIN CODE ZAE000017943
Website www.solutions.co.za
DIRECTORS
Ronald Graver, Ashvin Govan Mancha B Proc * - Chairman, Gaurang Mooney BA *,
(Zimbabwe), Robert Russell, Mark Smith BA LLB - Chief Executive Officer, Gareth
Tudor CA (SA) - Financial Director (* Independent)
BUSINESS AND REGISTERED OFFICE
372 B Oak Avenue, Randburg, 2194
PO Box 2404, Randburg, 2125
Telephone +27-11-293-0000
Fax 086-610-1000 / +27-11-787-2137
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Ltd
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Telephone +27-11-370-7700, Fax +27-11-688-7716
Website www.computershare.com
AUDITORS
G. Cambanis Inc, Registered Accountants and Auditors
ATTORNEYS
De Wet Partnership
PRINCIPAL BANKER
Absa Bank Limited
SECRETARY
G H Tudor CA (SA)
PO Box 2404, Randburg, 2125
SPONSOR
LPC Manhattan Sponsors (Pty) Ltd
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2005
CHIEF EXECUTIVE OFFICERS REPORT
Revenue for the period under review increased by 38% to R30,6 million compared
to the previous 12 months (R22 million). Earnings before interest,
depreciation, tax and amortisation (`EBITDA`) showed a profit of R2 381 000
(Loss R101 000). After depreciation, amortisation of goodwill and net interest
of R1 338 000 ((R1 248 000), the earnings before tax resulted in a profit of R1
043 000. This was a substantial turnaround against the same period last year
where a loss of R1,3 million was posted.
The group remains debt free, save for short-term finance for capital equipment
which amounts to R583,000 (R747 000) in aggregate and was cash positive at the
end of the financial year, with cash on hand of R3 million (R1.3 million).
The group, via its wholly owned subsidiary, FoneWorx (Pty) Ltd, is a
telecommunications value-added service provider. FoneWorx is one of the leading
service providers in the arena of infotainment and business services and is
licensed to MTN, Vodacom, Cell C and Telkom. FoneWorx operates its own voice
and data platform which is connected to all the GSM and PSTN networks.
FoneWorx Infotainment:
FoneWorx provides its clients (which include advertising agencies, electronic
media, print media and a broad range of corporates) with a turnkey solution for
hosting promotions, competitions and voting services. FoneWorx has a dynamic
and expanding technology capability which has the expertise to cater for the
diverse requirements of large and small organisations.
FoneWorx boasts an interactive voice response network (IVR) with 750 channels,
providing the platform for a range of services which are fully automated and
provide our clients with online statistics and complete transparency on their
campaigns.
During the year FoneWorx has successfully hosted interactive campaigns such as:
Telkom Charity Cup, Test The Nation, MTV Music Awards as well as over 300
campaigns for fast moving consumer brands.
Our fulfilment division, which facilitates the distribution of prizes or
promotional items, has shown promising growth and completes a campaign for our
clients who host competitions with us. We have managed over 10 fulfilment
services since we commenced 10 months ago and have fulfilled over 12,000 items.
FoneWorx`s internal systems have been further refined to host multiple services
and provide clients with a comprehensive complement of reporting and
administrative services.
Despite this, the infotainment service remains highly competitive primarily due
to the cellular networks appointing too many service providers. Many of these
service providers do not necessarily have the infrastructure to provide fully
comprehensive services but many of them undercut on price. In addition, certain
of the cellular networks also compete with their service providers instead of
working with them on a co-operative basis. These two factors create
unreasonable margin squeeze.
FoneWorx Business Services
FoneWorx has developed a defined strategy of deploying its business services
with the objective of providing additional value to our clients` `communication
room`. This will provide clients with a menu of services that will enhance the
client`s communication room and interaction between the client and its
stakeholders.
The FoneWorx suite of offering, or menu, allows the client to select a service
that operates on a `bureau basis`, which means that the client has no capital
expenditure and makes use of the FoneWorx platform. Alternatively, the client
can purchase a `stand-alone service` as an in-house managed solution. The menu
of services includes: Fax2Email, PC2Fax, Bulk SMS or Premium Rate SMS, document
storage, voice logging, VOIP applications and message on hold, to mention a few.
In order to achieve the roll-out of the strategy, FoneWorx has deployed a
Virtual Private Network (`VPN`) in association with Telkom and during the coming
year will be establishing various points of presence (`pops`) in key strategic
regions around South Africa to facilitate least cost routing (`LCR`) of data and
voice.
FoneWorx Fax2Email has shown an incredible growth in the year under review with
a growth in gross revenue of over 130% against the same period last year, and
the subscriber base has increased by 217% over the same period last year.
The channel to market for the suite of business services is via FoneWorx`s own
sales team as well as appointed dealers. FoneWorx now has over 56 trained
dealers around South Africa which has shown an increase of almost 500% against
the prior reporting year. Dealers are provided with a unique business
opportunity to sell FoneWorx`s products and achieve annuity-based income.
FoneWorx has developed a fully electronic, web-based administrative interface to
enable dealers to remotely manage their business.
Whilst it has taken time to develop and introduce a number of our business
products and dealer network into the market, we are now seeing a positive and
incremental growth in the uptake and usage. This bodes well for FoneWorx in
developing niche markets, which will allow for new applications to be explored,
particularly with the de-regulation in the telecommunications industry. It also
affords FoneWorx good opportunities in line with the objectives of the
Convergence Bill, particularly as FoneWorx is connected to all the GSM and PSTN
networks.
FoneWorx has recently been awarded a VANS (Value Added Network Services) licence
by ICASA, which allows for the carriage of voice and data. In addition, the
licence affords FoneWorx the ability to interconnect to the networks and the
right to apply for its own numbering range. The deployment of our VPN (coupled
with the fact that our platform is connected to all GSM networks as well as the
PSTN) and our recently acquired VANS licence will provide FoneWorx with exciting
new products and services within the VOIP arena. Plans are being developed to
explore this opportunity in the New Year.
FoneWorx is well focussed and continues to refine its strategy, particularly
within the business arena. The FoneWorx team has excellent development and
technical skills and these will continuously be leveraged to increase the range
and scope of our business services. I remain optimistic about the exciting
range of services that are now in our portfolio and the channels to market that
have been developed, particularly in the last 18 months. I believe that with
these new services as well as the wealth of intellectual property we have
developed in the past, the group should go from strength to strength albeit in a
competitive environment
During the year, we closed our subsidiary in Australia, VM Australia (Pty) Ltd,
and appointed an agent to sell our Valutronics guarding equipment. This has
resulted in a sharper focus and increased sales to that country.
I would like to extend my sincere thanks to our directors, staff and management
team who have worked extremely hard during the year. Many individuals have
excelled themselves in many instances and showed great vision in developing
various applications. I would also like to express my appreciation to our
shareholders for their continued support and we look forward to a positive year
with further new opportunities being seized, as they are uncovered.
Mark Smith - Chief Executive Officer
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2005
GROUP COMPANY
2005 2004 2005 2004
R `000 R `000 R `000 R `000
Revenue 30 530 22 146 - -
Other operating income
54 212 743 889
Direct operating costs (16 877) (10 482) - -
Staff costs (6 839) (7 915) (21) -
Depreciation and
amortisation expense (1 304) (1 258) (326) (313)
Other operating expenses
(4 509) (4 062) (258) (493)
__________________________________________
Profit (loss) from
operations 1 055 (1 359) 138 83
Finance costs (84) (52) (1) (1)
Investment income 50 62 - 1
__________________________________________
Profit (loss) from ordinary
activities 1 021 (1 349) 137 83
Attributable to outside
shareholders 22
__________________________________________
Net profit (loss) for the
year 1 043 (1 349) 137 83
Opening accumulated losses
(9 525) (8 176) (2 027) (2 110)
__________________________________________
Closing accumulated losses
(8 482) (9 525) (1 890) (2 027)
__________________________________________
Basic earnings / (loss) per
share (cents) 0.93 (1.21)
Headline earnings / (loss)
per share (cents) 1.22 (0.93)
BALANCE SHEET AS AT 30 JUNE 2005
_________________________________________________________________
GROUP COMPANY
2005 2004 2005 2004
R `000 R `000 R `000 R `000
_________________________________________________________________
ASSETS
Non current assets 3 463 4 192 12 436 12 406
Property plant and
equipment 1 781 1 790
Intangible assets 882 1 602 676 1 002
Other non-current assets
800 800 800 800
10 960 10 604
Investment in
subsidiaries
Current assets 9 371 6 022 - 3
Inventory 90 246 - -
Trade and other
receivables 6 135 4 446 - -
Cash and cash
equivalents 3 146 1 330 - 3
__________________________________________
Total assets 12 834 10 214 12 436 12 409
__________________________________________
EQUITY AND LIABILITIES
Capital and reserves 5 726 4 683 12 318 12 181
Share capital 112 112 112 112
Share premium 14 096 14 096 14 096 14 096
Accumulated (losses) (8 482) (9 525) (1 890) (2 027)
Non current liabilities 301 428 - -
Minority shareholders
interest - 22
Current liabilities 6 807 5 081 118 228
Trade and other payables
6 393 4 757 116 224
Current potion of non
current liabilities 282 319 -
Bank overdraft 132 5 2 4
__________________________________________
Total equity and
liabilities 12 834 10 214 12 436 12 409
__________________________________________
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2005
_________________________________________________________________
GROUP COMPANY
2005 2004 2005 2004
R `000 R `000 R `000 R `000
_________________________________________________________________
Share capital 112 112 112 112
Balance at beginning of
year 112 111 112 111
Issue of share capital - 1 - 1
Share premium 14 096 14 096 14 096 14 096
Balance at beginning of
year 14 096 14 034 14 096 14 034
Issues during the year - 62 - 62
Accumulated losses (8 482) (9 525) (1 890) (2 027)
Balance at beginning of
year (9 525) (8 176) (2 027) (2 110)
Attributable profits
(losses) 1 043 (1 349) 137 83
__________________________________________
5 726 4 683 12 318 12 181
__________________________________________
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2005
_________________________________________________________________
GROUP COMPANY
2005 2004 2005 2004
Note R `000 R `000 R `000 R `000
_________________________________________________________________
Cash flow from
operating activities 2 450 (185) 355 418
Net cash (utilised
by) generated from A 2 484 (195) 356 418
operations
Finance costs (84) (52) (1) (1)
Investment income 50 62 - 1
Cash flow from
investing activities (575) (938) (356) (527)
Decrease (increase)
in investment in
associates / (356) (464)
subsidiaries
Purchase of property,
plant and equipment (564) (857) -
Purchase on (11) (81) - (63)
intangible assets
Cash flow from
financing activities (186) 439 - 63
Share capital and
share premium - 63 - 63
introduced
Decrease in minority
shareholders interest (22) -
Increase (decrease)
in non-current (127) 280 -
liabilities
Increase in current
portion on non (37) 96 -
current liabilities
Net (decrease)
increase in cash and 1 689 (684) (1) (46)
cash equivalents
Cash and cash
equivalents at 1 325 2009 (1) 45
beginning of year
_____________________________________
Cash and cash
equivalents at end of B 3 014 1 325 (2) (1)
year
_____________________________________
NOTES TO THE CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2005
GROUP COMPANY
2005 2004 2005 2004
R `000 R `000 R `000 R `000
A RECONCILIATION OF PROFIT
(LOSS) BEFORE TAXATION TO
CASH GENERATED FROM
(UTILISED BY) OPERATIONS
Profit (loss) before 1 043 (1 349) 137 83
taxation
Adjustments for: 1 338 1 248 327 313
Amortisation 731 784 326 313
Depreciation 573 474 - -
Finance costs 84 52 1 1
Investment income (50) (62) - (1)
_____________________________________
Operating profit (loss)
before working capital
changes 2 381 (101) 464 396
Working capital changes 103 (94) (108) 22
Decrease in inventory 156 9 -
(Increase) decrease in -
trade and other receivables (1 689) (292)
Increase (decrease) in
trade and other payables 1 636 189 (108) 22
_____________________________________
Cash (utilised by)
generated from operations 2 484 (195) 356 418
_____________________________________
B CASH AND CASH
EQUIVALENTS
Cash and cash equivalents
consist of cash on hand and
balances with banks. Cash
and cash equivalents
included in the cash flow
statement comprise the
following balance sheet
amounts:
Cash and cash equivalents 3 146 1 330 - 3
Bank overdraft (132) (5) (2) (4)
_____________________________________
3 014 1 325 (2) (1)
_____________________________________
EARNINGS PER SHARE
The calculation of earnings
per share is based on
profits of R1 042 511
(2004 - loss of R1 348 630)
and a weighted average of
112 100 000 (2004- 111 090
000) ordinary shares issued
during the year (cents) 0.93 (1.21)
________________________________________
The calculation of headline
earnings per share is based
on profits of R1 368 221
(2004 - loss of R1 035 646)
and a weighted average of
112 100 000 (2004- 111 090
000) ordinary shares issued
during the year. (cents) 1.22 (0.93)
_______________________________________
Reconciliation between
earnings and headline
earnings
Per the income statement 1 043 (1 349)
Items included in other
operating expenses:
Intellectual property
amortised 326 313
_______________________________________
Headline (loss) earnings 1 369 (1 036)
_______________________________________
ACCOUNTING POLICIES AND BASIS OF PREPARATION
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, except in minor instances which are
not material.
Further Salient Information:
Audit: The auditors, G Cambanis Inc., have issued their opinion on the Group
financial statements for the year ended 30 June 2005. A copy of the auditors`
unqualified report is available for inspection at the company`s registered
office.
Annual General Meeting: The annual general meeting of the members of
Interconnective Solutions Ltd will be held at 10:00 on Friday 28 October 2005 in
the boardroom of company at 372B Oak Avenue, Randburg, 2194, Johannesburg
Dividend: The directors have not recommended the payment of a dividend for the
year ended 30 June 2005.
Date of mailing of Annual Financial Statements: On or before 30 September 2005
Johannesburg 15 September 2005
Date: 16/09/2005 11:41:31 AM
