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FRT
FRT
Faritec - Unaudited Interim Results For The Six Months Ended 31 December 2005
Faritec Holdings Limited
(Registration number 1998/004872/06)
Share code: FRT
ISIN: ZAE000016838
("Faritec" or "the company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2005
- Revenue grows by 29% to R263 million
- HEPS increases to 6,7 cents per share
- Net profit grows by 148% to R11 million
- NAV per share increases to 65,8 cents per share
ABRIDGED GROUP INCOME STATEMENT
6 months to 6 months to 12 months to
31 Dec 2005 31 Dec 2004 30 June 2005
Restated for Restated for
IFRS IFRS IFRS
R"000 R"000 R"000
Revenue 262 928 204 351 434 207
Operating expenses before (246 728) (200 695) (423 181)
depreciation
Depreciation and amortisation (4 111) (3 758) (7 808)
Profit/(loss) from operations 12 089 (102) 3 218
Net finance costs (145) (253) (380)
Investment income 490 0 768
Impairment of assets (80) (1 055) (5 303)
Write off of liability 0 0 2 689
Profit on sale of business 0 5 061 5 042
Fair value adjustment of 2 629 1 258 1 415
investment
Profit before taxation 14 983 4 909 7 449
Taxation (3 948) (460) (3 400)
Net profit for the period 11 035 4 449 4 049
Attributable to:
Minorities 2 271 273 (669)
Ordinary shareholders 8 764 4 176 4 718
11 035 4 449 4 049
Reconciliation of headline
earnings:
Attributable earnings for the 8 764 4 176 4 718
period
Write off of liability 0 0 (2 689)
Impairment of assets 80 1 055 5 303
Profit on sale of business 0 (5 061) (5 042)
Headline earnings for the period 8 844 170 2 290
Number of ordinary shares in issue 136 161 129 629 129 629
("000)
Weighted average number of
ordinary shares
in issue ("000)
132 895 129 629 129 629
Fully diluted shares in issue 141 030 129 629 129 880
("000)
Basic earnings per share (cents) 6,6 3,2 3,6
Headline earnings per share 6,7 0,1 1,8
(cents)
Fully diluted basic earnings per 6,2 3,2 3,6
share (cents)
Fully diluted headline earnings 6,3 0,1 1,8
per share (cents)
ABRIDGED GROUP BALANCE SHEET
At At At
31 Dec 2005 31 Dec 2004 30 June 2005
Restated for Restated for
IFRS IFRS IFRS
R"000 R"000 R"000
ASSETS
Non-current assets 81 631 81 681 80 325
Equipment 8 549 9 052 9 198
Development costs capitalised 12 550 13 880 13 688
Goodwill 127 0 127
Trademarks 38 204 38 204 38 204
Licence fees 0 1 579 0
Investments 12 425 9 964 9 796
Loans receivable 4 235 2 055 4 216
Deferred taxation 5 541 6 947 5 096
Current assets 145 293 91 495 133 748
Inventories 3 757 5 504 3 055
Trade receivables 118 923 71 490 106 707
Other receivables 9 743 2 947 5 145
Taxation 0 239 0
Cash and cash equivalents 12 870 11 315 18 841
Total assets 226 924 173 176 214 073
EQUITY AND LIABILITIES
Total equity 100 134 82 787 84 970
Shareholders" interest 89 603 75 912 76 591
Minority interest 10 531 6 875 8 379
Non-current borrowings 10 244 11 123 11 450
Interest-bearing borrowings 486 1 138 1 174
Operating lease liabilities 6 917 7 388 7 611
Non-interest-bearing borrowings 2 841 2 597 2 665
Current liabilities 116 546 79 266 117 653
Trade payables 94 135 62 373 100 018
Other payables 15 456 15 132 15 261
Taxation 5 483 940 1 197
Bank overdrafts 319 0 179
Non-interest-bearing borrowings 1 153 821 998
Total equity and liabilities 226 924 173 176 214 073
Total number of ordinary shares in 136 161 129 629 129 629
issue ("000)
Net asset value per share (cents) 65,8 58,6 59,1
Tangible net asset value per share 28,4 17,2 19,0
(cents)
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
6 months to 6 months to 12 months to
31 Dec 2005 31 Dec 2004 30 June 2005
Restated for Restated for
IFRS IFRS IFRS
R"000 R"000 R"000
Share capital 133 133 133
Share premium 30 680 27 483 27 323
Balance at beginning of period 27 323 27 483 27 483
Issued during the period, net of 3 357 0 (160)
issue costs
Share-based payments reserve 1 576 388 685
Balance at beginning of period 685 25 25
(restated)
Increase for the period 891 363 660
Accumulated profits 57 214 47 908 48 450
Balance at beginning of period as 48 338 48 338
previously reported
Adjustments for IAS 17 and (4 606) (4 606)
adoption of IFRS
Restated balance at beginning of 48 450 43 732 43 732
period
Net income for the period 8 764 4 176 4 718
Total capital and reserves 89 603 75 912 76 591
ABRIDGED GROUP CASH FLOW STATEMENT
6 months to 6 months to 12 months to
31 Dec 2005 31 Dec 2004 30 June 2005
Restated for Restated for
IFRS IFRS IFRS
R"000 R"000 R"000
Cash flow from operating (6 650) 10 411 22 808
activities
Cash flow from investing (2 460) 3 862 (878)
activities
Cash flow from financing 2 999 524 214
activities
Net movement in cash and cash (6 111) 14 797 22 144
equivalents
Cash and cash equivalents at 18 662 (3 482) (3 482)
beginning of period
Cash and cash equivalents at end 12 551 11 315 18 662
of period
EQUITY RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
At
transition
date 6 months to 12 months to
1 July 2004 31 Dec 2004 30 June 2005
R"000 R"000 R"000
Equity previously reported under 75 954 80 607 81 604
SA GAAP
Equity adjustments for IAS 17 and (4 581) (4 695) (5 013)
adoption of IFRS
Equity reported under IFRS 71 373 75 912 76 591
Equity adjustments
Retained earnings (4 606) (5 083) (5 698)
Operating leases (6 544) (6 802) (7 060)
Expensing of share-based payments (25) (388) (685)
Amortisation of development costs 0 (336) 0
Deferred tax 1 963 2 443 2 047
Share-based payments reserve 25 388 685
Total equity adjustments (4 581) (4 695) (5 013)
PROFIT RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
6 months to 12 months to
31 Dec 2004 30 June 2005
R"000 R"000
Attributable profit
As previously reported 4 653 5 810
Operating leases (IAS 17 (258) (516)
adjustment)
Share-based payments (363) (660)
Development costs and (336) 0
amortisations
Deferred taxation 480 84
As reported under IFRS 4 176 4 718
COMMENTS
INTRODUCTION
The Faritec board of directors is pleased to announce the results for the first
six months ended 31 December 2005. Faritec continues to make significant
progress in the implementation of its new strategy and is well on its way to
delivering to its full market potential. The group performed above expectations
for the first half of the year and is well positioned to show strong growth for
the full year to 30 June 2006.
RESULTS
Group revenue improved by 29% to R263 million (2004: R204 million). Hardware
related businesses (including the ebis joint venture) contributed R159 million,
a 41% growth compared to the previous corresponding period, while software and
services delivered R104 million in total.
For the six months ended December 2005, hardware related revenue comprised 60%,
software and services related revenue comprised 15% and 25% respectively. This
changed from 55%, 10% and 35% respectively in the corresponding period last
year.
Operating profits increased to R12 million (2004: restated operating loss of
R0,1 million) as a result of a combination of strong revenue growth,
productivity gains and expense reductions. Coupled by a lower effective tax
rate, this strong operating result offset the unfavourable IFRS adjustments on
share options (IFRS 2) amounting to R891 000 before tax.
Headline earnings per share improved to 6,7 cents, compared to a restated 0,1
cent per share for the corresponding period last year.
Cash on hand decreased by R6,1 million, to a net cash position of R12,6 million.
The net cash outflow is attributable to capital expenditure investment of R2,5
million, as well as an increase of R6,7 million in working capital arising from
increased activity towards the end of the interim period. These outflows have
been partly offset by R3,4 million raised from shares issued in terms of the
Faritec Share Incentive Scheme. The group expects to generate cash in the second
half of the year, and considers this decreased cash position to be temporary.
ACCOUNTING POLICIES
Basis of preparation
The group has adopted International Financial Reporting Standards (IFRS) for the
year ending 30 June 2006. IFRS 1 - First time adoption of International
Financial Reporting Standards has been applied in preparing the group"s
unaudited interim results, which have been prepared in accordance with IAS 34 -
Interim Financial Reporting.
In applying IFRS, the group has elected not to retrospectively apply the
requirements of IFRS 3 for business combinations that occurred prior to 1 July
2004, and not to apply IFRS 2 Share-based payments to equity instruments that
were granted on or before 7 November 2002.
This report has been prepared based on current IFRS statements issued up to 31
December 2005. The group"s first IFRS compliant annual financial statements will
be prepared for the year ended 30 June 2006, based on standards and
interpretations prevailing at that date.
Significant changes to the group"s accounting policies as a result of the
adoption of IFRS and adjustments to interpretations and new statements of
Generally Accepted Accounting Practice `GAAP"
1 Restatement in respect of IAS 17, Leases
Circular 7/2005 issued by SAICA requires that operating lease expenses be
recognised on a straight-line basis over the lease term. Previously lease
expenses were recognised in accordance with the payment terms of the lease
agreements. This change in accounting policy has had a retrospective
application.
2 Share-based payment transactions - IFRS 2
The fair value of share options granted to employees are now recognised as an
expense over the vesting periods.
3 GAAP/IAS adjustment to prior interims
The interim results for the six months ended 31 December 2004 have been adjusted
to conform with changes in amortisation policies and rates, and impairments
raised, arising from the adoption of (AC128) IAS 36 and (AC129) IAS 38 in the
year ended 30 June 2005. The before tax effect is a decrease in profits
previously reported of R336 000.
The above changes have had a negative impact on the group"s previously reported
earnings and net asset values, as shown in the profit and equity reconciliations
contained in this report. There was no material effect on cash flows.
OPERATIONS
The group"s operations turned in an exceptional performance as reflected in the
financial results. This performance can be attributed to the efforts of
management and staff at Faritec and the support of Faritec"s customers and
partners.
While the entire group performed well, the hardware business showed better than
expected growth. This is due to the group having received and delivered on
certain orders earlier than expected. With the assistance of our strategic
partner, IBM, we continue to maintain our dominant position in this market, and
hardware revenue grew by 41% from R112 million to R159 million compared to the
same period last year.
Faritec"s software business also showed a strong growth of 86% from R20 million
to R38 million compared to the same period last year. This is mainly due to the
security and business integration divisions that are fast becoming leaders in
their areas of focus.
Our services business did not perform as well as expected, with revenue
declining by 7,7% from R72 million to R66 million, compared to the same period
last year. The slow down is as a result of a few projects being delayed, and as
these projects are now underway, we are satisfied that this area of business
will achieve its targeted revenue growth by year-end.
As stated in previous announcements, we have initiated a number of internal
projects to improve the focus, operational efficiency and profitability of the
group. The process to fix, close or dispose of under-performing or non-core
businesses, is proving to be a success and has assisted in improved
profitability and focus over the last six months. Also, the internal projects to
improve operational efficiency by focusing on systems, processes, policies,
communication, staff morale and market awareness, are on track and are already
starting to deliver results.
TRANSFORMATION AND BEE
The incomplete process on the adoption of the ICT Charter has not prevented
Faritec from vigorously pursuing the implementation of policies adopted by the
Faritec Board, on all the major pillars of the broad-based BEE scorecard. Also
significant progress has been made on the adoption of a scalable and sustainable
skills development programme and Faritec has formalised and is implementing its
corporate social investment initiatives. This latter investment is aimed at
narrowing the digital divide. Our quest to grow and enhance our equity and
management indicators of the balance scorecard will soon receive a significant
boost by our acquisition of the Enterprise Connection business. This will impact
in growing our credentials at Board and Executive management levels.
PROSPECTS
The outlook for the second half of the year is positive, although we do not
expect to repeat the results achieved in the first half of the year. This
situation is not due to an expected slow down in the second half, but rather to
an exceptional performance in the first half of the year, mainly during the
second quarter. We expect to show growth in the second half of the year over
the corresponding period last year.
Faritec is in the process of finalising the acquisition of the Enterprise
Connection business. This will have a positive impact on the group"s results to
the year-end and into the future.
The group is also looking at a few smaller acquisitions to complete the
execution of its strategy and marketing position.
The board and management of Faritec are satisfied that the group is well
positioned to achieve market related returns and growth into the future.
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
CR Jardine SM Tomlinson
Chairman Chief Executive Officer
Johannesburg
23 February 2006
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Ltd
70 Marshall Street Johannesburg 2001
PO Box 61051 Marshalltown 2107
Registered address:
Faritec House 150 Kelvin Drive Woodmead Sandton 2148
PO Box 76784 Wendywood 2144
Incorporated in the Republic of South Africa
Registration number 1998/004872/06
Share code FRT & ISIN ZAE000016838
Date: 23/02/2006 09:00:08 AM Produced by the JSE SENS Department
