| Wed 13 Sep 2006, 14:15 | | Interconnective - Financial results for the year e |
|
ILT
ILT
Interconnective - Financial results for the year ended 30 June 2006
INTERCONNECTIVE SOLUTIONS LIMITED
COMPANY REGISTRATION NUMBER 1997/010640/06
SHARE CODE: ILT
ISIN CODE: ZAE000017943
Website: www.solutions.co.za and www.foneworx.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
372b 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
ATTORNEYS
De Wet Wrigglesworth Inc
PRINCIPAL BANKER
Absa Bank Limited
SECRETARY
G H Tudor CA (SA)
PO Box 2404, Randburg, 2125
SPONSOR
LPC Manhattan Moela (Pty) Ltd
CHIEF EXECUTIVE OFFICER"S REVIEW
I am pleased to report that the results for the period under review reflect
improved earnings before net interest, tax, depreciation and amortisation
("EBITDA") of R3,755,000 (2005 - R2,381,000) which is an increase of 58%, and
after net interest, depreciation and amortisation of R2,507,000 (R1,043,000),
an increase of 140% against the previous year.
Earnings per share increased by 138% from 0,93c to 2,2c and headline earnings
per share by 105% from 1,22c to 2,50c. During the year, effort was put into
enhancing the quality of earnings. In the process, lower margin business was
replaced with higher earning revenues. This resulted in revenues increasing by
only 8.7% while gross profit, as a percentage of revenue, improved by 17% from
44.7% to 52.4%. The group spent almost R1 million on research and development
which amounts were fully expensed during the year in compliance with accounting
requirements. The benefits of this expenditure will accrue to the group in the
future.
The group"s cash position improved with cash on hand of R4,5 million (R3,0
million). The group remains debt free save for short-term finance for vehicles
and capital equipment, which amounts to R2.3 million in aggregate.
The group, via its wholly owned subsidiary, FoneWorx (Pty) Ltd, is one of the
leading value-added service providers in the arena of business and infotainment
services and is fully licensed to Vodacom, MTN, Cell C and Telkom. FoneWorx
differentiates itself from many of its competitors by operating its own voice
and data platform, and by providing a full turnkey operation for a broad range
of clients.
In the period under review, the group extended its sphere of influence by
acquiring equity in an Internet Service Provider ("ISP") which trades as
ALTONet. It also formed a new company, SurveyOnline (Pty) Ltd, which provides
electronic surveys using various forms such as email, websites, SMS and IVR.
FoneWorx has two clearly defined divisions which are now well established and
focused, namely: Infotainment and Business Services.
Infotainment
FoneWorx has developed its own proprietary voice and data platform which
currently operates over 800 channels and caters for a broad range of fully
automated services to a wide range of clients within the fast moving consumer
goods and general commercial markets. During the period under review, FoneWorx
successfully hosted over 500 interactive campaigns including Strictly Come
Dancing, Noot Vir Noot, Telkom Charity Cup, Generations and Gospel Gold to name
a few. In addition, FoneWorx managed a number of services in over 29 countries
in Africa covering a diverse range of services such as World Cup Soccer 2006
and Shell Site of the Year campaigns.
During the year, FoneWorx was appointed as the sole service provider to the
SABC for value-added services and is currently engaged with the SABC in the
development of a more comprehensive strategy for these services.
FoneWorx has developed a number of new software programs which enable clients
to program and launch their own SMS and IVR services using a self-service
terminal approach with an easy-to-use graphic user interface. These programs
are ideally suited to radio and television stations which can initiate services
by themselves within a few minutes. This process has further enhanced the
intellectual property of the FoneWorx service offering.
Business Services
We have been pleased with the growth of our business services, which revenues
now exceed the revenues generated from infotainment services. This is in line
with our stated strategic objective, which is to provide the group with more
predictable annuity-based revenue.
The FoneWorx suite of business services is provided on a "bureau basis", which
allows our clients to access our platform without any capital expenditure and
make use of the many services hosted on this platform. This offering is known
as The Virtual Business Centre and is described fully below.
The FoneWorx Fax2Email has shown remarkable growth in the year under review
with a growth in revenue of 250% and a similar increase in the subscriber base
over the same period last year.
FoneWorx has established a well-trained and focussed dealer network to sell the
FoneWorx product set and now boasts a dealer network of 108 dealers, which is
an increase of 52% against the prior reporting year. In addition, dealers are
provided with a fully integrated web-based administrative interface to enable
them to remotely manage their business.
Virtual Business Centre
FoneWorx has fully embraced the convergence of technology and the associated
Electronic Communications Act by exploring solutions to meet growing needs as
cost-effectively as possible. This has been achieved by providing the best of
different technologies via a single on-line portal. To this end, FoneWorx
recently launched an innovative and exciting product aimed primarily at the
growing SMME market, which is branded The Virtual Business Centre ("VBC"). VBC
is an on-line application which has capitalised on the exploding digital age
which is itself making access to bandwidth easier and cheaper. The application
is an aggregation of an initial 15 services all accessed via a single portal.
Services included in the VBC package are Telco Services and Products, Business
and Legal Forms, Address Book, Data Storage, Fax2Email, PC2Fax, SMS, E-mail,
VoIP Call, Accounting, SurveyOnline, Diary Service, Conference Call, Credit
Card Processing and Auto Receptionist (PBX).
VBC operates on a prepaid basis and allows the subscriber to access services on
a true "pay-to-use" basis. Subscribers purchase credits by credit card,
electronic funds transfer or bank deposit and these are deposited into a
central account in the name of the subscriber. As services are used, the usage
charges are deducted from the user"s account. This methodology allows
individuals and businesses to effectively manage their cash flow and the use of
selected services. New products will be added to this package in the future,
and these will include: travel, insurance, vehicle purchases, mortgage
origination and courier services, to mention a few.
The VBC service has been developed by FoneWorx which employs its own full-time
programmers. Within a few weeks of its launch VBC has attracted a tremendous
amount of interest in South Africa. In addition, enquiries have been received
from European and African countries, which bodes well for FoneWorx to launch
and host this application in territories outside of the Republic.
Internet Service Provider
During the period under review the group acquired a 40% interest in Alto
Network Communications (Pty) Ltd ("ALTONet") which provides Internet and
network services. The group has an option to increase this interest to 51% by
February 2007. ALTONet is a hosting and data networking company that provides
a range of services including Dial Up, ADSL and Diginet services. In addition,
ALTONet also provides website hosting, server hosting and website development.
The acquisition is an important strategic move for the group, particularly
because VBC is an on-line product and requires Internet connectivity. A number
of the ALTONet services will also be incorporated into the VBC package. The
phenomenal growth of the Fax2Email subscriber base meant that a large
percentage of the cost base was becoming attributable to bandwidth and thus it
made sense to have equity in ALTONet and re-direct network connectivity via
this company and enjoy the upside of the ALTONet earnings. The group intends
to create value-added bundled products using a combination of the ALTONet and
FoneWorx services and providing consumers with differentiated products at
competitive and affordable prices.
Electronic Surveys
The group formed a company, SurveyOnline (Pty) Ltd ("SOL") in which its holds
51% equity with the remaining 49% held by the operational staff who are full
members of South African Market Research Association ("SAMRA"). SOL is a
solution-based application using the Internet to provide market research which
offers quick, easy and direct access to customers, suppliers, employees and
website visitors. It employs the latest methodologies, making use of the
Internet, SMS and IVR, all of which are in the domain of the group"s offerings.
SOL offers generic or customised surveys that are simple and easy to deploy and
provide immediate automated web-based results.
General
The group"s cash focus was well managed with excess funds placed at favourable
interest rates. All the functional divisions within the group performed well
and continued to refine essential key dials. I remain optimistic about the
growth potential of our business services and the stable channels to market
that have been developed by our dealer base. The group"s intellectual property
has been further enhanced with the launch of The Virtual Business Centre and
positions the group as one of the leading value-added service providers, which
includes having its own internet service provider.
I would like to extend my thanks to my co-directors, management and staff who
have excelled during the period under review and have clearly demonstrated that
the group can develop and host world-class services and bespoke applications.
I would also like to express my appreciation to our shareholders for their
continued support.
Mark Smith - Chief Executive Officer
13 September 2006
INTERCONNECTIVE SOLUTIONS LIMITED AND ITS SUBSIDIARIES
BALANCE SHEET AS AT 30 JUNE 2006
GROUP COMPANY
2006 2005 2006 2005
Note R "000 R "000 R "000 R "000
ASSETS
Non current assets 5,854 3,463 13,148 12,436
Property plant and
equipment 2 3,904 1,781 - -
Intangible assets 3 400 882 350 676
Other non-current assets 4 800 800 800 800
Investment in subsidiaries 5 - - 11,248 10,960
Investment in associate 6 750 - 750 -
Current assets 15,092 9,371 44 -
Inventory 7 145 90 - -
Loans to directors, managers
and employees 12 - - -
Trade and other receivables 8 10,406 6,135 33
Cash and cash equivalents 4,529 3,146 11
Total assets 20,946 12,834 13,192 12,436
EQUITY AND
LIABILITIES
Capital and reserves 8,983 5,726 13,092 12,318
Share capital 9 116 112 116 112
Share premium 10 14,842 14,096 14,842 14,096
Accumulated (losses) (5,975) (8,482) (1,866) (1,890)
Non current liabilities 1,955 301 - -
Installment sale agreements 11 1,542 301 - -
Loan Payable 12 413 - - -
Current liabilities 10,008 6,807 100 118
Trade and other payables 13 9,206 6,393 100 116
Current portion of non
current liabilities 11 802 282 - -
Bank overdraft - 132 - 2
Total equity and liabilities 20,946 12,834 13,192 12,436
INTERCONNECTIVE SOLUTIONS LIMITED AND ITS SUBSIDIARIES
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2006
GROUP COMPANY
2006 2005 2006 2005
Note R "000 R "000 R "000 R "000
Revenue 14 33,191 30,530 - -
Other operating income 57 54 744 743
Direct Operating Costs (15,813) (16,877) - -
Staff Costs (7,771) (6,839) (27) (21)
Depreciation and
amortisation expense (1,291) (1,304) (326) (326)
Other operating expenses (5,909) (4,509) (350) (258)
Profit from operations 15 2,464 1,055 41 138
Finance costs 18 (131) (84) (17) (1)
Investment income 19 174 50 - -
Profit from ordinary
activities 2,507 1,021 24 137
Attributable to outside
shareholders - 22 - -
Net profit for the year 2,507 1,043 24 137
Opening accumulated
losses (8,482) (9,525) (1,890) (2,027)
Closing accumulated
losses (5,975) (8,482) (1,866) (1,890)
Basic earnings
per share 21 2.21c 0.93c
Headline earnings
per share 21 2.50c 1.22c
INTERCONNECTIVE SOLUTIONS LIMITED AND ITS SUBSIDIARIES
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006
GROUP COMPANY
2006 2005 2006 2005
Note R "000 R "000 R "000 R "000
Share capital 116 112 116 112
Balance at beginning
of year 112 112 112 112
Issued during the year 4 - 4 -
Share premium 14,842 14,096 14,842 14,096
Balance at beginning
of year 14,096 14,096 14,096 14,096
Issued during the year 746 - 746 -
Accumulated losses (5,975) (8,482) (1,866) (1,890)
Balance at beginning
of year (8,482) (9,525) (1,890) (2,027)
Attributable profits 2,507 1,043 24 137
8,983 5,726 13,092 12,318
INTERCONNECTIVE SOLUTIONS LIMITED AND ITS SUBSIDIARIES
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2006
GROUP COMPANY
2006 2005 2006 2005
Note R "000 R "000 R "000 R "000
Cash flow from operating
activities 2,271 2,450 301 355
Net cash generated
from operations A 2,228 2,484 318 356
Finance Costs (131) (84) (17) (1)
Investment Income 174 50 - -
Cash flow from investing
activities (3,680) (575) (1,038) (356)
(Increase) in investment
in subsidiaries and (750) - (1,038) (356)
associates
Purchase of property, plant
and equipment (2,900) (564) - -
Purchase of intangible (30) (11) - -
assets
Cash flow from financing
activities 2,924 (186) 750 -
Share capital and share
premium introduced 750 - 750 -
Decrease in minority
shareholders interest - (22) - -
Increase / (decrease) in non-
current liabilities 1,654 (127) - -
Increase / (decrease) in
current
portion of non current 520 (37) - -
liabilities
Net increase in cash
and cash equivalents 1,515 1,689 13 (1)
Cash and cash equivalents
at beginning of year 3,014 1,325 (2) (1)
Cash and cash equivalents at
end of year B 4,529 3,014 11 (2)
INTERCONNECTIVE SOLUTIONS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2006
GROUP COMPANY
2006 2005 2006 2005
R "000 R "000 R "000 R "000
A RECONCILIATION OF
PROFIT BEFORE
TAXATION TO CASH
GENERATED FROM
OPERATIONS
Profit before taxation 2,507 1,043 24 137
Adjustments for: 1,246 1,338 343 327
Amortisation 512 731 326 326
Depreciation 777 573 - -
Finance costs 131 84 17 1
Investment income (174) (50) - -
Operating profit
before working capital
changes 3,753 2,381 367 464
Working capital changes (1,525) 103 (49) (108)
(Increase) decrease in (55) 156 - -
inventory
(Increase) in trade and other
receivables (4,283) (1,689) (33) -
Increase (decrease) in trade
and other payables 2,813 1,636 (16) (108)
Cash generated from
operations 2,228 2,484 318 356
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 4,529 3,146 11 -
Bank overdraft - (132) - (2)
4,529 3,014 11 (2)
EARNING PER SHARE
The calculation of earnings per 2.21c 0.93c
share is based on profits of
R2,507,177 (2005 - R1 042 511)
and a weighted average of 113 290
476(2005 - 112 100 000) ordinary
shares issued during the year.
The calculation of headline 2.50c 1.22c
earnings per share is based on
profits of R2,832,887(2005 - R1
368 221) and a weighted average
of 113 290 476 (2005 -112 100
000) ordinary shares issued
during the year.
Reconciliation between earnings
and headline earnings
Per the income statement 2,507 1,043
Items included in other operating
expenses:
Intellectual property amortised 326 326 - -
Headline earnings 2,833 1,369 - -
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards and the policies are consistent with those used
in the preparation of the audited financial statements for the year ended 30
June 2005.
Further salient information:
Audit: The auditors, G Cambanis Inc., have issued their opinion on the Group
financial statements for the year ended 30 June 2006. 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 10 November 2006
in the boardroom of the 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 2006.
Date of mailing of Annual Financial Statements: On or before 29 September 2006.
Date: 13/09/2006 02:15:24 PM Produced by the JSE SENS Department
