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FWX - Foneworx Holdings Limited - Abridged condensed consolidated

Release Date: 23/09/2011 12:35
Code(s): FWX
Wrap Text

FWX - Foneworx Holdings Limited - Abridged condensed consolidated audited financial results for the year ended 30 June 2011, dividend declaration and notice of Annual General Meeting FONEWORX HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number 1997/010640/06) Share code: FWX ISIN: ZAE000086237 ("FoneWorx" or "the Group" or "the Company") ABRIDGED CONDENSED CONSOLIDATED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2011, DIVIDEND DECLARATION AND NOTICE OF ANNUAL GENERAL MEETING HIGHLIGHTS: - An increase of 17.1 % in net asset value to R97.1 million from R82.9 million. - Cash and cash equivalents up by 10.7% from R74.1 million to R82.0 million. - Group revenue steady at R91.5 million (2010: R91.9 million). - Earnings before interest, tax, depreciation and amortisation ("EBITDA") decreased by 1.3% to R28.7 million (2010: R29.1 million). - Dividend to be paid up 22.2% to 5.5 cents per share from 4.5 cents per share. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Figures in Rands Audited as at Audited as at 30 June 2011 30 June 2010 Assets Non-Current Assets Property, plant and equipment 18 722 811 17 642 522 Intangible assets 6 117 771 4 015 774 Investments in subsidiaries - - Deferred tax asset - 658 279 24 840 582 22 316 575 Current Assets Inventories 1 773 441 784 115 Loans to group companies - - Current tax receivable 953 128 207 657 Trade and other receivables 17 870 247 15 574 468 Cash and cash equivalents 82 066 745 74 137 785 102 663 561 90 704 025 Total Assets 127 504 143 113 020 600 Equity and Liabilities Equity Share capital 36 509 029 35 709 029 Retained income (accumulated loss) 60 616 201 47 212 075 97 125 230 82 921 104
Liabilities Non-Current Liabilities Interest bearing liabilities 8 189 139 8 430 556 Deferred tax liability 744 784 - 8 933 923 8 430 556 Current Liabilities Current tax payable 62 754 23 927 Interest bearing liabilities 1 691 658 1 142 287 Trade and other payables 18 011 715 14 951 247 Provisions 1 651 175 5 537 804 Unclaimed dividends 27 688 13 675 21 444 990 21 668 940 Total Liabilities 30 378 913 30 099 496 Total Equity and Liabilities 127 504 143 113 020 600 Net asset value per share (cents) 71.4 61.7 Net tangible asset value per share 66.9 58.7 (cents) Number of shares in issue 136 002 041 134 402 041 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Figures in Rands Audited Audited year year ended ended 30 June 30 June 2011 2010
Revenue 91 579 433 91 921 685 Cost of sales (36 054 678) (34 232 391) Gross profit 55 524 755 57 689 294 Other income 506 191 661 274 Operating expenses (10 088 985) (10 819 137) Staff costs (17 235 800) (18 416 563) Depreciation and amortisation expense (4 217 151) (3 826 729) Operating profit 24 489 010 25 288 139 Investment income 4 229 316 4 702 705 Finance costs ( 913 903) (1 272 598) Profit before taxation 27 804 423 28 718 246 Taxation (8 280 205) (8 552 918) Profit for the year attributable to 19 524 218 20 165 328 the equity holders of the parent Other comprehensive income - - Total comprehensive income for the 19 524 218 20 165 328 year attributable to equity holders of the parent Basic earnings per share (cents) Note 14.4 15.0 2 Diluted earnings per share (cents) Note 14.4 15.0 2 Headline earnings per share (cents) Note 14.4 15.1 2 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Figures in Rands Share Share Total Retained Total equity capital premium share income
capital Balance at 01 July 134 35 574 35 709 32 486 829 68 195 858 2009 402 627 029 Changes in equity Total comprehensive - - - 20 165 328 20 165 328 income for the year Dividends - - - (5 440 082) (5 440 082) Total changes - - - 14 725 246 14 725 246 Balance at 01 July 134 35 574 35 709 47 212 075 82 921 104 2010 402 627 029 Changes in equity Total comprehensive - - - 19 524 218 19 524 218 income for the year Employee share 1 600 798 800 - 800,000 option scheme 400 000 Dividends - - - (6 120 092) (6 120 092) Total changes 1 600 798 800 13 404 626 14 204 126 400 000 Balance at 30 June 136 36 373 36 509 60 616 201 97 125 230 2011 002 027 029 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Figures in Rands Audited Audited year year ended ended 30 June
30 June 2011 2010 Cash flows from operating activities
Cash generated from operations 24 649 918 31 217 067 Interest income 4 229 316 4 702 705 Dividends received Finance costs ( 913 903) (1 272 598) Tax paid (7 583 785) (9 358 465) Net cash from operating activities 20 381 546 25 288 709 Cash flows from investing activities Purchase of property, plant and (4 432 306) (1 812 598) equipment Proceeds on disposal of property, 263 496 7 plant and equipment Purchase of intangible assets ( 902 046) ( 27 683) Repayment of (loan advanced to) group - - companies Expenditure on product development (2 383 605) (1 614 053) Net cash from investing activities (7 454 461) (3 454 327) Cash flows from financing activities Movement in share trust shares 800 000 - Advance (repayment) of loan payable - ( 471 975) Advance in (repayment of) interest 307 954 (1 948 130) bearing liabilities Dividends paid (6 106 079) (5 431 734) Net cash from financing activities (4 998 125) (7 851 839)
Total cash and cash equivalents 7 928 960 13 982 543 movement for the year Cash and cash equivalents at the 74 137 785 60 155 242 beginning of the year Total cash and cash equivalents at 82 066 745 74 137 785 end of the year NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL RESULTS 1. BASIS OF PREPARATION The Group annual financial statements from which these abridged condensed consolidated annual financial statements were derived have been prepared on the historical cost basis excluding financial instruments which are fair valued and conform to International Financial Reporting Standards ("IFRS"). The accounting policies applied in the preparation of these abridged condensed consolidated financial results, which are based on reasonable judgements and estimates, are in accordance with IFRS and are consistent with those applied in the Group annual financial statements for the year ended 30 June 2010. These abridged condensed consolidated financial statements set out in this report have been prepared in terms of IAS 34 - Interim Financial Reporting, the AC500 series, the Companies Act 2008, (Act 71 of 2008) and the Listings Requirements of JSE Limited ("JSE"). 2. RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS Figures in Rands Audited Audited year ended year ended
30 June 2011 30 June 2010 The calculation of earnings per share is 14.4 cents 15.0 cents based on profits of R19 524 218 attributable to shareholders of the parent (2010: R 20 165 328) and a weighted average of 135 202 041 (2010: 134 402 041) ordinary shares in issue during the year The calculation of headline earnings per 14.4 cents 15.1 cents share is based on profits of R19 524 218 attributable to shareholders of the parent adjusted to R19 563 835 (2010 R 20 165 328 adjusted to R 20 289 439) and a weighted average of 135 202 041 (2010: 134 402 041) ordinary shares in issue during the year Reconciliation between earnings and headline earnings Profit attributable to ordinary shareholders 19 524 218 20 165 328 of parent Loss on disposal of property, plant and 55 024 172 377 equipment Tax effect of the sale of associate and ( 15 407) ( 48 266) disposal of property, plant and equipment Headline earnings 19 563 835 20 289 439 The calculation of diluted earnings 14.4 cents 15.0 cents per share is based on profits of R 19 524 218 (2010: R 20 165 328) and a weighted average of 135 202 041 (2010: 134 812 910) ordinary shares issued during the year Reconciliation between earnings and diluted earnings per share: Weighted average number of shares used in 135 202 041 134 402 041 the calculation of earnings per share Shares deemed to be issued in respect of - 410 869 Employee Options 135 202 041 134 812 910 3. SEGMENTAL REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-makers ("the CODM"). The CODM have been identified as the executive committee members who make strategic decisions. The CODM have organised the operations of the Company based on its brands and this has resulted in the creation of the following segments: - BizWorx: the segment focusing on business related products; - MediaWorx: the segment focusing on information and entertainment services; and - Development: consists of the three brands that are still within the development and piloting phase being CarbonWorx, DRWorx and IDWorx. The accounting policies of the operating segments are the same as those described in the basis of preparation. MediaWorx provides services within South Africa as well as in 36 African countries ("Africa sales"). Within the period under review, 4.8% (2010: 3.5%) of MediaWorx revenue can be attributed to Africa sales. The Company allocates revenue to each country based on the domicile of the related customer. All of the Company`s assets are located in South Africa. MediaWorx currently generates 32.1% and 21.2% (2010: 36.8% and 17.9%) of its revenue through two customers respectively. BizWorx generated 95.5% (2020: 94.4%) through one single customer. The reconciliation of gross profit to profit before taxation is provided in the Condensed Statement of Comprehensive Income. The CODM reviews these income and expense items on a Group basis and not per individual segment. All assets and liabilities are reviewed on a Group basis by the CODM. Figures in Rands Audited Audited year year ended ended 30 June 2011 30 June 2010
Revenue BizWorx 64 369 424 64 245 676 MediaWorx 24 626 667 26 080 018 Development 2 583 342 1 595 991 91 579 433 91 921 685 Cost of sale BizWorx (20 259 924) (21 452 155) MediaWorx (14 368 085) (12 134 496) Development (1 426 669) ( 645 740) (36 054 678) (34 232 391) Gross Profit BizWorx 44 109 500 42 793 521 MediaWorx 10 258 582 13 945 522 Development 1 156 673 950 251 55 524 755 57 689 294 COMMENTARY The board of directors of FoneWorx ("the Board") is proud to announce their results for the year ended 30 June 2011. NATURE OF THE BUSINESS The Group provides interactive telecommunication, switching and business services, orientated around fixed and mobile networks. These include a broad range of services to the Fast Moving Consumer Goods ("FMCG") market, business and financial community, as well as media groups. FINANCIAL PERFORMANCE Although the Group is marginally down on last year`s revenue and net profit before tax, the Board is satisfied with the Group`s overall performance and it believes that a positive platform was established for the next reporting period. The downturn in revenue and net profit before tax materialised mainly due to: * the negative impact which the 2010 World Cup had on the first six months of the financial year ended 30 June 2011; * a slow-down in MediaWorx campaigns as a result of uncertainty around the introduction of the Consumer Protection 2008, (Act No. 68 of 2008) ("Consumer Protection Act") and relevant regulations, which has subsequently been clarified with the publication of the regulations; * the cancellation of the Telkom Charity Cup; * timing delays in certain client campaigns, which have rolled over into the new financial period; and * generally poor prevailing economic conditions resulting in protracted deal cycles. Despite the abovementioned factors, FoneWorx has a positive inflow of cash. The Group constantly strives to improve its products and service offering to its customers and dealers, and we are pleased that great strides were made in this regard during the year under review, thereby establishing a solid platform for our next financial year. The net asset value of the Group has increased to R97.1 million (2010: R82.9 million) over the past year, an increase of 17.1%. Cash and cash equivalents have increased by 10.7% to R82.0 million (2010: R74.1 million). The Group consistently looks for value adding acquisitions that complement its five divisions and cash on hand would be used for an appropriate acquisition. In addition, a portion of the Group`s cash resources will be used in deploying the Africa BizWorx Fax2Email expansion. Earnings per share ("EPS") of the Group, based on the weighted average number of shares in issue, decreased by 3.7% to 14.4 cents from 15.0 cents in the previous corresponding period. Headline earnings per share ("HEPS") decreased to 14.4 cents from 15.1 cents, a decline of 4.2%. Profit before tax decreased by 3.2% to R27.8 million (2010: R28.7 million) and gross profit reduced by 3.5% to R55.5 million (2010: R57.7 million), equating to a gross profit margin of 60.6% (2010: 62.7%). Net profit for the year under review decreased to R19.5 million (2010: R20.2 million) reflecting a 3.5% decrease. Operational Performance FoneWorx is predominantly an information, communication and technology company that focusses on switching various formats of voice and data through its distributed proprietary technology platform. The Group`s extensive intellectual platform embedded in its technology enables it to provide a broad range of products and services which have been divisionalised and branded as follows: MediaWorx This division is the most mature and continues to perform well with its diverse range of bearer technologies incorporating, Interactive Voice Response ("IVR"), Short Message Services ("SMS"), Multi Media Services ("MMS"), Unstructured Supplementary Services Data ("USSD") and mobi applications. This division was exposed to the effects of uncertainty pertaining to the implementation of the Consumer Protection Act which was occasioned by the delay in the publication of the regulations. This caused a slowdown in a number of promotions and competitions as media houses, advertising agencies and FMCG brands were uncertain as to the regulated SMS rates and tariffs. Post the release of the regulations, clarity in the process and tariffs has resulted in a marked improvement in the number of campaigns. Although the maximum rate for promotions and competitions has been limited to R1.50 per SMS, the division has seen an increase in volumes which has mitigated revenue reductions. During the year under review, this division successfully managed 750 campaigns for a number of established brands such as: Telkom Win Your Share, Telkom Charity Cup, Telkom Knockout, Cornetto, Top Billing, SA`s Got Talent, SATMA Awards, Metro FM Awards, SA Sports Awards and PepTxt. It was unfortunate that the Telkom Charity Cup was cancelled by Telkom as FoneWorx has run this event for the past eight years. However, the division continues to host and manage the Telkom Knock-Out which is much bigger this year and starts on 4 October 2011. The Cape Town office moved into new leased premises on 21 July 2011. This move has improved the branding in Cape Town and places FoneWorx in a good position to manage the increase in work for the region. MediaWorx Africa MediaWorx Africa has a presence in 37 countries in Africa comprising 88 mobile networks. It manages numerous SMS interactive campaigns, including well-known brands such as Big Brother Africa. During the year under review, 14 campaigns were managed for major brands such as Big Brother Africa, Face of Africa, and Naija Singhs. This division hosts and manages a system for Samsung which maintains a database to register mobile handsets for warranty purposes and to distinguish between grey imports and genuine devices. BizWorx BizWorx is the business service arm of FoneWorx, providing a broad range of business applications orientated around small, medium and micro enterprises ("SMMEs") and also incorporates facilities designed specifically for larger corporations or Non-Government Organisations ("NGO`s"). BizWorx incorporates a broad range of applications including, but not limited to: Fax2Email Web2Fax IVR Mobi Website Hosting Disaster Recovery Conference Call MMS Telco Services Auto Receptionist SurveyOnline Airtime Address Book Email Diary Classifieds SMS Accounting Business Plans Business and Legal Forms Business Management Credit Card Processing
During the year under review three independent technical platforms were deployed in Zambia, Nigeria and Kenya, following the formation of operating legal entities in these same three countries. The installations of the technical platforms came with a number of logistical, regulatory, cultural and operational challenges, which required BizWorx to adapt its South African offering of Fax2Email and Web2Fax to meet the local requirements of these territories. The offering in these territories includes a pre-paid scratch card offering which minimises any bad debt and is very simple and easy to use. The technical platforms are running well and all the technical architecture, including the Voice Over IP ("VOIP") routing to the Group`s Randburg Call Centre for customer care, is working well. The Africa division has a number of challenges in the marketing roll-out in these territories, but remains very positive about these markets and revenue opportunities. IDWorx This division develops and manages bespoke identity verification and image storage systems to corporate and governmental institutions. The software and intellectual property is proprietary and can be effectively applied to meet the requirements of various forms of legislation, such as FICA, RICA and the Consumer Protection Act. IDWorx continues to pilot one of these applications with Companies and Intellectual Property Commission ("CIPC") (formerly the Companies and Intellectual Property Registration Office), which is used by agents who are required to manage on-line changes to certain company forms. IDWorx has also successfully developed a FICA application for the stockbroking industry and has piloted the application with a private stockbroking firm. A new application for the security and leisure industry has been developed which will assist this sector with the identity management of its staff. This application will also be piloted in both the security industry (security officers / manned guarding) and tourism industry during the latter half of 2011. Should the Protection of Personal Information Bill ("POPI") be passed into legislation, then the IDWorx application will provide a solution for a number of affected industries. DRWorx DRWorx is a niche disaster recovery and work-flow continuity solution aimed at the stockbroking fraternity and small businesses. During the year under review, the FoneWorx hosting and infrastructure environment was approved by the JSE as an approved hosting site. Currently, three stockbroking firms have availed themselves of this facility as part of the Shared Infrastructure Providers ("SIPs") JSE accreditation policy. CarbonWorx This division has four main drivers which incorporate: Carbon Footprint Evaluation Many corporates are becoming more aligned to sustainability reporting and are conscious of the need to understand their own corporate footprint. CarbonWorx will assist companies to quantify their footprint in line with international standards ISO 14064 and the Greenhouse Gas Protocols. Training Understanding the impact of global warming and climate change is becoming an essential element of strategy and in understanding sustainability. The CarbonWorx two day training course will assist corporates to train staff in having a better understanding of the challenges being faced. Afforestation and Carbon Sequestration The primary driver is the restoration of eco systems, the creation of "green jobs" and the transfer of skills and education. CarbonWorx` strategy is aligned with the National Climate Change Response Green Paper of 2010 which, inter alia: "encourages agro- forestry and indigenous tree production as a potential socio economic benefit of environmentally integral planting regimes and tree breeding as an adaptive response to changing landscape conditions." CarbonWorx has formed a working relationship with The Champions of the Environment Foundation (Bantu Holomisa, Chairperson), Contralesa (Phatekile Holomisa) and the Department of Environmental and Water Affairs for the various afforestation initiatives. The first site in Mthatha, Eastern Cape was completed in the latter half of the year under review with the planting of over 3 000 indigenous trees in a fully verified site. Three larger sites are currently being developed and will create 76 jobs for members of the local communities for a minimum period of two years for the development of these sites. New sites in KwaZulu-Natal are currently being planned for similar community projects. All CarbonWorx` projects follow the guidelines of the Clean Development Mechanism ("CDM") as developed by the United Nations Framework Convention on Climate Change ("UNFCCC"). With the build-up to the Conference of the Parties (COP 17) which will take place in Durban in November 2011, it is anticipated that this division will receive more traction. Point Accumulation Programme This division is currently signing up retail outlets which will provide green points to CarbonWorx cardholders who purchase goods or services from them. The cardholder can then redeem the points for trees via the CarbonWorx website. Prospects The Board remains confident about the outlook for the ensuing financial year to 30 June 2012. The beginning of the new financial year has been positive and the Board is hopeful that all the energy and work that was deployed in the year under review will reap rewards going forward. Despite its marketing challenges in various African territories, the Board believes that the development of the Fax2Email and Web2Fax services into Africa will render positive rewards. MediaWorx and BizWorx continue to provide solid annuity income and the Board is positive that the development division will provide new revenue streams to the Group and open up new channels for leveraging relatively untapped sectors of not only the South African economy, but also those in the rest of Africa. A special thanks to all our staff and dealers for the part they have played over the past year. In addition, the Board would like to thank our customers, suppliers and shareholders for their continued support. SUBSEQUENT EVENTS No significant events have occurred between the financial year end, and the date of this report. AUDIT REPORT The abridged condensed consolidated annual financial statements for the year ended 30 June 2011 have been audited by PKF (Jhb) Inc. registered auditors. The Board has approved these abridged consolidated annual financial statements which have been condensed for purposes of this report. The auditors` unmodified audit report on the Group annual financial statements and the abridged condensed consolidated annual financial statements are available for inspection at the Company`s registered address. CORPORATE GOVERNANCE The Board recognises the need to conduct the affairs of the Company with integrity and in compliance with the principles of the King III report. Throughout the period under review the Company has complied with the principles as set out in the King III report except where the Board believes that the cost and practicality of compliance is not beneficial to the Group. FINAL AND SPECIAL DIVIDEND DECLARATION Notice is hereby given that the Board has resolved to declare a dividend of 5.5 cents per share. This dividend comprises of a regular dividend of 4.3 cents per share relating to the year ended 30 June 2011 (2010: 4.5 cents per share) and a special dividend of 1.2 cents per share. The special dividend, which is subject to approval by the Exchange Control Department of the South African Reserve Bank ("SARB"), is paid to provide the shareholders of the Group with dividend growth on last year and because the Company has surplus cash reserves. The dividend is to be paid to all ordinary shareholders recorded in the share register on the record date as set out below. In compliance with the requirements of Strate and Schedule 24 of the JSE Listings Requirements, the following dates are applicable: Last day to trade cum the dividend Friday, 7 October 2011 Date trading commences ex the Monday, 10 October 2011 dividend Record date Friday, 14 October 2011 Date of payment Monday, 17 October 2011 Share certificates may not be dematerialised or rematerialised between Monday, 10 October 2011 and Friday, 14 October 2011, both dates inclusive. A further announcement regarding the receipt of SARB approval will be made in due course. NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the 13th Annual General Meeting of shareholders of the Company will be held at the offices of the Company, FoneWorx House, Corner Bram Fischer Drive and Will Scarlet Road (entrance on Will Scarlet Road), Ferndale, Randburg, at 10:00, on Thursday, 10 November 2011, to transact the business stated in the notice of Annual General Meeting, which is contained in the Annual Report. Shareholders are advised that the Annual Report for the year ended 30 June 2011 was dispatched today. For and on behalf of the board Ashvin Mancha Mark Smith Pieter Scholtz Chairman Chief Executive Financial Director Officer
Johannesburg 23 September 2011 Business and Registered Office: FoneWorx House Corner of Bram Fischer Drive and Will Scarlet Road Ferndale, Randburg, 2194 PO Box 3386, Pinegowrie, 2123 Telephone +27-11-293-0000 Fax 086-610-1000 / +27-11-787-2137 Directors: Ashvin Govan Mancha (B Proc)* - Chairman, Mark Smith (BA LLB) - Chief Executive Officer, Pieter Scholtz (CA(SA)) - Financial Director, Ronald Graver, Robert Russell, Gaurang Mooney (BA)* (Botswana) (* Independent non-executive) Company Secretary: Pieter Scholtz (CA(SA)) Auditors: PKF (Jhb) Inc. Transfer Secretaries: Computershare Investor Services (Proprietary) Limited Designated Adviser: Merchantec Capital Date: 23/09/2011 12:35:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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