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Unaudited consolidated interim results for the six months ended 31 December 2013
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”)
UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
Revenue up 32% R63.2 million
EPS up 10% 9.88 cents
Profit before tax up 10.5% R19 million
Cash flow from operating activities up 23.1% R14.5 million
NAV per share up* 8.5% 90.94 cents
Cash reserves up* 9.6% R104.7 million
*December 2013 compared to December 2012
COMMENTARY
The board of directors of FoneWorx (“the board”) present the unaudited consolidated interim results for
the six months ended 31 December 2013 (“the interim period”) and should be read in conjunction with
the most recent audited annual financial statements for the year ended 30 June 2013.
The unaudited condensed consolidated interim financial statements are available to be viewed on the
company’s website: www.foneworx.co.za
Group revenue increased by 32.1% to R63.2 million from R47.9 million in the previous corresponding
period, while gross profit increased by 21.86% from R29.9 million to R36.5 million. This is partly
attributed to a change in payment policy that some network providers had where they now pay us our
full revenue earned through value added services and then charge us separately the bearer cost of
such services.
Profit before tax increased by 10.5% from R17.2 million to R19 million and profit after tax for the period
increased by 10% from R12.2 million in the previous corresponding period to R13.4 million in this
reporting period.
Staff costs for the period increased by 64% from R7.7 million to R12.6 million. This is mostly due to the
increase in the number of staff by 46% from 52 for the previous corresponding period to 76 people this
period. The increase in staff is attributable to the anticipated increase in sales in MediaWorx and the
launch of Knowledge 350 degrees. In addition the staff compliment in the FoneWorx Call Centre has
been increased by 12 people to cater for Dealfinder, a Caxton online digital product.
There has also been a corresponding increase in technical staff to cater for the aforementioned
developments.
The total asset value of the group increased by 9.28% from R138.4 million as at 31 December 2012 to
R151.2 million as at 31 December 2013 and net asset value per share increased from 83.9 cents per
share to 90.9 cents per share, an 8.5% increase. During the interim period the company also declared
and paid a dividend of 12 cents per share relating to the 2013 financial year, up 71% from the dividend
declared of 7 cents per share relating to the 2012 financial year.
Cash from operating activities increased by 23.1% from R11.8 million to R14.5 million and Cash on
hand increased by 9.6% when compared to the previous corresponding period; up from R95.6 million
to R104.7 million.
REVIEW OF OPERATIONS
MediaWorx
MediaWorx has traditionally been a promoter of the technology services developed by FoneWorx on its
managed proprietary technology platform. The technology offered via an ‘a la carte’ menu includes
amongst others, services such as: Short Message Service, Interactive Voice Response, Multi
Messaging Services’, Web Design/Hosting, Fulfilment, Unstructured Supplementary Service Data and
Instant Messaging.
MediaWorx has accordingly built a solid reputation of providing a broad range of technology services to
well over 800 blue chip clients. This reputation and reliable offering has enabled MediaWorx to become
the preferred service provider to a number of advertising agencies, corporates and media houses
including SABC Mobile and DSTV Africa.
In addition, MediaWorx has established long-term relationships with many blue chip clients such as
Pep Stores where MediaWorx provides the Instant Messaging and USSD applications for Pep Club
which currently has in excess of 4.8 million unique users who generate in excess of one billion
communication sessions between members on a monthly basis.
During the period under review MediaWorx successfully established a number of ‘eco systems’ on
behalf of blue chip clients. An example of this is Carling Black Label where close to one million unique
entrants participated in developing a solid database around the brand. Through this, MediaWorx
dispensed around 800 000 vouchers for instant airtime in consideration for participation. We anticipate
growth in developing many more eco systems for large companies who need to build ‘opt-in’ databases
in line with The Protection of Personal Information Act (“POPI”).
MediaWorx has developed an African footprint offering a defined range of services in 36 countries in
association with 89 mobile networks. MediaWorx has once again been awarded a number of high
visibility campaigns such as Big Brother Africa, Big Brother South Africa and Survivor South Africa.
During the period under review MediaWorx has ‘re-engineered’ itself to provide a much more
fundamental and broader strategic offering to our existing clients and, in addition thereto, to open up
new channels to gain new clients in varied sectors of the economy. This ‘re-engineering’ in essence
moves our solid technical offering to the periphery of our route to market and brings business
processes, strategic consulting and knowledge creation to the core of our route to market. In simple
terms, MediaWorx will play an increasing role as a management consulting firm and then apply its
technology to facilitate the business process developed specifically for each of our clients.
The core of our knowledge creation consulting is underpinned by our new business process called
Knowledge 350 degrees which is a roadmap that comprises 15 well-crafted and designed business
processes aimed at:
- Increasing a business’s knowledge about its customers, its market, regulations and includes a
sustainability evaluation.
- Moving a company’s marketing strategy from mass marketing to one-to-one marketing.
- Building databases to create granularity around a single customer view as opposed to
‘clustered views’.
- POPI which has now been signed and promulgated into law, will have a dramatic impact on marketing,
IT, security, data management and processing. Knowledge 350 degrees and its associated proprietary
tools will provide companies a clear road map to not only be compliant with POPI, but also increase
their knowledge of customers and market more effectively based on knowledge creation and the
unlocking of economic value.
The Knowledge 350 degrees integrated roadmap includes: surveys, market research, gamification,
search engine optimisation, web evaluation, social networking interfaces, loyalty services and creating
new customer experiences on a bespoke basis.
Knowledge 350 degrees will enhance MediaWorx by:
- Introducing new revenue streams via strategic consulting.
- Establishing new markets, thus broadening the geographic and sectoral footprint of MediaWorx.
- Establishing long-term relationships with clients as opposed to our traditional ad hoc short-term
relationships.
Knowledge 350 degrees has already shown good results in its early ‘soft launch’ phase by enabling
MediaWorx to secure many new blue chips clients with good prognoses of long-term relationships.
With POPI forming an important thread throughout the Knowledge 350 degrees process, we anticipate
huge interest in our new offering particularly within the next 24 months as businesses grapple with the
impact of POPI.
Knowledge 350 degrees has opened up exciting avenues for potential acquisitions of companies that
complement the underlying business process and executive management are currently evaluating
various options in this regard.
BizWorx
BizWorx provides Fax2Email, Email2Fax, corporate SMS, virtual airtime and bespoke services.
Fax2Email continues to provide solid annuity income albeit with pedestrian growth. During the six
months under review our automated platform processed over 30 million unique images which
translates to an average of around 230 000 per working day. The reverse of Fax2Email, which is
Email2Fax, has shown good growth on a day-to-day basis and shows promising growth. Email2Fax is
a prepaid model with no bad debts and Fax2Email is underpinned by Telkom as the carrier and billing
agent for the service, providing secure risk-free annuity revenue.
Both services are fully automated with built in redundancy and diversity and thus have very little impact
on capex or additional human resource for maintenance or growth.
We anticipate BizWorx’s services to continue providing solid annuity income whilst enabling the group
to continue to incubate and grow new products and services.
Call Centre
During the period under review the call centre has been increased from 20 seats to 70 seats. New
state-of-the-art systems have been included in the revamp and include: voice over IP applications, new
voice logging capabilities and enhanced facilities.
FoneWorx has primarily, via MediaWorx, secured a number of blue chip clients for the call centre
typically on the back of other services offered by MediaWorx. This has created additional revenue
streams which we anticipate to continue into the next six months and beyond.
Due to the fact that MediaWorx and the other operating divisions provide turnkey solutions to clients,
call centre applications form an integral part of most campaigns enabling the call centre to grow in
pace with services that are promoted by MediaWorx.
As previously mentioned, additional seats have also been added in the call centre to facilitate the data
capture for Caxton’s Dealfinder which is an online portal that showcases the most relevant, up-to-date
and exciting deals offered by retailers throughout South Africa.
Fulfilment Services
A new and larger fulfilment centre has been established at our Head Office in Randburg to cater for the
increase in fulfilment services which are aligned to the Fast Moving Consumer Goods promotional
campaigns and new clients which we intend to attract using the enhanced Knowledge 350 degrees process.
The new fulfilment centre will also cater for fulfilment for Caxton magazines where entrants to
promotional competitions receive benefits or samples from various brands within the Caxton stable.
With many of the promotional services provided by MediaWorx, fulfilment together with the call centre
provide an integral solution and we anticipate that fulfilment as a service will also grow incrementally
with the growth of additional MediaWorx services.
IDWorx
IDWorx is a cloud-based private vault for storing personal information all in one place.
This product is aimed specifically at individuals across the LSM spectrum and will enable subscribers
to not only comply with regulatory compliance such as FICA, FAIS and RICA, but will also assist them
in the regulatory requirements of POPI. Being a cloud-based application, the service incorporates
mobile apps for all major handset operating systems. The service enables subscribers to consolidate
important documents, medical records and the like into a single secure vault and then have the control
to ‘push’ documents to service providers requiring these documents or simultaneously allowing
selected companies or individuals to ‘pull’ documents from the secure vault with an audit trail of
persons who have accessed their personal database.
We anticipate that this product, branded as YourIdentity4U, will play a pivotal role in the regulatory
requirements of POPI, where the application can be used by individuals within an organisation who are
required to store documents in a particular secure format in line with the requirements of POPI and
also enable the individual to manage the documents in an appropriate and secure fashion.
Loyalty Services
During the period under review FoneWorx entered into an agreement with Sinfic, a company based in
Portugal and operating in Brazil, Europe and Africa, for the exclusive use (in South Africa) of a loyalty
programme which has been developed over the last 8 years.
The loyalty programme provides a fully-fledged treasury system, catalogue and Application
Programming Interfaces for connections to point of sale devices, cell phones and tablets.
The loyalty programme will generate a new revenue stream for FoneWorx as a stand-alone application
and as an element of Knowledge 350 degrees, where the application will be used as a profiling and
measurement tool.
PROSPECTS
We remain optimistic about the next six months to our financial year end in June 2014. We are very
excited about the re-engineered MediaWorx route to market incorporating Knowledge 350 degrees as
we believe that ‘knowledge’ will become the next intellectual property for corporations, specifically as
there has been a dramatic move to one-to-one marketing which has been facilitated by the massive
roll-out of smart devices enabling consumers to access information that is relevant to them as and
when required. It is imperative going forward (not only due to legislative requirements such as POPI)
that companies become sensitive to the fact that consumers are becoming more demanding and
require a relevant dialogue particularly through engagement via various digital channels. In order to
create the relevant dialogue, companies must develop single customer views and deep granularity
around each customer so as to communicate in the most relevant fashion possible.
Knowledge 350 degrees will assist clients in this process and enable FoneWorx to build intelligent
databases with intuitive marketing interfaces that can communicate effectively to ‘connected
consumers’ in relevant and selected channels.
We accordingly anticipate good growth in MediaWorx over the next six months with the deployment of
Knowledge 350 degrees which will then facilitate the acceleration of a number of the technical services
which have been developed by FoneWorx over the last 17 years in a structured format.
Our enhanced call centre, fulfilment centre and new loyalty programme all augur well for enhanced
earnings.
We are also actively evaluating niche acquisitions to complement our new Knowledge 350 degrees
business process.
We would like to thank our Directors, management, employees, dealers, partners and other
stakeholders for their continued support.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
Growth as at as at as at
31 December 31 December 30 June
2013 2012 2013
R'000 R'000 R'000
ASSETS
Non-current assets 24 338 25 627 24 716
Property, plant and equipment 15 514 16 800 15 893
Intangible assets 8 824 8 827 8 823
Current assets 126 932 112 802 134 966
Inventory 490 391 348
Current tax receivable - 1 523 39
Trade and other receivables 21 691 15 268 25 244
Cash and cash equivalents 104 751 95 620 109 335
Total assets 151 270 138 429 159 682
EQUITY AND LIABILITIES
Capital and reserves 123 686 114 042 126 571
Share capital 136 136 136
Share premium 52 489 35 619 52 488
Accumulated profits 71 061 78 287 73 947
Non-current liabilities 4 890 6 943 4 908
Interest bearing liabilities 3 974 5 643 4 574
Deferred tax liability 916 1 300 334
Current liabilities 22 694 17 444 28 200
Trade and other payables 16 411 12 905 20 020
Provisions 4 468 2 878 6 303
Tax payable 346 - -
Unclaimed dividends - 47 69
Current portion of non-current liabilities 1 469 1 614 1 808
Total equity and liabilities 9.28% 151 270 138 429 159 679
Net asset value per share (cents) 8.46% 90.94 83.85 93.07
Net tangible asset value per share (cents) 9.17% 84.46 77.36 86.58
Number of shares in issue 136 002 041 136 002 041 136 002 041
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Growth six months six months 12 months
ended ended ended
31 December 31 December 30 June
2013 2012 2013
R'000 R'000 R'000
Revenue 32.1% 63 279 47 897 107 367
Cost of Sales (26 822) (17 980) (41 180)
Gross profit 21.86% 36 457 29 917 66 187
Other operating income 603 30 659
Staff costs (12 600) (7 686) (19 102)
Depreciation and amortisation expense (2 432) (2 150) (4 520)
Other operating expenses (5 468) (5 163) (11 875)
Operating profits 16 560 14 948 31 349
Finance costs (228) (294) (547)
Investment income 2 674 2 548 4 833
Profit before tax 10.5% 19 006 17 202 35 635
Income tax expense (5 572) (4 992) (10 704)
Profit for the period 10.02% 13 434 12 210 24 931
Other comprehensive income - - -
Total comprehensive income for the period 10% 13 434 12 210 24 931
Profit attributable to the equity holders of the parent
company 10% 13 434 12 210 24 931
Weighted average number of shares in issue 136 002 041 136 002 041 136 002 041
Basic earnings per share (cents) 10% 9.88 8.98 18.33
Headline earnings per share (cents)* 10% 9.88 8.98 18.33
Diluted earnings per share(cents) 10% 9.88 8.98 18.33
* There have been no headline earnings adjustments between earnings per share and headline
earnings per share
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Total Retained Total
Capital Premium Share Income Equity
R’000 R’000 R’000 R’000 R’000
Audited balance at 1 July 2012 136 36 373 36 509 75 597 112 106
Changes in equity
Total comprehensive income for the period - - - 12 210 12 210
Cost to issue equity - (754) (754) - (754)
Dividends - - - (9 520) (9 520)
Total changes - (754) (754) 2 690 1 936
Unaudited balance at 1 January 2013 136 35 619 35 755 78 287 114 042
Changes in equity
Total comprehensive income for the period - - - 12 721 12 721
Share repurchase 1 October 2012 (40) (36 373) (36 413) (17 062) (53 475)
Share issue 1 October 2012 40 53 435 53 475 - 53 475
Cost to issue equity - (192) (192) - (192)
Dividends - - - - -
Total changes - 16 870 16 870 (4 341) 12 529
Audited balance at 1 July 2013 136 52 489 52 625 73 946 126 571
Changes in equity
Total comprehensive income for the period - - - 13 434 13 434
Dividends - - - (16 319) (16 319)
Total changes - - - (2 885) (2 885)
Unaudited balance at 31 December 2013 136 52 489 52 625 71 061 123 686
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
Growth ended ended ended
31 December 31 December 30 June
2013 2012 2013
R'000 R'000 R'000
Cash flow from operating
activities 23.1% 14 529 11 803 28 022
Net cash generated from operations 16 862 14 510 33 889
Finance costs (228) (294) (547)
Investment income 2 674 2 548 4 833
Normal tax paid (4 779) (4 961) (10 153)
Cash flow from investing
activities 42.2% (1 959) (3 388) (4 847)
Purchase of property, plant and equipment (616) (428) (890)
Proceeds on disposal of property, plant and equipment 96 - -
Expenditure on product development (1 439) (2 960) (3 957)
Cash flow from financing activities (47.71%) (835) (1 597) (2 665)
Dividends paid 71.42% (16 319) (9 520) (9 497)
Net increase in cash and cash equivalents (4 584) (2 702) 11 013
Cash and cash equivalents at beginning of the period 109 335 98 322 98 322
Cash and cash equivalents at
end of the period 9.55% 104 751 95 620 109 335
BASIS OF PREPARATION
The accounting policies applied in the preparation of these unaudited consolidated interim results,
which are based on reasonable judgements and estimates, are in accordance with International
Financial Reporting Standards and are consistent with those applied in the annual financial statements
for the year ended 30 June 2013. These unaudited consolidated interim results as set out in this report
have been prepared in terms of IAS 34 – Interim Financial Reporting, the Companies Act, 2008 (Act 71
of 2008), as amended, the SAICA Financial Reporting Guides, as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards
Council and the Listings Requirements of the JSE.
These financial statements have been prepared under the supervision of Mr Pieter Scholtz CA(SA):
Financial Director.
The unaudited consolidated interim results for the six months ended 31 December 2013 have not been
reviewed by the group’s auditors.
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision makers. These chief operating decision-makers (“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 reportable segments:
- BizWorx: the segment focusing on business related products; and
- MediaWorx: the segment focusing on information and entertainment services.
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2013 2012 2013
R'000 R'000 R'000
Revenue
BizWorx 32 912 28 342 64 922
MediaWorx 30 367 19 555 42 445
63 279 47 897 107 367
Cost of sales
BizWorx (7 998) (7 247) (15 597)
MediaWorx (18 824) (10 733) (25 583)
(26 822) (17 980) (41 180)
Gross Profit
BizWorx 24 914 21 095 49 325
MediaWorx 11 543 8 822 16 862
36 457 29 917 66 187
The accounting policies applied to the operating segments are the same as those described in the
basis of preparation paragraph above. MediaWorx provides services within South Africa as well as in
36 African countries (“Africa sales”). Within the period under review, 5.1% (2012: 4.3%) of
MediaWorx’s revenue can be attributed to Africa sales. The company allocates revenue to each
country based on the relevant domicile of the client. All of the company’s assets are located in South
Africa.
MediaWorx currently generates 47.7% (2012: 45.5%) of its revenue through two large network service
providers and BizWorx generated 96.5% (2012: 94.2%) through one single land line service provider.
The reconciliation of the gross profit to profit before taxation is provided in the 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.
DIVIDEND POLICY
It is the board’s policy to pay annual dividends and therefore no interim dividend has been declared for
this interim period. Dividends paid during the interim period relate to dividends declared in prior
periods.
SUBSEQUENT EVENTS
The board is not aware of any material events that have occurred between the end of the interim
period and the date of this report.
CHANGES TO THE BOARD
The following appointments were made to the Board during the period under review:
Independent Non-Executive Directors
Paul Jenkins (appointed on 17 September 2013)
Roger Pitt (appointed on 17 September 2013)
Non-Executive Directors
Marc du Plessis (appointed on 17 September 2013)
Piet Greyling (appointed on 18 September 2013)
For and on behalf of the board
Ashvin Mancha Mark Smith Pieter Scholtz
Chairman Chief Executive Officer Financial Director
Johannesburg
28 February 2014
Directors: Ashvin Mancha*# - Chairman, Mark Smith – Chief Executive Officer, Pieter Scholtz -
Financial Director, Gaurang Mooney* (Botswana), Graham Groenewaldt – Sales Director, Paul
Jenkins*# , Roger Pitt*#, Marc du Plessis# , Piet Greyling#
# Non-executive
* Independent
Website: www.foneworx.co.za
Company Secretary: P A Scholtz (CA (SA))
Designated Adviser: Merchantec Capital
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Date: 28/02/2014 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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