Listed mobile solutions provider Foneworx's revenue and profit for the year to June were hampered by a slowdown at one of its units due to uncertainty around the introduction of the Consumer Protection Act (CPA).
The company says it also saw a slowdown in the first half of the year, because of last year's Fifa Soccer World Cup, which led to lower office occupancy rates and slowed sales at BizWorx and MediaWorx.
Foneworx has five operating entities, including BizWorx, which focuses on business-related products, and MediaWorx, which provides information and entertainment services. In development and piloting are CarbonWorx, DRWorx and IDWorx.
The company reported revenue slightly lower, at R91.6 million, from last year's R91.92 million. Net profit declined from R20.3 million to R19.5 million.
Positive outlook
In a statement to shareholders on Friday, it said despite the slowdown, it is “satisfied” with overall performance and a “positive platform” has been established for the new financial year.
“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.”
Foneworx, which ended the year with R82 million in cash, is looking for “value-adding acquisitions that complement its five divisions”. It says it will use cash resources to fund an acquisition.
The company will also use some of its cash to expand its Africa BizWorx Fax2Email rollout. During the year, FoneWorx deployed three independent technical platforms in Zambia, Nigeria and Kenya after establishing operating entities.
However, setting up the platforms came with a number of logistical, regulatory, cultural and operational challenges, which resulted in BizWorx adapting its South African offering of Fax2Email and Web2Fax to meet local requirements, it says.
“The Africa division has a number of challenges in the marketing rollout in these territories, but remains very positive about these markets and revenue opportunities.”
Slower sales
Foneworx explains the downturn in revenue and pre-tax profit, which went from R28.7 million to R27.8 million, was due to the negative effect of the soccer tournament on its first half results. The company also saw a slowdown in MediaWorx campaigns because of “uncertainty around the introduction of the Consumer Protection Act”.
The CPA came into effect in April. It is an overarching law that protects consumers and businesses that turn over less than R2 million a year and is enforced by the National Consumer Commission. Foneworx says the lack of clarity has since been cleared up as regulations were published shortly before the Act came into effect.
FoneWorx explains that MediaWorx saw a slowdown in promotions, because of uncertainty in how the CPA would work until the regulations were published. The company says media houses, advertising agencies and fast-moving consumer goods brands were confused as to how SMS rates and tariffs would be regulated for competitions and promotions.
The maximum rate for promotions and competitions has been limited to R1.50 per SMS. However, the unit has seen an increase in volumes, which has mitigated revenue reductions, the company says.
Foneworx adds that the cancellation of the Telkom Charity Cup also affected results. In April, the Premier Soccer League removed the long-standing event from its calendar. Foneworx has partnered with the event since 2003.
The company also battled with timing delays in some client campaigns, which rolled over into the new financial period, as well as generally poor prevailing economic conditions, that led to longer sales cycles, which also weighed on results.
BixWorx accounted for the bulk of the company's revenue, at R64.4 million, while MediaWorx contributed R24.6 million.
Foneworx declared a 5.5c a share dividend, which includes a special 1.2c a share dividend based on its surplus cash reserves.
Its shares closed 5c, or 5%, lower on Friday at 95c.
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