Faritec has experienced a “difficult and disappointing chapter in its history, posting a loss reflective of the many hardships endured throughout the year”, it says.
The company expects to report an earnings per share loss of between 47.5c and 48.7c, and a headline earnings per share loss of between 35c and 36.2c for the year to June, when it reports on Wednesday.
Last year, the company reported earnings per share of 11.3c, an improvement on the prior year's 8.5c. Headline earnings per share were also 11.3c, up from the previous year's 8.9c.
Revenue declined by about 30%, compared to last year, to about R736 million. Revenue last year was R1 billion, an increase on 2007's revenue of R858 million.
The listed IT company says the drop in revenue is largely due to trading difficulties, which were exacerbated as the company undertook its turnaround programme and customers cut back on capital expenditure.
Several once-off items contributed to its loss, including downsizing costs of about R10 million, bad debts written off of R8 million, additional interest charges of R11 million more than it budgeted for, and an impairment charge of R31 million on goodwill.
Cost structure
Faritec says, in a Stock Exchange News Service announcement, that the results were disappointing, despite the current domestic and global economic crisis.
“The biggest factors contributing to the losses were the rapid decline in sales as the economy and the Faritec market contracted, together with the high cost structures of the business, which needed to be trimmed as the market shrunk.”
The company explains that revenue declined faster than it could trim the cost structure, which resulted in severe working capital pressures and “ultimately to the losses experienced”.
However, the company's costs have now been trimmed by about R7 million a month and it has improved working capital management. Its share issue and Shoden's purchase of a majority stake have injected R60 million into the company.
“Faritec is now in a much improved position as compared to the period just prior to the corporate transactions. There is a new management team in place, the cost structure has been significantly reduced, the company has narrowed its focus to its core enterprise offerings, and the high-end corporate customer base remains promising,” it says.
The company expects to reap the benefits of its repositioning in the year ahead, it adds.
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