Faritec says loss is temporary

Faritec Holdings, a JSE-listed mid-range technology infrastructure and services provider, says it expects a profitable financial year despite reporting a loss for the six months to December 2002.

Faritec incurred a headline loss of R1.24 million for the period, compared with headline earnings of R8.61 million for the previous interim period.

CEO Simon Tomlinson attributes the loss to the product revenue at the enterprise solutions business being well below budget.

He says tight management of operating expenses kept the impact of the slowdown in the product business to a minimum.

A 31% increase in services revenue was not enough to make up for the product revenue decline and overall revenue dropped by almost 17.5% to R125.6 million.

Tomlinson says the product business, which has been the major contributor to the results over the past two years, was hit by tough trading and economic conditions that saw a slowdown in customer spend in the server and storage markets.

An improvement is expected in the second half as a result of a pending empowerment deal, an improved pipeline and the investigation of new services to add value to the products.

The strategic IT services business performed well, with both revenue and earnings ahead of budget and operating expenses below budget.

Tomlinson says the Inter Company Process (ICP) venture, which focuses on the service provision of inter-company processes, is still in the development and pre-revenue phase of its business plan.

However, he says the balance sheet remains solid. Cash on hand excluding cash equivalents decreased to R28 million from the R41 million reported at the June year-end.

Of the R13 million spent, R9.8 million was used to fund operations and R2.4 million was on development costs for the ICP project. About R700 000 was used to buy fixed assets and the balance was used to settle vendor debts and to repurchase 40 000 Faritec shares.

"We expect the tough trading conditions being experienced in the South African IT market to continue for the remainder of the financial year," Tomlinson says. However, he expects the second half to show an improvement over the first half and a profit for the full year is being forecast.