JSE-listed black-empowered IT services company Faritec aims to raise about R60 million to implement its turnaround and growth strategies.
The embattled company is targeting a return to profitability this year, after being hammered by the global recession that hit the world late in 2008.
Last year, the company reported a slide in revenue from R1 billion to R727 million in the year to June, and operational losses led to a loss per share of 48.1c, compared with a gain of 11.3c in 2008.
Operations at Faritec, which was criticised for growing too fast, were also hampered by the resignation of both its CEO and CFO last year, before Shoden injected R20 million into the company for a 51% stake. Another R29 million was invested by shareholders after a rights offer. Together, these amounts gave the company the cash it needed to continue operating.
Turning around
Faritec, which is trading under cautionary, says the fundraising will be used to “implement its turnaround and growth strategies”. The investment will also be used to ensure Faritec has sufficient working capital to fund its operations and clear some of its debt.
The nature of the funding, which could be share issues or debt, or a combination of several options, should be announced later this month.
CEO Fanie van Rensburg says the report will be published by the JSE's deadline, and has been delayed to include details of the fundraising.
Smaller loss
Faritec still expects to report a loss for the six months to December, but this loss has narrowed, it says. Earnings will be between 25% and 45% higher, and both earnings per share and headline earnings per share should be between 80% and 90% higher than last year.
A year ago, the company made a net loss of R21.5 million off revenue of R414 million, and a headline and earnings per share loss of 8.3c.
Despite the fact that the company will still report a loss, Van Rensburg is confident that it will return to profitability this year. He had previously aimed for a break-even position.
“I am confident that our focus on executing the basics in our core areas capably, together with our continued drive to improve efficiencies and grow our market share, will allow the company to return to profitability over the course of the coming year,” he says.
Van Rensburg says the cash injection will be used to free up working capital to allow the company to grow. He explains that, as the business is starting to grow, its cash flow is being constrained. The funding will allow it to overcome this obstacle.
However, the market reacted negatively to the news, with the share sliding to 4c, after opening at 5c on the day.
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