Faritec's rough ride over

Listed empowered IT company Faritec says it is looking ahead as the worst is now behind it, despite reporting a net loss after tax of R123 million for the year to June.

Recently appointed CEO Fanie van Rensburg says he sees the company growing this year and is “excited” about its future.

“Following a very difficult year, Faritec can now look forward to operating off a more efficient platform into the market. We believe that our focus on executing the basics in our core areas, together with our hard drive to further improve efficiencies and grow our market share, will allow us to rebuild to our full potential.”

The company reported revenue down 30%, as expected, to R727 million, from R1 billion in the previous year. Earnings per share decreased from 11.3c, in 2008, to a loss of 48.1c, which was the result of operational losses during the year.

Faritec has also been focusing on working capital and – after the financial year-end – received a cash injection of R60 million after a rights offer and Shoden taking up a majority stake in the company.

In the year under review, about 160 jobs were cut, either through retrenchments or freezing positions after staff have left. The company also spent R10 million on downsizing and wrote off bad debts of about R8 million.

However, it now expects to save R7 million a month on costs due to the restructuring. Chairman Chris Jardine says the company will continue to focus on improving cost efficiencies in the future.

Van Rensburg says the company has restructured its business units and can now support cross-selling between previously separate entities. It is also on the lookout for new products and services to offer customers.

He adds that the company is aggressively seeking new customers and has recently secured a contract with Neotel. Faritec also sees good growth opportunities in the public sector and will endeavour to add government departments to its client base.

FD Arvind Gupta, who was appointed in August, says the company has trimmed its debtors’ days from 106 to 56, as it has been more efficient in collecting money. It has also improved payment to creditors, from 135 days to 90 days.

“I think the board’s response to these numbers says it all,” says Frost & Sullivan senior ICT industry analyst Lindsey Mc Donald. “It’s obviously not completely unexpected to see these sorts of results, but I think they’ve taken the right approach by being pragmatic about it. They’ve said they’re disappointed, but they are looking to the future now, and that’s probably the best they can do.”

Mc Donald adds there is a determination from the Faritec board to turn things around and not lose a company that, until this year, was a very good competitor in South Africa’s ICT industry.

She feels that focusing on core businesses is now the best way forward for the company. “Faritec may have made a mistake in stretching themselves too thinly over the last few years in terms of the services they were offering.”

“The company made a number of acquisitions in a number of areas, perhaps trying to be all things to all men. There were unfortunately a lot of structures that were absorbed into the company but weren’t necessarily streamlined,” Mc Donald explains.

By going back to its core areas, the company should be able to improve efficiencies and start rebuilding, she adds.