Small improvement for Faritec

By Iain Scott, ITWeb group consulting editor

Johannesburg, 26 Feb 2004

Faritec has reported a headline loss of 0.9c a share for the six months to end-December, compared with a loss of 1c for the previous comparable period.

Revenue increased by almost 46% from R125.6 million to R183.23 million, but operating expenses, up from R126.59 million to R185.56 million, coupled with depreciation of R729 000 (2002: R895 000), resulted in a loss of R3.07 million (R1.88 million) from operations.

CEO Simon Tomlinson says the increase in operating expenses is due to some of the new businesses, which were still in the set-up phase, experiencing slower than anticipated sales cycles, while certain operating and salary expenses were being incurred.

A decline in product revenue margins also influenced the figures, although management expects operating margins to improve during the second half of the year.

A net loss of R2.33 million (R1.26 million) was softened by income of R1.15 million attributable from minorities, resulting in an attributable loss of R1.19 million, which compared with a prior-year loss of R1.26 million.

"Faritec`s six-month performance can be summarised in terms of a significant increase in revenue, a substantial investment in new managed service businesses, and finally, an increase in operating expenses," says Tomlinson. "These are as a direct result of our strategy to become the leader in the managed services market in Africa."

Faritec invested R11.3 million in new managed service businesses, which included R5.3 million in the construction of its new security operations centre; R2 million in development costs for its Inter Company Processes division; and R4 million in acquiring the African licence for a multimedia message service mobile application and content offering.

Tomlinson expects the second half of the year to be an improvement over the first half. He also expects to realise a significant improvement in finances for the year, mainly due to a slowdown in investment activity and a flattening of operating expenses as the company enters the consolidation phase of its strategy.