Faritec is optimistic about the future despite declaring an operating loss of R96 million for the year, the company is hopeful that its new strategy will propel it to a new profitable future.
The JSE-listed black-empowered IT services company reported a 30% decline in revenue to R727m.
According to Faritec Chairman Chris Jardine, Faritec has experienced a challenging chapter in its history.
“The principal factor contributing to the loss was a large decline in sales as the economy and Faritec’s target market contracted, resulting in customers cutting back on capital expenditure. The loss was then exacerbated by the high cost structures of the business which did not decrease appropriately to match the decline in revenue,” Jardine explained.
The company has implemented a turnaround programme, which includes a new management team, stringent working capital management disciplines, significant reduction in its cost structures and a focus on its core capabilities of servicing high-end corporate enterprise customers.
New management changes included the appointment of Fanie van Rensburg as Chief Executive Officer and Arvind Gupta as Financial Director in August 2009 as well as the appointment of Dan McMahon as Sales and Business Development Director in September 2009.
“Year-on-year monthly costs are down by approximately R7m,” said van Rensburg. “Gross margins have remained stable, there has been significant improvement in our working capital management, and the business has been successfully recapitalised.”
During the period, working capital pressures led to a rights offer to raise additional capital as well as the introduction of a new equity partner in Shoden Data Systems, through an issue of shares for cash. This injection of capital, together with the release of certain guarantees, resulted in an inflow of approximately R60m into the company.
The rights offer and the Shoden Data Systems transaction were concluded after the year-end on 13 July and 21 July 2009 respectively. Had these transactions been concluded at the commencement of the financial year, it would have resulted in an EPS loss of 6.6 cents and HEPS loss of 4.9 cents.
van Rensburg believes that moving into 2010, Faritec is in a position to operate off of a more efficient operating platform into its target market of high-end corporate enterprise customers.
“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 its full potential over the course of the coming year,” he concluded.
