Faritec is expecting to post an earnings loss for the 12 months ended 30 June, but is confident of its prospects going forward.

Late on Friday, the company issued a statement advising shareholders that it expects to post an EPS loss of between 47,5c and 48,7c and a HEPS loss of between 35c and 36,2c for the year.
It explains that the rights offer and the Shoden Data Systems transaction were concluded after the year-end, on 13 July and 21 July 2009 respectively. In terms of these transactions, there are now 1 891 544 767 shares in issue. Had the transactions had been concluded at the commencement of the financial year, it would have resulted in an EPS loss of between 6,5c and 6,7c and HEPS loss of between 4,8c and 5,0c.
"Faritec has experienced a difficult and disappointing chapter in its history, posting a loss reflective of the many hardships endured throughout the year," the statement reads. "Notwithstanding the current domestic and global economic situation, the board is immensely disappointed with the results for the year ended 30 June 2009."
It adds that thebiggest factors contributing to the losses were the rapid decline in sales as the economy and the Faritec market contracted, together with the high cost structures of the business, which needed to be trimmed as the market shrank.
"Revenues declined at a faster rate than that by which the cost structures could be reduced," according to the statement. "This gave rise to severe working capital pressures and ultimately to the losses experienced."
Revenue has declined as compared to last year, with full-year revenues of       
approximately R736-million being down about 30%. "This is largely due to the trading difficulties, which were exacerbated as the company undertook its turnaround programme and customers cut back on capital expenditure."
According to the company, there are several non-recurring costs which contributed to the loss, including:
* Once-off downsizing costs of approximately R10-million;
* A write-off of bad debts of approximately R8-million and provisions of R18-million for doubtful accounts receivable, both relating to debtors raised in the prior financial year and arising as a consequence of the ongoing economic climate;
* Additional interest charges of R11-million more than budgeted for and which were incurred during the difficult trading conditions; and
* An impairment charge of R31-million on goodwill.
"Going forward, Faritec`s operating costs have been reduced by approximately R7-million per month on a year-on-year comparative basis," the company says. "In addition, there has been a significant improvement in the working capital management.
"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, through an issue of shares for cash. This injection of capital, with the release of certain guarantees, has resulted in an inflow of approximately R60-million into the business.
"Faritec is now in a much improved position as compared to the period just prior to the corporate transactions. There is a new management team in place, the cost structure has been significantly reduced, the company has narrowed its focus to its core enterprise offerings and the high-end corporate customer base remains promising. Faritec is now well poised to build on its stabilisation and realise its full potential over the course of the coming year."