faritec annual reportjayendra naidoo non-executive director (47) bproc (unisa) jayendra naidoo is...
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FARIT
EC A
nnual R
EPORT
01 Financial highl ights
Group structure
Revenue analysis
Board of directors
Chairman’s report
CEO’s review of operat ions
Corporate governance
Group value-added statement
Annual f inancial statements
Shareholders’ diary
Administrat ion
Not ice to the annual general meet ing
Form of proxy
02
03
06
1014
1828
31
69
70
73
RT
01 Financial highl ights
Group structure
Revenue analysis
Board of directors
Chairman’s report
CEO’s review of operat ions
Corporate governance
Group value-added statement
Annual f inancial statements
Shareholders’ diary
Administrat ion
Not ice to the annual general meet ing
Form of proxy
02
03
06
1014
1828
31
69
70
73
2003 2004
2005 2006
2007
SA
GA
AP
S
A G
AA
P
IFRS
IFR
S
IFRS
Trading
Revenue (R000)
282 478 329 980
428 425 530 058
858 349
Profi t/(loss) from
operations (R000) 4 610
(16 429) 1 380
17 767 19 530
Headline earnings (R000)
6 311 (11 173)
1 291 14 062
17 088
Attributable earnings (R000)
514 (11 556)
3 719 13 982
16 460
Ordinary share perform
ance
Earnings per share (cents)
0,4 (8,9)
2,9 10,4
8,5
Headline earnings per share (cents)
5,0 (8,6)
1,0 10,4
8,9
Financial ratios
Return on equity (%
) 0,6
(14,2) 3,4
16,7 9,7
N
umber of em
ployees 174
215 220
410 464
900 000
700 000600 000500 000400 000300 000200 000100 0000
800 000
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
20 000
10 000
5 0000
-5 000
-10 000
-15 000
15 000
FINANCIAL HIGHLIGHTS
001Faritec H
oldings Lim
ited A
nnual Rep
ort 2007
59%
41%
BE
E S
hareholding
J&J G
roup and
Other
Other
Sharehold
ers
Faritec (Pty) Ltd
Sub
sidiary
Faritec Inter-Com
pany
Processes (P
ty) Ltd
Trading S
ubsid
iary
Faritec Strategic
IT Services (P
ty) Ltd
Sub
sidiary
Faritec Enterp
rise
Solutions (P
ty) Ltd
Trading S
ubsid
iary
Farimed
(Pty) Ltd
Trading S
ubsid
iary
ebusiness Infrastructure
Solution (P
ty) Ltd
Joint Venture
100%
100%
50%
100%
69,9%
100%
100%
Group structure
002Faritec H
oldings Lim
ited A
nnual Rep
ort 2007
FARITEC HOLDINGS LIMITED
(JSE
CO
MPA
NY
)
The ability to d
iscipline yourself to d
elay
gratifi cation in the short term in ord
er to enjoy
in the long term is the ind
ispensab
le
prereq
uisite for success
Revenue analysisHardw
are revenue grew by 64%
, software revenue grew
by 115% and services revenue grew
by 31%
, year on year.
Segmental analysis of revenue
Segmental analysis of revenue
2006
2007
2007
��Hardware
59%��Softw
are18%
��Services23%
2006��Hardw
are58%
��Software
14%��Services
28%
003Faritec H
oldings Lim
ited A
nnual Rep
ort 2007
Archimedean Spiral
An A
rchimedean spiral (also arithm
etic spiral), is a spiral named after the 3rd-century-B
C G
reek mathem
atician Archim
edes;
it is the locus of points corresponding to the locations over time of a point m
oving away from
a fi xed point with
a constant speed along a line which rotates w
ith constant angular velocity. g
“ Give me the place to stand, and I shall m
ove the earth.”
ARCHIMEDES
Greek inventor, mathem
atician, and physicist
PurposeFaritec p
rovides the m
ost customer-
centric technology solutions
Board of directors
Simon Tomlinson
Executive Director – C
EO (43)
Appointed on 19 August 1998Sim
on Tomlinson’s experience in
the IT industry spans more than a
decade, and includes positions held at Unisys and EDS. In 1995, Sim
on w
as part of a managem
ent buy-out of Inform
atica Systems, and the
subsequent formation of the Faritec
Group, which Sim
on headed up as Group M
anaging Director. Simon
directed the Faritec Group during the early years of its developm
ent, playing an instrum
ental role in the organic and strategic grow
th of the group, including its successful listing on the M
ain Board of the JSE in N
ovember 1998. Sim
on is currently the CEO of the Faritec Group, continuing to drive the group’s strategic direction.
Dr Hasmukh GajJar Executive D
irector – D
eputy CEO
(56)M
B ChB (UCT)Appointed on 17 July 2003Hasm
ukh Gajjar is an entrepreneur w
ith extensive IT experience and w
as previously the Chief Executive Offi cer of the IT fi rm
Consilience Technologies, form
er Chairman
of the Black IT Forum and past
President of the Black Business Council. He serves on num
erous IT and telecom
bodies. Hasmukh is
Deputy CEO and Executive Director of Faritec. Hasm
ukh is responsible for driving business transform
ation and black econom
ic empow
erment.
Mncedisi MayekisoExecutive D
irector – Marketing (37)
B.Soc Science, P Grad Diploma
Managem
ent (UCT), MBA (CASS
Business School London)Appointed on 30 June 2006M
ncedisi is a co-founder and N
on-executive Director at Canal Square Investm
ents, an investment
holdings company w
ith interests in the inform
ation technology and m
otor industry sectors. From 2003
until 2006 he served as Executive Director at Enterprise Connection until the acquisition of Enterprise Connection by Faritec. A graduate of the University of Cape Tow
n and the holder of an M
BA degree from Cass
Business School in the UK, Mncedisi
co-founded Joburg City Auto in 2003, South Africa’s fi rst black-ow
ned BM
W franchise. He has over
11 years of experience in the ICT sector, having occupied positions in leading com
panies such as IBM
and Microsoft. M
ncedisi as Group M
arketing Director is responsible for brand, custom
er and solutions m
arketing.
Tshidi Nyembe Executive D
irector – CFO
(34)BCom
pt, BComp (Hons), CTA, CA(SA)
Appointed on 1 April 2005Tshidi’s experience lies in capital expenditure and equity investm
ents, corporate fi nance and fi nancial m
anagement.
At Faritec, she applies this valuable experience w
here she is responsible for overseeing all fi nancial functions of the group. Tshidi joined Faritec from
Transnet, w
here she was an Assistant
General Manager of fi nance and
also held various positions as a m
ember of the investm
ent, risk and audit com
mittees of the Transnet
Retirement Fund since 1999. Prior
to Transnet, she held the position of corporate analyst at Stanbic. She also sits on the board of directors of Criterion Holdings and the Charities Aid Foundation SA, a section 21 com
pany.
Allan TimmExecutive D
irector – Sales (47)
Appointed on 19 August 1998Allan Tim
m has m
any years’ experience in m
arketing positions in the FM
CG sector, as well as
extensive experience in the IT industry that spans m
ore than a decade. Allan w
as Group MD
of Informatica System
s and was
involved in the managem
ent buy-out of the com
pany, resulting in the form
ation of Faritec. Under Allan’s direction, Faritec quickly grew
into a m
ajor player in the Unix marketplace,
winning an im
pressive list of prestigious clients, and garnering num
erous awards, including IBM
’s Top Business Partner for 2005 and 2006. Allan fi lls the role of Group Sales Director and is also responsible for building Faritec’s public sector business.
006Faritec H
oldings Lim
ited A
nnual Rep
ort 2007
Peter Winn
Executive Director – S
ervices (42)BSoc Sc (University of N
atal)Appointed on 19 August 1998Peter W
inn has 18 years’ local and international experience in business process reengineering as w
ell as the installation and im
plementation
of business applications. With
this background, Peter joined Inform
atica Systems, and assisted
in the managem
ent buy-out of the com
pany and the formation of the
Faritec Group. Peter fi lls the role of Services Director and is responsible for driving Faritec’s service business ensuring that Faritec m
eets and exceeds custom
er expectations.
Dr Chris Jardine N
on-executive Director
– Chairm
an (43)BSc, M
Sc (Computer Science), PhD
Information Technology (George
Mason University, USA)
Appointed on 17 July 2003Dr Chris Jardine is the Chief Executive Offi cer of the J&
J Group, an investm
ent and managem
ent com
pany with interests in the
technology, industrial and fi nancial services sectors. A form
er Executive Director of Transnet, Chris is a seasoned executive, having w
orked as CIO, CEO, Director and Chairm
an for various com
panies both inside and outside of the ICT sector. He currently serves as a Director of num
erous J&J subsidiaries and
associate companies.
Donald MassonIndependent N
on-executive D
irector (76)Appointed on 28 August 2002Donald M
asson contributes some
four decades’ experience as a senior executive. He has held top positions in a diversity of organisations, including listed and unlisted com
panies as well as parastatals.
He is a former President of the
Afrikaanse Handelsinstituut, and an ex-m
ember of the State President’s
Economic Advisory Council.
Phumzo NoxakaIndependent N
on-executive D
irector (35)BAdm
in, BCom Accounting (Hons),
CA(SA)Appointed on 18 M
ay 2004Phum
zo Noxaka is the General
Manager Finance for SAM
RO Ltd (Southern African M
usic Rights Organisation), an organisation that adm
inisters royalties on behalf of com
posers, authors and publishers. She has a num
ber of years’ experience in the fi nancial services industry, in IT risk m
anagement from
an IT audit perspective, and as Head of Finance for a subsidiary of one of the m
ajor banks. Phumzo serves
on the board of AWCA (African
Wom
en Chartered Accountants), an organisation that advocates the developm
ent of aspirant and qualifi ed African w
omen CAs.
Jayendra NaidooN
on-executive Director (47)
BProc (Unisa)Jayendra N
aidoo is the Executive Chairm
an of the J&J Group, the
company he started w
ith former
cabinet minister Jay N
aidoo. Jayendra is also the Chairm
an of fi nancial services com
pany, M
acquarie First South Securities. He w
as the fi rst Executive Director of N
edlac and has been involved in leading various signifi cant political, labour, governm
ent and comm
ercial negotiations.
007Faritec H
oldings Lim
ited A
nnual Rep
ort 2007
Albert Einstein w
as a Germ
an-born theoretical physicist. Einstein received the 1921 Nobel P
rize in Physics
“for his services to Theoretical Physics”. W
orks by Albert Einstein include m
ore than fi fty scientifi c papers and also non-scientifi c books.
In 1999 Einstein was nam
ed Time m
agazine’s “Person of the C
entury”, and a poll of prominent physicists nam
ed him the
greatest physicist of all time due to his unique vision. In popular culture the nam
e “Einstein” has become synonym
ous with genius.
g
“ I am enough of an artist to draw
freely upon my im
agination. Imagination is m
ore
important than know
ledge. Knowledge is lim
ited. Imagination encircles the w
orld.”
Albert Einstein Germ
an mathem
atician and Nobel Prize Laureate (physics)
VISIONInsp
ired and
emp
owered
peop
le, growing a d
ynamic
business, com
mitted
to outperform
ing our peers and
creating sustainable stakehold
er value.
010 Faritec Hold
ings Limited
Annual R
eport 2007
Following a solid
perform
ance of the business lead
ing
up to the interim
s, the Board
of Faritec has been
disap
pointed
in the perform
ance of the business in
the latter six months of the year, as evid
enced b
y
the full-year results.
The integration challenges arising from the acquisitions undertaken during the year
proved more diffi cult, consum
ed more m
anagement energy, and took longer to
complete than anticipated. This w
as compounded by the required introduction of new
processes and system
s, which w
ere necessary to enable better managem
ent of a grow
ing business with the size and scope of the new
Faritec. All of these factors, together w
ith certain revenue generating opportunities being delayed into the new
fi nancial year, have led to poorer than expected results.
Financial overviewFaritec achieved revenue of R858 m
illion compared to revenue of R530 m
illion in 2006, an increase of 62%
. This refl ects acquisitive revenue growth as w
ell as a change in geographical revenue m
ix, with the W
estern Cape region’s contribution increasing to 18%
. The group’s gross profi t margins have declined to 22,6%
(2006: 23,4%), w
hile softw
are and services’ revenue contribution decreased from 42%
to 41%, m
ainly as a result of the slow
uptake of the services business.
Attributable earnings increased by 18% to R16,5 m
illion compared w
ith the prior period of R14,0 m
illion. Included in attributable earnings is the impairm
ent of a capitalised asset am
ounting to R1,3 million and the proportionate share of the losses allocated to
minorities of R2,2 m
illion.
Headline earnings per share decreased from 10,4 cents in 2006 to 8,9 cents in 2007.
Basic earnings per share decreased from 10,4 cents in 2006 to 8,5 cents in 2007. The
weighted average num
ber of shares in issue for the year was 193 m
illion, which
increased from last year’s 135 m
illion as a result of the additional shares issued on the exercise of the J&
J option, shares issued in terms of the Faritec Share Incentive
Scheme, and 5,6 m
illion shares issued for the acquisition of the business of Lechabile Storage Solutions.
CHAIRMAN'S REPORT
011Faritec H
oldings Limited Annual R
eport 2007
Included in ordinary shareholders’ funds is the issue of shares to the J&J Group am
ounting to R84,3 million for the exercise of the option, as w
ell as the issue of 5,6 m
illion shares, raised at market value of R6,4 m
illion on acquisition date, for the acquisition of the Lechabile Storage Solutions sale assets and liabilities. This increase has been offset by the resultant acquisition equity adjustm
ent amounting to a net
R86 million arising from
the purchase of the J&J minority interest.
Tangible net asset value per share decreased to 2,1 cents (2006: 12,1) which has been
negatively impacted by the recognition of goodw
ill on the acquisition of the Lechabile Storage Solutions sale assets and liabilities, am
ounting to R37 million. The acquisition
date for Lechabile was 1 Novem
ber 2006 and the total cost of the acquisition was
R17,2 million. This business w
as fully integrated into the Faritec operations post acquisition date.
The group experienced better cash generation in the second half of the year, which
reversed the cash consumed in the fi rst half, w
ith operating cash of R9 million
generated for the year.
The group incurred capital expenditure of R13,8 million during the year, the m
ajority of w
hich related to the procurement of the new
fi nancial and call centre systems.
Corporate governance
The Board conducts the affairs of the group with integrity and openness and w
ithin the param
eters of the King Report on Corporate Governance. The Board is comm
itted to continued im
provement and im
plementation of best practices in corporate
governance.
BEE and transform
ationFaritec has successfully im
plemented and integrated all the pillars of the Departm
ent of Trade and Industry’s BBBEE scorecard. Each elem
ent has now developed a m
ature, self-sustaining effort w
ithin the operations of Faritec.
No business remains static and as w
e grow as a com
pany, each element of the
scorecard requires its own continuous evaluation. Faritec has invested a great deal
of managem
ent time and resources in Em
ployment Equity and Skills Developm
ent to
ensure that we continue to rem
ain one of the leading black-empow
ered companies
on the JSE.
Faritec successfully completed its rating in February 2007, receiving an A-Rating from
Empow
erdex as a Level Four Contributor. With our grow
th in people and skills, we
aspire to achieve a better rating through our investments in our people and partners.
We are satisfi ed that Faritec is succeeding in its efforts to becom
e a truly South
African company.
The futureThe m
arket for our products and services remains buoyant on the back of a grow
ing
economy. In addition, there are various m
anagement interventions to effect a quick
turn-around of the business’ performance. Accordingly, the Board believes that the
prospects of a return to the expected performance for Faritec to be good.
Dr C
hris JardineC
hairman
Sandton
14 November 2007
The Napoleonic C
ode, or Code N
apoléon (originally called the Code civil des Français) w
as the French civil code, established under
Napoléon I. The C
ode, with its stress on clearly w
ritten and accessible law, was a m
ajor step in establishing the rule of law. The rule of
law, in its most basic form
, is the principle that no one is above the law. The rule follows logically from
the idea that truth, and therefore
law, is based upon fundamental principles w
hich can be discovered, but which cannot be created through an act of w
ill. g
“ Imagination governs the w
orld”
Napoleon French Em
peror
StrategyFaritec specialises in providing tailored technology solutions that address the business requirem
ents of our custom
ers using our strength in partnering and by em
powering our people.
014 Faritec Holdings Lim
ited Annual Report 2007
The operations of the business did not manage to follow
on from the positive perform
ance of the fi rst six months.
This led to our trading results, being revenue and gross
profi t, being well below
our expectations. These trading
results were im
pacted by integration challenges and
the introduction of new processes and system
s, which
resulted in us taking our “eyes off the ball” and focusing
on fi xing the internal issues.
Review
of operationsCom
pared to the 2006 fi nancial year, revenues grew by 62%
, mainly due to our acquisitions.
The operations did not deliver the larger organic growth that w
as expected. Hardware
revenue grew by 64%
from R306 m
illion to R503 million, softw
are revenue grew by
115% from
R73 million to R157 m
illion and services revenue grew by 31%
from
R151 million to R198 m
illion. We continue to grow
our software and services businesses
in line with our stated strategy of im
proving our revenue mix.
We have been successful in grow
ing and improving our relationships w
ith our custom
ers and partners. This has resulted in continued business from our historic
base and signifi cant wins in a num
ber of new custom
ers and sectors. Our well-
established relationships with our regular partners and the grow
ing relationships with
some new
partners continue to allow us to provide tailored technology solutions to
our customer base. W
e have also managed to enhance our offerings across all our
solutions and now have a far better value proposition for our custom
ers.
Our people have been through signifi cant transformation over the last year but have
adapted well to the new
size and scope of Faritec. Faritec remains an em
ployer of choice and w
e have had an increase in the number of applications for positions in
our company.
AcquisitionsThe acquisition of the business of Lechabile Storage Solutions closed on 31 October
2006. This business was fully integrated into the Faritec operations after the
acquisition date.
On 30 July 2007 Faritec signed a contract to acquire the business of Fidentia Software
Futures. The suspensive conditions have not yet been met and the transaction is
expected to be concluded in the next few m
onths. The Software Futures business w
ill
then be integrated into the Faritec operations.
We have now
entered a period of consolidation relating to our three recent acquisitions,
and are focusing on driving the business forward.
We w
ill, however, continue to investigate potential acquisition opportunities in our
business focus areas.
ProspectsW
e have spent a lot of time and effort on the issues that tem
porarily stalled our growth
and impacted our trading in the past year, and w
e have implem
ented a number of
action plans to ensure this is not repeated in the new fi nancial year.
Faritec remains w
ell positioned to succeed in our target markets. Com
pared to last
year, the business has a greater scale, a larger customer base and m
ore talent to
pursue its growth targets. W
e are confi dent that the most diffi cult integration
challenges are fi nally behind us and we anticipate a return to our recent grow
th
trajectory in the short term.
CEO'S review of operations
015Faritec H
oldings Limited Annual R
eport 2007
AppreciationFaritec’s group of loyal and supportive stakeholders has grow
n signifi cantly over the last year. To our custom
ers and partners – thank you for your support during a challenging year. W
e look forward to strengthening our relationships w
ith you over the com
ing year.
To the managem
ent and staff – thank you for your dedication and the mom
entous effort that you have put in over the last year. I am
confi dent that our efforts will deliver
the results we are looking for in the New
Year.
Simon Tom
linson C
hief Executive Offi cer
Sandton 14 Novem
ber 2007
FIVEPILLARSW
e provid
e tailored technology solutions
We ad
dress the b
usiness requirem
ents of our custom
ers
We are strong in p
artnering
We em
pow
er our peop
le
We generate financial returns
Aristotle considered ethics to be a practical science, i.e., one m
astered by doing rather than merely reasoning. Further, A
ristotle
believed that ethical knowledge is not certain know
ledge (like metaphysics and epistem
ology) but is general knowledge. H
e wrote
several treatises on ethics, including most notably, N
ichomachean Ethics, in w
hich he outlines what is com
monly called virtue ethics. g
“Courage is the first of human qualities because
it is the quality which guarantees the others.”
Aristotle Greek philosopher and student of Plato
018
Faritec Hold
ings Limited
Annual R
eport 2007
The King C
ode on Corporate P
ractices and Conduct
The Board is comm
itted to continued improvem
ent and implem
entation of best
practices in corporate governance. The Board conducts the affairs of the group with
integrity and openness, and takes cognisance of the recomm
endations in the King
Report on Corporate Governance for South Africa 2002.
Corporate values
Faritec believes that corporate values are of utmost im
portance. Corporate values are
more than statem
ents that a company pins up on a w
all; they need to be the basis on
which decisions are m
ade. As such, Faritec has been through a process of defining a
meaningful value system
that takes into account the values of our employees. Faritec’s
core value system encom
passes a combination of relationships, integrity, team
work,
excellence and caring.
Corporate code of conduct and business ethics
Faritec’s employees are guided by the com
pany’s Business Ethics and Conduct
Guidelines. Guidelines are available to all staff on the company’s intranet. The
guidelines were developed to cover every area in w
hich staff have responsibilities to
Faritec as employees:
• Personal conduct
• Protection of Faritec’s assets
• Obligations in conducting Faritec’s business with other people and organisations
• Conflicts of interest and other considerations affecting Faritec that may arise in
their own tim
e
Stakeholder relations
The group is comm
itted to open and prompt com
munication w
ith all its stakeholders.
Faritec stakeholders include a combination of its shareholders, custom
ers, business
partners, em
ployees, suppliers,
media,
investment
analysts, black
economic
empow
erment partners, the com
munity, and legislative and governing bodies.
Regular comm
unication with stakeholders is conducted, taking due regard of
statutory, regulatory and other directives regulating the dissemination of inform
ation.
The dissemination of inform
ation occurs through various channels, including traditional
media such as new
spapers and magazines, face-to-face m
eetings and presentations
to stakeholders, and through the intranet and internet. Shareholders are encouraged
to attend the annual general meeting to m
eet the mem
bers of the Board.
Board of D
irectorsThe diversity of the Faritec Board brings together a w
ealth of experience and expertise
from the directors’ broad fields of business activity to ensure the effective leadership
of the group into the future. The Board is a unitary structure comprising six Executive
and four Non-executive Directors, of w
hich two are Independent N
on-executive
Directors, as defined by the King II Report on Corporate Governance. The Chairman of
the Board is a Non-executive Director, and this role is separate from
that of the Chief
Executive Officer.
The Board has adopted formal charters, w
hich define the responsibilities of the Board
and subcomm
ittees of the Board. The responsibilities of the Board include:
• Strategic and policy decisions
• Maintaining financial and internal controls
• Ensuring the company adheres to the recom
mendations of King II
• Assessing risk
• Monitoring the group and m
anagement’s perform
ance against pre-approved
budgets and operations reviews
All new appointm
ents to the Board are recomm
ended by existing Board mem
bers and
are carefully scrutinised to ensure that the new appointees are of the necessary calibre
to meaningfully contribute to the Board in fulfilling their duties and responsibilities as
directors of the group. The directors meet quarterly, or m
ore frequently if necessary,
and are aware of their duties and responsibilities. All directors have access to
independent professional advice and training programm
es to fulfil their duties as
directors. These costs are borne by the group. The Company Secretary is present at
Corporate g
overnance
019
Faritec Hold
ings Limited
Annual R
eport 2007
Board meetings and is of service to the directors to ensure the proper adm
inistration of
Board proceedings and compliance w
ith all aspects of good corporate governance.
The following changes took place during the reporting period:
Mr Paul M
oses and Mr Ciko Thom
as resigned from the Board as N
on-executive
Directors on 6 September 2007.
Executive Directors are required to give three months’ w
ritten notice of resignation.
14/ 0
2/ 07
22/ 0
3/ 07
10/ 05/ 0
7
21/ 0
6/ 07
13/ 09/ 0
7 C
hris Jardine C
hairman
P
P
P
P
P
Sim
on To
mlinso
n
P
P
P
P
P
Hasm
ukh Gajjar
P
P
P
P
P
Do
nald M
asson
P
P
P
P
P
Mnced
isi Mayekiso
P
P
P
P
P
Paul M
oses
P
P
P
A
N
/A
Jayendra N
aido
o
A
P
P
A
P
Phum
zo N
oxaka
P
P
P
A
P
Tshidi N
yemb
e
P
P
P
P
P
Ciko
Tho
mas
P
P
P
A
N
/A
A
llan Tim
m
P
P
P
P
A
Peter W
inn
P
P
P
P
P
Schedule of B
oard meetings and attendance since the issuing of the 2006 annual report in D
ecember 2006.
P = Present A = Apologies N/A = N
ot applicable
020
Faritec Hold
ings Limited
Annual R
eport 2007
Board com
mittees
The Board has instituted numerous sub-com
mittees to assist in discharging its
responsibilities. The Board has adopted charters within w
hich these sub-comm
ittees
are authorised to operate.
The Audit C
omm
itteeThe Audit Com
mittee consists of three N
on-executive Directors and is chaired by
Mr Donald M
asson, who is an Independent N
on-executive Director and who is not
Chairman of the group. The Chief Executive Officer, Chief Financial Officer and senior
managem
ent attend the comm
ittee meetings by invitation.
The Audit Comm
ittee meets several tim
es a year during planning and budgeting
periods as well as during interim
and final reporting periods. A formal charter and
terms of reference guide the com
mittee. Senior m
anagement and the external auditors
attend the meetings to discuss issues of accounting policies, auditing, risk, internal
controls and financial reporting. The comm
ittee reviews the annual results and interim
results before being presented to the Board for approval.
The Chairman of the com
mittee reports to the Board on a regular basis on m
atters
arising and on findings of the Audit Comm
ittee. The Chairman of the com
mittee attends
the annual general meeting. The external auditors have unrestricted access to the
comm
ittee and its Chairman.
The Audit Comm
ittee sets the principles for recomm
ending the use of the external
auditors for non-audit services.
Paul Moses w
as appointed to the Audit Comm
ittee on 22 March 2007, and resigned
from the Audit Com
mittee on 6 Septem
ber 2007 when he resigned from
the Board.
Schedule of A
udit Com
mittee m
eetings and attendance since the issuing of the 2006 annual report in D
ecember 2006.
P = Present A = Apologies N/A = N
ot applicable
Internal Audit
The Board has established operational, financial and internal control systems to
ensure the integrity of the group’s processes and financial information, and to
safeguard its assets. The Audit Comm
ittee reviews these system
s in consultation with
the external auditors. Faritec does not have a separate internal audit department, due
to the relatively small size of the finance and adm
inistration departments w
ithin the group. The group w
ill be establishing an internal control forum, w
hich will report to the
Audit Comm
ittee, to extend the internal review of policies, procedures and system
s that take place.
The Rem
uneration Com
mittee
The Remuneration Com
mittee consists of tw
o Non-executive Directors and is chaired
by Mr Jayendra N
aidoo, who is a N
on-executive Director. The purpose of the comm
ittee is to oversee all com
pensation and benefits programm
es, to ensure that rewards
and incentives are linked to individual, group and business unit performance as
appropriate, as well as being m
arket related, and to ensure that the group’s Executive Directors and senior m
anagement team
are remunerated appropriately. Details of
directors’ emolum
ents are disclosed in the notes to the financial statements in note 26.
The comm
ittee is also involved in the approval of the staff share incentive schemes
within the group.
Ciko Thomas w
as appointed to the Remuneration Com
mittee on 22 M
arch 2007, and resigned from
the Remuneration Com
mittee on 6 Septem
ber 2007 when he resigned from
the Board.
20/0
3/07
19/06/0
7
11/09/0
7
13/09/0
7
D
onald
Masso
n C
hairman
P
P
P
P C
hris Jardine
P
P
P
P
Paul M
oses
N
/A
A
N/A
N
/A P
humzo
No
xaka P
P
P
P
Corporate g
overnance
continued
021
Faritec Hold
ings Limited
Annual R
eport 2007
Schedule of R
emuneration C
omm
ittee meetings and attendance
since the issuing of the 2006 annual report in Decem
ber 2006.
P = Present A = Apologies N/A = N
ot applicable
Risk m
anagement
The Board acknowledges that it is accountable for risk m
anagement w
ithin the
group. No separate Risk Com
mittee has been established at this point. The Board
of Directors manages risk through the review
ing of internal control procedures and
monthly m
anagement reporting. The external auditors, w
orking in partnership with
managem
ent, provide assurance to the Board, through the Audit Comm
ittee, that
financial systems and reported financial inform
ation may be relied upon.
Internal controlsThe Board is responsible for the group’s system
s of financial and operational control
and for the safeguarding of assets against unauthorised use or disposition. These
controls are designed to provide reasonable, but not absolute, assurance as to the
integrity and reliability of the annual financial statements and the risks to w
hich
the company is exposed. All em
ployees are required to maintain the highest ethical
standards and to conduct themselves as representatives of the com
pany in a manner
that is, in all reasonable circumstances, above reproach. The Board has review
ed
the effectiveness of the systems of internal control and is not aw
are of any material
breakdown in controls, w
hich could cause misstatem
ent or loss, or uncertainty that
would require disclosure in the financial statem
ents.
Managem
ent reportingThe perform
ance of the group is monitored by m
onthly managem
ent meetings as
well as having m
anagement reporting disciplines, w
hich include preparation of annual budgets and quarterly business review
s where perform
ance against budgets is review
ed, opportunities are identified, and corrective action is taken as necessary. The m
onthly results are reported against budget and revised forecasts. Asset m
anagement, w
orking capital managem
ent and borrowing levels are m
onitored on an ongoing basis.
07/0
9/06
20/0
3/07
19/06/0
7
13/09/0
7
Jayend
ra Naid
oo
Chairm
an P
P
P
P
Do
nald M
asson
P
P
P
P C
iko T
hom
as
N/A
A
N
/A
N/A
The quality of a p
erson’s
life is in direct p
roportion to their
regardless of their chosen field
of endeavour.
022
Faritec Hold
ings Limited
Annual R
eport 2007
Business continuity
Disaster recovery plans are in place to ensure the business continuity of the group in the event of unforeseen circum
stances and disasters.
Insider tradingThe group applies a closed period policy w
hereby all directors and employees w
ho have access to unpublished price-sensitive inform
ation are prohibited from share
dealings during such periods. Closed periods apply prior to the release of interim and
year-end financial results and during times of cautionary announcem
ents. This policy has been com
municated to em
ployees. Dealings in Faritec shares by directors are m
inuted at Board meetings.
Occupational health and safety
Due to the nature of the Faritec office environment, there is very little risk to the health
and safety of employees. How
ever, statutory requirements have been m
et, after an assessm
ent by an independent firm.
Life-threatening diseases policyFaritec w
ill, as far as possible, accomm
odate the needs of employees w
ith life-threatening diseases to ensure productive and fulfilled em
ployment for as long as the
employee is able to continue w
orking. Faritec will not unfairly discrim
inate, directly or indirectly, against an em
ployee suffering from a dreaded disease.
The guidelines contained in this policy are aimed at assisting m
anagers to:• m
anage and reduce the impact of dreaded diseases in the w
orkplace;• achieve a balance betw
een the rights and responsibilities of all parties within the
workplace;
• promote a non-discrim
inatory workplace, w
here employees living w
ith a dreaded disease need not fear stigm
a or rejection;• elim
inate unfair discrimination against em
ployees suffering from a dreaded
disease;• create a supportive environm
ent for employees suffering from
a dreaded disease so that such em
ployees may continue w
orking under normal conditions w
ithin their current em
ployment, for as long as they are capable of doing so; and
• deal with dreaded diseases in the w
orkplace, in a manner that is consistent w
ith all relevant South African legislation.
Transformation and B
EE
Faritec adopts a broad-based approach to black-economic em
powerm
ent (BBBEE) based on the recom
mendations of the Departm
ent of Trade and Industry (dti), and the ICT draft charter.
Faritec has successfully implem
ented and integrated all the pillars of the dti’s BBBEE scorecard. Each elem
ent has now evolved into a m
ature self-sustaining effort w
ithin the operations of Faritec, and thus we have m
ostly achieved our objective of institutionalising BBBEE into every facet of our operations.
continuedCorporate g
overnance
023
Faritec Hold
ings Limited
Annual R
eport 2007
Our previously
published achievem
ents rem
ain on
track as
reflected by
the Em
powerdex rating of Faritec being a Level Four contributor.
The following depicts Faritec’s pillars of BEE and transform
ation:
Empow
erment scorecard in sum
mary
• 41% black-ow
ned;• 60%
of board mem
bers are historically disadvantaged individuals;• 44%
of employees are historically disadvantaged individuals;
• 63% of all fem
ale employees are historically disadvantaged individuals;
• 42% of discretionary spend is w
ith empow
ered suppliers;• a m
inimum
of 1% of net profit after tax w
as spent on CSI initiatives during the year;• skills developm
ent and learnership programm
es have been established, with
40 learners in this year’s programm
e; and• one of the largest BEE com
panies on the JSE on the IT sector (IT Index).
No business rem
ains static and therefore most of our BBBEE indicators are m
easured each m
onth to ensure we m
aintain and improve on our objectives. The new
ly published Codes of Good Practice have had greater em
phasis on Employm
ent Equity and Skills Developm
ent. These two indicators are extrem
ely fluid in a growing organisation such
as Faritec. Insular to the newly published Codes of Good Practice, Faritec m
anagement
made the decision to focus our investm
ent in skills development and em
powering
our employees. This focus allow
s us to meet the challenges set out in the Codes of
Good Practice.
Ownership and m
anagement
The Faritec Group has an effective BEE ownership of 41%
.
The Board of Directors of ten has six people of colour, two of w
hom are African
females. Faritec has an Executive Com
mittee of eleven, four of w
hom are of colour.
Employm
ent equity and skills development
This has received additional attention as part of our growth strategy. As part of this
increased focus, each division in our business is measured as an entity in term
s of the
codes. This allows us to engender a uniform
effort in each area of the operations and
lays the platform for sustainable transform
ation.
The budgeting process has been aligned to meet our Skills Developm
ent plans in each
division of the business. Several of our managem
ent team and technology leaders in
Faritec are enrolled on several skills growth program
mes.
Our recruitment plans are carefully m
onitored in each division so that we m
eet our own
internal expectations. As part of our plans to institutionalise BBBEE, each divisional
Success is not to
by the p
osition someone has reached
in life, but the ob
stacles he has overcome
while trying to succeed
024
Faritec Hold
ings Limited
Annual R
eport 2007
head is required to table plans and report on his employee profile so that w
e achieve representivity in our client facing and technology delivery areas.
Faritec views training and developm
ent of its employees as integral to achieving its
competitive advantage and overall efficiency. As far as possible, w
e• encourage em
ployees to attend relevant internal and external training courses, sem
inars and courses of study which w
ill develop their knowledge and skills;
• improve the capabilities of em
ployees, thereby enhancing their ability to attain the highest possible standards in their jobs and thereby increasing their productivity;
• realise the potential of employees by developing and preparing them
for increased responsibility and prom
otion; and• adequately train em
ployees to meet the challenges resulting from
technology change.
Faritec aims to foster a culture of high quality lifelong learning w
ithin the company and
enhance learning opportunities in the company.
Coupled with the Em
ployment Equity Plan, Faritec is exploring its investm
ent as a com
pany and, with its partners, the acceleration of know
ledge and skills amongst its
entire staff. Faritec’s Skills Development Plan for 2007 w
as submitted for approval to
the ISETT SETA. This plan is in line with the com
pany’s Employm
ent Equity Plan and BEE initiatives.
During 2005, in partnership with the dti, 10 previously disadvantaged learners enrolled
in Faritec’s first learnership programm
e. This programm
e has evolved over the past tw
o years and has become a fully integrated initiative throughout Faritec’s operations.
Eight out of the 10 learners who w
ent through the Faritec learnership programm
e in 2005 are now
employed by Faritec, and w
e are looking forward to the 2007 program
me,
for which w
e have 12 learners at present, with our goal being to grow
this to a total of 32 learners over the course of the year.
Corporate social responsibilityFaritec believes that com
panies are expected to demonstrate a social conscience.
They are not only expected to achieve their economic goals, but should also use their
power and influence to help the society in w
hich they operate. Faritec supports a range of com
munity activities and program
mes. Program
mes that specifically narrow
the digital divide have been evaluated in Faritec’s broader com
munity engagem
ent plan.
Faritec has formed a long-term
partnership with the SOS Children’s Villages. Faritec
put 3% of net profit before tax tow
ards the development of the com
puter and inform
ation centre at the SOS Children’s Village in Ennerdale during the past financial year. The SOS Ennerdale project, led by Faritec, w
as a six-month project valued at
R500 000 involving several major industry players such as IBM
, Microsoft, Sym
antec, TCM
/e-bis, Siyaya Phambili Technology Solutions and ITEC N
orth. Faritec continued its support of this centre during this financial year.
During this financial year Faritec put 1% of net profit after tax tow
ards CSI initiatives and the developm
ent of a computer centre for the SOS children in M
thatha. The com
puter and information centre is valued at m
ore than R1 million and w
ill benefit 500 children at the SOS school daily. There is also com
munity support and adult
education provided from the centre. During the developm
ent Faritec supported local businesses in the M
thatha area and once again partnered with m
ajor industry players M
icrosoft, IBM, Sym
antec, TCM and Verizon Business.
Faritec ensures that all CSI projects undertaken are aligned with Faritec’s CSI
philosophy and the objectives of the ICT charter.
CSI philosophyFaritec considers program
mes that bridge the “digital divide” and ensures that
corporate social investment is im
plemented w
ithin a set of sustainable long-term
objectives and with m
aximum
impact:
• Faritec’s projects adopt a partnership approach and support sustainability;• Faritec’s selected projects support the broad national goals identified by the
IT sector;• Faritec seeks to transfer ICT skills to previously disadvantaged com
munities
and individuals, with a special em
phasis on rural comm
unities;• Faritec attem
pts to support the provision of affordable and universal access to ICT infrastructure and services w
ith our CSI projects;
continuedCorporate g
overnance
025
Faritec Hold
ings Limited
Annual R
eport 2007
• Faritec co-ordinates various initiatives to enhance their collective impact;
• Faritec seeks to connect villages with ICTs and establish com
munity access points;
• Faritec’s CSI projects adopt a consultative approach and are driven by the em
powerm
ent of the recipient comm
unities.
Appeal to staffFaritec supports a culture of giving and encourages its staff to support initiatives such as attending fundraisers and giving of tim
e, money, products and food in their private
capacities. Faritec advertises these initiatives internally on the Faritec Intranet.
Faritec monitors and evaluates the im
pact of our CSI projects have and ensures that Faritec’s CSI philosophy is adhered to and that the defined CSI objectives are m
et.
Procurement
Faritec endorses the government’s initiative to support a com
petitive, sustainable and viable base of suppliers from
previously disadvantaged comm
unities. Faritec is com
mitted to m
aximising procurem
ent from black enterprises (including black-ow
ned, black-em
powered and black-influenced, good or satisfactory contributors), w
hether black w
omen-ow
ned, small or large suppliers, as w
ell as those owned and m
anaged by the physically challenged, w
hile emphasising our support for entrepreneurship
in black comm
unities and giving black businesses access to mainstream
business opportunities.
Faritec currently spends over 42% of its discretionary procurem
ent with our BEE
suppliers. Faritec Exco sets the targets for purchases from black suppliers, and
managem
ent is empow
ered to implem
ent the recomm
endations by providing the personnel, financial and other resources required to m
ake it succeed. The balanced scorecards of the m
embers of Exco and individuals involved in procurem
ent reflect a requirem
ent to comply w
ith this framew
ork.
In 2007 Faritec implem
ented a new financial m
anagement system
. Part of the specifications of the system
was developed to m
eet our BEE procurement reporting
requirements. M
uch of the tracking of our suppliers and the reporting of our discretionary spend has now
been embedded into our new
systems and facilitate our
ability to engender transformation w
ithin our supplier comm
unity.
The primary objective of the procurem
ent organisation in Faritec remains to procure
comm
odities and services of the best quality at the lowest total cost and to m
eet the requirem
ents for time-based com
petition.
Enterprise development
Faritec’s ability to engender black-owned SM
Es is now institutionalised as w
ith many of
the other BEE indicators. Our procurement policies dem
and significant investments
towards BEE from
our suppliers who have to form
ally submit their ow
n BEE programm
es.
There are two typ
es of peop
le
who w
ill tell you that you cannot
Those who are afraid
to try and those w
ho are afraid
you will succeed
.
Taoist propriety and ethics emphasise the Three Jew
els of the Tao namely com
passion, moderation,
and humility. A
n emphasis is placed on the link betw
een people and nature. Taoism teaches that this link lessened
the need for rules and order, and leads one to a better understanding of the world. g
“A journey of a thousand miles begins w
ith a single step.”
Lao-Tzu The Way of Lao-Tzu Chinese philosopher
VALUESR
elationships
Integrity
Teamw
ork
Excellence
Caring
OUR
group v
alue-a
dded s
tatem
ent
2007 2006
R000 %
R
000 %
Revenue 858 349
530 058
Cost of goods and services sold (628 884)
(384 369)
Value added 229 465
145 689
Net investm
ent income
2 097
2 561
Total wealth created
231 562 100,00
148 250 100,0
Distributed as follows:
Employees
159 511 68,9
89 379 60,3
Remuneration and service benefits
159 511
89 379
Government
50 832 21,9
32 529 21,9
Taxation 6 120
6 006
Regional Services Council levies –
1 103
Skills development levy
846
841
Employee taxation
43 866
24 579
Retained to develop future growth
21 219 9,2
26 342 17,8
Depreciation and amortisation
6 977
8 330
Minorities
(2 218)
4 030
Accumulated profit
16 460
13 982
Total wealth distributed
231 562 100,0
148 250 100,0
The above amounts exclude the effect of value-added taxation
for th
e year end
ed 30 Ju
ne 2007
028
Faritec Hold
ings Limited
Annual R
eport 2007
31 Directors’ responsibi l i ty
Declarat ion by the company secretary
Report of the independent auditors
Report of the directors
Balance sheets
Income statements
Statements of changes in equity
Cash f low statements
Notes to the cash f low statements
Notes to the f inancial statements
Schedule of interest in subsidiary and jo int venture companies
Share ownership analysis
32
33
37
38
39
40
41
43
67
68
Annual f
inancia
l s
tatem
ents
31 Directors’ responsibi l i ty
Declarat ion by the company secretary
Report of the independent auditors
Report of the directors
Balance sheets
Income statements
Statements of changes in equity
Cash f low statements
Notes to the cash f low statements
Notes to the f inancial statements
Schedule of interest in subsidiary and jo int venture companies
Share ownership analysis
32
33
37
38
39
40
41
43
67
68
I f you think you can
do a thing or you
you can’t , e i ther way
you wi l l be r ight .
031
Faritec Hold
ings Limited
Annual R
eport 2007
The directors are responsible for the content and integrity of the financial statements and other inform
ation contained in the annual report.
It is the directors’ responsibility to ensure that the financial statements fairly present the state of affairs of the group and
the company as at the end of the financial year, and the results of the operations and cash flow
s for the period then ended, in conform
ity with International Financial Reporting Standards.
The directors are required by the Companies Act, 1973, of South Africa, to m
aintain adequate accounting records.
To fulfill these responsibilities, the group maintains system
s of internal accounting and administration controls designed
to provide reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance w
ith the group’s standards of policies, procedures and mandates. These standards include the proper delegation of
responsibilities within a clearly defined authority m
atrix, effective operations and accounting procedures, and adequate segregation of duties, to ensure acceptable levels of risk.
The external auditors are engaged to express an independent opinion on the financial statements.
The financial statements are prepared in accordance w
ith International Financial Reporting Standards, applied consistently throughout the year, and are exam
ined by the external auditors using International Auditing Standards. The auditors’ report is set out on page 32 of the annual report.
The directors have no reason to believe that the group will not be a going concern for the year ahead. For this reason the
financial statements have been prepared on the going concern basis.
The financial statements have been approved by the Board of Directors and are signed on their behalf by:
Dr Chris Jardine
Simon Tom
linsonChairm
an Chief Executive Officer
Johannesburg14 N
ovember 2007
Declaration by the company secretary
I declare that, to the best of my know
ledge, the company has lodged w
ith the Registrar all such returns as are required of a public com
pany in terms of the Com
panies Act, 1973, as amended, and that all such returns are true, correct and up
to date.
Craig Densham
Company Secretary
Johannesburg14 N
ovember 2007
Dir
ectors’ r
esponsib
ilit
y
032
Faritec Hold
ings Limited
Annual R
eport 2007
Report o
f t
he in
dependent a
udit
ors
To the mem
bers of Faritec Holdings Lim
itedW
e have audited the accompanying annual financial statem
ents and group annual financial statements w
hich comprise
the directors’ report, balance sheets as at 30 June 2007, the income statem
ents, statements of changes in equity and cash
flow statem
ents for the year then ended, a summ
ary of significant accounting policies and other explanatory notes, set out on pages 33 to 66.
Directors’ responsibility for the financial statem
entsThe directors are responsible for the preparation and fair presentation of these financial statem
ents in accordance with
International Financial Reporting Standards, and in the manner required by the Com
panies Act of South Africa, 1973. This responsibility includes: designing, im
plementing and m
aintaining internal control relevant to the preparation and fair presentation of financial statem
ents that are free from m
aterial misstatem
ent, whether due to fraud or error, selecting and
applying appropriate accounting policies; and making accounting estim
ates that are reasonable in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. W
e conducted our audit in accordance w
ith International Standards on Auditing. Those standards require that we com
ply with ethical requirem
ents and plan and perform
the audit to obtain reasonable assurance that the financial statements are free from
material
misstatem
ent.
An audit involves performing procedures to obtain audit evidence about the am
ounts and disclosures in the financial statem
ents. The procedures selected depend on the auditor’s judgement, including the assessm
ent of the risks of material
misstatem
ent of the financial statements, w
hether due to fraud or error. In making those risk assessm
ents, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statem
ents in order to design audit procedures that are appropriate in the circum
stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estim
ates made by m
anagement, as w
ell as evaluating the overall presentation of the financial statem
ents.
We believe that the audit evidence w
e have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all m
aterial respects, the consolidated and separate financial position of Faritec Holdings Lim
ited as at 30 June 2007, and its consolidated and separate financial performance and
its consolidated and separate cash flows for the year then ended in accordance w
ith International Financial Reporting Standards, and in the m
anner required by the Companies Act of South Africa, 1973.
Chartered Accountants (S.A
.)Registered Auditors
Johannesburg 14 N
ovember 2007
033
Faritec Hold
ings Limited
Annual R
eport 2007
The directors submit the annual financial statem
ents of the company and the group for the year ended 30 June 2007.
NATU
RE OF B
USIN
ESSFaritec Holdings Lim
ited, a company incorporated in South Africa, listed on the M
ain Board of the JSE Limited (JSE), through
its subsidiaries and joint venture is involved in providing the most custom
er-centric technology solutions with the objective
of assisting customers to m
anage their businesses more effectively.
FINA
NCIA
L RESULTS
Profit attributable to shareholders amounted to R16 460 000 (2006: R13 982 000) or 8,5 cents (2006: 10,4 cents) per share.
Headline earnings amounted to R17 088 000 (2006: R14 062 000) or 8,9 cents (2006: 10,4 cents) per share.
Full details of the financial results of the company and group are set out in these financial statem
ents.
DIVID
END
SN
o dividends have been declared or are recomm
ended for the financial year under review. Funds generated w
ill be retained in the business to assist w
ith the group’s anticipated growth and possible new
ventures.
SHA
RE CAPITA
L
Authorised
There were no changes in the authorised share capital of the com
pany in the financial year under review.
N
umber of
Nom
inal Share
shares issued
value prem
ium Issued
000
R000 R000
Ordinary shares Balance at beginning of year
181 385 181
64 826Shares issued in respect of:
– Options exercised in term
s of the employee share incentive schem
e 6 016
6 2 040
– Shares issued in terms of the em
ployee share incentive scheme
267 0
221 – Acquisition of the business of Lechabile Storage Solutions
5 648 6
6 348 – Exercise of option by J&
J Group 61 677
62 84 245
– Share issue costs –
– (73)
Balance at end of year
254 993 255
157 607
Report o
f t
he d
irectors
034
Faritec Hold
ings Limited
Annual R
eport 2007
EMPLO
YEE SHA
RE INCEN
TIVE SCHEM
ESThe Faritec Group has a share incentive schem
e which provides opportunities for em
ployees to participate in the group’s grow
th and success.
Options have been granted to employees in term
s of the Faritec Holdings Share Incentive Scheme in respect of 25 440 026
(2006: 17 169 500) shares in the company, including 3 550 000 (2006: 3 130 000) options granted to directors on the sam
e terms
and conditions as those granted to other employees, and 2 550 000 (2006: 0) options granted on the sam
e terms and conditions
as those granted to other employees, except for a one-year vesting period instead of the norm
al three-year period.
Average strike
Average strike
and exercise
and exercise
N
umber
price per option N
umber
price per option
of options cents
of options cents
2007
2007 2006
2006
Balance at start of the year 17 169 500
33 19 494 500
29Options granted during the year
16 530 000 99
5 820 000 45
Options exercised during the year (6 016 224)
34 (7 435 833)
34Options forfeited during the year
(2 243 250) 58
(709 167) 24
Balance at the end of the year
25 440 026 73
17 169 500 33
The average exercise prices and average remaining contractual lives are as follow
s:
Average strike and
Num
ber exercise price
Average remaining contractual lives to vesting at 30 June 2007
of options
cents
Fully vested
6 433 526
22 1 year
3 051 500
50 1,5 years
325 000
32 2,5 years
15 630 000
100
Balance at the end of the year
25 440 026 73
The weighted average m
arket price in respect of options exercised during the year was 109 cents.
Expense arising from these share-based paym
ent transactions was R1 441 000 (2006: R898 000).
38 200 000 (2006: 27 200 000) shares have been set aside for the option scheme.
Report o
f t
he d
irectors continued
035
Faritec Hold
ings Limited
Annual R
eport 2007
Options granted have a waiting period of one year, after w
hich they vest in equal parts over a three-year period. Unexercised options lapse five years after grant date.
The estimated fair values of the options at grant date range from
20 cents to 125 cents per option, determined using the
Black-Scholes-Merton Option Value M
odel. The model inputs w
ere the share price at grant date, exercise price, a dividend yield of 0%
, a contractual life of 5 years and a risk-free interest rate of 8%. It w
as assumed that all options w
ill be exercised at the end of the relevant vesting period.
DIRECTO
RATE AN
D SECRETA
RYThe follow
ing persons were directors of the com
pany during the financial year under review:
Dr CR Jardine (Chairman)* SM
Tomlinson (Chief Executive Officer)
Dr HC Gajjar D Masson* M
Mayekiso PM
Moses* J N
aidoo* LN N
oxaka* SM N
yembe CJ Thom
as* AR Tim
m PJ W
inn *Non-executive
PM M
oses and CJ Thomas resigned from
the Board on 6 September 2007 as N
on-executive Directors.
Mr CN
Densham w
as the Company Secretary for the year, situated at 150 Kelvin Drive, W
oodmead, 2124 and postal address
being PO Box 76784, Woodm
ead, 2144.
In terms of the articles of association of the com
pany, Messrs CR Jardine, LN
Noxaka, SM
Nyem
be and SM Tom
linson retire by rotation at the forthcom
ing annual general meeting, all being eligible for re-election.
As at 30 June 2007, the aggregate direct and indirect beneficial interests of all the directors in the fully paid issued share capital of the com
pany was 43 431 027 (2006: 59 329 182) shares, split per director as follow
s:
2007
Direct
Indirect Total
Holdings by directors
holding holding
holding
M M
ayekiso 3 312 879
– 3 312 879
PM M
oses –
7 532 126 7 532 126
CJ Thomas
50 000 –
50 000AR Tim
m
–
9 592 902 9 592 902
SM Tom
linson –
11 527 062 11 527 062
PJ Winn
–
11 416 058 11 416 058
Total
3 362 879 40 068 148
43 431 027
2006
Direct
Indirect Total
Holdings by directors
holding holding
holding
M M
ayekiso 4 852 879
– 4 852 879
PM M
oses –
13 587 402 13 587 402
CJ Thomas
4 852 879 –
4 852 879AR Tim
m
–
11 092 902 11 092 902
SM Tom
linson –
12 527 062 12 527 062
PJ Winn
–
12 416 058 12 416 058
Total
9 705 758 49 623 424
59 329 182
There has been no material change in the directors’ interest in the issued share capital betw
een 30 June 2007 and the date of this report.
036
Faritec Hold
ings Limited
Annual R
eport 2007
DIRECTO
RATE AN
D SECRETA
RY continued Share options granted by the com
pany to all directors as at 30 June 2007 are split per director as follows:
A
t 30 June 2007
At 30 June 2006
Strike price
Strike price
Options granted to directors
Options
cents Options
cents
HC Gajjar
420 000 20
420 000 20
HC Gajjar
1 000 000 50
1 000 000 50
HC Gajjar
450 000 97
– –
M M
ayekiso 420 000
80 –
–M
Mayekiso
400 000 97
– –
SM N
yembe
420 000 50
420 000 50
SM N
yembe
400 000 97
– –
AR Timm
420 000 20
420 000 20
AR Timm
400 000 97
– –
SM Tom
linson 450 000
20 450 000
20SM
Tomlinson
500 000 97
– –
PJ Winn
420 000
20 420 000
20PJ W
inn
400 000 97
– –
Total
6 100 000 64
3 130 000 34
EQU
IPMEN
T AN
D SO
FTWA
REThere have been no changes in the nature of the group’s equipm
ent and software or the policy relating to its use. The group
acquired equipment at a cost of R5 617 000 (2006: R2 064 000) and softw
are of R8 193 000 (2006: R548 000) during the financial year under review
.
GO
ING
CON
CERNThe directors have no reason to believe that the group w
ill not be a going concern for the year ahead. For this reason the financial statem
ents have been prepared on the going concern basis.
POST-B
ALA
NCE SH
EET EVENTS
On 30 July 2007 Faritec signed a contract to acquire the business of Fidentia Software Futures. The suspensive conditions
have not been met yet and the transaction is expected to be concluded in the next few
months.
On 6 September 2007 PM
Moses and CJ Thom
as resigned from the board as non-executive directors.
The directors have no other post-balance sheet events to report.
INVESTM
ENT IN
SUB
SIDIA
RY COM
PAN
IESThe financial inform
ation in respect of the company’s interest in its subsidiary com
panies is set out in note 8 to the financial statem
ents, and in the schedule on page 67 of this annual report.
The aggregate profits after taxation of the subsidiaries attributable to the holding company are R16 460 000 (2006: R13 982 000).
SPECIAL RESO
LUTIO
NS A
DO
PTED B
Y SUB
SIDIA
RY COM
PAN
IESThere w
ere no special resolutions passed by any subsidiaries in the group, the nature of which m
ay be of significance to the readers of this report since the issuing of the last annual report.
Report o
f t
he d
irectors continued
037
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
N
otes R000
R000 R000
R000
ASSETS
Non-current assets
170 950
126 368 218 681
112 597
Equipment
3 11 863
9 142 –
–Softw
are 4
9 160 1 451
– –
Development costs capitalised
5 8 546
11 388 –
–Goodw
ill 6
92 994 56 054
– –
Trademarks
7 38 204
38 204 –
–Investm
ent in subsidiaries 8
– –
218 681 112 597
Loans receivable 9
6 331 4 772
– –
Deferred taxation 10
3 852 5 357
– –
Current assets
205 515 237 334
– 13 229
Inventories 11
9 511 5 313
– –
Investments
12 –
13 229 –
13 229Trade receivables
13 157 081
152 173 –
–Other receivables
13 5 481
26 230 –
–Cash and cash equivalents
14 32 166
39 353 –
–Taxation
1 276
1 036 –
–
Total assets
376 465 363 702
218 681 125 826
EQU
ITY AN
D LIA
BILITIES
Total equity
152 149 141 147
218 681 125 826
Share capital 15
255 181
255 181
Share premium
16
157 607 64 826
158 525 65 744
Acquisition equity adjustment
(85 455)
– –
– Share-based paym
ents reserve
4 146 2 705
– –
Retained income
77 770
61 310 59 901
59 901Total shareholders’ interest
154 323
129 022 218 681
125 826M
inority interests
(2 174) 12 125
– –
Non-current borrow
ings
35 190 34 471
– –
Interest-bearing borrowings
17 26 103
24 664 –
– Operating lease liabilities
18 6 253
6 973 –
–N
on-interest-bearing borrowings
19 2 834
2 834 –
–
Current liabilities
189 126 188 084
– –
Trade payables
147 309 133 663
– –
Other payables
26 567 40 396
– –
Current portion of interest-bearing borrowings
17 9 548
7 352 –
–Operating lease liabilities
18 698
652 –
–Taxation
5 004
6 021 –
–
Total equity and liabilities
376 465 363 702
218 681 125 826
at 30 Jun
e 2007
BALANCE S
HEETS
G
ROU
P CO
MPA
NY
038
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
N
otes R000
R000 R000
R000
Revenue 20
858 349 530 058
152 258
Operating expenses
(831 842) (503 961)
(152) (258)
Operating profit before depreciation and am
ortisation
26 507 26 097
– –
Depreciation and amortisation
(6 977)
(8 330) –
–
Profit from operations
19 530
17 767 –
–Finance costs
(3 297)
(606) –
–Investm
ent income
5 392
3 167 –
–Im
pairment losses
21 (1 263)
(80) –
–Reversal of im
pairment of investm
ent
– 3 770
– 3 770
Net profit before taxation
22 20 362
24 018 –
3 770Taxation
23 (6 120)
(6 006) –
–
Net profit for the period
14 242
18 012 –
3 770
Attributable to:
M
inorities
(2 218) 4 030
– –
Ordinary shareholders
16 460 13 982
– 3 770
14 242
18 012 –
3 770
Earnings per share (cents) 24
8,5 10,4
Headline earnings per share (cents)
24 8,9
10,4
Fully diluted earnings per share (cents) 24
8,0 9,7
Fully diluted headline earnings per share (cents) 24
8,3 9,8
INCOM
E S
TATEM
ENTS
for th
e year end
ed 30 Ju
ne 2007
G
ROU
P CO
MPA
NY
039
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
Share capital
255 181
255 181
Balance at beginning of period
181 133
181 133
Issued during the period
74 48
74 48
Share premium
157 607 64 826
158 525 65 744
Balance at beginning of period
64 826 27 323
65 744 28 241
Issued during the period
92 854 37 524
92 854 37 524
Write-off of share issue costs
(73)
(21) (73)
(21)
Acquisition equity adjustm
ent
(85 455) –
– –
Arising during the period
(97 536) –
– –
Derecognition of minority interest
12 081
– –
–
Share-based payments reserve
4 146
2 705 –
–
Balance at beginning of period
2 705 1 807
– –
Increase for period
1 441 898
– –
Retained income
77 770
61 310 59 901
59 901
Balance at beginning of period
61 310 47 328
59 901 56 131
Net profit for the period
16 460
13 982 –
3 770
Total shareholders’ interest
154 323 129 022
218 681 125 826
STATEM
ENTS O
F C
HANGES IN
EQUIT
Yat 30 Ju
ne 2007
G
ROU
P CO
MPA
NY
040
Faritec Hold
ings Limited
Annual R
eport 2007
2007
2006 2007
2006
N
otes R000
R000 R000
R000
Cash flows from
operating activities
8 884 17 028
– –
Net profit from
ordinary activities before taxation
20 362 24 018
– 3 770
Adjustments
6 912
2 887 –
(3 770)N
et investment incom
e
(2 095) (2 561)
– –
Reversal of impairm
ent of investment
–
(3 770) –
(3 770)Im
pairment of assets
1 263
(80) –
–Am
ortisation
3 950 4 315
– –
Depreciation
3 027 4 015
– –
Lease smoothing
(674)
70 –
–Share-based paym
ents
1 441 898
– –
Operating income before w
orking capital changes
27 274 26 905
– –
(Decrease)/increase in working capital
(14 613)
(9 958) –
–(Increase)/decrease in inventories
(4 196)
141 –
–Decrease/(increase) in trade and other receivables
3 088
(6 142) –
–Decrease in trade and other payables
(13 505)
(3 957) –
–
Cash generated by operating activities
12 661 16 947
– –
Finance costs
(3 297) (606)
– –
Investment incom
e
5 392 3 167
– –
Taxation paid A
(5 872) (2 480)
– –
Cash flows from
investing activities
(21 901) (2 805)
– –
Acquisition of equipment
(5 617)
(2 064) –
–Acquisition of softw
are
(8 193) (548)
– –
Proceeds on disposal of equipment
1 198
– –
–Acquisition of businesses
B (6 235)
1 598 –
–Developm
ent costs disposed of
– 1 263
– –
Development costs capitalised
(1 888)
(2 630) –
–Loans to and investm
ents in joint venture and associate
(1 166)
(424) –
–
Cash flows from
financing activities
5 830 6 468
– –
Loans raised
3 745 4 700
– –
Loans repaid
(111) (886)
– –
Net inflow
s from shares issued
C 2 196
2 654 –
–
Net (decrease)/increase in cash and
cash equivalents
(7 187) 20 691
– –
Cash and cash equivalents at beginning of year
39 353 18 662
– –
Cash and cash equivalents at end of year
32 166 39 353
– –
CASH F
LOW
STATEM
ENTS
for th
e year end
ed 30 Ju
ne 2007
G
ROU
P CO
MPA
NY
041
Faritec Hold
ings Limited
Annual R
eport 2007
NOTES T
O T
HE C
ASH F
LOW
STATEM
ENTS
at 30 Jun
e 2007
2007 2006
2007 2006
R000 R000
R000 R000
A
Taxation paid
Balance at beginning of year
(4 985) (1 198)
– –
Am
ount charged to the income statem
ent
(4 615) (6 267)
– –
Balance at end of year
3 728
4 985 –
–
(5 872)
(2 480) –
–
B
Acquisition of businesses
Acquisition of the business of Lechabile Storage Solutions on 31 October 2006 (2006: Enterprise Connection acquired on 28 June 2006)
Fair value of net assets acquired:
– Equipm
ent
(1 329) (2 929)
– –
– Softw
are
– (517)
– –
– Goodw
ill
(36 940) (55 927)
– –
– Inventories
–
(2 399) –
–
– Trade and other receivables
(2 281) (65 449)
– –
– Taxation
–
(1 036) –
–
– Cash
(137) (2 012)
– –
– Trade and other payables
9 475
70 929 –
–
– Non-current liabilities
7 731
741 –
–
Total
(23 481)
(58 599) –
–
Funding of net assets acquired:
– Cash
4 288
2 012 –
–
– Equity
6 353 34 897
– –
– Interest-bearing loan
–
25 300 –
–
– Liabilities excluded
7 504 –
– –
– Costs of acquisition
(899)
(2 012) –
–
Total
17 246
60 197 –
–
Cash flow
on acquisition
(6 235) 1 598
– –
The acquisition of the business of Lechabile Storage Solutions, which w
as legally effective from 1 February 2006, becam
e unconditional on 31 October 2006.
G
ROU
P CO
MPA
NY
042
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
C N
et inflows from
shares issued
Share issue costs
(74)
(21) –
–
Inflows from
shares issued
2 270 2 675
– –
2 196
2 654 –
–
G
ROU
P CO
MPA
NY
NOTES T
O T
HE C
ASH F
LOW
STATEM
ENTS
continued
at 30 Jun
e 2007
043
Faritec Hold
ings Limited
Annual R
eport 2007
1 B
asis of preparation
The financial statements are prepared in accordance w
ith International Financial Reporting Standards (IFRS), IAS 34 and the Com
panies Act of South Africa, 1973. The financial statements are prepared under the historical cost
convention except for certain financial instruments that are stated at fair value.
The policies set out below
have been consistently applied to all the years presented.
1.1 Significant judgem
ents
In preparing the financial statements, m
anagement is required to m
ake estimates and assum
ptions that affect the am
ounts represented in the financial statements and related disclosures. Use of available inform
ation and the application of judgem
ent is inherent in the formation of estim
ates. Actual results in the future could differ from these
estimates w
hich may be m
aterial to the financial statements.
Significant judgem
ents made by m
anagement in applying the accounting policies are:
A
sset lives and residual values
Equipment and softw
are are depreciated over its useful life taking into account residual values, where appropriate.
The actual lives of the assets and residual values are assessed annually and may vary depending on a num
ber of factors. In reassessing asset lives, factors such as technological innovation and m
aintenance programm
es are taken into account. Residual value assessm
ents consider issues such as future market conditions, the rem
aining life of the asset and projected disposal values.
D
eferred tax assets
Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against w
hich deductible tem
porary differences can be utilised. Future taxable profits are estimated based on business plans w
hich include estim
ates and assumptions regarding econom
ic growth, inflation, taxation rates and com
petitive forces. Deferred tax assets are recognised on STC credits only to the extent it is probable that future dividends w
ill utilise these credits.
Im
pairment of assets
Goodw
ill and intangible assets not yet available for use and those with indefinite lifespans are considered for
impairm
ent at least annually at the same tim
e each year. Equipment and softw
are are considered for impairm
ent if there is a reason to believe that an im
pairment m
ay be necessary.
The future cash flow
s expected to be generated by the assets are projected taking into account market conditions
and the expected useful lives of the assets. The present value of these cash flows, determ
ined using an appropriate discount rate, is the asset’s value in use. The recoverable am
ount of an asset or a cash-generating unit is the higher of its fair value less costs to sell, and its value in use. If the recoverable am
ount of an asset is less than its carrying am
ount, the carrying amount of the asset is reduced to its recoverable am
ount. That reduction is an impairm
ent loss. Further detail on assum
ptions used for purposes of the above calculations are detailed in notes 6 and 7 of these financial statem
ents.
O
ptions granted
Managem
ent used the Black-Scholes-Merton Option Value m
odel to determine the value of the options at issue date.
Additional details regarding the estimates are included in note 1.14 “Share-based paym
ents”.
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
for th
e year end
ed 30 Ju
ne 2007
044
Faritec Hold
ings Limited
Annual R
eport 2007
1.2 B
asis of consolidation
The consolidated financial statements com
prise the financial position, the results and cash flows of the com
pany, its
subsidiaries and the Share Incentive Trust.
The results of the subsidiaries are included from
the effective date of acquisition, being the date control passes up to
the date of disposal. All significant inter-company transactions and balances are elim
inated on consolidation.
Investm
ents in jointly controlled entities are accounted for by way of the proportionate consolidation m
ethod, where
the group’s proportionate share of the assets, liabilities, revenues and expenses of joint ventures are combined on
a line-by-line basis with sim
ilar items in the financial statem
ents of the group. The results of the joint ventures are
included from the effective dates of their acquisition and up to the effective dates of their disposal, being the dates
joint control passes. All significant inter-company transactions and balances betw
een group entities are eliminated
on proportionate consolidation to the extent of the group’s interest in the joint venture.
1.3 Equipm
ent
Equipment is initially recorded at cost and is subsequently carried at cost less accum
mulated depreciation and
any impairm
ent losses. Depreciation is calculated on the straight-line method at rates considered appropriate
to reduce the carrying values to estimated residual values over the expected useful lives of the assets
as follows:
Furniture and fittings
10 years
M
otor vehicles 3 – 5 years
Office equipm
ent 3 – 7 years
Com
puter equipment
3 – 7 years
This represents a change in accounting estim
ate, as office and computer equipm
ent were previously depreciated over
3 years.
The depreciation m
ethods, useful lives and residual values, if not insignificant, are reassessed annually.
1.4 G
oodwill
Goodw
ill represents the excess of cost of an acquisition over the fair value of the group’s share of the net identifiable
assets of the acquired subsidiary at the date of acquisition. Goodwill is recognised as an asset at cost less im
pairment
losses and is not amortised.
The excess of the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over
the cost of the business combination is im
mediately recognised in profit or loss.
On disposal of a subsidiary, jointly controlled entity or business unit to w
hich goodwill w
as allocated on acquisition,
the amount attributable to such goodw
ill is included in the determination of the profit or loss on disposal.
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
045
Faritec Hold
ings Limited
Annual R
eport 2007
1.5 Softw
are and trademarks
Expenditure on acquired softw
are, licence rights and trademarks is capitalised at cost, and the difference betw
een cost and residual value is am
ortised using the straight-line method over the expected useful lives of the assets as
follows:
Softw
are 3 – 5 years
Licence rights
4 years
Trademarks
Indefinite
This represents a change in accounting estim
ate, as software w
as previously amortised over 3 years.
The am
ortisation period and amortisation m
ethod for intangible assets are reviewed every reporting period-end.
Tradem
arks have been assessed as having an indefinite useful life as there is no foreseeable limit to the period over
which the asset is expected to generate net cash inflow
s for the group.
The carrying value of intangible assets are review
ed for impairm
ent when events or changes in circum
stances indicate that the carrying value m
ay not be recoverable, and on an annual basis for those assets with indefinite
lifespans. If any such indication exists and where the carrying values exceed the estim
ated recoverable amount,
the assets are written dow
n to their recoverable amount.
1.6 Investm
ents in subsidiaries and joint ventures
Investments in subsidiaries and joint ventures are stated at cost in the com
pany.
The cost of an investm
ent is the aggregate of:
• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instrum
ents issued by the com
pany; plus
• any costs directly attributable to the purchase.
An adjustm
ent contingent on future events is included in the cost if the adjustment is probable and can be m
easured reliably.
1.7 D
evelopment costs capitalised
An intangible asset arising from
development is recognised w
hen:
• it is technically feasible to complete the asset so that it w
ill be available for use;
• there is an intention to complete and use it;
• there is an ability to use it;
• it w
ill generate probable future economic benefits;
• there are available technical, financial and other resources to com
plete the development
and to use the asset; and
• the expenditure attributable to the asset during its development can be m
easured reliably.
Intangible assets being developed consist of com
puter software and are included at cost of developm
ent. Cost includes all costs directly attributable to bringing the assets to w
orking condition for their intended use.
046
Faritec Hold
ings Limited
Annual R
eport 2007
1.7 D
evelopment costs capitalised continued
Developm
ent costs are amortised so as to w
rite off the cost of the asset over its expected useful life, not exceeding five years, com
mencing on m
arket release date.
Research costs related to the projects have been previously expensed through the incom
e statement.
The carrying am
ount of the development costs is review
ed annually and adjusted for impairm
ent where it is considered
necessary.
Intangible assets being developed are carried at cost less any accum
ulated amortisation and any im
pairment losses.
1.8 Inventories
Inventories are stated at the low
er of cost and net realisable value.
N
et realisable value is the estimated selling price in the ordinary course of business less the estim
ated costs of com
pletion and the estimated costs necessary to m
ake the sale.
The cost of inventories com
prises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
The cost of inventories is assigned using the w
eighted average cost. The same cost form
ula is used for all inventories having a sim
ilar nature and use to the entity.
W
hen inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in
which the related revenue is recognised. The am
ount of any write-dow
n of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the w
rite-down or loss occurs. The am
ount of any reversal of any w
rite-down of inventories, arising from
an increase in net realisable value, is recognised as a reduction in the am
ount of inventories recognised as an expense in the period in which the reversal occurs.
Loan stock is am
ortised over its useful life in order to reflect the net realisable value of the stock.
1.9 Translation of foreign currencies
Transactions in foreign currencies are translated into South African rand at the rates of exchange ruling on the dates of the transactions. The related m
onetary assets and liabilities at the balance sheet date are translated at the rates of exchange ruling on that date.
Exchange differences are recognised in profit or loss in the period in w
hich they arise.
1.10 Financial instruments
Initial recognition
The group classifies financial instrum
ents, or their component parts, on initial recognition as a financial asset,
a financial liability or an equity instrument, in accordance w
ith the substance of the contractual arrangement.
Financial assets and financial liabilities are recognised on the group's balance sheet w
hen the group becomes party
to the contractual provisions of the instrument.
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
047
Faritec Hold
ings Limited
Annual R
eport 2007
Financial assets and liabilities are recognised initially at fair value. In the case of financial assets or liabilities not classified at fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrum
ent are added to the fair value.
Subsequent m
easurement
After initial recognition financial assets are m
easured as follows:
• loans and receivables and held-to-m
aturity investments are m
easured at amortised cost using the effective interest
rate method.
After initial recognition financial liabilities are m
easured at amortised cost using the effective interest rate m
ethod.
1.11 Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value and are subsequently m
easured at am
ortised cost using the effective interest rate method. Appropriate allow
ances for estimated irrecoverable am
ounts are recognised in profit or loss w
hen there is objective evidence that the asset is impaired. The allow
ance recognised is m
easured as the difference between the asset’s carrying am
ount and the present value of estimated future cash
flows discounted at the effective interest rate com
puted at initial recognition.
1.12 Cash and cash equivalents
Cash equivalents are short-term, highly liquid investm
ents that are readily convertible to known am
ounts of cash and are subject to insignificant risk of change in value.
Cash and cash equivalents are m
easured at fair value initially and subsequently.
1.13 Share capital and equity
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. The company and group’s ordinary share capital is recorded at original cost.
1.14 Share-based payments
Goods or services received or acquired in a share-based paym
ent transaction are recognised when the goods or as
the services are received. A corresponding increase in equity is recognised if the goods or services were received
in an equity-settled share-based payment transaction or a liability if the goods or services w
ere acquired in a cash-settled share-based paym
ent transaction.
W
hen the goods or services received or acquired in a share-based payment transaction do not qualify for recognition
as assets, they are recognised as expenses.
For equity-settled share-based paym
ent transactions, the goods or services received, and the corresponding increase in equity, directly, are m
easured at the fair value of the goods or services received, unless that fair value cannot be estim
ated reliably.
If the fair value of the goods or services received cannot be estim
ated reliably, their value and the corresponding increase in equity, indirectly, are m
easured by reference to the fair value of the equity instruments granted.
048
Faritec Hold
ings Limited
Annual R
eport 2007
1.14 Share-based payments continued
For cash-settled share-based paym
ent transactions, the goods or services acquired and the liability incurred are m
easured at the fair value of the liability. Until the liability is settled, the fair value of the liability is remeasured at each
reporting date and at the date of settlement, w
ith any changes in fair value recognised in profit or loss for the period.
For share-based paym
ent transactions in which the term
s of the arrangement provide either the entity or the counter-
party with the choice of w
hether the entity settles the transaction in cash (or other assets) or by issuing equity instrum
ents, the components of that transaction are recorded as a cash-settled share-based paym
ent transaction if, and to the extent that, a liability to settle in cash or other assets has been incurred, or as an equity-settled share-based paym
ent transaction if, and to the extent that, no such liability has been incurred.
Em
ployee share-based payments
The group operates an equity-settled, share-based com
pensation plan. The fair value of the employee services received
in exchange for the grant of the options is recognised as an expense on a straight-line basis over the vesting period. The total am
ount to be expensed over the vesting period is determined by reference to the fair value of the options
granted, excluding the impact of any non-m
arket vesting conditions (for example, profitability and sales grow
th targets). Fair value is determ
ined using the Black-Scholes-Merton Option Value M
odel. The expected life used in this model has
been adjusted for the effects of non-transferability, exercise restrictions and behavioural considerations. Non-m
arket vesting conditions are included in assum
ptions about the number of options that are expected to becom
e exercisable.
The m
odel inputs were the share price at grant date, the exercise price, the risk free rate on grant date and the share
price volatility, as calculated from the standard deviation of the historical share price of the com
pany. At each balance sheet date, the group revises its estim
ates of the number of options that are expected to becom
e exercisable. The impact
of the revision of original estimates, if any, are recognised in the incom
e statement, w
ith a corresponding adjustment
to equity.
1.15 Leases
Leases are classified as finance leases whenever the term
s of the lease transfer substantially all of the risks and rew
ards of ownership to the lessee. All other leases are classified as operating leases.
Finance leases are recognised as assets and liabilities in the balance sheets at am
ounts equal to the fair value of the leased property or, if low
er, the present value on the minim
um lease paym
ents.
The discount rate used in calculating the present value of the m
inimum
lease payments is the interest rate im
plicit in the lease.
Any initial direct costs are added to the am
ount recognised as an asset.
The lease paym
ents are apportioned between the finance charge and reduction of the outstanding liability.
The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
Operating lease paym
ents are recognised as an expense on a straight-line basis over the lease term.
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
049
Faritec Hold
ings Limited
Annual R
eport 2007
1.16 Employee benefits
Short-term
employee benefits
The cost of short-term
employee benefits (those payable w
ithin 12 months after the service is rendered, such as paid
vacation leave and sick leave, bonuses, and non-monetary benefits such as m
edical care) are recognised in the period in w
hich the service is rendered and are not discounted.
The expected cost of com
pensated absences is recognised as an expense as the employees render services that
increase their entitlement or, in the case of non-accum
ulating absences, when the absence occurs.
The expected cost of profit sharing and bonus paym
ents is recognised as an expense when there is a legal or
constructive obligation to make such paym
ents as a result of past performance.
D
efined contribution plans
Contributions to a defined contribution plan in respect of service in a particular period are recognised as an expense in that period.
1.17 Trade and other payables
Trade and other payables are initially measured at fair value and subsequently m
easured at amortised cost using the
effective interest rate method.
1.18 Provisions and contingencies
Provisions are recognised when:
• the group has a present obligation as a result of a past event;
• it is probable that an outflow
of resources embodying econom
ic benefits will be required to settle the obligation; and
• a reliable estim
ate can be made of the obligation.
The am
ount of a provision is the present value of the amount expected to be required to settle the obligation.
Contingent assets and contingent liabilities are not recognised.
1.19 Revenue recognition
Revenue is recognised when the am
ount of revenue and related costs, incurred or to be incurred, can be measured
reliably and it is probable that the economic benefits associated w
ith the transaction will flow
to the group.
Revenue is m
easured at the fair value of the consideration received or receivable, and represents the amounts
receivable for goods and services provided in the normal course of business, net of trade discounts and volum
e rebates.
Softw
are and services
Software revenue com
prises sales to customers and licence fees received. In the case of long-term
licence contracts, the fees are recognised in accordance w
ith the terms of the agreem
ent, usually over the period of the agreement. Fees
for the provision of services are recognised when the services are rendered, and exclude value-added taxation.
H
ardware and netw
orking distribution
Hardware revenue com
prises sales to customers and excludes value-added taxation. Sales are recorded in the
financial statements at the date the goods are delivered to custom
ers.
050
Faritec Hold
ings Limited
Annual R
eport 2007
1.20 Cost of sales
When inventories are sold, the carrying am
ount of those inventories is recognised as an expense in the period in w
hich the related revenue is recognised. The amount of any w
rite-down of inventories to net realisable value and all
losses of inventories are recognised as an expense in the period the write-dow
n or loss occurs. The amount of any
reversal of any write-dow
n of inventories, arising from an increase in net realisable value, is recognised as a reduction
in the amount of inventories recognised as an expense in the period in w
hich the reversal occurs.
The related cost of providing services recognised as revenue in the current period is included in cost of sales.
Contract costs com
prise:
• costs that relate directly to the specific contract;
• costs that are attributable to contract activity in general and can be allocated to the contract; and
• such other costs as are specifically chargeable to the customer under the term
s of the contract.
1.21 Taxation
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in
respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax assets and liabilities for the current and prior periods are m
easured at the amount expected to be
recovered from or paid to the tax authorities, using the tax rates (and tax law
s) that have been enacted or substantively enacted at the balance sheet date.
D
eferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences.
A deferred tax asset is recognised for all deductible tem
porary differences to the extent that it is probable that taxable profit w
ill be available against which the deductible tem
porary difference can be utilised.
A deferred tax asset is recognised for the carry forw
ard of unused tax losses and unused STC credits to the extent that it is probable that future taxable profit w
ill be available against which the unused tax losses and unused STC credits
can be utilised.
Deferred tax assets and liabilities are m
easured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the balance sheet date.
Tax expenses
Current and deferred taxes are recognised as an incom
e or an expense and included in profit or loss for the period.
Secondary taxation on com
panies is provided in respect of dividend payments net of dividends received or receivable
and is recognised as a taxation charge for the year.
1.22 Borrow
ing costs
Borrowing costs are expensed in the period in w
hich they are incurred.
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
051
Faritec Hold
ings Limited
Annual R
eport 2007
2 Standards, interpretations and am
endments to published standards that are not yet effective
Certain new standards, am
endments and interpretations to existing standards have been published but have effective
dates applicable to future annual financial statements of the group and com
pany and which the group and com
pany have
not early adopted:
• IFRS 7, Financial lnstrum
ents; Disclosures, and a complem
entary Amendm
ent to IAS 1, Presentation of Financial Statements
– Capital Disclosures (effective from 1 January 2007). IFRS 7 introduces new
disclosures to improve the inform
ation about
financial instruments, it requires the disclosure of quantitative inform
ation about exposure to risks arising from financial
instruments, including specified m
inimum
disclosures about credit risk, liquidity risk and market risk, including sensitivity
analysis to market risk. It replaces IAS 30, Disclosures in the Financial Statem
ents of Banks and Similar Financial
Institutions, and disclosure requirements in IAS 32, Financial instrum
ents: Disclosure and Presentation. It is applicable to
all entities that report under IFRS. The amendm
ent to IAS 1 introduces disclosures about the level of an entity's capital and
how it m
anages capital. The group assessed the impact of IFRS 7 and the am
endment to IAS 1 and concluded that the m
ain
additional disclosures will be sensitivity analysis to m
arket risk and the capital disclosures required by the amendm
ent of
IAS 1. The group will apply IFRS 7 and the am
endment to IAS 1 for annual periods beginning after 1 July 2007.
• IFRIC 10, Interim
Reporting and Impairm
ent (effective 1 Novem
ber 2006). Managem
ent are currently assessing the impact
of this new standard.
• IFRIC 11 – IFRIC 2, Group and Treasury Share Transactions (effective for annual periods com
mencing on or after
1 March 2007). This interpretation should have no im
pact as the group already complies w
ith the requirement of this
interpretation.
• IFRS 8, Operating Segm
ents (effective for annual periods comm
encing on or after 1 January 2009). IFRS 8 sets out
requirements for disclosure of inform
ation about an entity’s operating segments and also about the entity’s products and
services, the geographical areas in which it operates and its m
ajor customers. M
anagement are in the process of setting
up accounting systems to allow
for the reporting of financial information in accordance w
ith the requirements of this
standard.
The follow
ing new standards, am
endments and interpretations have, at present, no effect on the group and com
pany:
• IAS 1 (Am
endment), Presentation of Financial Statem
ents (effective 1 January 2009);
• IAS 23 (Am
endment), Borrow
ing Costs (effective 1 January 2009);
• IFRIC 12, Service Concession Arrangem
ents (effective 1 January 2008);
• IFRIC 13, Custom
er Loyalty Programm
e (effective 1 July 2008); and
• IFRIC 14, The Lim
it on Defined Benefit Assets, Minim
um Funding Requirem
ents and their Interaction
(effective 1 January 2008).
052
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000
R000 R000
R000
3 Equipm
ent
Cost
Furniture and fittings
9 138 5 997
– –
M
otor vehicles
872 348
– –
Office equipm
ent
10 078 8 437
– –
Com
puter equipment
13 334
9 039 –
–
33 422
23 821 –
–
A
ccumulated depreciation
Furniture and fittings
(4 857)
(2 715) –
–
Motor vehicles
(395)
(110) –
–
Office equipment
(7 614)
(6 824) –
–
Computer equipm
ent
(8 693) (5 030)
– –
(21 559)
(14 679) –
–
Carrying value
Furniture and fittings
4 281
3 282 –
–
Motor vehicles
437
238 –
–
Office equipment
2 504
1 613 –
–
Computer equipm
ent
4 641 4 009
– –
11 863
9 142 –
–
The carrying am
ounts of equipment are
reconciled as follow
s:
Carrying value at beginning of year
9 142 8 164
– –
Additions at cost
5 617
2 143 –
–
Furniture and fittings
2 520
763 –
–
Motor vehicles
302
– –
–
Office equipment
–
288 –
–
Computer equipm
ent
2 795 1 092
– –
Additions through acquisition of business
1 329
2 929 –
–
Furniture and fittings
–
739 –
–
Motor vehicles
100
193 –
–
Office equipment
1 206
212 –
–
Computer equipm
ent
23 1 785
– –
Current depreciation
(3 027)
(4 015) –
–
Furniture and fittings
(1 418)
(557) –
–
Motor vehicles
(164)
(12) –
–
Office equipment
(222)
(1 349) –
–
Computer equipm
ent
(1 223) (2 097)
– –
G
ROU
P CO
MPA
NY
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
053
Faritec Hold
ings Limited
Annual R
eport 2007
G
ROU
P CO
MPA
NY
2007 2006
2007 2006
R000 R000
R000 R000
Disposals
(1 198)
(79) –
–
Furniture and fittings
(103)
(7) –
–
Motor vehicles
(39)
– –
–
Office equipment
(93)
(32) –
–
Computer equipm
ent
(963) (40)
– –
Carrying value at end of year
11 863
9 142 –
–
Equipm
ent with a carrying value of R2 400 000
(2006: R1 508 000) has been pledged as security for finance lease agreem
ents (refer note 17).
Assets subject to finance leases are as follow
s:
Motor vehicles
224
193 –
–
Computer equipm
ent
2 176 1 315
– –
2 400
1 508 –
–
4 Softw
are
Cost
14 300 5 356
– –
Accum
ulated amortisation
(5 140)
(3 905) –
–
Carrying value at end of year
9 160
1 451 –
–
The carrying am
ounts of software are
reconciled as follows:
Carrying value at beginning of year
1 451
1 034 –
–
Additions at cost
8 193 1 065
– –
Current am
ortisation
(484) (648)
– –
Carrying value at end of year
9 160
1 451 –
–
Softw
are with a carrying value of R6 587 000
(2006: nil) has been pledged as security
for finance lease agreem
ents (refer note 17).
054
Faritec Hold
ings Limited
Annual R
eport 2007
G
ROU
P CO
MPA
NY
2007 2006
2007 2006
R000 R000
R000 R000
5 D
evelopment costs capitalised
Cost
17 848
17 223 –
–
Accumulated am
ortisation
(9 302) (5 835)
– –
Carrying value at end of year
8 546
11 388 –
–
The carrying am
ounts of development costs
capitalised are reconciled as follows:
Carrying value at beginning of year
11 388
13 688 –
–
Additions at cost
624 2 630
– –
Current am
ortisation
(3 466) (3 667)
– –
Disposals
–
(1 263) –
–
Carrying value at end of year
8 546
11 388 –
–
Developm
ent costs comprise softw
are developm
ent costs in respect of the following
projects:
Automated invoice m
atching program
7 311
9 807 –
–
Call centre solution
1 164 1 455
– –
Security portal
71
126 –
–
8 546
11 388 –
–
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
055
Faritec Hold
ings Limited
Annual R
eport 2007
G
ROU
P CO
MPA
NY
2007 2006
2007 2006
R000 R000
R000 R000
6 G
oodwill
At cost
93 598
56 658 –
–
Accumulated im
pairments
(604)
(604) –
–
Carrying value at end of year
92 994
56 054 –
–
The carrying am
ounts of goodwill are
reconciled as follows:
Carrying value at beginning of year
56 054
127 –
–
Additions during the year
36 940 55 927
– –
Carrying value at end of year
92 994
56 054 –
–
Goodw
ill acquired during the year comprises
the goodwill on acquisition of the business
of Lechabile Storage Solutions (2006: Enterprise Connection), as detailed in note B on page 41, and com
prises the following:
Purchase price
15 975
50 600 –
–
N
et liabilities/(assets) of the businesses acquired 18 795
(6 282) –
–
Costs of acquisition
899 2 012
– –
Purchase consideration adjustm
ent based on increase in Faritec share price from
contract date to closing date
1 271
9 597 –
–
G
oodwill acquired
36 940
55 927 –
–
Goodw
ill acquired during the year ended 30 June 2007 comprises the goodw
ill on acquisition of the business of Lechabile Storage Solutions. Of the contracted purchase consideration, 40%
was settled in cash, w
hile the other 60%
was settled by issuing Faritec shares. The Faritec share price w
as 90 cents at the contract date; at the closing date of 1 N
ovember 2006 the share price had increased to R1,125. This increase in the m
arket value of the shares issued, from
R5 083 000 at contract date to R6 354 000 at closing date, increased the purchase consideration from the contract
value of R15 975 000 to R17 246 000.
Goodw
ill acquired during the year ended 30 June 2006 comprises the goodw
ill of the business of Enterprise Connection.
In accordance w
ith the group’s accounting policy, an impairm
ent test was perform
ed on goodwill at year-end.
Budgeted operating cash flows for the related business units w
ere projected based on budgeted revenue growth of
between 15%
and 46% for the first year and betw
een 10% and 15%
thereafter and discounted at the group’s weighted
average pre-tax cost of capital. The impairm
ent calculations performed indicated that the goodw
ill was not im
paired.
056
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
7 Tradem
arks
At cost
38 204 38 204
– –
Carrying value at end of year
38 204
38 204 –
–
The tradem
arks comprise the Faritec tradem
ark and logo.
The tradem
arks are considered to have indefinite useful lives. There is no apparent legal or other restriction to the use of the tradem
arks or risk of technical or other obsolescence. Given the strategic importance of the tradem
arks to the future sustainability of the group, the group’s intention is to continue to use the tradem
arks indefinitely. The directors consider that there is no foreseeable lim
it to the period over which these assets are expected to
generate cash inflows for the group and, on this basis, the directors have concluded that the indefinite useful life
assumption is appropriate.
In accordance w
ith the group’s accounting policy, an impairm
ent test was perform
ed on the carrying values of intangible assets w
ith indefinite useful lives at year-end. Budgeted operating cash flows for the related business units
were projected based on a 10%
growth per annum
and discounted at the group’s weighted average pre-tax cost of
capital. The impairm
ent calculations performed indicated that the tradem
arks were not im
paired.
8 Investm
ent in subsidiaries
Faritec (Pty) Limited
– Shares, 100%
holding at cost (2006: 70%)
–
– 128 403
30 867
– Amount ow
ing
– –
44 179 44 179
Faritec Enterprise Solutions (Pty) Lim
ited
– Amount ow
ing
– –
46 099 37 551
–
– 218 681
112 597
The loans are unsecured, interest free and are repayable subject to 12 m
onths’ notice. Further detail on the group’s subsidiaries are contained in the schedule on page 67.
G
ROU
P CO
MPA
NY
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
057
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
9 Loans receivable
Share Incentive Trust B
eneficiaries
4 418 3 293
– –
The group has advanced R4 418 000
(2006: R3 293 000) to the staff of Faritec to participate in the Faritec Share Incentive Trust for the acquisition of 3 930 833 (2006: 9 507 333) Faritec Holdings Lim
ited ordinary shares. These shares have been issued at prices betw
een 0,1 cent and 30 cents each.
The loans are repayable on sale of the relevant shares.
Joint venture
1 913
1 479 –
–
The loan is unsecured, interest free and is repayable subject to 12 m
onths’ notice.
6 331
4 772 –
–
10 D
eferred taxation
Balance at beginning of year
5 357 5 096
– –
M
ovements during year attributable to
tem
porary differences
(1 505) 261
– –
Balance at end of year
3 852
5 357 –
–
The balance com
prises:
– Computed tax losses
3 268
5 781 –
–
– Capitalised expenditure
(2 478) (3 302)
– –
– Provisions
1 871
810 –
–
– Lease liabilities
2 016 2 068
– –
– Paym
ents received in advance
302 –
– –
– Fair value adjustm
ent on debtors and creditors
(67)
– –
–
– Accelerated capital allowances
(1 060)
– –
–
3 852
5 357 –
–
The group expects that w
ith the profits expected to be generated in future years, the computed tax losses w
ill be utilised.
Deferred tax assets have not been recognised for unused tax losses of R3 769 000 (2006: R6 073 000).
G
ROU
P CO
MPA
NY
058
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
11 Inventories
Loan stock, net of am
ortisation
279 822
– –
M
erchandise and components
9 232
4 491 –
–
9 511
5 313 –
–
N
o inventories are carried at net realisable value.
The cost of inventory sold for the year amounted
to R434 660 213 (2006: R270 369 725).
12 Investm
ents
Investment in preference shares – at cost
–
13 229 –
13 229
Fair value/directors’ valuation
–
13 229 –
13 229
Com
prising cumulative redeem
able non- convertible preference shares held in Lexshell 563 Investm
ents (Pty) Limited. The shares w
ere redeem
ed at par by the issuer on 16 May 2007.
13 Trade and other receivables
Trade receivables
157 081
152 173 –
–
Accounts receivable of R88 025 000 (2006: R74 934 000) have been ceded to the group’s banker as security for the overdraft and other banking facilities granted.
O
ther receivables
Included in other receivables are receivables
from com
panies controlled by certain directors 4 418
2 929 –
–
G
ROU
P CO
MPA
NY
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
059
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
14 Cash and cash equivalents
Cash and cash equivalents consists of:
Cash on hand
19 18
– –
Bank balances
32 147
39 335 –
–
32 166
39 353 –
–
The com
pany and group have pledged certain of its investm
ent accounts, restricted to R1 800 000 (2006: R1 800 00) to N
edbank Limited as security
for a guarantee issued to a supplier.
A call account w
ith a balance of R1 800 000 (2006: R1 800 000) has been presented as security for banking facilities granted to a property com
pany owned by certain directors of the group.
The group rents the premises ow
ned by that com
pany.
15 Share capital
A
uthorised
524 000 000 ordinary shares of 0,1 cents each 524
524 524
524
Issued
254 992 701 (2006: 181 385 458)
ordinary shares at 0,1 cents each
255 181
255 181
U
nissued shares
The 269 007 299 (2006: 342 614 542) unissued ordinary shares are under the control of the directors. This authority is valid until the forthcom
ing annual general meeting.
16 Share prem
ium
Balance at beginning of year 64 826
27 323 65 744
28 241
Premium
on shares issued for staff share schem
es during the year 2 261
2 671 2 261
2 671
Premium
on shares issued in terms of
acquisition of business of Lechabile Storage Solutions
(2006: Enterprise Connection)
6 348 34 853
6 348 34 853
Prem
ium on shares issued to J&
J Group on
exercise of option 84 245
– 84 245
–
Write-off of share issue costs
(73) (21)
(73) (21)
157 607 64 826
158 525 65 744
G
ROU
P CO
MPA
NY
060
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
17 Interest-bearing borrow
ings
Bank loan 24 000
30 000 –
–
Finance agreements
11 651 2 016
– –
Current portion included in current portion of
interest-bearing borrow
ings (9 548)
(7 352) –
–
26 103 24 664
– –
The bank loan is repayable in tw
enty quarterly instalm
ents of R1 500 000 each. The rate of interest varies from
a margin of 2,75%
to 3% above the
JIBAR rate and is secured as detailed in notes 13 and 25 of the financial statem
ents.
The bank loan w
as obtained for the purpose of funding the acquisition of the Enterprise Connection business, as detailed in note B on page 41.
The secured finance agreem
ents bear interest at rates from
0,5% below
to 5% above (2006: from
1,5%
below to 5%
above) the prime lending rate,
repayable in monthly instalm
ents of R382 782 (2006: R96 160). Secured by equipm
ent and software
with a book value of R8 987 000 (2006: R1 508 000).
Included in finance agreem
ents are acquired
finance leases, repayable as follows:
– payable w
ithin one year 3 866
1 287 –
–
– payable in second to fifth years 7 785
729 –
–
11 651 2 016
– –
Unearned finance charges
1 291 175
– –
12 942 2 191
– –
Lease com
mitm
ents due:
– Payable w
ithin one year 4 567
1 403 –
–
– Payable in second to fifth years 8 375
788 –
–
12 942 2 191
– –
G
ROU
P CO
MPA
NY
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
061
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
18 O
perating lease liabilities
Lease liability
6 951 7 625
– –
Current portion
(698)
(652) –
–
6 253
6 973 –
–
The average term
of the leases is 3 years, and escalates at 10%
– 12% per annum
. N
o contingent rent is payable.
19 N
on-interest-bearing borrowings
Technology Corporate M
anagement (Pty) Lim
ited joint venture partner
1 457 1 457
– –
The loans are unsecured, interest free and are subject to a 12 m
onths’ notice period.
Faritec Inter-Com
pany Processes (Pty) Limited
shareholder loans from
minority shareholders
1 377 1 377
– –
The loans are unsecured, interest free and have been subordinated in favour of the other creditors, of ICP until such tim
e as the assets, fairly valued, exceed the liabilities
2 834 2 834
– –
20 Revenue
Gross revenue com
prises turnover, which
excludes value-added tax and represents the invoiced value of goods and services supplied.
M
ajor classes of revenue comprise:
– Hardw
are 502 911
305 812 –
–
– Software
157 263 73 120
– –
– Services
198 175 151 126
152 258
858 349 530 058
152 258
21 Im
pairment losses
Softw
are development program
me
(1 263)
(80) –
–
(1 263)
(80) –
–
G
ROU
P CO
MPA
NY
062
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
22 N
et profit before taxation
Profit before taxation is stated after
taking into account the following:
Incom
e:
Forex gains
– 432
– –
Expenses:
Auditor’s rem
uneration – fees
1 245 652
– –
– other services
35 90
– –
Depreciation
3 027
4 015 –
–
Amortisation
3 950
4 315 –
–
Operating lease rentals: premises
6 426
4 517 –
–
Operating lease rentals: office equipment
1 517
813 –
–
Staff costs
111 006 89 379
– –
Included in depreciation and am
ortisation for 2007 is a change in estim
ate of R2 901 000 and R753 000 arising from
the re-assessment of the
useful lives of equipment and softw
are respectively.
23 Taxation
SA norm
al taxation – current
4 615 6 267
– –
Deferred taxation
– current
1 505 (261)
– –
6 120 6 006
– –
Tax rate reconciliation:
Statutory tax rate (%
)
29,0 29,0
– –
Exem
pt income and capital gains (%
)
– (4,6)
– –
N
on-deductible items and deferred
tax assets not raised (%
)
4,4 0,6
– –
Com
puted tax losses (%)
(3,3)
– –
–
Effective tax rates
30,1 25,0
– –
At 30 June 2007, the group had an estim
ated tax loss of R15 038 000 (2006: R26 008 000) w
hich w
ill be available for set-off against future taxable incom
e.
24 Earnings per share
Earnings
16 460
13 982 –
–
Adjustments:
Im
pairment of assets
628
80 –
–
Gross
1 263
80 –
–
Tax
(366) –
– –
M
inority share
(269) –
– –
Headline earnings
17 088
14 062 –
–
W
eighted average number of shares in issue (000)
192 962 135 075
– –
Dilution arising from
options issued to employees (000)
12 077 8 730
– –
Fully diluted num
ber of shares in issue (000)
205 039 143 805
– –
G
ROU
P CO
MPA
NY
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
063
Faritec Hold
ings Limited
Annual R
eport 2007
2007 2006
2007 2006
R000 R000
R000 R000
25 Contingent liabilities
Secondary tax on com
panies that would be
payable if all accumulated profits w
ere distributed by w
ay of a dividend.
8 641 6 812
6 656 6 656
The com
pany has signed omnibus suretyships
on behalf of its subsidiaries in favour of The Standard Bank of South-Africa Lim
ited, for banking facilities provided.
Faritec Enterprise Solutions (Pty) Lim
ited, a w
holly-owned subsidiary in the group, has
signed sureties restricted to R1 800 000 (2006: R1 800 000), for banking facilities granted to ebusiness Infrastructure Solution (Pty) Lim
ited, a joint venture company held 50%
by the group. At year-end no am
ounts were
outstanding in respect of this facility.
26 D
irectors’ emolum
ents
The aggregate of directors’ emolum
ents
amounted to:
– For services as directors
435
280 –
–
– For other services
7 112 7 666
– –
7 547
7 946 –
–
Share options
Total
Detailed analysis for 2007
Fees Rem
uneration exercised
Bonus 2007
financial year
R000 R000
R000 R000
R000
N
on-executive directors:
CR Jardine 95
– –
– 95
D M
asson 69
– –
– 69
P M
oses 69
– –
– 69
J N
aidoo 69
– –
– 69
LN
Noxaka
64 –
– –
64
CJ Thomas
69 –
– –
69
Executive directors:
SM Tom
linson –
1 412 –
– 1 399
HC Gajjar
– 1 283
– –
1 212
M M
ayekiso –
870 –
– 870
SM
Nyem
be –
946 –
– 1 034
AR Tim
m
– 1 327
– –
1 323
PJ Winn
– 1 274
– –
1 274
435 7 112
– –
7 547
G
ROU
P CO
MPA
NY
064
Faritec Hold
ings Limited
Annual R
eport 2007
G
ROU
P CO
MPA
NY
26 D
irectors’ emolum
ents continued
Share options
Total
D
etailed analysis for 2006 Fees
Remuneration
exercised Bonus
2006
financial year R000
R000 R000
R000 R000
N
on-executive directors:
CR Jardine 90
– –
– 90
D M
asson 65
– –
– 65
J N
aidoo 65
– –
– 65
LN
Noxaka
60 –
– –
60
Executive directors:
SM Tom
linson –
1 304 259
292 1 855
HC Gajjar
– 1 172
– 192
1 364
SM N
yembe
– 970
– 213
1 183
AR Timm
–
1 241 159
276 1 676
PJ W
inn –
1 206 159
223 1 588
280 5 893
577 1 196
7 946
2007
2006 2007
2006
R000 R000
R000 R000
27 Com
mitm
ents
The following lease com
mitm
ents have been entered into by the group in relation to prem
ises and office equipment as follow
s:
Payable within one year
– Prem
ises
9 725 7 745
– –
– Office equipm
ent
584 992
– –
Payable in second to fifth years inclusive
– Premises
43 782
25 675 –
–
– Office equipment
–
619 –
–
Payable thereafter
– Prem
ises
47 467 –
– –
– Office equipm
ent
– 127
– –
101 558
35 158 –
–
Capital com
mitm
ents of R8 500 000 relating to new prem
ises to be occupied in January 2008, and R4 500 000 relating to a telephone system
and network upgrade, have been entered into as at reporting date.
28 B
orrowing pow
ers
In terms of the com
pany’s articles of association, the borrowing pow
ers of the company are unlim
ited. The total group borrow
ings at year-end are R38 485 000 (2006: R34 847 000).
29 Retirem
ent benefits
The group presently contributes to a defined contribution retirement benefit plan, being a provident fund, w
hich does not require an actuarial valuation. The fund is subject to the Pension Funds Act, 1956. The group’s contribution to the above schem
e was R8 403 000 (2006: R3 482 000). The group has no obligations to fund post-retirem
ent benefits. The contributions paid to the defined contribution plan by Faritec for the directors am
ounted to R310 000 for the year.
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
065
Faritec Hold
ings Limited
Annual R
eport 2007
30 Related party transactions
Identity of related parties
The subsidiaries and joint venture of the group are identified in the schedule on page 67.
The directors are listed on pages 6 and 7.
Significant shareholders are detailed on page 68.
G
roup companies
Arm
s’ length trading transactions occur between divisions and com
panies within the group from
time to tim
e. The transactions are reversed on consolidation.
For details on loans to/from
the holding company, subsidiaries and joint venture, refer to notes 8, 9 and 13 and the
schedule on page 67.
The holding com
pany earns revenue from a subsidiary com
pany, Faritec Enterprise Solutions (Pty) Limited, as
disclosed in note 20 to these financial statements.
Details of guarantees betw
een the holding company, subsidiaries and joint venture are contained in note 25 of these
financial statements.
D
irectors
The Johannesburg and Cape Town prem
ises, from w
hich the group operates, are rented from com
panies in which
certain executive directors of Faritec Holdings Limited, AR Tim
m, SM
Tomlinson and PJ W
inn, have an interest. These leases w
ere done on an arm’s length basis based on open m
arket rental valuations.
Property lease rentals paid to these com
panies for the year were:
150 Kelvin Drive Properties (Pty) Lim
ited – R3 288 000 (2006: R2 989 000)
Ekin Holdings (Pty) Limited – R1 827 000 (2006: R1 631 000)
Refer to note 27 on page 64 for com
mitm
ents owing in respect of rentals on these prem
ises, and note 13 on page 58 for receivables due from
these companies.
The directors’ em
oluments are disclosed in note 26 on page 63. Further inform
ation on transactions with directors is
contained in the Directors’ report.
N
one of the directors or major shareholders of the group, nor their fam
ilies, had any direct or indirect interest in any transaction concluded w
ith the group in the current or prior financial years, other than as disclosed in this note and in the Directors’ report.
B
EE transaction
With effect from
1 July 2003 Faritec Holdings Limited (“Faritec”) concluded a black econom
ic empow
erment (“BEE”)
transaction with Jay and Jayendra (Pty) Lim
ited (“J&J”) in term
s of which:
• J&
J acquired a 30% stake in Faritec’s operating subsidiary Faritec (Pty) Lim
ited from Faritec. The acquisition w
as funded by Faritec subscribing for cum
ulative preference shares in J&J (“the J&
J preference shares”);
• J&J had an option (the “option”) to dispose of its shareholding in Faritec (Pty) Lim
ited to Faritec prior to 30 June 2007 in exchange for the redem
ption of the J&J preference shares and the issue of new
shares in Faritec.
J&
J exercised the option on 16 May 2007, and the BEE transaction w
as finalised.
Based on the term
s of the option the purchase price payable to J&J for its shares in Faritec (Pty) Lim
ited was
R103 649 000 which w
as settled as follows:
• R19 342 000 by w
ay of set off against the price payable to Faritec for the redemption of the J&
J preference shares (w
hich was the par value of R13 229 000 plus the cum
ulative value of the dividends accrued but not declared to that date); and
• R84 307 000 by the issue of 61 677 485 Faritec shares at an issue price of R1,3669 per share (being the volum
e w
eighted average price at which Faritec shares traded for the 30 days preceeding the exercise of the option).
066
Faritec Hold
ings Limited
Annual R
eport 2007
B
EE transaction continued
At the time, the shares issued to J&
J comprised 24,4%
of the total issued share capital of Faritec, which increased the
J&J Group’s total shareholding in Faritec to 30,0%
.
After the exercise of the option Faritec once again ow
ns 100% of the shares in its operating subsidiaries.
Details of the account balances affected by the finalisation the BEE transaction w
ith J&J are show
n as follows:
• in note 8 on page 56 (Investm
ent in subsidiary);
• in note 12 on page 58 (Investment in preference shares); and
• in the Statem
ents of changes in equity on page 39 (Acquisition equity adjustment).
31 Financial instrum
ents
Credit risk
The group maintains cash, cash equivalents and short-term
investments w
ith various financial institutions.
The group’s policy is to lim
it exposure with any one financial institution. A high credit standing is necessary for the
financial institutions with w
hich transactions are executed.
Credit risk w
ith respect to trade receivables is limited due to a large num
ber of customers com
prising the customer
base and their dispersion across different industries. Ongoing credit evaluation of the financial position of customers
is performed.
Interest rate risk
As part of the process of m
anaging the group’s interest rate risk, interest rate characteristics of new borrow
ings and the refinancing of existing borrow
ings are positioned according to expected movem
ents in interest rates. Full details of interest rates relating to interest-bearing borrow
ings are detailed in note 17 on page 60.
Foreign currency risk m
anagement – Forw
ard exchange contracts which relate to future com
mitm
ents
Amounts in foreign currency purchased
Forward exchange rate
Maturity date
182 000
1 USD = R7,07 27 July 2007
209 000
1 USD = R7,09 15 August 2007
2 000
1 USD = R7,10 30 August 2007
2 393 000
1 USD = R7,11 31 August 2007
35 000
1 USD = R7,11 4 Septem
ber 2007
The com
pany reviews its foreign currency exposure, including com
mitm
ents, on an ongoing basis. The company
utilises foreign exchange contracts to hedge foreign exchange exposure.
Liquidity risk
The group’s risk to liquidity is a result of the funds available to cover future com
mitm
ents. The group manages liquidity
risk through an ongoing review of future com
mitm
ents and credit facilities. Cash flow forecasts are prepared and
adequate unutilised borrowing facilities are m
onitored.
Fair values
The fair values of all applicable financial instrum
ents are substantially identical to the carrying values reflected in the balance sheet. W
here applicable, the fair value of receivables and payables is estimated by discounting contractual
cash flows at the current m
arket interest rate that is available to the group for similar instrum
ents.
NOTES T
O T
HE F
INANCIA
L S
TATEM
ENTS
continued
for th
e year end
ed 30 Ju
ne 2007
067
Faritec Hold
ings Limited
Annual R
eport 2007
SCHEDULE O
F IN
TEREST IN
SUBSID
IARY A
ND
JOiN
T V
ENTURE C
OM
PANIE
S
2007
2006 Interest of holding com
pany
Issued Effective Effective
2007
2006
share
holding holding
Shares Indebtedness
Shares Indebtedness
capital
%
%
R000 R000
R000 R000
Faritec (Pty) Limited
1 200
100,0 70,0
128 403 44 179
30 867 44 179
Faritec Enterprise Solutions (Pty) Limited
2 6 000
100,0 70,0
– 46 099
– 37 551
Faritec Group Managed Services (Pty) Lim
ited3
5 000 100,0
70,0 –
– –
–Faritec Inter-Com
pany Processes (Pty) Limited
2 1 300
69,9 48,93
– –
– –
Faritec Contracting (Pty) Limited
3 100
100,0 70,0
– –
– –
Faritec Strategic IT Services (Pty) Limited
3 5 000
100,0 70,0
– –
– –
FariMed (Pty) Lim
ited2
200 100,0
70,0 –
– –
– Jafcal System
s (Pty) Limited
1 100
100,0 70,0
– –
– –
Faritec Software and Applications (Pty) Lim
ited3
100 100,0
70,0 –
– –
–FGH (SA) Decision Support System
s (Pty) Limited
3 8
100,0 70,0
– –
– –
ebusiness Infrastructure Solution (Pty) Limited
2 – joint venture
100 50,0
35,0 –
– –
–
128 403 90 278
30 867 81 730
All companies are incorporated in South Africa.
Nature of business
1 holding companies
2 information technology (provision of m
anaged business and technology infrastructure solutions, software developm
ent and distribution, and hosting services)
3 dormant
Joint ventureSum
mary of the joint venture, accounted for on the proportionate consolidation m
ethod (Faritec Holdings Limited share):
2007
2006
R000
R000
Assets
Non-current assets
1 121
522
Current assets
16 987
14 697
Total assets
18 108
15 219
Equity and liabilitiesEquityShare capital
–
–
Retained income
3 571
2 837
Total equity
3 571
2 837
LiabilitiesN
on-current liabilities
2 916
2 953Current liabilities
11 621
9 429
Total liabilities
14 537
12 382
Total equity and liabilities
18 108
15 219
068
Faritec Hold
ings Limited
Annual R
eport 2007
SHARE O
WNERSHIP
ANALYSIS
at 30 Jun
e 2007
N
umber of
N
umber of
shareholders
%
shares %
Size of shareholding1
– 1 000 shares
172 15,3
124 012 0,0
1 001 – 10 000 shares
507
45,1 2 661 858
1,010 001
– 100 000 shares
351 31,2
11 485 433 4,5
100 001 – 1 000 000 shares
64 5,7
19 868 302 7,8
1 000 001 shares and over
32 2,7
220 853 102 86,7
Total
1 126 100,0
254 992 707 100,0
Individuals
963 85,6
61 323 871 24,0
Empow
erment
8
0,7 87 203 949
34,2N
ominee com
panies or trusts
53 4,7
11 705 925 4,6
Private companies
20
1,8 6 076 767
2,4 Public com
panies
5 0,4
11 393 721 4,5
Other corporations
35 3,1
1 536 048 0,6
Investment com
panies or funds
37 3,3
75 073 926 29,4
Banks
5 0,4
678 500 0,3
Total
1 126 100,0
254 992 707 100,0
Shareholder spread N
on-public shareholders
14 0,6
127 322 098 49,9
Directors and associates of the company
6
0,5 43 431 028
17,0Em
powerm
ent
8 0,1
83 891 070 32,9
Public shareholders
1 112 99,4
127 670 609 50,1
Total
1 126 100,0
254 992 707 100,0
Interest > 5%The interest of any shareholder, other than a director w
ho, in so far as is know
n, is directly or indirectly 5% or m
ore of the issued share capital
Jay and Jayendra (Pty) Limited
75 885 614
29,8
069
Faritec Hold
ings Limited
Annual R
eport 2007
Shareholders
’ dia
ry
Financial year-end June 2008
Annual general meeting
December 2008
Reports and profit statements
Half-year interim report
March 2008
Preliminary report
September 2008
Annual report and financial statements
Novem
ber 2008
adm
inis
tratio
nRegistered office
Transfer secretariesFaritec House
Computershare Investor Services 2004 (Pty) Lim
ited150 Kelvin Drive W
oodmead
(Registration number 1987/03382/06
Sandton 2148 70 M
arshall Street Marshalltow
n 2001(PO Box 76784 W
endywood 2144)
(PO Box 61051 Marshalltow
n 2107)
Auditors
Attorneys
Charles Orbach & Com
pany Read Hope Phillips Thom
as & Cadm
an IncChartered Accountants (SA)
2nd Floor 30 Melrose Boulevard
Registered Auditors M
elrose Arch 2196 3rd Floor 3 M
elrose Boulevard (PO Box 757 N
orthlands 2116)M
elrose Arch 2196 (PO Box 355 M
elrose Arch 2076)
Comm
ercial banker Corporate sponsor
The Standard Bank of South Africa Limited
Java Capital (Pty) Limited
156 Fifth Street Sandton 2196 2 Arnold Road Rosebank 2196
(PO Box 652360 Benmore 2010)
(PO Box 2087 Parklands 2121)
Company secretary
Faritec Holdings Lim
itedCraig Densham
CA(SA) Incorporated in the Republic of South Africa
Faritec House Registration num
ber 1998/004872/06150 Kelvin Drive W
oodmead
Share code FRTSandton 2148
ISIN ZAE 000016838
(PO Box 76784 Wendyw
ood 2144) w
ww
. faritec.com
070
Faritec Hold
ings Limited
Annual R
eport 2007
Notice is hereby given that the ninth annual general m
eeting of the shareholders of Faritec Holdings Limited w
ill be held in the boardroom
, Faritec House, 150 Kelvin Drive, Woodm
ead, Sandton on Thursday, 13 December 2007, at 08:30 for the
following purposes:
SPECIAL RESO
LUTIO
N N
UM
BER 1
Resolved that, pursuant to the articles of association of the company, Faritec Holdings Lim
ited, or a subsidiary, be and is hereby authorised, by w
ay of a general authority, to repurchase shares issued by the company in term
s of sections 85 and 89 of the Com
panies Act, No 61 of 1973, as am
ended, and in terms of the JSE Listings Requirem
ents (“the Listings Requirem
ents”), being that:• any such repurchase of shares shall be effected through the order book operated by the JSE trading system
without any
prior understanding or arrangement betw
een the company and the counterparty;
• the general authority shall only be valid until the company’s next annual general m
eeting, provided that it shall not extend beyond 15 (fifteen) m
onths from the date of passing of this special resolution;
• when the com
pany has cumulatively repurchased 3%
in aggregate of the initial number of that class of shares acquired
thereafter, an announcement m
ust be published as soon as possible and not later than 08:30 on the business day following
the day on which the relevant threshold is reached or exceeded, and the announcem
ent must com
ply with the listings
requirements;
• any general repurchase by the company of its ow
n shares shall not, in aggregate in any one financial year, exceed 20%
of the company’s issued share capital of that class as at the date of passing of this special resolution;
• acquisitions by a subsidiary of shares in the company m
ay not exceed 10% in the aggregate of the num
ber of issued shares of the com
pany. In determining the price at w
hich shares issued by the company are acquired by the com
pany or its subsidiary in term
s of this general authority.• the m
aximum
price at which such shares m
ay be acquired will be 10%
above the weighted average of the m
arket value for such shares for the 5 (five) business days im
mediately preceding the date of repurchase of such shares;
• the company w
ill, at any point in time, only appoint one agent to effect any repurchases on the com
pany’s behalf;• neither the com
pany, nor its subsidiaries, will repurchase shares during a prohibited period as defined by the listing
requirements; and
• the company, or a subsidiary, w
ill only undertake a repurchase of shares if, after such repurchases, the company com
plies w
ith the shareholder spread requirements prescribed by the listing requirem
ents.
The reason for and effect of this special resolution is to grant the company a general authority in term
s of the Companies
Act for the acquisition of shares of the company. Such general authority w
ill provide the Board with the flexibility, subject
to the requirements of the Com
panies Act and the JSE should it be in the interests of the company at any tim
e while the
general authority exists, to purchase shares.
This general authority shall be valid until the earlier of the next annual general meeting of the com
pany, or its variation or revocation by special resolution by any subsequent general m
eeting of the company, provided that this general authority
shall not extend beyond 15 (fifteen) months from
the date of passing of this special resolution.
After considering the effect of the repurchase of the maxim
um num
ber of securities, the directors are of the opinion that:• the com
pany and its subsidiaries will be able to pay their debts as they becom
e due in the ordinary course of business for the next 12 (tw
elve) months;
• the assets of the company and its subsidiaries, fairly valued in accordance w
ith Generally Accepted Accounting Practice, w
ill be in excess of the liabilities of the company and its subsidiaries;
NOTIC
E T
O T
HE A
NNUAL G
ENERAL M
EETIN
G
071
Faritec Hold
ings Limited
Annual R
eport 2007
• the issued share capital and reserves of the company and its subsidiaries w
ill be adequate for the purposes of the business of the com
pany and its subsidiaries for the next 12 (twelve) m
onths;• the w
orking capital available to the company and its subsidiaries w
ill be sufficient for the group’s requirements for the
next 12 (twelve) m
onths; and• The com
pany’s sponsor will confirm
the adequacy of the company’s w
orking capital for the purposes of undertaking a repurchase of shares in w
riting to the JSE, prior to the company (or any subsidiary) entering the m
arket to proceed with
the repurchase.
The annual report to which this notice of annual general m
eeting is attached provides details of:• the directors of the com
pany on pages and 6 and 7;• the m
ajor shareholders of the company on page 68;
• details of any material changes in the com
pany’s financial position between 30 June 2007
and the date on which the annual financial statem
ents were finalised on page 36;
• the directors' shareholding in the company on page 35;
• the share capital of the company on page 33; and
• the directors’ responsibility statement on page 31.
The directors of the company are not aw
are of any legal or arbitration proceedings (including any such proceedings that are pending or threatened) that m
ay have or have had in the recent past (covering at least the previous 12 months) a m
aterial effect on the group’s financial position.
AS O
RDIN
ARY RESO
LUTIO
NS
1 To consider and approve the financial statements and group financial statem
ents for the year ended 30 June 2007.2 To consider and approve the directors’ em
oluments for the year ended 30 June 2007, as per note 26.
3 To re-elect CR Jardine as a director, in accordance with the provisions of the articles of association of the com
pany.4 To re-elect LN
Noxaka as a director, in accordance w
ith the provisions of the articles of association of the company.
5 To re-elect SM N
yembe as a director, in accordance w
ith the provisions of the articles of association of the company.
6 To re-elect SM Tom
linson as a director, in accordance with the provisions of the articles of association of the com
pany.7 To approve an authority for the directors to issue ordinary shares of 0,1 cent each for cash to the public as and w
hen suitable situations arise, subject to the follow
ing conditions:
• that the securities which are the subject of the issue for cash m
ust be of a class already in issue, or where this is not
the case, must be lim
ited to such securities or rights as are convertible into a class already in issue;
• that this authority shall not extend beyond 15 (fifteen) months from
the date of this annual general meeting;
• that a paid press announcem
ent giving full details, including the impact on net asset value and earnings per share, w
ill be published at the tim
e of any issue representing, on a cumulative basis w
ithin one year, 5% or m
ore of the number of
shares in issue prior to the issues;
• that the number of shares issued for cash shall not in the aggregate in any one financial year exceed 15%
of the com
pany’s issued shares. The number of shares w
hich may be issued for cash shall be based on the num
ber of shares in issue at the date of the application, less any shares issued by the com
pany during the current financial year, provided that any shares to be issued for cash pursuant to a rights issue (announced and irrevocable and underw
ritten) or acquisition (concluded up to the date of application) may be included as though they w
ere shares in issue at the date of application;
• that, in determ
ining the price at which an issue of shares w
ill be made in term
s of this authority, the maxim
um discount
permitted w
ill be 10% of the average ruling price of the shares in question, as determ
ined over the 30 days prior to the date the price of the issue is determ
ined or agreed by the directors of the company;
072
Faritec Hold
ings Limited
Annual R
eport 2007
• that the shares m
ust be issued to public shareholders as defined in the listing requirements and not to related
parties; and
• a 75% m
ajority of votes is required for this resolution to be approved.8 To reappoint the auditors, Charles Orbach &
Company, for the ensuing year.
9 To transact any other business as may be transacted at an annual general m
eeting.
CERTIFICATED SH
AREH
OLD
ERS AN
D D
EMATERIA
LISED SH
AREH
OLD
ERS WITH
“O
WN
NA
ME” REG
ISTRATION
A shareholder of the company entitled to attend and vote at the annual general m
eeting of shareholders is entitled to appoint one or m
ore proxies (who need not be a shareholder of the com
pany) to attend, vote and speak in his/her stead. In order to be valid com
pleted forms of proxy m
ust be lodged at the registered office of the company or the transfer secretaries, so as
to be received by no later than 08:30 on Wednesday, 12 Decem
ber 2007.
On a show of hands, every shareholder of the com
pany present in person or represented by proxy shall have one vote only. On a poll, every shareholder of the com
pany present in person or represented by proxy shall have one vote for every share held in the com
pany by such shareholder.
DEM
ATERIALISED
SHA
REHO
LDERS, O
THER TH
AN
THO
SE WITH
“OW
N N
AM
E” REGISTRATIO
NFaritec Holdings Lim
ited shareholders who have dem
aterialised their Faritec Holdings Limited shares through a Central
Securities Depository Participant (“CSDP”) or broker, other than those with “ow
n name” registration, and w
ho wish to attend
the annual general meeting, m
ust instruct their CSDP or broker to issue them w
ith the necessary authority to attend.
Should Faritec Holdings Limited shareholders w
ho have dematerialised their shares, other than those w
ith “own nam
e” registration, w
ish to vote by way of proxy, they m
ust provide their CSDP or broker with their voting instructions in the m
anner and cut-off tim
e stipulated in terms of the custody agreem
ent entered into between them
and their CSDP or broker.
A proxy need not be a shareholder of the company.
In respect of dematerialised shares, it is im
portant to ensure that the person or entity (such as a nominee) w
hose name
has been entered into the relevant subregister maintained by a CSDP com
pletes the form of proxy in term
s of which he/she
appoints a proxy to vote at the annual general meeting of shareholders in accordance w
ith the instructions received from
dematerialised beneficial holders.
By order of the Board
CN D
enshamCom
pany Secretary
14 Novem
ber 2007
NOTIC
E T
O T
HE A
NNUAL G
ENERAL M
EETIN
Gcontinued
073
Faritec Hold
ings Limited
Annual R
eport 2007
FORM
OF P
ROXY
For use by certificated and own-nam
e dematerialised shareholders of Faritec (”ordinary shareholders”) for the ninth annual
general meeting of Faritec to be held at 08:30 on Thursday, 13 Decem
ber 2007 (”annual general meeting”) in the boardroom
, Faritec House, 150 Kelvin Drive, W
oodmead, Sandton.
I/We
(name(s) in block letters)
of (address)
being registered holder(s) of ordinary shares in Faritec, appoint (see note 1):
1 or failing him
2 or failing him
3 or failing him
,
the Chairman of the annual general m
eeting as my/our proxy to act for m
e/us and on my/our behalf at the annual general
meeting w
hich will be held for the purpose of considering, and if deem
ed fit, passing, with or w
ithout modification,
the resolutions to be proposed at the meeting and at any adjournm
ent thereof, and to vote for and/or against the resolutions and/or abstain from
voting in respect of the ordinary shares registered to my/our nam
e(s), in accordance with the follow
ing instructions (see note 6).
Special resolution
No 1 General authority for repurchase of shares
Ordinary resolutions
No 1 Approval of financial statem
ents
No 2 Approval of directors’ em
oluments
No 3 Re-election of director – CR Jardine
No 4 Re-election of director – LN
Noxaka
No 5 Re-election of director – SM
Nyem
be
No 6 Re-election of director – SM
Tomlinson
No 7 Authority to issue shares for cash
No 8 Reappointm
ent of auditors
No 9 General
Signed at
on
2007
Signature
Assisted by (w
here applicable) Please read the notes on the reverse.
In favour of
Against
Abstain from
resolution
resolution resolution
Faritec Holdings Limited
Incorporated in the Republic of South AfricaRegistration num
ber 1998/004872/06Share code FRT ISIN
ZAE000016838
074
Faritec Hold
ings Limited
Annual R
eport 2007
1 The follow
ing categories of shareholders are entitled to complete a proxy form
: a) certificated shareholders w
hose names appear on the com
pany’s register;
b) own nam
e electronic dematerialised shareholders w
hose names appear on the sub-register of a Central Securities
Depository Participant (“CSDP”);
c) CSDPs with nom
inee accounts; d) brokers w
ith nominee accounts.
2 Certificated shareholders w
ishing to attend the annual general meeting have to ensure beforehand w
ith the transfer secretaries of the com
pany that their shares are registered in their name.
3 Beneficial shareholders w
hose shares are not registered in their own nam
e but in the name of another, for exam
ple, a nom
inee, may not com
plete a proxy form, unless a proxy is issued to them
by the registered shareholder and should contact the registered shareholder for assistance in issuing instruction on voting their shares, or obtaining a proxy to attend the m
eeting.
4 All beneficial shareholders w
ho have dematerialised their shares through a CSDP or broker, other than those in “ow
n nam
e”, must provide the CSDP or broker w
ith their voting instruction. Alternatively, should such a shareholder wish
to attend the meeting in person, in term
s of the custody agreement w
ith the CSDP or broker, such shareholders must
request the CSDP or broker to provide the shareholder with a letter of representation.
5 An ordinary shareholder is entitled to appoint, by inserting the nam
e(s) of one or more proxies (of w
hom none need to
be a mem
ber), in the space provided, with or w
ithout deleting the words “the Chairm
an of the annual general meeting”,
to attend, speak and vote at the annual general meeting in his stead. In the event that no nam
es are indicated, the proxy shall be exercised by the Chairm
an of the annual general meeting.
6 An ordinary shareholder’s instructions to the proxy m
ust be indicated by the insertion of the relevant number of votes
exercisable by that ordinary shareholder in the appropriate box(es) provided.
7 The com
pletion and lodging of this form of proxy shall in no w
ay preclude the shareholder from attending, speaking and
voting in person at the annual general meeting to the exclusion of any proxy appointed in term
s hereof.
8 Any alteration or correction m
ade to this form of proxy m
ust be signed in full and not initialled by all the signatories.
9 Docum
entary evidence establishing the authority of a person signing this form of proxy in a representative capacity
must be attached to this form
of proxy, unless previously recorded by the company’s transfer secretaries or w
aived by the Chairm
an of the annual general meeting.
10 W
here there are joint holders of any shares, only that holder whose nam
e appears first in the register in respect of such shares need sign this form
of proxy.
11 A m
inor must be assisted by his/her parent or guardian unless the relevant docum
entation establishing his/her legal capacity has been produced or has been registered by the com
pany’s transfer secretary.
12 Proxy form
s must be lodged at the registered office of the com
pany or posted to:
Computershare Investor Services 2004 (Pty) Lim
ited, 17 Marshall Street, M
arshalltown, PO Box 61051, M
arshalltown,
2107, to be received not later than 48 hours before the time fixed for the annual general m
eeting (excluding Saturday, Sunday and public holidays).
NOTES T
O T
HE F
ORM
OF P
ROXY
