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CEL
CEL
CEL - Celcom Group Limited - Unaudited provisional results for the financial
year ended 30 June 2007
CELCOM GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/021219/06)
JSE code: CEL ISIN: ZAE000087490
("Celcom Group" or "the company" or "the group")
UNAUDITED PROVISIONAL RESULTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007
GROUP INCOME STATEMENT
Provisional Audited
Financial Year ended
year ended
30 June 31 March
2007 2006
R`000 R`000
Revenue 694,000 205,867
Gross profit 68,668 28,016
Operating profit before financing income 10,665 9,399
and amortisation of intangibles
Amortisation of intangibles -5,517 0
Net interest received 406 88
Profit before tax 5,555 9,487
Income tax expense -3,171 -2,564
Profit after taxation 2,384 6,923
Number of shares (000`s)
- Issued 204,609 131,500
- Weighted 172,486 131,500
- Diluted 172,809 131,500
Earnings per share (cents) 1.38 5.26
Headline earnings per share (cents) 4.58 5.26
Diluted headline earnings per share (cents) 4.57 5.26
Calculation of headline earnings
Net profit attributable to shareholders 2,384 6,923
Adjusted for:
Amortisation of intangibles 5,517 0
Headline earnings 7,901 6,923
GROUP CASH FLOW
Provisional Audited
Financial Year ended
year ended
30 June 31 March
2007 2006
R`000 R`000
Net cash flows from operations 29,200 11,034
Net cash flows from investing activities -60,540 -1,536
Net cash flows from financing activities 47,190 -5,495
Net increase in cash resources 15,850 4,003
Cash resources at beginning of period 4,668 665
Cash resources at end of period 20,518 4,668
GROUP BALANCE SHEET
Provisional Audited
at 30 June at 31 March
2007 2006
R`000 R`000
ASSETS
Non-current assets 61,011 5,361
Property, plant and equipment 2,421 1,995
Intangible assets 31,909 1,020
Goodwill 25,096 2,184
Deferred taxation 1,585 162
Current assets 91,452 46,762
Inventory 30,323 15,935
Trade and other receivables 36,420 19,903
Cash and cash equivalents 23,305 10,688
Prepaid taxation 1,404 236
Total assets 152,463 52,123
EQUITY AND LIABILITIES
Equity
Issued capital 54,184 6,801
Share-based compensation reserve 53 -
Retained earnings 17,342 14,958
Current liabilities 80,884 30,364
Trade and other payables 72,423 23,500
Interest-bearing loans and borrowings 316 844
Bank overdraft 2,787 6,020
Taxation payable 5,358 0
Total equity and liabilities 152,463 52,123
Net asset value per share (cents) 34.98 16.55
Net tangible asset value per share (cents) 7.12 14.11
GROUP STATEMENT OF
CHANGES IN EQUITY
For the financial year
ended 30 June 2007
Issued Share Compensation Accumulated Total
shares premium reserve profit
R`000 R`000 R`000 R`000 R`000
Balance at 31 March 2005 1 6,800 - 8,035 14,836
Net profit for the year - - - 6,923 6,923
Balance at 31 March 2006 1 6,800 - 14,958 21,759
Issue of shares at a 1 51,296 - - 51,297
premium
Cost of listing - -3,914 - - -3,914
Profit for the financial - - 2,384 2,384
year ending 30 June 2007 -
Share-based payment - - 53 - 53
Balance at 30 June 2007 2 54,182 53 17,342 71,759
COMMENTS
INTRODUCTION
Celcom Group is reporting provisional results for the period
ended 30 June 2007 due to difficulties in finalisation of
certain claims in Celcom Group`s retail outlet stores.
Audited results for the period will be published as soon as
these are available.
Celcom Group has changed its year-end from 31 March to 30
June and consequently is reporting on a 15 month financial
year ending 30 June 2007.
FINANCIAL RESULTS
Celcom Group`s prospectus issued on 13 November 2006 contains
profit forecasts for the period ending 30 June 2007. The
provisional results have not met the forecast for reasons set
out below.
Celcom Group`s cellphone accessories and enhancement
business, Celcom (Pty) Limited ("Celcom"), faced new
challenges in trading conditions in the final months of 2006
and early part of 2007. These include:
- Historically, the preferred model for new contracts was
a bundling of select cellphone accessories with the
handset. Retailers have recently experimented with
bundling lifestyle items such as gaming consoles, DVD
players and vacation vouchers together with handsets.
Celcom has appropriately adapted to this change. In the
first quarter of the 2008 financial year Celcom has
returned to profitability.
- Parallel/grey imports and the supply of counterfeit
cellphone accessories have been particularly prevalent
in the accessories market. As a distributor of original
accessories Celcom does not engage in the distribution
of parallel or counterfeit products and, together with
the network providers, is taking the necessary steps to
limit the impact of the sale of such products going
forward. In addition, the Department of Trade and
Industry has embarked on a campaign to clamp down on
illegal imports.
- The expansion of Celcom`s cellular accessories and
enhancement business into additional African markets
beyond the Southern African region was a material
assumption underlying its forecast performance. Although
management has been actively pursuing this expansion,
its implementation is taking longer than was
anticipated.
The remainder of Celcom Group`s key businesses, specifically
V Cellular (Pty) Limited ("V Cellular") and Virtual Payment
Solutions (Pty) Limited ("VPS"), outperformed their forecast
performance.
Overall, Celcom Group has recorded revenue at 6% below
forecast, earnings after tax at 80% below forecast and
headline earnings at 59% below forecast. In terms of the
trading update published on 11 June 2007 ("the trading
update"), Celcom Group envisaged earnings after tax to be
between 20% and 40% below forecast and headline earnings to
be between 20% and 35% below forecast. The variance to the
trading update resulted from pricing changes by a key
supplier, inventory write-offs, and impairment of certain
acquisition costs where the acquisitions have not yet been
finalised.
COMPARATIVE PERIOD
Revenue from the V Cellular acquisition and significant
growth in VPS was reflected in the growth to 2007. However,
as detailed above and in the trading update, the group faced
changes in trading conditions that resulted in a decline in
its local and export cellphone accessory and hardware
business ("Celcom") revenues.
The group`s gross profit grew 145% from the comparative
period, with the sale of low margin electronic prepaid
vouchers diluting group margins from 14% to 10%. The gross
profit margins were further negatively impacted by the tough
trading conditions referred to above.
Headline earnings increased 14% from the comparative period.
Earnings per share decreased over the comparative period as a
result of the amortisation of goodwill relating to the
acquisition of V Cellular and the factors as described above.
Net cash from operating activities grew by 165% and strong
cash generation was experienced in VPS as a result of its
robust performance. Current assets and liabilities increased
significantly as a result of the V Cellular acquisition and
increased trading activity in VPS.
PROSPECTS
The requisite action with regard to the issues faced by
Celcom has been implemented. Operational improvements in the
last quarter of the 2007 financial year have placed Celcom in
an improved trading position for the 2008 financial year. As
referred to above, Celcom has returned to a profit making
position.
The robust performance of V Cellular and VPS, which have both
out-performed against forecast, is expected to continue as a
result of buoyant customer demand.
Management believes that the level of operating expenditure
in relation to sales is too high, and has identified areas in
which operating costs are being reduced.
Management remains confident that Celcom Group is well
positioned to benefit from growth and new opportunities in
its markets.
DIVIDEND
In line with group policy no dividend has been declared for
the period.
BASIS OF PREPARATION
The provisional results have been compiled in accordance with
International Financial Reporting Standards ("IFRS") and have
been prepared in terms of IAS 34. The accounting policies are
consistent with those adopted in the annual financial
statements for the year ended 31 March 2006. The number of
issued shares shown as at 31 March 2006 has been calculated
in accordance with the requirements of IFRS.
By order of the board
Stefano Brachini Colin Brown
CEO CFO
28 September 2007
Directors:
M Golding (Chairman)*; S Brachini (CEO); C Brown (CFO);
L Brachini (MD); D Rose*; F Sonn*; P Vallet* (*non-
executive)
Registered office: 4 Fifth Avenue
Edenburg
Sandton
2196
(PO Box 2506, Rivonia, 2128)
Transfer secretaries: Computershare Investor Services 2004
(Pty) Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 61763, Marshalltown, 2107)
Company secretary: Probity Business Services (Pty) Limited
Date: 28/09/2007 17:15:03 Produced by the JSE SENS Department.
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