| Tue 27 May 2008, 16:11 | | ATR - ACTOWERS - Audited Condensed Financial Results For The Year Ended 29 |
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ATR
ATR
ATR - ACTOWERS - Audited Condensed Financial Results For The Year Ended 29
February 2008 Including The Revised Reviewed Interim Results For The
Six Months Ended 31 August 2007
Africa Cellular Towers Limited
(Incorporated in the Republic of South Africa)
(Registration number 2000/027374/06)
(JSE code: ATR & ISIN: ZAE000088084)
("ACTOWERS" or "the company" or "the group")
Highlights
Revenue up 66% to R327 million
Gross profit up 99% to R122 million
Headline earnings up 45% to R45 million
Headline earnings per share up 10% to 17.7 cents
Net tangible asset value per share up 18% to 64.6 cents
Audited Condensed Financial Results For The Year Ended 29
February 2008 Including The Revised Reviewed Interim Results For The Six
Months Ended 31 August 2007
Condensed Group Income Statements
Audited Audited Revised (2) Unaudited
12 months 12 months reviewed 6 months
February February 6 months August
2008 2007 August 2006
R`000 R`000 2007 R`000
R`000
Revenue 326 572 197 251 176 924 71 241
Gross profit 122 353 61 555 56 903 23 265
Other income 14 868 11 610 1 232 7 152
Operating costs (70 740) (29 364) (18 659) (12 149)
Earnings before 66 481 43 801 39 476 18 268
interest, taxation,
depreciation and
amortisation
("EBITDA")
Depreciation (2 216) (1 125) (1 234) (404)
Profit before 64 265 42 676 38 242 17 864
interest and taxation
Net interest received 5 156 2 439 977 2 706
Profit before 69 421 45 115 39 219 20 570
taxation
Taxation (24 396) (13 650) (11 374) (5 965)
Earnings attributable 45 025 31 465 27 845 14 605
to ordinary
shareholders
Reconciliation of
headline earnings:
Earnings attributable 45 025 31 465 27 845 14 605
to ordinary
shareholders
Adjusted for:
Profit on sale of (13) (385) - -
property, plant and
equipment
Headline earnings 45 012 31 080 27 845 14 605
attributable to
ordinary shareholders
Weighted average 254 658 193 425 253 772 180 000
shares in issue on
which earnings per
share are based (1)
(`000)
Fully diluted 260 195 196 329 257 885 180 000
weighted average
shares in issue
(`000)
Earnings per share 17.7 16.3 11.0 8.1
(cents)
Headline earnings per 17.7 16.1 11.0 8.1
share (cents)
Fully diluted 17.3 16.0 10.8 8.1
earnings per share
(cents)
Fully diluted 17.3 15.8 10.8 8.1
headline earnings per
share (cents)
Notes:
(1) The weighted average number of shares in issue includes the weighted
average number of shares issued in terms of the JK Shelters (Pty)
Limited transaction ("JK Shelters transaction") with effect from 1
March 2007. The 23 772 083 shares issued in terms of the JK Shelters
transaction were listed by the JSE Limited ("JSE") on 18 October 2007.
(2) The previous interim results issued on 9 November 2007 are being
withdrawn and the revised interims are presented above. These changes
were effected on the insistence by the JSE, on advice received from
the GAAP Monitoring Panel ("GMP"). The effect of the changes were to
account for the notional interest charge of approximately R997 000
based on the cash payment for the JK Shelters transaction and the
related effect on taxation calculations. This resulted in a reduction
of earnings and headline earnings per share from 11.3 cents per share
to 11.0 cents per share and fully diluted earnings and headline
earnings per share from 11.1 cents per share to 10.8 cents per share.
Refer to the "Restatement of the interim results" paragraph below for
details of the amendments to the interim results.
Condensed Group Balance Sheets
Audited Audited Revised
February 2008 February 2007 reviewed
R`000 R`000 August
2007
R`000
ASSETS
Non-current assets 63 899 11 834 60 211
Property, plant and 27 932 10 882 26 859
equipment
Goodwill 33 227 - 33 227
Other financial assets 1 023 952 70
Deferred taxation 1 717 - 55
Current assets 237 202 155 855 236 015
Inventories 75 388 41 353 82 129
Other financial assets - 720 4 738
Current taxation - 1 708 -
receivable
Trade and other 155 481 51 195 129 560
receivables
Cash and cash 6 333 60 879 19 588
equivalents
Total assets 301 101 167 689 296 226
EQUITY AND LIABILITIES
Equity and liabilities
Equity and reserves 205 503 125 896 186 677
Share capital 82 467 47 882 80 790
Reserves 63 66 94
Retained earnings 122 973 77 948 105 793
Non-current 12 082 7 479 17 749
liabilities
Installment sale 12 082 7 052 15 660
obligation
Deferred taxation - 427 2 089
Current liabilities 83 516 34 314 91 800
Loans from vendors 309 193 8 940
Current taxation 20 397 - 7 710
payable
Current portion of 3 182 2 426 2 748
long-term liabilities
Trade and other 53 372 31 695 72 402
payables
Bank overdraft 6 256 - -
Total equity and 301 101 167 689 296 226
liabilities
Shares in issue at 266 820 230 000 253 772(1)
period end (`000)
Net asset value per 77.0 54.7 73.8
share (cents)
Net tangible asset 64.6 54.7 60.3
value per share
(cents)
Notes:
(1) The 23 772 083 shares issued in terms of the JK Shelters transaction
were listed by the JSE Limited ("JSE") on 18 October 2007. These
shares were included in the Shares in issue as from 1 March 2007.
Condensed Group Statements of Changes in Equity
Share Foreign Revaluation Retained Total
capital currency reserve earnings equity
and translation R`000 R`000 R`000
premium reserve
R`000 R`000
Balance 1 March - - 14 46 483 46 497
2006
Changes in 23 23
equity:
Share capital
issued
Share premium 47 229 47 229
Share-based 630 630
payment reserve
Profit for the 31 465 31 465
year
Fair value 52 52
adjustment to
investments
Balance 28 47 882 - 66 77 948 125 896
February 2007
Changes in 2 2
equity:
Share capital
issued
Share premium 32 090 32 090
Share-based 816 816
payment reserve
Profit for the 27 845 27 845
first six months
Fair value 28 28
adjustment to
investments
Balance at 31 80 790 - 94 105 793 186 677
August 2007
Changes in
equity
Share premium 24 24
Share based 1 653 1 653
payment reserve
Fair value 36 36
adjustment to
investment
Currency (67) (67)
translation
reserve
Profit for the 17 180 17 180
second six
months
Balance at 29 82 467 130 122 973 205 503
February 2008 (67)
Condensed Group Cash Flow Statements
Audited Audited Revised
12 months 12 months reviewed
February February 6 months
2008 2007 August
R`000 R`000 2007
R`000
Cash flows from operating (40 055) 10 128 (37 138)
activities
Cash flows from investing (25 385) 2 172 (17 730)
activities
Cash flows from financing 4 638 48 715 13 577
activities
Change in cash and cash (60 802) 61 015 (41 291)
equivalents
Cash and cash equivalents at 60 879 (136) 60 879
beginning of year
Cash and cash equivalents at 77 60 879 19 588
end of year
Segmental Reporting
Audited Audited Revised Unaudited
12 months 12 months reviewed 6 months
February February 6 months August
2008 2007 August 2006
R`000 R`000 2007 R`000
R`000
Gross revenue
Cellular towers 285 575 197 251 148 843 71 241
Equipment shelters 58 471 - 32 203 -
Inter segment (17 474) - (4 122) -
eliminations
326 572 197 251 176 924 71 241
Profit before
interest and taxation
Cellular towers 67 534 42 676 30 501 17 864
Equipment shelters 14 205 - 11 863 -
Inter segment (17 474) - (4 122) -
eliminations
64 265 42 676 38 242 17 684
Depreciation
Cellular towers (2 002) (1 125) (1 137) (404)
Equipment shelters (214) - (97) -
(2 216) (1 125) (1 234) (404)
OVERVIEW
The year under review has been both an exciting and challenging year. The
group increased its revenue by 66% as a result of inter alia, the inclusion
of JK Shelters and the buoyant trading conditions in the overall cellular
industry in Africa and other emerging markets, increased demand for its
products, as well as geographical expansion into new regions such as
Madagascar, Congo (Brazzaville) and Uganda.
The conflict in inter alia, Chad in the earlier part of 2008, resulted in
delays in the completion of contracts before year end, and led to a
significant increase in working capital requirements, compared to the
previous financial year. Some of the group`s debtors have been slow in
settling outstanding amounts, and the group has made provisions against
these accounts in the current financial year, which had a negative impact
on an otherwise excellent performance by the group. Management has
introduced measures to reduce its exposure to the slow paying customers,
both in collecting outstanding amounts and with regard to entering into new
contracts with these customers.
ACTOWERS has furthermore invested in infrastructure and personnel to ensure
that it has the capacity and capabilities to meet the increased demand for
its products and services. Subsidiary companies have been established in
Congo (Brazzaville), Democratic Republic of Congo, Madagascar and Uganda to
allow ACTOWERS to expand its business, in accordance with the requirements
of these countries.
The group continued to take advantage of buoyant trading conditions in the
overall cellular industry in Africa and other emerging markets. For the
2009 financial year to date, the group has already received confirmed
orders from its customers well in excess of the previous comparable period.
In addition the supply of cellular towers without related installation
increased significantly during the 2008 year. The group also increased its
manufacturing capacity. Sales of components increased substantially,
especially to Nigeria.
The electrical pylons business has made significant progress in realising
its objectives to enter the market as a supplier of transmission and
distribution tower structures as well as becoming a recognised power line
construction company. This will position the group to take a share of the
R39 billion that has been earmarked by Eskom for transmission and
distribution projects over the next five years.
FINANCIAL RESULTS
Revenue of ACTOWERS increased by 66% from R197 million in 2007 to R327
million during the 2008 year end. These strong results are inter alia, due
to the inclusion of the JK Shelters transaction and an increase in the
manufacturing capacity of the production facilities which led to an
increase in product sales. Strong demand continued for the group`s
products and new clients were secured during the 2008 year end.
Gross profit increased to R122 million (2007: R62 million) by 99%, with
gross profit margins increasing from 31,2% to 37,5% in 2008. The increase
can mainly be attributable to a number of factors, the most important
being:
- the incorporation of subsidiaries in the various countries referred to
earlier, and the recordal of operations as separate entities, which
are consolidated into group results (prior to the incorporation of the
subsidiaries, the operations and related costs were recorded as
contracts within ACTOWERS), and
- an increase in operating efficiencies.
EBITDA increased by 52% to R66 million (2007: R44 million) for the 2008
year end. EBITDA margins decreased to 20% (2007: 22%) mainly as a result
of an increase in operating costs, due to increased spending on increased
capacity and staff to meet the increased demand, incorporation of the
subsidiaries, referred to above, and an increase in the provision for bad
debts to R15.6 million (2007: R1.6 million). Other income mainly relates
to foreign exchange gains.
Trade debtors at 29 February 2008 of R155 million was significantly higher
than forecast due to factors such as conflict in certain of the countries
and difficulty in obtaining final acceptance certificates in other
countries. Inventory levels increased to R75 million from R41 million in
2007. Trade and other payables also increased from R32 million in 2007 to
R53 million in 2008. These increases were mainly attributable to the delay
in finalising projects in African countries and the increase in steel
purchases before the steel price increases took effect on 1 March 2008.
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The condensed financial statements comprise a consolidated balance sheet at
29 February 2008, a consolidated income statement, consolidated statement
of changes in equity and summarised consolidated cash flow statement for
the year ended 29 February 2008. The condensed financial statements have
been prepared in accordance with the recognition and measurement criteria
of International Financial Reporting Standards ("IFRS") and the
presentation and disclosure requirements of IAS 34, Interim Financial
Reporting, JSE Listings Requirements and South African Companies Act.
The accounting policies applied for the year are consistent with those of
the prior year.
Basis of measurement
The condensed financial statements have been prepared on the historical
cost basis except for certain financial instruments measured at fair value.
AUDITED RESULTS
The auditors, Nexia HBLT Chartered Accountants (East Rand) Inc, have
audited these results (with the exception of the interim results which were
reviewed) and their unmodified audit opinion is available for inspection at
the company`s registered office.
BUSINESS COMBINATIONS
ACTOWERS acquired 100% of the share capital of JK Shelters with effect from
1 March 2007 for an amount of R45.8 million, paid in cash of R13.8 million
(before a notional interest adjustment of approximately R997 000 for the
six months ended 31 August 2007, and R1.4 million for the year ended 29
February 2008), and the issue of 23.8 million ordinary shares at a price of
R1.35 per share (which was the fair value as at 12 February 2007, the day
the Heads of Agreement was entered into).
That entity`s revenue, included in the results presented was R58.5 million
before inter group sales of R17,5 million and it generated a profit after
tax of R10.9 million. The goodwill acquired on the acquisition, after an
adjustment for the finance cost portion on the deferred payment, was R33.2
million. The results of JK Shelters have been shown separately as a new
operating segment in the segmental reporting, being "Equipment shelters".
The following assets and liabilities (at fair value) were acquired (R`000):
Non-current assets 1 472
Current assets 15 953
Non-current liabilities (960)
Current liabilities (5 255)
The goodwill was based on inter alia, the market share in Africa, synergy
to the group, growth opportunities, production capacity and strong client
base.
RESTATEMENT OF THE INTERIM RESULTS
Following a review by the GMP of the interim results of ACTOWERS for the
six months ended 31 August 2007, the JSE instructed the company to re-issue
the interim results in compliance with the requirements of IFRS. The
restatement of the interim results stems mainly from the disclosure
requirements for business combinations, to account for the acquisition of
JK Shelters. Payment of the purchase consideration was only affected during
October 2007, and goodwill therefore had to be adjusted by an amount of
approximately R997 000, transferred to interest paid, as required by IFRS.
Set out below are the details of the various line items of the interim
results affected by the required restatement.
Income statement items Before After
Net interest received (1) 1 974 977
Tax 11 663 11 374
Earnings attributable to ordinary 28 553 27 845
shareholders 11.3 11.0
Earnings per share (cents) 11.3 11.0
Headline earnings per share (cents) 11.1 10.8
Fully diluted earnings per share (cents) 11.1 10.8
Fully diluted headline earnings per share
(cents)
Re-allocation from goodwill to net interest
received.
The net effect of the amendment was to
reduce earnings and headline earnings per
share by 2.65%, and fully diluted earnings
and headline earnings per share by 2.70%. 34 463 33 466
9 999 9 710
Balance sheet items 106 501 105 793
73.8 73 6
Goodwill (1) 60.3 60.4
Current tax payable
Retained income
Net asset value per share (cents) (50 819) (17 730)
Net tangible asset value per share (cents) 46 666 13 577
Cash flow statement(2)
Cash flow from investing activities
Cash flow from financing activities
The settlement of a portion of the purchase
consideration was by way of the issue of
ordinary shares in ACTOWERS which, in terms
of the requirements of IAS 7, should not be
included in the cash flow statement. The
above amendments are to reflect the correct
treatment of the above issue of shares in
the interim results.
PROSPECTS
ACTOWERS is extending its product offering into the manufacturing of
electrical pylons for the electrical transmission industry. An order for
the first proto-type pylon was manufactured and testing was successful.
Eskom recently stated that approximately R39 billion has been earmarked for
transmission and distribution projects over the next five years. ACTOWERS
has employed highly qualified personnel with years of experience in the
electrical pylon industry in order to provide high standard pylons to Eskom
and other power supply companies in Africa.
ACTOWERS currently processes approximately 1 500 tons of steel per month.
With the current strong order book and the new electrical pylon venture
embarked upon, it is envisaged that ACTOWERS will increase production
output to approximately 3 000 tons of steel per month in 12 to 15 months`
time.
The group continues to experience buoyant trading conditions in its markets
across Africa and confirmed orders to date substantially exceeds that of
the comparable period of the previous financial year. ACTOWERS is
furthermore considering various acquisition opportunities to expand its
business into related industries.
ACTOWERS is fully committed to the transformation process required by Broad
Based Black Economic Empowerment ("BBBEE") and will over the short to
medium term increase the BEE ownership of the group. The company has also
embarked on the process of BEE accreditation and will restructure
accordingly.
The galvanizing bath and the galvanizing plant that was purchased during
the year will be replaced by a bigger facility which will be able to handle
the increased planned production output of the cellular towers and to
accommodate the galvanizing of the electrical pylon components. After the
installation and commissioning of three new CNC machines during September
and October 2007 ACTOWERS has a total of eleven fully automated CNC
machines which brings critical mass to the manufacturing plant.
The re-zoning of the Ghana Free Zone is complete and infrastructure
services such as roads, water and electricity was also completed in the
first quarter of 2008. ACTOWERS is in the process of opening a storage
facility in the Ghana Free Zone and is expected to occupy the premises by
the third quarter of 2008. JK Shelters is considering establishing a
manufacturing facility on the premises in the near future.
SHARE CAPITAL
The company issued 23 772 083 ordinary shares at R1.35 in terms of the JK
Shelters acquisition. The group`s employees acquired 1 400 000 ordinary
shares in the company through the share incentive trust on 25 October 2007.
DIVIDEND POLICY
It is the intention of the company to reconsider its dividend policy once
the group has achieved mature growth and periodically thereafter to take
account of prevailing circumstances and future cash requirements.
Initially all earnings generated by the group will be utilised to fund
future growth and development.
STATEMENT ON GOING CONCERN
The condensed financial statements have been prepared on the going-concern
basis since the directors have every reason to believe that the company has
adequate resources in place to continue in operation for the foreseeable
future.
On behalf of the Board
C J J Kruger J de Villiers
Managing Director Financial Director
27 May 2008
CORPORATE INFORMATION
Non executive director: Dr R R Richards
Executive directors: C J J Kruger (Chairman and Managing Director); D van
Staden; J de Villiers
Registration number: 2000/027374/06
Registered address: 10 Tennyson Drive, Tulisa Park, Johannesburg
Postal address: PO Box 1078, Jukskei Park, 2153
Company secretary: Premium Corporate Consulting Services (Pty) Limited
Telephone: (011) 907 7364
Facsimile: (011) 869 9107
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Vunani Corporate Finance
These results and an overview of ACTOWERS are available at
www.africacellular.co.za.
Date: 27/05/2008 16:11:00 Produced by the JSE SENS Department.
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