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ATR
ATR
ATR - Africa Cellular Towers Limited - Reviewed Condensed Financial Results for
the six months ended 31 August 2008
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 35% to R239 million
Gross profit up 56% to R89 million
Headline earnings up 32% to R37 million
Headline earnings per share up 31% to 14.4 cents
Net tangible asset value per share up 44% to
87.2 cents
REVIEWED GROUP CONDENSED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2008
Condensed Group Income Statements
Reviewed Reviewed Audited
6 months 6 months 12 months
August August February
2008 2007 2008
R`000 R`000 R`000
Revenue 238 531 176 924 326 572
Cost of sales (149 771) (120 021) (204 986)
Gross profit 88 760 56 903 121 586
Other income 2 827 1 232 14 868
Operating costs
Accommodation and facilities (3 334) (1 744) (3 862)
Administration costs (1) (9 140) (2 023) (25 952)
Employee costs (23 227) (11 819) (30 341)
Production and contract (6 200) (3 072) (9 817)
overheads
Earnings before interest, 49 686 39 476 66 481
taxation, depreciation and
amortisation (EBITDA)
Depreciation (2 241) (1 234) (2 216)
Profit before interest and 47 445 38 242 64 265
taxation
Interest received 16 842 3 326 13 351
Interest paid (9 134) (2 349) (8 195)
Profit before taxation 55 153 39 219 69 421
Taxation (18 461) (11 374) (24 396)
Earnings attributable to 36 692 27 845 45 025
ordinary shareholders
Reconciliation of headline
earnings:
Earnings attributable to 36 692 27 845 45 025
ordinary shareholders
Adjusted for:
Profit on sale of property, - - (13)
plant and equipment
Headline earnings 36 692 27 845 45 012
attributable to ordinary
shareholders
Weighted average shares in 253 928 253 772 254 658
issue on which earnings per
share are based (`000)
Fully diluted weighted 261 055 257 885 260 195
average shares in issue
(`000)
Earnings per share (cents) 14.4 11.0 17.7
Headline earnings per share 14.4 11.0 17.7
(cents)
Fully diluted earnings per 14.1 10.8 17.3
share (cents)
Fully diluted headline 14.1 10.8 17.3
earnings per share (cents)
Note:
The February 2008 administration costs includes an additional
impairment against debtors of R14 million. This impairment was
not reversed during the current reporting period.
Condensed Group Balance Sheets
Reviewed Reviewed Audited
August August February
2008 2007 2008
R`000 R`000 R`000
ASSETS
Non-current assets 72 272 60 211 63 899
Property, plant and equipment 35 713 26 859 27 877
Goodwill 33 227 33 227 33 227
Intangible assets 522 - 55
Other financial assets 1 093 70 1 023
Deferred taxation 1 717 55 1 717
Current assets 348 613 236 015 237 202
Inventories 119 668 82 129 75 388
Other financial assets - 4 738 -
Trade and other receivables 177 902 129 560 155 481
Cash and cash equivalents 51 043 19 588 6 333
Total assets 420 885 296 226 301 101
EQUITY AND LIABILITIES
Equity and reserves 263 368 186 677 205 503
Share capital 103 591 80 790 82 467
Reserves 112 94 63
Retained earnings 159 665 105 793 122 973
Non-current liabilities 17 144 17 749 12 082
Instalment sale obligation 11 504 15 660 12 082
Mortgage bond 5 640 - -
Deferred taxation - 2 089 -
Current liabilities 140 373 91 800 83 516
Loans from vendors 400 8 940 309
Current taxation payable 16 247 7 710 20 397
Current portion of instalment 3 741 2 748 3 182
sale obligation
Trade and other payables 119 094 72 402 53 372
Current portion of mortgage 891 - -
bond
Bank overdraft - - 6 256
Total equity and liabilities 420 885 296 226 301 101
Capital commitments 8 575 - -
Shares in issue at period end 263 322 253 772 253 772
(`000) (adjusted for treasury
shares)
Shares in issue at period end 276 722 265 422 266 822
(`000)
Net asset value per share 100.0 73.6 81.0
(cents)
Net tangible asset value per 87.2 60.5 67.9
share (cents)
Condensed Group Statements of Changes in Equity
Reviewed Reviewed Audited
August August February
2008 2007 2008
R`000 R`000 R`000
Balance at beginning of 205 503 125 896 125 896
period
Net profit for the period 36 692 27 845 45 025
Revaluation reserve 27 28 64
Foreign currency reserve 22 - (66)
Share capital and premium 21 124 32 908 34 584
Balance at end of period 263 368 186 677 205 503
Condensed Group Cash Flow Statements
Reviewed Reviewed Audited
6 months 6 months 12 months
August August February
2008 2007 2008
R`000 R`000 R`000
Cash flows from operating 34 994 (37 138) (40 055)
activities
Cash flows from investing (2 623) (17 730) (25 385)
activities
Cash flows from financing 18 595 13 577 4 638
activities
Change in cash and cash 50 966 (41 291) (60 802)
equivalents
Cash and cash equivalents at 77 60 879 60 879
beginning of period
Cash and cash equivalents at 51 043 19 588 77
end of period
Segmental Reporting
Reviewed Reviewed Audited
6 months 6 months 12 months
August August February
2008 2007 2008
R`000 R`000 R`000
Gross revenue
Cellular towers 218 225 148 843 285 575
Equipment shelters 37 667 32 203 58 471
Power lines 3 050 - -
Inter-segment eliminations (20 411) (4 122) (17 474)
238 531 176 924 326 572
Profit before interest and
taxation
Cellular towers 39 494 30 501 67 534
Equipment shelters 9 595 11 863 14 205
Power lines (1 545) - -
Inter-segment eliminations (99) (4 122) (17 474)
47 445 38 242 64 265
Depreciation
Cellular towers (2 084) (1 137) (2 002)
Equipment shelters (123) (97) (214)
Power lines (34) - -
(2 241) (1 234) (2 216)
Total assets
Cellular towers 444 682 284 574 276 476
Equipment shelters 48 824 27 878 34 943
Power lines 2 528 - -
Eliminations (75 149) (16 226) (10 318)
420 885 296 226 301 101
OVERVIEW
The directors of ACTOWERS are pleased to present the reviewed
interim financial results for the six months ended 31 August
2008 (the interim period). The interim period has been
characterised by buoyant market conditions in both the
Cellular towers and the Equipment shelters divisions. The
group increased its revenue by 35% as a result of the
continued strong demand for cellular towers and shelters in
Africa, as well as the increase in the steel price which led
to an increase in selling prices. The increase in
manufacturing capacity as well as increased efficiencies in
the factory further enhanced the growth of the company. A
contributor to the increase in the group`s gross profit
margins to 37% (2007: 32%) was attributable to the conscious
effort made by the group to secure "supply-only" contracts
where higher margins are achieved.
The Cellular towers division increased its revenue by an
impressive 47% to R218 million (2007: R149 million) on the
back of increased demand from both current and new customers.
Operating margins for this division decreased to 18% (2007:
21%). The decline is directly attributable to higher
provisions made for contract costs in the Congo (Brazzaville)
and increased spending to increase capacity and staff. The
Equipment shelters division increased its revenue by 17% to
R38 million (2007: R32 million). This division achieved an
operating profit margin of 26%.
Although only recently established, the Power lines division
recorded revenue of R3 million for the interim period. This
division 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 and installation company.
Significant establishment costs and capital expenditure have
been incurred to position this division as a major player in
this industry and stringing equipment to the value of R9
million has been budgeted for in the 2009 financial year. The
Power lines division achieved an important milestone during
the interim period through the manufacturing and installation
of towers and the award of its first transmission line
construction contract as the main contractor. This
construction contract commenced in October 2008 and completion
is expected to be in April 2009. The award of future
contracts in the South African market will be dependent on the
group increasing its Broad Based Black Economic Empowerment
(BBBEE) equity ownership levels and its BBBEE accreditation
over the short to medium term. Shareholders will be advised
once an agreement has been reached with a potential BBBEE
shareholder (refer cautionary announcement issued 29 October
2008).
ACTOWERS continues to invest in infrastructure and personnel
to ensure that it has the capacity and capabilities to meet
the increased demand for its products and services. New
subsidiary companies have been established, during the interim
period, in Ghana and Tanzania.
FINANCIAL RESULTS
Revenue of ACTOWERS increased 35% during the interim period to
R239 million (2007: R177 million) as a result of the continued
strong demand for the group`s products and the introduction of
new customers. Gross profit increased by 56% to R89 million
(2007: R57 million), with gross profit margins increasing to
37% (2007: 32%) as a result of an increase in steel prices and
increased efficiencies achieved in the manufacturing facility.
EBITDA increased by 26% to R50 million (2007: R39 million).
EBITDA margins decreased to 21% (2007: 22%) mainly as a result
of an increase in operating costs, due to increased spending
to increase capacity and staff to meet the increase in demand
and increased costs to position and align the company for the
electrical transmission industry.
The group has had some success in lowering its trade debtor
days` from 167 days as at 29 February 2008 to 129 days as at
31 August 2008. Certain of the long outstanding debtors were
collected during the interim period and the group is actively
collecting the remaining long outstanding amounts. Provisions
against these debtors in the previous financial year have been
maintained at the same level, despite a reduction in debtors`
days. The measures introduced by management to reduce its
exposure to the slow paying customers, both in collecting
outstanding amounts and with regard to new contracts, have
rendered positive results.
Inventory levels increased to R120 million (2007: R82 million)
mainly as a result of higher steel prices and an increase in
finished goods to R58 million (February 2008: R25 million) of
which a significant portion was shipped early in September
2008. The company has also experienced delays in the
completion of a contract in the Congo (Brazzaville), which
increased work in progress, compared to the previous financial
period. The increase in trade payables to R119 million (2007:
R72 million) is also as a direct result of the increase in the
steel prices and the increase in growth experienced by the
group.
During the interim period the group acquired three adjacent
stands in the Midvaal Municipality area, close to the R59
highway for a consideration of R7 million. These stands are
being developed and are earmarked to house the galvanizing
plant and will also be utilised as a packing area for towers
after galvanizing prior to shipment.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
Statement of compliance
The condensed consolidated interim financial statements for
the six months ended 31 August 2008 have been prepared in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS) and the
presentation and disclosure requirements of International
Accounting Standards 34, Interim Financial Reporting, the
Listings Requirements of the JSE Limited and the Companies
Act, 61 of 1973 as amended.
The accounting policies used to prepare these interim
financial statements are consistent with those applied in the
prior interim period and at previous year-end, except where
the group has adopted new or revised IFRS standards.
Basis of measurement
The condensed interim financial statements have been prepared
on the historical cost basis except for certain financial
instruments measured at fair value.
Segment information
The group elected to adopt IFRS 8 as from 1 March 2008. This
Standard requires disclosure of information in respect of the
group`s operating segments and replaces the requirements to
determine primary (business) and secondary (geographical)
reporting segments of the group. Adoption of this Standard
did not have any effect on the financial position or
performance of the group. The group determined that the
operating segments were the same as the business segments
previously identified under IAS 14 Segment Reporting.
For management purposes and resulting from growth, the group
is organised into business units based on their productions
and services, and has three reportable operating segments:
Cellular towers
Equipment shelters
Power lines
Management monitors the operating results of its business
units separately for the purpose of making decisions about
resource allocation and performance assessment. Group
financing (including finance cost and finance revenue) and
income taxes are managed on a group basis and are not
allocated to operating segments.
Transfer prices between operating segments are on an arm`s
length basis in a manner similar to transactions with third
parties.
REVIEWED RESULTS
The auditors, Nexia HBLT Chartered Accountants (East Rand)
Inc, have reviewed these results for the six months ended 31
August 2008. The unqualified review report is available for
inspection at the company`s registered office.
POST-BALANCE SHEET EVENTS
There have been no significant events subsequent to 31 August
2008 and up to the date of this report.
PROSPECTS
ACTOWERS continues to experience strong demand for its
products and the order book for both Cellular towers and
Equipment shelters remains strong and the company has, to
date, not experienced any decline in its business as a result
of the current global market turmoil.
Environmental approvals are currently being processed in
respect of the stands in the Midvaal Municipality and are
expected to be finalised by the end of May 2009, after which
the building process can commence. The cost savings from its
own galvanizing plant far outweighs the expected capital
outlay of approximately R45 million that ACTOWERS will have to
incur.
ACTOWERS has decided to rent a bond store and establish a
distribution centre in Ghana instead of the establishment of a
manufacturing facility in the Ghana Free Zone, with less
associated risks, achieving the same benefits for the group.
It remains an objective for ACTOWERS to increase production
output to approximately 3 000 tons of steel per month in the
next 8 to 12 months.
ACTOWERS is continuously considering various acquisition
opportunities to expand its business into related industries.
CHANGES TO THE BOARD OF DIRECTORS
Dr Ruben Richards, who served as a non-executive director did
not make himself available for re-election at the Annual
General Meeting and retired in terms of the company`s articles
of association. He also resigned as Chairman of the Audit
Committee with effect from 28 August 2008.
Mitesh Patel was appointed as an independent non-executive
director and Chairman of the Audit Committee with effect from
Tuesday 9 September 2008.
SHARE CAPITAL
The company issued 9 550 000 ordinary shares at R2.10 per
share to an international investment fund on 29 August 2008.
The group`s employees acquired 350 000 ordinary shares in the
company at a consideration of R1.30 per share in terms of the
share incentive trust on 7 July 2008.
DIVIDEND POLICY
In line with the group`s dividend policy, no interim dividend
has been declared for the period.
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
Chairman and Managing Director Financial
Director
12 November 2008
CORPORATE INFORMATION
Independent non executive director: M M Patel
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: 12/11/2008 10:30:26 Produced by the JSE SENS Department.
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