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TLM
TLM
TLM - Telemasters - Abridged reviewed results for the year ended 30 September
2008
TELEMASTERS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/015734/06)
Share code: TLM & ISIN Number: ZAE000093324
("TeleMasters" or "the Company")
ABRIDGED REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2008
COMPANY PROFILE
TeleMasters is a specialist tele-management and business communication strategy
player operating exclusively in the South African market. It focuses exclusively
on the corporate market. The company will not commit funds to building
infrastructure in competition to its current and future suppliers but will take
on a senior role in providing current and future client access to the most
efficient and effective connectivity technologies.
HIGHLIGHTS
Revenue increased markedly by 18.75%
Operating profit before tax increasing by 34.76%
Earnings per share up by 23.75%
Dividends per share of 24 cents
BALANCE SHEET
Figures in Rand Note(s) 30 September 30 September 2007
2008
ASSETS
Non-Current Assents
Property, plant and 1.2 11,881,179 7,206,663
equipment
Intangible assets 1.3 2,529,497 308,900
Other financial - 19
assets
Deferred tax 248,440 -
14,659,116 7,515,582
Current Assets
Trade and other 14,913,537 10,782,100
receivables
Cash and cash 17,025,662 19,352,863
equivalents
31,939,199 30,134,963
Total Assets 46,598,315 37,650,545
EQUITY AND
LIABILITIES
Equity
Share capital 5,508,059 5,508,059
Retained income 14,941,536 11,013,525
20,449,595 16,521,584
Liabilities
Non-Current
Liabilities
Instalment sale 1.4 2,254,981 469,672
agreement
obligations
Deferred tax - 70,520
2,254,981 540,192
Current Liabilities
Bank overdraft 24,907 21,938
Current tax payable 6,231,038 4,370,896
Trade and other 16,419,026 15,803,423
payables
Shareholder loan 185,881 -
Instalment sale 1.4 876,012 269,573
agreement
obligations
Provisions 156,875 122,939
23,893,739 20,588,769
Total Liabilities 26,148,720 21,128,961
Total Equity and 46,598,315 37,650,545
Liabilities
INCOME STATEMENT
Figures in Rand Note(s) 30 September 30 September 2007
2008
Revenue
Services rendered 178,978,732 150,708,587
Cost of sales
Cost of services (143,887,490) (124,334,542)
rendered
Gross profit 35,091,242 26,374,045
Other income
Investment income 1,119,622 488,266
Profit on disposal 8,941 -
of fixed asset
1,128,563 488,266
Operating expenses
Auditors` (130,895) (68,130)
remuneration
Depreciation and (2,858,235) (2,468,199)
amortisation
Directors` (2,561,858) (1,682,019)
emoluments
Lease rentals on (408,077) (274,950)
operating lease
Other expenses (9,225,813) (6,859,954)
(15,184,878) (11,353,252)
Profit before 21,034,927 15,509,059
finance costs and
taxation
Finance costs (207,431) (54,118)
Profit before 20,827,496 15,454,941
taxation
Taxation (6,819,485) (4,441,416)
Profit for the year 14,008,011 11,013,525
Earnings and diluted 1.5 33.35 26.95
earnings per share
(cents)
Headline earnings 1.5 33.33 26.95
and diluted headline
earnings per share
(cents)
CHANGES IN
EQUITY
Figures in Share Share Total Retained Total Equity
Rand capital Premium share income
capital
Balance at 01 - - - - -
October 2006
Changes in
equity
Profit for the 11,013,525 11,013,525
year
Issue of 4,200 5,966,262 5,970,462 5,970,462
shares
Share issue (462,403) (462,403) (462,403)
costs
Total changes 4,200 5,503,859 5,508,059 11,013,525 16,521,584
Balance at 30 4,200 5,503,859 5,508,059 11,013,525 16,521,584
September 2007
Profit for the 14,008,011 14,008,011
year
Dividends (10,080,000) (10,080,000)
Balance at 30 4,200 5,503,859 5,508,059 14,941,536 20,449,595
September 2008
CASH FLOW STATEMENT
Figures in Rand Notes 30 September 30 September 2007
2008
Cash flows from
operating activities
Cash generated from 19,282,702 22,633,254
operation
Finance costs (207,431) (54,118)
Taxation paid (5,278,302) -
Net cash generated from 13,796,969 22,579,136
operating activities
Cash flows from
investing activities
Purchase of property, (7,348,801) (9,586,448)
plant and equipment
Proceeds from sale of 105,073 -
property, plant and
equipment
Purchase of intangible (2,500,680) (397,313)
assets
Proceeds from sale of 19 -
financial assets
Purchase of financial - (19)
assets
Interest income 662,062 323,886
Dividends received 457,560 164,380
Net cash used in (8,624,767) (9,495,514)
investing activities
Cash flows from
financing activities
Proceeds on share issue - 5,970,462
Reduction of share - (462,403)
premium with share
issue costs
Proceeds from 3,173,113 867,774
borrowings
Repayment of borrowings (595,485) (128,530)
Dividends paid to (10,080,000) -
company`s shareholders
Net cash from financing (7,502,372) 6,247,303
activities
Total cash movement for (2,330,170) 19,330,925
the year
Cash at the beginning 19,330,925 -
of the year
Total cash at end of 17,000,755 19,330,925
year
1.1 Basis of preparation
The reviewed abridged financial statements for the year ended 30 September
2008 have been presented in accordance with IAS 34, Interim Financial
Reporting, and in the manner required by the Companies Act of South Africa
and the JSE Listings Requirements. The results have been prepared in
accordance with accounting policies of the company that comply with
International Financial Reporting Standards and are consistent with the
accounting policies from the prior year. These abridged financial results
have been reviewed by the company`s auditors, BDO Spencer Steward who has
expressed an unmodified review opinion on the results. A copy of the review
report is available for inspection at the offices of BDO Spencer Steward,
Pretoria.
1.2 Property, plant and equipment
Figures in Rand 2008
Cost/ Accumulated Carrying
Valuation depreciation value
Furniture and fixtures 96,210 (17,541) 78,669
Motor vehicles 1,711,023 (351,412) 1,359,611
Office equipment 60,527 (3,341) 57,186
IT equipment 251,147 (83,593) 167,554
Routers and handsets 14,688,168 (4,470,009) 10,218,159
16,807,075 (4,925,896) 11,881,179
Figures in Rand 2007
Cost/ Accumulated Carrying
Valuation depreciation value
Furniture and fixtures 53,328 (9,322) 44,006
Motor vehicles 825,494 (96,923) 728,571
Office equipment 4,572 (762) 3,810
IT equipment 107,919 (22,006) 85,913
Routers and handsets 8,595,136 (2,250,773) 6,344,363
9,586,449 (2,379,786) 7,206,663
Reconciliation of property, plant and equipment - 2008
Opening
Balance Additions Disposals Depreciation Total
Furniture and 44,006 42,882 - (8,219) 78,669
fixtures
Motor 728,571 1,013,704 (96,132) (286,532) 1,359,611
vehicles
Office 3,810 55,954 - (2,578) 57,186
equipment
IT equipment 85,913 143,228 - (61,587) 167,554
Routers and 6,344,363 6,093,033 - (2,219,237) 10,218,159
handsets
7,206,663 7,348,801 (96,132) (2,578,153) 11,881,179
Reconciliation of property, plant and equipment - 2007
Opening
Balance Additions Disposals Depreciation Total
Furniture and - 53,328 - (9,322) 44,006
fixtures
Motor - 825,494 - (96,923) 728,571
vehicles
Office - 4,572 - (762) 3,810
equipment
IT equipment - 107,919 - (22,006) 85,913
Routers and - 8,595,136 - (2,250,773) 6,344,363
handsets
9,586,449 (2,379,786) 7,206,663
Pledged as security
Carrying value of assets pledged as security:
2008 2007
Motor vehicles 1,359,611 728,571
Routers and handsets 1,664,732 -
3,024,343 728,571
Pledged as security in terms of instalment sale agreement obligations set
out in note 1.4
1.3 Intangible assets
Figures in Rand 2008
Cost/ Accumulated Carrying
Valuation amortisation value
Computer software 627,493 (240,656) 386,837
Customer base 2,270,500 (127,840) 2,142,660
2,897,993 (368,496) 2,529,497
Figures in Rand 2007
Cost/ Accumulated Carrying
Valuation depreciation value
Computer software 397,313 (88,413) 308,900
Reconciliation of Intangible assets - 2008
Opening
Balance Additions Disposals Amortisation Total
Computer 308,900 230,180 - (152,243) 386,837
software
Customer - 2,270,500 - (127,840) 2,142,660
base
308,900 2,500,680 - (280,083) 2,529,497
Reconciliation of Intangible assets - 2007
Opening
Balance Additions Disposals Depreciation Total
Computer - 397,313 (88,413) 308,900
software
1.4 Instalment sale agreement obligations
Minimum lease payment due
- within one year 876,012 269,573
- in second to fifth year 2,254,981 469,672
inclusive
Present value of minimum lease 3,130,993 739,245
payments
Non-current liabilities 2,254,981 469,672
Current liabilities 876,012 269,573
3,130,993 739,245
It is company policy to acquire motor vehicles and certain larger telephony
routers under instalment sale agreements.
The average instalment sale agreement term is 3 years and the average
effective borrowing rate is between 13,5% to 15,5% (2007 - 10% to 12,4%).
Interest rates are linked to prime at the contract date. All instalment
sale agreements have fixed repayments and no arrangements have been entered
into for contingent rent.
The company`s obligations under instalment sale agreements are secured by
the lessor`s charge over the financed assets. Refer note 1.2.
1.5 Headline earnings and diluted headline earnings per share
Reconciliation between earnings and headline earnings
Profit attributable to ordinary
shareholders of the company 14,008,011 11,013,525
Adjusted for:
Profit on disposal of property, (8,941) -
plant and equipment
Tax rate change (2,426) -
Headline earnings 13,996,644 11,013,525
Weighted number of ordinary shares outstanding
Number of Weighted average
Shares issued number of shares
2008 2008
Shares as at 30 September 2008 42,000,000 42,000,000
Number of Weighted average
Shares issued number of shares
2007 2007
Shares as at 1 October 2006 4,620,000 4,620,000
Effect of shares issued in 34,440,000 34,440,000
October 2006
Effect of shares issued in 2,940,000 1,793,000
February 2007
Weighted average number of 42,000,000 40,853,000
shares at 30 September 2007
There are no instruments in issue or other obligations that have a
dilutive effect on earnings
1.6 Segment Report
The company does not have different operating segments. The business is
conducted in South Africa and is managed centrally and has no branches.
The company is managed as one operating unit. Accordingly there is no
meaningful segmental information to report other than the following:
Figures in Rand 2008 2007
Revenue by nature
Commissions earned on 161,854,523 139,052,707
airtime
Connection Incentive Bonuses 15,159,260 11,569,990
Other 1,964,949 85,890
Total 178,978,732 150,708,587
2 Commentary
This has been a very satisfactory year and our results reflect the success
of our business strategy. The directors are pleased to report only good news
and an appreciable increase in every facet of the business.
Revenue increased markedly by 18,75% through sustained and sustainable
organic growth with only 0.16% additional revenue and 0.86% additional
margin being contributed through the 4 smaller customer base acquisitions
made during the year. The full effect of the acquisitions will only be felt
during the coming year due to the effective implementations dates being late
in the this financial year. These acquisitions were all made from the free
cash flow of the business. In two cases we grew our expertise as the
principals of two operations joined the company in senior sales positions.
The strategy of maintaining margins and focussing on increased system and
operational efficiency resulted in a 34.76% operating profit before tax
increase despite more staff being employed to gear up for future expansion
and for increased levels of service to customers.
Close attention and better business practices resulted in operating margins
increasing
Although the company`s margin is approx 20% lower than competitors, its
operating margin is 50% higher, indicating double the level of staff and
system efficiency.
The level of profit per employee is approx R30,000 profit after tax per
employee per month, a remarkable achievement.
The 23,75% increase in earnings per share reflects the company`s ability to
grow the business without diluting the shareholder value. The company now
serves over 3,000 corporate clients.
TeleMasters became the first company on the JSE to start paying quarterly
dividends to coincide with its established quarterly reporting. The directors
have declared dividends based on a 40% dividend policy which ranks
TeleMasters as one of the higher dividend yields on the JSE. This has
resulted in a large amount of STC being included in the total tax bill
which is 53.54% higher than last year. The increase in tax also resulted
from the operating profit before tax increasing by 34.76%.
Included in the current year is a 12 cent per share dividend which was
announced as a result of the prior year operating profits and the STC
charge is included in the current years results.
3. Dividends
The following dividends were declared during the year:
* Dividend 1 of 12 cents per share declared on 7 November 2007, payable
to shareholders registered on 30 November 2007;
* Dividend 2 of 6 cents per share declared on 6 May 2008 payable to
shareholders registered on 30 May 2008;
* Dividend 3 of 3 cents per share declared on 30 July 2008 payable to
shareholders registered on 22 August 2008;
* Dividend 4 of 3 cents per share declared on 30 September 2008 payable
to shareholders registered on 17 October 2008
The directors intend to continue with a generous dividend policy.
4. Litigation
There are currently no legal or arbitration proceedings against the
Company (including any proceedings which are pending or threatened) of
which the Company is aware which may have, or have had in the 12 months
preceding the date of this report, a material effect on the consolidated
position of the Company
5. Subsequent events
On 23 October 2008 the company has acquired a portion of the customer
base operating least cost routers of African Paradigm Communications
(Pty) Ltd trading as One Communications together with the property,
plant and equipment utilised by the client base.
Details of the net assets acquired are as follows:
Purchase consideration: R 4,000,000
Made up as follows:
Property plant and equipment acquired: R 1,100,000
Intangible asset - Client base acquired: R 2,900,000
6. SHARE CAPITAL
No changes to Share Capital occurred during the period.
7. OPERATIONAL REVIEW AND OUTLOOK
The company has embarked on increasing its service offering by signing
four new distribution agreements with major providers and are investigating
several more.
Despite a general decline in the South African economic trading conditions
business operations continue to grow. The board believes that the declining
markets will assist our business as more companies become cost conscious and
seek alternate communications avenues to improve efficiencies and decrease
overheads.
We have grown our dealer market over the past year and continue to
seek opportunities for accelerated growth with a number of operational
acquisitions targeted that may fall into the company`s strict targeted
Return on Investment.
TeleMasters expects to achieve full ISO 2000 status in the next financial
year. The efficiencies gained in the preparation for the certification has
resulted in more streamlined procedures, no overlapping of duties, better
understanding by all our staff of the overall business operations and the
inculcation of the "Simplicate` operations strategy.
To counter the expected economic downturn, the company has
implemented a counter-intuitive sales strategy by adding 100%
more sales and business development managers, altering the remuneration
strategy drastically and we will be following through on a remarkably
successful new initiative to increase market presence indirectly.Strong
emphasis will be placed on defensive strategies for customer retention and
customer usage optimisation.
The board is excited by the opportunities in the market which will assist
the company to maintain its growth utilising our diverse communications
product range and experience which will add value to all our stakeholders.
For and on behalf of the Board:
MB Pretorius BR Topham
Executive Chairman Chief Financial Officer
8 December 2008
Corporate information
Directors:MB Pretorius,BR Topham,IG Bekker ME Moji*,J Voight*
(* non-executive) Company secretary: Brandon Topham Inc. Registered
address: Equity Estate Building 2, Masters House, Charles de Gaulle
Crescent, Highveld Park Ext 9, Centurion, (P.O Box 2887, Montana Park, 0159)
Transfer secretaries: Computershare Investor Services Limited, 70 Marshall
Street, Johannesburg, 2001 (PO Box 61051, Marshalltown,2107)
Website: www.telemasters.co.za
Designated Advisor:
Arcay Moela Sponsors (Proprietary) Limited
Date: 08/12/2008 08:34:01 Produced by the JSE SENS Department.
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