| Mon 25 May 2009, 8:59 | | ATR - ACTOWERS - Audited condensed financial results for the year ended 28 |
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ATR
ATR
ATR - ACTOWERS - Audited condensed financial results for the year ended 28
February 2009
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")
Overview
- Revenue up 54.8% to R505.4 million
- Headline earnings up 13.6% to R51.1 million
- Headline earnings per share up 10.4% to 19.52
cents
- Net tangible asset value per share up 46.8% to
94.82 cents
- Improvement of 35% in debtors days from 167 days
to 109 days
- Successful placement of ordinary shares with
TisoGroup
- Empowerment shareholding in ACTOWERS now at
25.1%
AUDITED CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2009
Condensed Group Income Statements
Audited Audited
12 months 12 months
February February
2009 2008
R`000 R`000
Revenue 505 408 326 572
Gross profit 99 631 88 198
Other income 37 105 14 868
Operating costs (1) (71 717) (36 585)
Earnings before interest, taxation, 65 019 66 481
depreciation and amortisation
("EBITDA")
Depreciation (4 934) (2 216)
Profit before interest and taxation 60 085 64 265
Net interest received 12 612 5 156
Profit before taxation 72 697 69 421
Taxation (21 438) (24 396)
Earnings attributable to ordinary 51 259 45 025
shareholders
Reconciliation of headline earnings:
Earnings attributable to ordinary 51 259 45 025
shareholders
Adjusted for:
Profit on sale of property, plant and (145) (13)
equipment
Headline earnings attributable to 51 114 45 012
ordinary shareholders
Weighted average shares in issue on 261 889 254 658
which earnings per share are based (2)
(`000)
Fully diluted weighted average shares 267 409 260 195
in issue (`000)
Earnings per share (cents) 19.57 17.68
Headline earnings per share (cents) 19.52 17.68
Fully diluted earnings per share 19.17 17.30
(cents)
Fully diluted headline earnings per 19.11 17.30
share (cents)
Notes:
1 Operating costs include an additional provision against doubtful debts of
R18.7 million (2008: R13.4 million) and a bad debt write-off of R10
million.
2 The company placed 9 550 000 ordinary shares at 210 cents per share in
August 2008 for cash with an international institution, and 92 733 300
ordinary shares at 125 cents per share with Tiso Telecom (Pty) Limited
("Tiso Telecom") on 16 February 2009.
Condensed Group Balance Sheets
Audited Audited
February February
2009 2008
R`000 R`000
ASSETS
Non-current assets 87 753 62 876
Property, plant and equipment 48 035 27 877
Goodwill 33 227 33 227
Intangible assets 366 55
Deferred taxation 6 125 1 717
Current assets 400 675 222 608
Inventories 43 019 33 785
Other financial assets 1 572 1 023
Construction contracts and receivables 87 881 27 753
Trade and other receivables 158 338 154 786
Cash and cash equivalents 109 865 5 261
Total assets 488 428 285 484
EQUITY AND LIABILITIES
Equity and liabilities
Equity and reserves 384 321 205 503
Share capital 217 633 82 467
Reserves (7 544) 63
Retained earnings 174 232 122 973
Non-current liabilities 26 204 12 082
Installment sale obligation 19 649 12 082
Mortgage bond 6 555 -
Current liabilities 77 903 67 899
Current taxation payable 15 481 19 702
Current portion of long-term 7 458 3 182
liabilities
Trade and other payables 54 964 39 832
Bank overdraft - 5 183
Total equity and liabilities 488 428 285 484
Shares in issue at period end (`000) 369 887 266 820
Net asset value per share (cents) 103.90 77.02
Net tangible asset value per share 94.82 64.57
(cents)
Condensed Group Statements of Changes in Equity
Share Foreign Revaluat Retaine Total
capita currenc ion d equity
l and y reserve earning R`000
premiu transla R`000 s
m tion R`000
R`000 reserve
R`000
Balance 1 March 2007 47 882 - 66 77 948 125
896
Changes in equity: 2 457 2 457
Share capital issued
Share premium 32 128 32 128
Share-based payment 64 64
reserve
Revaluation of
financial assets
Foreign currency (67) (67)
translation
Profit for the year 45 025 45 025
Balance 29 February 82 467 (67) 130 122 973 205
2008 503
Changes in equity: 1 928 1 928
Share capital issued
Share premium 133 133
238 238
114 114
Revaluation of
financial assets
Foreign currency (7 721) (7
translation 721)
Profit for the year 51 259 51 259
Balance at 28 February 217 (7 788) 244 174 232 384
2009 633 321
Condensed Group Cash Flow Statements
Audited Audited
12 months 12 months
February February
2009 2008
R`000 R`000
Cash flows from operating activities (15 901) (40 055)
Cash flows from investing activities (3 904) (25 385)
Cash flows from financing activities 129 593 4 638
Change in cash and cash equivalents 109 788 (60 802)
Cash and cash equivalents at beginning of 77 60 879
year
Cash and cash equivalents at end of year 109 865 77
Note:
Cash and cash equivalents at 28 February 2009 includes cash balances of R127.6
million (2008: R5.3 million) and a bank overdraft of R18.6 million (2008: R5.2
million)
Segmental Reporting
Audited Audited
12 months 12 months
February February
2009 2008
R`000 R`000
Gross revenue
Cellular towers 417 545 285 575
Power lines 15 516
Equipment shelters 74 464 58 471
Inter segment (2 117) (17 474)
eliminations
505 408 326 572
Profit before interest
and taxation
Cellular towers 47 599 67 534
Power lines (2 667)
Equipment shelters 17 270 14 205
Inter segment (2 117) (17 474)
eliminations
60 085 64 265
Depreciation
Cellular towers (4 630) (2 002)
Power lines (58)
Equipment shelters (246) (214)
(4 934) (2 216)
OVERVIEW
The major global event of the last year has been the deterioration of the world
economy as a consequence of inter alia, the sub-prime crisis and credit crunch
that emanated from the United States of America. Whilst ACTOWERS believe that
the sectors in which the company operate in have been impacted less than many
others, there have been spillover effects and the slowdown in capital
expenditure in the telecommunications industry. The South African rand has also
weakened considerably against the US Dollar and the Euro. Despite this economic
downturn, the company increased its sales from R326.6 million for the 2008
financial year to R505.4 million in the 2009 financial year. The company has
also been successful in entering the power lines business with its first project
having been completed.
ACTOWERS successfully concluded its empowerment transaction with Tiso Telecom, a
subsidiary of TisoGroup (Pty) Limited ("TisoGroup"), in February 2009, in terms
of which Tiso Telecom acquired a 25.1% interest in ACTOWERS for a total
consideration of R116 million. Vuyisa Nkonyeni, an executive director of
TisoGroup, joined the board of ACTOWERS as a non-executive director and has
already made a valuable contribution to the company.
The Power Lines division has been established and with the introduction of Tiso
Telecom, can now tender for contracts as a lead, turn-key provider, complying
with all the relevant requirements for parastatal contracts. This division has
tendered for contracts for several hundred million rands, and has been short
listed on substantial tenders. This division successfully completed its first
construction contract as lead contractor in April 2009 and has already achieved
revenue of R15.5 million in its first year of operation.
The company expanded its product offering to the Optic Fiber market by
introducing services to install Optic Fiber links in South Africa and also in
other Sub-Saharan countries. This division is expected to be a major income
contributor for the 2010 financial year with a confirmed order book amounting to
approximately R35 million.
On the downside, the price of steel (which contributes approximately 70% to 85%
of the total input costs of the lattice towers), peaked in the third quarter of
2008 and has since then decreased significantly to current levels. The impact
of this fluctuation in the steel price had a negative impact on the gross profit
margin of the company, because it has not been able to pass the higher price of
steel on hand to its customers in the latter part of the 2009 financial year,
when the steel price declined significantly. The steel price has stabilised
since March 2009 and the fluctuations in the steel price are not as significant
as that experienced in 2008. The impact on the contract values and gross profit
margins of the company should therefore not be as significant as it has been in
the 2009 financial year. The world-wide economic crisis also had an effect on
payments from customers. The repatriation of foreign currency (US$) from
certain smaller African countries has proved to be a challenge.
The company reviewed its credit policies and procedures in the past year,
focusing on tightening the terms and conditions of its manufacturing and supply
contracts with regard to specifically the acceptance, performance and payment
terms of the contracts. Some of the changes that were implemented include only
shipping products on the receipt of acceptable Letters of Credit, more favorable
payment terms staggered on various milestones and no new work for long
outstanding and problem accounts. These changes resulted in improved working
capital management with regard to new contracts and debtors, as can be seen from
the improvement in debtors` days.
On old historic debt (the vast majority of which relate to only one customer),
decisive steps were taken to improve the as yet unresolved issues. To this
extent, the company collected R42.9 million of the long outstanding debtors
during the 2009 financial year. Senior management has had a series of meetings
with senior management of the customer in question, including meetings at their
Head Office and the various relevant African countries. Management has decided
to make substantial provisions and write-offs against this debtor, but is still
vigorously working on resolving this matter as soon as possible, and are
confident of collecting the long outstanding debt. If the actions taken by
management do not have a positive outcome, management will commence legal action
to resolve these matters.
FINANCIAL RESULTS
Revenue increased by 54.8% from R326.6 million in 2008 to R505.4 million for the
2009 financial year.
Gross profit increased to R99.6 million (2008: R88.2 million), with gross profit
margins decreasing from 27.0% to 19.7% in 2009. The decrease in gross profit
margins can mainly be attributed to a number of factors, the most important
being:
- The decrease in the steel price - normally the company only acquires
steel on confirmed orders. However, with the material increase in the
steel price in the first half of the financial year, the company
increased its stock pile of steel in an effort to reduce the impact of
increasing steel price on contracts. The sudden decline in the steel
price during the latter part of the financial year meant that the
company was not able to pass the higher price of the stock on hand to
its customers, and consequently its gross profit margin decreased.
The company has reduced its stock pile of steel at the higher prices
and gross profit margin should return to more acceptable levels in the
forthcoming financial year;
- Letter of Credit - As a result of the company`s policy not to ship
towers without a Letter of Credit from the customer, a few substantial
contracts were cancelled by certain customers after the company had
already manufactured the towers. These towers had to be sold to other
customers at lower prices as a consequence of the decrease in the
steel price;
- African operations - the company incurred losses in some of the
African installation operations in the latter part of the financial
year due to mainly to, escalating costs in the African countries and
delays experienced in the sign-off on projects by the customers as a
result of political instabilities, in particular Chad at the beginning
of the financial year and Madagascar at the end of the 2009 financial
year. The profits derived from the African installation operations
were consequently lower than anticipated; and
- Manufacturing expenses - Increased costs were incurred to establish
capacity, know-how and the staff complement for the manufacturing and
installation of power line components.
EBITDA decreased by 2.2% to R65.0 million (2008: R66.5 million) for the 2009
year end. EBITDA margins decreased to 12.86% (2008: 20.4%) mainly as a result
of bad debt written-off to the amount of R10 million, and an increase in the
provision for doubtful debts to R31.3 million (2008: R15.6 million).
Other income mainly relates to foreign exchange gains of R35.5 million (2008:
R13.5 million) of which R21.0 million is unrealised foreign exchange profits at
year end.
During the reporting 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 earmarked to house the
galvanizing plant as soon as the environmental approval process is completed.
These stands will also be utilised as a packing and dispatching area for towers
after they have been galvanized. Stringing equipment for the Power Line
division was acquired during the year and this will ensure that ACTOWERS can now
provide the full turn-key solution for manufacturing, construction and stringing
of power lines.
Trade debtors have remained largely unchanged at R150.9 million at 28 February
2009 (2008: R149.3 million) included in trade and other receivables, but the
debtors have reduced significantly from 167 days in 2008 to 109 days in 2009.
This amount allows for a doubtful debt provision of R31.3 million (2008: R15.6
million).
Construction contracts were reclassified from inventory and disclosed separately
to improve disclosure. Construction contracts increased to R87.8 million (2008:
R27.8 million), as a result of large contracts entered into during the year
nearing completion at year end. Subsequent to year end, material progress was
made on the completion and sign-off of the construction contracts.
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The audited condensed financial statements comprise a consolidated balance sheet
at 28 February 2009, a consolidated income statement, consolidated statement of
changes in equity and summarised consolidated cash flow statement for the year
ended 28 February 2009. The audited 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, the JSE Limited ("JSE") Listings Requirements
and the Companies Act 61 of 1973, as amended.
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.
Reclassification of accounts
The following reclassification of accounts was made in the 2009 financial year,
and the comparative results for the 2008 financial year have been restated
accordingly. Both were made to improve disclosure.
- Following improved accounting and management reporting systems,
certain operating expenses were reclassified from operating costs to
cost of sales. The net effect of this reclassification was to reduce
the reported gross profit for the 2008 financial year from R121.6
million to R88.2 million, and the gross profit margin from 37.2% to
27.0%. Operating costs decreased from R72.2 million to R36.6 million;
and.
- Construction contracts were reclassified from inventory and trade and
other payables to improve disclosure. The net effect of this
reclassification on the relevant items of the 2008 balance sheet is to
reduce inventories from R75.4 million to R33.8 million, to reduce
trade and other payables from R53.4 million to R39.8 million, and to
reflect construction contracts and receivables of R27.8 million.
CHANGE OF AUDITORS
On 16 March 2009, the board appointed SAB&T Incorporated ("SAB&T") as the
company`s auditors to ensure compliance with the JSE Listings Requirements which
require all listed companies to appoint auditors registered with the JSE.
AUDITED RESULTS
SAB&T Incorporated have audited the annual financial statements of the company
for the year ended 28 February 2009 and their unqualified audit opinion is
available for inspection at the company`s registered office.
POST-BALANCE SHEET EVENTS
There have been no significant events between 28 February 2009 and the date of
this report.
PROSPECTS
ACTOWERS experienced a decline in orders during the latter part of the 2009
financial year in both lattice towers and equipment shelters, as a result of the
global economic turmoil, as well as the larger mobile operators consolidating
and restructuring operations. The company has however since year end, seen an
increase in enquiries, some of which have resulted in supply only profitable
orders. Indications are that the global downturn has not affected the telecoms
industry as much as was anticipated. ACTOWERS has taken proactive steps and is
offering operators lower cost rapid deployment sites and has also designed new
technology for saving operating costs per site, The new products have been well
received by operators and this should have a positive effect on turnover. The
company has a strong order book for the supply and installation of lattice
towers to well into the second half of the current financial year, and have
tendered on several large contracts on which it is reasonable certain of being
successful. .
The expansion of the company`s business into the installation of optic fiber
links in South Africa and Sub-Saharan Africa has been well received since
February 2009 and this expansion is expected to be a major contributor to group
revenue and profits for the 2010 financial year.
Power Lines has established itself and has been successful in receiving a number
of orders for the manufacturing and installation of electrical pylons, and has
also tendered for various contracts as main contractor. Eskom has however
delayed the roll-out of transmission line projects and is only expected to
continue with its roll-out plan towards the end of 2009. There are however
opportunities in neighbouring countries such as Namibia, Botswana and Zimbabwe
for the construction and supply of transmission lines, and ACTOWERS has been
invited to tender on these opportunities.
ACTOWERS is continuously considering various acquisition opportunities to expand
its business into related industries.
DIVIDEND POLICY
In line with its policy, the group will not pay a dividend for the 2009 year.
It is ACTOWERS` long term intention to pay dividends and the existing policy
will be reconsidered as its rate of growth slows and in light of market
conditions and anticipated cash requirements for the business.
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.
CHANGES TO THE BOARD OF DIRECTORS
On 19 February 2009 Vuyisa Nkonyeni was appointed by the board of directors of
the company ("the board") as a non-executive director following the investment
by Tiso Telecom in ACTOWERS. Vuyisa is the chairman of the Remuneration
Committee of the board and a member of the Risk Committee.
Martin Potgieter was appointed by the board as an independent non-executive
director on 3 March 2009. He is a member of the Remuneration Committee, the
Audit Committee and the Risk Committee.
Mitesh Patel was appointed by the board on 9 September 2008 as an independent
non-executive director, chairman of both the Audit Committee and Risk Committee
and is a member of the Remuneration Committee.
Following these appointments, the board comprises three executive directors and
three non-executive directors of which two are independent.
The company would like to welcome the new directors to the board and also thank
them for the valuable contributions they have already made to the company since
their respective appointments.
On behalf of the board
C J J Kruger
J de Villiers
Managing Director
Financial Director
25 May 2009
CORPORATE INFORMATION
Independent non-executive directors : M Patel, M Potgieter
Non-executive director: V Nkonyeni
Executive directors: C J J Kruger (Chairman and Managing Director); DM 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: 25/05/2009 08:59:39 Produced by the JSE SENS Department.
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