| Wed 11 Nov 2009, 8:00 | | ATR - Africa Cellular Towers Limited - Reviewed Interim Results for the Six |
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ATR
ATR
ATR - Africa Cellular Towers Limited - Reviewed Interim Results for the Six
Months Ended 31 August 2009 And Withdrawal Of The Cautionary Announcement
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")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2009 AND
WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT
Condensed Consolidated Statement of Comprehensive Income
Reviewed Reviewed Audited
6 months 6 months 12 months
August August February
2009 2008 2009
R`000 R`000 R`000
Revenue 149 752 238 531 505 408
Gross profit 19 152 75 309 99 631
Other income 984 913 1 645
Operating expenses (30 879) (28 450) (71 717)
Trading (loss)/profit (10 743) 47 772 29 559
(Loss)/profit on foreign exchange
differences (19 103) 1 914 35 315
Gain on disposal of fixed assets 19 - 145
Impairment of goodwill (1) (6 194) - -
Operating (loss)/profit before
interest, taxation, depreciation and
amortisation (36 021) 49 686 65 019
Depreciation and amortisation (2 459) (2 241) (4 934)
(Loss)/profit before interest and
taxation (38 480) 47 445 60 085
Net interest (paid)/received (7 623) 7 708 12 612
(Loss)/profit before taxation (46 103) 55 153 72 697
Taxation (2 151) (18 461) (21 438)
(Loss)/earnings attributable to
ordinary shareholders (48 254) 36 692 51 259
Other comprehensive income
Exchange differences arising on
translation of
foreign operations
(16 561) 21 (7 722)
Available for sale financial assets
34 27 114
Other comprehensive (loss)/income for
the year
(net of tax) (16 527) 48 (7 608)
Total comprehensive (loss)/income for
the year (64 781) 36 740 43 651
Reconciliation of headline earnings:
(Loss)/earnings attributable to
ordinary shareholders (48 254) 36 692 51 259
Adjusted for:
Profit on sale of property, plant and
equipment (19) - (145)
Impairment of goodwill 6 194 - -
Headline (loss)/earnings attributable
to ordinary shareholders (42 079) 36 693 51 114
Weighted average shares in issue on
which earnings per share are based
(2) (`000) 356 055 253 772 261 889
Fully diluted weighted average shares
in issue (`000) 357 950 261 055 267 409
(Loss)/earnings per share (cents)
(13.6) 14.4 19.6
Headline (loss)/earnings per share
(cents) (11.8) 14.4 19.5
Fully diluted (loss)/earnings per
share (cents) (13.5) 14.1 19.2
Fully diluted headline
(loss)/earnings per share (cents) (11.8)
14.1 19.1
Notes:
1 Impairment of goodwill of R6.2 million relating to JK Shelters (Pty) Ltd
to net asset value.
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 Consolidated Statement of Financial Position
Reviewed Reviewed Audited
August August February
2009 2008 2009
R`000 R`000 R`000
ASSETS
Non-current assets 84 939 72 272 87 753
Property, plant and equipment 52 402 35 713 48 035
Goodwill 27 032 33 227 33 227
Intangible assets 214 522 366
Other financial assets - 1 093 -
Deferred taxation 5 291 1 717 6 125
Current assets 336 596 348 613 400 675
Inventories 34 688 67 682 43 019
Other financial assets 1 019 - 1 572
Construction contracts and receivables
88 481 52 096 87 881
Trade and other receivables 123 175 177 792 158 338
Cash and cash equivalents 89 233 51 043 109 865
Total assets 421 535 420 885 488 428
EQUITY AND LIABILITIES
Equity and liabilities
Equity and reserves 320 221 263 368 384 321
Share capital 218 315 103 591 217 633
Reserves (24 072) 112 (7 544)
Retained earnings 125 978 159 665 174 232
Non-current liabilities 29 306 17 144 26 204
Installment sale obligation 23 385 11 504 19 649
Mortgage bond 5 921 5 640 6 555
Current liabilities 72 008 140 373 77 903
Loans from vendors - 400 -
Current taxation payable 9 115 16 247 15 481
Current portion of installment sale
obligation 3 454 3 741 7 447
Trade and other payables 59 435 119 094 54 964
Current portion of mortgage bond 4 891 -
Total equity and liabilities 421 535 420 885 488 428
Shares in issue at period end (`000) 370 287 276 722 369 887
Net asset value per share (cents) 86.5 100.0 103.9
Net tangible asset value per share
(cents) 79.1 87.2 94.8
Condensed Group Statements of Changes in Equity
Share Foreign Revalua Retained Total
capital currency tion earnings equity
and transla reserve R`000 R`000
premium tion R`000
R`000 reserve
R`000
Balance 1 March 2008 82 467 (67) 130 122 973 205 503
Changes in equity:
Share capital issued 6 6
Share premium
20 054 20 054
Share-based payment
reserve 1 064 1 064
Revaluation of
financial assets 27 27
Foreign currency
translation 21 21
Profit for the year 36 692 36 692
Balance 31 August 2008 103 591 (46) 157 159 665 263 367
Balance 1 March 2009 217 633 (7 788) 244 174 232 384 321
Changes in equity:
Share capital issued
Share premium
Share-based payment
reserve 682 682
Revaluation of
financial assets 34 34
Foreign currency
translation (16 562) (16 562)
Profit for the year (48 254) (48 254)
Balance at 31 August
2009 218 315 (24 350) 278 125 978 320 221
Condensed Group Cash Flow Statements
Reviewed Reviewed Audited
6 months 6 months 12 months
August August February
2009 2008 2009
R`000 R`000 R`000
Cash flows from operating activities
before working capital changes
45 569 34 058 (60 664)
Working capital movement (57 753) 936 47 366
Cash flows from operating activities
(12 184) 34 994 (13 298)
Cash flows from investing activities
(6 432) (2 623) (3 904)
Cash flows from financing activities
(2 016) 18 595 126 990
Change in cash and cash equivalents
(20 632) 50 966 109 788
Cash and cash equivalents at beginning of
period 109 865 77 77
Cash and cash equivalents at end of
period 89 233 51 043 109 865
Note:
Cash and cash equivalents at 31 August 2009 include cash balances of R108.4
million (2008: R51.0 million) and a bank overdraft of R19.2 million (2008:
R0.26 million)
Segmental Reporting
Reviewed Reviewed Audited
6 months 6 months 12 months
August August February
2009 2008 2009
R`000 R`000 R`000
Gross revenue
Cellular Towers 129 480 218 225 417 545
Power Lines 6 523 3 050 15 516
Equipment Shelters 8 666 37 667 74 464
Fibre Optics 5 083 - -
Inter segment eliminations - (20 411) (2 117)
149 752 238 531 505 408
Trading (loss)/profit
Cellular Towers (3 319) 39 627 21 678
Power Lines 2 234 (1 511) (2 609)
Equipment Shelters (7 406) 9 656 10 490
Fibre Optics ( 2 252) - -
(10 743) 47 772 29 559
Profit before interest and taxation
Cellular Towers (21 984) 39 395 45 482
Power Lines 1 742 (1 545) (2 667)
Equipment Shelters (15 986) 9 595 17 270
Fibre Optics (2 252) - -
(38 480) 47 445 60 085
Depreciation and impairment
Cellular Towers (1 789) (2 084) (4 630)
Power Lines (492) (34) (58)
Equipment Shelters (6 372) (123) (246)
Fibre Optics - - -
(8 653) (2 241) (4 934)
OVERVIEW
This past six months, ended 31 August 2009 ("financial period"), have been
the most challenging trading period in ACTOWERS` history. The results were
impacted primarily by three major factors, namely the continued deterioration
in the global and local economy, the strengthening of the Rand against the US
Dollar and the continued decline in the steel price over the reported period.
Although the demand for the supply of cellular towers is still high in
Africa, as evidenced by the growth in cellular users in the respective
countries and international independent industry reports, cellular operators
delayed issuing contracts for new projects due, inter alia, to the tightening
of funding resources as a result of the global economic turmoil. ACTOWERS
initially believed that the sectors in which the company operates would not
be materially impacted by the global recession but unfortunately, this has
not been the case and ACTOWERS experienced a decline in orders from cellular
operators inAfrica. The roll-out of the anticipated Eskom projects has also
been postponed and this, in turn, impacted negatively on the company`s Power
Lines Division.
Approximately 98% of ACTOWERS` revenue is still derived from exports into
Africa. The Rand at 28 February 2009 peaked at around R10.00 to the US
Dollar. During the 2009 financial year, the weaker Rand sheltered ACTOWERS`
revenue against the effect of the decrease in the steel price. However, the
South African currency strengthened against the US Dollar during this period
and dropped to around R7.25 to the the US Dollar (a 27.5% movement) and at 31
August 2009 closed at around R7.80 to the US Dollar.
The steel price continued its decline and at 31 August 2009 steel traded at
approximately R6,500 per ton (31 August 2008: R10,675 per ton). This
represents a 39.1% decline in the steel price since 31 August 2008. As steel
contributes approximately 60% to 70% of the total input costs of the lattice
towers, the steel price is an important cost component for the Group.
These three factors contributed to the poor operational performance of the
Group for the six months ended 31 August 2009.
FINANCIAL RESULTS
Revenue decreased by 37.2% from R238.5 million in 2008 to R149.8 million,
mainly as a result of fewer cellular contracts, the stronger Rand against the
US Dollar and the weaker steel price.
Gross profit decreased by 74.5% to R19.2 million (2008: R75.3 million), with
gross profit margins declining from 31.6% to 12.8% in 2009. The decline in
the gross profit margin can be attributed mainly to the increased competitive
market and the weakening Rand against the US Dollar. As a result of projects
being cancelled or delayed, ACTOWERS experienced greater competition in the
market which put pressure on margins. Because suppliers of towers are
experiencing pressure due to the amount of work available, supply terms
(pricing and payment terms) have been dramatically adjusted by competitors
which has put pressure on ACTOWERS` supply terms.
ACTOWERS reported a trading loss of R10.7 million for the six months ended 31
August 2009 compared to a trading profit of R47.8 million in the comparative
2008 period. Increased operating expenses were incurred to position and
enable the company to secure opportunities in the Cellular Towers, Power
Lines and Fibre Optic Divisions in future. The Group has also improved its
systems and controls and is now ISO9001 compliant.
Following the trading loss, the operating loss of R36.0 million (2008:
operating profit of R49.7 million) is substantially as a result of the loss
on foreign exchange differences totaling R19.1 million mainly relating to the
collection of debtors. Of the R19.1 million loss on foreign exchange
differences, R16.1 million relates to unrealised losses. For the period ended
31 August 2008 and the year ended 28 February 2009, a respective profit on
foreign exchange differences of R1.9 million and R35.3 million was recorded,
which illustrates the severe impact of currency fluctuations on the results
for the current financial period.
As a result of the losses incurred by JK Shelters, Goodwill that was derived
from the acquisition of JK Shelters, was impaired by R6.2 million to the net
asset value of JK Shelters.
Net finance charges changed from net interest received of R7.7 million to net
interest paid of R7.6 million for the current financial period. The net
interest paid position is as a result of the IFRS adjustments. The actual
cash investment income amounted to R3.9million and the actual cash interest
payment amounted to R2.9 million. There is a R2.2 million tax charge for the
six months ended 31 August 2009.
The long outstanding debtors remain a challenge and the company collected an
additional R3.8 million of the long outstanding disputed debtors during the
financial period. ACTOWERS has appointed an agent who has been tasked with
managing the long outstanding disputed debtor position and positive results
are expected. Trade debtors declined by 24% to R114.7 million at 31 August
2009 from R150.9 million at 28 February 2009. Debtor days have increased
however from 109 days at the 2009 year end to 140 days at 31 August 2009,
primarily as a result of lower revenue. The doubtful debt provision of R31.3
million raised at year end is regarded as sufficient and no further
provisions have been made.
DIVISIONAL REVIEW
Cellular Towers Division
The Cellular Towers Division`s performance was impacted by lower sales
volumes, the stronger Rand and the weak steel price. As a result, revenue for
this division decreased by 40.7% to R129.5 million (2008: R218.2 million) and
trading profit decreased to a loss position of R3.3 million compared to a
trading profit of R39.6 million for the comparable period.
Power Lines Division
The Power Lines Division reported revenue growth of 113.9% to R6.5 million
from R3.1 million, which translates into a trading profit of R2.2 million for
the financial period compared to a trading loss of R1.5 million in 2008. This
division is yet to reach its full potential, however, its results have been
negatively impacted as a result of the Eskom`s project delays The Power
Lines Division has been mandated on smaller, but specialised power line
installation projects, as well as building test towers for other customers.
The division has also undertaken sub-contractor projects to establish a
credible track record in order to tender for large contracts going forward.
Opportunities also exist to tender for contracts outside of South Africa.
Equipment Shelters Division
This division delivered extremely disappointing results for the financial
period with revenue decreasing by 77.0% to R8.7 million (2008: R37.7 million)
and trading profit dropping from R9.6 million in 2008 to a trading loss of
R7.4 million in the current financial period, mainly as a result of a
decrease in demand caused by the economic slowdown which led to operators
delaying projects. The strategy of this division is currently being reviewed
to determine the way forward.
Fibre Optics Division
The company has expanded its product offering to the fibre optic market by
introducing services to install fibre optic links in South Africa and also in
other sub-Saharan countries. For the financial period this division reported
revenue of R5.1 million and an operating loss of R2.3 million.
PROSPECTS
Tough economic trading conditions are expected to prevail in the year ahead
and all indications are that the industries in which ACTOWERS operates will
remain competitive in the near future which, in turn, will place ACTOWERS`
results under pressure.
The environmental approvals for the galvanizing plant have been received, but
in light of the current economic climate, all major capital expenditure has
been placed on hold until market conditions improve.
ACTOWERS is well-placed to benefit from any improvement in both the
telecommunications and power lines industries with its full turnkey offering
of tower design, manufacture and installation solutions.
BASIS OF PREPARATION OF THE REVIEWED INTERIM RESULTS
Statement of compliance
The reviewed interim results 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 Listings Requirements and the Companies Act 61 of 1973,
as amended. The auditors have followed the guidance provided in the
International Standard on Review Engagements (ISRE) 2410 and Review Financial
Statements of Interim Financial Information Performed,
Significant accounting policies
The same accounting policies, presentation and methods of computation have
been followed in these reviewed interim results as were applied in the
preparation of the Group`s financial statements for the year ended 28
February 2009, except for the impact of the adoption of the Standards and
Interpretations described below.
IAS 1 (revised 2007) Presentation of Financial Statements
(effective for annual periods beginning on or after 1 January 2009)
The revised Standard has introduced a number of terminology changes
(including revised titles for the condensed financial statements) and has
resulted in a number of changes in presentation and disclosure. However, the
revised Standard has had no impact on the reported results or financial
position of the Group.
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 six months ended 31 August 2008 from R88.2
million to R75.3 million, and the gross profit margin from 37.2% to
31.6%. Operating costs decreased from R41.9 million to R28.4 million;
and.
- Construction contracts were reclassified from inventory to construction
contracts and receivables to improve disclosure. The net effect of this
reclassification on the relevant items as at 31 August 2008 balance
sheet is to reduce inventories from R119.7 million to R67.6 million, and
to reflect construction contracts and receivables of R52.1 million.
Review opinion
SAB&T have reviewed the interim results for the six months ended 31 August
2009 and their unqualified review opinion is available for inspection at the
company`s registered office.
DIVIDEND POLICY
In line with Group policy and having regard to the loss incurred, the Group
will not pay a dividend for the 2010 financial year. The dividend policy will
be reviewed on a continuous basis.
STATEMENT ON GOING CONCERN
The reviewed interim results for the six months ended 31 August 2009 have
been prepared on the going concern basis since the directors have every
reason to believe that the Group has adequate resources in place to continue
in operation for the foreseeable future.
WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT
As a result of the release of these interim results for the six months ended
31 August 2009, the cautionary announcement set out in the SENS announcement,
dated 13 October 2009, is hereby withdrawn.
C J J Kruger J de Villiers
Managing Director Financial Director
11 November 2009
CORPORATE INFORMATION
Independent Non-Executive Directors : MM Patel, MM 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: 11/11/2009 08:00:07 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
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implicitly, represent, warrant or in any way guarantee the truth, accuracy or
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employees and agents accept no liability for (or in respect of) any direct,
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