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TLM
TLM
TLM - TeleMasters - Unaudited interim results for the six month period ended 31
March 2010
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")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2010
CONDENSED STATEMENT OF COMPREHENSIVE Unaudited Restated
INCOME And
Unaudited
6 months 6 months
ended ended
31 March 31 March
2010 2009
R R
Revenue 117 466 515 113 769 858
Cost of sales (98 082 181) (92 559 249)
Gross profit 19 384 334 21 210 609
Loss on disposal of assets (43 298) -
Auditors` remuneration (317 500) (300 000)
Depreciation and Amortisation (2 433 940) (2 972 361)
Directors` remuneration (1 553 139) (1 214 499)
Operating lease (360 380) (250 981)
Employee costs (5 133 283) (4 634 491)
Bad debt written off (1 688 992) -
Operating expenses (2 413 471) (2 318 825)
Operating profit 5 440 331 9 519 452
Investment income 426 591 661 076
Finance costs (325 625) (306 918)
Profit before taxation 5 541 297 9 873 610
Taxation (1 894 601) (2 965 948)
Profit for the period 3 646 696 6 907 662
Total comprehensive income for the 3 646 696 6 907 662
period
Basic earnings per share (cents) 8.68 16.45
Diluted earnings per share (cents) 8.68 16.45
Headline earnings reconciliation:
Profit for the period 3 646 696 6 907 662
Adjustments:
Loss on disposal of assets 43 298 -
Headline earnings for the period 3 689 994 6 907 662
Headline earnings per share (cents) 8.79 16.45
Diluted Headline earnings per share 8.79 16.45
(cents)
Weighted average shares in issue 42 000 000 42 000 000
(`000)
Dividends declared per share (cents) 8.0 4.0
Dividends paid per share (cents) 4.0 4.0
Capital distributions declared per - 4.0
share (cents)
Capital distributions paid per share - -
(cents)
CONDENSED STATEMENT OF FINANCIAL
POSITION
Unaudited at Restated and
Unaudited at
31 March 31 March
2010 2009
R R
ASSETS
Non-current assets
Property plant and equipment 18 175 099 15 443 814
Intangible assets 3 925 804 4 875 702
Deferred tax assets - 256 610
22 100 903 20 576 126
Current assets
Trade and other receivables 10 629 093 23 932 654
Cash and cash equivalents 17 239 925 7 312 499
27 869 018 31 245 153
Total assets 49 969 921 51 821 279
EQUITY AND LIABILITIES
Equity and reserves
Issued capital 2 148 059 3 828 059
Retained earnings 24 372 405 20 169 200
26 520 464 23 997 259
Non-current liabilities
Deferred tax liabilities 1 611 452 -
Finance lease liabilities 2 803 292 3 425 328
4 414 744 3 425 328
Current liabilities
Trade and other payables 14 971 614 17 862 207
Current portion of finance lease 2 222 758 1 996 793
liabilities
Current tax payable 101 692 2 821 956
Dividend payable 1 685 883 1 680 000
Bank overdraft 52 766 37 736
19 034 713 24 398 692
Total equity and liabilities 49 969 921 51 821 279
Number of shares in issue 42 000 000 42 000 000
Net asset value per share (cents) 63.14 57.14
Net tangible asset value per share 53.80 45.53
(cents)
CONDENSED STATEMENT OF CASH FLOWS
Unaudited at Restated and
Unaudited at
31 March 31 March
2010 2009
R R
Cash flows from operating activities
Cash generated from operations 17 596 388 6 325 039
Finance costs (325 625) (306 918)
Tax paid (9 248 436) (6 383 200)
Net cash inflow / (outflow) from 8 022 327 (365 078)
operating activities
Cash flows from investing activities
Interest received 279 068 427 496
Dividends received 147 523 233 580
Property, plant and equipment (2 132 193) (6 068 759)
acquired
Proceeds from the sale of property, 261 966 -
plant and equipment
Intangible assets acquired (915 233) (2 812 442)
Net cash outflow from investing (2 358 869) (8 220 124)
activities
Cash flows from financing activities
Dividends paid (3 354 710) (2 940 000)
Repayment of borrowings - (185 000)
Repayment of instalment sale (1 287 268) -
agreements
Proceeds from instalment sale - 1 984 210
agreements
Net cash outflow from financing (4 641 978) (1 140 790)
activities
Net increase / (decrease) in cash and 1 021 479 (9 725 992)
cash equivalents
Cash and cash equivalents at the 16 165 680 17 000 755
beginning of the period
Cash and cash equivalents at the end 17 187 159 7 274 763
of the period
CONDENSED Issued Share Total Retained Total
STATEMENT capital premium Share income Equity
OF capital
CHANGES
IN EQUITY
Balance 4 200 5 503 859 5 508 059 14 941 538 20 449 597
at
30
September
2008
Profit - - 6 907 662 6 907 662
for the -
period
ended 31
March
2009
Dividends - - - (1 680 000) (1 680 000)
declared
Capital - (1 680 000) (1 680 000) - (1 680 000)
distribut
ions
Balance 4 200 3 823 859 3 828 059 20 169 200 23 997 259
at
31 March
2009
Profit - - 7 495 766 7 495 766
for the -
period
ended 30
September
2009
Dividends - - (1 680 000) (1 680 000)
declared -
Capital (1 680 000) (1 680 000) - (1 680 000)
distribut -
ions
Balance 4 200 2 143 859 2 148 059 25 984 966 28 133 025
at
30
September
2009
Profit - - 3 646 696 3 646 696
for the -
period
ended 31
March
2010
Prior - - - (1 899 257) (1 899 257)
year
correctio
n of
Deferred
tax
Dividends - - - (3 360 000) (3 360 000)
declared
Balance 4 200 2 143 859 2 148 059 24 372 405 26 520 464
at
31 March
2010
SEGMENT REPORT
The Company does not have different operating
segments. The business is conducted in South
Africa and is managed centrally with no
branches. The company is managed as one
operating unit. Accordingly there is no
meaningful segmental information to report
other than the following information:
Unaudited Restated
And
Unaudited
6 months 6 months
Ended ended
31 March 31 March
2010 2009
R R
Revenue by Nature
Sale of airtime 110 021 464 104 598
587
Connection incentive bonuses 4 567 237 7 221 630
Other 2 877 814 1 949 641
117 466 515 113 769
858
Major customers
Revenues from transactions with a single
external customer amounting to 10 percent or
more of the Company`s revenue, are disclosed
below:
- Customer 1 28 456 200 27 095
837
- Other customers 89 010 315 86 674
021
117 466 515 113 769
858
1. COMPANY PROFILE
TeleMasters is a specialist tele-management and business communication strategy
player operating exclusively in the South African market focussing on the
corporate market. The company provides current and future clients access to the
most efficient and effective telecommunication technologies.
2. FINANCIAL RESULTS
2.1 Statement of compliance and basis of preparation
The interim financial statements for the six months ended 31 March 2010 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 are consistent with the prior period and comply
with International Financial Reporting Standards. These results have not been
reviewed or audited by the Company`s auditors. The group adopted the revised IAS
1 - Presentation of Financial Statements. Such adoption did not have any
material effect on the financial performance or position of the group.
2.2 Commentary
During the last quarter, the regulatory changes in the interconnect rates have
had a direct impact on the profitability of the company. Due to this and
expected changes in Mobile Termination Rates, the company has decided not to
renew expired SIMs and did not earn Connection Incentive Bonuses. This directly
contributed to a decrease in gross profit of 11%.
Other factors that contributed to the drop in EPS of 7.77 cents per share to
8.68 cents per share, are as follows:
- Directors` remuneration increased with 28% due to the appointment of two
additional directors to ensure the independence of the board of directors;
- The higher staff complement resulted in an increase in Employee costs of
11%. This was due to additional salaries as well as the company policy to
pay full medical aid contribution for all staff with service in excess of 5
years;
- Since the beginning of the current period, the Company rented additional
office space to accommodate the increased staff complement and operations.
This led to a total increase in occupancy costs of R207 520;
- A total amount of R1 688 992 (1.5% of Revenue) was written off and / or
provided for bad debts. R1.5 million thereof related to amounts owed by
the subsidiary of a listed financial company which stopped trading, as
previously disclosed in the 2009 Annual Report. No further effects on
earnings are expected; and
- Investment income and Finance costs are linked to the prime lending rate
and fluctuated according to the amendments reported by the Regulator.
Despite the challenges in the industry, the company has managed to achieve a
Return on Equity ("ROE") of 13.8% and a Return on Assets ("ROA") of 7.3%. This
shows that the company is still profitable and successfully managed by the board
of directors and all managers and staff.
The Net Asset Value (NAV) per share increased by 10.5% since the end of the
comparative quarter. Net Tangible Asset per share is up 18%. This was after the
total dividends to shareholders of 8 cents per share.
The Company remains cash positive with a good liquidity position. The Company
improved its cash flows from operating activities compared to the previous
period.
2.3. Dividends
During the first quarter the board declared a first quarterly dividend of 4
cents per share, which was paid to all shareholders recorded in the share
register of the Company at the close of business on Friday, 15 January 2009.
The board has recently declared a second quarterly dividend of 4 cents per
share, which was paid to all shareholders recorded in the share register of the
Company at the close of business on Friday, 23 April 2010. The board will
continue with the policy of declaring quarterly dividends and, over the course
of the year, intends maintaining a high dividend policy.
During the comparative period ended 31 March 2009, the Company declared a first
quarterly dividend of 4 cents and did a capital distribution of 4 cents during
the second quarter.
2.4. Reclassification of comparative period figures
The following restatements and reclassifications were made to the comparative
figures:
- The prior year Revenue as previously reported included deposits received
from clients to the value of R167 500. This was reclassified to Trade and
other payables on the Statement of Financial Position to be in line with
the 2009 Annual Report and subsequent quarterly reporting;
- The prior year Cost of Sales as previously reported included commission
paid to employees of R1 751 847. This was reclassified to employee costs
to be in line with the 2009 Annual Report and subsequent quarterly
reporting;
- The prior year Cost of Sales as previously reported included the
depreciation charge on Routers and handsets of R2 112 375. This was
reclassified to Depreciation & Amortisation to be in line with the 2009
Annual Report and subsequent quarterly reporting;
- The prior year Operating expenses as previously reported included agent
call out fees to the value of R241 829. This was reclassified to Cost of
Sales to be in line with the 2009 Annual Report and subsequent quarterly
reporting;
- The prior year Finance cost as previously reported included Bank charges to
the value of R59 749. This was reclassified to Operating expenses to be in
line with the 2009 Annual Report and subsequent quarterly reporting;
- The prior year Operating expenses as previously reported included the Petty
cash balance to the value of R5 403. This was reclassified to Cash and
cash equivalents on the Statement of Financial Position to be in line with
the 2009 Annual Report and subsequent quarterly reporting;
- Incidental Loans receivable was reclassified from Trade and other payables
to Trade and other receivables on the Statement of Financial Position to be
in line with the 2009 Annual Report and subsequent quarterly reporting;
- During the previous year no deferred tax liability on Routers and handsets
was raised. This fundamental error was corrected during the current six
month period and resulted in a restatement of prior year net profit of R1,9
million.
3. 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
4. SUBSEQUENT EVENTS
The directors are not aware of any matter or circumstance arising since the
reporting date which would have an effect on the Company.
5. SHARE CAPITAL
No changes to Share capital occurred during the period.
6. OPERATIONAL REVIEW AND PROSPECTS
Uncertainties in the market concerning rates and supply have negatively impacted
sales growth, which increased only 3.2%. The Company thought it prudent to hold
back commitments until rates and interconnect clarifications have been
confirmed. There is an ongoing, but not excessive liquidation of smaller clients
as a result of the economic downturn. The loss of a single large client lost at
year-end has been taken to book with the resulting impact on bad debts. Cash
generation remains strong at a 136% increase and an 18% increase in the tangible
NAV is encouraging. The company is optimistic about its new product roll-out and
the subsequent positive impact on its performance.
7. CHANGES IN THE COMPOSITION OF THE BOARD
On 18 January 2010, Ms Nolene Owen was appointed as Financial Director. The
role of Mr Brandon Topham changed from Financial Director to non-executive
director on this same date.
For and on behalf of the Board:
MB Pretorius N Owen
Chief Executive Officer Chief Financial Officer
PRETORIA
11 May 2010
Corporate information
Directors: DS van Der Merwe*, MB Pretorius, IG Bekker, N Owen, BR Topham*, J
Voigt*, VI Beck*
(* non-executive)
Registered address: Equity Estate Building 2, Masters House, Charles de Gaulle
Crescent, Highveld Park Ext 9, Centurion, (P.O. Box 68255, Highveld Park, 0169)
Company secretary: Brandon Topham Inc.
Auditors: BDO, Block C, Riverwalk Office Park, 41 Matroosberg Avenue, Ashlea
Gardens, Pretoria
Transfer secretaries: Computershare Investor Services Limited, 70 Marshall
Street, Johannesburg, 2001 (P.O. Box 61051, Marshalltown, 2107)
Designated Advisor: Arcay Moela Sponsors (Proprietary) Limited
Website: www.telemasters.co.za
Date: 11/05/2010 07:53:01 Produced by the JSE SENS Department.
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