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ATR
ATR
ATR - Africa Cellular Towers - Audited condensed financial results for the
year ended 28 February 2010
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")
AUDITED CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2010
Condensed Consolidated Statement of Comprehensive Income
Audited Audited
12 months 12 months
February February
2010 2009
R`000 R`000
Revenue 227 390 505 408
Gross profit 2 951 99 631
Other income 7 537 1 645
Operating expenses (74 674) (71 717)
Trading (loss)/profit (64 186) 29 559
(Loss)/profit on foreign 35 315
exchange differences (25 489)
Profit on sale of property, 145
plant and equipment 174
Income from available for sale -
accounted investment 278
Impairment of investment (1) (5 000) -
Impairment of goodwill (1) (6 194) -
Operating (loss)/profit before (100 417) 65 019
interest, taxation, depreciation
and amortisation
Depreciation and amortisation (6 038) (4 934)
(Loss)/profit before interest 60 085
and taxation (106 455)
Net interest received 13 123 12 612
(Loss)/profit before taxation (93 332) 72 697
Taxation 1 069 (21 438)
(Loss)/earnings attributable to 51 259
ordinary shareholders (92 263)
Other comprehensive income
(Loss)/earnings attributable to
ordinary shareholders (92 263) 51 259
Exchange differences arising on
translation of
foreign operations (16 334) (7 722)
Financial assets available for
sale (244) 114
Total comprehensive 43 651
(loss)/income for the year (108 841)
Reconciliation of headline
earnings:
(Loss)/earnings attributable to 51 259
ordinary shareholders (92 263)
Adjusted for:
Profit on sale of property, (145)
plant and equipment (174)
Profit on disposal of other -
financial instruments (278)
Impairment of goodwill (1) 11 194 -
Headline (loss)/earnings 51 114
attributable to ordinary
shareholders (81 521)
Weighted average shares in issue 261 889
(`000) 356 055
Fully diluted weighted average 267 409
shares in issue (`000) (2) 356 055
(Loss)/earnings per share (25.9) 19.6
(cents)
Headline (loss)/earnings per (22.9) 19.5
share (cents)
Fully diluted (loss)/earnings (25,9) 19.2
per share (cents)
Fully diluted headline (22.9) 19.1
(loss)/earnings per share
(cents)
Notes:
Impairment of goodwill of R11.2 million relating to JK Shelters (Pty) Ltd`s
net asset value in the holding company`s financial statements.
No dilution in the weighted average number of shares in issue as a result
of the average value of the share options being higher than the average
market price of the ordinary shares, resulting in no options being
exercised during the year.
Condensed Consolidated Statement of Financial Position
Audited Audited
12 months 12 months
February February
2010 2009
R`000 R`000
ASSETS
Non-current assets 73 667 87 753
Property, plant and equipment 50 692 48 035
Goodwill 22 032 33 227
Intangible assets 69 366
Deferred taxation 874 6 125
Current assets 264 544 400 675
Inventories 47 849 43 019
Other financial assets 166 1 572
Current tax receivable 4 218 -
Construction contracts and 63 671 87 881
receivables
Trade and other receivables 88 141 158 338
Cash and cash equivalents 60 499 109 865
Total assets 338 211 488 428
EQUITY AND LIABILITIES
Equity and liabilities
Equity and reserves 276 999 384 321
Share capital 219 153 217 633
Reserves (24 123) (7 544)
Retained earnings 81 969 174 232
Non-current liabilities 24 286 26 204
Installment sale obligation 17 689 19 649
Mortgage bond 6 597 6 555
Current liabilities 36 926 77 903
Current taxation payable 2 761 15 481
Current portion of installment sale 6 111 7 447
obligation
Trade and other payables 28 050 54 964
Current portion of mortgage bond 4 11
Total equity and liabilities 338 211 488 428
Shares in issue at year end (`000) 370 287 369 887
Net asset value per share (cents) 74.8 103.9
Net tangible asset value per share 94.8
(cents) 68.8
Condensed Group Statements of Changes in Equity
Share Foreign Revalua Retained Total
capital currency tion earnings equity
and translat reserve R`000 R`000
premium ion R`000
R`000 reserve
R`000
Balance 1 March 82 467 130 122 973
2008 (67) 205 503
Changes in 10
equity: 10
Share capital
issued
Share premium 133 238
133 238
Total (7 721) 114 51 259 43 651
comprehensive
income for the
year
Share-based 1 918 1 918
payment reserve
Balance at 28 217 633 (7 788) 244 174 232 384 321
February 2009
Changes in
equity:
Share capital
issued
Share premium
Share-based 1 519 1 519
payment reserve
Total (16 334) (244) (92 263)
comprehensive
income for the
year (108841
)
Balance at 28 219 152 (24 122) - 81 969 276 999
February 2010
Condensed Group Cash Flow Statements
Audited Audited
12 months 12 months
February February
2010 2009
R`000 R`000
Cash flows utilised by operating (35 422) (13 298)
activities
Cash flows utilised by investing (3 245) (3 904)
activities
Cash flows utilised by financing (10 699) 126 990
activities
Change in cash and cash equivalents (49 366) 109 788
Cash and cash equivalents at beginning of 109 865 77
the year
Cash and cash equivalents at end of the 60 499 109 865
year
Segmental Reporting
Audited Audited
12 months 12 months
February February
2010 2009
R`000 R`000
Gross revenue
Cellular Towers 192 157 417 545
Power Lines 4 555 15 516
Equipment Shelters 13 635 74 464
Fibre Optics 17 043 -
Inter segment (2 117)
eliminations -
227 390 505 408
Trading (loss)/profit
Cellular Towers (47 245) 21 678
Power Lines (3 653) (2 609)
Equipment Shelters (9 742) 10 490
Fibre Optics (3 546) -
(64 186) 29 559
Profit (loss) before
interest and taxation
Cellular Towers (86 181) 45 482
Power Lines (5 600) (2 667)
Equipment Shelters (11 127) 17 270
Fibre Optics (3 547) -
(106 455) 60 085
Depreciation and
impairment
Cellular Towers (4 627) (4 630)
Power Lines (975) (58)
Equipment Shelters (436) (246)
Fibre Optics - -
(6 038) (4 934)
OVERVIEW
ACTOWERS experienced significant challenges and tough trading conditions
during the year ended 28 February 2010. As a result, ACTOWERS` financial
results for the year were well below the Board`s expectations. The results
were impacted mainly by both external and internal factors that, inter alia,
included the ongoing global economic recession, the strength of the
South African currency and losses incurred on certain installation
contracts in Africa.
As a result of the global economic crisis, most international cellular opera
tors held back on planned capital expansions and roll-outs, especially into
Africa. Exacerbating this, the company also observed a significant shift in
the cellular market to one where cellular operators are more inclined to
share tower sites than build their own new tower sites. The roll-out of
the anticipated Eskom projects was also postponed as a result of Eskom`s
financial position during this year, which in turn negatively impacted
the company`s Power Lines Division.
FINANCIAL RESULTS
At 28 February 2009, the South African currency peaked at around R10.00
to the US Dollar, compared to a strengthening of the Rand for most of the
financial year to a range of between R7.30 and R7.60 to the US Dollar.
As the majority of ACTOWERS` revenue is derived from export contracts
that are US Dollar denominated, the strong South African currency
resulted in significant losses on foreign exchange differences to the
amount of R25.5 million. During the 2009 financial year, the weaker Rand
sheltered ACTOWERS` revenue against the effect of the decrease in the
steel price, but as a result of the strength of the Rand as well as the
decrease in the steel price during 2010, the impact on Group revenue has
been unusually adverse as can be seen in revenue decreasing by 55% from
R505.4 million in 2009 to R227.4 million.
During the year under review, a number of cellular installation contracts
as well as fibre optic contracts were completed at lower than expected
profits, or losses in some cases. This led to the reversal of income
accrued in prior periods and the writing off of work-in-progress and
amounts outstanding. As a result, gross profit decreased by 97% to
R2.9 million (2009: R99.6 million), resulting in the gross profit
margin declining from 19.7% to 1.3% in the financial period. The decline
in the gross profit margin is attributable mainly to the explanations
given above and the same factors that influenced the drop in revenue.
As a result of projects being cancelled or delayed, ACTOWERS also
experienced greater competition in the market which increased
pressure on operating margins. In order to safeguard the company
against future losses on contracts, the company has formed a Risk
Committee, Forex Committee as well as a Tender Committee to
assess country risk, customer risk and ensure correct pricing of tenders.
ACTOWERS reported a trading loss of R64.2 million for the year ended
28 February 2010 compared to a trading profit of R29.6 million in the
comparative financial year. Increased operating expenses were incurred
to position and enable the company to secure future opportunities in the
Cellular Towers, Power Lines and Fibre Optic Divisions. The Group
has also improved its systems and controls and is now ISO9001 compliant.
The operating loss of R100.4 million (2009: Operating profit of
R65.0 million) has substantially been impacted by the loss on
foreign exchange differences totaling R25.5 million. Of the
R25.5 million loss on foreign exchange differences, R11.0 million
relates to unrealised losses. For the year ended 28 February 2009,
a profit on foreign exchange differences of R35.3 million was recorded,
which illustrates the severe impact of currency fluctuations on the
results for the current financial period. The Group recently introduced
a more comprehensive foreign exchange policy to reduce the risk of losses,
because of foreign exchange fluctuations. In addition the Group expects
the South African based revenue to increase as a proportion to exports.
Taking the Group`s performance in consideration, management has taken
various pro-active and corrective actions to reduce the risk to the Group.
Organisational restructuring and a review of the business model in the
various divisions were performed and are being implemented.
The company wrote-off bad debts to the value of R4.9 million during
the year and increased the doubtful debt provision by R11.8 million.
Although the African debtors remain a challenge for the company,
trade debtors declined from R150.9 million at 28 February 2009 to
R79.5 million at 28 February 2010, a drop of 47%. The doubtful debt
provision increased to R43 million at 28 February 2010. The company
has therefore either written-off or provided for all of the long
outstanding disputed debtors except for those where collection is
considered realistic. The amount not provided for on the long
outstanding disputed debtors reported on previously, amounts to
R16.4 million.
As a result of the losses incurred by JK Shelters, goodwill derived
from the acquisition of JK Shelters, was impaired by R11.2 million.
DIVISIONAL REVIEW
Cellular Towers Division
As explained above, the performance of the Cellular Towers Division was
impacted by lower sales volumes, the stronger Rand, the weak steel price,
the completion of loss-making installation contracts, and the withdrawal
from certain risky installation contracts. As a result, revenue for this
division decreased by 54% to R192.2 million (2009: R417.5 million) and the
trading profit of R21.7 million for the comparable period changed to a loss
position of R47.2 million. The strategy for this division is being reviewed
to address changing market conditions.
Power Lines Division
The Power Lines Division reported revenue of R4.5 million
(2009: R15.5 million), which translated into a trading loss of
R3.7 million (2009: R 2.6 million). This division is yet to reach its
full potential, and its results have been negatively impacted by delays
in Eskom projects. The Power Lines Division has been mandated on
smaller, but specialised power line installation projects, as well as
building test towers for other customers. Important milestones have
been achieved and in March 2010, this division was awarded its first
full turnkey contract with Eskom.
Equipment Shelters Division
This division delivered disappointing results for the financial period
with revenue decreasing by 82% to R13.6 million (2009: R74.5 million)
and trading profit dropping from R10.5 million in 2009 to a trading loss
of R9.7 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.
New product ranges are being introduced. Changes to management of this
division have also been introduced and the board is confident that these
changes will significantly enhance the prospects of this division.
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 R17.0 million and an operating loss of R3.5 million.
The loss was a result of, inter alia, a decision to withdraw from a project
where severe country risk exists.
PROSPECTS
ACTOWERS is expecting tough economic trading conditions to prevail in the
year ahead. Notwithstanding certain challenges such as the low steel price,
strong Rand and a competitive environment, ACTOWERS is experiencing an
increase in enquiries in both the cellular and power lines industries,
Eskom`s World Bank Loan is enabling Eskom to release certain projects
previously put on hold and new product developments by the Group, the
Group is doing its best to address internal issues and appointing
qualified managers to ensure that losses are contained.
As mentioned in the 2010 interim results announcement, 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.
DIVIDEND
In line with its policy, the Group will not pay a dividend for the 2010 year.
It is ACTOWERS` long term intention to pay dividends and the existing policy
will be reconsidered in light of market conditions and anticipated cash
requirements for the Group.
BASIS OF PRESENTATION
Statement of compliance:
The audited condensed consolidated results for the year have been prepared
in accordance with the framework concepts and the measurement requirements
of International Financial Reporting Standards ("IFRS"), the disclosure
requirements of IAS 34: Interim Financial Reporting, the AC500 standards
as issued by the Accounting Practices Board and its successor, the
JSE Listings Requirements and in the manner required by the Companies Act 61,
1973, as amended. The accounting policies and method of measurement and
recognition applied in preparation of the audited consolidated annual
financial statements are consistent with those applied in the Group`s annual
financial statements for the year ended 28 February 2009, which comply
with IFRS.
Audit opinion
The auditors, SAB&T Inc., have issued an unmodified audit opinion on the
Group`s financial statements for the year ended 28 February 2010.
The audit was conducted in accordance with International Standards on
Auditing. A copy of their audit report is available for inspection
at the company`s registered office. These audited condensed annual
financial statements have been derived from the Group audited annual
financial statements and are consistent in all material respects.
On behalf of the board
C J J KRUGER J DE VILLIERS
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Independent Non-Executive Directors : MM Patel, MM Potgieter
Non-executive Director: V Nkonyeni
Executive Directors: C J J KrUger (Chairman and Chief Executive Officer);
DM van Staden; J de Villiers (Financial Director)
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: 21/05/2010 08:36:28 Produced by the JSE SENS Department.
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