| Wed 30 Jun 2010, 17:05 | | TCS - Total Client Services Limited - Audited condensed consolidated results for |
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TCS
TCS
TCS - Total Client Services Limited - Audited condensed consolidated results for
the year ended 28 February 2010
Total Client Services Limited
Incorporated in the Republic of South Africa
(Registration number 1998/025018/06)
Share code: TCS ISIN: ZAE000116208
("TCS" or "the group" or "the company")
AUDITED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010
AUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year ended year ended
28 February 28 February
2010 2009
% change R R
Gross revenue (28.1) 71 734 868 99 771 049
Operating (loss)/profit (269.2) (13 280 116) 7 849 455
before interest and taxation
Net interest paid (1 795 583) (4 628
324)
(Loss)/Profit before (568) (15 075 699)
taxation 3 221 131
Taxation 2 442 005 (3 812
888)
Total comprehensive loss (2 034.9) (12 633 694)
(591 757)
Attributable to:
Equity holders of the (12 633 694) (591 757)
company
Minority interests - -
Reconciliation of earnings
per ordinary share to
headline earnings per
ordinary share
Attributable loss (12 633 694) (591 757)
Adjusted for:
Goodwill impairment 6 751 995 5 149 273
(Gain)/Loss on disposal of (6 238) 155 506
property, plant and
equipment
Scrapping of assets 776 993 -
Tax effects of the above (215 811) (43 542)
Headline (loss)/earnings for (214.1) (5 326 755) 4 669 480
the year
Loss per ordinary share (2 080.0) (3.27) (0.15)
attributable to the equity
holders of the company
(cents)
Weighted average number of 386 363 206 388 674 488
ordinary shares in issue
Headline (loss)/earnings per (215.0)
ordinary share (cents) (1.38) 1.20
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
year ended year ended
28 February 28 February
2010 2009
R R
ASSETS
Non-current assets 15 467 610 29 152 972
Current assets 26 580 761 44 654
063
TOTAL ASSETS 42 048 371 73
807 035
EQUITY AND LIABILITIES
Capital and reserves 5 107 885 17 934 171
Non-current liabilities (interest 23 220 032 27 441 582
bearing)
Deferred taxation 504 414 4 075 281
Current liabilities 13 216 040 24 356 001
TOTAL EQUITY AND LIABILITIES 42 048 371 73
807 035
Total number of ordinary shares 390 134 690 390 134 690
in issue at year end
Net asset value per ordinary 1.31 4.60
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
year ended year ended
28 February 28 February
2010 2009
R R
Cash flows from operating activities 14 380 665
2 083 136
Cash flows from investing activities (735 533) (1 992 672)
Cash flows from financing activities (7 029 173) 689 917
Net movement in cash and cash (5 681 570) 13 077 910
equivalents
Cash and cash equivalents at the 16 095 647 3 017 737
beginning of the year
Cash and cash equivalents at the end of 10 414 077 16 095 647
the year
STATEMENT OF CHANGES IN EQUITY
Share Share BEE Retained Total
capital premium reserve income
R R R R R
Balance as at 1 March 38 357 17 382 (9 923 10 134 17 631
2008 285 397) 588 833
Comprehensive loss for - - - (591 (591
the year 757) 757)
Share expenses written - (1 621 - - (1 621
off against equity 480) 480)
Share buyback (277) (570 008) - - (570
285)
Issue of shares 657 3 085 203 - - 3 085
860
Balance as at 28 38 737 18 276 (9 923 9 542 17 934
February 2009 000 397) 831 171
Comprehensive loss for - - - (12 633 (12 633
the year 694) 694)
Share buyback (100) (192 492) - - (192
592)
Balance as at 28 38 637 18 083 (9 923 (3 090 5 107
February 2010 508 397) 863) 885
CONDENSED SEGMENT REPORT FOR THE GROUP
Souther Norther North Coasta Corporat Total
n n West l e
R R R R R R
2010
Total revenue 43 326 8 992 9 543 5 891 3 981 71 734
459 291 932 015 171 868
Total 11 727 2 385 1 833 2 171 (33 194 (15 075
profit/(loss) 051 722 942 917 331) 699)
before tax for
reportable
segments
2009
Total revenue 72 615 8 066 7 639 6 116 5 332 99 771
792 248 416 755 838 049
Total 33 366 1 215 1 040215 5 431 (37 832 3 221
profit/(loss) 646 926 126 782) 131
before tax for
reportable
segments
OPERATIONAL PERFORMANCE
A rationalisation strategy was implemented prior to year end which resulted in
some of the smaller contracts being centralised. Initial benefits were
experienced prior to year end and the directors anticipate that the full
benefits of this process will be realised in the 2011 financial year. As
reported on SENS on 9 November 2009, the group was awarded the tender for the
Ekurhuleni Municipality. This contract will be a material contributor to revenue
in the year ahead. The New Business Development unit has and will continue to
ensure that the company`s profile and delivery capabilities are consistently
being promoted. TCS places a high emphasis on retaining its existing clients and
increasing income to enhance the sustainability of the company.
FINANCIAL PERFORMANCE
Revenue declined by 28% from the previous corresponding financial year. A
significant portion of this (13%) primarily related to the change in status of
the City of Cape Town ("COCT") contract. In addition, due to delays in the roll
out of the Ekurhuleni contract, the revenues from this contract were
insufficient to offset the decline in revenues of the COCT contract.
Strict controls were implemented to contain operating expenses, resulting in
operating expenses being reduced by 6% for the period. Excluding the irregular
transactions on the bank account of the group, as communicated to shareholders
on SENS on 27 May 2009 and 8 July 2009, operating expenses decreased by 12%.
These cost savings were, however, less than the decline in revenue which
contributed to the group reporting a loss for the year of R12.6 million compared
to a loss in the prior year of R0.6 million. Excluding the COCT adjustment and
the irregular bank transactions as noted above, the group would have reported an
operating profit of R3 million for the year.
Headline earnings per share has declined by 215% to a loss of 1.38 cents per
share and earnings per share has declined by 2 080% to a loss of 3.27 cents per
share from the previous corresponding period.
Notwithstanding the loss incurred, effective working capital management resulted
in the group generating R2.1 million of cash from operating activities during
the period. After investing and financing activities, the cash movement for the
year was an outflow of R5.7 million resulting in a closing cash balance of R10.4
million at year end.
PROSPECTS AND FUTURE PERFORMANCE
Since the start of the 2011 financial year, the group`s strategy has been to
ensure that maximum value is extracted from the remainder of the COCT contract
and that the Ekurhuleni contract is rolled out as planned. In addition,
restructuring has commenced at an operational level as well as at head office
subsequent to year end and the directors are confident that these measures will
result in improved operational efficiencies and cost savings.
The directors are pleased to report that subsequent to year end further
municipal tenders were awarded to the group including Khara Hais, Overstrand,
Kokstad, Harrismith and Limpopo Province.
The implementation of the Administration Adjudication of Road Traffic Offences
Project ("AARTO") is imminent. It is anticipated that AARTO will enhance the
company`s revenue and growth prospects. TCS has aligned its business strategy,
products and services in accordance with the requirements of AARTO.
SEGMENT REPORTING
Due to the fact that the group changed the structure of its internal
organisation, regional service centres have been identified by the group as
operating segments. This caused the composition of the group`s reportable
segments to change. The corresponding information for the prior year has been
restated to reflect this change. The group`s reportable segments are:
- Southern region
- Northern region
- North West region
- Coastal region
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of Compliance
The accounting policies applied in the preparation of these audited condensed
financial statements, which are based on reasonable judgments and estimates, are
in accordance with International Financial Reporting Standards ("IFRS") and are
consistent with those applied in the annual financial statements for the year
ended 28 February 2009. These audited condensed financial statements as set out
in this report have been prepared in terms of IAS 1 - Presentation of Financial
Statements, as amended, IAS 34 - Interim Financial Reporting, the Companies Act,
1973 (Act 61 of 1973), as amended, and the Listings Requirements of JSE Limited.
Basis of Measurement
These audited condensed financial statements have been prepared on the
historical cost basis, except for certain financial instruments that have been
measured at fair value.
The accounting policies are consistent with those used in the annual financial
statements for the year ended 28 February 2009, except for the adoption of IAS 1
- Presentation of Financial Statements, as amended.
Subsequent Events
The company entered into an agreement with Mvelaphanda Holdings (Proprietary)
Limited ("Mvelaphanda") to extend the redemption date of the 2 600 cumulative
redeemable preference shares issued to Mvelaphanda on 27 November 2007 for a
further three years.
In terms of the original agreement that was entered into between TCS and
Mvelaphanda on 27 November 2007, ("the preference share agreement"), TCS issued
2 600 cumulative redeemable preference shares to Mvelaphanda on the following
terms and conditions:
- the 2 600 cumulative redeemable preference shares were to be redeemed at
their issue price of R10 000 per share, which is comprised of a par value
of R1 and a share premium of R9 999, three years and one day after the
issue of such shares, being 29 November 2010;
- the cumulative redeemable preference shares carry a fixed coupon rate of
12%; and
- all unpaid accumulated dividends accrued interest at a fixed rate of 12%
per annum.
Under the amended terms, TCS and Mvelaphanda have agreed to a new preferential
share arrangement, whereby, other than the extension of the redemption date, all
the terms contained in the preference share agreement remain unchanged. The
preference shares will be redeemed in three years time on 29 November 2013. In
addition, TCS commits to a R3 million fee, payable to Mvelaphanda on
implementation of this new agreement.
Contingent Liability
The company is currently in dispute with Syntell (Proprietary) Limited
("Syntell") regarding the fee to be paid by the company to Syntell for the use
of two cameras on the COCT contract. The amount being claimed by Syntell is R1.8
million inclusive of VAT. The directors are of the view that the fee due is R0.3
million and has provided for this amount in the annual financial statements. An
arbitration hearing has been set for July 2010 where the quantum of the fee
payable by the company to Syntell will be determined.
Audited Opinion
The auditors, PricewaterhouseCoopers Inc, have audited these results and their
qualified opinion is available for inspection at the company`s registered
office.
Extract from auditor`s report
"Basis for Qualified Opinion
There is uncertainty on the impairment of goodwill reflected in the group annual
financial statements if two major customer contracts are not extended. Had the
impairment loss been recognised, goodwill would have been stated in the
consolidated statement of financial position at R1.4 million and consolidated
net profits after tax would have been reduced by R6.1 million to a loss of R18.8
million.
Qualified Opinion
In our opinion, except for the effect of the possible impairment of goodwill
described in the Basis for Qualified Opinion paragraph, the financial statements
present fairly, in all material respects, the financial position of Total Client
Services Limited as at 28 February 2010, and its consolidated and separate
financial performance and its consolidated and separate cash flows for the year
then ended in accordance with International Financial Reporting Standards and in
the manner required by the Companies Act of South Africa.
Report on Other Legal and Regulatory Requirements
In accordance with our responsibilities in terms of sections 44(2) and 44(3) of
the Auditing Profession Act, we have identified certain unlawful acts or
omissions committed by persons responsible for the management of Total Client
Services Limited which constitute reportable irregularities in terms of the
Auditing Profession Act, and have reported such matters to the Independent
Regulatory Board for Auditors. We have subsequently concluded that, in our
opinion, no reportable irregularity has taken place or is taking place."
Directorate
The following changes have been made to the board of directors of TCS during the
period under review:
Director Detail Date
Ina Jonker Appointed as Financial Director 24 April
2009
Vuyo Zitumane Appointed as non-executive director 6 May 2009
Brian Noel Resigned 11 May 2009
Birkholtz
Elaine Page Appointed as executive director 11 May 2009
Lindikhaya Sipoyo Change in function to non-executive 25 May 2009
chairman
Ina Jonker Not re-elected as Financial Director 30 October
at annual general meeting 2009
Abdul Shaheed Change in function from CEO to 4 December
Mohamed executive director 2009
Lindikhaya Sipoyo Change in function to executive 4 December
chairman and CEO 2009
Dumisani Mafu Appointed as non-executive director 4 December
2009
Abdul Shaheed Resigned 1 March 2010
Mohamed
John Morgan Appointed as Financial Director 17 May 2010
O`Kennedy Smit
The board also thanks Craig Whittle, for ensuring the efficient operation of the
financial department of TCS during the period under review. Craig will continue
to assist the company until the finalisation of the annual report for the year
ended 28 February 2010.
By order of the board
Lindikhaya Sipoyo Morgan Smit
Executive Chairman Financial Director
30 June 2010
Directors
L Sipoyo, (CEO and Executive Chairman), JMO Smit (Financial Director), JH
Taljaard (Chief Operating Officer), E Page, V Zitumane*, D Mafu*
(*Non-executive)
Registered office:
20 Regency Drive, Route 21 Corporate Park, Irene, Pretoria, 0153
(PO Box 853, Wingate Park, 0157)
Company Secretary:
Probity Business Services (Proprietary) Limited
Third Floor, JHI House, 11 Cradock Avenue
Rosebank, 2196
Auditors:
PricewaterhouseCoopers Inc. Chartered Accountants (SA)
2 Eglin Road, Sunninghill, 2157
(Private Bag X36, Sunninghill, 2157)
Designated Adviser:
Merchantec Capital
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61763, Marshalltown, 2107)
Company website:
www.tcsonline.co.za
www.viewfines.net
Date: 30/06/2010 17:05:01 Produced by the JSE SENS Department.
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