| Fri 17 Dec 2010, 15:56 | | TLM - Telemasters Holdings Limited - Reviewed consolidated results for the year |
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TLM
TLM
TLM - Telemasters Holdings Limited - Reviewed consolidated results for the year
ended 30 September 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")
REVIEWED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2010
CONDENSED CONSOLIDATED STATEMENT OF Reviewed Audited
COMPREHENSIVE INCOME
12 months 12 months
ended ended
30 September 30 September
2010 2009
R R
Revenue 236 899 745 231 222 775
Cost of sales (200 721 228) (191 287 718)
Gross profit 36 178 517 39 935 057
Loss on disposal of assets (318 187) (47 046)
Auditors` remuneration (325 020) (293 000)
Depreciation (3 973 114) (1 064 644)
Amortisation (996 991) (1 041 138)
Impairment of intangible asset - (905 829)
Directors` remuneration (3 289 417) (2 765 005)
Operating lease (738 313) (506 643)
Employee costs (6 989 196) (6 004 472)
Bad debt written off (1 310 892) (942 821)
Professional fees (1 241 451) (1 068 742)
Operating expenses (4 561 532) (3 751 272)
Operating profit 12 434 404 21 544 445
Investment income 880 159 1 103 108
Finance costs (773 697) (1 127 263)
Profit before taxation 12 540 866 21 520 290
Taxation (4 726 509) (7 116 860)
Profit for the period 7 814 357 14 403 430
Total comprehensive income for the period 7 814 357 14 403 430
Basic earnings per share (cents) 18.61 34.29
Diluted earnings per share (cents) 18.61 34.29
Headline earnings reconciliation:
Profit for the period 7 814 357 14 403 430
Adjustments:
Loss on disposal of assets 318 187 47 046
Impairment of intangible asset - 905 829
Headline earnings for the period 8 132 544 15 356 305
19.36 36.56
Headline earnings per share (cents)
Diluted Headline earnings per share 19.36 36.56
(cents)
Weighted average shares in issue (`000) 42 000 000 42 000 000
Dividends declared per share (cents) 9.00 8.00
Dividends paid per share (cents) 9.00 8.00
Capital distributions declared per share 5.00 8.00
(cents)
Capital distributions paid per share 5.00 8.00
(cents)
CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
Reviewed Audited
30 September 30 September
2010 2009
R R
ASSETS
Non-current assets
Property plant and equipment 16 600 971 17 977 899
Intangible assets 2 842 631 3 509 518
Goodwill 2 686 779 -
Deferred tax 3 860 944 394 675
25 991 325 21 882 092
Current assets
Trade and other receivables 18 726 561 23 040 606
Cash and cash equivalents 20 144 204 16 210 438
38 870 765 39 251 044
Total assets 64 862 090 61 133 136
EQUITY AND LIABILITIES
Equity and reserves
Issued capital 48 059 2 148 059
Retained earnings 30 019 324 25 984 967
30 067 383 28 133 026
Non-current liabilities
Finance lease liabilities 2 096 728 3 984 781
2 096 728 3 984 781
Current liabilities
Trade and other payables 28 155 260 19 405 263
Current portion of finance lease 2 426 455 2 002 913
liabilities
Current tax payable 2 044 085 7 562 395
Bank overdraft 72 179 44 758
32 697 979 29 015 329
Total equity and liabilities 64 862 090 61 133 136
Number of shares in issue 42 000 000 42 000 000
Net asset value per share (cents) 71.59 66.98
Net tangible asset value per share (cents) 58.42 58.63
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS
Reviewed Audited
30 September 30 September
2010 2009
R R
Cash flows from operating activities:
Cash generated from operations 26 090 003 19 119 515
Finance costs (773 697) (1 127 263)
Tax paid (10 465 893) (5 931 738)
Net cash inflow from operating activities 14 850 413 12 060 514
Cash flows from investing activities:
Interest received 565 360 687 563
Dividends received 314 799 415 545
Acquisition of businesses (1 800 000) -
Property, plant and equipment acquired (3 374 880) (7 947 610)
Proceeds from the sale of property, plant 994 441 739 200
and equipment
Intangible assets acquired (27 234) (2 926 988)
Net cash outflow from investing activities (3 327 514) (9 032 290)
Cash flows from financing activities:
Dividends and capital distributions paid (5 842 338) (6 720 000)
Proceeds from borrowings 1 214 451 3 976 366
Repayment of borrowings (2 988 667) (1 119 665)
Net cash outflow from financing activities (7 616 554) (3 863 299)
Net increase / (decrease) in cash and cash 3 906 345 (835 075)
equivalents
Cash and cash equivalents at the beginning 16 165 680 17 000 755
of the period
Cash and cash equivalents at the end of 20 072 025 16 165 680
the period
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Issued Share Total share Retained Total
capital premium capital income Equity
Balance at
30 September
2008 4 200 5 503 859 5 508 059 14 941 537 20 449 596
Profit for -
the period - - 14 403 430 14 403 430
Dividends
declared - - - (3 360 000) (3 360 000)
Capital -
distribu
tions (3 360 000) (3 360 000) - (3 360 000)
Balance at
30 September
2009 4 200 2 143 859 2 148 059 25 984 967 28 133 026
Profit for
the period - - - 7 814 357 7 814 357
Dividends
declared
- - - (3 780 000) (3 780 000)
Capital
distributions
- (2 100 000) (2 100 000) - (2 100 000)
Balance at 30
September
2010 30 067 383
4 200 43 859 48 059 30 019 324
SEGMENT REPORT
The group does not have different operating segments. The business is
conducted in South Africa and is managed centrally with no branches. The group
is managed as one operating unit. Accordingly there is no meaningful segmental
information to report other than the following information:
Reviewed Restated and
Audited
30 September 30 September
2010 2009
R R
Revenue by Nature
Sale of airtime 225 923 904 211 417 665
Connection incentive bonuses 5 602 244 16 130 918
Other 5 373 597 3 674 192
236 899 745 231 222 775
Major customers
Revenues from transactions with a single
external customer amounting to 10 percent or
more of the group`s revenue, are disclosed
below:
- Customer 1 57 544 438 62 460 544
- Other customers 179 355 307 168 762 231
236 899 745 231 222 775
1. GROUP PROFILE
TeleMasters is a specialist tele-management and business communication strategy
player operating exclusively in the South African market focusing on the
corporate market. The group 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 consolidated financial statements for the year ended 30 September 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 group that are consistent with the prior period and comply with
International Financial Reporting Standards. These results have been reviewed by
the group`s auditors who have expressed an unmodified review opinion on the
results. A copy of the review report is available for inspection at the offices
of the group`s auditors.
2.2 Commentary
During the period, the regulatory changes in the interconnect rates have had a
direct impact on the profitability of the group. Due to this and expected
changes in Mobile Termination Rates, the group has decided not to renew expired
SIMs and did not earn Connection Incentive Bonuses. This directly contributed
to a decrease in gross profit % of 2.0% from 17.3% to 15.3%.
Other factors that contributed to the drop in EPS of 15.68 cents per share to
18.61 cents per share are as follows:
* Legacy equipment and Motor vehicles were disposed during the period,
resulting in a loss of R318 187;
* Depreciation increased by R2.6 million due to the majority of the
assets being in the latter part of their useful lives as well as the
current year additions of R3.4 million;
* Amortisation is up 28.6% as it represents a full year`s write-down;
* An impairment test was performed on the client base and calculations
indicated that the intangible asset is not impaired. Therefore no
impairment was recognised during the current financial year;
* Directors` remuneration increased by 19% (R524 412) due to the
addition of a non-executive director and a full-time Financial
Director;
* Since the beginning of the year, the group rented additional office
space. This led to an increase in the operating lease cost of R231
670;
* Employee costs increased by 16.4% due to individual salary increases
and a policy to pay full medical aid contribution for all staff with
service in excess of 5 years;
* A total amount of R1 310 892 (0.55% of Revenue) was written off and /
or provided for bad debts;
* The acquisition of the subsidiary resulted in goodwill of R2 686 779.
An impairment test was performed on the goodwill and calculations
indicated that it is not impaired. Therefore no impairment was
recognised;
* Total Finance cost is linked to the lower prime lending rate and
decreased as the asset base under instalment sale agreements matured;
* Investment income is linked to the lower prime lending rate and
fluctuated according to the amendments reported by the Regulator; and
* Despite the challenges in the industry, the group has managed to
achieve a Return on Equity ("ROE") of 26% and a Return on Assets
("ROA") of 12.05%. This shows that the group remains profitable and
is successfully managed by the board of directors and all managers and
staff despite the challenging economic climate and industry changes.
The Net Asset Value (NAV) per share increased to 71.59 cents from 66.98 cents.
Net Tangible Asset per share is 58.42 cents (58.63 cents) after the total
dividends and capital distributions to shareholders of 9 cents and 5 cents
respectively per share.
The group has increased its net cash position substantially notwithstanding
pressure on margins and expenses. It remains cash positive with a very good
liquidity position.
2.3 Acquisition of subsidiary
With effect from 1 March 2010 the company acquired 100% of the voting equity
shares and claims in the subsidiary, Skycall Networks (Pty) Ltd for R1.8
million. The purchase consideration was paid in cash.
Fair value of assets and liabilities At acquisition
R
Non-current assets
Intangible assets 300 000
Deferred tax 3 785 944
Current liabilities
Trade and other payables (4 972 723)
Total net liabilities (886 779)
Consideration paid
Equity -
Cash 1 800 000
Goodwill 2 686 779
A loss of R83 575 since acquisition date has been included in the group profit
for the period.
Had the acquisition occurred at the beginning of the financial period, the
group`s revenue would have been R237 462 954 and the profit before tax would
have been R7 480 259.
2.4 Dividends and Capital distributions
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 2010.
During the second quarter the board 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.
During the third quarter the board declared a capital distribution from share
premium of 2 cents per share, which was payable to all shareholders recorded in
the share register of the company at the close of business on Friday, 23 July
2010.
During the fourth quarter the board declared a capital distribution from share
premium of 3 cents per share and a quarterly dividend of 1 cent per share, which
was payable to all shareholders recorded in the share register of the company at
the close of business on Friday, 22 October 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 30 September 2009, the company declared two
quarterly cash dividends of 4 cents each and did two capital distributions of 4
cents each during the second and third quarters.
3. LITIGATION
There are currently no legal or arbitration proceedings against the group
(including any proceedings which are pending or threatened) of which the group
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 group.
4. SUBSEQUENT EVENTS
Subsequent to the reporting date, it came to the attention of the directors that
a claim could possibly be instituted against the subsidiary, Skycall Networks
(Pty) Ltd by Telkom SA Ltd. The directors launched an investigation into the
claim and has received statements from Telkom SA Ltd to the value of R5 430 017.
These claims relate to the period prior to May 2008 and therefore the at
acquisition value of the subsidiary was adjusted to give effect to this possible
claim. In addition, shareholders are reminded of the potential delisting of the
company as announced on 02 December 2010.
5. SHARE CAPITAL
No changes to share capital occurred during the period other than the capital
distribution of share premium of 5 cents per share to shareholders in terms of a
special resolution passed at the last annual general meeting.
6. OPERATIONAL REVIEW AND PROSPECTS
The group is optimistic about its new product roll-out due to its full ECS and
ECNS licences acquired during the financial year and the subsequent positive
impact on its performance as a full telecommunications licencee.
7. CHANGES IN THE COMPOSITION OF THE BOARD
No further changes to the board occurred since the last announcement on SENS.
For and on behalf of the Board:
MB Pretorius N Owen
Chief Executive Officer Chief Financial Officer
17 December 2010
Corporate information
Directors: DS van Der Merwe*#, MB Pretorius, IG Bekker, N Owen, BR Topham*, J
Voigt*#, VI Beck*#
(* non-executive # independent)
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 South Africa Incorporated, Block C, Riverwalk Office Park, 41
Matroosberg Avenue, Ashlea Gardens, Pretoria
Transfer secretaries: Computershare Investor Services (Proprietary) 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: 17/12/2010 15:56:01 Produced by the JSE SENS Department.
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