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ATR
ATR
Africa Cellular Towers Limited - Audited Condensed Financial Results for the
year ended 28 February 2011
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 2011
Condensed Consolidated Statement of Comprehensive Income
Audited Audited
12 months 12 months
February February
2011 2010
R`000 R`000
Revenue 202 128 227 390
Gross (loss)/profit (11 635) 2951
Other income 2 316 7537
Operating expenses (76 818) (74 674)
Trading loss (86 137) (64 186)
Loss on foreign exchange (25 489)
differences (7 499)
Profit on sale of property, 174
plant and equipment 118
Income from available for sale 278
accounted investment -
Impairment of investment (1) (22 032) (5 000)
Impairment of goodwill (1) (6 194)
Impairment of land (1 711) -
Operating loss before interest, (117 261) (100 417)
taxation, depreciation and
amortisation
Depreciation and amortisation (7 786) (6 038)
Loss before interest and (106 455)
taxation (125 047)
Net interest received 2 633 13 123
Loss before taxation (122 413) (93 332)
Taxation (10 686) 1 069
Loss attributable to ordinary (92 263)
shareholders (133 100)
Other comprehensive income
Loss attributable to ordinary
shareholders (133 100) (92 263)
Exchange differences arising on
translation of
foreign operations (2 904) (16 334)
Financial assets available for
sale - (244)
Total comprehensive loss for the (108 841)
year (136 004)
Reconciliation of headline
earnings:
Loss attributable to ordinary (92 263)
shareholders (133 100)
Adjusted for:
Profit on sale of property, (174)
plant and equipment (118)
Profit on disposal of other (278)
financial instruments
Impairment of goodwill (1) 22 032 11 194
Impairment of land 1 711 -
Headline loss attributable to (81 521)
ordinary shareholders
(109 475)
Weighted average shares in issue 356 055
(`000) 356 055
Fully diluted weighted average 356 055
shares in issue (`000) (2) 356 055
Loss per share (cents) (37.4) (25.9)
Headline loss per share (cents) (30.8) (22.9)
Fully diluted loss per share (37.4) (25.9)
(cents)
Fully diluted headline loss per (30.8) (22.9)
share (cents)
Notes:
1. Impairment of goodwill of R22 million relating to JK Shelters (Pty)
Ltd`s net asset value in the holding company`s financial statements.
2. 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
2011 2010
R`000 R`000
ASSETS
Non-current assets 61 144 73 667
Property, plant and equipment 54 724 50 692
Goodwill - 22 032
Intangible assets 48 69
Other financial assets 6 297 -
Deferred taxation 75 874
Current assets 139 418 264 544
Inventories 37 212 47 849
Other financial assets - 166
Current tax receivable 95 4218
Construction contracts and 37 545 63 671
receivables
Trade and other receivables 46 434 88 141
Cash and cash equivalents 18 132 60 499
Total assets 200 562 338 211
EQUITY AND LIABILITIES
Equity and liabilities
Equity and reserves 140 495 276 999
Share capital 218 652 219 153
Reserves (27 026) (24 123)
Retained earnings (51 131) 81 969
Non-current liabilities 19 970 24 286
Installment sale obligation 12 414 17 689
Deferred taxation 957 -
Mortgage bond 6 599 6 597
Current liabilities 40 097 36 926
Current taxation payable 1 710 2 761
Current portion of installment sale 5 817 6 111
obligation
Trade and other payables 32 565 28 050
Current portion of mortgage bond 5 4
Total equity and liabilities 200 562 338 211
Shares in issue at year end (`000) 370 287 370 287
Net asset value per share (cents) 37.9 74.8
Net tangible asset value per share 68.8
(cents) 37.9
Condensed Group Statements of Changes in Equity
Share Foreign Revalu Retained Total
capital currency ation earnings equity
and translat reserv R`000 R`000
premium ion e
R`000 reserve R`000
R`000
Balance 1 March 217 633 244 174 232
2009 (7 788) 384 321
Changes in - - -
equity:
Share capital -
issued -
Share premium - - -
- -
Total (16 334) (244) (92 263) 108841)
comprehensive
income for the
year
Share-based 1 519 - - 1 519
payment reserve -
Balance at 28 219 152 (24 122) - 81 969 276 999
February 2010
Changes in - - - -
equity:
Share capital
issued -
Share premium - - - - -
Share-based (500) - - (500)
payment reserve -
Total - (2 904) - (133 100)
comprehensive
income for the
year 136
004)
Balance at 28 218 652 (27 026) - (51 131) 140 495
February 2011
Condensed Group Cash Flow Statements
Audited Audited
12 months 12 months
February February
2011 2010
R`000 R`000
Cash flows utilised by operating (14 826) (35 422)
activities
Cash flows utilised by investing (19 582) (3 245)
activities
Cash flows utilised by financing (7 959) (10 699)
activities
Change in cash and cash equivalents (42 367) (49 366)
Cash and cash equivalents at beginning of 60 499 109 865
the year
Cash and cash equivalents at end of the 18 132 60 499
year
Segmental Reporting
Audited Audited
12 months 12 months
February February
2011 2010
R`000 R`000
Gross revenue
Cellular Towers 100 932 192 157
Power Lines 81 752 4 555
Equipment Shelters 9 429 13 635
Fibre Optics 10 015 17 043
202 128 227 390
Trading (loss)
Cellular Towers (65 764) (47 545)
Power Lines 7 115 (3 653)
Equipment Shelters (8 613) (9 742)
Fibre Optics (18 875) (3 246)
(86 137) (64 186)
(Loss) before interest and
taxation
Cellular Towers (79 066) (86 181)
Power Lines 5 548 (5 600)
Equipment Shelters (10 509) (11 127)
Impairment of investment (22 032)
Fibre Optics (18 988) (3 547)
(125 047) (106 455)
Depreciation and impairment
Cellular Towers (7 370) (4 627)
Power Lines (1 566) (975)
Equipment Shelters (448) (436)
Impairment of investment (22 032) (11 194)
Fibre Optics (113) -
(31 529) (17 232)
OVERVIEW
In light of challenging market conditions persisting throughout the 28
February 2011 year end period and changes experienced in the business of
ACTOWERS, a comprehensive turnaround strategy was implemented during the year.
Although the results were still well below the Board`s expectations, the
second half of 2011 results, compared to the first half of 2011 results, show
a marked improvement, indicating that the Group is starting to see the
benefits of this turnaround strategy.
The main external and internal factors, inter alia, the strength of the South
African currency, low revenue generated, low volume throughput in the factory,
steel imports from China and India at below cost and losses incurred on
certain cellular and fibre optic installation contracts in Africa, negatively
impacted the results. Positive developments in the second half of 2011
included the securing of profitable cellular contracts and establishing the
Power Lines Division with Eskom enabling the company to be awarded several
meaningful power line contracts.
FINANCIAL RESULTS
Group revenue decreased by 11% from R227.4 million (2010) to R202.1 million
for the year ended 28 February 2011 mainly as a result of the lack of quality
contracts in the Cellular and Equipment Shelters Divisions and lower volume
throughput in the factory in the first six months 2011 as well as the strong
Rand. A stated objective of the Group was to reduce its exposure in Africa and
ACTOWERS geographic revenue split for 28 February 2011 is 55% South Africa
(2010: 14%) and 45% the rest of Africa (2010: 86%), a noteworthy achievement.
The company made a gross loss of R11.6 million in relation to last year`s
gross profit of R2.9 million. However a gross profit of R13 million was
achieved the second half of the year against a gross loss of R21 million in
the first half of the year. The gross loss mainly incurred in the first half
of the year can be attributed to the following factors:
- The overall low revenue and factory through-put compared to the fixed
factory cost structures in the Cellular Towers and Equipment Shelters
Divisions;
- The high cost structures of having a presence in the various African
countries compared to the low revenue generated from cellular
installation contracts;
- The strength of the South African currency. Although foreign exchange
losses are reported separately in the Statement of Comprehensive Income,
the strong Rand also had an effect on the gross profit. The effect of the
currency fluctuations between the date of quoting and the date of
invoicing is reflected in the gross loss. Furthermore, a big component of
the costs incurred for the cellular installations in Africa is incurred
in Rand, while the majority of the income is in US Dollar;
- The Cellular Towers and Fibre Optics Divisions have also completed a
number of loss making contracts in South Africa and various African
countries. The reason for loss-making contracts can be attributed to
escalating costs, overruns on contracts and sign-off procedures with
clients.
The gross profit achieved in second half of the year can be attributed to the
turnaround strategy implemented and would have been even higher was it not for
the completion off loss making projects from the first half of the year. The
turnaround in gross profit is directly aligned with the company turnaround
strategy and bodes well for the future.
The operating loss increased by 17% to R117.3 million from R100.4 million for
the comparative year. The major item affecting the operating loss is the R23.7
million goodwill impairment on JK Shelters and the "R59" property. The
goodwill on JK Shelters has now been fully written off. Margin pressure on
projects as a result of the competitive environment was experienced in the
first half of 2011.
The company wrote-off bad debts to the value of R17.6 million during the year,
with only R300 000 written off in the second half of the year, and increased
the doubtful debt provision by R15 million.
The management of working capital is a key focus area for ACTOWERS and days in
trade debtors improved to 78 days (2011) vs 128 days (2010), days in
construction contracts to 70 days (2011) vs 104 days (2010) and days in
inventory to 64 days (2011) vs 78 days (2010). There was a slight increase in
days in creditors from 46 days (2010) to 53 days (2011). The debtors` age
analysis also showed a satisfactory improvement with current debtors
representing 45% (2010: 25%) of the debtors` book and more than 120 days 44%
of the book (2010: 62%).
DIVISIONAL REVIEW
Power Lines Division
The Power Lines Division`s revenue growth of 1 694.8% to R81.8 million (2010:
R4.6 million) is testimony to ACTOWERS having established its credentials with
Eskom and being awarded turnkey power line contracts. This Division moved into
an operating profit position of R5.5 million (2010: operating loss of R5.6
million). ACTOWERS has high aspirations for this Division and believes that
the future growth of the Group will stem from this Division. The Power Lines
Division has submitted various tenders in excess of R150 million with an
optimistic expectation that at least one of these tenders will be successful.
The confirmed order book for this Division is R 168million as at 28 February
2011 of which R107 million is still due The Division has a clear strategy in
place which is ongoing.
Cellular Towers Division
The Cellular Towers Division reported a significant decline in revenue of
47.5% as a result of a changed cellular landscape and ACTOWERS being more
selective and risk averse when accepting cellular installation projects.
Regarding the operating loss of R79.1 million (2010: R86.2 million), the
Division showed an "improved" second half 2011 with an operating loss of R19.8
million opposed to the dire first half 2011 results reflecting a loss of R59.2
million. The second half 2011 demonstrates the benefits of turnaround strategy
implemented for this Division. The results were severely affected by the
completion of loss-making installation contracts, lower sales volumes, the
stronger Rand and the weak steel price. The strategy for this Division is to
focus on opportunities in the South African cellular market and stable African
countries as well as to transform this Division into a low cost flexible
division.
Equipment Shelters Division
This Division continues to deliver disappointing results. Revenue decreased by
30.8% to R9.4 million (2010: R13.6 million) and operating loss improved by
5.6% from R11.1 million in 2010 to R10.5 million in the current financial
period. The main reasons for the loss position are low revenue as a result of
the change in product demand and the strong Rand. The prospects and future for
this Division are uncertain.
PROSPECTS
The turnaround strategy, implemented since May 2010, encompassed inter alia a
cost cutting exercise, major organisational restructuring and evaluating the
sustainability and viability of each Division, which resulted in the closure
of the Fibre Optics Division. ACTOWERS developed comprehensive business plans
and models for each Division. The turnaround strategy is still ongoing and the
full benefits should materialise over the next 18 months.
ACTOWERS has set itself four specific goals in turning the company back on the
road to profitability. The goals are to create shareholder and stakeholder
wealth, become the preferred employer in the power lines and GSM industries,
become one of the leading power line companies in Southern Africa and restore
the Cellular Towers Division as a second core business.
Post year end, the company was able to secure various debt facilities to the
amount of R99 million from the Industrial Development Corporation (IDC) which
has assisted with working capital requirements and the purchase of necessary
assets for the Power Lines Division.
The Power Lines Division, subsequent to the funding being secured, is well
placed on several big tenders. The Cellular Towers Division is seeing an
increase in demand from new clients and operators and with a focus on growing
the business locally and in stable SADC and African countries, it is expected
that this Division will return to profitability.
ACTOWERS is considering recapitalising the business to reduce gearing,
alleviate short term pressure on cash flow, provide funding for contracts and
to be able to execute larger power line contracts. The management of ACTOWERS
believes that the Group is turning the corner and is striving to become
reliable in all aspects of its business.
DIVIDEND
In line with its policy, the Group will not pay a dividend for the 2011 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.
CHANGES TO THE BOARD OF DIRECTORS
With effect from 1 October 2010 Jacques de Villiers was appointed as Chief
Executive Officer (CEO), Chris Kruger stepped down as CEO and Redik Du Toit
was appointed as Acting Chief Financial Officer.
With effect from 1 June 2010 Nick van der Mescht was appointed as an Executive
Director and Martin Potgieter`s category of directorship changed from an
Independent Non-Executive Director to a Non-Executive director.
The following changes were effective from 26 January 2011:
- Chris Kruger, stepped down as Executive Chairman of the Board and now
serves in a Non-Executive Director capacity;
- Mitesh Patel was appointed as Independent Non-Executive Chairman of the
Board and resigned as Chairman of the Audit Committee and Risk Committee;
- Seth Radebe was appointed as an Independent Non-Executive Director,
Chairman of the Audit Committee and member of the Risk Committee.
Martin Potgieter resigned as a Non-Executive Director with effect from 31
January 2011.
Pieter Swart was appointed as Financial Director with effect from 1 March 2011
and replaced Redik Du Toit who was appointed as the Acting Chief Financial
Officer on 1 October 2010.
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 2010, which comply with IFRS.
STATEMENT ON GOING CONCERN
The reviewed financial results for the period ended 28 February 2011 have
been prepared on the going concern basis. The Group has restructured and the
directors believe that the Group is solvent, additional funding was secured to
perform on current and future contracts.
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 2011. 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
20 May 2011
J DE VILLIERS PSN Swart
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Independent Non-Executive Directors: MM Patel (Chairman) and
SM Radebe
Non-Executive Directors: CJJ Kruger and V Nkonyeni
Executive Directors: J de Villiers (CEO); PSN Swart (Financial Director); DM
van Staden and NWJ van der Mescht
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 on the website
www.africacellular.co.za.
Date: 20/05/2011 08:00:04 Produced by the JSE SENS Department.
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