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TCS
TCS
TCS - Total Client Services Limited - Reviewed Condensed Consolidated Group
Results for the six months ended 31 August 2011
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")
REVIEWED CONDENSED CONSOLIDATED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
2011
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Reviewed Reviewed Audited
six months six months year ended
ended ended 28 February
31 August 31 August 2011
2011 2010
% change R`000 R`000 R`000
Revenue 4.7 22 462 21 460 47 514
Gross profit 8.1 21 776 20 149 20 926
Earnings/ 129.3 916 (3 121) (5 367)
(Loss)before
interest, tax,
depreciation and
amortisation
Depreciation (2 590) (2 351) (4 605)
Goodwill - (1 385) (4 868)
Gain on preference 2 002
share roll over
Net finance costs (1 952) (1 799) (3 934)
Loss before taxation 58.1 (3 626) (8 656) (16 772)
Income tax expense 991 2 092 2 109
Loss after tax 59.9 (2 635) (6 564) (14 663)
Other comprehensive - - 2 453 2 779
income for the
period (net of
income tax)
TOTAL COMPREHENSIVE 35.9 (2 635) (4 111) (11 884)
LOSS FOR THE PERIOD
Loss attributable
to:
Owners of the (2 635) (6 564) (14 663)
company
Non-controlling - - -
interest
Loss per share
Basic and diluted 59.9 (0.68) (1.70) (3.80)
loss per ordinary
share (cents)
Headline and diluted 45.9 (0.72) (1.33) (2.48)
headline loss per
ordinary share
(cents)
Total weighted 386 363 386 363 386 363
average number of
shares in issue,
excluding treasury
shares (`000)
Reconciliation of
headline loss
Loss after tax (2 635) (6 564) (14 663)
Adjusted for:
Goodwill impairment - 1 385 4 868
(Gain)/Loss on (203) 75 (391)
disposal of
property, plant and
equipment
Scrapping of assets - - 705
Taxation effect 56 (21) (88)
Headline loss for 45.7 (2 782) (5 125) (9 568)
the period
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Reviewed Reviewed Audited
as at as at as at
31 August 31 August 28 February
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 12 126 17 373 13 382
Current assets 14 923 17 323 16 764
TOTAL ASSETS 27 049 34 696 30 146
EQUITY AND LIABILITIES
Capital and reserves (9 410) 997 (6 776)
Non-current liabilities 22 378 20 858 21 922
Current liabilities 14 081 12 841 15 000
Total Liabilities 36 459 33 699 36 922
TOTAL EQUITY AND LIABILITIES 27 049 34 696 30 146
Ordinary shares in issue (`000) 390 135 390 135 390 135
Treasury shares in issue (`000) (3 772) (3 772)
(3 772)
Total number of shares in 386 363 386 363 386 363
issue excluding treasury shares
(`000)
Net asset value per ordinary (2.44) 0.26 (1.75)
share (cents)
Net asset value per ordinary (2.41) 0.26 (1.74)
share (cents) including
treasury shares
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Reviewed Reviewed Audited
six months six months year ended
ended ended 28 February
31 August 31 August 2011
2011 2010
R`000 R`000 R`000
Net cash inflow/(outflow) from 69 (1 098) (940)
operating activities
Net cash outflow from investing (359) (2 343) (3 274)
activities
Net cash inflow/(outflow) from 320 (3 426) (3 980)
financing activities
Net increase/(decrease) in cash 30 (6 867) (8 194)
and cash equivalents
Cash and cash equivalents at 2 220 10 414 10 414
the beginning of the period
Cash and cash equivalents at 2 250 3 547 2 220
the end of the period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share BEE Retained
R`000 capital premium reserve earnings
Balance as at 1 March 2010: 39 18 082 (9 923) (3 090)
Total comprehensive loss for - - - (6 564)
the period
Balances as at 31 August 39 18 082 (9 923) (9 654)
2010
Total comprehensive loss for - - - (8 098)
the period
Transfer from revaluation - - - 695
reserve
39 18 082 (9 923) (17 057)
Balance as at 28 February
2011
Total comprehensive loss - - - (2 635)
for the period
Transfer from revaluation - - - 915
reserve
Balance as at 31 August 2011 39 18 082 (9 923) (18 777)
Attributable Minority Total equity
R`000 to holders interest
of company
Revaluation
reserve
Balance as at 1 March - - 5 108
2010: 5 108
Total comprehensive 2 453 (4 111) - (4 111)
loss for the period
Balances as at 31 2 453 - 997
August 2010 997
Total comprehensive (7 772) - (7 772)
loss for the period
326
Transfer from - - -
revaluation reserve to
retained income (695)
2 084 - (6 775)
Balance as at 28 (6 775)
February 2011
Total comprehensive (2 635) - (2 635)
loss for the period
Transfer from (915) - - -
revaluation reserve to
retained income
Balance as at 31 1 169 - (9 410)
August 2011 410)
COMMENTARY ON THE CONDENSED CONSOLIDATED GROUP RESULTS FOR THE SIX MONTHS ENDED
31 AUGUST 2011
Basis of preparation and accounting policies
These reviewed condensed consolidated interim financial statements for the six
months ended 31 August 2011 has been prepared in accordance with IAS 34 -
Interim Financial Reporting, the AC500 Standards as issued by the Accounting
Practice Board, in the manner required by the Companies Act, 2008 (Act 71 of
2008) and the Listings Requirements of JSE Limited. The reviewed interim
condensed consolidated financial statements should be read in conjunction with
the annual financial statements for the year ended 28 February 2011. The
accounting policies applied in the preparation of these condensed consolidated
interim financial statements, which are based on reasonable judgments and
estimates, are in accordance with International Financial Reporting Standards
and are consistent with those of the annual financial statements for the year
ended 28 February.
Going concern
Given the significant losses reported in the prior year, the group currently has
a negative equity position of R 9.4 million. The directors have prepared the
financial information on a going concern basis which presumes that the group
will generate sufficient cash flows to enable it to service its debts in the
normal course of business as and when they become payable.
The directors considered the future cashflows of the group when it assessed the
going concern status. Although due care has been exercised in the preparation of
these forecasts, any forecast is based on certain assumptions which may or may
not materialise in future. The most significant assumptions are that cash flow
from new contracts entered into will be realised as expected and the continued
support of the preference shareholder will be provided to the company.
Modified review report
BDO South Africa Inc. has issued a modified review report on the reviewed
consolidated results of the company for the six months ended 31 August 2011.
They have drawn attention to the disclosure made by the directors regarding the
ability of the group to continue as a going concern. Their review was conducted
in accordance with ISRE 2410 "Review of Interim Financial Information performed
by the independent auditor of the company". The modified review report is
available for inspection at the company`s registered office.
The emphasis of matter paragraph as contained in the review report is set out
below:
"Emphasis of matter
Without qualifying our conclusion above we draw attention to the disclosure made
by the directors regarding the ability of the group to continue as a going
concern."
Operating segments
The group has five reportable segments as reflected below. Operating segments
have been determined by management based on monthly reports reviewed by the
management committee of TCS. Financial and personnel resources are allocated
according to the needs of the various segments in order to implement the
strategy and operating plans of the company, as agreed upon during the budgeting
process.
CONDENSED CONSOLIDATED SEGMENT REPORT OF THE GROUP
Southern Northern North/West Coastal Total
Corporate
R`000 R`000 R`000 R`000 R`000 R`000
31 August 2011
Total revenue 1,314 12,317 3,201 2,821 2,809 22 462
(No inter (209) 2,760 954 1,254 (8,385) (3 626)
segmental
sales
occurred)
Total
(loss)/profit
before tax for
reportable
segments
31 August 2010
Total revenue 4 309 8 034 3 970 2 515 2 632 21 460
(No inter (1 459) 1 276 1 289 541 (10 303) (8 656)
segmental
sales
occurred)
Total
profit/(loss)
before tax for
reportable
segments
28 February
2011
Total revenue 7 281 24 900 5 775 4 867 4 691 47 514
(No inter (2 422) 7 870 (2 215) 1 487 (21 492) (16 772)
segmental
sales
occurred)
Total
profit/(loss)
before tax for
reportable
segments
FINANCIAL PERFORMANCE
TCS experienced a stabilisation of the finalisation of income on traffic
offences during the period. The industry continues to be affected by the delays
of the national roll-out of the Administrative Adjudication of Road Traffic
Offences Act which has resulted in uncertainty within the sector in enforcing
the finalisation of tenders. Notwithstanding this uncertainty, the group has
focused on improving finalisation of traffic offences during the period under
review by assisting with continuous roadblock activities as well as "sms"
campaigns in all major centres. In addition, production of traffic offences were
also a focus area during the period which will result in increased revenues in
the months ahead. Additional staff were hired in the larger centres to reduce
the capturing backlogs of offences which also resulted in improved collections
during the period.
The consolidated turnover of the group increased by 4.7% to R22.46 million over
the reporting period (August 2010: R21.46 million). The total consolidated loss
after tax for the reporting period reduced by 59.9% to R2.64 million (August
2010: R6.56 million). It is important to note that earnings before interest,
tax, depreciation and amortisation ("EBITDA") moved from a negative R3.12
million to a positive R0.92 million during the period under review. This was as
a result of management`s cost saving initiatives and the exiting of loss making
contracts.
Loss per share reduced significantly to 0.68 cents per share (August 2010: 1.70
cents). Headline losses per share also reduced significantly to 0.72 cents per
share (August 2010: 1.33 cents). Net asset value per share decreased to (2.44)
cents per ordinary share (August 2010: 0.26 cents).
OPERATIONS
The City of Cape Town contract is now out of the base revenue and with the
Ekurhuleni contract improving, an increase in revenues (albeit single digit) was
experienced during the period under review. Management`s focus is now to
diversify the group`s revenue to ensure sustainability. This is evidenced with
the Limpopo provincial vehicles contract as well as the recently announced City
of Windhoek project. There is a pipeline of projects under way including revenue
enhancement activities for licence users. In addition, the group`s own payment
portal, ePay, was launched during the period under review and as of the date of
this report there were four municipalities utilising this service.
PROSPECTS
As noted above, the board of directors of TCS have taken steps to diversify the
revenue of the group to ensure sustainability. These include:
- revenue enhancement proposals for municipalities;
- introduction of payment portal - ePay;
- automatic Number Plate Recognition systems - ANPR;
- licence (vehicle and driver`s) scanners; and
- fleet management and vehicle tracking.
The benefits of the above initiatives are expected to be realised within the
next few months and the directors believe that the success of these initiatives
will ensure the sustainability of the group.
SUBSEQUENT EVENTS
The directors are not aware of any other material events that have occurred
between the end of the interim period and the date of this report.
CONTINGENCIES
- The former landlord has issued summons against the company for R1
million. The company has defended the action and awaits a court date. The
case has progressed to the discovery of documents stage. The directors do
not believe that any amounts are due to the former landlord and have not
provided for this amount in the annual financial statements or in these
interim results.
- SARS has disallowed the loss of R3.5 million plus associated costs of R0.6
million relating to the irregularity on the bank account of the subsidiary
company which occurred during the 2010 financial year. The directors
believe that these amounts are deductible and have appointed Webber Wentzel
Attorneys to assist in this regard. These results have been prepared on the
basis that these amounts are deductible for tax purposes.
- Following the arbitration award in favour of Syntell, a further claim of R1
million has been submitted by Syntell against the company. The directors
are of the view that it would not be in the best interests of the company
to proceed to arbitration and is therefore currently in negotiations
regarding a settlement on this matter.
The directors are not aware of any other contingencies that occurred between the
date of authorisation of the results and the reporting date.
CHANGE TO THE BOARD OF DIRECTORS
Mr Craig Whittle was appointed financial director with effect from 1 October
2011.
Preparation of the unaudited reviewed interim results
The unaudited reviewed interim financial statements have been prepared under the
supervision of the Financial Director Mr C Whittle, B Com, CA(SA).
By order of the board
Lindikhaya Sipoyo Craig Whittle
Executive Chairman Financial Director
28 October 2011
Directors
L Sipoyo, (Chairman), E Page, C Whittle (Financial Director), V Zitumane*, D
Mafu*
(*Independent non-executive)
Registered office:
1st Floor, River Falls Office Park
Bushwillow Building, No. 3, Rose Ave.
Doringkloof, Centurion
0157
Company Secretary:
Merchantec (Proprietary) Limited
2nd Floor, North Block
Hyde Park Office Towers
Cnr 6th Rd & Jan Smuts Ave
Hyde Park
2196
Auditors:
BDO South Africa Incorporated
Building C, Riverwalk Office Park
41 Matroosberg Road, Ashlea Gardens
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: 28/10/2011 07:05:41 Produced by the JSE SENS Department.
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