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TLM
TLM
TLM - Telemasters Holdings Limited - Reviewed Provisional Condensed Consolidated
Results for the year ended 30 September 2011
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" or "the Group")
REVIEWED PROVISIONAL CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED
30 SEPTEMBER 2011
REVIEWED AUDITED
CONDENSED CONSOLIDATED STATEMENTS 30 September 30 September
OF COMPREHENSIVE INCOME
2011 2010
R R
Revenue
268,142,485 236,899,745
Cost of sales
(225,784,306) (200,721,228)
Gross profit 42,358,179 36,178,517
Investment revenue 876,041 880,159
Other gains and losses 4,670 (318,187)
Auditor`s remuneration (365,380) (325,020)
Depreciation (4,778,466) (3,973,114)
Amortisation (930,550) (996,991)
Directors` emoluments (3,145,858) (3,289,417)
Operating lease rentals (1,095,144) (738,313)
Employee costs (8,948,024) (6,989,196)
Bad debt (1,639,496) (1,310,892)
Professional fees (1,533,099) (1,241,451)
Other expenses (5,506,604) (4,561,532)
Finance costs (482,418) (773,697)
Profit before taxation 14,813,851 12,540,866
Income tax expense (4,813,500) (4,726,509)
Profit for the year 10,000,351 7,814,357
Total comprehensive income for the 10,000,351 7,814,357
period
Profit and total comprehensive 10,000,351 7,814,357
income attributable to the
shareholders of the Company
EARNINGS AND HEADLINE EARNINGS PER
SHARE
Earnings and diluted earnings per
share (cents) 23.81 18.61
Headline earnings and diluted 23.80 19.36
headline earnings per share (cents)
The Earnings per share and Headline
earnings per share were determined
using the following information:
Earnings used in the calculation of
earnings per share and diluted
earnings per share
Profit attributable to shareholders
of the Company 10,000,351 7,814,357
HEADLINE EARNINGS:
Profit attributable to shareholders
of the Company 10,000,351 7,814,357
Adjusted for:
(Loss)/profit on disposal of
Property plant and equipment (4,670) 318,187
Headline earnings for the period 9,995,681 8,132,544
Weighted number of ordinary shares Number of shares Weighted
in issue average number
of shares in
issue
Shares as at 30 September 2011 42 000 000 42 000 000
Shares as at 30 September 2010 42 000 000 42 000 000
Dividends declared and paid per
share (cents) 17.00 9.00
Capital distributions declared and
paid per share (cents) - 5.00
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
REVIEWED AUDITED
30 September 30 September
2011 2010
R R
ASSETS
Non-current assets
Property, plant & equipment 14,008,539 16,600,971
Intangible assets 1,912,081 2,842,631
Goodwill 2,415,685 2,686,779
Deferred tax 4,233,304 3,860,944
22,569,609 25,991,325
Current assets
Trade and other receivables 20,024,147 18,726,561
Cash and cash equivalents 20,420,572 20,144,204
40,444,719 38,870,765
Total assets 63,014,328 64,862,090
EQUITY AND LIABILITIES
Equity and reserves
Issued capital 48,059 48,059
Retained earnings 32,879,675 30,019,324
32,927,734 30,067,383
Non-current liabilities
Finance lease liabilities 336,779 2,096,728
336,779 2,096,728
Current liabilities
Trade and other payables 27,256,316 28,155,260
Finance lease liabilities 2,305,928 2,426,455
Current tax liabilities 122,260 2,044,085
Bank overdraft 65,311 72,179
29,749,815 32,697,979
Total liabilities 30,086,594 34,794,707
Total equity and liabilities 63,014,328 64,862,090
Number of shares in issue 42,000,000 42,000,000
Net asset value per share (cents) 78.40 71.59
Net tangible asset value per share 68.10 58.42
(cents)
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
REVIEWED AUDITED
30 September 30 September
2011 2010
R R
Cash flows from operating
activities
Profit for the year 10,000,351 7,814,357
Income tax expense 4,813,500 4,726,509
Interest received (639,058) (565,360)
Dividends received (236,982) (314,799)
Gain/ Loss on disposal of plant & (4,670) 318,187
equipment
Depreciation 4,778,466 3,973,114
Adjustment to plant & equipment - 102,442
Amortisation 930,550 996,991
Adjustment to intangible assets - (2,870)
Finance costs 482,418 773,697
20,124,575 17,822,268
Movements in working capital:
Decrease/ (Increase) in trade and
other receivables (1,297,586) 4,314,045
Increase/ (Decrease) in trade and
other payables (898,944) 4,050,518
Cash generated by operations 17,928,045 26,186,831
Finance cost (482,418) (773,697)
Income taxes paid (6,836,590) (9,925,144)
Net cash generated from operating 10,609,037 15,487,990
activities
Cash flow from investing activities
Interest received 639,058 565,360
Dividends received 236,982 314,799
Acquisition of subsidiary - (1,800,000)
Additions to plant and equipment (2,765,418) (3,374,881)
Proceeds from disposal of plant and
equipment 584,054 358,066
Additions to intangible assets - (27,234)
Net cash used in investing
activities (1,305,324) (3,963,890)
Cash flow from financing activities
Capital reduction of share premium
- (2,100,000)
Dividends paid (7,140,000) (3,743,538)
Proceeds from borrowings 664,957 1,214,451
Repayment of borrowings (2,545,435) (2,988,667)
Net cash used in financing (9,020,478) (7,617,754)
activities
Total cash movement for the period 283,235 3,906,346
Cash and cash equivalents at the
beginning of year 20,072,026 16,165,680
Cash and cash equivalents at the
end of year 20,355,261 20,072,026
CONDENSED
CONSOLIDATED
STATEMENTS
OF CHANGES
IN EQUITY
Share Share Total Retained Total
share
Capital premium capital income Equity
(`000)
Balance at 4,200 2,143,859 2,148,059 25,984,966 28,133,025
30 September
2009
Comprehen-
sive income
- Profit - - - 7,814,357 7,814,357
- Other - - - - -
comprehen-
sive income
Total - - - 7,814,357 7,814,357
comprehen-
sive income
Trans-action
with owners
- Distri- - (2,100,000) (2,100,000) - (2,100,000)
bution of
share
premium
- Divi- - - - (3,780,000) (3,780,000)
dends
Total trans- - (2,100,000) (2,100,000) (3,780,000) (5,880,000)
actions with
owners
Balance at 4,200 43,859 48,059 30,019,324 30,067,383
30 September
2010
Comprehen-
sive income
- Profit - - - 10,000,351 10,000,351
- Other - - - - -
comprehen-
sive income
Total - - - 10,000,351 10,000,351
comprehen-
sive income
Trans-action
with owners
- Distri- - - - - -
bution of
share
premium
- Divi- - - - (7,140,000) (7,140,000)
dends
Total trans- - - - (7,140,000) (7,140,000)
actions with
owners
Balance at 4,200 43,859 48,059 32,879,675 32,927,734
30 September
2011
REVIEWED AUDITED
30 30
September September
SEGMENT REPORT 2011 2010
R R
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
Revenue by Nature
Sale of Fixed Cellular airtime 261,529,976 225,923,904
Sale of Fixed Line airtime 1,167,171 -
Connection Incentive Bonuses 5,150 5,602,244
Other 5,440,188 5,373,597
268,142,485 236,899,745
Major customers
Revenues from transactions with external
customers amounting to 10 percent or more
of the Group`s revenue, are disclosed
below:
Customer A 16,857,957 57,544,438
Customer B 85,210,724 -
Other 166,073,804 179,355,307
268,142,485 236,899,745
1. COMPANY PROFILE
TeleMasters is a specialist tele-management and business communication strategy
player operating exclusively in the South African corporate market. It is now a
full ICASA licensed Fixed Line Service Provider. The Company provides current
and future clients access to the most efficient and effective digital
telecommunication technologies.
2. FINANCIAL RESULTS
2.1 Statement of compliance and basis of preparation
The provisional reviewed financial information for the year ended 30
September 2011 has been presented in accordance with the framework concepts
and the measurement and recognition requirements of International Financial
Reporting Standards ("IFRS"), the information required by IAS 34: Interim
Financial Reporting, the South African Companies Act, as amended, the AC500
Standards as issued by the Accounting Practices Board and the JSE Listings
Requirements. The results have been prepared in accordance with accounting
policies of the Company that are in terms of IFRS and are consistent with
those applied in the audited annual financial statements for the year ended
30 September 2010.
These results were prepared under the supervision of Brandon Topham CA (SA)
and have been reviewed by BDO South Africa Incorporated, whose unmodified
review opinion is open for inspection at the Company`s registered office.
2.2 Commentary on operating results
The last financial year has been a transitional operational period. Due to
the changes in the telecoms environment, the technology utilised by the
Group to provide telecommunication access to our clients is being upgraded
to that of a fully licensed fixed line operator. This transition is taking
place at clients where greater savings can be offered by embracing the new
technology which we have implemented to make cost efficient, clear and
reliable voice calls. Thus we utilise different platforms for different
clients depending on the circumstances and needs of the client. This
transition is taking longer than expected due to various system and sales
changes we have needed to develop. The changing of the platform away from
pure cellular least-cost routing has meant a greater investment in time and
to a lesser degree capital, to tweak the offering which has only become
fully marketable in the last quarter of the year. This change is important
for the Group in the longer term as the margins from the fixed line
operation are more sustainable and potentially more profitable.
Our Revenue growth of 13% is on the back of the sale of airtime to a large
once off client. These sales of R85 210 724 are not expected to be a
recurring business in the new year. The growth and stabilisation of the
Group`s revenue in the new year is anticipated to be on the back of our
fixed line platform. The reduction in the differential due to changes in
the interconnect rates resulted in smaller clients agreements being
mutually terminated. Our business model remains strictly based on ensuring
that healthy operating margins take preference over revenue which is not
profitable. We believe that our pruning efforts will assist in the growth
in the coming years as our Group`s attention will not be misdirected to
poor profitability business relationships.
Significant expenses are set out in the Condensed Consolidated Statement of
Comprehensive Income. Depreciation has increased by 20% on the back of the
capital purchased during the preceding and current financial years to
enable our new technology platform to be implemented.
The rise in the operating lease is a direct result of the move in December
2010 to new larger premises in the Route 21 Corporate Office Park.
The Company remains cash positive despite paying out 17 cents (2010: 14
cents) per share in dividends and reducing long term borrowings to the
point that during the next financial period we will once again be almost
debt free. Our net asset value per share increased 9.5% to 78.40 cents per
share after paying out 71% of our earnings to shareholders as we did not
require the cash for growth during this transitory period to fixed line
operator.
Earnings per share grew by 27.94% over the past year during a difficult
operating environment in the telecommunications industry. The decision to
not renew long term contracts on the cellular service platform can be
clearly seen by the lack of connection incentive bonus received. This
decision has enabled us to be in a position to move our platform from least
cost routing to fixed line operator. The full financial effect of this will
only become evident in the medium term.
2.3 Dividends
- The following dividends were declared during the year to date:
* First quarter: A dividend of 4 cents (2010: 4 cents) per share was
declared on 22 December 2010 and paid to all shareholders recorded in
the share register of the Company at the close of business on Friday,
21 January 2011;
* Second quarter: A dividend of 4 cents (2010: 4 cents) per share was
declared on 31 March 2011 and paid to all shareholders recorded in the
share register of the Company at the close of business on Friday 29
April 2011;
* Third quarter: A dividend of 5 cents per share was declared on 22 June
2011 and paid to all shareholders recorded in the share register of
the Company at the close of business on Friday 15 July 2011. During
the third quarter of the prior year a capital distribution from share
premium of 2 cents per share was declared.
* Fourth quarter: A dividend of 4 cents per share was declared on 23
September 2011, and paid to all shareholders recorded in the share
register of the Company at the close of business on Friday 21 October
2011. During the fourth quarter of the prior year a capital
distribution from share premium of 3 cents per share plus a cash
dividend of 1 cent per share was declared.
* First quarter of 2012. A dividend of 1 cent (2011: 4 cents) per share
has been declared and is payable to all shareholders recorded in the
share register of the Company at the close of business on Friday 20
January 2012.
The board will continue with the policy of declaring quarterly dividends but
draw your attention to the factors set out below under future prospects.
2.4 Acquisition of property, plant and equipment
Property, plant and equipment acquired during the year comprises various
items of Furniture and fittings, Motor vehicles, Office equipment, IT
equipment and Routers and handsets.
3. SUBSEQUENT EVENTS
The directors are not aware of any matter or circumstance arising since the
reporting date which would have a material effect on the consolidated
results or the consolidated financial position of the Company as reported
other than the intended delisting from the JSE as announced previously.
4. LITIGATION
There are currently no legal or arbitration proceedings against the Group
of which the Group is aware which may have, or have had in the 12 months
preceeding the date of this report, a material effect on the consolidated
position of the Group. As reported previously a subsidiary of the company,
Skycall Networks (Pty) Ltd has a potential claim against it by a supplier
which existed at consolidation date and which was provided for at the time
of acquisition.
5. SHARE CAPITAL
No changes to share capital occurred during the past financial year.
6. FUTURE PROSPECTS
The board of directors ("Board") is confident about the future prospects of
the Company, as the conversion from its traditional cellular least-cost
routing business to an ICASA licensed business continues to take place.
However the Board points out that the conversion process will take a longer
period before the increased profitability will be realised. This, combined
with the poor trading conditions currently in South Africa, has resulted in
the Board taking a cautious view regarding the working capital of the Group
and prudently deciding to recommend a lower dividend than previously paid.
This will have the effect that the Group is able to self-fund the switch-
over to the services of a fixed line operator. The Board will take every
effort to ensure that the Group remains profitable and cash flush but
cautions shareholders that dividends may be lower during the next few
quarters until trading conditions improve.
For and on behalf of the Board:
MB Pretorius BR Topham
Chief Executive Officer Chief Financial Officer
10 January 2012
Corporate information
Directors: DS van Der Merwe*#, J Voigt*, VI Beck*#, MB Pretorius, BR Topham,
(* non-executive, # independent)
Registered address: 90 Regency Drive, Route 21 Corporate Office Park, Irene,
0157, Pretoria (P.O. Box 68255, Highveld Park, 0169)
Company secretary: Brandon Topham Inc.
Auditors: BDO South Africa Inc., 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: 10/01/2012 08:00:01 Produced by the JSE SENS Department.
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