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TCS - Total Client Services Limited - Reviewed Provisional Condensed
Consolidated Results For The Year Ended 28 FEBRUARY 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 PROVISIONAL CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED
28 FEBRUARY 2011
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
year ended year ended
28 February 28 February
2011 2010
% change R R
Revenue (33.8) 47 514 073 71 734 868
Gross profit (39.3) 20 925 708 34 448 821
Operating loss before interest and 11.8 (14 840 552) (13 280 116)
taxation
Net finance cost (3 934 052) (1 795 583)
Gain on roll-over of preference 2 002 439 -
shares
Loss before taxation 11.3 (16 772 165) (15 075 699)
Taxation 2 109 418 2 442 005
Loss for the year 16.1 (14 662 747)
(12 633 694)
Other comprehensive income :
Gain on equipment revaluation 4 111 934 -
Deferred tax on revaluation of (1 151 341) -
equipment
Devaluation of equipment (252 450) -
Deferred tax on devaluation of 70 686 -
equipment
Total comprehensive loss for the (5.9) (11 883 918) (12 633 694)
year
Loss attributable to:
Equity holders of the company (14 662 747) (12 633 694)
Reconciliation of loss to headline
loss
Loss after tax (14 662 747) (12 633 694)
Adjusted for:
Goodwill impairment 4 867 866 6 751 995
Gain on disposal of property, (390 990) (6 238)
plant and equipment
Scrapping of assets 705 437 776 993
Tax effects of the above (88 045) (215 812)
Headline loss for the year 79.7 (9 568 479) (5 326 756)
Basic and diluted loss per 16.2 (3.80) (3.27)
ordinary share attributable to the
equity holders of the company
(cents)
Weighted average number of 386 363 206 386 363 206
ordinary shares in issue
Headline and diluted headline loss 79.7
per ordinary share (cents) (2.48) (1.38)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
year ended year ended
28 February 28 February
2011 2010
R R
ASSETS
Non-current assets 13 381 441 15 467 610
Current assets 16 764 401 26 580
761
TOTAL ASSETS 30 145 842 42
048 371
EQUITY AND LIABILITIES
Capital and reserves (6 776 033) 5 107 885
Non-current liabilities (interest 21 921 748 23 220 032
bearing)
Deferred taxation - 504 414
Current liabilities 15 000 127 13 216 040
TOTAL EQUITY AND LIABILITIES 30 145 842 42
048 371
Total number of ordinary shares in 390 134 690 390 134 690
issue at year end
Treasury shares (3 771 484) (3 771 484)
Total number of ordinary shares in 386 363 206 386 363 206
issue excluding treasury shares
Net asset value per ordinary share (1.75) 1.32
(cents)
Net tangible asset value per (2.86) (0.88)
ordinary share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewedyear Audited
ended year ended
28 February 28
2011 February
2010
R R
Net cash (outflow)/inflow from operating 2 083 136
activities (939 927)
Net cash outflow from investing (3 274 481) (735 533)
activities
Net cash outflow from financing (3 979 752) (7 029
activities 173)
Net decrease in cash and cash equivalents (8 194 160) (5 681
570)
Cash and cash equivalents at the 10 414 077 16 095 647
beginning of the year
Cash and cash equivalents at the end of 2 219 917 10 414 077
the year
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share BEE
capital premium reserve
R R R
Audited balance as at 1 March 38 737 18 276 000 (9 923 397)
2009
Comprehensive loss for the year - - -
Share buyback (100) (192 492) -
Audited balance as at 28 38 637 18 083 508 (9 923 397)
February 2010
Comprehensive loss for the year - - -
Transfer from revaluation - - -
reserve to retained income
Reviewed balance as at 28 38 637 18 083 508 (9 923 397)
February 2011
Revaluation Retained Total
reserve income
R R R
Audited balance as at 1 March - 9 542 831 17 934 171
2009
Comprehensive loss for the year - (12 633 694) (12 633 694)
Share buyback - - (192 592)
Audited balance as at 28 - (3 090 863) 5 107 885
February 2010
Comprehensive loss for the year 2 778 829 (14 662 747) (11 883 918)
Transfer from revaluation (694 707) 694 707 -
reserve to retained income
2 084 122 (17 058 903) (6 776 033)
Reviewed balance as at 28
February 2011
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE GROUP
Southern Northern North/ Coastal Corporate Total
West
R R R R R R
2011 Reviewed
Total revenue 7 280 24 899 5 775 4 867 4 691 47 514
727 654 490 087 115 073
Total (loss)/ (2 422 7 869 (2 215 1 486 (21 491 (16 772
profit before 106) 791 183) 989 656) 165)
tax for
reportable
segments
2010 Audited
Total revenue 43 326 8 992 9 543 5 891 3 981 171 71 734
459 291 932 015 868
Total profit/ 11 727 2 385 1 833 2 171 (33 194 (15 075
(loss) before 051 722 942 917 331) 699)
tax for
reportable
segments
OPERATIONAL PERFORMANCE
The year under review was a challenging one for the group. Significant
resources were spent on the upgrading of systems and on improving production
in all the service centres. The group continues to face both staffing and
information technology challenges at municipalities and anticipates that the
impact of the effort in the current year will be reflected in the results for
the year ahead. In addition, various initiatives were implemented to improve
the finalisation of offences at all service centres. These include SMS
campaigns, LPR (licence plate recognition) systems for roadblocks,
implementation of payment channels for all service centres and a significantly
redesigned website for viewing and payment of offences.
FINANCIAL PERFORMANCE
Revenue declined by 34% from the previous corresponding financial year. A
significant portion of this related to the City of Cape Town ("COCT") contract
which came to an end in December 2010. Revenues from the Ekurhuleni contract
and the newer smaller contracts of Cederberg and Overstrand were insufficient
to offset the decline in the revenue from the COCT contract.
Given the decline in revenue, costs were contained and operating expenses
reflect a decline of 26% over that of the prior year. These cost savings were,
however, less than the decline in revenue which resulted in the group
reporting a loss for the year of R14.7 million compared to a loss in the prior
year of R12.6 million.
Headline loss per share has increased by 80% to a loss of 2.48 cents per share
and loss per share has increased by 16% to a loss of 3.8 cents per share from
the previous corresponding period. The difference in headline loss per share
and loss per share relates predominantly to the impairment of goodwill.
Notwithstanding the loss incurred, effective working capital management
resulted in the group utilising R0.9 million of cash for operating activities
during the period. After investing and financing activities, the cash movement
for the year was an outflow of R8.2 million resulting in a closing cash
balance of R2.2 million at year-end.
Included in financing activities is a payment of R3 million to Mvelaphanda
Holdings (Proprietary) Limited, comprising of a repayment of R1.5 million of
the capital outstanding and R1.5 million relating to the fee for rolling over
the preference shares until 29 November 2013.
In terms of the new agreement the group has an obligation to retain the first
R8 million profit after taxation per year for repayment of the preference
share capital.
PROSPECTS AND FUTURE PERFORMANCE
Since the start of the 2012 financial year the group`s strategy has been to
ensure that maximum value is extracted from the Ekurhuleni contract and that
the Limpopo contract is rolled out as planned.
The directors are pleased to report that subsequent to year-end further
municipal tenders were awarded to the group including Saldana and Queenstown.
The Administration Adjudication of Road Traffic Offences Project ("AARTO") was
planned to be implemented with effect from 1 April 2011, however this has once
again been delayed. 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
Regional Service Centres have been identified by TCS as operating segments as
they engage in business activities from which they earn revenue and incur
expenses. In addition, operating results are regularly reviewed by the group`s
chief operating decision makers in order to assess the segment`s performance
and to allocate resources.
The group`s reportable segments are:
Southern region;
Northern region;
North/West region;
Coastal region; and
Corporate.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
Statement of Compliance
The accounting policies applied in the preparation of these reviewed
provisional condensed consolidated results ("results"), which are based on
reasonable judgments and estimates, are in accordance with International
Financial Reporting Standards ("IFRS"). During the year the accounting policy
for camera accessories changed from the cost model to the revaluation model.
Except for the above, the accounting policies adopted are consistent with
those of the annual financial statements for the year ended 28 February 2010.
These results as set out in this report have been prepared in accordance with
the framework concepts and the measurement and recognition requirements of
IFRS and the AC500 standards as issued by the Accounting Practices Board, the
Companies Act, 1973, (Act 61 of 1973), as amended and the Listings
Requirements of JSE Limited ("JSE Listings Requirements") and contain the
information as required by IAS 34 - Interim Financial Reporting.
Basis of Measurement
These results have been prepared on the historical cost basis, except for
certain financial instruments and camera accessories that have been measured
at fair value.
Subsequent events
On 2 March 2011 the arbitrator in the matter between Syntell (Proprietary)
Limited ("Syntell") and the company announced the award in the favour of
Syntell. The company was ordered to pay Syntell R1.4 million plus interest
plus costs. The award was paid to Syntell subsequent to year-end and the
necessary amounts are provided for in these results.
Going concern
Given the significant losses reported in the prior year and the current year,
the group had a negative equity position of R6.8 million at year end. 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 determined 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 year ended 28 February 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."
Contingent Liabilities
The former landlord has issued summons against the company for R1 million. The
company has defended the action and awaits a court date. The directors do not
believe that any amounts are due to the former landlord and have not provided
for this amount in the 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 prior year. The directors believe that these
amounts are deductable and have appointed Webber Wentzel Attorneys to assist
in this regard. The results have been prepared on the basis that these amounts
are deductable for tax purposes; and
Following the arbitration award in favour of Syntell, a further claim for R1
million has been submitted by Syntell against TCS. This claim is currently
being assessed and could proceed to arbitration. No provision has been made in
the results for this amount.
DIRECTORATE
The following changes have been made to the board of directors of TCS during
the period under review:
Director Detail Date
Abdul Shaheed Mohamed Resigned 1 March 2010
John Morgan O`Kennedy Appointed as Financial Director 17 May 2010
Smit
Jacobus Hermanus Retired by rotation 29 October 2010
Taljaard
John Morgan O`Kennedy Resigned as Financial Director 31 January 2011
Smit and Director
The board has appointed Craig Whittle as acting Chief Financial Officer with
effect from 1 February 2011, pending the appointment of a Financial Director.
By order of the board
Lindikhaya Sipoyo
Executive Chairman
31 May 2011
Directors
L Sipoyo, (CEO and Executive Chairman), E Page, 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: 31/05/2011 17:52:35 Supplied by www.sharenet.co.za
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