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TLM - Telemasters Holdings Limited - Reviewed Provisional Condensed Consolidated

Release Date: 10/01/2012 08:00
Code(s): TLM
Wrap Text

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 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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