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TCS - Total Client Services Limited - Reviewed Provisional Condensed
Consolidated Results for the year ended 29 February 2012
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
29 FEBRUARY 2012
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
year ended year ended
29 February 28 February
2012 2011
% change R R
Revenue 3.6 49 236 583 47 514 073
Gross profit 48.9 31 154 862 20 925 708
Earnings/(Loss)before interest, 164.7 3 471 180 (5 367 442)
taxation, depreciation and
amortisation
Depreciation (4 878 188) (4 605 244)
Goodwill impairment (859 876) (4 867 866)
Gain on preference share roll over - 2 002 439
Investment revenue 34 439 198 228
Finance Costs (4 427 079) (4 132 280)
Loss before taxation 60.3 (6 659 524) (16 772 165)
Taxation 730 598 2 109 418
Loss for the year 59.6 (5 928 926)
(14 662 747)
Other comprehensive income :
Gain on equipment revaluation - 4 111 934
Deferred tax on revaluation of - (1 151 341)
equipment
Devaluation of equipment (220 203) (252 450)
Deferred tax on devaluation of 61 657 70 686
equipment
Total comprehensive loss for the 48.8 (6 087 472) (11 883 918)
year
Loss attributable to:
Equity holders of the company (5 928 926) (14 662 747)
Non- controlling interest _ _
Reconciliation of loss to headline
loss
Loss after tax (5 928 926) (14 662 747)
Adjusted for:
Goodwill impairment 859 876 4 867 866
Gain on disposal of property, (181 707) (390 990)
plant and equipment
Scrapping of assets - 705 437
Tax effects of the above 50 878 (88 045)
Headline loss for the year 45.7 (5 199 879) (9 568 479)
Basic and diluted loss per 59.7 (1.53) (3.80)
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 45.6
per ordinary share (cents) (1.35) (2.48)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
as at as at
29 February 28 February 2011
2012
R R
ASSETS
Non-current assets 10 234 141 13 381 441
Current assets 17 813 777 16 764 401
TOTAL ASSETS 28 047 918 30 145 842
EQUITY AND LIABILITIES
Capital and reserves (12 863 505) (6 776 033)
Non-current liabilities (interest 24 303 523 21 921 748
bearing)
Current liabilities 16 607 900 15 000 127
TOTAL EQUITY AND LIABILITIES 28 047 918 30 145 842
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 (3.33) (1.75)
(cents)
Net asset value per ordinary share (3.30) (1.74)
(cents) including treasury shares
Net tangible asset value per ordinary (4.02) (2.86)
Shares (cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
year ended year ended
29 February 28 February
2012 2011
R R
Net cash outflow from operating activities (939 927)
(1 045 058)
Net cash outflow from investing activities (420 979) (3 274 481)
Net cash inflow/(outflow) from financing 646 865 (3 979 752)
activities
Net decrease in cash and cash equivalents (819 172) (8 194 160)
Cash and cash equivalents at the beginning 2 219 917 10 414 077
of the year
Cash and cash equivalents at the end of the 1 400 745 2 219 917
year
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share BEE
capital premium Reserve
R R R
Audited balance as at 1 March 38 637 18 083 508 (9 923 397)
2010
Comprehensive loss for the year - - -
Audited balance as at 28 38 637 18 083 508 (9 923 397)
February 2011
Comprehensive loss for the year - - -
Transfer from revaluation - - -
reserve to retained income
Reviewed balance as at 29 38 637 18 083 508 (9 923 397)
February 2012
Revaluation Retained Total
reserve income
R R R
Audited balance as at 1 March - (3 090 863) 5 107 885
2010
Comprehensive loss for the year 2 778 829 (14 662 747) (11 883 918)
Transfer from revaluation (694 706) 694 706 -
reserve to retained income
Audited balance as at 28 2 084 123 (17 058 904) (6 776 033)
February 2011
Comprehensive loss for the year (158 546) (5 928 926) (6 087 472)
Transfer from revaluation 1 310 142
reserve to retained income (1 310 142)
Reviewed balance as at 29 615 435 (21 677 688) (12 863 505)
February 2012
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE GROUP
Southern Northern North/
West
R R R
2012 Reviewed
Total revenue 2 786 635 30 078 863 5 180 459
Total (loss)/ (1 959 506) 9 273 758 335 702
profit before
tax for reportable segments
2011 Audited
Total revenue 7 280 727 24 899 654 5 775 490
Total profit/ (2 422 106) 7 869 791 (2 215 183)
(loss) before
tax for reportable segments
Coastal Corporate Total
R R R
2012 Reviewed
Total revenue 5 207 515 5 983 112 49 236 583
Total (loss)/profit before tax 2 365 054 (16 674 532) (6 659 524)
for reportable segments
2011 Audited
Total revenue 4 867 087 4 691 115 47 514 073
Total profit/ 1 486 989 (21 491 656) (16 772 165)
(loss) before
tax for reportable segments
OPERATIONAL PERFORMANCE
The year under review was a particularly difficult one for the group. Severe
cashflow constraints were experienced due to delayed payments from
municipalities as well as a major client, the Limpopo Province, going under
administration. Significant strides were made in increasing production as well
as improving finalisation at major clients. The company continued to improve its
systems and rolled out productivity improvements such as hand held licence
scanners and automation of the S56 process at roadside. TCS` payment channel (E-
pay) was successfully launched in the latter part of the financial year and in
excess of R 0.5 million of offences have been recorded through this payment
channel.
FINANCIAL PERFORMANCE
Revenue improved by 4% from the previous corresponding financial year. The loss
of the City of Cape Town ("COCT") contract which came to an end in December 2010
has now been more than offset from revenues from the Ekurhuleni contract.
Costs were severely contained and operating expenses reflect only an
inflationary increase of 5% over that of the prior year. Positive EBITDA of R
3.5 million was recorded, however, after deducting depreciation and accounting
for a goodwill impairment relating to the loss of the Mogale City contract, a
loss of R 5.9 million was recorded for the year, a 60% improvement on the loss
of R 15 million in the previous corresponding period.
Headline loss per share has improved by 46% to a loss of 1.35 cents per share
and loss per share has improved by 60% to a loss of 1.53 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 R 1 million of cash for operating activities during the
period. After investing and financing activities, the cash movement for the year
was an outflow of R 0.8 million resulting in a closing cash balance of R 1.4
million at year-end. The cash position would have been much improved had the
company`s two largest customers kept to their agreed credit terms.
PROSPECTS AND FUTURE PERFORMANCE
Since the start of the 2013 financial year the group`s strategy has been to
ensure that maximum value is extracted from the Ekurhuleni and Emfuleni
contracts and that the newly won pilot project for the Gauteng Province is
rolled out as planned.
The Administration Adjudication of Road Traffic Offences Project ("AARTO") was
planned to be implemented with effect from 1 April 2012, 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 and our systems are
fully compliant.
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"). The accounting policies adopted are consistent
with those of the annual financial statements for the year ended 28 February
2011. 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, Act 71 of 2008, 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 5 April 2012 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 R 1 million plus interest plus costs. A
payment arrangement was agreed with Syntell and R 0.5 million has
been paid to Syntell as at the date of this report. 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 R 12.9 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.
Review report
BDO South Africa Inc. has issued a review report on the reviewed consolidated
results of the company for the year ended 29 February 2012. 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 unmodified 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 the matter has been set down for hearing
on 22 April 2013 in the North Gauteng High Court in Pretoria. The directors do
not believe that any amounts are due to the former landlord and have not
provided for this amount in the results.
South African Revenue Service ("SARS") has disallowed the loss of R 3.5 million
plus associated costs of R 0.6 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 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. We are
following the Alternative Dispute Resolution ("ADR") process with SARS and await
feedback from SARS as to a date for this hearing.
DIRECTORATE
The following changes have been made to the board of directors of TCS :
Craig Douglas Whittle was appointed as Financial Director on 1 October 2011.
Nkosinathi Chonco was appointed as Independent Non Executive Director on 10
January 2012.
Craig Douglas Whittle resigned as Financial Director on 14 March 2012.
Orapeleng Ramagaga was appointed as acting Chief Financial Officer with effect
from 15 March 2012, pending the appointment of a Financial Director.
The board has appointed Orapeleng Ramagaga as acting Chief Financial Officer
with effect from 15 March 2012, pending the appointment of a Financial Director.
By order of the board
Lindikhaya Sipoyo
Executive Chairman
1 June 2012
Directors
L Sipoyo, (CEO and Executive Chairman), E Page, V Zitumane*, D Mafu*, N Chonco*
(*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
2nd Floor, North Block
Hyde Park Office Towers
Cnr 6th Rd & Jan Smuts Ave
Hyde Park, 2196
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: 01/06/2012 10:08:01 Supplied by www.sharenet.co.za
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