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Abridged Condensed Unaudited Consolidated Results for the 3 Months ended 30 September 2017 & Dividend Declaration
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”)
ABRIDGED CONDENSED UN-AUDITED CONSOLIDATED RESULTS FOR THE THREE MONTH PERIOD ENDED
30 SEPTEMBER 2017 AND DIVIDEND DECLARATION
UNAUDITED UNAUDITED
CONDENSED CONSOLIDATED For the 3 month
STATEMENTS OF COMPREHENSIVE For the 3 month period period ended 30
INCOME ended 30 September September
2017 2016
R R
Revenue 30 861 482 29 621 540
Cost of sales (19 412 644) (20 246 914)
Gross profit 11 448 838 9 374 626
Operating expenses (9 720 360) (8 641 914)
Operating profit/(loss) 1 728 478 732 712
Investment revenue 101 550 60 497
Finance costs (147 615) (99 972)
Profit before tax 1 682 413 693 237
Taxation (681 075) (194 106)
Profit for the period 1 001 338 499 131
Comprehensive income for the period -
Total comprehensive income for the
period 1 001 338 499 131
Profit and total comprehensive
income attributable to the owners of
the company 1 001 338 499 131
EARNINGS PER SHARE
Basic earnings per share (cents) 2.38 1.19
Dilutive earnings per share (cents) 2.38 1.19
Headline earnings per share (cents) 2.38 1.19
The earnings per share/ dilutive
earnings per share and headline
earnings per share were determined
using the following information:
Basic and dilutive earnings - used in
the calculation of basic and dilutive
earnings per share
Earnings attributable to owners of the
company 1 001 338 499 131
HEADLINE EARNINGS:
Earnings attributable to owners of the
Company 1 001 338 499 131
Adjusted for:
Headline earnings for the period 1 001 338 499 131
Weighted number of ordinary shares Number of shares Number of shares
Shares as at 30 September 2017 42 000 000 42 000 000
Shares as at 30 September 2016 42 000 000 42 000 000
Dividends declared per share (cents) 1.00 0.50
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL
POSITION
UNAUDITED AUDITED UNAUDITED
As at 30 September As at 30 June As at 30 September
2017 2017 2016
R R R
ASSETS
Non-current assets
Property plant & equipment 20 172 724 20 081 413 21 442 811
Intangible assets 1 143 373 913 762 910 872
Goodwill 2 686 779 2 686 779 2 686 779
Deferred tax - - 651 773
Prepayments 6 231 160 6 462 727 4 588 118
30 234 036 30 144 681 30 280 353
Current assets
Inventories 341 203 660 142 612 751
Trade and other receivables 13 232 538 14 991 947 15 673 829
Prepayments 4 412 086 4 703 906 3 058 744
Cash and cash equivalents 6 821 338 4 269 126 2 411 256
24 807 165 25 625 121 21 756 580
Total assets 55 041 201 54 769 802 52 036 933
EQUITY AND LIABILITIES
Total equity
Issued capital 48 059 48 059 48 059
Retained earnings 35 231 045 34 649 707 33 321 445
35 279 104 34 697 766 33 369 504
Non-current liabilities
Finance lease liabilities 2 215 093 2 369 347 3 139 547
Deferred income 397 131 462 213 719 416
Deferred tax 820 284 199 521
3 432 508 3 031 081 3 858 963
Current liabilities
Other financial liabilities 2 614 285 2 995 385 3 194 721
Finance lease liabilities 2 881 112 2 943 066 2 083 316
Trade and other payables 10 309 906 10 634 503 9 191 870
Deferred income 260 329 260 329 255 973
Bank overdraft 80 621 84 648 82 586
Current tax payable 183 336 123 024
16 329 589 17 040 955 14 808 466
Total liabilities 19 762 097 20 072 036 18 667 429
Total equity and liabilities 55 041 201 54 769 802 52 036 933
Number of shares in issue 42 000 000 42 000 000 42 000 000
Net asset value per share (cents) 84.00 82.61 79.45
Net tangible asset value per share
(cents) 74.88 74.04 70.89
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
UNAUDITED UNAUDITED
For the 3 months ended For the 3 months
30 September ended 30 September
2017 2016
R R
Cash flows from operating activities
Cash generated/(utilised) by operations 3 934 469 (973 607)
Finance cost (147 615) (99 972)
Income taxes refunded/(paid) - -
Net cash generated/(utilised) from
operating activities 3 786 854 (1 073 579)
Cash flow from investing activities
Investment revenue received 101 550 60 497
(Additions)/disposal to plant and
equipment (319 799) -
Net cash used in investing activities (69 551) 60 497
Cash flow from financing activities
Dividends paid (210 000) (210 000)
Proceeds from other finance liabilities - 700 000
Repayment of borrowings (951 064) (691 720)
Net cash used in financing activities (1 161 064) (201 720)
Total cash movement for the period 2 556 239 (1 214 802)
Cash and cash equivalents at the
beginning of the year 4 184 478 3 543 472
Cash and cash equivalents at the end
of period 6 740 717 2 328 670
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN
EQUITY
Share Share Total share Retained Total
capital premium capital Earnings equity
R R R R R
Balance at 30 June 2016 4 200 43 859 48 059 33 032 314 33 080 373
Comprehensive income
- Profit for the period - - - 499 131 499 131
Total comprehensive income - - - 499 131 499 131
Transaction with owners
- Dividends - - - (210 000) (210 000)
Total transactions with owners
Balance at 30 September 2016 4 200 43 859 48 059 33 321 445 33 369 504
Comprehensive income
- Profit for the period - - - 1 958 262 1 958 262
Total comprehensive income - - - 1 958 262 1 958 262
Transaction with owners
- Dividends - - - (630 000) (630 000)
Total transactions with owners
Balance at 30 June 2017 4 200 43 859 48 059 34 649 707 34 697 766
Comprehensive income
- Profit for the period - - - 1 001 338 1 001 338
Total comprehensive income - - - 1 001 338 1 001 338
Transaction with owners
- Dividends - - - (420 000) (420 000)
Total transactions with owners
Balance at 30 September 2017 4 200 43 859 48 059 35 231 045 35 279 104
SEGMENT REPORT
IFRS8 requires an entity to report financial and descriptive information about its reportable segments, which are
operating segments or aggregations of operating segments that meet specific criteria. Operating segments are
components of an entity about which separate financial information is available that is evaluated regularly by the chief
operating decision maker. The Chief Executive Officer is the chief operating decision maker of the Group.
The Group does not have different operating segments. The business is conducted in South Africa and is managed
centrally with no branches. The Company is managed as one operating unit.
All revenues from external customers originate in South Africa.
LCR and Digital Direct+, our main technologies, are two technologies which are fully integrated to provide one
telecommunications solution to our customers and are not separately managed.
No single customer makes up more than 10% of the Group’s Revenue.
Related Party Relationships
Members of key management BR Topham
MB Pretorius
M van der Walt
T Smith
Non-executive directors J Voigt
DS Van der Merwe
MG Erasmus
Entities in which a member of key management and/or non-executive director have a beneficial interest
BR Topham TAG Business Advisors (Pty) Ltd
TAG Consulting (Pty) Ltd
BRAT Trust
MB Pretorius Snowy Owl Properties 82 (Pty) Ltd
Maison D' Obsession Trust
TeleMasters (Pty) Ltd
MG Erasmus Arbor Capital Company Secretarial (Pty) Ltd
Arbor Capital Corporate Finance (Pty) Ltd
J Voigt PerfectWorx Consulting (Pty) Ltd
Contineo Virtual Communications (Pty) Ltd
30 30
September September
2017 2016
Related party balances
Loan accounts - Owing (to) by related parties
Maison D' Obsession Trust (2 614 285) (3 194 721)
Amounts included in Trade receivable regarding related parties
TeleMasters (Pty) Ltd 573 942 (14 409)
TAG Business Advisors (Pty) Ltd 1 632 1 905
Snowy Owl Properties 82 (Pty) Ltd 130 995
Amounts included in Trade Payable regarding related parties
PerfectWorx Consulting (Pty) Ltd 11 844 -
TAG Consulting (Pty) Ltd 37 000 -
Related party transactions
Cost of Sales from related parties
PerfectWorx Consulting (Pty) Ltd 301 065 523 669
Contineo Virtual Communications (Pty) Ltd 2 157 421 1 385 165
Telemasters (Pty) Ltd 52 632 52 632
Rent paid to related parties
Snowy Owl Properties 82 (Pty) Ltd 344 724 344 724
Consulting fees paid to related parties
Arbor Capital Corporate Finance (Pty) Ltd 30 000 30 000
Arbor Capital Company Secretarial (Pty) Ltd 30 000 30 000
TAG Consulting (Pty) Ltd 51 500 69 825
Sales to related parties
TAG Business Advisors (Pty) Ltd 4 064 4 856
Telemasters (Pty) Ltd 130 942 57 537
Compensation to key management
Short-term employee benefits – Key Management non-directors 237 112 232 887
Short-term employee benefits – Directors 659 535 474 750
1. COMPANY PROFILE
TeleMasters is licensed to provide voice, data and cloud based corporate communication. It supplies fixed-line, fixed
cellular, data and virtual PBX services countrywide.
2. FINANCIAL RESULTS
2.1 Statement of compliance and basis of preparation
The unaudited abridged condensed financial results comprise a condensed statement of financial position, condensed
statement of comprehensive income, condensed statement of changes in equity and condensed statement of cash flow
for the 3 month period ended 30 September 2017, which have 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, SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements
as issued by Financial Reporting Standards Council and the JSE Listings Requirements. The results have been
prepared in accordance with accounting policies that are consistent with those applied in the audited annual financial
statements for the year ended 30 June 2017.
These results were prepared under the supervision of Brandon Topham CA (SA) and have not been audited or reviewed
by the Auditors of the Group.
2.2 Commentary on operating results
The Revenue for the period is up by 4.19% compared to the prior period. The Gross margin is at 37.10% compared with
31.65% in the prior period. This is primarily as a result of a movement of clients over time from LCR technology to the
Digital direct platform and a constant focus on managing the margin offered to clients.
Operating costs have reduced due to the restructuring which the company implemented over the last few months in
order to improve our operating efficiencies.
The combined effect of the increase in revenue, gross margin and the decrease in operating costs resulted in an increase
of net profit percentage before tax from 2.34% to 5.45% in the current period after a substantial increase in our bad debt
provision to cater for the slowing economy. Our tax charge is at 40% compared to the statutory rate of 28% as a result
of non-deductible expenditure and the bad debt provision adjustment.
The earnings per share doubled from 1.19 cents per share to 2.38 cents per share. Net asset value, after the one cent
per share dividend paid in this quarter in respect of the prior quarter, increased from 82.61 cents per share at June 2017
to 84 cents per share.
At June 2017 year end, a decision was taken to split the pre-payments from the trade and other receivables to enable
a better understanding of the amounts by users. Consequently, we have reclassified the prior period amounts to be
consistent with this disclosure.
The Net cash generated from operating activities increased from a negative R1 073 579 to a positive R3 787 854 as a
result of the increased profitability and operating efficiencies, with net cash generated since year end of R2 556 2339
resulting in the Company closing the period with positive cash and cash equivalents of R6 740 717.
2.3. Dividends paid and notice of declaration of a dividend
The following dividends were declared during the year to date:
• A dividend of 1.0 cents per share was declared and payable to all shareholders recorded in the share register
of the Company at the close of business on Friday, 20 October 2017.
Notice is hereby given that a dividend of 1.0 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, 12 January 2018
The dividend will be subject to the Dividends Tax that was introduced with effect from 1 April 2012. In accordance with
the provisions of the Listings Requirements of the Johannesburg Stock Exchange, the following additional information
is disclosed:
- the dividend has been declared out of retained earnings;
- the local Dividends Tax rate is 20%;
- the gross local dividend is 1.0 cents per share for shareholders exempt from Dividends Tax;
- the net local dividend is 0.80 cents per share for shareholders liable for Dividends Tax;
- the Company has 42 000 000 ordinary shares in issue;
- the Company’s income tax reference number is: 9683978143.
The following dates are applicable to the dividend:
The last day to trade in order to be eligible for the dividend will be Tuesday, 9 January 2018. Shares will trade ex-
dividend from Wednesday, 10 January 2018. The record date will be Friday, 12 January 2018 and payment will be made
on Monday, 15 January 2018.
Share certificates may not be dematerialised/ re-materialised between Wednesday, 10 January 2018 and Friday, 12
January 2018, both days inclusive.
2.4. Acquisition of property plant and equipment
Property, plant and equipment acquired during the year was comprised mostly of investments in IT equipment and
routers and handsets to assist with the expansion of the Digital Direct product.
2.5 Reclassification
The following comparative disclosures in the statement of financial position have been reclassified, as at
30 September 2016, as follows:
Restated Previously stated Difference
Non-current assets -
Pre-payments 4 588 118 - 4 588 118
Current assets – Pre-
payments 3 058 744 - 3 058 744
Trade and other
receivables 15 673 829 23 320 691 (7 646 862)
This reclassification was made in order to enhance disclosure of this growing significant category of asset. This results
in the separate disclosure of the pre-payments balance from trade receivables and will aid users in better understanding
the operations of the Group.
No changes to the Statement of Comprehensive Income, Retained Earnings or to the Total Cash Movement for the
Period in the Statement of Cash Flow occurred because of the above reclassification.
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 Group as reported.
4. LITIGATION
There are currently no legal proceedings of which the Group is aware which may have, or have had in the 12 months
preceding the date of this report, a material effect on the consolidated position of the Group, other than as disclosed
below:
• The Company is currently involved in the final process of litigation with a previous client, Huge Group Limited
(“Huge”) pertaining to outstanding receivables to the value of R4.1 million. These receivables are, however,
adequately secured through a cession of shares held against the debt owed to the Company in excess of the
R4.3 million outstanding receivable. An agreement was reached between the parties to the dispute to separate
the most contentious issues in the dispute for adjudication by the appointed arbitrator. Subsequent to period
end, the arbitrator ruled on these issues and found in TeleMasters favour in respect of two of the three issues.
The Company is currently engaging with Huge in an attempt to settle the matter in its entirety, but failing such
settlement, it will approach the arbitrator for a date for the final adjudication of the matter, including the
determination of the quantum of TeleMasters ’claim.
• The Company is currently involved in litigation with a previous supplier relating to contractual disputes over
amounts billed by the suppler to the value of R1.4 million. A court date has still not been allocated.
The estimated legal fees to continue pursuing these legal matters are approximately R400 000.
5. GOING CONCERN
The board of directors is of the opinion that, having regard to the current status and the future strategy of the Group, the
Group has sufficient resources to continue as a going concern.
6. SHARE CAPITAL
No changes to share capital occurred during the past financial year.
7. CORPORATE GOVERNANCE
The Group subscribes to the values of good corporate governance at all levels and is committed to conducting business
with discipline, integrity and social responsibility.
8. FINANCIAL INSTRUMENTS
The carrying amount of all significant financial instruments approximates the fair value.
9. FINANCIAL RISK MANAGEMENT AND FAIR VALUE
There has been no material change in the Group's financial risk management objectives and policies compared to
those disclosed in the consolidated annual financial statements as at and for the year ended 30 June 2017.
The Group does not currently carry any assets or liabilities at fair value which require any disclosure on its fair value
measurement.
10. FUTURE PROSPECTS
Management’s focus on maintaining good margins and generating cash from operations is evident in the results. Overhead
expenses were curtailed and the efficiencies of restructuring to match the strategy will be reaped for the foreseeable future.
The roll-out of new products to arrest the loss of business telephony to staff’ own devices (Bring your own device) is being
rolled out. The sales of data bandwidth have grown remarkably and it is the anchor to which the suite of TeleMasters’ products
is tethered. An enterprise-grade unified communications solution is due to be launched, a platform from which we will
seamlessly move calls and data across multiple user devices. The depth of technical expertise is evident in the ever-improving
‘uptime’ at customer sites - a major driver of the high satisfaction ratings we command.
11. CHANGES TO THE BOARD
Mrs Talana Smith resigned as Chief Financial Officer with effect from 31st August 2017.
Subsequent to the period end, shareholders were advised that with effect from 1 January 2018:
(i) Mr Mario Pretorius will be retiring as Chief Executive Officer of the Company (“CEO”), but will continue to serve
on the Board in the capacity of Non-executive Chairman;
(ii) the role of the current Independent Non-executive Chairman, Mr Stephen van der Merwe, will change to that
of Lead Independent Director; and
(iii) Mr Jaco Voigt, a Non-executive director of the Company for the past 9 years, will be appointed as CEO and
his role will accordingly change from that of Non-executive Director to Executive Director.
For and on behalf of the Board:
MB Pretorius BR Topham
Chief Executive Officer Acting Chief Financial Officer
13 December 2017
Corporate information
Directors: DS van Der Merwe#, MB Pretorius, BR Topham, J Voigt* MG Erasmus*
(* 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: TAG Consulting (Pty) Ltd
Auditors: Nexia SAB&T, 119 Witch-Hazel Avenue, Highveld Technopark, Centurion
Transfer secretaries: Link Market Services Proprietary Limited, 13th Floor, Rennie House, 19 Ameshoff Street,
Braamfontein, 2017
Designated Advisor: Arbor Capital Sponsors Proprietary Limited
Website: www.telemasters.co.za
Date: 13/12/2017 12:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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