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TELEMASTERS HOLDINGS LIMITED - Abridged Condensed Unaudited Consolidated Results for the Six Months Ended 31 December 2017 & Dividend Declaration

Release Date: 29/03/2018 17:50
Code(s): TLM     PDF:  
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Abridged Condensed Unaudited Consolidated Results for the Six Months Ended 31 December 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 SIX-MONTH PERIOD ENDED
31 DECEMBER 2017 AND DIVIDEND DECLARATION


                                                    For the 6 months ended    For the 6 months ended 31
                                                          31 December 2017                December 2016
                                                                         R                            R
                                                                 Unaudited                    Unaudited
 Revenue                                                        60 058 276                   60 321 831
 Cost of Sales                                                 (38 344 565)                 (40 863 316)
 Gross Profit                                                   21 713 711                   19 458 515
 Other Income                                                      200 688                      148 976
 Operating expenses                                            (18 109 561)                 (17 771 842)
 Operating profit                                                3 804 838                    1 835 649
 Investment revenue                                                242 182                      127 095
 Finance costs                                                   (420 351)                     (417 941)
 Profit Before Tax                                               3 626 669                    1 544 803
 Taxation                                                       (1 556 508)                    (420 595)
 Profit for the period                                           2 070 161                    1 124 208
 Other Comprehensive Income for the period                               -                            -
 Total comprehensive income for the period                       2 070 161                    1 124 208

 Profit & total comprehensive income attributable
 to the owners of the Group                                      2 070 161                    1 124 208


 EARNINGS PER SHARE AND DIVIDEND
 Basic earnings per share (cents)                                     4.93                         2.68
 Diluted earnings per share (cents)                                   4.93                         2.68
 Dividends declared per share (cents)                                 2.00                         1.00

CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL
POSITION
                                            UN-AUDITED         AUDITED           UN-AUDITED
                                     As at 31 December   As at 30 June    As at 31 December
                                                  2017            2017                 2016
                                                    R               R                     R
ASSETS
Non-current assets
Property plant & equipment                  19 168 307     20 081 413            20 112 589
Intangible assets                            1 057 984        913 762               977 633
Goodwill                                     2 686 779      2 686 779             2 686 779
Deferred tax                                         -              -               588 911
Prepayments                                  6 373 524      6 462 727             6 037 942
                                            29 286 594     30 144 681            30 403 854
Current assets
Inventories                                    494 765        660 142               655 517
Trade and other receivables                 10 101 219     14 991 947            16 596 584
Prepayments                                  4 713 195      4 703 906             4 195 858
Cash and cash equivalents                    6 986 180      4 269 126             1 451 363
                                            22 295 359     25 625 121            22 899 322
Total assets                                51 581 953     54 769 802            53 303 176


EQUITY AND LIABILITIES
Total equity
Issued capital                                  48 059         48 059                48 059
Retained earnings                           35 879 868     34 649 707            33 736 522
                                            35 927 927     34 697 766            33 784 581
Non-current liabilities
Finance lease liabilities                    3 305 441      2 369 347             2 803 585
Deferred income                                332 048        462 213               592 377
Deferred tax                                 1 714 828        199 521                     -
                                             5 352 317      3 031 081             3 395 962
Current liabilities
Other financial liabilities                  1 673 668      2 995 385             3 990 000
Finance lease liabilities                    1 608 427      2 943 066             1 792 010
Trade and other payables                     6 693 926     10 634 503             9 834 081
Deferred income                                260 328        260 328               260 328
Bank overdraft                                  24 160         84 648                82 586
Current Tax payable                             41 200        123 024               163 627
Total Current liabilities                   10 301 709     17 040 955            16 122 633
Total liabilities                           15 654 026     20 072 036            19 518 595
Total equity and liabilities                51 581 953     54 769 802            53 303 176

Number of shares in issue                   42 000 000     42 000 000            42 000 000

Net asset value per share (cents)                85.54          82.61                 80.44
Net tangible asset value per share
(cents)                                          76.63          74.04                 71.71

CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
                                                                      UN-AUDITED                UN-AUDITED
                                                          For the 6 months ended    For the 6 months ended
                                                                31 December 2017          31 December 2016
                                                                               R                         R
Cash flows from operating activities

Cash generated/(utilised) by operations                                7 129 688                  (884 244)
Finance cost                                                            (420 351)                 (227 941)
Income taxes refunded/ (paid)                                           (123 024)                        -
Net cash generated/(utilised) from operating activities                6 586 313                (1 112 185)


Cash flow from investing activities


Investment revenue received                                              242 182                   127 095
Disposal/ (Additions) to plant and equipment                          (1 784 236)                  (10 234)
Proceeds from disposal of plant and equipment                                  -                         -
Disposal/ (Additions) to intangible assets                              (315 000)                 (101 200)
Net cash used in investing activities                                 (1 857 054)                   15 661


Cash flow from financing activities


Dividends paid                                                         (630 000)                 (210 000)
Proceeds from borrowings                                                      -                 1 495 279
Repayment of borrowings                                              (1 321 717)               (2 363 450)
Net cash used in financing activities                                (1 951 717)               (1 078 171)



Total cash movement for the period                                     2 777 542                (2 174 695)
Cash and cash equivalents at the beginning of period                   4 184 478                 3 543 472
Cash and cash equivalents at the end of period                         6 962 020                 1 368 777

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 2015            4 200      43 859         48 059    32 279 057    32 327 116
Comprehensive income
- Profit for the period                -           -             -        787 851       787 851
Total comprehensive income             -           -             -        787 851       787 851
Transaction with owners
- Dividends                            -           -             -       (840 000)     (840 000)
Total transactions with owners         -           -             -       (840 000)     (840 000)
Balance at 31 December 2015        4 200      43 859        48 059     32 226 908    32 274 967
Comprehensive income
- Profit for the period                -           -             -      1 225 406     1 225 406
Total comprehensive income             -           -             -      1 225 406     1 225 406
Transaction with owners
- Dividends                            -           -             -       (420 000)     (420 000)
Total transactions with owners         -           -             -       (420 000)     (420 000)
Balance at 30 June 2016            4 200      43 859        48 059     33 032 314    33 080 373
Comprehensive income
- Profit for the period                -           -             -      1 124 208     1 124 208
Total comprehensive income             -           -             -      1 124 208     1 124 208
Transaction with owners
- Dividends                            -           -             -       (420 000)    (420 000)
Total transactions with owners         -           -             -       (420 000)    (420 000)
Balance at 31 December 2016        4 200      43 859        48 059     33 736 522   33 784 581
Comprehensive income
- Profit for the period                -           -             -      1 333 185    1 333 185
Total comprehensive income             -           -             -      1 333 185    1 333 185
Transaction with owners
- Dividends                            -           -             -       (420 000)    (420 000)
Total transactions with owners         -           -             -       (420 000)    (420 000)
Balance at 30 June 2017            4 200      43 859        48 059     34 649 707   34 697 766
Comprehensive income
                                                                        2 070 161    2 070 161
- Profit for the period                -           -
                                                                        2 070 161    2 070 161
Total comprehensive income
Transaction with owners
- Dividends                            -           -                     (840 000)    (840 000)
Total transactions with owners         -           -                     (840 000)    (840 000)
Balance at 31 December 2017        4 200      43 859        48 059     35 879 868    35 927 927
SEGMENT REPORT

IFRS 8 requires an entity to report financial and descriptive information about its reportable segments, which are operating s
segments that meet specific criteria. Operating segments are components of an entity about which separate financial info
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 central
managed as one operating unit.

All revenues from external customers originate in South Africa.

LCR and Digital Direct+ are two technologies which are fully integrated to provide one telecommunications solution to o
managed.

No single customer makes up more than 10% of the Group’s Revenue.


RELATED PARTY TRANSACTIONS

Subsidiary                      Skycall Networks (Pty) Limited

Members of Key Management
M.B. Pretorius                  Executive Director to 31 December 2017 – now Non-Executive Chairman
J Voigt                         Executive Director from 1 January 2018
T Smith                         Executive Director to 31 August 2017
BR Topham                       Executive Director from 1 March 2018
M van der Walt                  Chief Operating Officer

Non-Executive Directors         MG Erasmus
                                J Voigt               Non-Executive Until 31 December 2017
                                DS van der Merwe
                                BR Topham             Non-Executive Until 28 February 2017
                                MB Pretorius          from 1 January 2018
                                M Tappan              from 1 February 2018

Entities in which key management and/or non-executive directors have a beneficial interest:

BR Topham                       SEESA (Pty) Ltd
                                TAG Consulting (Pty) Ltd
                                TAG Business Advisors (Pty) Ltd

MB Pretorius                    Snowy Owl Properties 82 (Pty) Ltd
                                Maison D’Obsession Trust
                                Telemasters (Pty) Ltd

MG Erasmus                      Arbor Capital Corporate Finance (Pty) Ltd
                                Arbor Capital Company Secretarial (Pty) Ltd

J Voigt                         Perfectworx Consulting (Pty) Ltd
                                Contineo Virtual Communications (Pty) Ltd
                                                                
                                                                       31 December 2017         31 December 2016
 Related party balances
 Loan Accounts – Owing to/(by) related parties
  Maison D’Obsession Trust                                                    1 673 668               3 990 000

 Amounts included in Trade receivables regarding related
 parties
  Telemasters (Pty) Ltd                                                         474 033                 652 248
  TAG Business Advisors (Pty) Ltd                                                 1 594                   1 775

 Amounts included in Trade Payables regarding related
 parties

   Snowy Owl Properties 82 (Pty) Ltd                                             67 835                      -

 Related party transactions
 Cost of sales from related parties
  PerfectWorx Consulting (Pty) Ltd                                              629 265                 809 499
  Contineo Virtual Communications (Pty) Ltd                                   3 732 882               2 899 399
  Telemasters (Pty) Ltd                                                         120 000                 105 263

 Rent paid to related parties
  Snowy Owl Properties 82 (Pty) Ltd                                             748 952                 689 447

 Consulting fees paid to related parties

   TAG Consulting (Pty) Ltd                                                     137 500                 173 509
   Arbor Capital Corporate Finance (Pty) Ltd                                     60 000                  60 000
   Arbor Capital Company Secretarial (Pty) Ltd                                   60 000                  60 000

 Sales to related parties
  TAG Business Advisors (Pty) Ltd                                                 8 243                  11 446
  Telemasters (Pty) Ltd                                                         262 601                 190 324

 Compensation to Key management
   Short-term employee benefits – Key Management non-                           486 162                 465 774
  directors
  Short-term employee benefits – Directors                                    1 125 671               1 009 500

1. COMPANY PROFILE

TeleMasters is licensed to provide voice, data and cloud-based communication infrastructure and services. The
Company supplies fixed-line, mobile, fixed data and virtual PBX services, countrywide.

2. FINANCIAL RESULTS

2.1 Statement of compliance and basis of preparation
The un-audited 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 6 month period ended 31 December 2017, which have been presented in accordance with the framework
concepts and the measurement and recognition requirements of the 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 of the Group that are consistent with those applied in the
audited annual financial statements for the twelve months 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 remained static over the period but the gross profit percentage increased from 32% to 36% as a result of
the conversion of customers from LCR technology to the Digital direct platform and the maintenance of a policy of only
doing business where the margins make business sense. Operating costs increased marginally by 1.9% as a result of
the restructuring completed by the company during later part of the previous financial year. The combined effect of this is
an increase in earnings per share from 2.68 cents per share to 4.93 cents, an increase of 84%.

Cash generation from operations benefited and the net cash from operating activities increased from a negative of
R1 112 185 in the comparative period to a positive of R6 587 313. This was used to repay borrowings of R1 321 717 and
to acquire additional assets for expansion of new services to customers. Assets acquired increased from R11 434 to
R2 099 236. These additional assets generate additional revenue in subsequent periods and bode well for the future
operations of the group.

The current ratio is positive being 2.16 to 1 thus reflecting a positive working capital position with non-current assets of
R29 286 594 compared with non-current liabilities of only R5 352 317. The balance sheet allows for increased gearing
and capital raising as the need to expand the operations of the group realises.

After dividends of two cents have been declared in this period there has been an increase in the net asset value from
82.61 cents per share to 85.54 cents per share, which is far in excess of the current trading price of the share.

2.3 Headline Earnings and Per Share Information


 Headline earnings per share (cents)                                               4.93                              2.68
 Diluted headline earnings per share (cents)                                       4.93                              2.68


 Earnings attributable to owners of group                                     2 070 161                         1 124 208
 Adjustments:                                                                        --                                --
 Headline earnings attributable to owners of the group                        2 070 161                         1 124 208
 Issued and weighted number of shares                                        42 000 000                        42 000 000


2.4 Dividends Declared and Paid

The following dividends were declared during the year to date:
•        A dividend of 1.0 cents per share was declared on 29 September 2017 and payable to all shareholders recorded
         in the share register of the Company at the close of business on Friday, 20 October 2017.
•        A dividend of 1.0 cents per share was declared on 13 December 2017 and payable to all shareholders recorded
         in the share register of the Company at the close of business on Friday, 12 January 2018.

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, 20 April 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, 17 April 2018. Shares will trade ex-dividend
from Wednesday, 18 April 2018. The record date will be Friday, 20 April 2018 and payment will be made on Monday, 23
April 2018.

Share certificates may not be dematerialised/ re-materialised between Wednesday, 18 April 2018 and Friday, 20 April
2018, both days inclusive.
2.5 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. The majority of items acquired falls into the category of
routers and handsets.

2.5.1 Reclassifications

The comparative period cash flow statement as at 31 December 2016 has been reclassified as follows:


                                                                Restated              Previously stated            Difference
  Amounts disclosed at 31 December 2016
  Non-current assets - Pre-payments                            6 037 942                              -             6 037 942

  Current assets – Pre-payments                                4 195 858                              -             4 195 858

  Trade and other receivables                                16 596 584                      26 830 384           (10 233 800)


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 between the end of the period and 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 or related proceedings against the Group, of which the Board 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.

    -   The Company is involved in the final process of litigation with a previous client, Huge Group Limited (“Huge”)
        pertaining to outstanding receivables to the value of R4.3 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 receivables. 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. The arbitrator ruled on these
        issues and found in TeleMasters favour in respect of two of the three issues. The Company has approached the
        arbitrator for a date for the final adjudication of the matter.
    -   The Company is currently involved in litigation with a previous supplier relating to disputes over amounts billed
        by the suppler to the value of R1.4 million.

The estimated legal fees to continue pursuing these legal matters are approximately R600 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, that
the Group has sufficient resources to continue as a going concern.

6. SHARE CAPITAL

No changes were made to the share capital during the period under review.

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

The focus on maintaining good margins and generating cash from operations will remain core to the business. We have
identified Unified Communications and Digital transformation, underpinned by managed analytics and reporting, as key
focus areas for future growth. The Telemasters product stack has been expanded to service our direct sales effort of
making Digital Transformation real and easy to use to our clients. The Company strives to be a trusted provider to its
diverse corporate base and to offer a host of unique and valuable value propositions on its world-class transmission
network.

11. CHANGES TO THE BOARD

Mrs Talana Smith resigned as Chief Financial Officer (“CFO”) with effect from 31st August 2017. Mr Brandon Topham, a
former CFO prior to becoming a Non-executive director was re-appointed as CFO with effect 1 March 2018.

With effect from 1 January 2018:

    -          Mr Mario Pretorius retired as Chief Executive Officer of the Company (“CEO”), but continues to serve on the
               Board in the capacity of Non-executive Chairman;
    -          the role of the current Independent Non-executive Chairman, Mr Stephen van der Merwe, changed to that of
               Lead Independent Director; and
    -          Mr Jaco Voigt, a Non-executive director of the Company for the past 9 years, was appointed as CEO.


12. CHANGES TO REPORTING PERIODS

The group has applied a quarterly reporting of results since it listed in 2007. The board has decided to discontinue this
practice and only report every six months as is required by the rules of the Johannesburg Stock Exchange. The practice
of paying quarterly dividends will however not be affected by this decision and this practice is anticipated to continue
into the future, cash flow and operating results remaining positive.



For and on behalf of the Board:

J Voigt                                         BR Topham
Chief Executive Officer                         Chief Financial Officer
29 March 2018

Corporate information
Directors: DS van Der Merwe*#, J Voigt, MG Erasmus*, MB Pretorius*, M Tappan*#, 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: S Victor
Auditors: Nexia SAB&T, 119 Witch-Hazel Avenue, Highveld Techno Park, Centurion
Transfer secretaries: Link Market Services Proprietary Limited, 13th Floor, 19 Ameshoff Street, Braamfontein, 2017
Designated Advisor: Arbor Capital Sponsors Proprietary Limited
Website: www.telemasters.co.za

Date: 29/03/2018 05:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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