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Un-audited condensed consolidated financial statements for the six months ended 31 December 2018 and dividend decl.
TeleMasters Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2006/015734/06
Share code: TLM
ISIN: ZAE000093324
(“TeleMasters” or “Group” or “Company”)
TeleMasters Holdings Limited un-audited condensed consolidated financial statements for the six
months ended 31 December 2018 and dividend declaration
TeleMasters is licensed to provide voice, data and cloud-based communication, infrastructure and services.
We serve as a trusted advisor to our customers, through offering a clear road-map of the business
communications journey utilising our technology platform. This enables us to provide unparalleled Enterprise
Focused Communication solutions throughout South Africa. Our stack of products, structured around the four key
pillars of Connectivity, Communications, Cloud Services and Security, makes Digital Transformation tangible and
effective and enables our customers to progress at their own pace and with the necessary peace of mind that,
when ready, they know that TeleMasters has the solution they require.
1. Commentary on operating results
During the period under review, the Company embarked on a new strategic direction, providing digital
transformation solutions to our clients.
The revenue decreased over the period as a result of the GSM Sim Card technology customers moving away
from the platform and cancelling existing agreements. The gross profit percentage stayed static on 36%. We
have managed to keep our operating expenditure relatively stable with an increase of only 5.53%. This resulted
is a decrease in operating profit to R563 935 compared to R2 070 161 for the comparative period. Our earnings
per share decreased from 4.93 cents per share to 1.34 cents, a decrease of 73%.
The net cash from operating activities increased from a positive of R6 586 313 in the comparative period to a
positive of R6 762 951. The cash was used to repay borrowings of R920 278 and to acquire additional assets for
expansion of new services to customers. Assets acquired decreased from R2 099 236 to R1 642 386. These
new assets will generate additional revenue in subsequent periods and bode well for the future operations of the
Group. The positive cash generation is a key component of our business focus and is a result of our focus on
building an annuity-based business model.
The current working capital ratio is 2.76 to 1 thus reflecting a positive working capital position. The non-current
assets are R20 621 458 compared with non-current liabilities of only R1 503 403.
The net asset value has decreased from 85.00 cents per share to 83.34 cents per share, this was influenced by
dividends of three cents per share which were paid in the period,
2 Dividends declared and paid
The Board does not link the payment of dividends primarily to the current year’s operating results, but considers
the dividends in relation to the Group’s reserves of R34.95 million in 2018 (R35.87 million in 2017). The Board
considers the working capital requirements of the Group for the next 12-month period when determining a
dividend. The Board considers that dividends are an important reason why shareholders invest in a company and
hence regards the principle of paying quarterly dividends as important.
The following dividends were declared during the period under review:
• Dividend number 41 of 1.5 cents per share was declared on 1 October 2018 and paid to all shareholders
recorded in the share register of the Company at the close of business on 19 October 2018.
• Dividend number 42 of 1.5 cents per share was declared on 10 December 2018 and payable to all
shareholders recorded in the share register of the Company at the close of business on 4 January 2019.
3. Dividend declaration
Notice is hereby given that a gross interim cash dividend (Number 43) 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, 18 April 2019.
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 9683/978/14/3.
The following dates are applicable to the dividend: The last day to trade in order to be eligible for the dividend will
be Tuesday, 15 April 2019. Shares will trade ex-dividend from Wednesday, 16 April 2019. The record date will be
Friday, 18 April 2019 and payment will be made on Monday, 23 April 2019.
Share certificates may not be dematerialised / re-materialised between Wednesday, 16 April 2019 and
Friday, 18 April 2019, both days inclusive.
4. Prospects
Our product strategy is centred around driving customers to the Cloud thereby enabling them to unlock business
value and drive efficiency and productivity. We have a brand new, world-class Unified Communications product
suite which will change the way that our customers do business.
With this strategy, we have diversified our route to market. We now have direct and indirect routes to market,
which we believe will enable better market penetration.
We will continue to investigate opportunities for diversification and growth within the sector. In the coming year
we will focus on the identification and acquisition of complementary businesses to aid in a more unified and
competitive product offering to customers as well as improved profitability. As part of our new direction, we are
also placing renewed focus on our marketing strategy. As a first step, we are in the process of reviewing our
brand identity in order to align our marketing efforts with the sales activities in progress. We are excited at what
the future holds, as we morph into the Next Generation player we believe ourselves to be.
5. 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.
6. Changes to the Board of Directors
Mr Brandon Topham, resigned from the Board, with effect from 31 January 2019.
The Group has commenced with the process of recruiting a new CFO and shareholders will be advised once an
appointment has been made.
7. Approval of the financial statements
The un-audited condensed consolidated financial statements were approved by the Board of Directors on
28 March 2019 and are signed on its behalf by:
MB Pretorius J Voigt
Non-executive Chairman Chief Executive Officer
Condensed consolidated statement of comprehensive
income
for the six months ended 31 December 2018
31 December 31 December
2018 2017
Un-audited Un-audited
R R
Revenue 53 630 736 60 058 276
Cost of Sales (34 172 109) (38 344 565)
Gross profit 19 458 627 21 713 711
Other Income 217 889 200 688
Operating expenses (19 110 547) (18 109 561)
Operating profit 565 969 3 804 838
Investment revenue 406 157 242 182
Finance costs (188 884) (420 351)
Profit before income tax 783 242 3 626 669
Income tax (219 307) (1 556 508)
Profit for the period 563 935 2 070 161
Other comprehensive income for the period 0 0
Total comprehensive income for the period 563 935 2 070 161
Earnings per share and dividend
Basic earnings per share (cents) 1,34 4,93
Diluted earnings per share (cents) 1,34 4,93
Dividends declared per share (cents) 3,00 2.00
Condensed consolidated statement of financial position
as at 31 December 2018
31 December 30 June 31 December
2018 2018 2017
Un-audited Audited Un-audited
R R R
Assets
Non-current assets 20 621 458 23 648 584 29 286 594
Property, plant and equipment 12 766 502 14 741 336 19 168 307
Intangible assets 1 702 674 1 380 409 1 057 984
Goodwill 3 286 779 3 286 779 2 686 779
Prepayments 2 865 503 4 240 060 6 373 524
Current assets 24 899 861 24 879 180 22 295 359
Inventories 507 251 627 371 494 765
Trade and other receivables 5 582 392 8 646 270 10 101 219
Prepayments 4 565 883 4 731 260 4 713 195
Cash and cash equivalents 14 244 335 10 874 279 6 986 180
Total assets 45 521 319 48 527 764 51 581 953
Equity and liabilities
Total equity 35 002 318 35 698 383 35 927 927
Issued capital 48 059 48 059 48 059
Retained earnings 34 954 259 35 650 324 35 879 868
Non-current liabilities 1 503 403 1 934 215 5 352 317
Finance lease liabilities 665 562 835 185 3 305 441
Deferred income - 201 884 332 048
Deferred tax 837 841 897 146 1 714 828
Current liabilities 9 015 598 10 895 166 10 301 709
Other financial liabilities - - 1 673 668
Finance lease liabilities 1 655 470 2 217 241 1 608 427
Trade and other payables 6 827 703 7 966 630 6 693 926
Deferred income 201 884 260 329 260 328
Bank overdraft 51 343 110 381 24 160
Current tax payable 279 198 340 585 41 200
Total equity and liabilities 45 521 319 48 527 764 51 581 953
Number of shares in issue 42 000 000 42 000 000 42 000 000
Net asset value per share (cents) 83,34 85,00 85.54
Net tangible asset value per share (cents) 71,46 73,88 76.63
Consolidated statement of changes in
equity
for the six months ended 31 December
2018
Total
Share Share share Retained Total
capital premium capital earnings equity
R R R R R
Balance at 30 June 2017 4 200 43 859 48 059 34 649 707 34 697 766
Other comprehensive income - - - - -
Profit for the period - - - 2 070 161 2 070 161
Total comprehensive income - - - 2 070 161 2 070 161
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
Other comprehensive income - - - - -
Profit for the period - - - 1 030 456 1 030 456
Total comprehensive income - - - 1 030 456 1 030 456
Transaction with owners:
Dividends - - - (1 260 000) (1 260 000)
Total transactions with owners - - - (1 260 000) (1 260 000)
Balance at 30 June 2018 4 200 43 859 48 059 35 650 324 35 698 383
Other comprehensive income - - - - -
Profit for the period - - - 563 935 563 935
Total comprehensive income for the
period - - - 563 935 563 935
Transaction with owners:
Dividends - - - (1 260 000) (1 260 000)
Total transactions with owners - - - (1 260 000) (1 260 000)
Balance at 31 December 2018 4 200 43 859 48 059 34 954 259 35 002 318
Condensed consolidated statement of cash flows
for the six months ended 31 December 2018
31 December 31 December
2018 2017
Un-Audited Un-Audited
R R
Cash flows from operating activities
Cash generated by operations 7 291 835 7 129 688
Finance cost (188 884) (420 351)
Income taxes paid (340 000) (123 024)
Net cash generated / (utilised) from operating activities 6 762 951 6 586 313
Cash flow from investing activities
Investment revenue received 406 157 242 182
Additions to property, plant and equipment (1 372 386) (1 784 236)
Additions to intangible assets (270 000) (315 000)
Net cash used in investing activities (1 236 229) (1 857 054)
Cash flow from financing activities
Dividends paid (1 177 350) (630 000)
Repayment of borrowings (920 278) (1 321 717)
Net cash used in financing activities (2 097 628) (1 951 717)
Total cash movement for the period 3 429 094 2 777 542
Cash and cash equivalents at the beginning of period 10 763 898 4 184 478
Cash and cash equivalents at the end of period 14 192 992 6 962 020
Notes to the condensed consolidated financial statements
for the six months ended 31 December 2018
1. Statement of compliance and the basis of preparation
The condensed consolidated interim financial statements of TeleMasters Holdings Limited (the Company or the
Group), have been prepared 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 2008 (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.
These results were prepared under the supervision of Michael Vosloo CA (SA) and have not been audited or
reviewed by the Auditors of the Group.
2. Going concern
The Board of Directors are 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.
3. Financial instruments
The carrying amount of all significant financial instruments approximates the fair value.
4. 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 2018.
5. Headline earnings and per share information
31 December 31 December
2018 2017
Headline earnings per share (cents) 1,34 4,93
Diluted headline earnings per share (cents) 1,34 4,93
Earnings attributable to owners of the group 563 935 2 070 161
Adjustments: 0 0
Headline earnings attributable to owners of the group 563 935 2 070 161
Issued and weighted number of shares 42 000 000 42 000 000
6. Change in accounting policies
The interim condensed consolidated financial statements do not include all the information and disclosures
required in the annual financial statements and should be read in conjunction with the Group’s annual financial
statements as at 30 June 2018. The accounting policies adopted in the preparation of the interim condensed
consolidated interim financial statements are consistent with those followed in the Group’s annual consolidated
financial statements for the year ended 30 June 2018, except for the adoption of new standards effective as of 1
January 2018.
IFRS 9: Financial instruments
The standard requires financial assets to be measured either at amortised cost or fair value depending on the
business model under which they are held and the cash flow characteristics of the instrument. In addition, the
standard replaces the incurred loss impairment model in IAS 39 with an expected loss model. It will no longer be
necessary for a credit event to have occurred before credit losses are recognised.
The amendments have not materially impacted the Group’s financial statements as presented.
IFRS 15: Revenue from contracts with customers
The IFRS replaces IAS 18 Revenue and provides a single, principles based five-step model to be applied to all
contracts with customers. The steps involve identifying the contract, identifying the performance obligations under
the contract, determining the transaction price, allocating the transaction price to the performance obligations in
the contract, and recognising revenue when the entity satisfies a performance obligation.
The amendments have not materially impacted the Group’s financial statements as presented.
7. New standards and interpretations not yet adopted
A new standard has been issued by the International Accounting Standards Board (IASB), but is effective only in
future accounting periods, as listed below:
IFRS16: Leases – Effective date: 1 January 2019
The IFRS 16 replaces IAS 17 Leases. IFRS 16 has one model for lessees which will result in almost all the
leases being included on the Statement of Financial Position. Lessors continue to classify leases as operating or
finance leases.
The Group has chosen not to early adopt the standard and interpretations. The amendments will not have a
material impact on the Group’s financial statements.
8. Segment reporting
IFRS 8 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+ 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.
9. Related party transactions
Subsidiaries Skycall Networks (Pty) Limited
Spice Telecoms (Pty) Ltd
Members of Key Management
J Voigt Executive Director
BR Topham Executive Director (resigned 31 January 2019)
M van der Walt Chief Operating Officer
Non-Executive Directors MG Erasmus
MB Pretorius
WF Steinberg
M Tappan
Entities in which key management and/or non-executive directors have a beneficial interest:
MG Erasmus Arbor Capital Company Secretarial (Pty) Ltd
Arbor Capital Corporate Finance (Pty) Ltd
MB Pretorius Snowy Owl Properties 82 (Pty) Ltd
Maison D’Obsession Trust
Telemasters (Pty) Ltd
Zero Plus Trading 194 (Pty) Ltd
BR Topham SEESA (Pty) Ltd
TAG Consulting (Pty) Ltd
TAG Business Advisors (Pty) Ltd
J Voigt Perfectworx Consulting (Pty) Ltd
Contineo Virtual Communications (Pty) Ltd
Related parties
31 December 31 December
2018 2017
R R
Related party balances:
Loan Accounts – Owing to/(by) related parties
Maison D’Obsession Trust 0 1 673 668
Amounts included in Trade receivables regarding related parties
Telemasters (Pty) Ltd 301 234 474 033
TAG Business Advisors (Pty) Ltd 544 1 594
Amounts included in Trade Payables regarding related parties
Snowy Owl Properties 82 (Pty) Ltd 200 574 67 835
Related party transactions
Cost of sales from related parties
PerfectWorx Consulting (Pty) Ltd 736 718 629 265
Contineo Virtual Communications (Pty) Ltd 3 807 172 3 732 882
Telemasters (Pty) Ltd 0 120 000
Rent paid to related parties
Snowy Owl Properties 82 (Pty) Ltd 1 046 473 748 952
Consulting fees paid to related parties
TAG Consulting (Pty) Ltd 115 801 137 500
Arbor Capital Corporate Finance (Pty) Ltd 0 60 000
Arbor Capital Company Secretarial (Pty) Ltd 90 000 60 000
Zero Plus (Pty) Ltd 204 000 0
Sales to related parties
TAG Business Advisors (Pty) Ltd 3 689 8 243
Telemasters (Pty) Ltd 32 920 262 601
Compensation to Key management
Short-term employee benefits – Key Management non-directors 569 582 486 162
Short-term employee benefits – Directors 1 469 318 1 125 671
10. 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 litigation with a previous client, Huge Group Limited (“Huge”) pertaining to
outstanding receivables to the value of R3.06 million. These receivables are, however, adequately
secured through a cession of shares held against the debt owed to the Company. The matter is being
arbitrated and is pending a decision.
• The estimated legal fees to continue pursuing these legal matters are approximately R600 000.
11. 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.
Corporate information
Directors: MB Pretorius*, J Voigt, MG Erasmus*#, WF Steinberg*#, M Tappan*#
(*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 Ramirez-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: 28/03/2019 05:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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