Group Interim Results for the Six Months Ended September 30, 2003 (Part 2)
Johannesburg, November 24 /PRNewswire/ -- Condensed consolidated interim
statement of changes in equity for the six months ended September 30, 2003
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
Balance at April 1 16,832 16,832 18,348
Net profit for the year/period 1,630 644 1,663
Fair value adjustment on (37) (22) 7
investments
Foreign currency reserve (121) (23) (31)
Share issue expenses 44 44 -
Balance at March 31/September 30 18,348 17,475 19,987 Condensed consolidated interim cash flow statement for the six months ended
September 30, 2003 ]] Audited Reviewed Reviewed March 31, September 30, September 30, 2003 2002 2003
Note Rm Rm Rm Operating activities 9,748 3,462 5,771 Cash receipts from 37,494
18,021 19,896 customers Cash paid to suppliers (25,431) (13,980) (13,640) and
employees Cash generated from 12,063 4,041 6,256 operations Investment income
384 152 259 Finance charges paid (2,776) (1,168) (549) Dividends paid (25) -
(26) Taxation refunded/(paid) 102 437 (169) Investing activities (5,731) (2,453)
(1,893) Expenditure to maintain operations Proceeds on disposal of 193 2 9
investments, property, plant and equipment Proceeds on disposal of 16 - -
subsidiaries and joint ventures Additions to property, (5,671) (2,346) (1,763)
plant and equipment Additions to intangible - - (54) assets Additions to other
(269) (109) (85) investments Financing activities (3,026) (1,178) (3,810)
Listing costs (154) - - Loans raised 9,117 7,599 1,619 Loans repaid (11,526)
(8,614) (5,077) Finance lease raised 5 2 - Increase in net (468) (165) (352)
financial assets Net increase/(decrease) 991 (169) 68 in cash and cash
equivalents Net cash and cash (98) (98) 837 equivalents at beginning of the year
Effect of foreign (56) (12) (8) exchange rate differences Net cash and cash 9
837 (279) 897 equivalents at end of the year/period ]] Notes to the condensed
consolidated interim financial statements for the six months ended September 30,
2003 1. Basis of preparation and accounting policies The condensed consolidated
interim financial statements have been prepared in accordance with IAS 34
(Interim Financial Reporting) and comply with the South African Companies Act,
1973. The accounting policies of the Group applied in the presentation of the
interim financial statements for the six month period ended September 30, 2003
are consistent with those applied in the financial statements for the year ended
March 31, 2003.
The preparation of the condensed consolidated interim financial statements
requires Telkom's management to make estimates and assumptions that may affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the condensed consolidated interim
financial statements, and reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
The results of the interim period are not necessarily indicative of the results
for the entire year.
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
2. Operating revenue 37,600 18,316 20,110
Fixed line 29,199 14,355 15,151
Mobile 8,401 3,961 4,959
Fixed line 29,199 14,355 15,151
Subscriptions, connections 4,595 2,239 2,466
and other usage
Traffic 18,001 8,911 9,221
Domestic (local and long 9,178 4,510 4,907
distance)
Fixed to mobile 7,539 3,770 3,658
International (outgoing) 1,284 631 656
Interconnection 1,598 825 647
Data 4,265 1,996 2,351
Directories and other 740 384 466
3. Restructuring expenses (included in employee 244 169 120
expenses)
The Group recognises the cost of restructuring charges associated with
management's plan to right skill and align the size of its workforce to a
comparable level for world-class telecommunication companies.
The total number of employees affected by the restructuring is 694 (September
30, 2002: 498 and a further 1,193 notified, March 31, 2003: 2,124). These
employees include operating personnel, product development and corporate staff.
4. Impairment and write-off of property, plant and 205 16 259
equipment (included in selling, general and
administrative expenses)
During the period, the Group raised an impairment provision of R149m on an earth
station. This asset was developed to route traffic between the Public Switch
Telecommunication Network ("PSTN") of Telkom and the Satellite Access Node
("SAN") of a satellite company.
The satellite company has not met its current outstanding financial obligations
to Telkom and management is of the opinion that no future payments will be
received. Management has assessed the asset and it appears unlikely that there
will be future economic benefits flowing to the Company.
Additionally the Group incurred property, plant and equipment write-offs, as
these assets are no longer in service. 5. Earnings per share Basic and diluted
earnings per share The calculation of earnings per share is based on net profit
for the period/year of R1,663m (September 30, 2002: R644m, March 31, 2003:
R1,630m) and ordinary shares in issue of 557,031,819 (September 30, 2002:
557,031,819, March 31, 2003: 557,031,819).
Headline earnings per share The calculation of headline earnings per share is
based on headline earnings of R1,871m (September 30, 2002: R690m, March 31,
2003: R1,749m) and 557,031,819 (September 30, 2002: 557,031,819, March 31, 2003:
557,031,819) ordinary shares issued.
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
5. Earnings per share
(continued)
Reconciliation between
earnings and headline
earnings:
Earnings as reported 1,630 644 1,663
Adjustments:
Net profit on disposal of (104) (7) (9)
investments, property,
plant and equipment
Property, plant and 189 - 259
equipment impairment and
write-offs
Goodwill amortisation 73 36 35
Goodwill impairment 16 16 -
Tax and outside (55) 1 (77)
shareholder effects
Headline earnings 1,749 690 1,871
Basic and diluted earnings 292.6 115.6 298.5
per share (cents)
Headline earnings per 314.0 123.9 335.9
share (cents)
6. Net asset value per share 3,293.9 3,137.2 3,588.1
(cents)
The calculation of net
asset value per share is
based on net assets of
R19,987m (September 30,
2002: R17,475m, March 31,
2003: R18,348m) and
557,031,819 (September 30,
2002: 557,031,819
March 31, 2003:
557,031,819) issued shares.
7. Property, plant and
equipment
During the period the
Group acquired property,
plant and equipment of
R1,763m. A major portion
of this
expenditure relates to
network modernisation.
8. Deferred taxation 240 382 (261)
Deferred tax assets 737 905 380
Deferred tax liabilities (497) (523) (641)
The higher taxable income
in the current period
resulted in the Group
reducing its tax losses,
thus utilising a portion
of the deferred tax asset.
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
9. Net cash and cash 837 (279) 897
equivalents
Cash and bank balances 916 1,085 648
Short-term deposits 201 - 1,061
Cash shown as current 1,117 1,085 1,709
assets
Credit facilities utilised (280) (1,364) (812)
Undrawn borrowing
facilities
General banking facilities 3,018 2,200 2,468
The general banking
facilities are unsecured,
bear interest at a rate
linked to prime, have no
specific maturity date
and are subject to annual
review. The facilities
are in place to
ensure liquidity.
Borrowing capacity
The directors may
exercise all of Telkom's
powers to borrow money
and to mortgage or
encumber Telkom's
property or any part
thereof and to issue
debentures, whether
secured or unsecured,
whether outright or as
security for debt,
liability or obligation
of Telkom or of any third
party. For this purpose
the borrowing powers of
the directors are
unlimited.
10. Number of shares in issue
557,031,817 (September
30, 2002: 557,031,819;
March 31,
2003: 557,031,817)
ordinary shares of R10
each.
1 (September 30, 2002:
Nil, March 31, 2003: 1)
Class A
ordinary share of R10
1 (September 30, 2002:
Nil; March 31, 2003: 1)
Class B ordinary share of
R10
11. Interest bearing debt
(excluding finance leases)
Current portion of 4,677 5,953 4,683
interest bearing debt
Local debt 4,527 5,892 4,356
Foreign debt 150 61 327
Long-term portion of 16,346 17,097 12,857
interest bearing debt
Local debt 11,473 11,011 8,438
Foreign debt 4,873 6,086 4,419
11. Interest bearing debt (excluding finance leases) Movement in borrowings for
the six months ended September 30, 2003 Facility Vodacom Congo (RDC) obtained revolving credit facilities totalling R134m (Group
share: R67m).
Repayments The TL03 locally registered bond with a nominal value of R4,311m at March 31,
2003 was redeemed on September 30, 2003. The redemption was financed by cash
flows from operations and the issuing of R800m (nominal value) of commercial
paper bills.
A total of R48m was repaid by Vodacom Tanzania Limited and Vodacom Congo (RDC)
s.p.r.l relating to the extended credit facilities.
Refinancing of current portion of interest-bearing debt. The refinancing of
R4,683m of the current portion of interest bearing debt will depend on the
market circumstances at the time of repayment. Management believes that
sufficient funding facilities will be available at the date of refinancing.
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
12. Commitments
Capital commitments 5,929 6,670 4,665
authorised
Fixed line 4,977 4,901 3,152
Mobile 952 1,769 1,513
Commitments against 435 2,793 1,130
authorised capital
expenditure
Fixed line 104 1,852 227
Mobile 331 941 903
Authorised capital 5,494 3,877 3,535
expenditure not yet
committed
Fixed line 4,873 3,049 2,925
Mobile 621 828 610
Management expects these commitments to be financed from internally generated
cash and other borrowings.
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
13. Contingencies
Contingent liabilities
Third parties 161 29 98
Guarantee of employee 192 175 184
housing loans
Third parties These amounts represent sundry disputes with third parties that are not
individually significant and that the Group does not intend to settle.
Guarantee of employee housing loans Telkom guarantees to settle a certain portion of employees' housing loans. The
amount guaranteed differs depending on factors such as employment period and
salary rates. When an employee leaves the employment of Telkom, any housing debt
guaranteed by Telkom is settled before any pension payment can be made to the
employee.
Supplier dispute Expenditure of R594m was incurred up to March 31, 2002 for the development and
installation of an integrated end-to-end customer assurance and activation
system to be supplied by Telcordia. In the 2001 financial year, the agreement
with Telcordia was terminated and in that year, the Company wrote off R119m of
this investment in the fixed-line business. Following an assessment of the
viability of the project, the balance of the Telcordia assets were written off
in the 2002 financial year. During March 2001, the dispute was taken to
arbitration, where Telcordia was seeking approximately US$130m plus interest at
a rate of 15,50% per year for money outstanding and damages. In September 2002,
a partial ruling was issued by the arbitrator in favour of Telcordia. On
November 5, 2002, Telkom brought an application in the High Court in South
Africa to review the partial award. The hearing of the review application
commenced on August 11, 2003 and is presently ongoing. Telcordia also petitioned
the United States District Court for the District of Columbia to confirm the
partial ruling, which petition Telkom has successfully resisted. Telcordia,
however, have since filed a notice to appeal. The arbitration proceeding and the
amount of Telkom's liability are not expected to be finalised until December
2003. Telkom had provided US$47m (March 31, 2003: US$44m) for its estimate of
probable liabilities, which include interest and legal fees at September 30,
2003.
Site restoration costs The Group has an obligation to incur site restoration costs. No sites have been
identified that would require material restoration to be performed in the
foreseeable future.
13. Contingencies (continued) The Group exposure is 50% of the following item: Vodacom Congo (RDC) s.p.r.l The Vodacom Group has a 51% equity interest in Vodacom Congo (RDC) s.p.r.l.,
("Vodacom Congo"), which commenced business on December 11, 2001. This
investment is governed by a shareholders' agreement, which provides the other
shareholder with certain protective and participating rights and therefore, in
terms of IAS 31: "Accounting for interest in Joint Ventures", Vodacom Congo may
not be consolidated as a subsidiary as it is considered to be a joint venture
resulting in it being proportionally consolidated in the condensed consolidated
interim financial statements for the six months ended September 30, 2003 and
2002 and for the year ended March 31, 2003.
Vodacom, in terms of the shareholders' agreement, is ultimately responsible for
the funding of the operations of Vodacom Congo. The shareholders' agreement also
gives Vodacom the right to appoint management and the majority of the Board of
the Company. Vodacom also has a management agreement to manage the company on a
day-to-day basis. Currently Vodacom Congo is incurring losses, which are
expected to continue in the short term. The 49% portion attributable to the
other joint venture partner in respect of the liabilities and losses as at
September 30, 2003 and 2002 and March 31, 2003 were as follows: Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
Net accumulated loss (186) (87) (294)
Total liabilities (522) (384) (783)
Total assets 658 714 848
Preference shares (368) (368) (368) Negative working capital ratio At each of the financial periods ended September 30, 2003, September 30, 2002
and for the year ended March 31, 2003 the Group had a negative working capital
ratio. A negative working capital ratio arises when current liabilities are
greater than the current assets. Current liabilities, including the short-term
portion of long-term debt, are intended to be financed from operating cash
flows, new borrowings and borrowings available under existing credit
facilities.
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
14. Segment information
The intercompany
transactions are
reflected as net and are
thus eliminated against
segment results
Business segment
Consolidated revenue 37,600 18,316 20,110
Fixed line 29,635 14,563 15,372
Mobile 9,890 4,720 5,647
Elimination (1,925) (967) (909)
Consolidated operating 6,514 2,811 4,250
profit
Fixed line 4,348 1,894 3,025
Mobile 2,166 920 1,225
Elimination - (3) -
Consolidated investment 424 152 260
income
Fixed line 730 183 541
Mobile 36 8 30
Elimination (342) (39) (311)
Consolidated finance 4,154 1,779 1,871
charges
Fixed line 3,758 1,660 1,703
Mobile 438 158 179
Elimination (42) (39) (11)
Consolidated taxation 1,049 456 933
Fixed line 449 194 547
Mobile 600 262 386
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
14. Segment information
(continued)
Other segment information
Capital expenditure for 5,712 2,346 1,763
property, plant and
equipment
Fixed line 4,013 1,487 1,199
Mobile 1,699 859 564
15. Related parties
With joint venture:
Vodacom Group
(Proprietary) Limited
Related party balances
Trade receivable 35 41 41
Trade payable (253) (272) (248)
Related party transactions
Income (436) (208) (221)
Expenses 1,489 759 688
Audit fees - IPO related 14 - -
fees
IPO costs 25 - -
Interest received (42) (20) (11)
Audited Reviewed Reviewed
March 31, September 30, September 30,
2003 2002 2003
Rm Rm Rm
15. Related parties
With shareholder:
Thintana Communications
LLC
Management fees 273 154 104
With government:
Revenue (1,606) (888) (925)
Trade receivable 193 134 223
With employees:
Other receivable 126 170 112
......more DATASOURCE: Telekom SA Limited . |