Results for the year ended 31 December 2014 REVIEW OF THE YEAR The company achieved strong levels of subscriber and Service Revenue growth during 2014 which resulted in a significant increase in profitability. These achievements were supported by the successful implementation of various expansion projects and cost management strategies. The high inflation environment, the high interest rates, the volatile exchange rate movements and a very significant increase in regulatory fees continued to drive the increase in the cost of our operations. Although the current levels of profitability are encouraging, TNM requires a significant higher level of profitability to support the sustainability of the company through future investment in infrastructure expansion projects and the upgrade of its technology. The company was successful with the actions taken to improve the Revenue streams and the cost management projects which resulted in the improvement of the EBITDA margin to 36% in 2014 from 35% in 2013. The Net Financing Cost decreased to MK 2,887 million (2013 MK 3,128 million) which includes Foreign Exchange Losses of MK 420 million (2013 MK 633 million). The Net Profit after Taxation for 2014, increased by 102% to MK 5,243 million, from MK 2,598 million in 2013. TNM invested in Capex Expenditure of MK 11,968 million in 2014 (2013: MK 3,085 million) which mainly consisted of the upgrade of the Prepaid billing systems, the Core network upgrades, the Lilongwe network coverage expansion, 3G data network coverage expansion and various other technology upgrade projects. The company acquired the ISP business and related infrastructure assets from Burco Electronic Systems Limited and will use these investments as the foundation to develop the TNM Business Services division which will focus on the needs of our Enterprise and SME customers. OUTLOOK Although the levels of growth in the business are expected to slow down in 2015 as a result of the economic circumstances and competition in the market, we remain optimistic that the profitability of the business will further improve. The company has initiated various business expansion strategies, supported by significant investment in the data network, network modernization and capacity expansion. DIVIDENDS Total Dividends of MK 2,408 million (MK 0.24 per share) are proposed for the period ended 31 December 2014: K 702 million 7t per share was declared and paid in September 2014 K 702 million 7t per share was declared in December 2014 and paid in January 2015. K 1,004 million 10t per share to be declared at the upcoming AGM* *The Directors propose a Final Dividend of 10 (ten) Tambala per share out of the profits of the company for the year ended 31 December 2014, to be declared at the forthcoming Annual General Meeting. BY ORDER OF THE BOARD Mathews Chikaonda Willem Swart Chairman Managing Director Building infrastructure for the sustainable development of Malawi. K 40,017 MILLION KEY FINANCIAL HIGHLIGHTS KEY ACHIEVEMENTS IN 2014 20% growth in subscriber base General improvement in network quality Acquisition of ISP Business from BURCO Electronic Systems Limited Launch of SERVICE REVENUE GROWTH 42% K 14,568 MILLION INCREASE IN EBITDA 44% K 10,523 MILLION OPERATING PROFIT 50% K 11,968 MILLION CAPEX ADDITIONS K 5,243 MILLION INCREASE IN NET PROFIT (AFTER TAXATION) 102% K 1,401 ARPU EARNINGS K 0.52 PER SHARE TNM as a Malawian company is committed to be a sustain- able and profitable business which will continue to invest in infrastructure in our country and contribute significantly to building the Great Nation of Malawi.
Transcript
Results for the year ended 31 December 2014
REVIEW OF THE YEAR
The company achieved strong levels of subscriber and Service Revenue growth during 2014 which resulted in a significant increase in profitability. These achievements were supported by the successful implementation of various expansion projects and cost management strategies.
The high inflation environment, the high interest rates, the volatile exchange rate movements and a very significant increase in regulatory fees continued to drive the increase in the cost of our operations. Although the current levels of profitability are encouraging, TNM requires a significant higher level of profitability to support the sustainability of the company through future investment in infrastructure expansion projects and the upgrade of its technology.
The company was successful with the actions taken to improve the Revenue streams and the cost management projects which resulted in the improvement of the EBITDA margin to 36% in 2014 from 35% in 2013. The Net Financing Cost decreased to MK 2,887 million (2013 MK 3,128 million) which includes Foreign Exchange Losses of MK 420 million (2013 MK 633 million). The Net Profit after Taxation for 2014, increased by 102% to MK 5,243 million, from MK 2,598 million in 2013.
TNM invested in Capex Expenditure of MK 11,968 million in 2014 (2013: MK 3,085 million) which mainly consisted of the upgrade of the Prepaid billing systems, the Core network upgrades, the Lilongwe network coverage expansion, 3G data network coverage expansion and various other technology upgrade projects.
The company acquired the ISP business and related infrastructure assets from Burco Electronic Systems Limited and will use these investments as the foundation to develop the TNM Business Services division which will focus on the needs of our Enterprise and SME customers.
OUTLOOK
Although the levels of growth in the business are expected to slow down in 2015 as a result of the economic circumstances and competition in the market, we remain optimistic that the profitability of the business will further improve. The company has initiated various business expansion strategies, supported by significant investment in the data network, network modernization and capacity expansion.
DIVIDENDS
Total Dividends of MK 2,408 million (MK 0.24 per share) are proposed for the period ended 31 December 2014:
K 702 million 7t per share was declared and paid in September 2014
K 702 million 7t per share was declared in December 2014 and paid in January 2015.
K 1,004 million 10t per share to be declared at the upcoming AGM*
*The Directors propose a Final Dividend of 10 (ten) Tambala per share out of the profits of the company for the year ended 31 December 2014, to be declared at the forthcoming Annual General Meeting.
BY ORDER OF THE BOARD
Mathews Chikaonda Willem SwartChairman Managing Director
Building infrastructure for the sustainable development of Malawi.
K 40,017 MILLION
KEY FINANCIAL HIGHLIGHTS
KEY ACHIEVEMENTS IN 2014
20% growth in subscriber base
General improvement in network quality
Acquisition of ISP Business from BURCO Electronic Systems Limited
Launch of
SERVICE REVENUE GROWTH 42%
K 14,568 MILLION
INCREASE IN EBITDA 44%
K 10,523 MILLION
OPERATING PROFIT 50%
K 11,968 MILLION
CAPEX ADDITIONS
K 5,243 MILLION
INCREASE IN NET PROFIT (AFTER TAXATION) 102%
K 1,401 ARPU
EARNINGS K 0.52
PER SHARE
TNM as a Malawian company is committed to be a sustain-able and profitable business which will continue to invest in infrastructure in our country and contribute significantly to building the Great Nation of Malawi.
Results for the year ended 2014www.tnminvestor.com
STATEMENT OF CASHFLOWS for the year ended 31 December 2014
2014MK’million
2013MK’million
Cash flows from operating activitiesCash receipts from customers 39,049 27,762Cash payments to suppliers and employees (17,779) (20,569)
Net cash generated by operating activities 16,299 3,812
Investing activitiesInterest received 91 248 Acquisition of property, plant and equipment (9,465) (2,006)Purchase of software (4,739) (1,079)Proceeds from sale of property, plant and equipment 16 29
Net cash used in investing activities (14,097) (2,808)
Financing activities Dividend paid (1,506) (803)Repayments of loans (1,439) (1,208)
Proceeds from loans
180 -Deferred payment facility 4,250 -
Net cash from/(used)in financing activities 1,485 (2,011)
Net decrease in cash and cash equivalents 3,687 (1,007)Cash and cash equivalents at beginning of year (4,575) (3,568)
Cash and cash equivalents at end of year (888) (4,575)
Additional statutory requirementDecrease in net working capital 9,559 (2,980)
STATEMENT OF FINANCIAL POSITION as at 31 December 2014
NON-CURRENT LIABILITIES Deferred tax 32 174Long-term portion of interest bearing loans 278 1,618Long-term portion of deferred payment facility 2,407 -
Total Non-current Liabilities 2,717 1,792
CURRENT LIABILITIES Bank overdraft 4,543 5,353Current portion of interest bearing loans 1,664 1,568Current portion of deferred payment facility 2,229 -Dividend payable 703 301Deferred income 1,609 1,176Trade and other payables 11,729 3,728Amounts due to related parties 242 -Income tax liabilities 922 802
Total Current Liabilities 23,641 12,928
Total Liabilities 26,358 14,720
TOTAL EQUITY AND LIABILITIES 39,607 24,633
AUDITOR’S REPORT TO THE MEMBERS OF TELEKOM NETWORKS MALAWI LIMITEDThe accompanying summarised financial statements, which comprise the summarised statement of financial position as at 31 December 2014 and the summarised statement of comprehensive income, the summarised state-ment of changes in equity and the summarised statements of cash flows for the year then ended, are derived from the audited financial statements of Telekom Networks Malawi Limited for the year ended 31 December 2014. We expressed an unmodified opinion on those financial statements in our report dated 19 March 2015. Those financial statements, and the sum-marised financial statements, do not reflect the effect of events that oc-curred subsequent to the date of our report on those financial statements.
The summarised financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the sum-marised financial statements, therefore, is not a substitute for reading the audited financial statements of Telekom Networks Malawi Limited.
DIRECTORS’ RESPONSIBILITY FOR THE SUMMARISED FINANCIAL STATEMENTSThe directors are responsible for the preparation of the summarised finan-cial statements in accordance with the framework concepts and the mea-surement and recognition requirements of International Financial Reporting Standards (IFRS) and the Companies Act, 1984.
AUDITORS’ RESPONSIBILITYOur responsibility is to express an opinion on the summarised financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810, “Engagements to Report on Summary Financial Statements.”
OPINIONIn our opinion, the summarised financial statements derived from the au-dited financial statements of Telekom Networks Malawi Limited for the year ended 31 December 2014 are consistent, in all material respects, with those financial statements, in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), and the Companies Act, 1984.
Public Accountants 19 March 2015Blantyre, Malawi
STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2014
2014MK’million
2013MK’million
Service Revenue 40,017 28,257Hardware and Equipment Revenue 500 617Total Revenue 40,517 28,874
Direct Operational Costs (17,659) (13,057)Gross profit 22,858 15,817
Other Income 780 240Selling and administrative expenses (9,070) (5,962)
Earnings before interest, tax, depreciation and amortisation 14,568 10,095Depreciation and Amortisation (4,045) (3,092)
Results from operating activities 10,523 7,003
Finance Income 91 248Finance expenses (2,978) (3,376)
Net finance expense (2,887) (3,128)
Profit before income tax 7,636 3,875Income tax expense (2,393) (1,277)
Profit for the year 5,243 2,598
Other comprehensive income - -
Total comprehensive income for the year 5,243 2,598
EBITDA margin 36% 35%EBITDA per share (MK) 1.45 1.01
Dividend per share (MK) 0.19 0.09
Earnings per share Basic earnings per share (MK) 0.52 0.26
Number of ordinary shares in issue (millions) 10,040 10,040
