Despite a bigger loss for the financial year, JSE-listed Africa Cellular (AC) Towers' directors believe the group is “solvent” and is starting to reap the rewards of a turnaround strategy.
AC Towers has been “restructured” and additional funding has been secured to enable the group to perform on current and future contracts, the company says. This is the fourth period in a row the group has reported a loss.
For the year to February, the group's revenue dropped from R227.4 million a year ago to R202 million. It widened its loss from R108.8 million to R136 million, and its headline loss per share was higher at 30.8c, from last year's 22.9c.
The company wrote-off bad debts worth R17.6 million during the year, of which only R300 000 was written off in the second half of the year, it said in a statement on Friday.
AC Towers says results were “well below the board's expectations”. However, the second half of the year was an improvement on the first six months, an indication that the “group is starting to see the benefits of this turnaround strategy,” it says.
AC Towers' shares slumped on the news, losing 2c, or 14.29%, to close at 12c on Friday, close to its 52-week low of 9c on 28 February. Its 52-week high was 48c on 4 August last year.
The company was established in 1999 and is listed on the JSE's Alternative Exchange. It has three business units: power lines, cellular towers and equipment shelters.
Plans defined
The group has cut costs, closed its fibre-optics division and developed “comprehensive business plans and models for each division”.
“The turnaround strategy is still ongoing and the full benefits should materialise over the next 18 months,” it says.
AC Towers has secured funding of R99 million from the Industrial Development Corporation, which has helped it fund operations and equipment necessary for its power lines division, it notes. It is looking to recapitalise the business to “alleviate” short-term pressure on cash flows and provide contract funding.
“The management of AC Towers believes that the group is turning the corner and is striving to become reliable in all aspects of its business,” it says.
AC Towers was affected by the strength of the rand, low revenue, low volumes in its factory and steel imports coming in from China and India at below cost. It has also made losses on some cellular and fibre-optic installation contracts in Africa.
However, in the second half, it signed up profitable cellular contracts and established its power lines division with Eskom, which will enable it to win several contracts. The company has also managed to reduce its exposure to Africa, from 86% to 45%. Its African operations had been a thorn in its side.
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