Teljoy Holdings Limited, the listed provider of cellphone services and TV rental services, has announced substantially improved profitability for the six months ended September 30, 1999, with profits attributable to shareholders growing by 36% to R28,6m (1998: R21m) and earnings per share growing by 20% to 24,6 cents (20,5 cents). An increased dividend of 7 cents per ordinary share has been declared (4,5 cents).
Revenue increased by 45% to R704,4m (R485,7m) as a result of higher volumes and the inclusion of the results of Cellphones Direct acquired in November last year. Operating profits rose by 48% to R35m from R23,7m. Interest receipts on higher levels of cash were partly responsible for a rise of 41% in pre-tax profits to R47,4m from R33,6m. The balance sheet remained strong, with cash and investments totalling R245m as at September 30.
The directors state that operating cashflows were positive, while working capital was well managed despite difficult market conditions. They add that the upgrading of IT systems at the Cellular Services and Television Services divisions is almost complete.
Vodacom recently made and offer to Teljoy shareholders to acquire 100% of the issued share capital of Teljoy. The shareholders` meeting to approve a scheme of arrangement for the acquisition by Vodacom of Teljoy`s issued share capital will be held on Monday, December 13, 1999. The circular to shareholders will be posted shortly.
Johan Pieterse, Teljoy chief executive officer, says that both Vodacom and Teljoy have made the necessary submissions to the Competitions Commission. He emphasises that the proposed transaction is very much in line with global trends in the maturing cellular industry, which are characterised by merges and acquisitions.
"The combination of Teljoy`s 350 000 Vodacom contract and prepaid subscribers with Vodacom`s own service providers will increase the efficiency of the market for the benefit of cellular users by enabling the group`s service providers to rationalise marketing functions and information systems.
"Finally, as part of Vodacom, Teljoy will be better placed to respond effectively and rapidly to the ever-changing cellular environment.
Mr Pieterse adds that growth for the full financial year is expected to be in line with performance reported for the first six months. All divisions are operating profitably and are expected to benefit from forecast increases in consumer spending as interest rates fall.
He said that Teljoy was confident that the third cellular licence, due to be awarded next month, would have an overall beneficial effect on the cellular industry. "It will increase competition, which is healthy for the marketplace and will benefit the consuming public. At the same time it will raise market awareness among potential users and thus stimulate growth.
"Revenue of Teljoy Cellular Services increased by 51% as a result of growth in volumes, added focus on the Vodago Prepaid market and the inclusion of the results of Cellphones Direct. This division, contributed meaningfully to profitability and is performing in line with budget forecasts. Attributable profit for the Teljoy Cellular Services division rose by 61% to R22,1m from R15,2m.
"The profitability of Teljoy Television Services was materially affected by the R1m cost of restructuring the Mastercare appliance repair division, and attributable profits rose marginally to R5,7m (R4,9m) in difficult trading conditions. Mastercare is now generating satisfactory profits."
Pieterse added that the Cellular Shop, which sells cellular contracts, handsets and accessories, opened a further nine shops during the six months, bringing the total number of retail outlets to 22.
At headoffice expenses remain well controlled although interest revenues were affected by the decline in interest rates.
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