TS Telecom loses $1,179,000 in third quarter
TS Telecom Ltd TOM
Shares issued 22,003,005 Feb 26 close $0.11
Wed 27 Feb 2002
Mr. Randy Hung reports
T S TELECOM LTD. - FINANCIAL RESULTS FOR THE THIRD QUARTER ...
TS Telecom has posted a net loss of approximately $1.2-million for the
three-month period and $3.5-million for the nine-month period ended Dec.
31, 2001, despite an increase in gross revenue. The operating results are
below the company's expectation so it is currently reviewing its business
process and will adopt a new operation plan. The new operation plan, aiming
to bring the company back to profitability again, involves reorganizations
of branch office personnel, introduction of new incentive schemes, and
implementation of initiatives to control marketing and engineering
expenses. Together with the company's commitments in marketing focus and
customer services, the company will continue to pursue the opportunities
ahead of the company in the telecom industry.
FINANCIAL HIGHLIGHTS
Three months ended Dec. 31
(thousands of dollars)
2001 2000
Gross sales $ 4,399 $ 1,122
Gross profit 2,172 395
(Loss) before
tax and
minority
interest (1,746) (3,324)
(Loss)/income
for the period (1,179) (2,002)
(Loss)/earnings
per share
Basic $ (0.05) $ (0.09)
FINANCIAL HIGHLIGHTS
Nine months ended Dec. 31
(thousands of dollars)
2001 2000
Gross sales $ 11,777 $ 8,339
Gross profit 6,425 5,352
(Loss) before
tax and
minority
interest (5,620) (405)
(Loss)/income
for the period (3,454) 7
(Loss)/earnings
per share
Basic $ (0.16) $ 0.0003
Results of operations
Third quarter results
Gross revenue for the three months ended Dec. 31, 2001, amounted to
approximately $4.4-million, an increase of 292 per cent from approximately
$1.1-million for the same three-month period last year. The increase was
mainly from the increase in power monitoring equipment contracts from
mobile operators.
Despite the increase in gross revenue, the company posted a loss before tax
and minority interest of approximately $1.7-million as compared with
approximately $3.3-million for the same period last year. Net loss for the
three months ended Dec. 31, 2001, was approximately $1.2-million as
compared with approximately $2.0-million for the same period last year. The
decrease in net loss was largely contributed by the increase in gross
revenue from closing delayed contracts from the last quarter.
Nine-month results
Gross revenue for the nine months ended Dec. 31, 2001, was approximately
$11.8-million, an increase of 41 per cent as compared with approximately
$8.3-million for the corresponding nine-month period last year. The
increase in gross revenue is the primarily result of actively marketing the
company's power monitoring systems to mobile operators and sales of the
first mobile gas turbine generator.
The company's loss before tax and minority interest for the nine months was
$5.6-million, as compared with $400,000 realized in fiscal 2001, which
included a one-time dilution gain on issuance of shares of TS Telecom
Technologies Limited (TST Technologies). The net loss for the third quarter
of fiscal 2002 was $3.5-million or 16 cents per share, as compared with the
net income of $7,000 or 0.03 cent per share for the same period a year
earlier.
The net loss for the nine-month result was due to the decline in interest
revenue, increase in engineering expenses for mobile operator customers,
provision of long-aged accounts receivable, marketing expenses incurred for
promoting the company's gas turbine generator product line and payments for
non-recurring employment termination costs in the quarters.
At the end of the third quarter, management implemented initiatives to
control costs in marketing and engineering activities as part of the
company's effort to bring down general and administrative expenses in the
coming quarters.
Analysis of cash flows and financial condition
Cash decreased from approximately $20.3-million as at March 31, 2001, to
$14.5-million as at Dec. 31, 2001, primarily due to the loss position from
operations and the making of a mobile gas turbine generator demo unit and
purchase of two gas turbine shafts inventory in preparation of closing
additional sales contracts of mobile gas turbine generators. Management
believed that the company had sufficient cash and financial resource to
carry out its operations and business plans.
During the quarter, the company provided a general provision for long-aged
accounts receivable of approximately $600,000 for prudent reason.
The increase in other receivables, prepaid expenses and deposits were
mainly related to the deposits made to suppliers of long production cycle
components.
Capital assets increased from approximately $3.1-million as at March 31,
2001, to approximately $6.5-million as at Dec. 31, 2001. It was primarily
due to the purchase of a motor vehicle, purchase of a real property in
Shenzhen, China, and the making of a mobile gas turbine generator demo
unit.
The increase in bank loan to approximately $2.7-million was primarily
related to a short-term financing of approximately $1.2-million in Reminbi
and a bridge loan of $1.5-million for the purchase of a real property in
Shenzhen, China. The real estate was originally planned to be the company's
new factory site but later on decided to be the company's new Shenzhen
office. The site is currently under renovation and will be able to host 168
personnel.
Business review and prospects
The marketplace
The company's main business is in distribution of monitoring systems to
fixed line and mobile operators. Despite the increase in gross revenue for
the nine-month period, most of the sales came from mobile operators, which
required high engineering costs resulting less profit than contracts from
fixed line operators.
During the company's third quarter, the fixed line operators in China had
finally announced their restructuring plan. Under such plan, all fixed line
telephone offices would be reorganized into two separate companies. The
company anticipated that contracts from fixed line operators should resume
as soon as the announced restructuring plan is completed.
New products
Fibersmart
The company targeted to commence a soft launch of Fibersmart at the end of
its fourth quarter allowing the company to deliver Fibersmart to the
marketplace. The company noted that similar equipment were also being
offered by certain multinational companies. These multinational companies
would compete head to head with the company. The company believed that the
key success factors would be functionality and customer services, wherein
it has made a substantial investment during the course of its development
of Fibersmart.
Gas turbine generator
The company continued its effort in marketing its gas turbine generator. In
October, the company conducted a conference in Beijing Diaoyutai State
Guesthouse attended by key personnel of telephone offices as well as
officials from provincial and national government and military units. The
result of the conference was extremely positive and the company has
subsequently started negotiating field trials, technical conferences and
follow-up meetings with most attendants.
Establishment of New Zealand office
In October, 2001, the company entered into an agreement with its long-time
technical partner, Sparton Technology, Inc., of Albuquerque, for the
exclusive rights to distribute cable monitoring equipment in Australia, New
Zealand and Southeast Asia (except for Taiwan). To implement the agreement,
the company established a new subsidiary in New Zealand to serve the
telecom operators in Australia and New Zealand. The company is also
planning to establish additional offices in Southeast Asia to serve telecom
operators in that region.
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