MARKHAM, ON, Nov. 29 /CNW/ - T S Telecom Ltd. is pleased to report its
financial results for the six months ended September 30, 1999, as follows.
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Financial Highlights
For the 3 months ended September 30, 1999 1998
(in thousands of dollars, except earnings
per share) $ $
Gross revenues 6,002 9,268
Net income before tax 2,472 2,146
Net income 2,439 2,021
Earnings per share 0.12 0.10
Cash flow from operations 2,249 1,236
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For the 6 months ended September 30, 1999 1998
(in thousands of dollars, except earnings
per share) $ $
Gross revenues 7,647 13,835
Net income before tax 1,538 2,368
Net income 1,447 2,196
Earnings per share 0.07 0.11
Cash flow from operations 1,891 1,478
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T S Telecom Ltd's second quarter of the 2000 fiscal year show a strong
recovery over the weakness experienced in the first quarter of the current
fiscal year, with healthy growth in after tax net income. The strength of the
recovery is expected well into the future.
Financial Review
Gross revenue from operations for the three months ended September 30,
1999 was $6.0 million as compared to $9.3 million for the same period in
fiscal year 1999. The decrease reflects the final effects of the consolidation
of China's telecom industry, which is now largely completed. Although second
quarter gross revenues declined, net income before tax for the second quarter
of fiscal 2000 increased from $2.1 million in fiscal 1999 to $2.5 million,
representing an increase of about 20%. After tax income for the three months
ended September 30, 1999 also increased 20% to $2.4 million, from $2.0 million
for the same period last year. The increase in second quarter net income is
primarily attributable to significantly higher gross margins achieved through
the acquisition of manufacturing capabilities to allow local production of
selected company products or product components.
Year to date gross revenue was $7.6 million, a 44.7% reduction from the
$13.8 million realized a year earlier. The decline is largely related to the
weak first quarter which saw sales decrease 65% from the first quarter of the
previous fiscal year. Income before tax for the six months was $1.5 million,
as compared to $2.4 million for the same period a year earlier. On an after
tax basis, net income for the first six months was $1.4 million or $0.07 per
share, as compared to $2.2 million or $0.11 per share for the same period last
year. Similarly, the decrease in net earnings is due to the weak first
quarter.
Operational cash flow for the second quarter was $2.2 million, increased
from $1.2 million realized for the corresponding period last year. Cash flow
from operations for the six months was $1.9 million, as compared to $1.5
million from the previous year. The Company was in a strong cash position at
September 30, 1999 with cash and cash equivalents of $2.6 million.
T S Telecom's share of the six months earnings of its 30% equity joint
venture, Shanghai Hua Cheng Telecommunications Equipment & Co. Ltd. ("SHC")
was $125,000, as compared to $324,000 for the same period last year. The
decrease reflects the restructuring in China's telecom sector, which
significantly impacted first quarter results.
At September 30, 1999, T S Telecom had approximately $0.7 million of
undelivered contracts on its order book, as compared to $2.3 million at the
end of the first quarter. These orders will be delivered in the third quarter.
Company update
The Company is extremely pleased with the progress made in the second
quarter in a number of areas, all of which are expected to contribute
significantly to revenue and earnings growth.
The Company completed the acquisition of YingZhiXun Telecom Equipment
(Shenzhen) Co. Ltd. ("YZX"), a Shenzhen, PRC based manufacturer of electronic
lock control systems, ancillary devices for wireless telephone and security
devices for telecommunication networks. Coincident with this purchase,
effective July 1999, the Company's subsidiary, T S International Co. Ltd.
("TSI") acquired from Sparton Technology, Inc., its major supplier, the rights
to manufacture and distribute Sparton's POWERCOM system in China. The YZX
acquisition enables TSI to move quickly to manufacture the POWERCOM systems,
which accounts for over 50% of sales, with minimal capital and human resource
additions. The local manufacturing will also bring other benefits including
substantially higher margins, shortened production and delivery time and
greater quality control. These benefits are already being realized as evident
by the high gross margins achieved in the second quarter.
TSI has also developed and tested a new version of POWERCOM specifically
for mobile base stations (wireless telephony). This product will be launched
this year, and with the growing demand for mobile telecommunications, is
expected to be a significant contributor to future revenues and earnings.
Similarly, the Company's Fibersmart system has been well received in field
tests, and it is expected that commercial sales will commence this fiscal
year. We believe that the product is well positioned to take advantage of
China's increased use of and reliance on fiber optics in its telecommunication
networks.
TSI recently entered into a joint venture agreement with Harbin Dongan
Generators (Group) Company Limited to establish D & T Engineering Co., Ltd.
("D & T Engineering"). TSI will invest approximately $240,000 for a 45%
interest in D & T Engineering, which will be principally engaged in the
manufacture and sale of gas turbine power generators designed specifically for
telecom providers in China. The joint venture will be the "the first and only"
local venue to assemble gas turbine generators for China's telecommunications
industry, and is vertically complimentary to our core telecom maintenance and
monitoring businesses.
Growth Enterprises Market ("GEM") listing
We are extremely pleased that the Stock Exchange of Hong Kong Limited
("SEHK") has in principal approved the application for listing of our
subsidiary, T S Telecom Technologies Limited ("TST Technologies"), on the
recently introduced Growth Enterprise Market ("GEM") operated by the SEHK. TST
Technologies was formed by T S Telecom for the GEM listing, and owns 100% of
TSI. We believe that the GEM, which is the alternative board of the SEHK
targeting smaller to medium size growth enterprises, particularly those in
technology sector, will enhance our capabilities to do business in our primary
market of China.
In connection with the GEM listing, TST Technologies will raise
approximately $22.2 million by issuing 79.2 million new shares. The offering
has been priced at a price/earning ratio of 11, based on management's net
income forecast for the operating subsidiary of not less than Cdn$6.7 million
(HK$36 million) for the fiscal year ending March 31, 2000. With this
completion of the offering, the Company will be well financed for future
growth and acquisitions. Following the offering, T S Telecom will have a 64%
interest in TST Technologies.
T S Telecom has taken significant steps this year in positioning itself
to capitalize on China's growing telecommunication demands. With the recent
developments with China and its entry into the World Trade Organization, we
believe that the opportunities for T S Telecom will continue to expand, and we
are confident that we will succeed in maximizing their potential and grow our
revenues and net income well into the future.
T S Telecom together with its subsidiaries is a value added distributor,
manufacturer and systems integrator of specialized telecommunications
equipment in China, including Hong Kong. The Company's focus is to assist
telecommunication providers to ensure trouble free and continuous operations
of their networks. The Company offers a range of products including advanced
maintenance and monitoring systems, and digital access equipment for
telecommunication and related networks. It is the exclusive and/or preferred
agent and distributor in Hong Kong and China for a number of U.S., European
and Asian manufacturers of technology based products including Sparton
Technology, Inc. and Opnet Technologies. It is also engaged in the development
and production of its own fiber optics monitoring system and cable
pressurization systems. T S Telecom Ltd., through T S Telecom Technologies
Limited, its wholly owned Hong Kong subsidiary T S International Co., Ltd.,
has a 30% interest in a manufacturing joint venture in Shanghai registered in
the name of T S International Co. Ltd.
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Spin off of subsidiary to captialize on HKGEM market. |
