RNS Number:7294T
Teleset Networks PCL
06 May 2008
Press Announcement
EMBARGOED UNTIL 7AM ON 6 MAY 2008 Tuesday, 6 May 2008
Teleset Networks PCL ("Teleset", "Teleset Networks" or "the Company"), a leading
private fixed-line telecom network operator in the Republic of Tatarstan,
Russia, announces financial results for the year ended 31 December 2007.
FINANCIAL HIGHLIGHTS
*Operating revenue up 69 per cent to US$ 22.7 million
*Net Profit up 86% to US$ 5.1 million.
*55 per cent EBITDA margin and 23 per cent net margin
*Increased network coverage in Kazan from 27 per cent to 29 per cent of
market share
*First strategic move outside Kazan with US$ 10.8 million acquisition of
telecom business in Naberezhnie Chelny
*Subscriber base up 18 per cent per cent to 130,790
*US$14.7 million of new equity raised in 2007 from institutional investors
including Templeton Asset Management Limited, the Black Sea Trade and
Development Bank and Deutsche Bank
*US$ 20 million loan facility provided by Black Sea Trade and Development
Bank
*A further US$ 10 million raised already in 2008 in a pro rata offer to
existing shareholders
Year
ended 31 31.12.2003 31.12.2004 31.12.2005 31.12.2006 31.12.2007
December
US$ US$ US$ US$ US$
Operating
revenue 5,683,022 7,239,620 9,428,684 13,460,783 22,737,313
Operating
profit 1,964,481 2,208,424 3,663,488 6,160,733* 8,938,378
Net 1,006,221 1,084,930 2,541,640 2,768,552 5,142,984
profit
Operating
expenses (3,718,541) (5,031,196) (5,765,196) (7,736,787) (14,137,674)
EBITDA 3,852,503 4,109,291 5,696,259 8,544,002* 12,427,240
Monthly
revenue
per 3,447 4,287 4,767 5,172 5,386
employee**
*before admission costs
**Calculations based on the indicators for December
CONTACTS
Teleset Networks PCL +357 22 450 790
Yiannis Demetriou
Blue Oar Securities Plc - Nominated Adviser +44 20 7448 4400
Shane Gallwey / John Wilkes / Toby Gibbs
Metropol (UK) Limited - Broker +44 20 7439 6880
Alexander Selegenev
Bankside Consultants - Financial PR adviser +44 20 7367 8888
Simon Bloomfield, Steve Liebmann or Andy Harris
CHAIRMAN'S STATEMENT
Teleset Networks PCL, with its all-digital network and continuing investment in
new technologies, is well placed to deliver the combination of voice content,
broadband access and video content that its customers will demand over the
coming years.
The year ended 31 December 2007 saw a strong financial performance and
significant strategic progress by Teleset. During the first half of the year, we
successfully completed the integration of TNPKO, our first acquisition, which
contributed significantly to the financial results of the year, and increased
Teleset's network coverage and strengthened its platform for further profitable
growth in the city of Kazan.
Revenues for the year were up 69 per cent to US$ 22.7 million compared to
US$13.5 million in 2006, with operating profit up 45 per cent to US$ 8.9 million
(2006: US$6.2 million*). This reflected the expected improvement in margins
from TNPKO in the second half of the year after the business was successfully
integrated. Basic earnings per share for 2007 were US$ 0.0405 (2006: US$0.0271).
As the Company is concentrating its financial resources on expanding the
business, the Board is not recommending the payment of a dividend.
Teleset made its first strategic move outside Kazan in November 2007 with the
US$10.8 million acquisition of OOO Svyazinvest ("Svyazinvest"), a private
fixed-line telecom operator in Naberezhnie Chelny, the second largest city in
Tatarstan. The Company expects to complete the integration of Svyazinvest during
the first half of 2008 and anticipates that the new acquisition will enhance
earnings per share in 2008 as a result of significant synergies realised from
the enlarged business. Through Svyazinvest, management has also gained
significant experience of integrating operations outside Kazan, which is
invaluable for the Company's further development.
One of our key objectives is to continue generating and maximising incremental
revenues from Teleset's all-digital network. In August 2007 Teleset launched a
new cable TV service to existing subscribers in Kazan. The new service is
supported by TV content comprising around 40 of the most popular sports, music
and entertainment channels including The Discovery Channel, Animal Planet,
National Geographic Channel and Eurosport. Following an encouraging early
performance by the new service, which by the end of the year had approximately
850 subscribers, the Company is extending the availability of this service, for
example by integrating it into the service package offered to residents in new
apartment buildings currently under construction.
Board changes
Mr Yuri Mashintsev, Executive Director of Templeton Asset Management Limited,
and Mr. Gueorgui Horozov, the Director, Energy & Infrastructure with the Black
Sea Trade and Development Bank, joined the Board as Non-Executive Directors
during the year. I would like to thank both of them for their valuable
contribution and support. In April 2008 the Board of Directors accepted Mr Yuri
Mashintsev's resignation with effect from 30th April 2008..
Outlook
Teleset continues to experience buoyant demand for its services, in both the
residential and business sectors, supported by continuing economic growth and
prosperity in its chosen markets. Broadband services penetration is steadily
increasing and internet traffic is growing rapidly.
Control over the "last mile" and the Company's ability to offer bundled
services, enable Teleset to take full advantage of growing demand for
unregulated broadband services, which we expect will have a positive impact on
the financial performance of new business acquisitions.
*before admission costs
The company will continue to pursue its stated strategy for long term profitable
growth both organically and through attractive acquisitions and we remain
confident that we will make strong further progress in 2008.
Philippos Vatiliotis
Non-Executive Chairman
CHIEF EXECUTIVE OFFICER'S REVIEW
In 2007 Teleset Networks cemented its position as a successful fixed-line
telecom operator in the Republic of Tatarstan.
Overview
In 2007, Teleset entered a new phase of growth and made further significant
progress in its development as a successful fixed-line telecom operator in the
Republic of Tatarstan. Key to Teleset's leading market position is its
all-digital local network which enables the Company to provide reliable, high
quality services to satisfy all modern communication needs. Having acquired
TNPKO in November 2006 and completed its successful integration, the Company has
realised substantial synergies through having network coverage in all 7
districts of Kazan. In November 2007, the Company made its first move outside
Kazan with the acquisition of OOO Svyazinvest ("Svyazinvest"), a telecom
operator in Naberezhnye Chelny, the second largest city in Tatarstan.
Telephone services
Teleset achieved all its strategic and operational objectives for 2007. We
continued investing significantly in enhancing the quality, performance and
expansion of our network with three new remote switches being added. Installed
capacity of Teleset's existing network is approximately 135,000 lines giving
plenty of capacity for the interconnection of new subscribers in the foreseeable
future.
Today the Company has a significant presence in the two largest cities of the
Republic of Tatarstan - Kazan and Naberezhnie Chelny. The number of telephony
subscribers in Kazan is more than 112,200, 7 per cent of which are corporate
clients, whereas in Naberezhnie Chelny the number of subscribers is more than
18,500, 27 per cent of which are corporate clients.
In the corporate sector, Teleset benefits from a high level of client retention
in line with the continuous improvement of revenues. This demonstrates our high
quality of service combined with reliability. Our large corporate customers,
including Metro Cash & Carry, the local branch of the Federal Tax Service, the
local branch of the largest Russian Bank, Sberbank and the Central Bank of
Russia among others, have been using Teleset's network for more than 5 years.
We have an excellent relationship with the property developers in Kazan as a
result of our ability to provide win-win solutions. In 2007, 4,500 apartments
were provided with telephony and Internet. The Company is planning to install
four new remote switches in different districts of Kazan and telephony and
Internet connectivity in 6,000 new apartments.
Internet services
We are taking full advantage of buoyant demand for broadband services in
Tatarstan, where the Company believes there is high upside potential in the data
services market. This is demonstrated by the fact that we have boosted our xDSL
subscribers' base to 11,198 compared to 4,184 in 2006 or 168 per cent growth for
2007. This led to a 250 per cent increase in xDSL traffic to 126,758 Gb for the
year (2006: 36,226Gb). Dial-up traffic grew by 77 per cent in 2007 to 37,772Gb
(2006:21,275Gb). Internet services revenues accounted for 29 per cent of total
revenue compared to 24 per cent in 2006.
The substantial increase achieved in revenues from Internet services in 2007 was
supported by the installation of 25 DSL nodes for 5,400 ports and upgrading
Teleset's data transmission network to one Gigabit per second. The contract
signed with ECI Telecom for the delivery of 7,500 ADSL2+ lines has provided
further broadband access capacity for expansion in the business market. We plan
to install 10,000 DSL ports in 2008.
The combination of offering a wide range of Internet and media services, new
product development and the success of our marketing and sales activities has
enabled us to win and retain new customers and to increase the level of
recurring revenues. Activities devoted to other type of services, such as
universal pre-paid cards and new internet tariffs, also contributed to the
Company's incremental revenues.
Cable TV
In line with our strategy for maximising incremental revenues from our network,
in August 2007 the Company successfully launched a cable TV service via its
fiber-optic network. The new service was marketed initially in four districts of
Kazan, (Aviastroitelny, Kirovsky, Novo-Savinovsky and Privolzhsky).
Programming for the new service includes content from around 40 of the most
popular sports, music and entertainment channels. Teleset has already signed
direct contracts with well-known channels including The Discovery Channel,
Animal Planet, National Geographic Channel and Eurosport.
Our cable TV service is available to the Groups' existing telephone subscribers,
as well as to customers on other networks, and offers TV viewers in Kazan high
quality services at competitive prices.
All Teleset's existing subscribers are being offered a number of incentives to
subscribe for the Company's new cable TV service. Customers are also benefiting
from the Company's single billing for all its services, including fixed-line
telephony, internet and cable TV.
In Russia, cable TV is emerging as a leading alternative to municipal
free-to-air television services. The market is still in its infancy with the
total number of subscribers throughout Russia amounting to 13.5 million
households in 2007. Demand for cable TV is growing rapidly in Kazan and across
Russia as disposable incomes increase in line with the strong economic growth
the country is experiencing.
In anticipation of the government-controlled switch from analog to digital TV
broadcasting by 2014, we plan to focus strongly on expanding our cable TV
content to ensure that Teleset can compete effectively in this growing market.
Acquisitions
Through its experience with TNPKO, which has significantly strengthened
Teleset's market position in Kazan, management has demonstrated its expertise in
identifying and successfully integrating high quality businesses that match our
strategic criteria. The acquisition of TNPKO also represents a significant step
towards Teleset's goal of being a leading telecom industry consolidator in
Russia.
The US$10.8 million acquisition in November 2007 of Svyazinvest in Naberezhnie
Chelny was Teleset's first strategic move outside Kazan and is in line with our
stated strategy of expanding our network coverage and operations both within the
Republic of Tatarstan and in other cities of the Russian Federation. It has
significantly increased Teleset's subscriber base to 130,790, of which corporate
customers now account for approximately 10 per cent, and represents an important
part of the planned transition to being a much larger business.
Naberezhnie Chelny is the second biggest city of the Republic of Tatarstan
(after Kazan) with a population of about 500,000 located 200 kilometres from
Kazan. The city is highly industrialised and is best known for being where
KAMAZ, the worldwide heavy trucks manufacturer, operates its largest plant.
There are several well-developed industries in Naberezhnie Chelny which in total
account for 20 per cent of Tatarstan's gross regional product. 220,000 square
meters of housing space was completed in 2007. Since 2005, average growth in
communication services in Naberezhnie Chelny has been 110 per cent per annum.
This level of growth is expected to continue and underpins the growth potential
for Svyazinvest.
Svyazinvest is the third largest telecom operator in Naberezhnie Chelny, where
it provides services solely through its own fully digital telecom
infrastructure. The operator is licensed to provide fixed-line telephony,
IP-telephony, HS internet access, and rent communication channels. It has 18,500
telephone subscribers, including 13 primary-rate ISDN interfaces, and a total
installed capacity of 19,700 lines with one main exchange and 16 remote
switching units in the city. The assets acquired include three premises with a
total area of 512 square metres, primary, ducting, fiber-optic and distribution
lines, as well as work in progress and materials that will be used for future
expansion of the network in Naberezhnie Chelny.
The integration of Svyazinvest, which management expects to complete during the
first half of 2008, is proceeding according to plan. The benefits of the
acquisition include:
*an immediate and significant presence in the second biggest city of the
Republic of Tatarstan
*significant penetration of the corporate market in Naberezhnie Chelny
*significant synergies and new revenue opportunities for the combined
business.
Once Svyazinvest is fully integrated and the full benefits from the enlarged
business are being realised, management anticipates the acquisition will be
earnings enhancing.
Other developments
We continue to obtain additional revenues from Teleset's fiber-optic network
capacity as well as from construction activities on behalf of the State
Television and Radio Company of the Republic of Tatarstan, and some of Russia's
largest cellular operators, Vimpelcom, Megafon and MTS.
During 2007 we also continued the process of optimising our operational
expenses. For example, we negotiated a substantial reduction in the cost of
leasing internet channels due with our primary internet provider TransTelecom.
Regulation
During the year the company experienced improved profitability thanks to a range
of beneficial regulations and cost-cutting measures introduced in late-2006.
Substantial revenues were supported by the introduction of the "Calling Party
Pays" standard, liberalisation of long-distance market, a 50 per cent increase
in the fixed rental tariff fee and a 10 per cent increase in all other tariffs
with effect from 1st February 2007.
We anticipate that the 4 per cent increase in regulated tariffs with effect from
1 April 2008 will have a positive impact on the operating revenues in 2008.
Financial Review
Our company has delivered a strong financial performance in 2007, and built a
platform for steady growth going forward. EBITDA was US$ 12.4 million and EBITDA
margin was 55 per cent (2006: US$ 8.5 million and 63 per cent respectively). We
achieved healthy net profits of US$ 5.1 million and net margin of 23 per cent
(2006: US$ 2.7 million and 21 per cent).
Operating revenues were US$ 22.7 million, of which 52 per cent are from fixed
telephony services (US$ 11.9 million). We indicated 92 per cent increase in
incomes from rental fee with 4.4 per cent increase in connection fees.
The share of internet services in the Company's revenues keeps growing to 29 per
cent or US$ 6.7 million in 2007 (2006: US$ 3.3 million), showing 104.8 per cent
increase.
Our other source of revenues - VoIP is up 3.4 per cent. ISDN rental and
connection fees increased to US$ 1.9 million comparing with US$ 1.3 million in
2006 representing 44 per cent growth.
Capital expenditure was US$ 3,732,195 million with 75 per cent supporting
infrastructure construction and telecommunication equipment modernisation.
In July 2007 Teleset Networks agreed a US$ 20.0 million credit-line from the
Black Sea Trade and Development Bank ("BSTDB") on which interest paid is 2.5 per
cent over LIBOR. In addition, Teleset raised a further US$3.0 million via the
issue to BSTDB of new ordinary shares at a price of 23.8 pence per share. The
new credit line is helping the company to reduce its net interest expense and to
maintain a healthy level of EBT and net profit margins.
The company was also delighted to announce on 10 August 2007 that the London
office of Deutsche Bank AG made a substantial equity investment of US$ 1.7
million securing 3,481,592 new ordinary shares at a price of 24.5 pence per
share.
The investments from BSTDB and Deutsche Bank followed the successful raising of
US$ 10 million equity via a placing of 24,390,244 new ordinary shares at 21
pence each with Templeton Strategic Emerging Market Fund ("TSEMF") arranged in
the first quarter of 2007.
The proceeds of the new issues raised from the three prime institutional
investors helped the company to accelerate the implementation of its strategy.
Interest expense was US$ 2 million in 2007 comparing with US$ 1.2 million
(increased by 60 per cent) due to the loan for US$ 9.8 million obtained in 2006
and for US$ 10 million obtained at the end of 2007. Interest income has grown by
37 per cent to US$ 0.9 in 2007 comparing with US$ 0.6 million in 2006.
Future developments
The Internet services market, with less than 5% penetration, has great potential
for expansion. Fixed-line broadband Internet services are much cheaper, faster
and of higher quality than any other mobile data technology, and we see
broadband access, along with quality and range of services, as key to Teleset's
future development.
We will also enhance the revenues and profits of acquisitions by adding
broadband services to the product offering.
Teleset has ambitious plans to develop the business further. Favourable economic
conditions, which will also benefit from Russia's planned accession to the World
Trade Organisation in 2009, underpin the growth in demand for Teleset's services
from both the business and residential sectors.
Strong fundamentals, coupled with a favourable regulatory environment and the
positive economic trends in the region ensure we remain optimistic about
Teleset's strong performance going forward.
We will continue to make determined efforts to improve both strategic focus and
operating performance by implementing our stated strategy for sustained and
profitable growth through organic development and if more opportunities appear
through selected acquisitions that would add value for our shareholders.
Yiannis Demetriou
Chief Executive Officer
BUSINESS REVIEW
An emerging leader in Russian telecoms
Teleset Networks is an established, rapidly growing and profitable fixed-line
telecom operator in the Republic of Tatarstan. Tatarstan is located in the
European part of the Russian Federation, where the population of approximately
3.8 million is benefiting from the strong economic performance of the region and
Russia as a whole.
The Company currently operates in two of Tatarstan's leading cities, Kazan and
Naberezhnie Chelny, which have populations of 1.1 million and 0.5 million
respectively.
Teleset Networks is emerging as a leading brand in Russia's rapidly developing
telecom market through an aggressive growth strategy which combines competitive
and innovative service offerings for customers, effective sales and marketing,
and the application of best modern practice in operational management and
corporate governance. As a result, the Company is winning market share and
achieving high growth in revenue and profit.
Marketing and advertising activities, which range from radio and print ads to
Flash-animated Web banners and Tariff packages to meet the needs of different
customer groups, reflect the Company's dynamism, energy, reliability and
innovation. By creating and sustaining a clear and consistent presence in the
marketplace, the Company is achieving a high level of brand recognition and
increased sales and market share.
As the competitive environment intensifies, we are improving our ability to
respond quickly to changes in customer demands whilst maintaining the highest
levels of performance and reliability. Investment in expanding network capacity
and the latest technology is at the heart of this effort to deliver top quality
service. At the same time, the Company is seeking to drive competitive advantage
by "bundling" communication and entertainment services to give subscribers a
broad range of choice and flexibility whilst generating new sources of revenue.
Competitive environment and market position of Teleset Networks
The Russian telecommunications services market is a complex and highly
fragmented. Whilst there is a monopoly controlling the local call market, there
are a relatively large number of fixed-line operators and hundreds of ISPs and
VoIP providers, usually small businesses operating at a local level.
According to various estimates, the telecom market in Russia has the potential
to double to $70 billion by 2010 with broadband penetration in the residential
sector reaching 23 per cent over the same period. This supports the Company's
belief that there is scope for substantial further growth in the Russian telecom
sector, especially for regional operators, which is far from reaching saturation
and justifies further investment.
According to IKS-Consulting, total revenues from telecom operators reached an
estimated RRUB 250 billion (US$10 billion) in 2007. The 18 per cent growth of
the market in 2007 was largely the result of tariff increases introduced during
the year.
The growth potential in Russia for both fixed-line and mobile operators is
substantial as the market continues to develop. Currently, the availability and
penetration of telecom services in Russia is lagging behind many of its European
peers. The broadband market is currently at a very early stage of development
and there is a notable lack of internet access and fixed line telephony in many
smaller residential areas and rural communities. Furthermore, there are
considerable disparities in mobile penetration between the major cities and the
provinces.
Currently, Internet services in Russia are delivered mainly through wireline
broadband access which accounts for 66 per cent of the market with wireless
accounting for 6 per cent and dial up for 28 per cent. According to various
estimates, by 2010 wireline broadband access will grow to 75 per cent of
internet market with wireless broadband access expected to achieve 10 per cent
and dial up expected to decrease to 15 per cent.
During 2007, while the share of traditional telephony decreased over the
previous year to an estimated 25 per cent, Internet access made strong gains
with 43 per cent growth in the corporate sector and 71 per cent in the
residential sector. The total number of fixed Internet connections in Russia is
expected to reach 16.6 million in 2011, more than doubling the number of
connections at the end of 2006, which stood at 7.3 million. According to a
recent IDC forecast, 2007 should see the number of fixed broadband connections
surpassing dial-up technology as broadband coverage widens and more broadband
service providers bundle Internet access with video and voice.
Economic conditions in the region where the Company operates are very positive.
Tatarstan is one of Russia's main oil-producing regions, with output remaining
stable at about 30 million tonnes a year. Gross Regional Product ("GRP") for
2007 went up 8.7 per cent to RR 740 billion (approximately US$ 30.8 billion in
2007) with average salary rising 27.1 per cent.
In Tatarstan, the growth in population resulting from economic prosperity is
reflected in approximately 2 million square metres of land commissioned during
2007. This represents a 14 per cent increase compared to the previous year and
provides a significant opportunity for Teleset to gain new subscribers.
In Naberezhnie Chelny, major truck manufacturer, Kamaz, is one of the
locomotives of Tatarstan's economic growth and the city's GRP of RR 71 billion
in 2007.
In addition to the competition from fixed-line and mobile operators, traditional
telecom companies in Russia are facing aggressive "alternative" cable operators
offering their customers integrated, multi-services through lines of broadband
access. Cable operators generally pursue strategies focused on corporate and
wealthy residential customers in big cities.
Telephony is divided between traditional fixed-line operators, mobile operators
and cable operators. Internet service is delivered by fixed-line, mobile, Cable
and satellite operators. Pay-TV service is available through ADSL, fiber optic
cable, satellite, and MMDS technologies.
Teleset Networks competes mainly with fixed line, alternative and mobile
operators, focusing on the growth areas of telephony, internet and Pay-TV
service. The provision of value-added services is key to both increasing margins
and building customer loyalty. One of the competitive advantages enjoyed by
Teleset Networks is that its fully digital network enables it to provide
telephony, internet and cable TV. In Kazan, the company has 29 per cent of the
telephony market and 29 per cent of internet market including 15 per cent of the
xDSL market. In Naberezhnie Chelny has a market share of more than over 10 per
cent.
Service delivery
Teleset Networks has established and maintains strong relationships with the
most prestigious business and government organisations in Kazan. We focus our
service activities on achieving high customer retention rates as well as on
winning new business customers, as well as on launching new tariff packages and
pursuing a customer-tailored approach. During 2007, we benefited from a number
of new large corporate customers, including JSC Kazan Helicopters, AkBars Bank,
AkBars Mortage and AkBars Medical Insurance as well as from increased demand for
our services from existing customers.
Excellent customer service is critical to success and is an area where the
Company is continually seeking to maintain high standards and achieve
improvements. We define and monitor the quality of service we provide by
reference to our network performance and customer service.
We constantly track, and seek to improve, our network performance in the areas
of fault incidences, network coverage, voice quality, grade of service, call
completion rates, call dropping percentages, network downtime, accuracy of
billing and our range of value-added services.
Our customer service approach is based on a full understanding, gained through
active pre-sales and post-sales activities, of our customers' needs and
experience in a number of areas including service activation time, time to
repair faults, knowledge level and courtesy of customer service agents,
relevance and clarity of offers and tariff schemes, dealer network coverage,
metering and billing accuracy and resolution of billing complaints.
As a result of the efforts made by the Company to understand and maintain strong
customer relationships, it has become clear that being able to provide combined
services will be a key factor in future customer retention and profitability.
Updating management structure.
We have strengthened and refined our management structure and processes to
support our planned expansion, both organically and through acquisition.
Following the acquisition of Svyazinvest in Naberezhnie Chelny, we introduced a
number of changes necessary for integrating and managing business over long
distances. This involved the streamlining of business process and communication
between Head Office and the regional business as well as the centralisation of
various functions including Human Resources, Finance, Marketing, Technical and
Billing and essential operational direction.
We have also created a Regional Director position with responsibility for
implementing corporate strategy and local operational budgets.
Employees
Teleset Networks actively seeks to provide a friendly working environment in
which staff can maximise their performance, commitment and contribution to the
Company. In order to attract well-qualified people, we have developed working
methods and Human Resources policies designed to realise the full potential of
employees as well as to motivate them and improve productivity. These involve a
combination of competitive remuneration, personnel training and other programmes
to encourage staff development.
At 31 December 2007, out of a total of 448 employees, 202 have specialist
qualifications and university degrees, and 110 have successfully completed
vocational courses or other further education. The average age of the Company's
employees is 37 years.
Nine are top managers, 28 are Heads of departments, 206 are office personnel,
110 are cable men and 48 are maintenance staff, others 47.
Total personnel costs, including share based payments, were US$ 3.75 million for
the full year reflecting the increase in the total number of staff following
acquisitions.
The average revenue per employee was US$ 50,753 with an average of 292
subscriber lines per employee in 2007 which the company believes is higher than
average rate for the Russian telecom industry as a whole.
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF TELESET NETWORKS PUBLIC COMPANY LIMITED
Report on the Consolidated Financial Statements
We have audited the consolidated financial statements of Teleset Networks Public
Company Limited (the ''Company'') and its subsidiaries (''the Group'') on pages
8 to 38, which comprise the consolidated balance sheet as at 31 December 2007,
the consolidated income statement, consolidated statement of changes in equity
and consolidated cash flow statement for the year then ended, and a summary of
significant accounting policies and other explanatory notes.
Board of Directors' Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as adopted by the European Union
(EU) and the requirements of the Cyprus Companies Law, Cap 113. This
responsibility includes: designing, implementing and maintaining internal
control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Board of Directors as well as
evaluating the overall presentation of the financial statements.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited consolidated financial statements. This other
information comprises only the Chairman's Statement, the Chief Executive's
Review, Board of Directors' Report, Remuneration Report and the Corporate
Governance Statement. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
consolidated financial statements. Our responsibilities do not extent to any
other information.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF TELESET NETWORKS PUBLIC COMPANY LIMITED (continued)
Opinion
In our opinion, the consolidated financial statements give a true and fair view
of the financial position the Group as of 31 December 2007 and of its financial
performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the EU and the
requirements of the Cyprus Companies Law, Cap. 113.
Report on Other Legal Requirements
Pursuant to the requirements of the Companies Law, Cap. 113, we report the
following:
* We have obtained all the information and explanations we considered
necessary for the purposes of our audit.
* In our opinion, proper books of account have been kept by the Company.
* The Company's financial statements are in agreement with the books of
account.
* In our opinion and to the best of our information and according to the
explanations given to us, the consolidated financial statements give the
information required by the Companies Law, Cap. 113, in the manner so
required.
* In our opinion, the information given in the report of the Board of
Directors on pages 3 to 5 is consistent with the consolidated financial
statements.
Other Matters
This report, including the opinion, has been prepared for and only for the
Company's members as a body in accordance with Section 156 of the Companies Law,
Cap.113 and for no other purpose. We do not, in giving this opinion, accept or
assume responsibility for any other purpose or to any other person to whose
knowledge this report may come to.
Grant Thornton
Certified Public Accountants (Cy)
Nicosia, 1 May 2008
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2007
--------------------------------------------------------------------------------
2007 2006
Note US$ US$
Operating revenue 1 22,737,313 13,460,783
Operating expenses (14,137,674) (7,736,787)
Other income 2 338,739 436,737
Admission costs - (1,196,613)
Operating profit 3 8,938,378 4,964,120
Finance income 1,183,327 922,807
Finance costs (2,197,015) (1,439,306)
Net finance costs 5 (1,013,688) (516,499)
Profit before tax 7,924,690 4,447,621
Tax 6 (2,781,706) (1,679,069)
Net profit for the year 5,142,984 2,768,552
Attributable to the equity holders of the
parent 5,142,984 2,768,552
Earnings per share
Basic earnings per share (US$) 7 0.0405 0.0271
Diluted earnings per share (US$) 7 0.0356 0.0268
CONSOLIDATED BALANCE SHEET
31 December 2007
--------------------------------------------------------------------------------
2007 2006
Note US$ US$
ASSETS
Non-current assets
Property, plant and equipment 10 31,088,176 26,065,104
Intangible assets 11 16,385,945 9,739,110
47,474,121 35,804,214
Current assets
Inventories 1,978,888 1,497,591
Trade and other receivables 5,862,542 4,232,184
Cash at bank and in hand 15,024,993 4,351,945
22,866,423 10,081,720
Total assets 70,340,544 45,885,934
EQUITY AND LIABILITIES
Equity attributable to the equity holders of
the parent
Share capital 12 3,082,011 2,282,924
Other reserves 14 27,705,839 13,593,374
Retained earnings 9,210,966 4,067,982
39,998,816 19,944,280
Non-current liabilities
Borrowings 15 20,652,130 17,871,279
Deferred tax liabilities 3,759,112 2,637,049
24,411,242 20,508,328
Current liabilities
Trade and other payables 3,900,827 3,292,592
Borrowings 2,000,000 2,000,000
Current tax liabilities 29,659 140,734
5,930,486 5,433,326
Total liabilities 30,341,728 25,941,654
Total equity and liabilities 70,340,544 45,885,934
On 1 May 2008 the Board of Directors of Teleset Networks Public Company Limited
authorised these financial statements for issue.
Philippos Vatiliotis Yiannis Demetriou
Non-Executive Chairman Chief Executive Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2007
--------------------------------------------------------------------------------
Attributable to equity holders of the Parent
Share capital Other reserves Retained earnings Total
(Note 14)
US$ US$ US$ US$
Balance - 1
January 2006 2,222,970 13,105,721 2,092,062 17,420,753
Exchange
difference
arising on the
translation to
presentation
currency - 193,729 - 193,729
Net gains and
losses recognised
directly in
equity - 193,729 - 193,729
Net profit for
the year - - 2,768,552 2,768,552
Total recognised
income and
expense for 2006 - 193,729 2,768,552 3,156,010
Issue of share
capital 59,954 238,924 - 298,878
Dividends - - (792,632) (792,632)
Equity share
based payments - 55,000 - 55,000
At 31 December
2006/ 1 January
2007 2,282,924 13,593,374 4,067,982 19,944,280
Exchange
difference
arising on the
translation to
presentation
currency - (107,360) - (107,360)
Net gains and
losses recognised
directly in
equity - (107,360) - (107,360)
Net profit for
the year - - 5,142,984 5,142,984
Total recognised
income and
expense for 2007 - (107,360) 5,142,984 5,035,624
Issue of share
capital 799,087 13,780,325 - 14,579,412
Equity share
based payments - 439,500 - 439,500
At 31 December
2007 3,082,011 27,705,839 9,210,966 39,998,816
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2007
--------------------------------------------------------------------------------
2007 2006
Note US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 7,924,690 4,447,621
Adjustments for:
Depreciation of property, plant and 10 3,371,262 2,360,048
equipment
Amortisation of computer software 11 41,162 23,221
Amortisation of number capacity 11 76,438 -
(Profit) from the sale of property, plant
and (99,358) (253,044)
equipment
Equity share based payments 439,500 55,000
Interest income 5 (869,492) (632,847)
Interest expense 5 1,982,860 1,241,772
Cash flows from operations before working
capital 12,867,062 7,241,771
changes
Increase in inventory (289,409) (350,781)
(Increase) / decrease in trade and other
receivables (965,557) 502,507
Increase in trade and other payables 96,169 777,586
Cash flows from operations 11,708,265 8,171,083
Tax paid (2,722,925) (1,426,590)
Net cash from operating activities 8,985,340 6,744,493
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for purchase of intangible assets 11 (119,179) (101,181)
Payment for purchase of property, plant and
equipment 10 (3,732,195) (3,385,048)
Acquisition of subsidiaries, net cash
outflow on 9 (10,812,256) (16,830,930)
acquisition
Proceeds from disposal of property, plant
and 10 163,592 388,622
equipment
Interest received 869,492 632,847
Net cash used in investing activities (13,630,546) (19,295,690)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 14,579,412 298,878
Repayments of borrowings (7,282,018) -
Proceeds from borrowings 9,846,472 8,870,962
Interest paid (1,982,860) (1,241,772)
Dividends paid - (792,632)
Net cash from financing activities 15,161,006 7,135,436
Net increase / (decrease) in cash and cash
equivalents 10,515,800 (5,415,761)
Cash and cash equivalents:
At beginning of the year 4,351,945 9,720,594
Foreign exchange differences on cash 157,248 47,112
position
At end of the year 15,024,993 4,351,945
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended 31 December 2007
--------------------------------------------------------------------------------
1. Operating revenue
2007 2006
US$ US$
Connection fees 681,402 652,910
Rental fees 7,887,954 4,110,899
Traffic fees 3,338,097 2,507,050
ISDN - Connection fees 136,445 230,801
ISDN - Traffic fees 1,759,648 1,088,374
Internet services 6,677,888 3,260,442
IP Services 772,269 575,026
Sundry income 1,483,610 1,035,281
22,737,313 13,460,783
2. Other income
2007 2006
US$ US$
Technical services provided 86,864 71,546
Sundry operating income 152,517 112,147
Gain from sale of property, plant and equipment 99,358 253,044
338,739 436,737
3. Operating profit
2007 2006
US$ US$
Operating profit is stated after (crediting) /
charging the following items:
Gain from sale of property, plant and equipment (Note
10) (99,358) (253,044)
Amortisation of number capacity (Note 11) 76,438 -
Amortisation of computer software (Note 11) 41,162 23,211
Depreciation of property, plant and equipment (Note
10) 3,371,262 2,360,048
Staff costs (Note 4) 3,754,177 1,743,540
Auditors' remuneration 73,700 34,000
4. Staff costs
2007 2006
US$ US$
Wages and salaries 3,314,677 1,688,540
Share based payments 439,500 55,000
3,754,177 1,743,540
Average number of employees:
Full time 412 353
Part time 36 22
448 375
5. Finance income / cost
2007 2006
US$ US$
Interest income 869,492 632,847
Foreign exchange gain 313,835 289,960
Finance income 1,183,327 922,807
Interest expense 1,982,860 1,241,772
Other finance expenses 214,155 197,534
Finance costs 2,197,015 1,439,306
Net finance costs (1,013,688) (516,499)
6. Tax
2007 2006
US$ US$
Corporation tax - current year 2,573,728 1,470,200
Deferred tax - charge 207,978 208,869
Charge for the year 2,781,706 1,679,069
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the applicable tax rates as follows:
2007 2006
US$ US$
Profit before tax 7,924,690 4,447,621
Tax calculated at the applicable tax rates 1,901,926 1,067,429
Tax effect of allowances and income not subject to tax 671,802 402,771
Deferred tax 207,978 208,869
Tax charge 2,781,706 1,679,069
Taxation charge for the year is in respect of Russian Federation Tax. It is
computed on the appropriate rate on the chargeable profits for the year. Each
company in the Russian Federation is liable to taxation on profits at the rate
of 6.5% (for Russian Federation purposes) and also to taxes of the local
authorities (for Teleset Limited, Teleset Invest Ltd, TNPKO and Svyazinvest the
Tatarstan Region). Tatarstan Region for the year ended 31 December 2007 charges
tax on profits at the rate of 17.5%.
The Company is taxed under Cyprus tax legislation and is subject to corporation
tax on its taxable profits at the rate of 10%. Interest receivable from
investment activities is subject to Special Contribution for Defence Fund at the
rate of 10%. In such a case 50% of this interest is not subject to corporation
tax. In addition, in some cases, dividends from abroad are subject to Special
Contribution for Defence Fund at the rate of 15%.
7. Earnings per share
Basic earnings per share has been calculated by dividing the net profit
attributable to ordinary shareholders by the weighted average number of shares
in issue during the relevant financial year.
Diluted earnings per share is calculated after taking into consideration the
effect of potentially dilutive shares in existence as at the year end.
2007 2006
Basic earnings per share
Earnings attributable to shareholders (US$) 5,142,984 2,768,552
Weighted average number of ordinary shares in
issue 127,094,284 102,271,024
Basic earnings per share (US$) 0.0405 0.0271
Diluted earnings per share
Earnings attributable to shareholders (US$) 5,142,984 2,768,552
Effect of potentially dilutive shares (323,117) -
4,819,867 2,768,552
Weighted average number of shares 127,094,284 102,271,024
Effect of potentially dilutive shares 8,470,060 1,105,903
135,564,344 103,376,927
Diluted earnings per share (US$) 0.0356 0.0268
8. Dividends
2007 2006
US$ US$
Final dividend paid - 792,632
- 792,632
9. Acquisitions
During the year the Group acquired 100% of the share capital of Svyazinvest.
Svyazinvest also provides telecommunication services to residential and business
customers through the operation of a local digital fixed-line network in
Naberezhnie Chelny, the second largest city after Kazan in the Republic of
Tatarstan.
Details of net assets acquired and goodwill were as follows:
US$
Purchase consideration 10,812,956
Fair value of the net assets acquired (6,801,063)
Total Goodwill 4,011,893
The factors that contributed to the creation of goodwill are mainly due to
significant revenue growth prospects of the acquiree's business and synergies
created from the business combination.
The assets and liabilities purchased were as follows:
US$
Number capacity- Intangible asset 2,579,382
Property, plant & equipment 4,726,373
Computer software 53,981
Inventory 122,881
Trade and other receivables 150,266
Cash and cash equivalents 700
Trade and other payables (85,704)
Tax liabilities (18,581)
Deferred tax liability (728,235)
Net assets acquired 6,801,063
Goodwill 4,011,893
Consideration:
Cash paid 10,812,956
The carrying amounts in the acquiree's books approximate fair values as shown
above, with the exception of property, plant & equipment for which the carrying
amount in the books of the acquiree was US$4,295,656, the number capacity which
was not previously recognised in the books of the acquiree, and the deferred tax
liability relating to the above fair value adjustments of US$728,235, for which
the carrying amount in the books of the acquiree was nil.
The acquisition of Svyazinvest has contributed US$169,852 to the Group's net
profit for the year. If the acquisition had taken place on the 1st January 2007
the contribution to the Group's revenue would have been US$2,580,077 and the
contribution to the Group's net profit for the year would have been US$828,909.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended 31 December 2007
10. Property, plant and equipment
Premises Telecommuni- Motor Furniture, Total
cation vehicles fixtures
equipment and computer
hardware
US$ US$ US$ US$ US$
Cost
Balance - 1
January 2006 2,443,532 22,103,103 403,903 993,824 25,944,362
Additions 692,988 2,413,993 92,230 185,837 3,385,048
Disposals - (128,058) (31,516) (2,823) (162,397)
Acquisitions
through
business
combinations 2,825,492 6,885,918 155,263 1,182,467 11,049,140
Transfer - 277,400 - (277,400) -
At 31
December
2006/ 1 5,962,012 31,552,356 619,880 2,081,905 40,216,153
January 2007
Additions 359,059 2,792,595 220,288 360,253 3,732,195
Disposals (51,410) (7,500) (100,680) (28,116) (187,706)
Acquisitions
through
business
combinations 783,210 3,853,840 47,167 101,037 4,785,254
Transfers 7,524 21,965 (579) (28,910) -
At 31
December 7,060,395 38,213,256 786,076 2,486,169 48,545,896
2007
Depreciation
Balance - 1
January 2006 396,535 7,848,572 268,205 778,012 9,291,324
Charge for
the 81,069 2,116,778 52,186 110,015 2,360,048
year
On disposals - (4,276) (22,543) - (26,819)
Acquisitions
through
business
combinations 198,437 1,715,885 86,029 526,145 2,526,496
Transfers - 182,784 - (182,784) -
At 31
December
2006/ 1 676,041 11,859,743 383,877 1,231,388 14,151,049
January 2007
Charge for
the 179,708 2,751,198 97,007 343,349 3,371,262
year
On disposals (11,114) (1,888) (94,102) (16,368) (123,472)
Acquisitions
through
business
combinations - 49,993 8,838 50 58,881
At 31
December 844,635 14,659,046 395,620 1,558,419 17,457,720
2007
Net book
amount
At 31
December 6,215,760 23,554,210 390,456 927,750 31,088,176
2007
At 31
December 5,285,971 19,692,613 236,003 850,517 26,065,104
2006
In the cash flow statement, proceeds from sale of property, plant and equipment
comprise:
2007 2006
US$ US$
Net carrying amount 64,234 135,578
Profit from the sale of property, plant and equipment
(Note 2) 99,358 253,044
Proceeds from disposal of property, plant and equipment 163,592 388,622
Bank borrowings are secured on premises and equipment to the value of US$
15,080,531 (2006: US$ 18,035,437) (Note 15).
11. Intangible assets
Goodwill Computer software Number capacity Total
US$ US$ US$ US$
Cost
Balance - 1 January
2006 - 214,965 - 214,965
Additions - 197,625 - 197,625
Acquisitions
through
business 4,256,481 - 5,302,988 9,559,469
combinations
At 31 December 2006
/1 January 2007 4,256,481 412,590 5,302,988 9,972,059
Additions - 119,179 - 119,179
Acquisitions
through
business 4,011,893 53,981 2,579,382 6,645,256
combinations
At 31 December 2007 8,268,374 585,750 7,882,370 16,736,494
Amortisation
Balance - 1 January
2006 - 209,728 - 209,728
Amortisation for
the - 23,221 - 23,221
year (Note 3)
At 31 December 2006
/1 January 2007 - 232,949 - 232,949
Amortisation for
the year (Note 3) - 41,162 76,438 117,600
At 31 December 2007 - 274,111 76,438 350,549
Net book amount
At 31 December 2007 8,268,374 311,639 7,805,932 16,385,945
At 31 December 2006 4,256,481 179,641 5,302,988 9,739,110
Goodwill acquired in a business combination is allocated to the cash generating
units (CGU's) that are expected to benefit from that business combination.
Goodwill represents the premium paid to acquire TNPKO and Svyazinvest (Note 9).
The value of goodwill for the acquisition of TNPKO recognised in the financial
statements for the year ended 31 December 2006 was US$7,885,010. That was
determined provisionally following the initial accounting rules of IFRS3
"Business combinations". Within 12 months since the acquisition date the
Directors received an external professional valuation report for the purpose of
identifying and valuing intangibles that were not recognised previously by
TNPKO. As per IFRS3 the identified intangible, (number capacity) measured at
US$5,302,988 and the related deferred tax liability of US$1,674,459 have been
retrospectively recognised, adjusting the original value assigned to goodwill.
During the year a similar external professional valuation report was received
for the acquisition of Svyazinvest for the purpose of identifying and valuing
the same class of intangible. As a result of this an addition to number capacity
of US$2,579,382 has been recognised.
No other significant intangibles not previously recognised by either TNPKO or
Svyazinvest were identified.
Goodwill
The Group tests goodwill for impairment annually or more frequently if there are
indications that goodwill might be impaired.
Goodwill is allocated to the Group's cash generating units (CGUs) for impairment
test purposes as follows:
US$
TNPKO 4,256,481
Svyazinvest 4,011,893
8,268,374
The recoverable amount for the above CGUs has been determined based on
value-in-use calculations. These calculations use cash flow projections based on
financial budgets approved by management covering a five-year period. Cash flows
beyond the five-year period are extrapolated using the estimated growth rates
stated below. The growth rates do not exceed the long-term average growth rate
for the business in which CGU operates.
Key assumptions used for value-in-use calculations are:
TNPKO Svyazinvest
Average increase in operating revenue during the
five-year period 6.6% 10.9%
Growth rate for cash flows after the five-year period -1.3% -1.3%
Discount rate 9% 9%
Management prepares the financial budgets based on past performance and its
expectations for market developments. The growth rate used is consistent with
the macroeconomic forecasts for the country of operation. The discount rate used
does not include the tax effects and reflects specific risks relating to the
CGU.
The impairment tests for goodwill show no impairment of goodwill during 2007.
12. Share capital
2007 2007 2006 2006
Number of US$ Number of US$
shares shares
Authorised
Ordinary shares of
CYP 0.01 each 162,500,000 3,705,000 162,500,000 3,705,000
Issued and fully paid
At 1 January 102,736,610 2,282,924 102,191,010 2,222,970
Issue of shares 34,820,105 799,087 545,600 59,954
At 31 December 137,556,715 3,082,011 102,736,610 2,282,924
Authorised capital
The Company was incorporated in Cyprus as a public limited company on 19 June
2006 with an authorised capital of CYP25,000 divided into 25,000 shares of CYP1
each.
On 11 September 2006 the nominal value of the shares became CYP0.01 each. On the
same day the authorised share capital of the Company was increased to
CYP1,125,000 divided into 112,500,000 shares of CYP0.01 each.
On 15 December 2006 the authorised share capital of the Company was increased to
CYP1,625,000 divided into 162,500,000 shares of CYP0.01 par value.
Issued capital
Upon incorporation the Company issued to the subscribers of its Memorandum of
Association 21,904 shares of CYP1 each at par.
On 11 September 2006 the nominal value of the shares became CYP0.01 each and the
number of the shares in issue was accordingly increased to 2,190,400. On the
same day, 100,000,610 shares were issued and allotted to shareholders at the
price of CYP0.15728 in respect of their contribution of their shares in Teleset
Limited and Teleset Invest Limited to the capital of the Company.
On 25 October 2006 195,600 shares were issued and allotted at the price of
GBP0.18.
On 15 November 2006 a further 350,000 shares were issued and allotted at the
price of GBP0.28.
On 31 December 2006 the issued share capital of the Company was CYP1,027,366
divided into 102,736,610 shares of CYP0.01.
On 15th March 2007 24,390,244 shares were issued and allotted at a price of
CYP0.1797.
On 2nd July 2007 an additional 6,348,228 shares were issued and allotted at a
price of CYP0.2054.
A further 406,041 shares were issued and allotted at CYP0.2120 on 13th July 2007
On 19th July 2007 a further 194,000 shares were issued and allotted at a price
of CYP0.2120.
On the 9th August 2007 an additional 3,481,592 shares were issued and allotted
at a price of CYP0.2120.
On 31st December 2007 the issued share capital of the Company was CYP1,375,567
divided into 137,556,715 shares of CYP0.01.
13. Share options
2007 2006
Number of options Number of options
At 1 January 5,109,550 -
Granted during the year 5,109,550 5,109,550
At 31 December 10,219,100 5,109,550
Details of share options outstanding
Number of Date Vesting Earliest Expiry of Exercise Fair value at
options granted date exercise date exercise date price grant date
GBP US$
5,109,550 12/10/ 12/10/ 12/10/2007 12/10/2016 0.162 0.065
2006 2007
1,021,910 1/05/ 25/05/ 25/05/2007 1/05/2012 0.21 0.030
2007 2007
1,021,910 1/05/ 25/05/ 25/05/2008 1/05/2012 0.21 0.040
2007 2008
1,021,910 1/05/ 25/05/ 25/05/2009 1/05/2012 0.21 0.055
2007 2009
1,021,910 1/05/ 25/05/ 25/05/2010 1/05/2012 0.21 0.065
2007 2010
1,021,910 1/05/ 25/05/ 25/05/2011 1/05/2012 0.21 0.070
2007 2011
The fair value of options granted on initial recognition to employees during the
year ended 31 December 2007 was determined using the "Black Scholes Merton"
model. The model assumptions take into account a volatility rate of 30% and a
risk free rate of 4.8%.
14. Other reserves
Share premium Translation Share options Merger reserve Total
reserve reserve
US$ US$ US$ US$ US$
Balance 1
January 32,729,089 (88,242) - (19,535,126) 13,105,721
2006
Difference on
conversion from
foreign
currency - 193,729 - - 193,729
Issue of share
capital 238,924 - - - 238,924
Equity share based
payments - - 55,000 - 55,000
At 31December
2006 32,968,013 105,487 55,000 (19,535,126) 13,593,374
At 31 December
2006/ 1 January
2007 32,968,013 105,487 55,000 (19,535,126) 13,593,374
Difference on
conversion from
foreign
currency - (107,360) - - (107,360)
Issue of share
capital 13,780,325 - - - 13,780,325
Equity share based
payments - - 439,500 - 439,500
At 31 December
2007 46,748,338 (1,873) 494,500 (19,535,126) 27,705,839
The merger reserve represents the excess of the nominal value of the shares
issued by Teleset Networks Public Company Limited over the nominal value of the
share capital of Teleset Limited and Teleset Invest Limited.
15. Borrowings
2007 2006
US$ US$
Current borrowings
Bank loans 2,000,000 2,000,000
Non current borrowings
Bank loans 20,652,130 17,871,279
Total 22,652,130 19,871,279
Maturity of non-current borrowings
Between one to two years 6,802,940 9,871,279
Between two and five years 9,864,099 8,000,000
After five years 3,985,091 -
20,652,130 17,871,279
The bank loans and overdrafts are secured as follows:
* By mortgage against immovable property of the Group for US$ 24,699,961
(2006: US$ 29,059,055).
* Cross guarantees from Group companies
The weighted average effective interest rates at the balance sheet date were as
follows:
2007 2006
% %
Bank loans 8.7 10.0
The carrying amounts of current bank loans approximate their fair value.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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