RNS Number:8809U
Teleunit S.p.A
16 April 2007
16 April 2007
Teleunit SpA
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
Teleunit S.p.A., ("Teleunit" or "the Company"; stock code: TLU), the Italian
telecom services provider, announces its preliminary financial results for the
year ended 31 December 2006.
Highlights:
* Revenue increased 17% to Euro100.3 million (2005: Euro85.4 million)
* Gross profit up 11% to Euro20.3 million (2005: Euro18.2 million)
* Resolution of all network issues, streamlining of business processes and
strengthening of administrative and technical departments
* Mobile Content Services' total subscriber base of c. 600,000 at year-end
(2005: 260,000). Teleunit Turkey (Dito Mito brand) now a leading provider
of mobile content
* 85% increase in VoIP customer base to over 3,750 (2005: 2,000)
* Post year-end: Mobile Content Services division incorporated as
Neomobile, a subsidiary of Teleunit; Neomobile launches new consumer brand
"VIPmobile" in Italy; new Teleunit website has gone "live".
Commenting on the financial results, Gianfranco Cimica, Chairman & Chief
Executive Officer of Teleunit S.p.A, said:
"The corrective measures implemented in the second half of 2006, including a
corporate reorganisation and the streamlining of our business processes, have
led to a strong recovery in Teleunit's operating performance and a return to
profitability in the second half. These measures have contributed to
establishing a strong foundation for growth and Teleunit's executive management
team views the future with renewed confidence."
About Teleunit SpA
Based in Perugia in Central Italy, Teleunit is a telecommunications services
provider to both business and residential customers throughout Italy. The Group
has three operating divisions: voice and data services, premium access services
and mobile content services. Teleunit is focused on profitable growth through
provision of excellent customer service, effective cost control and an aversion
to risk. The Group is looking to expand its operations selectively in Italy and
internationally. Teleunit listed on AIM in May 2004, the first Italian company
to complete a primary listing in London. For more information, please visit the
website, www.teleunit.it.
For further information, please contact:
Gianfranco Cimica, Chairman & CEO, Teleunit SpA 00 39 075 528 3921
Oliver Rigby, Daniel Stewart & Company Plc 020 7776 6550
Chairman's Statement and CEO's review
On behalf of the Board of Directors, I am pleased to present the Annual Report
and Financial Statements of the Company for the financial year ended 31 December
2006.
Operating Performance
The year 2006 has proved to be the Company's most challenging year to date. The
problems that beset Teleunit's 2006 interim results proved to be a significant
setback yet, in hindsight, were instrumental in identifying underlying issues
that, had they gone unchecked, would have compromised the Company's longer-term
performance. Instead, Teleunit has been able to resolve these issues and, as a
result, the second half of 2006 saw a considerable improvement in the Company's
trading performance and financial position. In the second half of the year the
Company returned to profitability and was cash-generative.
The Fixed Line, Wireless Services and Wholesale divisions have been amalgamated
into a single division - "Voice and Data Services". Improved internal
communication between these complementary activities has enhanced operational
efficiency. The administrative and technical departments have been strengthened
through the assignment of key roles with defined responsibilities; moreover,
company-wide cost-cutting measures have been implemented and business processes
have been streamlined, particularly with regards to billing. Investments in the
network and in personnel implemented in 2005 and 2006, coupled with the recent
rationalisation, have laid a solid foundation for Teleunit's future growth. The
Board believes that these factors collectively will yield much improved
financial results going forward and contribute greatly to enhanced shareholder
value in 2007 and beyond.
Financial Performance
The full year pre-tax loss of Euro2.9 million represented a significant improvement
on the pre-tax loss of Euro3.5 million reported at the interim stage. Gross profit
for the year came in 11% higher at Euro20.3 million (2005: Euro18.2 million) on
revenues 17% higher at Euro100.3 million (2005: Euro85.4 million). The revenue
increase is primarily due to the Premium Access and Mobile Content Services
divisions, which in 2006 grew turnover by Euro7.0 million (+10%) and Euro9.9 million
(+276%) respectively.
The Company's balance sheet remains strong, enabling us to support further
growth. Trade receivables increased to Euro26.7 million from Euro23.4 million in 2005,
due mainly to increased business in the Mobile Content Division. The majority of
these Mobile Content receivables have been collected post period-end. Trade and
other payables nearly doubled from Euro9.3 million to Euro16.2 million in 2006,
primarily due to an across the board renegotiation of supplier contracts aimed
at securing longer payment terms. As a result, working capital remains a very
robust Euro14.7 million.
The debt restructuring effort of 2006 led to a decrease in bank overdrafts down
Euro5.1 million to Euro3.0 million (2005: Euro8.1 million), whilst long-term interest
bearing loans and borrowings were reduced from Euro20.2 million in 2005 to Euro17.7
million in 2006.
As detailed in note 5, the Company is owed Euro10.2 million by Telecom Italia which
is being disputed, but which the Company, its legal advisors and its auditors
believe is recoverable. Accordingly the Company has made a provision of Euro944,874
against the debt in light of the fact that an extra-judicial settlement may be
reached.
The Company's operational cash flows have significantly improved, running a Euro4.6
million operational surplus for the year versus a Euro4.1 million outflow in 2005.
Investments in property plant and equipment of Euro3.8 million in 2006 (2005: Euro8.9
million) were entirely financed by the cash generated from operations. Cash
outflow from financing activities of Euro3.2 million was the result of the dividend
paid in 2006 and of the repayment of Euro1.2 million of debt. In 2006 the Group did
not require further debt facilities as the business is sufficiently geared
following a 2005 financing. Cash outflow before financing activities for the
year was Euro0.9 million versus an Euro11.4 million outflow in 2005.
Total Shareholder's Equity at year-end stood at Euro22.6 million compared to Euro27.1
million at the end of the previous period.
As of 2006, Teleunit is reporting consolidated financial statements, inclusive
of its Turkish mobile content operation. The consolidation of Teleunit Turkey's
results has in 2006 contributed Euro1.6 million to Group revenues, Euro1.0 million to
gross profit and Euro0.5 million to the Group's loss before tax. We expect that
Teleunit Turkey will make a positive contribution to the Group's bottom line
going forward.
Employees
The number of employees now stands at 91 compared with 80 at the end of 2005.
This increase was required to support the growth of the Mobile Content Services
division, where the headcount has grown from just 6 at the end of 2005 to 17
employees currently. On behalf of the management and the Board, I would like to
take this opportunity once again to thank all of our employees for the
dedication and hard work they have demonstrated over the course of this very
challenging year.
Outlook
The outlook from a market perspective is very positive. Incumbent network
operators are steadily losing ground, as regulatory and market forces conspire
against them. The digital divide is slowly closing as the Government recognises
the urgent need to provide ADSL services to the general public. Broadband
penetration is increasing steadily, and with an influx of expatriate workers in
Italy, international high-margin traffic is increasing. As a leading secondary
operator, Teleunit is well positioned to secure an increased share of a market
that is forecast to grow substantially in coming years.
The growth of the Mobile Content Services division has exceeded expectations
since it first started trading in 2004. Last year, in Teleunit's first
international move, we expanded our operations into Turkey. As of February 2007,
all of Teleunit's mobile content activities, including Teleunit Turkey, were
incorporated as Neomobile. Bringing all our mobile content activities under the
Neomobile umbrella will result in greater autonomy and increased market
visibility. Neomobile is focused entirely on mobile content and can now compete
independently with key players in the market. Neomobile intends to launch
similar initiatives in one or two more countries in the current year. The market
is still immature and, through selective expansion, Neomobile aims to establish
itself as a leading player in the global mobile content market.
In summary, I believe that the prospects for each of Teleunit's divisions remain
encouraging for 2007 and beyond.
Gianfranco Cimica 16 April 2007
Chairman & Chief Executive Officer
Chief Operating Officer's Review
Operational Review
Premium Access Services:
Divisional highlights:
* Revenues up 10% to Euro76.2 million (2005: Euro69.2 million)
* Gross profit of Euro9.8 million; 13% margin (2005: Euro13.1 million; 19%
margin)
* Customer retention strategies and targeted marketing initiatives
implemented in 2H06
Revenues, Euro7.0 million ahead of prior-year levels, exceeded expectations due
mainly to a strong recovery in the second half of the year. Nevertheless,
technical issues did impact the Premium Access division considerably in the
first half of 2006. Until April 2006, network downtime and other technical
issues eroded the division's customer base.
More favourable revenue-sharing agreements with the service centres became
necessary to retain customers, leading to a reduction in the division's gross
margin. Moreover, the expected shift in the business mix, with a strong increase
in mobile traffic at the expense of higher-margin fixed line traffic, further
depressed margins. In August, once all of the technical issues had been
resolved, proactive marketing initiatives were launched, aimed at acquiring
large service centres. By offering competitive revenue-sharing arrangements and
payment terms and through joint marketing initiatives to increase service centre
traffic, the division has been able to rebuild its customer base and fully
regain lost revenues in the second half.
In 2007 the focus will be on maximising traffic by developing new products to
assist the service centres in rolling-out innovative, value-added services.
Voice and Data Services
Divisional Highlights:
* Revenues of Euro10.6 million (2005: Euro12.6 million)
* Gross profit of Euro0.6 million on margins of 6% (2005: Euro2.8 million; 22%)
* Launch of Tria - a new ADSL VoIP service including value-added fax and
POS services
* 85% increase in the VoIP customer base to over 3,750 (2005: 2000)
* Established and efficient provisioning and customer service procedures
The Voice and Data Services division also made a strong recovery in the second
half of 2006. By year-end, the wholesale department had entirely recouped the
losses incurred in the first half with margins swinging from (8.0%) in 1H06 to
7.9% in the second half. The segment gross margin has been calculated including
Euro1.85 million of amortisation and impairment costs related to WLL assets that
have been allocated to the division. Net of these WLL costs, the segment margin
would have been 23% versus 6 per cent.
As a result of extensive product development in 2005 and 2006, Teleunit now has
a comprehensive portfolio of ADSL VoIP products covering all market niches. An
outsourcing agreement, covering product delivery, installation and primary
customer support, that was implemented at the beginning of 2006, has allowed the
in-house team to focus on the development and provision of new and higher-margin
VoIP services. For example, in mid-September, Teleunit launched Tria, a new ADSL
VoIP Fax and POS (point of sale) offering that will replace the GoVoIP service.
Tria to date has been well received by sales agencies and their customers,
resulting in an encouraging pipeline of new business. At the end of 2006, our
total VoIP customer base stood at over 3,750 users, up 85% in comparison with
2005. Demand remains strong with 950 new contracts generated in the first two
months of 2007 alone.
The decline in our Carrier Pre-Selection ("CPS") customer base has been
mitigated by the introduction of a new team within the customer service
department dedicated to customer retention. The average month-on-month
compounded rate of customer loss in 2006 was around 4%; we aim to reduce this
number to around 2% in 2007. Whilst a gradual decline in our CPS customer base
is to be expected, this should be more than compensated by the growth in new
ADSL VoIP contracts.
Thanks to operational efficiency gains, growing regulatory pressure on both the
telecom carriers and government agencies to widen the availability of broadband
and the emergence of potential first-time broadband users, we expect to see
strong growth in new contracts in 2007.
According to Government sources, at the end of September 2006 only 27% of
Italian households, 69% of SMEs (40% of all companies) and 75% of all larger
businesses had access to broadband. Although broadband coverage has reached 88%
of the Italian population, this is focused primarily on densely populated urban
areas; in contrast, coverage in rural areas reached only 46% of the population.
On 20 December 2006, the Italian Ministry of Communications set up the "Comitato
Banda Larga" (Broadband Committee), whose role is to promote wider availability
of broadband and to create regulatory conditions to stimulate increased
competition and the introduction of new services.
Our large corporate wireless local loop (WLL) contracts have remained stable and
margins sustained in 2006. Our network of 18 base stations covering the regions
of Tuscany and Umbria is becoming increasingly valuable with the emergence of
new wireless technologies such as WiMaX. Teleunit for the time being is holding
back on the roll-out of alternative wireless services in favour of concentrating
on core businesses while keeping a close eye on market developments. The
Ministry is set to auction the first full WiMaX licences in July of this year.
The ADSL and wireless services markets in Italy have considerable growth
potential, particularly in the SoHo and residential markets. With its extensive
sales network covering both rural and urban areas throughout Italy, Teleunit is
well positioned to increase its market share over time.
Mobile Content Services:
Divisional Highlights:
* Revenues up 276% to Euro13.6 million (2005: Euro3.6 million)
* Gross profit up 335% to Euro10.4 million; 77% margin (2005: Euro2.4 million;
67% margin)
* A total of 600,000 subscribers at year-end (FY2005: 260,000)
* Teleunit Turkey performing ahead of expectations; Dito Mito brand now a
market leader
* Development of content and technology platform brought in-house
The Mobile Content Services division is exhibiting exceptional growth in what is
proving to be the most rapidly expanding sector within the telecommunications
market. In 2006 the division focused on product diversification, infrastructure
development and international expansion whilst managing exceptional rates of
growth. Margins have increased by 10% on 2005 levels to 77%, although average
ARPU levels in 2006 have decreased due to lower per customer revenues of Euro1.20
in Turkey, versus Euro3.30 in Italy. The overall subscriber base has more than
doubled in 2006 to 600,000 at year-end (2005: 260,000).
Teleunit has been offering services direct to consumers under two brand names -
Dindo in Italy and Dito Mito in Turkey. Since operations began in 2004, the
division has grown primarily through its ability to effectively market content
via targeted advertising campaigns, backed up by systematic market research.
This approach has also allowed the division to identify emerging consumer trends
and develop compelling content. Marketing strategies are continually being
refined and optimised and Teleunit has now accumulated an extensive know-how of
the mobile content market.
In March 2006 we exported our subscription-based business model and
marketing-focused strategy to the Turkish market. Within less than a year, our
services have gained widespread popularity amongst the target demographic and
Dito Mito has achieved the status of an emerging market leader. Our strong
partnership with Turkcell, Turkey's leading mobile operator (with a 70% market
share) has further assisted us in penetrating this very challenging market.
Teleunit has succeeded where other operators have failed, and we see this as a
defining trend as we seek further opportunities in foreign markets in the
future.
In the latter part of 2006 we took the decision to bring content development and
delivery in-house as this gives us greater creative and quality control and
reduces the risks inherent in outsourcing. We are now positioning ourselves as a
content aggregator, developing a large proportion of content in-house while
sourcing the balance from our most reliable partners. As of January 2007 the new
platform is fully operative, and a strategic agreement with a global third party
content enabler will enable us to retain our technological advantage. This
strategy of vertical integration should contribute to improving margins in 2008;
however, the impact of advertising-intensive launches of new offerings is
expected to erode margins slightly in the current financial year.
At the beginning of 2007, we launched a new consumer brand in Italy -
"VIPmobile". Customers subscribe by sending an SMS to a new cross-operator short
code. The service is being fronted by celebrities, such as Eva Henger, the
Italian television presenter and glamour model. VIPmobile is targeting different
audiences with a new brand image and innovative content categories, with the
objective of diversifying sales revenues in Italy and offsetting the risk of
increased churn inherent to an expanding subscriber base.
Summary and Outlook
In recent years the dominant trend in the telecoms market has been a move away
from traditional telephony in favour of ADSL VoIP services and the provision of
mobile content and value-added services. New wireless technologies such as WiMaX
are expected to gain wider acceptance in coming years, in particular to provide
connectivity to niche markets with high bandwidth requirements, such as
businesses and households in rural areas not covered by wired ADSL
infrastructure. Teleunit is now strongly positioned to exploit the various
opportunities that are emerging as a result of these trends.
The popularity of free Internet-based VoIP telephony and more affordable WiFi
mobile applications has resulted in global telecom players gradually adopting a
greater emphasis on value-added services. In Italy, the coming years will see
ADSL penetration increase at dynamic rates as market demand and more stringent
regulatory pressures on the national carrier will combine to drive growth.
Through its highly competitive and feature-rich ADSL offering, and through its
extensive and established sales network, Teleunit aims to secure increased
market share by offering connectivity and a broad range of value-added services
to new ADSL entrants.
We envisage that new ADSL VoIP contracts, together with the provision of
targeted online content and innovative telecom-driven billing platforms, will
contribute greatly to the Company's revenues in years to come. This is not to
say, however, that traditional telephony services are being completely
sidelined. Heightened demand for PSTN termination services is being driven by
increasing levels of intra-EU migration. This has boosted international traffic
volumes as immigrant workers in Italy demand traditional international telephony
services via phone shops, internet cafes or pre-paid cards. Teleunit is
currently developing new services targeted specifically at this market, aimed at
boosting wholesale traffic and achieving economies of scale on supplier costs.
Through its proprietary and scalable network infrastructure and strong ties with
tier one international operators, Teleunit is well poised to maintain a strong
presence in traditional PSTN termination and routing, as well as to benefit from
the VoIP routing demands of the growing number of tertiary telecom providers and
resellers.
Teleunit's proprietary wireless infrastructure consisting of 18 WLL base
stations throughout Umbria and Tuscany is, with minimal capital expenditure,
upgradeable to emerging wireless technologies. The advent of next generation
wireless connectivity services provides the Company with interesting
opportunities, many of which we expect to materialise in the not-too-distant
future.
Neomobile's future success will lie in its marketing-centric approach, which has
proved to be a winning strategy in Italy and abroad. We have accumulated a
wealth of market specific know-how which will be invaluable to Neomobile going
forward as it looks to further expand its operations internationally, whilst
deploying innovative content services within its home market. We believe that
mobile content remains one of Teleunit's most promising business lines and, with
increased international recognition, Neomobile is expected to make a significant
contribution to Teleunit's shareholder value going forward.
In a world moving towards content-driven cross-media applications, facilitated
by wireless or broadband services, Teleunit is well positioned to exploit the
excellent growth opportunities that lay ahead.
Francesco Cimica 16 April 2007
Chief Operating Officer
INCOME STATEMENT
For the year ended 31 December 2006
in thousands of euro Note 2006 2005
Sales revenue 2 100,346 85,404
Cost of sales (80,069) (67,208)
-------- --------
Gross profit 20,277 18,196
Administrative expenses (2,647) (2,710)
Sales and marketing expenses (10,932) (6,027)
Other net operating expenses (7,710) (4,586)
-------- --------
Total operating expenses (21,289) (13,323)
(Loss)/profit from operations (1,012) 4,873
Share of results of associates after tax 86 198
Financial charges (2,311) (912)
Financial income 311 1,014
-------- --------
(Loss)/profit before tax (2,926) 5,173
Taxation 3 422 (2,203)
-------- --------
Net (loss)/profit for the year (2,504) 2,970
======== ========
Basic (loss)/earnings per share (euro) 4 (0.0134) 0.0160
Diluted (loss)/earnings per share (euro) 4 (0.0132) 0.0156
BALANCE SHEET
As at year end 31 December 2006
in thousands of euro 2006 2005
Assets
Property, plant and equipment 14,591 14,118
Intangible assets 2,171 1,436
Investments in subsidiaries and associates 6,029 5,759
Other investments 375 315
Deferred tax assets 820 156
--------- ----------
Total non-current assets 23,986 21,784
Trade receivables 26,688 23,380
Non-trade receivables 3,707 3,795
Cash and cash equivalents 10,950 20,204
Assets classified as held for sale 1,305 1,305
Other financial assets - 52
--------- ----------
Total current assets 42,650 48,736
--------- ----------
TOTAL ASSETS 66,636 70,520
========= ==========
Equity
Issued capital 2,334 2,334
Share premium 12,756 12,656
Reserves 917 261
Own shares (214) -
Retained earnings 6,812 11,818
---------- ----------
Total Group equity 22,605 27,069
Equity attributable to third parties (3) -
Total equity 22,602 27,069
Liabilities
Interest-bearing loans and borrowings 17,660 20,215
Employee benefits 311 207
Provisions 378 100
Deferred tax liabilities 1,173 1,178
---------- ----------
Total non-current liabilities 19,522 21,700
Bank overdrafts 2,956 8,106
Interest-bearing loans and borrowings 4,575 3,253
Trade and other payables 16,151 9,271
Income tax payable 830 1,121
---------- ----------
Total current liabilities 24,512 21,751
---------- ----------
TOTAL EQUITY AND LIABILITIES 66,636 70,520
========== ==========
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2006
in Share Legal Share Own Retained Total
thousands Capital Reserve Premium shares Earnings
of euro
Balance at
1 January
2005 2,334 194 12,656 (114) 9,025 24,095
Net profit
2005 - 181 - - 2,789 2,970
Other - - - - (4) (4)
Own shares
acquired - - - - - -
Shares
issues - - - - - -
------- ------- -------- -------- -------- -------
Balance at
31 December
2005 2,334 375 12,656 (114) 11,818 27,069
======= ======= ======== ======== ======== =======
Balance at
1 January
2006 2,334 375 12,656 (114) 11,818 27,069
2005
profit
allocated
to
reserves - 541 100 - (641) -
Dividend
paid - - - - (1,859) (1,859)
Net loss - - - - (2,504) (2,504)
2006
Other - - - - (4) 4
Own shares
acquired - - - (100) - (100)
-------- -------- --------- --------- --------- --------
-------- -------- --------- --------- --------- --------
Balance at
31 December
2006 2,334 916 12,756 (214) 6,810 22,602
======== ======== ========= ========= ========= ========
STATEMENT OF CASH FLOWS
For the year ended 31 December 2006
in thousands of euro 2006 2005
Operating activities
Net (loss)/profit for the year (2,504) 2,970
Adjustments for:
Depreciation and amortisation 4,071 2,384
Employee benefits 181 120
Deferred tax (669) 551
Share of results of associates after tax (86) (198)
Losses from disposal of assets - (124)
Other 267 -
-------- ---------
1,260 5,703
-------- ---------
(Increase) in trade receivables (3,308) (10,694)
(Increase) in non-trade receivables 88 (86)
Increase in trade and other payables and income tax 7,178 2,050
Income tax paid (589) (971)
Retirement benefits payment (77) (32)
Other - (36)
-------- ---------
Cash flows from operating activities 4,552 (4,066)
======== =========
Investing activities
Purchase of property, plant and equipment (3,823) (8,920)
Proceeds from sale of fixed assets - 93
Purchase of intangible assets (1,458) (999)
Purchase of investments in associates (183) (4,131)
Purchase of other investments - (5)
(Purchase)/Sale of monetary collective investment funds - 6,669
--------- ----------
Cash flows from investing activities (5,464) (7,293)
========= ==========
Financing activities
Proceeds from loans and borrowings (1,233) 20,402
Proceeds from the issue of share capital - -
Increase in share premium (net of unsubscribed amount) - -
Payment of transaction costs - -
Purchase of owned shares (100) -
Dividends paid (1,859)
---------- ----------
Cash flows from financing activities (3,192) 20,402
========== ==========
Net increase/(decrease) in cash and cash equivalents (4,104) 9,043
Cash and cash equivalents (net of overdrafts) 12,098 3,055
at 1 January
Cash and cash equivalents (net of overdrafts) 7,994 12,098
at 31 December
NOTES TO THE FINANCIAL STATEMENTS
1. Statement of compliance &Basis of preparation
(a) Statement of compliance
The separate financial statements have been prepared in accordance with the
current version of International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board (IASB), as adopted by the European
Union.
Under Italian law (D.l. 24/2/1998 n. 58 art 119) the Company is not required to
prepare the statutory financial statements under IFRS, as a consequence of the
fact that the Company is admitted to the Alternative Investment Market (AIM)
which, for the CONSOB, is an unregulated stock exchange (effective 15/11/2005).
However, as a consequence of the incorporation of Teleunit Turkey, as from year
ending 31 December 2006 the company has the option to prepare consolidated
financial statements. These have been prepared under IFRS in accordance with the
requirements of the rules (Feb 2007) of the Alternative Investment Market, part
1.19.
Based on the D.l. 28/02/05 n.38 art. 2 and art. 3, the Directors have decided to
prepare both the statutory consolidated financial statements (ex. D.l. 9/4/91 n.
127 art. 27) and the separate financial statements of Teleunit S.p.A. in
accordance with IFRS.
The consolidated financial statements as at 31 December 2006 have been prepared
in accordance with the current Italian statutory law (Italian Civil Code,
adopting also the rules of the D.l. n.6 17/01/2003 and following modifications
and integration).
The Company is not subject to Direction and Coordination of another company in
accordance with art. 2497 of the Italian Civil Code.
(b) Basis of preparation
The consolidated financial statements of the Company as at and for the year
ended 31 December 2006 comprise the Company and its subsidiary (together
referred to as the "Group") and the Group's interest in associates and jointly
controlled entities. The parent Company financial statements present information
about the Company as a separate entity and not about its Group.
The consolidated financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting Standards as
adopted by the EU ("Adopted IFRS").
As a consequence of the incorporation of Teleunit Turkey, starting from year
ending 31 December 2006 the company is required to prepare the consolidated
financial statements, consequently the comparative information refers to the
individual financial statement of Teleunit S.p.A. as at 31 December 2005.
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements, and have been
applied consistently by Group entities.
Certain comparative amounts have been reclassified to conform with the current
year's presentation
The preparation of financial statements in conformity with IFRSs requires
management to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
2. Segmental Information
Teleunit now has three operating divisions, namely:
* Voice and Data Services ("VDS")
* Premium Access ("PA")
* Mobile Content Services ("MCS")
The following tables provide information regarding the financial performance of
these operating divisions:
in thousands of euro 2006
VDS PA MCS Unallocated TOTAL
Sales 10,589 76,232 13,525 - 100,346
Cost of sales (9,970) (66,407) (3,076) (616) (80,069)
------- ------- ------ --------- ------------
Gross profit 619 9,825 10,449 (616) 20,277
Operating expenses (5,570) (5,932) (8,647) (1,140) (21,289)
------- ------- ------ --------- ------------
Profit from operations (4,951) 3,893 1,802 (1,756) (1,012)
Amortisation and
depreciation 2,862 425 6 767 4,060
EBITDA (2,089) 4,318 1,808 (989) 3,048
Trade receivables 2,826 19,397 4,360 105 26,688
Investments in associates - 6,004 - 25 6,029
Non-trade receivables 1,347 192 424 1,744 3,707
Cash and cash equivalents - - 222 10,728 10,950
Other assets 9,854 1,987 178 7,243 19,262
------- ------- ------ --------- ------------
Total assets 66,636
Trade payables 1,439 8,392 4,126 641 14,598
Bank overdraft - - - 2,955 2,955
Loans and borrowings 5,151 4,061 505 12,518 22,235
Other liabilities 175 645 326 3,102 4,248
------- ------- ------ --------- ------------
Total liabilities 44,036
------- ------- ------ --------- ------------
------- ------- ------ --------- ------------
Net Equity 22,600
======= ======= ====== ========= ============
TOTAL 66,636
======= ======= ====== ========= ============
in thousands of euro 2005
VDS PA MCS Unallocated TOTAL
Sales 12,574 69,235 3,595 - 85,404
Cost of sales (9,770) (56,095) (1,191) (152) (67,208)
------- ------- ------ --------- ------------
Gross profit 2,804 13,140 2,404 (152) 18,196
Operating expenses (6,695) (3,715) (2,351) (562) (13,323)
------- ------- ------ --------- ------------
Profit from operations (3,891) 9,425 53 (714) 4,873
Amortisation and
depreciation 1,470 275 - 639 2,384
EBITDA (2,421) 9,700 53 (75) 7,252
Trade receivables 2,328 17,592 2,918 541 23,379
Investments in - 5,759 - - 5,759
associates
Non-trade receivables 1,217 221 0,041 2,316 3,795
Cash and cash
equivalents - - - 20,204 20,204
Other assets 8,071 312 22 8,978 17,383
------- ------- ------ --------- ------------
Total assets 70,520
Trade payables 599 2,902 2,014 2,770 8,285
Bank overdraft - - - 8,106 8,106
Loans and borrowings - - - 23,468 23,468
Unallocated liabilities - - - 3,592 3,592
------- ------- ------ --------- ------------
Total liabilities 43,451
------- ------- ------ --------- ------------
------ ------- ------ --------- ------------
Net Equity 27,068
=== ====== ======= ====== ========= ============
TOTAL 70,520
=== ====== ======= ====== ========= ============
3. Taxation
Two taxes are applicable to the Company:
* Corporate income tax (IRES) at the rate of 33%
* Regional tax (IRAP) at the rate of 4.25%
The difference in tax rates arises from the different basis for the two taxes.
in thousands of euro 2006 2005
Current tax expense:
- IRES (99) 1,279
- IRAP 242 297
Total current tax expense 143 1,576
Deferred tax expense (565) 627
------- -------
Total (422) 2,203
======= =======
Income tax expense/(income) may also be analysed as follows:
in thousands of euro 2006 2005
IRES (552) 1,864
KV (Turkish Income tax) (84) -
IRAP 215 339
------- -------
Net expense 421 2,203
======= =======
Reconciliation of the effective tax rate (IRES and IRAP)
in thousands of euro 2006 2006 2005 2005
% %
Profit (loss) before tax (2,926) 5,173
Income tax at standard rate 1,090 37.25 1,927 37.25
Permanent differences (613) 209
Effect of tax rate in foreign jurisdictions (55) -
Effect on tax due to variation of tax rate
(24.25% to 37.25%) - 63
------- -------
Total 422 2,203
======= =======
4. Earnings per share
4.1 Basic (loss)/earnings per share
The calculation of basic earnings per share for the year ended 31 December 2006
and 2005 have been determined as net profit attributable to ordinary
shareholders divided by the weighted average number of ordinary shares for each
year considering the effect of change in nominal value of shares.
Net profit attributable to ordinary shareholders
in thousands of euro 2006 2005
Net profit attributable to ordinary shareholders (2,504) 2,970
Weighted average number of ordinary shares
in thousand of shares 2006 2005
Issued ordinary shares at the beginning (0.0125 Euro per
share) 185,944 186,744
Weighted average number of ordinary shares 185,944 186,744
-------- --------
in euro 2006 2005
Basic earnings/(loss) per share at 31 December (0.0134) 0.016
4.2 Diluted earnings/(loss) per share
Diluted earnings per share are calculated by dividing the profit for the period
attributable to shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period adjusted for the effects of all
potentially dilutive shares (e.g. employees stock options).
Net profit attributable to ordinary shareholders
in thousands of euro 2006 2005
Net profit attributable to ordinary shareholders (2,504) 2,970
Weighted average number of ordinary shares (diluted)
in thousands of shares 2006 2005
Issued ordinary shares at 31 December 185,944 186,744
Effect of shares option agreements 3,141 3,238
Weighted average number of ordinary shares (diluted)
at 31 December 189,121 189,982
--------- ---------
in euro 2006 2005
Diluted earnings/(loss) per share at 31 December (0.0132) 0.0156
5. Credit risk
Management has a credit policy in place and the exposure to credit risk is
monitored on an ongoing basis. Under this policy, investments are made only in
liquid securities or financial assets.
At the balance sheet date of 31 December 2006 the only material concentration of
credit risk was with Telecom Italia S.p.A. ("Telecom Italia"), the main client
of the Company, and with Telconline a service centre and a client of Teleunit's
VAS division.
The potential credit risk at balance sheet date refers mainly to the following
items:
* The total value of the uncollected Telecom Italia receivables subject to
dispute at year-end 2006 amounted to Euro9,007,668 (Excluding VAT) for a total
consideration (inclusive of VAT) of Euro10,235,102:
o Euro8,605,888 relates to alleged traffic anomalies and traffic
discords between the parties in relation to fixed and mobile
premium access traffic, of which Euro2,583,519 relates to VAT
excl. income accruals.
o Euro1,490,490 is in relation to credit recovery risk (see below
for more details), of which Euro286,977 relates to VAT excl.
income accruals.
The total sum net of income accruals is Euro7,364,606 VAT incl.
In addition to the injunctions already placed on Telecom Italia by the Rome
Courts (outlined in note 27 of the FY 2005 Results - available on the Teleunit
Investor Relations website), a further four injunctions on Telecom Italia were
requested by Teleunit and duly granted by the Rome Courts. Telecom Italia has
legally opposed these four injunctions. In July 2006, Telecom Italia provided
their data in relation to traffic volumes they "recovered", and had not
previously declared, thereby providing undisputable evidence to substantiate
Teleunit's claims. Following this negotiations were undertaken with Telecom
Italia to together define the full amount of outstanding receivables owed to
Teleunit. During these negotiations, it was decided that the parties would
reconvene on 20 May 2007 ("the deadline"). In the lead up to the deadline both
parties will evaluate possible avenues and solutions for a extra-judicial
settlement of all the outstanding receivables (excluding outstanding receivables
related to the credit recovery risk - see below). In the period leading up to
the deadline, all judicial activity in relation to the injunctions have been
temporarily suspended.
In light of the fact that an extra-judicial settlement between Teleunit and
Telecom Italia may be reached on the date of the deadline, Teleunit has
considered it prudent to set aside:
o a provision for Euro691,811 for the disputed receivables related
to alleged traffic anomalies and traffic discords between the
parties and,
o a provision of Euro253,063 in relation to the credit recovery
risk - please see below for more details regarding this risk
The total amount of the provisions is therefore Euro944,874. All provision have
been calculated on the outstanding sum net of income accruals (Euro7,364,606 VAT
Incl.).
In the case that the forthcoming negotiations are not closed successfully and
the receivables remain unrecovered, our legal team has been mounting a case
against Telecom Italia to reclaim contractual interest and to recover damages
incurred by Teleunit. Teleunit intends on highlighting Telecom Italia's
non-compliance to their obligations as an operator of a public
telecommunications network and abuse of their position as the sole incumbent.
* Credit recovery risk: The recent AGCOM (Italian Telecommunications
Authority) decree 417/06/CIR further substantiated the validity of
Teleunit's claims, and via an official communication sent on 16 March 2007
to all licensed telecommunications operators ("the operators"), Telecom
Italia consented to allow operators to directly recover debt from clients
employing their services (previously Telecom Italia charged a fixed and
non-circumventable charge of 3.1% of revenues generated by clients on their
network, a contractual term repeatedly contested by Teleunit). We are
currently looking to schedule a meeting with Telecom Italia to define the
rules and obligations for the direct management by Teleunit of credit
recovery. For prudence, Teleunit has decided to set aside a provision based
on historical credit risks related to the recovery of receivables of limited
value (average of receivables outstanding not higher than Euro 100) for a sum
of Euro253,063.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MGGMDLFNGNZM
Teleunit (LSE:TLU)
Historical Stock Chart
From Apr 2024 to May 2024
Teleunit (LSE:TLU)
Historical Stock Chart
From May 2023 to May 2024
