4 May 2010 07:00
4 May 2010
PME AFRICAN INFRASTRUCTURE OPPORTUNITIES PLC
("PME" or the "Group") (AIM: PMEA.L; PMEW.L)
Final results for the year ended 31 December 2009
PME African Infrastructure Opportunities plc, an investment company established to invest in sub-Saharan African infrastructure and infrastructure related industries, announces its results for the year ended 31 December 2009.
Highlights
Financial highlights
·; Net Asset Value of US$140.6 million (93 cents per ordinary share), unchanged on a cents per ordinary share basis since 31 December 2008 (US$167.3million (93 cents per ordinary share))
·; Group's share of gearing US$5.8 million at year end (31 December 2008: US$2.1 million)
·; Share buy-backs of 28.8 million ordinary shares completed at an average price per share of 49 cents
·; Dividend of 2.6 cents per ordinary share distributed on 24 March 2010 funded by profits realised in December 2009 on the Econet Burundi investment
Operational highlights
·; Successful exit from the Econet Burundi investment realising an annual return of approximately 40 per cent
·; At the end of the period PME had committed up to US$93.5 million to its portfolio of which US$88.6 million had been invested in five investments (including Econet Burundi), covering the telecommunications and transportation sectors
·; Two remaining telecom subsidiaries now fully operational
·; Seven out of the twelve locomotives leased; discussions ongoing regarding the future of the remaining five
·; Sheltam in late stage discussions with a potential partner that could accelerate regional expansion opportunities
·; A number of pipeline opportunities under negotiation in the energy and transport sectors
·; Grounds for optimism that sub-Saharan Africa's performance relative to the rest of the world will be better than in the past
Valuation update
·; Independent valuations of the four projects conducted as at 31 December 2009 confirmed that there had been no impairment at the Group level
Further enquiries:
| PME Infrastructure Managers Limited | Brian Myerson | +41 22 908 1190 |
| Smith & Williamson Corporate Finance Limited | Azhic Basirov / Siobhan Sergeant | +44 20 7131 4000 |
| Fairfax I.S. PLC | James King / Gillian McCarthy | +44 20 7598 5368 |
| Pelham Bell Pottinger | Dan de Belder | +44 20 7861 3232 |
| On behalf of Helvetica (Isle of Man) Company Limited | Clara Parisot | +41 798 249 788 |
| Principle Capital | Mark Whitfeld | +44 20 7240 3222 |
Note to Editors:
·; PME African Infrastructure Opportunities plc ('PME') is a company investing in sub-Saharan African infrastructure and infrastructure related industries. Its shares were admitted to AIM in July 2007 raising US$180 million.
·; PME was established to invest in sub-Saharan African infrastructure and infrastructure related industries with a view to generating attractive returns, principally through capital growth. It is targeting opportunities arising from years of under investment in sub-Saharan African infrastructure where that infrastructure will be instrumental in allowing the continent's economic development to continue to grow.
·; The Investment Manager is PME Infrastructure Managers Limited ('PMEIM'). The Investment Manager is responsible for identifying new investment opportunities.
·; PMEIM is a joint venture between Principle Capital Holdings S.A. (AIM: PCX.L), Unicos Partners LLP (holding company of the Helvetica Group of companies), Masazane Capital (Pty) Limited and the interests of Richard Bouma, CEO of PMEIM.
Chairman's Statement
It is my pleasure to report the final results for PME African Infrastructure Opportunities plc ("PME" or "the Company") for the year ended 31 December 2009.
The most significant event in the period under review has been the successful realisation of our investment in Econet Burundi, yielding an annualised investment return of around 40%. This vindicates our strategy of having invested in telecommunications at the time we did, and presages further exciting developments in respect of our other investments in this sector. The Board's policy is to return realised profits to shareholders by way of dividend, which made it possible for the Company to declare on 15 February 2010 a dividend distribution of 2.6 cents per ordinary share and the payment of a performance fee due to the Investment Manager. It should be stressed that these payouts will occur at irregular intervals as investments are realised, rather than on a fixed annual or semi-annual basis.
Investments and Valuations
Since inception in 2007, the Group (PME and its subsidiaries) has announced five significant transactions, with cumulative equity requirements of up to US$93.5 million, of which US$88.6 million had been invested at the balance sheet date. Included within the initial five was the US$10.0 million that had been invested in Econet Burundi in September 2008, and realised in December 2009.
No new investments were completed in the year, a matter to which I refer later in my report, but two significant milestones were passed with the successful commercial launches of the Company's two wireless broadband internet service providers; Sasatel in Tanzania and BroadBand Company in Uganda in June and July of 2009 respectively.
A specialist department of one of the major international accountancy firms conducted a valuation of these investments as at the year end in accordance with International Private Equity and Venture Capital Valuation Board guidelines, and I was pleased to see that the results confirmed that there had been no indication of any impairment at the Group level.
Financial Results
At 31 December 2009, PME's Net Asset Value in accordance with IFRS was US$140.6 million or 93 cents per ordinary share unchanged on a cents per ordinary share basis since 31 December 2008 (US$167.3 million or 93 cents per ordinary share) however, the US$26.7 million reduction in the Net Asset Value was after the US$14.2 million cost of share buy-backs that are further explained below.
The operating loss for the year of US$13.4 million (2008: US$5.4 million) is after the US$4.3 million (2008: US$1.0 million), non-recurring, positive impact of loan interest income arising from the Econet Burundi investment, US$3.8 million (2008: US$0.2 million) of net finance lease income and US$2.2 million (2008: US$Nil) of revenues from the telecommunications segment.
Operating expenses at subsidiary company level, predominately Dovetel and TMP Uganda, increased sharply to US$19.8 million (2008: US$6.6 million) as these entities moved firmly into the operating phase and a certain level of expenditure was incurred to maximise awareness and prospective market penetration.
The Group's share of non-current borrowings or gearing was US$5.8 million (31 December 2008: US$2.1 million), reflecting vendor finance arrangements and borrowings at two of the Company's investments; TMP Uganda and Sheltam.
Share buy-backs
In order to enhance shareholder value, in February 2009 the Group announced that it was commencing the first of two share buy-back exercises and subsequently the Company has bought back a total of 29,175,248 ordinary shares at an average price of 50 cents per share (28,800,248 shares as at 31 December 2009 at an average price of 49 cents per share), all of which were cancelled. We are also seeking to renew PME's share buy-back authority at the Company's forthcoming annual general meeting.
Outlook
Echoing the concerns of shareholders, the Board has for some time been disturbed by the slow rate at which our cash was being put to work so as to achieve the required investment returns. We have had intensive discussions with the Investment Manager, about both the required level of human resources, and any need to amend the investment criteria so as to fully deploy our capital. This has led to a more proactive management of our portfolio and improvements in our pipeline of prospective deals. The Board now has a settled strategy to commit fully its cash resources by the end of the third quarter of this calendar year, or else return any surplus to shareholders. A number of potential transactions are at an advanced stage and we fully intend to meet our strategic and financial objectives.
In the light of these matters and in order to deliver the Company's strategic and financial objectives of investing funds and realising returns the Board considers that a change in the existing investment management arrangements would be in the interests of shareholders. Accordingly, the Board has formed the current intention not to extend the term of the investment management agreement with the Investment Manager beyond its minimum term to July 2012 and the Board is initiating discussions with the Investment Manager in order to reach agreement on an earlier termination of the investment management agreement. The Board's intention is to implement alternative investment management arrangements following any agreed early termination of the Investment Manager's services, whilst continuing to develop the deal pipeline. Further information on the progress of these discussions will be made available to shareholders as matters progress.
David von Simson
Chairman
30 April 2010
Report of the Investment Manager
According to the IMF, the nascent recovery in the global economy is expected to sustain a revival in sub-Saharan Africa's growth to just over 4% in 2010 and more than 5% in later years. This would be much faster than after previous global slowdowns because of sustained domestic demand resulting from policies such as increasing deficits and lower interest rates with most countries avoiding responses to the slowdown with actions that would deter future growth such as trade restrictions.
During the period PME has continued to demonstrate solid performance and on 29 December 2009 it realised its investment in Econet Wireless Burundi, yielding an annual return of approximately 40% on its original investment of US$10.0 million.
DOVETEL TANZANIA LIMITED ("DOVETEL")
US$26.0 million in a national CDMA 3G network
Dovetel is a telecommunications company with a unified national licence in Tanzania in which PME has a 65% interest. Dovetel is rolling out a 3G wireless (based on Code Division Multiple Access (CDMA)) national network in order to benefit from the demand for data and broadband services to both high-end residential and corporate customers. Dovetel bundles its broadband offering with fixed voice services and offers limited mobility voice services to the low-end of the residential market in order to increase penetration beyond the traditional GSM target market for mobile voice.
Having launched its full suite of services to the market in Dar es Salaam under the "Sasatel" brand during June and July last year, Dovetel ended 2009 as an established leading broadband provider with full coverage across the capital.
Dovetel is continually refining and broadening its product offering to optimise customer uptake while focusing on the corporate market. It is now connected to the "Seacom" undersea cable, in turn connecting to the Gulf and Europe, which increases capacity and reduces the costs of international traffic and, in addition to CDMA modems and routers, is now offering its corporate clients WiMAX solutions which provide even greater bandwidth.
The full US$26.0 million that was initially approved for this investment has now been fully drawn down and a term sheet has been signed with a financial institution that has expressed an interest in providing a debt facility of up to US$35.0 million that could, subject to the approval of PME, be utilised to finance the consolidation of the network in Dar es Salaam and its expansion into the major urban centres across the country. It is likely that further funding from the Company will be required before any draw down under the aforementioned prospective facility would be possible and it is anticipated that a portion of that requirement will be secured by the acquisition, by PME, of the headquarters building that Dovetel presently occupies. The Company believes that Dovetel should utilise its available capital to focus on its core business and therefore, PME has agreed that the acquisition of the building, in the context of the Dovetel transaction, is the most secure approach to meeting its immediate funding needs and in itself, it should prove to be an attractive investment. This transaction has not yet completed.
TMP UGANDA LIMITED ("TMP UGANDA")
Up to US$18.5 million in a national WiMAX 4G network
TMP Uganda is a telecommunications company with a unified national licence in Uganda in which PME has an 82% interest. TMP is rolling out a 4G wireless (based on WiMAX) national network in order to address the demand for data and broadband services to high-end residential and the corporate sector of the market. TMP will also provide voice services to its customer base (VOIP).
TMP launched its services to the market in Kampala in July last year branded as "BroadBand Company" and almost immediately experienced greater demand for its dedicated high-end broadband solutions for larger corporate customers than anticipated.
The constraints this demand placed on the network have now been addressed by increasing the capacity on the affected base stations and acquiring capacity on the recently laid TEAMS (The East African Marine Service) cable in Mombasa which links to the Gulf and onto Europe. This latter initiative is significantly cheaper than satellite and allows TMP Uganda to offer much greater bandwidth to its clients.
The evident demand for true broadband services has encouraged the company to plan an extension of its network to the cities of Entebbe and Jinja in addition to the 26 base stations that are presently in operation in Kampala. Currently, there are no other urban centres of sufficient size in Uganda to warrant their own network but there are a number of large corporations with operations in remote areas, such as those involved in commercial activity relating to the discovery of oil on Lake Albert and these will be connected to the existing network via a satellite link.
TMP Uganda has employed the latest version of WiMAX technology and as a result, there are continuing innovations that are being introduced, such as auto-installing, "plug and play" products and condominium "hotspots" that allow all the occupants of one block of apartments to obtain access to the network via one equipment link to the building. Such innovations should improve subscriber growth.
To date TMP Uganda has utilised US$16.7 million of the US$18.5 million originally approved for this investment (US$13.6 million as at the balance sheet date). It is anticipated that the remaining balance will be drawn down before the end of June and the Company is now in discussion with a number of parties who may be interested in providing debt finance.
ECONET WIRELESS BURUNDI ("EWB")
US$10.0 million in a national GSM network
PME was invested in the expansion of a GSM telecommunications network in Burundi. However, following the issuance of a notice by Econet Wireless Global Limited ("Econet Wireless") that it wished to exercise its option to purchase the loan note and shares held by the Company, via its subsidiary PME Burco (Mauritius) Limited ("PME Burco"), in Econet Wireless Ventures Global Limited, the joint venture that the two parties formed in September 2008, PME Burco received approximately US$15.1 million in December 2009 representing an annual return to the Company of just under 40% on its US$10.0 million investment.
PME has therefore successfully exited from its joint venture with Econet Wireless which holds a majority interest in the GSM operator, EWB. PME's investment in the joint venture provided EWB with the cash funding that enabled EWB to relaunch commercial operations and expand its network coverage on a national scale. EWB's high quality voice and data network and its national footprint in Burundi position EWB as a leading operator driving growth in the sector.
This investment in EWB was a short/medium term opportunistic investment for PME based on the premise that Burundi's mobile voice market needed the impetus from a well capitalised operator in order to allow the market for mobile voice services to embark on the same significant growth path which its neighbouring countries are currently experiencing. This premise has largely been borne out and PME is happy that its investment has proven successful to EWB and to PME's shareholders. We are convinced that EWB will continue to achieve great success in the Burundi mobile voice market.
PME LOCOMOTIVES (MAURITIUS) LIMITED
US$30.9 million in a pan-African locomotive leasing company
PME owns, via a subsidiary, 12 General Electric C30 2.8MW-rated locomotive units that were acquired to support mining, general freight and passenger operations throughout sub-Saharan Africa. Although the acquisition of these assets was soon followed by the global financial crisis, their superior performance has been noted by customers and demand for their services is expected to grow during the coming year as mining houses respond to the increase in commodity prices and require additional tractive power.
These locomotives have been leased to Sheltam for placement with its clients and comprise some of the newest and most powerful locomotives in operation in southern Africa. Generally, Sheltam will supply these locomotives on a fully serviced basis including crew, maintenance and insurance.
SHELTAM HOLDINGS (PTY) LIMITED ("SHELTAM")
US$8.2 million in a rail operations and maintenance company
Sheltam is a South African company providing engineering, management and operations of railway locomotives and privately owned track in which PME has a 50% interest. It also owns and charters a number of light aircraft and repairs, maintains and installs marine engines and generators.
PME's strategy in acquiring Sheltam was to assist it in growing and consolidating its business in South Africa and the region. It currently has operations in the Democratic Republic of Congo and Mozambique and is at an advanced stage of negotiations in a third country to overhaul its locomotive fleet, lease additional tractive power and provide maintenance services.
In South Africa the lease to Sheltam by a PME subsidiary of 12 new GE C30 locomotives has enabled it to consolidate its position by offering a superior package to mining companies that includes the benefits of increased haulage capacity and fuel and other efficiency savings. However, the global financial crisis had resulted in a fall in demand for commodities which in turn has reduced demand for rail capacity. As a consequence, only seven of the locomotives leased to Sheltam are in operation although with the improving economic climate negotiations are ongoing to place the balance.
In order that Sheltam is not pressured by its lease obligations to PME, PME Locomotives (Mauritius) Limited has agreed, in principle, to defer rental payments on up to 5 of the unplaced locomotives for each of the first 6 months of 2010 (and any outstanding as at 31 December 2009), through a loan note structure that will be repayable by the end of September 2010 ("Maturity Date"). Although it is anticipated that most of the loan notes will be redeemed in the interim period, any outstanding liability at the Maturity Date is expected to convert into shares, increasing PME's shareholding in Sheltam.
In a separate development, and in line with its strategy to expand its services to the public domain in South Africa, Sheltam is in late stage discussions with a preferred Black Economic Empowerment ("BEE") joint venture partner. The partner has extensive transportation sector expertise and the transaction will enable Sheltam's core business of railway services to enter an entirely new sector and bring additional opportunities offered by the partnership.
Transactions in the pipeline
Water: PME is in discussions with a company in southern Africa that has procured a technology for the processing of contaminated water in mining voids to meet legislated requirements. The water will be treated to industrial and/or potable quality standards and sold to local utilities. The feasibility study has been completed and an off-take agreement is being negotiated.
PME is also in discussion with one of the largest manufacturers and operators of desalination plants with regards to financing their projects in the region.
Energy: PME is currently negotiating a memorandum of understanding outlining the terms under which it would provide expansion capital to an existing power plant supplying electricity in an East African country.
It has also held preliminary talks with a US based operator of a gas fired power project in the region about co-investment.
PME is in discussion with a group that is focussed on Waste to Energy opportunities in Africa. African governments are paying increased attention to the management of their municipal landfills, many of which have reached capacity and are creating an environmental hazard. In many countries where the cost of electricity production is high and depends on imported fuel, waste to energy projects provide an attractive solution to both an energy production deficit and the problem of waste management.
Financial Update
PME expects to commit a total of US$93.5 million to its current portfolio of investments (including Econet Burundi) of which US$88.6 million had been invested by the year end. The projects in the pipeline, if successfully completed, would utilise the balance of the funds and our objective is to make significant progress on these in the coming months.
Following the realisation of the Econet Wireless Global Limited investment, the board of Directors of PME confirmed on 15 February 2010 that a special dividend of 2.6 cents per ordinary share would be declared.
Outlook
The recession in South Africa which, because of the lag effect, had finished later than in other economies is now officially over and in the fourth quarter of 2009, according to the median of a Reuters poll of economists, grew by 2.5% quarter on quarter and annualised. This fact coupled with rising commodity prices creates a positive outlook for many African economies. This is confirmed by the IMF in its Regional Economic Outlook which states:
"As the global economic cycle moves to recovery, there are grounds for optimism that sub-Saharan Africa's performance relative to the rest of the world will be better than in the past. For one thing, South Africa and many frontier markets have already positioned themselves to sustain domestic demand, and oil exporters, including Nigeria have seen some rebound in revenues and have capacity to expand output. Second, increased openness to trade and foreign capital once financial markets have fully thawed should enable the private sector throughout the region to take better advantage of rising world demand, while near-term domestic policies can remain directed toward supporting growth bolstered by more robust fiscal positions than in the past , particularly among oil producers."
There are already a number of specific examples that support increasing activity in sub-Saharan Africa particularly in the infrastructure space. The African Development Bank ("AfDB") is estimating that it will finance up to US$10.0 billion in infrastructure projects in the next three years, with the energy sector central to this. Bobby Pittman, AfDB vice-president of infrastructure and regional integration confirmed that this was a conservative estimate stating that they have a pipeline of projects ready to go with feasibility studies complete.
DRC President Joseph Kabila has officially launched the reconstruction of Societe Nationale des Chemins de fer Congolese ("SNCC" - the state railway of the DRC) with 3,641km of track and 12,500 employees. Belgian firm Vecturis SA was selected by international tender to assist in the rehabilitation process, fully funded by the World Bank and the Government advises that the US$360 million required immediately will also come from the World Bank (US$160.0 million) and Cooperation Sino Congolese (US$200 million). Sheltam currently has locomotives operating with SNCC and its experience and efficiency are highly regarded by the national railway.
On 15 February 2010 Bharti Airtel Ltd, South Asia's largest mobile phone company, offered US$10.7 billion to buy most of Zain's African telecoms assets that would create one of the largest emerging-markets carriers. The offer values Zain's African assets at more than 10 times EBITDA. These assets support more than 40 million subscribers and generated over half of the group's US$7.4 billion of annual sales in 2008 according to Bloomberg data.
This increased activity has had the effect of strengthening our pipeline further with a number of opportunities exhibiting a potentially short completion timetable. We are anxious to take advantage of the recovering economic environment to deploy our remaining funds as quickly as possible to create a diversified portfolio that will generate attractive returns to our shareholders as we have been able to do with the exit from our first portfolio company.
PME Infrastructure Managers Limited
Investment Manager
30 April 2010
PME African Infrastructure Opportunities plc
Consolidated Income Statement
|
| Year ended 31 December 2009 | Year ended 31 December 2008 |
|
| US$'000 | US$'000 |
|
|
|
|
| Revenue | 2,153 | 8 |
|
|
|
|
| Realised gains on sale of property, plant and equipment | 1,664 | 1,148 |
| Net changes in fair value on financial assets at fair value through profit or loss | 45 | (191) |
| Investment Manager's fees | (2,041) | (2,170) |
| Performance fees | (974) | - |
| Operating and administration expenses | (22,256) | (9,249) |
| Other income | - | 228 |
| Foreign exchange gain/(loss) | 363 | (772) |
| Operating loss | (21,046) | (10,998) |
|
|
|
|
| Finance income | 8,624 | 6,896 |
| Finance costs | (341) | (2,386) |
| Net finance income | 8,283 | 4,510 |
|
|
|
|
| Share of (loss)/profit of associate | (667) | 757 |
| Loss before income tax | (13,430) | (5,731) |
|
|
|
|
| Income tax | (38) | - |
| Loss for the year | (13,468) | (5,731) |
|
|
|
|
| Attributable to: |
|
|
| - Owners of the Parent | (13,429) | (5,367) |
| - Minority interest | (39) | (364) |
|
| (13,468) | (5,731) |
|
|
|
|
| Basic and diluted loss per share (cent) for loss attributable to the owner of the Parent during the year | (8.48) | (2.97) |
PME African Infrastructure Opportunities plc
Consolidated Statement of Comprehensive Income
|
|
|
|
|
| Year ended 31 December 2009 | Year ended 31 December 2008 |
|
| US$'000 | US$'000 |
|
|
|
|
| Loss for the year | (13,468) | (5,731) |
| Other comprehensive income |
|
|
| Minority interest on acquisition | - | 403 |
| Currency translation differences | 945 | (2,275) |
| Other comprehensive income/(expense) for the year (net of tax) | 945 | (1,872) |
| Total comprehensive expense for the year | (12,523) | (7,603) |
|
|
|
|
| Total comprehensive expense attributable to: |
|
|
| - Owners of the Parent | (12,514) | (7,612) |
| - Minority interest | (9) | 9 |
|
| (12,523) | (7,603) |
PME African Infrastructure Opportunities plc
Consolidated Balance Sheet
|
| As at 31 December 2009 | As at 31 December 2008 |
|
| US$'000 | US$'000 |
| Assets |
|
|
| Non-current assets |
|
|
| Intangible assets | 3,534 | 2,817 |
| Investment in associate | 2,990 | 2,933 |
| Loan due from associate | 6,335 | 15,516 |
| Property, plant and equipment | 15,941 | 21,791 |
| Finance lease receivables | 29,188 | 15,304 |
| Trade and other receivables | 3,091 | - |
| Total non-current assets | 61,079 | 58,361 |
|
|
|
|
| Current assets |
|
|
| Financial assets at fair value through profit or loss | - | 69,886 |
| Finance lease receivables | 1,910 | 604 |
| Inventory | 2,000 | - |
| Trade and other receivables | 4,522 | 2,860 |
| Cash at bank | 84,590 | 38,671 |
| Total current assets | 93,022 | 112,021 |
| Total assets | 154,101 | 170,382 |
|
|
|
|
| Equity |
|
|
| Capital and reserves attributable to owners of the Parent: |
|
|
| Issued share capital | 1,516 | 1,805 |
| Foreign currency translation reserve | (1,330) | (2,245) |
| Capital redemption reserve | 289 | - |
| Retained earnings | 140,096 | 167,735 |
|
| 140,571 | 167,295 |
| Minority interest | - | 9 |
| Total equity | 140,571 | 167,304 |
|
|
|
|
| Non-current liabilities |
|
|
| Long term liabilities | 7,997 | 1,553 |
| Total non-current liabilities | 7,997 | 1,553 |
|
|
|
|
| Current liabilities |
|
|
| Trade and other payables | 5,533 | 1,525 |
| Total current liabilities | 5,533 | 1,525 |
| Total liabilities | 13,530 | 3,078 |
| Total equity and liabilities | 154,101 | 170,382 |
PME African Infrastructure Opportunities plc
Consolidated Statement of Changes in Shareholders' Equity
|
| Attributable to owners of the Parent |
|
|
| |||
|
| Share capital | Capital redemption reserve | Foreign currency translation reserve | Retained earnings | Total | Minority interest | Total |
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
|
|
|
|
|
|
|
|
|
| Balance at 1 January 2008 | 1,805 | - | - | 173,102 | 174,907 | - | 174,907 |
| Comprehensive income |
|
|
|
|
|
|
|
| Loss for the year | - | - | - | (5,367) | (5,367) | (364) | (5,731) |
| Other comprehensive income |
|
|
|
|
|
|
|
| Foreign exchange translation differences | - | - | (2,245) | - | (2,245) | (30) | (2,275) |
| Total comprehensive expense for the year | - | - | (2,245) | (5,367) | (7,612) | (394) | (8,006) |
| Transactions with owners |
|
|
|
|
|
|
|
| Minority interest on acquisition | - | - | - | - | - | 403 | 403 |
| Balance at 31 December 2008 | 1,805 | - | (2,245) | 167,735 | 167,295 | 9 | 167,304 |
| Balance at 1 January 2009 | 1,805 | - | (2,245) | 167,735 | 167,295 | 9 | 167,304 |
| Comprehensive income |
|
|
|
|
|
|
|
| Loss for the year | - | - | - | (13,429) | (13,429) | (39) | (13,468) |
| Other comprehensive income |
|
|
|
|
|
|
|
| Foreign exchange translation differences | - | - | 915 | - | 915 | 30 | 945 |
| Total comprehensive income/(expense) for the year | - | - | 915 | (13,429) | (12,514) | (9) | (12,523) |
| Transactions with owners |
|
|
|
|
|
|
|
| Shares cancelled following market purchases | (289) |
289
| - | (14,210) | (14,210) | - | (14,210) |
| Balance at 31 December 2009 | 1,516 | 289 | (1,330) | 140,096 | 140,571 | - | 140,571 |
PME African Infrastructure Opportunities plc
Consolidated Cash Flow Statement
|
| Year ended 31 December 2009 | Year ended 31 December 2008 |
|
| US$'000 | US$'000 |
| Operating activities |
|
|
| Loss for the year before income tax | (13,430) | (5,731) |
| Adjustments for: |
|
|
| Net changes in fair value on financial assets at fair value through profit or loss | (45) | 191 |
| Realised gain on sale of property, plant and equipment | (1,664) | (1,148) |
| Finance income | (8,624) | (6,896) |
| Finance costs | 341 | 2,386 |
| Depreciation and amortisation | 2,219 | 593 |
| Share of loss/(profit) of associate | 667 | (757) |
| Foreign exchange (gain)/loss | (363) | 772 |
| Operating loss before changes in working capital | (20,899) | (10,590) |
| Increase in inventory | (1,959) | - |
| Increase in trade and other receivables | (5,037) | (1,789) |
| Increase in trade and other payables | 2,794 | 1,907 |
| Cash used in operations | (25,101) | (10,472) |
| Interest paid | (129) | (2,386) |
| Income tax paid | (22) | - |
| Interest received | 5,145 | 4,643 |
| Lease rental income received | 4,805 | - |
| Net cash used in operating activities | (15,302) | (8,215) |
| Investing activities |
|
|
| Acquisition of subsidiaries, net of cash acquired | - | (567) |
| Acquisition of associates | - | (2,621) |
| Loan to associate | 10,000 | (14,463) |
| Loans from third parties | 7,922 | - |
| Purchase of property, plant and equipment | (10,942) | (37,436) |
| Purchase of intangible assets | (951) | (888) |
| Purchase of treasury bills | (130,069) | (195,077) |
| Maturity of treasury bills | 200,000 | 125,000 |
| Cash restricted by bank guarantees | 1,911 | (2,315) |
| Net cash generated from/(used) in investing activities | 77,871 | (128,367) |
| Financing activities |
|
|
| Market purchases of shares | (14,210) | - |
| Repayment of borrowings | - | (173) |
| Net cash used in financing activities | (14,210) | (173) |
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents | 48,359 | (136,755) |
| Cash and cash equivalents at beginning of year | 36,424 | 174,666 |
| Foreign exchange losses on cash and cash equivalents | (437) | (1,487) |
| Cash and cash equivalents at end of year | 84,346 | 36,424 |
Notes to the Financial Statements
1 General Information
PME African Infrastructure Opportunities plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 19 June 2007 as a public limited company with registered number 120060C. The investment objective of PME African Infrastructure Opportunities plc and its subsidiaries (the "Group") is to achieve significant total return to investors through investing in various infrastructure projects and related opportunities across a range of countries in sub-Saharan Africa.
The Company's investment activities are managed by PME Infrastructure Managers Limited (the "Manager"). The Company's administration is delegated to Galileo Fund Services Limited (the "Administrator"). The registered office of the Company is 3rd Floor, Britannia House, St George's Street, Douglas, Isle of Man, IM1 1EJ.
Pursuant to a prospectus dated 6 July 2007, there was an original placing of up to 180,450,000 Ordinary Shares with Warrants attached on the basis of 1 Warrant for every 5 Ordinary Shares. Following the close of the placing on 12 July 2007, 180,450,000 Shares and 36,090,000 Warrants were issued.
The Shares of the Company were admitted to trading on the AIM, a market of the London Stock Exchange, on 12 July 2007 when dealings also commenced.
During the year the Company bought back 28,800,248 Ordinary Shares for total consideration of US$14,209,094. The shares were subsequently cancelled and as a result 151,649,752 Ordinary Shares remain in issue at 31 December 2009.
Financial Year End
The financial year end for the Company is 31 December in each year.
Company Income Statement
In accordance with the provisions of Section 3 of the Isle of Man Companies Act 1982, no separate income statement has been presented for the Company. The amount of the Company's loss for the year recognised in the Consolidated Income Statement is US$4,635,413 (31 December 2008: loss US$2,516,403).
2 Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.
2.1 Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss, and the requirements of the Isle of Man Companies Acts 1931 to 2004. The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Company and Group's accounting policies.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:
Estimated Impairment of Goodwill and Telecommunication Licences
The Group tests annually whether goodwill and telecommunications licenses held by group companies have suffered any impairment. In assessing impairment the Group takes account of the business plans and projected results of the relevant subsidiaries. In addition the Group engaged a specialist department of one of the major international accountancy firms to conduct a valuation of the portfolio investments in accordance with International Private Equity and Venture Capital Valuation Board guidelines.
Loan to Associate Company
The Group tests annually whether the loan to the associated company has suffered any impairment. In assessing this, the Group takes account of the impairment tests carried out on the associated Company investments (see note 9) as well as the business plans of this company. In addition the Group engaged a specialist department of one of the major international accountancy firms to conduct a valuation of the portfolio investments in accordance with International Private Equity and Venture Capital Valuation Board guidelines.
3 Risk Management
The Company's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The financial risks relate to the following financial instruments: loans and receivables, cash and cash equivalents and trade and other payables. The accounting policies with respect to these financial instruments are described in Note 2.
Risk management is carried out by the Investment Manager under policies approved by the Board of Directors.
Market price risk
The Group's strategy on the management of market risk is driven by the Group's investment objective. The objective of the Group is to achieve significant total return to investors through investing in various infrastructure projects and related opportunities across a range of countries in sub-Saharan Africa. The Group's market risk is monitored by the Investment Manager on a day to day basis and by the Directors at Board meetings. In the current year, the Group's financial instruments have no associated market price risk. In the prior year, the Group held US Treasury Bills (note 13), which were subject to fair value interest rate risk.
Foreign exchange risk
Currency risk is the risk that the value of the financial instruments will fluctuate due to changes in foreign exchange rates. The Group's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than US Dollars. As a result, the Group is subject to the effects of exchange rate fluctuations with respect to these currencies. The currencies giving rise to this risk are South African Rand, Tanzanian Shilling, Pound Sterling and Ugandan Shilling.
The Group's policy is not to enter into any currency hedging transactions.
The table below summarises the Group's exposure to foreign currency risk:
| 31 December 2009 | Monetary Assets US$'000 | Monetary Liabilities US$'000 | Total US$'000 |
| South African Rand | 705 | (13) | 692 |
| Tanzanian Shilling | 2,057 | (8,601) | (6,544) |
| Pound Sterling | 4 | (230) | (226) |
| Ugandan Shilling | 1,305 | (3,649) | (2,344) |
|
| 4,071 | (12,493) | (8,422) |
| 31 December 2008 | Monetary Assets US$'000 | Monetary Liabilities US$'000 | Total US$'000 |
| South African Rand | 662 | - | 662 |
| Tanzanian Shilling | 3,208 | (574) | 2,634 |
| Pound Sterling | 205 | (232) | (27) |
| Ugandan Shilling | 1,067 | (2,271) | (1,204) |
|
| 5,142 | (3,077) | 2,065 |
The Investment Manager and the Board of Directors monitor and review the Group's currency position on a continuous basis and act accordingly.
At 31 December 2009, had the US Dollar strengthened by 1.50% (2008: 1%) in relation to South African Rand, Tanzanian Shilling, Pound Sterling and Uganda Shilling, with all other variables held constant, the shareholders' equity would have decreased by the amounts shown below:
|
| 2009 US$'000 | 2008 US$'000 |
| South African Rand | (147) | (36) |
| Tanzanian Shilling | (163) | (99) |
| Pound Sterling | (3) | - |
| Ugandan Shilling | (38) | (23) |
| Effect on net assets | (351) | (158) |
The direct and indirect subsidiaries do not have US Dollar as their functional currency and therefore on the Group level any effects of changes in foreign exchange rates will be included in the translation reserve on consolidation.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group.
The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. This relates also to financial assets carried at amortised cost.
At the reporting date, the Group's financial assets exposed to credit risk amounted to the following:
|
| 31 December 2009 US$'000 | 31 December 2008 US$'000 |
| Loan due from associate | 6,335 | 15,516 |
| Finance lease receivables | 31,098 | 15,908 |
| Financial assets at fair value through profit or loss | - | 69,886 |
| Trade and other receivables | 7,613 | 2,860 |
| Cash at bank | 84,590 | 38,671 |
|
| 129,636 | 142,841 |
The Group manages its credit risk by monitoring the creditworthiness of counterparties regularly. Cash transactions and balances are limited to high-credit-quality financial institutions (at least an Aa2 credit rating). Loan due from associate and finance lease receivables relate to the investment in Sheltam Holdings and the Investment Manager and the Board of Directors do not expect any losses from non-performance by this counterparty. A balance of US$296,000 (2008: US$102,000) included within trade and other receivables relates to trade debtors (net of provisions) all of which are less than 12 months old and are considered past due and impaired (see note 15). The Investment Manager and the Board of Directors do not expect any losses in respect of the other balances included within trade and other receivables.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due. The Group currently manages its liquidity risk by maintaining sufficient cash (maturing on a weekly and monthly basis). The Group's liquidity position is monitored by the Investment Manager and the Board of Directors.
The residual undiscounted contractual maturities of financial liabilities are as follows:
| 31 December 2009 | Less than 1 month | 1-3 months | 3 months to 1 year | 1-5 years | Over 5 years | No stated maturity |
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Financial liabilities |
|
|
|
|
|
|
| Trade and other payables | 2,842 | - | 2,691 | - | - | - |
| Long term liabilities | - | - | - | 7,997 | - | - |
|
| 2,842 | - | 2,691 | 7,997 | - | - |
| 31 December 2008 | Less than 1 month | 1-3 months | 3 months to 1 year | 1-5 years | Over 5 years | No stated maturity |
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Financial liabilities |
|
|
|
|
|
|
| Trade and other payables | 3,078 | - | - | - | - | - |
|
| 3,078 | - | - | - | - | - |
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk from the cash held in interest bearing accounts at floating rates or short term deposits of one month or less. The Company's Investment Manager and Board of Directors monitor and review the interest rate fluctuations on a continuous basis and act accordingly.
During its year ended 31 December 2009 should interest rates have decreased by 25 basis points, with all other variables held constant, the shareholders' equity and profit for the year would have been US$81,000 (2008: 100 basis points US$1,547,000) lower.
Capital Risk Management
The Group's primary objective when managing its capital base is to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.
Consistent with others in the industry, the Group intends to leverage its capital structure through the use of commercial borrowing and will endeavour to secure such finance for individual portfolio investments on a non-recourse basis where practicable.
The overall level of commercial borrowings on the Group's portfolio, at the date on which any such borrowing is incurred, is expected to generate a debt: equity ratio in the region of 70:30 although the Directors may from time to time review this ratio in the light of changing market circumstances and the particular investments being made by the Group in order to maintain the optimum level of gearing.
The Group evaluates levels of capital available and future capital requirements to determine where returns of capital (by way of share buy-backs) are appropriate.
Group capital comprises share capital and reserves.
No changes were made in respect of the objectives, policies or processes in respect of capital management during the years ended 31 December 2008 and 2009.
Fair value estimation
Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the statement of financial position at fair value. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
As at 31 December 2009, the Group did not hold any financial instruments measured at fair value (see note 13). In the prior year the Group had US Treasury Bills which had been valued based on quoted prices in an active market.
4 Operating Segments
The chief operating decision-makers have been identified as the Board and the Investment Manager. The Board and the Investment Manager review the Group's internal reporting in order to assess performance and allocate resources. It has determined the operating segments based on these reports. The Board and the Investment Manager consider the business on a project by project basis by type of business. The type of business is either telecommunications (wireless and broadband services) or transport (railway).
| Year ended 31 December 2009 | Telecommunications | Transport | Other* | Total | |||
|
| Dovetel | Econet | TMP Uganda | Sheltam | PME Locos |
|
|
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Revenue | 1,438 | - | 715 | - | - | - | 2,153 |
| Finance income | - | 4,254 | - | 518 | 3,798 | 54 | 8,624 |
| Depreciation and amortisation | (1,308) | - | (443) | - | (468) | - | (2,219) |
| Share of loss of associate | - | - | - | (667) | - | - | (667) |
| Segment results | (9,482) | 4,013 | (7,956) | (240) | 4,871 | (4,635) | (13,429) |
| Additions to non-current assets (other than financial instruments) | (10,144) | - | (1,749) | - | - | - | (11,893) |
| Investment in associate | - | - | - | 2,990 | - | - | 2,990 |
| Segment assets | 20,751 | 15,081 | 8,092 | 10,031 | 36,702 | 63,444 | 154,101 |
| Segment liabilities | (8,610) | (10) | (3,658) | (12) | (35) | (1,205) | (13,530) |
* Other refers to income and expenses of the Group not specific to any specific sector such as fees of the Investment Manager and income on un-invested funds. Other assets comprise; cash and cash equivalents US$63,025,210 (note 16) and other assets US$418,746.
| Year ended 31 December 2008 | Telecommunications | Transport | Other | Total | |||
|
| Dovetel | Econet | TMP Uganda | Sheltam | PME Locos |
|
|
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Revenue | - | - | 8 | - | - | - | 8 |
| Finance income | - | 1,012 | - | 850 | 982 | 4,052 | 6,896 |
| Depreciation and amortisation | (8) | - | (17) | - | (568) | - | (593) |
| Share of profit of associate | - | - | - | 757 | - | - | 757 |
| Segment results | (4,205) | 879 | (1,639) | 1,248 | 866 | (2,516) | (5,367) |
| Additions to non-current assets (other than financial instruments) | (6,145) | - | (3,732) | - | (30,412) | - | (40,289) |
| Investment in associate | - | - | - | 2,933 | - | - | 2,933 |
| Segment assets | 9,416 | 11,059 | 4,643 | 8,135 | 31,797 | 105,332 | 170,382 |
| Segment liabilities | (575) | - | (2,272) | - | - | (231) | (3,078) |
The entity is domiciled in the Isle of Man. All of the reported revenue, US$2,153,260 (2008: US$7,874), is from external customers from other countries.
The total of non-current assets other than financial instruments and deferred tax assets is US$22,465,368 (2008: US$27,541,417) and all of these are located in other countries outside of the Isle of Man.
5 Investment Manager Fees
Annual fees
The Investment Manager receives a management fee of 1.25% per annum of the gross asset value of the Group from Admission, payable quarterly in advance and subject to a cap of 3% per annum of the net asset value of the Group.
The Investment Manager is also entitled to recharge to the Group all and any costs and disbursements reasonably incurred by it in the performance of its duties including costs of travel save to the extent that such costs are staff costs or other internal costs of the Investment Manager. Accordingly, the Group is responsible for paying all the fees and expenses of all valuers, surveyors, legal advisers and other external advisers to the Group in connection with any investments made on its behalf. All amounts payable to the Investment Manager by the Group are paid together with any value added tax, if applicable.
Annual management fees payable for the year ended 31 December 2009 amounted to US$2,040,723 (31 December 2008: US$2,169,502).
Performance fees
The Investment Manager is entitled to a performance fee of 20% of the net income and capital cash returns to the Company or any subsidiary in respect of the sale or partial sale, refinancing or restructuring of an investment in an infrastructure project ("relevant investment") provided that the "Project test" has been passed. For these purposes, the Project test will be passed if the Company or any subsidiary has received in cash the return of all its cash invested in a relevant investment and a return equivalent to an internal rate of return of 12% on such cash.
80% of the performance fee calculated will be payable to the Investment Manager within 30 days of the receipt of the relevant returns by the Company. The balance will be paid at the same time into an escrow account invested in money market deposits.
At the end of the financial year ending on 31 December 2010 and at the end of each financial year thereafter the Total Return will be calculated and the total performance fee will be calculated as 20% of the Total Return multiplied by the weighted average number of Ordinary Shares in issue during the year. This is provided that the Total Return exceeds the NAV test, being the proceeds of the Placing Shares increased at a rate of 12% per annum on an annual compound basis from the date of Admission to the Relevant End Date. Total Return is the difference between the net asset value per Ordinary Share as at the last business day of the relevant financial year and the net proceeds of the placing shares divided by the number of placing shares.
Performance fees payable for the year ended 31 December 2009 amounted to US$974,403 (31 December 2008: US$nil) as a result of the disposal of Econet Wireless, (see note 9.2).
6 Operating and Administration Expenses
|
| Year ended 31 December 2009 US$'000 | Year ended 31 December 2008 US$'000 |
| Administration expenses | 567 | 440 |
| Administrator and Registrar fees (note 21) | 178 | 212 |
| Amortisation of intangible assets | 173 | 18 |
| Audit fees - current year | 299 | 54 |
| Audit fees - prior years | 217 | 29 |
| Bad debt provision (note 15) | 477 | - |
| Custodian fees (note 21) | 20 | 24 |
| Depreciation | 2,046 | 593 |
| Directors' fees | 254 | 234 |
| Employee costs | 3,066 | 347 |
| Retirement benefits | 316 | 22 |
| Management fees - Silex (note 21) | 231 | 274 |
| Management fees - TMP (note 21) | 2,026 | 48 |
| Management fees - other | 416 | 3,375 |
| Marketing costs | 2,778 | 53 |
| Network and direct costs | 4,238 | 456 |
| Professional fees | 1,966 | 1,264 |
| Property and utilities | 817 | 102 |
| Travel | 838 | 779 |
| Other | 1,333 | 925 |
| Operating and administration expenses | 22,256 | 9,249 |
Administrator and Registrar fees
The Administrator receives a fee of 10 basis points per annum of the net assets of the Company between £0 and £50 million; 8.5 basis points per annum of the net assets of the Company between £50 and £100 million and 7 basis points per annum of the net assets of the Company in excess of £100 million, subject to a minimum monthly fee of £4,000 and a maximum monthly fee of £12,500 payable quarterly in arrears.
Administration fees payable by the Company for the year ended 31 December 2009 amounted to US$165,923 (31 December 2008: US$200,522).
The Administrator provides general secretarial services to the Company, for which it receives a minimum annual fee of £5,000. Additional fees, based on time and charges, will apply where the number of Board meetings exceeds four per annum. For attendance at meetings not held in the Isle of Man, an attendance fee of £750 per day or part thereof will be charged. The fees payable by the Company for general secretarial services for the year ended 31 December 2009 amounted to US$12,183 (31 December 2008: US$11,279).
Custodian fees
The Custodian receives a fixed monthly fee of £875 payable quarterly in arrears. The fee payable for the year ended 31 December 2009 amounted to US$19,663 (31 December 2008: US$23,920).
Directors' Remuneration
The maximum amount of remuneration payable to the Directors permitted under the Articles of Association is £200,000 per annum. The Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment.
The Directors' fees payable by the Company for the year ended 31 December 2009 amounted to US$254,300 (31 December 2008: US$233,805) and Directors' insurance cover payable amounted to US$51,658 (31 December 2008: US$132,479).
7 Income tax expense
| Group | Year ended 31 December 2009 US$'000 | Year ended 31 December 2008 US$'000 |
| Current tax | 38 | - |
|
| 38 | - |
The tax on the Group's loss before tax is higher than the standard rate of income tax in the Isle of Man of zero%. The differences are explained below:
| Group | Year ended 31 December 2009 US$'000 | Year ended 31 December 2008 US$'000 |
| Loss before tax | (13,430) | (5,731) |
|
|
|
|
| Tax calculated at domestic tax rates applicable in the Isle of Man (0%) | - | - |
| Effect of higher tax rates in Mauritius (15%) | 38 | - |
| Tax expense | 38 | - |
8 Basic and Diluted Loss per Share
Basic and diluted loss per share are calculated by dividing the loss attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year.
|
| Year ended 31 December 2009 | Year ended 31 December 2008 |
|
|
|
|
| Loss attributable to equity holders of the Company (US$'000) | (13,429) | (5,367) |
| Weighted average number of ordinary shares in issue (thousands) | 158,398 | 180,450 |
| Basic and diluted loss per share (cent per share) | (8.48) | (2.97) |
9 Investments in Subsidiaries and Associates
9.1 Investments in Subsidiaries
The direct and indirect subsidiaries held by the Company are as follows:
| 2009 | Country of incorporation | Percentage of shares held |
| PME Burco (Mauritius) Limited | Mauritius | 100% |
| PME Locomotives (Mauritius) Limited | Mauritius | 100% |
| PME RSACO (Mauritius) Limited | Mauritius | 100% |
| PME Tanco (Mauritius) Limited | Mauritius | 100% |
| PME Uganco (Mauritius) Limited | Mauritius | 100% |
| Dovetel Tanzania Limited | Tanzania | 65% |
| TMP Uganda Limited | Uganda | 82% |
The Company invested in its direct subsidiaries as follows:
|
| 31 December 2009 | 31 December 2008 |
|
| US$'000 | US$'000 |
| Start of the year | 67,029 | - |
| Increase in investment | 23,876 | 67,029 |
| End of the year | 90,905 | 67,029 |
9.2 Investments in Associates
|
| 31 December 2009 | 31 December 2008 |
| Group | US$'000 | US$'000 |
| Start of the year | 2,933 | - |
| Acquisition of associates | - | 2,621 |
| Foreign exchange gain/(loss) | 724 | (445) |
| Share of (loss)/profit of associate | (667) | 757 |
| End of the year | 2,990 | 2,933 |
The Group's share of the results of its principal associates, all of which are unlisted, and its share of the aggregate assets (including goodwill) and liabilities, is as follows:
| 31 December 2009 | Percentage of shares held | Assets | Liabilities | Revenues | Loss |
| Name |
| US$'000 | US$'000 | US$'000 | US$'000 |
| Sheltam Holdings | 50% | 30,531 | (27,541) | 26,597 | (667) |
| 31 December 2008 | Percentage of shares held | Assets | Liabilities | Revenues | Profit |
| Name |
| US$'000 | US$'000 | US$'000 | US$'000 |
| Econet Wireless | 49.5% | 7,099 | (7,099) | - | - |
| Sheltam Holdings | 50% | 18,970 | (16,037) | 4,268 | 757 |
|
|
| 26,069 | (23,136) | 4,268 | 757 |
Loan due from associate
|
| 31 December 2009 | 31 December 2008 |
|
| US$'000 | US$'000 |
| Loan due from associate | 6,335 | 15,516 |
The loan due from associate is as follows:
| Name | Term | Interest Rate | 31 December 2009 |
|
|
|
| US$'000 |
| Sheltam Holdings (Pty) Limited (US$5.771m principal; US$0.564m accrued interest) | No fixed term | South Africa Prime | 6,335 |
The fair value of this loan approximates its carrying value at 31 December 2009.
In December 2009 the Group disposed of its holding in Econet Wireless for total consideration of US$15,053,157 of which US$50 related to its equity investment and US$15,053,107 to loan notes. The original investment was $50 and $10,000,000 respectively giving a US$nil gain on disposal on the sale of equity and US$5,053,107 overall return on the loan notes, US$4,042,148 of which relates to interest received and has been included in the current year's results.
10 Intangible assets
| Group |
| Goodwill
| Telecommunication licences | Total |
| Cost |
| US$'000 | US$'000 | US$'000 |
| At 1 January 2009 |
| 1,843 | 974 | 2,817 |
| Additions |
| - | 951 | 951 |
| Exchange differences |
| - | (62) | (62) |
| At 31 December 2009 |
| 1,843 | 1,863 | 3,706 |
| Amortisation |
|
|
|
|
| At 1 January 2009 |
| - | - | - |
| Amortisation charge |
| - | (173) | (173) |
| Exchange differences |
| - | 1 | 1 |
| At 31 December 2009 |
| - | (172) | (172) |
| Net book value |
|
|
|
|
| At 31 December 2009 |
| 1,843 | 1,691 | 3,534 |
| Group |
| Goodwill
| Telecommunication licences | Total |
|
|
| US$'000 | US$'000 | US$'000 |
| At 1 January 2008 |
| - | - | - |
| Acquisitions through business combinations |
| 1,843 | 122 | 1,965 |
| Additions |
| - | 888 | 888 |
| Exchange differences |
| - | (36) | (36) |
| At 31 December 2008 |
| 1,843 | 974 | 2,817 |
There has been no impairment of the value of goodwill and telecommunications licences.
Amortisation of licences is calculated using the straight-line method to allocate the cost of licences over their estimated useful lives. The useful lives and renewal periods of licences are determined primarily with reference to the unexpired licence period.
11 Property, Plant and Equipment
| Group | Locomotives | Capital WIP | Network Infrastructure & Equipment | Other | Total |
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Cost |
|
|
|
|
|
| At 1 January 2009 | 15,312 | 3,868 | 2,732 | 222 | 22,134 |
| Additions | - | (3,202) | 12,908 | 1,236 | 10,942 |
| Disposals | (15,312) | - | - | - | (15,312) |
| Exchange differences | - | (158) | (38) | 9 | (187) |
| At 31 December 2009 | - | 508 | 15,602 | 1,467 | 17,577 |
| Accumulated depreciation |
|
|
|
|
|
| At 1 January 2009 | (319) | - | (10) | (14) | (343) |
| Disposals | 764 | - | - | - | 764 |
| Charge for the year | (445) | - | (1,355) | (246) | (2,046) |
| Exchange differences | - | - | (9) | (2) | (11) |
| At 31 December 2009 | - | - | (1,374) | (262) | (1,636) |
| Net Book Value |
|
|
|
|
|
| At 31 December 2009 | - | 508 | 14,228 | 1,205 | 15,941 |
Six locomotives with a net book value of US$14,548,786 were disposed in June 2009 giving rise to a gain on disposal of US$1,663,521 and are now being recognised as finance lease receivables see note 12. This sale is a non-cash transaction and therefore excluded from the cash flow statement.
There were no impairment charges in 2009.
| Group | Locomotives | Capital WIP | Network Infrastructure & Equipment | Other | Total |
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Cost |
|
|
|
|
|
| At 1 January 2008 | - | - | - | - | - |
| Additions | 30,325 | 3,966 | 2,918 | 227 | 37,436 |
| Disposals | (15,013) | - | - | - | (15,013) |
| Exchange differences | - | (98) | (186) | (5) | (289) |
| At 31 December 2008 | 15,312 | 3,868 | 2,732 | 222 | 22,134 |
| Accumulated depreciation |
|
|
|
|
|
| At 1 January 2008 | - | - | - | - | - |
| Disposals | 249 | - | - | - | 249 |
| Charge for the year | (568) | - | (11) | (14) | (593) |
| Exchange differences | - | - | 1 | - | 1 |
| At 31 December 2008 | (319) | - | (10) | (14) | (343) |
| Net Book Value |
|
|
|
|
|
| At 31 December 2008 | 14,993 | 3,868 | 2,722 | 208 | 21,791 |
Six locomotives with a net book value of US$14,763,393 were disposed in December 2008 giving rise to a gain on disposal of US$1,148,030 and are now being recognised as finance lease receivables see note 12. This sale is a non-cash transaction and therefore excluded from the cash flow statement.
There were no impairment charges in 2008.
12 Finance lease receivables
|
| 31 December 2009 US$'000 | 31 December 2008 US$'000 |
| Amounts receivable under finance leases: |
|
|
| Within one year | 6,132 | 3,066 |
| In the second to fifth years inclusive | 24,545 | 9,206 |
| Beyond five years | 25,670 | 18,203 |
|
| 56,347 | 30,475 |
| Less: unearned finance income | (25,249) | (14,567) |
| Present value of minimum lease payments receivable | 31,098 | 15,908 |
The present value of the lease payments is receivable as follows:
|
| 31 December 2009 US$'000 | 31 December 2008 US$'000 |
| Within 1 year | 1,910 | 604 |
| After 1 year | 29,188 | 15,304 |
|
| 31,098 | 15,908 |
The Group has entered into finance leasing arrangements with Sheltam Holdings (Pty) Limited, an associated company, for twelve locomotives (six in December 2008 and another six in June 2009). The average term of finance leases entered into is ten years. The interest rate inherent in the leases is fixed at the contract date for the entire lease term. The average effective interest rate contracted approximates to 16.30%. The fair value of the Group's finance lease receivables at 31 December 2009 is estimated at US$31,098,000 (31 December 2008: US$15,908,000). The lease receivables are secured on the related assets.
13 Financial assets at fair value through profit or loss
Held for trading
| Group and Company | 31 December 2009 | 31 December 2008 |
| Security name | US$'000 | US$'000 |
|
|
|
|
| US Treasury Bill 0% 15/01/09 | - | 34,971 |
| US Treasury Bill 0% 29/01/09 | - | 34,915 |
|
| - | 69,886 |
Net changes in fair value on financial assets at fair value through profit or loss:
|
| 31 December 2009 US$'000 | 31 December 2008 US$'000 |
|
|
|
|
| Realised losses | (106) | (40) |
| Unrealised gains/(losses) | 151 | (151) |
| Total gains/(losses) | 45 | (191) |
14 Inventory
| Group | 31 December 2009 US$'000 | 31 December 2008 US$'000 |
|
|
|
|
| Network Equipment, Dongles, Routers | 2,000 | - |
| Inventory | 2,000 | - |
15 Trade and Other Receivables
| Group | 31 December 2009 US$'000 | 31 December 2008 US$'000 |
| Non-current |
|
|
| Lease prepayment | 3,091 | - |
| Current |
|
|
| Amount due from Roy Puffett (note 21) | 264 | 185 |
| Loans and receivables due from associate companies | 84 | - |
| Prepayments | 1,204 | 952 |
| VAT recoverable | 1,285 | 274 |
| Operating lease income | - | 540 |
| Finance lease income* | 1,256 | 741 |
| Trade debtors** | 296 | 102 |
| Sundry debtors | 133 | 66 |
| Trade and other receivables | 4,522 | 2,860 |
* Rental payments on up to 5 of the unplaced locomotives have been deferred for each of the first 6 months of 2010 (and any outstanding as at 31 December 2009) through a loan note structure that will be repayable by the end of September 2010.
** During the year bad debt provisions of US$477,000 (2008: US$nil) have been provided against trade receivables (see note 6).
| Company | 31 December 2009 US$'000 | 31 December 2008 US$'000 |
|
|
|
|
| Loans and receivables due from subsidiary companies | 401 | 260 |
|
|
|
|
| Loans and receivables due from associate companies | 84 | - |
| Prepayments | 300 | 254 |
| Sundry debtors | 35 | 179 |
| Trade and other receivables | 419 | 433 |
Expense recharges from the Company to its subsidiaries and associates during the year amounted to US$339,910 and US$140,122 respectively (2008: US$363,589 and US$nil), with outstanding balances at the year-end as above.
Inter-company loans from the Company to its subsidiaries and associates are interest-free, unsecured and repayable on demand.
16 Cash at Bank
| Group | 31 December 2009 US$'000 | 31 December 2008 US$'000 |
|
|
|
|
| Bank balances | 22,346 | 36,424 |
| Deposit balances | 62,244 | 2,247 |
| Cash at bank | 84,590 | 38,671 |
The deposit balances include US$244,000 (31 December 2008: US$247,000) held as security for a letter of credit issued by Standard Chartered Bank, and US$nil (31 December 2008: US$2 million) as security for a bank guarantee issued by Barclays Bank in Tanzania in favour of the Tanzania Communications Regulatory Authority. These are the only figures excluded from the above balances for analysing the movements of cash and cash equivalents in the cash flow statement.
| Company | 31 December 2009 US$'000 | 31 December 2008 US$'000 |
|
|
|
|
| Bank balances | 1,025 | 35,014 |
| Deposit balances | 62,000 | - |
| Cash at bank | 63,025 | 35,014 |
17 Share Capital
| Ordinary Shares of US$0.01 each | 31 December 2009 and 2008 Number | 31 December 2009 and 2008 US$'000 |
| Authorised | 500,000,000 | 5,000 |
| Ordinary Shares of US$0.01 each | 31 December 2009 Number | 31December 2009 US$'000 |
| In issue at 31 December 2008 | 180,450,000 | 1,805 |
| Redeemed during the year | (28,800,248) | (289) |
| In issue at 31 December 2009 | 151,649,752 | 1,516 |
| Ordinary Shares of US$0.01 each | 31 December 2008 Number | 31 December 2008 US$'000 |
| In issue at start and end of year | 180,450,000 | 1,805 |
| C Shares of US$1 each | 31 December 2008 and 2009 Number | 31 December 2008 and 2009 US$'000 |
| Authorised | 5,000,000 | 5,000 |
| Issued | - | - |
At incorporation the authorised share capital of the Company was US$10,000,000 divided into 500,000,000 ordinary shares of US$0.01 each and 5,000,000 C Shares of US$1.00 each. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
The holders of C Shares would be entitled to one vote per share at the meetings of the Company. The C Shares can be converted into Ordinary shares on the approval of the Directors. On conversion each C share would be sub-divided into 100 C Shares of US$0.01 each and will be automatically converted into New Ordinary shares of US$0.01 each.
On 12 July 2007, the Company raised a gross amount of US$180,450,000 following the admission of the Company's ordinary shares to AIM. The Company placed 180,450,000 Ordinary Shares of US$0.01 par value, at an issue price of US$1.00 per share, and 36,090,000 warrants on a 1 warrant per 5 ordinary shares basis.
A registered holder of a Warrant has the right to subscribe for Ordinary Shares of US$0.01 each in the Company in cash on 30 April in any of the years 2008 to 2012 for a price of US$1.21 each (adjusted from US$1.25 effective from 11.59pm on 23 February 2010, see note 22).
During the year the Company bought back 28,800,248 Ordinary Shares for total consideration of US$14,209,094.
18 Net Asset Value per Share
| Group
| As at 31 December 2009 | As at 31 December 2008 |
|
|
|
|
| Net assets attributable to equity holders of the Company (US$'000) | 140,571 | 167,295 |
| Shares in issue (thousands) | 151,650 | 180,450 |
| NAV per share (US$) | 0.93 | 0.93 |
The NAV per share is calculated by dividing the net assets attributable to equity holders of the Group by the number of ordinary shares in issue.
19 Trade and Other Payables
| Group | 31 December 2009 US$'000 | 31 December 2008 US$'000 |
|
|
|
|
| Performance fee payable | 974 | - |
| Administration fees payable | 27 | 44 |
| Audit fee payable | 194 | 43 |
| CREST service provider fee payable | 2 | 3 |
| Custodian fee payable | 5 | 4 |
| Directors' fees payable | 53 | - |
| Trade creditors | 383 | 377 |
| Income tax payable | 16 | - |
| ZTE loan (see below) | 2,691 | - |
| Other accrued expenses | 751 | - |
| Other sundry creditors | 437 | 1,054 |
|
| 5,533 | 1,525 |
| Company | 31 December 2009 US$'000 | 31 December 2008 US$'000 |
|
|
|
|
| Performance fee payable | 974 | - |
| Administration fees payable | 27 | 44 |
| Audit fee payable | 137 | 43 |
| CREST service provider fee payable | 2 | 3 |
| Custodian fee payable | 5 | 4 |
| Directors' fees payable | 53 | - |
| Other sundry creditors | 7 | 138 |
|
| 1,205 | 232 |
ZTE Loans
|
| Interest rate | 31 December 2009 | 31 December 2008 |
|
| 31 December 2009 | £'000 | £'000 |
| Current liabilities |
|
|
|
| Dovetel Tanzania Limited | LIBOR + 3% | 2,691 | - |
| Non-current liabilities |
|
|
|
| Dovetel Tanzania Limited | LIBOR + 3% | 5,543 | - |
| TMP Uganda Limited | LIBOR + 3% | 2,454 | 1,553 |
| Long term liabilities |
| 7,997 | 1,553 |
The ZTE loans are unsecured.
20 Contingent Liabilities and Commitments
At 31 December 2009 the capital expenditure contracted for property, plant and equipment by Dovetel Tanzania Limited was US$2,790,427.
At 31 December 2009 TMP Uganda Limited had commitments relating to its ongoing ERP implementation totalling US$111,016.
The following guarantees are in place as a result of the acquisition of 50% of the ordinary share capital of Sheltam Holdings (Pty) Limited:
(i) Rand Merchant Bank debtors facility in the amount of US$1.4m (ZAR 10m) of which 50% has been indemnified by Roy Puffett, a shareholder in and a director of Sheltam Holdings (Pty) Limited.
(ii) FirstRand Bank suretyship in the amount of US$0.8m (ZAR 6m) in connection with a US$1.6m (ZAR 12m) working capital facility.
(iii) Rand Merchant Bank letter of support in the amount of US$0.7m (ZAR 5.5m) in connection with aircraft finance lease obligations.
The indirect subsidiaries Dovetel Tanzania Limited and TMP Uganda Limited had contractual commitments to acquire mobile telecommunication network infrastructure equipment. The Groups' share of these commitments were valued at US$6.2 million and US$2.2 million respectively at the balance sheet date.
20 Contingent Liabilities and Commitments (continued)
Dovetel Tanzania Limited has entered into operating lease agreements for a number of office and property buildings. The lease terms are between one and ten years and the majority of the lease agreements are renewable at the end of the lease period at market rates.
The Groups' share of future aggregate minimum lease payments under operating leases are as follows:
|
| 31 December 2009 US$'000 | 31 December 2008 US$'000 |
| Amounts payable under operating leases: |
|
|
| Within one year | 182 | 57 |
| In the second to fifth years inclusive | 634 | 283 |
| Beyond five years | 1,878 | 1,209 |
|
| 2,694 | 1,549 |
21 Related Party Transactions
Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions.
Group
At 31 December 2009, US$263,664 was payable by Roy Puffett, a shareholder in Sheltam Holding (Pty) Ltd. (2008: US$184,841), see note 22.
Management fees of US$2,026,000 (2008: US$48,000) were paid to TMP Management A.S., outstanding at 31 December 2009, US$145,000 (2008: US$128,000).
Sheltam Holdings (Pty) Limited, an associate, had the following positions/transactions with Group companies:
- PME Locomotives (Mauritius) Limited sold its remaining six locomotives via finance lease to Sheltam Holdings (Pty) Limited in June 2009 (see notes 11 and 12)
- The outstanding finance lease liability owing to PME Locomotives (Mauritius) Limited as at 31 December 2009 was US$31,098,211 (31 December 2008: US$15,907,642), see note 12).
- Finance lease interest expense due to PME Locomotives (Mauritius) Limited during the year ended 31 December 2009 amounted to US$4,804,800 (31 December 2008: US$201,600).
- Finance lease amounts due but not yet paid to PME Locomotives (Mauritius) Limited as at 31 December 2009 amounted to US$1,255,856 (31 December 2008: US$740,966).
- The loan payable to PME RSACO (Mauritius) Limited is disclosed in note 9.2.
The Directors of the Company are considered to be related parties by virtue of their influence over making operational decisions. Directors' remuneration is disclosed in note 6.
Brian Myerson, a director of the Company, is executive chairman of Principle Capital Holdings S.A. ("PCH") and is joint chairman of the Investment Manager, PME Infrastructure Managers Limited. PCH indirectly owns 31.67% of the Investment Manager. Fees payable to the Investment Manager are disclosed in Note 5.
Silex Management Limited ("Silex"), an indirect subsidiary of PCH has been retained by the Company to oversee the administration of the overseas subsidiaries. A total of US$231,253 has been invoiced by Silex in respect of the financial year ended 31 December 2009 (31 December 2008: US$273,873).
Lawrence Kearns, a director of the Company, is non-executive director of the Administrator and the Custodian. Fees payable to the Administrator are disclosed in Note 6.
Company
Intercompany transactions with subsidiaries and associates are disclosed in note 15.
22 Post Balance Sheet Events
Since the year end the Company has purchased a further 375,000 ordinary shares for a total consideration of US$275,000. The Company has cancelled these re-purchased shares leaving the total shares in issue as 151,274,752.
On 6 January 2010 Roy Puffett, a shareholder in Sheltam Holding (Pty) Limited, settled the amount due to the Group in full (see note 21).
On 15 February 2010 the Company announced that following the realisation of the Econet Wireless Global Limited investment a special dividend of 2.6 cents per ordinary share would be paid. This has had the supplementary effect of adjusting the warrant subscription price to US$1.21 effective from 11.59pm on 23 February 2010, representing a reduction of US$0.04 from the original subscription price of US$1.25. Additional warrants were also issued to each Warrant holder at approximately 0.033 warrants for every existing warrant held (no fractions of warrants were issued). The additional 1,193,042 warrants were admitted to trading on 22 March 2010.
On 8 March 2010 a new wholly owned subsidiary, PME TZ Property (Mauritius) Limited was incorporated.