RNS Number:7215V
Teleset Networks PLC
30 April 2007
FOR IMMEDIATE RELEASE Monday, 30 April 2007
Teleset Networks - first full year results since admission to AIM
Teleset Networks ("Teleset" or "the Company"), a leading private fixed-line
telecom network operator in Kazan, Republic of Tatarstan, Russia, announces
results for the year ended 31 December 2006
FINANCIAL HIGHLIGHTS 2006 2005 Growth
Year ended 31 December US$'000 US$'000 %
Revenue 13,461 9,429 43%
Operating profit before admission costs * 5,724 3,663 56%
Operating profit* 4,964 3,683 35%
Profit before tax* 4,448 3,432 30%
Net profit after admission costs * 2,769 2,542 9%
Basic earnings per share (US$) 0.0271 0.0254 7%
* Admission costs of US$1.2 million
*Expanded network infrastructure and developed; new product and services
promoted aggressively in a buoyant market for fixed-line voice and data
services
*Admission to AIM in October 2006 has provided access to capital to
finance new acquisitions
*US$17m acquisition in November 2006 of TNPKO, Kazan's 4th largest
fixed-line telecom operator, will generate significant synergies and
economies of scale
*In March 2007, Teleset raised US$10m (gross) through a placing with
Templeton Strategic Emerging Markets Fund II
"The Board believes that Teleset has the business, strategy and management
expertise and experience to achieve our objectives and we are confident that the
Company has an excellent future."
(Philippos Vatiliotis, Chairman)
CONTACTS
Blue Oar Securities - Nominated Adviser +44 (0) 20 7448 4400
Shane Gallwey
Metropol (UK) Limited - Broker +44 (0) 20 7439 6880
Alexander Selegenev
Bankside - Financial PR +44 (0) 20 7367 8888
Simon Bloomfield or Andy Harris
Chairman's Statement
The year ended 31 December 2006, during which we produced strong financial
results, was one of outstanding achievement for Teleset Networks. During the
year, we successfully pursued our growth strategy and the shares of the Company
were admitted to trading on the AIM market in London.
One of the main objectives for 2006 achieved was to expand our network
infrastructure and develop new products and services which we promoted
aggressively in a buoyant market for fixed-line voice and data services. As a
result, revenues and profits for the year significantly exceeded stockmarket
expectations.
Revenues for the year increased by 43 per cent and profit before taxation rose
by 30 per cent despite US$1.2 million of costs associated with admission to AIM.
Profit from operations before admission costs increased by an impressive 56 per
cent.
The strategy of Teleset Networks is to achieve long-term, profitable growth both
organically and through attractive acquisitions. In this regard, a major step
forward in 2006 was that we extended our network coverage into the remaining two
districts of Kazan, our core market, where we were previously unable to offer
our services. We achieved this through the acquisition of one of our
competitors, TNPKO, which is the fourth largest fixed-line telecom operator in
Kazan. The integration of TNPKO is proceeding smoothly and will be completed as
planned, and we are confident that it will improve the operational effectiveness
and profitability of the combined business as well as providing longer-term
synergies and economies of scale.
In view of the stage of the Company's development, and our strong financial
record, ambition and prospects, the Board decided to seek admission of the C
ompany's shares to the AIM market in London where the shares started trading on
12 October 2006. As a result, the Company has raised its profile with investors
and customers, and gained access to capital to finance new acquisitions and
other investment.
On 19 March, 2007 we announced that the Company had raised $10 million before
expenses via a placing, arranged by Metropol (UK) Limited, of 24,390,244 new
ordinary shares at US$0.41 (approximately 21 pence) each with Templeton
Strategic Emerging Markets Fund II ("TSEMF"). The proceeds of the placing will
be used to accelerate implementation of the Company's strategy. Following the
placing, on 4 April 2007 we announced the appointment of Yuri Mashintsev, a
representative of TSEMF, as a non-executive director.
Outlook
The fixed-line telecom market in Tatarstan and elsewhere in Russia, where usage
is directly related to economic prosperity, is developing rapidly and offers
excellent opportunities for the Company. Our aim is to take advantage of these
opportunities with a view to building a leading position in the market and
continuing our record of profitable growth.
The Board believes that Teleset has the business, strategy and management
expertise and experience to achieve our objectives and we are confident that the
Company has an excellent future.
Philippos Vatiliotis
Chairman
Chief Executive's Review
Overview
During 2006, Teleset Networks achieved a number of significant strategic
milestones and completed its 10th year of profitable growth. We strengthened our
position as the leading alternative fixed-line telecom operator in Kazan where
our digital network now covers the whole city. As a result, the Company has been
able to take advantage of the rapid growth in demand for fixed-line telecom
services and significantly increased market share through organic development in
both the corporate and residential sectors.
This excellent performance is reflected in strong financial results for the year
ended 31 December 2006 when the company achieved a 43 per cent rise in
consolidated revenues to US$13.46 million (2005: US$ 9.43 million) and a 29.6
per cent increase in profit before taxation after admission costs to US$ 4.45
million (2005: US$3.43 million). Excluding admission costs of US$1.2 million,
net income increased by 56per cent to US$3.97 million (2005: US$2. 54 million).
Earnings per share for 2006 were US$0.0271 (2005: US$0.0254
In line with management's stated strategy of being a consolidator in its chosen
markets, in November 2006 we acquired TNPKO, Kazan's fourth largest fixed-line
telecom operator, for a cash consideration of US$17 million. Since acquisition,
TNPKO has performed in line with our expectations and the integration of the
business will be completed as planned by mid 2007 resulting in significant
synergies and economies of scale.
Following the acquisition of TNPKO, our all-digital local network has reached
switching capacity of 130,000 lines and our shares of the market in Kazan are 27
per cent for voice traffic and 29 per cent of data traffic.
In the long term, we believe that Teleset Networks has the potential to become
not only Kazan's leading telecom operator but also a successful regional player
in the Russian telecom industry. We have been granted a licence for the
provision of zonal traffic routing, providing us an opportunity to develop a
zonal network subject to the results of a feasibility study which is currently
under preparation. This represents an important business opportunity which will
allow the company to have direct access to long-distance operators. It will also
enable us to increase revenues by direct interconnection with mobile operators
for long-distance traffic.
Financial performance
FINANCIAL RESULTS 2006 2005 Growth
Year ended 31 December US$'000 US$'000 %
Revenue 13,461 9,429 43%
Operating profit before admission costs * 5,724 3,663 56%
Operating profit* 4,964 3,683 35%
Profit before tax* 4,448 3,432 30%
Net profit after admission costs * 2,769 2,542 9%
Basic earnings per share (US$) 0.0271 0.0254 7%
EBITDA before admission costs 8,544 5,726 49%
EBITDA margin before admission costs 63% 61%
* Admission costs of US$1.2 million
The two principal sources of Teleset's revenues are telephone services and data
transmission services. Whilst telephone services currently account for the
majority, as a result of substantial growth in demand for broadband in Russia,
we expect that internet and data transmission services will contribute an
increasing proportion of revenues and profits over the coming years.
Core business revenue 2006 2005 Growth
US$'000 US$'000 %
Telephone services 9,160 6,755 36%
Internet and data transmission services 3,990 2,425 64%
Overall, in 2006 the Company achieved a 56 per cent increase in operating profit
before admission costs to US$5.72 million (2005: US$ 3.66 million) as well as
increasing operating margin before admission costs to 42.5 per cent (2005: 38.8
per cent). This reflects improved gross margins resulting from tariff increases,
cost savings and the growth in sales of internet data transmission and value
added services.
Expenses excluding admission costs increased by 34 per cent to support the
growth of the business compared with the growth achieved in operating revenues
of 43 per cent.
Interest income has grown by 20 per cent to US$0.7 million, mainly because of
increased cash balances generated by the Company, while interest expenses grew
to US$ 1.1 million (up by 47 per cent) as a result of new loan facilities to
finance the TNPKO acquisition in the last quarter 2006.
Cash generation is strong with the amount from operating activities in 2006
reaching US$ 6.7 million against US$ 3.3 million in 2005.
Capital expenditure was US$ 3.5 million of which 90 per cent was on
telecommunication equipment, outside line network and production buildings.
Telephone Services
Teleset has achieved significant growth in telephone services by targeting
developers of new residential areas and business centres in Kazan. This,
combined with competitive pricing, has been a key factor during 2006 when the
company increased subscriber lines by 38,400 (35,500 residential and 2,900
business) to 111,000 at the end of the year (31 December 2005: 72,600). During
this time, customer churn at less than 5 per cent has been negligible.
Although intense competition for new subscribers will continue to cause
installation fees to decrease, fixed telephony provides the company with a
stable and growing source of recurring revenues. We have been able to mitigate
the impact of competition by entering into exclusive agreements with developers
for the provision of telephone cables in new residential and business centre
developments.
The Company continues the aggressive targeting of developers in Kazan. In total,
the Company plans to build telephone and data transmission networks for 5,500
apartments in 2007 compared to 4,100 apartments in 2006. Developers in Kazan
with which the Company has relationships include the State Housing Fund (managed
by the Tatarstan Government), the Capital Construction and Reconstruction Board
of Kazan, LLC (Kazan - 21st century), OJSC (Housing Investment Company) and
others.
As part of our expansion with new residential developments in Kazan, we
established 2 new remote switching units and plan a further 4 units in 2007.
The Company continually seeks to optimise the cost of network resources provided
from its own infrastructure and the capacity provided by other networks. To this
end, towards the end of 2006 we upgraded one of our SDH rings to STM-16 level.
Internet and data transmission services
During 2006, revenue derived from broadband internet services provided to
businesses and private customers increased by 64 per cent compared to 2005. This
reflects rapid growth in internet and broadband penetration in Kazan, in line
with the whole Russian market, with xDSL connections accounting for 63 per cent
of all internet services provided compared to 50 percent in 2005. The total
volume of Gigabytes sold in 2006 increased by 113 per cent to 57,500 Gigabytes
compared to 26,960 Gigabytes in 2005.
In view of the strong prospects for broadband market growth over the next few
years, this will continue to be a major focus for Teleset and we plan to
increase future sales and market share in this area.
In support of this effort, we are expanding and improving the efficiency of
Teleset's broadband network infrastructure as well as developing new products
and services which we will offer on a competitive basis. For example, the C
ompany has launched a universal prepaid card for broadband internet usage which
we believe will generate significant incremental sales.
For the residential market, during 2007 we plan to expand broadband access
following the installation of approximately 25 DSL nodes in Kazan with a
combined capacity of 5,400 ports, of which 4,100 are already deployed.
Teleset currently provides broadband for large corporate users by running fiber
from their offices. We plan to extend Teleset's broadband access capacity for
the business market and have recently signed a contract with ECI Telecom for the
delivery of 7,500 ADSL2+ lines during 2007.
The Company has upgraded its data transmission network and now has a
transmission speed of up to one Gigabit per second and will support the
substantial growth of Internet traffic anticipated over the next 2 years.
In October 2006, we re-negotiated the agreement with our primary Internet
provider, TransTelecom, which will result in a substantial reduction in the cost
to Teleset of providing internet services.
Acquisition of TNPKO
The US$17 million acquisition of TNPKO, Kazan's fourth largest operator, is the
first since Teleset floated on AIM and represents a major strategic step forward
for the Company. It has boosted Teleset's position and profit potential in Kazan
and will enhance earnings per share once the full benefits of integration start
to flow.
TNPKO had approximately 36,000 subscribers at the time of the acquisition and
operates a digital network in the Privolgsky and Sovetsky districts of Kazan
where Teleset previously had no presence.
So far, we have been very encouraged by the performance of TNPKO and the
integration of the business is on target for completion during the first half of
2007. A key focus of the integration has been to upgrade TNPKO's performance to
Teleset's standards in the following areas:
* re-engineering TNPKO's internal processes and procedures to bring them
in line with modern management methods
* re-organising the combined business and reducing headcount
* merging the two companies operationally to enable the combined business
to realise the full benefits of economies of scale and synergies
* increasing the return on investment in the combined Data Transmission
Network by reducing operating costs and leasing capacity to third parties
* introducing single billing and financial systems for the combined
business
* interconnecting TNPKO subscribers using Teleset's remote switches
* establishing a common SDM STM-16 ring to enable network monitoring to be
conducted from a single location
* re-negotiating fiber optic leasing arrangements with Kazan GTS, the
local monopoly
* re-negotiating terms of businesses with other suppliers
The acquisition of TNPKO was financed through a US$9.8 million loan, secured on
the assets of TNPKO, from a leading Russian bank, and existing financial
resources. The loan is repayable by January 2009 and pays interest at Libor plus
5.5 per cent.
Fiber optics network contracts
The Company has signed a contract with Vimpelcom, Russia's largest cellular
operator for construction and project planning for 15 km of fiber-optic network
capacity for their use within Kazan and outside the city. This contract
continues Teleset's construction activities on behalf of Vimpelcom and provides
incremental revenue to the company which will also be able to utilise the
capacity for its own purposes.
Teleset has also signed a similar contract with the State Television & Radio
Company of the Republic of Tatarstan.
Regulation
Since 2004, Russian Telecommunication Law has allowed residential customers to
choose either a fixed rental for unlimited local calls, or a rental fee plus an
additional amount for actual local calls. The increasing number of high usage
customers has led to a significant trend towards fixed rental which accounted
for 0.4 per cent of residential customers in 2004, 9 per cent in 2005 and 22 per
cent in 2006.
Regulated tariffs for fixed rental fee and local traffic were increased by 18
per cent with effect from 1st January 2006.
The Company has successfully applied to the Federal Tariff Agency for a 50 per
cent increase in the fixed rental tariff fee and a 10 per cent increase in all
other tariffs with effect from 1st February 2007.
Outlook
The rapid growth of internet penetration is a key driver of the Russian telecom
market and Teleset Networks and, in particular, the burgeoning demand for
broadband from both the business and residential sectors. During 2007, we expect
to be able to build on our competitive advantage of operating an all-digital
network by expanding our broadband capacity and range of services.
Having moved significantly closer to becoming the leading telecom operator in
Kazan, we will seek acquisition opportunities in other cities. In the meantime,
we will start to see the financial benefits from the integration of TNPKO in the
second half of the current year.
Given the outlook for a buoyant Russian telecom market and the strength of our
business and management team, we are confident that Teleset Networks will
achieve strong organic growth in 2007 and is building the foundations for long
term success.
Yiannis Demetriou
Chief Executive Officer
TELESET NETWORKS PUBLIC COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2006
--------------------------------------------------------------------------------
Note 2006 2005
US$ US$
Operating revenue 1 13,460,783 9,428,684
Operating expenses (7,736,787) (5,765,196)
Operating profit 5,723,996 3,663,488
Other income 2 436,737 19,492
Admission costs (1,196,613) -
Profit before finance costs 4,964,120 3,682,980
Finance income 3 654,008 544,983
Finance costs 3 (1,170,507) (795,909)
Profit before taxation 4,447,621 3,432,054
Taxation 4 (1,679,069) (890,414)
Net profit for the year 2,768,552 2,541,640
Earnings per share (note 5)
Basic earnings per share ($) 0.0271 0.0254
Diluted earnings per share ($) 0.0268 0.0254
TELESET NETWORKS PUBLIC COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
at 31 December 2006
--------------------------------------------------------------------------------
Note 2006 2005
US$ US$
ASSETS
Non-current assets
Property, plant and equipment 6 26,065,104 16,653,038
Intangible assets 8,064,651 101,681
34,129,755 16,754,719
Current assets
Stocks 1,497,591 873,267
Trade and other receivables 4,232,184 3,893,486
Cash at bank and in hand 4,351,945 9,720,594
10,081,720 14,487,347
Total assets 44,211,475 31,242,066
EQUITY AND LIABILITIES
Capital and reserves
Share capital 2,282,924 2,222,970
Share premium 32,968,013 32,729,089
Exchange difference reserve 105,487 (88,242)
Merger reserve (19,535,126) (19,535,126)
Share options reserve 55,000 -
Accumulated profits 4,067,982 2,092,062
19,944,280 17,420,753
Non-current liabilities
Borrowings 7 17,871,279 10,000,000
Deferred tax 962,590 834,064
18,833,869 10,834,064
Current liabilities
Trade and other payables 3,292,592 1,889,808
Borrowings 7 2,000,000 1,000,317
Tax liabilities 140,734 97,124
5,433,326 2,987,249
Total liabilities 24,267,195 13,821,313
Total equity and liabilities 44,211,475 31,242,066
These financial statements were approved by the Board of Directors on 27 April
2007 and were signed on its behalf by:
Philippos Vatiliotis Yiannis Demetriou
Non-Executive Chairman Chief Executive Officer
TELESET NETWORKS PUBLIC COMPANY LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2006
--------------------------------------------------------------------------------
Share Share Exchange Share Merger Accumulated Total
capital premium difference options reserve profits US$
US$ US$ reserve reserve US$ US$
US$ US$
At 1
January
2005 2,222,970 32,729,089 - - (19,535,126) (396,946) 15,019,987
Net profit
for
the year - - - - - 2,541,640 2,541,640
Dividends - - - - - (52,632) (52,632)
Difference
on
conversion
from
foreign
currency - - (88,242) - - - (88,242)
At 1
January
2006 2,222,970 32,729,089 (88,242) - (19,535,126) 2,092,062 17,420,753
Issue of
share
capital 59,954 238,924 - - - - 298,878
Net profit
for
the year - - - - - 2,768,552 2,768,552
Dividends - - - - - (792,632) (792,632)
Granted in
the
year 55,000 55,000
Difference
on
conversion
from
foreign
currency - - 193,729 - - - 193,729
At 31
December
2006 2,282,924 32,968,013 105,487 55,000 (19,535,126) 4,067,982 19,944,280
The merger reserve represents the excess of the nominal value of the shares
issued by Teleset Networks Public Company Limited over the nominal value of the
share capital of Teleset Limited and Teleset Invest Limited.
TELESET NETWORKS PUBLIC COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2006
--------------------------------------------------------------------------------
2006 2005
US$ US$
Cash flows from operating activities
Profit before taxation 4,447,621 3,432,054
Adjustments for:
Depreciation and amortisation of property,
plant and equipment and software 6 2,383,269 2,013,279
(Profit)/loss from the sale of property, plant
and equipment (253,044) 1,872
Interest income (654,008) (544,983)
Interest expense 1,123,043 761,657
Profit from operations before working capital
changes 7,046,881 5,663,879
Changes in working capital:
Stocks (350,781) (114,968)
Trade and other receivables 541,781 (1,447,540)
Trade and other payables 840,424 40,608
Cash generated from operations 8,078,305 4,141,979
Tax paid (1,426,590) (803,539)
Net cash from operating activities 6,651,715 3,338,440
Cash flows from investing activities
Acquisition of subsidiary undertaking (17,000,000) -
Purchase of intangible assets (101,181)
Purchase of property, plant and equipment 6 (3,385,048) (4,384,811)
Proceeds from sale of property, plant and
equipment 388,622 2,233,380
Interest received 654,008 544,983
Net cash used in investing activities (19,443,599) (1,606,448)
Cash flows from financing activities
Proceeds from issue of share capital 298,878 -
Repayment of borrowings - (2,262,758)
Proceeds from borrowings 8,870,962 5,327,652
Interest paid (1,123,043) (761,657)
Dividends paid (792,632) (52,632)
Net cash from financing activities 7,254,165 2,250,605
Net (decrease)/increase in cash and cash
equivalents (5,537,719) 3,982,597
Cash acquired on business combination 169,070 -
Cash and cash equivalents at beginning of the
year 9,720,594 5,737,997
Cash and cash equivalents at end of the year 4,351,945 9,720,594
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF TELESET NETWORKS PUBLIC COMPANY LIMITED
Report on the consolidated Financial Statements
1 We have audited the consolidated financial statements of Teleset Networks
Public Company Limited (the "Company") and its subsidiaries (the "Group") on
pages 8 to 30, which comprise the consolidated balance sheet as at 31 December
2006, and the consolidated income statement, consolidated statement of changes
in equity and consolidated cash flow statement for the year then ended, and a
summary of significant accounting policies and other explanatory notes.
Board of Directors' Responsibility for the Financial Statements
2 The Company's Board of Directors is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as adopted by the European Union
(EU) and International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB) and the requirements of the
Cyprus Companies Law, Cap 113. This responsibility includes: designing,
implementing and maintaining internal control relevant to the preparation and
fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditors' Responsibility
3 Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
4 An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor's judgement, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Board of Directors, as well
as evaluating the overall presentation of the financial statements.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited consolidated financial statements. This other
information comprises only the Chairman's Statement, the Chief Executive's
Review, Board of Directors' Report, Remuneration report and the Corporate
Governance Statement. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
consolidated financial statements. Our responsibilities do not extent to any
other information.
5 We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
6 In our opinion, the consolidated financial statements give a true and fair
view of the financial position of the Group as of 31 December 2006, and of its
financial performance and its cash flows for the year then ended in accordance
with International Financial Reporting Standards as adopted by the EU and the
International Financial Reporting Standards as issued by the IASB and the
requirements of the Cyprus Companies Law, Cap. 113.
Report on Other Legal Requirements
7 Pursuant to the requirements of the Companies Law, Cap. 113, we report the
following:
* We have obtained all the information and explanations we considered
necessary for the purposes of our audit.
* In our opinion, proper books of account have been kept by the Company.
* The Company's financial statements are in agreement with the books of
account.
* In our opinion and to the best of our information and according to the
explanations given to us, the financial statements give the information
required by the Companies Law, Cap. 113, in the manner so required.
* In our opinion, the information given in the report of the Board of
Directors on pages 2 to 3 is consistent with the financial statements.
Other Matter
8 This report, including the opinion, has been prepared for and only for the
Company's members as a body in accordance with Section 156 of the Companies Law,
Cap.113 and for no other purpose. We do not, in giving this opinion, accept or
assume responsibility for any other purpose or to any other person to whose
knowledge this report may come to.
Grant Thornton
Certified Public Accountants (Cy)
Nicosia,
27 April 2007
TELESET NETWORKS PUBLIC COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2006
1. Operating revenue
2006 2005
US$ US$
Connection fees 652,910 1,063,556
Rental fees 4,110,899 2,466,148
Traffic fees 2,507,050 1,881,368
ISDN - Connection fees 230,801 132,083
ISDN - Traffic fees 1,088,374 708,275
Internet services 3,260,442 1,788,717
IP Services 575,026 541,526
Universal cards 154,693 95,119
Sundry income 880,588 751,894
13,460,783 9,428,686
2. Other income
2006 2005
US$ US$
Other operating income 112,147 19,492
Profit from sale of property, plant and equipment 253,044 -
Technical services provided 71,546 -
436,737 19,492
3. Finance costs - net
2006 2005
US$ US$
Interest expense 1,123,043 761,657
Sundry finance expenses 47,464 34,252
1,170,507 795,909
Interest income (654,008) (544,983)
516,499 250,926
4. Taxation
2006 2005
US$ US$
Current taxation:
Corporation tax - current year 1,470,200 803,539
Deferred tax 208,869 86,875
1,679,069 890,414
Taxation charge for the year is in respect of Russian Federation Tax. It is
computed on the appropriate rate on the chargeable profits for the year. Each
company in the Russian Federation is liable to taxation on profits at the rate
of 6.5% (for Russian Federation purposes) and to taxes of the local authorities
(for Teleset Limited and Teleset Invest Ltd the Tatarstan Region). Tatarstan
Region for the year ended 31 December 2006 charges tax on profits at the rate of
17.5%.
The Company is subject to corporation tax on its taxable profits at the rate of
10%. Interest receivable from investment activities is subject to Special
Contribution for Defence Fund at the rate of 10%. In such a case 50% of this
interest is not subject to corporation tax. In addition, in some cases,
dividends from abroad are subject to Special Contribution for Defence Fund at
the rate of 15%.
5. Earnings per share
Basic earnings per share has been calculated by dividing the net profit
attributable to ordinary shareholders by the weighted average number of shares
in issue during the relevant financial year.
Dilluted earnings per share is calculated after taking into consideration the
potentially dilutive shares in existence as at the year ended 31 December 2006.
For the year ended 31 December 2005 there were no potentially dilutive shares.
2006 2005
US$ US$
Net profit attributable to ordinary shareholders 2,768,552 2,541,640
Weighted average number of ordinary shares in
issue 102,271,024 100,000,610
Basic earnings per share (US$) 0.0271 0.0254
Weighted average number of ordinary shares
including the effect of potentially dilutive
shares 103,376,927 100,000,610
Diluted earnings per share (US$) 0.0268 0.0254
Weighted average number of ordinary shares in
issue 102,271,024 100,000,610
Effect of potentially dilutive shares - share
options 1,105,903 -
Weighted average number of ordinary shares
including the effect of potentially dilutive
shares 103,376,927 100,000,610
6. Property, plant and equipment
Premises Telecom Motor Furniture, Total
equipment vehicles fixtures
and
computer
hardware
US$ US$ US$ US$ US$
Cost
At 1 January 2,443,532 22,103,103 403,903 993,824 25,944,362
2006
Additions 692,988 2,413,993 92,230 185,837 3,385,048
Acquisitions
through
business 2,825,492 6,885,918 155,263 1,182,467 11,049,140
combinations
Disposals - (128,058) (31,516) (2,823) (162,397)
Transfers - 277,400 - (277,400) -
At 31 December 5,962,012 31,552,356 619,880 2,081,905 40,216,153
2006
Depreciation
At 1 January 396,535 7,848,572 268,205 778,012 9,291,324
2006
Charge for the 81,069 2,116,778 52,186 110,015 2,360,048
year
Acquisitions
through
business 198,437 1,715,885 86,029 526,145 2,526,496
combinations
Disposals - (4,276) (22,543) - (26,819)
Transfers - 182,784 - (182,784) -
At 31 December
2006 676,041 11,859,743 383,877 1,231,388 14,151,049
Net book value
At 31 December
2006 5,285,971 19,692,613 236,003 850,517 26,065,104
At 31 December
2005 2,046,997 14,254,531 135,698 215,812 16,653,038
Bank borrowings are secured on premises and equipment of the Group to the value
of US$ 18,035,437 (2005: US$ 11,471,766) (Note 7).
7. Borrowings
2006 2005
US$ US$
Current
Bank loans 2,000,000 -
Loans from related companies - 1,000,317
2,000,000 1,000,317
Non-current
Bank loans 17,871,279 10,000,000
17,871,279 10,000,000
Maturity of non-current borrowings:
between one to two years 9,871,279 -
between two and five years 8,000,000 10,000,000
17,871,279 10,000,000
The bank loans are secured as follows:
* By mortgage against immovable property, plant and equipment of the Group
for US$ 29,059,055 (2005: US$ 17,059,055).
* Guarantee from Teledev East Limited.
* Cross guarantees between Group companies.
The bank loan from Black Sea Trade and Development Bank carries interest of
libor plus 4%. The bank loans from Vneshtorgbank carries interest of libor plus
5.5%.
The weighted average effective interest rates at the balance sheet date were as
follows:
2006 2005
% %
Bank loans 10.0 9.4
The carrying amounts of current bank loans approximate their fair value.
8. Post balance sheet events
On 12th February 2007 the Board of Directors decided to increase the issued
share capital of the Company by 24,390,244 shares with a par value of CYP0.01.
Templeton Strategic Emerging Markets Fund II, purchased the total amount of
these shares at an exercise price of US$0.41 (GBP0.21), for the amount of
US$10,000,000 (GBP5,121,951). With effect of this transaction, the participation
of Templeton Strategic Emerging Markets Fund II in the Company is approximately
20%.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEWFSUSWSEIL
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