T S Telecom Ltd. - December 31, 2006 Third Quarter Financial Results



    Canadian Venture Exchange: TOM

    TORONTO, March 1 /CNW/ - T S Telecom Ltd. (the "Company") and its
Subsidiary Companies (collectively referred to as the "Group" reported a net
loss of approximately $0.98 million for the nine months period ended December
31, 2006. As at December 31, 2006, the Group had approximately $1.04 million
or $0.05 per share of cash.

    
    Financial Highlights

        For the nine months ended December 31,               2006       2005
        (in thousands of Canadian dollars except loss           $          $
        per share)

        Gross sales                                         2,918      2,121
        Gross income                                        1,346        690
        Loss before tax & non-controlling interest         (1,683)    (2,365)
        Net loss for the period                              (981)    (1,524)
        Loss per share - basic                              (0.04)     (0.07)
    

    RESULTS OF OPERATIONS

    Sales were approximately $2.92 million for the nine months ended
December 31, 2006 compared with sales of approximately $2.12 million for the
same period of last year.
    Our gross margin was 46% for the nine months period as compared to a
gross profit margin of 33% for the corresponding period in 2005.
    During the nine months period, the Group continued to control general and
administrative expenses. The general and administrative expenses successfully
reduced by 12%, as compared with the corresponding period of last year.
    The increase in interest costs was because of the interest charges on an
installment bank loan, a short-term loan from a finance company and a
short-term bank loan. The Group posted a net loss of approximately $0.98
million for the nine months period ended December 31, 2006, which was 36%
lower from the net loss incurred for the same period of last year. The
reduction of the net loss was mainly attributable to the dilution gain on
placement of new shares of our subsidiary, T S Telecom Technologies Limited on
June 12, 2006, the receipt of dividend from our associated company, the gain
on disposal of properties, together with the increase in gross margin.

    CASH FLOW ANALYSIS

    As at December 31, 2006, the Group had approximately $1.04 million or
$0.05 per share of cash, compared to $0.24 million or $0.01 per share of cash
as of September 30, 2006 and $0.513 million or $0.02 per share of cash as of
March 31, 2006. The change in cash for the three months and nine months ended
December 31, 2006 mainly due to the cash inflows provided by a short-term loan
from a finance company of approximately $150,000 denominated in Hong Kong
dollars and a short-term bank loan of approximately $418,000 denominated in
Renminbi, which were used in operating activities. The short-term loan is
personally guaranteed by Mr. Lau See Hoi, the Chairman, President and Chief
Executive Officer of the Company, which is repayable on May 14, 2007 and
charged at a fixed interest rate of 24% per annum. The short-term bank loan is
secured by the Group's real estate properties in Shenzhen, which is repayable
on November 16, 2007 and bears fixed interest rate of 6.723% per annum.
    Cash provided by (used in) operating activities for the three months and
nine months ended December 31, 2006 were approximately $237,000 and
approximately ($722,000), respectively and resulted primarily from the net
loss before non-controlling interest of $0.61 million and $1.70 million as
compared to net loss of $0.92 million and $2.38 million for the corresponding
periods of last year.
    Cash provided by investing activities for the three months and nine
months ended December 31, 2006 amounted to approximately $87,000 and $778,000
respectively as compared to the cash used in investing activities for the
three months and nine months ended December 31, 2005 were approximately
$16,000 and $46,000 for the corresponding periods of last year. The cash
inflow was related to the proceeds from disposal of properties.
    Cash provided by financing activities for the three months and nine
months ended December 31, 2006 were approximately $555,000 and approximately
$457,000 respectively as compared to approximately $562,000 and $1,013,000
respectively for the corresponding periods of last year. The increase was
mainly due to the short-term loan from a finance company of approximately
$150,000 and the short-term bank loan of approximately $418,000 obtained
during the third quarter of 2006.

    ANALYSIS OF FINANCIAL CONDITION

    Current and long-term accounts receivable reduced from $1,026,000 as of
March 31, 2006 to $843,000 as of December 31, 2006. The reduction in accounts
receivable is mainly due to the provision of doubtful debts and bad debts
written off.
    Property and equipment decreased by $0.39 million from $1.10 million at
March 31, 2006 primarily attributable to the amortization of properties and
office equipment and the disposal of our office and staff quarters of our
China headquarters in Shenzhen, China.
    Inventories decreased by $115,000 from approximately $470,000 at
March 31, 2006 to approximately $355,000 as of December 31, 2006. The decrease
in inventories was primarily related to the provision for inventories
obsolescence for the quarter.
    Accounts payable and accrued liabilities increased by $891,000 in line
with the increase in trading activities during the period.

    LIQUIDITY, FINANCIAL RE

SOURCES AND CAPITAL STRUCTURE As at December 31, 2006, the Group had approximately $1.04 million of cash. The cash balance increased from $0.513 million as of March 31, 2006 was mainly due to the procurement of short-term loan from a finance company and the short-term bank loan to finance the Group's daily operations. As at December 31, 2006, the Group had net current liabilities of approximately $1.79 million. The Group has considered disposing its office properties located in the PRC, raising additional bank loans and equity capital to finance its future operations. Most of the trading transactions, assets and liabilities of the Group were denominated in Hong Kong dollars and Renminbi. The Group adopted a conservative treasury policy with almost all bank deposits being kept in Hong Kong dollars, or in the local currencies of the operating subsidiaries to minimize exposure to foreign exchange risks. As at December 31, 2006, the Group had no foreign exchange contracts, interest or currency swaps or other financial derivatives for hedging purposes. For the nine months period ended December 31, 2006, a subsidiary of the Company, T S Telecom Technologies Limited, allotted and issued 56,400,000 new Placing Shares on June 12, 2006 to not fewer than six independent investors to raise additional capital and received a gross proceeds of approximately $0.839 million. Financial Instruments As at December 31, 2006, the Group has no financial instruments nor any foreign currency investments held for hedging purposes. Contingent Liabilities The Group neither has material contingent liabilities nor legal proceedings against the Group as of December 31, 2006. Third Quarter Event There were no events or items that have had a material impact on the Group's financial condition, cash flows or results of operations during the Group's third quarter of the fiscal year ended March 31, 2007. Subsequent Events On 22nd January 2007, a principal subsidiary of the Company, T S Telecom Technologies Limited ("TSTT") (as Vendor) and Mr. Lau See Hoi (as Purchaser) entered into a Sale and Purchase Agreement pursuant to which TSTT has conditionally agreed to dispose of and Purchaser has conditionally agreed to acquire the entire issued share capital of (a) T S Telecom (B.V.I.) Ltd. and its subsidiaries comprised T S International Company Limited, TSTT (Canada) Ltd., T S International Ltd., T S Electric and Power Co., Ltd., T S Telecom (Shenzhen) Co., Ltd., Ying Zhi Xun Telecom Equipment (Shenzhen) Co., Ltd., and (b) T S Bio-Medical (B.V.I.) Ltd. and its subsidiaries comprised T S Bio-Technology Ltd. and T S Bio-Technology (Wuhan) Co., Ltd. (as Disposal Group) and the Advances to Disposal Group upon completion of the Corporate Restructuring for a cash consideration of approximately $450,000. Save as disclosed above, no subsequent events have occurred after December 31, 2006, that may have a significant effect, on the assets and liabilities or future operations of the Group. This transaction remains to be approved at a shareholder meeting on March 5, 2007. BUSINESS REVIEW AND PROSPECTS Segment Information Sales from the telecommunications products, the biotechnology products and others accounted for 97.3%, 0.2% and 2.5% respectively of the turnover of the Group for the nine months period ended December 31, 2006. There was no sale of gas turbine generator during the nine months period. Telecommunications Products During the nine months period, the Group continued to encounter pressure from customers demanding for concession of contract terms including lower pricing and longer payment period, causing the Group to take a longer time required to close and sign contracts. It is quite clear that the business environment of the telecom monitoring equipment industry of China has become more unfavorable and competitive. Our subsidiary, T S Telecom Technologies Limited ("TSTT") has conditionally agreed to dispose of the subsidiaries engaging in the assembly, distribution and integration of telecommunications products which have been operating at a loss for the past few years and is not expected to generate any profit in the near future. To avoid duplication and accumulation of marketing costs by using multiple sales vehicle and further depletion of the Group's resources in telecom manufacturing, the Directors (including the independent non-executive directors) of TSTT consider it is best for the Group to dispose of those loss-making subsidiaries to Mr. Lau See Hoi and concentrate their effort on telecom trading businesses. Gas Turbine Generators During the nine months period, there is no sale of gas turbine generator, even though the Group continued to implement aggressive marketing strategies to promote the sale of gas turbine generators in the telecom, petroleum and other industries. TSTT has conditionally agreed to dispose of this business to Mr. Lau See Hoi. Bio-technology Products During the nine months period, there is tiny sale of biotechnology products, even though the Group made efforts to promote the products in the PRC and North American market. TSTT has conditionally agreed to dispose of this business to Mr. Lau See Hoi. IMPACT ON INFLATION Impact on inflation remains substantially unchanged as disclosed in the annual report for the fiscal year ended March 31, 2006. RISK AND UNCERTAINTIES The Company is subject to the same risk factors and uncertainties as disclosed in the annual report for the fiscal year ended March 31, 2006. OUTSTANDING SHARE DATA As at December 31, 2006, the Company has total issued and outstanding shares of 21,990,005. During the period, no option had been granted or exercised under the Stock Option Plan as at December 31, 2006. The TSX Venture Exchange has neither approved nor disapproved the information contained herein.

For further information:

For further information: Cindy Lau, Director of T S Telecom Ltd., at
(905) 470-2282

Organization Profile

T S TELECOM LTD.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890