Ja well, no fine
TOTAL CLIENT SERVICES (TCS), the administrative software specialist, was trading at 38c on the AltX this time last year when speculators seemed quite enamoured with its traffic fine processing systems. Last week TCS was bobbing unconvincingly around the 7c to 10c/share level.
Looking at the company’s year endFebruary 2009 results, you might be forgiven for thinking the market is overly sceptical of TCS. While turnover was down 12% to R100m, the drop in operating profits was restricted to just 4% to R13m. Headline earnings came in at a somewhat underwhelming 1,21c/share, but TCS could at least claim strong net cash inflows of R13m. In fact, its bank balance of R16m provides the major underpin to its 6c/share net asset value.
But there’s gearing. The company’s balance sheet is so abridged it’s difficult to see the exact nature of the debt from the results to end-February 2009. Non-current interest-bearing liabilities stand at R27m, with another R24m listed under current liabilities. While the annual report should cast more light on those numbers, its interest bill of R4,5m suggests a fair portion of borrowings.
While that R4,5m may not sound too terrible measured against operating profits of R13m, remember TCS will in the near future have to service its debt without the reassuring cash flows from its large Cape Town traffic administration contract (recently lost to HCI subsidiary, Syntell).
That means a fair chunk of its future prospects hinge on TCS quickly securing new tenders from other municipalities and capitalising on the Administration Adjudication of Road Traffic Offences (AARTO) project – which is expected to be implemented at least next year.
There’s some promise. TCS – as part of an international consortium led by Inter Toll SA – has been short-listed in the Gauteng Open Road Tolling tender and has a cooperation agreement with GijimaAst.