T S Telecom Ltd.

T S Telecom Ltd.

March 01, 2005 11:24 ET

T S Telecom Ltd.: December 31, 2004 Third Quarter Financial Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: T S TELECOM LTD.

TSX VENTURE SYMBOL: TOM

MARCH 1, 2005 - 11:24 ET

T S Telecom Ltd.: December 31, 2004 Third Quarter
Financial Results

TOROTNO, ONTARIO--(CCNMatthews - March 1, 2005) - T S Telecom Ltd. (TSX
VENTURE:TOM) (the "Company") and its Subsidiary Companies (collectively
referred to as the "Group") reported a net loss of approximately $1.79
million for the nine months period ended December 31, 2004. As at
December 31, 2004, the Group had approximately $0.33



Financial Highlights

For the nine months ended December 31, 2004 2003
(in thousands of Canadian dollars except loss $ $
per share amounts)

Gross sales 7,833 7,678
Gross profit 2,622 2,290
(Loss) before tax & non-controlling interest (2,843) (3,999)
Net (loss) for the period (1,794) (2,422)
(Loss) per share - basic (0.08) (0.11)


RESULTS OF OPERATIONS

Sales were approximately $7.83 million for the nine months ended
December 31, 2004 compared with sales of approximately $7.68 million for
the same period of last year. The increase in sales was mainly due to
one major contract of Fibersmart products worth approximately $2.97
million (equivalent to RMB 18,600,000), 100% of which were delivered to
customers.

Our gross margin was 33% for the nine months period ended December 31,
2004 as compared to a gross profit margin of 30% for the corresponding
period in 2003 after reclassifying engineering charges of $523,000
(2003: $1,096,000) included in general and administrative expenses as
cost of sales. The increase in gross margin was because the majority of
sales recorded in the period was related to the sales of Fibersmart
products which fetched a higher margin.

The Group posted a net loss of approximately $1.79 million for the nine
months period ended December 31, 2004, which was 26% lower from the net
loss incurred for the same period of last year. The reduction of the net
loss was mainly attributable to the increase in sales and gross margin,
together with the reduction of general and administrative expenses,
research and development expenses, amortization and interest expenses.

During the nine months period, the Group continued to control research
and development expenses and administrative expenses. The research and
development expenses successfully reduced by 92% and administrative
expenses declined by 12%, as compared with the corresponding period of
last year.

CASH FLOW ANALYSIS

As at December 31, 2004, the Group had approximately $0.33 million or
$0.02 per share of cash, compared to $1.10 million or $0.05 per share of
cash as of September 30, 2004 and $2.51 million or $0.11 per share of
cash and pledged bank deposits as of March 31, 2004. The decline in cash
was mainly due to the operating losses incurred during the three months
and nine months periods ended December 31, 2004 and repayment of short
term bank loan of $0.96 million in August 2004.

Cash used in operating activities for the three months and nine months
ended December 31, 2004 were approximately $352,000 and approximately
$435,000, respectively and resulted primarily from the net loss before
non-controlling interest of $1.01 million and $2.85 million as compared
to net loss of $0.58 million and $4.00 million for the corresponding
periods of last year.

Cash used in investing activities for the three months and nine months
ended December 31, 2004 amounted to approximately $70,000 and $166,000
respectively as compared to approximately $101,000 and $131,000 for the
corresponding periods of last year. The cash used was related to the
purchase of capital assets.

Cash used in financing activities for the three months and nine months
ended December 31, 2004 were approximately $nil million and
approximately $619,000 respectively as compared to the cash used of
approximately $1.5 million and approximately $1.3 million for the
corresponding periods of last year. The net cash outflow was primarily
due to the repayment of short-term bank loan of approximately of $0.96
million during the second quarter of 2004.

ANALYSIS OF FINANCIAL CONDITION

Current and long-term accounts receivable decreased from $6.69 million
as of March 31, 2004 to $4.67 million as of December 31, 2004. The
decrease in accounts receivable is due to the management efforts on the
collection of older receivables.

Property and equipment decreased by $0.39 million from $2.61 million at
March 31, 2004 primarily because of the amortization of our office in
Shenzhen, China.

Inventories decreased by $51,000 from approximately $2.18 million at
March 31, 2004 to approximately $2.13 million as of December 31, 2004.
The decrease in inventories was primary related to faster shipment to
our customers during this period.

Accounts payable and accrued liabilities decreased by $0.33 million due
to tighter control on purchasing and engineering related expenditures.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at December 31, 2004, the Group had approximately $0.33 million of
cash. The cash balance declined from $1.10 million at the end of the
previous quarter mainly due to the operating losses, purchase of capital
assets for the quarter and the negative effect of foreign currency
translation adjustment.

As at December 31, 2004, the Group had net current assets of
approximately $104,000. The short-term bank loans at March 31, 2004 of
approximately $0.96 million (which was equivalent to $6.0 million
denominated in Renminbi), which was primarily used to secure a letter of
credit facility to purchase inventory and secured by the Group's real
estate property in Shenzhen, was fully repaid in August 2004.

After the repayment of the short-term bank loans disclosed above, the
Group had no bank financing as at December 31, 2004. The Group financed
its operations and investing activities primarily by operations,
internal resources, balance of proceeds from initial public offering and
proceeds from a share placement exercised in August 2000. The net
current assets of $104,000 along with available unutilized banking
facilities should provide sufficient working capital for the Group's
existing 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, 2004, 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, 2004, there was no change
in the capital structure and issued capital of the Group.

Financial Instruments

As at December 31, 2004, 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, 2004.

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, 2005.

Subsequent Events

No subsequent events occurred after December 31, 2004, which may have a
significant effect, on the assets and liabilities or future operations
of the Group.

BUSINESS REVIEW AND PROSPECTS

Segment Information

Sales from telecommunications products accounts for 97% of the turnover
of the Group for the nine months period ended December 31, 2004. There
were four sales contracts of gas turbine generators completed, all of
which were shipped to our customers during the nine months period.

Telecommunications Products

During this quarter, 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. The Group has been
addressing this challenge by broadening our product base and exploring
opportunities in the international market.

Gas Turbine Generators

The Group hopes sales of gas turbine generators will increase in the
coming months despite minimal revenue growth in the current quarter. The
Group continues to implement aggressive marketing strategies to promote
gas turbine generators in the telecom, petroleum and other industries.

IMPACT ON INFLATION

Impact of inflation remains substantially unchanged as disclosed in the
annual report for the fiscal year ended March 31, 2004.

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, 2004.

OUTSTANDING SHARE DATA

As at December 31, 2004, 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, 2004.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    T S Telecom Ltd.
    Eileen Lam
    Director
    (905) 470-2282
    The TSX Venture Exchange has neither approved nor disapproved the
    information contained herein.