| Fri 12 Oct 2007, 13:52 | | RAC - RACEC Group Limited - Abridged Pre-Listing S |
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RAC
RAC - RACEC Group Limited - Abridged Pre-Listing Statement
RACEC GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1998/006153/06)
Share code: RAC & ISIN: ZAE000105409
("RACEC" or "the group")
ABRIDGED PRE-LISTING STATEMENT
This abridged pre-listing statement is not an invitation to the public to
subscribe for shares in RACEC, but is issued in compliance with the Listings
Requirements of the JSE Limited for information purposes only. The information
in this abridged pre-listing statement has been extracted from a full pre-
listing statement issued by RACEC on 25 September 2007 ("the detailed pre-
listing statement"), which is available as set out in paragraph 8. At the date
of listing the authorised share capital of RACEC comprises 500 000 000 ordinary
shares with a par value of 0.001 cent each, of which 100 000 000 shares will be
in issue after a private placement of 27 500 000 ordinary shares at an issue
price of 100 cents per ordinary share in the share capital of RACEC thereby
raising R27 500 000 million before expenses ("the private placement").
1. Nature of the group`s business and industry
1.1 The group was launched in 1956 under the name of Railway and Civil
Engineering Construction (Pty) Ltd from which the present day name of RACEC
was derived. The group at that time concentrated mainly on construction and
maintenance of railway sidings.
1.2 In 1976 RACEC was purchased by Metkor Ltd and in 1988 a management buyout,
supported by Standard Corporate and Merchant Bank, was successfully
completed.
1.3 The then privately owned company relocated its head office to Cape Town and
the business activities were expanded nationally as well as further
northwards into Africa.
1.4 Although originally purely a plate laying organisation, RACEC ventured into
the field of electrical construction in 1977 as a result of a desire to
provide its clients in the rail sector with a more complete service.
1.5 RACEC now operates throughout South and Southern Africa with permanent
offices in Cape Town, Gauteng, Richards Bay, Witbank, Caledon and George
and has established itself as a respected leader in both these specialised
fields.
1.6 RACEC provides engineering infrastructure solutions in two key focus areas,
Rail and Electrical. The group strives to build long term relationships
with clients. The group does this through its dedicated and committed
staff with superior knowledge and skill levels.
1.7 RACEC Rail concentrates mainly on the construction and maintenance of
railway tracks throughout South and Southern Africa. Its activities include
track design, survey, construction and maintenance as well as the
refurbishment and merchandising of railway materials.
1.8 RACEC Rail is a leader in its field and has the capability of providing its
clients turnkey project solutions as well as specialising in:
1.8.1 construction, maintenance and upgrading of railway track systems;
1.8.2 gantry, stacker reclaimer and ship loader trackwork;
1.8.3 customised trolley tracks;
1.8.4 thermite and arc butt welding of rails;
1.8.5 crane tracks for the building industry;
1.8.6 railway siding design;
1.8.7 railway material refurbishment and sales;
1.8.8 trackwork encased in concrete;
1.8.9 track related civil and ancillary works;
1.8.10 management of industrial rail networks; and
1.8.11 manufacture of precast concrete items for Spoornet.
1.9 RACEC Electrification came about in 1977 as a result of the group`s desire
to complement its then main activity of rail track construction with the
electrification of rail track. From this beginning RACEC Electrification
has grown into an integral part of the group focusing on electrical
reticulation. These electrical reticulation projects include the
installation of medium and low voltage electrical networks from the intake
substations through to the industrial, commercial or residential consumer
supply.
1.10 RACEC Electrification has the technical skill and experience capable of
undertaking projects from design stage through to commissioning related to:
1.10.1 electrical reticulation;
1.10.2 electrical metering and vending;
1.10.3 electrical distribution;
1.10.4 electrical substations;
1.10.5 overhead transmission lines;
1.10.6 road and area lighting;
1.10.7 rail track electrification;
1.10.8 maintenance of electrical networks; and
1.10.9 maintenance of rail track electrification systems.
1.11 RACEC recently acquired the business and assets of JMB Electrical
Contractors, effective 1 June 2007, which will be incorporated into RACEC
Electrification. JMB Electrical Contractors is a well established
electrical reticulation contracting business, founded in 1972 and consists
of two operating companies, Baden Tec and Baden Tec Plant Hire. JMB
Electrical Contractors has been a competitor of RACEC for many years,
specialising in overhead reticulation with a dominant position in the
Overberg and South Cape regions. The acquisition of JMB Electrical
Contractors will have a significant effect on RACEC`s future earnings as it
will increase the volume of business, particularly in areas where RACEC is
not currently active.
2 prospects
2.1 A number of government initiatives, including the 2010 soccer world cup,
low cost housing and an increase in electricity demand should result in an
increased demand for the services offered by RACEC. Government has
announced a budgeted infrastructure spend of approximately R370 billion
over the next five years.
2.2 In addition, there has been very little spending on the electrification of
railways systems over the last few years. However, Spoornet has recently
committed to increased spending on their railway networks. This, together
with government`s infrastructure spend, is regarded as a growth area in
which RACEC is ideally positioned to benefit.
2.3 Current projects, which indicate Government`s commitment to upgrading
the ralway infrastructure include:
2.3.1 Spoornet`s commitment to the upgrading of infrastructure and traction
power as a result of spending by the Richard`s Bay terminal in
expanding throughput from 72 million tons to 91 million tons by 2009.
2.3.2 Rail connections to the new Ngqura port under construction at Coega,
25 km north of Port Elizabeth, jointly the responsibility of the
National Ports Authority (NPA), South African Ports Authority and
Spoornet, which is expected to be complete by the end of 2008.
2.3.3 Continuation of work on reviving the 282 km long disused line from
Amabele junction to Mthatha.
2.3.4 Planned R450 million spend on the new non-stop link between Cape Town
city centre and Cape Town International Airport.
2.3.5 The Western Cape government`s commitment to spend more than R1 billion
on improving the province`s rail infrastructure, with a plan for an
express train to service commuters travelling from Khayelitsha. The
province is proposing an improved rail service along three corridors;
Cape Town to Simon`s Town, Cape Town to Bellville and Cape Town to
Khayelitsha.
2.4 RACEC is currently involved in a number of projects involved in upgrading
Spoornet`s infrastructure, including the supply and installation of
universal concrete sleepers, the loop extension project on the iron ore
Saldanha Sishen line and the phase five project in respect of Richards Bay
Coal terminal. In addition to the above, RACEC has tendered for and is
awaiting the result or is in the process of finalising its tender on a
number of rail projects, including work in respect of the Amabele junction
and improvement of rail infrastructure from Khayelitsha. Other potential
work which is still in the feasibility stage, such as the link between the
Cape Town city centre and Cape Town International Airport, will be
considered when the tender process opens.
2.5 Further to Spoornet`s commitment, Eskom is committed to the upgrading and
construction of rail infrastructure for the Majuba power station in
Mpumalanga, which will result in laying a total of in excess of 60 km of
further track.
2.6 South Africa is currently experiencing capacity constraints in the
engineering sector. This allows highly specialised and empowered companies
such as RACEC, with an experienced management team and highly skilled staff
complement, to focus on high quality projects with better margin levels.
2.7 RACEC`s principal clients are government departments, parastatals, local
governments and large corporates involved in various development projects.
The Group is currently involved in a number of projects, including the
Leeuwpan coal mine project (ExXaro Coal (Pty) Limited), St Francis Links
Golf Estate, Val de Vie Lifestyle and Country Estate, Pearl Valley Golf
Estate, Pezuala Golf Estate, Arabella and Simola Golf Estates, Hartland
Properties, Century City, Sheffield Business Park and will soon be starting
on projects such as Atlantic Shores and Atlantic Sands (Laaiplek).
2.8 Amongst others, RACEC is also currently well advanced in negotiations for
their involvement in two large business parks in the Western Cape
(electrical value of approximately R40 million), a new Western Cape golf
estate (electrical value of approximately R50 million) and a new Golf
Estate expansion in the Overberg (electrical value of approximately R45
million), all of which are planned for commencement within the next 12
months.
3 summary of historical and forecast income statement
3.1 Set out below is an extract from the historic income statements of RACEC
for the financial year ended 30 September 2006 and the six months ended 31
March 2007, as well as the forecast income statements for the financial
years ending 30 September 2007, 2008 and 2009, the preparation of which is
the responsibility of the directors. The results must be read in
conjunction with the independent reporting accountant`s report thereon
reproduced in Annexure 2 and Annexure 8 of the detailed pre-listing
statement.
RACEC RACEC RACEC RACEC
Audited Audited Forecast Forecast
12 months 6 months 12 months 12 months
R`000 30 September 31 March 30 September 30 September
2006 2007 2007 2008
REVENUE 157 797 89 535 211 915 326 018
Gross profit 25 701 15 233 33 703 49 617
Other income 754 363 4 353 -
Operating (19 597) (10 981) (20 860) (26 053)
expenses
EBITDA 6 859 4 615 17 196 23 564
Depreciation (1 263) (1 254) (3 279) (2 498)
Profit before 5 597 3 361 13 917 21 066
interest and
taxation
Net interest (130) 604 1 219 1 453
received / (paid)
Profit before 5 467 3 965 15 136 22 519
taxation
Taxation (2 267) (1 320) (3 513) (6 608)
Profit after 3 200 2 645 11 623 15 911
taxation
Illustrative 100 000 000 100 000 000 100 000 000 100 000 000
shares in issue
Earnings per 3.2 2.7 11.6 15.9
share (cents)
Headline earnings 3.6 2.7 7.9
per share (cents) 15.9
Dividend per 4.4 0.9 3.9 5.0
share (cents)
Notes
1 Set out above are the actual income statements for the 12 months ended 30
September 2006, the six months ended 31 March 2007, as well as the forecast
income statements for the three years ending 30 September 2007, 2008 and
2009. The RACEC employee share trust has been consolidated in terms of SIC
12 in the above results.
2. The forecast income statements for the period ending 30 September 2007
includes actual trading for the six months ended 31 March 2007.
3. Revenue comprises the fair value of the consideration for products and
services rendered, net of discounts and rebates to customers, excluding
value added taxes.
4. Included in the RACEC forecast for the 12 months ending 30 September 2007
is the financial impact of the acquisition of JMB Electrical Contractors,
including:
- a forecast gross revenue of R20.9 million and net profit before tax of R1.2
million for the four months ending 30 September 2007; and
- the excess of the net assets acquired over the purchase consideration paid,
amounting to R3.8 million, which has been included in other income
totalling R4.353 million.
5. The results in the above table have been calculated based on the shares
that will be in issue after the private placement.
6. The report on the audited historic financial information for the year ended
30 September 2006 and the 6 months ended 31 March 2007 is set out in
Annexure 1 of the detailed pre-listing statement. Historically 1000 shares
were in issue and the earnings per share was R2 645 (R3 200 for 30
September 2006) and the headline earnings per share was R2 696 (R3 562 for
30 September 2006) for the 6 month period ended 31 March 2007,
respectively.
4 purpose of the private placement and listing
4.1 The purpose of the private placement is to:
4.1.1 enhance investor and general public awareness of RACEC;
4.1.2 allow the group to grow its market share through the funding of
organic growth and acquisitions;
4.1.3 allow the funding of working requirements of the existing business;
and
4.1.4 create value for current and future shareholders.
5. Directors, company secretary and registered office
5.1 The full names, ages, business address and occupations of the directors of
RACEC are outlined below:
Full name Age Occupation Business Address
Michael John Uys 61 Non executive 8 Hawkins Avenue
chairman Epping 1
Cape Town, 7460
Colin Rodney Spry 63 Non executive 8 Hawkins Avenue
Gooden director Epping 1
Cape Town, 7460
Charles John Harrod 60 CEO 8 Hawkins Avenue
Epping 1
Cape Town, 7460
Gillian Jacqueline 39 Financial 8 Hawkins Avenue
Kleinschmidt director Epping 1
Cape Town, 7460
Gary Lee Harrod 36 Executive 8 Hawkins Avenue
director Epping 1
Cape Town, 7460
Winston Ollewagon 34 Executive 8 Hawkins Avenue
director Epping 1
Cape Town, 7460
Sean Charles Wilkins 35 Executive 8 Hawkins Avenue
director Epping 1
Cape Town, 7460
5.2 All directors are South African citizens.
5.3 The company secretary and registered office are:
Mrs GJ Kleinschmidt CA (SA)
8 Hawkins Avenue
Epping 1
Cape Town, 7460
(P O Box 61, Eppindust, 7475)
Telephone: (021) 531 7540
Facsimile: (021) 531 8488
6 details of the placement
RACEC placed 27 500 000 shares at 100 cents per share by way of a private
placement raising R27 500 000.
Subscriptions in excess of R500 million were received.
The 27 500 000 shares have been allocated to strategic institutional
shareholders and more than 500 individuals.
7 Listing on the jse
Subject to the confirmation of the required spread of public shareholders
in terms of the Listings Requirements being obtained pursuant to the
private placement, the JSE has approved the listing of 100 000 000 shares
on Altx with effect from the commencement of business on Thursday, 18
October 2007 in the Heavy Construction Sector FTSE 2357. The shares will
trade under the abbreviated name "RACEC" and the JSE code "RAC" and ISIN
ZAE000105409
8 copies of the pre-listing statement
8.1 Copies of this pre-listing statement, in English, may be obtained during
business hours from 09:00 on Monday, 1 October until 12:00 on Tuesday, 16
October 2007 from the registered office of RACEC and the offices of BDO
QuestCo (Pty) Ltd and the transfer secretaries, details of which are set
out below:
8.1.1 the registered office of RACEC - 8 Hawkins Avenue, Epping 1,Cape Town,
7460;
8.1.2 the offices of BDO QuestCo (Pty) Ltd - 13 Wellington Road Parktown,
2193; and
8.1.3 the offices of Computershare Investor Services 2004 (Pty) Limited -
Ground Floor, 70 Marshall Street, Johannesburg, 2001.
8.2 An electronic copy of the pre-listing statement can be obtained by sending
a request to shares@racec.co.za
Cape Town
12 October 2007
Designated Adviser Attorneys
BDO Questco.(Pty)Ltd C&A Friedlander Attorneys
Date: 12/10/2007 13:52:02 Produced by the JSE SENS Department.
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