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PSV
PSV
PSV - PSV Holdings - Unaudited Results For The Interim Period Ended
31 August 2007
PSV Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/004365/06)
JSE Share code: PSV
ISIN Code: ZAE000078705
("PSV" or "the Group")
UNAUDITED RESULTS FOR THE INTERIM PERIOD ENDED 31 AUGUST 2007
- REVENUE UP 56,48%
- AFTER-TAX PROFIT UP 20,85% (adjusted for non cash flow IFRS 2 charges)
- HEPS UP 17,9% (adjusted for non cash flow IFRS 2 charges)
- TANGIBLE NET ASSET VALUE PER SHARE UP 19,3%
- 27,3% BLACK EMPOWERMENT
- OVER R400 million IN NEW CONTRACTS
INCOME STATEMENTS
Unaudited Reviewed Audited
31 Aug `07 31 Aug `06 28 Feb `07
R`000 R`000 R`000
Continuing operations
Revenue 119 904 76 628 151 024
Gross profit 35 471 28 021 59 473
Operating expenses (19 555) (12 348) (36 997)
Earnings before interest tax 16 991 14 964 22 476
depreciation and
amortisation and IFRS 2
charge
Depreciation/Amortisation of 1 873 2 733 2 278
intangibles
IFRS 2 - BEE cost 1 513
Earnings before interest and 13 605 12 231 20 198
tax
Net interest paid 297 364 1 047
Profit before taxation 13 308 11 866 19 151
Taxation 4 087 3 654 5 474
Profit after tax for the 9 221 8 212 13 677
period from continuing
operations
Discontinued operations
Profit after tax from 670 487
discontinued operations
Profit for the period 9 221 8 882 14 164
Calculation of headline
earnings
Profit for the period 9 221 8 882 14 164
Profit on disposal of fixed 20 176
assets
Headline earnings 9 201 8 882 13 988
Basic earnings per share 4,27 4,21 7,56
(cents)
Diluted earnings per share 4,17 4,21 7,09
(cents)
Headline earnings per share
Headline earnings per share 4,26 4,21 7,47
(cents)
Diluted headline earnings 4,16 4,21 7,00
per share - (cents)
Weighted average number of 215 951 211 108 187 263
shares (`000)
Diluted average number of 220 994 211 108 199 763
shares (`000)
CASH FLOW STATEMENTS
Unaudited Reviewed Audited
31 Aug `07 31 Aug `06 28 Feb `07
R`000 R`000 R`000
Cash flow from operating (11 705) 3 869 5 001
activities
Cash flow from investing (14 228) (29 874) (29 434)
activities
Cash flow from financing 26 250 35 371 32 478
activities
Net movement in cash and 317 9 366 8 045
cash equivalents
Cash and cash equivalents at 8 083 38 38
beginning of year
Cash and cash equivalents at 8 400 9 404 8 083
end of period
BALANCE SHEETS
Unaudited Reviewed Audited
31 Aug `07 31 Aug `06 28 Feb `07
R`000 R`000 R`000
ASSETS
Non-current assets 144 790 160 504 133 691
Property, plant and equipment 19 804 12 645 6 910
Trade investments 21
Loans receivable 2 624 1 561 3 868
Deferred tax assets 7 339 6 078 5 649
Intangibles 19 860 29 699 20 273
Goodwill 95 141 110 522 96 991
Current assets 104 968 105 353 79 646
Inventories 40 519 37 823 32 271
Trade and other receivables 52 493 52 169 38 766
Cash and cash equivalents 11 956 15 361 8 609
Total assets 249 758 265 857 213 337
EQUITY AND LIABILITIES
Equity 179 326 184 481 152 674
Non-current liabilities 18 137 17 121 8 939
Borrowings 12 343 8 465 3 543
Deferred tax liabilities 5 793 8 657 5 396
Current liabilities 52 295 64 254 51 724
Trade and other payables 42 135 46 908 46 006
Taxation payable 6 604 11 390 5 192
Bank overdrafts 3 556 5 957 526
Total equity and liabilities 249 758 265 857 213 337
NAV/share 83,04 88,36 76,62
TNAV/share 29,79 21,20 17,77
SEGMENTAL REPORT
Pumps, Engineering,
spares and linings and Petro-
valves industrial chemical
supplies
Revenue 43 782 25 099 51 023
Gross profit 18 583 6 599 10 289
Operating expenses 6 232 3 240 7 016
Profit before tax 12 245 3 653 2 732
Depreciation/Amortisation 638 226 400
Capital expenditure 995 614 394
Gross assets** 53 075 16 527 39 283
Gross liabilities** 20 950 10 030 21 019
*Includes R1,5 million IFRS 2 BEE cost.
**Excludes deferred tax.
SEGMENTAL REPORT (continued)
Central
costs Total
Revenue - 119 904
Gross profit - 35 471
Operating expenses 4 580* 21 068
Profit before tax (5 322) 13 308
Depreciation/Amortisation 608 1 873
Capital expenditure 12 328 14 331
Gross assets** 18 532 127 417
Gross liabilities** 12 639 64 638
*Includes R1,5 million IFRS 2 BEE cost.
**Excludes deferred tax.
STATEMENT OF CHANGES IN EQUITY
Share based Foreign
currency
Stated capital payment reserve translation
reserve
Balance at 28 236 178 (440)
February 2007
Issue of share 1 200 -
capital to
vendors
Settlement of (1 200) -
deferred equity
consideration
Issue of share 17 250 -
capital for
cash
Share issue (21) -
expenses
Profit for the - -
year
Foreign - (288)
currency
translation
reserve - PSV
Zambia
IFRS 2 BEE cost 1 513 -
Share issue (1 024) -
expenses
Balance at 31 252 383 1 513 (728)
August 2007
STATEMENT OF CHANGES IN EQUITY (continued)
Accumulated
loss Total
Balance at 28 February 2007 (83 063) 152 674
Issue of share capital to vendors - 1 200
Settlement of deferred equity - (1 200)
consideration
Issue of share capital for cash - 17 250
Share issue expenses - (21)
Profit for the year 9 221 9 221
Foreign currency translation reserve - - (288)
PSV Zambia
IFRS 2 BEE cost - 1 513
Share issue expenses - (1 024)
Balance at 31 August 2007 (73 843) 179 326
COMMENTARY
NATURE OF THE BUSINESS
PSV is an industrial engineering holding company currently comprising three
operating business segments:
- Pumps, spares and valves;
- Engineering linings and general industrial supplies; and
- Petrochemical.
ACCOUNTING POLICIES
This set of financial results have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and the presentation and
the disclosure requirements of IAS 34 - Interim Financial Reporting and are in
compliance with the listing requirements of the JSE Limited.
The accounting policies followed are consistent with those used in the annual
financial statements for the year ended 28 February 2007. The unaudited interim
results as at 31 August 2006 have been restated to reflect the disposal of the
Colvic group of companies.
Earnings per share was calculated in accordance with IAS 33: Earnings Per Share
and IFRS 3: Business Combinations. Headline earnings per share ("HEPS") was
calculated in accordance with Circular 8/2007, issued by SAICA. The ordinary
shares in issue were weighted in the calculation for the effect of the issue of
shares to the vendor of Group Line Projects (Pty) Limited ("Group Line") and the
issue of shares to the black economic empowerment ("BEE") partners.
FINANCIAL REVIEW
The business of PSV grew revenue organically by 57% compared to the same period
last year. The substantial growth in the business was facilitated by a major
investment in inventories and debtors. In addition, it was decided to sacrifice
cash flow in favour of margin by taking advantage of discounts offered by
suppliers, contributing to the increased profitability of the Group.
The Group`s HEPS remained virtually unchanged at 4,26 cps (August 2006: 4,21
cps), being impacted by the introduction of our BEE partners, namely, Vunani
Capital Holdings (Pty) Limited ("Vunani") and Mapi Investments (Pty) Limited
("Mapi") as additional shares were issued and a R1,5 million IFRS 2 cost was
provided for in the income statement. The Group`s adjusted HEPS after adding
back the IFRS 2 cost is 4.96cps, 17,9% up compared to the August 2006 HEPS.
The Group achieved an acceptable 21, 96% (August 2006: 26, 82%) working capital
ratio and focused on improving stock and credit management.
The comparable period of August 2006 reflects the assets and liabilities of the
Colvic companies which were disposed of in November 2006. Consequently,
comparison to the August 2006 balance sheet is not meaningful and as a result,
balance sheet movements in this section will be compared against the final
results as at 28 February 2007. In this light the Group`s balance sheet
strengthened as the net asset value per share increased to 83,04 cps (February
2007: 76,62 cps). The current ratio improved to a healthy 2:1 compared to 1, 5:1
as at the end of February 2007. The Group`s debt: equity ratio increased to 24,
72% (February 2007: 11,49%) mainly attributable to the acquisition of a new head
office building and additional infrastructural capex to underpin the substantial
organic growth enjoyed in the first six months.
Overall profitability for PSV was however maintained due to infrastructural
overheads remaining the same percentage of revenue as the previous financial
year despite the increased organic growth. As a result, operating margins
(before the IFRS 2 BEE cost) remained at 12,36% (February 2007: 12,68%) in line
with forecasts. Management is confident that margins will be maintained at this
level into the future.
OPERATIONAL REVIEW
Trading in the six months under review are the best ever experienced since the
inception of PSV 19 years ago. PSV also celebrated a relationship spanning 19
years of spares supply to the Group`s very first customer, Royal Swazi Sugar
Corporation in Swaziland.
The successful completion of our two BEE transactions favourably positions the
Group to compete aggressively for tenders within the mining and parastatal
sectors in South Africa.
The Group successfully completed a large petrol dispenser supply contract for
Zimbabwe and aggressive tendering on projects has secured various contracts for
lining solutions, pumps and dispensers exceeding R400 million over the next five
years.
PSV and three of its subsidiaries have relocated into a new office and workshop
facilities based in Greenhill Industrial Estate, Germiston, adding further to
cost-saving initiatives.
PROSPECTS
All segments within the business have positive pipelines and contracts in place
for at least the next six months and the foreseeable future with contract
extensions and enhanced and diversified applications of certain products being
implemented.
Integration of all PSV subsidiary businesses has been undertaken and results of
this integration process are clearly visible. PSV plans to tender for additional
mining supply contracts in South Africa now that the company is empowered.
Pumps, spares and valves This business segment enjoyed a successful six months
with contracts being extended for an additional five years securing significant
annuity income for the Group. Our valve manufacturing output has doubled and
increased stock levels will facilitate accelerated delivery capabilities.
Engineering, linings and general industrial supplies With high margin glass
lining contracts nearing completion at Komati Camden and Grootvlei, Group Line
has actively diversified its product offering and customer base into plastic and
ceramic linings to ensure continued growth and profitability.
Omnirapid Mining and Industrial Supplies (Pty) Limited continues to exceed all
expectations. The company achieved its annual budget in the first six months and
is well positioned to sustain this growth in the next six months.
Petrochemical The decision to retain Petro-Logic (Pty) Limited ("Petro-Logic`")
when the Colvic group was unbundled has been vindicated as the company achieved
record levels of turnover and profitability. Petro-Logic has already exceeded
last year`s profit and is on track to overperform against 2008`s forecast. We
successfully negotiated a three year extension on service contracts, and
continue to supply new dispensers in South Africa and into Africa.
The repair facility is starting to contribute to Petro-Logic`s turnover and
profit and expansion of this facility is already being considered. With
increased dispenser installations, our services and turnaround time continue to
improve and benefit the bottom line.
BLACK EMPOWERMENT
During the period, PSV successfully concluded BEE participation with Vunani and
Mapi who subscribed for shares in PSV, taking PSV to an effective 27,3%
empowerment status as at 31 August 2007. It is anticipated that the BEE
transactions will positively enhance the Group`s future profitability.
CORPORATE GOVERNANCE
The Group subscribes to and is in the process of implementing where applicable,
the principal recommendations of the King II Code of Corporate Governance.
DIRECTORATE
The Directorate of the Group has changed as follows:
JH Anderson appointed as a non-executive director with effect from 7 May 2007;
JH Mateya resigned as chairperson with effect from 2 August 2007; E Chimombe-
Munyoro was appointed as a non-executive chairperson with effect from 2 August
2007; E Dube was appointed as alternate director to E Chimombe-Munyoro with
effect from 2 August 2007. LDS Thobejane appointed as a non-executive director
with effect from 1 September 2007. The Board wishes to thank the out-going
director for his support and contribution and looks forward to working together
with new directors for the future success of PSV.
DIVIDENDS
The Group will continue to retain and utilise cash generated to fund working
capital requirements and potential acquisitions. The Board will review the
dividend policy annually. No dividend has been declared for the period under
review.
For and on behalf of the Board
AR Dreisenstock Johannesburg
Financial Director 24 October 2007
DIRECTORS: Executive Directors: P Robinson* (Deputy Chairman)
AJD Da Silva (Chief Executive Officer) AR Dreisenstock (Financial Director)
D Kelly*
Non-Executive Directors: E Chimombe-Munyoro (Non-Executive Chairperson) JH
Anderson* E Dube (Alternate) GJV Shongwe
LDS Thobejane *British
Company Secretary: Premium Corporate Consulting Services (Pty) Limited
(Registration number 2003/009512/07)
Registered office: Unit 419, Sam Green Road, Greenhills Industrial Estate,
Tunney Ext 6, Germiston PO Box 1078, Jukskei Park, 2153 Tel: (011) 0860
778 778 Fax: (011) 0860 329 778
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg, South Africa, 2001 PO Box 61051, Marshalltown,
South Africa, 2107
www.psvholdings.com
Date: 24/10/2007 07:26:46 Produced by the JSE SENS Department.
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