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PSV
PSV
PSV - PSV Holdings Limited - Reviewed abridged results for the year ended 29
February 2008
PSV Holdings Limited
(Registration number 1998/004365/06)
JSE code: PSV & ISIN: ZAE000078705
("PSV" or "the Group")
Reviewed Abridged Results for the year ended 29 February 2008
Revenue up 97,7%
Profit after tax up 101,0%
Basic earnings per share up 88,0%
Cash conversion ratio at 70,2%
Tangible net asset value per share up 54,5%
Income statement
for the year ended 29 February 2008
R`000 2008 2007
Revenue 298 618 151 024
Cost of sales 224 995 91 551
Gross profit 73 623 59 473
Operating expenses 30 977 39 275
Operating profit 42 646 20 198
Financial income 1 022 1 575
Financial expenses 6 862 2 622
Profit before taxation 36 806 19 151
Taxation 8 329 5 474
Profit for the year from continuing operations 28 477 13 677
Profit after tax from discontinued operations 487
Profit for the year attributable to ordinary 28 477 14 164
shareholders
Reconciliation of headline earnings
Profit for the year attributable to ordinary 28 477 14 164
shareholders
Gains on business combinations (12 501) -
Profit on sale of property, plant and - (176)
equipment
Headline earnings 15 976 13 988
14,2 7,6
Basic earnings per share (cents)
Headline earnings per share (cents) 8,0 7,5
Core earnings per share 11,3 9,5
Diluted earnings per share (cents) 14,0 7,1
Diluted headline earnings per share (cents) 7,9 7,0
Continuing operations
Basic earnings per share (cents) 14,2 7,3
Diluted headline earnings per share (cents) 8,0 6,8
Cash flow statement for the year ended 29 February 2008
R`000 2008 2007
Cash flows from operations 10 317 5 001
Cash flows from investing activities (39 772) (29 434)
Cash flows from financing activities 34 360 32 478
Increase in cash and cash equivalents 4 905 8 045
Cash at acquisition of subsidiary 12 883 -
Cash and cash equivalents at beginning of the 8083 38
year
Cash and cash equivalents at end of the year 25 871 8 083
Balance sheet as at 29 February 2008
R`000 2008 2007
ASSETS
Non-current assets 192 583 133 692
Property, plant and equipment 50 281 6 910
Intangible assets 23 614 20 273
Goodwill 111 817 96 991
Deferred taxation assets 6 564 5 649
Loans receivable 307 3 869
Current assets 165 882 79 646
Inventories 48 004 32 271
Trade and other receivables 77 437 38 766
Current portion of long-term assets 3 733
Cash and cash equivalents 36 708 8 609
Total assets 358 465 213 338
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 202 457 152 675
Stated capital 252 475 236 178
Deferred equity consideration 2 254
Share-based payment reserve 1 513
Accumulated loss (54 645) (83 063)
Foreign currency translation reserve 859 (440)
Non-current liabilities 34 005 8 939
Borrowings 13 862 1 634
Purchase consideration payable 13 363 1 909
Deferred tax liabilities 6 780 5 396
Current liabilities 122 003 51 724
Trade and other payables 72 215 33 896
Current portion of long-term liabilities 31 698 12 110
Taxation payable 7 253 5 192
Bank overdrafts 10 837 526
Total equity and liabilities 358 465 213 338
Net asset value per share (cents) 91.5 82.9
Net tangible asset value per share (cents) 30.3 19.6
Segmental analysis for the year ended 29 February 2008
Engineering
linings
Pumps, and
spares general
and industrial Petro- Shared
R`000 valves supplies chemical services Total
Revenue 93 117 90 699 114 802 298 618
Gross Profit 34 261 20 614 18 749 73 623
Operating 10 922 8 285 12 119 9 439 40 766
expenses
Profit before 20 687 11 266 5 059 (205) 36 806
tax
Depreciation/ 1 634 666 729 4 933 7 962
amortisation
Capital 13 119 922 992 22 055 37 088
expenditure
Gross assets* 86 859 66 269 50 788 147 986 351 902
Gross 48 703 30 880 31 501 38 146 149 228
liabilities*
*Excludes deferred tax.
Statement of changes in equity
Share Share Non- Share-
capital premium distri- based
butable payment
reserves reserve
R`000
Balance at 28 February 2006 2 231 93 912 - -
Conversion of share (2 231) (93 912) - -
capital/premium to stated
capital
Issue of share to vendors - - - -
Issue of share to Colvic - - - -
vendors
Issue of shares for cash - - - -
Buy back of company shares - - - -
Share issue expenses - - - -
Forfeiture of shares issued - - - -
to vendors
Cancellation shares issued - - - -
to Colvic vendors
Net profit for the year - - - -
Foreign translation reserve - - - -
- PSV Zambia
Balance at 28 February 2007 - - - -
Issue of share to Vunani - - - -
Issue of share to Mapi - - - -
Issue of share to Dasher - - - -
vendors
Odd lot shares issued - - - -
Share issue costs - - - -
Odd lot share issue costs - - - -
Net profit for the year - - - -
Share-based payment reserve - - - 1 513
- Vunani
Deferred equity - - - 2 254 -
Engineered Lining vendor
Opening retained income - - - -
adjustment -PSV Zambia
Foreign translation reserve - - - -
- PSV Zambia
Balance at 29 February 2008 2 254 1 513
Statement of changes in equity(continued)
Revalua- Accumu- Stated Total
tion lated capital
reserve loss
R`000
Balance at 28 February 2006 - (97 227) - (1 084)
Conversion of share - - 96 143 -
capital/premium to stated
capital
Issue of share to vendors - - 120 219 120 219
Issue of share to Colvic - - 18 345 18 345
vendors
Issue of shares for cash - - 43 950 43 950
Buy back of company shares - - (2 982) (2 982)
Share issue expenses - - (3 447) (3 447)
Forfeiture of shares issued - - (17 219) (17 219)
to vendors
Cancellation shares issued - - (18 833) (18 833)
to Colvic vendors
Net profit for the year - 14 164 - 14 164
Foreign translation reserve (440) - - (440)
- PSV Zambia
Balance at 28 February 2007 (440) (83 063) 236 178 152 674
Issue of share to Vunani - - 14 250 14 250
Issue of share to Mapi - - 3 000 3 000
Issue of share to Dasher - - 270 270
vendors
Odd lot shares issued - - 19 19
Share issue costs - - (1 160) (1 160)
Odd lot share issue costs - - (81) (81)
Net profit for the year - 28 477 - 28 477
Share-based payment reserve - - - 1 513
- Vunani
Deferred equity - Engineered - - - 2 254
Lining vendor
Opening retained income - (58) - (58)
adjustment -PSV Zambia
Foreign translation reserve 1 299 - - 1 299
- PSV Zambia
Balance at 29 February 2008 859 (54 645) 252 475 202 457
Commentary
Nature of business:
PSV Holdings Limited ("the Group") is an industrial engineering company
including pumps, valves, engineering linings, industrial supplies and fuel pumps
and dispensers.
Business review:
The Group recorded impressive revenue growth of 97% over the previous year
comprising 62% organic growth and 38% through acquisition. Through effective
margin management, the Group achieved an operating margin of 14,3% (2007 -
13,4%) and a 101,0% increase in its profit after tax to R28,477 million (2007 -
R14,164 million).
The Groups` core earnings (defined as the profit after tax after excluding all
IFRS 2 - share based payments and IFRS 3 (revised) - Business Combinations
adjustments) amounted to R22,615 million (2007 - R17,812 million). Core earnings
per share increased to 11,3 cents per share (2007 - 9,5 cents per share) an
18,8% increase.
The Group`s substantial organic growth was achieved through a major investment
in capital equipment and working capital. We are pleased to announce that during
the year, the Group generated R20,923 million from operating activities (2007 -
R13,719 million). The conversion ratio of cash generated from operating
activities to operating profit amounted to 70,2%.
During the year under review, the Group acquired three new businesses:
Engineered Linings (Pty) Limited ("EL"), a geosynthetic lining company catering
to a broad spectrum of industries.
The company operates primarily in Africa and was acquired for a fair valued cost
of R41,4 million.
Dasher (Pty) Limited ("DAS"), a pump and valve manufacturer, was acquired for
R624 000 and APE Pumps (Pty) Limited ("APE"), an OEM pump manufacturer
established in 1952 and which operates worldwide was acquired for R348 000.
These companies are in the process of being successfully integrated into the
Group`s portfolio and have already significantly increased the Group`s market
share and influence in the relevant sectors they operate in.
The Group also concluded two Black Economic Empowerment ("BEE") transactions
with Vunani Capital (Pty) Limited ("Vunani") and the Mapi Investment Group
("Mapi") respectively, who collectively owned 27,2% of the Group`s total share
capital at year-end. Both companies enjoy Board representation and have
constructively influenced the Group`s strategic and operational objectives.
The Group also acquired and moved into a new head office based in Tunney
Germiston. Several of the Group`s subsidiaries have also moved into the
building, resulting in a reduction of costs and improved logistics.
Financial review:
Non-cash flow adjustments arising in terms of IFRS 2 and IFRS 3 (revised) have
had a significant impact on the figures presented for the year ended February
2008. They comprise gains made on the acquisition of business combinations,
share-based expenses arising from the BEE transactions concluded in August 2007,
the amortisation of specific intangibles created in performing the at
acquisition purchase price allocation and deferred interest expense arising on
the unwinding of discounts on the deferred purchase considerations.
The apparent moderate increase in headline earnings per share from 7,5 cents to
8,0 cents is the direct result of these non-cash flow adjustments and is not
reflective of the operating performance of the Group. In order to give a true
reflection of how the Group actually performed, non-cash flow adjustments have
been eliminated from headline earnings in calculating core earnings per share.
The change in core earnings per share has been disclosed above.
The increase in goodwill and intangible assets is attributable to the
acquisitions concluded during the course of the year. The goodwill balance at
year-end is thus primarily attributable to the goodwill arising on reverse
listing the Group into the Elexir Technology Holdings Limited shell. Of the
total goodwill figure of R111,817 million, R83,807 million arose on the reverse
listing.
The major capital investment in buildings and plant and equipment amounting to
some R40 million, underpinned the Group`s substantial organic growth. The
capital expenditure was primarily funded with medium and long term borrowings.
Included in current liabilities, is the current portion owing to vendors of
acquisitions made during the year amounting to R26,017 million. Due to volatile
financial markets experienced in the first few months of 2008, the Board of
Directors decided to conclude short term vendor financing arrangements until
such time as markets begin to stabilise.
These arrangements bear interest at market rates typical of transactions of this
nature and are expected to be extinguished before August 2008 via a combination
of issues of shares for cash and medium term funding.
A significant financial imperative in 2008 was to improve the Group`s working
capital management. Whilst there is still scope for improvement in this area,
substantial progress was made and the Group`s cash cycle reduced from 79 days in
2007 to 55 days in 2008. This resulted in an increase in net cash in the bank
from R8,083 million in 2007 to R25,871 million in 2008.
The Group`s balance sheet strengthened considerably in 2008. The net asset value
per share increased to 30,3 cents per share (2007 - 19,6 cents per share), a
54,5% increase.
In terms of IAS 34 the following additional disclosures are made:
DAS was purchased with effect from 1 September 2007. The loss from this entity
included in Group profit for the year ended February 2008 is R753 000.
EL was purchased from 1 October 2007. The profit from this entity included in
Group results for the year ended February 2008 is
R1,396 million. The profit represents five months trading and has been arrived
at after the deduction of the deferred interest attributable to the unwinding of
the discount arising on the cash portion of the purchase price, as well as the
amortisation charges arising from the valuation of the acquired intangible
assets.
The business of APE was acquired on 1 November 2007. The loss from this entity
included in Group results for the year ended February 2008 is R583 000. The loss
represents four months trading and has been arrived at after the deduction of
the deferred interest attributable to the unwinding of the discount arising on
the cash portion of the purchase price as well as the amortisation charges
arising from the valuation of the acquired intangible assets.
Review of operations:
The Group`s subsidiaries grew significantly during the year under review. Most
notably, Petro-Logic (Pty) Limited`s ("PL") turnover increased from R67 million
in 2007 to R114 million in 2008 and its profitability increased by 300%. This
company enjoyed its best year in their 38 years of operations.
Omnirapid Mining and Industrial Supplies (Pty) Limited continued to exhibit
extraordinary growth augmented by turnover generated as a result of supplying
our new acquisitions. This company is rapidly becoming the general procurement
arm for the Group thereby achieving profits internally on materials previously
outsourced and achieved its best year ever.
PSV Services (Pty) Limited ("PSVS") and PSV Zambia (Pty) Limited recorded their
best trading performances ever. These companies have contributed significantly
to the Group`s overall profitability.
Prospects:
As at 29 February 2008, the Group had a confirmed forward order book in excess
of R110 million representing some 30% of the Group`s 2008 turnover.
PSVS will be relocated to the premises of APE. These premises are currently
being improved and refurbished to accommodate the company. Besides the reduction
of costs, the additional operating capacity available to PSVS should serve to
increase both company`s turnover and profitability.
In addition, the Board has approved a capital investment programme which will
permit PSVS to eliminate the outsourcing of machining of material, thereby
further enhancing profitability. The additional equipment will also assist APE
in obtaining larger pump contracts and expedite turnaround and delivery times.
Additional contracts are also currently being secured.
The dramatic increase in fuel prices will have a positive impact on the business
of PL as the existing unleaded petrol pumps have not been designed to
accommodate a petrol price in excess of R10 a litre.
EL is negotiating large lining contracts in Namibia and West Africa.
A primary Group imperative is to exploit opportunities arising from the upsurge
in infrastructural and power generation spend in South Africa.
Accounting policies:
The annual financial statements have been prepared in accordance with the
recognition and measurement criteria embodied in International Financial
Reporting Standards ("IFRS") and their interpretation adopted by International
Accounting Standards Board, the Listings Requirements of the JSE Limited ("JSE")
and the Companies Act, 61 of 1973, as amended, which remain consistent with
those applied in the previous financial year.
Dividends:
The Group will continue to retain and utilise cash generated to fund working
capital requirements and potential acquisitions and as such, no dividends were
declared or proposed. The Board will review the dividend policy annually.
Auditor`s report:
The unmodified review report issued by KPMG Inc, on the abridged financial
statements contained in this report is available for inspection at the Group`s
registered office.
For and on behalf of the Board
AJD da Silva AR Dreisenstock
Chief Executive Officer Financial Director
20 May 2008
Directors
Executive Directors: P Robinson* (Deputy Chairman),
AJD da Silva (Chief Executive Officer),
AR Dreisenstock (Financial Director), DJ Kelly*.
Non-Executive Directors: E Chimombe-Munyoro (Non-Executive Chairperson), JH
Anderson*, E Dube (Alternate), GJV Shongwe, LDS Thobejane *British
Secretary: Premium Corporate Consulting Services (Pty) Limited (Registration
number 2003/009512/07).
PSV Holdings Limited (Incorporated in the Republic of South Africa)
(Registration number 1998/004365/06)
JSE Share code: PSV ISIN: ZAE000078705
("PSV" or "the Group")
Registered office: Unit 419, Sam Green Road,
Greenhills Industrial Estate, Tunney Ext 6, Germiston
Postnet Suite 229, Private Bag X19, Gardenview, 2047
T: (011) 0860 778 778 F: (011) 0860 329 778
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70
Marshall Street, Johannesburg, South Africa, 2001.
PO Box 61051, Marshalltown, South Africa, 2107
www.psvholdings.com
Designated Adviser
Vunani Corporate Finance
Date: 19/05/2008 17:30:01 Produced by the JSE SENS Department.
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