| Tue 4 Nov 2008, 7:05 | | PSV - PSV Holdings Limited - Unaudited Results For The Interim Period Ended 31 |
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PSV
PSV
PSV - PSV Holdings Limited - Unaudited Results For The Interim Period Ended 31
August 2008
PSV HOLDINGS LIMITED
20 YEARS
Registration number 1998/004365/06
(Incorporated in the Republic of South Africa)
JSE code: PSV & ISIN: ZAE000078705
("PSV" or "the company")
Unaudited results for the interim period ended 31 August 2008
Revenue up 45,7% to R174, 7 million
(2007: R119, 9 million)
Headline earnings per share up 20,7% to 5,14 cents
(2007: 4,26 cents)
Tangible net asset per share up 33,8% to 39,85 cents
(2007: 29,79 cents)
Commentary
NATURE OF 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
- Specialised services (previously Petrochemical).
ACCOUNTING POLICIES: These interim 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 29 February 2008.
FINANCIAL REVIEW: Revenue increased by 45,7% compared to the same period last
year. Although the majority of the growth is organic, it does include revenue
generated by three acquisitions made in the second half of the previous year.
Gross margins were slightly reduced due to a change in the sales mix to lower
margin products and services. Operating expenditure as a percentage of revenue
remained at an acceptable 16,09%, slightly above the Group target of 15%. The
Group`s EBIT margin decreased to 9,62% from 11,35% mainly due to much higher
depreciation charges owing to the substantial capital expenditure programme
implemented in the prior financial year.
The substantial growth in the business was facilitated by a major investment in
inventories and debtors. This resulted in a negative cash flow from operations
which is expected to reverse in the second six months of the year. The Group`s
working capital ratio was 22,6% (2007: 21,48%).
The negative cash flow was materially impacted by an approximate R10 million
cash injection into the APE Pumps and Dasher subsidiaries necessary to convert
these operations into viable going concerns. The Group`s effective tax rate was
21,44% (2007 30,71%). The low tax rate was attributable to the inclusion of
exempt income.
The Group`s HEPS increased by 20,66% to 5,14 cps (2007: 4,26 cps). The Group`s
core earnings per share increased to 6,03 cps up 20, 68% compared to the
previous period of 5 cps. Core earnings per share are defined as the Group`s
headline earnings after eliminating all IFRS adjustments. These results are
extremely pleasing and reflect substantial intrinsic value at current share
price levels.
The Group`s balance sheet continued to strengthen as the net tangible asset
value per share increased by 33,8% to 39,85 cps compared to the corresponding
prior period (2007: 29,79 cps).
Although the Group`s debt equity ratio increased by 6,72% (calculated as a
percentage against tangible net asset value), the ratio remains at a comfortable
20,48% (2007: 19,19%). The debt equity ratio is considerably lower than February
2008 (40,48%) due to substantial repayments made during the interim period. The
debt equity ratio has also improved as the opening deferred equity consideration
has been properly adjusted to reflect the payment terms as per the Engineered
Linings acquisition agreement. The current ratio has decreased from 2:1 to 1,4:1
mainly attributable to the inclusion of R19,454 million of current portion of
long term liabilities and deferred purchase considerations which will either be
repaid or refinanced with long term debt in the next six months. The current
ratio is, however, the same as that achieved at February 2008.
OPERATIONAL REVIEW: Despite tough trading conditions, all business segments of
the Group exceeded budgeted profit expectations.
The pumps, spares and valves segment contributed 26% of the Group`s revenue.
Underpinned by a substantial working capital investment, the OEM pump
manufacturer, APE Pumps ("APE"), has made good progress and is currently
profitable, exceeding budgetary expectations. Gross margins continue to improve
as the company focuses on obtaining additional refurbishment and service
maintenance work on the approximately 25 000 APE pumps already in use in
industry.
PSV Services ("PSVS") was successfully relocated to the APE premises in April
2008. The property refurbishment programme is nearly completed and both APE and
PSVS are now operating at full manufacturing capacity. State-of-the-art
manufacturing equipment worth approximately R3,5 million has been ordered and is
due to arrive before the end of the year. This equipment will reduce both PSVS`
and APE`s need to utilise the services of sub-contractors, thereby enhancing
manufacturing capability and profitability.
The engineering linings and general industrial supplies segment has increased
revenue by 169% from the previous period. Omnirapid, the Group`s general
industrial supplier, continues to impress with its stellar organic growth.
Compared to the same period last year, Omnirapid`s turnover has increased by
103% and its profit after tax by 51,1%. We believe that the growth curve at
these levels is sustainable for at least one more year until it normalises. High
growth in this company is attributable to the high demand for steel and steel
products.
Engineered Linings has proven to be an exceptionally well-managed and
efficiently run operation. The conclusion of a R53 million contract in Namibia
is the largest contract the company has ever obtained. For the first six months
of the year, the subsidiary exceeded its budgetary profit targets by 29%,
attributable to invoicing low volume high margin labour and service work. We
expect that the company`s turnover will substantially increase in the next six
months of the year as high volume low margin geo-synthetic linings are
installed.
The Group successfully acquired the business of Rand Air and Gas Installations
(Pty) Ltd ("RAGI") with effect from 1 September 2008 and combined RAGI with the
petrochemical subsidiary to form the specialised services segment. RAGI
manufactures, installs and repairs storage vessels for the cryogenic industry.
The purchase price of RAGI amounted to R18 million and will be settled in cash
over a period of three years. This subsidiary is perfectly positioned to assist
in the future roll-out of nuclear power plants in the country.
The dramatic increase in fuel prices had a positive impact on the business of
Petro-Logic as the existing unleaded petrol pumps were not designed to
accommodate a petrol price in excess of R10 a litre. Several unanticipated
orders in excess of R10 million have already been received and executed and
there are several more orders in the pipeline.
PROSPECTS: PSV continues to see demand for its products and range of services.
As at 31 August 2008, the Group had a confirmed forward order book of R151
million. This order book is expected to be converted into sales by the financial
year end. We expect the Group`s gross margin to reduce slightly over the next
six months to normalised levels, based on the project mix in the order book.
Despite a tough economic climate, PSV is a supplier of essential products and
services to major industries allowing the company to grow organically.
Government infrastructure spend and essential spend from ESKOM, on which PSV is
positioned to supply product, further enhance prospects for the Group. The
subsidiaries of the Group have been capitalised and equipped to drive each of
their respective products forward.
BLACK EMPOWERMENT: Various BEE initiatives have commenced including inter alia
the establishment of a PSV graduate programme designed to provide bursaries to
previously underprivileged South Africans. Our Black Empowerment partners have
integrated well into PSV and are enhancing the business in various ways.
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 remained unchanged since February
2008.
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.
Income statements
Unaudited Unaudited Audited
for the for the for the
6 months ended 6 months ended 12 months ended
31 Aug 2008 31 Aug 2007 28 Feb 2008
R`000 R`000 R`000
Continuing operations
Revenue 174 736 119 904 298 618
Gross Profit 49 047 35 471 73 623
Operating expenses 28 107 21 068 28 669
Earnings before interest 20 939 15 478 44 954
tax depreciation and
amortisation
Depreciation/amortisation 4 129 1 873 3 722
of intangibles
Earnings before interest 16 811 13 605 41 232
and tax
Net interest paid 1 404 297 4 427
Profit before taxation 15 406 13 308 36 805
Taxation 3 302 4 087 8 329
Profit after tax for the 12 104 9 221 28 476
period from continuing
operations
Profit for the period 12 104 9 221 28 476
Basic earnings per share 5,13 4,27 14,22
(cents)
Diluted earnings per 4,90 4,17 14,03
share (cents)
Weighted average number 236 131 215 951 200 269
of shares (`000)
Headline earnings per 5,14 4,26 7,95
share (cents)
Core operating earnings 6,03 5,00 11,29
per share (cents)
Balance sheets
Unaudited Unaudited Audited
for the for the for the
6 months 6 months 12 months
ended ended ended
31 Aug 2008 31 Aug 2007 28 Feb 2008
R`000 R`000 R`000
ASSETS
Non-current assets 193 749 144 789 192 812
Property, plant and 52 454 19 804 50 281
equipment
Trade Investments 158 21
Loans receivable 1 014 2 624 770
Deferred tax assets 6 170 7 339 6 563
Intangibles 21 938 19 860 23 381
Goodwill 112 015 95 141 111 817
Current assets 211 768 104 969 165 420
Inventories 76 687 40 520 48 004
Trade and other 91 081 52 493 80 708
receivables
Cash and cash 44 000 11 956 36 708
equivalents
Total assets 405 517 249 758 358 232
EQUITY AND LIABILITIES
Equity 228 047 179 326 202 457
Non-current liabilities 25 667 18 137 33 772
Borrowings 19 270 12 344 27 225
Deferred tax liabilities 6 397 5 793 6 547
Current liabilities 151 803 52 295 122 003
Trade and other payables 111 767 42 135 103 913
Taxation payable 7 946 6 604 7 253
Bank overdrafts 32 090 3 556 10 837
Total equity and 405 517 249 758 358 232
liabilities
NAV/share 96,58 83,04 91,47
TNAV/share 39,85 29,79 30,39
Cash flow statements
Unaudited Unaudited Audited
for the for the for the
6 months 6 months 12 months
ended ended ended
31 Aug 2008 31 Aug 2007 28 Feb 2008
R`000 R`000 R`000
Cash flow from (1 753) (11 417) 9 167
operating activities
Cash flow from (30 590) (13 017) (39 862)
investing activities
Cash flow from 23 031 25 040 47 243
financing activities
Net movement in cash (9 311) 605 16 548
and cash equivalents
Exchange difference (4 650) (288) 1 241
arising on conversion
of foreign subsidiary
Cash and cash 25 871 8 083 8 083
equivalents at
beginning of year
Cash and cash 11 910 8 400 25 871
equivalents at end of
period
Segmental report
Pump Linings and Specialised
spares general
and industrial Services
valves supplies
Revenue 45 546 67 752 61 438
Gross Profit 18 809 15 304 11 948
Operating expenses 8 672 7 156 7 378
Profit before tax 10 418 9 083 3 555
Depreciation/amortisation 931 461 430
Capital expenditure 1 203 1 148 298
Gross assets 100 914 89 670 53 647
Gross liabilities 93 796 46 574 31 801
Segmental report (continued)
Shared
services Total
Revenue - 174 736
Gross Profit - 46 061
Operating expenses 4 901 28 107
Profit before tax (7 649) 15 406
Depreciation/amortisation 2 307 4 129
Capital expenditure 1 976 4 625
Gross assets 163 044 407 275
Gross liabilities 6 500 178 671
Statement of changes in equity
Stated Share- Deferred
capital based equity
payment Considera-
reserve tion
Balance at 28 February 2008 252 475 1 513 2 254
Issue of share capital to 10 500
vendors
Foreign translation reserve
- PSV Zambia
Share issue expenses (26)
Deferred equity 7 663
consideration - opening
balance correction
Net profit for the year
Balance at 31 August 2008 262 949 1 513 9 917
Statement of changes in equity (continued)
Foreign Accumula-
translation ted
reserve loss Total
Balance at 28 February 2008 800 (54 586) 202 457
Issue of share capital to 10 500
vendors
Foreign translation reserve (4 650) (4 650)
- PSV Zambia
Share issue expenses (26)
Deferred equity 7 663
consideration - opening
balance correction
Net profit for the year 12 104 12 104
Balance at 31 August 2008 (3 850) (42 482) 228 047
For and on behalf of the Board
AR Dreisenstock
Financial Director
4 November 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
Company secretary: J van Eden
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
DESIGNATED ADVISER: Vunani Corporate Finance
www.psvholdings.com
Date: 04/11/2008 07:05:02 Produced by the JSE SENS Department.
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