| Mon 11 May 2009, 7:05 | | PKH - Protech Khuthele Holdings Limited - Audited preliminary report for the |
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PKH
PKH
PKH - Protech Khuthele Holdings Limited - Audited preliminary report for the
year ended 28 February 2009
Protech Khuthele Holdings Limited
Registration number 2000/024352/06
JSE code: PKH ISIN: ZAE000101986
("Protech" or "the Company" or "the Group")
Audited preliminary report
for the year ended 28 February 2009
Revenue
62% organic
revenue growth
91% up
Operating profit
61% up
Operating margins
maintained above 20% at 22%
Cash generated by operations
before working capital changes
40% up
Commentary
INTRODUCTION
Protech achieved another year of strong growth against increasingly difficult
markets. Noteworthy was the continued strong cash generation, profit and
earnings growth and the maintenance of margins above 20% at 22%.
FINANCIAL REVIEW
Income statement
Revenue increased by 91% over the prior year to R702,7 million which includes,
for the first time, revenue from the acquired Readymix operations of R108,1
million.
Organic revenue growth, after elimination of inter-group transactions, was
62%. This strong growth was due to the group`s ability to quickly shift its
focus from market sectors under pressure to growth markets. During the year,
the group shifted from a 57% exposure to the private sector at the start of
the year to only 27% at the end of the year. The remaining 73% of revenue came
from the fast-growing mining, mainly coal, and infrastructure sectors.
Operating profit increased by 61% to R156,0 million (2008: R97,2 million).
The group operating profit is largely generated by the contracting division
(the combination of Protech Khuthele and Pela Plant). The Readymix operation,
acquired in 2008, contributed only R977 000 to operating profit, as this
division operates in a severely depressed market. Against these markets, this
division managed to contain costs, whilst at the same time shifting its focus
away from the residential housing market to the industrial construction sector.
The operating margins remained higher than that of industry peers and are in
line with the group`s goal of maintaining margins above 20%. Overall operating
margin for the year was 22% compared to 26% in 2008. The reduction was mainly
due to lower margins from the Readymix operation. Without Readymix, margins
would have remained at 26%. Operating margins for the largest contributors to
the group, the Contracting divisions, remained unchanged at 26%.
The group`s effective tax rate was 27,5% compared to 30,3% in 2008, mainly due
to a decrease in the statutory tax rate and deferred tax charges in F2008.
Earnings were R92,9 million compared to R62,1 million in 2008, which translates
into earnings per share growth of 47% to 25,6 cents (2008: 17,4 cents). There
was no material difference between headline earnings and earnings per share.
Balance sheet
Debt:equity was 99,8% (2008: 97,7%). Although high, the group is comfortable
with this level as a high gearing is in line with its plant policy of running
new equipment. All long term debt on the balance sheet relates to asset-backed
finance and the group generates sufficient cash to comfortably service this
debt.
The group invested R162 million in capital expenditure (2008: R179 million).
This included R54 million to renew the vehicle and plant fleet in line with the
group plant replacement policy, as well as R108 million to expand the fleet to
310 units at the end of the 2009 financial year (2008: 237 units). The fleet of
310 units includes 10 units from Readymix and 15 units from the newly acquired
Impact Compaction business.
Net tangible asset value per share increased by 59% to 55,0 cents per share
(2008: 34,7 cents per share).
Interest bearing liabilities increased to R274,4 million from R164,5 million in
2008. Included in the interest bearing liabilities is R54,1 million which
relates to the financing of the Readymix acquisition. The increase, which
relates to capital expenditure incurred to renew and expand the vehicle and
plant fleet, was R55,8 million.
Working capital increased to R77,0 million from a net working capital deficit
of R17,1 million in 2008. This was mainly as a result of the improved cash
position of the group and the increase in accounts receivable in line with the
increase in revenue.
The group continued to contain bad debts below 1% of turnover.
Cash flow statement
Cash generated by operations before changes in working capital increased by
40% to R177,4 million (2008: R126,7 million). Cash on hand at 28 February 2009
was R101,6 million (2008: R93,2 million).
OPERATIONAL REVIEW
Contracting (87% of group revenue)
During the year, Contracting contributed 87% to group revenue and 95% to group
operating profit. Turnover was up 54% to R770,0 million (2008: R499,1 million)
and operating profit was up 55% to R148,8 million (2008: R96,3 million).
Protech Khuthele
Protech Khuthele continued to deliver robust results. Revenue grew by 52% from
R382,9 million to R580,1 million on the back of the strong roll out of
contracts. Operating profit increased by 84% from R36,1 million to R66,6
million. The operating margin increased from 9% to 12%.
Pela Plant and Impact Compaction
Pela Plant and Impact Compaction are reported as one business unit. This unit
experienced exceptional revenue growth of 63% from R116,3 million to R189,8
million over the prior year. Operating profit increased by 37% from R60,2
million to R82,2 million, in line with the organic growth experienced. Margins
decreased from 52% to a still very healthy 43% due to the normalisation of the
contribution split in operating profit between Pela and Protech Khuthele.
SARTS (1% of group revenue)
SARTS increased revenue by 71% to R11,3 million (2008: R6,6 million). However,
operating profit decreased by 11% to R0,8 million from R0,9 million and
operating margin decreased from 14% to 7% due to additional investment in
human capital, systems and equipment to satisfy the criteria required for
industry accreditation. The SANAS accreditation positions the business well to
generate additional revenue and earnings from sources outside of the group.
Protech Readymix (12% of group revenue)
The year under review was the first full year of contribution from Protech
Readymix. As Readymix has traditionally been very exposed to the residential
sector, this business was severely impacted by the extreme downturn in this
sector. It achieved turnover of R108,1 million. Operating profit was R1,0
million and operating margin 0,9% in line with challenging market conditions.
During the year, Readymix managed to shift away from a 95% exposure to the
residential sector upon acquisition in 2008 to that of an average of 80% of
revenue now being generated from the commercial and industrial sectors.
PROSPECTS
A great deal of development activity remains on schedule in sub-Saharan
Africa. Key infrastructure development projects (both related to and well
after the 2010 World Cup) are on track in South Africa, with mining activity
in the coal sector still prevalent in South Africa and across its borders.
While the group`s operational segmentation is currently weighted towards
infrastructure development and mining, it will remain active in all its current
markets. The group`s business model allows for swift moves from one market to
another, depending on where growth is the strongest.
The group remains well positioned, with a solid R735 million of work in
progress.
Protech is confident of weathering the market dynamics although the group`s
high levels of growth will be difficult to maintain in the current unpredictable
markets. While the outlook is more challenging than a year ago, the group will
continue to proactively manage its own environment.
On behalf of the directors
DA Ackerman GD Chapman CJA Wolmarans
Chairman of the Group Chief Group Financial
Board Executive Director
Lanseria
8 May 2009
Directors: DA Ackerman* (Chairman), GD Chapman (Group Chief Executive) CJA
Wolmarans (Group Financial Director),
MSG Mareletse*+, C Nkosi*, V Raseroka*, P van Tonder*, MJ Vuso*+
* non-executive + independent
Secretary: A van der Merwe
Registered office: Corner R512 and Elandsdrift Road, Bultfontein, Lanseria
(Private Bag X6, Lanseria, 1748) (Website: www.pkh.co.za)
Transfer secretary: Link Market Services South Africa (Proprietary) Limited
11 Diagonal Street, Johannesburg, 2001. (PO Box 4844, Johannesburg, 2000)
Sponsor: Deloitte & Touche Sponsor Services (Proprietary) Limited
Condensed consolidated income statement
for the year ended 28 February 2009
2009 2008
R`000 R`000
Revenue 702 745 368 495
Earnings before amortisation, 188 172 112 470
depreciation, and interest
Amortisation of intangible assets (147) -
Depreciation (32 038) (15 278)
Earnings before interest and 155 987 97 192
taxation
Net interest expense (27 869) (8 093)
Earnings before taxation 128 118 89 099
Taxation (35 207) (26 989)
Earnings for the year 92 911 62 110
Attributable to ordinary 92 911 62 110
shareholders
- prior to listing - 26 952
- subsequent to listing 92 911 35 158
Earnings per share (cents)
Basic earnings per share 25,6 17,4
Diluted earnings per share 25,6 17,4
SUPPLEMENTARY INCOME STATEMENT
INFORMATION
Reconciliation of weighted average
number of shares in issue:
- Weighted average number of shares 362 500 357 070
in issue (thousands)
Reconciliation of headline earnings:
Earnings attributable to 92 911 62 110
shareholders of the holding company
Adjusted for loss/(profit) on 1 457 (2 085)
disposal of plant and equipment (net
of tax)
Headline earnings 94 368 60 025
Headline earnings per share (cents)
- Basic 26,0 16,8
Condensed consolidated balance sheet
at 28 February 2009
2009 2008
R`000 R`000
ASSETS
Non-current assets 393 143 279 413
Property, plant and equipment 354 172 256 964
Goodwill 33 549 16 045
Other intangible assets 1 817 -
Other financial assets 3 605 -
Deferred tax - 6 404
Current assets 298 839 213 339
Inventory 16 946 13 781
Amounts due from contract customers 9 290 11 899
Trade and other receivables 163 088 90 326
Other financial assets 7 927 4 095
Bank balances and cash 101 588 93 238
Total assets 691 982 492 752
EQUITY AND LIABILITIES
Total equity 234 614 141 703
Share capital and share premium 228 598 228 598
Common control reserve (122 053) (122 053)
Retained earnings 128 069 35 158
Total liabilities 457 368 351 049
Non-current liabilities 235 566 120 629
Borrowings 186 517 95 451
Deferred tax 49 049 25 178
Current liabilities 221 802 230 420
Borrowings 87 839 69 092
Trade and other payables 88 629 49 178
Subcontractor liabilities 9 704 8 898
Provisions 5 496 18 312
Vendor liability - 71 356
Current tax liabilities 30 134 13 584
Total equity and liabilities 691 982 492 752
Supplementary balance sheet
information
Total number of shares in issue 362 500 362 500
(thousands)
Net asset value per share (cents) 64,7 39,1
Capital expenditure (R`000)
- Spent 162 102 179 161
- Commitments - Authorised but 128 302 43 675
unspent
Performance guarantees issued 49 210 19 894
(R`000)
Condensed consolidated statement of changes in equity
for the year ended 28 February 2009
Common
Share Share control Retained
R`000 capital premium reserve earnings Total
Balance at 28 -* - - - -*
February 2007
Share issues
23 May 2007 - - - -
20 000 0003
- 41 869 3622 -* - -*
Common control
share issues
28 May 2007 - 1 216 096 216 097
288 130 6381
Common control (149 005) (149 005)
reserve
Reviewed pro 2 216 096 (149 005) - 67 093
forma group
Share issues
6 August 2007 - -* 12 500 12 500
12 500 0002
Earnings for 62 110 62 110
the year
Transfer profit 26 952 (26 952) -
at acquisition
date to reserve
Balance at 29 2 228 596 (122 053) 35 158 141 703
February 2008
Earnings for 92 911 92 911
the year
Balance at 28 2 228 596 (122 053) 128 069 234 614
February 2009
1 Issued to acquire common control subsidiaries.
2 Issued for cash.
3 Share split of 200 000 to 1.
* Amounts below R1 000.
Condensed consolidated cash flow statement
for the year ended 28 February 2009
2009 2008
R`000 R`000
Cash flows from operating activities 114 667 81 085
Cash generated by operations 142 930 98 796
Interest received 2 097 654
Interest paid (29 966) (8 747)
Income taxes paid (394) (9 618)
Cash flows from investing activities (145 655) (119 753)
Purchase of property, plant and (162 102) (179 161)
equipment
Proceeds on disposal of property, 32 768 47 937
plant and equipment
Assets acquired through acquisition (7 000) -
Cash received from acquisition - 8 695
(Increase)/decrease in loans granted (9 321) 2 776
Cash flows from financing activities 39 338 129 462
Share issue - 12 500
Decrease in net loans from - 7 931
shareholders
Settlement of Vendor liability (71 356) -
Increase in bank borrowings 62 200 -
Payments of bank borrowings (8 146) -
Increase in borrowings related to 163 381 191 393
instalment sale agreements and
finance leases
Payments in terms of instalment sale (106 741) (82 362)
agreements and finance leases
Net increase in cash and cash 8 350 90 794
equivalents
Cash and cash equivalents at the 93 238 2 444
beginning of the year
Cash and cash equivalents at the end 101 588 93 238
of the year
Cash and cash equivalents comprise
of:
Bank balances and cash 101 588 93 238
Operational segmental reporting
for the year ended 28 February 2009
Services within each business segment
The group`s segmental reporting is currently broken into four major operating
divisions - earthworks, plant hire, geotechnical laboratories and readymix.
However, operationally, the group runs its business along three main areas:
contracting that encompasses earthworks and plant hire, geotechnical
laboratories and readymix. The principal services and products of each of these
business areas are as follows:
EARTHWORKS - bulk earthworks and roads and civil engineering
PLANT HIRE - plant hire, impact compaction and logistical services
GEOTECHNICAL LABORATORY - geotechnical laboratory and surveying services
READYMIX - supplier of readymix concrete and concrete pumping services
The group acquired Impact Compaction on 1 June 2008 and the assets and
liabilities of the business are included in the plant hire segment`s assets
and liabilities, as reported below.
Segment revenue and segment result
Segment revenue Segment result
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Earthworks 580 122 382 870 66 607 36 086
Plant hire 189 845 116 265 82 227 60 219
Geotechnical 11 347 6 639 754 893
laboratory
Readymix 108 127 - 977 -
889 441 505 774 150 565 97 198
Corporate* 13 460 600 (5) (6)
Eliminations (200 156) (137 879) 5 427 -
702 745 368 495
Earnings before 155 987 97 192
interest and taxation
Net interest paid (27 869) (8 093)
Earnings before 128 118 89 099
taxation
Taxation (35 207) (26 989)
Earnings for the year 92 911 62 110
Segment assets and liabilities
Segment assets Segment liabilities
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Earthworks 211 411 138 872 119 206 85 384
Plant hire 413 734 289 575 302 231 215 880
Geotechnical 5 102 4 921 2 649 3 012
laboratory
Readymix 82 629 100 103 86 326 100 103
712 876 533 471 510 412 404 379
Corporate* 357 719 84 312 112 009 71 701
Eliminations (378 613) (125 031) (165 053) (125 031)
691 982 492 752 457 368 351 049
Other segment information
Depreciation and Additions to
amortisation non-current assets
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Earthworks 1 380 726 1 880 1 833
Plant hire 25 777 14 253 164 087 176 172
Geotechnical 521 299 1 482 1 156
laboratory
Readymix 4 507 - 1 577 39 235
32 185 15 278 169 026 218 396
* Corporate includes the transactions of the holding company.
Segment revenue reported above represents revenue generated from external
customers. Intersegment sales amounted to R200,2 million (2008: R137,9 million).
Segment result reported above represents operating profit per segment.
The accounting policies of the reportable segments are the same as the Group`s
accounting policies.
Notes to the condensed consolidated financial statements
for the year ended 28 February 2009
1. Basis of preparation and accounting policies
This preliminary report complies with International Accounting
Standard 34 - Interim Financial Reporting as well as with
Schedule 4 of the South African Companies Act and the
disclosure requirements of the JSE Limited`s Listings
Requirements. The preliminary report has been prepared using
accounting policies that comply with International Financial
Reporting Standards. The accounting policies are consistent
with those applied in the prior financial year.
2. Acquisitions
Protech acquired the business of Impact Compaction (Pty) Ltd on
1 June 2008. The company specialises in impaction compaction
services. The purchase price of the acquisition was R7 million
and was settled in cash. A portion of the purchase price was
allocated to intangible assets which relates to technical
drawings and designs. Certain patents over impact rollers are
in the process of being registered. On the completion of the
registration process an additional amount of R3 million will be
paid to the vendors.
3. Post balance sheet events
No material events have occurred subsequent to 28 February 2009
which may have an impact on the group`s reported financial
position at this date.
4. Audit opinion
The auditors, Deloitte & Touche, have issued their unmodified
audit opinion on the Group`s financial statements for the year
ended 28 February 2009. The audit was conducted in accordance
with International Standards on Auditing. A copy of their audit
report is available for inspection at the company`s registered
office. These abridged financial statements have been derived
from the Group financial statements and are consistent in all
material respects, with the Group financial statements.
www.pkh.co.za
Date: 11/05/2009 07:05:07 Produced by the JSE SENS Department.
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