| Tue 30 Jun 2009, 8:00 | | RAC - Racec Group Limited - Condensed Consolidated unaudited results for the six |
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RAC
RAC
RAC - Racec Group Limited - Condensed Consolidated unaudited results for the six
months ended 31 March 2009
RACEC GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/006153/06)
Share code: RAC ISIN: ZAE000105409
("RACEC" or "the Company" or "the Group")
CONDENSED CONSOLIDATED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2009
For the six months ended 31 March 2009 compared to the corresponding prior
period:
Revenue up 29%
Gross margin increased to 23% from 19%
Net profit before investment revenue, finance costs and taxation increased by
31%
Net profit attributable to holders of the parent up 4%
Net asset value per share up 45%
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Audited
6 months Unaudited 12 months
ended 6 months ended
31 March ended 30
2009 31 March September
R`000 2008 2008
R`000 R`000
Revenue 188 447 146 325 383 840
Cost of sales (144 566) (118 857) (301 985)
Gross profit 43 881 27 468 81 855
Other income 244 - 71
Other expenses (30 486) (17 033) (55 352)
Net profit before investment revenue, 13 639 10 435 26 574
finance costs and taxation
Investment revenue 758 1 091 3 122
Finance costs (3 825) (1 832) (5 700)
Profit before taxation 10 572 9 694 23 996
Taxation (3 053) (3 190) (7 837)
Profit for the period 7 519 6 504 16 159
Attributable to:
Equity holders of the parent 6 785 6 504 14 904
Minority interest 734 - 1 255
7 519 6 504 16 159
EARNINGS PER SHARE (CENTS)
Basic 6.5 6.5 15.0
Diluted basic 6.5 6.5 15.0
Headline 6.6 6.6 16.0
Diluted headline 6.6 6.6 16.0
Weighted average number of ordinary 104 018 100 000 99 200
shares in issue (`000)
Fully diluted weighted average number 104 354 100 000 99 200
of ordinary shares in issue (`000)
SEGMENTAL REPORT
Administr Electric Rail Total
ative al construc R`000
investmen services tion
t and R`000 R`000
plant
hire
R`000
Business segment
Unaudited - 6 months ended 31
March 2009
Revenue - 120 173 68 274 188 447
Profit before tax (20 665) 21 080 10 157 10 572
Unaudited - 6 months ended 31
March 2008
Revenue - 81 541 64 784 146 325
Profit before tax (8 775) 8 542 9 927 9 694
Audited -12 months ended 30
September 2008
Revenue - 212 072 171 768 383 840
Profit before tax (29 161) 25 168 27 989 23 996
Western Gauteng Total
Cape R`000 R`000
R`000
Geographical segment
Unaudited - 6 months ended 31
March 2009
Revenue 133 602 54 845 188 447
Profit before tax 4 595 5 977 10 572
Unaudited - 6 months ended 31
March 2008
Revenue 99 860 46 465 146 325
Profit before tax 4 445 5 249 9 694
Audited - 12 months ended 30
September 2008
Revenue 248 582 135 258 383 840
Profit before tax 17 158 6 838 23 996
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
as at 31 as at as at
March 2009 31 March 30
R`000 2008 September
R`000 2008
R`000
ASSETS
Non-current assets 65 948 33 670 63 784
- Property, plant and equipment 57 898 31 761 55 984
- Investment property 351 350 351
- Intangible assets 6 903 1 559 6 957
- Loans to shareholders - - 39
- Loans to related parties 73 - 111
- Deferred tax assets 723 - 342
Current assets 105 555 107 820 125 788
- Inventories 33 391 20 983 30 234
- Trade and other receivables 68 773 86 215 83 560
- Cash and cash equivalents 3 391 622 11 994
Total assets 171 503 141 490 189 572
EQUITY AND LIABILITIES
Capital and reserves 64 320 44 337 62 657
- Equity attributable to equity 61 427 44 337 58 266
holders of the parent
- Minority shareholders` 2 893 - 4 391
interest
Non-current liabilities 22 459 14 625 22 424
- Other financial liabilities 14 852 10 639 15 892
- Share based payments 3 206 1 881 2 874
- Deferred tax liabilities 4 401 2 105 3 658
Current liabilities 84 724 82 528 104 491
- Loans from shareholders 1 649 - -
- Loans from related parties 1 586 673 673
- Other financial liabilities 7 342 6 331 6 985
- Current tax payable 7 469 2 341 8 611
- Trade and other payables 43 820 54 271 48 679
- Bank overdraft 22 858 18 912 39 543
Total equity and liabilities 171 503 141 490 189 572
Net asset value per share 59.1 45.3 56.0
(cents)
Net tangible asset value per 52.4 43.7 49.3
share (cents)
Total number of ordinary shares 104 018 100 000 104 018
in issue (`000)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
6 months Unaudited 12 months
ended 6 months ended
31 March ended 30
2009 31 March September
R`000 2008 2008
R`000 R`000
Cash flows from operating activities 15 512 (26 031) (6 313)
- Cash generated from operations 22 412 (19 333) 5 233
- Interest income 758 1 092 3 122
- Finance costs (3 825) (1 832) (5 700)
- Taxation paid (3 833) (5 958) (8 968)
Cash flows from investing activities (5 597) (6 943) (23 280)
- Purchase of property, plant and (5 802) (7 024) (22 170)
equipment
- Purchase of business operations - - (1 904)
- Proceeds from disposal of property, 205 81 794
plant and equipment
Cash flows from financing activities (1 833) 16 270 3 630
- Repayment of other financial (4 248) (11 879) (14 999)
liabilities
- Advance of other financial 3 787 5 691 8 447
liabilities
- Advance of loans by related parties 952 9 372 9 260
- Advance / (Repayment) of loans from 1 689 (9 153) (9 192)
shareholders
- Net proceeds from share issue - 25 146 15 569
- Dividends paid (4 013) (2 907) (5 455)
Total cash movement for the period 8 082 (16 704) (25 963)
Cash at the beginning of the period (27 549) (1 586) (1 586)
Total cash at the end of the period (19 467) (18 290) (27 549)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Revalua Retaine Minorit Total
capita buy- tion d y equity
l and back reserve earning interes R`000
share R`000 R`000 s R`000 t R`000
premiu
m
R`000
Balance at 1 October 1 (3 879) 2 939 16 504 - 15 565
2007
Shares issued 27 400 - - - - 27 400
Share issue expenses (2 - - - - (2 254)
254)
- Realised revaluation - (475) 475 - -
through depreciation -
- Deferred tax on - 133 (133) - -
realised revaluation -
through depreciation
- Effect of tax rate - 29 - - 29
change on revaluation -
reserve
Net income/(expenses) - - (313) 342 - 29
recognised directly in
equity
Net profit for the - - - 6 504 - 6 504
period
Dividends paid - - - (2 907) - (2 907)
Balance at 31 March 25 147 2 626 20 443 - 44 337
2008 (3 879)
Shares issued 5 151 - - - - 5 151
- Realised revaluation - (370) 370 - -
through depreciation -
- Deferred tax on - 103 (103) - -
realised revaluation -
through depreciation
- Revaluation of - 4 063 - - 4 063
property, plant and -
equipment
- Deferred tax on - (1 137) - - (1 137)
revaluation of -
property, plant and
equipment
- Minority interest on - - - 3 136 3 136
business acquisition -
Net income/(expenses) - - 2 659 267 3 136 6 062
recognised directly in
equity
Net profit for the - - 8 400 1 255 9 655
period
Dividends paid - - - (2 548) - (2 548)
Balance at 30 September 30 298 5 285 26 562 4 391 62 657
2008 (3 879)
- Realised revaluation - (333) 333 - -
through depreciation -
- Deferred tax on - 93 (93) - -
realised revaluation -
through depreciation
- Minority interest - - - - (1 843) (1 843)
acquired
Net income/(expenses) - - (240) 240 (1 843) (1 843)
recognised directly in
equity
Net profit for the - - 6 785 734 7 519
period
Dividends paid - - - (3 624) (389) (4 013)
Balance at 31 March 30 298 (3 879) 5 045 29 963 2 893 64 320
2009
NOTES TO THE CONSOLIDATED FINANCIAL RESULTS
1 Statement of compliance
The accounting policies applied in the preparation of these unaudited
condensed results, which are based on reasonable judgments and estimates,
are in accordance with International Financial Reporting Standards and are
consistent with those applied in the annual financial statements for the
year ended 30 September 2008. These unaudited condensed results as set out
in this report have been prepared in terms of IAS 34 - Interim Financial
Reporting, the Companies Act, 1973 (Act 61 of 1973), as amended, and the
Listings Requirements of JSE Limited.
The interim results have not been audited or reviewed by the Group`s
auditors.
2 Basis of measurement
These unaudited condensed results have been prepared on the historical cost
basis.
The accounting policies are consistent with those used in the annual
financial statements for the year ended 30 September 2008.
3 Operating profit
Operating profit includes:
Unaudited Audited
6 months Unaudited 12 months
ended 6 months ended
31 March ended 30
2009 31 March September
R`000 2008 2008
R`000 R`000
- Operating lease charges 1 699 546 1 635
- Loss on sale of property 141 126 412
plant and equipment
- Impairment of property, - - 260
plant and equipment
- Impairment of intangible - - 570
assets
- Depreciation on 3 554 1 496 4 287
property, plant and
equipment
- Amortisation on 462 175 714
intangible assets
- Directors` emoluments 2 218 2 283 4 911
- Employee costs 42 019 20 887 60 455
- Audit fees 647 367 523
- Share-based payments 108 114 240
4 Reconciliation of earnings to headline earnings
Unaudited Audited
6 months Unaudited 12 months
ended 6 months ended
31 March ended 30
2009 31 March September
R`000 2008 2008
R`000 R`000
Profit for the period 6 785 6 504 14 904
Adjustments for:
- Loss on disposal of 140 126 412
property, plant and
equipment
- Impairment losses on - - 260
property, plant and
equipment
- Impairment losses - - 570
intangible assets
- Tax effects (39) (35) (268)
- Minority interest effect (3) - -
Headline earnings 6 883 6 595 15 878
5 Cash and cash equivalents
Cash and cash equivalents comprise cash balances with banks and bank
overdrafts.
6 Acquisitions
During the 12 months ended 30 September 2008, the Group acquired the
businesses of Greenbro CC and Northern Electric (Cape) (Proprietary)
Limited ("Northern Electric") for R10.1 million and R4.5 million
respectively. The excess of the purchase price over the net assets
acquired was recognised as Goodwill. At 30 September 2008 the Group had a
80% shareholding in Greenbro (Pty) Ltd, which contained the operations of
the Greenbro CC, and a 70% shareholding in Northern Electric. During the
six months ended 31 March 2009, the Group increased its shareholding in
Northern Electric from 70% to 95% for R2.25 million which will be settled
with cash and shares in RACEC Group Limited.
7 Related party transactions
During the year, the Company and its subsidiaries in the ordinary course of
business, entered into various related party sales, purchases and
investment transactions. These transactions were subject to terms that were
no less favourable than those arranged with third parties.
8 Post balance sheet events
RACEC has entered into an agreement with Solethu Investments (Proprietary)
Limited ("Solethu Investments") whereby Solethu Investments, through its
recently established wholly-owned subsidiary and special purpose vehicle,
Solethu Civils (Proprietary) Limited, will acquire a 25% interest in the
increased share capital of the company by way of subscription for 34 615
384 ordinary shares at an issue price of R1.30 per share for an aggregate
subscription price of R45 million. This transaction is in line with the
board`s objective of increasing the BEE shareholding within the Group.
Shareholders are referred to the announcements released on SENS on 2 April
2009, 5 June 2009 and 17 June 2009 and the circular to shareholders dated
29 June 2009 for further information.
9 Contingent liabilities
Unaudited Audited
6 months Unaudited 12 months
ended 6 months ended
31 March ended 30
2009 31 March September
R`000 2008 2008
R`000 R`000
STC on remaining reserves 3 039 1 944 2 752
Performance guarantees 25 814 30 476 32 137
Contractor contingency - - 1 704
The performance guarantees are provided by Lombards Insurance Company Limited
and C&G Underwriting Managers (Proprietary) Limited for work by subsidiary
companies.
The contractor contingency related to invoices received by the Group for work
performed by a subcontractor. The Group was of the view that there is no
liability to the subcontractor as there are errors on the billings and the
invoices are not valid. The amount is currently under dispute and is under
negotiation with the subcontractor, but unpaid amounts have been accrued.
10 Dividends
Unaudited Audited
6 months Unaudited 12 months
ended 6 months ended
31 March ended 30
2009 31 March September
2008 2008
Dividends declared to - 2 000 4 347
equity holders of the
parent (R`000)
Dividends per share (cents) - 2.0 4.2
11 Directors
There were no changes to the directorate during the period under review.
COMMENTARY
PROFILE AND STRUCTURE
RACEC has been in existence since 1956 and has built an extremely well trained
and experienced group of employees.
Despite the current economic turmoil, the Group remains well positioned to take
advantage of the infrastructure spend both locally and on the African continent.
The backlog to reverse the deteriorating South African and other African
countries` infrastructure which resulted from the lack of investment for over a
decade persists.
The Group`s primary business is the provision of engineering infrastructure
solutions.
The Group comprises a holding company and a number of subsidiaries, from which
the business activities are conducted. The Group has two main focuses, namely
the provision of electrical reticulation ("RACEC Electrification") and rail
construction which includes both track installation and maintenance ("RACEC
Rail").
As a result of RACEC`s experience across both the Rail and Electrification
segments, the Group is one of the only specialists in South Africa with the
capability to offer complete turnkey rail track solutions, from concept design
recommendations, through to construction and handover without outsourcing.
Electrification services are provided by:
* RACEC Electrification (Proprietary) Limited ("RACEC Electrification") and
RACEC Power (Proprietary) Limited, which are both involved in electrical
reticulation and which originated from RACEC`s objective to complement its
rail track business with the electrification of railway tracks;
* Greenbro (Proprietary) Limited ("Greenbro"), which supplies industrial
generators and electrical enclosures; and
* Northern Electric (Cape) (Proprietary) Limited ("Northern Electric"), which
is an electrical contractor focused primarily on the industrial and
commercial markets.
Greenbro and Northern Electric were acquired during the 2008 financial year and
are now an integral part of the Group`s operations.
Rail services are provided by:
* RACEC Rail (Proprietary) Limited ("RACEC Rail") which concentrates mainly
on the construction and maintenance of railway tracks throughout South and
southern Africa.
There have been no major changes in the nature of the Rail business.
The Group`s implementation of an ISO 9001 Quality Management System will further
assure the Group`s clients of its commitment to "Excellence in Engineering
Infrastructure".
FINANCIAL PERFORMANCE
The Group reported a 29% increase in revenue for the six months ended 31 March
2009 to R188.4 million (2008: R146.3 million) with continued solid organic
growth flowing from ongoing infrastructure investments in its target markets.
The inclusion of Greenbro and Northern Electric, which were acquired during the
2008 financial year, also contributed to the increased revenue.
The increase in gross profit and other operating expenses relate to the
acquisitions of Greenbro and Northern Electric which were included in the
Group`s results for the full six months.
Attributable profit for the period increased by 16% to R7.5 million (2008: R6.5
million). Stable headline earnings per share of 6.6 cents (2008: 6.6 cents) were
reported as the weighted average shares in issue increased to 104.0 million
(2008: 100.0 million) as shares were issued to fund the acquisitions in 2008.
Diluted headline earnings per share, which were based on 104.4 million (2008:
100.0 million) fully diluted weighted average shares, remained constant at 6.6
cents (2008: 6.6 cents).
Cash flow from operating activities amounted to R15.5 million in line with the
increased operating results.
The net bank overdraft decreased from R27.5 million at 30 September 2008 to
R19.5 million at 31 March 2009 due to better debtor collections. The net asset
value per share increased from R0.56 per share to R0.59 per share due to profits
and acquisition of property, plant and equipment.
Given the nature of the industry and the traditional close down periods during
December and January of each year, the Group`s operations show a seasonal bias
towards the second half of the financial year.
Net tangible asset value per share increased by 6% to 52.4 cents (30 September
2008: 49.3 cents).
OPERATIONAL PERFORMANCE AND PROSPECTS
RACEC Rail
In the first six months ended 31 March 2009, RACEC Rail reported revenue
amounting to R68.3 million (2008: R64.8 million), reflecting an increase of
5.4%.
The division continues to be impacted by lengthy adjudication processes among
parastatal companies, with contracts taking up to 18 months to be awarded.
In addition to the turnkey solutions, the Group is aligning itself with
companies specialising in locomotive shunting operations. Coupled with its rail
infrastructure maintenance subdivision, this will enable RACEC Rail to expand
its services to offer "Build, Operate and Transfer" project solutions.
RACEC Rail is currently involved in a number of cross border opportunities in
line with its plans to actively expand its footprint into Sub-Saharan Africa,
within the next three years. This will counteract the long lead times on
projects in the local parastatal sector and should dampen the impact of the
global economic downturn in the local market.
RACEC Electrification
For the first six months ended 31 March 2009 RACEC Electrification delivered
revenue amounting to R120.2 million (2008: R81.5 million), which represents an
increase of 48%.
Although a number of projects which had been identified in 2008 did not
materialise, the Group remains confident that they will still need to be
undertaken in the near future. These projects, along with Government`s ongoing
commitment to infrastructure investment, positions RACEC Electrification to
achieve growth in the next year.
PROSPECTS
As a result of the uncertain local economic environment and delays in project
awards, the RACEC Group anticipates more subdued activity levels in the second
half of the financial year. However, the Group is well positioned to show
sustainable growth in the longer term based on the trend of infrastructure
investments in its target markets and as initiatives to diversify its revenue
streams gain momentum.
BEE
A multi-faceted approach to BEE has been adopted which aims to increase the
number of previously disadvantaged individuals that manage, own and control
RACEC.
RACEC is fully committed to the principals of direct control through ownership
of the organisation`s equity, human resource development, employment equity and
indirect empowerment through preferential procurement policies.
The agreement with Solethu Investments will results in an increase in the BEE
shareholding within the Group which has been a key objective of the board.
Solethu Investments is strategically positioned in the rail logistics industry
with solid experience in road, rail, sea and related industries. Through this
new partnership RACEC will deliver on its strategic imperative of becoming a
leading provider of rail and electrification solutions while enhancing its
transformation imperatives by introducing a substantial black shareholder to the
listed entity, RACEC Group Limited.
The BEE shareholding of most of the operating companies in the Group exceeds
30%.
The RACEC Employee Share Trust ("the Trust") was established in 2004 and owns
30% of the equity in RACEC Rail and RACEC Electrification. There are
approximately 1 000 beneficiaries of the Trust, most of whom are from the
previously disadvantaged community.
The Company also makes significant investments in skills development of
employees from previously disadvantaged backgrounds who show potential by
assisting them to start their own businesses and providing them with
administration, management, mentorship and financial support.
RACEC has established and built long-term relationships with emerging
contractors from previously disadvantaged backgrounds. This facilitates emerging
contractors` ability to bid for larger contracts and ensures skills transfer.
Many major contracts have been successfully completed to the benefit of RACEC,
its BEE partners and clients.
RACEC also supports deserving disadvantaged learners in their studies with the
aim of equipping them to create a better future for themselves as well as
pursuing their careers within the RACEC Group.
DIRECTORATE
With effect from 28 May 2009, Mr Gary Lee Harrod, an executive director of
RACEC, assumed the role of Chief Operating Officer of the Group.
SOCIAL RESPONSIBILITY
Employment equity/Skills development
RACEC has a dedicated manager responsible for handling all issues related to
employment equity and training. As a group, RACEC is committed to creating
opportunities for its staff through training and promotion from within, wherever
possible.
Health and safety
The Group has a dedicated Group Health and Safety manager who reports directly
to the CEO and carries his authority. Health and safety committees are
established at all our branches and all work areas are continuously assessed.
There is a training programme in place and all safety representatives are
trained and regularly monitored.
HIV/AIDS
As a further commitment to our staff we have arranged HIV/AIDS information
sessions and testing of all our staff on a voluntary basis. The results of these
tests are strictly confidential and counselling is arranged for those requiring
further assistance. Information about the HIV/AIDS pandemic is provided on an
ongoing basis.
DIVIDENDS
No interim dividends have been declared for the period.
By order of the board
M Uys C Harrod
Non-Executive Chairman Chief Executive Officer
30 June 2009
Directors:
M Uys* (Chairman), C Harrod (Chief Executive Officer), G Harrod (Chief Operating
Officer), C Gooden*, W Ollewagen, S Wilkins (Financial Director), B Petersen*
* Non-executive
Company secretary:
C van Rensburg
Registered office:
8 Hawkins Avenue, Epping 1, 7460 (PO Box 61, Eppindust, 7475)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited (PO Box 61051,
Marshalltown, 2107)
Designated Adviser:
Merchantec (Proprietary) Limited (PO Box 41480, Craighall, 2024)
Auditors:
BDO Spencer Steward (Cape) Inc. (Docex 158, Cape Town)
These results may be viewed on the internet on http://www.racec.co.za
Date: 30/06/2009 08:00:03 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
