| Mon 2 Nov 2009, 7:41 | | PKH - Protech Khuthele Holdings - Reviewed consolidated interim results |
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PKH
PKH
PKH - Protech Khuthele Holdings - Reviewed consolidated interim results for the
period ended 31 August 2009
Protech Khuthele Holdings Limited
Registration number 2000/024352/06
JSE code: PKH ISIN: ZAE000101986
("Protech" or "the Company" or "the Group")
Reviewed consolidated interim results for the period ended 31 August 2009
- Revenue up 24%
- Cash generated by operations (after changes in working capital) up 113%
- Net tangible asset value up 53%
- Earnings attributable to shareholders down 8%
Condensed consolidated statement of financial position
at 31 August 2009
R~000 Reviewed Audited Reviewed
Group Group Group
31/08/2009 28/02/2009 31/08/2008
ASSETS
Non-current assets 394 976 393 143 333 699
Property, plant and 355 009 354 172 300 107
equipment
Goodwill 33 549 33 549 31 365
Other intangible assets 2 010 1 817 1 768
Other financial assets 3 029 3 605 -
Deferred tax 1 379 - 459
Current assets 351 360 298 839 225 508
Inventory 19 962 16 946 22 642
Amounts due from 56 003 9 290 23 573
contract customers
Trade and other 110 810 132 268 107 390
receivables
Retention receivables 39 674 30 820 35 725
Other financial assets 9 036 7 927 5 197
Bank balances and cash 115 875 101 588 30 981
Total assets 746 336 691 982 559 207
Equity and liabilities
Share capital and
reserves
Shareholders~ equity 283 235 234 614 194 695
Share capital and share 228 598 228 598 228 598
premium
Common control reserve (122 053) (122 053) (122 053)
Retained earnings 176 690 128 069 88 150
Total liabilities 463 101 457 368 364 512
Non-current liabilities 239 683 235 566 213 880
Borrowings - interest 176 541 186 517 168 402
bearing
Deferred tax 63 142 49 049 45 478
Current liabilities 223 418 221 802 150 632
Trade and other 97 992 94 125 66 980
payables
Subcontractor 5 472 9 704 5 558
liabilities
R~000 Reviewed Audited Reviewed
Group Group Group
31/08/2009 28/02/2009 31/08/2008
Borrowings - interest 103 948 87 839 58 219
bearing
Current tax liabilities 16 006 30 134 19 875
Total equity and 746 336 691 982 559 207
liabilities
SUPPLEMENTARY STATEMENT
OF FINANCIAL POSITION
INFORMATION
Total number of shares 362 500 362 500 362 500
in issue (thousands)
Net asset value per 78.1 64.7 53.7
share (cents)
Capital expenditure
- Spent 64 441 162 102 72 192
- Commitments - 34 862 128 302 45 859
Authorised but unspent
Performance guarantees 48 386 49 210 29 383
issued
Consolidated statement of cash flows
for the six months ended 31 August 2009
R~000 Reviewed Audited Reviewed
Group Group Group
6 months 12 months 6 months
ended ended ended
31/08/2009 28/02/2009 31/08/2008
Cash flows from 28 672 114 667 12 826
operating activities
Cash receipts from 387 935 635 929 279 772
customers
Cash paid to suppliers (332 543) (492 999) (253 819)
and employees
Cash generated by 55 392 142 930 25 953
operations
Net interest paid (6 912) (27 869) (12 979)
Income taxes paid (19 808) (394) (148)
Cash flows from (20 518) (145 655) (65 805)
investing activities
Purchase of property, (64 441) (162 102) (72 192)
plant and equipment
Replacement (51 349) (55 068) (15 176)
Additions (13 092) (107 034) (57 016)
Proceeds on disposal of 44 456 32 768 16 374
property, plant and
equipment
Assets acquired through - (7 000) (7 000)
acquisition
Increase in loans (533) (9 321) (2 987)
granted
Cash flows from 6 133 39 338 (9 278)
financing activities
Settlement of vendor - (71 356) (71 356)
liability
Increase in loan - 62 200 62 200
finance
Payments in terms of (6 797) (8 146) (3 949)
loan finance
Increase in borrowings 63 924 163 381 66 719
related to instalment
sale agreements
R~000 Reviewed Audited Reviewed
Group Group Group
6 months 12 months 6 months
ended ended ended
31/08/2009 28/02/2009 31/08/2008
Payments in terms of (50 994) (106 741) (62 892)
instalment sale
agreements
Net increase/(decrease) 14 287 8 350 (62 257)
in cash and cash
equivalents
Cash and cash
equivalents at the
beginning
of the period 101 588 93 238 93 238
Cash and cash 115 875 101 588 30 981
equivalents at the end
of the period
Consolidated statement of changes in equity
for the six months ended 31 August 2009
R~000 Share Share Common Retained Total
capital premium control earnings
reserve
Balance at 29 2 228 596 (122 053) 35 158 141 703
February 2008
Profit for the 92 911 92 911
year
Balance at 28 2 228 596 (122 053) 128 069 234 614
February 2009
Profit for the 48 621 48 621
period
Balance at 31 2 228 596 (122 053) 176 690 283 235
August 2009
Condensed consolidated statement of comprehensive income
for the six months ended 31 August 2009
R~000 Reviewed Audited Reviewed
Group Group Group
6 months 6 months
ended 12 months ended
31/08/2009 28/02/2009 31/08/2008
Revenue 425 805 706 683 344 235
Profit before 94 947 188 172 101 987
depreciation,
amortisation,
interest and taxation
Depreciation and (21 018) (32 185) (15 342)
amortisation
Profit before interest 73 929 155 987 86 645
and taxation
Net interest expense (6 912) (27 869) (12 979)
Profit before taxation 67 017 128 118 73 666
Taxation (18 396) (35 207) (20 673)
Total comprehensive 48 621 92 911 52 993
income for the
period/year
attributable to the
owners of the company
Earnings per share
(cents)
- Basic 13.4 25.6 14.6
R~000 Reviewed Audited Reviewed
Group Group Group
6 months 6 months
ended 12 months ended
31/08/2009 28/02/2009 31/08/2008
SUPPLEMENTARY STATEMENT
OF COMPREHENSIVE INCOME
INFORMATION
Weighted average number
of shares in issue:
- Weigted average 362 500 362 500 362 500
number of shares in
issue (thousands)
Reconciliation of
headline earnings:
Profit attributable to 48 621 92 911 52 993
shareholders of the
holding company
Adjusted for (1 448) 1 457 582
(profit)/loss on
disposal of assets
Headline earnings 47 173 94 368 53 575
Headline earnings per
share (cents)
- Basic 13.0 26.0 14.8
Operational segmental reporting
for the six months ended 31 August 2009
SERVICES WITHIN EACH BUSINESS SEGMENT
For management purposes, the Group is organised into four major operating
divisions - earthworks, plant hire, geotechnical laboratory and readymix. These
divisions are the basis on which the Group reports its primary segment
information. The principal services and products of each of these divisions are
as follows:
Earthworks - bulk earthworks and roads and civil engineering contractors.
Plant hire - plant hire and logistical services.
Geotechnical laboratory - geotechnical laboratory and surveying services.
Readymix - supplier of readymixed concrete and pumping services.
SEGMENT REVENUE AND SEGMENT RESULTS
R~000 Segment revenue Segment result
6 months 6 months 6 months 6 months
ended ended ended ended
31/08/2009 31/08/2008 31/08/2009 31/08/2008
Earthworks 344 875 281 202 16 133 40 646
Plant hire 130 534 88 578 76 592 54 905
Geotechnical 7 690 5 680 1 234 1 387
laboratory
Readymix 58 659 62 476 386 3 017
541 758 437 936 94 345 99 955
Corporate* 3 258 6 480 602 2 032
Eliminations (119 211) (100 181) - -
425 805 344 235
Profit before 94 947 101 987
depreciation,
amortisation,
interest and
taxation
Depreciation (21 018) (15 342)
and
amortisation
Profit before 73 929 86 645
interest and
taxation
Net interest (6 912) (12 979)
paid
Profit before 67 017 73 666
taxation
Taxation (18 396) (20 673)
Profit for the 48 621 52 993
period
Segment assets and liabilities
R~000 Segment assets Segment liabilities
6 months 6 months 6 months 6 months
ended ended ended ended
31/08/2009 31/08/2008 31/08/2009 31/08/2008
Earthworks 186 696 174 868 128 029 87 729
Plant hire 391 939 290 781 309 348 229 029
Geotechnical 7 692 3 455 3 306 2 329
laboratory
Readymix 83 108 86 122 23 086 18 294
669 435 555 226 463 769 337 381
Corporate* 130 396 39 709 52 827 62 859
Eliminations (53 495) (35 728) (53 495) (35 728)
746 336 559 207 463 101 364 512
Other segment information
R~000 Depreciation and Capital expenditure
amortisation
6 months 6 months 6 months 6 months
ended ended ended ended
31/08/2009 31/08/2008 31/08/2009 31/08/2008
Earthworks 699 978 594 1 142
Plant hire 17 578 11 758 61 388 69 603
Geotechnical 437 209 2 169 859
laboratory
Readymix 2 304 2 397 290 588
21 018 15 342 64 441 72 192
* Corporate includes the transactions of the holding company.
Segment revenue reported above represents revenue generated from external
customers. Intersegment sales amounted to R119.2 million (2009: R100.2 million).
The accounting policies of the reportable segments are the same as the Group~s
accounting policies. Segment profit, represents the profit before interest
earned by each segment.
Notes to the condensed consolidated financial report
for the six months ended 31 August 2009
CORPORATE INFORMATION
Protech is a limited liability company incorporated and domiciled in South
Africa. Protech is listed on the JSE Limited. The main business of Protech and
its operating subsidiaries is bulk earthworks, plant hire, civil engineering
services and sale and distribution of readymix concrete.
The directors of Protech authorised the issue of the condensed consolidated
financial report for the six months ended 31 August 2009 on 30 October 2009.
BASIS OF PREPARATION
The condensed consolidated financial report for the six months ended 31 August
2009 has been prepared in compliance with the South African Companies Act No 61
of 1973, as amended, the Listings Requirements of the JSE Limited and
International Accounting Standard 34, Interim Financial Reporting.
The interim report has been prepared using accounting policies that comply with
International Financial Reporting Standards. The accounting policies are
consistent with those applied in the financial statements
for the year ended 28 February 2009, except for the changes which are described
in the next paragraph, new accounting standards and interpretations adopted.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED
During the period under review the group has adopted the following accounting
standards and interpretations:
- IAS 1 (Revised) Presentation of financial statements (effective for accounting
periods beginning on or after
1 January 2009);
- IAS 1 Presentation of financial statements: Puttable financial instruments and
obligations arising on liquidation (effective for accounting periods beginning
on or after 1 January 2009);
- IAS 23 (Revised) Borrowing Costs (effective for accounting periods beginning
on or after 1 January 2009);
- IFRS 2 - Share based payments: Vesting Conditions and Cancellations
(amendments effective on or after
1 January 2009);
- IFRS 8 Operating Segments (effective for accounting periods beginning on or
after 1 January 2009); and
- IFRIC 15 Agreements for the Construction of Real Estate (effective for
accounting periods beginning on or after 1 January 2009).
The adoption of these accounting standards and interpretations had no material
impact on the financial results of the Group for the period ended 31 August 2009
and resulted in no changes to the Group~s accounting policies.
PROPERTY, PLANT AND EQUIPMENT
Capital expenditure on property, plant and equipment was R64 million for the six
months ended 31 August 2009.
Post-balance sheet date events
The directors are not aware of any matter or circumstance arising since the end
of the period and up to the date of this report, not otherwise dealt with in
this report.
CORPORATE GOVERNANCE
The group subscribes to the Code of Good Corporate Practices and Conduct as
contained in the King II Report on corporate governance and the board has
satisfied itself that Protech has complied throughout the period under review in
all material aspects with the code.
INDEPENDENT REVIEW OPINION
The auditors, Deloitte & Touche have issued their unmodified review opinion on
the condensed consolidated financial report for the six months ended 31 August
2009. A copy of their unmodified review opinion is available for inspection at
the company~s registered office.
Commentary
INTRODUCTION
Protech Khuthele (Protech) is a bulk earthworks and civil engineering Group that
offers fast-track contracting. The Group is involved in projects in the mining,
public and private sectors.
During the six months to 31 August 2009, spend in certain areas of public
infrastructure development and in the coal mining sector continued, with the
ongoing tapering off of private and commercial sector activity.
The Group~s ability to deliver additional value to clients in an economic
context that demands high levels of efficiency and minimal downtime served it
well. Protech~s healthy margin structure also offered some manoeuvra-bility
against the market slump. The Group therefore managed to increase volumes while
still maintaining margins at significantly higher levels than the industry. Its
main business of Contracting - representing 88% of revenue - ended the period by
maintaining its margin above its internal target of 20% at 21.6%.
FINANCIAL REVIEW
Statement of comprehensive income
Group revenue increased by 24% to R426 million (2008: R344 million). Revenue was
predominantly generated through the Group~s ability to quickly shift between
sectors. At the period end, the Group~s exposure to the strained private sector
was down to only 8%, with mining representing 48% and public infrastructure 44%.
As was expected in the prevailing market conditions, operating profit at R73.9
million was 15% lower (2008: R86.6 million) than the comparative prior period.
The Group managed to limit severe margin impact by focusing on quality projects
and efficiencies. The operating margin therefore declined to a still above-
average 17.5% from the 22.2% at the previous year end.
Net interest cost was R6.9 million (2008: R13.0 million) due to the reduction in
interest rates and once off interest charged on a specific contract. Interest
bearing debt increased to R280.5 million (2008: R226.6 million). The effective
tax rate of 27.4% (2008: 28.1%) was in line with statutory corporate tax rates
and is not expected to vary significantly in the future.
Earnings per share decreased by 8% from 14.6 cps to 13.4 cps. Headline earnings
decreased by 12% to 13.0 cps (2008: 14.8 cps) over the comparative prior year
period.
Statement of financial position
The debt:equity ratio decreased from 74% at 28 February 2009 to 58% at the
period end. Although it remains high, management is pleased with the decrease
and believes it is in line with the Group~s business model and policy of running
only new equipment and replacing equipment on average 30 months after purchase.
Furthermore, interest bearing debt relates almost exclusively to asset finance,
providing sufficient equity in plant and equipment to cover debt. The Group also
generates strong cash flow to comfortably service its debt.
During the last six months, the equipment and plant fleet was not increased,
with the Group only continuing
to replace equipment in line with its strategy of maintaining a quality fleet.
Capital expenditure amounted to R64 million for the period and related mainly to
the replacement of equipment.
Receivables increased by 27% to R167 million (2008:R131 million). Of this:
- 37% (R62 million) consisted of blue-chip and listed clients
- 34% (R56 million) consisted of work certified, but not yet invoiced
Of the invoiced debtors at 31 August 2009, 65% (R72 million) was collected by
the end of October 2009.
Retention debtors increased by 11% to R40 million (2008: R36 million). This is
in line with the industry where retentions are typically due 12 months after
completion of the contract. None of the Group~s retention debtors are older than
12 months, indicating that retention debtors are collected as and when they fall
due.
There were no significant bad debts or bad debt write-offs during the period
under review. Management remains actively involved in the credit control and
credit vetting process and this paid off in the tough economic climate during
this period.
Cash flow
During the six months, there was a continued strong focus on effective working
capital management. Cash generated by operations after working capital therefore
doubled from R26.0 million to R55.4 million.
Cash utilised to fund increased working capital comprised largely of the R36
million increase in the above-mentioned accounts receivable.
The closing cash balance of R115.9 million (2008: R31.0 million) was pleasing.
OPERATIONAL REVIEW
Contracting (88% of Group revenue)
The Civils and Earthworks and Plant hire and Logistical services form the
Contracting arm of the Group. Revenue was up by 24% to R344 million (R278
million) due to focusing on the still-growing coal sector and some
infrastructure projects. Even against the tough markets, three new projects were
secured - the DMO pipeline (BHP Billiton), the Dorstfontein access road (Total
Coal SA) and works on the new Kiepersol mine (Jindal Mining SA). Additional work
was awarded on current mining contracts, such as Goedgevonden (Xstrata Coal SA).
The upgrading of the main runways at the Waterkloof Airforce Base continued and
this business~ portion of the Gauteng Freeway Improvement Project progressed
smoothly. The client~s accelerated interim completion dates on the Gautrain
contract were all met and the contract is nearing completion.
Although operating profit was down 10%, the margin of 21.6% remained well above
the industry norm due to a rigid adherence to the Group~s business model of
efficiencies and carefully selecting which projects to take on. This business
also made a strategic decision not to chase lower-margin work in the public
infrastructure arena. Pleasingly, the Group~s plant utilisation remained at
102%.
Geotechnical (1% of Group revenue)
Geotechnical comprises a geotechnical laboratory and survey services. The
Geotechnical division supports Contracting by providing timeous and high quality
geotechnical and survey services. Revenue was up 34% to R8 million (2008: R6
million). The investment in staff and equipment during 2009 for the South
African National Accreditation Systems accreditation process has now been
incorporated into the results.
The accreditation is imminent and will result in the business being able to
service a wider selection of clients.
Readymix (11% of Group revenue)
Despite market conditions that deteriorated even further during the last six
months, a continued shift of sectors mitigated extreme volume pressure. Revenue
derived from the pressurised housing sector has now successfully reduced from
95% at the time of acquisition in February 2008 to 8% now. 92% of revenue is
currently derived from commercial, industrial and infrastructure spend.
Sales volumes were down 12% from the comparable period, with margins being much
tighter in a very competitive market. Revenue was down 6% to R58 million (R62
million).
During the six months, Readymix remained cash self-sufficient, reduced input
costs and decreased its operating cost base in response to the tough market
conditions.
The corrective action taken in this business since acquisition has positioned it
well to take advantage of any increase in sales volumes. However, this is not
expected in the short term.
PROSPECTS
The Group~s main business of Contracting will continue to focus on mining to
counter weak private and slow public infrastructure sector spend. As projects
are of a shorter duration, it prevents the Group from being tied into long term
low-margin projects. Geotech is set to increase volumes and margins over the
next 12 months as its external client base increases following its SANAS
accreditation. Corrective actions at Readymix have been comprehensively
implemented and this business is now as lean as it can be for the eventual
market recovery.
Although overall markets are likely to remain difficult until mid-calendar 2010,
Protech is proactively managing its environment by cherry-picking quality
projects, sticking to a blue-chip client base and remaining steadfast on its
business model that was designed to cope with challenging conditions. The Group
has already secured 65% of the F2009 revenue, with current secured work in
progress of R456 million and around R300 million of imminent contract awards.
Mrs Constance (Connie) Nkosi has resigned as a non-executive director of the
company with effect from 6 October 2009.
On behalf of the directors
DA Ackerman
Chairman of the Board
GD Chapman
Group Chief Executive
CJA Wolmarans
Group Financial Director
Lanseria
30 October 2009
Directors: DA Ackerman* (Chairman), GD Chapman (Group Chief Executive) CJA
Wolmarans
(Group Financial Director), MSG Mareletse*+, 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
www.pkh.co.za
Date: 02/11/2009 07:05:03 Produced by the JSE SENS Department.
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