| Thu 19 Nov 2009, 7:05 | | PSV - PSV Holdings - Unaudited results for the interim period ended 31 August |
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PSV
PSV
PSV - PSV Holdings - Unaudited results for the interim period ended 31 August
2009
PSV Holdings Limited
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 2009
Salient features
Revenue up 8,1%
Operating profit up 5,5%
Operating cash flow up 195%
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
6 months 6 months 12 months
ended 31 ended 31 ended 28
August August February
2009 2008 R`000 2009
R`000 R`000
Revenue 188 882 174 736 430 865
Gross profit 50 635 49 047 97 920
Operating expenses 32 892 32 236 64 542
Operating profit 17 743 16 811 33 378
Impairment of goodwill and (69 421) - -
intangibles
Operating (loss)/profit after (51 678) 16 811 33 378
impairment of goodwill and
intangibles
Net finance charges* (7 501) (1 404) (10 145)
(Loss)/profit before taxation (59 179) 15 407 23 234
Taxation** (609) (3 302) (6 686)
Total comprehensive (59 788) 12 105 16 547
(loss)/income for the period
attributable to owners of the
parent
Reconciliation to headline
earnings
(Loss)/profit attributable to (59 788) 12 105 16 547
PSV equity holders
Profit/(loss) on disposal of 73 (36) (108)
fixed assets
Impairment of goodwill and 69 421 - -
intangibles
Tax effect arising on (2 640) - -
impairment
Headline earnings 6 920 12 141 16 655
Reconciliation to core
earnings
Headline earnings 6 920 12 141 16 655
Interest on deferred purchase 1 534 879 1 342
consideration payable
Amortisation of specific 2 733 1 677 4 852
intangibles
Deferred taxation provided on (765) (470) (1 358)
above
Straight lining of leases 349 21 21
Share based payments 289 - -
Core earnings 11 060 14 248 21 512
Basic (loss)/earnings per (25,25) 5,13 7,02
share (cents)
Headline earnings per share 2,92 5,14 7,06
(cents)
Core earnings per share 4,67 6,03 9,12
(cents)
Diluted (loss)/earnings per (24,11) 4,88 6,69
share (cents)
Diluted headline earnings per 2,79 4,90 6,73
share (cents)
Actual number of shares in 247 962 236 131 236 020
issue at period end
Weighted number of shares in 236 795 236 131 235 784
issue at period end
Fully diluted weighted 247 962 247 799 247 451
average number of shares in
issue at period end
*Actual net interest paid was R4,640 million. Balance comprises deferred
purchase consideration interest and net foreign exchange losses
** After deducting R2,640 million being the tax effect arising on impairment of
intangibles
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
31 August 31 August 28
2009 2008 February
R`000 R`000 2009
R`000
ASSETS
Non-current assets 147 456 193 749 213 795
Current assets 138 808 179 678 157 506
Inventories 74 509 76 687 74 228
Trade and other receivables 62 772 91 081 76 469
Taxation receivable 1 527 - 5 463
Cash and cash equivalents - 11 910 1 346
Total assets 286 264 373 427 371 301
EQUITY AND LIABILITIES
Equity 171 602 228 047 230 890
Non-current liabilities 26 868 25 668 35 354
Borrowings 19 508 17 978 20 065
Purchase consideration payable 1 557 1 293 6 460
Deferred tax liabilities 5 803 6 397 8 829
Current liabilities 87 794 119 712 105 057
Trade and other payables 77 343 111 766 96 928
Taxation payable - 7 946 3 725
Bank overdrafts 10 451 - 4 404
Total equity and liabilities 286 264 373 427 371 301
Net asset value per share 69,20 96,58 97,83
(cents)
Tangible net asset value per 35,77 39,85 33,54
share (cents)
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited 12
6 months 6 months months
ended 31 ended 31 ended 28
August August February
2009 2008 2009 R`000
R`000 R`000
Balance at beginning of year 230 890 202 457 202 457
Total comprehensive income 6 993 12 104 16 547
for the period
Buy back of shares for share - - (2 339)
incentive scheme
Issue of shares for cash less - 10 473 10 468
costs
Share based payments 493 - -
Impairment of goodwill and (66 781) - -
intangibles
Net movement in stated 7 3 013 3 757
capital
Balance at end of period 171 602 228 047 230 890
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited 12
6 months 6 months months
ended 31 ended 31 ended 28
August August February
2009 2008 2009 R`000
R`000 R`000
Cash flows from operating 6 097 (6 402) (2 561)
activities
Cash flows from investing (19 179) (30 590) (55 255)
activities
Cash flows from financing 5 690 23 031 24 049
activities
Net movement in cash and cash (7 392) (13 961) (33 767)
equivalents
Increase/(decrease) in cash (7 392) (13 961) (33 767)
and cash equivalents
Cash at acquisition of - - 4 838
subsidiary
Cash and cash equivalents at (3 059) 25 871 25 871
beginning of the period
Cash and cash equivalents at (10 451) 11 910 (3 058)
end of the period
Condensed consolidated segmental information
Pump spares Linings and Specialised Total R`000
and valves general services
R`000 industrial R`000
supplies
R`000
Revenue 63 282 55 176 70 424 188 882
Gross profit 23 721 15 316 11 598 50 635
Operating expenses 12 206 11 607 9 079 32 892
Profit before tax 6 420 2 236 1 586 10 242
Depreciation/amortisation 1 886 552 455 2 893
Capital expenditure 4 006 94 290 4 390
Gross assets 105 314 61 414 57 047 223 775
Gross liabilities 56 313 8 571 28 177 93 061
Note: Shared service costs have been apportioned pro rata into the respective
operating segments based on revenue
Commentary
Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards including IAS 34: Interim Financial
Reporting, the JSE Limited Listings Requirements and in the manner required by
the Companies Act of South Africa. The principal accounting policies as set out
in the company`s 2009 annual report has been consistently applied throughout the
six-month period under review except for the application of IFRS 8: Operating
Segments. Revised IFRS 8 replaces IAS 14: Segment Reporting and requires an
entity to adopt a "management approach" to reporting the financial performance
of its segments. In accordance with the requirements of IFRS 8 the segmental
reporting is now prepared based on the business units as reported internally by
management. The company has complied with the revised naming conventions as
required by IAS 1 and reports one Statement of Comprehensive Income. As required
by the JSE Limited Listings Requirements, the company reports headline earnings
in accordance with Circular 3/2009: Headline Earnings as issued by the South
African Institute of Chartered Accountants.
Overview
The company experienced tough trading conditions for the six months ended August
2009 ("2009 period"). The strengthening of the Rand and high cost of debt
reduced the company`s profit after tax. Notwithstanding, the company`s operating
cash flows improved through the implementation of strict working capital
procedures.
Financial
Although turnover increased by 8,1% compared to the 2008 period, gross profit
margins reduced by 1,3 percentage points to 26,8%. Notwithstanding, it is
pleasing to note that gross profit margins are 4,1 percentage points higher than
those achieved for the year ended February 2009. Similarly, operating margins at
9,4% were 0,2 percentage points less than those achieved during the 2008 period,
but 1,6 percentage points higher than those achieved for the year ended February
2009.
The profit for the period was eroded by high finance and foreign currency
related costs. These costs include inter alia a R1,4 million foreign exchange
loss arising on the conversion of US dollar denominated debtors and R1,47
million interest arising on deferred payment structures in place for vendors of
businesses acquired. The strengthening of the Rand against the US dollar
affected the company detrimentally as PSV has traditionally not covered its
foreign exchange risk on exports. In addition, the Rand`s performance caused
certain foreign currency denominated inventory items being overvalued,
necessitating write downs. These factors caused the company`s headline earnings
per share to decrease by 43,2% to 2,92 cents per share (2008 5,14 cents per
share).The company`s core earnings per share were 4,67 cents per share (2008:
6,03 cents per share).
Strict working capital protocols manifested in a vast improvement in operating
cash flows to just over R6 million compared to negative R6,5 million for the
2008 period. The positive cash conversion permitted the company to repay
expensive short term mezzanine debt and should result in a noticeable reduction
in finance costs in the next six months.
A detailed assessment of the group`s goodwill and intangibles was undertaken at
period end. In terms of this assessment, the carrying values of goodwill and
intangibles of the company`s PSV Services, PSV Zambia and Petrologic cash
generating units were not in line with the values reflected in the balance
sheet. The goodwill arose when the company reverse listed into the Elixir
Technology Holdings Limited cash shell in 2006. Whilst the valuation was in line
with market expectations at the time, trading conditions have since deteriorated
necessitating an impairment of goodwill and intangibles amounting to R66,8
million after tax. This had the impact of reducing the company`s earnings per
share to a loss to 24,1 cents per share.
Operations
Most business units performed below budgeted expectations and came under severe
margin pressure. Notwithstanding, all business units made a profit with the
exception of PSV Zambia which made a loss as a result of declining copper prices
and the consequential down scaling by the copper mines to care and maintenance
programmes.
The company made the decision to maintain operating infrastructures at the same
level as in the previous year as the erosion of intellectual capital will be far
more costly to replace when market conditions improve.
The current order book value is R130 million.
Corporate actions
The company is currently in the process of acquiring the business of Cryoshield
(Pty) Ltd a business operating in the cryogenics sector for R8 million. This
company provides a highly complementary suite of products and services to Rand
Air and Gas as well as a suitable succession plan. The due diligence is
currently been finalised and the transaction is still subject to board approval.
Prospects
Management is of the view that a difficult six months still lie ahead. Despite
contracts being extended and slow to be appointed, PSV has experienced a slight
increase in activity over the past few months. Contracts tendered on but not yet
awarded currently amount to R234 million. Approximately 50% of these prospects
are attributable to lining projects and the remainder is made up of service
contracts, a vaporiser contract in Richards Bay, and pumps and piping contracts.
Changes to the board
Mr MM Patel was appointed chairman of the audit committee in place of Mr JA
Anderson who was not re-elected as an independent non-executive director at the
company`s annual general meeting on 28 August 2009.
Mr GS Nzalo has been appointed as an independent non-executive director to the
board with effect from 1 November 2009. Mr Nzalo is chairman of the risk
committee and a member of the audit committee.
Dividends
The company will continue to retain and utilise cash generated to fund working
capital requirements and as such, no dividends were declared or proposed. The
board will review the dividend policy at the end of the financial year.
AJD da Silva AR Dreisenstock
Chief Executive Officer Chief Financial Officer
19 November 2009
Corporate Information
Independent Non-executive Directors:
CE Chimombe-Munyoro, MM Patel, GS Nzalo
Executive Directors:
AJD Da Silva, AR Dreisenstock, P Robinson and DJ Kelly
Registered address:
Unit 419, Greenhills Industrial Estate, Tunney Extension 6, Germiston
Postal address:
Postnet Suite 229, Private Bag X19, Gardenview, 2047
Company Secretary:
M Saayman Telephone: 0860 778 778 Facsimile: 0860 329 778
Transfer Secretaries:
Computershare Investor Services (Pty) Limited
Designated Adviser:
Vunani Corporate Finance
Date: 19/11/2009 07:05:02 Produced by the JSE SENS Department.
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