| Wed 14 Apr 2010, 8:00 | | PKH - Protech Khuthele Holdings Limited - trading statement |
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PKH
PKH
PKH - Protech Khuthele Holdings Limited - trading statement
Protech Khuthele Holdings Limited
Registration number 2000/024352/06
JSE code: PKH ISIN: ZAE000101986
("Protech" or "the Company" or "the Group")
TRADING STATEMENT
In terms of the JSE Limited`s Listings Requirements, companies are
required to publish a trading statement as soon as they are reasonably
certain that the financial results for the current reporting period will
be more than 20% different to that of the previous corresponding period
Shareholders are advised that headline earnings per share and earnings
per share for the full year ended 28 February 2010 are expected to
decline by between 15-25% from the 26,0 cents per share and 25,6 cents
per share respectively reported for the year ended February 2009.
Protech warned at interim stage that the second half of the financial
year would be challenging and this has proved to be correct. The civil
engineering sector as a whole found conditions in calendar year 2009
remarkably challenging, with the second half of the year particularly
difficult. According to SAFCEC, the cumulative number of tenders during
calendar year 2009 declined by 18% compared to 2008, with the second
half down 24% on the first half. On top of this, the total value of
contracts awarded in 2009 compared to 2008 declined by a massive 50%.
Protech`s earnings decline was mainly caused by the three factors
outlined below:
* Continued recessionary pressure
* This resulted in increased competition in South Africa as
several large construction players returned to the local
market due to global market pressure, in particular the Dubai
meltdown; and
* The already-shrunken private sector also saw significantly
more players competing for very limited contracts.
* Public infrastructure spending paralysis
* Certain central and provincial government departments under-
spent on their infrastructure budgets by as much as 70%
* Extreme rainfall
* Mpumalanga, where the group had an unusual concentration of
work due to the growth experienced in the coal sector,
experienced 1120mm rainfall over the last quarter to February
2010 compared to a 60-year average annual rainfall of 459mm
for the corresponding period.
As outlined in the interim results announcement in November 2009, in
line with the group`s strategy to counter weak markets, it continued to
pro-actively shift market emphasis to the still-growing mining sector.
The group successfully increased the relative contribution of mining
work to total group contracts from 48% to 50% and resulted in the group
winning a further R602 million of contracts for blue-chip mining clients
since November 2009.
The group`s strategy of being one of the first in its peer group to
focus on the South African mining sector growth as an alternative to
otherwise weak markets therefore served it well. However, as outlined
above, the continued pressure experienced in the private sector due to
the international recession, as well as significant delays in public
sector contract awards, resulted in an increase in competition towards
the end of the 2010 financial year in the group`s chosen mining markets.
This was further exacerbated by excessive rainfall, which had a severe
impact on the start of a number of projects, as well as on the flow of
current projects.
Against these factors, the group continued to focus on identifying South
African opportunities, as well as establishing a presence in several
southern African countries. The group has also not wavered from its
strategy of working for blue-chip clients only and cherry picking its
work. This resulted in continued margin maneuverability, which helped to
limit the earnings decline and maintained group bad debts at less than
1% of revenue. Whilst margins did indeed come under pressure, they are
still well above the industry average.
Furthermore, Protech has substantial current work in progress of R970
million, with R700 million still to be executed. The majority of this
work will be executed by the end of calendar year 2010.
This trading statement has not been audited or reviewed by the group`s
auditors. The group`s results will be released in late May 2010.
Johannesburg
14 April 2010
Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 14/04/2010 08:00:03 Produced by the JSE SENS Department.
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