| Tue 18 May 2010, 7:06 | | SAN - Sanyati Holdings Limited - Audited results for the year ended 28 February |
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SAN
SAN
SAN - Sanyati Holdings Limited - Audited results for the year ended 28 February
2010
Sanyati Holdings Limited ("Sanyati" or "the company" or "the Group")
(Registration number 1988/002538/06)
Share code: SAN
ISIN: ZAE000081055
AUDITED RESULTS
for the year ended 28 February 2010
42% Revenue increased to R1 997 million
66% EBITDA increased to R173 million
15% Normalised HEPS of 23,5 cents
R116 million Cash generated by operations
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
28 February 28 February
2010 2009
% R`000 R`000
Change Audited Audited
Continuing operations
Revenue 42,4 1 997 166 1 402 571
Cost of sales (1 732 253) (1 143 908)
Gross profit 264 913 258 663
Other income 3 459 928
Administration and operating expenses (95 634) (155 463)
Operating profit/EBITDA before
change in estimate 65,9 172 738 104 128
Depreciation (20 143) (14 857)
Operating profit before change
in estimate 70,9 152 595 89 271
Changes in accounting estimates (50 245) -
Operating profit before
interest and taxation 14,7 102 350 89 271
Interest received 15 575 12 068
Interest paid (14 792) (18 753)
Profit before tax 24,9 103 133 82 586
Income tax expense (34 317) (31 855)
Profit for the period from
continuing operations 35,6 68 816 50 731
Discontinued operations
Loss from discontinued operations
(net of income tax) (15 832) (3 146)
Total comprehensive income
for the period 11,3 52 984 47 585
Earnings per share from
continuing operations
Basic earnings per share (cents) 22,7 17,44 14,21
Headline earnings per share (cents) (27,2) 17,62 24,21
Fully diluted headline earnings
per share (cents) (24,5) 15,42 20,43
Normalised headline earnings
per share (cents) 10,6 26,78 24,21
Normalised fully diluted headline
earnings per share (cents) 14,8 23,45 20,43
Earnings per share from total
operations
Basic earnings per share (cents) 0,7 13,43 13,33
Headline earnings per share (cents) (37,7) 14,53 23,33
Fully diluted headline earnings
per share (cents) (35,4) 12,72 19,69
Normalised headline earnings
per share (cents) (1,6) 23,70 23,33
Normalised fully diluted headline
earnings per share (cents) 5,4 20,75 19,69
Reconciliation between earnings and
headline earnings from continuing operations
Attributable earnings 68 816 50 731
Goodwill impairment - 35 706
Plus: fair value adjustment 1 020 -
Less: profit on sale of assets (318) -
Headline earnings 69 518 86 437
Reconciliation between earnings and
normalised headline earnings from
continuing operations
Attributable earnings 68 816 50 731
Changes in accounting estimates 50 245 -
Tax adjustment on changes in
accounting estimates (14 069) -
Normalised earnings 104 992 50 731
Goodwill impairment - 35 706
Plus: fair value adjustment 1 020 -
Less: profit on sale of assets (318) -
Normalised headline earnings 105 694 86 437
Reconciliation between earnings and
headline earnings from total operations
Attributable earnings 52 984 47 585
Goodwill impairment - 35 706
Plus: fair value adjustment 1 020 -
Plus: net loss on remeasurement to fair value 2 713 -
Headline earnings 57 345 83 291
Reconciliation between earnings and
normalised headline earnings from
total operations
Attributable earnings 52 984 47 585
Changes in accounting estimates 50 245 -
Tax adjustment on changes in accounting estimates (14 069) -
Normalised earnings 89 160 47 585
Goodwill impairment - 35 706
Plus: fair value adjustment 1 020 -
Plus: net loss on remeasurement to fair value 2 713 -
Normalised headline earnings 93 521 83 291
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
28 February 28 February
2010 2009
R`000 R`000
Audited Audited
ASSETS
Non-current assets 705 793 683 153
Property, plant and equipment 181 327 205 187
Investments - 412
Goodwill 504 458 464 407
Deferred tax 20 008 13 147
Current assets 773 284 566 009
Inventories 85 649 70 389
Trade and other receivables 553 807 345 955
Gross amount due from customers 62 278 89 443
Taxation 3 159 -
Cash and cash equivalents 68 391 60 222
Non-current assets classified as held for sale 21 080 -
Total assets 1 500 157 1 249 162
EQUITY AND LIABILITIES
Equity attributable to owners of Sanyati
Total equity 766 808 709 530
Share capital and premium 552 812 547 869
Share-based payment reserve 6 829 7 478
Retained earnings 207 167 154 183
Non-current liabilities 107 952 64 902
Vendor liabilities - 8 586
Long-term borrowings 62 261 32 978
Deferred taxation 45 691 23 338
Current liabilities 614 082 474 730
Trade and other payables 401 868 213 732
Gross amount due to customers 110 467 89 276
Current portion of interest-bearing borrowings 38 843 95 825
Current portion of vendor liabilities 38 318 17 530
Short-term provisions 1 755 1 460
Current tax payable 18 898 31 121
Bank overdraft 3 933 25 786
Liabilities directly associated with non-
current assets classified as held for sale 11 315 -
Total liabilities 733 349 539 632
Total equity and liabilities 1 500 157 1 249 162
SUPPLEMENTARY INFORMATION
Year ended Year ended
28 February 28 February
2010 2009
Audited Audited
Capital expenditure (R`000) 45 073 72 648
Weighted average number of shares (`000) 394 645 357 063
Number of shares in issue (`000) 440 037 399 975
Fully diluted number of shares (`000) 450 802 423 098
Net tangible asset value (NTAV) per share (cents) 59,6 61,3
Operating (EBITDA) margin (%) 8,6 7,4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
28 February 28 February
2010 2009
R`000 R`000
Audited Audited
Cash generated by operations before
working capital changes 109 065 134 202
Changes in working capital 7 391 9 825
Cash generated by operations 116 456 144 027
Interest received 15 575 12 068
Interest paid (14 792) (19 425)
Taxation paid (28 704) (31 380)
Net cash flows from operating activities 88 535 105 290
Cash flows from investing activities
Purchase of property, plant and equipment (45 073) (72 648)
Purchase of investment property (2 666)
Proceeds from sale of property,
plant and equipment 4 115 2 359
Proceeds from sale of business 16 749
Decrease/(increase) in investments 412 (1 830)
Net cash flow from investing activities (26 463) (72 119)
Cash flows from financing activities
Increase in interest-bearing borrowings (15 133) 35 719
Decrease in vendor liability (16 917) (36 686)
Net cash flows from financing activities (32 050) (967)
Net increase/(decrease) in
cash and cash equivalents 30 022 32 204
Cash and cash equivalents at
beginning of period 34 436 2 232
Cash and cash equivalents at end of period 64 458 34 436
SEGMENTAL REPORT
Revenue Revenue
Year ended Year ended
28 February 28 February
2010 2009
R`000 R`000
Audited Audited
Civils 1 769 541 1 090 166
Central 680 448 310 633
Coastal 593 890 506 278
North (including Civils Inland
and old Civils North) 495 203 273 255
Specialist 304 753 314 753
Piling & Geotechnical 85 303 129 942
Buildings & Property Development 176 666 104 107
Conform 42 784 80 704
Corporate Services 38 792 41 205
Elimination of intergroup (115 920) (43 553)
Total 1 997 166 1 402 571
EBITDA EBITDA
Year ended Year ended
28 February 28 February
2010 2009
R`000 R`000
Audited Audited
Civils 175 532 85 014
Central 72 102 41 968
Coastal 48 720 49 081
North (including Civils Inland
and old Civils North) 54 710 (6 035)
Specialist (8 719) 16 906
Piling & Geotechnical 6 320 (11 546)
Buildings & Property Development (19 044) 4 175
Conform 4 005 24 277
Corporate Services 5 925 2 208
Elimination of intergroup - -
Total 172 738 104 128
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury
capital premium shares
R`000 R`000 R`000
Balance as at February 2008 (audited) 3 235 116 (21 000)
Total comprehensive income for the period - - -
Treasury share consolidation - 3 000 (3 000)
Transfer of fair value reserve - - -
Share issues and adjustments 1 256 858 -
Balance as at 28 February 2009 (audited) 4 494 974 (24 000)
Total comprehensive income for the period - - -
Share issues and adjustments * 59 190 (12 220)
Balance as at 28 February 2010 (audited) 4 554 164 (36 220)
*Amounts less than R1 000.
Share-based Fair
Shares to payment value
be issued reserve reserve
R`000 R`000 R`000
Balance as at February 2008 (audited) 315 760 2 353 3 111
Total comprehensive income for the period - - -
Treasury share consolidation - - -
Transfer of fair value reserve - - (3 111)
Share issues and adjustments (238 869) 5 125 -
Balance as at 28 February 2009
(audited) 76 891 7 478 -
Total comprehensive income for the
period - - -
Share issues and adjustments (42 027) (649) -
Balance as at 28 February 2010
(audited) 34 864 6 829 -
*Amounts less than R1 000.
Retained Total
earnings equity
R`000 R`000
Balance as at February 2008 (audited) 103 487 638 830
Total comprehensive income for the period 47 585 47 585
Treasury share consolidation - -
Transfer of fair value reserve 3 111 -
Share issues and adjustments - 23 115
Balance as at 28 February 2009 (audited) 154 183 709 530
Total comprehensive income for the period 52 984 52 984
Share issues and adjustments - 4 294
Balance as at 28 February 2010 (audited) 207 167 766 808
*Amounts less than R1 000.
COMMENTARY
GROUP OPERATING AND FINANCIAL REVIEW
Despite tough trading conditions in the domestic construction market, as well
as a number of operational challenges faced by Sanyati`s non-core businesses,
Sanyati has produced a satisfactory set of results. The most positive aspect of
the results was the performance of the Group`s three core civil construction
businesses which generated outstanding results in a challenging environment.
Group revenue grew by a more than satisfactory 42% to nearly R2,0 billion in
the year (2009: R1,4 billion) and lifted operating profit before interest,
taxation, depreciation and amortisation (EBITDA) as well as changes in
estimates, by an impressive 66% to R173 million (2009: R104 million). This
resulted in an EBITDA margin of 8,6% compared with 7,4% in 2009, a sterling
performance in the face of increased competition in the civils construction
industry. Sanyati posted a net interest received position of R0,8 million
compared to a net interest paid position of R6,7 million in 2009.
The increase of 15% in the year-on-year fully diluted normalised headline
earnings per share from continuing operations from 20,4 cents in 2009 to 23,5
cents for 2010 is pleasing. Earnings per share from continuing operations
increased by 23% to 17,4 cents per share (2009: 14,2 cents per share).
Normalised earnings exclude the impact of the historic change in accounting
estimates, which was recognised in the interim results for the six months ended
31 August 2009, of R50,2 million as well as the loss on discontinued operations
resulting from the sale of the roads surfacing business announced in February
this year.
The total capital expenditure for the year amounted to R45 million (2009: R73
million), in light of an emphasis on cost control. A further R24 million in
capital expenditure has been budgeted for the year ahead primarily for
replacement of existing assets.
The balance sheet reflects net gearing, including vendor liabilities, of R75
million (2009: R120 million). The net gearing ratio of 9,8% compares favourably
to the 17,0% at 28 February 2009. Cash management continues to be an area of
focus for Sanyati to ensure a healthy balance sheet for the Group to grow the
business into its areas of strategic focus in the years ahead.
DIVISIONAL RESULTS
Civils divisions
Sanyati North
The new Sanyati North division, which includes the Civils Inland and old Civils
North divisions, performed exceptionally well during the year. Revenue
increased by an impressive 81% to R495 million resulting in an operating margin
and operating profit of 11,0% and R55 million, respectively.
The division is currently involved in the Gauteng Freeway Improvement Project
(GFIP), a 23 km stretch of the N1 freeway from 14th Avenue in the south to the
Buccleuch interchange in the north including major upgrades of Malibongwe
Drive, William Nicol and Rivonia Road interchanges. Sanyati North is a partner
in a joint venture with WBHO, Rainbow Construction, Patula, Glash and Munausi
on this project. Another major project this division is involved in is the
upgrade of the R40 through the centre of Nelspruit. Sanyati North was also
involved in several high-profile contracts around the Soccer City FNB Stadium
in preparation for the FIFA Soccer World Cup.
Sanyati Coastal
This division continued to build on the consistent growth record which it has
achieved in KwaZulu-Natal over the last number of years. Turnover increased by
17% to R594 million (2009: R506 million) and the business generated an
operating margin of 8,2% (2009: 9,7%) and an operating profit of R49 million
for the year. This is an impressive result which was achieved in an
increasingly competitive market.
The highlight of the year was undoubtedly our ongoing role as a member of the
Ilembe consortium in the execution of the demanding civil works component of
the King Shaka Airport. The work was completed on time resulting in an
extraordinary 36-month end- to-end construction period and the opening of the
airport on time on 1 May 2010.Other high profile and successful projects
included the ongoing AC pipe replacement programme across the greater Durban
area, the two major road contracts between Mount Edgecombe and the new King
Shaka International Airport, and the access road to the Greenville Hospital on
the South Coast.
Sanyati Central
The Sanyati Central division performed exceptionally well and contributed
significantly to the Group`s overall performance. Revenue increased by a
phenomenal 119% to R680 million (2009: R311 million) and operating profit was
70% higher at R72 million from R42 million a year earlier. The division`s
operating profit margin was 10,6% compared to an unprecedented 13,5% in the
prior year. The decline in operating margin is a consequence of a change in the
mix of the work undertaken and is also more reflective of current market
conditions.
Road and earthworks form the backbone of the engineering activities of Sanyati
Central and as such the division has successfully completed various road and
earthwork projects varying from GSM access roads in difficult geographical
conditions, load dig and haul in open cast mining, large platforms for the
mining industry and conventional roads that form part of the national roads
network. The business continues to leverage off its experience and reputation
in the rail market and is well advanced in the execution of the
re-electrification and capacity upgrade of the Sishen-Saldanha line. Sanyati
Central has a broad range of public sector clients including SANRAL, Transnet,
provincial and local government. Private sector clients include Vodacom, MTN
and mining companies in the Northern Cape.
Specialist contractors
Sanyati Conform
Sanyati Conform reported revenue of R43 million (2009: R81 million) and
operating profit of R4 million (2009: R24 million). This disappointing result
was primarily due to the general downturn in Conform`s traditional mining and
industrial markets compounded by ongoing delays in the rollout of Eskom
projects. Sanyati Conform continues to capitalise on partnering opportunities
with the Civils divisions within Sanyati. A notable achievement was the
excellent result at the UMK mine where Sanyati Conform was responsible for the
construction of the load-out silos.
Sanyati Piling & Geotechnical
Sanyati Piling & Geotechnical also experienced tough trading conditions with a
reduced turnover of R85 million (2009: R130 million) and an operating profit of
R6 million. The business continues to expand its mix of opportunities away from
its historical dependence on the KwaZulu-Natal market and was particularly
successful with the award and successful execution of a lateral support project
at the Zuikerbosch pump station for Rand Water Board.
Sanyati Buildings & Property Development
The poor performance of this division which generated a loss of R19 million for
the year was primarily a result of confronting historic operational problems
within the Buildings business. Interventions during the year included the
replacement of the management team, deployment of competent contract and site
agent staff to resolve project problems and a downsizing of the business.
Property Development activity during the twelve months was directed solely at
accelerating the conversion of work-in-progress to cash with a moratorium on
any future development projects. The increase in revenue to R177 million (2009:
R104 million) was aided by the proceeds from the sales of Property Development
assets during the last six months.
CORPORATE ACTIONS
On 12 February 2010, Sanyati announced the disposal of its non-core asphalt
manufacturing and supply plant to Aqua Transport (Pty) Limited (Aqua Trans), a
wholly owned broad-based black economic empowerment company, for a cash
consideration of R18 million. The disposal was effective 28 February 2010. The
sale of this business was in line with a decision made in 2009 to exit non-core
businesses and Sanyati delayed this disposal to ensure that it coincided with
the completion of the Group`s supply and paving contract at the King Shaka
International Airport.
BOARD CHANGES
There have been a number of changes to the Board of directors over the past
year. These changes have been resulted in greater compliance with the
principles of King III and the Construction Charter.
Appointments
Malcolm Lobban was appointed Chief Executive Officer effective 1 May 2009 and
John Deeb as the Chief Financial Officer effective 1 August 2009. On 25 January
2010, Sanyati announced the appointment of two independent non-executive
directors in Zohra Ebrahim, as the Independent Non-executive Chairperson and
Lesibana Fosu, who also chairs the Audit Committee.
Resignations
Rick Jackson (former CEO and Chairperson) resigned effective 15 January 2010,
Archie Rutherford (executive director) on 11 May 2009, Marc Krouse (Chief
Financial Officer) on 31 July 2009, Moses Sangweni (Human Resource executive)
effective 22 January 2010 and Nhlanhla Khambule (non-executive director) on 29
March 2010. Moses Sangweni is however still employed by the Group within the
Sanyati Coastal division. We acknowledge the contribution that they have all
made in the building of Sanyati and wish them well.
PROSPECTS
The debate regarding government`s well publicised infrastructure spend and the
unanswered questions regarding timing, funding and procurement capacity
continues. Notwithstanding the many challenges that lie ahead, Sanyati remains
optimistic that this government infrastructure programme will ensure
significant opportunities for the construction sector in the years ahead. The
urgent need for grass roots service delivery to millions of South Africans in
the vital areas of water, sanitation and shelter cannot be questioned. The
importance of maintaining and expanding the country`s rail, road and power
infrastructure and capacity as the backbone for our economy is also well
understood. Sanyati will therefore continue to adopt a strategy that optimises
opportunities to meaningfully participate in this spend programme as and when
it is rolled out.
At the same time the Group has embarked on a selective and responsible strategy
of expanding its business into the SADC region and leveraging off Sanyati`s
position in the mining infrastructural markets. Both these strategies provide
an important hedge against the timing risks associated with government
infrastructural spend programs and are significant opportunities in their own
right.
Sanyati currently has a confirmed order book of R1,0 billion with approximately
R1,8 billion pending award.
DIVIDENDS TO SHAREHOLDERS
The Board has decided that based on current market conditions, no dividend will
be declared for this financial year.
BASIS OF PREPARATION
The annual financial statements for the year ended 28 February 2010 are
prepared in accordance with International Financial Reporting Standards, and in
a manner required by the Companies Act, and the JSE Listings Requirements and
the requirements of ISA 34 and incorporates responsible disclosure in line with
the accounting philosophy of the Group. The financial statements are based on
appropriate accounting policies consistently applied and supported by
responsible and prudent judgments and estimates.
AUDIT OPINION
The Group`s auditors, PKF Durban have audited the financial information in
terms of Rule 3.18 of the Listing Requirements of the JSE Limited. Their
unqualified audit opinion is available for inspection at Sanyati`s offices.
On behalf of the Board
Malcolm Lobban John Deeb
Chief Executive Officer Chief Financial Officer
Bryanston 18 May 2010
CORPORATE INFORMATION
Sanyati Holdings Limited ("Sanyati" or "the company" or "the Group")
(Registration number 1988/002538/06) Share code: SAN ISIN: ZAE000081055
Directors: ZB Ebrahim (independent non-executive Chairperson), MH Lobban
(Chief Executive Officer), JJ Deeb (Chief Financial Officer), RM Crowie
(non-executive director), HM Dlamini (independent non-executive director),
MR Gahagan (independent non-executive director) and LJ Fosu (independent
non-executive director)
Registered office: 2nd Floor, Pin Oak House, Ballyoaks Office Park,
35 Ballyclare Drive, Bryanston, 2191
Transfer secretaries: Computershare Investor Services (Pty) Limited,
PO Box 61051, Marshalltown, 2008
Sponsor: Exchange Sponsors (2008) (Pty) Limited
www.sanyati.co.za
Date: 18/05/2010 07:06:06 Produced by the JSE SENS Department.
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