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RAC
RAC
RAC - Racec Group Limited - Condensed consolidated unaudited interim results for
the six months ended 31 March 2010
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 INTERIM RESULTS FOR THE SIX MONTHS ENDED 31
MARCH 2010
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 September
2010 2009 2009
R`000 R`000 R`000
Revenue 167 092 188 447 344 647
Cost of sales (138 937) (144 566) (284 385)
Gross profit 28 155 43 881 60 262
Other income 613 244 258
Other expenses (27 652) (30 486) (68 937)
Net profit/(loss) before investment 1 116 13 639 (8 417)
revenue, finance costs and taxation
Investment revenue 1 558 758 1 262
Finance costs (4 112) (3 825) (8 267)
(Loss)/Profit before taxation ( 1 438) 10 572 (15 422)
Taxation (595) (3 053) 2 227
(Loss)/Profit for the period (2 033) 7 519 (13 195)
Attributable to:
Equity holders of the parent (2 033) 6 785 (13 159)
Minority interest - 734 (36)
(2 033) 7 519 (13 195)
Other comprehensive (loss)/income:
- Impairment of property, plant and (240) - (404)
equipment
- Deferred tax on impairment of 67 - 113
property, plant and equipment
- Deferred tax on realised 58 - -
revaluation through disposal of
property
- Reserve from issue of share option - - 6 231
Total comprehensive (loss)/income (2 148) 7 519 (7 255)
for the year
Attributable to:
Equity holders of the parent (2 148) 6 785 (7 219)
Minority interest - 734 (36)
(2 148) 7 519 (7 255)
(LOSS)/EARNINGS PER SHARE (CENTS)
Basic (1.9) 6.5 (12.6)
Diluted basic (1.9) 6.5 (12.6)
Headline (2.0) 6.6 (12.3)
Diluted headline (2.0) 6.6 (12.3)
Weighted average number of ordinary 105 429 104 018 104 129
shares in issue (`000)*
Fully diluted weighted average 105 429 104 354 104 129
number of ordinary shares in issue
(`000)*
*Excludes treasury shares
SEGMENTAL REPORT
Business segment Administrative Electrical Rail Total
investment and services construction R`000
plant hire R`000 R`000
R`000
Unaudited - 6 months ended
31 March 2010
Revenue 38 104 341 62 713 167 092
Profit/(Loss) before tax 730 (7 571) 5 403 (1 438)
Unaudited - 6 months ended
31 March 2009
Revenue - 120 173 68 274 188 447
(Loss)/Profit before tax (20 665) 21 080 10 157 10 572
Audited -12 months ended
30 September 2009
Revenue 189 238 715 105 743 344 647
Loss before tax (5 506) (3 486) (6 430) (15 422)
Geographical segment Western Gauteng Total
Cape R`000 R`000
R`000
Unaudited - 6 months ended
31 March 2010
Revenue 119 191 47 901 167 092
(Loss)/Profit before tax (6 354) 4 916 (1 438)
Unaudited - 6 months ended
31 March 2009
Revenue 133 602 54 845 188 447
Profit before tax 4 595 5 977 10 572
Audited - 12 months ended
30 September 2009
Revenue 263 417 81 230 344 647
Loss before tax (6 079) (9 343) (15 422)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
31 March 31 March 30 September
2010 2009 2009
R`000 R`000 R`000
ASSETS
Non-current assets 68 395 65 948 73 485
- Property, plant and equipment 54 271 57 898 59 914
- Investment property 351 351 351
- Intangible assets 10 030 6 903 10 452
- Loans to related parties 80 73 171
- Deferred tax assets 3 663 723 2 597
Current assets 131 765 105 555 110 027
- Inventories 25 694 33 391 23 931
- Trade and other receivables 94 589 68 773 63 575
- Tax receivable 1 894 - 1 796
- Cash and cash equivalents 9 588 3 391 20 725
Total assets 200 160 171 503 183 512
EQUITY AND LIABILITIES
Capital and reserves 46 134 64 320 48 374
- Equity attributable to equity 46 134 61 427 48 305
holders of the parent
- Minority shareholders` interest - 2 893 69
Non-current liabilities 52 993 22 459 54 636
- Loans from related parties 35 364 - 35 498
- Other financial liabilities 11 647 14 852 13 530
- Share based payments 3 201 3 206 3 210
- Deferred tax liabilities 2 781 4 401 2 398
Current liabilities 101 033 84 724 80 502
- Loans from shareholders - 1 649 -
- Loans from related parties - 1 586 577
- Other financial liabilities 6 919 7 342 9 124
- Current tax payable 1 582 7 469 3 030
- Trade and other payables 60 346 43 820 38 549
- Bank overdraft 32 186 22 858 29 222
Total equity and liabilities 200 160 171 503 183 512
Net asset value per share (cents) 43.5 59.1 45.8
Net tangible asset value per share 34.1 52.4 35.9
(cents)
Total number of ordinary shares in 105 969 104 018 105 363
issue (`000)*
*Excludes treasury shares
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 September
2010 2009 2009
R`000 R`000 R`000
Cash flows from operating activities (9 482) 15 512 9 088
- Cash (utilised by)/generated from (7 986) 22 412 24 095
operations
- Interest income 992 758 1 155
- Finance costs (1 674) (3 825) (7 610)
- Taxation paid (814) (3 833) (8 552)
Cash flows from investing activities 1 591 (5 597) (19 937)
- Purchase of property, plant and (1 201) (5 802) (12 507)
equipment
- Purchase of business operations - - (7 722)
- Proceeds from disposal of property, 2 832 205 652
plant and equipment
- Purchase of intangible assets (40) - (360)
Cash flows from financing activities (6 210) (1 833) 29 901
- Advance of property bond - - 2 925
- Repayment of other financial (5 805) (4 248) (7 049)
liabilities
- Advance of other financial 1 597 3 787 4 020
liabilities
- Advance of loans (to)/by related (2 002) 952 34 847
parties
- Advance of loans from shareholders - 1 689 39
- Net proceeds from share issue - - (748)
- Dividends paid - (4 013) (4 133)
Total cash movement for the period (14 101) 8 082 19 052
Cash at the beginning of the period (8 497) (27 549) (27 549)
Total cash at the end of the period (22 598) (19 467) (8 497)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Treasury Other Retained Minority Total
capital shares reserves earnings interest equity
and R`000 R`000 R`000 R`000 R`000
share
premium
R`000
Balance at 1 30 298 - 1 406 26 562 4 391 62 657
October 2008
- Realised - (333) 333 - -
revaluation through -
depreciation
- Deferred tax on - 93 (93) - -
realised -
revaluation through
depreciation
- Minority interest - - - - (1 843) (1 843)
acquired
Net income - - (240) 240 (1 843) (1 843)
/(expenses)
recognised directly
in equity
Comprehensive - - - 6 785 734 7 519
income
Dividends paid - - - (3 624) (389) (4 013)
Balance at 31 March 30 298 - 1 166 29 963 2 893 64 320
2009
Shares issued 46 748 - - - - 46 748
Share issue (748) - - - - (748)
expenses
Shares issued to - (45 000) - - - (45 000)
subsidiary*
- Realised - (316) 316 - -
revaluation through -
depreciation
- Deferred tax on - 88 (88) - -
realised -
revaluation through
depreciation
- Minority interest - - - (2 054) (2 054)
on business -
acquisition
Net income (228) 228 (2 054) (2 054)
/(expenses)
recognised directly
in equity
Comprehensive - - 5 940 (19 944) (770) (14 774)
income/(loss)
Dividends paid - - - (118) - (118)
Balance at 30 76 298 (45 000) 6 878 10 129 69 48 374
September 2009
Shares issued 4 286 - - - - 4 286
Shares issued to - (3 878) - - - (3 878)
the Trust**
- Realised - (300) 300 - -
revaluation through -
depreciation
- Deferred tax on - 84 (84) - -
realised -
revaluation through
depreciation
- Realised - (246) 246 - -
revaluation through -
disposal of assets
- Deferred tax on - 12 (12) - -
realised -
revaluation through
disposal of asset
- Minority interest - - (431) - (69) (500)
acquired
Net income - - (881) 450 (69) (500)
/(expenses)
recognised directly
in equity
Comprehensive loss - - (115) (2 033) - (2 148)
Balance at 31 March 80 584 (48 878) 5 882 8 546 - 46 134
2010
* Shares were issued to Solethu Civils Holdings (Proprietary) Limited
("Solethu Civils") which is consolidated as part of the Group in terms of
SIC 12 Consolidation - Special Purpose Entities, even though Solethu Civils
is not a subsidiary of RACEC and RACEC does not have any control over
Solethu Civils, and therefore the shares are disclosed as treasury shares.
** Shares were issued to The RACEC Employee Trust ("the Trust") which is
consolidated as part of the Group and therefore the shares are disclosed as
treasury shares.
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 2009. These unaudited condensed results as set out
in this report have been prepared in terms of IAS 1 - Presentation of
Financial Statements (as amended), 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 financial statements have been prepared on the
historical cost basis, modified for certain items measured at fair value.
3. Operating profit
Operating profit includes:
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 September
2010 2009 2009
R`000 R`000 R`000
- Operating lease charges (1 795) (1 699) (3 211)
- Loss on sale of property, plant - (141) (494)
and equipment
- Profit on sale of property, 66 - 24
plant and equipment
- Impairment of property, plant - - (46)
and equipment
- Depreciation on property, plant (3 839) (3 554) (6 997)
and equipment
- Amortisation on intangible (462) (462) (924)
assets
- Directors` emoluments (2 677) (2 218) (4 726)
- Employee costs (41 396) (42 019) (90 670)
- Audit fees (385) (647) (769)
- Secretarial fees (22) - (53)
- Share-based payments (113) (108) (216)
- Share-based payment option - - (6 231)
expense
- Profit on exchange differences 4 - 6
- Operating lease income 30 - 107
4. Share capital
Number of shares
Balance as at 1 October 2008 104 018 088
Balance as at 31 March 2009 104 018 088
Increase in issued share capital* 35 959 939
Balance as at 30 September 2009 139 978 027
Increase in issued share capital** 6 388 440
Balance as at 31 March 2010 146 366 467
* 34 615 384 of these shares were issued to Solethu Civils which is
consolidated as part of the Group in terms of SIC 12 Consolidation -
Special Purpose Entities, even though Solethu Civils is not a subsidiary of
RACEC and RACEC does not have any control over Solethu Civils, and is
therefore classified as treasury shares.
** 5 781 756 of these shares were issued to the Trust which is consolidated as
part of the Group and is therefore classified as treasury shares, and the
balance of 606 684 shares was issued to Mr Vuyani Victor Mrwau, a former
director and shareholder of RACEC Power.
5. Other reserves
Share Revaluation Share- Total
buy- reserve based R`000
back R`000 payment
R`000 reserve
R`000
Balance at 1 October 2008 (3 878) 5 284 - 1 406
- Realised revaluation through - (333) - (333)
depreciation
- Deferred tax on realised revaluation - 93 - 93
through depreciation
Balance at 31 March 2009 (3 878) 5 044 - 1 166
- Realised revaluation through - (316) - (316)
depreciation
- Deferred tax on realised revaluation - 88 - 88
through depreciation
- Other comprehensive (loss)/profit - (291) 6 231 5 940
Balance at 30 September 2009 (3 878) 4 525 6 231 6 878
- Realised revaluation through - (300) - (300)
depreciation
- Deferred tax on realised revaluation - 84 - 84
through depreciation
- Impairment of property, plant and - (240) - (240)
equipment
- Deferred tax on impairment of - 67 - 67
property, plant and equipment
- Realised revaluation through - (246) - (246)
disposal of assets
- Deferred tax on realised revaluation - 12 - 12
through disposal of asset
- Deferred tax on realised revaluation - 58 - 58
through disposal of property
- Minority interest buy-out (431) - - (431)
Balance at 31 March 2010 (4 309) 3 960 6 231 5 882
The share buy-back reserve arises on the consolidation of the Trust due to
its investments in RACEC Electrification (Proprietary) Limited ("RACEC
Electrification") and RACEC Rail (Proprietary) Limited ("RACEC Rail").
The revaluation reserve arises on the revaluation of property, plant and
equipment. Where revalued assets are sold, the portion of the revaluation
reserve that relates to that asset is effectively realised, and transferred
directly to retained profits.
The share-based payment reserve arises on the recognition of the share-
based option expense relating to the issue of 34 615 384 RACEC ordinary
shares to Solethu Civils.
6. Reconciliation of (loss)/earnings to headline (loss)/earnings
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 September
2010 2009 2009
R`000 R`000 R`000
(Loss)/Profit for the period (2 033) 6 785 (13 159)
Adjustments for:
- Loss on disposal of property, - 140 494
plant and equipment
- Profit on disposal of property, (66) - (23)
plant and equipment
- Impairment losses on property, - - 46
plant and equipment
- Tax effects 19 (39) (145)
- Minority interest effect - (3) -
Headline (loss)/earnings (2 080) 6 883 (12 787)
7. Acquisitions
RACEC acquired the remaining 30% minority interests in RACEC Rail, RACEC
Electrification and RACEC Power, respectively, by issuing 6 388 440 new
ordinary shares in RACEC on 11 March 2010, for a total consideration of R4
286 004, effective 1 October 2009 ("the minority buyout").
RACEC acquired the remaining 30% minority interests in RACEC Rail and RACEC
Electrification from the Trust in exchange for 5 781 756 new ordinary
shares in RACEC, which shares are classified as treasury shares. The
remaining 30% minority interest in RACEC Power was acquired from Mr Vuyani
Victor Mrawu, a former director and shareholder of RACEC Power, in exchange
for 606 684 new ordinary shares in RACEC.
The ordinary shares in RACEC issued as consideration for the minority
buyout were issued at a price of 67.09 cents per share, being the 30-day
volume weighted average share price of RACEC shares on 1 October 2009.
The rationale for the acquisition of these minority interests was to remove
the remaining minority interests in the Group, to increase RACEC`s overall
Broad-Based Black Economic Empowerment and to increase the earnings
attributable to the equity holders of RACEC. The minority buyout did not
classify as a category 1 or category 2 transaction in terms of the Listings
Requirements of JSE Limited, as the 5 781 756 ordinary shares issued as
treasury shares to the Trust are excluded from the categorisation
calculations.
8. Subsequent events
As detailed in the SENS announcements dated 26 May 2010, 3 June 2010 and 11
June 2010, and the circular posted to shareholders on 21 June 2010, RACEC
is undertaking a fully underwritten renounceable rights offer in order to
raise R10 million. The proceeds of the rights offer will be used to fund
RACEC`s working capital requirements in order to facilitate the completion
of two large electrical projects in the Western Cape to the value of
approximately R140 million that have been awarded to RACEC, as well as a
further railway rehabilitation project in North West Africa that is
expected to be formally awarded to RACEC in due course. These projects are
detailed further in the operational performance and prospects section
contained in this announcement.
9. Contingent liabilities
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 September
2010 2009 2009
R`000 R`000 R`000
STC on remaining reserves 4 438 3 039 1 546
Performance guarantees 38 376 25 814 25 177
The performance guarantees are provided by Lombards Insurance Company
Limited and C&G Underwriting Managers (Proprietary) Limited for work by
subsidiary companies.
10. Dividends
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 September
2010 2009 2009
Dividends declared to equity holders - - 3 120
of the parent (R`000)
Dividends per share (cents) - - 3.0
11. Commitments to Solethu Civils
As detailed in the circular to shareholders dated 29 June 2009, a specific
issue of 34 615 384 ordinary shares was made by RACEC to Solethu Civils for
a consideration of R45 000 000 ("the specific issue"). The specific issue
agreement entered into between RACEC and Solethu gave rise to a number of
obligations to RACEC including the following:
The right
RACEC granted Solethu Civils the right within specific terms and conditions
to sell 26 923 077 of the specific issue shares back to RACEC for a total
consideration of R35 000 000 ("the right").
On exercise of the right, Solethu Civils will be deemed to have subscribed
for RACEC ordinary shares for a consideration based on a formula as agreed
upon and on the actual versus budgeted profit before tax for a rolling 12-
month period before the right was exercised. The number of ordinary shares
to be issued will be determined by dividing the consideration as determined
using the agreed upon formula by the 30-day volume weighted average price
of RACEC ordinary shares as at the date of exercise of the right.
Funding assistance
In order to assist Solethu Civils in funding the specific issue, RACEC has
undertaken to advance an annual loan to Solethu Civils commencing on 31
December of every year until 31 December 2013, equal to the aggregate
interest that would notionally have accrued on R13 462 000, calculated at
the prime interest rate.
Such amounts advanced by RACEC to Solethu Civils will carry interest at the
prime interest rate until repayment of the amounts advanced and interest
thereon on 28 February 2014.
Profit guarantee
RACEC provided Solethu Civils with a profit guarantee which allows Solethu
Civils to compel RACEC to purchase a class "B" ordinary share in Solethu
Civils with limited voting rights, no dividend rights and no right to share
premium on the winding up of Solethu Civils.
The subscription price for the "B" share will be 34 615 385 multiplied by
(R1.30 less the normalised earnings per share multiplied by 5), added the
notional interest at prime lending rate that would have accrued from 28
August 2009 up to the date of exercise of the option by Solethu Civils.
The normalised earnings is defined as the headline earnings of RACEC at 30
September 2010, adjusted for the consolidation of Solethu Civils, any
IFRS/fair value adjustments pertaining to the share issue option expense
given to Solethu Civils and any IFRS/fair value adjustments which will be
considered extra-ordinary.
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 and RACEC Power (Proprietary) Limited 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 manufactures and supplies industrial generators and electrical
enclosures.
- Northern Electric 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 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.
FINANCIAL PERFORMANCE
The Group reported an 11% decrease in revenue for the six months ended 31 March
2010 to R167.1 million (2009: R188.4 million) with continued pressure on revenue
and margins as a result of the toughest trading and economic conditions seen in
decades.
The difference in financial results can be attributed to a combination of:
- the delays in the expected commencement of two significant contracts to the
value of approximately R140 million in RACEC Electrification in 2009. Work
on these contracts, however, began during March/April 2010 and management
expects that they will contribute significantly to the results of the Group
in the next six months of trading; and
- significant losses sustained by RACEC`s manufacturing subsidiary, Greenbro,
due in part to the economic downturn and the "reversal" of Eskom`s
inability to supply consistent power. During the last six months however,
RACEC has undertaken a number of initiatives, which management is confident
will ensure a return to profitable operations for Greenbro. These
initiatives include:
- the restructuring of Greenbro`s senior management team, including the
employment of a temporary Managing Director while the incumbent Managing
Director is on sick leave; and
- the completion of a significant cost cutting and retrenchment programme of
both management and staff.
There is strong evidence that the infrastructure market is recovering, with a
number of projects, which were postponed during the economic crisis now being
revisited. In particular, RACEC Electrification has recently secured several new
contracts for delivery in the next two years, which are set to contribute
positively to the financial performance in the current year.
Generally, margins have come under pressure, however, the Group has also
experienced a slowdown in its generator manufacturing operations, which
typically contributed margins in the region of 25% to 30%.
Attributable loss for the period was R2.0 million (2009: profit of R6.8
million). A headline loss per share of 2.0 cents (2009: earnings of 6.6 cents)
was reported. Diluted headline loss per share, which is based on 105.4 million
weighted average shares (2009: 104.0 million) was 2.0 cents (2009: earnings of
6.6 cents).
Cash flow utilised by operating activities in the six months to 31 March 2010
amounted to R9.5 million (2009: generated R15.5 million).
The net asset value per share decreased from 45.8 cents per share to 43.5 cents
per share in the six months to 31 March 2010.
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 decreased by 5% to 34.1 cents (30 September
2009: 35.9 cents).
OPERATIONAL PERFORMANCE AND PROSPECTS
RACEC Rail
In the first six months ended 31 March 2010, RACEC Rail reported revenue
amounting to R62.7 million (2009: R68.3 million), reflecting a decrease of 8%.
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 undertaking a large rail rehabilitation/reconstruction
contract in North West Africa.
These cross border projects 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 2010 RACEC Electrification delivered
revenue amounting to R104.3 million (2009: R120.2 million), which represents a
decrease of 13%.
The projects identified in 2008 and 2009, which did not materialise, have now
been awarded and have commenced from March 2010. These are:
- Cape Town Container Terminal Expansion Project - this is a 22-month
contract valued at R70 million as part of Transnet`s upgrade of five
substations and the construction of two new substations. The project scope
includes reconfiguring the container stack areas and installing new
electrical supplies to approximately 2 700 refrigerated containers. The
electrical works will include the installation of some 25 and 70 kilometres
of MV and LV cabling respectively, 38 miniature substations and 460 Reefer
Power kiosks among others; and
- Street lighting on the N1 motorway between Koeberg Interchange and Old Oak
Interchange - this project covers the supply and installation of street
lighting in a 13-month contract valued at more than R70 million. The
distance to be lit spans approximately 12.75 kilometres of multi lane
divided highway and 10.5 kilometers of on- and off-ramps located at the
interchanges. The new lighting will be controlled by an intelligent
wireless mesh-network (BEKA`s OWLET nightshift Telemanagement System). This
will eliminate the need for a wired control circuit and will allow remote
management and control of the installation from a centralised management
server. The contract includes the supply and installation of approximately
70 kilometres of MV and LV cabling, 600 poles and 900 luminaires among
others.
These projects, along with Government`s ongoing commitment to infrastructure
investment, positions RACEC Electrification to achieve growth in the next year.
PROSPECTS
The delays in the commencement of the two contracts and the losses sustained by
Greenbro contributed to a lower level of profitability in the six months ended
31 March 2010, compared to the six months ended 31 March 2009. However, the
performance of the Group in the six months ended 31 March 2010 has shown a
significant improvement on the headline loss per share of 18.9 cents for the six
months ended 30 September 2009.
With confirmed projects, representing 85% of this year`s anticipated total
revenue, in comparison to 41% in the previous comparative period, management is
confident that results will continue to improve and that RACEC will return to
profitability by 30 September 2010.
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 has resulted 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 the introductions of a substantial black
shareholder to the Group.
The BEE shareholding of most of the operating companies in the Group exceeds
30%.
The Trust was established in 2004 and owns shares in RACEC. There are
approximately 800 beneficiaries of the Trust, most of whom are from the
previously disadvantaged community.
DIRECTORATE
There have been no changes to the board of directors during the period under
review. As announced on SENS on 14 May 2010, Charles Harrod retired as CEO on 31
May 2010, but remains on the board as a non-executive director. Gary Harrod, the
previous chief operating officer of RACEC, assumed the role of CEO from 1 June
2010.
SOCIAL RESPONSIBILITY
Employment equity and 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 G Harrod
Non-Executive Chairman Chief Executive Officer
23 June 2010
Directors:
M Uys* (Chairman), G Harrod (Chief Executive Officer), C Harrod*, C Gooden*, W
Ollewagen, S Wilkins (Financial Director), B Petersen*, Q Zulu*, S Smithyman**
* Non-executive
** Non-executive and alternate director to Q Zulu
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 61763,
Marshalltown, 2107)
Designated Adviser:
Merchantec Capital (PO Box 41480, Craighall, 2024)
Auditors:
BDO Incorporated (Docex 158, Cape Town)
These results may be viewed on the internet on http://www.racec.co.za
Date: 23/06/2010 13:00:01 Produced by the JSE SENS Department.
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