| Mon 25 Oct 2010, 17:05 | | SAN - Sanyati Holdings Limited - Unaudited interim results for the six months |
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SAN
SAN
SAN - Sanyati Holdings Limited - Unaudited interim results for the six months
ended 31 August 2010
Sanyati Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1988/002538/06
Share code: SAN
ISIN code: ZAE000081055
("Sanyati" or "the company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2010
- Revenue decreased by 17% to R855 million
- EBITDA decreased by 46% to R44 million
- Fully diluted HEPS from continuing operations increased by 48% to 4,8 cents
- Net tangible asset value per share increased by 10% to 64,8 cents
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2010 2009 2010
% change R`000 R`000 R`000
CONTINUING OPERATIONS
Revenue (16,6) 855 335 1 025 149 1 997 166
Contracting costs (758 424) (890 541) (1 732 253)
Gross profit 96 911 134 608 264 913
Other income 4 063 4 972 3 459
Administrative and
operating expenses (56 634) (57 119) (95 634)
Profit before depreciation
(EBITDA) (46,2) 44 340 82 461 172 738
Depreciation (9 113) (8 381) (20 143)
Operating profit before
changes in estimates (52,4) 35 227 74 080 152 595
Changes in accounting
estimates - (50 245) (50 245)
Operating profit before
interest and taxation 47,8 35 227 23 835 102 350
Interest income 2 046 16 521 15 575
Interest expense (6 967) (21 543) (14 792)
Profit before tax 30 306 18 813 103 133
Taxation (8 486) (5 267) (34 317)
Profit for the period from
continuing operations 61,1 21 820 13 546 68 816
DISCONTINUED OPERATIONS
Profit/(loss) from
discontinued operations
(net of income tax) 461 1 153 (15 832)
Profit for the period 22 281 14 699 52 984
Other comprehensive income - - -
Total comprehensive income
for the period 51,6 22 281 14 699 52 984
Earnings per share from
continuing operations (cents)
Basic earnings per share 59 5,46 3,44 17,44
Diluted earnings per share 53 4,95 3,24 15,42
Fully diluted earnings
per share 51 4,84 3,20 15,27
Headline earnings per share 55 5,42 3,49 18,54
Diluted headline
earnings per share 49 4,91 3,29 16,39
Fully diluted headline
earnings per share 48 4,81 3,25 16,23
Earnings per share from total
operations (cents)
Basic earnings per share 49 5,57 3,73 13,43
Diluted earnings per share 44 5,05 3,52 11,87
Fully diluted earnings
per share 42 4,94 3,47 11,75
Headline earnings per share 46 5,53 3,78 14,53
Diluted headline
earnings per share 41 5,02 3,56 12,85
Fully diluted headline
earnings per share 40 4,91 3,52 12,72
Reconciliation between
earnings and headline earnings
Profit for the period 22 281 14 699 52 984
(Profit)/loss on disposal
of property, plant and
equipment (211) 267 1 779
Fair value adjustment - - 1 416
Remeasurement loss - - 3 768
Tax adjustment 59 (75) (2 602)
Headline earnings 22 129 14 891 57 345
Reconciliation between
earnings from
continuing operations
and headline earnings from
continuing operations
Profit for the period 21 820 13 546 68 816
(Profit)/loss on
disposal of property,
plant and equipment (211) 267 1 779
Fair value adjustment - - 1 416
Remeasurement loss - - 3 768
Tax adjustment 59 (75) (2 602)
Headline earnings from
continuing operations 21 668 13 738 73 177
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
As at As at As at
31 August 31 August 28 February
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non-current assets 712 819 694 201 705 793
Property, plant and equipment 184 919 215 397 179 192
Goodwill 504 458 464 407 504 458
Investments 2 135 1 250 2 135
Deferred tax 21 307 13 147 20 008
Current assets 665 560 816 598 773 284
Inventories 74 491 102 885 85 649
Trade and other receivables 443 368 507 118 556 966
Gross amount due from customers 96 217 113 832 62 278
Cash and cash equivalents 51 484 92 763 68 391
Non-current assets classified as held
for sale 11 634 - 21 080
Total assets 1 390 013 1 510 799 1 500 157
EQUITY AND LIABILITIES
Total equity 790 216 723 345 766 808
Share capital and premium 552 812 547 869 552 812
Share-based payment reserve 7 956 6 594 6 829
Accumulated profits 229 448 168 882 207 167
Non-current liabilities 100 670 89 735 107 952
Interest-bearing borrowings 48 535 66 397 62 261
Deferred taxation 52 135 23 338 45 691
Current liabilities 492 952 697 719 614 082
Trade and other payables 333 030 428 512 422 521
Gross amount due to customers 59 808 121 481 110 467
Bank overdraft 45 950 56 883 3 933
Current portion of vendor liabilities 18 028 9 052 38 318
Current portion of interest-bearing
borrowings 36 136 81 791 38 843
Liabilities directly associated with
non-current assets classified as
held for sale 6 175 - 11 315
Total liabilities 599 797 787 454 733 349
Total equity and liabilities 1 390 013 1 510 799 1 500 157
SUPPLEMENTARY INFORMATION
Unaudited Unaudited Audited
As at As at As at
31 August 31 August 28 February
2010 2009 2010
Capital expenditure (R`000) 5 505 21 518 45 073
Number of shares in issue (`000) 409 803 414 037 440 037
Weighted average number of
shares (`000) 399 875 393 687 394 645
Diluted number of shares (`000) 440 875 417 748 446 410
Fully diluted number of
shares (`000) 450 803 423 098 450 802
Net tangible asset value
(NTAV) per share (cents) 64,8 62,0 58,8
Operating (EBITDA) margin (%) 5,2 8,0 8,6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share capital Share-based
and payment Accumulated Total
premium reserve profits equity
R`000 R`000 R`000 R`000
Balance as at 28
February 2009* 547 869 7 478 154 183 709 530
Total comprehensive income
for the period - - 14 699 14 699
Share issues and adjustments - (884) - (884)
Balance as at 31
August 2009** 547 869 6 594 168 882 723 345
Total comprehensive income
for the period - - 38 285 38 285
Share issues and adjustments 4 943 235 - 5 178
Balance as at 28
February 2010* 552 812 6 829 207 167 766 808
Total comprehensive income
for the period - - 22 281 22 281
Share issues and adjustments - 1 127 - 1 127
Balance as at 31
August 2010** 552 812 7 956 229 448 790 216
*Audited **Unaudited
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2010 2009 2010
R`000 R`000 R`000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated by operations before
working capital changes 45 896 63 466 109 065
Changes in working capital (33 476) (25 932) 7 391
Cash generated by operations 12 420 37 534 116 456
Net interest (paid)/received (4 921) (7 097) 783
Taxation paid (19 377) (10 922) (28 704)
Net cash flow from operating activities(11 878) 19 515 88 535
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment property - - (2 666)
Purchase of property, plant and
equipment (5 505) (21 518) (45 073)
Proceeds from sale of property,
plant and equipment 468 1 077 4 115
Proceeds on disposal of non-current
assets held for sale (146) - -
Net cash flow from sale of business - - 16 749
Decrease in investments - 47 412
Net cash flow from investing activities (5 183) (20 394) (26 463)
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease)/increase in interest-bearing
borrowings (16 709) 19 387 (15 133)
Decrease in vendor liabilities (20 290) (17 064) (16 917)
Decrease in liabilities associated with
non-current assets held for sale (4 864) - -
Net cash flow from financing activities(41 863) 2 323 (32 050)
Net (decrease)/increase in cash and
cash equivalents (58 924) 1 444 30 022
Cash and cash equivalents at
beginning of period 64 458 34 436 34 436
Cash and cash equivalents at end of
period 5 534 35 880 64 458
SEGMENTAL REPORT
Unaudited Unaudited Unaudited Unaudited
Revenue Revenue EBITDA EBITDA
Six months Six months Six months Six months
ended ended ended ended
31 August 31 August 31 August 31 August
2010 2009 2010 2009
R`000 R`000 R`000 R`000
Coastal 282 408 378 236 15 995 7 355
External revenue 282 408 373 069
Intersegment revenue - 5 167
Central 372 505 279 845 23 335 37 492
External revenue 372 505 279 595
Intersegment revenue - 250
North 160 997 304 788 9 946 27 421
External revenue 156 454 290 238
Intersegment revenue 4 543 14 550
Specialist Contractors 45 598 82 247 (4 936) 9 281
External revenue 43 968 82 247
Intersegment revenue 1 630 -
Shared services - - - 912
Intersegmental revenue (6 173) (19 967) - -
Total external revenue 855 335 1 025 149 44 340 82 461
COMMENTARY
Introduction
The Group`s results were severely impacted by the difficult trading conditions
encountered in the domestic construction market. Challenges during the period
have included margin pressure, the unprecedented delays in the awarding and
mobilisation of key contracts and the inevitability of rightsizing action to
address excess capacity.
Notwithstanding these realities, the Group achieved positive outcomes with the
securing of significant new order book and a pipeline of imminent awards and
strong prospects.
Good progress was also made with the stated aim of geographic diversification
and the establishment of niche contracting opportunities.
FINANCIAL OVERVIEW
The results of the Group`s continuing operations reported a decrease in revenue
of 16,6% to R855,3 million for the period ended 31 August 2010 (31 August 2009:
R1 025,2 million) and a decline of 46,2% in earnings before interest, taxation,
depreciation and amortisation (EBITDA) to R44,3 million from R82,5 million for
the corresponding interim period. Major contributors to the decline in EBITDA
included revenue and margin contraction, holding costs associated with delays in
awards and mobilisation of contracts, retrenchment costs and a particularly
difficult environment for the Group`s piling and concrete sliding businesses. As
a result, Group EBITDA margin of 5,2% was materially below the 8,0% that was
achieved in the comparative period to 31 August 2009.
The Group`s operating profit before interest and taxation (R35,2 million versus
R23,8 million), was 47,8% higher than the result achieved to 31 August 2009.
This anomaly must be seen in the light of the R50,2 million change in accounting
estimate that was charged to income during the six months ended 31 August 2009.
Net interest cost for the six months was R4,9 million (2009: R5,0 million) and
profit before taxation of R30,3 million (2009: R18,8 million) represents a 61,1%
increase on the prior period.
Basic earnings per share (EPS) and fully diluted headline earnings per share
(HEPS) for continuing operations increased by 58,7% and 48,0%, respectively.
Basic EPS moved from 3,4 cents in August 2009 to 5,5 cents for August 2010 and
fully diluted HEPS moved from 3,3 cents in August 2009 to 4,8 cents for August
2010, a satisfactory performance.
The statements of financial position reflects a 3,1% increase in total equity
from R766,8 million as at 28 February 2010 to R790,2 million. Net interest-
bearing borrowings as at 31 August 2010 amounted to R97,2 million, which
translates into a more than acceptable net gearing ratio of 12,3%.
Total capital expenditure for the six months amounted to R5,5 million compared
to R21,5 million spent over the 2009 interim period.
Cash generated by operations, before working capital changes, was a credible
R45,9 million. The net investment in working capital of R33,5 million during the
period was not unexpected and was a consequence of a new mix of business
together with the life cycle of certain key projects. We are also experiencing
some delays with payment from certain public sector clients. Also impacting the
Group`s cash flows was the payment of an amount of R20 million to the Meyker
vendors ("agterskot" payment following delivery of post-acquisition profit
thresholds) and an aggregate of R21 million paid in accordance with existing
instalment sale agreements.
OPERATIONAL REVIEW
Sanyati Central
Sanyati Central delivered welcome growth of 33,1% in revenue to R372,5 million
(31 August 2009: R279,8 million). EBITDA of R23,3 million (margin of 6,3%) is
reflective of a low margin being realised on a major roads project due to be
completed in December this year, delays on the mobilisation of a key contract as
well as the challenging market conditions. We expect the margin from this
business to improve in the months ahead.
Sanyati Coastal
Sanyati Coastal incorporates the KwaZulu-Natal (KZN) building construction
activity which was previously reported as part of Specialist Contractors.
Revenue decreased by 25,3% to R282,4 million from R378,2 million reported for
the interim period ended August 2009. This business generated EBITDA of R16,0
million and a resultant EBITDA margin of 5,7%.
Sanyati North
The Sanyati North business reported disappointing results for the past six
months primarily as a result of the delay with the mobilisation of a key
contract coupled with the ongoing challenges of a highly competitive tender
market. Revenue and EBITDA decreased by 47,2% to R161,0 million and 63,7% to
R9,9 million, respectively. EBITDA margin also came off from 9,0% in the
previous period to 6,2% for this reporting period.
Specialist Contractors
Specialist Contractors reported revenue of R45.6 million (31 August 2009: R82.2
million) and an EBITDA loss of R4.9 million (31 August 2009: EBITDA profit of
R9.3 million).Both the Piling and Conform businesses continued to be impacted by
tough trading conditions and corrective rightsizing action has been taken. We
remain positive regarding the long term prospects for these businesses.The
ongoing drive for the Property business continues to be the conversion of
property assets to cash
Subsequent events to 31 August 2010
Sanyati acquired a strategic interest of 27% in Africa Pipe Industries (Pty)
Limited in September 2010. This business is a world-class manufacturer of spiral
steel pipe primarily for the water industry in South Africa. The management team
of Africa Pipe Industries has significant experience in the design, building,
commissioning and operation of steel pipe mills in Africa.
Changes to the board of directors
On 25 May 2010, Mr HM Dlamini resigned as a non-executive director of the board.
Prospects
The well publicised industry experience of unprecedented delays in both the
award and mobilisation of contracts continues to represent a challenge for
Sanyati. We nevertheless remain confident that the underlying fundamentals will
ensure medium and long-term positive growth for the business and that our stated
objective of geographical diversification and the establishment of new
opportunities in niche markets will provide an important hedge against the
timing uncertainty of government work in South Africa.
Solid progress has been made in Lesotho with an initial contract award and we
are confident that our efforts in Zambia and Uganda will result in similar
success in the near future. The Group`s telecommunications infrastructure
business is gaining momentum (both in South Africa and the rest of Africa) and
we have secured new opportunities in mining infrastructure as well as design,
construct and finance solutions for select clients.
Pent up demand for service delivery in the vital areas of water and sanitation,
together with the importance of maintaining the country`s existing water
infrastructure were the key factors in the Group`s decision to invest in Africa
Pipe Industries and the Group is excited about the prospects of this investment.
Sanyati has a continued emphasis on strategic partnerships and alliances. The
improved Level 3 Contributor BBBEE status achieved by Sanyati in June 2010 is
testimony to Sanyati`s drive to be a "Partner of Choice".
The Group will continue to focus on cash management and the conversion of its
pipeline of opportunities into a confirmed order book in the period ahead. The
order book as at 31 August 2010 was R950 million, with imminent awards of R87
million and close prospects of R1,8 billion. The quantum and nature of these
prospective awards are expected to provide the platform for our growth ambitions
in the future.
Dividend
No interim dividend has been declared for the six months ended 31 August 2010,
in line with our current Group dividend policy.
Basis of preparation
The condensed consolidated interim financial statements have been prepared in
accordance with IAS 34 - Interim Financial Reporting, the AC500 Interpretations
as issued by the Accounting Practices Board and the JSE Limited Listings
Requirements.
The accounting policies applied in preparing these condensed consolidated
interim financial statements are consistent with those applied in the annual
financial statements of the previous year end and comply with the statements of
International Financial Reporting Standards (IFRS) and the South African
Companies Act.
The condensed consolidated interim financial statements have not been audited or
reviewed by the Group`s auditors.
On behalf of the board
Malcolm Lobban John Deeb
Chief Executive Officer Chief Financial Officer
Bryanston 25 October 2010
Sanyati Holdings Limited ("Sanyati" or "the company" or "the Group")
Registration number: 1988/002538/06 JSE code: SAN ISIN: ZAE000081055
Directors
ZB Ebrahim** (Chairperson), MH Lobban (Chief Executive Officer),
JJ Deeb (Chief Financial Officer), RM Crowie*, MR Gahagan**, LJ Fosu**
* Non-executive ** Independent non-executive
Registered office
2nd Floor, Pin Oak House, Ballyoaks Office Park, 35 Ballyclare Drive, Bryanston,
2191
Sponsor
BDO Corporate Finance
(a division of BDO South Africa Advisory Services (Pty) Limited)
Transfer Secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2008
Company Secretary
Highway Corporate Services (Pty) Limited
Suites 13-17 Marwick Centre, Lucas Drive, Hillcrest, 3610; PO Box 1319,
Hillcrest, 3650
A copy of the presentation to investors will be available on
www.sanyati.co.za
Date: 25/10/2010 17:05:01 Produced by the JSE SENS Department.
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