| Tue 21 Dec 2010, 17:09 | | RAC - Racec Group Limited - Condensed consolidated audited financial results for |
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RAC
RAC
RAC - Racec Group Limited - Condensed consolidated audited financial results for
the year ended 30 September 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 AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
2010
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year year
ended ended
30 30
September September
2010 2009
R`000 R`000
Revenue 394 170 344 647
Cost of sales (310 156) (284 385)
Gross profit 84 014 60 262
Other income 1 311 258
Other expenses (56 878) (68 937)
Net profit/(loss) before investment 28 447 (8 417)
revenue, finance costs and taxation
Investment revenue 2 388 1 262
Finance costs (9 340) (8 267)
Profit/(Loss) before taxation 21 495 (15 422)
Taxation (8 549) 2 227
Profit/(Loss) for the period 12 946 (13 195)
Attributable to:
Equity holders of the parent 13 075 (13 159)
Non-controlling interest (129) (36)
12 946 (13 195)
Other comprehensive income/(loss):
- Deferred tax on revaluation through 251 -
disposal
- Revaluation of property, plant and 336 -
equipment
- Deferred tax on revaluation of property, (94) -
plant and equipment
- Impairment of property, plant and - (404)
equipment
- Deferred tax on impairment of property, - 113
plant and equipment
- Reserve from issue of share option - 6 231
- Foreign currency translation differences 6 -
Total comprehensive income/(loss) for the 13 445 (7 255)
year
Attributable to:
Equity holders of the parent 13 574 (7 219)
Non-controlling interest (129) (36)
13 445 (7 255)
EARNINGS/(LOSS) PER SHARE (CENTS)
Basic 12.4 (12.6)
Diluted basic 8.7 (12.3)
Headline 13.3 (12.3)
Diluted headline 9.4 (12.0)
Weighted average number of ordinary shares 105 730 104 129
in issue (`000)*
Fully diluted weighted average number of 149 642 106 974
ordinary shares in issue (`000)**
* Excludes treasury shares
** Treasury shares considered to have dilutive potential
SEGMENTAL REPORT
Analysis per reportable Administrati Electrica Rail Total
segment ve l construc R`000
investment services tion
and plant R`000 R`000
hire
R`000
Audited - year ended 30
September 2010
Revenue - external 271 236 722 157 177 394 170
Revenue - intersegment 23 773 230 45 24 048
Profit/(Loss) before tax (218) (1 257) 22 970 21 495
Total assets 54 051 91 224 77 712 222 987
Audited -year ended 30
September 2009
Revenue - external 189 238 715 105 743 344 647
Revenue - intersegment 22 196 25 281 2 47 479
Loss before tax (5 506) (3 486) (6 430) (15 422)
Total assets 65 374 81 082 37 056 183 512
Geographical analysis South Outside Total
Africa South R`000
R`000 Africa
R`000
Audited - year ended 30
September 2010
Revenue 338 559 55 611 394 170
Profit/(Loss) before tax (3 348) 24 843 21 495
Total assets 191 736 31 251 222 987
Audited - year ended 30
September 2009
Revenue 344 647 - 344 647
Loss before tax (15 422) - (15 422)
Total assets 183 512 - 183 512
An operating segment is a component of the Group that engages in business
activities which may earn revenues and incur expenses and whose operating
results are regularly reviewed by the Group`s chief operating decision maker
(this being the RACEC board of directors ("the Board")), in order to allocate
resources and assess performance and for which discrete financial information is
available.
Operating segments, which display similar economic characteristics and have
similar products, services, customers, methods of distribution and regulatory
environments are aggregated for reporting purposes.
Segments were identified and grouped together using a combination of the
products and services offered by the segments and the geographical areas in
which they operate. The basis on which the operating segment information is
presented has been adjusted in line with the requirements of IRFS 8: Operating
Segments. The Group previously presented operating segment information using
similar economic characteristics as a basis for dividing the business
operations.
With the adoption of IFRS 8, the Group has identified its reportable operating
segments as those regularly reviewed by the chief operating decision maker, in
order to allocate resources and assess performance. Comparative amounts have
been restated to reflect the new classifications; this change had no impact on
the Group`s earnings per share.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
as at as at
30 30
September September
2010 2009
R`000 R`000
ASSETS
Non-current assets 75 374 73 485
- Property, plant and equipment 55 631 59 914
- Investment property 351 351
- Intangible assets 10 314 10 452
- Loans to related parties 4 694 171
- Deferred tax assets 4 384 2 597
Current assets 147 614 110 027
- Inventories 31 020 23 931
- Trade and other receivables 97 237 63 575
- Derivative financial instruments 28 -
- Tax receivable 97 1 796
- Cash and cash equivalents 19 232 20 725
Total assets 222 988 183 512
EQUITY AND LIABILITIES
Capital and reserves 61 232 48 374
- Equity attributable to equity holders 61 361 48 305
of the parent
- Non-controlling interest (129) 69
Non-current liabilities 66 176 54 636
- Loans from related parties 50 161 35 498
- Other financial liabilities 7 244 13 530
- Share based payments 2 911 3 210
- Deferred tax liabilities 5 860 2 398
Current liabilities 95 580 80 502
- Loans from related parties - 577
- Other financial liabilities 12 828 9 124
- Current tax payable 6 894 3 030
- Trade and other payables 54 494 38 549
- Bank overdraft 21 364 29 222
Total equity and liabilities 222 988 183 512
Net asset value per share (cents) 57.8 45.8
Net tangible asset value per share 48.1 35.9
(cents)
Total number of ordinary shares in issue 106 104 105 363
(`000)*
*Excludes treasury shares
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
year year
ended ended
30 30
September September
2010 2009
R`000 R`000
Cash flows from operating activities 10 083 9 088
- Cash generated from operations 11 136 24 095
- Interest income 2 388 1 155
- Finance costs (4 165) (7 610)
- Taxation paid 724 (8 552)
Cash flows from investing activities (5 258) (19 937)
- Purchase of property, plant and (13 186) (12 507)
equipment
- Purchase of business operations - (7 722)
- Proceeds from disposal of property, 8 771 652
plant and equipment
- Purchase of intangible assets (843) (360)
Cash flows from financing activities 1 527 29 901
- Advance of property bond - 2 925
- Repayment of other financial (14 003) (7 049)
liabilities
- Advance of other financial 11 144 4 020
liabilities
- Advance of loans by related parties 4 879 34 847
- Advance of loans from shareholders - 39
- Net proceeds from share issue (493) (748)
- Dividends paid - (4 133)
Total cash movement for the period 6 352 19 052
Cash at the beginning of the period (8 497) (27 549)
Exchange rate movements on cash and 13 -
cash equivalents
Total cash at the end of the period (2 132) (8 497)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Treasury Other
capital shares reserve
and share R`000 s
premium R`000
R`000
Balance at 1 October 2008 30 298 - 1 406
Total comprehensive income (loss) - - 5 472
- Loss for the year - - -
- Option expense on share issue - - 6 231
- Realised revaluation through - - (650)
depreciation
- Deferred tax on revaluation - - 182
through depreciation
- Impairment of property, plant and - - (404)
equipment
- Deferred tax on impairment of - - 113
property, plant and equipment
Share capital issued by the company 46 748 - -
Share issue expenses (748) - -
Shares issued to subsidiary - (45 000) -
Non-controlling interest acquired - - -
Dividends paid - - -
Balance at 30 September 2009 76 298 (45 000) 6 878
Total comprehensive income/(loss) - - (832)
- Profit for the year - - -
- Realised revaluation through - - (499)
depreciation
- Deferred tax on revaluation - - 140
through depreciation
- Realised revaluation through - - (1 002)
disposal
- Deferred tax on revaluation - - 281
through disposal
- Revaluation of property, plant and - - 336
equipment
- Deferred tax on revaluation of - - (94)
property, plant and equipment
- Foreign currency translation - - 6
differences
Share capital issued by the company 15 726 - -
Share issue expenses (548) - -
Shares issued to subsidiaries * - (15 265) -
Share premium reduction (21 107) 21 107 -
Non-controlling interest acquired - - -
Acquisition of remaining equity - - (431)
interest in subsidiary
Non-controlling interest in shares - - -
issued by subsidiary
Balance at 30 September 2010 70 369 (39 158) 5 615
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Retained Non- Total
earnings controlli equity
R`000 ng R`000
interest
R`000
Balance at 1 October 2008 26 562 4 391 62 657
Total comprehensive income (loss) (12 691) (36) (7 255)
- Loss for the year (13 159) (36) (13 195)
- Option expense on share issue - - 6 231
- Realised revaluation through 650 - -
depreciation
- Deferred tax on revaluation (182) - -
through depreciation
- Impairment of property, plant and - - (404)
equipment
- Deferred tax on impairment of - - 113
property, plant and equipment
Share capital issued by the company - - 46 748
Share issue expenses - - (748)
Shares issued to subsidiary - - (45 000)
Non-controlling interest acquired - (3 897) (3 897)
Dividends paid (3 742) (389) (4 131)
Balance at 30 September 2009 10 129 69 48 374
Total comprehensive income/(loss) 14 406 (129) 13 445
- Profit for the year 13 075 (129) 12 946
- Realised revaluation through 499 - -
depreciation
- Deferred tax on revaluation (140) - -
through depreciation
- Realised revaluation through 1 002 - -
disposal
- Deferred tax on revaluation (30) - 251
through disposal
- Revaluation of property, plant and - - 336
equipment
- Deferred tax on revaluation of - - (94)
property, plant and equipment
- Foreign currency translation - - 6
differences
Share capital issued by the company - - 15 726
Share issue expenses - - (548)
Shares issued to subsidiaries * - - (15 265)
Share premium reduction - - -
Non-controlling interest acquired - (68) (68)
Acquisition of remaining equity - - (431)
interest in subsidiary
Non-controlling interest in shares - (1) (1)
issued by subsidiary
Balance at 30 September 2010 24 535 (129) 61 232
* The shares were issued to the RACEC Employee Share Trust ("the Trust"), RACEC
Employee Share Purchase Scheme ("the Scheme") and Solethu Civils Holdings
(Proprietary) Limited ("Solethu Civils"), being special purpose entities, which
are consolidated as part of the Group.
NOTES TO THE CONSOLIDATED FINANCIAL RESULTS
1. Statement of compliance
The accounting policies applied in the preparation of these audited condensed
results, which are based on reasonable judgments and estimates, are in
accordance with International Financial Reporting Standards, AC500 as issued by
the Accounting Practices Board, its interpretations adopted by the International
Accounting Standards Board and are consistent with those applied in the annual
financial statements for the year ended 30 September 2009. These condensed
financial statements as set out in this report have been prepared in terms of
IAS 34 - Interim Financial Reporting, the Companies Act, 1973 (Act 61 of 1973),
as amended, and the Listings Requirements of JSE Limited ("Listings
Requirements").
2. Basis of measurement
These audited condensed financial statements have been prepared on the
historical cost basis, modified for certain items measured at fair value.
3. Audit opinion
Grant Thornton Cape Inc. has audited the financial information set out in this
audited report. Their unqualified audit report is available for inspection at
the Group`s registered office.
4. Operating profit
Operating profit includes:
Audited Audited
year year
ended ended
30 30
September September
2010 2009
R`000 R`000
- Operating lease charges 3 671 3 211
- Loss on sale of property 631 494
plant and equipment
- Profit on sale of property (80) (24)
plant and equipment
- Impairment of property, plant 736 46
and equipment
- Impairment of intangible 57 -
assets
- Depreciation on property, 7 748 6 997
plant and equipment
- Amortisation of intangible 924 924
assets
- Directors` emoluments 5 273 4 726
- Employee costs 84 045 90 670
- Audit fees 850 769
- Secretarial fees 68 53
- Share-based payments (22) 216
- Share-based payment option - 6 231
expense
- Profit on exchange (228) (6)
differences
- Operating lease income (152) (107)
- Insurance recoveries (67) -
5. Share capital
Audited Audited
year ended year ended
30 September 30 September
2010 2009
- Beginning of the year 139 978 027 104 018 088
- Increase in issued share 34 988 447 35 959 939
capital*
- End of the year 174 966 474 139 978 027
* 34 615 384 of the shares issued in 2009 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.
During 2010, 3 600 000 ordinary shares issued to the Scheme, 5 781 756 ordinary
shares issued to the Trust and 24 865 036 ordinary shares issued to Solethu
Civils were classified as treasury shares.
6. Other reserves
Share Revaluat Share-
buy-back ion based
R`000 reserve payment
R`000 reserve
R`000
Balance at 1 October 2008 (3 878) 5 284 -
- Share based option expense - - 6 231
- Realised revaluation through - (650) -
depreciation transferred to
retained earnings
- Deferred tax on revaluation - 182 -
through depreciation transferred to
retained earnings
- Impairment of property, plant and - (404) -
equipment
- Deferred tax on impairment of - 113 -
property, plant and equipment
Balance at 30 September 2009 (3 878) 4 525 6 231
- Realised revaluation through - (499) -
depreciation
- Deferred tax on revaluation - 140 -
through depreciation
- Realised revaluation through - (1 002) -
disposal
- Deferred tax on revaluation - 281 -
through disposal
- Revaluation of property, plant - 336 -
and equipment
- Deferred tax on revaluation of - (94) -
property, plant and equipment
- Acquisition of non-controlling (431) - -
interest in subsidiary
- Foreign currency translation - - -
differences
Balance at 30 September 2010 (4 309) 3 687 231
Other reserves (continued)
Foreign Total
currency R`000
translation
reserve
R`000
Balance at 1 October 2008 - 1 406
- Share based option expense - 6 231
- Realised revaluation through (650)
depreciation transferred to -
retained earnings
- Deferred tax on revaluation 182
through depreciation transferred to -
retained earnings
- Impairment of property, plant and - (404)
equipment
- Deferred tax on impairment of - 113
property, plant and equipment
Balance at 30 September 2009 - 6 878
- Realised revaluation through - (499)
depreciation
- Deferred tax on revaluation - 140
through depreciation
- Realised revaluation through - (1 002)
disposal
- Deferred tax on revaluation - 281
through disposal
- Revaluation of property, plant - 336
and equipment
- Deferred tax on revaluation of - (94)
property, plant and equipment
- Acquisition of non-controlling - (431)
interest in subsidiary
- Foreign currency translation 6 6
differences
Balance at 30 September 2010 6 5 615
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.
The foreign currency translation reserve arises on the translation of foreign
assets, liabilities and operations into Rands.
7. Reconciliation of earnings/(loss) to headline earnings/(loss)
Audited Audited
year ended year ended
30 30
September September
2010 2009
R`000 R`000
Profit/(Loss) for the 13 075 (13 159)
period
Adjustments for:
- Loss on disposal of 631 494
property, plant and
equipment
- Profit on disposal of (80) (23)
property, plant and
equipment
- Impairment losses on 736 46
property, plant and
equipment
- Impairment loss on 57 -
Intangible assets
- Tax effects (369) (145)
Headline earnings/(loss) 14 050 (12 787)
8. Cash and cash equivalents
Cash and cash equivalents comprise cash balances with banks and bank overdrafts.
9. Acquisitions
RACEC acquired the remaining 30% non-controlling 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 non-controlling interest 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% non-
controlling 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 non-controlling
interest 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 non-controlling interests was to
remove the remaining non-controlling 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 non-controlling interest buyout
did not classify as a category 1 or category 2 transaction in terms of the
Listings Requirements, as the 5 781 756 ordinary shares issued as treasury
shares to the Trust are excluded from the categorisation calculations.
10. Related party transactions
During the year, the Company and its subsidiaries in the ordinary course of
business, entered into various related party sales, purchases and investment
transactions. These transactions were subject to terms that were no more
favourable than those arranged with third parties.
11. Events after the reporting period
The directors are not aware of any material matters or circumstances arising
since the end of the financial year and the date of this report.
12. Contingent liabilities
Audited Audited
year year
ended ended
30 30
September September
2010 2009
R`000 R`000
STC on remaining reserves 4 779 1 546
Performance, retention and 78 900 25 177
prepayment guarantees
The performance guarantees are provided by Lombards Insurance Company Limited,
C&G Underwriting Managers (Proprietary) Limited, Construction Guarantees
(Proprietary) Limited and ABSA Bank Limited for work undertaken by subsidiary
companies.
13. Dividends
Audited Audited
year ended year
30 ended
September 30
2010 September
2009
Dividends declared to equity - 3 120
holders of the parent (R`000)
Dividends per share (cents) - 3.0
14. Capital commitments
Audited Audited
year ended year
30 ended
September 30
2010 September
R`000 2009
R`000
Contracted for property, plant 5 201 -
and equipment
15. 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 twelve 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.
The normalised earnings per share was calculated to be 13.8 cents per share, the
value of the "B" share was calculated to be R21 107 364 and the interest accrued
from 28 August 2009 to 30 September 2010 amounted to R2 480 070. The share
premium and treasury shares were reduced with the amount of R21 107 365 in the
Group financial statements.
COMMENTARY
PROFILE AND STRUCTURE
The Group was founded in 1956 under the name of Railway and Civil Engineering
Construction (Proprietary) Limited from which the present day name of RACEC was
derived. The Group at that time concentrated mainly on construction and
maintenance of railway sidings.
During 2009 RACEC Group sold 25% of its equity to Solethu Investments
(Proprietary) Limited ("Solethu Investments"), which is an empowerment
investment group with specific expertise that complements RACEC`s own skill set
and which has significantly strengthened RACEC`s black economic empowerment
("BEE") credentials. Solethu Investments further increased its shareholding by
almost 10% to 34% during the 2010 financial year.
RACEC now operates throughout South, Southern and North West Africa. The Group
has permanent offices in Cape Town, Johannesburg, Richards Bay, Witbank, East
London and George.
The Group`s primary business is the provision of engineering infrastructure
solutions and it has established itself as a respected leader in its chosen
specialised fields.
Despite the positive euphoria experienced during the FIFA 2010 World Cup the
global financial recovery has been slower than anticipated. Although Eskom,
Transnet and SANRAL remain committed to their infrastructure spend, the local
construction industry is experiencing a lag as it remains influenced by the
recession. Excess capacity in the local industry is placing pressure on
construction margins.
Local uncertainty is pushing companies to pursue opportunities further afield
and as resource-based industries show promising signs of recovery, Africa has
become an attractive market/destination for infrastructure related businesses.
The Group provides engineering solutions in the areas of rail construction,
which includes both track installation and maintenance ("RACEC Rail"),
electrical reticulation ("RACEC Electrification") and the manufacturing of
industrial generators, electrical enclosures and energy efficient geysers
("RACEC Manufacturing").
FINANCIAL PERFORMANCE
As previously reported by the Group, RACEC has been awarded a number of
projects, which were postponed during the economic crisis. In particular, RACEC
Electrification is completing two large projects in the Western Cape and RACEC
Rail successfully tendered on projects in Mozambique and Sierra Leone.
The Group reported a pleasing 14% increase in revenue for the year ended 30
September 2010 to R394.2 million (2009: R344.6 million). However, its
performance was dampened by continued industry wide pressure on revenue and
margins as a result of the toughest trading and economic conditions experienced
in several decades.
Attributable comprehensive income attributable to equity holders of the parent
for the year was recorded at R13.6 million (2009: loss of R7.2 million).
Headline earnings per share amounted to 13.3 cents (2009: loss of 12.3 cents).
Diluted headline earnings per share, which is based on 149.6 million weighted
average shares (2009: 107.0 million) improved to 9.4 cents (2009: loss of 12.0
cents).
Cash flow utilised by operating activities for the year to 30 September 2010
amounted to R10.1 million (2009: R9.1 million), due largely to the increased
working capital requirements associated with the two significant electrification
projects in the Western Cape.
The net asset value per share increased from 45.8 cents per share to 57.8 cents
per share in the year to 30 September 2010.
Net tangible asset value per share increased to 48.1 cents (2009: 35.9 cents).
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.
OPERATIONAL PERFORMANCE AND PROSPECTS
RACEC Rail
In the year ended 30 September 2010, RACEC Rail reported revenue amounting to
R157.1 million (2009: R105.7 million), reflecting strong growth of 48.6%.
The division continues to be impacted by lengthy adjudication processes among
parastatal companies, with contracts awards taking up to 18 months. However, the
successful award of contracts in Mozambique and Sierra Leone Africa partially
mitigated the impact the domestic market challenges.
In addition to its well-established turnkey solutions, the Group has aligned
itself with companies specialising in locomotive shunting operations. Coupled
with its rail infrastructure maintenance capability, this will enable RACEC Rail
to expand its services to offer "Build, Operate and Transfer" project solutions.
RACEC Electrification
For the year ended 30 September 2010, RACEC Electrification delivered revenue
amounting to R236.7 million (2009: R238.7 million), which represents a decrease
of 0.8%.
The marginal reduction in revenue is due to reduced turnover in generator and
kiosk sales which was offset by an increase in revenue resulting from projects
which had been identified in 2008 and 2009, but which commenced from March 2010,
including :
- the Cape Town Container Terminal Expansion Project (value R80.0 million /
duration 22 months); and
- the Street lighting on the N1 between Koeberg Interchange and Old Oak
Interchange (value R94.0 million / duration 15 months).
PROSPECTS
RACEC remains positive and optimistic about its future prospects despite the
short term uncertainty in the local market.
Medium to longer term opportunities in the public sector within South Africa are
promising, and we are confident that with the political will, local demand for
infrastructure will once again become a priority.
We are also seeing early signs that local private sector construction is
recovering. Although the impact may not fully materialise during 2011, we are
confident that it will once provide stability to the local market thereafter.
In the shorter term we are excited by resource-based industries which are
presenting attractive opportunities throughout Africa. As a provider of
infrastructure related services with a proven track record we believe that we
are ideally positioned to take advantage of these opportunities.
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 led to a material 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
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
RACEC`s dividend policy is to pay one third of profit after tax, which would
translate into a dividend declaration amounting to R4 million for 2010, with the
proviso that this was affordable.
However, the Board has taken a decision that due to the uncertainties and
volatility in the global environment RACEC should adopt a more vigilant approach
to cash management and accordingly the declaration has been delayed until the
next meeting of the Board on 3 March 2011. The Board is confident that at this
time the cash flow and the environment in which RACEC is operating will be more
certain.
No dividends have therefore been declared for the period.
By order of the Board
M Uys G Harrod
Non-Executive Chairman Chief Executive Officer
21 December 2010
Directors:
M Uys* (Chairman), G Harrod (Chief Executive Officer), C Harrod*, C Gooden#, W
Ollewagen, S Wilkins (Chief Financial Officer), B Petersen#, Q Zulu*, S
Smithyman**
* Non-executive
# Independent 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:
Grant Thornton Cape Inc. (Docex 158, Cape Town)
These results may be viewed on the internet on http://www.racec.co.za
Date: 21/12/2010 17:09:02 Produced by the JSE SENS Department.
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