| Mon 30 May 2011, 7:05 | | PKH - Protech Khuthele Holdings Limited - Audited provisional report for the |
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PKH
PKH
PKH - Protech Khuthele Holdings Limited - Audited provisional report for the
year ended 28 February 2011
Protech Khuthele Holdings Limited
Registration number 2000/024352/06?JSE code: PKH ISIN: ZAE000101986
("Protech" or "the Company" or "the Group")
Audited provisional report for the year ended 28 February 2011
Revenue up 43%
Operating margin of 7,2%
Earnings per share down 48%
Net asset value 92,4 cents per share
Condensed consolidated statement of financial position
at 28 February 2011
R`000 2011 2010
ASSETS
Non-current assets 469 998 412 130
Property, plant and equipment 429 430 373 659
Goodwill 33 549 33 549
Other intangible assets 4 648 1 762
Other financial assets - 2 202
Deferred tax 2 371 958
Current assets 383 879 315 187
Inventory 11 434 8 536
Amounts due from contract customers 80 265 90 149
Trade and other receivables 216 067 122 183
Other financial assets 3 501 7 173
Bank balances and cash 72 612 87 146
Total assets 853 877 727 317
EQUITY AND LIABILITIES
Total equity 334 898 310 255
Share capital and share premium 228 598 228 598
Reserves (124 029) (123 943)
Retained earnings 230 329 205 600
Equity attributable to equity holders of the 334 898 310 255
holding company
Non-controlling interests - -
Total liabilities 518 979 417 062
Non-current liabilities 238 280 223 113
Interest bearing borrowings 171 102 165 481
Deferred tax 67 178 57 632
Current liabilities 280 699 193 949
Interest bearing borrowings 122 535 99 100
Trade and other payables 120 778 81 087
Subcontractor liabilities 28 844 6 928
Current tax liabilities 8 542 6 834
Total equity and liabilities 853 877 727 317
SUPPLEMENTARY STATEMENT OF FINANCIAL POSITION
INFORMATION
Total number of shares in issue (thousands) 362 500 362 500
Net asset value per share (cents) 92,4 85,6
Capital expenditure
- Spent 215 024 109 185
- Commitments - Authorised but unspent 226 360 143 294
Performance guarantees issued 133 356 82 432
Condensed consolidated statement of comprehensive income
for the year ended 28 February 2011
R`000 2011 2010
Revenue 1 069 665 748 778
Earnings before interest, taxation, 141 596 162 366
depreciation and amortisation
Depreciation and amortisation (64 475) (43 812)
Earnings before interest and taxation 77 121 118 554
Net interest expense (23 226) (15 561)
Earnings before taxation 53 895 102 993
Taxation (14 666) (27 407)
Earnings for the year 39 229 75 586
Other comprehensive income for the year, (86) 55
net of tax
Movement in foreign currency translation (86) 55
reserve
Total comprehensive income for the year 39 143 75 641
Earnings attributable to: 39 229 75 586
- Equity holders of the holding company 39 229 75 586
- Non-controlling interests - -
Total comprehensive income attributable to:
- Equity shareholders of the company 39 143 75 641
- Non-controlling interests - -
Total comprehensive income for the year 39 143 75 641
Earnings per share (cents)
Basic earnings per share 10,8 20,9
Diluted earnings per share 10,8 20,9
SUPPLEMENTARY STATEMENT OF COMPREHENSIVE
INCOME INFORMATION
Reconciliation of weighted average number of
shares in issue:
- Weighted average number of shares in issue 362 500 362 500
(thousands)
Reconciliation of headline earnings:
Earnings attributable to shareholders of the 39 229 75 586
holding company
Adjusted for loss/(profit) on disposal of 3 713 (2 239)
plant and equipment (net of tax)
Headline earnings 42 942 73 347
Headline earnings per share (cents)
- Basic 11,8 20,2
Condensed consolidated statement of cash flows
for the year ended 28 February 2011
R`000 2011 2010
Cash flows from operating activities 78 825 45 888
Cash generated by operations 121 377 104 531
Net interest paid (23 226) (15 561)
Dividends paid (14 500) -
Income taxes paid (4 826) (43 082)
Cash flows from investing activities (122 415) (46 747)
Purchase of property, plant and equipment (211 667) (109 025)
- Replacement (114 502) (86 331)
- Additions (97 165) (22 694)
Purchase of intangible assets (3 357) (160)
Proceeds on disposal of property, plant and 86 735 74 732
equipment
Movement in loan through acquisition - (11 625)
Decrease/(increase) in loans granted 5 874 (669)
Cash flows from financing activities 29 056 (13 583)
Net movement related to bank loans (7 476) (11 349)
Net movement related to instalment sale 36 532 (2 234)
agreements
Net (decrease) in cash and cash equivalents (14 534) (14 442)
Cash and cash equivalents at the beginning of 87 146 101 588
the year
Cash and cash equivalents at the end of the 72 612 87 146
year
Cash and cash equivalents comprise of:
Bank balances and cash 72 612 87 146
Condensed statement of changes in equity
for the year ended 28 February 2011
R`000 Share Share Common Foreign
capital premium control Currency
reserve Trans-
lation
Reserve
Balance at 1 March 2009 2 228 596 (122 053) -
Realisation in respect of - - (1 945) -
deregistered dormant
subsidiaries
Total comprehensive income - - - 55
for the year
Balance at 28 February 2010 2 228 596 (123 998) 55
Dividends paid - - - -
Total comprehensive income - - - (86)
for the year
Balance at 28 February 2011 2 228 596 (123 998) (31)
R`000 Retained Equity Non- Total
earnings Attri- Control- equity
butable ling
to the interest
share-
holders
of the
company
Balance at 1 March 2009 128 069 234 614 - 234 614
Realisation in respect of 1 945 - - -
deregistered dormant
subsidiaries
Total comprehensive income 75 586 75 641 - 75 641
for the year
Balance at 28 February 2010 205 600 310 255 - 310 255
Dividends paid (14 500) (14 500) - (14 500)
Total comprehensive income 39 229 39 143 - 39 143
for the year
Balance at 28 February 2011 230 329 334 898 - 334 898
The adjustment against the common control reserve relates to the
deregistration of the dormant subsidiaries Protech Projects Holding (Pty) Ltd
and Umvundla Investments No. 2 (Pty) Ltd subsequent to the 2010 year end.
Operational segmental reporting
for the year ended 28 February 2011
Services within each business segment
For management purposes, the group is organised into three major operating
divisions - contracting, geotechnical laboratory and readymix. These three
divisions are the basis on which the group reports its primary segment
information. The principal services and products of each of these divisions are
as follows:
Contracting - bulk earthworks, roads and civil engineering contractors, plant
hire, impact compaction and logistical services.
Geotechnical laboratory - geotechnical laboratory and surveying services.
Readymix - supplier of readymixed concrete and pumping services.
Segment revenue and segment result
Segment revenue Segment result
R`000 2011 2010 2011 2010
Contracting 942 890 640 235 74 485 120 137
Geotechnical laboratory 18 827 16 064 3 575 2 847
Readymix 128 617 113 049 (1 500) (5 430)
1 090 334 769 348 76 560 117 554
Corporate 8 930 8 960 15 298 1 071
Intergroup eliminations (29 599) (29 530) (14 737) (71)
1 069 665 748 778
Operating profit 77 121 118 554
Net interest paid (23 226) (15 561)
Earnings before tax 53 895 102 993
Taxation (14 666) (27 407)
Earnings for the year 39 229 75 586
Segment revenue reported above represents revenue generated from
external customers. Intersegment sales amounted to R29,6 million
(2010: R29,5 million). Segment result reported above represents
operating profit per segment prior to taking interest into account.
The accounting policies of the reportable segments are the same as
the group`s accounting policies.
Segment assets and liabilities
Segment assets Segment liabilities
R`000 2011 2010 2011 2010
Contracting 815 776 727 947 517 052 430 273
Geotechnical laboratory 9 216 6 489 2 188 2 036
Readymix 72 293 79 724 85 856 89 990
897 285 814 160 605 096 522 299
Corporate 391 872 388 282 157 470 171 148
Intergroup eliminations (435 280) (475 125) (243 587) (276 385)
853 877 727 317 518 979 417 062
Other segment information
Depreciation and Additions to non-
amortisation current assets
R`000 2011 2010 2011 2010
Contracting 58 106 38 405 209 506 106 034
Geotechnical laboratory 1 196 1 007 878 2 686
Readymix 3 933 4 400 494 465
Corporate 1 240 - 789 25 681
64 475 43 812 211 667 134 866
Corporate includes the transactions of the holding company.
Information about major customers
Included in revenues arising from contracting income of R942,9
million (2010: R640,2 million) are revenues of approximately R511,2
million (2010: R302,8 million) which arose from contracting income
from two of the group`s largest customers.
Operating segments
The operating segments reported above form the basis on which
internal reporting is structured for the chief operating decision
makers. Therefore there are no differences in the results and
information reported to shareholders and those reported to
management.
Notes to the condensed consolidated financial statements
for the year ended 28 February 2011
1. Basis of preparation and accounting policies
This provisional report complies with International Accounting Standard 34 -
Interim Financial Reporting as well as with Schedule 4 of the South African
Companies Act and the disclosure requirements of the JSE Limited`s Listings
Requirements. The condensed financial information has been prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS) and the AC
500 standards as issued by the Accounting Practices Board. The accounting
policies comply with IFRS and are consistent with those applied in the prior
financial year except for those standards that became effective during the
reporting period. The adoption of these standards has had no effect on the
results.
2. Subsequent events
No material events have occurred subsequent to 28 February 2011 which may have
an impact on the group`s reported financial position at this date.
3. Audit opinion
The auditors, Deloitte & Touche, have issued their unmodified audit opinion on
the group`s financial statements for the year ended 28 February 2011. The audit
was conducted in accordance with International Standards on Auditing. A copy of
their audit report is available for inspection at the company`s registered
office. These provisional financial statements have been derived from the group
financial statements and are consistent, in all material respects, with the
group financial statements. Any reference to future financial performance
included in this announcement has not been reviewed or reported on by the
Company`s auditors.
Commentary
INTRODUCTION
Protech is a bulk earthworks and civil engineering group that offers fast-track
contracting to the mining, public and private sectors, mainly in Southern
Africa.
As indicated in the 2010 results commentary during May 2010, the group expected
2011 to be a challenging trading year as the construction industry in South
Africa started to feel the full effect of the economic downturn. This
expectation proved to be correct as the construction sector in general
experienced tough markets with dwindling activity levels amidst heightened
levels of competition and increased margin pressure. Notwithstanding this,
Protech succeeded in achieving a solid set of results for the 2011 financial
year.
The group achieved healthy revenue growth on the back of its increased focus on
the mining sector. The contribution to group revenue from the mining sector has
increased to 80% from 50% in the 2010 financial year albeit at reduced margins.
Even though the group operating margin achieved in the period under review is
lower than that traditionally enjoyed, margins in the mining sector are still
higher than those currently attainable in the public and private sectors.
Although it was not pleasing to see margins dipping to below the level of 10%,
we are encouraged by the fact that the decline in margins was stemmed with
second half 2011 margins at the same level as those attained in the first half
of 2011.
FINANCIAL REVIEW
Statement of comprehensive income
Revenue increased by 43% to R1 069,7 million (2010: R748,8 million). This growth
was entirely organic and mainly attributable to the continued increased focus on
the mining sector and the expansion of African operations. The Contracting
division contributed R942,9 million (2010: R640,2 million), which represents 86%
(2010: 83%) of group revenue before inter-group eliminations.
Group operating profit before interest was 35% down at R77,1 million (2010:
R118,6 million). Earnings per share was 48% lower at 10,8 cents per share (2010:
20,9 cents per share). Headline earnings per share did not differ significantly
from the earnings per share at 11,8 cents per share.
Statement of financial position
The group incurred capital expenditure of R211,7 million (2010: R109,0
million) related to plant and machinery.
The bulk of this capital expenditure was to replace plant and equipment in line
with Protech`s plant policy. The plant sold in the replacement process amounted
to R86,7 million (2010: R74,7 million), resulting in net capital expenditure in
respect of plant and machinery of R125,0 million (2010: R34,3 million).
Net asset value per share increased by 8% from 85,6 cents to 92,4 cents per
share. Interest bearing liabilities increased by R29,0 million to R293,6 million
(2010: R264,6 million) at the end of the period under review. The net debt to
equity ratio of the group was 66% (2010: 57%) and fell comfortably within the
medium term target range set by the group.
Net working capital decreased by R18,1 million to R103,1 million from the
previous year`s net working capital of R121,2 million.
Statement of cash flows
Cash generated before working capital changes was down 5% to R146,7
million (2010: R153,8 million). When comparing cash generated by operations
before working capital changes to EBITDA, the ratio of cash generated to EBITDA
improved from 95% in 2010 to 104% in 2011. The group therefore remains confident
of its cash generating ability.
OPERATIONAL REVIEW
Contracting - 86% of group revenue
Revenue for Contracting was up 47% to R942,9 million (2010: R640,2
million) against the market backdrop of a considerable decline in work volumes
in the private and public sectors. The increase was achieved due to the group`s
proactive and successful shift to the mining sector more than 2 years ago along
with further expansion into Africa ensured a solid base load of work with
sustainable workflow.
Geotechnical - 2% of group revenue
Although this business is a small contributor to the group it performed
extremely well. Revenue was up 17% to R18,8 million due to increased capacity
and operating profit was up from R2,8 million in 2010 to R3,6 million this
year, resulting in an 19% margin.
Readymix - 12% of group revenue
Operating in a severely depressed market, Readymix managed to sustain its market
share through pro-actively driving sales and further entrenching its first-to-
market reputation. Sales volumes for the 2011 financial year increased by 9%
over that of the previous year resulting in satisfactory revenue growth.
Concentrated cost containment initiatives resulted in an increase in the gross
margins and overall profitability of this business.
Revenue for the year increased by 14% to R128,6 million. As expected and
indicated at the interim results presentation, margins remained under pressure
and the business posted an operating loss of R1,5 million (2010: loss of R5,4
million) for the year.
Dividend
The general poor and uncertain economic environment along with the particularly
depressed nature of the construction sector is forcing the group to take a very
conservative view as far as the preservation of cash resources is concerned.
Consequently no dividend was declared in respect of the 2011 financial year.
OUTLOOK
Protech`s tried and tested business model which hinges on its unique policy of
running a new fleet of plant and machinery has stood it in good stead over the
years and continues to do so. The entrenched relationships with equipment
suppliers and the trade back arrangements in place with these suppliers enable
the group to deliver on its value proposition of highly efficient service to
clients. The condition of the plant and machinery and the ability to rapidly
mobilise plant and equipment will continue to play a big part in the group`s
ability to secure workflow.
While the group expects the next year to remain challenging, it starts the 2012
financial year with 96% of the F2011 Contracting revenue already secured. The
group has a healthy pipeline of R1,4 billion up to 2013 with R901 million worth
of contracts currently in progress that still need to be executed. The focus
will for the immediate future continue to be the mining sector both locally and
in Southern Africa as the group believes that this sector will present the best
opportunities at positive margins.
On behalf of the directors
MSG Mareletse CJA Wolmarans
Acting Chairman of the Board Group Financial Director
Lanseria
27 May 2011
Directors: MSG Mareletse*+ (Acting Chairman), CJA Wolmarans (Group Financial
Director), V Raseroka*, MJ Vuso*+
* non-executive + independent
Secretary: A van der Merwe
Registered office: Corner R512 and Elandsdrift Road, Bultfontein, Lanseria
(Private Bag X6, Lanseria, 1748) (Website: www.pkh.co.za)
Transfer secretary: Link Market Services South Africa (Proprietary) Limited,
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein.
PO Box 4844, Johannesburg, 2000)
Sponsor: Deloitte & Touche Sponsor Services (Proprietary) Limited
www.pkh.co.za
Date: 30/05/2011 07:05:03 Produced by the JSE SENS Department.
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