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RAC
RAC
RAC - Racec Group Limited - Condensed consolidated unaudited interim results for
the six months ended 31 March 2011
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 2011
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months year ended
ended ended 30 September
31 March 31 March 2010
2011 2010 R`000
R`000 R`000
Revenue 150 220 167 092 394 170
Cost of sales (109 291) (138 937) (310 156)
Gross profit 40 929 28 155 84 014
Other income 20 613 1 311
Other expenses (33 441) (27 652) (56 878)
Net profit before investment 7 508 1 116 28 447
revenue, finance costs and taxation
Investment revenue 863 1 558 2 388
Finance costs (3 496) (4 112) (9 340)
Profit/(Loss) before taxation 4 875 ( 1 438) 21 495
Taxation (2 221) (595) (8 549)
Profit/(Loss) for the period 2 654 (2 033) 12 946
Attributable to:
Equity holders of the parent 3 103 (2 033) 13 075
Non-controlling interest (449) - (129)
2 654 (2 033) 12 946
Other comprehensive income / (loss):
- Deferred tax on revaluation - - 251
through disposal
- Revaluation of property, plant and - - 336
equipment
- Deferred tax on revaluation of - - (94)
property, plant and equipment
- Impairment of property, plant and - (240) -
equipment
- Deferred tax on impairment of - 67 -
property, plant and equipment
- Deferred tax on realised - 58 -
revaluation through disposal of
property
- Share option expense 75 - -
- Foreign currency translation (164) - 6
differences
Total comprehensive income / (loss) 2 565 (2 148) 13 445
for the period
Attributable to:
Equity holders of the parent 3 014 (2 148) 13 574
Non-controlling interest (449) - (129)
2 565 (2 148) 13 445
EARNINGS / (LOSS) PER SHARE (CENTS)
Basic 2.9 (1.9) 12.4
Diluted basic 1.8 (1.9) 8.7
Headline 2.9 (2.0) 13.3
Diluted headline 1.8 (2.0) 9.4
Weighted average number of ordinary 106 104 105 429 105 730
shares in issue (`000)*
Fully diluted weighted average 174 966 105 429 149 642
number of ordinary shares in issue
(`000)**
*Excludes treasury shares
** Treasury shares considered to have dilutive potential
SEGMENTAL REPORT
Analysis per reportable Administrative Electrical Rail Total
segment investment services construct R`000
and plant hire R`000 -ion
R`000 R`000
Unaudited - 6 months ended
31 March 2011
Revenue - external - 69 617 90 723 160 340
Revenue - intersegment 10 305 241 245 10 791
Profit/(Loss) before tax 1 706 (14 506) 17 675 4 875
Total assets 39 654 78 399 87 712 205 765
Unaudited - 6 months ended
31 March 2010
Revenue - external 38 104 341 62 713 167 092
Revenue - intersegment 10 404 101 5 10 510
Profit/(Loss) before tax 730 (7 571) 5 403 (1 438)
Total assets 39 029 111 664 49 467 200 160
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 77 713 222 988
Geographical analysis South Outside Total
Africa South R`000
R`000 Africa
R`000
Unaudited - 6 months ended 31
March 2011
Revenue 110 357 49 983 160 340
Profit/(Loss) before tax (20 465) 25 340 4 875
Total assets 173 809 31 956 205 765
Unaudited - 6 months ended
31 March 2010
Revenue 167 092 - 167 092
Loss before tax (1 438) - (1 438)
Total assets 200 160 - 200 160
Audited - year ended
30 September 2010
Revenue 338 559 55 611 394 170
(Loss)/Profit before tax (3 348) 24 843 21 495
Total assets 191 736 31 252 222 988
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 Group Limited board of directors), 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 IFRS 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
Unaudited Unaudited Audited
as at as at as at
31 March 31 March 30 September
2011 2010 2010
R`000 R`000 R`000
ASSETS
Non-current assets 83 546 68 395 75 374
- Property, plant and equipment 61 713 54 271 55 631
- Investment property 351 351 351
- Intangible assets 10 548 10 030 10 314
- Loans and receivables 4 404 - -
- Loans to related parties 11 80 4 694
- Deferred tax assets 6 519 3 663 4 384
Current assets 122 219 131 765 147 614
- Inventories 49 501 25 694 31 020
- Trade and other receivables 58 364 94 589 97 237
- Derivative financial - - 28
instruments
- Tax receivable 119 1 894 97
- Cash and cash equivalents 14 235 9 588 19 232
Total assets 205 765 200 160 222 988
EQUITY AND LIABILITIES
Capital and reserves 59 423 46 134 61 232
- Equity attributable to equity 60 001 46 134 61 361
holders of the parent
- Non-controlling interest (578) - (129)
Non-current liabilities 56 926 52 993 66 176
- Loans from related parties 40 620 35 364 50 161
- Other financial liabilities 8 284 11 647 7 244
- Share based payments 2 890 3 201 2 911
- Deferred tax liabilities 5 132 2 781 5 860
Current liabilities 89 416 101 033 95 580
- Other financial liabilities 8 800 6 919 12 828
- Current tax payable 10 624 1 582 6 894
- Trade and other payables 48 513 60 346 54 494
- Bank overdraft 21 479 32 186 21 364
Total equity and liabilities 205 765 200 160 222 988
Net asset value per share 56.6 43.5 57.8
(cents)
Net tangible asset value per 46.6 34.1 48.1
share (cents)
Total number of ordinary shares 106 104 105 969 106 104
in issue (`000)*
*Excludes treasury shares
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months year ended
ended ended 30 September
31 March 31 March 2010
2011 2010 R`000
R`000 R`000
Cash flows from operating activities 18 327 (9 482) 10 083
- Cash generated from operations 22 276 (7 986) 11 136
- Interest income 863 992 2 388
- Finance costs (3 496) (1 674) (4 165)
- Taxation paid (1 316) (814) 724
Cash flows from investing activities (11 137) 1 591 (5 258)
- Purchase of property, plant and (13 490) (1 201) (13 186)
equipment
- Proceeds from disposal of 3 048 2 832 8 771
property, plant and equipment
- Purchase of intangible assets (695) (40) (843)
Cash flows from financing activities (12 077) (6 210) 1 527
- Repayment of other financial (6 649) (5 805) (14 003)
liabilities
- Advance of other financial 3 528 1 597 11 144
liabilities
- (Repayment) / Advance of loans by (4 582) (2 002) 4 879
related parties
- Net proceeds from share issue - - (493)
- Dividends paid (4 374) - -
Total cash movement for the period (4 887) (14 101) 6 352
Cash at the beginning of the period (2 132) (8 497) (8 497)
Exchange rate movements on cash and (225) - 13
cash equivalents
Total cash at the end of the period (7 244) (22 598) (2 132)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Treasury Other
and share shares reserves
premium R`000 R`000
R`000
Balance at 30 September 2009 76 298 (45 000) 6 878
Total comprehensive loss - - (565)
- Loss for the period - - -
- Realised revaluation through - (300)
depreciation -
- Deferred tax on revaluation - 84
through depreciation -
- Realised revaluation through - (246)
disposal -
- Deferred tax on revaluation - 12
through disposal -
- Impairment of property, plant -
and equipment - (240)
- Deferred tax on impairment of - - 67
property, plant and equipment
- Deferred tax on realised - - 58
revaluation through disposal of
property
Share capital issued by the 4 286 - -
company
Shares issued to subsidiaries * - (3 878) -
Non-controlling interest - - (431)
acquired
Balance at 31 March 2010 80 584 (48 878) 5 882
Total comprehensive - - (267)
income/(loss)
- Profit for the period - - -
- Realised revaluation through - (199)
depreciation -
- Deferred tax on revaluation - 56
through depreciation -
- Realised revaluation through - - (756)
disposal
- Deferred tax on revaluation - 269
through disposal -
- Revaluation of property, - 576
plant and equipment -
- Deferred tax on revaluation - (219)
of property, plant and -
equipment
- Foreign currency translation - 6
differences -
Share capital issued by the 11 440 - -
company
Share issue expenses (548) - -
Shares issued to subsidiaries * - (11 387) -
Share premium reduction (21 107) 21 107 -
Balance at 30 September 2010 70 369 (39 158) 5 615
Total comprehensive - - (375)
income/(loss)
- Profit for the period - - -
- Realised revaluation through - - (333)
depreciation
- Deferred tax on revaluation - - 93
through depreciation
- Realised revaluation through - - (64)
disposal
- Deferred tax on revaluation - - 18
through disposal
- Share option expense - - 75
- Foreign currency translation - - (164)
differences
Dividends paid - - -
Balance at 31 March 2011 70 369 (39 158) 5 240
Retained Non- Total
earnings controlling equity
R`000 interest R`000
R`000
Balance at 30 September 2009 10 129 69 48 374
Total comprehensive loss (1 583) - (2 148)
- Loss for the period (2 033) - (2 033)
- Realised revaluation through 300 - -
depreciation
- Deferred tax on revaluation (84) - -
through depreciation
- Realised revaluation through 246 - -
disposal
- Deferred tax on revaluation (12) - -
through disposal
- Impairment of property, plant - -
and equipment (240)
- Deferred tax on impairment of - - 67
property, plant and equipment
- Deferred tax on realised - - 57
revaluation through disposal of
property
Share capital issued by the - - 4 286
company
Shares issued to subsidiaries * - - (3 878)
Non-controlling interest - (69) (500)
acquired
Balance at 31 March 2010 8 546 - 46 134
Total comprehensive 15 989 (129) 15 593
income/(loss)
- Profit for the period 15 108 (129) 14 979
- Realised revaluation through 199 - -
depreciation
- Deferred tax on revaluation (56) - -
through depreciation
- Realised revaluation through 756 - -
disposal
- Deferred tax on revaluation (18) - 251
through disposal
- Revaluation of property, - - 576
plant and equipment
- Deferred tax on revaluation - - (219)
of property, plant and
equipment
- Foreign currency translation - - 6
differences
Share capital issued by the - - 11 440
company
Share issue expenses - - (548)
Shares issued to subsidiaries * - - (11 387)
Share premium reduction - - -
Balance at 30 September 2010 24 535 (129) 61 232
Total comprehensive 3 389 (449) 2 565
income/(loss)
- Profit for the period 3 103 (449) 2 654
- Realised revaluation through 333 - -
depreciation
- Deferred tax on revaluation (93) - -
through depreciation
- Realised revaluation through 64 - -
disposal
- Deferred tax on revaluation (18) - -
through disposal
- Share option expense - - 75
- Foreign currency translation - - (164)
differences
Dividends paid (4 374) - (4 374)
Balance at 31 March 2011 23 550 (578) 59 423
* 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 CONDENSED CONSOLIDATED FINANCIAL RESULTS
Statement of compliance
The accounting policies applied in the preparation of these unaudited condensed
consolidated 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 2010. These
condensed consolidated 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").
These results have not been reviewed or audited by the Group`s auditors.
Basis of measurement
These unaudited condensed financial statements have been prepared on the
historical cost basis, modified for certain items measured at fair value.
Reconciliation of earnings /(loss) to headline earnings/(loss)
Unaudited Unaudited Audited
6 months 6 months year ended
ended ended 30 September
31 March 31 March 2010
2011 2010 R`000
R`000 R`000
Profit/(Loss) for the 3 103 (2 033) 13 075
period
Adjustments for:
- Loss on disposal of 27 - 631
property, plant and
equipment
- Profit on disposal of (2) (66) (80)
property, plant and
equipment
- Impairment losses on - - 736
property, plant and
equipment
- Impairment loss on - 19 57
intangible assets
- Tax effects (7) - (369)
Headline earnings/(loss) 3 121 (2 080) 14 050
Events after the reporting period
The directors are not aware of any material matters or circumstances arising
since the end of the interim period and up to the date of this report.
COMMENTARY
FINANCIAL PERFORMANCE
While the Group reported a 10% reduction in revenue for the six months to 31
March 2011 compared to the corresponding period of the prior year, there was a
45% increase in the gross profit from R28.2 million to R40.9 million, with
overall margins improving to 27% (2010: 17%). This has been driven by several
cross border contracts which commenced in the latter part of the 2010 financial
year.
Comprehensive income attributable to equity holders of the parent for the six
months was recorded at R3.0 million (2010: loss of R2.1 million). Headline
earnings per share amounted to 2.9 cents (2010: loss of 2.0 cents). Diluted
headline earnings per share improved to 1.8 cents (2009: loss of 2.0 cents).
Cash flow generated by operating activities for the six months to 31 March 2011
amounted to R18.3 million (2010: utilised R9.5 million), due largely to the cash
generated from profitable operations and advance contract receipts.
The net asset value per share increased from 43.5 cents per share to 56.6 cents
per share and the net tangible asset value per share increased from 34.1 cents
to 46.6 cents compared to the corresponding prior period.
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
Although Eskom, Transnet and SANRAL remain committed to their infrastructure
spend, the local construction industry is still experiencing a lag as it remains
influenced by the recession. The local rail sector is showing positive signs of
recovery with RACEC Rail`s confirmed and potential order book looking extremely
promising. Unfortunately, RACEC`s Electrical and Manufacturing operations are
continuing to operate in a hugely competitive environment as current supply
continues to outstrip demand.
As the local uncertainty has pushed companies to pursue opportunities further
afield, RACEC Rail has successfully expanded its operations into Africa. With
the successful delivery of current contracts in Sierra Leone and Mozambique, the
rail operations are well positioned to take advantage of further opportunities
in Ghana, Kenya, Tanzania, Liberia and Malawi whilst further consolidating its
position in Sierra Leone and Mozambique.
RACEC Electrification continues to be impacted by a tough domestic market where
the average size of projects is reducing and margins are being placed under
significant pressure.
Despite the depressed market conditions, RACEC Electrification is working on a
number of potential projects in the renewable energy sector, including wind
farms, solar farms and large infrastructure projects, however, we do not foresee
that these will have a significant impact on our turnover until the next
financial year.
Following the success of RACEC Rail`s cross border operations, RACEC
Electrification is also actively pursuing opportunities in the African market,
as well as seeking potential acquisitions and joint ventures to improve its
local market share.
In summary, RACEC remains positive and optimistic about its future prospects
despite the short-term uncertainty in the local market. The 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.
DIVIDENDS
RACEC`s dividend policy is to pay one third of profit after tax, which would
have translated into a dividend declaration amounting to R4 million for 2010,
with the proviso that this was affordable.
However, the Board took 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 was delayed until the Board meeting
held on 3 March 2011. At that meeting, the decision was taken to declare a
dividend of 2.5 cents a share, which was paid on 4 April 2011.
No dividends have been declared for the 6 months to 31 March 2011.
Directorate
During the period under review, Mr Winston Ollewagen retired as an executive
director of RACEC at the annual general meeting held on 3 March 2011.
By order of the Board
M Uys G Harrod
Non-Executive Chairman Chief Executive Officer
27 June 2011
Directors:
M Uys* (Chairman), G Harrod (Chief Executive Officer),
C Harrod*, C Gooden*, S Wilkins (Chief Financial Officer),
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:
Grant Thornton Cape Inc.
(Docex 158, Cape Town)
These results may be viewed on the internet on http://www.racec.co.za
Date: 27/06/2011 13:28:01 Produced by the JSE SENS Department.
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