| Thu 27 Oct 2011, 10:54 | | PSV - PSV Holdings Limited - Unaudited Condensed Financial Results for the |
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PSV
PSV
PSV - PSV Holdings Limited - Unaudited Condensed Financial Results for the
six months ended 31 August 2011
PSV HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1988/004365/06)
JSE code: PSV ISIN: ZAE000078705
("PSV" or "the Company" or "the Group")
Unaudited Condensed Financial Results for the six months ended 31 August
2011
Condensed consolidated statement of comprehensive income
for the period ended 31 August 2011
Unaudited Restated Audited
for the unaudited for the
six months for the 12 months
ended six months ended
31 August ended 28
2011 31 August February
2010 2011
R`000 R`000 R`000
Revenue 194 998 157 513 314 419
Gross profit 44 476 33 126 59 406
Operating expenses (38 535) (31 050) (62 436)
Operating profit/(loss) 5 941 2 076 (3 030)
Net finance charges* (6 026) (3 665) (8 069)
Net exchange profit/(loss) 1 069 (783) 50
Profit/(Loss) before taxation 984 (2 372) (11 049)
Taxation 409 643 (131)
Total income/(loss) for the 1 393 (1 729) (11 180)
period from continuing
operations
Discontinued operations 889 5 409 2 874
Total profit/(loss) for the 2 282 3 680 (8 306)
period
Other comprehensive income
Foreign currency translation 305 - -
gain
Total comprehensive income for 2 587 3 680 (8 306)
the period
Reconciliation of headline
earnings/(loss)
Profit/(Loss) attributable to 2 282 3 680 (8 306)
PSV equity holders
(Profit)/Loss on disposal of (775) (462) (520)
fixed assets
Impairment of non-current - - 998
assets
Headline earnings/(loss) 1 507 3 218 (7 828)
Headline earnings/(loss) 619 (2 191) (10 702)
continuing operations
Reconciliation of normalised
earnings/(loss)
Headline earnings/(loss) 1 507 3 218 (7 828)
Interest on deferred purchase 841 627 950
consideration payable
Amortisation of specific 1 450 1 442 2 921
intangibles
Deferred taxation provided on (406) (425) (818)
above
Straight lining of leases 875 (8) 146
Share based payments 22 570 834
Normalised earnings/(loss) 4 289 5 424 (3 795)
Normalised earnings/(loss) 3 401 15 (6 669)
from continuing operations
Basic earnings/(loss) per 0,92 1,48 (3,36)
share (cents)
Basic earnings/(loss) per 0,56 (0,70) (4,52)
share (cents) from continuing
operations
Headline earnings/(loss) per 0,61 1,30 (3,17)
share (cents)
Headline earnings/(loss) per 0,25 (0,88) (4,33)
share (cents) from continuing
operations
Normalised earnings/(loss) per 1,73 2,19 (1,54)
share (cents)
Normalised earnings/(loss) per 1,38 0,01 (2,70)
share (cents) from continuing
operations
Diluted earnings/(loss) per 0,91 1,45 (3,30)
share (cents)
Diluted earnings/(loss) per 0,55 (0,68) (4,46)
share (cents) from continuing
operations
Diluted headline 0,60 1,27 (3,11)
earnings/(loss) per share
(cents)
Diluted headline 0,25 (0,87) (4,25)
earnings/(loss) per share
(cents) from continuing
operations
Actual number of shares in 247 962 247 962 247 962
issue at period end
Weighted number of shares in 247 210 247 962 247 210
issue at period end
Fully diluted weighted average 251 740 253 178 251 740
number of shares in issue at
period end
* Actual net interest paid was R5 185 million. Balance comprises deferred
purchase consideration interest.
Condensed consolidated statement of financial position
as at 31 August 2011
Unaudited Unaudited Audited 28
31 August 31 August February
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 124 972 130 212 108 519
Current assets 206 093 151 944 181 458
Inventories 70 618 71 727 52 583
Trade and other receivables 68 167 67 552 58 016
Taxation receivable 6 860 3 520 7 205
Cash and cash equivalents 23 142 9 145 26 532
Assets held for sale 37 306 - 37 122
Total assets 331 065 282 156 289 977
EQUITY AND LIABILITIES
Equity 145 358 154 471 142 749
Non-current liabilities 42 430 26 005 25 640
Borrowings 34 150 20 579 20 985
Deferred tax liabilities 8 280 5 426 4 655
Current liabilities 143 277 101 680 121 588
Trade and other payables 92 147 76 501 65 910
Bank overdrafts 39 080 25 179 37 200
Liabilities held for sale 12 050 - 18 478
Total equity and liabilities 331 065 282 156 289 977
Net asset value per share 58,62 62,30 57,57
(cents)
Tangible net asset value per 34,77 39.01 36,99
share (cents)
Condensed Consolidated statement of changes in equity
for the period ended 31 August 2011
Unaudited Unaudited for Audited for
for the the the
six six months 12 months
months ended 31 ended 28
ended 31 August 2010 February 2011
August
2011
R`000 R`000 R`000
Balance at the beginning of the 142 749 150 222 150 221
period
Total comprehensive income for 2 282 3 680 (8 306)
the period
Share based payment transactions 22 569 834
Foreign currency translation 305 - -
differences
Balance at the end of the period 145 358 154 471 142 749
Condensed Consolidated statement of cash flows
for the period ended 31 August 2011
Unaudited Unaudited Audited for
for the for the the
six months six months 12 months
ended 31 ended 31 ended 28
August 2011 August 2010 February
2011
R`000 R`000 R`000
Cash flows from operating 2 236 733 7 044
activities
Cash flows from investing (8 830) (14 029) (16 417)
activities
Cash flows from financing 3 325 9 093 10 845
activities
Net movement in cash and cash (3 269) (4 203) 1 472
equivalents
Cash from acquisition of (2 001) 296 296
subsidiary
Cash transferred to assets held - - (308)
for sale
Cash and cash equivalents at the (10 668) (12 128) (12 128)
beginning of the period
Cash and cash equivalents at the (15 938) (16 035) (10 668)
end of the period
Condensed consolidated segmental information
for the six months ended 31 August 2011
Pumps Valves Specia- Other Total Discon-
and and lised tinued
Spares Indus- Service opera-
trial s tions
Supplie
s
R`000 R`000 R`000 R`000 R`000 R`000
Revenue 53 536 59 837 81 625 - 194 998 20 197
Gross profit 16 962 18 154 9 360 - 44 476 6 330
Operating 6 412 10 415 8 336 14 893 40 056 2 086
expenses*
Profit before 5 490 3 867 (8 960) 587 984 1 234
tax
Depreciation/ 1 291 630 1 348 2 136 5 405 289
Amortisation
Capital 849 (989) (893) 9 731 8 698 (302)
expenditure
Gross assets** 76 036 56 309 72 161 82 194 286 700 23 170
Gross 31 480 44 547 17 249 69 397 162 673 7 893
liabilities**
* Operating expenses exclude other income and finance costs
** Deferred tax assets and deferred tax liabilities are excluded
Condensed consolidated segmental information
for the six months ended 31 August 2010
Pumps Valves Specia- Other Total Discon-
and and lised tinued
Spares Indus- service operati
trial s ons
Supplie
s
R`000 R`000 R`000 R`000 R`000 R`000
Revenue 49 552 21 176 86 784 - 157 512 38 065
Gross profit 12 554 4 934 15 638 - 33 126 12 267
Operating 9 060 1 776 9 848 9 168 29 852 3 079
expenses*
Profit before (1 880) 2 413 1 722 (4 267) (2 372) 7 493
tax
Depreciation/ 1 178 41 1 570 2 252 5 041 218
Amortisation
Capital (703) - (1 923) 270 (2 356) 116
expenditure
Gross assets** 77 168 7 162 76 560 77 175 238 065 28 729
Gross 38 600 (5 646) 11 426 61 586 105 966 12 773
liabilities**
* Operating expenses exclude other income and finance costs
** Deferred tax assets and deferred tax liabilities are excluded
COMMENTARY
NATURE OF BUSINESS
PSV is an industrial engineering company operating in the primary sectors of
the South African economy. Due to the acquisition of Turbo Agencies
(Proprietary) Limited ("Turbo Agencies") which was effective 1 March 2011,
and the disposal of Group Line Projects (Proprietary) Limited ("Group Line
Projects") which was effective 8 October 2011, the board of directors of PSV
("the Board") has decided to align the Company`s business segments with
existing structures used for monthly management reporting purposes. As a
result, the Company`s new business segments are as follows:
Pumps and Spares;
Valves and Industrial Supplies; and
Specialised Services (including petrochemical, geosynthetic linings and
cryogenic activities).
Accordingly, the comparative segmental report for the six months ended 31
August 2010 has been restated for ease of comparison.
BASIS OF PREPARATION
The condensed consolidated financial statements ("interim results") have
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards ("IFRS") and the presentation
and disclosure requirements of IAS 34: Interim Financial Reporting, the
Listings Requirements of JSE Limited and in the manner required by the
Companies Act, 2008 (Act 61 of 2008). The principal accounting policies as
set out in the Company`s 2011 annual report, which are in terms of IFRS,
have been consistently applied throughout the six month period under review.
These interim results have not been reviewed or audited by the Group`s
auditors.
PREPARATION OF THE INTERIM RESULTS
The interim financial statements have been prepared under the supervision of
the Financial Director, AR Dreisenstock CA (SA) and H Dip Tax Law.
FINANCIAL REVIEW
PSV experienced a tough trading period during the six month period under
review. Nothwithstanding, there was a noticeable improvement from the prior
interim period. Revenue from continuing operations increased by 23,8%
compared to the six month period ended 31 August 2010, and gross margins
increased to 22,8% (2010: 21,0%). Operating expenses increased by 24,1%, in
line with the increase in revenue.
Operating margins increased to 3,0% (2010: 1,3%) and headline earnings per
share from continuing operations increased by 128,4% to 0,25 cents (2010:
0,88 cents loss per share). Normalised earnings per share from continuing
operations, calculated after eliminating interest provided on deferred
purchase considerations, straight lining of leases, share based payments and
amortisation of intangibles net of tax effects thereon also increased to
1,38 cents per share (2010: 0,01 cents per share).
Compared to the prior interim period, operating cash flows trebled during
the six month period under review, despite the ongoing pressure exerted on
working capital. Securing a twelve month commitment from the Group`s
bankers, together with the successful disposal of Group Line Projects
subsequent to the six month period under review, will significantly reduce
the Company`s gearing and consequential business risk.
A detailed assessment of the Group`s goodwill and intangible assets was
undertaken at period end. In terms of this assessment, the carrying values
of goodwill and intangible assets of the Company`s cash generating units
were in line with the values reflected in the statement of financial
position. Accordingly, the Board decided not to effect any impairment at
this time. The carrying value of goodwill and intangible assets will be re-
assessed at year end.
OPERATIONAL REVIEW
Pumps and Spares
This segment experienced an increase in revenue, gross margins and
consequential profitability during the six months ended 31 August 2011,
compared to the prior interim period. The segment contributed 27.5% to the
Company`s total consolidated revenue at an average gross profit margin of
31,7% (2010: 25,3%). As the rainy season approaches, PSV is confident that
there will be an improvement in high margin refurbishment and maintenance
work on water pumps. The Company`s Mather + Platt subsidiary, which
benefited from relocation and restructuring in the six month period under
review, achieved a profit in the six month period under review, compared to
the loss experienced in the prior interim period.
Valves and Industrial Supplies
This segment contributed 30.7% to the Company`s total consolidated revenue
at an average gross profit margin of 30,3% (2010: 23,3%). Revenue increased
substantially to R59,8 million (2010: R21,2 million), as a result of the
addition of Turbo Agencies in the six month period, which contributed R30,4
million in revenue, as well as to the outstanding performance by Omnirapid
Mining and Industrial Supplies (Proprietary) Limited ("Omnirapid").
Omnirapid has continued to exceed budgetary expectations, generating revenue
of R34,5 million in the six month period under review(2010: R25,3 million).
Specialised Services
Specialised Services contributed 42% to the Company`s total consolidated
revenue at an average gross profit margin of 11,5% (2010 18,0%). Segmental
revenue declined from R86,8 million for the six months ended 31 August 2010
to R81,6 million for the comparable six month period ended 31 August 2011.
The decline of the gross profit margin is attributable to PSV`s
petrochemical subsidiary Petro-Logic (Proprietary) Limited ("Petro-Logic").
Petro-Logic has invested significantly in human and capital resources, as
well as having implemented vastly improved operating procedures and systems.
Unfortunately, whilst Petro-Logic can unreservedly be called market leaders
in terms of service excellence, the provision of this service has come at an
unaffordable cost. Post the six month period under review, Petro-Logic has
been able to negotiate far better maintenance rates with its main customers,
diversify its revenue streams into more profitable areas and effectively
control costs. As a result, the Board is expecting a significant improvement
in performance in the next six months.
ACQUISITION OF TURBO AGENCIES
With effect 1 March 2011 100% of the issued share capital was purchased from
Earthwise Services (Pty) Ltd ("EWS") and Keith and Carol Parry ("the
Parry`s) for a consideration of R24 million. Turbo Agencies supplies tooling
equipment and provides crane maintenance services to the mining, engineering
automotive industries in Botswana, Zambia and the Democratic Republic of
Congo ("DRC").
The main reason for the purchase of Turbo Agencies is to extend PSV`s
footprint into Africa, and leverage off Turbo Agencies` existing customer
network with the range of PSV products.
The purchase consideration is to be settled as follows:
- A R12 million fully amortising vendor financed loan owed to EWS
payable over five years at prime plus one and
- R12 million due to the Parry`s subject to profit warranties to be
settled in three equal tranches by the issue of PSV shares.
However, in terms of the sales agreement, in the event that the
price of PSV shares drops below 17 cents per share, then the
entire consideration due is to be settled in cash. As this is the
case, the full amount is now to be settled in cash.
The balance sheet at effective date was as follows:
28-Feb-
11
R`000
ASSETS
Non-current assets 11,665
Goodwill 4,392
Deferred Tax 433
Other non-current 6,840
assets
Current assets 21,051
Inventories 5,625
Trade and other 15,234
receivables
Cash and cash 192
equivalents
Total assets 32,716
Non-current 16,638
liabilities
Loans from 13,841
shareholders
Finance lease 2,797
obligations
Current liabilities 11,905
Taxation payable 1,725
Trade and other 7,986
payables
Bank overdrafts 2,194
Total equity and 28,543
liabilities
Net assets 4,173
As at 31 August 2011 Turbo has generated revenue of R30million and
contributed 28% to the Group`s EBITDA. The current profit after tax for the
six months ending 31 August 2011 is R2.8million.
CHANGES TO THE BOARD
At the Company`s recent annual general meeting held on 29 September 2011,
shareholders voted against the re-election of all the incumbent non-
executive directors. The Company has committed to re-establishing its Board
and its audit and risk committees by no later than 30 November 2011,
provided that all JSE and statutory requirements can be met timeously.
Shareholders will be informed accordingly.
As a result of the disposal of Group Line Projects, Dave Kelly`s function
changed from that of an executive director to a non-executive director with
effect from 30 September 2011.
DIVIDENDS
The Group will continue to retain and utilise cash generated to fund its
working capital requirements and potential acquisitions. As such, no
dividends were declared or proposed. The Board will review the dividend
policy annually.
SUBSEQUENT EVENTS
Other than the disposal of Group Line Projects, the Board is not aware of
any other material matters that have occurred since the end of the six month
period under review, up to and including the date of this report.
PROSPECTS
It is the opinion of the Board that, the six month period under review has
undoubtedly been the most difficult period which the Company has had to
endure during its history. However, the Board is pleased with its adopted
strategy of disposing of Group Line Projects and replacing the lost income
with the positive contribution from Turbo Agencies. Turbo Agencies is also
assisting with the diversification of the PSV footprint in Africa.
Furthermore, the consolidation of costs and businesses into the PSV Office
Park has been a resounding success.
In October 2011, PSV acquired the business of PSV MITECH, a local
manufacturer of globe control valves, pneumatic actuators, de-superheaters
and allied equipment for the process industry. This acquisition will provide
PSV with access to the high end of the control valve market, a segment PSV
has not previously been involved in, as well as the ability to broaden the
existing valve range in South African, African and international markets.
The effective date accounts are still being finalised. Consequently, the
relevant financial information is not yet available.
Although the economic climate is expected to remain difficult, the Board is
cautiously optimistic that the changes effected within the various business
units will position them to generate better returns despite the current
operating environment.
For and on behalf of the Board
AJD da Silva AR Dreisenstock
Chief Executive Officer Financial Director
27 October 2011
DIRECTORS
Executive Directors: P Robinson* (Deputy Chairman), AJD da Silva (Chief
Executive Officer),
AR Dreisenstock (Financial Director).
Non-Executive Directors DJ Kelly*
*British
Company secretary: M Pretorius
REGISTERED OFFICE: PSV Holdings Office Park, Corner Barbara and North Reef
Roads, Henville Ext, Elandsfontein
Postnet Suite 229, Private Bag X19, Gardenview, 2047 Tel (local): (011) 657
6000 Tel (international): +2711 657 6000 Fax: (011) 822 8470
TRANSFER SECRETARIES: Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg,
South Africa, 2001 (PO Box 61051, Marshalltown, South Africa, 2107)
DESIGNATED ADVISER: Merchantec Capital
Date: 27/10/2011 10:54:01 Produced by the JSE SENS Department.
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