| Mon 28 May 2012, 8:21 | | 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 29 February 2012 and renewal of cautionary announcement
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 29 February 2012 and renewal
of cautionary announcement
Condensed consolidated statement of financial position
at 29 February 2012
Audited Group
2012 2011
R`000 R`000
ASSETS
Non-current assets 460 045 469 998
Property, plant and equipment 411 278 429 430
Goodwill 33 549 33 549
Other intangible assets 4 100 4 648
Deferred taxation 11 118 2 371
Current assets 358 595 383 879
Inventory 11 305 11 434
Amounts due from contract customers 64 614 80 265
Trade and other receivables 192 309 216 067
Other financial assets 3 428 3 501
Current taxation assets 6 967 -
Bank balances and cash 79 972 72 612
Total assets 818 640 853 877
EQUITY AND LIABILITIES
Total equity 324 589 334 898
Share capital and share premium 228 598 228 598
Reserves (123 273) (124 029)
Retained earnings 219 264 230 329
Equity attributable to equity holders of 324 589 334 898
the holding company
Non-controlling interests - -
Total liabilities 494 051 518 979
Non-current liabilities 226 837 238 280
Borrowings 170 686 171 102
Deferred taxation 56 151 67 178
Current liabilities 267 214 280 699
Borrowings 117 451 122 535
Trade and other payables 109 086 120 778
Subcontractor liabilities 20 212 28 844
Amounts due to contract customers 20 465 -
Current taxation liabilities - 8 542
Total equity and liabilities 818 640 853 877
SUPPLEMENTARY STATEMENT OF FINANCIAL
POSITION INFORMATION
Total number of shares in issue (`000) 362 500 362 500
Net asset value per share (cents) 89,5 92,4
Capital expenditure (R`000)
-?Spent 160 721 211 667
-?Commitments - Authorised but unspent 20 000 226 360
Performance guarantees in issue (R`000) 98 687 133 356
Condensed consolidated statement of comprehensive income
for the year ended 29 February 2012
2012 2011
R`000 R`000
Revenue 965 794 1 069 665
Earnings before interest, taxation, 63 162 141 596
depreciation and amortisation
Depreciation and amortisation (66 985) (64 475)
(Loss)/earnings before interest and (3 823) 77 121
taxation
Net interest paid (19 442) (23 226)
(Loss)/earnings before taxation (23 265) 53 895
Taxation 12 200 (14 666)
(Loss)/earnings for the year (11 065) 39 229
Other comprehensive income for the year, 756 (86)
net of tax
Movement in foreign currency translation 756 (86)
reserve
Total comprehensive (loss)/income for (10 309) 39 143
the year
Attributable to: (11 065) 39 229
-?Equity holders of the holding company (11 065) 39 229
-?Non-controlling interests - -
Total comprehensive (loss)/income
attributable to:
-?Equity shareholders of the company (10 309) 39 143
-?Non-controlling interests - -
Total comprehensive (loss)/income for (10 309) 39 143
the year
Earnings per share (cents)
Basic (loss)/earnings per share (3,1) 10,8
Diluted (loss)/earnings per share (3,1) 10,8
Supplementary Statement of comprehensive
income information
Reconciliation of weighted average
number of shares in issue:
-?Weighted average number of shares in 362 500 362 500
issue (thousands)
Reconciliation of headline earnings:
(Loss)/earnings attributable to (11 065) 39 229
shareholders of the holding company
Adjusted for loss on disposal of plant 7 360 3 713
and equipment (net of tax)
Headline (loss)/earnings (3 705) 42 942
Headline (loss)/earnings per share
(cents)
-?Basic (1,0) 11,8
Condensed consolidated statement of cash flows
for the year ended 29 February 2012
2012 2011
R`000 R`000
Cash flows from operating 71 294 78 825
activities
Cash generated by operations 113 820 121 377
Net interest paid (19 442) (23 226)
Dividends paid - (14 500)
Income taxes paid (23 084) (4 826)
Cash flows from investing (58 434) (122 415)
activities
Purchase of property, plant and (160 721) (211 667)
equipment
Purchase of intangible assets - (3 357)
Proceeds on disposal of property, 102 214 86 735
plant and equipment
Decrease in loans granted 73 5 874
Cash flows from financing (5 500) 29 056
activities
Net movement in terms of bank loans 3 732 (7 476)
Net movement in terms of instalment (9 232) 36 532
sale agreements
Net increase/(decrease) in cash and 7 360 (14 534)
cash equivalents
Cash and cash equivalents at the 72 612 87 146
beginning of the year
Cash and cash equivalents at the 79 972 72 612
end of the year
Cash and cash equivalents comprise
of:
Bank balances and cash 79 972 72 612
Condensed consolidated statement of changes in equity
for the year ended 29 February 2012
R`000 Share Share Common Foreign
capital control currency
premium reserve translation
reserve
Balance at 1 2 228 (123 998) 55
March 2010 596
Dividends paid - - - -
Total - - - (86)
comprehensive
income for the
year
Balance at 2 228 (123 998) (31)
28 February 596
2011
Total - - - 756
comprehensive
loss for the
year
Balance at 2 228 (123 998) 725
29 February 596
2012
R`000 Equity Non- Total
Retained attributable control- equity
earnings to the ling
share- interest
holders
of the
company
Balance at 205 600 310 255 - 310 255
1 March 2010
Dividends paid (14 500) (14 500) - (14 500)
Total 39 229 39 143 - 39 143
comprehensive
income for the
year
Balance at 230 329 334 898 - 334 898
28 February
2011
Total (11 (10 309) - (10 309)
comprehensive 065)
loss for the
year
Balance at 219 264 324 589 - 324 589
29 February
2012
Operational segmental reporting
for the year ended 29 February 2012
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
R`000 Segment revenue Segment result
2012 2011 2012 2011
Contracting 865 767 942 890 (17 74 485
902)
Geotechnical 23 405 18 827 7 123 3 575
laboratory
Readymix 139 386 128 617 5 541 (1 500)
1 028 558 1 090 334 (5 238) 76 560
Corporate 51 823 8 930 3 415 15 298
Intergroup (114 587) (29 599) (2 000) (14
eliminations 737)
965 794 1 069 665
Operating (3 823) 77 121
(loss)/profit
Net interest (19 (23
paid 442) 226)
(Loss)/profit (23 53 895
before tax 265)
Taxation 12 200 (14 666)
(Loss)/profit (11 39 229
for the year 065)
Segment revenue reported above represents revenue
generated from external customers. Intersegment sales
amounted to R114,6 million (2011: R29,6 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
R`000 Segment assets Segment liabilities
2012 2011 2012 2011
Contracting 841 518 815 776 563 527 517 052
Geotechnical 17 476 9 216 5 383 2 188
laboratory
Readymix 72 171 72 293 83 204 85 856
931 165 897 285 652 114 605 096
Corporate 422 537 391 872 183 849 157 470
Intergroup (535 062) (435 280) (341 912) (243
eliminations 587)
818 640 853 877 494 051 518 979
Other segment information
Depreciation and Additions to non-
amortisation current assets
R`000 2012 2011 2012 2011
Contracting 61 486 58 158 209 506
106 103
Geotechnical 1 319 1 196 854 878
laboratory
Readymix 3 439 3 933 1 243 494
Corporate 741 1 240 521 789
66 985 64 160 211 667
475 721
1 Corporate includes the transactions of the holding
company.
Geographical segmental reporting
Revenue Non-current assets
R`000 2012 2011 2012 2011
South Africa 751 017 1 029 448 410 154 429 191
Rest of Africa2 214 777 40 217 1 124 239
965 794 1 069 665 411 278 429 430
2 Non-current assets in the rest of Africa comprise assets
acquired through subsidiaries or joint venture operations.
The operations in the rest of Africa hire plant and
machinery locally as well as from South Africa.
Information about major customers
Included in revenues arising from contracting income of R865,8 million
(2011: R942,9 million) are revenues of approximately R279,7 million (2011:
R511,2 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 decision makers. Therefore there are
no differences in terms of the information reported to shareholders and
management.
Notes to the condensed consolidated annual financial statements
for the year ended 29 February 2012
Basis of preparation and accounting policies
1.
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)
of the International Accounting Standards Board, the AC 500
standards as issued by the Accounting Practices Board, the
information as required by IAS 34: Interim Financial Reporting, the
JSE Limited`s Listings Requirements and the requirements of the
Companies Act of South Africa. The report has been prepared using
accounting policies that comply with IFRS, which are consistent with
those applied in the financial statements for the year ended 28
February 2011. The preparation of the Group`s consolidated year-end
results for the year ended 29 February 2012 was supervised by
the Group Financial Director, CJA Wolmarans CA(SA).
Subsequent events
2.
No material events have occurred subsequent to 29 February
2012 which may have an impact on the group`s reported financial
position at this date.
Audit opinion
3.
The auditors, Deloitte & Touche, have issued their unmodified audit
opinion on the group`s financial statements for the year ended 29
February 2012. 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 Khuthele Holdings Limited ("Protech" or "the group") is a bulk
earthworks and civil engineering group that offers fast track contracting to
the mining, public and private sectors, mainly in southern Africa. The group
is extending its reach in the infrastructure value chain and selectively
pursuing projects in the rest of Africa.
Activity levels in the broader construction industry in South Africa
remained muted during the year under review. Despite large infrastructure
investment budgets, public sector spending continued to be slow. The
economic uncertainty led to drawn out decision-making and erratic spending
patterns among top mining companies. Accordingly, tenders and new project
opportunities are highly contested, with lower margins on new contracts.
Expansion in South Africa and the rest of Africa by junior miners is opening
up opportunities for second tier contractors such as Protech who can provide
a wide range of value added services. However, the challenges of operating
in Africa lead to longer establishment cycles and contractors need to be
compensated for the additional risks.
The group`s performance in 2012 reflected the tight operating environment
which is impacting the whole construction industry. The Contracting business
unit incurred a loss, largely due to impairments recognised on three
projects in Africa that the group has fully exited and accounted for in
2012. The Readymix business unit sustained the momentum of its turnaround
while the Geotechnical business unit continued to achieve solid margins.
Strategy Review
The focus of new management, which took over from 1 September 2011,
was on repositioning the group to weather the current market environment
while gearing up for growth for an anticipated market recovery in 2013.
Three core areas of the business have been prioritised:
- A review of market opportunities led Protech`s initiatives to extend its
reach in the infrastructure value chain. A seasoned executive has been
appointed to drive growth in the civils segment while public sector
transport and energy infrastructure projects will also be targeted.
- A renewed focus on nurturing entrepreneurship and delivering innovative
solutions is underpinned by the alignment of the human resources strategy to
the business strategy, to be driven by the Organisational Performance
Executive who recently joined the group.
- The plant policy has been modified without compromising the service
quality for which Protech is known. Replacement cycles for plant and
equipment have been extended within their warranty periods to optimise asset
utilization and reduce the capital requirements with the overall effect of
reducing the inherent financial risks of the business.
Financial Review
Statement of comprehensive income
Group revenue decreased by 10% to R965,8 million (2011: R1 069,7 million),
in line with the tough prevailing market as well as the challenges of
starting up projects in Africa.
Judicious management of input costs enabled the group to contain growth in
expenses and it maintained its gross margin at 35%.
Operational expenditure increased 18% to R286,3 million (2011: R242,0
million). The major impact was the impairments recognised on three projects
in Africa which had not progressed beyond the first phase. The full effect
has been accounted for in the 2012 financial year. The group reported an
operating loss before interest and taxation of R3,8 million (2011: operating
profit of R77,1 million).
A loss per share of 3,1 cents per share (2011: 10,8 cents earnings per
share) and a headline loss per share of 1,0 cents per share (2011: 11,8
cents earnings per share) were recorded for the year ended 29 February 2012.
Statement of financial position
Total property, plant and equipment decreased to R411,3 million (2011:
R429,4 million) at the financial year end, in line with the lower net
capital expenditure of R58,5 million (2011: R124,9 million) that reflects
the group`s modified plant policy.
As a result of net debt repayments of R5,5 million on it`s interest bearing
liabilities, Protech`s net debt:equity ratio improved from 66% in 2011 to
64% in 2012. The outstanding interest bearing liabilities decreased to
R288,1 million (2011: R293,6 million).
The financial position remains strong with a cash balance at 29 February
2012 of R80,0 million compared to R72,6 million at 28 February 2011.
Net working capital amounted to R91,4 million (2011: R103,2 million).
The net asset value per share at 29 February 2012 was reported at 89,5 cents
compared to 92,4 cents at 28 February 2011.
Statement of cash flows
Protech remains strongly cash generative despite the more challenging
operating environment with total cash generated by operations of
R113,8 million (2011: R121,4 million). When comparing cash generated by
operations before working capital changes to EBITDA, the ratio of cash
generated to EBITDA improved to 1,16 times (2011: 1,04).
Operational Review
Contracting - 84% of group revenue
The Contracting business unit showed an 8% decline in revenue to R865,8
million (2011: R942,9 million) as a result of fewer project opportunities in
South Africa and the long project establishment cycles in the rest of
Africa. An operating loss of R17,9 million (2011: operating profit of R74,5
million) was reported. Increased competition and lower project margins had
an impact, but the loss was predominantly due to impairments recognised on
three contracts in Africa which did not progress beyond the first phase. No
further losses will be incurred in relation to these projects that the group
has now fully exited.
During the second half of the financial year, the new management team
initiated a full review of the Contracting project portfolio.
Notwithstanding the loss making east African projects, management has a
solid understanding of the inherent risks in the remaining projects. Protech
has fully adapted its operating practices to the challenges of working in
Africa. In addition, the creation of a dedicated risk management function
will ensure that the increased risks of working outside of South Africa are
addressed.
Geotechnical - 2% of group revenue
The Geotechnical business unit which primarily services Protech`s
Contracting business unit achieved a 24% increase in revenue to R23,4
million (2011: R18,8 million) with 97% growth in operating profit to R7,1
million (2011: R3,6 million).
Readymix - 14% of group revenue
The Readymix business unit achieved a strong financial turnaround in 2012.
Its revenue growth of 8% to R139,4 million (2011: R128,6 million) outpaced
the current industry growth rate by a factor of two. This was due to the
successful development and launch of new products as well as its flexibility
and rapid lead times, which enabled the business unit to supply customers`
requirements on short notice.
Readymix did not pursue volume growth at lower margins. This together with a
continued focus on driving down production costs led to improved gross
margins and a reported operating profit of R5,5 million (2011: operating
loss of R1,5 million).
Board of Directors
The Board of Protech has been strengthened with several new appointments
since 1 March 2011:
- Mr ASW Page was appointed to the board on 1 September 2011 as an executive
director and to the position of chief executive officer.
- Mr MSG Mareletse was appointed as the independent chairman on 25 October
2011.
- Mr TW Rensen was appointed as an independent non-executive director with
effect from 19 April 2012.
Dividend
The prevailing economic environment is prompting 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 2012 financial year.
Outlook
The Group has seen evidence of improved tender activity since the beginning
of the new financial year, both in the mining sector and commercial
infrastructure. Renewed commitments from the South African government to
accelerate infrastructure investments are encouraging, particularly in the
transport and energy sectors which are strategic focus areas for Protech.
There are numerous opportunities to work in Africa, in mining and related
infrastructure, but a conservative and highly selective approach has been
adopted, in relation to clients and partners.
The total order book, which consists of awarded projects currently in
progress in the Contracting business unit amounted to R1,1 billion at 29
February 2012. In addition, the total value of work tendered, submitted and
awaiting adjudication and award to the successful contractor is currently
valued at some R2,4 billion on a probability weighted basis.
With its internal repositioning and capacity building, Protech is on a sound
footing to benefit from these opportunities, leveraging its unique sales
model to drive new business development. Best in class practices which are
being implemented throughout the business should ensure Protech`s capacity
to deliver profitable growth. Initiatives to extend its capability in
specific areas of the construction value chain are on track, including the
recent announcement to establish a civils division. These should provide
further growth as the group delivers more diversified solutions to its
customers.
The figures as stated in the outlook section of the commentary have not been
reviewed nor audited by the Company`s auditors.
Renewal of cautionary announcement
Shareholders are referred to the cautionary announcement published on the
Securities Exchange News Service ("SENS") on 2 May 2012 wherein they were
advised that the Company had entered into discussions which, if successfully
concluded may have a material effect on the price of the Company`s
securities.
Accordingly, Shareholders are advised to continue to exercise caution when
dealing in the Company`s securities until a further announcement is made.
On behalf of the directors
MSG Mareletse
Chairman
ASW Page
Chief Executive Officer
CJA Wolmarans
Group Financial Director
Lanseria
25 May 2012
Directors:
MSG Mareletse*+ (Chairman), ASW Page (Chief Executive Officer), CJA
Wolmarans (Group Financial Director), V Raseroka*, MJ Vuso*+, TW
Rensen*+
* non-executive??+ independent
Secretary:
iThemba Governance, Statutory Solutions (Pty) Ltd.
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: 28/05/2012 08:21:27 Produced by the JSE SENS Department.
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