| Wed 27 Mar 2002, 0:00 | | Putco Limited: Financial Report |
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PUTCO LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1945/018672/06)
JSE Share code: PTC ISIN: ZAE000005716
("Putco" "the Company" or "the Group")
Income statements
Six months ended Year ended
31 December 30 June
2001 2000 Increase 2001
Rm (unaudited) (unaudited) % (audited)
Revenue - bus operations 408,8 374,9 9,0 766,1
Cost of operating 378,2 348,8 8,4 718,3
Operating profit 30,6 26,1 17,2 47,8
Net finance costs 2,9 1,8 4,2
Profit before taxation 27,7 24,3 14,0 43,6
Taxation 9,8 10,1 16,6
Profit from ordinary activities 17,9 14,2 26,1 27,0
Loss attributable to minorities - - 0,1
Ordinary earnings 17,9 14,2 27,1
Shares in issue
(weighted number) (millions) 26,4 26,4 26,4
Headline earnings
per share (cents) 69,7 61,4 13,5 118,6
Ordinary earnings
per share (cents) 67,8 53,8 26,0 102,7
Ordinary dividend
per share - declared (cents) 20,0 10,0 40,0
Dividend cover (times) 3,4 5,4 2,6
Determination of
headline earnings
Ordinary earnings 17,9 14,2 27,1
Profit on disposal of assets
(other than buses) (0,7) - -
Profit on disposal of investment - - (0,1)
Provision for retrenchments 1,2 2,0 4,3
Headline earnings 18,4 16,2 31,3
Notes:
1. Revenue - bus operations includes R6 million (2000: R12 million)
additional payment due by Government for extending the Soweto contract.
2. Changes in accounting policies
The interim results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. The accounting
policies are consistent with those applied in the last annual report, except
for the adoption of the following new accounting policies:
Depreciation on owner - occupied buildings
Following the introduction of AC 135 - Investment Property, depreciation is
now provided on owner-occupied properties in accordance with AC 123 -
Property, Plant and Equipment. Comparative figures for six months to 31
December 2000 and year ended 30 June 2001 have been restated. This change
has the effect of decreasing the reported profit for the period by R0,5
million (2000: R0,4 million).
Provision for dividend
AC 107 (revised) - Events after Balance Sheet Date - precludes the raising
of a provision for any dividends declared after balance sheet date.
Dividends, including any applicable Secondary Tax on Companies charge, will
now be accounted for as and when declared. The adoption of AC 107 (revised)
has resulted in the Group adjusting the opening balance of distributable
reserves at 1 July 2001 by R8,9 million (2000: R6,0 million).
Post-retirement medical aid contributions
AC 116 (revised) - Employee Benefits - which is effective for the Company
from 1 July 2001, requires Putco to recognise post-retirement medical aid
benefit liability. Currently, the obligation is being actuarially determined
and the related liability has not been recognised in the accounts.
Segmental reporting
No segmental information is provided as the Group operates in a single
geographical region and a single line of business.
Cash flow statements
Six months ended Year ended
31 December 30 June
2001 2000 2001
Rm (unaudited) (unaudited) (audited)
Cash inflow from operating activities 35,6 7,7 6,9
Cash receipts from customers 428,9 392,0 758,2
Cash paid to suppliers and employees (378,5) (370,4) (723,2)
Net cash generated from operations 50,4 21,6 35,0
Finance costs (1,7) (1,8) (4,2)
Taxation paid (5,2) (3,7) (12,9)
Dividends paid (7,9) (5,3) (7,9)
Dividends paid to outside shareholders - (3,1) (3,1)
Cash outflow from investing activities (48,3) (11,8) (20,3)
Maintain operations (48,8) (13,2) (22,9)
Proceeds on disposal of plant
and equipment 2,1 1,0 1,8
(Increase)/Decrease in investments (1,6) 0,4 0,8
Financing activities
Borrowings raised 38,5 - -
Net cash inflow/(outflow) 25,8 (4,1) (13,4)
Net overdraft at beginning of period (44,7) (31,3) (31,3)
Net bank overdraft at end of period (18,9) (35,4) (44,7)
Statement of changes in equity
Share Non-
capital and distributable Distributable
Half-year ended premium reserves reserves Total
31 December 2001 Rm Rm Rm Rm
At 30 June 2001,
as previously reported 10,9 21,1 82,9 114,9
Adjusted for changes in
accounting policies
as detailed below:
- Accounting for
depreciation on owner
occupied buildings
AC 123 (10,4) (10,4)
- Accounting for dividends
payable in accordance
with AC 107 (revised) 8,9 8,9
At 30 June 2001,
as restated 10,9 21,1 81,4 113,4
Earnings
per income statement 17,9 17,9
Dividend paid (7,9) (7,9)
Net movements not
recognised through
income statement 10,3 10,7 21,0
At 31 December 2001 10,9 31,4 102,1 144,4
Half-year ended
31 December 2000
At 30 June 2000, as
previously reported 10,9 21,0 66,0 97,9
Adjusted for changes in
accounting policies
as detailed below:
- Accounting for
depreciation on owner
occupied buildings
AC 123 (9,7) (9,7)
- Accounting for
dividends payable
in accordance with
AC 107 (revised) 6,0 6,0
At 30 June 2000,
as restated 10,9 21,0 62,3 94,2
Earnings
per income statement 14,2 14,2
Dividend paid (5,3) (5,3)
At 31 December 2000 10,9 21,0 71,2 103,1
Balance sheets
31 December 30 June
2001 2000 2001
Rm (unaudited) (unaudited) (audited)
ASSETS
Non-current assets 240,8 181,5 181,0
Property, plant and equipment 236,1 178,0 177,9
Investments 4,7 3,5 3,1
Current assets 93,7 74,4 114,4
Inventory 48,4 42,0 42,6
Trade and other receivables 45,3 32,4 71,8
Total assets 334,5 255,9 295,4
EQUITY AND LIABILITIES
Equity capital and reserves 144,4 103,3 113,4
Ordinary shareholders' interest 144,4 103,1 113,4
Minority interest - 0,2 -
Non-current liabilities 62,6 27,1 36,9
Interest bearing borrowings 32,6 - -
Deferred taxation 9,7 11,0 17,2
Long-term provisions 20,3 16,1 19,7
Current liabilities 127,5 125,5 145,1
Trade and other payables 102,7 90,1 100,4
Short-term borrowings 5,9 - -
Net bank overdraft 18,9 35,4 44,7
Total equity and liabilities 334,5 255,9 295,4
CAPITAL EXPENDITURE
- Incurred 48,9 13,2 22,9
- Contracted for 1,3 9,9 42,5
- Authorised but not contracted for 22,4 - 1,0
RATIOS
Net asset value per share (cents) 547 391 430
Gearing ratio 0,4 0,3 0,4
Current asset ratio 0,7 0,6 0,8
COMMITMENTS AND CONTINGENT LIABILITIES
Contingent liabilities
- Recourse agreement for the purchase
of buses by joint venture partners 3,0 3,0 3,0
- Performance guarantees 4,9 5,0 5,0
- Pledge of cash on call to secure
open-ended guarantees 2,5 2,5 2,5
10,4 10,5 10,5
Bank borrowing facilities are secured to the extent of R10 million (2000:
R10 million) by notarial bond over buses.
CHAIRMAN'S STATEMENT FOR INTERIM REPORT DECEMBER 2001
GENERAL REVIEW
The overall results for the first six months of this financial year are
favourable. There has been a continued positive improvement in a number of
areas. Many of the Strategic Business Units have produced good results.
Profits earned are mainly attributable to the core bus-operating business.
Provided operating conditions remain stable we expect the profitability of
the Company to continue.
It is necessary, however, to highlight some areas of concern that may affect
the ongoing performance of the Company. These issues are presented for
information purposes only. Management and staff are addressing these issues
on an on-going basis.
* Tender delays
The repeated delays in the awarding of tendered contracts is creating a
high degree of uncertainty, affecting decisions regarding asset replacement
and forward planning, and causing problems with staff morale and
productivity.
* Potential conflict over the Heads of Agreement
The Heads of Agreement signed in the Tripartite Committee between
Government, organised labour and bus operators in 1999, governing labour
issues in the new tendered contract system, continue to be of concern. The
relevant parties are currently involved in a mediation process to try to
reach a mutually acceptable solution.
* Negotiated contracts
The National Land Transport Transition Act provided for negotiated contracts
(for a once-off period of five years) to be applied for by an operator under
certain conditions prior to their business being placed on open tender.
Although this provision has expired, the Department of Transport is
reconsidering the awarding of negotiated contracts in certain instances,
with specific goals and linked to overall National policy objectives.
Discussions are taking place to progress this matter. SABOA's (South African
Bus Operators Association) official stance is that negotiated contracts
could be viewed as an alternative to the tendered contract system.
* Black empowerment initiatives in line with Government policy
We continue to experience difficulties in finding suitable partners. Gensec
Bank, who is entrusted with the project, is still seeking a solution.
* Unemployment
The increase in unemployment in some of our areas of operation is having a
detrimental effect on our passenger base.
* Increase in costs as a result of Rand depreciation
There is a distinct possibility that the depreciation in the value of the
Rand could result in an increase in our costs and affect our capital
expenditure decisions.
* Netcare 911 campaign - safety programme
Putco launched a ground-breaking safety initiative as part of its broader
safety strategy, in terms of which Netcare 911 provides emergency medical
assistance to all Putco passengers who suffer an injury in any accident
involving one of our buses. This initiative will supplement our existing
safety programme, which already addresses driver selection and training,
medical fitness testing and driver attitude, as well as operational control
of driving time, driving habits, speed regulation and vehicle maintenance.
Our safety programme is closely aligned with the safety initiatives of the
Department of Transport and the Drive Alive campaign.
* Revaluation of fixed property - CGT issues
A revaluation of all Putco properties was undertaken in September 2001, in
light of the Capital Gains Tax ("CGT") legislative requirements.
PASSENGER LEVELS and FINANCIAL RESULTS
Passenger levels are down by 2,3%, as compared with the first six months of
last year, from 39,3 million to 38,4 million. The bus fleet at the end of
the period has increased from 1 463 to 1 526, up by 4,3%. Revenue increased
from R374,9 million to R408,8 million for the six months, an increase of
9,0%. The cost of operating increased from R348,8 million to R378,2 million,
an increase of 8,4%. Operating profit, before interest and tax, increased
from R26,1 million to R30,6 million, an increase of 17,2%.
OTHER RESULTS
* Soweto special subsidy
An agreement has been concluded with the Department of Transport regarding
the losses being incurred in our Greater Soweto operation due to the delay
in awarding the tendered contract. However, this short-term assistance is
insufficient to cover the actual losses being incurred.
* Pension fund contribution holiday
The new legislation related to surpluses in Pension Funds requires the
termination of the so-called "pension fund contribution holiday" practice,
as from 1 December 2001. The effect of the enactment of this legislation
means that R1,2 million, instead of the budgeted R1,5 million, will be
retained by the Company to reduce the cost of retirement benefits. No
further amounts will accrue for the second half of the year.
* Change in gearing policy
There has been a change in the gearing policy of the Company during the
period under review. Refurbishment has lost its cost advantage over the
purchase of new vehicles. The purchase of new buses was initially funded out
of short-term funding, predominantly at overdraft rates and is now being
funded out of long-term funding at more favourable rates.
* Overdraft improvement
As a result of the improvement in the operating results, the change in the
gearing policy and our strategic thrust goal of more efficient cash flow
management (Strategic Conference - March 2001), there has been a dramatic
reduction in the overdraft liability.
OPERATING FLEET
The bus programme for the current financial year will cost approximately
R62,4 million (2001: R17,8 million). This is again in line with our long-
term plan to upgrade our fleet.
FUTURE PROSPECTS
* Introduction of new buses in six months under review
We have purchased 50 new generation bus chassis. New style and SABS safety
approved bus-bodies were built and supplied by Putco's Dubigeon factory.
These buses have been placed in our Greater Soweto operation, which will
assist us in fulfilling the bus requirements for the upcoming tender.
* Future bus plan
The availability of sufficient buses that comply with the tender
specification requirements is crucial for the attainment of future tenders.
Detailed bus planning is being undertaken. A further approximately 100 bus
chassis will be purchased in 2002. The bus-bodies will be manufactured by
Putco's Dubigeon factory and the completed buses will be placed in various
operations by the end of the year.
* Mgqibelo Transport Consortium
The Consortium is a tri-party group; Putco, Johannesburg Metro and Alton
Coaches, each operating 25 buses. The Consortium was established to operate
for one year, until the end of March 2002. The operation has been
successful.
Negotiations are taking place to extend the contract. The current parties
have been asked to present business plans to the Provincial Department of
Transport for evaluation.
* Restructuring support functions
In line with our strategic plan to consider the rationalisation of our
support functions, we have closed our Electronic Commodities manufacturing
division and are sourcing our brake drum and small parts requirements from
outside suppliers, at much improved prices. This decision was also prompted
by the need to replace a large part of the old and outdated equipment, at a
major cost. The longer production runs of the outside manufacturers will
allow us to reduce our costs substantially and obtain high quality parts.
We have entered into a co-sourcing agreement with the accounting/consulting
firm of KPMG to assist and improve our internal auditing function. We have
completed a comprehensive risk analysis and a re-evaluation of our control
procedures and have introduced an improved programme of checks and balances.
This new plan will enable management to identify and implement timeous
corrective action more effectively.
* Tyre pressure system
As part of the Company's ongoing drive for greater efficiency and road
safety, Putco embarked on a pilot project with Taco South Africa to fit air
pressure systems to maintain the correct air pressure in tyres. These
initiatives will hopefully result in reduced tyre cost and increased vehicle
safety.
* Human resources system
The process of installing a new human resources/payroll information system
is now nearing finalisation. Despite a number of delays in the project, we
plan to go live with the new system in March 2002.
We are pleased to advise that the industry-wide SARPBAC annual wage
negotiations were successfully concluded on 4 March 2002.
The current results emanate from a sound base, which should result in the
sustainability of the present profit stream.
DIVIDEND DECLARATION
Notice is hereby given that an interim dividend of 20 cents (31 December
2000: 10 cents) per share has been declared in respect of the six months
ended 31 December 2001, payable on 22 April 2002. The last day to trade to
participate in the dividend will be 12 April 2002 and the shares will
commence trading ex-dividend from the commencement of business on 15 April
2002 and the record date will be 19 April 2002.
Shareholders may not dematerialise or rematerialize their shares between
Monday, 8 April 2002 and Friday, 19 April 2002, both dates inclusive.
A Carleo (Chairman)
E M R L Oldham (Chief Executive Officer)
N A Khena (Managing Director)
28 March 2002
Registered office Transfer secretaries
5 Mimosa Way Mercantile Registrars Limited
Mimosa Park 8th Floor, 11 Diagonal Street,
Gallo Manor, Sandton, 2194 Johannesburg, 2001.
(Private Bag 3, (PO Box 1053,
Wendywood, 2144) Johannesburg, 2000)
