| Thu 26 Sep 2002, 13:01 | | Putco Limited - Financial Report |
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PUTCO Limited - Financial Report
PUTCO Limited
Registration number 1945/018672/06
JSE Share code: PTC
ISIN: ZAE000005716
* Overall results for the financial year are favourable
* Eighty four new buses have been introduced, built from South African
sourced materials
* Improved cash flow
* Putco with the assistance of the CSIR developed a bus for disabled
passengers
* Group revenue increased by 8%
* Group operating profit before onerous contracts up 41% from R47 782 to
R67 602.
* Putco is well placed to meet a number of challenges due to changes in the
transport industry
Income statements
Group Company
R000 R000
2002 2001 2002 2001
Revenue 828 411 766 902 790 696 746 836
Turnover
- Bus operating 827 148 766 131 785 713 735 654
Cost of operating and trading 759 546 718 349 728 279 693 893
Operating profit before
onerous contracts 67 602 47 782 57 434 41 761
Onerous contracts 23 548 - 23 548 -
Operating profit after
onerous contracts 44 054 47 782 33 886 41 761
Dividends from subsidiaries - 3 354
Other dividends 18 13 18 13
Distributions from trading trusts 3 887 7 110
Interest received 1 245 758 1 078 705
Profit before interest paid and taxation 45 317 48 553 38 869 52 943
Finance costs 15 189 4 973 15 175 4 869
Profit before taxation 30 128 43 580 23 694 48 074
Taxation 10 691 16 576 8 614 16 576
Profit from ordinary activities 19 437 27 004 15 080 31 498
Loss attributable to minorities - 109 - -
Profit attributable to shareholders 19 437 27 113 15 080 31 498
Headline earnings per share (cents) 58,0 113,4
Adjusted headline earnings per share 147,0 -
Earnings per share (cents) 73,6 102,6
Dividends per share (cents) 50,0 30,0
- Interim paid 20,0
- Final proposed 30,0
Note:
Earnings per share
The calculation of headline earnings per
share is based on earnings of R38 857 000
(2001: R29 977 000) and 26 425 000
(2001: 26 425 000) shares in issue
during the year.
The calculation of earnings per share
is based on earnings of R19 437 000
(2001: R27 113 000) and 26 425 000
(2001: 26 425 000) shares in issue
during the year.
Reconciliation between earnings
and headline earnings:
Attributable earnings 19 437 27 113
Profit on disposal of assets
(other than buses) (631) (49)
Profit on disposal of business - (77)
Provision for retrenchments 5 096 4 271
Deferred tax effect thereof (8 593) (1 281)
Headline earnings 15 309 29 977
Provision for onerous contracts 23 548 -
Adjusted headline earnings 38 857 29 977
Balance sheets
Group Company
R000 R000
2002 2001 2002 2001
Assets
Non-current assets 268 359 180 984 244 766 177 327
Property, plant and equipment 259 304 177 848 211 599 149 901
Investments 5 102 3 136 1 415 10 115
Investments in subsidiaries 16 789 17 311
Deferred taxation 3 953 - 14 963 -
Current assets 118 608 117 961 110 183 110 583
Inventory 56 157 42 562 54 922 41 528
Taxation - 6 430 - 6 343
Trade and other receivables 29 969 65 429 25 550 59 967
Cash on call, at bank and on hand 32 482 3 540 29 711 2 745
Total assets 386 967 298 945 354 949 287 910
Equity and liabilities
Equity capital and reserves 94 449 108 659 69 943 103 240
Share capital 10 917 10 917 10 917 10 917
Non-distributable reserves 22 954 10 538 - -
Distributable reserves 60 578 87 204 59 026 92 323
Ordinary shareholders` interest 94 449 108 659 69 943 103 240
Non-current liabilities 107 940 41 565 107 391 36 665
Long-term liabilities 35 664 - 35 664 -
Deferred taxation - 21 903 - 17 205
Provisions 72 276 19 662 71 727 19 460
Current liabilities 184 578 148 721 177 615 148 005
Short-term liabilities 8 207 - 8 207 -
Provisions 81 671 43 987 80 934 43 457
Trade and other payables 82 461 56 525 78 144 55 946
Bank overdraft 858 48 209 858 48 602
Taxation 11 381 - 9 472 -
Total equity and liabilities 386 967 298 945 354 949 287 910
Statements of changes in equity
for the year ended 30 June 2002
Non
distri-
Stated butable Retained
capital reserves profit Total
R`000 R`000 R`000 R`000
GROUP
Balance at 30 June 2000,
as previously reported 10 917 21 013 65 963 97 893
Adjusted for changes in accounting
policies as detailed below:
In terms of AC123 - Property, Plant and
Equipment and AC135 - Investment Property
- Deferred tax now accounted for on previous
revaluation of immovable property (6 305) (6 305)
- Accounting for backlog depreciation
on owner occupied buildings (9 667) (9 667)
- Deferred tax released on revalued
portion of depreciation 1 607 1 607
Revaluation reserve realised
through depreciation (3 751) 3 751
In terms of AC107 - Events after
Balance Sheet Date 5 946 5 946
- Proposed dividend previously
accrued now reversed 5 285 5 285
- Secondary tax on companies 661 661
Balance at 30 June 2000, as restated 10 917 10 957 67 600 89 474
Net profit for the year as
previously stated 27 576 27 576
Depreciation adjustment after tax (793) (793)
Secondary tax on companies 330 330
Net profit as restated 27 113 27 113
Revaluation reserve realised
through depreciation (419) 419
Dividend paid (7 928) (7 928)
Balance at 30 June 2001 10 917 10 538 87 204 108 659
(35 165) (35 165)
Accounting for post retirement
medical aid liability
in accordance with AC116 -
Employee Benefits (50 236) (50 236)
Deferred tax thereon 15 071 15 071
Transitional fair value
adjustment to investment
property in accordance
with AC135 - Investment
Property (1 890) 1 890
Balance at 30 June 2001, as restated 10 917 8 648 53 929 73 494
Net profit for the year 19 437 19 437
Revaluation of properties 21 043 21 043
- Deferred tax on revaluation (6 313) (6 313)
Revaluation reserve realised
through depreciation (424) 424
Dividend paid (13 212) (13 212)
Balance at 30 June 2002 10 917 22 954 60 578 94 449
Non
distri-
Stated butable Retained
capital reserves profit Total
R`000 R`000 R`000 R`000
COMPANY
Balance at 30 June 2000 as
previously reported 10 917 62 807 73 724
Adjusted for changes in accounting
policies as detailed below:
In terms of AC107 - Events after
Balance Sheet Date 5 946 5 946
- Proposed dividend previously accrued
now reversed 5 285 5 285
- Secondary tax on companies 661 661
Balance at 30 June 2000, as restated 10 917 68 753 79 670
Net profit for the year as
previously stated 31 168 31 168
- Secondary tax on companies 330 330
Net profit as restated 31 498 31 498
Dividend paid (7 928) (7 928)
Balance at 30 June 2001 10 917 92 323 103 240
(35 165) (35 165)
Accounting for post retirement
medical aid liability in accordance
with AC116 - Employee Benefits (50 236) (50 236)
Deferred tax thereon 15 071 15 071
Balance at 30 June 2001, as restated 10 917 57 158 68 075
Net profit for the year 15 080 15 080
Dividend paid (13 212) (13 212)
Balance at 30 June 2002 10 917 59 026 69 943
Cash flow statements
for the year ended 30 June 2002
Group Company
R000 R000
2002 2001 2002 2001
Cash generated by operating activities 117 070 6 929 104 237 16 290
Net cash generated by operations
(see below) 143 788 35 041 127 139 30 790
Investment income 1 263 771 4 983 11 182
Finance costs (4 791) (4 973) (4 777) (4 869)
Taxation paid (9 978) (12 886) (9 897) (12 885)
Dividends paid (13 212) (7 928) (13 212) (7 928)
Dividends paid to outside shareholders
of subsidiary - (3 096) - -
Investing activities (84 648) (20 275) (73 397) (22 832)
Replacement of property, plant
and equipment (85 622) (22 926) (85 553) (22 856)
Proceeds on disposal of plant
and equipment 2 940 1 857 2 934 1 931
(Increase)/decrease in investments (1 966) 696 8 700 (1 786)
Proceeds on disposal of
investments/business - 98 - 98
Decrease/(increase) of in loans
to subsidiaries - - 522 (219)
Financing activities 43 871 - 43 871 -
Long-term liabilities advanced 35 664 - 35 664 -
Short-term liabilities advanced 8 207 - 8 207 -
Cash resources
Net increase/(decrease) in cash and
cash equivalents 76 293 (13 346) 74 710 (6 542)
Cash and cash equivalents at
beginning of year (44 669) (31 323) (45 857) (39 315)
Cash and cash equivalents at end of year 31 624 (44 669) 28 853 (45 857)
Reconciliation of operating profit before
taxation with cash generated by operations
Operating profit before taxation 30 128 43 580 23 694 48 074
Adjusted for depreciation 23 072 17 451 21 720 16 389
Finance costs 15 189 4 973 15 175 4 869
Profit on disposal of property, plant
and equipment (802) (649) (798) (774)
Investment income (1 263) (771) (4 983) (11 182)
Changes in working capital 47 800 (29 470) 43 221 (26 362)
Profit on disposal of investment/business - (77) - (44)
Non-cash effect of provisions raised 29 664 4 29 110 (180)
143 788 35 041 127 139 30 790
Chairman`s statement
OVERVIEW
The overall results for the financial year are favourable. There has been a
continued improvement in a number of areas. Many of the Strategic Business Units
have performed very well. Profits earned were obtained from core bus-operating
business. Escalating costs, particularly in support functions, have been well
managed and their effect on company results has been contained.
The following items are provided mainly for information purposes and to
advise stakeholders of the more important matters facing the Company. The issues
are considered significant in that they could have an impact on the future
performance of the Company. Management and staff are addressing these points and
are taking appropriate action.
TENDERED CONTRACTS
A moratorium on the issuing of further tendered contracts has been declared
by the National Department of Transport (NDOT). Reasons forwarded are twofold:
a lack of adequate funds, as well as guaranteed funds for the duration of
contracts, and the unresolved dispute about the Tripartite Heads of Agreement.
The moratorium is creating a high degree of uncertainty in the industry. This is
continuing to affect decisions on asset replacement and forward planning and is
causing problems with employee morale and productivity.
FUEL
The monthly fluctuations in the price of diesel fuel resulted in a year-on-
year 9,9% increase in the cost per litre. The net changes added approximately R
3,25 million to our fuel cost. We have introduced a pilot project utilising low-
sulphur content fuel. Preliminary results indicate an improved engine life and
reduced environmental emissions.
HEADS OF AGREEMENT
The current dispute between the three parties involved in Heads of Agreement
- Government, Labour and Bus Operators - is still unresolved. This agreement
governs the transition of the bus industry from a protected industry to an
industry that will face regulated competition through the tender for contract
system. A facilitation process meeting of all the parties took place in March
2002 to try to find a satisfactory solution. Unfortunately, this crucial matter
has been inexplicably delayed. SABOA (South African Bus Operators Association)
is actively following up on this matter.
NEGOTIATED CONTRACTS
The National Land Transport Transition Act (NLTTA) provided for negotiated
contracts to be applied for by an operator under certain defined conditions,
prior to their business being placed on open tender. Although this provision has
expired, the National and Provincial Departments of Transport are reconsidering
the introduction of negotiated instead of tendered contracts. These contracts
will be linked to overall Government transformation goals and empowerment
objectives.
BLACK EMPOWERMENT INITIATIVES IN LINE WITH GOVERNMENT POLICY
Negotiations regarding the introduction of a substantial empowerment partner
are at an advanced stage. A cautionary notice was published in the media on 19
August 2002 in this regard.
Putco`s Joint Ventures continue to operate successfully. We have entered into
a new Joint Venture in the Lekoa/Vaal area with our Valuader partners
(Ipelegeng) and Alton Coaches. This venture replaces our previous association
with Mgqibelo Transport Trust. Our sub-contracting initiatives continue to form
part of our strategy to empower SMMEs in a planned and sustainable manner.
REINVESTMENT
Eighty-four new buses have been introduced into the Company during this
financial year in line with our bus plan. These buses incorporate a number of
advanced safety features. New style and SABS safety-approved bus bodies were
designed, built and supplied by Putco`s Dubigeon factory, from South African
sourced materials. Fifty were introduced into our Greater Soweto operation and
thirty-four into our Tshwane/Mpumalanga operation. We also completed a major
project to refurbish/upgrade our mobile ticket selling buses. Twenty of these
newly designed offices were completed and distributed throughout our areas of
operation and will assist our passengers with their ticket purchases.
CHANGE IN GEARING POLICY
The purchase of new bus chassis was previously funded out of short-term
funding, predominantly at overdraft rates, and is now funded on a long-term
basis at more favourable rates. This is in line with one of our key thrust
strategies of improved cash flow management.
PENSION FUND CONTRIBUTION HOLIDAY
As stated in the Interim Report, new Pension Fund legislation required that
the "pension fund contribution holidays" practice must terminate as from 7
December 2001. The result of this legislation is that a total of R1,2 million
for the year, instead of the planned R3,0 million, has been retained by the
Company to reduce the cost of retirement benefits.
INCREASE IN COSTS AS A RESULT OF THE RAND`S DEPRECIATION
The cost of imported components, spares and bus chassis has increased
considerably during the latter part of this financial year. However, overall
operating costs were well contained to within the inflation rate.
REVALUATION OF FIXED PROPERTY
A revaluation of the Putco properties was undertaken as at 1 October 2001 as
a legislative requirement linked to Capital Gains Tax (CGT).
WAGE NEGOTIATIONS
The South African Road Passenger Bargaining Council (SARPBAC) concluded the
annual negotiations on 28 February 2002. Agreement was reached without any
industrial action. The wage settlement was 8%.
RISK ASSESSMENT
Putco determined the organisation`s strategic risks and implemented a risk
management programme in line with the latest corporate governance trends. In
March 2001 KPMG management Assurance Services was engaged on a co-sourcing basis
to assist Management in assessing and prioritising the risks that need to be
managed in order to achieve our business objectives, and to develop a risk-based
internal audit plan. Management is focusing its attention and resources on the
areas of most significant risk and concern to stakeholders. Follow-up strategic
risk assessment workshops are being conducted.
ROAD SAFETY PLAN
Continued attention was given to monitoring and improving our road safety
plan. Our holistic programme is built on four core elements - the driver, the
vehicle, the role of supervision/control and emergency service provision. The
programme is aligned with safety initiatives and the Drive Alive campaign of the
Department of Transport.
EMPLOYMENT EQUITY
A new Employment Equity Manager has been appointed to head up this very
important function in the Company. Steady progress has been made in meeting the
goals set out in our equity plan. Top management will continue to give focused
attention to this strategic objective (see the Employment Report section for
more details).
PUTCO FOUNDATION
The Putco Foundation supports over twenty community programmes, with the
emphasis primarily on educating disadvantaged children and students. One of the
Foundation`s major commitments is the support of SOS Children`s Villages in
Mamelodi and Ennerdale. Nearly 40% of the Foundation`s budget goes towards
bursaries and sponsorship at various educational institutions. Students are from
a disadvantaged background and live in the areas in which Putco operates. It
remains the Foundation`s commitment to help our youth to develop necessary
skills through education. In this way the Foundation contributes positively to
the economic growth of our country.
BUS FOR THE DISABLED
Putco with the assistance of the CSIR developed a bus for disabled
passengers, in order to make bus transport more accessible for the disabled. The
bus was built at Putco`s Dubigeon factory. It is currently operating in the
Tshwane area, in Mamelodi and Soshanguve. The bus is operated by two specially
trained crew members who ably handle the special needs of their passengers.
Putco is in discussions with the Tshwane Metropolitan Council to try to expand
the service by introducing more specially constructed buses.
HIV/AIDS
Putco has started a comprehensive HIV/Aids awareness campaign in the Company.
One hundred and ten Aids Monitors are being professionally trained to assist
with Aids awareness education. TV and video machines are installed in our
operating centres to enhance the awareness campaign.
OPERATING RESULTS
The current results emanate from a sound sustainable base. Group Revenue
increased from R766,9 million to R828,4 million, an increase of 8,0%. The cost
of operating increased from R718,3 million to R759,5 million, an increase of
5,7%. Group profit before taxation is R30,1 million (2001: R43,6 million).
The Company has changed its accounting policy to comply with AC116 (Post
Retirement Benefits) and this, together with the cost of accounting for onerous
contracts in terms of AC130, has adversely affected the profit after tax by
R21,3 million. Prior to making these adjustments, the profit after tax for the
year would have been R40,7 million compared to R27,1 million in the previous
year. The improved performance has been borne out by the significant improvement
in cash flow that has generated R117,1 million from operating activities
compared to R6,9 million in the previous year.
Passenger levels are up slightly by 0,8%, from 77,5 million in the previous
year to 78,1 million. Total kilometres travelled were 89,3 million compared to
84,0 million the previous year, up by 6,3%.
The operating bus fleet at the end of June 2002 was 1 538, compared to 1 524
at the end of June 2001, an increase of 1%.
The total number of employees was 4 235, compared to 4 125 at the end of the
previous year, up by 2,7%.
OPERATING FLEET
The bus replacement programme for the current financial year cost R74,4
million (2001: R17,8 million). This is according to our overall bus plan.
FUTURE PROSPECTS
Future bus plans
One of our key strategic thrust areas is "bus fleet management". Bus planning
meetings form an important part of our ongoing activities. We will purchase
approximately eighty new bus chassis in the next financial year. The bus bodies
will be built at our Dubigeon factory. This is in line with our plan to
introduce new improved technology buses into our fleet on an ongoing planned
basis and to cater for our planned growth. A further ninety of our existing bus
fleet will undergo extensive rebuild and refurbishment during this period.
Soweto special subsidy
The agreement with the Department of Transport to partly assist with the
losses being incurred in our Soweto operation because of the tender delay, has
been extended to December 2002 or until such time as the award of the tendered
contract.
Restructuring/rationalisation
We are continuing with plans to restructure and reposition the Company to
ensure that it remains competitive, in line with the developing and changing
public transport requirements. We are investigating ways to combine some of our
operations in order to become more cost effective as well as being able to
provide a better service to our customers. Putco will continue to work towards
maintaining a balance between cost containment and the maintenance of
professional standards and safety in all spheres.
Taxi recapitalisation
The taxi recapitalisation plan continues to be a major issue facing the bus
industry. The delays and uncertainty surrounding the plan have not assisted the
process nor provided clarity on its eventual implementation. While Putco, as a
member of SABOA, is supportive of the Government`s initiative, we remain
apprehensive that the necessary decision support systems are not in place to
ensure orderly implementation. Provided the required controls and regulatory
measures were in place the passenger revenue base for existing bus-contract
operators would not be substantially affected.
Corporate governance
The directors support the Code of Corporate Practice and Conduct as contained
in the King I and the King II Report and are in the process of implementing the
provisions thereof, where applicable. The directors and management acknowledge
the need to manage the business with integrity and according to accepted
corporate practices (see detailed section on corporate governance).
Putco is facing a number of challenges as a result of the changes taking
place in the transport industry. Putco with all its skills and experience should
be well placed to meet these requirements and ensure sustained growth.
Dividend announcement for the year ended 30 June 2002
The board of directors has resolved to declare a final dividend of 30 cents per
share to all ordinary shareholders. The dividend is declared out of current year
profits before tax of R19,4 million.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last day to trade cum the dividend Friday, 11 October 2002
Date trading commences ex the dividend Monday, 14 October 2002
Record date Friday, 18 October 2002
Date of payment on Monday 21 October 2002
Share certificates may not be dematerialised or rematerialised between Monday,
14 October 2002 and Friday, 18 October 2002, both days inclusive.
A S J Nel
Secretary
Report of the independent auditors to the members of Putco Limited
We have audited the annual financial statements and group annual financial
statements of Putco Limited set out on pages 20 to 48. These financial
statements are the responsibility of the Company`s directors. Our responsibility
is to express an opinion on these financial statements based on our audit.
Scope.
We conducted our audit in accordance with Statements of South African
Auditing Standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance that the financial statements are free of material misstatement.
An audit includes:
* examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements,
* assessing the accounting principles used and significant estimates made by
management,
* evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
Audit opinion.
In our opinion, the financial statements fairly present, in all material
respects, the financial position of the Company and of the Group at 30 June
2002, and the results of their operations and cash flow information for the year
then ended in accordance with South African Statements of Generally Accepted
Accounting Practice, and in the manner required by the Companies Act in South
Africa.
Ernst & Young
Chartered Accountants (SA)
Registered Accountants and Auditors
CONCLUSION
I would like to extend my appreciation to all the staff and their families
for their contribution to the results of the Company. Thank you for the hard
work, loyalty and dedication shown during the financial year. Let us strive for
an even better 2002/2003.
By order of the board
A Carleo
Chairman
10 September 2002
Registered Office: Transfer Secretaries:
Mimosa Park Computershare Services Limited
5 Mimosa Way Registration number 1987/003382/06
Gallo Manor 11 Diagonal Street
Sandton, 2052 Johannesburg, 2001
Date: 26/09/2002 12:04:56 PM Produced by the JSE SENS Department
