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PSV - PSV Holdings Limited - Provisional reviewed condensed consolidated results
for the year ended 29 February 2012
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")
PROVISIONAL REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 29
FEBRUARY 2012
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 29 FEBRUARY 2012
Reviewed Audited
2012 2011
R`000
Revenue 339 243 223 277
Cost of sales (276 173) (184 434)
Gross profit 63 070 38 843
Operating expenses* (76 771) (60 240)
Operating loss (13 701) (21 577)
Financial income 380 163
Financial expenses (10 319) (4 930)
Loss before taxation (23 640) (26 344)
Taxation (charge)/ credit (6 322) 3 576
Comprehensive loss for the year from (29 962) (22 768)
continuing operations
Profit from discontinued operations 12 338 14 462
Loss for the year attributable to (17 624) (8 306)
ordinary shareholders
Other comprehensive loss adjustments (96) -
Foreign currency translation loss
Total comprehensive loss for the year (17 720) (8 306)
Basic loss per share (cents) (7,06) (3,36)
Basic loss per share - continuing (12,00) (9,21)
operations (cents)
Headline loss per share (cents) (9,86) (3,17)
Headline loss per share - continuing (11,98) (9,02)
operations (cents)
Normalised loss per share (cents) (9,18) (7,70)
Diluted loss per share (cents) (6,83) (3,30)
Diluted loss per share - continuing (11,61) (9,04)
operations (cents)
Diluted headline loss per share (cents) (9,55) (3,11)
Diluted headline loss per share - (11,60) (8,85)
continuing operations (cents)
Reconciliation of loss
Loss after tax from continuing operations (29 962) (22 768)
Profit on disposal of assets (574) (520)
Gain on bargain purchase (10 788)
Impairment of goodwill and specific 12 651 -
intangibles
Deferred tax reversed on impairment of (1 254) -
intangibles
Impairment of non-current assets - 998
Headline loss (29 927) (22 290)
Interest on deferred purchase 2 594 950
consideration
Amortisation of intangible assets 2 786 2 038
Deferred taxation on amortisation of (781) (571)
intangible assets
Share based payments 641 834
Straight lining of rentals 1 750 -
Normalised loss (22 937) (19 039)
Weighted average number of shares in 249 771 247 210
issue (`000)
Fully diluted number of shares in issue 258 044 251 740
(`000)
*Operating expenses includes impairment charges, depreciation, amortisation and
is net of sundry income
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 29
FEBRUARY 2012
Reviewed Audited
2012 2011
R`000
ASSETS
Non-current assets 82 369 69 827
Property, plant and equipment 31 860 13 682
Intangible assets 15 354 16 355
Goodwill 32 057 32 997
Deferred taxation assets 2 410 6 793
Loans receivable 688 -
Current assets 208 436 220 150
Inventories 42 867 23 312
Trade and other receivables 57 601 45 312
Taxation receivable 839 2 054
Short term portion of loans receivable 1 000 -
Cash and cash equivalents 27 180 16 399
Non-current assets held for sale 78 949 133 073
Total assets 290 805 289 977
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 125 772 142 749
Stated capital 271 606 270 806
Share based payment reserve 206 263
Retained loss (142 845) (125 221)
Foreign currency translation reserve (3 195) (3 099)
Non-current liabilities 48 699 23 654
Borrowings 22 499 19 865
Purchase consideration payable 20 504 -
Deferred tax liabilities 5 696 3 789
Current liabilities 116 334 123 574
Trade and other payables 57 737 38 718
Current portion of long term liabilities 9 090 11 257
Current portion of purchase consideration 1 953 5 623
payable
Taxation payable 2 477 662
Bank overdrafts 18 011 37 104
Loan from related parties 1 600 -
Non-current liabilities held for sale 25 466 30 210
Total equity and liabilities 290 805 289 977
Net asset value per share (cents) 49,69 57,74
Net tangible asset value per share 30,96 37,78
(cents)
Total number of shares in issue (net of 253 106 247 210
treasury shares) (`000)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW AT 29 FEBRUARY 2012
Reviewed Audited
R`000 2012 2011
Cash flows from operations 57 120 7 044
Cash flows utilised in investing activities (16 172) (16 418)
Cash flows from financing activities 835 10 846
Increase in cash and cash equivalents 41 783 1 472
Cash at acquisition of subsidiary (2 001) 296
Cash and cash equivalents at beginning of the year (20 705) (12 128)
Cash transferred to assets held for sale (9 908) (10 345)
Cash and cash equivalents at end of the year 9 169 (20 705)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AT 29
FEBRUARY 2012
R`000 Stated Share based Retained
capital payment reserve loss
Balance at 28 February 270 806 1 670 (119 155)
2010
Share based payment 833 -
transactions
Loss for the year - - (8 306)
Transfer of vested - (2 240) 2 240
shares from share
based payment reserve
Balance at 28 February 270 806 263 (125 221)
2011
Issue of shares 3 688 - -
Transfer of shares to (2 888) - -
treasury shares
Share based payment - 641 -
transactions
Transfer of vested - (698) -
shares from share
based payment reserve
Net loss for the year - - (17 624)
Foreign currency - - -
translation
differences
Balance at 29 February 271 606 206 (142 845)
2012
R`000 Foreign currency Total
translation reserve
Balance at 28 February (3 099) 150 222
2010
Share based payment - 833
transactions
Loss for the year - (8 306)
Transfer of vested - -
shares from share
based payment reserve
Balance at 28 February (3 099) 142 749
2011
Issue of shares - 3 688
Transfer of shares to - (2 888)
treasury shares
Share based payment - 641
transactions
Transfer of vested - (698)
shares from share
based payment reserve
Net loss for the year - (17 624)
Foreign currency (96) (96)
translation
differences
Balance at 29 February (3 195) 125 772
2012
SEGMENTAL REPORT AT 29 FEBRUARY 2012
R`000 Valves and Specialised Shared Total
Industrial Services Services
Supplies
2012
Revenue 167 723 171 520 - 339 243
Gross profit 45 030 18 040 - 63 070
Operating expenses 25 832 7 849 36 319 70 000
Profit/(loss) before 28 781 (3 297) (49 124) (23 640)
tax
Depreciation/ 1 998 3 125 4 364 9 487
amortisation
Capital expenditure (14 498) (3 584) (6 796) (24 878)
Gross assets 69 984 68 039 50 764 188 787
Gross liabilities 38 869 32 920 86 430 158 219
2011
Revenue 49 074 174 203 - 223 277
Gross profit 10 159 28 684 - 38 843
Operating expenses 6 948 31 081 (3 335) 34 694
Profit/(loss) before 5 097 271 (31 712) (26 344)
tax
Depreciation/ 95 2 876 3 198 6 169
amortisation
Capital expenditure (7) (4 349) (1 248) (5 604)
Gross assets 17 036 103 611 55 570 176 217
Gross liabilities 2 227 47 633 53 601 103 461
BASIS OF PREPARATION
These condensed consolidated financial statements for the year ended 29 February
2012, which are based on reasonable estimates and judgements, have been prepared
in accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS"), its interpretations adopted by the
International Accounting Standards Board ("IASB"), IAS34 : Interim Financial
Reporting, the AC500 standards as issued by the Accounting Practices Board or
its successor, and in compliance with the Listing Requirements of the JSE
Limited and the requirements of the South African Companies Act, 2008 (Act 71 of
2008). The accounting policies followed are consistent with those used in the
prior year and are in terms of IFRS.
The financial results for the year ended 28 February 2011 have been restated by
disclosing the results of the Pump Business as discontinued operations to
enhance comparability.
These results have been reviewed by KPMG, the Group`s auditors, and their
unmodified review opinion is available for inspection at the registered office
of PSV.
These results have been prepared under the supervision of Anthony Dreisenstock
CA(SA), the Financial Director of PSV.
COMMENTARY
NATURE OF BUSINESS
PSV is an industrial engineering holding company now comprising two operating
business segments:
* Valves and Industrial Supplies; and
* Specialised Services (including petrochemical and cryogenic activities).
FINANCIAL AND OPERATIONAL REVIEW
The Group disposed of its Groupline Projects subsidiary in September 2011 for a
profit of R18,8 million. The proceeds received were utilised in paying off debt
held with Investec. This reduced the Group`s debt equity ratio from 42% to 29%
as at 29 February 2012.
As previously announced, the Group is in the process of disposing of its pump
companies comprising PSV Services (Pty) Ltd, PSV Zambia (Pvt) Ltd, APE Pumps
(Pty) Ltd, Mather and Platt (Pty) Ltd and the property these companies operate
from, PSV Properties 2 (Pty) Ltd (collectively referred to as the "Pump
Business") for a total purchase consideration amounting to R54 million. As
stated previously, the main purpose for the disposal is to settle debt, provide
working capital to the Group`s remaining subsidiaries and pay a special dividend
to shareholders. The results of the Pump Business` operations have been
reflected as part of the profit from discontinued operations. Following
shareholder approval at the general meeting held earlier today, all conditions
precedent to the disposal have now been fulfilled, with the exception of the
payment of the proceeds by the Purchaser by no later than 7 June 2012.
On the assumption that the Group will collect a minimum of R12 million of its
intercompany loan accounts associated with the Pump Business, it has become
necessary to impair non-current assets owned by these companies as discussed
below.
The Group`s trading results have been marred by the necessity to impair the
following assets:
- Goodwill and intangibles arising in Engineered Linings and Rand Air
and Gas Installations amounting to R12,7 million.
- Alignment of the carrying value of the Pump Business in the process of
being disposed of, to the purchase consideration to be received. The
impairment amounts to R12,2 million and has been included in the
profit from discontinued operations.
- Impairment of the deferred tax assets arising in PSV Holdings and
Petrologic. The total impairment amounts to R8,7 million. PSV Holdings
is an investment holding company that recovers the bulk of its costs
from its underlying subsidiaries. As there are limited possibilities
of this company reflecting taxable income, the deferred tax asset has
been impaired. The deferred tax asset in Petrologic has been impaired
due to the poor trading results made by this subsidiary. We expect
that this company will become profitable within the next two years and
consequently the Group is taking the necessary steps in its
restructuring process to mitigate further losses.
As a result of these material impairments, the Group`s basic loss per share from
continuing operations increased from 9,21 cents to 12,00 cents, and its headline
loss per share from continuing operations increased from 9,02 cents to 11,98
cents.
Notwithstanding the above, the Group`s turnover from continuing operations
increased by 52% to R339,2 million compared to R223,3 million in the prior year
and gross margins improved by just over 1% to 18,6%. Operational expenditure
increased, but disproportionally to the increase in turnover (21% of turnover vs
27% in February 2011). As a result, the Group generated an EBITDA margin of 2,5%
on turnover amounting to R8,4 million compared to a R14,3 million loss in the
prior year.
Exceptional trading performances by Omnirapid Industrial and Mining Supplies and
the new acquisition, Turbo Agencies, were highlights for the year under review.
Both companies exceeded budgeted expectations and experienced the best years in
their trading histories.
In addition, the Group managed to generate positive cash flows from operating
activities, which allowed PSV to comfortably service all of its debt obligations
and still retain just over R9 million in the bank at year end. The generation of
record levels of operating cash belies the ostensible poor results made by the
Group.
Following the disposal of the Pump Business, the Group will be in a net cash
positive position after settling all its debt obligations with Investec and
before the declaration of any dividends to shareholders.
The cryogenic companies, Rand Air and Gas Installations and Cryoshield, both
suffered from the deep recession that the gas industry finds itself in. The
erosion of gross margins, higher operating costs and poor cash flows
characterised these companies. We expect that difficult conditions will prevail
until October 2012.
Despite promising prospects, Petrologic had a tough year as it was forced to
operate on uneconomic revenue streams. In order to maintain service levels with
the petroleum companies it is necessary to maintain an expensive infrastructure,
making this business marginal in nature. Petrologic is currently attempting to
obtain additional income streams which will assist in returning the company to
profit. The Board of PSV have guaranteed to invest sufficient funds directly or
indirectly into this business to ensure it remains a viable going concern.
PROSPECTS
The management of PSV expects the trading environment to become easier in the
second quarter of the 2013 financial year, mainly attributable to the reduced
gearing in the Group subsequent to the disposal of the Pump Business. This will
release additional working capital and permit our remaining companies to
implement aggressive organic growth strategies. In addition, the elimination of
the Investec debt will reduce finance costs in the holding company, thereby
minimising interest costs and increasing profitability by R4 - 5 million per
annum.
CHANGES TO THE BOARD OF DIRECTORS
During the year under review, the following changes were made to the Board:
CE Chimombe-Munyoro, E Dube (Alternate), MM Patel, GS Nzalo were not re-elected
by shareholders at the annual general meeting held on on 29 September 2011. DJ
Kelly`s designation changed from executive director to non-executive director on
30 September 2011.
The following independent non-executive directors were appointed:
- Ralph Patmore (Chairperson of the Board and the Risk Committee)*
- Anthony de la Rue (Chairperson of the Audit Committee)*
- Portia Molefe (Chairperson of the Social and Ethics Committee) **
* Appointed 8 November 2011
* Appointed 2 May 2012
DIVIDENDS
No dividends have been declared or proposed in respect of the year ended 29
February 2012. The Board will continue to review the dividend policy annually.
However, following the disposal of the Pump Business, the Board is in the
process of finalising the declaration of a special once off dividend to
shareholders, subject to the payment of the proceeds by the Purchaser as
mentioned above. A further announcement in this regard will be made in due
course.
CHANGE IN COMPANY SECRETARY
During the year under review, Merchantec Capital replaced Monika Pretorius as
company secretary on 13 February 2012.
SUBSEQUENT EVENTS
There are no other material events that have occurred since the end of the
period under review, up to and including the date of this report.
For and on behalf of the board
AJD da Silva AR Dreisenstock
Chief Executive Officer Financial Director
31 May 2012
DIRECTORS:
Executive Directors: P Robinson* (Deputy Chairman), AJD da Silva (Chief
Executive Officer), AR Dreisenstock (Financial Director).
Non-Executive Directors: DJ Kelly*, R Patmore**, A de la Rue**, P Molefe**
*British
**Independent
COMPANY SECRETARY: Merchantec Capital
REGISTERED OFFICE: PSV Holdings Office Park
Corner Barbara and North Reef Roads, Elandsfontein, Johannesburg
Postnet Suite 229, Private Bag X19, Gardenview, 2047
Tel (local): 0860 778 778 Tel (international): +2711 657 6000
Fax: 0860 329 778
TRANSFER SECRETARIES: Computershare Investor Services Proprietary Limited
AUDITORS: KPMG
DESIGNATED ADVISER: Merchantec Capital
Date: 31/05/2012 16:04:01 Supplied by www.sharenet.co.za
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