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PSV HOLDINGS LIMITED - Unaudited Condensed Consolidated Financial Results for the six months ended 31 August 2012 and change to the Board

Release Date: 19/10/2012 15:41
Code(s): PSV     PDF:  
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Unaudited Condensed Consolidated Financial Results for the six months ended 31 August 2012 and 
change to the Board

 PSV HOLDINGS LIMITED
 Incorporated in the Republic of South Africa
 (Registration number 1998/004365/06)
 Share code: PSV ISIN: ZAE000078705
 (“PSV” or “the Company” or “the Group”)

 Unaudited Condensed Consolidated Financial Results for the six months ended 31 August 2012 and
 appointment of independent non-executive director

Condensed consolidated statement of comprehensive income
                                                                                                                          Unaudited for
                                                                                                    Unaudited for         the 6 months
                                                                                                    the 6 months                 ended          Audited for the
                                                                                                           ended           31 Aug 2011        12 months ended
                                                                                                     31 Aug 2012             (Restated)           29 Feb 2012
                                                                                                            R’000                 R’000                  R’000
Revenue                                                                                                    182,326               109,992               275,862
Gross profit                                                                                                46,042                27,602                 62,332
Operating expenses*                                                                                        -42,338               -22,604                -79,046
Operating profit/(loss)                                                                                       3,704                 4,998               -16,714
Net finance charges**                                                                                          -513                -3,291                -8,377
Profit/(Loss) before taxation from continuing operations                                                      3,191                 1,707               -25,091
Taxation                                                                                                     -2,618                   268                 3,397
Profit/(Loss) for the period from continuing operations                                                         573                 1,975               -28,488

(Loss)/Profit from discontinued operations                                                                 -23,666                    307               10,864
Total comprehensive (loss)/income for the period                                                           -23,093                  2,282               -17,624

Reconciliation of headline (loss)/earnings
(Loss)/Profit attributable to PSV equity holders                                                           -23,093                  2,282               -17,624
Loss/(Profit) on disposal of fixed assets                                                                      144                   -775                  -637
Impairments                                                                                                 21,629                      -                24,935
Deferred tax reversed on impairment of specific intangibles                                                      -                      -                -1,697
Loss/(Profit) on sale of discontinued operations                                                             5,717                      -               -18,820
Gain on bargain purchase                                                                                         -                      -               -10,788
Headline earnings/(loss)                                                                                     4,397                  1,507               -24,631
Headline earnings/(loss) – continuing operations                                                               717                  1,200               -28,453

Basic (loss)/earnings per share (cents)                                                                      -9.03                  0.92                 -7.06
Basic earnings/(loss) per share (cents) from continuing operations                                            0.22                  0.80                -11.41
Headline earnings/(loss) per share (cents)                                                                    1.72                  0.61                 -9.86
Headline earnings/(loss) per share (cents) from continuing operations                                         0.28                  0.49                -11.39
Diluted (loss)/earnings per share (cents)                                                                    -8.74                  0.91                 -6.83
Diluted earnings/(loss) per share (cents) from continuing operations                                          0.22                  0.78                -11.04
Diluted headline earnings/(loss) per share (cents)                                                            1.66                  0.60                 -9.55
Diluted headline earnings/(loss) per share (cents) from continuing operations                                 0.27                  0.48                -11.04
Actual number of shares in issue at period end                                                             272,548               247,962               272,547
Weighted number of shares in issue at period end                                                           255,791               247,210               249,771
Fully diluted weighted average number of shares in issue at period end                                     264,352               251,740               258,044
 * Operating expenses are net of sundry income and include depreciation, impairments and amortisation charges.
 **Actual net interest paid was R2,225 million. Balance comprises deferred purchase consideration interest and foreign exchange gains and losses.


Condensed consolidated statement of financial position
                                                                                                       Unaudited             Unaudited                  Audited
                                                                                                      31 Aug 2012           31 Aug 2011             29 Feb 2012
                                                                                                            R’000                 R’000                   R’000
ASSETS
Non-current assets                                                                                          74,853                95,108                82,369
Current assets                                                                                             162,358               260,582               207,318
Total assets                                                                                               237,211               355,690               289,687
EQUITY AND LIABILITIES
Equity                                                                                                      97,256               145,358               125,772
Non-current liabilities                                                                                     28,829                36,964                50,668
Current liabilities                                                                                        111,126               173,368               113,247
Total equity and liabilities                                                                               237,211               355,690               289,687
Net asset value per share (cents)                                                                            35.68                  58.62                50.72
Tangible net asset value per share (cents)                                                                   23.92                  34.77                31.60
Condensed consolidated statement of changes in equity
                                                                                       Unaudited for    Unaudited for
                                                                                       the 6 months     the 6 months      Audited for the
                                                                                              ended            ended    12 months ended
                                                                                        31 Aug 2012      31 Aug 2011        29 Feb 2012
                                                                                               R'000            R'000              R'000
Balance at beginning of period                                                              125,772           142,749            142,749
Total comprehensive income for the period                                                   -23,093             2,282            -17,624
Dividends paid                                                                               -9,219                 -                  -
Share based payment transactions                                                                 10                22                743
Foreign currency translation differences                                                      3,786               305                -96
Balance at end of period                                                                     97,256           145,358            125,772


Condensed consolidated statement of cash flows
                                                                                       Unaudited for    Unaudited for
                                                                                       the 6 months     the 6 months      Audited for the
                                                                                              ended            ended    12 months ended
                                                                                        31 Aug 2012      31 Aug 2011        29 Feb 2012
                                                                                               R’000            R’000              R’000
Cash flows from operating activities                                                         -10,604            2,236             15,770
Cash flows from investing activities                                                          42,942           -8,830             22,160
Cash flows from financing activities                                                         -19,893            3,325             -8,185
Net movement in cash and cash equivalents                                                    12,445            -3,269             29,745
Cash at acquisition of subsidiary                                                                 -            -2,001                  -
Cash transferred to assets held for sale                                                     -4,120                 -             -9,908
Cash and cash equivalents at beginning of the period                                          9,169           -10,668            -10,668
Cash and cash equivalents at end of the period                                               17,494           -15,938              9,169


Condensed consolidated segmental information for the six months ended 31 August 2012
                                                   Valves and Industrial          Specialised                                               Discontinued
                                                                Supplies             Services                Other            Total           operations
                                                                  R'000                R'000                 R'000            R'000                R'000
Revenue                                                                112,753            69,573                 -          182,326               71,315
Gross profit                                                             35,905           10,137                 -           46,042               12,718
Operating expenses*                                                      18,503            7,583            12,951           39,037                6,539
Profit/(Loss) before tax                                                  6,199           -2,472            -6,254           -2,527              -15,465
Depreciation/amortisation                                                 1,313              745             1,841            3,899                1,402
Capital expenditure                                                       1,797              928               367            3,092                    -
Gross assets**                                                         100,571            64,513            55,305          220.389               15,062
Gross liabilities**                                                      65,308           19,540            35,357          120,205               15,108
                    * 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 2011
                                                   Valves and Industrial          Specialised                Other             Total        Discontinued
                                                                Supplies             Services                                                 operations
                                                                  R'000                R'000                 R'000            R'000                R'000
Revenue                                                                  59,837           50,210                -55         109,992             105,203
Gross profit                                                             18,694            9,314               -406          27,602              23,204
Operating expenses*                                                      10,415            5,497            14,690           30,602              11,541
Profit/(Loss) before tax                                                  7,782            6,067           -12,142            1,707                 511
Depreciation/amortisation                                                   630              577             2,051            3,258               2,436
Capital expenditure                                                        -989             -893             9,731            8,698                 547
Gross assets**                                                           56,308           35,482            69,694          161,484             158,237
Gross liabilities**                                                      44,547          -11,891            65,990           98,645              73,439
                    * Operating expenses exclude management fees, depreciation, other income and finance costs
                    ** Deferred tax assets and deferred tax liabilities are excluded
COMMENTARY

NATURE OF BUSINESS

PSV is an industrial engineering holding company comprising two operating business segments:

     - Valves and Industrial Supplies; and
     - Specialised Services (including geosynthetic lining and cryogenic activities).

BASIS OF PREPARATION

The condensed consolidated financial statements 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 JSE Limited Listings Requirements and
in the manner required by the Companies Act No 71 of 2008, as amended, of South Africa. The accounting policies used in the preparation of the interim
financial statements for the six months ended 31 August 2012, are in terms of IFRS and are consistent with those applied in the Audited Financial Statements of
the Group for the year ended 29 February 2012.

These results have not been reviewed or audited by the Group’s auditors, and have been compiled under the supervision of the Chief Financial Officer, Tony
Dreisenstock, CA(SA).

FINANCIAL REVIEW:

The period under review was materially affected by two major corporate actions namely;

     - The sale of the businesses comprising the pump segment for a purchase consideration of R54 million plus the recovery of R14 million loan accounts;
           and
     - The sale of the business of Petrologic to Tokheim International.

In order to better understand the financial position of the Group, the prior year statement of comprehensive income has been restated to reflect the results of
the above businesses as “discontinued operations”. The liquidation of the Group’s primary debt, coupled with the elimination of a major loss-making subsidiary,
has permitted management to implement the last phase of the restructuring programme. This programme also entails decentralising the Group, transferring
shared service costs to the subsidiaries where possible and practical as well as materially reducing the remaining fixed costs. The effects of the last phase of the
restructuring will only start to filter through in the next six months.

The Group’s revenue from continuing operations has increased by 65,7% to R182,3 million (Aug 2011: R110,0 million). The gross profit margin remained
constant at just over 25%. Operating costs, relative to turnover, have increased slightly to 23,2% (Aug 2011: 20,6%) but are substantially lower than the 28,6%
operating cost ratio which prevailed at the February 2012 financial year end. The effects of repaying the Company’s primary debt resulted in a drop in finance
costs and a material reduction in the Group’s debt:equity ratio which now stands at 13% (Aug 2011: 34%).

The decision to transfer the business of Petrologic to Tokheim resulted in a substantial loss on discontinued operations amounting to R21,9 million. The loss is
mainly attributable to the impairment of fixed assets and stock and will not impact upon the Group’s headline earnings. The balance of the loss made on
discontinued operations is attributable to loan accounts written off and relevant disposal costs arising from the sale of the pump segment.

Cash Flow Review

The Group’s cash flows have improved from R9,2 million in February 2012 to R17,5 million as at 31 August 2012 due to the following factors:

                                                                                                                          R’000
     - Net cash received on the sale of the pump companies and the settlement of residual Investec debt                  33 049
     - Cash reinvested into subsidiaries for working capital purposes                                                   (10 000)
     - Dividend paid to shareholders                                                                                     (9 218)
     - Income tax paid ( including R1,5 million extraneous tax charge levied by the DRC tax authorities)*                (3 523)
     - Net finance costs paid (net of exchange gains and losses)                                                           (513)
     - Cash balances transferred to pump companies on sale                                                               (4 120)
     - Cash generated from operations                                                                                     2 436

     *The tax charge is currently being investigated by the Group’s auditors and tax attorneys

The loss attributable to the sale of Petrologic has not affected the Group’s cash flows. The remaining businesses are generally profitable and cash generative.

Due to the substantial growth in the remaining cash generating units, the Board has decided that a detailed assessment of the Group’s goodwill and intangibles
will only be undertaken at year end. Accordingly, no impairment was made at this time.

OPERATIONAL REVIEW

Valves and Industrial Supplies

This segment contributed 62% (Aug 2011: 31%) to the Group’s consolidated revenue at an average gross profit margin of 31,8% (Aug 2011: 31,2%). Revenue
increased substantially to R112,7 million (Aug 2011: R59,8million). The increase in revenue is partially attributable to the inclusion of the revenue from PSV
Mitech for the first time amounting to R13,8 million. However the remaining companies in this segment, namely Omnirapid and Turbo Agencies, have exceeded
budget expectations and shown organic growth patterns exceeding 30% on the prior period.
Specialised Services

Specialised Services contributed 38% (Aug 2011: 69,7%) to the Group’s consolidated revenue at an average gross profit margin of 14,6% (Aug 2011: 18,6%). The
segmental revenue increased from R50,2 million to R69,6 million mainly as a result of a 65% increase in revenue generated by Engineered Linings. The small loss
generated in this segment is expected to reverse in the next six months due to the existing escalating order book.

CHANGES TO THE BOARD

During the period under review, Portia Molefe resigned as independent non-executive director on 11 July 2012 and David Joseph Kelly resigned as non-executive
director on 30 August 2012. We would like to thank Portia and Dave for their hard work and dedication.

In addition, the Board is pleased to advise shareholders of the appointment of Eric Ratshikhopha as independent non-executive director with immediate effect.
Eric will also be appointed as member of the Audit Committee and as chairman of the Social and Ethics Committee. He currently holds a number of directorships
on foundations and serves as a trustee on a number of trusts. His background includes vast work experience in the mining sector, having been involved in
industrial relations, health and safety, strategic management and corporate social investment. Eric has worked at Gencor, Genmin, Billiton SA and most recently
as Corporate Development Director at Xstrata. His wealth of experience in transformation, stakeholder relations and community development as well as general
management practices will be advantageous to PSV. The Board welcomes Eric and looks forward to his contribution to PSV.

DIVIDENDS

Other than the special dividend paid in July 2012, the Group will continue to retain and utilise cash generated to fund working capital requirements and as such,
no dividends were declared or proposed. The Board will review the dividend policy annually.

SUBSEQUENT EVENTS

Aside from the transfer of Petrologic to Tokheim, with effect from 4 September 2012, there have been no material events that have occurred since 31 August
2012 up to the date of this report.

PROSPECTS

With the implementation of the decentralising model well under way, the management team of PSV is confident regarding the Group’s prospects. The real
benefits of this model are expected to fully unfold during the course of next year. The continuing operations of the Group are profitable as well as cash
generative and should contribute to the Group’s growth going forward. The Group’s order book is healthy at record levels compared to the prior periods.


For and on behalf of the Board
AJD da Silva                                                                 AR Dreisenstock
Chief Executive Officer                                                      Chief Financial Officer

19 October 2012

DIRECTORS
Executive Directors: AJD da Silva (Chief Executive Officer); AR Dreisenstock (Chief Financial Officer)
Non-Executive Directors: R Patmore (Independent Chairperson); A De La Rue (Independent Chairman of the Audit Committee); P Robinson*
*British

COMPANY SECRETARY: Merchantec Capital

REGISTERED OFFICE: PSV Holdings Office Park, Corner Barbara and North Reef Roads, Henville Ext, Elandsfontein
Postnet Suite 229, Private Bag X19, Gardenview, 2047 T (local): (011) 657 6000 T (international): +2711 657 6000 F: (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: 19/10/2012 03:41:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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