Wrap Text
Unaudited condensed consolidated financial results for the six months ended 31 August 2013
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 2013
Highlights
- Revenue up 34%
- Pre-tax profit from continuing operations of R8,2 million
- Operating cost ratio reduced by 24,5%
- 18% increase in cash and cash equivalents
Condensed consolidated statement of comprehensive income
for the six months ended 31 August 2013
Unaudited
Unaudited for the
for the six six months Audited for the
months ended ended 12 months ended
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
Revenue 225 512 168 596 381 109
Gross profit 43 473 41 612 83 342
Operating expenses* (34 225) (34 220) (71 169)
Operating profit 9 248 7 392 13 735
Net finance charges (1 017) (1 926) (3 730)
Profit/(loss) before taxation from
continuing operations 8 231 5 466 10 006
Taxation (3 154) (2 887) (5 773)
Profit for the period from continuing operations 5 077 2 579 4 233
Loss from discontinued operations (4 838) (25 672) (878)
Total comprehensive income/(loss) for the period 239 (23 093) (20 773)
Reconciliation of headline earnings
Profit/(loss) attributable to PSV equity holders 239 (23 093) (23 782)
Loss /(profit) on disposal of property, plant and
equipment 334 144 (39)
Loss on disposal of discontinued operations 4 716 21 629 2 871
Loss on sale of discontinued operations - 5 717 27 137
Headline earnings 5 290 4 397 6 187
Headline earnings - continuing operations 5 372 717 7 064
Basic earnings/(loss)per share (cents) 0,09 (9,03) (9,36)
Basic earnings per share (cents) from continuing
operations 1,92 0,22 1,67
Headline earnings per share (cents) 2,00 1,72 2,43
Headline earnings per share (cents) from continuing
operations 2,05 0,28 2,78
Diluted earnings/(loss) per share (cents) 0,09 (8,74) (9,33)
Diluted earnings per share (cents) from continuing
operations 1,91 0,22 1,66
Diluted headline earnings per share (cents) 1,99 1,66 2,43
Diluted headline earnings per share (cents) from
continuing operations 2,04 0,27 2,77
Actual number of shares in issue at end of the period 272 548 272 548 272 548
Weighted number of shares in issue at end of the period 263 781 255 791 254 066
Fully diluted weighted average number of shares in
issue at end of the period 265 308 264 352 254 944
* Operating expenses are net of sundry income and include depreciation,
impairments and amortisation charges.
Condensed consolidated statement of financial position
as at 31 August 2013
Unaudited Unaudited Audited
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
ASSETS
Non-current assets 64 888 74 853 64 321
Current assets 155 516 162 358 149 398
Total assets 220 404 237 211 213 719
EQUITY AND LIABILITIES
Equity 97 117 97 256 97 059
Non-current liabilities 19 250 28 829 18 095
Current liabilities 104 037 111 126 98 565
Total equity and liabilities 220 404 237 211 213 719
Net asset value per share (cents) 35,63 35,68 38,20
Tangible net asset value per share (cents) 20,88 23,92 22,09
Condensed consolidated statement of changes in equity
for the six months ended 31 August 2013
Unaudited Unaudited Audited
for the for the for the
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
Balance at beginning of the period 97 059 125 772 125 772
Total comprehensive income for the period 166 (23 093) (20 773)
Dividends paid - (9 219) (9 239)
Share-based payment transactions (107) 10 1 389
Foreign currency translation differences - 3 786 -
Balance at end of the period 97 117 97 256 97 059
Condensed consolidated statement of cash flows
for the six months ended 31 August 2013
Unaudited Unaudited Audited
for the for the for the
six months six months six months
ended ended ended
31 August 31 August 28 February
2013 2012 2013
R'000 R'000 R'000
Cash flows from operating activities 1 059 (10 604) 8 990
Cash flows from investing activities 5 733 42 942 44 740
Cash flows from financing activities (2 896) (19 893) (42 060)
Net movement in cash and cash equivalents 3 896 12 445 11 670
Cash at acquisition of subsidiary - - (3 640)
Cash transferred to assets held for sale - (4 120) (450)
Cash and cash equivalents at beginning of the period 16 749 9 169 9 169
Cash and cash equivalents at end of the period 20 645 17 494 16 749
Condensed consolidated segmental information
for the six months ended 31 August 2013
Industrial Specialised
Supplies Services Other Total
R'000 R'000 R'000 R'000
Revenue 115 783 109 729 571 225 512
Gross profit 30 446 13 159 (132) 43 473
Operating expenses* 15 193 6 540 10 015 31 748
Profit/(loss) before tax 10 198 2 241 (4 208) 8 231
Depreciation/amortisation (183) - - (183)
Capital expenditure 2 292 2 037 284 4 613
Gross assets 81 863 85 153 53 388 220 404
Gross liabilities 56 574 57 458 9 255 123 287
* Operating expenses exclude other income and finance costs.
Condensed consolidated segmental information
for the six months ended 31 August 2012
Industrial Specialised
Supplies Services Other
R'000 R'000 R'000
Revenue 98 974 69 573 49
Gross profit 32 646 8 966 -
Operating expenses* 13 599 7 583 10 247
Profit/(loss) before tax 15 301 (2 472) (7 363)
Depreciation/amortisation 878 745 1 168
Capital expenditure 1 797 928 367
Gross assets 100 571 64 513 55 305
Gross liabilities 65 308 19 540 35 357
* Operating expenses exclude other income and finance costs.
Condensed consolidated segmental information
for the six months ended 31 August 2012
Discontinued
Total operations
R'000 R'000
Revenue 168 596 71 315
Gross profit 41 612 12 718
Operating expenses* 31 430 6 539
Profit/(loss) before tax 5 466 (25 672)
Depreciation/amortisation 2 791 1 402
Capital expenditure 3 092 -
Gross assets 220 389 15 062
Gross liabilities 120 205 15 108
* Operating expenses exclude other income and finance costs.
COMMENTARY
BASIS OF PREPERATION
The unaudited condensed consolidated financial results for the six months ended 31 August 2013 ("the interim results") have been prepared in accordance with the framework concepts, the recognition and measurement requirements of International Financial Reporting Standards ("IFRS"), the disclosure and presentation requirements of "IAS 34: Interim Financial Reporting", the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of the JSE Limited and the South African Companies Act, 2008 (Act 71 of 2008), as amended. The accounting policies and method of computation applied in preparation of these financial statements are in accordance with IFRS and are consistent with those applied in the annual financial statements for the 12 months ended 28 February 2013.
The financial statements have been prepared under the supervision of the Financial Director, Tony Dreisenstock and have not been audited or reviewed by the Group's auditors.
INTRODUCTION
The interim results reflect improved trading conditions from continuing operations. The Group successfully unbundled loss-making and cash-hungry businesses during the past year establishing a stable platform for growth in the forthcoming year.
NATURE OF BUSINESS
PSV is an industrial engineering holding Company comprising two operating business segments:
- Industrial Supplies (including industrial spares and supplies, crane maintenance and automotive spares); and
- Specialised Services (including geosynthetic linings and cryogenic activities).
FINANCIAL RESULTS
Revenue from the period under review increased by 33,8% to R225,5 million (2012: R168,6 million). The growth in the business is attributable to improving market conditions and additional working capital injected back into the business from proceeds derived on the sale of PSV Mitech Control Valves Proprietary Limited ("Mitech"). Gross profit margin reduced primarily due to reduced margins in Engineered Linings Proprietary Limited ("Engineered Linings") and Turbo Agencies Proprietary Limited ("Turbo") (see "Operational review" below). Although operating costs are in line with the previous period, the business has grown by 34% and operating costs as a percentage of turnover has decreased by 24,5% to 14,1% (August 2012: 18,6%). The decrease is largely due to the continual assessment of cost-cutting measures implemented at head office, and the disposal of loss-making operations. The Group's EBITDA increased to R13 million (2012: R10,8 million), a 19,8% improvement. The Company improved its profit before income tax from continuing operations by 50,6% to R8,2 million (2012: R5,5 million).
The taxation charge is still high due to the decentralised business model in operation. Notwithstanding, the effective tax rate on continuing operations decreased from 52,8% in the prior period to 38,3% as at 31 August 2013. PSV is aggressively assessing various strategies to be more tax efficient and the results of this strategy are expected to materialise by the year-end.
The total comprehensive income for the period is R0,2 million, a substantial improvement from the loss of R23,1 million incurred in the previous period. The Group's after tax profit was reduced by the R4,8 million loss made on the disposal of Mitech. Headline earnings per share from continuing operations grew by 16,3% to 2,00 cents (2012: 1,72 cents).
At the period end, cash of R20,6 million was recorded, 22,6% higher than 28 February 2013. Despite a substantial increase in the trading operations of the business, PSV managed to generate a positive cash flow from operating activities.
OPERATIONAL REVIEW
Industrial Supplies
This segment contributed 51% (2012: 59%) to the Group's consolidated revenue at an average gross profit margin of 26% (2012: 33%). Omnirapid continues to grow on the back of superior service delivery and increased orders for mining supplies. Omnirapid remains highly profitable, cash generative and consistently delivers positive results. Whilst revenue at Turbo increased, gross profit margins and operating costs came under pressure causing a reduction in the segment's operating margin to 11,4% (2012: 18,4%).
Specialised Services
Specialised Services contributed 49% (2012: 41%) to the Group's consolidated revenue at an average gross profit margin of 12% (2012: 13%). The segmental revenue increased from R69,6 million to R109,7 million. Both the African Cryogenics and the Engineered Linings businesses showed substantial top line growth. However the latter continues to experience cash flow pressure due to the resultant surge in working capital requirements. African Cryogenics has surged forward, delivering a solid set of results on the back of increased demand for its products and services. As a result of the strong performance of African Cryogenics the segment's operating margin has increased to 5,2% (2012: 0,9%).
DISPOSAL OF MITECH
On 13 May 2013, PSV announced on SENS the disposal of the Mitech business. Mitech is a specialised control valves business that produces valves which are primarily used in the mining and petrochemical industries.
The rationale for the disposal was that Mitech did not meet PSV's return on investment targets. It was therefore decided to dispose of Mitech and focus efforts on maximising the returns generated by the rest of the companies within the Group. Mitech was sold for a total consideration of R7,0 million in cash. The effective date of the disposal was 1 April 2013. PSV made a consolidated loss on the disposal of Mitech of under R5 million, of which R1,6 million was a cash loss incurred in writing off an inter-company loan. The balance represented a non-cash flow reversal of fixed asset revaluation gains previously booked to income.
DIVIDENDS
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 of directors of PSV ("the Board") reviews the dividend policy annually.
CHANGES TO THE BOARD
On 5 June 2013, it was announced on SENS that Peter Robinson resigned as a Non-Executive Director with effect from 4 June 2013. We wish him well in his future endeavours.
CHANGE IN TRANSFER SECRETARY
On 11 October 2013, it was announced on SENS that Link Market Services South Africa Proprietary Limited will replace Computershare Investor Services Proprietary Limited as PSV's transfer secretary with effect from 1 November 2013.
PROSPECTS
The remainder of the financial year is viewed as a year of consolidation for PSV, where the main aim is to focus on profitability, working capital management and cash flow generation. In concentrating on core competencies in South Africa and further expansion into Africa, PSV will build on its existing foundation. Much of our work is carried out on a project basis and this will continue into the future.
PSV has experienced larger capex spend by mines in Africa and is looking to take advantage of this opportunity. The focus on improved cash flow is slowly producing results and as such cautious expansion in Africa will be assessed, ever mindful of the risks associated with doing business on the continent.
The domestic market continues to show sustainable growth in the industrial segments in which we operate and PSV will be looking to maximise efficiencies and gain market share to improve profitability.
Both the Industrial Supplies and Specialised Services segments began the new financial year with larger order books than last year and indications are that this trend, although small, should continue. The appointment of a marketing manager to exploit opportunities across the Group of companies is showing positive results.
For and on behalf of the Board
AJD da Silva
Chief Executive Officer
AR Dreisenstock
Chief Financial Officer
Johannesburg
28 October 2013
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);
E Ratshikhopha (Independent Chairman of the Social and Ethics Committee)
COMPANY SECRETARY
Merchantec Capital
DESIGNATED ADVISER
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
Tel (local): (011) 657 6000
Tel (international): +27 11 657 6000
Fax: (011) 822 8470
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited,
70 Marshall Street,
Johannesburg,
South Africa,
2001
PO Box 61051,
Marshalltown,
South Africa,
2107
Date: 28/10/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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