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Provisional audited condensed consolidated results for the year ended 28 February 2014
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”)
Provisional audited condensed consolidated results for the year ended 28 February 2014
- Profit after tax from continuing operations of R6,7 million (2013: R4,2 million)
- Improved headline earnings per share to 2,70 cents (2013: 2,43 cents)
Condensed consolidated statement of comprehensive income
Audited for the 12 Audited for the 12
months ended months ended
28 Feb 2014 28 Feb 2013
R R
Revenue 391 121 145 381 109 304
Cost of sales (318 935 498) (297 767 130)
Gross profit 72 185 646 83 342 174
Other expenses net of sundry income (74 723 217) (69 606 268)
Results from operating activities (2 537 571) 13 735 906
Finance income 441 927 2 035 634
Finance costs (2 672 161) (5 765 951)
Net finance costs (2 230 234) (3 730 317)
(Loss)/Profit before income tax (4 767 805) 10 005 589
Income tax 11 457 532 (5 772 703)
Profit for the year from continuing operations 6 689 727 4 232 886
Loss from discontinued operations (121 249) (877 981)
Loss on sale of discontinued operations (4 715 826) (27 136 736)
Profit/(Loss) for the year attributable to ordinary shareholders 1 852 652 (23 781 831)
Reclassification adjustment on disposal of foreign operation - 3 099 444
Foreign currency translation gain/(loss) 111 823 (90 981)
Total comprehensive income/(loss) for the year 1 964 475 (20 773 368)
Reconciliation of headline earnings
Profit/(Loss) after tax attributable to ordinary shareholders 1 852 652 (23 781 831)
Loss/(Profit) on disposal of property, plant and equipment 188 267 (54 504)
Impairment of goodwill - 2 870 573
Loss on sale of discontinued operations 4 715 826 27 136 736
Impairment of tangible asset 351 723 -
Tax effect of above adjustment (52 715) 15 261
Headline earnings 7 055 754 6 186 235
Headline earnings – continuing operations 7 177 003 7 064 216
Basic earnings/(loss) per share (cents) 0,71 (9,36)
Basic earnings per share (cents) - continuing operations 2,56 1,67
Headline earnings per share (cents) 2,70 2,43
Headline earnings per share (cents) - continuing operations 2.75 2,78
Diluted earnings/(loss) per share (cents) 0,71 (9,33)
Diluted earnings per share (cents) - continuing operations 2,55 1,66
Diluted headline earnings per share (cents) 2,69 2,43
Diluted headline earnings per share (cents) – continuing
operations 2,73 2,77
Diluted headline earnings per share (cents) - discontinuing
operations (0,04) (0,34)
Actual number of shares in issue at end of the year 272 547 699 272 547 699
Weighted number of shares in issue at end of the year 261 378 069 254 066 206
Fully diluted weighted average number of shares in issue at end
of the year 262 730 028 254,944,137
Condensed consolidated statement of financial position
Audited Audited
28 Feb 2014 28 Feb 2013
R R
ASSETS
Non-current assets
Property, plant and equipment 21 061 114 21 212 730
Intangible assets 10 610 210 11 750 851
Goodwill 29 186 265 29 186 265
Deferred taxation 12 199 448 2 171 068
Total non-current assets 73 057 037 64 320 914
Current assets
Inventories 29 358 229 33 953 769
Trade and other receivables 58 032 277 70 570 850
Taxation receivable 894 473 -
Cash and cash equivalents 27 710 873 23 029 914
Total current assets 115 995 852 127 554 533
Non-current assets held for sale - 21 843 562
Total assets 189 052 889 213 719 009
EQUITY
Share capital 273 136 360 273 059 364
Share-based payment reserve 41 594 141 842
Foreign currency translation reserve (75 337) (187 160)
Retained loss (174 102 672) (175 955 326)
Total equity attributable to ordinary shareholders of the
Company 98 999 945 97 058 720
LIABILITIES
Non-current liabilities
Deferred purchase consideration 4 659 206 7 578 457
Deferred taxation liabilities 3 740 557 4 873 649
Loans and borrowings 6 966 779 5 642 916
Total non-current liabilities 15 366 541 18 095 022
Current liabilities
Trade and other payables 45 406 739 67 868 525
Taxation payable 3 171 195 4 779 574
Current portion of deferred purchase consideration 6 599 229 7 133 970
Bank overdraft 16 672 996 6 280 851
Current portion of loans and borrowings 2 836 244 2 161 107
Total current liabilities 74 686 403 88 224 027
Non-current liabilities held for sale - 10 341 240
Total liabilities 90 052 944 116 660 289
Total equity and liabilities 189 052 889 213 719 009
Net asset value per share (cents) 37,88 38,20
Net tangible net asset value per share (cents) 22,65 22,09
Total number of shares in issue (net of treasury shares) 261 378 069 254 066 206
Condensed consolidated statement of changes in equity
Share capital Share-based (Deficit)/reserve Retained loss Total
payment translation reserve
reserve
Balance at 29 February 2012 271 606 106 205 782 (3 195 623) (142 844 627) 125 771 638
Loss for the year - - - (23 781 831) (23 781 831)
Other comprehensive income
Sale of foreign subsidiary - - 3 099 444 - 3 099 444
Foreign currency translation reserve - - (90 981) - (90 981)
- - 3 008 463 (23 781 831) (20 773 368)
Total comprehensive loss for the - - 3 008 463 (23 781 831) (20 773 368)
year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Shares vested during the year 1 453 258 (1 453 258) - - -
Dividends paid - - - (9 328 872) (9 328 872)
Share-based payment costs - 1 389 318 - - 1 389 318
1 453 258 (63 940) - (9 328 872) (7 939 554)
Balance at 28 February 2013 273 059 364 141 842 (187 160) (175 955 326) 97 058 720
Total comprehensive income for the
year
Profit for the year - - 111 823 1 852 652 1 964 475
Total comprehensive income for the - - 111 823 1 852 652 1 964 475
year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Shares vested during the year 76 996 (76 996) - - -
Share-based payment transactions - (23 252) - - (23 252)
76 996 (100 248) - - (23 252)
Balance at 28 February 2014 273 136 360 41 594 (75 337) (174 102 672) 98 999 945
Condensed consolidated statement of cash flows
Audited Audited
28 Feb 2014 28 Feb 2013
R R
Cash flows from operating activities (1 346 990) 8 989 683
Taxation paid (2 169 755) (5 322 694)
Net cash (used in)/from operating activities (3 516 745) 3 666 989
Cash flows from investing activities
Additions to property, plant and equipment to expand operations (3 937 405) (8 416 993)
Additions to intangibles to expand operations (449 009) -
Proceeds from disposal of property, plant and equipment 1 830 721 7 921 201
Proceeds of sale on subsidiaries 6 810 204 49 406 906
Financial income 441 927 2 035 634
Net cash from investing activities 4 696 438 47 946 748
Cash flows from financing activities
Loans to vendors of Turbo Agencies - 1 688 060
Loans repaid (2 683 911) (2 057 653)
Settlement of deferred purchase consideration (1 415 715) (7 367 288)
External loans repaid to finance property, plant and equipment (764 726) (22 515 811)
Financial expenses arising on interest bearing debt (2 026 528) (4 085 768)
Dividends paid - (9 328 872)
Loans from directors repaid - (1 600 000)
Net cash used in financing activities (6 890 880) (45 267 332)
Net (decrease)/increase in cash and cash equivalents (5 711 187) 6 346 405
Cash transferred to assets held for sale - 1 233 513
Cash and cash equivalents at beginning of the year 16 749 063 9 169 145
Cash and cash equivalents at end of the year 11 037 876 16 749 063
Segmental information
Specialised
Industrial Supplies Services Other Total
R R R R
2014
Total segment revenue 226 701 276 175 023 808 - 401 725 085
Intersegmental revenue (10 603 940) - - (10 603 940)
Reportable segment revenue 216 097 336 175 023 808 - 391 121 145
Gross profit 51 046 882 21 917 352 (778 587) 72 185 646
Depreciation/amortisation 2 764 125 2 000 223 2 350 587 7 114 935
Other operating expenses 29 488 840 17 940 564 27 117 528 74 546 932
Profit/(Loss) before tax
from continuing
operations 2 616 939 (8 582 711) 1 197 968 (4 767 805)
Loss before tax from
discontinued operations (181 993) - - (181 993)
Capital expenditure 3 598 312 2 657 119 445 716 6 701 146
Gross assets 76 698 040 64 921 456 47 433 394 189 052 889
Gross liabilities 62 447 008 58 234 215 (30 628 281) 90 052 942
Specialised
Industrial Supplies Services Other Total
R R R R
2013
Total segment revenue 201 916 452 181 675 347 - 383 591 799
Intersegmental revenue (2 482 495) - - (2 482 495)
Reportable segment revenue 199 433 957 181 675 347 - 381 109 304
Gross profit 54 349 321 28 992 853 - 83 342 174
Depreciation/amortisation 1 984 380 1 660 136 2 988 407 6 632 923
Other operating expenses 29 733 839 16 667 078 18 136 055 64 536 972
Profit/(Loss) before tax from
continuing operations 15 187 917 3 519 341 (8 701 669) 10 005 589
Capital expenditure 7 517 392 2 292 851 1 813 606 11 623 849
Gross assets 70 056 718 70 819 524 72 842 767 213 719 009
Gross liabilities 54 575 664 43 595 110 18 489 515 116 660 289
COMMENTARY
BASIS OF PREPARATION
The audited condensed consolidated financial statements (“the financial statements”) for the year ended 28
February 2014 (“the year”) 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.
This provisional report is extracted from audited information, but is not itself audited. The board of directors of PSV
(“the Board”) takes full responsibility for the preparation of this provisional report and that the financial information
has been correctly extracted from the underlying annual financial statements, which is available for inspection at the
registered office of the Company.
The financial statements have been prepared under the supervision of the Financial Director, Tony Dreisenstock and
have been audited by the Group’s auditors, Certified Master Auditors Inc, whose unqualified audit report is available
for inspection the registered office of the Company.
The auditor’s report does not necessarily report on all of the information contained in this announcement.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s
engagement they should obtain a copy of the audit report together with the accompanying financial information from the
Company’s registered office. Any reference to future financial performance included in this announcement has not
been reviewed or reported on by the Company’s auditor.
NATURE OF BUSINESS
PSV is an industrial engineering holding company comprising two operating business segments:
- Industrial Supplies (including industrial spares and supplies, crane/forklift maintenance and automotive
capital equipment); and
- Specialised Services (including comprehensive cryogenic and gas systems and geosynthetic linings).
INTRODUCTION
2014 was a year of consolidation for PSV. Cash flow was channelled into growth areas, the South African business
operations were restructured, whilst our foreign operations were re-focused, re-positioned and diversified into new
markets and customers.
During the course of the year, the Company restructured its local business operations into one operating company,
PSV Industrial (Pty) Ltd. The restructuring should facilitate economies of scale in several areas of operation, but will
also streamline treasury, working capital and tax management. The tax benefits are immediately apparent by the
creation of a substantial deferred tax asset at year end, whilst other economic benefits will flow in the new financial
year.
FINANCIAL RESULTS
Despite a slight increase in revenue, the business experienced a difficult year with both gross margins and cash flow
coming under pressure. Reduced margins were principally caused by increased competition in virtually all sectors of
the business. The reduction in cash flows was primarily due to bad debts as well as substantial continued investment
in infrastructure in African Cryogenics and Turbo Agencies. An operating loss of R2,5 million was made for the year.
Total comprehensive income for the period settled at R2,0 million, an improvement from the loss of R20,8 million in
2013. Headline earnings per share improved from 2,43 cents per share (“cps”) to 2,70 cps.
Cash flow from operating activities declined principally due to loss making contracts at Engineered Linings and
continued infrastructural development in Turbo Agencies and African Cryogenics. As a result, the Company’s
debt:equity ratio (net of cash) increased from 5,94% in 2013 to 10,15% in the current year. PSV ended the year with
cash and cash equivalents of R11,0 million, 34% less than in 2013 when the year ended on R16,7 million.
The Company’s balance sheet remained stable, with marginal improvements experienced in working capital ratios
and the Company’s net tangible asset per share increasing slightly from 22,09 cps in 2013 to 22,65 cps in 2014.
A new accounting system was implemented across the divisions, which puts in place a better foundation for aligned
and comparable financial information in the future. In addition, PSV has appointed BDO Spencer Steward as Internal
Auditor and the process has kicked off with a Risk Review which has been formulated into a managed Risk Register.
OPERATIONAL REVIEW
Industrial Supplies
This segment contributed 55% (2013: 52%) to the Group’s consolidated revenue at an average gross profit margin of
23.6% (2013: 27.3%).
Omnirapid has again performed well resulting in excellent growth, on the back of superior service delivery, expert
product knowledge to match client requirements and increased orders. Omnirapid remains a highly profitable and
cash generative business.
Turbo Agencies underwent a major management restructure as a result of the original owners departing. The
company continued to be profitable although at a reduced level despite this disruption. The company has succeeded
in diversifying its customer base into large mining groups in Zambia, refocusing its marketing and sales initiatives,
particularly in Botswana, and is in the process of bedding down substantial new crane maintenance, refurbishment
and spares contracts in the Democratic Republic of Congo (“DRC”).
Specialised Services
Specialised Services contributed 45% (2013: 48%) to the Group’s consolidated revenue at an average gross profit
margin of 12,5% (2013: 16.0%).
African Cryogenics is transforming itself from a small regional cryogenic vessel manufacturer and solution provider
for industrial applications, into a global player operating out of a state of the art new manufacturing facility based in
Elandsfontein, Germiston. The business has budgeted for the acquisition of substantial capital equipment in the
coming year. The new factory combined with the new equipment will enable African Cryogenics to substantially
reduce turnaround times, facilitate materials handling, enhance productivity levels and cut production costs.
In the current year, the business invested a considerable amount into research and development into new road
tanker designs with a specific focus to improve load to weight ratios. These new tanker designs, coupled with the
new factory should enable African Cryogenics to start competing internationally within the next two years.
The investment in the new factory, capital equipment and research and development will forge a cash generative
and profitable business within the coming year.
Engineered Linings, a contract driven business, experienced a year in which the business suffered due to a major
customer going into business rescue, resulting in a substantial bad debt write off. In addition, unforeseen inclement
weather conditions caused the company to incur substantial losses on a major contract in Gauteng. These factors
necessitated the restructuring of its business operations. This restructuring manifested inter alia in a downsizing of
the Johannesburg branch office, and a cut back in operating costs. With ongoing restructuring we expect the
business to return to profitability within the next two years.
DISPOSAL OF MITECH
On 13 May 2013, PSV announced the disposal of the Mitech business. The rationale for the disposal was that Mitech
did not meet PSV’s return on investment targets. Mitech was sold for a total consideration of R7 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.
For additional information on the disposal of Mitech please refer to the 2013 Integrated Report available on the
website at www.psvholdings.com in the Investor Relations section under Annual Reports.
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 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.
CHANGE IN TRANSFER SECRETARY
On 11 October 2013, it was announced on SENS that Link Market Services South Africa Proprietary Limited replaced
Computershare Investor Services Proprietary Limited as PSV’s transfer secretary with effect from 1 November 2013.
LITIGATION STATEMENT
Further to the disposal of Groupline Projects Proprietary Limited, a wholly-owned subsidiary of PSV, in 2011, the
purchaser has declared a dispute on the basis of a supposed breach of warranties contained in the Sale of Shares
Agreement. The Group has aggressively opposed this action. Consequently the parties have entered into arbitration
to resolve the dispute. The arbitration hearing will be sometime in the new financial year. After consultation with the
Group’s auditors, no provision has been made in the Group accounts for any potential loss arising from this dispute.
Other than the above, there are no legal or arbitration proceedings, including any such proceedings that are pending
or threatened, of which PSV is aware that may have, or have had during the 12 months preceding the date of the
Integrated Annual Report, a material effect on the financial position of the Group.
SUBSEQUENT EVENTS
As announced on SENS on 12 May 2014, PSV has entered into negotiations, which if successfully concluded, may
have a material effect on the price of the Company’s securities. There are no other material subsequent events that
require disclosure.
PROSPECTS
The management of PSV believe that a good foundation for the year ahead is in place for Omnirapid, Turbo Agencies
and African Cryogenics. Omnirapid continues to operate a lean business with manageable growth in new clients
based on product knowledge and excellent client service.
External and difficult market conditions locally and in Africa have taken their toll on Engineered Linings and PSV
foresees that this business will take longer to turn around than was initially expected. The company is being closely
monitored.
The extensive product range on offer in both Botswana, Zambia and the DRC remains in place and coupled with
quality service, should see Turbo Agencies producing better results into the future. The opening of a branch office in
Solwezi in the North West province of Zambia will allow Turbo Agencies to exploit the current mining boom in the
area.
The future for African Cryogenics is looking brighter as the company has evolved its product offering suite to include
comprehensive cryogenic and gas systems rather than only generic equipment.
For and on behalf of the Board
AJD da Silva AR Dreisenstock
Chief Executive Officer Chief Financial Officer
Johannesburg
30 May 2014
DIRECTORS
Executive Directors:
AJD da Silva (Chief Executive Officer); AR Dreisenstock (Chief Financial Officer)
Independent Non-Executive Directors:
R Patmore (Chairman of the Board); A de la Rue (Chairman of the Audit and Remuneration Committees); E
Ratshikhopha (Chairman of the Social and Ethics Committee)
COMPANY SECRETARY
Merchantec Capital
DESIGNATED ADVISER
Merchantec Capital
AUDITORS
Certified Master Auditors Inc
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
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein
PO Box 4844, Johannesburg, 2000
Tel: +27 (0) 11 713 0899
Fax: +27 (0) 86 674 4381
Date: 30/05/2014 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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