Wrap Text
Reviewed provisional report for the year ended 28 February 2014
Protech Khuthele Holdings Limited
Registration number 2000/024352/06 JSE code: PKH ISIN: ZAE000101986
("Protech" or "the Company" or "the Group")
Reviewed provisional report for the year ended 28 February 2014
Condensed consolidated statement of financial position
at 28 February 2014
Reviewed Audited
R'000 2014 2013
Assets
Non-current assets 395 039 409 798
Property, plant and equipment 321 709 355 273
Goodwill 33 549 33 549
Other intangible assets 3 004 3 552
Deferred taxation 36 777 17 424
Current assets 324 720 471 556
Inventory 17 063 17 936
Amounts due from contract customers 47 048 56 902
Trade and other receivables 234 206 246 922
Other financial assets 3 428 3 428
Current tax assets 8 275 7 272
Bank balances and cash 14 700 139 096
Total assets 719 759 881 354
Equity and liabilities
Total equity 231 997 342 432
Share capital and share premium 228 598 228 598
Reserves (120 783) (121 500)
Retained earnings 124 182 235 334
Equity attributable to equity holders of the holding company 231 997 342 432
Total liabilities 487 762 538 922
Non-current liabilities 95 277 132 275
Borrowings 45 272 75 430
Deferred taxation 50 005 56 845
Current liabilities 392 485 406 647
Borrowings 74 994 102 195
Trade and other payables 171 557 173 447
Subcontractor liabilities 43 922 17 411
Amounts due to contract customers 52 056 98 848
Bank overdraft 47 440 -
Current tax liabilities 2 516 14 746
Total equity and liabilities 719 759 881 354
Supplementary statement of financial position information
Total number of shares in issue ('000) 362 500 362 500
Net asset value per share (cents) 64,0 94,5
Capital expenditure (R'000)
- Committed 43 209 19 371
- Commitments - Authorised but unspent 13 666 148 451
Guarantees issued (R'000) 148 332 149 882
Condensed consolidated statement of comprehensive income
for the year ended 28 February 2014
Reviewed Audited
R'000 2014 2013
Revenue 974 501 1 027 244
(Loss)/earnings before interest, taxation, depreciation and amortisation (70 758) 116 054
Depreciation (42 551) (69 533)
Amortisation of intangible assets (548) (548)
(Loss)/earnings before interest and taxation (113 857) 45 973
Interest received 1 850 3 228
Interest paid (12 092) (19 425)
(Loss)/earnings before taxation (124 099) 29 776
Taxation credit/(charge) 12 947 (13 706)
(Loss)/earnings for the year (111 152) 16 070
Other comprehensive income for the year, net of taxation 717 1 773
Movement in foreign currency translation reserve(1) 717 1 773
Total comprehensive (loss)/income for the year (110 435) 17 843
Earnings per share (cents)(2)
Basic (loss)/earnings per share (30,7) 4,4
Adjusted for:
Profit on disposal of property, plant and equipment (1,0) (0,7)
Tax effect thereof 0,3 0,2
Headline (loss)/earnings per share (31,4) 3,9
1 This item may subsequently be classified to profit and loss.
2 There are no diluting instruments.
Condensed consolidated statement of cash flows
for the year ended 28 February 2014
Reviewed Audited
R'000 2014 2013
Cash flows from operating activities (109 161) 180 623
Cash receipts from customers 1 012 678 1 022 297
Cash paid to suppliers and employees (1 085 118) (820 600)
Cash (utilised)/generated by operations (72 440) 201 697
Interest received 1 850 3 228
Interest paid (12 092) (19 425)
Income taxes paid (26 479) (4 877)
Cash flows from investing activities (5 316) (10 987)
Purchase of property, plant and equipment (43 209) (19 371)
- Replacement (41 223) (715)
- Additions (1 986) (18 656)
Proceeds on disposal of property, plant and equipment 37 893 8 384
Cash flows from financing activities (57 359) (110 512)
Payments in terms of bank loans (17 268) (18 991)
Increase in borrowings related to instalment sale agreements 45 776 -
Payments in terms of instalment sale agreements (85 867) (91 521)
Net (decrease)/increase in cash and cash equivalents (171 836) 59 124
Cash and cash equivalents at the beginning of the year 139 096 79 972
Cash and cash equivalents at the end of the year (32 740) 139 096
Cash and cash equivalent comprises of
Bank balances and cash 14 700 139 096
Bank overdraft (47 440) -
Condensed consolidated statement of changes in equity
for the year ended 28 February 2014
Equity
attributable
Foreign to the
Common currency shareholders
Share Share control translation Retained of the
R'000 capital premium reserve reserve earnings Company
Balance at 1 March 2012 2 228 596 (123 998) 725 219 264 324 589
Total comprehensive income for the year - - - 1 773 16 070 17 843
Balance at 28 February 2013 2 228 596 (123 998) 2 498 235 334 342 432
Total comprehensive loss for the year - - - 717 (111 152) (110 435)
Balance at 28 February 2014 2 228 596 (123 998) 3 215 124 182 231 997
Condensed operational segmental reporting
for the year ended 28 February 2014
Services within each business segment
For management purposes, the Group is organised into three major operating divisions - Contracting, Geotechnical Laboratory
and Readymix. These three divisions are the basis on which the Group reports its primary segment information. The principal
services and products of each of these divisions are as follows:
Contracting - bulk earthworks, roads and civil engineering contractors, plant hire, impact compaction and logistical services.
Geotechnical laboratory - geotechnical laboratory and surveying services.
Readymix - supplier of readymix concrete and pumping services.
Segment revenue and segment result
Segment revenue Segment result
R'000 2014 2013 2014 2013
Contracting 814 190 879 668 (88 962) 45 333
Geotechnical laboratory 16 692 17 503 775 (87)
Readymix 141 099 150 622 (12 595) 757
971 981 1 047 793 (100 782) 46 003
Corporate(1) 69 403 98 969 (13 075) (30)
Intergroup eliminations (66 883) (119 518) - -
974 501 1 027 244
(Loss)/earnings before interest and taxation (113 857) 45 973
Net interest paid (10 242) (16 197)
(Loss)/earnings before taxation (124 099) 29 776
Taxation credit/(charge) 12 947 (13 706)
(Loss)/earnings for the year (111 152) 16 070
Segment revenue reported above represents revenue generated from external customers. Intersegment sales amounted to R66,9
million (2013: R119,5 million). Segment result reported above represents operating profit per segment prior to taking interest into
account.
The accounting policies of the reportable segments are the same as the Group's accounting policies.
Segment assets and liabilities
Segment assets Segment liabilities
R'000 2014 2013 2014 2013
Contracting 787 792 914 375 577 718 615 891
Geotechnical laboratory 15 779 13 406 3 029 1 480
Readymix 78 768 76 518 98 335 87 927
882 339 1 004 299 679 082 705 298
Corporate(1) 473 219 420 708 255 618 183 769
Intergroup eliminations (635 799) (543 653) (446 938) (350 145)
719 759 881 354 487 762 538 922
Other segment information
Additions to property, plant
Depreciation and amortisation and equipment
R'000 2014 2013 2014 2013
Contracting 38 860 64 137 42 416 18 334
Geotechnical laboratory 1 457 1 574 604 948
Readymix 1 765 3 353 189 89
Corporate(1) 1 017 1 017 - -
43 099 70 081 43 209 19 371
1 Corporate includes the transactions of the holding company.
Geographical segmental reporting
Revenue Property, plant and equipment
R'000 2014 2013 2014 2013
South Africa 566 946 793 857 312 073 337 291
Rest of Africa(2) 407 555 233 387 9 636 17 982
974 501 1 027 244 321 709 355 273
2 Property, plant and equipment in Rest of Africa comprise assets acquired through subsidiaries or joint venture operations.
Information about major customers
Included in revenues arising from contracting income of R814,2 million (2013: R879,7 million) are revenues of approximately
R490,6 million (2013: R380,6 million) which arose from contracting income from two of the Group's largest customers.
Operating segments
The operating segments reported above form the basis on which internal reporting is structured chiefly for decision-making
purposes. Therefore there are no differences between the numbers reported to shareholders and management.
Notes to the condensed consolidated financial statements
for the year ended 28 February 2014
1. Basis of preparation and accounting policies
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting
Standards Council and to also, as a minimum, contain the information required by IAS 34, Interim Financial Reporting. The
accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS.
The accounting policies applied in the preparation of these condensed consolidated financial statements are consistent with
those applied in the prior year, other than for the adoption of IFRS 7 (Revised) Financial Instruments: Disclosures, IFRS 10
Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IFRS 13
Fair Value Measurement, IAS 19 (Revised) Employee Benefits, IAS 27 (Revised) Separate Financial Statements, IAS 28
(Revised) Investments in Associates and Joint Ventures and various other improvements.
The adoption of these accounting standards did not have a material impact on the Group results.
2. Subsequent events
Other than those set out in this announcement, no other material events have occurred subsequent to 28 February 2014
which may have had an impact on the Group's reported financial position at this date.
3. Audit opinion
The Group's external auditor, Deloitte & Touche, has issued a modified review conclusion on the reviewed provisional
condensed financial statements for the year ended 28 February 2014. The review was conducted in accordance with ISRE
2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity". A review is substantially
less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not
enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. A
copy of their modified review report is available for inspection at the company's registered office. The Group advised
shareholders on 30 May 2014 that it was to lodge an application for business rescue. This event indicates a material
uncertainty that may cast significant doubt on the Group's ability to continue as a going concern and, therefore, the Group
may be unable to realise its assets and settle its liabilities in the normal course of business and at the amounts stated in the
financial statements.
Commentary
Group Performance and Going Concern
The reviewed consolidated provisional financial statements have been prepared on the going concern basis, which contemplates
the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the normal course of the
business.
The Group's solvency is evidenced by the excess of assets over liabilities of R232,0 million and a tangible net asset value of
R195,4 million.
During the year, the Group incurred a loss after tax of R111,2 million (2013: R16,1 million profit) after impairment of long
outstanding receivables of R13,5 million, non-recoverable foreign withholding taxes of R15,6 million. In addition, continued
depressed market conditions in South Africa led to idle plant and the non-recovery of overheads in the projects. The above has
resulted in a loss per share and a headline loss per share of 30,7 cents per share and 31,4 cents per share respectively for the
year (2013: earnings and headline earnings of 4,4 cents per share and 3,9 cents per share respectively).
The net cash flows absorbed in operations were R109,2 million (2013: R180,6 million generated) which together with a net cash
outflow in investing and financing activities led to an overall decrease in cash of R171,8 million (2013: R59,1 million increase) and
a net overdraft position of R32,7 million at year-end (2013: R139,1 million bank and cash balance).
Shareholders were advised by means of a trading update on 13 March 2014 regarding the difficulties being experienced with the
DRC project both from a performance and cash point of view.
Subsequent to year-end and after further investigations instructed by the board of directors, on 30 May 2014, the Group advised
shareholders that due to the non-payment of amounts reflected as owing by the joint venture and the fact that the Group could
therefore not meet its immediate commitments, the Group, together with its operating subsidiaries, had no choice but to lodge
an application for business rescue.
A "preliminary" business rescue plan had been put in place by the board of directors at that date and the board concluded that
"although Protech is financially distressed, there appears to be a reasonable prospect of rescuing the Group, as the assets,
fairly valued, exceed the liabilities of the Group". In addition the board of directors were "of the opinion that the implementation
of business rescue will afford the directors the opportunity to develop and implement a business rescue plan in a manner that will
optimise the likelihood of Protech continuing as a going concern".
Further investigations instructed by the board of directors have revealed that the project performance of the DRC joint venture and
therefore the cash due from the joint venture to the Group, has continued to worsen, resulting in additional after tax losses of
R11,6 million (included in the final results), having to be provided in addition to those accounted for at the date of the trading
update on 13 March 2014.
As advised to shareholders on 6 June 2014, all relevant resolutions relating to the business rescue have been lodged and
Mr Gavin Gainsford has been appointed as the business rescue practitioner.
At the date of issue of the report and based on the progress with the business rescue plan, the directors remain of the opinion that
there is a reasonable prospect of rescuing the Group.
In the event that the Group is not successful in its business rescue plan, significant uncertainty would exist as to the ability of the
Group to continue as a going concern and, therefore, the Group may be unable to realise its assets and settle its liabilities in the
normal course of business and at the amounts stated in the financial statements.
The year-end financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts, nor to the amounts and classification of liabilities that might be necessary should the Group not continue as a going
concern. The auditors have disclaimed their review conclusion on the financial statements due to material uncertainty of the going
concern assumption.
The provisional results have been prepared under the supervision of Mr VRG Dingle CA(SA), the Group Financial Director and
Acting Chief Executive Officer.
Changes to the Board of Directors
Non elections and resignations
- Mr MSG Mareletse, who retired by rotation, was not re-elected as a director of Protech and therefore ceased to be a director of
the Company with effect from 22 November 2013.
- The appointment of Mr MR Madubanya as an executive director of Protech, was not passed by the requisite number of votes
and he therefore ceased to be a director of the Company with effect from 22 November 2013.
- Mr V Raseroka resigned as a non-executive director with effect from 1 December 2013.
- Mr MP Adamson resigned as an independent non-executive director with effect from 28 May 2014.
- Ms M Vuso resigned as an independent non-executive director with effect from 28 May 2014.
- Mr ASW Page resigned as chief executive officer and executive director with effect from 28 May 2014.
- Mr TW Rensen resigned as an independent non-executive director with effect from 29 May 2014.
Appointments
- Mr PS O'Flaherty was appointed to the board as an independent non-executive director with effect from 14 February 2014.
Mr O'Flaherty was also appointed as the Chairman of the audit and risk committee.
- Mr ND Robertson was appointed as an independent non-executive director to the board as well as a member of its audit and
risk committee with effect from 14 February 2014.
- Mr VRG Dingle was appointed as Financial Director and executive member of the board with effect from 1 May 2014. With the
resignation of the Chief Executive on 28 May 2014, he was appointed as Acting Chief Executive.
- Prof SA Zinn was appointed as an independent non-executive director of the Company and a member of the remuneration and
nominations Committee, with effect from 5 May 2014.
Outlook
Shareholders will be advised as appropriate regarding the status of the business rescue plan.
On behalf of the board
PS O'Flaherty VRG Dingle
Chairman of Audit and Risk Committee Group Financial Director and Acting Chief Executive Officer
18 June 2014
Executive director: VRG Dingle (Group Financial Director and Acting Chief Executive Officer)
Independent non-executive directors: ND Robertson, PS O'Flaherty, SA Zinn
Registered office: Corner R512 and Elandsdrift Roads, Lanseria (Private Bag X6, Lanseria, 1748)
(Website: www.pkh.co.za)
Transfer secretary: Link Market Services South Africa (Proprietary) Limited, 13th Floor, Rennie House, 19 Ameshoff Street,
Braamfontein. PO Box 4844, Johannesburg, 2000
Sponsor: Deloitte & Touche Sponsor Services (Proprietary) Limited
www.pkh.co.za
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