Unaudited condensed consolidated financial results

Transcription

1 PSV HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number 1998/004365/06) Share code: PSV ISIN: ZAE ( PSV or the Company or the Group ) Unaudited condensed consolidated financial results for the six months ended 31 August 2014 Introduction During the period under review, PSV experienced the toughest trading conditions in its history. The poor results are primarily attributable to the following factors: A R1.9 million bad debt write off and a further R2.5 million in invoicing to Protech Khuthele Limited ( Protech ), a customer of Engineered Linings, that could not be raised following Protech entering into liquidation; The NUMSA strikes which effectively cost PSV six weeks of turnover and over R2 million in profit; A contraction in the capital expenditure ( capex ) spend of the major gas companies in PSV s cryogenics business; Excessive shared service costs; and Underperforming foreign assets attributable to delays in signing lucrative maintenance contracts based on slow regulatory processes. As a result, management has embarked upon a radical remedial programme designed to address the aforementioned issues immediately and effectively.

2 Condensed consolidated statement of comprehensive income 31 August August 2013 Audited for the 12 months ended 28 February 2014 Revenue Gross profit Operating expenses* (37 288) (34 225) (74 724) Operating (loss)/profit (10 463) (2 538) Net finance charges (1 626) (1 017) (2 230) (Loss)/profit before taxation from continuing operations (12 089) (4 768) Taxation (3 154) (Loss)/profit for the period from continuing operations (10 466) (Loss)/profit from discontinued operations (4 838) (4 837) Total comprehensive (loss)/income for the period (10 466) Reconciliation of headline (loss)/earnings (Loss)/profit attributable to PSV equity holders (10 466) Loss /(profit) on disposal of property, plant and equipment (89) Loss/(profit) on disposal of discontinued operations Impairment of tangible assets 351 Headline (loss)/earnings (10 555) Headline (loss)/earnings continuing operations (10 555) Basic (loss)/earnings per share (cents) (3.98) Basic (loss)/earnings per share (cents) from continuing operations (3.98) Headline (loss)/earnings per share (cents) (4.01) Headline (loss)/earnings per share (cents) from continuing operations (4.01) Diluted (loss)/earnings per share (cents) (3.98) Diluted (loss)/earnings per share (cents) from continuing operations (3.98) Diluted headline (loss)/earnings per share (cents) (4.01) Diluted headline (loss)/earnings per share (cents) from continuing operations (4.01) Actual number of shares in issue at end of the period Weighted number of shares in issue at end of the period Fully diluted weighted average number of shares in issue at end of the period * Operating expenses are net of sundry income and include depreciation, impairments and amortisation charges.

3 Condensed consolidated statement of financial position Unaudited as at 31 August 2014 Unaudited as at 31 August 2013 Audited as at 28 February 2014 ASSETS Non-current assets* Current assets Inventory Trade and other receivables Taxation receivable 894 Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity Non-current liabilities Current liabilities Current portion of deferred purchase consideration Taxation payable Current portion of long-term liabilities Trade and other payables Bank overdraft Total equity and liabilities Net asset value per share (cents) Tangible net asset value per share (cents) * Includes deferred tax assets.

4 Condensed consolidated statement of changes in equity 31 August August 2013 Audited for the 12 months ended 28 February 2014 Balance at beginning of the period Total comprehensive (loss)/income for the period (10 466) Dividends paid Share-based payment transactions 99 (107) (23) Foreign currency translation differences (340) 111 Balance at end of the period Condensed consolidated statement of cash flows 31 August August 2013 Audited for the 12 months ended 28 February 2014 Cash flows from operating activities (9 507) (3 140) Cash flows from investing activities Cash flows from financing activities (5 288) (2 896) (6 891) Net movement in cash and cash equivalents (11 799) (5 711) Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period (761)

5 Condensed consolidated segmental information for the six months ended 31 August 2014 Industrial Supplies Specialised Services Other Total Revenue (1 755) Gross profit (441) Operating expenses* (Loss) before tax (95) (4 001) (6 370) (10 466) Depreciation/amortisation Capital expenditure Gross assets Gross liabilities (12 701) * Operating expenses exclude other income and finance costs. Condensed consolidated segmental information for the six months ended 31 August 2013 Industrial Supplies Specialised Services Other Total Revenue Gross profit (132) Operating expenses* Profit/(loss) before tax (4 208) Depreciation/amortisation (183) (183) Capital expenditure Gross assets Gross liabilities * Operating expenses exclude other income and finance costs.

6 Commentary BASIS OF PREPARATION The unaudited condensed consolidated financial results for the six months ended 31 August 2014 ( 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 ( Listing Requirements ) 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 The interim results have been prepared under the supervision of the Financial Director, Tony Dreisenstock CA(SA), and have not been audited or reviewed by the Group s auditors. Any forecast financial information contained in the interim results has not been reviewed and reported on by the Group s auditors in accordance with paragraph 8.40(a) of the Listings Requirements. 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 during the period under review decreased by 39,7% from R225.5 million to R135.9 million. The contraction in turnover levels is attributable to the aforementioned contributing factors. Gross profit margins remained stable at 19.7% (2013: 19.3%) mainly due to a positive change from a higher margin sales mix. Although operating expenses decreased by 8.9% from the previous corresponding period, the operating expense ratio increased to 21.5% from 19.1% during the previous corresponding period due mainly to the reduction in revenue. During the period under review PSV incurred a comprehensive loss of R10.5 million compared to a R0.2 million profit in the previous corresponding period. Headline loss per share from continuing operations decreased to 4.01 cents per share ( cps ) (2013: earnings 2.05 cps). Due to the losses incurred, PSV s net cash position reflected a R0.8 million deficit, compared to R11.1 million cash available at 28 February Net tangible asset value per share also decreased to 18.8 cps compared to 22.7 cps as at February PSV is however, still trading at a substantial discount compared to its current share price. Whilst PSV s overall interest-bearing debt position increased marginally during the last six months, all debt obligations were properly and timeously serviced. As a result of the significant turnaround strategies currently being implemented, PSV remains a viable going concern, and enjoys the continued and ongoing support of its bankers and suppliers. OPERATIONAL REVIEW Industrial Supplies This segment contributed 70% (2013: 51%) to the Group s consolidated revenue at an average gross profit margin of 21% (2013: 26%). Despite having been detrimentally affected by strike action and generally poor economic conditions, Omnirapid remains highly profitable, cash generative and continues to deliver consistent results. Turbo incurred a loss for the six months primarily due to various lucrative mining contracts not having been signed and unsustainable infrastructure costs. A substantial reorganisation is currently under way and all outstanding mining contracts should be signed in the near future. Head count has been reduced by 52% and 33% in Zambia and Botswana. These measures should ensure that Turbo returns to a profitable position. Specialised Services Specialised Services contributed 30% (2013: 49%) to the Group s consolidated revenue at an average gross profit margin of 16% (2013: 12%). The aforementioned contributing factors detrimentally impacted Engineered Linings, necessitating downsizing of business operations. Breakeven levels have been decreased by 75%, payment arrangements have been secured with critical suppliers and order levels have recovered to sustainable levels. Currently the business is focusing on smaller low value higher margin installation jobs. A threshold has been introduced with respect to low margin high value geosynthetic supply jobs. Any supply jobs which exceed the threshold will be routed directly to the material supplier in return for a destination commission. The result is a substantial reduction in top line with increases in bottom line profitability. Furthermore, the risk profile of the business has changed and is now far more positive than at any time in the past. The Board is confident that with continued focus, the company will return to long-term profitability. African Cryogenics remains cash generative and profitable despite major logistical hurdles, industrial strike action and contraction in gas company capex spend. The business is now properly entrenched at its new state-of-the-art manufacturing facility and is enjoying reasonably healthy order books at good margins. SUBSEQUENT EVENTS On 31 October 2014, after months of interaction, PSV served notice of cancellation of the lease agreement at its principal location in Elandsfontein, Germiston. The reason for the cancellation was the non-performance by the landlord of its obligations in terms of the lease agreement. Accordingly, PSV s head office has relocated to Stoneridge Office Park, Greenstone.

7 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 There were no changes to the Board during the period under review. PROSPECTS PSV expects tough trading conditions to prevail in the coming six months. The significant restructure of head office and other operations will ensure a substantial reduction in costs, resulting in the alleviation of pressure on cash. The remedial action taken is severe and will ensure PSV s going concern viability. Omnirapid has moved into the new African Cryogenics facility, thereby eliminating duplicated overhead costs. Low operating costs and a burgeoning reputation for service excellence throughout Africa, should ensure this business continues to generate high levels of cash and profitability, and that budgetary targets will be comfortably exceeded, albeit at lower margins. African Cryogenics has repeatedly demonstrated economic resilience and an ability to adapt to changing market conditions as demonstrated by sustained levels of profitability and positive cash generation over the years. The business unit has embarked upon an aggressive marketing campaign designed to entice the gas companies away from imports to locally manufactured cryogenic vessels and containers. The campaign has attracted interest and we are hoping to start achieving some levels of success in the new financial year. The current order book is reasonable and at good margins. Whilst the unit is expected to generate below top line budgetary targets, the budgeted profit after tax should be met, due to higher margins and strict control of operating costs. Turbo operates in countries of immense opportunity and potential, especially in Zambia and the Democratic Republic of Congo ( DRC ). PSV is systematically implementing new procurement and marketing strategies designed to ensure sustainable levels of turnover and profitability. New highly experienced management has been recruited into the various Turbo business units. Management s objective is to drive the successful implementation of Turbo s new strategies. The current financial year has seen statutory impediments in the DRC delaying the signing of lucrative contracts which were pivotal in formulating budgetary targets for the 2015 financial year. The Board is pleased that these impediments have been addressed and Turbo DRC should soon return to profitability and positive cash generation. Despite the adversity experienced by Engineered Linings in the first half of the financial year, the unit has emerged leaner and more focused. The unit is comfortably servicing all its obligations and is systematically reducing its legacy trade debt with critical suppliers. Losses have been stopped and the unit has returned to profitability. Whilst the unit is not expected to reflect a profit in the 2015 financial year, a reduction in losses is anticipated. PSV generated a Loss Before Interest, Tax, Depreciation and Amortisation ( LBITDA ) of R7.5 million in the first quarter and an EBITDA of R0.47 million in the second quarter, indicating a slow return to overall profitability. The Company is bullish in its ability to sustain the positive trend generated in the second quarter particularly in light of the substantial reduction in shared services costs and operational costs. For and on behalf of the Board AJD da Silva Chief Executive Officer Johannesburg 13 November 2014 AR Dreisenstock Chief Financial Officer

8 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 Proprietary Limited DESIGNATED ADVISER Merchantec Capital REGISTERED OFFICE Building C 2nd Floor Stoneridge Office Park 8 Greenstone Place Greenstone Hill Postnet Suite 229 Private Bag X19 Gardenview 2017 Tel: Fax: