Protech Khuthele reports 5.9c vs 13.0c earnings

Posted On Monday, 29 November 2010 02:00 Published by Commercial Property News
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Protech Khuthele has reported basic headline earnings per share of 5.9c for the 6 months ended August 2010 from 13.0c for the corresponding period a year ago.

Gerald Chapman Protech KhutheleConstruction group Protech Khuthele on Monday reported basic headline earnings per share of 5.9 cents for the six months ended August 2010 from 13.0 cents for the corresponding period a year ago.

Revenue increased by 28% to R538.3 million due to the continued awarding of quality contracts and extensions.

The Contracting division remained the largest part of the business, contributing 86% to group revenue and 97% to operating profit.

Group operating profit before interest was 47% lower at R39.3 million.

The reported results include a provision for a non-operating expense of R3.9 million relating to the retirement package of the group's previous CEO.

Excluding the provision for non-recurring expenses, normalised headline earnings per share declined by 48% to 6.9 cents per share.

Operating margin was down to 7.3% compared to first half of F2010 17.5%), mainly due to the margins in coal mining being lower than Protech's traditionally exceptional margins, as well as the effect of increased competition in private and public sectors and continued rainfall.

However, margins achieved in mining remain higher than those currently experienced in the private or public sectors, indicating the soundness of management's strategy of pro-actively moving the majority of its work into the mining sector, the company noted.

The current margin was also impacted by the R3.9 million provision for non- recurring, non-operating expenses.

Without this provision, the operating margin would have been 8.0% compared to the 13.7% in the second half of F2010.

The group incurred capital expenditure of R121.8 million related to plant and equipment, the bulk of which was expensed to expand the fleet to service signed contracts. The capex budget for the second half of 2011 is R45 million, which will be replacement capex only.

Revenue for Contracting increased by 30% on the back of the continued awarding of new contracts and extensions on existing contracts in the mining sector.

In the last six months, additional work to the value of R218 million was secured in the form of extensions to existing contracts and new contracts.

However, the operating profit decreased by 41%.

Geotechnical, which contributes, 2% of group revenue, increased revenue by 24% rand due to more inter-group Contracting business, while operating profit increased by 107%.

Readymix, which contributed 12% of group revenue, saw revenue up 12% indicating increased penetration in a declining market. This business' improved service reputation led to good contract base load, such as water reticulation works, bridges and culverts for SANRAL and town planning work.

The operating loss decreased from R1.9 million to R368 000.

Looking ahead, the group said its project pipeline and work-in-progress remain healthy, with the current value of contracts still to be completed standing at R954 million.

This translates to 127% of the F2010 revenue of R748.8 million being already secured.

The focus will remain on the coal sector to limit the severe downturn seen across the board, with the scope to broaden when other mining capex increases.

Contracting has secured its first cross-border contracts, with contracts to the value of R78 million rand in Tanzania and Botswana.

The group has a realistic pipeline of work of R1.4 billion, 83% of which is focused on the mining sector.

This pipeline will continue to support revenue growth. However, as markets are expected to remain weaker for longer, it will become increasingly difficult to cherry-pick margins.

Margins are therefore expected to remain under pressure in a market that remains intensely competitive, it said.

Last modified on Tuesday, 02 July 2013 15:18

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