REG-Kentz Corp Ltd Final Results - Part 2
Released: 30/03/2009
Part 2 : For preceding part double click [nRn1d6585P]
Summary of Key Financial Indicators (values and percentage changes)
2008 2007 %
For the year ended 31 December: (US$M) (US$M) Change
Sales Revenue 643.4 544.6 +18.1%
EBITDA 42.2 35.2 +19.9%
Profit before tax * 40.7 34.3 +18.7%
Profit after tax * 30.9 26.3 +17.5%
Profit after tax attributable to shareholders * 28.8 26.2 +9.8%
Cash generated from operations 21.9 92.5 -76.3%
Net Cash from operating activity 11.0 87.5 -87.4%
Cash and equivalents at year end 154.4 123.7 +24.8%
Basic earnings per share (US cents) * 25.09 22.81 +10.0%
Backlog 1,003.8 596.4 +68.3%
Group Income Statement - Overview of Trends (values and percent of sales)
Continuing Operations For the year ended 31 December
(Values in US$ millions) 2008 2007 2006 2005
Sales Revenue 643.4 544.6 370.1 312.8
Gross Profit * 87.6 68.2 56.0 33.2
% of sales 13.6% 12.5% 15.1% 10.6%
S.G. & A. expenses * 51.4 39.7 33.0 26.9
% of sales 8.0% 7.3% 8.9% 8.6%
EBITDA * 42.2 35.2 27.2 8.9
% of sales 6.6% 6.5% 7.4% 2.8%
Profit before tax * 40.7 34.3 25.1 7.4
% of sales 6.3% 6.3% 6.8% 2.4%
Profit for the year - continuing operations *
30.9 26.3 21.4 3.9
% of sales 4.8% 4.8% 5.8% 1.2%
ROCE * 27.5% 41.4% 40.4% 15.8%
* 2008 results are before non-recurring flotation costs of US$4.695m which were
expensed during the period.
The group accounts are prepared in accordance with IFRS
Commentary on Group Income Statement Highlights
Revenue
Sales revenues increased by 18.1% in 2008 to US$643.4m (2007: US$544.6m)
reflecting continued strong growth in our main geographical business regions -
particularly in the Arctic and New Areas, Africa and the Middle East.
The breakdown of revenue by business unit reflects the pattern we saw in the
first half of 2008, with the Specialist EPC unit showing a reduction and the
Construction and Technical Support Services units both showing an increased
share of revenue. Specialist EPC represented 29% of Group revenue (FY 2007:
48%), Construction 43% (FY 2007: 27%) and Technical Support Services 28% (2007:
25%).
A review of the composition of our order backlog at December 2008 of US$
1,003.8m shows that 31.5% of the total consists of Specialist EPC (31 December
2007: 33.7%). However, looking at the composition of the pipeline of the future
projects that we are pursuing, which are valued at in excess of US$2.15bn, we
can see that 54.8% of that total consists of Specialist EPC projects. This
indicates that this sector should account for a larger portion in future years.
Sales to the oil and gas and petrochemicals market in 2008 totalled US$532.3m or
82.7% of Group revenues, up from US$484m or 89% of Group revenues in 2007. Our
remaining revenues have come from the mining and metals sector (11.1%) and from
other sectors (6.2%).
Gross Profit
Gross profits of US$87.6m or 13.6% of sales were recorded in 2008, an increase
of US$19.4m or 28.6% on the 2007 figure of US$68.2m.
Selling, General & Administrative Expenses (SG&A)
SG&A expenses in 2008 increased by US$11.7m to US$51.4m in absolute terms (2007:
US$39.7m). In relative terms, as a percentage of sales the number is up by 0.7%
to 8.0% (2007: 7.3%). This increase is due to a combination of salary
realignment costs to reflect industry norms in the Middle East, increased costs
associated with being a listed company, and exchange impacts arising on the
translation of non-US$ denominated costs during the year.
Other operating income
Other operating income for the year (before non-recurring flotation costs of
US$4.7m) was US$0.6m. This figure is down US$0.9m on the 2007 figure of US$1.5m,
which mainly related to the recovery of a doubtful debt previously provided for,
which had been collected and therefore written back.
Operating profit before finance costs
Operating profit before finance costs for the year (and before non-recurring
flotation costs of US$4.7m) increased by US$6.9m to US$36.8m or 5.7% of sales,
up from US$29.9m or 5.5% in 2007.
Geographically, the main increase occurred in Africa (up US$9.1m to $12.2m
despite the impact of the weaker Rand, particularly in the latter part of the
year). This is mainly due to higher activity and an excellent performance on the
Madagascar Ilmenite project.
In the Arctic and New Areas region profits are up US$5.4m to US$5.9m. The
activity level in this region has doubled, and has now reached the level where
profits are comfortably covering the administration and new area set-up costs.
The operating profit in the Middle East region is down US$4.4m to US$22.9m. This
mainly reflects the temporary swing away from EPC to construction work, which
typically has a lower average margin than EPC.
The Australasia, Europe and Caribbean region recorded an operating loss of
US$5.9m, up US$3.7m on the 2007 loss of US$2.2m. This is mainly due to the
combined effect of lower activity (down 36.5%) and group administration costs
which are incurred in the region.
Net finance income
Net finance income for the year was US$4.0m, up US$0.8m from the 2007 figure.
This relates to interest income resulting from positive project cash flows and
Group cash balances, including cash proceeds from the listing of the Company
completed during the period.
Share of joint venture's (loss)/profit
Loss for the period from our joint venture operation was US$0.1m (2007: profit
of US$1.2m). This has been brought about by a combination of delays in the
awarding of anticipated orders in Australia, coupled with lower than expected
margins on some projects. These factors have resulted in a contribution that was
not sufficient to cover overheads for the period. However, a pick up in activity
in the second half meant an improved performance from the loss of US$0.8m
recorded in the first half.
Profit before tax
Profit before tax for 2008 is US$40.7m or 6.3% of sales. This represents an
increase of 18.7% on the 2007 figure of US$34.3m, which was also 6.3% of sales.
Taxation
The tax charge for the year is US$9.8m which is an effective tax rate of 24.2%.
This compares with an effective rate of 23.4% for 2007. The slightly higher
percentage in 2008 reflects the fact that the group has expanded its business
into new regions which have higher average tax rates.
Net Profit for the year
Profit for the year from continuing operations was US$30.9m, up 17.5% on 2007.
Net profit equates to 4.8% of revenue which is in line with the 2007
percentage.
Minority interest
Minority interest for the year is US$2.068m or 0.32% of sales (2007: US$0.329m
or 0.06%). The minority interest relates to our Black Economic Empowerment
partner in Africa and the higher percentage is due to the higher proportion of
group profits contributed by Africa during the year (approximately 33% of
profits in 2008 compared to 10% in 2007).
Earnings per share (Basic)
Basic earnings per share for the year were 25.09 US$ cents (2007 22.81 US$
cents). This calculation is based on a weighted average number of 114,801,603
shares in issue at 31 December 2008.
Dividend
The group intends to adopt a progressive dividend policy, paying out
approximately 20% to 25% of profits after tax, paid on an interim (one third)
and final (two thirds) basis. The interim dividend payment amounting to US$1.9
cents per share was made in October 2008 and, the Directors intend to propose a
final dividend payment of US$3.8 cents per share which would make a total
dividend payment of US$5.7 cents per share for the year ended December 2008. The
final dividend payment will be made in June 2009 to shareholders on the register
at the close of business on May 22nd 2009.
Summary of Group Balance Sheet Highlights
Working Capital
Working capital at year end was US$102.5m, up 85.7% on 2007 year end
(US$55.2m).
Current assets at year end were US$281.2m, up 10.8% on 2007 (US$253.7m). This
growth is due to increased cash (up by US$30.5m) reflecting the cash proceeds
from the listing coupled with a strong trading performance.
Current liabilities at the year end were US$178.7m, down US$19.9m or 10% on
2007. This was mainly due to a reduction in trade and other payables, primarily
a reduction of US$16m in advance payments received from US$53m in December 2007
to US$37m at December 2008. This occurs naturally as progress is achieved on
those projects on which the advances were received and continues until new
advances are received on other new projects.
Equity
Shareholders' equity at the year end was US$114.1m, up 83.1% on 2007 (US$62.3m).
The growth is mainly due to an increase of US$34.0m from the issue of new shares
when the Company was admitted to trading on AIM in February 2008, coupled with
the growth of US$16m in retained earnings due to the successful trading
performance.
Total Assets
Total Assets at the end of the year were US$312.1m, up 14% or US$38.4m on 2007.
The increase was mainly due to higher cash balances coupled with the purchase of
some additional plant and equipment, mainly cranes for the Medupi project in
Africa.
Summary of Group Cash Flow Highlights
Cash flow from operations
Cash generated from operations for the year was US$21.9m, down 76.3% or US$70.6m
on 2007 levels. This is mainly attributable to an increase in the working
capital requirements associated with the mobilisation of a number of new
projects, including the natural growth element on some existing projects. This
is very welcome but comes without advance payments. The cash flow from
operations also declined due to the reduction in advance payments of US$16m
described above which occurs naturally as progress is achieved on those projects
on which the advances were received. The decline also reflects the reduction in
the proportion of Specialist EPC work during the year, with which advance
payments are more likely to be associated. We anticipate that with the increased
pipeline of future prospects in Specialist EPC that the positive working capital
movements seen in prior years should be restored in the future.
Cash flow used in investing activities
Net cash used in investing activities was US$16.9m, up 176% on the 2007 year-end
level and primarily related to the purchase of plant and equipment in South
Africa and the Middle East.
Cash flow from financing activities
Net cash arising from financing activities for the year was US$33.2m. This
positive position is the result of the net proceeds of the share issue on the
admission to AIM in February 2008, partially offset by expenses paid of US$3.1m
associated with the share issue, and dividends paid of US$2.0m.
Net cash and equivalents
Net cash and cash equivalents amounted to US$154.4m at year end, up US$30.7m or
24.8% on the 2007 figure of US$123.7m. This was mainly as a result of the cash
proceeds from the new share issue on the admission to AIM.
unaudited consolidated income statement
Year ended 31 December
In thousands of USD 2007
2008
Before flotation costs Flotation costs Total
(Note 3)
Total
Continuing Operations
Revenue 643,414 - 643,414 544,650
Cost of sales (555,773) - (555,773) (476,490)
Gross profit 87,641 - 87,641 68,160
Administration expenses (48,848) - (48,848) (38,104)
Distribution & selling costs (2,561) - (2,561) (1,654)
Other operating income/(cost) 609 (4,695) (4,086) 1,512
Operating profit/(loss) before finance costs 29,914
36,841 (4,695) 32,146
Net finance income 3,994 - 3,994 3,234
Share of joint ventures' (loss)/profit (118) - 1,163
(118)
Profit/(loss) before tax 40,717 (4,695) 36,022 34,311
Income tax expense (9,845) - (9,845) (8,033)
Profit/(loss) for the period - continuing operations 30,872 (4,695) 26,177 26,278
Loss on discontinued operations - - (524)
-
Gain on disposal of discontinued operations - - 761
-
Profit/(loss) for the period 30,872 (4,695) 26,177 26,515
Attributable to:
Equity holders of the parent 28,804 (4,695) 24,109 26,186
Minority interest 2,068 - 2,068 329
Profit/(loss) for the period 30,872 (4,695) 26,177 26,515
Basic earnings per share (US$ cents)
From continuing and discontinued operations 25.09 (4.09) 21.00 22.81
From continuing operations 25.09 (4.09) 21.00 22.60
unaudited consolidated statement of total recognised income and expense
Year Ended 31
December
In thousands of USD 2008 2007
Profit for the financial year 26,177 26,515
Exchange translation differences
- on employee benefits 802 (946)
- on foreign currency net investments 3,150 536
- on discontinued operations - (219)
Actuarial (losses)/gains on
defined benefits plans (8,316) (1,655)
Total recognised income and expenses for the year 21,813 24,231
Attributable to:
Equity holders of the parent 19,745 23,902
Minority interest 2,068 329
Total recognised income and expenses for the year 21,813 24,231
unaudited consolidated balance sheet
Year Ended 31
December
In thousands of USD 2008 2007
ASSETS
Non-current assets
Property, plant & equipment 25,345 12,565
Goodwill 543 760
Other investments 2,902 3,929
Trade and other receivables 1,936 1,596
Deferred tax asset 184 1,045
30,910 19,895
Current assets
Inventories 39,157 18,194
Trade and other receivables 84,078 108,055
Amounts owed by related parties 3,412 3,436
Cash and cash equivalents 154,504 124,041
281,151 253,726
Assets classified as held for sale - -
281,151 253,726
Total assets 312,061 273,621
EQUITY
Share capital 2,284 14
Share premium 39,568 7,796
Reserves 2,388 578
Retained earnings 69,861 53,930
Total equity attributable to equity holders of the parent 114,101 62,318
Minority interests 125 339
Total equity 114,226 62,657
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings 30 117
Employee benefit obligations 15,670 9,801
Amounts owed to related parties 92 92
Trade and other payables 3,278 2,327
Deferred tax liabilities 81 59
19,151 12,396
Current liabilities
Trade and other payables 170,464 190,614
Corporation tax payable 4,317 5,444
Interest bearing loans and borrowings 2,009 1,121
Amounts owed to related parties 1,894 1,389
178,684 198,568
Liabilities directly associated with assets classified as - -
held for sale
178,684 198,568
Total liabilities 197,835 210,964
Total equity and liabilities 312,061 273,621
unaudited consolidated cash flow statement
Year Ended 31
December
In thousands of USD 2008 2007
Cash flows from operating activities
Profit before tax 36,022 34,306
Adjustments for:
Depreciation 5,448 4,185
Net finance (income)/cost (3,994) (2,942)
Loss/(gain) on sale of property, plant & equipment 65 20
Share of profit from joint ventures 118 (1,163)
Current service cost 519 644
(Increase)/decrease in trade and other receivables 22,771 (17,882)
(Increase)/decrease in inventories (20,964) (5,372)
Increase in trade and other payables (18,073) 80,681
Cash generated from operations 21,912 92,477
Interest paid (202) (515)
Income taxes paid (10,662) (4,464)
Net cash from operating activities 11,048 87,498
Cash flows from investing activities
Return from joint venture 1,476 3,709
Investment in joint venture - (2,799)
Acquisition of minority interest - (246)
Disposal of subsidiary (net of cash) 1,000 856
Purchase of property, plant and equipment (22,112) (9,235)
Proceeds from sale of equipment 826 224
Interest received 4,182 3,212
Pension contribution (2,311) (1,848)
Net cash used in investing activities (16,939) (6,127)
Cash flows from financing activities
Proceeds of share issue 37,114 -
Expenses associated with new share issue (3,071) -
Payment of finance lease liabilities - (126)
Proceeds of long-term borrowings (86) 171
Payment of short-term borrowings (168) (3,247)
Proceeds from short-term borrowings 1,387 1,046
Dividends paid (2,003) (12,700)
Net cash used in financing activities 33,173 (14,856)
Net increase in cash and cash equivalents 27,282 66,515
Cash and cash equivalents at beginning of year 123,651 57,282
Exchange difference 3,426 (146)
Cash and cash equivalents at end of year 154,359 123,651
Kentz Corporation plc
Notes to the preliminary statement for the year ended 31 December 2008
1. Basis of Preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) and its interpretations
adopted by the International Accounting Standards Board (IASB) and Jersey
Company law.
The Group's date of transition to IFRS is 1 January 2004, the comparative
figures have been restated to reflect IFRS, except where otherwise required or
permitted by IFRS 1, First Time Adoption of International Financial Reporting
Standards.
The currency used in these accounts is the US Dollar.
2. Segment reporting
Segment information is presented in respect of the group's geographical and
business segments. The primary format, geographical segments, is based on the
group's management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly income-earning assets and revenue,
interest-bearing loans, borrowings and expenses, and corporate assets and
expenses.
Segment capital expenditure is the total cost incurred during the period to
acquire segment assets that are expected to be used for more than one period.
(i) Geographical segments
The group manages its business on a worldwide basis by organising its activities
into four distinct regions. The geographical areas are:
* Middle East
* Africa
* Australasia, Europe and Caribbean
* Arctic and New Areas
In presenting the information on the basis of geographical segments, segment
revenue is based on the geographical location of assets.
(ii) Business segments
The group's activity comprises of the following main business segments:
* Engineering, procurement, and construction (EPC)
* Construction and
* Technical Support services
2. Segment reporting (continued)
Primary segment information by location of assets
Geographical segments
Year ended 31 December
In thousands of USD20082007
Revenue by location of assets
Middle East 405,951 379,568
Africa 131,108 94,902
Australasia, Europe and Caribbean 15,787 24,858
Arctic and New Areas 90,568 45,322
Continuing operations 643,414 544,650
Discontinued operations - 9,618
Total revenue 643,414 554,268
Revenue by business
EPC 184,471 263,695
Construction 279,204 147,412
Technical Support Services 179,739 133,543
Continuing operations 643,414 544,650
3. Flotation Costs
On 5 February 2008, the Company commenced trading on AIM. The non-recurring flotation costs associated
with this amounted to $4.695m.
4. Earnings per ordinary share
Year ended 31 December
In USD 2008 2007
Earnings per share 25.09 22.81
In thousands of USD
Earnings after tax, minority
Interests and preference dividends 28,804 26,186
The number of shares used for the earnings
per share calculation is as follows:
No. '000 No. '000
Weighted average number of shares 114,801,603 114,801,603
The calculation is based on a weighted average number of 114,801,603 shares in
issue at 31 December 2008. The actual number of shares in issue at 31 December
2008 is 116,371,470.
This information is provided by RNS
The company news service from the London Stock Exchange
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