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Septem ber 2010 Presentation to the JSE / PSG 1. Outlook 2 Agenda Introduction Results to 28 February 2010 Introduction.

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Presentation on theme: "Septem ber 2010 Presentation to the JSE / PSG 1. Outlook 2 Agenda Introduction Results to 28 February 2010 Introduction."— Presentation transcript:

1 Septem ber 2010 Presentation to the JSE / PSG 1

2 Outlook 2 Agenda Introduction Results to 28 February 2010 Introduction

3 3 What does Protech do? Introduction  Site clearance  Demolitions  Fast-track bulk earthworks  Basement excavation  Canal/river rehabilitation  Earthworks for commercial, industrial and retail developments  Crushing and screening  Road construction  Community infrastructure services  Dams and attenuation ponds  Airports and airfields  Harbour and reclamation works  Mine infrastructure development  Earthworks  Topsoil and overburden removal  Rehabilitation  Slime dams  Dump reclamation  Materials handling  Contract mining Plant hire and logistics Geotechnical laboratory and survey services Impact compaction Readymix concrete and pumping services Protech is a bulk earthworks and civil engineering group that offers fast-track contracting. Its business offering includes: Bulk earthworks Roads and civil works Mining

4 4 What gives Protech the edge? Introduction  Reputation as fastest in sector ―Guaranteed to be onsite in hrs ―100% track record for finishing in time or before time ―Proactively manage adversities to improve completion dates  Expertise & experience (21 yrs)  Reputation as fastest in sector ―Guaranteed to be onsite in hrs ―100% track record for finishing in time or before time ―Proactively manage adversities to improve completion dates  Expertise & experience (21 yrs) Fast track specialists Proven quality assurance Compete on reputation, not price Margins underpinned by: 1.Cherry-picking work 2.Plant renewal policy Margins underpinned by: 1.Cherry-picking work 2.Plant renewal policy Above average margins A focused producer of efficiency

5 Quality client base Blue chip client base: bad debts < 1% of revenue Introductio n 5 Protech Offices in Botswana, Zambia, Zimbabwe, Namibia and Tanzania

6 6 Rm PBT remains well above F2008 levels following the peak of the construction cycle in F year Performance: Profit Before Tax Note: PBT used as a measure as it includes all historic acquisition funding costs Introduction

7 Outlook 7 Results to 28 February 2010 Introduction Agenda

8 RevenueR748,8m Operating profitR118,6m Operating margin15.8% vs 22.2% EPS*20,9cps Maiden dividend declared5x covered4,0cps Market capitalisation**R275,5m P:E ratio**3.7 times Results to 28 Feb 2010 Results to 28 February 2010 * HEPS of 20,2cps declined by 22% as it excludes profit on sale of plant & equipment (i.t.o. plant replacement policy) ** As at 31 August % Pleasing in light of results from most other construction sector players 24% 7% 6 p.p. 18%

9 1.Excessive rainfall  Areas of geographic operation much more concentrated than usual due to new coal focus  Rainfall exceed the last 60 years avg by > 100%  Disrupted operations and delayed start-ups on new contracts 2.Worsening market conditions  The recession’s negative impact was even more powerful in H ― Private & public infrastructure spending decimated ― Increased competition 3.Public sector infrastructure spending paralysis Results to 28 February % 20% 50% Affected by 3 main factors Results to 28 Feb 2010

10 Plant policy  Fleet age & quality ‒ Plant max. 2 years old ‒ Demo-quality by end of term ‒ Protects against state of the equipment market  Balance sheet protection – no impairments ‒ R3m profit on sale of equipment  Competitive advantage: Fleet averages 1 year old vs 6 yr industry avg High efficiencies secure above-average margins  Reputation as –Providers of innovative solutions for clients –Ultra-efficient fast-track specialists  Won contracts worth R1,5bn without pricing stupidly  Still have margin headroom Ability to quickly shift sectors  Sector flexibility combats market conditions  Successful shift into coal mining sector Quality earnings  Blue-chip clientele & well-entrenched risk policy  Bad debts only 0,08% of revenue 10 Results to 28 February 2010 Results to 28 Feb 2010 Earnings decline limited through unique business model

11 11 Results to 28 February 2010 Results to 28 Feb 2010  Strong cash flow  Capital intensive business, therefore traditionally high gearing ―Net gearing reduced to 57% ―Net interest cover of 7,6x vs. minimum target of 5x–6x ―However, gearing will increase in line with capex requirements for specific contracts won ―There is sufficient equity in plant & equipment to cover the debt (carrying value of PPE: R374m vs debt of R265m) Statement of financial position

12 12 Outlook Results to 28 February 2010 Introduction Agenda

13 Revenue* Operating Profit* F2010 R769,3m F2010 R769,3m F2009 R708,7m F2009 R708,7m Geotechnical Contracting Readymix Divisional contributions to revenue & operating profit F2010 R117,6m F2010 R117,6m F2009 R150,6m F2009 R150,6m Readymix = R5,4m loss in F Outlook * Before eliminations

14 Outlook: Contracting 14 Outlook 1st 2nd 3rd  Non mining work has dried up; unlikely to show much improvement in H1 F2011  Spend unlikely to increase meaningfully until government, provincial and municipal management structures, processes & capacity improve ―Will continue to be selective in choosing contracts Sector preferences based on margins  Protech’s short term pipeline = 90% of work is on the mines  Immediate focus remains coal – sustained activity due to global energy demand  Will broaden when other mining capex increases  Owned fleet will grow to service 3-yr R340m blue-chip mining contract Private sector Mining sector Public sector

15 Current work in progress (short term) Work in Progress at May 2010 (Rm) 2009 (Rm) Total contracts awarded Already executed Total WIP still-to-be- executed (91% is new projects secured since Nov 2009) Outlook Starting F2011 with 99% of F2010 Group revenue already secured Outlook: Contracting (contd)

16 16 Outlook R1,43bn realistic Pipeline as at May 2010 runs to 2012 (medium term) Categories of work Total Rm Realistic expectation Rm Current Work in Progress - Still to be executed Category 1 - Recommended by professional team 170±130 Category 2 - Shortlisted (imminent)*320±160 Category 3 - Un-adjudicated bids900-#-# Realistic total - Current WIP + Category 1 + Category 2 ±1 430 * Note: Of the R300m imminent work list at interim results, R263m (88%) was secured # Not included in pipeline See appendix for breakdown of the pipeline and work in progress Outlook: Contracting (contd)

17 Outlook: Geotechnical 17 Outlook  Improves credibility with existing clients  Servicing of a wider selection of external clients in future  Increased turnover on existing cost base * SANAS: South African National Accreditation Systems State of the art laboratories & SANAS* accreditation:

18  Protech culture now entrenched  Successful shift out of Residential  Pro-active management ensures that payments from RDP Housing remain strictly under control Sector Current Revenue contr. Supply to F2011 expected conditions Residential 27% (95% at acquisition) Townhouse & estate developers Picking up Industrial & commercial 43% Shopping centres; light industrial/engineering parks; commercial retail & office parks Flat Public infrastructure 13% Roads, bridges, storm water drains, reservoirs & hospitals Flat RDP Housing7%Building contractors Unreliable payment Mining infrastructure 10% Infrastructure contractors Picking up Volumes likely to increase from late F2011 Outlook: Readymix 18 Outlook

19 Outlook: Group 19 H1 F2012  Improved market conditions H1 F2010 H2 F2010  Includes initial effects of market downtur n  Brunt of the downturn  Excessiv e rainfall  Pre- contract costs (largely once-off) on mining work H1 F2011H2 F2011  Benefits of shorter term contracts won in H1 at higher margins  Slight improvement expected in Private Residential building sector  Longer duration of mining contracts means H2 F2010 margins will impact 12 months +  However, full benefit of mining contracts realised as pre-contract mine costs already sunk  Strong pipeline allows us to be more selective on the new margins we accept on new shorter duration work

20 Forward looking statements Certain statements in this release that are neither reported financial results nor other historical information are forward looking statements including but not limited to predictions of or indications of future earnings. Undue reliance should not be placed on such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and company plans and objectives to differ materially from those expressed or implied in the forward looking statements. The information in this presentation has not been reviewed or reported on by Protech’s auditors. 20 Group outlook

21 Questions & answers 21


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