Crown Publications - Raubex results

• Revenues up 10,1% to R4,58-billion (2009: R4,16-billion)
• Operating profit up 11,7% to R887,3-million (2009: R794,6-million)
• Group operating margin of 19,4% (2009: 19,1%)
• HEPS up 11% to 323,8 cents per share (2009: 291,7 cents per share)
• Cash flow from operations down 17,8% to R793,1-million (2009: R964,4-million)
• Capex spend of R252,4-million (2009: R382,8-million)
• Order book of R4,7-billionn (2009: R5,2-billionn)
• Final dividend of 75 cents per share declared

FINANCIAL OVERVIEW

Revenue increased 10,1% to R4,58-billion and operating profit increased 11,7% to R887,3-million from the corresponding prior period. Profit before tax increased 13,4% to R858,6-million.
Earnings per share increased 12,6% to 325,6 cents with headline earnings per share increasing 11% to 323,8 cents.
Group operating profit margin increased 1,6% to 19,4% (2009: 19,1%).
The Group generated operating cash flows of R793,1-million before finance charges and taxation. Cash generation was negatively affected by an increase in working capital due to delayed payments from the Road Development Agency in Zambia.
Trade receivables increased 65,8% to R977,7-million as a result of the increase in accounts due by the Roads Development Agency in Zambia and South African Provincial Government accounts that were collected post balance sheet date.
Capital expenditure on fixed assets to the value of R252,4-million was incurred during the year ended 28 February 2010.
The Group's depreciation charge for the period increased 45% to R225-million from the corresponding prior period as a result of the increased level of capital expenditure incurred in the prior year and a change in accounting estimate of the useful economic lives of plant and equipment. This change in accounting estimate has given rise to an additional depreciation charge of R39,4-million during the period.
Total cash and cash equivalents at the end of the period amounted to R494,7-million.

OPERATIONAL OVERVIEW

Roadmac

Roadmac is a specialist in the manufacturing and laying of asphalt, chip and spray, surface dressing and slurry seals.
Roadmac continues to be the largest contributor to Group revenue. Performance for the period was impacted by the increased competition in light rehabilitation and resulting slight decrease in margins.
The division has secured a healthy order book going into 2011 with demand for asphalt in the Gauteng market remaining strong.
Unusually high rainfalls caused delays in the execution of some work, particularly in the Gauteng region. This had a negative impact on the asphalt business with a number of orders now taking place during the new reporting period.
Surfacing teams were deployed in Zambia during the latter part of the year to assist with the completion of the seal work on some major contracts. This work will be completed in the months ahead and the teams will be redeployed on South African contracts.
The division currently operates at full capacity but the impact of new work being completed at lower margins due to increased competition will become more evident in the 2011 operating margins.
Revenue for the division decreased 3,4% to R1,98-billion (2009: R2,05-billion) and operating profit by 5,9% to R405,4 million (2009: R431-million).
The divisional margins decreased to 20,5% (2009: 21,1%) due to the increased competition experienced during the year.
The division incurred capital expenditure of R79,5-million during the year.

Raubex Construction

Raubex Construction is the road and civil infrastructure construction division focused on the key areas of new road construction (green fields) and heavy road rehabilitation.
The division operated at full capacity during the year as a result of the contracts secured in the run up to the World Cup and the Namibian contracts which were awarded at the beginning of the year.
Despite increased competition for Raubex Construction‟s line of work, the strength of the order book reduced the need for the division to tender on lower margin contracts which are in higher demand at present. Whilst the environment is expected to remain very competitive in the short term resulting in slightly lower margins, Raubex Construction will continue to ensure that it maintains a healthy order book, in particular through its growing international exposure.
Revenue for the division increased 44,8% to R1,59 billion (2009: R1,09 billion) whilst operating profit increased 84,4% to R263,2 million (2009: R142,7 million).
Internationally, revenue increased 57,6% to R507-million (2009: R321,7-million) with margins decreasing to 7% (2009: 9,6%) as a result of tough trading conditions experienced in Zambia.
Work on the Namibian contracts is progressing well and site establishment has commenced in Malawi following the awarding of the Mchinji-Kawere Road contract.

Raumix

Raumix is the materials division of the Group with its core focus spread over three areas including contract crushing, production of aggregates for the commercial market and materials handling for the mining industry.
Commercial quarry operations continue to benefit from infrastructure projects, particularly in Gauteng.
The residential building market remains depressed, with the slowdown first felt in the Gauteng region, now starting to filter through to other areas. Recovery in the short term is not expected.
Contract crushing operations of B&E International performed well during the first half of the year, but have experienced a reduced order book in the second half and more pressure on margins.
Material handling operations of SPH Kundalila continue to be profitable and appear to be favoured by the current economic conditions with stable revenue streams being reported. Mining activities are starting to show signs of recovery.
Revenue for the division remained flat at R1,02-billion (2009: R1,02-billion) and operating profit decreased by 1% to R218,7 million (2009: R220,9-million).

Prospects

Despite difficult trading conditions this year, the Group has been able to grow both revenue and earnings while maintaining a secured order book of R4,7-billion (2009: R5,2-billion).
In the short term, trading conditions in the industry will continue to be challenging with the impact of pressures on margins likely to become more evident in the 2011 financial year.
The long-term outlook remains positive with a number of concession contracts expected to come out for tender. These include the N1 N2 Winelands Project which is now out on tender as well as the N2 Wild Coast toll road and the second phase of the Gauteng Freeway Improvement Project which is expected to commence by the end of 2011.
SANRAL's annual maintenance budgets remain encouraging and the poor condition of the provincial and municipal road networks should see government and local authorities place additional emphasis on this essential infrastructure.