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May 11, 2009

Protech sees jump in revenue amidst 'good times'

Protech Khuthele CEO Gerald Chapman discusses the construction cycle and its effect on the company (11/05/09) Cameraperson: Nicholas Boyd; editing: Shane Williams
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Protech Khuthele CEO Gerald Chapman was filled with his trademark optimism as he announced his company's results for the 2009 financial year on Monday.

Speaking in Sandton, he noted that the last few years had not been a boom for the JSE-listed earthworks specialist, but rather “a glut”.

He insisted that the group still had more work on its books than it had seven years ago.

Despite current negative sentiments amidst a global economic meltdown, Chapman said the company was still experiencing “good times” – if not a boom – compared with the prolonged construction market lull evident in the 1990s.

Announcing a solid set of results, he noted that the 20-year-plus-old company's management had operated in “tougher times for most of their professional lives”.

Protech Khuthele reported a 91% increase in revenue to R702,7-million for the financial year ended February 28. Operating profit jumped by 61% to R156-million, with headline earnings a share increasing by 55% to 26c a share.

Profit increased to R128,1-million, in line with the upward trend evident from 2005's R16,9-million profit.

The 2009 financial year saw a major shift for the company away from work in the ailing private sector to the mining and public infrastructure sectors, which were still fuelled by energy demands, especially in the coal mining industry, and government's continued infrastructure development drive.

The private sector contributed 27% to group contracts in 2009, compared with 57% in 2008. The mining sector jumped to 46% in 2009, up from 21%, and the public infrastructure sector to 27%, up from 2008's 22%.

However, Chapman said he remained “pleasantly surprised” by how much work remained on the drawing board in the private sector, as well as the mining industry.

If he had any concerns, it was more on the public infrastructure side, where competition was increasing.

“For every contract tender, instead of ten guys tendering, now there are 30 guys.”

This growing competition could see increased pressure on margins, added Protech CFO Nellis Wolmarans.

“We expect margins to be slightly softer going forward.”

He said the company was not about the “buy work”, but noted that it was hard to ignore the generally negative sentiment prevalent in the market.

Protech Khuthele recorded a trading margin of 22,2% for the 2009 financial year.

Chapman added that the pressure was felt especially in the fourth quarter of 2008, with abnormally high rainfall adding to the financial complexity which had already existed in the marketplace.

“We had three times the amount of rainfall we usually get in the last quarter. So there were over 30 days we were technically not able to work, but we still managed to complete our contracts.”

Chapman said there were no immediate acquisitions on the horizon for the company.

“These are the times for consolidating – but never say never. If it is a sensible, attractive buy we'd be able to do it.”

Edited by: Creamer Media Reporter
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