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Protech Khuthele in earnings drop

Johannesburg - Construction group Protech Khuthele Holdings [JSE:PKH] 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 R538.3m.

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 R39.3m. The reported results include a provision for a non-operating expense of R3.9m 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 2010 (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.

The current margin was also impacted by the R3.9m 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 2010.

The group incurred capital expenditure of R121.8m 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 R45m, 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.

Geotechnical, which contributes, 2% of group revenue, increased revenue by 24% 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 R1.9m to R368 000m.

The group said its project pipeline and work-in-progress remain healthy, with the current value of contracts still to be completed standing at R954m.
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