Shares in Malaga-based scaffolding and production equipment supplier PCH Group Ltd have risen 12.8 per cent this morning after the company posted a half year net profit of $11.9 million, a 121 per cent increase over the previous corresponding period.
Shares in Malaga-based scaffolding and production equipment supplier PCH Group Ltd have risen 11.6 per cent after the company posted a half year net profit of $11.9 million, a 121 per cent increase over the previous corresponding period.
The share price at close was up 10 cents to 96 cents.
The company reported solid results from all areas, with the exception of NSW where trading conditions were soft.
The company also recorded a 70 per cent increase in sales revenue to $60.2 million, largely as a result of the buoyant resources and industrial sector in Australia and overseas.
In a comparison of sales and services revenues by geographical sectors, PCH recorded $32.5 million in Australia (up from $15.4 million in 2004 half year) and $27.5 million overseas (up from $19.9 million in 2004 half year).
Earnings per share increased from 3.8 cents per share in 2004 half year to 7.1 cents per share in 2005 half year.
PCH stressed that results for the first half benefited from several projects moving through peak periods, with results fluctuating from one half to the next as existing major projects wind down and new projects ramp up.
The company declared an interim dividend of 0.75 cents per share.
Below is the edited Directors Report:
DIRECTORS' REPORT
Your Directors present their report on the consolidated entity consisting of PCH Group Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2005.
DIRECTORS
The following persons were Directors of PCH Group Limited during the whole of the half-year and up to the date of this report:
W B Ryan
P F Finn
J D Cullen
B E Hewitt
With the exception of New South Wales, where trading conditions were soft, solid results were reported from all areas of the Company's operations. The 70% lift in revenues is largely the result of the buoyant Resources and Industrial sector, both in Australia and overseas. These conditions, together with the benefits emerging from growth initiatives put into place last year, led to the strong results for the half-year.
The Australian Resources and Industrial sector has continued to strengthen, with a growing list of major new projects being committed. The level of work available in this sector over the next several years is expected to remain high, although construction activity for some major projects is shifting offshore.
Overseas, led by strong oil and gas activity, the outlook is even stronger with substantially more than 5 years of robust activity expected. PCH's confidence in this sector is underscored by three recent regional manager appointments in the Arabian Gulf, Kazakhstan, and South-East Asia. In Kazakhstan, where the Company is pursuing work on the US$30 billion Kashagan development, the first contract has been secured and work has commenced. In the Arabian Gulf and South-East Asia, major work is currently being tendered by the experienced key industry executives who have recently joined PCH.
The Company recognises that there will be initial costs incurred developing these new markets, however, the potential rewards to come from them may be quite considerable.
Results for the first half received the benefit of several projects moving through their peak periods. As the Company has indicated many times in the past, there may be fluctuations in results from one-half to the next, as existing major projects wind down and new projects ramp up. This can be seen from the graph below where in 2004, there was a weaker second half, however, the overall growth trend over the period shown remained strong.
The Board maintains confidence in overall continued growth based on the strength and duration of the cycles in PCH's key sectors, the Company's position within these sectors and other growth initiatives underway.
PCH continues to be leveraged to a broad range of income streams from both Australia and overseas as a result of its expansion activities.
In terms of new product initiatives introduced last year, approximately 10% of revenues were generated from these, both from within Australia and overseas.
Operating cash flow for the half was $8.7 million and this was more than sufficient to fund the Company's net capital expenditure requirements of $7 million. Similar operating cash flow and capital expenditure levels are expected in the second half. Following the successful $10 million capital raising completed during the first half and the continuing strong contributions from operations, the Company's balance sheet reflects a modest net gearing level of 13%.
As previously announced, results for the first half received the benefit of two one-off items as follows:
- offshore provision reversal of $1.5 million; and
- income tax expense credit of $1.3 million.
On 17 February 2006 the Company announced that a material level of foreign income was no longer assessable for Australian income tax purposes. Going forward, this will reduce the Company's effective income tax rate to between 15% and 25%, with the rate for 2006 expected to be at the lower end of this range.
The directors are pleased with the Company's performance, its outlook and the health of its balance sheet and have declared an interim dividend of 0.75 cents per share.
