appendix 4d – half year report for the half year ended 31 ... · pdf filethe eal group...

Appendix 4D – Half Year Report

For the Half Year Ended 31 December 2009

E&A Limited

ABN 22 088 588 425

This Half Year Report is provided to the Australian Stock Exchange (ASX) under ASX Listing Rule 4.2A. Current Reporting Period: Half Year Ended 31 December 2009

Previous Corresponding Period: Half year Ended 31 December 2008

Contents

1. Media Release

2. Results for Announcement to the Market

3. Directors’ Report

4. Consolidated Interim Financial Statements

For

per

sona

l use

onl

y

E&A Limited ABN 22 088 588 425

25 February 2010 The Manager Company Announcements Platform Australian Stock Exchange Ltd

REVIEW OF OPERATIONS

OVERVIEW Diversified South Australian Investment Company, E&A Limited (ASX:EAL) today announced a record net profit after tax of $2.051 million for the half year ended 31 December 2009 This represents an increase of 58.9% on the previous corresponding period. EAL achieved consolidated revenue of $68.4 million which represented a growth over the previous corresponding period of 22.8%. EAL’s balance sheet has been strengthened, with net debt of $23.7 million, including cash on hand of $6.9 million as at 31 December 2009. The Executive Chairman of EAL, Mr Young said “ looking forward we see the trend of improving conditions continuing in the industrial mining, energy, water and defence sectors and accordingly we expect a strong second half performance based on organic growth, recent contract wins and the contributions from recent acquisitions”. Mr Young stated that EAL is well positioned for expansion with its strengthened balance sheet and further strategic acquisitions are being actively pursued. CASHFLOW Cash generated from operations for the six month period ended 31 December 2009 was a positive $5.821 million and after interest and tax a positive $3.578 million. Mr Young said “this strong cash flow was particularly pleasing given the underlying capital requirements associated with the 22.8% growth in turnover”. The EAL Group companies continued cashflow management focus was instrumental in delivering a strong cashflow result.

For

per

sona

l use

onl

y


INTERIM DIVIDEND Upon review of E&A Limited’s third quarter trading performance, EAL Directors intend to declare a fully franked interim dividend of 1.5 cents per share. This dividend would be payable prior to 30 June 2010 and could be taken in cash or reinvested in E&A Limited shares at a discount of 2.5% to the volume weighted average price of all E&A Limited shares traded on the Australian Securities Exchange during the five trading days after the record date. Detailed comments in respect of EAL’s operating segments for the six months to the 31st of December are as follows: HEAVY MECHANICAL & ELECTRICAL ENGINEERING Operating Businesses This segment comprises the services provided by Ottoway Engineering Pty Ltd (Ottoway), Whyalla Fabrications Pty Ltd (Whyalla Fabrications) and ICE Engineering & Construction Pty Ltd (ICE). This segment offers services across a range of industries including industrial, petro-chemical, oil and gas, mining, water, defence, power generation and infrastructure. Services Ottoway operates as a pipe fabrication and installation business involving all aspects of turn-key project management including design, engineering, procurement, manufacture, fabrication, machining, installation and maintenance. Whyalla Fabrications provides a range of steel fabrication and structural engineering services, including project management, design, structural steel fabrication and erection, pipe welding and pipework installation, pneumatic and hydraulic installations, and light machining. ICE provides services and contract labour to the electrical and instrumentation sector of the industrial, water and mining sectors. Operating Performance The following table provides a summary of the financial performance of the Heavy Mechanical and Electrical Engineering segment for the six months ended 31 December 2009 in comparison to the previous corresponding period.

SEGMENT REPORTING HALF YEAR HALF YEAR PERCENTAGE (%)

HEAVY MECHANICAL & ELECTRICAL ENGINEERING (in thousands) FY10 FY09 INCREASE / (DECREASE)

Segment Revenue 1 43,144 22,027 95.87%

Operating Results (Before Finance Expense and Income Tax Expense) 3,183 1,605 98.34%

1 Note: FY09 1ST HALF results do not include impact of ICE Engineering earnings.

For

per

sona

l use

onl

y


The Heavy Mechanical and Electrical Engineering segment achieved revenue growth of 95.87% and operating earnings growth of 98.34% compared to the previous corresponding period. As mentioned previously, ICE was acquired with effect from 1 May 2009. ICE made a positive contribution to the earnings of the Heavy Mechanical and Electrical Engineering segment and is expected to continue to make a strong contribution to earnings in the second half of FY10. Ottoway Engineering was the primary contributor to the improvement in both revenue and also earnings during the first half compared to the previous corresponding period. Ottoway Engineering is expected to make a strong contribution during the second half as a consequence of the AE&E contract at Cape Preston in Western Australia, the Honeymoon Project and also the Snapper Project. Whyalla Fabrication’s performance was less than expected. Operations were restructured during the six month operating period with the merging of this business with Louminco to form E&A Contractors in order to offer its clients fully integrated solutions including design, drafting, engineering, fabrication and onsite construction. The restructure was formally implemented with effect from 1 January 2010. Further progress is expected to be made during the next six months as clients begin to use their capacity to deliver integrated engineering solutions. FABTECH Operating Businesses This segment comprises the services provided by Fabtech SA. Services Fabtech SA is a national leader in the provision of flexible geomembrane liners and floating covers for dams, reservoirs, channels & tunnels in such industries as mining, resources, potable and waste water containment, waste management and agriculture. Operating Performance The following table provides a summary of the financial performance of the Fabtech segment for the six months ended 31 December 2009 in comparison to the previous corresponding period.


FABTECH (in thousands) FY10 FY09 INCREASE / (DECREASE)

Segment Revenue 8,647 10,625 (18.62%)

Operating Results (Before Finance Expense and Income Tax Expense) 802 (97) 926.88%

For

per

sona

l use

onl

y


The Fabtech segment experienced a decline in revenue of 18.62% compared to the previous corresponding period, however increased operating earnings to $802k from a deficit of $97k in the first half of FY09. The restructuring initiatives undertaken by Fabtech have returned the Company’s profitability margins back to budget expectations. The key contributing factors to Fabtech’s performance were: § Tight operational management which resulted in more efficient installations on large

contracts; § Tight expense control; and § A combination of better weather and more effective contract management of adverse weather

events. Management’s expectation for the future outlook of the geomembrane industry continues to remain positive and in particular the opportunities in the coal seam gas sector in south east Queensland remains strong. MAINTENANCE ENGINEERING & PLANT CONSTRUCTION Operating Businesses This segment comprises the services provided by Heavymech and QMM. Services Heavymech provides emergency breakdown, maintenance and machining services to a wide variety of industries including mining, earthmoving, foundry, water hydraulic, marine, defence and power generation. QMM is a provider of maintenance engineering and plant construction services to the quarry, recycling and mining sectors. Operating Performance The following table provides a summary of the financial performance of the Maintenance Engineering and Plant Construction segment for the six months ended 31 December 2009 in comparison to the previous corresponding period.


MAINTENANCE ENGINEERING & PLANT CONSTRUCTION (in thousands) FY10 FY09 INCREASE / (DECREASE)

Segment Revenue 7,820 6,116 27.84%

Operating Results (Before Finance Expense and Income Tax Expense) 577 163 253.99%

The Maintenance Engineering and Plant Construction segment achieved revenue growth of 27.84% and growth in operating earnings of 253.99% compared to the previous corresponding period.

For

per

sona

l use

onl

y


QMM was primarily responsible for growth in revenue with increased activity following the recommencement of a number of plant construction projects which were put on hold during FY09. The improved operating performance of this segment is a consequence of the increased level of activity in the mining and industrial markets in which QMM and Heavymech operate. PROCUREMENT Operating Businesses This segment comprises the services provided by Louminco and Blucher. Services Louminco provides procurement, maintenance, engineering support and project management services to the industrial, mining, base metals, defence and power generation industries. Louminco is focused on sourcing fabricated and manufactured components and spare parts. Blucher Australia supplies high quality stainless steel products for both drainage and supply systems for industrial, commercial and residential applications. Operating Performance The following table provides a summary of the financial performance of the Procurement segment for the six months ended 31 December 2009 in comparison to the previous corresponding period.


PROCUREMENT (in thousands) FY10 FY09 INCREASE / (DECREASE)

Segment Revenue 12,224 17,980 (32.01%)

Operating Results (Before Finance Expense and Income Tax Expense) 433 1,063 (59.23%)

The Procurement segment experienced a decline in revenue of 32.01% and a decline in operating earnings of 59.23% compared to the previous corresponding period. Segment revenue is down primarily due to the termination of the Onesteel and Rio Tinto procurement contracts now being undertaken in-house by these companies. Louminco’s operations were less than expected and as previously mentioned, Louminco’s operations were restructured during the six month operating period with the merging of this business with Whyalla Fabrications to form E&A Contractors in order to offer its clients fully integrated solutions including design, drafting, engineering, fabrication and onsite construction. The restructure was formally implemented with effect from 1 January 2010. Progress is expected to be made during the next six months as clients begin to use their capacity to deliver integrated engineering solutions.

For

per

sona

l use

onl

y


Blucher made a positive contribution to the first six months of FY10 and expects increased opportunities for its products as the industrial construction market continues to show signs of improvement. INVESTMENT & ADVISORY Operating Businesses This segment comprises the services provided by Equity & Advisory and includes the group and corporate costs and other income associated with the parent entity E&A Limited. Services Equity & Advisory provides a comprehensive range of corporate advisory services relating to the analysing, negotiating, financing and completing of business transactions, and the provision of management advice for external and internal clients. Equity & Advisory provides corporate advisory services to public, private and government organisations. In addition, Equity & Advisory provides a range of corporate advisory services to E&A Limited subsidiaries as they continue to expand both organically and through acquisition. Operating Performance The following table provides a summary of the financial performance of the Investment & Corporate Advisory segment for the six months ended 31 December 2009 in comparison to the previous corresponding period.


INVESTMENT & CORPORATE ADVISORY (in thousands) FY10 FY09 INCREASE / (DECREASE)

Segment Revenue 1,534 2,261 (32.14%)

Operating Results (Before Finance Expense and Income Tax Expense) (796) 523 (252.22%)

The Investment & Corporate Advisory segment revenue decreased compared to the previous corresponding period by 32.14% due primarily to market for mergers, acquisitions and divestments transaction mandates remaining depressed during the period. Operating Results reflected the costs associated with the successful capital raising completed during the half and also a lesser contribution from the advisory business given the lower level of revenues for the period compared with the prior year. This segment also includes the group costs of audit and insurance which had not been allocated to subsidiaries as at the 31st of December 2009.

For

per

sona

l use

onl

y


Half Year Report Contents

Page Results for announcement to the market 1 Directors’ report 2 Consolidated interim statement of comprehensive income 4 Consolidated interim statement of changes in equity 5 Consolidated interim balance sheet 6 Consolidated interim statement of cash flows 7 Notes to the consolidated interim financial statements 8 Directors’ declaration 21 Independent Auditor’s Review Report 22 Auditor’s Independence Declaration 24

For

per

sona

l use

onl

y

E&A Limited Page 1 ABN 22 088 588 425

Results for announcement to the market

Half Year Report for the Period Ended 31 December 2009

Revenue and Net Profit

Percentage Change %

Amount $’000

Revenue from ordinary activities Up 22.8% To 68,369

EBIT from ordinary activities Up 29.0% To 4,199

Net profit from ordinary activities after tax attributable to members

Up 58.9% To 2,051

Dividends

Amount per security Percentage Franked %

Final Dividend 1 cent 100%

Record Date for determining entitlements to the dividend

10 December 2009

Date of Dividend Payment 23 December 2009

Previous corresponding period 1.5 cents 100% Earnings Per Share

2009 2008

Earnings Per Share (undiluted) 2.97 cents 2.21 cents

Earnings Per Share (diluted) 2.95 cents 2.19 cents

Net Tangible Assets

31 Dec 2009 31 Dec 2008

NTA Per Share (undiluted) -4.14 cents -16.79 cents

Review of Operations

For commentary on current year operations, please refer to the attached Media Release.

For

per

sona

l use

onl

y


E&A Limited Directors’ report The directors present their report together with the consolidated financial report for the

six months ended 31 December 2009 and the review report thereon.

Directors The directors of the Company at any time during or since the end of the interim period

are: Name Period of directorship Non-executive Mr Michael L Abbott Appointed 16/10/2007 Mr Michael J Terlet Appointed 16/10/2007 Mr David J Klingberg Appointed 16/10/2007 Executive Mr Stephen Elliott Young (Chairman) Appointed 12/07/1999 Mr Mark Gabriel Vartuli Appointed 26/07/2007 Review of operations The Company has achieved a net profit after tax of $2.051 million (2008: $1.291 million)

or 2.97 cents per share.

Dividends The Board of Directors intend to declare an interim dividend of 1.5 cents per share fully

franked upon review of the Group’s third quarter trading performance. The dividend is expected to be paid prior to 30 June 2010.

For

per

sona

l use

onl

y

For

per

sona

l use

onl

y


Consolidated Interim Statement of Comprehensive Income

For the six months ended 31 December 2009 In thousands of $AUD

31 Dec 2009 31 Dec 2008

Continuing Operations

Revenue 68,369 55,658

Cost of sales (51,499) (41,723)

Gross Profit 16,870 13,935

Other income 191 149

Operations expenses (4,443) (3,790)

Administrative expenses (7,122) (5,848)

Marketing expenses (190) (202)

Occupancy expenses (996) (973)

Other expenses (111) (14)

Results from operating activities 4,199 3,257

Finance income 37 33

Finance expenses (1,277) (1,403)

Net finance income / (expense) (1,240) (1,370)

Profit before income tax 2,959 1,887

Income tax expense (908) (596)

Profit from continuing operations 2,051 1,291

Attributable to:

Equity holders of the Company 2,051 1,291

Minority interest - -

Profit for the period 2,051 1,291

Other comprehensive income for the period, net of income tax - -

Total comprehensive income for the period 2,051 1,291

Earnings per share

Basic earnings per share (AUD) 2.97 cents 2.21 cents

Diluted earnings per share (AUD) 2.95 cents 2.19 cents The notes on pages 8 to 20 are an integral part of these consolidated interim financial statements.

For

per

sona

l use

onl

y


Consolidated Interim Statement of Changes in Equity


Share Capital

Retained Earnings

Options Reserve Total

Minority Interest

Total Equity

Balance at 1 July 2008 38,904 2,071 32 41,007 - 41,007

Profit for the period - 1,291 - 1,291 - 1,291

Total recognised income and expense for the period

- 1,291 - 1,291 - 1,291

Shares issued as consideration for business acquisitions

709 - 709 - 709

Dividends provided for or paid - (2,605) - (2,605) - (2,605)

Issue of ordinary shares under DRP

1,206 - - 1,206 - 1,206

Equity settled transactions, net of tax

- - 14 14 - 14

Balance at 31 December 2008 40,819 757 46 41,622 - 41,622

Balance at 1 July 2009 41,454 (879) 60 40,635 - 40,635

Profit for the year - 2,051 - 2,051 - 2,051

Total recognised income and expense for the year

- 2,051 - 2,051 - 2,051

Shares issued as consideration for business acquisitions

1,000 - - 1,000 - 1,000

Dividends provided for or paid - (922) - (922) - (922)

Issue of ordinary shares under capital raising

8,616 - - 8,616 - 8,616

Issue of ordinary shares under DRP

588 - - 588 - 588

Costs of capital raising recognised directly in equity

(195) - - (195) - (195)

Income tax on costs of capital raising recognised in equity

58 - - 58 - 58

Equity settled transactions, net of tax

- - 14 14 - 14

Balance at 31 December 2009 51,521 250 74 51,845 - 51,845

The notes on pages 8 to 20 are an integral part of these consolidated interim financial statements.

For

per

sona

l use

onl

y


Consolidated Interim Balance Sheet

As at 31 December 2009 In thousands of $AUD

Note 31 Dec 2009 30 Jun 2009 Current assets

Cash and cash equivalents 4 6,935 759

Trade and other receivables 20,745 25,331

Inventories 15,805 13,484

Other current assets 140 13

Total current assets 43,625 39,587

Non-current assets

Other financial assets 3 3

Property, plant and equipment 10,204 9,935

Intangible assets 9 54,700 54,604

Deferred tax assets 2,937 2,233

Total non-current assets 67,844 66,775

Total assets 111,469 106,362

Current liabilities

Trade and other payables 19,529 25,753

Loans and borrowings 5 11,831 11,951

Provisions 3,290 2,597

Current tax liability 2,069 1,519

Total current liabilities 36,719 41,820

Non-current liabilities

Trade and other payables 2,371 2,989

Loans and borrowings 5 18,830 19,202

Provisions 250 263

Deferred tax liability 1,454 1,453

Other liabilities - -

Total non-current liabilities 22,905 23,907

Total liabilities 59,624 65,727

Net assets 51,845 40,635

Equity

Issued share capital 51,521 41,454

Reserves 74 60

Retained profits 250 (879)

Total equity attributable to equity holders of the Company 51,845 40,635

Minority interest - -

Total equity 51,845 40,635


For

per

sona

l use

onl

y


Consolidated Interim Cash Flow Statement


Note 31 Dec 2009 31 Dec 2008

Cash flows from operating activities

Cash receipts from customers 79,925 64,481

Cash paid to suppliers and employees (74,104) (58,126)

Cash generated from operations 5,821 6,355

Interest paid (1,277) (1,403)

Interest received 37 33

Income taxes paid (1,003) (1,329)

Net cash from (used in) operating activities 3,578 3,656

Cash flows from investing activities

Payments for acquisition of subsidiaries, net of cash acquired* (3,924) (4,604)

Payments for acquisition of property, plant and equipment (904) (659)

Proceeds from disposal of property, plant and equipment 137 147

Payment for acquisition of intangible assets - (18)

Net cash from (used in) investing activities (4,691) (5,134)

Cash flows from financing activities

Proceeds from the issue of share capital** 8,421 1,206

Proceeds from borrowings 7,353 7,121

Repayment of borrowings (4,310) (3,500)

Payment of finance lease liabilities (372) (411)

Dividends reinvested under Dividend Reinvestment Plan 588 -

Related party loans (to) from** (3,153) (5)

Dividends paid (922) (2,020)

Net cash from (used in) financing activities 7,605 2,391

Net increase (decrease) in cash and cash equivalents 6,492 913

Cash and cash equivalents at 1 July (227) (138)

Cash and cash equivalents at 31 December 4 6,265 775

* The cash payment in the period of $3.9 million relates to the settlement of the ICE Engineering & Construction acquisition which was completed in the financial year ending 30 June 2009. In addition to the cash consideration for the business, $1 million worth of the purchase price was settled during the period through the issue of E&A Limited equity.

** Proceeds from the issue of share capital and payment to related party loans includes the conversion of $3.690 million of Port Tack related party loans into equity under the E&A Limited Capital Raising Program throughout the period.


For

per

sona

l use

onl

y


Notes to the Consolidated Interim Financial Statements

For the six months ended 31 December 2009

1. Basis of Preparation

(i) Reporting Entity

E&A Limited (the “Company”) is a company domiciled in Australia. The consolidated interim financial report of the Company as at and for the period ended 31 December 2009 comprises the Company and its subsidiaries (together referred to as the “Group”). The Group is primarily involved in providing engineering services to the mining and resources, water and defence industries and financial advisory services to the corporate sector (refer Note 3).

(ii) Basis of Presentation

The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. The consolidated interim financial report does not include all of the notes and information normally included in a full annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2009 and any public announcements made by E&A Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. The Company is of a kind referred to in ASIC Class Order 98/0100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. Comparative information has been reclassified where appropriate to enhance comparability.

2. Significant Accounting Policies

(i) New Standards and Interpretations Adopted

The Company applied Revised AASB101 Presentation of Financial Statements, which became effective on 1 July 2009. As a result, the Company presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been represented in conformity with the revised standard. The change in accounting policy only impacts presentation. Revised AASB 3 Business Combinations became effective on 1 July 2009. This changes the application of acquisition accounting for business combinations and the accounting for non controlling (minority) interests. Key changes include: the immediate expensing of all transaction costs, measurement of contingent consideration at acquisition date with subsequent changes through the income statement, measurement of non controlling (minority) interest at full fair value or the proportionate share of the fair value of the underlying net assets, guidance on issues such as reacquired rights and vendor indemnities, and the inclusion of combinations by contract alone. No other new standards have been adopted.

For

per

sona

l use

onl

y




3. Estimates

The preparation of the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing this consolidated interim financial report, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty related to goodwill and the key assumptions underlying the discounted cash flows that surround its carrying value.

For

per

sona

l use

onl

y




3. Segment Reporting Investment &

Advisory Procurement Fabtech Heavy Steel

Fabrication & Engineering

Maintenance Engineering &

Plant Construction Eliminations Consolidated

In thousands of $AUD 31 Dec 2009

31 Dec 2008

31 Dec 2009

31 Dec 2008

31 Dec 2009

31 Dec 2008

31 Dec 2009

31 Dec 2008

31 Dec 2009

31 Dec 2008

31 Dec 2009

31 Dec 2008

31 Dec 2009

31 Dec 2008

External sales 268 1,232 12,045 17,703 8,635 10,582 40,329 20,440 7,092 5,701 - - 68,369 55,658

Inter-segment sales 1,070 1,029 117 179 - 43 2,805 1,530 620 374 (4,612) (3,155) - -

Dividend revenue 1,669 2,878 - - - - - - - - (1,669) (2,878) - -

Other income 196 - 62 98 12 - 10 57 108 41 (197) (47) 191 149

Segment Revenue 3,203 5,139 12,224 17,980 8,647 10,625 43,144 20,027 7,820 6,116 (6,478) (6,080) 68,560 55,807

Impairment losses - - - - - - - - - - - - - -

Underlying EBITDA (780) 542 556 1,191 927 29 3,599 1,832 726 308 - - 5,027 3,902

Depreciation (16) (19) (122) (128) (125) (126) (319) (227) (149) (145) - - (731) (645)

Significant items (i) - - - - - - (97) - - - - - (97) -

Segment Result (EBIT) (796) 523 433 1,063 802 (97) 3,183 1,605 577 163 - - 4,199 3,257

NPAT (578) 254 65 570 466 (221) 1,851 757 247 (69) - - 2,051 1,291

Income tax expense / (credit) (242) 101 89 285 152 (94) 809 329 99 (25) - - 908 596

Net finance costs 24 168 279 208 184 218 522 519 231 257 - - 1,240 1,370

Segment Result (EBIT) (796) 523 433 1,063 802 (97) 3,183 1,605 577 163 - - 4,199 3,257

Results from operating activities (continuing operations) 2,051 1,291

(i) Significant costs incurred to 31 December 2009 relate to the costs associated with establishing E&A Contractors throughout the period and with merging the business operations of Whyalla Fabrications and Louminco accordingly. The merger of Whyalla Fabrications and Louminco took place post 31 December 2009 and E&A Limited’s segment reporting will be adjusted accordingly going forward.

For

per

sona

l use

onl

y




3. Segment Reporting (Continued)

The Group comprises the following main business segments:

Investment & Advisory • Services: Investment and Advisory segment provides a comprehensive range of corporate

advisory services relating to the analysing, negotiating, financing and completing of business transactions for external and internal clients.

• Industry Exposure: Investment and Advisory provides corporate advisory services to public, private and government organisations. In addition, Investment and Advisory provides a range of corporate advisory services to E&A Limited subsidiaries as they continue to expand both organically and through acquisition.

Procurement • Services: This segment comprises the services provided by Louminco and Blucher.

Procurement segment provides procurement, maintenance, engineering support and project management services.

• Industry Exposure: Procurement segment services the industrial, mining, base metals, defence and power generation industries.

Fabtech • Services: Fabtech provides flexible geomembrane liners and floating covers for dams, reservoirs

and tunnels. • Industry Exposure: Fabtech services the mining, potable and waste water containment, waste

management and agriculture industries.

Heavy Mechanical and Electrical Engineering • Services: This segment comprises the services provided by Ottoway Engineering, Whyalla

Fabrications and ICE Engineering & Construction. Ottoway operates as a pipe fabrication and installation business involving all aspects of turn-key project management including design, engineering, procurement, manufacture, fabrication, machining, installation and maintenance. Whyalla Fabrications provides a range of steel fabrication and structural engineering services, including project management, design, structural steel fabrication and erection, pipe welding and pipework installation, pneumatic and hydraulic installations, and light machining. ICE provides services and contract labour to the electrical and instrumentation sector of the industrial, water and mining sectors.

• Industry Exposure: Offers services across a range of industries including industrial, petro-chemical, oil and gas, mining, water, defence, power generation, infrastructure and wine.

Maintenance Engineering & Plant Construction • Services: This segment comprises the services provided by Heavymech and QMM. Heavymech

supplies breakdown and repair services to the heavy industrial, mining and power generation industries. QMM supplies equipment, spare parts, plant construction and repair, and onsite maintenance to the quarry, recycling and mining sectors.

• Industry Exposure: Offers services across a range of industries including mining, power, quarry, recycling and heavy industrial industries.

As our business continues to grow we will update our segment disclosures accordingly.

For

per

sona

l use

onl

y




4. Cash and Cash Equivalents

In thousands of $AUD Consolidated

31 Dec 2009 30 Jun 2009

Cash at bank and in hand 6,415 759

Deposits at call 520 -

Cash and cash equivalents 6,935 759

Bank overdraft (670) (986)

Balances per statement of cash flows 6,265 (227)

5. Loans and Borrowings

The following loans and borrowings at their carrying amounts are disclosed below:

In thousands of $AUD Consolidated as at 31 December 2009

Total facility

Drawn facilities

Undrawn amount

Current

Bank overdraft 1,500 670 830

Working capital facilities 13,595 7,371 6,224

Commercial bills 3,110 3,110 -

Finance leases 1,567 606 961

Credit cards / other finance 368 74 294

Related party facility - - -

Total Current Borrowings 20,140 11,831 8,309

Non-Current


Finance leases 1,662 1,556 106

Other finance - - -

Related party facility 2,000 679 1,321

Total Non-Current Borrowings 20,257 18,830 1,427

Total Borrowings 40,397 30,661 9,736

For

per

sona

l use

onl

y




5. Loans and Borrowings (Continued)

In thousands of $AUD Consolidated as at 30 June 2009

Total facility

Drawn facilities

Undrawn amount

Current

Bank overdraft 1,500 986 514

Working capital facilities 14,450 6,750 7,700


Finance leases 1,693 712 981

Credit cards / other finance 360 153 207

Related party facility - - -

Total Current Borrowings 21,353 11,951 9,402

Non-Current


Finance leases 1,590 1,590 -

Other finance - - -

Related party facility 4,000 3,762 238

Total Non-Current Borrowings 19,440 19,202 238

Total Borrowings 40,793 31,153 9,640

All debt facilities are secured. Certain finance facilities contain a number of standard representations, warranties and undertakings (including financial and reporting obligations) from E&A Limited and E&A Limited Group companies in favour of the respective lenders. The facilities also include a cross guarantee between the parent and all group companies with staged security enforcement rights and obligations.

The following loans and borrowings (non-current and current) were issued and repaid during the six months ended 31 December:

In thousands of $AUD 31 Dec 2009 31 Dec 2008

Balance as at 1 July 31,153 29,865

Acquisition of interest bearing liabilities through business combinations - -

New Issues

Bank overdraft - 489

Working capital facilities 3,347 1,603

Commercial bills 3,850 5,500

Leasing facilities 270 495

Credit cards / other finances 156 17

Related party facility 607 -

For

per

sona

l use

onl

y




5. Loans and Borrowings (Continued)

31 Dec 2009 31 Dec 2008

Repayments

Bank overdraft 316 (953)

Working capital facilities 2,726 (1,519)

Commercial bills 1,345 (1,924)

Leasing facilities 410 (411)

Credit cards / other finances 235 (61)

Related party facility 3,690 -

Balance as at 31 December 30,661 33,101

6. Share Capital

Movements in shares of the Company were as follows:

In thousands of shares Ordinary Shares

2009 2008

Shares on Issue at 1 July 62,037 56,658

Issued under EAL capital raising plan 26,108 -

Issued as consideration for business acquisitions 4,075 1,189

Issued as part of dividend reinvestment plan 1,784 2,443

Shares on Issue at 31 December 94,004 60,290

All shares on issue are fully paid. The Company does not have authorised capital or par value in respect of its issued shares.

For

per

sona

l use

onl

y




7. Earnings Per Share

Cents per share Consolidated

31 Dec 2009 31 Dec 2008

Basic earnings per share (cents) 2.97 2.21

Diluted earnings per share (cents) 2.95 2.19

Basic & Diluted Earnings Per Share

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows:

In thousands of $AUD and Shares Consolidated

31 Dec 2009 31 Dec 2008

Earnings used in the calculation of basic EPS (i) 2,051 1,291

Weighted average number of ordinary shares for the purpose of basic earnings per share (ii) 68,959 58,298

Weighted average number of ordinary shares for the purpose of diluted earnings per share (iii) 69,519 58,858

(i) Earnings used in the calculation of total basic earnings per share is equal to the net profit after tax in the income statement.

(ii) Options on issue are considered to be potential ordinary shares and are therefore excluded from the weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of dilutive earnings per share.

(iii) The weighted average number of ordinary shares for the purpose of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share plus an additional 559,911 options on issue at 31 Dec 2009.

For

per

sona

l use

onl

y




8. Dividends

In thousands of $AUD 31 Dec 2009 31 Dec 2008

Cents per share

Total $’000 Cents

per share Total $’000

Recognised amounts

Fully franked final dividend declared and paid during the half-year 1.0 922 4.5 2,605

Fully franked at a 30% tax rate

Unrecognised amounts

Interim fully franked ordinary dividend proposed and not recognised as a liability at 31 December - - 1.5 904

Fully franked at a 30% tax rate

Shareholders can elect to have all or a certain number of their shares participate in the Company’s Dividend Reinvestment Plan (DRP). Shares allotted under the DRP will be issued at a discount of 2.5% to the volume weighted average price of all E&A Limited shares traded on the Australian Securities Exchange during the five trading days after the record date.

9. Goodwill and Intangible Assets

In thousands of $AUD Goodwill Intangibles Total

31 Dec 2009

30 Jun 2009

31 Dec 2009

30 Jun 2009

31 Dec 2009

30 Jun 2009

Balance at beginning of period 54,404 50,246 200 1,085 54,604 51,331

Additional amounts recognised from business combinations occurring during the period

- 4,827 - - - 4,827

Adjustments during the period to amounts initially recognised from business combinations

96 (669) - (885) 96 (1,554)

Balance at end of period 54,500 54,404 200 200 54,700 54,604

For

per

sona

l use

onl

y




9. Goodwill and Intangible Assets (Continued)

Goodwill and intangibles are allocated for impairment testing purposes to cash generating units as follows:


31 Dec 2009

30 Jun 2009

Equity & Advisory 1,058 1,058

Heavymech 4,033 4,033

Fabtech 17,420 17,420

Ottoway 12,131 12,131

Panado 2,027 2,027

Whyalla Fabrications 4,057 4,057

QMM 3,691 3,691

Blucher 5,360 5,360

ICE Engineering 4,923 4,827

Total goodwill and intangibles 54,700 54,604

Each cash generating unit represents one or more operational divisions within the consolidated entity. The recoverable amount of each cash-generating unit was based on value in use calculations. Those calculations use 5 year cash flow projections based on actual and forecast operating results, which forecast a return to historical earnings performance. These earnings were extrapolated using a growth rate of 2% to 4.2%, consistent with the growth prospects of each cash generating unit, and a 3% terminal value growth rate, which is less than the historical 20 year growth rate of 5.1%.

A discount rate of between 14.5% and 15.5% has been applied to each cash generating unit to determine the value in use and is based on the target gearing level for E&A Limited (pre-tax nominal WACC).

For

per

sona

l use

onl

y




10. Related Parties

Parent and Ultimate Controlling Party

The ultimate controlling entity of the Group is E&A Limited.

Loans to Directors and Key Management Personnel

As at 31 December 2009 the balance of unsecured loans outstanding to directors and key management personnel was $38,706. Net repayments throughout the period were $54,096. Interest is payable on amounts owing on normal commercial terms and conditions and at market rates.

In thousands of $AUD Balance at Beginning of

Period

Repayment of Loans

Balance Outstanding

1 July 2009 31 Dec 2009

Stephen Young and controlled entities 93 54 39

Total 93 54 39

Other Related Party Transactions

Port Tack is an entity controlled by Stephen Young, the Chairman of E&A Limited. The following related party transactions were entered into during the six months ended 31 December 2009:

(a) Port Tack “Come & Go” Loan Facility

Port Tack entered into a “Come and Go” unsecured loan facility to provide finance to E&A Limited and subsidiary companies for the purpose of funding working capital needs and short term acquisition funding requirements on an as required basis. During the period, part of the outstanding balance was converted into 11,182,700 ordinary shares for a total consideration of $3,690,291 under the terms of the E&A Limited Capital Raising Program which was approved by shareholders on 30 November 2009. As a consequence of this transaction, the total facility limit of the Come and Go facility was reduced from $4 million to $2 million at 31 December 2009. The balance outstanding at 31 December 2009 was $679,000. The Directors consider the Loan Facility is on arms length terms and conditions, and therefore the financial benefit (i.e. interest payments) which may accrue to Port Tack Pty Ltd as a related party of the Company does not require Shareholder approval under Chapter 2E of the Corporations Act.

For

per

sona

l use

onl

y




10. Related Parties (Continued)

Outstanding balances arising from sales / purchases of goods and services

The following transactions occurred with related parties:


31 Dec 2009 31 Dec 2008

Rental paid to other related parties 288 208 The following balances are outstanding at the reporting date in relation to transactions with related

parties:


31 Dec 2009 30 June 2009

Current receivables

Other related parties 39 93

Current payables

Other related parties - (125)

Current loans and borrowings

Other related parties - -

Non-Current loans and borrowings

Other related parties (679) (3,762)

Loans to / from Related Parties

In thousands of $AUD Loans to other related parties

Loans from other related parties

31 Dec 2009 30 Jun 2009 31 Dec 2009 30 Jun 2009

Loans to /from other related parties

Beginning of the period 93 - (3,887) (3,711)

Loans advanced - 93 (482) (176)

Loan repayments received (54) - 3,690 -

Interest charged - - - -

Interest paid - - - -

End of period 39 93 (679) (3,887)

For

per

sona

l use

onl

y




11. Subsequent events

The Directors resolved on the 25th of February 2010 to declare a dividend of 1.5 cents per share conditional upon EAL delivering budget performance for the third quarter payable prior to the 30th of June 2010.

12. Contingencies

In the normal course of business certain E&A Limited companies are required to enter into contracts that include performance obligations. These commitments only give rise to a liability where the respective entity fails to perform its contractual obligations. Claims of this nature arise in the ordinary course of construction contracting. Where appropriate a provision is made for these issues. The Directors are not aware of any material claims that have not been appropriately provided for in the financial statements at 31 December 2009.

For

per

sona

l use

onl

y

For

per

sona

l use

onl

y

appendix 4d – half year report for the half year ended 31 ... · pdf filethe eal group...

Documents