PCG 0.00% $1.71 pengana capital group limited

pch group - the future's looking good

  1. 461 Posts.

    HOMEX - Perth

    As we have now entered the final quarter of the 2003 financial year,
    it is an opportune time for me to update you on your Company's
    activities, its financial position and the outlook ahead.


    I am pleased to report that our quarter by quarter results continue
    to grow as the various projects we are working on move into full
    swing. Below is a year-to-date quarterly financial summary taken from
    our September 2002 and March 2003 unaudited management accounts, as
    well as our 31 December 2002 audit reviewed accounts ($'000's):

    30/09/2002 31/12/2002 31/03/2003
    $ $ $

    Revenues 7,546 15,723 23,346
    EBITDA 1,248 2,922 4,625
    Net Profit Before Tax 832 2,036 3,350

    I am confident of achieving further earnings growth and more
    importantly sustaining the increased earnings levels. This confidence
    is supported by our strong order book along with the robust outlook
    we have for market conditions in general as more fully described
    elsewhere in this update. At this stage, we expect to deliver a full
    year return on shareholders' funds in excess of 20% for fiscal 2003
    and 2004.

    Whilst it is not normally the Company's practice to comment on share
    trading activity, most shareholders will be aware of rising interest
    in PCH shares over recent months. As a result of this, I am pleased
    to welcome a number of important new shareholders to our register.


    All of our divisions are trading well, with utilisation rates at very
    high levels and several new contracts having been secured recently. A
    brief review of activity and the outlook in each of our key sectors
    is provided below:


    In November 2002 PCH secured an initial two year contract with BHP
    Billiton's Boodarie Iron operation at the HBI plant in Port Hedland.
    The contract requires PCH to provide scaffolding equipment and
    management services and follows the custom design specialised access
    systems for this important client, which have saved them a
    considerable amount of downtime and money.

    On the high profile North West Shelf Train IV Expansion Project, the
    Company has now been established on site for some nine months and is
    busy hiring scaffolding to various con tractors on site. We are also
    busy at various other sites such as Hamersley Iron, Iluka and BP
    servicing maintenance requirements.

    As advised in previous Activity Updates to Shareholders, the outlook
    in this sector continues to be very positive indeed. There are a
    number of large engineering projects that have either commenced or
    are likely to commence in coming years. This sector appears to be set
    for a buoyant four or five years and PCH is well positioned to secure
    additional projects and further extend our order book.


    We were pleased to have recently received a two year renewal of our
    initial two year contract in Thailand with the Clough-Unithai Joint
    Venture. This renewal endorses the high quality of equipment and
    expertise that we provide in this specialist sector.

    In Baku, where a number of projects are proceeding in connection with
    the development of the Caspian oilfields, we have secured a further
    $1.3 million in contracts, adding to the $23 million secured at the
    end of the last financial year and which are now well underway. We
    have a workforce of some 200 personnel and an established
    infrastructure to support the provision of our specialist services on
    this very important BP led project.

    Based on our track record to date and with around six years still to
    run on the BP project, PCH is confident of securing further contracts
    in this market to further extend its order book.

    Interestingly, recent world events in the Middle East, Venezuela and
    West Africa have lifted the already high profile of the Caspian
    oilfields and it is indeed now a "hot spot" in terms of global oil
    supply. Significant future developments are likely to occur here and
    PCH is in a good position to capitalise on the opportunities that


    Activity in the West Australian two-storey housing market continues
    to run at levels similar to the "pre-GST boom". Anecdotal evidence
    from our major clients suggests that these levels will continue for
    at least 12 to 18 months.

    Unlike the severe post-GST downturn recently seen in the industry, we
    predict a relatively soft landing towards the end of the current
    cycle. This view is based on the positive outlook for the West
    Australian economy and the continuing prevalence of small block sizes
    (which forces more two-storey houses to be built) in a relatively low
    interest rate environment.


    PCH continues to build its profile in the NSW market. Utilisation
    rates are at record levels and we are in the process of acquiring
    additional stock to support demand. We are currently tendering work
    with completion dates as far out as 18 months away and are confident
    of increasing our market share.

    Whilst we expect activity levels in this market to eventually fall,
    the very favourable reception we have received since entering the NSW
    market and the level of repeat business we are building give us
    confidence in the future.


    A summary of our unaudited financial position at 31 March 2003 is as
    Cash 1,147
    Receivables 7,192
    Other Current Assets 770
    Plant and Equipment 22,418
    Other Non-current Assets 2,828
    TOTAL ASSETS 34,355

    Payables 5,303
    Debt - Current 451
    Provisions - Current 697
    Debt - Non-current 4,703
    Other Non-current Liabilities 4,956


    Net Debt 4,007
    Net Debt/Equity 24%
    Current Ratio 1.4 times
    Net Tangible Assets per share 13 cents

    Due to the strong and sustainable demand being experienced in all
    sectors, PCH is in the midst of a stock expansion programme to
    increase our income generating capacity. Whilst this necessarily
    requires a reasonable level of capital expenditure, I am pleased to
    report that operating cash flows have been sufficiently strong to
    cover most of our capital requirements. Consequently, debt levels
    have remained fairly constant and gearing at a comfortable level of
    under 25%. Debt levels are forecast to reduce reasonably quickly at
    the conclusion of the existing capital expenditure programme.

    It is most pleasing that we are able to build our income generating
    asset base without affecting debt levels.

    Because our hire equipment generally has a long useful life - well in
    excess of 15 years - this creates an enduring and strong financial
    platform for the years ahead.


    In the continuing effort to lower costs, we are requesting
    shareholders to notify us if they do not wish to receive the Annual
    Report. Please note that the Annual Report will be available on the
    Company's website. I would be grateful if you could review the
    enclosed form and, if applicable, complete and return it in the reply
    paid envelope provided.


    As we enter the last quarter of the financial year your Company is in
    good shape. All sectors of the business are operating profitably , we
    have considerable work on hand out to early FY '05 and are highly
    likely to secure new work that will further extend our order book.

    We have been adding to the earnings power of the Company by building
    our stock levels to meet sustainable demand, whilst maintaining
    borrowings at a relatively constant and comfortable level.
    Utilisation rates are forecast to remain high for the foreseeable
    future and profit levels expected to increase. All of these factors
    point to PCH having a successful 2003 fiscal year and an even better
    2004 fiscal year.

    I look forward to further updating you on your Company's progress in
    the future.

    James Cullen
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