Hard at work fix­ing cash flow

Proper client pay­ment con­tract and 25% debt re­duc­tion

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA sikonathim@fin­week.co.za

CONSTRUCTION SER­VICES Com­pany Top Fix Hold­ings’ 33% in­crease in rev­enue in the in­terim pe­riod to De­cem­ber 2008 hasn’t done much to im­prove its prof­itabil­ity. What it has achieved is light­en­ing its debt bur­den. The R41m rev­enue in­crease to R162m was ac­com­pa­nied by a rather hefty 47,6% es­ca­la­tion in the cost of sales to R109m, re­sult­ing in an 11,7% drop in op­er­at­ing profit.

That Top Fix achieved a R200 000 growth in profit to take the to­tal to R12,2m is in­deed com­mend­able un­der the cir­cum­stances. How­ever, due to a rights is­sue dur­ing the year head­line earn­ings per share were di­luted to 6c from 6,5c pre­vi­ously.

The earn­ings story paints a rather dull pic­ture if you omit to look at its cash flow state­ment and that of li­a­bil­i­ties, where man­age­ment has per­formed a good job in the high in­ter­est rates en­vi­ron­ment. Both sit­u­a­tions im­proved sig­nif­i­cantly over the pe­riod. A pre­vi­ous cash deficit of R15m has re­duced to R5,8m, while cur­rent in­ter­est-bear­ing li­a­bil­i­ties fell 25% to R25m (R33m pre­vi­ously). That saved Top Fix share­hold­ers in­ter­est charges of R1,1m over the pe­riod.

The com­pany is still pur­su­ing a for­mer joint ven­ture part­ner and a for­mer client in an at­tempt to re­cover a to­tal R15m owed to it. The part­ner is re­spon­si­ble for R9m of that, which ac­crued as a re­sult of the joint ven­ture agree­ment, which re­quired Top Fix to pro­vide man­age­ment and per­son­nel for the part­ner.

“We had a dis­pute with them and had to can­cel the ven­ture,” says Top­Fix CE Web­ber Marais. He hopes the mat­ter will be con­cluded soon. Top Fix says should the case be re­solved suc­cess­fully in its favour it would re­sult in ad­di­tional earn­ings for its share­hold­ers.

To fur­ther im­prove cash flow, Top Fix has im­ple­mented “proper client pay­ment pro­ce­dures” for pay­ment ac­cord­ing to con­trac­tual obli­ga­tions. That could help the group re­ceive the ben­e­fits of the in­crease in ac­counts re­ceiv­able, which have in­creased to R77m from R57m in June 2008. The in­crease is due to ac­counts Top Fix won in the en­ergy-gen­er­at­ing sec­tor, par­tic­u­larly in con­struct­ing new power sta­tions.

26 FE­BRU­ARY 2009


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