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BSR
BSR
BSR - Basil Read Holdings Limited - Unaudited results for the six months
ended 30 June 2007
BASIL READ HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/007758/06)
("Basil Read" or "the group")
ISIN: ZAE000029781
Share code: BSR
89% increase in EPS
Order book of R3,4 billion
78% increase in revenue
Total assets exceed R1 billion
1 060 new positions created
136% increase in net profit
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
Summarised consolidated income statement
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Revenue 900 660 505 675 1 162 198
Operating profit for the 69 906 19 062 53 750
period
Net finance (costs)/income (2 538) 4 384 3 479
Profit for the period 67 368 23 446 57 229
before taxation
Taxation (18 715) (2 817) (2 269)
Normal and foreign taxation (2 703) (2 739) (4 310)
Secondary taxation on (2 743) - (19)
companies
Deferred taxation (13 269) (78) 2 060
Profit for the period after 48 653 20 629 54 960
taxation
Profit for the period
attributable to the
following:
Equity shareholders of the 50 010 20 233 54 103
company
Minority interest (1 357) 396 857
Net profit for the period 48 653 20 629 54 960
Earnings per share (cents) 68,98 36,54 93,53
Fully diluted earnings per 68,80 36,27 93,05
share (cents)
Ordinary dividend per share 30,00 - -
(cents)
Summarised consolidated balance sheet
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
ASSETS
Non-current assets 316 193 137 868 215 007
Property, plant and 290 782 111 783 176 438
equipment
Intangible assets 11 010 1 873 10 444
Investment property - 1 500 -
Available-for-sale financial 292 170 650
assets
Investments in associates 66 - 66
Deferred taxation 14 043 22 542 27 409
Current assets 747 114 250 093 415 941
Inventories 7 738 4 929 6 659
Trade and other receivables 374 339 142 443 138 764
Cash and cash equivalents 365 037 102 721 270 518
1 063 307 387 961 630 948
EQUITY AND LIABILITIES
Capital and reserves 312 658 55 341 199 463
Issued capital 233 738 58 746 164 537
Accumulated profit/(loss) 52 582 (9 440) 24 430
Other reserves 21 463 5 172 4 264
Minority interests 4 875 863 6 232
Non-current liabilities 125 235 31 115 55 775
Interest-bearing borrowings 119 221 29 516 49 982
Provisions for other 3 166 - 2 818
liabilities and charges
Deferred taxation 2 848 1 599 2 975
Current liabilities 625 414 301 505 375 710
Trade and other payables 521 294 245 704 286 102
Provisions for other 46 592 24 891 52 531
liabilities and charges
Current portion of interest- 49 446 30 910 32 996
bearing borrowings
Bank overdraft 8 082 - 4 081
1 063 307 387 961 630 948
Statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Issued capital
Ordinary share capital
Balance at the beginning of 164 537 58 550 58 550
the period
Issued to Share Incentive
Scheme
(nett of treasury shares) 15 201 196 425
Clawback offer - - 105 562
Private placement 54 000 - -
Balance at the end of the 233 738 58 746 164 537
period
Accumulated profit/(loss)
Balance at the beginning of 24 430 (29 673) (29 673)
the period
Net profit for the period 50 010 20 233 54 103
Dividend declared (21 858) - -
Balance at the end of the 52 582 (9 440) 24 430
period
Other reserves
Balance at the beginning of 4 264 4 508 4 508
the period
Share-based payment - equity 17 252 - -
settled
Movement in foreign currency 105 664 (475)
translation reserve
Movement in fair value (158) - 231
adjustment reserve
Balance at the end of the 21 463 5 172 4 264
period
Minority interests 4 875 863 6 232
Commentary
These condensed consolidated interim financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS"), IAS 34: "Interim Financial Reporting", the South African
Companies Act, as amended, and the JSE Listings Requirements. The principal
accounting policies used in the preparation of the unaudited results for
the period ended
30 June 2007 are consistent with those applied for the year ended 31
December 2006 and for the unaudited results for the six months ended 30
June 2006 in terms of IFRS.
Overall review
The Basil Read Group continues to cement its position in the South African
economy as a leading construction company and reaffirm its sustainability
as a group through a pleasing set of results for the six months to 30 June
2007. The group has been well placed to capitalise on buoyant conditions in
the construction sector and the accelerated programme of infrastructural
development.
The board is proud to report a profit attributable to ordinary shareholders
of R50,0 million (June 2006: R20,2 million), a healthy increase of 148%.
Net margin improved from 4,1% in June 2006 to 5,4% at 30 June 2007.
Turnover grew by 78% to R900,7 million (June 2006: R505,7 million) and a
strong cash flow led to cash on hand increasing by 248% to R357,0 million
(June 2006: R102,7 million). The group`s shares continued to outperform the
JSE All Share index and were trading at R24,50 at close of business on 29
June 2007 (June 2006: R7,35).
Operating margin was significantly improved from a level of 4,6% at 31
December 2006 to 7,8% for the six-month period ended 30 June 2007 (June
2006: 3,8%). The current boom in the industry coupled with the high number
of tenders on offer has meant that, generally, margins have improved on
most contracts. This has been particularly evident in the Opencast Mining
division following the termination of the loss-making contract with Lonmin
Platinum in 2006.
Total assets breached the R1 billion mark to reach R1,1 billion at the
reporting date (June 2006: R388 million), a considerable increase of 174%.
The utilisation of tax losses across the group has led to the current tax
charge remaining low as the deferred tax asset unwinds through the income
statement.
The group was awarded new contracts during the six-month period under
review in the amount of R1,7 billion (June 2006: R1,5 billion) and the
order book is currently at a sound level of R3,4 billion (June 2006: R2
billion), bringing the group a step closer to its goal of being a R5+
billion turnover company by 2010.
In line with the expansion of the group and in anticipation of further
growth ahead, strategic plant to the value of R143,4 million (June 2006:
R36,2 million) was invested in. Basil Read will continue to monitor current
and expected activity levels as part of the ongoing plant acquisition
programme.
At the end of the period under review the group had issued guarantees in
the amount of R547 million (June 2006: R275 million). These guarantees have
arisen in the ordinary course of business and it is not expected that any
loss will arise out of the issue of these guarantees.
At this stage in the group`s evolution, Basil Read continues to focus on
the South African market, given the ambitious infrastructure spend
currently being experienced. Work for selected private clients in sub-
Saharan Africa will continue for the foreseeable future and the group is
cautiously investigating expansion into new African markets.
The group continues to focus on sustained organic growth, while monitoring
opportunities for expansion through acquisition. Basil Read increased its
shareholding in Spray Pave (Pty) Limited, a bitumen supplier and sprayer,
from 61% to 71% at the reporting date. On 19 July 2007, the group
successfully concluded the 100% acquisition of Blasting and Excavating
(Pty) Limited ("B&E") for R100 million. The group funded the acquisition by
raising R54 million in cash, after costs, through a private placement of
its shares at the end of June 2007 and will fund the balance of the
purchase price from cash resources. B&E`s core business is the provision of
specialised drill and blast services for clients, including mines,
construction contractors and commercial quarries. B&E already has a strong
relationship with Basil Read, carrying out all the drilling and blasting
for Opencast Mining.
The group also continues to monitor opportunities to align with strategic
partners in tendering for additional work. In this regard, Basil Read`s
long-standing relationship with Bouygues Travaux Publics SA, has served
them well.
Operational review
Buildings
The buildings division has expanded exponentially and has secured numerous
contracts in the period under review. Following on from the successful
completion of the three inaugural schools in Cosmo City, the division was
awarded the contract for a further three schools. The division also secured
the contract to construct a luxury apartment block in Morningside, Sandton,
as well as four five-storey office blocks in Roodepoort. In addition,
negotiations regarding the construction of two further shopping centres are
at an advanced stage, the total value of which is in excess of
R1 billion.
Work on the Grayston Apartments is progressing well, as are the two
hospital extensions that Basil Read is currently working on, Chris Hani
Baragwanath Hospital and Paarl Hospital. The division has also been tasked
with the construction of an additional extension to the Basil Read head
offices in Boksburg. Preparation of the site is currently under way with
completion expected in July 2008. The division also recently commenced
construction of a new warehouse in Rosslyn.
Roads and Civils
Basil Read`s flagship division continued to produce outstanding results and
secured numerous new contracts. Of these, the significant contracts include
further construction in the Coega Development Zone in Port Elizabeth under
the direction of the group`s subsidiary Newport Construction, as well as
the P10/1 and P83/1 Sasolburg rehabilitation, N1 Section 16 Glen Lyon-
Zandkraal upgrade and N1 Flying Saucer to Atterbury Road.
Berth 306, extension to Richards Bay Coal Terminal, is progressing well and
is scheduled for completion in August 2007.
Work on the diaphragm wall for Gautrain`s Sandton and Park stations, in
joint venture with Intrafor, is on track for completion in August 2007.
Work on the 2010 Soccer World Cup stadium in Nelspruit, in partnership with
Bouygues Travaux Publics SA, is progressing well and completion is expected
according to schedule, well ahead of the 2010 event.
The Pier One Container Terminal project will reach completion seven months
ahead of schedule following a request from Transnet to accelerate the
construction. Basil Read has achieved this without compromising both
quality and safety, with site personnel having completed 500 000 man hours
with no lost time for injury.
Opencast Mining
Following a challenging year in 2006, the division reported much improved
results for the six months under review. The contract with Rossing Uranium
in Namibia is progressing well and has been extended by a further 17
months. The division continues to work in Botswana with Debswana and
IAMGOLD and is exploring opportunites to work in other African countries.
The division is currently in a process of arbitration with Lonmin Platinum
regarding monies outstanding relating to escalation and additional claims
relating to a change in scope of works with Lonmin. Basil Read is hoping to
conclude the arbitration process in the final quarter of 2007, however, all
losses relating to this contract have been fully provided for in prior
years.
Given the capital intensive nature of opencast mining and the increased
risk of owning specialised mining trucks and excavators, the division is
exploring options to mitigate this risk.
Developments
Phase Two of Cosmo City, the flagship project in partnership with
government, is progressing well. The division has carved a niche for itself
with this type of project, and is investigating similar developments with
limited property risk.
The division is in advanced negotiations with Old Mutual Investment Group
for a housing development south of Johannesburg, and expects to break
ground within two years of successful negotiation of the contract. In a
first for South Africa, the project has been given the backing of USAID, an
American institution specialising in the support of economic growth through
the promotion of financial services to lower-income households.
Additional projects, partnering not only with local governments but also
with leading financial institutions, are in the pipeline.
Prospects
The Basil Read Group continues to go from strength to strength, in a local
market buoyed by improved infrastructural expenditure, guided by a highly
effective management team. Confidence in the construction sector is booming
and Basil Read is well positioned to capitalise on current favourable
conditions, with expectations of further awards in excess of R2 billion in
the next six months.
Capacity exists within the group to accommodate further growth and the
appropriately structured balance sheet and healthy cash holdings ensure
that potential acquisitions are possible. The risks associated with rapid
growth are monitored closely to ensure that expansion of the group is
systematically and effectively achieved without disruption to the day-to-
day operations of the group.
Having experienced a difficult period in recent years and emerging as a
well-capitalised and stable group, Basil Read has positioned itself as a
sustainable entity. The growth of the group, which has translated into real
results, is expected to continue for the foreseeable future.
Governance
The directors and senior managers of the group endorse the Code of
Corporate Practices and Conduct as set out in the King II Report on
Corporate Governance. Having regard for the size of the group, the board is
of the opinion that the group substantially complies with the Code as well
as the Listings Requirements of JSE Limited.
Dividends
The board has reviewed the current period`s results together with the
forecasts for 2007/8 and has decided not to declare an interim dividend.
Post-balance sheet events
On 19 July 2007, the group successfully concluded the acquisition of
Blasting and Excavating (Pty) Limited for R100 million. Full disclosure of
the transaction was provided in the SENS releases dated 22 March 2007 and
19 July 2007.
On behalf of the board
M L Heyns (Chief Executive Officer)
2 August 2007
Additional information to the annual financial statements
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2007 2006 2006
Number of shares in issue 75 434 55 444 70 720
(`000)
Headline earnings per share 68,80 36,54 89,62
(cents)
Fully diluted headline 68,62 36,27 89,15
earnings per share (cents)
Reconciliation of basic
earnings to headline
earnings R`000 R`000 R`000
Basic earnings 50 010 20 233 54 103
Adjusted by -
- Profit on sale of available-
for-sale
financial asset (175) - -
- Loss/(profit) on sale of
property,
plant and equipment 48 - (554)
- Fair value gain - investment - - (1 710)
properties
Headline earnings 49 883 20 233 51 839
Reconciliation between
weighted average
number of shares and diluted
average
number of shares `000 `000 `000
Weighted average number of 72 500 55 374 57 846
shares
Adjusted by - Share Incentive 191 407 300
Scheme
Diluted average number of 72 691 55 781 58 146
shares
Net asset value per share 414,48 99,81 282,05
(cents)
Capital expenditure for the 143 442 36 185 98 548
period (R`000)
Depreciation (R`000) 21 886 9 042 23 484
Amortisation of intangible 234 568 735
asset (R`000)
Summarised consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Operating cash flow 106 715 28 672 72 776
Movements in working capital (6 304) (1 343) 70 533
Net cash generated by 100 411 27 329 143 309
operations
Net finance (costs)/income (2 538) 4 384 3 479
Dividends paid (21 787) - (75)
Taxation paid (5 824) (3 563) (6 421)
Cash flow from operating 70 262 28 150 140 292
activities
Cash flow from investing (29 163) (30 953) (40 767)
activities
Cash flow from financing 49 419 14 275 75,663
activities
Movement in cash and cash 90 518 11 472 175 188
equivalents
Cash and cash equivalents at
the beginning
of the period 266 437 91 249 91 249
Cash and cash equivalents at 356 955 102 721 266 437
the end of the period
Summarised consolidated segment report
Roads
and Opencast Develop-
Total civils mining ments Buildings
R`000 R`000 R`000 R`000 R`000
Revenue 900 660 534 158 172 893 26 974 166 635
Operating 69 906 44 956 14 666 4 094 6 190
profit
Operating 7,76% 8,42% 8,48% 15,18% 3,71%
margin
Directors:
B T Ngcuka* (Chairman), M L Heyns (Chief Executive Officer),
L B Dyosi*, S Ntsaluba*, T Tlelai*, C Davies*+,
L Peteni*+ (* Non-executive, + Independent)
Group Secretary:
E Kruger
Registered office:
388 Gild Road, Lilianton, Boksburg, 1459
Transfer secretaries:
Link Market Services South Africa (Pty) LimitedSponsor:
Sasfin Capital
Auditors:
PricewaterhouseCoopers Inc
Date: 02/08/2007 14:51:16 Produced by the JSE SENS Department.
