| Thu 7 Feb 2008, 14:00 | | BSR - Basil Read Holdings - Audited Results For The Twelve Months Ended |
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BSR
BSR
BSR - Basil Read Holdings - Audited Results For The Twelve Months Ended
31 December 2007 and dividend declaration
BASIL READ HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/007758/06)
ISIN: ZAE000029781 Share code: BSR
("Basil Read" or "the group")
AUDITED RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2007
- Revenue up 73% to R2 billion
- Operating profit up 217% to R170 million
- Earnings per share up 70%
- Order Book OF R3,6 BILLION
COMMENTARY
BASIS OF PRESENTATION
These consolidated abridged annual financial statements have been prepared in
terms of International Financial Reporting Standards, IAS 34 on Interim
Financial Reporting and Schedule 4 of the South African Companies Act. The
accounting policies used in the preparation of these annual financial statements
are consistent with those applied in the annual financial statements for the
year ended 31 December 2006.
The results for the year ended 31 December 2007 have been audited by the group`s
auditors, PricewaterhouseCoopers Inc, and the unqualified audit report is
available for inspection at the company`s registered office.
OVERALL REVIEW
In our 55th year of operation, Basil Read has once again produced a record set
of results, reflecting the hard work and dedication of the past few years,
underpinning a continued future in the construction industry. From the humble
beginnings of Mr Basil Read, through many ups and downs, the group has now taken
its rightful place amongst the leaders in construction and aims to continue its
strong performance in the years ahead.
The board is proud to report sustained growth, with after-tax profit of R117,6
million (2006: R55,0 million), an increase of 114%. Turnover rose 73% to R2,0
billion (2006: R1,2 billion), setting a new record in the group`s 55th year.
Operating margin rose from 4,6% in 2006 to 8,5% in the year under review to
R170,3 million (2006: R53,8 million). Despite having experienced huge growth
during the year, the group managed to finance this growth, mainly through cash
generated by operations. At the reporting date, cash generated by operations
stood at R403,0 million (2006: R143,3 million) and the group`s debt-equity
percentage was at an acceptable level of 49,4% (2006: 25,1%). The group`s total
assets amounted to R1,3 billion (2006: R630,9 million). Cash on hand was R434,8
million (2006: R266,4 million), an increase of R168,4 million.
Contracts secured during the year totalled R3,3 billion (2006: R2,0 billion) and
the order book at the end of the period is strong at R3,6 billion (2006: R2,3
billion), underpinning continued sustainable growth.
The group successfully concluded the acquisition of the Blasting & Excavating
(B&E) group, a provider of specialised drill and blast services. The group paid
R97 million for the entire capital of B&E, which was partly funded by the issue
of 2 500 000 shares at R22 per share. Goodwill of R31,5 million was recognised
on acquisition. The group further increased its shareholdings in both Spray Pave
(Pty) Limited, a bitumen distributor and sprayer, and Stone and Allied
Industries Limited, a stone crushing company, to 100%. The group also bought out
the minorities in Codevco (Pty) Limited, the property development company
responsible for the Cosmo City project.
With higher levels of current and projected activity, the group invested in new
plant worth R288 million (2006: R99 million). This ongoing plant acquisition is
guided by prudent assessments of expected activity levels and a comprehensive
maintenance programme that ensures the optimal use of existing plant. The group
has budgeted for capital expenditure of R200 million in 2008.
During the year, the group`s issued guarantees amounted to R632 million (2006:
R320 million). These are guarantees arising in the ordinary course of business
and no loss is expected from their issue. The group`s guarantee facility at year
end was R1 billion.
OPERATIONAL REVIEW
Buildings
The resurgence in this division perhaps best illustrates the group`s turnaround,
from turnover of R6 million in 2004, the division recorded R400,8 million in
turnover during the year and recognised an operating profit of R13,2 million.
The division`s order book stands at R1,0 billion and is satisfactorily split
60:40 between private clients and government institutions.
After completing several high-profile projects in recent years, which clearly
demonstrated its ability to take on larger and more diverse developments, the
buildings division has expanded exponentially and secured contracts worth R1,1
billion in the period.
The restructured division is managing an increased workload, and attracting top-
calibre professionals despite the shortage of skills in the construction sector,
underscoring the group`s reputation for delivery.
Roads and civils
The roads and civils division produced outstanding results and secured numerous
contracts during the year under review. The order book at 31 December 2007
stands at a robust level of R1,7 billion. The division contributed R1,0 billion
to revenue and maintained healthy margins, reporting an operating profit of
R98,3 million for the year.
Reinforcing the group`s reputation as a leader in road construction, the
division currently has six contracts with the SA National Roads Agency totalling
almost R1 billion.
The division has successfully diversified its client base and has secured work
with private clients, making an equity investment in certain of these projects.
Mining
Following a challenging year in 2006, the mining division - renamed Basil Read
Mining - reported much improved results for the year by focusing its hard-rock
mining work in areas where competition is less active and margins are higher. It
ended the period with a 2008 order book of R550 million, compared to R296
million for 2007 and R27 million in 2006.
The division reported revenues of R543,1 million, which included a six month
contribution from B&E. With B&E`s expertise, developed over three decades, Basil
Read has again expanded its range of services and is well positioned to
capitalise on opportunities from the contract mining and civil engineering
industry.
Developments
The developments division reported another steady year of performance,
contributing revenues of R60,4 million to the group at an impressive operating
margin of 17%. The Cosmo City project, which is progressing well, has become the
prototype for similar projects and the division is pleased to report that
agreement has been reached with regard to several new projects.
The agreement with Old Mutual Investment Group for a housing development south
of Johannesburg was concluded and the environmental impact assessment is
currently under way. Other projects include development of an industrial park
south of Johannesburg and mixed integrated housing developments in Welkom and
Cape Town.
PROSPECTS
The local construction sector continues to offer opportunities for contractors
as government maintains its commitment to infrastructural spend. It is widely
believed in the industry that the current unprecedented boom will continue well
into the next decade.
Basil Read has solidified its place in the South African construction industry
and has experienced exceptional organic growth in recent years, a trend that is
expected to continue albeit at a slower rate. To achieve the group`s vision of
being a R5 billion turnover company by 2010, a three tier strategy has been
implemented:
- global expansion;
- larger, technically challenging projects; and
- private public partnerships (PPP`s).
As local operations have bedded down well and the level of organic growth is
satisfactory, the group is exploring international acquisition options. A
significant amount of time has been spent on determining the criteria for what
Basil Read would consider a strategic fit for the group and preliminary
investigations are under way to identify possible acquisition targets.
The strategic imperative to take on bigger and more technically challenging
projects is gaining momentum as the group has pre-qualified for the design-and-
construction tender for the airport on St Helena island. Partnering with
international construction conglomerates, such as Bouygues Travaux Publics SA
and VSL Intrafor Hong Kong, on larger projects has been beneficial to the group,
as the risk exposure is limited and invaluable experience is gained. The group
envisages more of this type of partnership with global players in the future.
Participating in the private public partnership (PPP) responsible for the
design, construction and financing of major projects is key to the group`s
growth strategy. The PPP model works well for Basil Read, and the group is
involved in several projects, including the bidding on the new Tshwane municipal
offices as well as several prisons throughout the country.
The shortage of skills, currently being experienced by the industry as a whole,
remains a key focus area for the group. Basil Read successfully implemented a
recruitment strategy in 2007 that enabled the group to not only meet current
operational requirements but also create additional capacity to meet the
challenging targets ahead.
Fifty-five years on, Basil Read is a well-capitalised and stable group, and
demonstrably a sustainable entity on track to its target of being a R5 billion
group by 2010.
CORPORATE GOVERNANCE
The directors and senior management 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 with the Listing
Requirements of the JSE Limited. The group performs regular reviews of its
corporate governance policies and practices and strives for continuous
improvement in this regard.
The group is pleased to welcome Ms Ntombekaya September as an independent non-
executive director, who was appointed on 23 October 2007. She has a wealth of
experience in the construction industry with specific reference to private
public initiatives, an area of particular focus for Basil Read.
DIVIDENDS
Notice is hereby given that the directors have declared a final dividend of 50
cents per share (2006: 30 cents) in respect of the year ended 31 December 2007.
In order to comply with the requirements of STRATE the relevant details are as
follows:
Event Date
Last date to trade "cum" dividend Friday, 2 May 2008
Share to commence trading "ex" dividend Monday, 5 May 2008
Record date (date shareholders recorded
in books) Friday, 9 May 2008
Payment date Monday, 12 May 2008
No payment certificates may be dematerialised or rematerialised between Monday,
5 May 2008 and Friday, 9 May 2008, both dates inclusive.
ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting will be held at the
group`s registered office on 9 May 2008 at 10:00.
POST-BALANCE SHEET REVIEW
No material events have occurred between the balance sheet date and the date of
these results that would have a material effect on the financial statements of
the group.
On behalf of the board
M L Heyns
7 February 2008
Summarised consolidated income statement
Audited Audited
12 months 12 months
31 December 31 December
2007 2006
R`000 R`000
Revenue 2 010 559 1 162 198
Operating profit for the year 170 335 53 750
Net finance (costs)/income (6 030) 3 479
Share of profits from associates 15 -
Profit for the year before taxation 164 320 57 229
Taxation (46 678) (2 269)
Profit for the year after taxation 117 642 54 960
Profit for the year attributable to the
following:
Equity shareholders of the company 117 788 54 103
Minority interest (146) 857
Net profit for the year 117 642 54 960
Earnings per share (cents) 159,18 93,53
Fully diluted earnings per share 156,92 93,05
(cents)
Dividends per share (cents) 30,00 -
Summarised consolidated balance sheet
Audited Audited
31 December 31 December
2007 2006
R`000 R`000
ASSETS
Non-current assets 587 074 215 007
Property, plant and equipment 489 021 176 438
Intangible assets 41 486 10 444
Investments in jointly controlled 8 281 -
entities
Investments in associates 21 581 66
Available-for-sale financial assets 208 650
Deferred taxation 26 497 27 409
Current assets 732 682 415 941
Inventories 20 533 6 659
Trade and other receivables 263 822 138 764
Investments in jointly controlled 11 200 -
entities
Cash and cash equivalents 437 127 270 518
1 319 756 630 948
EQUITY AND LIABILITIES
Capital and reserves 357 923 199 463
Issued capital 233 954 164 537
Accumulated profit 117 901 24 430
Other reserves 4 008 4 264
Minority interests 2 060 6 232
Non-current liabilities 195 539 55 775
Interest-bearing borrowings 149 443 49 982
Other borrowings 27 432 -
Provisions for other liabilities and 3 493 2 818
charges
Deferred taxation 15 171 2 975
Current liabilities 766 294 375 710
Trade and other payables 575 609 286 102
Current portion of borrowings 102 620 32 996
Provisions for other liabilities and 85 709 52 531
charges
Bank overdraft 2 356 4 081
1 319 756 630 948
Summarised consolidated segment report
Roads
Total and civil Mining Develop- Buildings
engineering ments
R`000 R`000 R`000 R`000 R`000
Revenue 2 010 559 1 006 224 543 121 60 429 400 785
Operating 170 335 98 381 48 399 10 314 13 241
profit
Operating 8,47% 9,78% 8,91% 17,07% 3,30%
margin
Statement of changes in equity
Audited Audited
12 months 12 months
31 December 31 December
2007 2006
R`000 R`000
Issued capital
Ordinary share capital
Balance at the beginning of the year 164 537 58 550
Issued to share incentive scheme (net 15 417 425
of treasury shares)
Clawback offer - 105 562
Private placement 54 000 -
Balance at the end of the year 233 954 164 537
Accumulated profit/(loss)
Balance at the beginning of the year 24 430 (29 673)
Transfer from other reserves 20 072 -
Transactions with minorities (22 531) -
Net profit for the year 117 788 54 103
Dividend declared (21 858) -
Balance at the end of the year 117 901 24 430
Other reserves
Balance at the beginning of the year 4 264 4 508
Share-based payment - equity settled 20 072 -
Transfer to accumulated profit (20 072) -
Movement in foreign currency (14) (475)
translation reserve
Disposal of available-for-sale (246) -
financial asset
Movement in fair value adjustment 4 231
reserve
Balance at the end of the year 4 008 4 264
Minority interests 2 060 6 232
Summarised consolidated cash flow statement
Audited Audited
12 months 12 months
31 December 31 December
2007 2006
R`000 R`000
Operating cash flow 261 823 72 776
Movements in working capital 141 131 70 533
Net cash generated by operations 402 954 143 309
Net finance (costs)/income (6 030) 3 479
Dividends paid (21 920) (75)
Taxation paid (7 021) (6 421)
Cash flow from operating activities 367 983 140 292
Cash flow from investing activities (189 248) (40 767)
Cash flow from financing activities (10 401) 75 663
Movement in cash and cash equivalents 168 334 175 188
Cash and cash equivalents at the
beginning
of the year 266 437 91 249
Cash and cash equivalents at the end of 434 771 266 437
the year
Additional information to the annual financial statements
Audited Audited
12 months 12 months
31 December 31 December
2007 2006
Number of shares in issue (`000) 75 588 70 720
Headline earnings per share (cents) 158,54 89,62
Fully diluted headline earnings per 156,29 89,15
share (cents)
Reconciliation of basic earnings to R`000 R`000
headline earnings
Basic earnings 117 788 54 103
Adjusted by -
Profit on sale of available-for-sale (175) -
financial asset
Adjusted by -
Profit on sale of property, plant and (301) (554)
equipment
Adjusted by -
Fair value gain - investment properties - (1 710)
Headline earnings 117 312 51 839
Reconciliation between weighted average `000 `000
number of shares and diluted average
number of shares
Weighted average number of shares 73 995 57 846
Adjusted by - Share incentive scheme 1 065 300
Diluted average number of shares 75 060 58 146
Net asset value per share (cents) 473,52 282,05
Capital expenditure for the year 287 791 98 548
(R`000)
Depreciation (R`000) 71 546 23 484
Amortisation of intangible asset 468 735
(R`000)
Directors:
B T Ngcuka* (Chairman), M L Heyns (Chief Executive Officer), C P Davies*#, L B
Dyosi*, S S Ntsaluba*, S L L Peteni*#, N Y September*#, A T Tlelai*
*Non-executive, #Independent
Group Secretary:
E Kruger
Registered office:
388 Gild Road, Lilianton, Boksburg, 1459
Transfer secretaries:
Link Market Services South Africa (Pty) Limited
Sponsor:
Sasfin Capital (a division of Sasfin Bank Limited)
Auditors:
PricewaterhouseCoopers Inc
www.basilread.co.za
Date: 07/02/2008 14:00:01 Produced by the JSE SENS Department.
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