| Thu 7 Aug 2008, 10:59 | | BSR - Basil Read - Unaudited Results For The Six Months Ended 30 June 2008 |
|
BSR
BSR
BSR - Basil Read - Unaudited Results For The Six Months Ended 30 June 2008
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
www.basilread.co.za
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
- 57% increase in revenue
- Cash on hand R467,6 million
- 64% increase in EPS
- 70% increase in total assets to R1,8 billion
- 82% increase in operating profit
- Order book of R5,4 billion
SUMMARISED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Revenue 1 411 455 900 660 2 010 559
Operating profit for the period 126 893 69 906 170 335
Net finance costs (8 893) (2 538) (6 030)
Share of profits from associates 57 - 15
Profit for the period before 118 057 67 368 164 320
taxation
Taxation (32 123) (18 715) (46 678)
Profit for the period after 85 934 48 653 117 642
taxation
Profit for the period
attributable to the following:
Equity shareholders of the 85 552 50 010 117 788
company
Minority interest 382 (1 357) (146)
Net profit for the period 85 934 48 653 117 642
Earnings per share (cents) 113,14 68,98 159,18
Fully diluted earnings per share 111,46 68,80 156,92
(cents)
Ordinary dividend per share 50,00 30,00 30,00
(cents)
SUMMARISED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
ASSETS
Non-current assets 694 141 316 193 587 074
Property, plant and equipment 589 462 290 782 489 021
Intangible assets 41 252 11 010 41 486
Investments in jointly controlled 11 949 - 8 281
entities
Investments in associates 21 638 66 21 581
Available-for-sale financial assets 208 292 208
Deferred taxation 29 632 14 043 26 497
Current assets 1 117 121 747 114 732 682
Inventories 19 798 7 738 20 533
Trade and other receivables 629 704 374 339 263 822
Investments in jointly controlled - - 11 200
entities
Cash and cash equivalents 467 619 365 037 437 127
1 811 262 1 063 307 1 319 756
EQUITY AND LIABILITIES
Capital and reserves 421 450 312 658 357 923
Issued capital 233 996 233 738 233 954
Accumulated profit 181 070 52 582 117 901
Other reserves 4 730 21 463 4 008
Minority interests 1 654 4 875 2 060
Non-current liabilities 201 337 125 235 195 539
Interest-bearing borrowings 163 555 119 221 149 443
Other borrowings 20 705 - 27 432
Provisions for other liabilities and 3 846 3 166 3 493
charges
Deferred taxation 13 231 2 848 15 171
Current liabilities 1 188 475 625 414 766 294
Trade and other payables 1 012 972 521 294 575 609
Current portion of borrowings 99 689 49 446 102 620
Provisions for other liabilities and 75 814 46 592 85 709
charges
Bank overdraft - 8 082 2 356
1 811 262 1 063 307 1 319 756
STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Issued capital
Ordinary share capital
Balance at the beginning of the 233 954 164 537 164 537
period
Issued to share incentive scheme
(net of treasury shares) 42 15 201 15 417
Private placement - 54 000 54 000
Balance at the end of the period 233 996 233 738 233 954
Accumulated profit
Balance at the beginning of the 117 901 24 430 24 430
period
Transfer from other reserves - - 20 072
Transactions with minorities - - (22 531)
Share-based payment - equity 15 437 - -
settled
Net profit for the period 85 552 50 010 117 788
Dividend declared (37 820) (21 858) (21 858)
Balance at the end of the period 181 070 52 582 117 901
Other reserves
Balance at the beginning of the 4 008 4 264 4 264
period
Share-based payment - equity - 17 252 20 072
settled
Transfer to accumulated profit - - (20 072)
Movement in foreign currency 722 105 (14)
translation reserve
Disposal of available-for-sale - - (246)
financial asset
Movement in fair value - (158) 4
adjustment reserve
Balance at the end of the period 4 730 21 463 4 008
Minority interests 1 654 4 875 2 060
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Operating cash flow 213 233 106 715 261 823
Movements in working capital 56 813 (6 304) 141 131
Net cash generated by operations 270 046 100 411 402 954
Net finance costs (8 893) (2 538) (6 030)
Dividends paid (38 608) (21 787) (21 920)
Taxation paid (41 702) (5 824) (7 021)
Cash flow from operating 180 843 70 262 367 983
activities
Cash flow from investing (80 198) (29 163) (189 248)
activities
Cash flow from financing (67 797) 49 419 (10 401)
activities
Movement in cash and cash 32 848 90 518 168 334
equivalents
Cash and cash equivalents at the 434 771 266 437 266 437
beginning of the period
Cash and cash equivalents at the 467 619 356 955 434 771
end of the period
SUMMARISED CONSOLIDATED SEGMENT REPORT
Roads
and civil
Total engineer-ing Buildin Mining Develop- Inter-
gs ments segment
R`000 R`000 R`000 R`000 R`000 R`000
Revenue 1 411 455 668 250 409 691 355 722 24 677 (46 885)
Operating 126 893 67 108 19 737 35 913 4 135 -
profit
Operating 8,99% 10,04% 4,82% 10,10% 16,76% 0,00%
margin
ADDITIONAL INFORMATION TO THE ANNUAL FINANCIAL STATEMENTS
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Number of shares in issue (`000) 75 619 75 434 75 588
Headline earnings per share 113,98 68,80 158,54
(cents)
Fully diluted headline earnings 112,29 68,62 156,29
per share (cents)
Reconciliation of basic earnings R`000 R`000 R`000
to headline earnings
Basic earnings 85 552 50 010 117 788
Adjusted by:
- Profit on sale of available- - (175) (175)
for-sale financial asset
- Loss/(profit) on sale of 638 48 (301)
property, plant and equipment
Headline earnings 86 190 49 883 117 312
Reconciliation between weighted `000 `000 `000
average number of shares and
diluted average number of shares
Weighted average number of 75 619 72 500 73 995
shares
Adjusted by - Share Incentive 1 135 191 1 065
Scheme
Diluted average number of shares 76 754 72 691 75 060
Net asset value per share 557,34 414,48 473,52
(cents)
Capital expenditure for the 178 339 143 442 287 791
period (R`000)
Depreciation (R`000) 69 927 21 886 71 546
Amortisation of intangible asset 234 234 468
(R`000)
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 2008 are
consistent with those applied for the year ended 31 December 2007 and for the
unaudited results for the six months ended 30 June 2007 in terms of IFRS.
OVERALL REVIEW
Basil Read has produced a solid set of results in the six months to June 2008,
confirming that it is on track to achieving its goal of becoming a R5 billion
turnover group by 2010. With renewed commitment to quality, safety and
minimising its environmental footprint, the group is well positioned for future
growth, strengthening its reputation as a leader in the construction industry.
The board is proud to report sustained growth, with operating profit of R126,9
million (June 2007: R69,9 million), at an improved margin of 9,0% (June 2007:
7,8%) and profit attributable to ordinary shareholders of R85,6 million (June
2007: R50 million), a substantial increase of 71,1%. Turnover increased by 56,7%
to R1,4 billion (June 2007: R900,7 million). Cash generated by operating
activities was satisfactory at R213,2 million (June 2007: R106,7 million) and
was utilised for investment activities and to reduce debt levels. Cash on hand
now stands at R467,6 million with the debt equity ratio at a modest 43,7% (June
2007: 38,1%).
The group experienced significant balance sheet growth, with total assets at a
level of R1,8 billion (June 2007: R1,1 billion), and considers the balance sheet
to be appropriately structured to enable further growth.
The group secured new contracts in the period under review in the amount of R2,8
billion (June 2007: R1,7 billion) and the order book is a healthy R5,4 billion
(June 2007: R3,4 billion). Commensurate with the growth of the group, and in
line with its strategic intentions, Basil Read has successfully targeted large
scale contracts, with several under negotiation.
The group continues to investigate opportunities for international expansion and
as yet has not identified a suitable target company for acquisition. Given that
the global economy has slowed to some extent, with market corrections taking
place across the board, the group aims to exercise caution in this regard.
Locally, the group is in the process of acquiring Roadcrete Africa (Pty)
Limited, an established and respected civil engineering contractor, for a
purchase consideration of R160 million. Roadcrete`s current order book is R800
million. The application to the Competition Commission is pending and further
announcements regarding the transaction will be made in due course.
With higher levels of current and projected activity, the group invested in new
plant worth R178,3 million (June 2007: R143,4 million). Included in this figure,
is the cost of a new head office block, currently under construction at the
group`s premises in Boksburg, to accommodate the growing workforce.
At the reporting date, the group had issued guarantees in the amount of R1,2
billion (June 2007: R547 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.
The group continues with its commitment to transformation and the main operating
company, Basil Read (Pty) Limited, was certified as a level 4 BBBEE contributor
in terms of both the DTI Generic Scorecard and the Construction Sector Charter,
which means that clients can accumulate 100% of their expenditure with the
company towards their own scorecard.
OPERATIONAL REVIEW
BUILDINGS
The buildings division reported acceptable results for the six months to June
2008, with operating margins of 4,8% (June 2007: 3,7%). The division has been
largely unaffected by the downturn in the residential property market and
continues to focus on the construction of schools, hospitals and shopping
centres. The order book currently stands at R1,1 billion.
The division, in joint venture with Murray & Roberts Construction, was appointed
as the main contractor for the construction of the Galleria Shopping Centre in
Umbogintwini, KwaZulu-Natal. The contract, which involves the construction of an
80 000 m2 retail shopping centre and a 76 000 m2 parking garage, is valued at
R670 million.
ROADS AND CIVILS
Considered a leader in road construction, the division secured new contracts in
the amount of R1,9 billion, and the order book currently stands at a robust
level of R3,1 billion. The division continues to be a solid performer for the
group and contributed revenues of R668,3 million (June 2007: R534,2 million) at
operating margins of 10,0% (June 2007: 8,4%).
Work on the Mbombela Stadium is slightly behind schedule but is still expected
to be completed well in advance of the 2010 Soccer World Cup. Delays have been
experienced due to numerous instances of unprocedural, illegal and unfair
industrial action which left Basil Read with little choice but to issue a final
ultimatum in terms of an order of the labour court. Following further illegal
industrial action, notice to dismiss was issued to all staff members involved.
Following further negotiations with all affected parties, the situation has now
been resolved to the satisfaction of all parties concerned, the majority of the
workforce has been reemployed and work on the site has resumed.
The division was awarded two of the Gauteng Freeway Improvement Projects, worth
a combined value of R1,8 billion. These projects link to the division`s current
contract at the Atterbury interchange, which is progressing according to
schedule.
Following on the success of the Pier One Container Terminal project, the
division secured the contract to provide the complete infrastructure to Pier Two
in the Port of Durban, valued at R430 million.
Under the direction of the group`s subsidiary company, Newport Construction, the
division was awarded further contracts in the Coega Development Zone in Port
Elizabeth, including the contract to construct the Coega River bridges valued at
R180,8 million.
MINING
The mining division has had an exceptional six-month period, securing several
new contracts, contributing to an order book which is currently in excess of R1
billion. The division has grown exponentially, generating revenues of R355,7
million (June 2007: R172,9 million), a significant increase of 106%.
The division was awarded a three year contract to mine for Debswana in Botswana,
commencing July 2008, with a contract value of R413 million. A three year
contract extension at Rossing Uranium Limited in Namibia worth R382,6 million
will commence in September 2008.
Blasting & Excavating continues to perform well and has proven to be a sound
investment for the group. The business has integrated well into the division and
significant synergies have been realised. Through the expansion of its range of
services, the division is well placed to capitalise on opportunities in the
contract mining and civil engineering industries.
DEVELOPMENTS
The developments division continues to be a key growth area for the group, with
several new projects in the pipeline. This type of contract is characterised by
long lead times with significant costs being incurred prior to the breaking of
ground. Despite this, the division reported turnover of R24,7 million (June
2007: R27 million) at a generous operating margin of 16,8% (June 2007: 15,2%).
Work continues on several projects around the country including the successful
Cosmo City. The project with Old Mutual Investment Group for a housing
development south of Johannesburg is at an advanced stage and the division
expects construction to commence in early 2009. Other projects, including an
industrial park south of Johannesburg and housing developments in Welkom and
Cape Town, are still in the planning phase. Feasibility studies are currently
underway at various other sites.
PROSPECTS
The Basil Read group continues to flourish in a local market buoyed by improved
infrastructural spend and is ideally positioned to capitalise on these
favourable market conditions. On the back of a healthy balance sheet and
effective management structure, the group will continue to grow in a controlled
and structured manner.
The view that the construction sector will not be sustained beyond 2010, due to
the completion of the 2010 World Cup Soccer stadiums is not a view that Basil
Read shares with the market. Government has demonstrated their commitment to
infrastructure with the commencement of the Gauteng Freeway Improvement Project,
with several new projects in the pipeline including the upgrade of the N1/N2
freeway in Cape Town. Eskom have a dire need for improved and increased
infrastructure and the contracts to construct new power plants will continue
well beyond 2010. Basil Read is part of a consortium that will be bidding for
the construction of these projects.
Low cost housing continues to be a focus area for government as communities
become impatient with the slow delivery of homes and services. Basil Read has
created a niche for itself in this market, which is characterised by longer term
projects that create secondary work for the group.
Basil Read is also actively pursuing other business ventures, both locally and
internationally, to further secure the future of the group. One such project is
the construction of the airport on St Helena island, for which Basil Read has
pre-qualified. A preferred bidder is expected to be announced before the end of
the 2008 financial year. The group is also interested in becoming involved in
the engineering consultancy and project management market as a means of
diversifying revenue streams.
Risk management is an integral part of the group`s operations and risks are
closely monitored at every stage of each contract that Basil Read undertakes.
Risk mitigation is imperative to ensure that expansion is systematically and
effectively achieved without disrupting day-to-day operations.
Basil Read is a well-capitalised and stable group and will continue to build the
future for generations to come.
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 Listings
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.
DIVIDENDS
The board has reviewed the current period`s results together with the forecasts
for 2008/2009 and has decided not to declare an interim dividend.
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 (Chief Executive Officer)
7 August 2008
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
Date: 07/08/2008 10:59:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
