| Thu 26 Feb 2009, 13:22 | | BSR - Basil Read Holdings Limited - Audited Results For The Twelve Months |
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BSR
BSR
BSR - Basil Read Holdings Limited - Audited Results For The Twelve Months
Ended 31 December 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
AUDITED RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2008
- Revenue up 73% to R3,5 billion
- Operating profit up 81% to R308 million
- Earnings per share up 67%
- Order book of R6,3 billion
- Cash on hand R944 million
SUMMARISED CONSOLIDATED INCOME STATEMENT
Audited Audited
12 months 12 months
31 December 31 December
2008 2007
R`000 R`000
Revenue 3 474 831 2 010 559
Operating profit for the year 308 390 170 335
Net finance costs (12 314) (6 030)
Share of profits from associates 85 15
Profit for the year before taxation 296 161 164 320
Taxation (90 319) (46 678)
Profit for the year after taxation 205 842 117 642
Profit for the year attributable to the
following:
Equity shareholders of the company 204 516 117 788
Minority interest 1 326 (146)
Net profit for the year 205 842 117 642
Earnings per share (cents) 265,44 159,18
Diluted earnings per share (cents) 262,12 156,92
Ordinary dividend per share (cents) 50,00 30,00
SUMMARISED CONSOLIDATED BALANCE SHEET
Audited Audited
31 December 31 December
2008 2007
R`000 R`000
ASSETS
Non-current assets 960 792 587 074
Property, plant and equipment 761 470 489 021
Intangible assets 143 907 41 486
Investments in jointly controlled entities 12 001 8 281
Investments in associates 21 579 21 581
Available-for-sale financial assets 2 208
Deferred income tax asset 21 833 26 497
Current assets 1 515 927 732 682
Inventories 80 674 20 533
Trade and other receivables 411 804 220 582
Work in progress 73 902 42 940
Investments in jointly controlled entities 705 11 200
Current income tax asset 5 085 300
Cash and cash equivalents 943 757 437 127
2 476 719 1 319 756
EQUITY AND LIABILITIES
Capital and reserves 792 073 357 923
Stated capital 466 134 233 954
Retained income 315 607 117 901
Other reserves 7 811 4 008
Minority interests 2 521 2 060
Non-current liabilities 348 150 195 539
Interest-bearing borrowings 264 249 149 443
Other borrowings 38 811 27 432
Provisions for other liabilities and charges 5 405 3 493
Deferred income tax liability 39 685 15 171
Current liabilities 1 336 496 766 294
Trade and other payables 688 906 445 712
Amounts due to customers 335 894 87 410
Current portion of borrowings 155 646 102 620
Provisions for other liabilities and charges 69 805 85 709
Current income tax liability 86 245 42 487
Bank overdraft - 2 356
2 476 719 1 319 756
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
12 months 12 months
31 December 31 December
2008 2007
R`000 R`000
Operating cash flow 490 382 261 823
Movements in working capital 211 708 141 131
Net cash generated by operations 702 090 402 954
Net finance costs (12 314) (6 030)
Dividends paid (38 423) (21 920)
Taxation paid (52 159) (7 021)
Cash flow from operating activities 599 194 367 983
Cash flow from investing activities (171 681) (189 248)
Cash flow from financing activities 81 473 (10 401)
Movement in cash and cash equivalents 508 986 168 334
Cash and cash equivalents at the beginning of 434 771 266 437
the year
Cash and cash equivalents at the end of the 943 757 434 771
year
SUMMARISED CONSOLIDATED SEGMENT REPORT
Operating Operating Operating
Revenue profit margin margin
2008 2008 2008 2007
R`000 R`000 % %
Construction 2 677 734 170 387 6,36 7,93
Buildings 926 563 12 986 1,40 3,30
Civils 371 093 39 629 10,68 10,40
Roads 1 380 078 117 772 8,53 9,21
Mining 719 691 124 473 17,30 8,91
Developments 77 406 13 530 17,48 17,07
Total 3 474 831 308 390 8,87 8,47
STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 months 12 months
31 December 31 December
2008 2007
R`000 R`000
Issued capital
Ordinary share capital
Balance at the beginning of the year 233 954 164 537
Issued by share incentive scheme (net of 42 15 417
treasury shares)
Acquisition of subsidiary 52 581 -
Private placement 179 557 54 000
Balance at the end of the year 466 134 233 954
Retained income
Balance at the beginning of the year 117 901 24 430
Transfer from other reserves - share-based 30 493 20 072
payment
Transactions with minorities 517 (22 531)
Net profit for the year 204 516 117 788
Dividend declared (37 820) (21 858)
Balance at the end of the year 315 607 117 901
Other reserves
Balance at the beginning of the year 4 008 4 264
Share-based payment - equity settled 30 493 20 072
Transfer to retained income (30 493) (20 072)
Movement in foreign currency translation 3 792 (14)
reserve
Disposal of available-for-sale financial 66 (246)
asset
Movement in fair value adjustment reserve (55) 4
Balance at the end of the year 7 811 4 008
Minority interests 2 521 2 060
ADDITIONAL INFORMATION TO THE ANNUAL FINANCIAL STATEMENTS
Audited Audited
12 months 12 months
31 December 31 December
2008 2007
Number of shares in issue (`000) 86 472 75 588
Headline earnings per share (cents) 267,04 158,54
Diluted headline earnings per share (cents) 263,71 156,29
Reconciliation of basic earnings to R`000 R`000
headline earnings
Basic earnings 204 516 117 788
Adjusted by
- loss/(profit) on sale of available-for- 48 (175)
sale financial asset
- profit on sale of property, plant and (1 115) (301)
equipment
- impairment of goodwill 2 304 -
Headline earnings 205 753 117 312
Reconciliation between weighted average `000 `000
number of shares and diluted average number
of shares
Weighted average number of shares 77 049 73 995
Adjusted by - share incentive scheme 974 1 065
Diluted average number of shares 78 023 75 060
Net asset value per share (cents) 915,99 473,52
Net tangible asset value per share (cents) 749,57 418,63
Capital expenditure for the year (R`000) 388 128 287 791
Depreciation (R`000) 145 038 71 546
Amortisation of intangible asset (R`000) 4 947 468
COMMENTARY
BASIS OF PRESENTATION
The 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 61 of
1973. 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 2007.
The results for the year ended 31 December 2008 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
Basil Read has had an exceptional year, the highlight of which was,
undoubtedly, our selection as the winner of the Sunday Times Business Times
Top 100 Companies for 2008. This prestigious annual survey acknowledges those
listed companies that have earned the most wealth for their shareholders over
the past five years. At 96% compounded growth over the period, Basil Read was
more than 10 percentage points ahead of the second-placed company. The share
price rose from R1,40 at the start of the ranking period, 1 October 2003, to
close at R25,20 at 30 September 2008. Although the share price had dropped to
R14,75 at year-end the decline was in line with the industry.
The board is proud to once again report sustained growth, with after-tax
profit of R206 million (2007: R118 million), an increase of 75%. Turnover
rose 73% to R3,5 billion (2007: R2,0 billion) with strong growth coming
through all the divisions. Operating profit increased to R308 million (2007:
R170 million) at a slightly improved operating margin of 8,9% (2007: 8,5%).
The improvement is due to increased focus on the containment of costs.
At the reporting date cash generated by operations stood at R702 million
(2007: R403 million) and cash on hand was R944 million (2007: R435 million).
The group`s debt-equity percentage was at an acceptable level of 38,3% (2007:
49,4%) and total interest-bearing borrowings amounted to R459 million (2007:
R279 million). The increase in debt can be attributed to the acquisition of
property, plant and equipment and the acquisition of Roadcrete Africa (Pty)
Limited. The group acquired new property, plant and equipment in the amount
of R388 million (2007: R288 million) of which R205 million was financed
(2007: R185 million). The group`s total assets amounted to R2,5 billion
(2007: R1,3 billion) at year-end.
Earnings per share increased by 66,8% to 265,44 cents (2007: 159,18 cents).
Headline earnings increased by a slightly higher margin, mainly due to a
write back of the impairment of goodwill in the calculation of headline
earnings. Headline earnings increased by 68,4% to 267,04 cents (2007: 158,54
cents).
Contracts secured during the year totalled R5,6 billion (2007: R3,3 billion)
and the order book at the end of the period is strong at R6,3 billion (2007:
R3,6 billion).
The acquisition of Roadcrete Africa (Pty) Limited was successfully completed
during the 2008 financial year and their results have been consolidated from
1 September 2008. The total purchase consideration of R164 million comprises
an equity investment of R130 million and the purchase of a shareholders` loan
for R34 million. The acquisition gave rise to the recognition of a contract-
based intangible asset of R18 million and goodwill in the amount of R89
million.
During the year, the group`s issued guarantees amounted to R1,1 billion
(2007: R632 million). These are guarantees arising in the ordinary course of
business and no loss is expected from their issue.
OPERATIONAL REVIEW
To renew focus and support the group`s strategies, Basil Read`s operational
divisions have been consolidated into Construction, Mining and Developments.
CONSTRUCTION
BUILDINGS
The exceptional growth experienced highlighted certain key weaknesses within
the division, which the group is currently addressing. Problems in the latter
half of the year were experienced on two sites resulting in a sharp decline
in profitability. Management believes that it has adequately provided for
losses on these sites and will pursue all possible claims during 2009.
The buildings division experienced a tough trading year. With revenue of R927
million for the year (2007: R401 million), the division has reached capacity
based on management and skills availability. Operating profit was down to R13
million (2007: R13,2 million), resulting in decreased margins of 1,4% (2007:
3,3%). The order book stands at a manageable level of R618 million (2007: R1
billion).
Basil Read is the lead contractor on the Galleria Shopping Centre in
Umbogintwini, KwaZulu-Natal. The new mall, south of Durban, has a gross
lettable area of 97 000 m2, with 76 000 m2 of parking decks. The contract,
with a total value of R617 million, commenced in March 2008 and is due for
completion in November 2009.
During the year, the division was awarded four of the stations relating to
the Gautrain project with the total contract value being R200 million.
Construction also commenced on the institutional housing development within
the highly successful Cosmo City mixed use residential development.
CIVILS
Operating margins in the civils division improved slightly to 10.7% (2004:
10.4%) albeit off a smaller revenue base of R371 million (2007: R479
million). At year-end the order book amounts to R1,3 billion (2007: R314
million), laying a good platform for growth in 2009.
Progress on the construction of the Mbombela Stadium in Nelspruit improved
significantly in the second half of the year following widespread labour
unrest at the start of the year. The site is progressing well and will be
completed well ahead of the 2010 Soccer World Cup.
The division has been extensively involved in upgrading the Port of Durban
for Transnet. The initial R290 million contract involved transforming the old
multipurpose terminal at Pier One into a modern container terminal. The group
has subsequently been contracted to provide the complete infrastructure for
Pier Two and construction of this R430 million project began in April 2008.
Work on the Kusile Power Station, in joint venture with three other
contractors commenced in early 2009. Located next to the existing Kendal
Power Station in the Witbank area of the Mpumalanga Province, Kusile`s
anticipated capacity will be 4 800 MW, with the first unit planned for
commercial operation in 2012. Basil Read`s share of the contract amounts to
R725 million.
ROADS
The roads division has consistently produced excellent results and remains
the group`s biggest operating division. Revenue improved by an impressive
162% to R1,4 billion (2007: R527 million) and accounts for 40% of the group`s
turnover. Operating profit was R118 million (2007: R49 million) at a slightly
decreased operating margin of 8,5% (2007: 9,2%). The division`s order book
stands at R3,6 billion (2007: R1,4 billion).
During the year, the division was awarded its largest contract to date -
packages D1 and D2 of the Gauteng Freeway Improvement Project totalling R1,7
billion commissioned by SANRAL as part of the 2010 Roads Improvement Project.
In conjunction with newly acquired subsidiary, Roadcrete Africa (Pty)
Limited, and other joint venture partners, the division has the
responsibility for improvements between the Brakfontein and Flying Saucer
interchanges and improvements from Atterbury to Scientia (N4 interchanges).
Construction began in May 2008 and needs to be substantially completed before
the first-half 2010 deadline.
The R370 million contract to improve a section of the N1 between Pretoria`s
landmark flying saucer and the Atterbury interchange is progressing well.
Also underway is an upgrade of the N1 between Bloemfontein and Winburg with a
total contract value of R200 million, which is nearing completion.
The Sasolburg contract, encompassing the rehabilitation and upgrade of two
sections of the R59 passing Sasolburg between the Vaal River and the N1
highway, is due to be completed in May 2009.
MINING
The mining division had a satisfactory year and reported revenue of R720
million (2007: R543 million). Operating profit increased significantly from
R48,4 million in 2007 at a margin of 8,9% to R124 million in 2008, at a
respectable margin of 17,3%. With an order book of R685 million (2007: R550
million) at year-end, the division looks set to continue its good performance
in 2009.
The contracts at Mupane and Letlhakane open pit mines were successfully
concluded during 2008.
The recent announcement regarding Debswana`s cancellation of mining
activities in Botswana has impacted on the division`s order book by R235
million with the cancellation of the Damtshaa contract. Mutually acceptable
termination conditions and compensation have been agreed upon.
Work at the Rossing Uranium mine in Namibia continued and the division was
awarded a contract extension for three years. The contract is for Rio Tinto,
one of the world`s largest mining houses. The Rossing mine is considered one
of the safest mines in Africa.
The division secured a R120 million contract for the drilling and blasting at
Venetia mine. This contract commenced in October 2008 and is expected to be
completed in September 2011.
DEVELOPMENTS
The division performed well during the year under review, increasing revenue
by 28% to R77 million (2007: R60 million). Operating margins were maintained
above the 17% level with a 31% reported increase in operating profit to R14
million (2007: R10 million). Despite being the smallest of Basil Read`s
divisions, developments are of significant strategic importance due to the
philanthropic nature of the contracts undertaken and the secondary work the
division creates for the group.
7 000 of the 12 500 homes at Cosmo City have already been occupied and six
schools, including a hotel school, a clinic and various churches are fully
operational. The Cosmo City development should be substantially complete by
the end of 2010 and will be home to 70 000 residents.
Other projects, comprising Phakisa Estate, Doornkuil, Klipriver Business Park
and Fisantekraal, are set to commence in 2009. These projects will create
secondary work in excess of R3 billion for the group, and have been excluded
from the group`s current order book.
PROSPECTS
Our goal of becoming a R5 billion plus turnover group by 2010 is within reach
and we expect to achieve this goal ahead of plan.
For this reason, we have updated our vision statement and our revised
strategic goal is to become a R10 billion turnover global construction group
by 2013. In order to achieve this goal, we are constantly monitoring
opportunities for expansion, while continuing to aggressively drive organic
growth.
The Basil Read group continues to flourish in a local market buoyed by
improved infrastructural spend and is ideally positioned to capitalise on
these market conditions, despite current economic uncertainty. "Building our
capacity to grow" is a key component of the government`s spending plans and
Basil Read looks forward to partnering with them in their bid to realise
their R787 billion infrastructure investment plans. Government has reaffirmed
their commitment to major investments in power generation, transport networks
and telecommunications and their continued infrastructure spend looks set to
continue well beyond 2010.
Low-cost housing remains a focus 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, and diversifying its revenue streams to further secure
its future.
On the back of a healthy balance sheet and effective management structure, we
will adopt a prudent approach to managing the prevailing volatility to ensure
our group can continue to grow in a controlled and structured manner.
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 did not have any changes to its board of directors during the year
under review.
DIVIDENDS
Despite the challenging economic conditions and in light of the group`s
growth targets, notice is hereby given that the directors have declared a
final dividend of 58 cents per share (2007: 50 cents) in respect of the year
ended 31 December 2008, which represents an increase of 16% over last year`s
dividend. In order to comply with the requirements of STRATE the relevant
details are as follows:
Event Date
Last date to trade cum-dividend Friday, 8 May 2009
Share to commence trading ex-dividend Monday, 11 May 2009
Record date (date shareholders recorded in books) Friday, 15 May 2009
Payment date Monday, 18 May 2009
No payment certificates may be dematerialised or rematerialised between
Monday, 11 May 2009 and Friday, 15 May 2009, both dates inclusive.
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.
FINANCIAL RESULTS PRESENTATION
Full details of information to be distributed at Basil Read`s financial
results presentation can be found on the group`s website,
www.basilread.co.za. For further information, kindly contact Basil Read on
011 418 6300.
On behalf of the board
M L Heyns
26 February 2009
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: 7 Brook 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: 26/02/2009 13:22:02 Produced by the JSE SENS Department.
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