| Mon 7 Sep 2009, 7:05 | | WBO - Wilson Bayly Holmes - Ovcon - Reviewed Financial Statements For The Year |
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WBO
WBO
WBO - Wilson Bayly Holmes - Ovcon - Reviewed Financial Statements For The Year
Ended 30 June 2009
WILSON BAYLY HOLMES - OVCON LIMITED
Building and civil engineering contractors
(Registration no. 1982/011014/06)
ISIN No: ZAE000009932
Share code: WBO
REVIEWED FINANCIAL STATEMENTS for the year ended 30 June 2009
HIGHLIGHTS
* Revenue up 37%
* Headline earnings up 27%
CONDENSED INCOME STATEMENT
% Reviewed Audited
increase June 2009 June 2008
R`000 R`000
Revenue 37 14 768 807 10 783 651
Operating profit before non- 16 1 048 716 904 828
trading items
Net realisation/(impairment) 2 101 (18 994)
of negative goodwill or
goodwill
Fair value adjustment to 4 653 3 657
investment
Profit on changes in - 93 408
shareholdings
Share-based payments expense (22 974) (23 860)
Operating profit 1 032 496 959 039
Share of profits in associates 31 480 (20 710)
Investment income 328 704 162 744
Operating income 1 392 680 1 101 073
Finance costs (31 847) (20 338)
Profit before taxation 1 360 833 1 080 735
Taxation (398 033) (318 211)
Profit for the year 962 800 762 524
Profit attributable to
Equity shareholders of Wilson 889 927 716 169
Bayly Holmes-Ovcon Limited
Minority interests 72 873 46 355
962 800 762 524
Reconciliation of headline
earnings
Net profit 889 927 716 169
Adjustments:
Net (realisation)/impairment (2 101) 18 994
of negative goodwill or
goodwill
Share of impairment of - 58 109
goodwill arising within
associate
Profit on change in - (93 408)
shareholdings
Profit on disposal of (5 329) (5 708)
property, plant & equipment
(net of tax)
Headline earnings 27 882 497 694 156
Operating margin (%) 7,1 8,4
Ordinary shares
Issued (`000) 66 000 66 000
Weighted average number of 54 787 54 956
shares (`000)
Diluted weighted average 54 973 55 118
number of shares (`000)
Earnings per share (cents) 25 1 624,3 1 303,2
Diluted earnings per share 1 618,8 1 299,3
(cents)
Headline earnings per share 27 1 610,8 1 263,1
(cents)
Diluted headline earnings per 1 605,3 1 259,4
share (cents)
CONDENSED BALANCE SHEET
ASSETS
Non-current assets 1 853 819 1 805 670
Property, plant and equipment 1 113 672 1 041 071
Goodwill 206 261 160 579
Investment in associates 428 502 285 755
Other non-current assets 105 384 318 265
Current assets 7 487 208 6 152 291
Cash and cash equivalents 4 033 309 2 781 521
Other current assets 3 453 899 3 370 770
Total assets 9 341 027 7 957 961
EQUITY AND LIABILITIES
Capital and reserves 2 565 019 1 865 312
Ordinary share capital and reserves 2 390 908 1 731 904
Minority interests 174 111 133 408
Non-current liabilities 122 400 264 798
Long-term financial liabilities 21 768 141 942
Other non-current liabilities 100 632 122 856
Current liabilities 6 653 608 5 827 851
Bank overdrafts 1 046 4 597
Other current liabilities 6 652 562 5 823 254
Total equity and liabilities 9 341 027 7 957 961
Net tangible asset value per share 3 988 2 859
(cents)
CONDENSED STATEMENT OF CHANGES IN EQUITY
Ordinary share capital and reserves at 1 731 904 1 002 702
the beginning of the period
Net profit for the year 889 927 716 169
Translation of foreign entities (61 001) 81 964
Share-based payments expense 22 974 23 860
Dividend paid (172 589) (88 110)
Purchase of treasury shares - (4 681)
Change in shareholding of subsidiaries (20 307) -
Ordinary share capital and reserves at 2 390 908 1 731 904
the end of the period
CONDENSED CASH FLOW STATEMENT
Cash generated from operations 2 444 943 2 239 493
Investment income 328 704 162 744
Finance costs (31 847) (20 338)
Taxation paid (690 651) (224 994)
Dividend paid (172 589) (88 110)
Cash retained from operations 1 878 560 2 068 795
Net cash flow from investing activities (499 965) (530 556)
Net cash flow from financing activities (123 256) (29 766)
Net increase in cash and cash 1 255 339 1 508 473
equivalents
Cash and cash equivalents at the 2 776 924 1 268 451
beginning of the year
Cash and cash equivalents at the end of 4 032 263 2 776 924
the year
SEGMENTAL INFORMATION
Primary segments
Segment revenue
- Building and civil engineering 10 256 984 7 807 924
- Roads and earthworks 4 481 874 2 719 297
- Industrial - 183 689
- Property 29 949 72 741
14 768 807 10 783 651
Segment result (operating profit before
non-trading items)
- Building and civil engineering 449 446 484 380
- Roads and earthworks 597 578 374 394
- Industrial - 39 058
- Property 1 692 6 996
1 048 716 904 828
Secondary segments
Segment revenue
- Local 8 749 611 6 911 796
- International 6 019 196 3 871 855
14 768 807 10 783 651
Segment result (operating profit before
non-trading items)
- Local 555 009 521 894
- International 493 707 382 934
1 048 716 904 828
BASIS OF PREPARATION
The condensed 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
reviewed results for the year ended 30 June 2009 are consistent with those
applied for the previous year.
Wilson Bayly Holmes-Ovcon (the group) makes estimates and assumptions
concerning the future, particularly in regard to construction profit
recognition, provisions, arbitrations, claims and the fair values of certain
assets. The resulting accounting estimates can, by definition, only
approximate the actual results. Estimates and judgements are based on
historical experience and other factors, including expectations of future
events which are believed to be reasonable at that time.
These results have been reviewed by the independent, external auditors BDO
Spencer Steward (Jhb) Inc. and their unmodified review opinion is available
for inspection at the company`s registered office.
FINANCIAL OVERVIEW
The group has had a solid year with headline earnings increasing from R694
million in 2008 to R882 million this year, an increase of 27%. Earnings per
share increased by 25% to 1 624 cents compared to 1 303 cents in 2008.
The group`s revenue for the year increased by 37% to R14,8 billion (2008:
R10,8 billion). Net profit increased to R963 million (2008: R763 million) an
improvement of 26%.
The operating margin of 7,1% (2008: 8,4%) achieved by the group is an
indication of the tightening of the economic conditions in the construction
market both locally and globally.
Assisted by lower levels of capital expenditure and working capital, cash
balances increased by R1,2 billion to R4 billion (2008: R2,8 billion). As a
result investment income increased by R166 million to R329 million (2008: R163
million).
Capital expenditure for the year amounted to R215 million (2008: R439 million)
which is 46% of the R466 million approved at the outset of the year. The group
has approved capital expenditure of R244 million for the next financial year
which will be confined mainly to the replacement of plant. It is unlikely that
the size of our fleet will increase as in the current climate it is possible
to hire plant at competitive rates.
On 1 July 2008 the group increased its holding in C.E.C.K. Pty Limited, a
civil engineering company operating in Perth, Australia, from 40% to 83% at a
cost of R38,7 million. The transaction consitutes a business combination in
terms of IFRS 3. The company which was previously equity accounted for has
been consolidated as a subsidiary since the acquisition date. Profits for the
period included in the group results amount to R14 million. Goodwill amounting
to R27 million was raised on the transaction.
Other piece-meal acquisitions resulting in changes in shareholding are as
follows; as a result of a share buy back in Probuild Constructions (Aust) Pty
Limited, the group`s interest in the company increased by 2,7% to 62,6%. The
cost of the transaction amounted to R89,3 million. Furthermore the group
increased its investments in St Francis Golf Links (Pty) Limited from 50% to
80% and in Edwin Construction (Pty) Limited from 49% to 57%.
In November 2008 the group acquired a 30% interest in the equity of Roadspan
Holdings (Pty) Limited, a company specialising in road resurfacing,
rehabilitation and the production of asphalt. The cost of the transaction
amounted to R16,3 million. The company has been equity accounted for since the
acquisition date.
The impact of the sudden downturn in the economy on both commercial and
residential developers this year has unfortunately affected the group.
Consequently R163 million in debt and a loan of R57 million have been written
off.
Comparative figures have been restated to reflect the effects of a prior
period correction. The effect of which has resulted in an increase in goodwill
of R62 million, an increase in minority interests of R50 million and an
increase in short-term liabilities of R12 million. There is no effect on the
comparative income statement.
Total guarantees given to financial institutions amounted to R3,6 billion as
at 30 June 2009 (2008: R3,4 billion). The directors believe any exposure to
loss is unlikely.
A final dividend of 200 cents per share (2008: 142 cents) has been declared
which, together with the interim dividend of 100 cents per share gives a total
dividend of 300 cents for the year (2008: 242 cents), an increase of 24%.
BUILDING & CIVIL DIVISION
The division once again contributed above-average returns, with revenue
increasing to R10,3 billion of which Australia contributed R4,7 billion, and
achieved an operating profit of R449 million (2008: R484 million). The
slowdown in the world economy with a concomitant drying up of finance
available for development and reduced demand for commodities will have a
negative effect on the performance of these divisions in the medium term as
they are more dependent on the private sector.
The North building division has once again shown consistent growth and will
enter the new financial year with a healthy order book. Notable achievements
were the completion of the OR Tambo Central Terminal Building ahead of
schedule and the opening of the Morningside shopping centre. Work is
progressing well on the Peter Mokaba Stadium in Polokwane and The Glen
shopping centre in Johannesburg. Work has commenced on the mega Mall of the
North in Polokwane and phase 1 of the Sandton City upgrade. Large mixed-use
developments currently under construction include One Monte at Montecasino,
The Zone in Rosebank and Lynnwood Junction in Tshwane. Although most of our
contracts in this division have been negotiated with long standing private
clients, we have also submitted a number of bids for prisons as public/private
partnerships and are awaiting their adjudication.
The Eastern Cape division has had another record year, but unfortunately this
has been marred by bad debts arising from the financial failure of a number of
local developers. Contracts successfully completed during this period include
the five star Radisson Hotel on the Port Elizabeth beach front, the Fountains
Mall in Jeffreys Bay, Rosehill Mall in Port Alfred and two hospitals in Port
Alfred and Grahamstown. We have three contracts under construction in the
Coega Development Zone and have started work on the Livingstone Hospital.
Our Western Cape division has experienced its best year ever, however the
construction industry in the Western Cape is very sensitive to the economic
cycle and with the current economic downturn, finding replacement work has
been difficult. Teams have been relocated to the North and Cape personnel are
also spearheading the new Manda Hill contract in Lusaka, Zambia. The highlight
for the division was the completion of the One & Only Hotel in the V&A
Waterfront months ahead of schedule. Works on the Greenpoint Stadium and the
Ben Schoeman harbour contracts are on schedule.
Two of the group`s largest projects are in KwaZulu-Natal, namely the King
Shaka International Airport and the Moses Mabhida Stadium, both of which are
on programme. Traditionally this market has been very competitive and in the
current tough climate margins are coming under pressure however there is
potential for future work in and around the new international airport at La
Mercy.
The Civil division had a pleasing year, completing work on Anglo Platinum`s
Potgietersrust mine, Nkomati Nickel for ARM and Phola Coal for Anglo Coal. The
decline in commodity prices has reduced spending on new mining infrastructure.
We have been fortunate to secure a contract from Eskom as part of a joint
venture for the main civil works at Kusile Power Station and have started work
for Foskor in Phalaborwa and on various contracts for Sasol in Secunda.
Subsidiaries
Probuild Constructions (Aust.) Pty Limited, once again achieved a solid
performance with revenue increasing by 53% to AU$666 million and attributable
profits increasing by 22%. The group has entrenched its position as a first-
tier contractor in the state of Victoria by being awarded several building
contracts in Melbourne in excess of AU$100 million and by increasing revenue
for the year by 47%. Conditions remain extremely competitive in Sydney and
despite increasing revenue by 55%, a small operating loss was incurred.
Brisbane achieved exceptional results for the year, increasing operating
profits threefold whilst revenue remained static. Performance in Perth was
largely influenced by the increase in the 140 William Street contract to
AU$200 million, as a result both revenue and contracting margin improved
substantially. Our civil engineering subsidiary which operates in Western
Australia, achieved good results for the year and also increased its client
base.
The global financial crisis has impacted upon the Australian economy but the
initial signs are that the effect has not been as severe as that experienced
in other developed economies. Despite pressure on margins Probuild is
budgeting to increase both revenue and profit in 2010.
The Building and Civil division commences the new financial year with an order
book of R11,5 billion.
ROADS & EARTHWORKS DIVISION
This division achieved an exceptional performance for the year under review
with a 65% increase in its revenue to R4,5 billion (2008: R2,7 billion) and
increasing its operating profit by 60% to R598 million (2008: R374 million).
Government spending has been slower than anticipated and is moving towards
improving service delivery, an area on which we will focus.
In the North division we have recently completed the upgrade of the Sishen-
Saldanha railway line and we are the lead partner on the R1,9 billion Gauteng
Freeway Improvement project. Work on the Ingula Dam project for Eskom is
progressing well and the division continues with work at OR Tambo
International Airport and a large tailings facility for Gold Fields.
The Central division concentrates largely on work in and around the mining
areas of Mpumalanga. A major highlight was the successful commissioning of the
coal processing plant at Klipspruit mine for BHP Billiton. Projects in the
Ogies, Witbank and Nkomati areas are ongoing and we await further awards in
the Secunda/Leandra area.
The Roads and Earthworks Coastal division is the lead partner of the joint
venture responsible for executing the civil works at the new King Shaka
International Airport north of Durban. This contract has some very tight
deadlines and, despite the recent strike, is still on track to deliver in time
for the 2010 Soccer World Cup. Work continues on the R700 million AC waterline
replacement project for eThekwini Metro.
The over-border divisions have experienced an exceptional year with major
contracts completed in the DRC copper belt for the Tenke Fungurume mine. We
continue to expand our projects relating to mining operations in Ghana and
Zambia. In Mozambique work was completed for the Beluluane pipe factory and
roadworks continue in Mapapa. The upgrade of the Sir Seretse Khama
International Airport in Gaborone, Botswana, was completed and the first
aircraft landed on the new improved concrete runway on 1 July 2009.
Swaziland`s Mbabane Bypass opened successfully in May 2009. These divisions
have also provided resources for the Barberton road contract for SANRAL, which
has been completed and are currently providing assistance on the Polokwane and
Nelspruit by-passes.
Subsidiaries
Edwin Construction (Pty) Limited improved its revenue substantially during the
year enabling it to successfully tender on larger contracts. The upgrading of
the Ogies to Witbank road is going well and in the North West province the
link roads and bridges between the N4 and Bafokeng Stadium near Rustenburg are
making good progress.
Matkovich & Hayes (Pty) Limited has successfully handed over the Dunblane
project near Newcastle and work on the Nondela Golf Estate in the Drakensberg
is also nearing completion. The demand for residential golf estates in South
Africa has decreased markedly and the company has been obliged to extend its
field of operations. As a result it has been awarded the landscaping contract
for the King Shaka International Airport.
Insitu Pipelines (Pty) Limited, a company specialising in providing innovative
technology for trenchless solutions, is well positioned to benefit from
infrastructure spend in the service delivery market. This year revenue
increased by more than 200% and 2010 should also prove to be another
successful year.
Our strategy going forward is to consolidate and maintain market share by
carefully selecting our projects and clients, especially in Africa. The Roads
and Earthworks division is experiencing increased competition with tighter
margins and fewer contracts being let, we have nevertheless secured contracts
to the value of R3,8 billion going forward.
INDUSTRIAL DIVISION
WBHO holds a 50% interest in Capital Africa Steel (Pty) Limited (CAS), an
associate, which invests in companies active in the steel industry and in
ready-mix and quarrying operations.
Trading has been difficult due to the volatility in the price of steel and
price reductions in the second half of the year have impacted margins.
Conditions are expected to remain competitive in the new financial year.
The ready-mix and quarrying results for the year have been well below forecast
due to the heavy rainfall experienced on certain contracts and delays in the
start-up of the power station contracts. CAS acquired a controlling interest
in the Bela Bela quarry near Gaborone in Botswana. Although margins are likely
to be affected, this sector is expected to remain profitable in 2010.
A joint venture between CAS and the Seven Star Group of China was established
to manufacture steel piping for the gas and petro-chemical industries.
Construction of the new factory facility is complete and we are now in the
last stages of plant commissioning. World-wide, the pipe market remains flat
and is only expected to start to improve in the first quarter of 2010.
However, the local market has some life and a reasonable order book has been
secured. The company is budgeting for modest profits during its first year of
operations.
As a whole CAS is budgeting for higher revenue and operating profit in 2010
but due to a significant increase in finance charges, profit after tax is
expected to be lower than that achieved this year.
PROPERTY
Sales in our two property developments have been slow due to the decline of
activity in the real estate market. Despite this, the property division has
recorded R1,7 million profit, we do not expect this market to improve in the
next financial year, however we do foresee opportunities for selective
investments.
TRANSFORMATION
The Construction Industry Charter was gazetted on 5 June 2009, an event
welcomed by the whole industry. WBHO is rated as a level 4 contributor, which
gives our clients 100% BEE procurement recognition. As training, mentoring and
shadow processes start to bear fruit, employment equity is accelerating across
all levels in the group, including the employment of women.
PROSPECTS
The order book at the start of 2010 stands at R15,3 billion (2008: R18,3
billion). Despite the recessionary conditions in the global and local
economies our outlook for the South African construction industry remains
positive. The group is well positioned to participate in the government`s
infrastructural spend and to secure work in the private market. The decrease
in funding available to clients and the strong cash position of the group will
provide various opportunities to secure additional work in the future. We
continue to explore for opportunities outside the country, particularly in
Africa and the United Arab Emirates.
APPRECIATION
The board would like to thank each and every employee for their loyalty and
hard work throughout the year.
The company`s strength lies in its loyal and committed people and in a
management team which, having been together on average for 20 years, has the
same culture and values and is well qualified and experienced.
DIVIDEND DECLARATION
Notice is hereby given that a final dividend of 200 cents per share in respect
of the year ended 30 June 2009 has been declared payable to all shareholders
recorded in the register on Friday, 23 October 2009, the record date. The last
day to trade cum dividend will be Friday, 16 October 2009 and the shares will
trade ex dividend on Monday, 19 October 2009. Payment will be made on Monday,
26 October 2009.
Share certificates may not be dematerialised or rematerialised between Monday,
19 October 2009 and Friday, 23 October 2009, both dates inclusive.
By order of the board
MS Wylie EL Nel
Chairman Chief Executive Officer
www.wbho.co.za
07 September 2009
Sponsor: Investec Bank Limited
Date: 07/09/2009 07:05:02 Produced by the JSE SENS Department.
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