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BSR
BSR
BSR - Basil Read Holdings Limited - Unaudited results for the six months ended
30 June 2010
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
Unaudited results for the six months ended 30 June 2010
Revenue up 26%
Operating profit up 9%
Earnings per share down 26%
Order book of R8,1 billion
Summarised consolidated income statement
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Revenue 2 621 176 2 073 897 4 662 492
Operating profit for the period 202 207 186 310 429 238
Amortisation of intangible (23 498) (4 502) (20 488)
assets
Net finance income 547 36 3 019
Share of profits from associates 502 25 10
Profit for the period before 179 758 181 869 411 779
taxation
Taxation (52 239) (59 277) (140 869)
Profit for the period after 127 519 122 592 270 910
taxation
Profit for the period
attributable to the following:
Equity shareholders of the 128 629 122 116 274 270
company
Minority interest (1 110) 476 (3 360)
Net profit for the period 127 519 122 592 270 910
Earnings per share (cents) 103,90 141,21 317,15
Diluted earnings per share 103,90 141,21 316,49
(cents)
Dividend paid per share (cents) 42,00 58,00 58,00
Dividend declared per share - - 42,00
(cents)*
*Based on the year to which the dividend relates
Summarised consolidated statement of comprehensive income
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Net profit for the period 127 519 122 592 270 910
Other comprehensive income for (3 089) (5 054) (4 125)
the period, net of tax
Movement in foreign currency (2 423) (5 054) (4 404)
translation reserve
Movement in fair value (666) - 279
adjustment reserve
Total comprehensive income for 124 430 117 538 266 785
the period
Total comprehensive income for
the period attributable
to the following:
Equity shareholders of the 125 238 117 062 269 495
company
Retained income 128 629 122 116 274 270
Other reserves (3 391) (5 054) (4 775)
Minority interest (808) 476 (2 710)
Total comprehensive income for 124 430 117 538 266 785
the period
Summarised consolidated statement of financial position
Unaudited Unaudited Audited
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
ASSETS
Non-current assets 1 844 319 912 807 1 647 284
Property, plant and equipment 976 449 726 302 798 490
Intangible assets 754 283 145 813 723 174
Investments in jointly 22 345 12 001 26 324
controlled entities
Investments in associates 1 851 171 1 383
Available-for-sale financial 27 661 2 25 414
assets
Deferred income tax asset 61 730 28 518 72 499
Current assets 2 668 724 1 789 506 2 543 292
Inventories 49 711 32 796 24 928
Development land 324 871 188 051 280 718
Trade and other receivables 1 140 269 633 639 782 934
Work in progress 269 603 118 957 197 644
Investments in jointly 359 1 351 -
controlled entities
Current income tax asset 15 264 9 823 11 029
Cash and cash equivalents 868 647 804 889 1 246 039
Non-current assets held-for-sale - 48 055 -
4 513 043 2 750 368 4 190 576
EQUITY AND LIABILITIES
Capital and reserves 1 590 861 864 042 1 499 704
Stated capital 948 667 466 138 948 667
Retained income 626 787 392 600 549 213
Other reserves (355) 2 757 3 036
Minority interests 15 762 2 547 (1 212)
Non-current liabilities 440 060 255 192 515 947
Interest bearing borrowings 260 854 180 900 350 852
Other borrowings 96 245 39 378 79 357
Deferred income tax liability 82 961 34 914 85 738
Current liabilities 2 482 122 1 609 961 2 174 925
Trade and other payables 1 171 451 855 193 997 740
Amounts due to customers 423 803 395 867 485 893
Current portion of borrowings 650 112 254 873 459 979
Provisions for other liabilities 152 034 64 828 130 174
and charges
Current income tax liability 39 431 39 200 76 905
Bank overdraft 45 291 - 24 234
Liabilities directly associated
with non-current assets
classified as held-for-sale - 21 173 -
4 513 043 2 750 368 4 190 576
Statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Issued capital
Ordinary share capital
Balance at the beginning of the 948 667 466 134 466 134
year
Issued to share incentive scheme - 4 10
(net of treasury shares)
Acquisition of subsidiary - - 482 523
Balance at the end of the period 948 667 466 138 948 667
Retained income
Balance at the beginning of the 549 213 315 607 315 607
year
Total comprehensive income for 128 629 122 116 274 270
the period
Share based payment - equity 1 829 5 043 9 612
settled
Transactions with minorities (883) - (128)
Dividend declared (52 001) (50 166) (50 148)
Balance at the end of the period 626 787 392 600 549 213
Other reserves
Balance at the beginning of the 3 036 7 811 7 811
year
Total comprehensive income for (3 391) (5 054) (4 775)
the period
Balance at the end of the period (355) 2 757 3 036
Minority interests 15 762 2 547 (1 212)
Summarised consolidated statement of cash flows
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Operating cash flow 308 365 277 125 624 756
Movements in working capital (401 076) (110 827) (122 419)
Net cash generated by operations (92 711) 166 298 502 337
Net finance income 547 36 3 019
Dividends paid (51 572) (50 616) (50 623)
Taxation paid (91 577) (126 642) (203 095)
Cash flow from operating (235 313) (10 924) 251 638
activities
Cash flow from investing (19 430) (48 044) (141 077)
activities
Cash flow from financing (143 706) (74 681) 167 487
activities
Movement in cash and cash (398 449) (133 649) 278 048
equivalents
Cash and cash equivalents at the 1 221 805 943 757 943 757
beginning of the year
Cash and cash equivalents at the 823 356 810 108 1 221 805
end of the period
Included in cash and cash
equivalents as per the
balance sheet 823 356 804 889 1 221 805
Included in the assets of the - 5 219 -
disposal group
823 356 810 108 1 221 805
Summarised consolidated segment report
Operating Operating Operating Operating
Revenue profit margin margin margin
30 June 30 June 30 June 30 June 31 December
2010 2010 2010 2009 2009
R`000 R`000 % % %
Construction 1 932 865 159 318 8,24 7,80 7,90
Mining 362 730 46 158 12,73 15,02 16,77
Developments 14 688 2 074 14,12 8,04 9,08
Engineering 310 893 (5 343) (1,72) - -
Total 2 621 176 202 207 7,71 8,98 9,21
Additional information to the interim financial statements
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
2010 2009 2009
Number of shares in issue (`000) 123 797 86 476 123 797
Headline earnings per share 104,34 153,66 333,12
(cents)
Diluted headline earnings per 104,34 153,66 332,43
share (cents)
Reconciliation of basic earnings R `000 R `000 R `000
to headline earnings
Basic earnings 128 629 122 116 274 270
Adjusted by
- Loss on sale of subsidiary - 130 130
- Loss/(profit) on sale of 536 (1 102) 2 151
property, plant and equipment
- Impairment of fixed assets in - 11 737 11 528
disposal group
Headline earnings 129 165 132 881 288 079
Reconciliation between weighted
average number
of shares and diluted average `000 `000 `000
number of shares
Weighted average number of 123 797 86 476 86 479
shares
Adjusted by - Share Incentive - - 181
Scheme
Diluted average number of shares 123 797 86 476 86 660
Net asset value per share 1 285,06 999,17 1 211,42
(cents)
Tangible net asset value per 675,77 830,55 627,26
share (cents)
Capital expenditure for the 256 626 80 941 170 675
period (R`000)
Depreciation (R`000) 105 291 86 922 171 669
Impairment (R`000) - 11 737 11 528
Amortisation of intangible asset 23 498 4 502 20 488
(R`000)
Commentary
The consolidated abridged interim financial statements have been prepared in
terms of International Financial Reporting Standards ("IFRS"), IAS 34 on
Interim Financial Reporting, AC 500 Standards as issued by the Accounting
Practices Board or its successor, Schedule 4 of the South Africa Companies Act
as amended and the JSE Listings Requirements. The principal accounting
policies used in the preparation of the unaudited results for the six months
ended 30 June 2010 are consistent with those applied for the year ended 31
December 2009 and for the unaudited results for the six months ended 30 June
2009 in terms of IFRS.
Overall review
The successful hosting of the 2010 FIFA World Cup in the first half of 2010
showcased the achievements of the construction sector with the various
stadiums, airports and networks of roads proudly on display for all football
lovers to enjoy. Basil Read is proud to have been a contributor to the success
of the tournament through the construction of the Mbombela Stadium in
Nelspruit and having reached the required milestone on packages D1 and D2 of
the Gauteng Freeway Improvement Project. The abundance of work that the
construction sector has enjoyed in recent years has enabled Basil Read to grow
and develop into a well managed sustainable entity.
On the back of solid growth in domestic construction operations, the group has
successfully secured contracts in various African countries as it seeks to
mitigate geographic risk and establish a global presence. Despite trying
economic times, Basil Read has produced a satisfactory set of results for the
six months to June 2010.
The board is proud to report steady growth, with revenue of R2,6 billion (June
2009: R2,1 billion), an increase of 26%. Operating profit increased by 9% to
R202,2 million (June 2009: R186,3 million), which translated into an operating
margin of 7,7% (June 2009: 9,0%). Net profit attributable to ordinary
shareholders increased by 5% to R128,6 million (June 2009: R122,1 million).
Earnings per share decreased by 26% to 103,90 cents (June 2009: 141,21 cents).
Headline earnings per share was 104,34 cents (June 2009: 153,66 cents), a
decrease of 32%. Although earnings increased for the period under review,
earnings per share and headline earnings per share decreased due to the 43%
increase in the weighted average number of shares in issue.
Other divisional results were mixed with a contraction in the mining division
being partly offset by strong growth being reported in the construction
division, bolstered by the acquisition of the Gerolemou/Mvela group in the
2009 financial year.
The poor performance of TWP can be attributed to the slow recovery in the
commodities market with mining houses remaining cautious regarding the
commissioning of new projects. Their performance was in line with expectations
at the time of acquisition and as the economic recovery gains traction, the
group expects the performance of TWP to improve, albeit more slowly than was
originally anticipated. The TWP group has integrated well into the Basil Read
structure and the group is exploring numerous areas of synergy.
Further impacting the results was the amortisation of intangible assets which
was at a level of R23,5 million (June 2009: R4,5 million). This included an
amount of R10,3 million relating to the acquisition of the TWP group.
Intangible assets are raised at the time of new acquisitions based on the
future benefit that is expected to accrue to the group from contracts that
exist at time of acquisition.
Operating cash flow was satisfactory at R308,4 million (June 2009: R277,1
million) but due to a significant increase in working capital and the
utilisation of cash to reduce debt levels, cash on hand declined from the
December level of R1,2 billion to a balance of R823,4 million (June 2009:
R810,1 million) at the reporting date.
The increase in working capital is largely due to an increase in trade and
other receivables, a direct result of the prevailing economic environment as
debtors extended their terms. A significant portion of the group`s cash is
tied up in its property portfolio, which comprises both residential and
industrial components. While the residential sector has been slow to recover
from the economic crisis, momentum is gathering in the industrial space and
the group expects to realise a portion of this cash in the foreseeable future.
The group continues to monitor its debt levels closely. Total debt increased
to R1,0 billion (December 2009: R890 million) largely as a result of a
significant investment in capital expenditure. New plant worth R256,6 million
(June 2009: R80,9 million) was acquired, of which R173,9 million (June 2009:
R15,2 million) was funded by instalment sale agreements.
Included in the short-term portion of interest-bearing borrowings is the
group`s domestic medium-term note programme totalling R225 million. Of this
amount, R100 million matured in August 2010 and was funded through a further
issue under the programme of R125 million, maturing in August 2011. The
remaining R125 million matures in February 2011. Also included in short-term
interest-bearing borrowings is a banking loan of R85 million, which was
settled out of cash balances during August 2010.
Total assets are reported at a level of R4,5 billion (December 2009: R4,2
billion), and the group 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
R2,6 billion (June 2009: R2,0 billion) and the order book is a healthy R8,1
billion (June 2009: R6,2 billion), of which R3,5 billion will be constructed
in 2011. The group has come in as the lowest bidder on a number of significant
tenders across the African continent, totalling R3,5 billion, and awaits
further communication in this regard.
At the reporting date, the group had issued guarantees in the amount of R1,5
billion (June 2009: R1,4 billion). 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.
Basil Read has maintained its rating as a level 4 BBBEE contributor, meaning
that companies are entitled to recognise 100% of the amount spent with our
group in calculating their procurement spend.
The group still faces challenges in certain areas to reach its goal of real,
sustainable economic empowerment, specifically management control, employment
equity and skills development. Several initiatives are under way to address
these areas, including the monitoring of middle to senior black management and
the provision of support and mentoring to all previously disadvantaged
individuals in the group`s employ.
Corporate activity
The 2009 financial year was characterised by significant acquisitive growth
and the six months to June 2010 have been spent integrating the newly acquired
companies. Basil Read`s strategy continues to be growth, not only organic, but
also through acquisition. During the first half of 2010 the group made a
strategic acquisition of a roads and civil engineering company based in
Botswana.
On 1 May 2010, the group acquired Sladden International (Botswana) (Pty)
Limited through an initial cash payment of R30,5 million and the recognition
of a deferred payment liability of R32,4 million, conditional on the company
achieving BWP 67,6 million net profit after tax in the three years post-
acquisition. Based on the provisional purchase price allocation, the
acquisition gave rise to the recognition of a contract based intangible asset
of R6,8 million and goodwill of R19,0 million. The company has been operating
in Botswana and neighbouring countries for more than 40 years and has an
established reputation with a valued client base. The acquisition provides
Basil Read with the ideal opportunity to expand its African footprint for a
relatively low initial investment.
On 1 June 2010, the group increased its stake in Newport Construction (Pty)
Limited from 70% to 100% through the buyout of the remaining minorities. The
purchase consideration for 30% of the company was R4,0 million and the
transaction resulted in the recognition of a loss on transactions with
minorities of R0,9 million.
Operational review
Safety, health, environmental, risk management and quality
Basil Read remains committed to safety, health, the environment, risk
management and quality (`SHERQ`) and continuously looks to improve in all of
these aspects. SHERQ is the cornerstone of Basil Read`s operations - the
driving force behind project delivery, teamwork, operational discipline and
overall business excellence.
The disabling injury frequency rate (`DIFR`) was a low 0,37 (December 2009:
0,58) for the period under review. Unfortunately, the group suffered two
fatalities on our sites during this period, which emphasizes the need to
continually train and teach staff regarding the various hazards associated
with construction sites.
Construction
Basil Read`s largest division continued to perform well in the review period
and reported revenue of R1,9 billion (June 2009: R1,7 billion) with operating
profit of R159,3 million (June 2009: R132,8 million). The order book remains
acceptable at a level of R5,3 billion (June 2009: R5,0 billion).
The roads division is currently working on a number of projects that form part
of the Gauteng Freeway Improvement Project - packages D1 and D2, covering
improvements between the Brakfontein and Flying Saucer interchanges, and the
N4 interchanges from Atterbury to Scientia as well as the improvement and
rehabilitation of section 19 of the busy N12 highway in Gauteng, which runs
from the R21 to the Tom Jones offramp.
New contracts secured locally by the division include two contracts on the
Free State Provincial Network. The first contract valued at R305,2 million
involves the rehabilitation and repair of 72,8km of road between Kroonstad and
Vredefort. The second contract, awarded to subsidiary Roadcrete Africa (Pty)
Limited, involves the repair and rehabilitation of the Bultfontein to
Wesselsbron Road, comprising 18,2km. This contract has a duration of 12 months
and is valued at R165,5 million.
Work continued on the 18 month project to upgrade 160km of gravel road to tar
between Gobabis and Otjinandi in Namibia, valued at R381 million.
The division secured a further cross border roads contract in Sierre Leone for
a reputable private client. This initial 14 month contract is valued at USD30
million. Site establishment commenced in March 2010 and the contract is
progressing well.
Further roads opportunities are apparent throughout the African continent and
the group is actively pursuing a number of these. Tenders have been submitted
for contracts in excess of R2 billion in Tanzania and Zambia and the group is
well placed to secure work in these areas.
Phase 1 infrastructure at the St Micheil`s International Lifestyle Estate was
completed in the period under review. Sales of serviced stands have been slow
to date, largely due to the slump in the secondary residential property
market. As the economy recovers, it is expected that sales will recover,
albeit slowly. The group is currently investigating bringing in investment
partners for the proposed hotel development and golf course. Infrastructure on
phase 2 is only likely to commence when significant sales in phase 1 have been
achieved.
The Gerolemou/Mvela group was successfully integrated into the buildings
division by the end of the 2009 financial year, adding critical mass to the
group`s ability to target larger projects in South Africa and across borders.
Work continued on a number of hospital projects around the country. The
further on-site projects that form part of the R315 million upgrade of Paarl
Hospital are scheduled for completion in December 2010.
The ongoing R1,5 billion Natalspruit Hospital project involving a 760 bed
facility for the Department of Public Works is progressing well and is
scheduled for completion in November 2011.
The 300 bed facility at Germiston Hospital for the Department of Public Works
has progressed to finishes and mechanical and electrical installations.
Completion is scheduled for November 2010.
The division secured a further contract from the Department of Public Works
comprising repair work to the Nurses College Residences for the Thaba Tshwane
Department of Defence: SAMHA College. This 24 month contract commenced in
March 2010 and is valued at R164 million.
Work continued on the R110 million contract to construct a new entrance
building for the University of South Africa. The five-storey multi-purpose
building will house offices, student gathering facilities and galleries.
The division continues to actively pursue private-public partnerships (PPPs)
as this type of business model enables the group to partner with larger teams
of architects and other development partners, in the process developing skills
and creating jobs. PPPs are characterised by long lead times and substantial
preliminary expenses, necessarily incurred in the preparation of this type of
bid.
The civils division continued to work in joint venture on the R2,9-billion
Kusile power station. Located next to the existing Kendal power station in the
Witbank area of Mpumalanga province, Kusile`s expected capacity will be 4
800MW, with the first unit planned for commercial operation in 2012.
Work continued in the Port of Durban on the complete infrastructure for Pier
Two and the R130 million container vehicle repair and straddle carrier
workshop. The Khangela Bridge over the M4 south freeway, constructed in joint
venture, was completed in the reporting period. Construction of the bridge
proved to be a challenge due to the constraints of lateral and vertical space.
The final structure was a unique and innovative design which led to a SAICE
Durban branch award for Most Outstanding Civil Engineering Project in
Technical Excellence.
The civils division secured the R172 million contract for the extension of the
Sunderland Ridge waste water treatment works for client, City of Tshwane
Municipality. This 16 month contract commenced in April 2010.
The division also secured the contract for the Grootgeluk - Medupi Expansion
Project - plant workshop in Limpopo Province. Works consist of a 2 230mSquared
steel frame and cladded workshop, including a double-storey office block and
other satellite structures.
Mining
The mining division reported revenue of R362,7 million (June 2009: R339,7
million) and operating profit of R46,2 million (June 2009: R51,0 million).
Despite the contraction in the review period, the division`s order book
remains promising at a level of R1,2 billion (June 2009: R1,0 billion).
The division continues to work at the Rossing uranium mine in Namibia for
owner Rio Tinto, one of the world`s largest mining houses.
Work is continuing at Venetia diamond mine, near Musina in Limpopo Province.
The R138-million contract for the mine`s percussion drilling project is
expected to be complete in September 2011.
The division is currently working at the Mapochs Mine, in Mpumalanga, for
Highveld Steel and Vanadium. The contract, which is being undertaken in
extremely challenging conditions, involves the drilling and blasting,
crushing, loading and hauling of 125 000 tons of material per month. The
contract is expected to be completed in June 2011 and has a remaining contract
value of R180 million.
The mining division commenced work at Jwaneng mine for Debswana in early 2010.
The 12 month contract is valued at more than R200 million. Works include
drilling, blasting and hauling of 20 million tons of waste.
In a joint venture, the division commenced a 24 month contract at the
Trekkopje mine, situated 140km north-east of Swakopmund in Namibia in the
Namib Desert. Contract work consists of the construction of the maxi leach
pad, seven solution ponds and crushing of the filter material. The contract is
being undertaken for Areva, a French company, whose core business is nuclear
power plants and the enriching and extraction of uranium.
Developments
The developments division contributed revenue of R14,7 million (June 2009:
R31,1 million) and operating profit of R2,1 million (June 2009: R2,5 million).
The division`s performance was affected by delays in the breaking of ground on
several projects. Given that government has reaffirmed its commitment to
eradicating informal settlements, with a concomitant effect on job creation
and poverty reduction, this division remains of strategic importance to the
group.
The development of the Doornkuil site, south of Johannesburg and recently
named Savanna City, has yet to break ground. Although the record of decision
has been received, delays have been experienced in the finalising of bulk
service agreements with the local municipality. Savanna City is being
developed in partnership with the Old Mutual group, which is providing
funding. This planned development, a R9-billion project, will be larger than
Cosmo City.
Klipriver Business Park, a pivotal spine between Johannesburg, Meyerton and
Ekurhuleni, is progressing well. Although sales of this industrial development
have been subdued to date, the group has received several serious enquiries in
recent weeks. Negotiations are ongoing but are expected to gain momentum in
the coming months.
In Cape Town, Basil Read is developing another integrated mixed-use
residential area in partnership with Garden Cities, the largest private land
owner in Cape Town and a non-profit group with an established track record of
90 years of providing affordable housing. Garden City New Town, a 700-hectare
property has been identified for low-cost, middle-income and bonded housing.
Similar to Cosmo City, the R9,7-billion project will include schools,
community centres, clinics, churches, parks, commercial and light industrial
areas. Regulatory approvals are beginning to flow and good relationships are
being built with stakeholders, including municipalities, government bodies and
communities.
Engineering
The engineering division reported revenue of R310,9 million and an operating
loss of R5,3 million. The division`s order book of R1,5 billion is defined as
an 18 month order book, although a number of the contracts included in this
figure will continue well beyond this 18 month period. The contract value for
the portion of work that extends beyond this 18 month period has not been
included in the divisional order book.
The group is in the process of finalising the purchase price allocation for
the TWP group. Adjustments made to date have resulted in an increase in
goodwill of R31,3 million. As Basil Read concludes this exercise, no material
adjustments are anticipated.
The Wesizwe Ledig Project is being executed on a small scope until December
2010. The division is currently busy with work that will ready the project for
full execution in 2011. The division is acting as EPCM contractor and is
aiming to conclude full EPCM negotiations before the end of the 2010 financial
year. Client negotiations for project funding are ongoing with a Chinese
consortium.
Four years of intensive hard work and effort has resulted in the successful
completion of the first phase of Konkola Copper Mine`s ("KCM") Konkola Deeps
Mining Project ("KDMP"). Responsible for the design of what is now one of the
largest steel headgears in the world, as well as extensive underground
infrastructure, the division considers KDMP to be one of its biggest design
project achievements. The 81,5m tall headgear (Konkola No. 4 shaft) - which is
a massive architectural feat - is part of the expansion project designed to
substantially increase the mine`s copper ore production from 2,5mtpa to
7,5mtpa. The division has also completed the design of the shaft steelwork for
the deepening of Konkola No. 1 shaft from its current 1 000m depth to 1 505m.
The design of the pumping and piping infrastructure is currently being
completed. This will provide the biggest pumping capacity from a mine of this
depth in the world - over 280 megalitres per day.
The twin shaft system project at Styldrift is set to start shaft sinking in
October 2010. Project progress to date has been good with a high quality
installation, and an excellent safety record. No lost time injuries have
occurred since the project commenced in March 2009. This project is on
schedule and on budget.
Underground infrastructure installation and commissioning at Impala`s No. 20
shaft is in full swing and on track, with the first reef hoisting to occur by
the end of 2010. Production is aiming to start in the first week of January
2011. Second reef hoisting is planned for March 2011.
The division has secured the single biggest shaft sinking EPCM contract for
the Impala 17 shaft project. This project will be commissioned in 2016 and it
will take a further four years to develop the mine to full production. The
project consists of three shafts being sunk concurrently, with the main shaft
being the deepest at nearly 2000m. This project will be the engineering
division`s flagship project for many years to come.
During the first quarter of 2010, the engineering process division secured
further work in the Democratic Republic of Congo and in Zambia. The projects
improved the pipeline in the copper and cobalt portfolio and will continue to
improve the pipeline with ramp-up to full production into 2013. In the second
quarter of 2010 a local gold project expansion was secured with its planned
production ramp-up starting in mid-2012. The sentiments around base metal
production improved during the second quarter and the division saw a marked
increase in request for tenders covering a broad range of commodities world
wide.
Prospects
Basil Read continues to actively pursue growth, both organic and acquisitive,
to build a company of critical mass for shareholders. The group remains
committed to its stated target of becoming a global construction group with
R10 billion turnover by 2013. Despite these uncertain economic times the trend
of development, particularly in sub-Saharan Africa, is expected to resume in
the near future.
Prospects remain good in the local economy with government`s commitment to
infrastructure investment reaffirmed, particularly relating to power supply,
transport and water supply capacity. There has been a definite delay in the
roll out of projects, but this is expected to resume post-World Cup. Budgetary
constraints in certain municipal areas create opportunities for the group to
partner with municipalities in developing innovative solutions to finance
future projects, particularly for our developments division.
Private-public partnerships remain a viable option for government to undertake
larger projects, without needing to commit the necessary funding. Given our
long-standing and robust partnerships with international construction
conglomerates and turnkey contractors, we are well placed to bid on projects
of this nature. Various PPP projects are in the pipeline, including government
office blocks, mixed classification correctional centres and toll roads. Basil
Read has pre-qualified for a number of these and submitted bids, in joint
venture, where applicable.
Government recently announced their intention to broaden the use of PPPs in
the health sector. The flagship PPP hospital project is Chris Hani Baragwanath
and the new George Mkhari and Polokwane academic health complexes are to be
fast-tracked. Basil Read has particular expertise in this area and aims to
submit bids in due course. The combined construction value for the group`s
targeted PPPs is over R17 billion.
Internationally, the group is building a presence in the rest of Africa, the
Middle East, Australia and South America, in partnership with selected local
contractors, where applicable.
Following a period in which commodity prices have been under pressure and
mining companies have had severe financial constraints being imposed by their
stakeholders, it is encouraging to report that the group has seen a
significant change in sentiment in the last few months. In the six months to
June, the group has secured work on new engineering projects with a capital
value exceeding R16 billion. Sixty-five percent of the new awards are for
projects outside the borders of South Africa. This freeing up in project flow
is expected to improve the staff utilisation and recovery ratios in the latter
part of 2010 and during 2011. A similar improvement has been noted in the
Australasian region and in South America where TWP has recently established a
presence in Peru.
On the back of a healthy balance sheet and effective management structure,
Basil Read will adopt a prudent approach to managing the prevailing volatility
to ensure the group continues to grow in a controlled and structured way.
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 complies with the Code as well as with the Listings
Requirements of the JSE Limited in all material respects. The group performs
regular reviews of its corporate governance policies and practices and strives
for continuous improvement in this regard.
The group is currently assessing the impact of King III and the new Companies
Act.
Board of directors
At the group`s annual general meeting, held on 6 May 2010, Mr Lungisa Dyosi
resigned as non-executive director with immediate effect.
Dividends
The board has reviewed the current period`s results 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
S L L Peteni (Chairman) M L Heyns (Chief Executive Officer)
31 August 2010
Directors: S L L Peteni*+ (Chairman),
M L Heyns (Chief Executive Officer), M D G Gouveia (Financial Director), N J
Townshend, C P Davies*+, S S Ntsaluba*, N Y September*+,
A T Tlelai*, G R Sibiya*+
(* Non-executive, + Independent, British)
Group Secretary: E Kruger
Registered office: 7 Brook Road, Lilianton, Boksburg, 1459
Auditors: PricewaterhouseCoopers Inc
Transfer secretaries: Link Market Services South Africa (Pty) Limited
Sponsor: Sasfin Capital (a division of Sasfin Bank Limited)
www.basilread.co.za
Date: 31/08/2010 14:00:01 Produced by the JSE SENS Department.
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