| Mon 6 Sep 2010, 10:00 | | WBO - Wilson Bayly Holmes - Ovcon Limited - Reviewed financial results for the |
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WBO
WBO
WBO - Wilson Bayly Holmes - Ovcon Limited - Reviewed financial results for the
year ended 30 June 2010
WILSON BAYLY HOLMES - OVCON LIMITED
Building and civil engineering contractors
(Registration no. 1982/011014/06)
ISIN No: ZAE 000009932
Share code: WBO
Reviewed financial results for the year ended 30 June 2010
Revenue up 3%
Operating profit up 21%
Headline earnings up 8%
Condensed consolidated statement of financial performance
Reviewed Audited
% June 2010 June 2009
change R`000 R`000
Revenue 3 15 201 095 14 768 807
Operating profit before non-trading
items 21 1 274 174 1 048 716
(Impairment of goodwill)/realisation
of negative goodwill (219) 2 101
Fair value adjustment to investments 2 583 4 653
Loss on disposal of investments (5 682) -
Share-based payment expense (8 922) (22 974)
Operating profit 1 261 934 1 032 496
Share of profits and losses in
associates (30 385) 31 480
Income from investments 279 505 328 704
Operating income 1 511 054 1 392 680
Finance costs (17 018) (31 847)
Profit before taxation 1 494 036 1 360 833
Taxation (466 524) (398 033)
Profit for the year 7 1 027 512 962 800
Operating margin (%) 8,4 7,1
Profit attributable to
Equity shareholders of Wilson Bayly
Holmes-Ovcon Limited 954 282 889 928
Non-controlling interests 73 230 72 872
1 027 512 962 800
Reconciliation of headline earnings
Attributable profit 954 282 889 928
Adjustments net of tax:
(Impairment of goodwill)/net
realisation of negative goodwill 219 (2 101)
Loss on disposal of investments 5 682 -
Profit on disposal of property, plant
& equipment (2 666) (5 330)
Headline earnings 8 957 517 882 497
Ordinary shares
Issued (`000) 66 000 66 000
Weighted average number of shares
(`000) 54 791 54 787
Diluted weighted average number of
shares (`000) 54 987 54 973
Earnings per share (cents) 7 1 741,7 1 624,3
Diluted earnings per share (cents) 1 735,5 1 618,8
Headline earnings per share (cents) 8 1 747,6 1 610,8
Diluted headline earnings per share
(cents) 1 741,4 1 605,3
Dividend per share (cents) 330,0 300,0
Condensed consolidated statement of comprehensive income
Reviewed Audited
June 2009 June 2010
R`000 R`000
Profit for the year 1 027 512 962 800
Translation of foreign entities (36 427) (61 002)
Total comprehensive income for the year 991 085 901 798
Total comprehensive income attributable to
equity shareholders of Wilson Bayly Holmes-
Ovcon Limited 917 855 828 926
Non-controlling interests 73 230 72 872
991 085 901 798
Condensed consolidated statement of financial position
Assets
Non-current assets 2 231 545 2 162 107
Property, plant and equipment 1 203 769 1 113 672
Goodwill 293 056 206 261
Investment in associates 448 670 428 502
Other non-current assets 286 050 413 672
Current assets 7 159 445 7 445 721
Other current assets 3 268 406 3 412 412
Cash and cash equivalents 3 891 039 4 033 309
Total assets 9 390 990 9 607 828
Equity and liabilities
Capital and reserves 3 261 139 2 579 993
Ordinary share capital and reserves 3 057 769 2 384 550
Non-controlling interests 203 370 195 443
Non-current liabilities 82 049 376 887
Long-term financial liabilities 24 946 21 768
Other non-current liabilities 57 103 355 119
Current liabilities 6 047 802 6 650 948
Other current liabilities 6 047 802 6 649 902
Bank overdrafts - 1 046
Total equity and liabilities 9 390 990 9 607 828
Condensed consolidated statement of changes in equity
Reviewed Audited
June 2009 June 2010
R`000 R`000
Ordinary share capital and reserves at the
beginning of the year 2 384 550 1 731 904
Profit for the year 954 282 889 928
Other comprehensive income for the year (36 427) (61 002)
Dividend paid (193 974) (172 589)
Treasury shares sold/(acquired) 3 586 (6 359)
Share based payment expense 8 922 22 974
Goodwill recognised in equity as part of a
staged acquisition (63 170) -
Change in shareholding of subsidiaries - (20 306)
Ordinary share capital and reserves at the
end of the year 3 057 769 2 384 550
Condensed consolidated statement of cash flows
Cash generated from operations 1 052 772 2 287 500
Finance income 279 505 328 704
Finance costs (17 018) (31 847)
Taxation paid (608 592) (527 739)
Dividend paid (193 974) (172 589)
Cash retained from operations 512 693 1 884 029
Net cash flow from investing activities (599 282) (505 434)
Net cash flow from financing activities (54 635) (123 256)
Net (decrease)/increase in cash and cash
equivalents (141 224) 1 255 339
Cash and cash equivalents at the beginning
of the year 4 032 263 2 776 924
Cash and cash equivalents at the end of the
year 3 891 039 4 032 263
Condensed consolidated segmental analysis
Segment revenue
Building and civil engineering 5 469 684 5 363 391
Roads and earthworks 4 609 889 4 469 874
Australia 4 534 442 4 674 588
Other operations 587 080 260 954
15 201 095 14 768 807
Segment result
Building and civil engineering 430 024 309 496
Roads and earthworks 629 779 586 177
Australia 152 241 124 721
Other operations 62 130 28 322
1 274 174 1 048 716
Basis of preparation
The condensed consolidated financial results 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 2010 are consistent with
those applied for the previous year. IAS 1: Presentation of Financial Statements
has been adopted and changes to the terminology, format and content of the
financial statements have been applied. Following the adoption of IFRS 8, which
requires that operating segments be identified and reported on the same basis as
is done internally, comparative figures have been reclassified accordingly.
Wilson Bayly Holmes-Ovcon Limited (WBHO) makes estimates and assumptions
concerning the future, particularly in regard to construction profit
recognition, provisions, 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
South Africa Inc. and their unmodified review opinion is available for
inspection at our registered office.
Financial overview
The group has produced a solid performance in a challenging environment.
Operating profit before non-trading items increased 21% from R1 billion in 2009
to R1,3 billion this year. The operating margin at 8,4% is higher than the 2009
margin of 7,1% which had been eroded by a material debt write off.
Earnings per share improved 7% to 1 742 cents and headline earnings per share
improved 8,5% increasing to 1 747 cents. Revenue increased to R15,2 billion
(2009: R14,8 billion) and net profit after tax increased to R1,028 billion
(2009: R963 million).
The group`s net cash position reduced slightly to R3,9 billion (2009: R4
billion) due to the absorption of early contract payments, the drop in interest
rates and the strengthening of the rand. The group has also provided short-term
contract financing to a few selected clients.
Capital expenditure amounted to R256 million this year (2009: R215 million). The
group has approved capital expenditure of R401 million for the next financial
year, the majority of which will be utilised to equip new contracts in Africa
and to the replace existing items of plant. To date, R69 million of the approved
capital budget has been committed.
During the year the group acquired a further 6,8% interest in its Australian
subsidiary, Probuild Constructions (Proprietary) Limited (Probuild). This
increased the total effective interest in Probuild to 69,4%.
In October 2009, the group increased its shareholding in Roadspan Holdings
(Proprietary) Limited (Roadspan) from 30% to 70%. The results of the company
have subsequently consolidated into the group`s financial statements. The fair
value of the assets and liabilities amounting to R34 million were acquired for
R65 million. Goodwill of R31 million was recognised as part of the
transaction.Revenue of R439,4 million and a loss before tax of R45,3 million
have been included in the group`s results since the acquisition date.
Guarantees given to financial institutions on behalf of subsidiary companies
remains unchanged at R3,6 billion. The directors believe any exposure to loss is
unlikely.
A final dividend of 220 cents per share (2009: 200 cents) has been declared
which, together with the interim dividend of 110 cents per share amounts to a
total dividend of 330 cents for the year (2009: 300 cents), an increase of 10%.
Building & civil engineering
This year must be counted as the most eventful year ever experienced by the
division after the completion on time of numerous projects for the World Cup.
The division is immensely proud of the part that it played in enabling the
successful hosting of the largest tournament in the world.
The financial performance of the Building and Civil Engineering division this
year was in line with projections at the outset of the year. The division
achieved a turnover of R5,5 billion comparable with that achieved in 2009 of
R5,4 billion. Operating profit increased 39% to R430 (2009: R309 million). The
increase is partly attributable to the irrecoverable debts of R95,4 million
written off against 2009 profits.
The North division had an extremely busy year securing more projects than it
could execute alone. Fortuitously, this burst of activity in Gauteng coincided
with a decline in activity in the coastal divisions which enabled them to
redeploy excess resources to assist the North division.
The Civil Engineering division concentrated on projects for Eskom, Sasol,
Transnet, the mining industry and also contributed to the civil works on two
World Cup stadiums. Continuing work on the Duncan dock in Cape Town is
progressing well.
A strong presence had been maintained in the Western Cape where, over and above
its contribution to the successful completion of the Greenpoint stadium, the
Cape division engaged in residential, commercial, education and healthcare
related projects. In 2009 the Cape division successfully expanded into Zambia to
exploit opportunities in that country and further projects are currently being
negotiated.
The bulk of the work in KwaZulu-Natal related to the World Cup with hospital
projects and commercial developments continuing to be a source of work. This
market is very competitive and we can expect further declines in construction
activity.
The Coega Development Zone, a quasi-governmental initiative to create industrial
opportunities in Port Elizabeth and the surrounding areas, has been an ongoing
source of projects for the Eastern Cape division. Private and provincial
hospital work constituted the remainder of the division`s work in this region.
The Building and Civil division starts the 2011 financial year with an order
book of R4,3 billion (2009: R5,8 billion). Project finance is difficult to
obtain for some developers and the division continues to secure additional work
through the provision of mezzanine finance on selected projects. A proven track
record of reliability combined with long-term relationships with loyal clients
continue to be a source of ongoing commercial projects for the division which is
well equipped to maintain its activity levels in the year ahead.
Roads & earthworks
The Roads and Earthworks division achieved a satisfactory result for the year
under review improving both revenues and operating profits. Revenue for the year
amounts to R4,6 billion (2009: R4,5 billion) and the operating profit of R630
million (2009: R586 million) showed substantial improvement.
The North, Coastal and International business units were all involved in World
Cup related projects. The North, in joint venture, successfully delivered its
section of the Gauteng Freeway Improvement Programme (GFIP), which was the
section from the Buccleuch interchange to the 14th Avenue off ramp. This
contract was handed over to SANRAL ahead of schedule. The Polokwane and
Nelspruit bypass contracts were also completed on time for SANRAL.
The Coastal business unit has been extremely active on the King Shaka
International Airport (KSIA) contract in Ballito, where construction of the
runways and civil infrastructure was completed on time well before the opening
of the World Cup on 11 June. At the same time, the division completed the N2
interchange for the KSIA. This unit also completed construction of the Mount
Frere main road and has been involved with other infrastructure work in the
Eastern Cape.
In Mpumalanga the Central business unit has been involved in major projects
primarily for BHP Billiton and Anglo Coal and work continues in this region.
The International business unit was also deployed to assist with the successful
completion of the Nelspruit bypass for SANRAL. Extensions to the Sir Seretse
Khama Airport in Gaborone, Botswana and the Mbabane bypass in Swaziland were
finished during the year. Work continues in Ghana, Zambia, Zimbabwe and
Botswana. This unit has been able to maintain its workload in Africa despite its
contract in the DRC coming to an end. The resources market has started to
recover and the division has been awarded new work in Sierra Leone and
Mozambique.
Insitu Pipelines (Proprietary) Limited, engaged in a number of large contracts
for private clients as well as ongoing projects for several municipalities.
Roadspan has been involved in resurfacing five GFIP related contracts.
The roads and earthworks market in South Africa has contracted, competition for
work has increased and tender margins are under pressure. Although there is less
activity on the upgrade and renewal of provincial roads, SANRAL continues to let
out work in line with its strategic plan.
In the local resources sector, mining houses have resumed investment in
infrastructure projects with a consequent increase in tender activity. The
division is optimistic that this trend will continue. The resources drive in
Africa and Australia continues to improve and the division has been able to
offer its services to a number of its clients in this market.
As at 1 July 2010, the order book for the Roads and Earthworks division amounts
to R3,8 billion (2009: R3,8 billion). The division is awaiting the award of a
number of large contracts which will continue beyond the new financial year.
Australia
Probuild`s revenue of R4,5 billion for the year was just below the record R4,7
billion achieved in 2009. As a result of stronger contract profit margins, year-
on-year operating profits increased from R125 million to R152 million, an
improvement of 22%. This is the tenth consecutive year of improvement in profits
for Probuild who are now firmly established as a tier one contractor.
In Melbourne, there were a number of projects completed or nearing completion at
the end of the financial year. The Myer Retail Store redevelopment is on
programme and will be completed by November 2010. Probuild`s largest residential
project, the 40-storey Bank Apartments tower, which commenced in February 2009,
remains on schedule for an August 2011 completion. In Perth, the R1,5 billion
One-40 William Street development was completed during the year.
Projects completed during 2010 in Sydney included the Royal Randwick Racecourse
redevelopment and and the Grosvenor Apartments multi-storey residential
projects. In Queensland a number of smaller projects were completed during the
year for the company`s main client, Main Roads. The company`s largest current
project in the state, the Gold Coast freeway upgrade, remains on schedule for
completion in November 2010.
Probuild begins the year with an order book of R4,1 billion (2009: R5,8 billion)
which represents 90% of the revenue achieved in 2010. In addition the company is
well advanced in exclusive negotiations to secure major projects in both
Melbourne and Perth. Margins have declined throughout the country and the
company will be challenged to achieve the same level of profit in 2011 as was
achieved this year.
Projects
This year the Projects unit was mainly engaged on the King Shaka International
Airport and achieved solid returns. Projects are involved in a number of
opportunities including the N1/N2 Winelands toll road bid and a significant
number of public, private partnerships introduced by government.
Property
The real estate market continues to remain depressed and this has curtailed
investment in developments. However it is pleasing to note that a steady flow of
sales was maintained in the Simbithi Eco-Estate development near Ballito.
Associates
The group`s interests in associated companies include a 50% shareholding in
Capital Africa Steel (Proprietary) Limited (CAS) and a 26,6% holding in
Gigajoule International (Proprietary) Limited. CAS operates in the construction
materials and steel sectors and Gigajoule is engaged in the procurement and
delivery of natural gas. Following the impact of the recession on the steel
industry, CAS incurred a loss during the year. Gigajoule International
(Proprietary) Limited contributed to group profits.
Late last year, CAS commissioned its greenfields pipe mill in Matola,
Mozambique. This year focus has been placed on improving production capacity and
the mill is expected to achieve profitability in 2011. Due to the lack of mining
activity and delays on certain major contracts, the ready mix concrete business
experienced a loss while the rebar and roof bolt businesses produced reasonable
results. Looking forward conditions for all the business units will remain
difficult.
Safety
Safety remains a prime focus and we continually seek to raise standards
throughout the group.
Unfortunately, management regrets to report that it suffered four fatalities
during the year. This year the group achieved an LTIFR of 1,5 (2009: 2,7), a 56%
improvement. The target is to reduce this to 1,0 in the coming year.
Transformation
This year WBHO scored well in the elements of the scorecard and were rated as a
level 3 contributor, which gives our clients 110% BEE procurement recognition in
line with the Construction Charter. Employment equity remains a challenge and
the group continues to concentrate on training, mentoring and shadowing
processes to further increase the number of black management staff in WBHO over
the next few years, including the employment of senior black women.
Prospects
Recovery from the global financial crisis has been slower than initially
expected and the construction industry tends to lag the economic cycle by
between 6 and 18 months. Fixed investment by the private sector has slowed and
the industry has put much store in the infrastructural works programme announced
by the government.
Asia has not been affected by the global crisis to the same degree as the
industrialised world and continues to achieve reasonable growth, especially
China and India. This growth has fortunately increased the demand for resources,
particularly from Australia and Africa. It is in this arena that the group is
actively pursuing opportunities.
The order book at the 1 July 2010 stood at R12,1 billion (2009: R15,3 billion).
As has been stated previously it is expected that 2011 and 2012 will be
difficult years for the group and the industry, but it is believed that WBHO is
well positioned to meet these challenges.
Appreciation
The board would like to thank all management and staff for having gone the
"extra mile" in order to deliver on every project deadline, especially for the
2010 World Cup. It also extends its gratitude to all the group`s stakeholders
who have supported us during the year.
Dividend declaration
Notice is hereby given that a final dividend of 220 cents per share in respect
of the year ended 30 June 2010 has been declared payable to all shareholders
recorded in the register on Friday, 22 October 2010, the record date. The last
day to trade cum the dividend will be Friday, 15 October 2010 and the shares
will trade ex the dividend on Monday, 18 October 2010. Payment will be made on
Monday, 25 October 2010.
Share certificates may not be dematerialised or rematerialised between Monday,
18 October 2010 and Friday, 22 October 2010, both dates inclusive.
By order of the board
MS Wylie EL Nel
Chairman Chief Executive Officer
Johannesburg
6 September 2010
www.wbho.co.za
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