| Tue 16 Nov 2010, 7:05 | | BWI - B & W Instrumentation and Electrical Limited - Preliminary condensed |
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BWI
BWI
BWI - B & W Instrumentation and Electrical Limited - Preliminary condensed
consolidated audited financial results for the year ended 31 August 2010
B & W Instrumentation and Electrical Limited
Incorporated in the Republic of South Africa
(Registration number 2001/008548/06)
Share code: BWI ISIN: ZAE000098687
("B&W" or "the company" or "the group")
PRELIMINARY CONDENSED CONSOLIDATED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED
31 AUGUST 2010
Revenue up 19.6%
Order book R523 million
Net profit margin 9.6%
Cash positive R71,1 million
No interest-bearing debt
Consolidated statements of financial position
Audited Audited Audited
31 August Restated Restated
2010 31 August 31 August
R`000 2009 2008
R`000 R`000
ASSETS
Non-current assets 63 477 50 580 24 309
Property, plant and equipment 36 939 27 362 10 561
Deferred tax - 3 041 -
Goodwill 7 368 - -
Intangible assets 3 404 - -
Retention debtors 15 766 20 177 13 748
Current assets 400 914 331 442 236 941
Inventories 3 502 2 084 4 690
Loans to related parties 3 700 - 940
Other financial asset 3 484 - -
Trade and other receivables 319 146 189 594 120 684
Cash and cash equivalents 71 082 139 764 110 627
Total assets 464 391 382 022 261 250
EQUITY AND LIABILITIES
Equity 205 084 156 064 111 779
Share capital 38 583 32 285 32 285
Foreign currency translation 315 - -
reserve
Retained income 165 970 123 771 79 494
Non-controlling interest 216 8 -
Non-current liabilities 11 813 10 649 11 608
Finance lease obligation 131 - -
Deferred tax 11 682 10 649 11 608
Current liabilities 247 494 215 309 137 863
Loans from related parties 1 634 1 030 1 185
Financial liabilities 49 217 78 017 -
Current tax payable 6 841 6 065 18 130
Trade and other payables 181 079 126 295 116 718
Finance lease obligation 158 - -
Provisions 8 565 3 902 1 830
Total equity and liabilities 464 391 382 022 261 250
Number of ordinary shares in issue 204 373 959 200 000 000 200 000
000
Net asset value per share (cents) 100,35 78,03 55,89
Net tangible asset value per 95,08 78,03 55,89
share(cents)
Consolidated statements of comprehensive income
Audited Audited
31 August 31 August
2010 2009
R`000 R`000
Contract revenue 601 283 502 840
Cost of contracts (478 158) (397 062)
Gross profit 123 125 105 778
Other Income 1 040 1 279
Operating expenses (45 855) (31 506)
Operating profit 78 310 75 551
Investment revenue 3 567 7 750
Finance costs (323) (386)
Profit before taxation 81 554 82 915
Taxation (24 041) (23 631)
Profit for the year 57 513 59 284
Other comprehensive income
Foreign currency translation reserve 318 -
Total comprehensive income 57 831 59 284
Profit attributable to:
Owners of the parent 57 308 59 277
Non-controlling interest 205 7
57 513 59 284
Total comprehensive income attributable to:
Owners of the parent 57 623 59 277
Non-controlling interest 208 7
57 831 59 284
Profit attributable to:
Owners of the parent 57 308 59 277
Adjustment for headline earnings - (14) 236
(profit)/loss on sale of property,
plant and equipment
Headline earnings attributable to ordinary shareholders 57 294 59 513
Weighted average number of ordinary 201 275 738 200 000 000
shares in issue
Earnings per ordinary share (cents) 28,5 29,6
Headline earnings per ordinary 28,5 29,8
share(cents)
Consolidated statements of changes in equity
R`000 Share Share Treasury
capital premium shares
Balance at 1 September 2007 2 32 283 -
Total comprehensive income for the - - -
year
Dividends - - -
Issue of share capital - 6 703 -
Treasury shares - - (6 703)
Balance at 31 August 2008 2 38 986 (6 703)
Total comprehensive income for the - - -
year
Issue of share capital - 4 566 -
Treasury shares - - (4 566)
Dividends - - -
Balance at 31 August 2009 2 43 552 (11
269)
Total comprehensive income for the - - -
year
Issue of share capital - 6 298 -
Dividends - - -
Balance at 31 August 2010 2 49 850 (11
269)
R`000 Foreign Retained Minority Total
currency income interest equity
translation
reserve
Balance at 1 September 2007 - 32 658 - 64 943
Total comprehensive income for the - 57 836 - 57 836
year
Dividends - (11 000) - (11 000)
Issue of share capital - - - 6 703
Treasury shares - - - (6 703)
Balance at 31 August 2008 - 79 494 - 111 779
Total comprehensive income for the - 59 277 8 59 285
year
Issue of share capital - - - 4 566
Treasury shares - - - (4 566)
Dividends - (15 000) - (15 000)
Balance at 31 August 2009 - 123 771 8 156 064
Total comprehensive income for the 315 57 308 208 57 831
year
Issue of share capital - - - 6 298
Dividends - (15 109) - (15 109)
Balance at 31 August 2010 315 165 970 216 205 084
Consolidated statements of cash flows
Audited Audited
31 August 31 August
2010 2009
R`000 R`000
Cash generated from operations 23 305 17 945
Interest income 3 567 7 750
Finance costs (323) (387)
Tax paid (19 347) (39 695)
Net cash from operating activities 7 202 (14 387)
Purchase of property, plant and equipment (14 344) (20 592)
Sale of property, plant and equipment 314 313
Business combinations (11 653) -
Loans to related parties repaid (3 097) (1 183)
Proceeds from loans from group companies - 1 969
Purchase of financial assets (3 484) -
Net cash from investing activities (32 264) (19 493)
(Repayment of) proceeds from other financial (28 800) 78 017
liabilities
Inflow from finance lease 289 -
Dividends paid (15 109) (15 000)
Net cash from financing activities (43 620) 63 017
Total cash movement for the year (68 682) 29 137
Cash at the beginning of the year 139 764 110 627
Total cash at end of the year 71 082 139 764
Segmental reporting
South Africa Foreign Total
R`000 operations R`000
R`000
2010
Profit and loss
Contract revenue 320 142 281 141 601 283
Contract costs (263 527) (214 631) (478 158)
Gross profit 56 615 66 510 123 125
Other income 1 040 - 1 040
Operating profit 57 655 66 510 124 165
Investment income 3 567 - 3 567
Finance costs (323) - (323)
Depreciation and amortisation (5 715) (1 183) (6 898)
Operating expenses (20 742) (18 215) (38 957)
Taxation (6 095) (17 946) (24 041)
Profit after tax 28 347 29 166 57 513
Assets and liabilities
Total assets 412 525 51 866 464 391
Total liabilities (228 759) (30 548) (259 307)
2009
Profit and loss
Contract revenue 351 841 150 999 502 840
Contract costs (263 770) (133 292) (397 062)
Gross profit 88 071 17 707 105 778
Other income 525 754 1 279
Operating profit 88 596 18 461 107 057
Investment income 7 708 42 7 750
Finance costs (159) (227) (386)
Depreciation and amortisation (2 137) (1 103) (3 240)
Operating expenses (19 778) (8 488) (28 266)
Taxation (18 836) (4 795) (23 631)
Profit after tax 55 394 3 890 59 284
Assets and liabilities
Total assets 240 226 141 796 382 022
Total liabilities (138 476) (87 482) (225 958)
Notes
Deferred taxation
In the prior year, the deferred tax balances were disclosed as current and non-
current. In terms of IAS 1, deferred tax should always be presented as non-
current, even if a portion of the asset or liability will realise within the
next financial period.
As such, the amounts reflected in the statements of financial position have been
reclassified as non-current.
The restatement has no impact on the net asset position, the statement of
comprehensive income, earnings per share and headline earnings per share
reported previously.
The effects of the reclassification are as follows:-
Group
Statement of financial position 2009 2008
Deferred tax - current 9 967 11 051
Deferred tax - non-current (9 967) (11 051)
Operating segments
Previously, the group was managed based on the geographical location of its
operations. The basis on which operations are managed has changed in the year
under review to areas of risk and this has necessitated a change to the
disclosures made under the segmental reporting note.
Commentary
Basis of preparation
The accounting policies applied in the preparation of these preliminary
condensed audited annual financial statements, which are based on reasonable
judgements and estimates, are in accordance with International Financial
Reporting Standards ("IFRS") and are consistent with those applied in the
audited annual financial statements for the year ended 31 August 2009. These
preliminary condensed audited annual financial statements as set out in this
report have been prepared in terms of IAS 34: Interim Financial Reporting, the
Companies Act (Act 61 of 1973), as amended, the AC 500 Standards and the
Listings Requirements of the JSE Limited.
Audit opinion
The preliminary condensed annual financial statements for the year have been
audited by B&W`s auditors, Certified Master Auditors Inc. Their unqualified
audit report is available for inspection at the company`s registered office.
Introduction
The directors of B&W are pleased to present the preliminary condensed
consolidated audited financial results for the year ended 31 August 2010 ("the
year"), which reflect B&W`s resilience in the face of tough trading conditions.
Despite reduced levels of activity in the construction industry, the group
recorded satisfactory results. B&W ended the year with a strong balance sheet
reflecting no long-term debt and a substantial positive cash balance.
The group successfully weathered pressure on margins in the wake of the global
recession through ongoing project work in Africa, where the mining industry in
particular continues to offer promising opportunity. The results were boosted by
a significant proportion of work - which had been previously postponed due to
the economic downturn - being brought to account during the year. In addition,
initial recovery towards the end of the year in B&W`s target sectors in South
Africa had a further positive effect.
The acquisition of earthing, lightning and surge protection specialist Pontins
(Pty) Ltd ("Pontins") was finalised during the year. As part of the acquisition
intangible assets amounting to R4,3 million were acquired and goodwill arising
on the transaction totalled R7,4 million. The carrying amount of intangible
assets after amortisation is disclosed in the statements of financial position.
Pontins` results have been incorporated into these group results.
During the year B&W received 9EB accreditation from the Construction Industry
Development Board (CIDB) enabling the group to participate in public sector
works of unlimited size and value.
Group profile
The group is one of South Africa`s top three niche providers of electrical and
instrumentation ("E&I") services as well as specialist earthing, lightning and
surge protection solutions to the oil & gas, infrastructure, industrial,
utilities, mining, chemical and food & beverage industries across sub-Saharan
Africa. Services include equipment procurement, project supervision,
installation, post-installation commissioning and to a lesser degree ongoing
maintenance.
Financial results
Group revenue increased 19,6% to R601,3 million (2009: R502,8 million) due to
the materialisation of previously postponed orders, as well as new contracts
secured. Challenging trading conditions slightly depressed the gross profit
margin to 20,5% (2009: 21,0%).
Group operating expenses rose 45,5% to R45,9 million (2009: R31,5 million). This
amount includes once-off costs in respect of the acquisition of Pontins as well
as Pontins` operating costs. Excluding the once-off costs the increase is
commensurate with the increase in turnover and normal inflationary pressure.
Group profit before taxation ("PBT") amounted to R81,6 million (2009: R82,9
million) and net profit after tax attributable to ordinary shareholders totalled
R57,3 million (2009: R59,2 million). Group earnings declined slightly to 28,5
cents per share (2009: 29,6 cents per share) in line with the drop in net profit
after tax ("NPAT") and due to the dilution of additional shares issued for the
Pontins acquisition.
Cross-border contracts accounted for R281,1 million, or 46,8%, of revenue and
R66,5 million of gross profit equating to approximately 54,0% of total gross
profit reported.
The cash balance of R140 million at the beginning of the year halved to R71,1
million at year-end, primarily as a result of increased debtors and work in
progress as well as a reduction in upfront payments. Capital expenditure in the
ordinary course of business, the acquisition of Pontins, and the payment of the
interim dividend further contributed to this decrease.
Health & safety
B&W prides itself on excellence in maintaining health and safety standards. This
commitment is clearly reflected in the achievement during the year of the
milestone 1 000 000 accident-free hours on a B&W site.
Prospects
The after-effects of the recession are anticipated to impact the construction
industry for at least another 18 months. The board believes it may take even
longer to return to the activity levels of 2007/8. However, recent price
increases in some commodities may prove this time horizon overly-pessimistic.
At year-end B&W carried over work in hand to the value of R433 million as well
as anticipated annuity income of R90 million, the majority of which is scheduled
for completion in the year ahead prior to August 2011 with no expected delays.
A slow recovery in orders, supported by a focused marketing effort is
positioning the group to sustain top line growth. However, profit margins are
expected to remain tight for the foreseeable future and management is focusing
on operational efficiencies, which are critical to maintaining cash flow and
ensuring reasonable returns in a lower margin environment.
Looking beyond FY2011 B&W`s identified pipeline of projects is substantial. The
majority of these projects are in the mining industry and are currently in the
feasibility stage. Commencement time-frames will be dependent on global resource
pricing and the extent of risk appetite in the financial sector.
The discovery of new oil and gas reserves in a number of African countries as
well as the proposed refineries in South Africa, Angola and Mozambique present
further opportunities for the group, although the latter is expected to have an
impact only from 2013 onwards.
Recent developments in the regulatory framework of the South African power
generation industry could expose opportunity for private sector participation
and open a further avenue for growth.
Subsequent events
The board of directors is not aware of any material matters or circumstances
arising since year-end and up to the date of this report.
Dividend
Company policy is to declare a dividend equal to 25% of NPAT, cash flow
permitting. In light of the cash balance on hand at year-end as well as the
company`s long-term interest-bearing debt free record, the directors feel that
there is no need to deviate from this policy and have declared a final dividend
of 4,5 cents per share (2009: 5 cents per share). This, together with the
interim dividend of 2,5 cents per share, maintains the company`s stated dividend
policy.
The salient dates for the dividend are as follows:
Last day to trade shares cum dividend Friday, 3 December 2010
Shares trade ex dividend Monday, 6 December 2010
Record date Friday, 10 December 2010
Payment date Monday, 13 December 2010
No share certificates may be dematerialised or rematerialised between Monday, 6
December 2010 and Friday, 10 December 2010, both dates inclusive.
John Barrow Brian Harley
Chairman Chief Executive Officer
On behalf of the board
16 November 2010
Directors:
John Barrow (Chairman); Brian Harley (CEO); Danie Evert (Financial Director);
Johan Breedt; Tom Lombard; Ken Nel; Dean Nevay; Gary Swanepoel; Sam Vilakazi;
Wolf Wassermeier*; Jimmy Oosthuizen*; Unati Mabandla*.
*Non-executive director???Independent
Registered office:
42 Fourth Avenue, Alberton North, 1449?(PO Box 956, Alberton, 1450)
Designated adviser:
Merchantec Capital
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001(PO Box 61051, Marshalltown, 2107)
Company secretary:
CIS Company Secretaries (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001(PO Box 61051, Marshalltown, 2107)
Investor relations:
Envisage Investor & Corporate Relations
Date: 16/11/2010 07:05:03 Produced by the JSE SENS Department.
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