| Mon 5 Sep 2011, 10:00 | | WBO - Wilson Bayly Holmes - Ovcon Limited - Audited financial results for the |
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WBO
WBO
WBO - Wilson Bayly Holmes - Ovcon Limited - Audited financial results for the
year ended 30 June 2011
WILSON BAYLY HOLMES - OVCON LIMITED
Building and civil engineering contractors
(Registration no. 1982/011014/06)
ISIN No: ZAE 000009932
Share code: WBO
Sponsor: Investec Bank Limited
Audited financial results for the year ended 30 June 2011
Revenue down 3%
Operating profit down 14%
Headline earnings down 20%
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
Audited Audited
June June
% 2011 2010
change R`000 R`000
Revenue (2,9) 14 766 631 15 201 095
Operating profit before non-trading items (14,5) 1 090 049 1 274 174
Impairment of goodwill/negative goodwill (36 266) (219)
realised
Fair value adjustment to investments 97 2 583
Impairment of loan to associate (65 867) -
Profit/(loss) on disposal of investments 57 921 (5 682)
Share-based payment expense (32 418) (8 922)
Operating profit 1 013 516 1 261 934
Share of profits and losses in associates (51 388) (30 386)
Income from investments 224 727 279 505
Operating income 1 186 855 1 511 053
Finance costs (18 089) (17 018)
Profit before taxation 1 168 766 1 494 035
Taxation (380 000) (466 524)
Profit for the year (23,2) 788 766 1 027 511
Operating margin 7 4% 8,4%
Profit attributable to
Equity shareholders of Wilson Bayly Holmes- 733 475 961 485
Ovcon Limited
Non-controlling interests 55 291 66 026
788 766 1 027 511
Reconciliation of headline earnings
Attributable profit 733 475 961 485
Adjusted for:
Impairment of goodwill 36 266 219
Impairment of loan 65 867 -
(Profit)/loss on disposal of investments (57 921) 5 682
Profit on disposal of property, plant and (2 502) (3 703)
equipment
Tax effect thereof (412) 1 036
Headline earnings (19,7) 774 773 964 719
Ordinary shares
Issued (`000) 66 000 66 000
Weighted average number of shares (`000) 54 727 54 791
Diluted weighted average number of shares 55 237 54 987
(`000)
Earnings per share (cents) (23,6) 1 340,2 1 754,8
Diluted earnings per share (cents) (24,1) 1 327,9 1 748,6
Headline earnings per share (cents) (19,6) 1 415,7 1 760,7
Diluted headline earnings per share (20,1) 1 402,4 1 754,4
(cents)
Dividend per share (cents) 0,0 330,0 330,0
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
June June
2011 2010
R`000 R`000
Profit for the year 788 766 1 027 511
Translation of foreign entities 17 005 (47 730)
Share of associates` comprehensive loss (17 922) (25 978)
Total comprehensive income for the year 777 849 953 803
Total comprehensive income attributable to
Equity shareholders of Wilson Bayly Holmes-Ovcon 732 558 887 777
Limited
Non-controlling interests 55 291 66 026
787 849 953 803
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
June June
2011 2010
R`000 R`000
ASSETS
Non-current assets 2 472 330 2 198 648
Property, plant and equipment 1 433 063 1 203 768
Goodwill 390 467 293 057
Investment in associates 401 116 415 773
Other non-current assets 247 684 286 050
Current assets 7 019 418 7 159 445
Other current assets 4 136 646 3 268 406
Cash and cash equivalents 2 882 772 3 891 039
Total assets 9 491 748 9 358 093
EQUITY AND LIABILITIES
Capital and reserves 3 630 209 3 228 245
Ordinary share capital and reserves 3 371 904 3 031 919
Non-controlling interests 258 305 196 326
Non-current liabilities 131 526 82 048
Long-term financial liabilities 90 526 24 946
Other non-current liabilities 41 000 57 102
Current liabilities 5 730 013 6 047 800
Other current liabilities 5 713 620 6 047 800
Bank overdrafts 16 393 -
Total equity and liabilities 9 491 748 9 358 093
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited Audited
June June
2011 2010
R`000 R`000
Ordinary share capital and reserves at the 3 031 919 2 384 550
beginning of the year
Profit for the year 733 475 961 485
Other comprehensive income for the year (917) (62 563)
Share of movement in associates` equity (24 812) (6 918)
Dividend paid (209 721) (193 974)
Cash settled equity instruments raised (1 632) -
Treasury shares sold/(acquired) - 3 587
Share based payment expense 13 337 8 922
Goodwill arising from business combinations (169 745) (63 170)
Ordinary share capital and reserves at the end of 3 371 904 3 031 919
the year
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
June June
2011 2010
R`000 R`000
Operating profit before working capital changes 1 233 151 2 141 491
Working capital changes (887 875) (1 076 702)
Cash generated from operations 345 276 1 064 789
Income from investments 224 727 279 505
Finance costs (18 089) (17 018)
Taxation paid (650 624) (608 154)
Dividends paid (224 562) (193 974)
Cash retained from operations (323 272) 525 148
Net cash flow from investing activities (660 148) (611 738)
Net cash flow from financing activities (41 240) (54 634)
Net (decrease)/increase in cash and cash (1 024 660) (141 224)
equivalents
Cash and cash equivalents at the beginning of the 3 891 039 4 032 263
year
Cash and cash equivalents at the end of the year 2 866 379 3 891 039
SEGMENTAL INFORMATION
Audited Audited
June June
2011 2010
R`000 R`000
Segment revenue
- Building and civil engineering 4 377 474 5 469 684
- Roads and earthworks 4 110 792 4 609 889
- Australia 5 972 873 4 534 442
- Other operations 305 492 587 080
14 766 631 15 201 095
Segment result
- Building and civil engineering 332 810 430 024
- Roads and earthworks 524 569 629 779
- Australia 171 200 152 241
- Other operations 61 470 62 130
1 090 049 1 274 174
BASIS OF PREPARATION
The summarised financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), IAS 34: Interim Financial
Reporting, the South African Companies, Act 71 of 2008, as amended, and the
JSE Listings Requirements. The principal accounting policies used in the
preparation of the audited results for the year ended 30 June 2011 are
consistent with those applied for the previous year.
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 audited by the independent, external auditors, BDO
South Africa Inc. and their unmodified audit opinion is available for
inspection at our registered office.
FINANCIAL OVERVIEW
When considering the particularly tough market conditions experienced over the
last 18 months the group has produced a commendable performance. Revenue
decreased marginally to R14,8 billion (2010: R15,2 billion) while the decrease
of 14,5% in operating profit before non-trading items to R1,1 billion (2010:
R1,3 billion) is representative of the decline in available work and
consequential margin pressures. Despite such margin pressures the group has
maintained a satisfactory margin of 7,4%, firstly through the finalisation of
some major contracts and secondly through effective cost management within the
operating divisions.
Earnings per share, which decreased by 23,6% to 1,340 cents, was impacted
predominantly by the decrease in operating profits but furthermore through
impairments of goodwill and loans and a 19,6% decrease in investment income.
Headline earnings per share of 1,416 cents, which excludes the effects of
impairments and other adjustments, showed a decrease of 19,6%.
The initial goodwill recognised on the acquisition of Roadspan Holdings
(Proprietary) Limited has been fully impaired following conservative profit
forecasts. In December 2010, as part of the group`s interim reporting, the
loan to Capital Africa Steel (Proprietary) Limited ("CAS") was impaired by R66
million and no further adjustment was deemed necessary at year end. The group
realised a profit of R58 million from the sale of its investment in the
Bakwena Platinum Corridor Concessionaire (Proprietary) Limited.
The net cash position reduced to R2,8 billion (2010: R3,9 billion) following
working capital demands, in particular the absorption of payments in advance
and from short-term contract financing for selected clients. Further cash
outflows arose from the acquisition of four new subsidiaries, and capital
expenditure of R291 million (2010: R256 million) on plant.
Capital expenditure of R437 million has been approved for the FY2012, a
significant portion of which will be utilised to equip new contracts awarded
in the rest of Africa.
Financial institutions have issued guarantees to the value of R3,8 billion
(2010: R3,5 billion). The directors believe that the risk of loss is minimal.
OPERATIONAL REVIEW
Building and Civil Engineering
Matching the performance of the prior year after the completion of all the
major projects was always going to be a challenge for the division. While a
decrease in revenue was anticipated, slow starts on some of the division`s
larger projects further exacerbated this impact.
In Gauteng construction began on the prestigious Alexander Forbes offices in
Sandton, whilst work continues on the Standard Bank office block in Rosebank
and the Sandton City expansion. Construction also began on new shopping
centres on William Nicol Drive, in Sandton and in Middleburg. The Lynwood
Precinct in Pretoria and the Mall of the North shopping centre in Polokwane
were completed. The division has also been awarded a number of new contracts
in the Menlyn suburb of Pretoria.
Activity in the coastal markets remains subdued and in the absence of large
projects the regions have had to tender on an increased number of smaller
projects to keep resources fully utilised. The latter half of the year showed
some signs of improvement particularly in KwaZulu-Natal, where the region
procured a number of contracts including the Empangeni Hospital. The Western
Cape division is involved in a mixed use development in Mauritius and
continues with the on-going works at the Cape Town Harbour. In the Eastern
Cape, we are optimistic that additional contracts will soon be awarded. On 30
June 2011 the division acquired a 60% interest in Renniks Construction
(Proprietary) Limited, a civil contracting company specialising in sliding.
The continued strength within the resources market has seen ongoing capital
expenditure on the mines which has supported revenue growth within the Civil
Engineering division this year. The Kusile Power Station provides a solid
revenue stream for the division through to 2013 while work for Sasol and
expansion into Botswana and Zambia assisted further in the growth achieved.
Project Lion Phase II for Xstrata has recently been awarded to the division.
The increase in the division`s order book to R5,7 billion (2010: R4,3
billion:) supports sentiment that WBHO remains the construction company of
choice, however projects continue to be secured at competitive margins which
will remain evident in the division`s results over the short to medium term.
Roads and Earthworks
The recessionary effects within the construction environment were perhaps most
prevalent within the local roads and earthworks market. Instead of securing
projects at very low margins the division elected to focus on strengthening
revenue streams from the rest of Africa. Revenue for the period decreased by
10,8% to R4,1 billion (2010: R4,6 billion) with an operating profit of R525
million (2010: 630 million).
In South Africa, the North region successfully completed the Bedford and
Braamhoek dams for the Ingula Pump Storage scheme. The Free State Roads
Project, managed by the Central region together with Edwin Construction
(Proprietary) Limited, a group subsidiary, incorporates six road projects and
has progressed well. A number of the roads are due for completion ahead of
schedule at the end of 2011. Following very little tender activity the Coastal
region has focused on low cost housing in the KZN rural area securing three
significant projects.
In the rest of Africa, mining projects in Sierra Leone, Zambia and in the
Moatize coal fields in Mozambique underpinned the division`s offshore
operations. Activity in Ghana has also improved and construction of a tailings
dam and haul road at the Iduapriem Mine has commenced.
In Botswana, mining infrastructure work at Jwaneng for Debswana continues and
the division has secured additional work at the AK6 Boteti Mine. The division
has also been appointed as the preferred bidder in joint venture, on the North
South Carrier project to the value of R1,2 billion.
During the year WBHO acquired the remaining 30% interest in both Roadspan
Holdings (Proprietary) Limited and Insitu Pipelines (Proprietary) Limited.
Within Roadspan the strengthening of the operational teams and upgrading and
modernising of the plant over the last twelve months has seen improvements in
production and profits. Insitu Pipelines will also have a significant role in
the construction of the North South Carrier contract in Botswana.
The order book for the Roads and Earthworks division amounts to R2,4 billion
(2010: R3,8 billion), however since then R1,7 billion worth of work has been
secured.
Australia
The Australian operations begin the year with an impressive order book of R7,7
billion (2010: R4,1 billion) which represents 140% of the revenue achieved in
2011. However, in line with local markets this increase in activity remains at
competitive margins.
The acquisition of three subsidiaries together with the strength of the
Australian dollar saw revenue from Australia grow by 21% over the comparative
period to R5.4 billion (2010: R4,5 billion). On 1 July 2010 Probuild acquired
a 60% interest in Monaco Hickey Proprietary Limited (MH), a company
specialising in the construction of laboratories and medical facilities. On 1
November 2010 the company also acquired a 51% interest in Contexx Proprietary
Limited, a high rise residential building contractor operating in Melbourne.
Probuild, produced solid results within the building market and successfully
completed the R1,6 billion Myer Shopping Centre redevelopment and the R1,4
billion 717 Burke Street mixed use development in Melbourne. During the year
the Highpoint Redevelopment, Monash University research centre and the
Precinct Apartments worth R3 billion were awarded in Melbourne. In Perth we
secured our first PPP design and construct project the QE11 Medical Centre Car
Park valued at R800 million and in Queensland, the R500 million NDRA 18D
Clarkson cyclone damage restoration project was also secured.
In respect of the civil side of the Australian business, WBHO Australia
purchased a 51% share in Carr Civils Proprietary Limited, a roads and
earthworks company operating out of Western Australia. With WBHO`s involvement
the company has shown considerable growth during the year achieving revenue of
R575 million, in line with expectations. CECK Proprietary Limited has again
shown revenue growth and continues to achieve solid results each year.
Projects
The Projects team has been strengthened during the year and was successful in
negotiating the design and construct contract for the upgrade of the
Beitbridge border post in Zimbabwe. The Overberg Consortium which WBHO is a
partner has reached the BAFO stage of the N1/N2 Winelands Project and we
expect that the preferred bidder will be announced soon. In addition to a
number of other potential projects we are involved in an EPC contract for a
new gas fuelled power plant in Mozambique and are preferred bidder on the
Department of Rural Development and Land Reform offices in Tshwane.
Associated companies
The results for Capital Africa Steel (Proprietary) Limited (CAS) were again
heavily influenced by conditions within the steel industry and interest
accruing on shareholder loans advanced for the construction of the pipe
factory in Mozambique. Demand remains volatile with all companies expecting to
operate well within capacity. We do anticipate increases in demand but remain
concerned about the constrained and volatile market conditions.
WBHO together with the shareholders and CAS management has focused on
restructuring the group in preparation for a recovery in the steel industry.
ACQUISITIONS
Subsidiaries
The aggregate fair values of the assets and liabilities of the acquisitions
(Monaco Hickey Proprietary Limited, Contexx Proprietary Limited, Carr Civils
Proprietary Limited, and Renniks (Proprietary) Limited), the non-controlling
interests and goodwill recognised and the purchase prices paid are set out
below:
Total assets 518 498
Total liabilities 318 031
Non-controlling interests recognised on consolidation 61 202
Goodwill recognised on consolidation 97 555
Purchase price 205 873
The aggregate effect of the acquisitions on the group`s results amounted to an
increase in revenue of R1,2 billion and an increase in profit after tax of R2
million.
Increase in shareholding of existing subsidiaries
The aggregate goodwill recognised and purchase prices paid arising from
transactions with non-controlling shareholders (Probuild Constructions
Proprietary Limited, Roadspan Holdings (Proprietary) Limited and Insitu
Pipelines (Proprietary) Limited) are as follows:
Goodwill recognised in equity 169 745
Purchase price 221 555
PROSPECTS
We commence this financial year with an impressive order book of R16,2 billion
(2010: R12,1 billion) which is well balanced with 50% outside of South Africa.
80% of the order book is with private clients and the group thus is well
positioned once government spending increases. Margins will remain under
pressure for the foreseeable future until there is sufficient work to absorb
the excess capacity in the market.
Despite the resilience of the resources market, the global economy especially
in Europe and America remains sluggish regardless of all the financial support
mechanisms put in place. Institutional investment is extremely conservative,
which negatively impacts the construction industry. Government in South Africa
is still slow in producing an adequate stream of identified infrastructure and
PPP work.
Our civil business benefits from the mining industry, particularly in Africa
and Australia and rides on the back of the demand from China and India.
Strategically we are focusing on the civil opportunities in both Africa and
Australia and to this end our acquisitions will assist us going forward.
The Building division continues to secure opportunities in South Africa and
Australia but is intent on procuring further building work in other African
countries in order to expand its footprint in a similar fashion to the Roads
and Earthworks and Civil Engineering divisions.
SAFETY
Regrettably, two subcontractors` employees lost their lives in fatal accidents
on WBHO sites during the year and we extend our deepest sympathies to their
families. This year the group met its safety target of a lost time injury
frequency rate (LTIFR) of less than 1 which was set at the beginning of the
year achieving an LTIFR of 0,93 (2010: 1,24).
TRANSFORMATION
This year WBHO was proudly ranked fourteenth in the Financial Mail`s Top
Empowerment Companies listed on the JSE. The group continues to concentrate on
the training and development of black management through its management
development programme.
COMPETITION COMMISSION
The Competition Commission is currently in the process of assessing WBHO`s
submissions which will possibly result in the imposition of an administrative
penalty. The outcome of the process will only be known early in 2012 and
therefore the group has not made any provision for a penalty in the results
for the year ended 30 June 2011.
APPRECIATION
The board acknowledges the efforts of management and staff over the past year
especially when taking cognisance of the difficult conditions experienced over
the past 18 months. The board also extends its gratitude once again 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 2011 has been declared payable to all shareholders
recorded in the register on Friday, 21 October 2011, the record date. The last
day to trade cum the dividend will be Friday, 14 October 2011 and the shares
will trade ex the dividend on Monday, 17 October 2011. Payment will be made on
Monday, 24 October 2011.
Share certificates may not be dematerialised or rematerialised between Monday,
17 October 2011 and Friday, 21 October 2011, both dates inclusive.
By order of the board
MS Wylie
Chairman
EL Nel
Chief Executive Officer
Johannesburg
2 September 2011
www.wbho.co.za
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