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WBO - Wilson Bayly Holmes - Unaudited financial results for the six months
ended 31 December 2010
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
Unaudited financial results for the six months ended 31 December 2010
Revenue down 6%
Operating profit up 1%
Earnings per share down 14%
Condensed consolidated statement of financial performance
%
change Unaudited Unaudited Audited
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Revenue (5,8) 7 194 510 7 641 029 15 201 095
Operating profit
before non-trading
items 0,9 609 046 603 519 1 274 174
Impairment of goodwill (29 139) (219) (219)
Fair value adjustment
to investments - 1 018 2 583
Impairment of loan in
associate (65 867) - -
Profit/(loss) on
disposal of
investments 57 921 - (5 682)
Share-based payment
expense (4 892) (6 545) (8 922)
Operating profit 567 069 597 773 1 261 934
Share of profits and
losses from associate
companies (38 947) (23 243) (30 386)
Income from
investments 116 633 140 399 279 505
Operating income 644 755 714 929 1 511 053
Finance costs (6 655) (3 799) (17 018)
Profit before taxation 638 100 711 130 1 494 035
Taxation (199 634) (210 765) (466 524)
Profit for the period 438 466 500 365 1 027 511
Operating margin (%) 8,5 7,9 8,4
Profit attributable to
Equity shareholders of
Wilson Bayly Holmes-
Ovcon Limited 395 863 460 492 961 485
Non-controlling
interests 42 603 39 873 66 026
438 466 500 365 1 027 511
Reconciliation of
headline earnings
Attributable profit 395 863 460 492 961 485
Adjusted for:
Impairment of goodwill 29 139 219 219
(Profit)/loss on
disposal of
investments (57 921) - 5 682
Profit on disposal of
property, plant and
equipment (3 544) (1 029) (3 703)
Tax effect thereof 11 049 288 1 036
Headline earnings 374 586 459 970 964 719
Ordinary shares
Issued (`000) 66 000 66 000 66 000
Weighted average
number of shares
(`000) 54 886 54 787 54 791
Diluted weighted
average number of
shares (`000) 55 388 54 973 54 987
Earnings per share
(cents) (14,2) 721,2 840,5 1 754,8
Diluted earnings per
share (cents) (14,7) 714,7 837,7 1 748,6
Headline earnings per
share (cents) (18,7) 682,5 839,6 1 760,7
Diluted headline
earnings per share
(cents) (19,2) 676,3 836,7 1 754,4
Dividend per share
(cents) - 110,0 110,0 330,0
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Profit for the period 438 466 500 365 1 027 511
Translation of foreign
entities (25 150) (30 986) (47 730)
Share of translation of
foreign entities from
associate companies (14 538) - (25 978)
Total comprehensive income for
the period 398 778 469 379 953 803
Total comprehensive income
attributable to
Equity shareholders of Wilson
Bayly Holmes-Ovcon Limited 356 175 429 506 887 777
Non-controlling interests 42 603 39 873 66 026
398 778 469 379 953 803
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Assets
Non-current assets 2 580 934 2 001 552 2 198 648
Property, plant and equipment 1 349 722 1 089 060 1 203 768
Goodwill 412 386 277 642 293 057
Investment in associates 408 673 507 835 415 773
Other non-current assets 410 153 127 015 286 050
Current assets 5 616 776 6 386 936 7 159 445
Other current assets 2 415 067 2 322 802 3 268 406
Cash and cash equivalents 3 201 709 4 064 134 3 891 039
Total assets 8 197 710 8 388 488 9 358 093
Equity and liabilities
Capital and reserves 3 305 348 2 820 001 3 228 245
Ordinary share capital and
reserves 3 128 946 2 692 169 3 031 919
Non-controlling interests 176 402 127 832 196 326
Non-current liabilities 89 211 208 852 82 048
Long-term financial
liabilities 58 047 8 393 24 946
Other non-current liabilities 31 164 200 459 57 102
Other current liabilities 4 803 151 5 359 635 6 047 800
Total equity and liabilities 8 197 710 8 388 488 9 358 093
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Ordinary share capital and
reserves at the beginning of
the period 3 031 919 2 384 550 2 384 550
Profit for the period 395 863 460 492 961 485
Other comprehensive income for
the period (39 688) (30 986) (62 563)
Share of movement in
associates` equity - - (6 918)
Dividend paid (138 795) (128 432) (193 974)
Treasury shares sold - - 3 587
Share based payment expense 4 892 6 545 8 922
Goodwill arising from business
combinations (125 245) - (63 170)
Ordinary share capital and
reserves at the end of the
period 3 128 946 2 692 169 3 031 919
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Profit before working
capital changes 524 196 586 562 2 141 491
Working capital changes (248 302) 104 515 (1 076 702)
Cash generated from
operations 275 894 691 077 1 064 789
Finance income 116 633 140 399 279 505
Finance costs (6 655) (3 799) (17 018)
Taxation paid (386 915) (390 962) (608 154)
Dividend paid (138 795) (128 432) (193 974)
Cash flow from operations (139 838) 308 283 525 148
Net cash flow from investing
activities (453 792) (263 037) (611 738)
Net cash flow from financing
activities (95 700) (13 375) (54 634)
Net (decrease)/increase in
cash and cash equivalents (689 330) 31 871 (141 224)
Cash and cash equivalents at
the beginning of the period 3 891 039 4 032 263 4 032 263
Cash and cash equivalents at
the end of the period 3 201 709 4 064 134 3 891 039
Segmental analysis
Unaudited Unaudited Audited
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Segment revenue
Building and civil
engineering 2 429 426 2 800 278 5 469 684
Roads and earthworks 1 997 893 2 073 947 4 609 889
Australia 2 644 000 2 566 066 4 534 442
Other operations 123 191 200 738 587 080
7 194 510 7 641 029 15 201 095
Segment result
Building and civil
engineering 211 879 180 809 430 024
Roads and earthworks 264 641 277 033 629 779
Australia 107 148 107 521 152 241
Other operations 25 378 38 156 62 130
609 046 603 519 1 274 174
Basis of accounting
The consolidated interim unaudited financial statements have been prepared in
accordance with IAS34: Interim Financial Reporting, the International
Financial Reporting Standards (IFRS) and Schedule 4 of the Companies Act. The
accounting policies adopted in the preparation of these financial statements
are consistent with those used to prepare the comparative interim financial
statements and the annual financial statements for the year ended 30 June
2010. The information disclosed in these statements has not been reviewed nor
reported on by the group`s auditors.
Overview of results
WBHO is able to report an improvement in the operating profit before non-
trading items over the comparative period despite a reduction in revenue of
5,8%. While the decrease in revenue is indicative of the tougher trading
conditions experienced by the industry as a whole, the group has achieved an
increase in its operating margin.
Having taken cognisance of the uncertain outlook for the steel and ready mix
industries, management have considered the recoverability of the group`s
funding loan to Capital Africa Steel (Pty) Limited (CAS) and felt it prudent
to recognise an impairment thereof. This impairment together with the
disappointing results declared by CAS has contributed significantly towards
the decrease in earnings per share of 14,2%. Poor results from Roadspan
Holdings (Pty) Limited have also resulted in the goodwill being impaired.
The impact of higher working capital demands on cash balances and lower
interest rates has seen a 17% decrease in investment income which further
contributed to the decrease in earnings. However, the group balance sheet
remains strong with a net cash position of R3,2 billion (2009: R4,1 billion).
To date the group has spent R175 million of the approved capital expenditure
of R401 million. It is unlikely that the group will exceed its capital
expenditure budget.
Acquisitions
During the current year the group acquired interests in a number of Australian
subsidiaries. WBHO Australia Pty Ltd acquired a 51% interest in Carr Civil
Contracting Pty Ltd and Probuild Constructions (Aust) Pty Ltd acquired a 60%
interest in Monaco Hickey Pty Ltd and a 50% interest in Contexx Pty Ltd both
of which are building companies.
R`000
Aggregate fair value of the assets and liabilities:
Total assets 336 170
Total liabilities (270 612)
Fair value of subsidiaries acquired 65 558
Non-controlling interests recognised on consolidation (47 709)
17 849
Goodwill recognised on consolidation 135 019
Purchase price of acquisitions 152 868
The individual goodwill recognised on each acquisition
amounts to:
Carr Civil Contracting Pty Ltd (Civil) 45 415
Monaco Hickey Pty Ltd (Building) 38 748
Contexx Pty Ltd (Building) 50 856
135 019
The following amounts arising from the acquisitions have
been included in the group`s results:
Revenue 280 720
Profit before taxation 13 026
The group has also increased its effective interest in a
number of existing subsidiaries, namely Insitu Pipelines
(Pty) Ltd, Probuild Constructions (Aust) Pty Ltd,
Probuild Civil QLD Pty Ltd and C.E.C.K. Civil
Construction Pty Ltd.
The effects of these transactions is disclosed below:
Goodwill recognised in other components of equity 122 868
Aggregate purchase price paid 198 762
Aggregate decrease in non-controlling interest 78 890
Financial guarantees issued to third parties amount to R3,4 billion compared
to R3,3 billion as at 30 June 2010.
An interim dividend of 110 cents per ordinary share has been declared (2009:
110 cents per share).
Building & civil engineering
In light of the current market the division has had a satisfactory six months,
however margins on both tendered and negotiated projects remain under
pressure. Operating profit achieved for the period amounts to R212 million
(2009: R181 million) an increase of 17%, and the operating margin has
increased from 7,9% at June 2010 to 8,7% for the period under review. The
division has recently been awarded a number of large projects in both Gauteng
and KwaZulu Natal with the order book now at R5,6 billion (June 2010: R4,3
billion).
In line with expectations at the outset of the financial year the North
division has successfully maintained its revenue over the last six months. The
mixed-use development, The Zone in Rosebank, Johannesburg has been handed over
and further work continues on the large development at Lynwood Junction in
Tswane, where we have completed two office blocks and a hotel. Construction
continues on the last remaining office block and the retail centre as well as
on a number of other shopping centres and office blocks throughout Gauteng.
The Mall of the North, a 75 000m2 GLA shopping centre under construction in
Polokwane, Limpopo, will be completed on time in April.
The market in the Western Cape remains competitive and having redeployed
excess capacity to execute projects in both Mauritius and Zambia the division
continues to seek new opportunities in these and other African countries. In
December the Manda Hill Shopping Centre in Lusaka, Zambia successfully opened.
The division has recently secured a contract for the extension and
rehabilitation of the Tyger Valley Shopping Centre in Cape Town. Construction
continues on the Cape Town Harbour having secured additional awards.
There is still a severe shortage of large commercial building projects in the
Eastern Cape and the division has focused on smaller contracts for private
clients. The General Motors warehouse for the Coega Development Corporation
was successfully completed during the period. The order book in KwaZulu Natal
has improved significantly over the last two months with the award of the K-
Rith laboratory at the Nelson Mandela Medical School, the Mayfair Offices in
Umhlanga, extensions to the Bay Hospital for Netcare in Richards Bay and
further extensions to the Wild Coast Sun Hotel. The division completed the
construction work on Umfolozi Casino for Peermont in Empangeni.
The Civil division has grown in the last six months due to increased capital
expansion from the mining sector and consequently the order book is at levels
where the division is close to its full capacity. Various contractual issues
at the Kusile Power Station project are being satisfactorily dealt with and
the project is on track. The division is currently involved on various
projects in Sasolburg, Secunda, Zambia and Botswana.
Roads & earthworks
Whilst the division has produced solid results for the period under review
achieving an operating profit of R265 million (2009: R277 million), the local
market remains exceptionally competitive as can be seen in the decrease in the
order book from R3,8 billion in June 2010 to the current level of R3,3
billion.
Within RSA the Ingula Dams and the South Deep projects are nearing completion.
Work is continuing for the resource based mining houses. The Central division
is concentrating on a number of large roads contracts within the Free State.
There is currently limited activity in the Coastal area and the majority of
its resources have been redeployed to the International division.
The International division has recently obtained six new awards and is now
executing mining infrastructure contracts in Botswana, Mozambique, Zimbabwe,
Zambia, Ghana and Sierra Leone. The division is also assisting in building the
capacity of the WBHO civil operations in Western Australia. A number of
additional opportunities continue to be pursued in Central and West Africa.
Edwin Construction has been successful in obtaining new provincial roads
projects in the Free State, Mpumalanga and Limpopo provinces and is performing
satisfactorily.
Insitu Pipelines is on track with much needed pipe rehabilitation works for
the municipalities. The company is involved in major pipe laying contracts for
Sasol, Eskom and Vale in Mozambique. These projects are all performing well.
Australia
Probuild has maintained its operating levels over the period, however the
weakness of the rand has seen revenue increase to R2,6 billion from R2,5
billion in 2009. Operating profit has remained the same at R107 million and
this is due to the competitive nature within the building market placing
pressure on margins. Conditions dictate that margins may well remain highly
competitive for the foreseeable future. The order book remains stable at R4,2
billion (June 2010: R4,2 billion).
Melbourne in Victoria continues to produce the majority of Probuild`s projects
and work continues on the Meyer Retail Store which is close to completion.
Ongoing major projects include the 40 storey Bank Apartments, the Harvey
Norman and Ikea project and the Roi Apartments, all of which continue into the
next financial year. The recent acquisitions of two subsidiaries, Monaco
Hickey and Contexx, have added capacity to the group.
The award of Raine Square has assisted in maintaining Probuild`s presence in
Perth, Western Australia. Construction is ongoing on the Aspect Apartment
project and for the Department of Housing on the Cockburn project. Our civil
subsidiary CECK in Perth is doing well and has achieved both higher revenues
and profits over the comparative period in 2009. In New South Wales the group
is involved with a number of smaller projects as the building industry in this
state is subdued.
The floods in Queensland have had a negative effect on the civil business and
progress on contracts has been delayed. The Australian government has put a
flood relief programme in place to which Probuild Civils have committed their
full support.
Other operations
Projects
This division is responsible for the procurement and execution of large
`design and construct` and `engineer, procure and construct` contracts. Even
though work at King Shaka International Airport has been successfully
completed, numerous other contracts for the Dube Trade Port continue. We are
the preferred bidder for the Department of Rural Development and Land Reform
building and anticipate reaching financial closure over the next few months.
The submission for the N1/N2 Winelands was made in November 2010.
Property
The Simbithi Eco-Estate development near Ballito in KZN continues to be a
popular choice for both the first and second home markets. Our St Francis
Links development remains quiet, but is operationally strong. There are no new
property developments being considered for the foreseeable future.
Associates
CAS has had a disappointing six months, posting an overall loss for the
period. Sales from the pipe factory in Maputo are slow due to project delays
and slow international demand. Furthermore the lack of work available in the
reinforced steel industry has also adversely affected profitability. The ready
mix business has experienced low demands over the last year and has only
recently experienced increased activity, particularly from the mining sector.
Competition commission
The Competition Commission has approached the construction industry to engage
in a fast track settlement process. We are committed to co-operating with the
commission and are again investigating all bids submitted over the period
under review. Compliance education for all of our staff was completed some
time ago and is being reinforced on a regular basis.
Prospects
Locally there are positive signs emanating from the private sector, arising
firstly from the increase in the mining sector`s capital spend and secondly
from indications that institutions now have excess liquidity available for
investment in certain developments. The group is in the fortunate position
where a large portion of the building order book includes negotiated work.
The infrastructure spend by the Government continues to be slow with the
exception of SANRAL which has been given another 22 000km of provincial roads
to maintain which should generate some contracts in the next financial year.
The provincial road network needs rehabilitation and we are currently working
on initiatives with the Provincial Government to find additional funding
models to unlock this work. There have been positive indicators that the
delivery of PPP`s may improve with the focus on delivery from National
Treasury.
The market for mining infrastructure is buoyant for the rest of Africa and
Australia and the group plans to expand its operations by redeploying skills
and plant into these areas. The group believes that Africa has further
potential for both of our construction divisions. The focus is to concentrate
on projects in countries in Africa where the risks can be adequately
mitigated.
Australia has become increasingly competitive in the last year and it is
difficult to secure work at current margins. Through the acquisition of Carr
Civil Contracting Pty Limited by WBHO Australia we intend to grow our civil
business in Western Australia. The current recovery of the resource market
will present opportunities to achieve this growth.
The order book for the group at the beginning of 2011 is R13,1 billion
compared to R12,3 billion in June 2010 an increase of R800 million. The
outlook for the remainder of this financial year and FY2012 is still of
concern, however we believe that we are well positioned to cope with the
situation.
Appreciation
The directors and management would like to thank their clients and staff for
the continuous support and loyalty to the group.
Dividend declaration
Notice is hereby given that the directors have declared an interim dividend of
110 cents per share (2009: 110 cents) payable in respect of the six months
ended 31 December 2010.
The following dates have reference:
Last day to trade cum dividend Friday, 8 April 2011
Trading ex dividend commences Monday, 11 April 2011
Record date Friday, 15 April 2011
Payment date Monday, 18 April 2011
Shares may not be dematerialised or rematerialised between Monday, 11 April
2011 and Friday, 15 April 2011, both dates inclusive.
For and on behalf of the board
MS Wylie EL Nel
Chairman Chief Executive Officer
Johannesburg
21 February 2011
www.wbho.co.za
Date: 21/02/2011 10:00:01 Supplied by www.sharenet.co.za
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