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WBO - Wilson Bayly Holmes - Ovcon Limited - Unaudited financial statements
for the six months ended 31 December 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
Unaudited financial statements for the six months ended 31 December 2011
Revenue up 16,5%
Operating profit down 15,2%
Earnings per share down 8,6%
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
% Unaudited Unaudited Audited
change December December June
2011 2010 2011
R`000 R`000 R`000
Revenue 16,5 8 383 564 7 194 510 14 766 631
Operating profit before (23,6) 465 269 609 046 1 090 049
non-trading items
Impairment of goodwill (18 125) (29 139) (36 266)
Fair value adjustment to (82) - 97
investments
Impairment of loan (3 000) (65 867) (65 867)
Profit on disposal of 41 903 57 921 57 921
investments
Share-based payment (5 131) (4 892) (32 418)
expense
Operating profit (15,2) 480 834 567 069 1 013 516
Share of profits and (17 010) (38 947) (51 388)
losses in associates
Income from investments 94 054 116 633 224 727
Operating income 557 878 644 755 1 186 855
Finance costs (6 364) (6 655) (18 089)
Profit before taxation 551 514 638 100 1 168 766
Taxation (168 865) (199 634) (380 000)
Profit for the period (12,7) 382 649 438 466 788 766
Operating margin 5,5% 8,5% 7,4%
Profit attributable to:
Equity shareholders of 360 626 395 863 733 475
Wilson Bayly Holmes-
Ovcon Limited
Non-controlling 22 023 42 603 55 291
interests
382 649 438 466 788 766
Reconciliation of
headline earnings
Attributable profit 360 626 395 863 733 475
Adjusted for:
Impairment of goodwill 18 125 29 139 36 266
Impairments included in 1 498 - -
share of profits and
losses in associates
Profit on disposal of (1 024) - -
investments included in
share of profits and
losses in associates
Impairment of loan 3 000 - 65 867
Profit on disposal of (41 903) (57 921) (57 921)
investments
Loss/(profit) on 700 (3 544) (2 502)
disposal of property
plant and equipment
Tax effect thereof 5 328 11 049 (412)
Headline earnings as (7,5) 346 350 374 586 774 773
published
Impairment of loan - 65 867 -
Tax effect thereof - (9 221) -
Headline earnings as (19,7) 346 350 431 232 774 773
restated
Ordinary shares
Issued (`000) 66 000 66 000 66 000
Weighted average number 54 727 54 886 54 727
of shares (`000)
Diluted weighted average 54 917 55 388 55 237
number of shares (`000)
Earnings per share (8,6) 659,0 721,2 1 340,2
(cents)
Diluted earnings per 656,7 714,7 1 327,9
share (cents)
Headline earnings per 632,9 682,5 1 415,7
share (cents)
Headline earnings per (19,5) 632,9 785,7 1 415,7
share as restated
(cents)
Diluted headline 630,7 676,3 1 402,4
earnings per share
(cents)
Diluted headline 630,7 778,6 1 402,4
earnings per share as
restated (cents)
Dividend per share 110,0 110,0 330,0
(cents)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
December December June
2011 2010 2011
R`000 R`000 R`000
Profit for the period 382 649 438 466 788 766
Translation of foreign 110 653 (25 150) 17 005
entities
Share of associates` (5 558) (14 538) (17 922)
comprehensive loss
Total comprehensive income for 487 744 398 778 787 849
the period
Total comprehensive income
attributable to:
Equity shareholders of Wilson 465 721 356 175 732 558
Bayly Holmes-Ovcon Limited
Non-controlling interests 22 023 42 603 55 291
487 744 398 778 787 849
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
December December June
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 2 700 544 2 580 934 2 472 330
Property, plant and equipment 1 609 474 1 349 722 1 433 063
Goodwill 413 139 412 386 390 467
Investment in associates 410 332 408 673 401 116
Other non-current assets 267 599 410 153 247 684
Current assets 6 380 676 5 616 776 7 019 418
Other current assets 3 650 257 2 415 067 4 136 646
Cash and cash equivalents 2 730 419 3 201 709 2 882 772
Total assets 9 081 220 8 197 710 9 491 748
EQUITY AND LIABILITIES
Capital and reserves 3 975 565 3 305 348 3 630 209
Ordinary share capital and 3 674 690 3 128 946 3 371 904
reserves
Non-controlling interests 300 875 176 402 258 305
Non-current liabilities 207 419 89 211 131 526
Long-term financial 177 647 58 047 90 526
liabilities
Other non-current liabilities 29 772 31 164 41 000
Current liabilities 4 898 236 4 803 151 5 730 013
Other current liabilities 4 898 236 4 803 151 5 713 620
Bank overdrafts - - 16 393
Total equity and liabilities 9 081 220 8 197 710 9 491 748
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
December December June
2011 2010 2011
R`000 R`000 R`000
Ordinary share capital and 3 371 904 3 031 919 3 031 919
reserves at the beginning of
the period
Profit for the period 360 626 395 863 733 475
Other comprehensive income 105 095 (39 688) (917)
for the period
Share of movement in 2 175 - (24 812)
associates` equity
Dividend paid (139 020) (138 795) (209 721)
Cash settled equity - - (1 632)
instruments raised
Share based payment expense 5 131 4 892 13 337
Goodwill recognised in (31 221) (125 245) (169 745)
equity
Ordinary share capital and 3 674 690 3 128 946 3 371 904
reserves at the end of the
period
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
December December June
2011 2010 2011
R`000 R`000 R`000
Cash generated from operations 315 161 275 894 345 276
Income from investments 94 054 116 633 224 727
Finance costs (6 364) (6 655) (18 089)
Taxation paid (215 366) (386 915) (650 624)
Dividends paid (139 020) (138 795) (224 562)
Cash retained from/(utilised 48 465 (139 838) (323 272)
in) operations
Net cash flow from investing (295 551) (453 792) (660 148)
activities
Net cash flow from financing 111 126 (95 700) (41 240)
activities
Net decrease in cash and cash (135 960) (689 330) (1 024 660)
equivalents
Cash and cash equivalents at 2 866 379 3 891 039 3 891 039
the beginning of the period
Cash and cash equivalents at 2 730 419 3 201 709 2 866 379
the end of the period
SEGMENTAL INFORMATION
% Unaudited Unaudited Audited
margin December December June
2011 2010 2011
R`000 R`000 R`000
Segment revenue
- Building and civil 2 615 515 2 429 426 4 377 474
engineering
- Roads and earthworks 1 924 161 1 997 893 4 110 792
- Australia 3 811 648 2 644 000 5 972 873
- Other operations 32 240 123 191 305 492
8 383 564 7 194 510 14 766 631
Segment result
- Building and civil 5,5 142 876 211 879 332 810
engineering
- Roads and earthworks 11,9 230 662 264 641 524 569
- Australia 2,1 81 181 107 148 171 200
- Other operations 37,7 10 550 25 378 61 470
465 269 609 046 1 090 049
BASIS OF ACCOUNTING
The unaudited consolidated interim financial statements have been prepared
in accordance with IAS 34: 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 is consistent with those used to prepare the comparative interim
financial statements and the annual financial statements for the year ended
30 June 2011. The information disclosed in these statements has not been
reviewed nor reported on by the group`s auditors.
OVERVIEW OF RESULTS
The group increased revenue by 16,5% from R7,2 billion to R8,4 billion for
the six months to December 2011. This increase is predominantly a result of
increased activity levels in Australia across both traditional markets and
the mining and resources sector in Western Australia. However the effect of
the competitive conditions within both the local and Australian markets is
evident in the reduction of the group`s operating margin from 8,5% to 5,5%.
While the operating profit before non-trading items declined by 23,6% to
R466 million when compared to the comparative period of R609 million, it
remains comparable with the profits from the second half of FY2011, which
amounted to R481 million.
Earnings per share declined by 8,6% to 659 cents per share (2010: 721 cents)
and headline earnings per share declined by 19,5% to 633 cents per share
(2010: 786 cents)
Headline earnings per share included in the published results for the period
ended 31 December 2010 had not been adjusted for the impairment of the loan
to associate. However, the impairment of the loan to associate was adjusted
for in the calculation of headline earnings per share included in the
audited published results at 30 June 2011. The headline earnings per share
for the period ending 31 December 2010 was adjusted for the impairment of
the loan to associate when calculating the headline earnings per share for
the period ended 31 December 2011.
During the first six months the group finalised the sale of its minority
holding in a mining company, which has prospecting rights for coal in
Mpumalanga. The group`s share in the profit thereon amounted to R42 million.
Goodwill of R18 million relating to the initial acquisition of WBHO-CARR has
been impaired during the period, however fluctuations in exchange rates have
resulted in an increase in goodwill in the statement of financial position.
Cash generated from operations amounts to R315 million compared to R276
million generated in the comparative period. The group`s capital expenditure
to date amounts to R246 million against an authorised budget of R437
million. Cash balances have decreased by R136 million over the six months
ended 31 December 2011.
Financial guarantees issued to third parties amount to R3,4 billion compared
to R3,6 billion as at 30 June 2011.
ACQUISITIONS
In terms of the shareholders` agreement, on 30 September 2011, the group
interest in Probuild Constructions (Australia) Pty Limited (Probuild)
increased from 76,6% to 78,5% as a result of a share buy-back valued at R41
million. Goodwill of R31 million was recognised in the statement of changes
in equity.
BUILDING AND CIVIL ENGINEERING
Although industry conditions have remained depressed over the last six
months the division has successfully increased its revenue by 7,6% to R2,6
billion (2010: R2,4 billion), however as yet there has been no recovery from
the margin pressures experienced in the latter half of FY2011.
The North division has again produced a strong result following progress on
a number of significant projects including the Standard Bank building in
Rosebank, the Alexander Forbes offices in Sandton, the successful
procurement of work in the Menlyn area as well as a number of retail
centres, namely the Nicolway Shopping Centre and Middelburg Mall. New awards
include the Alice Lane Standard Bank development, a shopping centre in
Bethlehem, a further extension to the Highveld Mall and the refurbishment of
the Grayston Drive Hotel for Sun International. During the period the
division, in joint venture, successfully completed the iconic extension to
Sandton City.
In the Western Cape all projects are fiercely contested and we are
privileged to have been awarded the new development by Growthpoint at the
Waterfront for Allan Gray as well as office blocks for the Ingenuity
Property fund. Ongoing construction at the harbour for Transnet and on
certain apartment blocks continues to provide secure revenue streams for the
division. The multi-use development in Mauritius is progressing well and is
due for completion within the next 12 months.
At the outset of the financial year the potential for work in the Eastern
Cape was limited. The award of the extension to, and refurbishment of, the
Hemingway Casino for Tsogo Sun, a new shopping centre in Queenstown and the
Oncology Unit at Livingstone Hospital have contributed toward the order
book.
The KZN division remains busy with the expansion of the Empangeni Hospital,
the new K-Rith building for the medical faculty at the University of KZN and
the refurbishment of the Wild Coast Sun. We have recently been awarded our
first project in the Durban harbour for Transnet. While the order book is
currently at reasonable levels, it has a relatively short horizon and
replacing current work is anticipated to prove challenging.
Mining activity within the Civil division continues to present opportunities
for growth and additional resources have been focused on this sector to meet
the expected expansion, however, some project delays together with other
projects not being awarded hindered the growth prospects for the six months
to December 2011. Progress on the Kusile project continues and the
international projects in both Botswana and Zambia are proving to be
successful. Renniks, the group`s new subsidiary, is finding it difficult to
replace its order book both in sliding and mining services while the
industrial side of the business remains busy.
ROADS AND EARTHWORKS
Trading conditions for the division have proved difficult over the six
months with sustained competition within the local market continuing to hold
margins at low levels. In order to replace falling revenue streams within
South Africa the division has successfully relocated its resources to
African mining projects. Overall the division has managed to maintain
revenue at the same levels compared to 31 December 2010, while operating
profits have declined by 13% to R230,6 million (2010: R264,6 million).
The six Free State Roads projects have four contractual milestone payment
events. The first payment was made in October 2010, the second, which was
due in mid 2011 and has only been partially paid. As a result the works were
suspended in October 2011 and will only recommence once full payment is
received. The total amount owing, amounts to R245 million (VAT inclusive).
Stop/go facilities have been maintained on all contracts to ensure access
and safety. We are currently in discussions with the client to resolve the
short payment and are confident that we will be paid for the work executed
thus far.
Work for the mining houses and SANRAL continues in the North West,
Mpumalanga, Limpopo, Eastern Cape and Gauteng.
The shortage of bitumen has hampered the turn-around strategy for Roadspan,
however all operational restructuring has been implemented and the business
is well placed to capitalise on the promised infrastructure work announced
by government. Insitu Pipelines is currently completing a number of major
pipe contracts and has recently commenced a gas line project between Secunda
and Sasolburg in joint venture with a specialist French pipe company. Of
further significance is the company`s involvement in a joint venture, which
is the preferred bidder for the North South Carrier in Botswana. Edwin
Construction is on budget for the year and is performing well.
The international division focuses primarily on the mining infrastructure
environment and is currently executing projects for mining houses in Zambia,
Botswana, Mozambique, Ghana, Sierra Leone and recently Guinea.
AUSTRALIA
Probuild has increased its revenue but operating profit is down due to the
competitive Australian building market. The majority of this growth is
derived from market growth in Perth, the inclusion of the Contexx
acquisition and the Queensland Civil operations which secured key
infrastructure rectification projects following last year`s devastating
floods.
Projects completed during the first six months include the AU$200 million
Harvey Norman and Ikea Retail Precinct, Perth`s CBD AU$120 million Raine
Square Commercial Tower, as well as three high-rise residential apartment
projects in Victoria with a combined value in excess of AU$220 million.
Probuild was awarded new projects with a combined value of AU$787 million
during the first six months and the division remains well positioned for
further revenue growth with the order book increasing to AU$1,3 billion
(June 2011: AU$1 billion).
WBHO Civils and WBHO-CARR have benefited from the resource sector in Western
Australia resulting in growth in revenues. WBHO Civils is performing well
with operating profit better than forecast. WBHO-CARR`s operating profit is
still adversely affected by logistical challenges in extremely remote areas
in Western Australia and reported a loss for the period.
WBHO`s management information systems have now been implemented within both
companies.
OTHER OPERATIONS
Property
Sales continue at the Simbithi Eco-Estate development near Ballito in KZN as
it remains a popular choice within both the first and second home markets.
The St Francis Links development remains quiet. There are no new
developments that have been identified for the immediate future.
Associates
Capital Africa Steel (CAS) generated earnings before interest and tax of R11
million compared to the prior period loss of R20 million when including the
share of its associates. The newly appointed CEO, Edwin Hewitt, has settled
in well however the restructuring of the CAS balance sheet is still in
progress.
The pipe factory has been downsized which has improved working capital
requirements as well as profitability. Shelving and racking and long steel
products have shown improvement in the current period. The aggregate and
ready mix business is impacted by a loss-making supply contract on the
Kusile Power Station and limited opportunities in Botswana, resulting in a
poor financial performance in the current period.
COMPETITION COMMISSION
The Competition Commission continues with the process of assessing the
group`s submissions and we continue to cooperate with the Commission. The
outcome of the process will only be known later in 2012 and the group has
made provision for a possible penalty. Compliance education is an ongoing
process for all senior staff.
PROSPECTS
Locally, WBHO is pursuing a number of opportunities within the renewable
energy sector and we believe these will materialise in the short term.
Following the President`s "State of the Nation" address we are encouraged by
the anticipated increase in the potential public spend.
There is still capacity in the private sector building market for new retail
centres and upgrades to existing centres which we will actively pursue, as
well as building and civil projects in the rest of Africa with existing
clients.
The group is pursuing further opportunities for mining infrastructure work
in South Africa and the rest of Africa.
New work prospects across Australia remain promising with the 12 to 18 month
tracked project pipeline amounting to AU$7,5 billion, slightly higher than
the pipeline of AU$7,4 billion at 30 June 2011. The contracting market in
Western Australia remains buoyant due to strong global demand for
commodities and significant investment in oil, gas and mining
infrastructure. Penetration of the civil engineering market in Western
Australia is progressing as we consolidate the businesses and enhance the
WBHO brand.
Although the business environment is still impacted by the uncertain global
economic and financial markets, the order book for the group at the
beginning of 2012 is R21,1 billion compared to R16,2 billion in June 2011 an
increase of R4,9 billion. Approximately 50% of the book is in Australia,
with the balance split equally between Building and Civil Engineering and
Roads and Earthworks. The geographical split of the order book is now 61%
foreign and 39% local.
EMPOWERMENT AND HEALTH AND SAFETY
This year saw the vesting of the first tranche of shares issued to employees
through Akani, the group`s broad-based employment equity share scheme. 1 090
employees were awarded between 305 and 508 shares each and this occasion
marked a very special event in WBHO`s history. We congratulate all the
participants for their loyal service to the group.
In July the group was assessed against the Construction Sector scorecard and
we are pleased to report that we have improved our rating to that of a Level
2 contributor. We thank all employees and suppliers for their commitment to
transformation.
The group has maintained an LTIFR of less than one over the period, however,
regrettably, three employees and one subcontractor were involved in fatal
accidents in the six months to December 2011. The board continues to treat
safety as its highest priority.
APPRECIATION
The Directors and Management would like to thank their clients and staff for
their continuous support and loyalty.
DIVIDEND DECLARATION
Notice is hereby given that the directors have declared an interim dividend
of 110 cents per share (2010: 110 cents) payable in respect of the six
months ended 31 December 2011.
The following dates have reference:
Last day to trade cum dividend Wednesday, 4 April 2012
Trading ex dividend commences Thursday, 5 April 2012
Record date Friday, 13 April 2012
Payment date Monday, 16 April 2012
Shares may not be dematerialised or rematerialised between Thursday, 5 April
2012 and Friday, 13 April 2012, both dates inclusive.
By order of the board
MS Wylie
Chairman
EL Nel
Chief Executive Officer
CV Henwood
Chief Financial Officer
Johannesburg
17 February 2012
www.wbho.co.za
Date: 20/02/2012 10:34:16 Supplied by www.sharenet.co.za
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