Wrap Text
Unaudited interim consolidated financial results
For the six months ended 31 December 2013
WILSON BAYLY HOLMES – OVCON LIMITED Building and civil engineering
contractors (Registration no. 1982/011014/06)
ISIN No: ZAE 000009932
Share code: WBO
Unaudited interim consolidated financial results
For the six months ended 31 December 2013
Highlights
Revenue up 11,3%
Operating profit down 15,1%
Headline earnings down 20,4%
Consolidated statement of comprehensive income
Restated
Unaudited unaudited Audited
December December June
% 2013 2012 2013
change R’000 R’000 R’000
Revenue 11,3 13 377 419 12 021 058 23 773 481
Operating profit before non-
trading items (15,1) 480 620 566 304 939 191
Impairment of goodwill – (9 112) (9 112)
Gain on bargain purchase 37 166 – –
Loss on deemed disposal of
associate (46 646) – –
Contingent consideration
refunded – 9 720 9 720
Fair value adjustments to
investments – (5 000) (6 429)
Impairment of property, plant
and equipment – – (536)
Net loss on disposal of
investments (17 917) – –
Share-based payment expense (15 741) (11 232) (24 990)
Operating profit 437 482 550 680 907 844
Share of profits and losses
from associates 7 072 (9 604) (14 890)
Net finance income 33 254 55 469 115 623
Profit before taxation 477 808 596 545 1 008 577
Taxation (171 446) (184 150) (333 672)
Profit for the period (25,7) 306 362 412 395 674 905
Translation of foreign entities 2 595 43 387 125 374
Share of associates’
comprehensive (loss)/income – (1 250) 28 873
Total comprehensive income for
the period (30,5) 308 957 454 532 829 152
Operating margin 3,6% 4,7% 4,0%
Profit attributable to:
Equity shareholders of Wilson
Bayly Holmes-Ovcon Limited 303 313 380 120 611 745
Non-controlling interests 3 049 32 275 63 160
306 362 412 395 674 905
Comprehensive income attributable to:
Equity shareholders of Wilson
Bayly Holmes-Ovcon Limited 315 252 412 221 765 992
Non-controlling interests (6 295) 32 275 63 160
308 957 444 496 829 152
Earnings per share (cents) (19,9) 548,2 684,0 1 104,3
Diluted earnings per share
(cents) (19,7) 543,5 677,2 1 093,3
Headline earnings per share
(cents) (20,4) 586,4 736,3 1 150,9
Diluted headline earnings per
share (cents) (20,2) 581,5 729,0 1 139,4
Dividend per share (cents) – 135,0 135,0 368,0
Consolidated statement of financial position
Restated
Unaudited unaudited Audited
December December June
2013 2012 2013
R’000 R’000 R’000
Assets
Non-current assets 4 168 770 3 333 016 3 384 834
Property, plant and equipment 2 696 948 1 874 988 1 949 689
Intangible assets 600 635 569 859 582 509
Investment in associates 103 998 409 122 442 123
Investments 73 116 47 575 43 624
Long-term receivables 296 907 169 406 166 064
Deferred taxation 397 166 262 066 200 825
Current assets 8 213 501 7 637 156 8 952 397
Inventories 595 645 208 787 190 727
Amounts due by customers 745 454 781 273 718 566
Trade and other receivables 3 502 374 3 507 131 4 435 912
Taxation receivable 321 750 137 118 271 633
Cash and cash equivalents 3 048 278 3 002 847 3 335 559
Total assets 12 382 271 10 970 172 12 337 231
Equity and liabilities
Capital and reserves 5 009 209 4 400 594 4 575 365
Stated capital 28 625 28 625 28 625
Non-distributable reserves 560 821 492 128 556 084
Distributable reserves 3 989 634 3 687 289 3 838 548
Non-controlling interests 430 129 192 552 152 108
Non-current liabilities 272 359 174 017 172 485
Borrowings 252 768 142 557 160 747
Deferred taxation 19 591 31 460 11 738
Current liabilities 7 100 703 6 395 561 7 589 381
Excess billings over work done 1 405 820 1 825 307 1 630 676
Trade and other payables 3 270 607 2 974 876 4 195 987
Short-term portion of borrowings 233 400 170 499 136 343
Provisions 1 689 677 1 226 465 1 499 100
Taxation payable 102 866 198 414 127 275
Bank overdraft 398 333 – –
Total equity and liabilities 12 382 271 10 970 172 12 337 231
Consolidated statement of changes in equity
Restated
Unaudited unaudited Audited
December December June
2013 2012 2013
R’000 R’000 R’000
Stated capital and reserves at the
beginning of the period 4 423 257 4 110 338 4 110 338
Profit for the period 303 313 380 120 611 745
Translation of foreign entities 2 595 42 137 154 247
Share of movement in associates’
equity – (983) –
Dividend paid (140 077) (143 324) (241 619)
Treasury shares sold (12 549) (1 023) –
Share-based payment expense 15 741 11 232 24 990
Share-based payment settlement – – 2 567
Changes in shareholding (13 200) (190 455) (239 011)
Stated capital and reserves at the
end of the period 4 579 080 4 208 042 4 423 257
Consolidated statement of cash flows
Unaudited Unaudited Audited
December December June
2013 2012 2013
R’000 R’000 R’000
Operating income before working
capital requirements 835 531 630 331 1 368 712
Working capital changes (424 447) 7 250 215 516
Cash generated from operations 411 084 637 581 1 584 228
Finance income 65 762 59 045 135 237
Finance costs (31 297) (11 307) (29 049)
Taxation paid (360 966) (93 685) (408 079)
Dividends paid (163 775) (143 324) (282 357)
Cash (utilised in)/retained from
operations (79 192) 448 310 999 980
Net cash flow from investing
activities (271 699) (589 398) (675 621)
Net cash flow from financing
activities (86 192) 75 051 (102 860)
Net (decrease)/increase in cash and
cash equivalents (437 083) (66 037) 221 499
Cash and cash equivalents at the
beginning of the period 3 335 559 3 068 884 3 068 884
Net overdraft acquired (271 204) – –
Foreign currency translation effect 22 673 – 45 176
Cash and cash equivalents at the end
of the period 2 649 945 3 002 847 3 335 559
Segmental information
Unaudited Unaudited Audited
December December June
2013 2012 2013
R’000 R’000 R’000
Segment revenue
Building and civil engineering 3 505 612 3 154 710 6 528 934
Roads and earthworks 2 513 175 2 683 731 5 073 998
Australia 6 532 872 6 168 007 12 141 346
Total construction revenue 12 551 659 12 006 448 23 744 278
Property developments 23 008 14 610 29 203
Construction materials* 802 752 – –
Total revenue 13 377 419 12 021 058 23 773 481
%
margin
Segment operating profit
Building and civil
engineering 4,3 152 078 138 933 240 234
Roads and earthworks 8,8 220 376 287 579 505 162
Australia 2,1 134 412 133 821 184 202
Total construction operating
profit 4,0 506 866 560 333 929 598
Property developments 43,3 9 967 5 971 9 593
Construction materials* (4,5) (36 213) – –
Total operating profit (3,6) 480 620 566 304 939 191
Geographical revenue contribution
South Africa 5 309 645 4 508 023 8 736 057
Africa 1 534 902 1 345 028 2 896 078
Australia 6 532 872 6 168 007 12 141 346
13 377 419 12 021 058 23 773 481
* A segment for construction materials has been created following the
consolidation of Capital Africa Steel, a group of companies supplying the
construction sector.
Number of shares
Unaudited Unaudited Audited
December December June
2013 2012 2013
’000 ’000 ’000
Ordinary shares in issue 66 000 66 000 66 000
Weighted average number of shares 55 331 55 574 55 397
Diluted weighted average number of shares 55 804 56 130 55 956
Reconciliation of headline earnings
% Unaudited Unaudited Audited
change December December June
2013 2012 2013
R’000 R’000 R’000
Attributable profit 303 313 380 120 611 745
Adjusted for: Group:
Impairment of goodwill – 9 112 9 112
Gain on bargain purchase (37 166) – –
Loss on deemed disposal of
associate 46 646 – –
Fair value adjustments to
investments – 5 000 1 669
Net loss on disposal of investment
(net of non-controlling interest) 10 349 – –
Impairment of property, plant and
equipment – – 536
Loss on disposal of property,
plant and equipment 1 844 3 454 766
Tax effect thereof (516) (3 250) (523)
Associates:
Loss on dilution of interest in
associate – – 1 802
Impairment of investments – 14 669 –
Impairment of goodwill – – 2 855
Loss on disposal of investments – 91 9 055
Profit on disposal of property,
plant and equipment (4) – –
Impairment of property, plant and
equipment (net of non-controlling
interest) 23 – 620
Tax effect thereof (5) – (87)
Headline earnings (20,7) 324 484 409 196 637 550
Reconciliation of taxation rate
Unaudited
December
2013
%
Normal tax 28,0
Withholding tax on dividends 2,7
Deferred taxation not recognised on losses 5,5
Non-deductible expenses 0,2
Foreign tax rate differential (0,2)
After tax profit from associates (0,3)
Effective tax rate 35,9
Business combinations
On 1 July 2013, Capital Africa Steel (CAS) acquired 10% of its share
capital for an amount of R15,9m through a share buy-back transaction with
the result that the group’s shareholding increased to 55,5%.
The following summarises the deemed consideration transferred and received
and the recognised amounts of identifiable assets acquired and liabilities
assumed at the acquisition date. The values used to determine the
calculations below are provisional.
Assets
1 July 2013
R’000
Property, plant and equipment 660 063
Intangible assets 2 093
Investments in associates 34 623
Long-term receivables 4 828
Deferred taxation 67 882
Inventory 397 411
Tax receivable 2 590
Trade and other receivables 401 215
Cash and cash equivalents 54 589
1 625 294
Liabilities
Borrowings 132 546
Deferred taxation 159
Provisions 2 294
Other financial liabilities 133
Current tax payable 438
Short-term portion of borrowings 14 435
Trade and other payables 457 981
Excess billings over work done 6 627
Bank overdraft 341 693
956 306
Net identifiable assets and liabilities 668 988
Fair value of previously held interest 334 493
Non-controlling interests recognised 297 327
Fair value of identifiable assets and liabilities (668 987)
Gain on bargain purchase (37 167)
Should new information be obtained within one year of the acquisition date
which provides additional insight about facts and circumstances that
existed at acquisition date and which affect adjustments to the
identifiable assets and liabilities, then the acquisition accounting will
be revised.
Included in the group’s results to 31 December 2013 is revenue of R803m
and after-tax losses of R72m which relate to CAS.
Restatement
During the financial year ended 30 June 2013 an error arising from the
consolidation of Probuild Constructions (Australia) (Pty) Ltd in 2004,
together with the fact that non-controlling interests had been incorrectly
translated at the closing rate, was identified. At the time of publishing
the Unaudited Interim Consolidated Financial Statements for the six months
ended 31 December 2012, the restatement had not been performed. The
amounts below reflect the effect of the restatement on the 31 December
2012 unaudited results. Full disclosure of the restatement is included in
the Audited Consolidated Financial Statements for the year ended 30 June
2013. The effect of the change on the figures reported at 31 December 2012
is as follows:
Statement of financial position
Previously
reported Restated
R’000 R’000
Intangible assets 469 361 569 859
Stated capital and reserves 4 043 449 4 110 338
Non-controlling interest 256 647 192 552
Statement of comprehensive income
Translation of foreign entities 33 351 43 387
Commentary
Basis of accounting
The unaudited interim consolidated financial statements have been prepared
in accordance with the framework concepts, the recognition and measurement
criteria of International Financial Reporting Standards (IFRS), the
information required by International Accounting Standard 34: Interim
Financial Reporting, the SAICA Financial Reporting Guides issued by the
Accounting Practices Committee, the JSE Listing Requirements and the South
African Companies Act 71 of 2008.
The accounting policies adopted in the preparation of these financial
statements are consistent with those used to prepare the annual financial
statements for the year ended 30 June 2013 with the exception of various
new standards and amendments to existing standards which are effective
from 1 January 2013. These standards include IFRS 10: Consolidated
Financial Statements, IFRS 11: Joint Arrangements and IAS 28: Investments
in Associates and Joint Ventures (Revised). The standards have not had a
material impact on the group’s figures in the current period and
comparative figures have not been restated.
The information disclosed in these statements has not been reviewed nor
reported on by the group’s auditors.
Operational review
Building and civil engineering
The growth of 11% in revenue achieved by the division is largely
attributable to the sustained improvement within the local building sector
most notably in Gauteng. Revenue growth was further assisted by increased
revenues from West Africa as the division’s projects in Ghana progress.
Operating profits increased to R152m from R139m in the prior period with
an operating margin of 4,3% (2012: 4,4%).
Building
Good growth of 18% in Gauteng and the surrounding regions was achieved in
line with the improved market conditions. The division is currently
constructing six shopping centres in the region together with two major
mixed-use developments, namely Newtown Junction in Johannesburg and the
Menlyn precinct in Tshwane. In the coastal regions, markets remained
stable and the divisions performed largely in line with management’s
expectations. Revenue from the Western Cape increased 29% supported
strongly by revenue from the Kathu solar farm as well as ongoing projects
at the V&A Waterfront and a number of residential apartments. In KwaZulu-
Natal (KZN), provincial hospital work at Empangeni, commercial offices in
Umhlanga and the Transnet pipe rack project at the harbour were the
significant contributors towards revenue in the six-month period. In the
Eastern Cape construction of the FAW truck assembly plant is nearing
completion, while the construction of the business school for the NMMU is
progressing well. Internationally, in Ghana, construction of the West
Hills Mall continues to progress well, however, ensuring delivery of a
high quality fit-out by the subcontractors is crucial to the project’s
success. Work has also now commenced on a second shopping centre in joint
venture with a local construction company.
Civil engineering
Revenue from the Civil engineering division was static when compared to
the prior period although the impact of subdued mining activity on the
market has been noticeable in the number of available projects on which to
tender. The operational and contractual complexity of large civil projects
together with a lengthy claims resolution process has prompted a more
conservative approach by management towards profit recognition on projects
of this nature.
Roads and earthworks
Both revenue and profit from the Roads and earthworks division were
negatively affected by the impact of subdued mining activity in West
Africa and, as a result, overall revenue decreased by 6% and operating
profit decreased by 23% at a margin of 8,8% (2012: 10,7%). The effects
were, however, partially offset by 15% growth from the South African
businesses, while revenue from both Botswana and Mozambique was broadly in
line with the comparative period. Despite subdued mining activity, the
division has a number of current mining projects in South Africa, Botswana
and Namibia as well as various small works contracts being executed in
Mozambique, Ghana and Sierra Leone following the completion of the major
works on those particular mines. Various roadwork projects also continued
to contribute towards revenue in the period. Roadspan continues to be
profitable and generated some improvement in the margin. WBHO Pipelines
recently secured the Mooi Umgeni contract in KZN, while production at the
North South Carrier pipeline in Botswana was hampered by strong rains and
flooding over December and January. The project team is working to an
accelerated programme to ensure the delays are caught up. The cost of the
damage caused by the flooding is covered by insurance.
Australia
Revenue from Probuild decreased by 6% in dollar terms in the six months to
31 December 2013, however, this was fully offset by a solid performance
from WBHO Civil which grew revenue by 67%. Revenue streams from civil
engineering grew to 28% of total revenue compared to 19,5% in the prior
period. Operating profit decreased by 7% in dollar terms, but was
essentially flat in rand terms as a result of currency translation gains.
The operating margin has pleasingly recovered to 2,1%, up from the margin
of 1,5% reported at 30 June 2013 with no further material losses
recognised on the three problem contracts reported on within Probuild at
that time.
Probuild
In Melbourne, construction of various large multi-storey residential
towers together with ongoing work at the Woodgrove shopping centre, Shrine
of Remembrance and Waurn Ponds shopping centre contributed towards revenue
in the period. Furthermore work has commenced on the $365m Eastland
Shopping Centre and the $67m offices for South Eastern Water for which
Probuild was preferred contractor on both contracts at 30 June 2013. In
Perth, Cloisters on Hay, a mixed-use development, St Georges Terrace, an
office block and the completion of the QE II Medical Centre car park were
the major projects under construction, while in Sydney delays in the
commencement of new projects and delays arising from insufficient
construction documentation on a project for local government, affected
revenue. A new building division has now also been set up in Brisbane.
WBHO Civil
Revenue from WBHO Civil was supported by the $113m civil and earthworks
project at the Burrop Technical Ammonia Nitrate Facility in the Pilbara.
Revenues from the Karatha, Geraldton and Kwinana regions were all in line
with expectations. WBHO Civil successfully set up a new roads division
during the period.
Property
Sales at the Simbithi Eco Estate near the King Shaka International Airport
in KZN continue to sell well with a number of stands transferred in the
six-month period. Sales at the golf course development at St Francis in
the Eastern Cape remain lacklustre. No improvement is anticipated by
management in the short term.
Capital Africa steel
Revenue from Capital Africa Steel (CAS) was flat year-on-year, however,
overall profitability was severely hampered by a poor performance from the
pipe factory in Mozambique. The poor performance at the pipe factory was
the result of production issues arising from one particular contract which
is nearing completion. The performance from the long steel and aggregate
businesses was satisfactory. CAS disposed of Symo, the group’s shelving
division as a result of increased foreign competition and the high capital
expenditure required to remain competitive.
Financial review
Revenue increased by 11% from R12b to R13,4b for the six months to
December 2013, approximately 6% of which related to the full consolidation
of Capital Africa Steel in the period. The Building and civil engineering
division achieved moderate growth despite the effects of a three week
strike in August. Revenue from the Roads and earthworks division decreased
in the absence of an anchor project in West Africa, which also hampered
the division’s profitability. Revenue from the Australian businesses was
static in dollar terms, but increased by 364m in rand terms following
further currency weakness in the six-month period.
Operating profit before non-trading items decreased from R566m to R481m as
a result of a loss of R36m from Capital Africa Steel (Pty) Ltd (CAS) and
the decrease in operating profit from the Roads and earthworks division.
Consequently the overall operating margin decreased from 4,7% to 3,6%.
When excluding the performance of CAS the operating margin increases to
4%, which is in line with the margin achieved at 30 June 2013. The net
loss on disposal of investments consists of a R26m loss on the disposal of
the Symo shelving division and an R8m profit on the disposal of 5% of 3Q
Holdings to an empowerment partner, both within CAS. Net finance income
decreased from R55m to R33m primarily due to interest on the bank
overdraft and related currency losses within the pipe factory in
Mozambique now being consolidated.
The effective tax rate is particularly high at 36% as a result of deferred
tax assets, which have not been recognised in respect of losses within
certain CAS companies as well as withholding taxes levied on dividends
repatriated during the period.
Earnings per share decreased by 19,9% to 548 cents per share (2012: 684
cents per share) and headline earnings per share decreased by 20,4% to 586
cents per share (2012: 736 cents per share).
Capital expenditure during the period amounted to R234m against an
authorised budget of R430m. Capital expenditure in respect of CAS amounted
to R53m during the period. Total depreciation amounted to R170m (2012:
R144m).
Cash generated from operations amounts to R411m compared to R638m
generated in the comparative period. The decrease in cash balances of
R686m at 31 December 2013 is attributable to the consolidation of a net
overdraft of R271m within the CAS group of companies, the working capital
utilisation of R424m and taxation paid of R361m.
Financial guarantees issued to third parties amount to R5,4b compared to
R4,7b issued as at 30 June 2013.
Changes in shareholding
On 1 July 2013, CAS acquired 10% of its share capital for an amount of
R15,9m through a share buy-back transaction, with the result that the
group’s shareholding increased to 55,5%. In accordance with
IFRS 3: Business combinations, a loss of R46m has been recognised on the
deemed disposal of the group’s 50% share in CAS, and a gain on bargain
purchase of R37m was accounted for on the re-acquisition of the 55%
interest as a subsidiary.
Probuild also repurchased equity from minority shareholders in the period
under review resulting in an increase in the group’s interest from 78,51%
to 80,03% at a cost of R25m. Debit amounts of R13m were recognised in
equity.
Safety
The group’s LTIFR has further improved from 1,35 at 30 June 2013 to 1,12
at 31 December 2013 with good progress being made in Australia, which
improved from 5,31 at 30 June 2013 to 3,08 at 31 December, as well as
within the group’s building divisions.
Order book and prospects
The order book at 31 December 2013 has increased 16% to R25,3b from
R21,9b.
31 December 30 June
Order book by segment (Rm) % 2013 % 2013
Building and civil engineering 31 7 857 33 7 253
Roads and earthworks 15 3 670 17 3 817
Australia 54 13 752 50 10 806
Total 100 25 279 100 21 876
31 December 30 June
Order book by geography (Rm) % 2013 % 2013
South Africa 42 10 599 49 9 783
Africa 4 928 6 1 287
Australia 54 13 752 45 10 806
Total 100 25 279 100 21 876
South Africa and the rest of Africa
Subdued mining activity is impacting both the Civil engineering and Roads
and earthworks divisions with no new significant awards in this sector
since 30 June 2013. However, Exxaro was recently awarded the mining
licence for its Mayoko mine in the Congo, for which WBHO remains the
preferred contractor. In Ghana, WBHO is pursuing opportunities in the
mining sector as well further shopping centre prospects. Locally, the
strong building market in Gauteng continues to provide various
opportunities in the short term, while the recent award of the new Nedbank
offices in KZN has filled the order book in that region. In the Western
Cape the V&A Waterfront continues to be a good source of projects.
Australia
Following the conversion of the Eastland shopping centre and South East
Water projects to secured work, Probuild’s order book has increased
significantly with good revenue visibility through to 2016. Probuild are
the preferred contractor for a further six contracts amounting to $729m.
These projects are expected to start in the current financial year. The
bid for the new Perth Stadium was submitted in December 2013 and the
announcement of the preferred bidder is expected in March 2014. WBHO Civil
has a strong book till the end of the financial year, but its future order
book is impacted by reduced mining spend in Australia.
Competition commission
The transgression to be settled with the Commission outside of the fast-
track settlement process was agreed with the Commission on 11 February
2014 and requires approval of the Tribunal.
Changes to the board
On the 23 January 2014, Mr JP Botha resigned from the board and Mr R
Gardiner was appointed as an independent non-executive director. These
changes to the board restore the composition of the board to a majority of
non-executive directors. The board thanks Mr Botha for his contribution
over the years and welcomes Mr Gardiner and the knowledge and experience
he brings with him.
Appreciation
The directors and management would like to thank all stakeholders
especially our employees for their continuous support and loyalty.
Dividend declaration
Notice is hereby given that the directors have declared an interim
dividend of 135 cents per share (2012: 135 cents) payable to all
shareholders recorded in the register on 11 April 2014.
In terms of the dividends tax legislation the following information is
disclosed:
The dividend is made from income reserves and is subject to dividend
withholding tax of 15% which resulted in a net dividend of 114,75 cents
per share. The company has no STC credits to be utilised.
The number of shares in issue at date of declaration amount to 66 000 000
(55 331 430 exclusive of treasury shares) and the company’s tax reference
number is 9999597710.
In order to comply with the requirements of Strate, the relevant details
are:
Last date to trade cum dividend: 4 April 2014
Trading ex dividend commences: 7 April 2014
Record date: 11 April 2014
Payment date: 14 April 2014
Shares may not be dematerialised or rematerialised between 7 April 2014
and 11 April 2014, both dates inclusive.
By order of the board
MS Wylie EL Nel CV Henwood
Chairman Chief Executive Officer Chief Financial Officer
Johannesburg
21 February 2014
Date: 24/02/2014 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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