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Audited Summary Consolidated Financial Statements for the year ended 30 June 2014
Wilson Bayly Holmes-Ovcon Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1982/011014/06)
Share code: WBO ISIN: ZAE000009932
(“WBHO”)
RESULTS 2014
AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
HIGHLIGHTS
- REVENUE UP 8,4%
Revenue contribution by segment continuing operations
2014: 2013:
Total revenue R25 777m R23 773m
Building and Civil Engineering 7 002 6 529
Roads and Earthworks 5 002 5 074
Australia 12 438 12 141
Property development 85 29
Construction materials 1 251
Revenue contribution by geographic area continuing operations
2014: 2013:
Total revenue R25 777m R23 773m
South Africa 10 243 8 736
Rest of Africa 3 096 2 896
Australia 12 438 12 141
- OPERATING PROFIT UP 10,2%
Operating profit contribution by segment continuing operations
2014: 2013:
Total operating profit R1 035m R939m
Building and Civil Engineering 329 240
Roads and Earthworks 414 505
Australia 250 184
Property development 28 10
Construction materials 14
Operating profit contribution by geographic area continuing operations
2014: 2013:
Total revenue R1 035m R23 773m
South Africa 495 323
Rest of Africa 290 432
Australia 250 18
BASIS OF PREPARATION
for the year ended 30 June 2014
The summary consolidated financial statements for the year ended 30 June 2014 have been prepared in
compliance with the Listings Requirements of the JSE Limited, the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards (“IFRS”), the requirements
of the International Accounting Standards (“IAS”) 34, Interim Financial Reporting, SAICA Financial
Reporting Guidelines as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council and the Companies Act of South Africa.
The accounting policies used in the preparation of these results are in accordance with IFRS and are
consistent in all material respects with those used in the audited annual financial statements for the
year ended 30 June 2013.
The external auditor, BDO South Africa Inc., have issued an unmodified audit opinion on the group’s
consolidated financial statements and summary consolidated financial statements. These summary
consolidated financial statements have been derived and are consistent in all material respects with the
group’s consolidated financial statements. A copy of the auditor’s report on the group’s consolidated
financial statements are available for inspection at the Company’s registered office, together with the
financial statements identified in the auditor’s report.
Mike Wylie Louwtjie Nel Charles Henwood
Chairman Chief Executive Officer Chief Financial Officer
29 August 2014
STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS
for the year ended 30 June 2014
The directors are responsible for the preparation, integrity and fair presentation of the summary
consolidated financial statements of Wilson Bayly Holmes-Ovcon Limited and its subsidiaries. The summary
consolidated annual financial statements have been prepared in compliance with the Listings Requirements
of the JSE Limited, the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (“IFRS”), the requirements of the International Accounting
Standards (“IAS”) 34, Interim Financial Reporting, SAICA Financial Reporting Guidelines as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and the Companies Act of South Africa and include amounts based on judgements and
estimates made by management. The directors have also prepared any other information included in the
annual report and are responsible for both its accuracy and its consistency with the summary
consolidated financial statements.
The directors acknowledge that, ultimately, they are responsible for the system of internal financial
control established by the group and place considerable importance on maintaining a strong control
environment. To enable the directors to meet these responsibilities, the board sets standards for
internal control aimed at reducing the risk of error or loss in a cost-effective manner.
The going-concern basis has been adopted in preparing the audited summary consolidated financial
statements. Based on forecasts and available cash resources, the directors have no reason to believe
that the company or the group will not be a going concern in the foreseeable future. The viability of
the company and the group is supported by the audited summary consolidated financial statements.
The preparation of the audited summary consolidated financial statements was supervised by the Chief
Financial Officer, Charles Henwood CA(SA), and approved by the board of directors on 29 August 2014 and
are signed on its behalf.
Mike Wylie Louwtjie Nel
Chairman Chief Executive Officer
29 August 2014
INDEPENDENT AUDITOR’S REPORT ON SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2014
To the Shareholders of Wilson Bayly Holmes-Ovcon Limited
The summary consolidated financial statements of Wilson Bayly Holmes-Ovcon Limited, contained in the
accompanying preliminary report, which comprise the summary consolidated statement of financial position
as at 30 June 2014, the summary consolidated statements of financial performance and other comprehensive
income, changes in equity and cash flows for the year then ended, and related notes, are derived from
the audited consolidated financial statements of Wilson Bayly Holmes-Ovcon Limited for the year ended
30 June 2014. We expressed an unmodified audit opinion on those consolidated financial statements in our
report dated 29 August 2014. Our auditor’s report on the audited consolidated financial statements
contained an Other Matter paragraph: Other reports required by the Companies Act (refer below).
The summary consolidated financial statements do not contain all the disclosures required by
International Financial Reporting Standards and the requirements of the Companies Act of South Africa
as applicable to annual financial statements. Reading the summary consolidated financial statements,
therefore, is not a substitute for reading the audited consolidated financial statements.
Directors’ Responsibility for the Summary Financial Statements
The directors are responsible for the preparation of the summary consolidated financial statements in
accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports, set
out in basis of preparation note to the summary financial statements, and the requirements of the
Companies Act of South Africa as applicable to summary financial statements, and for such internal
control as the directors determine is necessary to enable the preparation of summary consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the summary consolidated financial statements based on
our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810,
Engagements to Report on Summary Financial Statements.
Opinion
In our opinion, the summary consolidated financial statements derived from the audited consolidated
financial statements of Wilson Bayly Holmes-Ovcon Limited for the year ended 30 June 2014 are
consistent, in all material respects, with those consolidated financial statements, in accordance with
the requirements of the JSE Limited Listings Requirements for preliminary reports, set out in the basis
of preparation note to the summary financial statements and the requirements of the Companies Act of
South Africa as applicable to summary financial statements.
Other reports required by the Companies Act
The other reports required by the Companies Act paragraph in our audit report dated 29 August 2014
states that as part of our audit of the consolidated financial statements for the year ended
30 June 2014, we have read the Directors’ Report, the Audit Committee’s Report and the Company
Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies
between these reports and the audited consolidated financial statements. These reports are the
responsibility of the respective preparers. The paragraph states that, based on reading these reports,
we have not identified material inconsistencies between these reports and the audited consolidated
financial statements. The paragraph furthermore states that we have not audited these reports and
accordingly do not express an opinion on these reports. The paragraph does not have an effect on the
summary consolidated financial statements or our opinion thereon.
Other Matter
We have not audited future financial performance and expectations by management included in the
accompanying summary consolidated financial statements and accordingly do not express any opinion
thereon.
BDO South Africa Inc
Director: Stephen Shaw
Registered Auditor
22 Wellington Road, Parktown, 2193
29 August 2014
CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE AND OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2014
Audited Audited
June June
% 2014 2013
change R’000 R’000
Revenue from continuing operations 8,4 25 776 907 23 773 481
Operating profit before non-trading items 10,2 1 034 852 939 191
Impairment of goodwill (392) (9 112)
Loss on deemed disposal of associate (1 914) –
Contingent consideration refunded – 9 720
Fair value adjustments to investments – (6 429)
Impairment of property, plant and equipment (15 340) (536)
Share-based payment expense (33 337) (24 990)
Operating profit 983 869 907 844
Share of profit/(loss) from associate 11 168 (14 890)
Net finance income 113 202 115 623
Profit before taxation 1 108 239 1 008 577
Taxation (332 972) (333 672)
Profit from continuing operations 14,9 775 267 674 905
Loss from discontinued operations (527 030) –
Profit for the year 248 237 674 905
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Translation of foreign entities (64 216) 125 374
Share of associates’ comprehensive income 6 967 28 873
Total comprehensive income for the year 190 988 829 152
Total comprehensive income attributable to:
Equity shareholders of Wilson Bayly Holmes-Ovcon Limited 401 252 765 992
Non-controlling interests (210 264) 63 160
190 988 829 152
Profit for the year attributable to:
Equity shareholders of Wilson Bayly Holmes-Ovcon Limited 422 742 611 745
Non-controlling interests (174 505) 63 160
248 237 674 905
Basic earnings per share (cents) (30,8) 763,8 1 104,3
Diluted earnings per share (cents) (30,2) 762,6 1 093,3
Headline earnings per share (cents) 1,9 1 172,6 1 150,9
Dividend per share (cents) 368,0 368,0
Profit from continuing operations attributable to:
Equity shareholders of Wilson Bayly Homes-Ovcon Limited 705 438 611 745
Non-controlling interests 69 829 63 160
775 267 674 905
Basic earnings per share (cents) 15,4 1 274,5 1 104,3
Diluted earnings per share (cents) 16,4 1 272,5 1 093,3
Headline earnings per share (cents) 11,4 1 282,1 1 150.9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2014
Audited Audited
June June
2014 2013
R’000 R’000
Stated capital and reserves at the beginning of the year 4 423 257 4 110 338
Profit for the year 422 742 611 745
Translation of foreign entities (21 490) 154 247
Dividend paid (235 490) (241 619)
Share-based payment expense 33 337 24 990
Share-based payment settlement 12 496 2 567
Changes in shareholding (43 612) (239 011)
Stated capital and reserves at the end of the year 4 591 240 4 423 257
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2014
Audited Audited
June June
2014 2013
R’000 R’000
ASSETS
Non-current assets
Property, plant and equipment 2 163 442 1 949 689
Goodwill 644 936 582 509
Intangible assets 1 282 –
Investment in associates 97 847 442 123
Investments 96 997 43 624
Long-term receivables 292 345 166 064
Deferred taxation 365 903 200 825
Total non-current assets 3 662 752 3 384 834
Current assets
Inventories 259 025 190 727
Amounts due by customers 929 688 718 566
Trade and other receivables 4 955 738 4 435 912
Taxation receivable 356 268 271 633
Cash and cash equivalents 2 756 700 3 335 559
Total current assets 9 257 419 8 952 397
Assets held-for-sale 477 642 –
Total assets 13 397 813 12 337 231
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 28 625 28 625
Non-distributable reserves 578 873 556 084
Distributable reserves 3 983 742 3 838 548
Shareholder’s equity 4 591 240 4 423 257
Non-controlling interests 273 776 152 108
Total equity 4 865 016 4 575 365
Non-current liabilities
Borrowings 184 903 160 747
Deferred taxation 32 591 11 738
Total non-current assets 217 494 172 485
Current liabilities
Excess billings over work done 1 417 028 1 630 676
Trade and other payables 4 697 296 4 195 987
Short-term portion of borrowings 149 645 136 343
Provisions 1 313 421 1 499 100
Taxation payable 66 552 127 275
Bank overdraft 115 605 –
Total current liabilities 7 759 547 7 589 381
Liabilities associated with disposal group held-for-sale 555 756 –
Total equity and liabilities 13 397 813 12 337 231
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2014
Audited Audited
June June
2014 2013
R’000 R’000
Operating profit before working capital requirements 1 344 045 1 366 559
Working capital changes (546 938) 217 669
Cash generated from operations 797 107 1 584 228
Net finance income 61 005 106 188
Taxation paid (548 071) (408 079)
Dividends paid (265 089) (282 357)
Cash retained from operations 44 952 999 980
Cash flow from investing activities
Advance of long-term receivables (211 166) (18 027)
Additional investment in associates (27 524) –
Additions to investments (53 547) (39 829)
Contingent consideration refunded – 9 720
Changes in shareholding of subsidiaries (54 787) (242 540)
Proceeds on disposal of plant and equipment 106 175 49 966
Repayment of receivable 15 753 –
Proceeds on disposal of operations 29 052 –
Purchase of property, plant and equipment
– to maintain operations (210 032) (155 911)
– to expand operations (92 111) (279 000)
Net cash flow from investing activities (498 187) (675 621)
Cash flow from financing activities
Repayment of borrowings (22 565) –
Instalments in respect of capitalised finance leases (163 494) (102 860)
Net cash flow from financing activities (186 059) (102 860)
Net (decrease)/increase in cash and cash equivalents (639 294) 221 499
Cash and cash equivalents at the beginning of the year 3 335 559 3 068 884
Net overdraft acquired (263 927) –
Foreign currency translation effect (59 693) 45 176
Net overdraft in respect of disposal group 268 450 –
Cash and cash equivalents at the end of the year 2 641 095 3 335 559
NOTES TO THE SUMMARY AUDITED FINANCIAL STATEMENTS
for the year ended 30 June 2014
1. DISCONTINUED OPERATION AND DISPOSAL GROUP HELD-FOR-SALE
During the year, four operations within the construction materials business segment were classified as
discontinued operations. Symo Steel (a division of Capital Africa Steel) and Krost Shelving (Pty) Ltd
were disposed of for a loss of R40 million. A sale agreement (pending certain conditions) has been
concluded in respect of Dywidag Systems International (Pty) Ltd. Capital Africa Steel is engaging with a
number of parties who have signed non-disclosure agreements and expressed an interest to purchase the
Capital Star Steel business.
Audited
June
2014
R’000
Revenue 483 731
Cost of sales (522 643)
Gross loss (38 912)
Operating expenses (27 021)
Operating loss before non-trading items (65 933)
Impairment of property, plant and equipment (360 014)
Loss on disposal of operations (39 778)
Onerous contracts (35 233)
Operating loss (500 958)
Share of profits from associate 5 223
Net finance costs (31 307)
Loss before tax (527 042)
Taxation benefit 12
Loss from discontinued operations (527 030)
Loss from discontinued operations attributable to:
Equity shareholders of Wilson Bayly Holmes-Ovcon Limited (282 696)
Non-controlling interests (244 334)
(527 030)
Assets classified as held-for-sale
Disposal group held-for-sale
Property, plant and equipment 178 000
Inventories 137 270
Trade and other receivables 44 722
Cash and cash equivalents 32 085
Assets of disposal group held-for-sale 392 077
Non-current asset held-for-sale
Investment in associate 85 565
Assets classified as held-for-sale 477 642
Disposal group held-for-sale
Trade and other payables (213 108)
Provisions (42 113)
Bank overdraft (300 535)
Liabilities associated with assets of a disposal group held-for-sale (555 756)
2. RECONCILIATION OF HEADLINE EARNINGS
Audited Audited
June June
2014 2013
R’000 R’000
Headline earnings from continuing operations
Attributable profit from continuing operations 705 438 611 745
Adjusted for:
Group:
Impairment of goodwill 392 9 112
Loss on deemed disposal of associate 1 914 –
Fair value adjustments to investments* – 1 669
Impairment of property, plant and equipment* 14 825 536
Net (gain)/loss on disposal of property, plant and equipment (12 213) 766
Tax effect (731) (523)
Associates:
Loss on dilution of interest in associate – 1 802
Impairment of goodwill – 2 855
Loss on disposal of investments – 9 055
Impairment of property, plant and equipment* – 620
Tax effect – (87)
709 625 637 550
Headline earnings from total operations
Attributable profit from total operations 422 742 611 745
Adjusted for:
Group:
Impairment of goodwill 392 9 112
Loss on deemed disposal of associate 1 914 –
Fair value adjustments to investments* – 1 669
Net loss on disposal of investment* 22 101 –
Impairment of property, plant and equipment* 214 849 536
Net (gain)/loss on disposal of property, plant and equipment (12 213) 776
Tax effects (731) (523)
Associates:
Loss on dilution of interest in associate – 1 802
Impairment of goodwill – 2 855
Loss on disposal of investments – 9 055
Impairment of property, plant and equipment* – 620
Tax effect – (87)
649 054 637 550
* Net of non-controlling interest
3. ORDINARY SHARES
Audited Audited
June June
2014 2013
Ordinary shares in issue (‘000) 66 000 66 000
Weighted average number of shares (‘000) 55 350 55 397
Diluted weighted average number of shares (‘000) 55 436 55 956
4. BUSINESS COMBINATIONS
Deemed acquisition of a subsidiary
On 1 July 2013, Capital Africa Steel (CAS) acquired 10,0% of its share capital for an amount of
R15,9 million through a share buy-back transaction with the result that the group’s shareholding
increased from 50,0% to 55,6%.
The CAS group contributed revenue of R1,3 billion, profit before tax of R4,2 million from continuing
operations and an attributable loss of R283 million from discontinued operations during the year. The
following summarises the deemed consideration transferred and received and the recognised amounts of
identifiable assets acquired and liabilities assumed at the acquisition date.
1 July
2013
Assets
Property, plant and equipment 660 063
Intangible assets 2 093
Investments in associates 88 675
Long-term receivables 4 828
Deferred taxation 52 033
Inventory 397 411
Trade and other receivables 403 805
Cash and cash equivalents 70 489
1 679 397
Liabilities
Borrowings 132 546
Deferred taxation 159
Provisions 2 294
Contingent liability 15 900
Short-term portion of borrowings 14 435
Trade and other payables 465 180
Bank overdraft 341 693
972 207
Identifiable net assets and liabilities 707 190
Fair value of previously held interest 379 226
Non-controlling interests recognised 337 089
Fair value of identifiable assets and liabilities (707 190)
Goodwill 9 125
The following fair values have been determined:
- The fair value of the investment in associate has been determined using the discounted cash flow
method. A discount rate of 16,4% over a period of five years was used to discount the expected cash
flows.
- The contingent liability of R15,9 million represented an obligation in respect of the buy back of
shares.
- Deferred tax assets of R4,2 million not recognised by the CAS Group have been recognised as there
is an expectation that the deferred tax asset will be utilised in the future. The carrying value of
the remaining identifiable assets and liabilities approximates the fair values at the acquisition
date.
5. SEGMENTAL INFORMATION
Audited Audited
June June
2014 2013
% growth R’000 R’000
Segment revenue
Continuing operations
Building and civil engineering 7,2 7 001 985 6 528 934
Roads and earthworks (1,4) 5 001 508 5 073 998
Australia 2,4 12 437 970 12 141 346
Property developments 189,7 84 601 29 203
Construction materials* 1 250 844 –
Total revenue from continuing operations 25 776 907 23 773 481
Construction materials* (discontinued operations) 483 731 –
Total revenue 26 260 638 23 773 481
Segment operating profit % margin
Continuing operations
Building and civil engineering 4,7 329 089 240 234
Roads and earthworks 8,3 413 888 505 162
Australia 2,0 250 043 184 202
Property developments 33,2 28 055 9 594
Construction materials* 1,1 13 777 –
Total operating profit from continuing operations 4,0 1 034 852 939 192
Construction materials* (discontinued operations) (65 934) –
Total operating profit 3,7 968 918 939 192
- A segment for construction materials has been created following the consolidation of Africa Steel,
a group of companies supplying the construction sector. Four operations (including an associate)
within the construction materials segment were discontinued in the current year.
Geographical revenue contribution
South Africa 10 242 530 8 736 057
Rest of Africa 3 096 407 2 896 078
Australia 12 437 970 12 141 346
25 776 907 23 773 481
Geographical profit contribution
South Africa 4,8 495 022 323 240
Rest of Africa 9,4 289 790 431 749
Australia 2,0 250 043 184 202
4,0 1 034 855 939 192
FINANCIAL REVIEW
Despite challenging conditions within certain sectors, the group’s construction divisions have delivered
a credible performance. However, the poor performance from the pipe factory in Mozambique, Capital Star
Steel (CSS), has been of great concern and significantly affected the overall financial performance of
the group. Reference to discontinued operations includes the trading results for CSS, Symo Steel and
Krost (Pty) Ltd and the equity accounted income from Dywidag-Systems International (Pty) Ltd (DSI).
Continuing operations
Revenue from continuing operations increased by 8,4% during the year, however, approximately 3,2%
relates to the full consolidation of Capital Africa Steel from 1 July 2013. Following strong growth of
24% in FY13, the Building and civil engineering division achieved moderate growth of 7,2% in the current
year in what remains a buoyant private sector building market. The Roads and earthworks division has
performed well to achieve revenue which is only marginally down (1,4% decrease) from the prior year,
given the effect of very little activity in the mining sector both locally and in Africa. Revenue from
the Australian businesses was essentially static in dollar terms (2,4% decrease) and this was primarily
due to start-up delays on certain projects in the second half of the year. In rand terms, revenue
increased by 2,4% after the effects of currency conversions. Revenue from continuing operations within
the construction materials division amounted to R1,3 billion and relates to the rebar, ready-mix and
aggregate businesses.
Operating profit from continuing operations before non-trading items increased by 10,2% to R1 billion at
a margin of 4,0% compared to R939 million at 3,9% in FY13. Improvement in building margins in the second
half of the year were unfortunately offset by declining margins in the Civil engineering and Roads and
earthworks divisions due to the lack of work from the mining sector and strong competition in the road
sector. The Australian construction margin returned to the 2,0% level in the current year. Margins in
the materials businesses have been under severe pressure in the second half particularly in the rebar
market and this is reflected in the disappointing margin achieved of 1,1%.
Discontinued operations
Subsequent to the business update released on SENS in June 2014 in which shareholders were advised of
the effects of production constraints and poor trading conditions on the value of non-current assets
within the pipe mill, CSS, as well as concerns over the future viability of the business, a decision was
reached to dispose of Capital Star Steel. The trading losses within CSS amount to R65 million for the
year and at 30 June FY14 the carrying amount of the factory was impaired by R360 million. The shelving
and racking businesses, Symo (a division within CAS) and Krost (Pty) Ltd were both disposed of during
the year and have also been disclosed as discontinued operations. The management of CAS have furthermore
concluded a sale agreement in respect of DSI, a company supplying roof bolts to the mining sector, and
the equity accounted earnings from this business are also included in discontinued operations. Assets to
the value of R478 million net of the impairment of R360 million have been classified as held-for-sale.
Associated liabilities amounted to R556 million and have also been reclassified. The investment amount
in respect of DSI has also been classified as held-for-sale.
Earnings per share and headline earnings per share
The combined effect of the trading losses, impairment losses and disposal losses have resulted in a
decrease in earnings per share of 30,8% from 1 104 cents per share in FY13 to 764 cents per share in
FY14. Headline earnings per share which excludes the effect of the impairment and disposal losses
increased by 1,9% to 1 173 cents per share from 1 151 cents per share. Earnings per share and headline
earnings per share, in respect of continuing operations, have increased by 15,4% and 11,4% respectively
over the comparative period.
Taxation
The effective tax rate of 30,1% is a result of foreign taxes raised in higher tax rate jurisdictions and
withholding taxes levied on dividends repatriated during the period.
Cash
Cash generated from operations amounts to R797 million compared to R1 584 million generated in the
comparative period. The decrease in cash balances of R695 million at 30 June FY14 is attributable to the
consolidation of a net overdraft of R264 million within the CAS group of companies, the working capital
utilisation of R547 million and taxation paid of R548 million. Capital expenditure during the period
amounted to R413 million against an authorised budget of R430 million and depreciation amounted to
R355 million (2013: R277 million)
Changes in shareholding
On 1 July 2013, CAS acquired 10,0% of its share capital for an amount of R15,9 million through a share
buy-back transaction, with the result that the group’s shareholding increased to 55,6%. In accordance
with IFRS 3: Business combinations, a loss of R1,9 million has been recognised on the deemed disposal of
the group’s 50,0% share in CAS and goodwill of R9 million was accounted for on the re-acquisition of the
55,6% interest as a subsidiary.
Probuild repurchased equity from minority shareholders in the year under review resulting in an increase
in the group’s interest from 78,5% to 80,0% at a cost of R26 million. Debit amounts of R13 million were
recognised in equity. Probuild also increased its interest from 60,0% to 84,0% within Monaco Hickey at a
cost of R12,7 million. Debit amounts of R2,8 million were recognised in equity.
Contingent liabilities
Financial guarantees issued to third parties amount to R6,6 billion compared to R4,7 billion issued as
at 30 June 2013.
OPERATIONAL REVIEW
Building and civil engineering
FY14 FY13
Rm Rm
Revenue 7,2% growth 7 002 6 529
Operating profit 4,7% margin 329 240
Building
The strengthening of the building market observed towards the end of FY13 has continued through FY14 and
the division’s work on-hand has grown steadily over the year. Margins have shown some improvement during
the year, however, they remain competitive. The division continues to negotiate the large majority of
its projects on the strength of its reputation for consistent reliable delivery demonstrated with a
proven track record.
Despite the effects of difficult economic conditions on consumers’ disposable income, the retail sector
remains resilient particularly in Gauteng with new developments under construction in the major city
areas of Tshwane, Midrand and Newtown in Johannesburg, as well as in the more outlying areas of Orange
Farm, Heidelberg and Krugersdorp. Furthermore existing centres in Rosebank and Sandton have
refurbishments and upgrades in progress. Various new offices for large corporates further supported the
Gauteng market. In KwaZulu-Natal (KZN), development in and around Umhlanga and Ballito has grown
steadily since the opening of the King Shaka Airport. New corporate offices have underpinned the KZN
division’s growth this year although the healthcare sector, both public and private, also contributed
strongly towards performance. In the Western Cape, growth in tourism has supported demand for
residential apartments as well as ongoing development within the V&A Waterfront, both of which have
provided a strong source of projects for the Cape division along with the Kathu renewable energy project
which is now nearing completion. The Eastern Cape division has had a challenging year with a significant
decrease in activity in the region. This together with some under-performing contracts resulted in a
poor performance however the order book of the division has shown improvement in the second half of
FY14. The successful completion and handover of the FAW truck assembly plant was a highlight of the
year.
The expansion of the division’s geographical footprint into Africa continues to gain traction with the
award of two additional shopping centres in Ghana during the year to replace the West Hills Mall
development which is nearing completion.
Civil engineering
The Kusile Power Station continues to contribute strongly towards revenue for the Civil engineering
division particularly in the context of persistent pressure on mining-related infrastructure projects
during the current downward trend in activity from the mining sector. In Zambia the division completed
the Ndola Brewery for SAB Miller during the year and has established various relationships with other
clients which provide sufficient projects to retain a presence in the region in the short to medium
term.
Roads and earthworks
FY14 FY13
Rm Rm
Revenue (1,4)% growth 5 002 5 074
Operating profit 8,3% margin 414 505
Subdued activity within the global mining sector has resulted in fewer available mining projects and a
heavier weighting of the work on-hand toward roadwork, mostly in South Africa, in recent years. The
absence of an anchor mining project in West Africa together with the competitive nature of the roads
market continues to affect the overall margin of the Roads and earthworks division which has dropped to
8,3% in FY14 (FY13: 9,9%).
Revenue from the South African businesses (including the SADC regions) was broadly in line with that of
the previous year. Increased revenue from the ancillary works at the Kusile Power Station and the Husab
Uranium mine in Namibia offset lower SA revenue from the Pipeline division. Increased revenue from the
North South Carrier Pipeline contributed towards revenue from Botswana exceeding R1 billion in FY14. In
our interim report we reported on delays affecting the NSC project caused by heavy flooding. The time
lost due to the floods and the resulting repair work done in the second half of the year has placed the
project behind programme which is affecting profitability, however, the mining and airport projects in
Botswana performed well. In Mozambique revenue grew by 16,0% following the start of the EN4 road
rehabilitation contract for Trans African Concessions (TRAC). This revenue growth in Botswana and
Mozambique has substantially offset a sharp decline in revenue in West Africa which consisted mainly of
ad hoc maintenance type work in FY14, with reduced teams in both Ghana and Sierra Leone. Both Edwin and
Roadspan performed well during the year.
Australia
FY14 FY13
Rm Rm
Revenue 2,4% growth 12 438 12 141
Operating profit 2,0% margin 250 184
Probuild
Revenue from Probuild decreased by 7,3% in dollar terms, however, this is primarily due to secured
projects starting later than anticipated in the latter half of the year rather than a decrease in
activity. Demand within the Australian building market has been strengthening in recent years due to an
increase in Asian developers investing in residential apartments while developers within the retail
market have now also begun delivering large scale retail developments to the construction market. These
buoyant conditions are reflected in the growth in activity levels of 29% in FY13 which have been
maintained through FY14.
The revenue from each of the divisions within the business was comparable with that of the previous
period with the marginal decline originating from Melbourne and Monaco Hickey. From a profitability
perspective the FY14 performance improved significantly following the completion of the three loss-
making projects reported on in FY13. Monaco Hickey which operates in the pharmaceutical market has
however experienced a slow-down. A number of residential towers were completed during FY14 with three
new towers now under construction. Construction on the Eastland, Chadstone and Werribee shopping centres
is progressing well.
WBHO Civil
Revenue grew by 33,6% in FY14 supported by the $113 million anchor project at the Burrop Technical
Ammonia Nitrate Facility in the Pilbara as revenue from mining related projects continued to taper.
As part of a strategy to diversify away from a heavy reliance on mining work, WBHO Civil has started a
roads and special projects division, however, penetration into these new markets has been slower than
anticipated.
Property
FY14 FY13
Rm Rm
Revenue 85 29
Operating profit 28 10
All stands at the Simbithi Eco Estate near the King Shaka International Airport in KZN have now been
sold with only a few stands remaining to be transferred in the FY15 year. Sales at the golf course
development at St Francis in the Eastern Cape remain lacklustre and while no improvement is anticipated
by management in the short-term.
Capital Africa Steel
FY14 FY13*
Rm Rm
Continuing operations
Revenue 1 251 814
Operating profit 14 63
Discontinued operations
Revenue 484 835
Operating profit (66) (26)
* Not consolidated in FY13, for comparative purposes only.
Improvements within the building market have yet to filter through to the construction materials markets
which supply into it. This combined with the effects from the stagnant mining sector, saw conditions
actually deteriorate in the second six months of the year. Over-supply, declining margins and rising
input costs over this period diluted what had been a promising first six months from these businesses.
In respect of the pipe supply market, the slower growth of the Chinese economy in recent years has
resulted in an over-supply of pipe within the global market which has driven prices down while steel
prices increased and demand has decreased in the SA pipe market over the same period. A decision by the
Capital Africa Steel board to sell CSS was reached.
Order book and prospects
FY2014 FY2013
% Rm % Rm
Order book by segment
Building and civil engineering 23 8 207 33 7 253
Roads and earthworks 14 5 064 17 3 817
Australia 63 22 880 50 10 806
Total 100 36 151 100 21 876
Order book by geography
South Africa 31 11 363 45 9 783
Rest of Africa 6 1 908 5 1 287
Australia 63 22 880 50 10 806
Total 100 36 151 100 21 876
The 65,3% increase in the order book at 30 June 2014 to R36,1 billion from R21,9 billion reflects a
general improvement in the order books across each of the divisions within the group but is
predominantly the result of a 111,7% increase in the Australian book. The strength of the Australian
book has diluted the contribution from Africa (including South Africa) to 36,7% (2013: 50,6%).
South Africa and the rest of Africa
The current strength within the local building market is expected to persist in the short to medium
term. With demand at these levels the Building division is able to be more selective in terms of the
projects it undertakes. Margins have however reached industry norms and the scope for further
enhancement is limited. Looming saturation within local markets together with a demand for retail
infrastructure in other African countries has resulted in local developers expanding their geographical
footprint in recent years. This trend is expected to continue and the African Building team is pursuing
various opportunities in this regard.
It is pleasing that the Roads and earthworks division has secured over R1 billion of bus rapid transport
contracts in the current year. Subdued mining activity throughout Africa is impacting both the civil
engineering and roads and earthworks divisions. Both divisions have been awarded further work for
Glencore Coal at the colliery in Tweefontein during the second six months. It was with disappointment
that we were formally advised by Exxarro of the termination of the Mayoko project in the Congo in July
2014, for which the division was the preferred contractor. Projects in Ghana remain of a smaller nature
yet are sufficient to retain a full-time presence in-country. The West African team continues to pursue
opportunities in various countries. New projects have not received the necessary support from financial
institutions.
The group’s Projects team recently reached financial close on two concessions incorporating design and
construct projects; the first being serviced accommodation for the Department of Statistics (Stats SA)
in Tshwane and the second a gas-fired power station in Mozambique. The Stats SA contract will be
executed by the group’s building division in joint venture with local empowerment contractors while the
civil works for the power station will be executed by the Roads and earthworks division.
Australia
Probuild has secured all three of the large scale retail projects brought to the Victorian (Melbourne)
market in the last 12 months, two of which are in excess of $350 million. These projects will generate
strong revenue streams for Probuild over the next two years. Furthermore, Probuild is the preferred
contractor on a number of residential towers, one of which is 77 stories. During the year Probuild
identified an opportunity to enter the Queensland (Brisbane) market and in a relatively short period of
time has secured projects to the value $334 million, $298 million of which was awarded post 30 June 2014
and is not included in the order book above. Market conditions in the New South Wales (Sydney) market
have also improved in the second half of FY14 and Probuild have concentrated their efforts on raising
the profile of their brand with the financial institutions and developers there in order to negotiate
larger scale projects.
The outlook for WBHO Civil has deteriorated in the second half of FY14. As in Africa, the lack of mining
activity has impacted the work on-hand, while the scarcity of large scale projects has seen margin
contraction on what work is available. However, the company continues to secure ongoing maintenance type
projects in its traditional markets on various industrial plants. Diversification into the roads market
as well as other markets will remain a strategic focus looking forward.
SAFETY
The group’s LTIFR has shown significant improvement in FY14 decreasing from 1,35 at 30 June 2013 to
0,94 at 30 June 2014. This is within the group’s target of less than one and is largely attributable to
a significant improvement in Australia where the LTIFR decreased from 5,31 to 1,60 during the year after
a focused drive from the management team. We regret to report that two work-related fatalities occurred
during the year and we extend our sincere condolences to the families, friends and colleagues of these
employees.
CHANGES TO THE BOARD
Subsequent to the resignation of Mr JP Botha and the appointment of Mr R Gardiner reported upon in our
interim results in February, there have been no further changes to the board during the year.
APPRECIATION
The directors and management would like to thank all stakeholders especially our employees for their
continuous commitment, hardwork and loyalty in what has been a particularly challenging year.
DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a final gross dividend of 233 cents per share
(2013: 233 cents) payable to all shareholders recorded in the register on 17 October 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
results in a net dividend of 198.05 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 (55 350 001 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 Friday, 10 October 2014
Trading ex dividend commences Monday, 13 October 2014
Record date Friday, 17 October 2014
Payment date Monday, 20 October 2014
Shares may not be dematerialised or rematerialised between Monday, 13 October 2014 and Friday,
17 October 2014, both dates inclusive.
Sponsor
Investec Bank Limited
1 September 2014
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