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WILSON BAYLY HOLMES-OVCON LIMITED - Audited Summary Consolidated Financial Statements for the year ended 30 June 2014

Release Date: 01/09/2014 10:30
Code(s): WBO     PDF:  
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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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