Wrap Text
Reviewed provisional results for the year ended 31 December 2014
BASIL READ HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/007758/06)
(“Basil Read” or “the company”)
ISIN: ZAE000029781
Share code: BSR
REVIEWED PROVISIONAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014
Key results
R820,9 million
Loss after tax (2013: Profit of R281,5 million)
R6,5 billion
Turnover (2013: R6,2 billion)
R10,5 billion
Order book (2013: R12,5 billion)
362,08 cents
Headline loss per share (2013: Headline earnings of 86,99 cents)
-51,9%
Return on equity (2013: 16,8%)
2 fatalities
Safety (2013: 1 fatality)
Condensed consolidated income statement
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
R’000 R’000
Continuing operations
Revenue 6 502 407 6 218 152
Operating (loss) / profit for the year before provision for
Competition Commission, impairment of goodwill and
write down of development land (603 460) 97 736
Provision for Competition Commission - (19 936)
Impairment of goodwill (222 212) -
Write down of development land (80 565) (22 572)
Operating (loss) / profit for the year (906 237) 55 228
Net finance (costs) / income (26 202) 12 670
Share of profits of investments accounted for using the equity method 39 539 45 166
(Loss) / profit for the year before taxation (892 900) 113 064
Taxation 150 682 (21 691)
(Loss) / profit for the year after taxation (742 218) 91 373
Discontinued operations
Net (loss) / profit for the year from discontinued operations (78 661) 190 097
Net (loss) / profit for the year (820 879) 281 470
(Loss) / profit for the year attributable to the following:
Equity shareholders of the company (789 938) 310 742
Non-controlling interests (30 941) (29 272)
Net (loss) / profit for the year (820 879) 281 470
(Loss) / earnings per share (cents) (599,86) 235,97
Diluted (loss) / earnings per share (cents) (599,86) 235,97
(Loss) / earnings per share from continuing operations (cents) (540,13) 91,61
Diluted (loss) / earnings per share from continuing operations (cents) (540,13) 91,61
(Loss) / earnings per share from discontinued operations (cents) (59,73) 144,36
Diluted (loss) / earnings per share from discontinued operations (cents) (59,73) 144,36
Condensed consolidated statement of comprehensive income
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
R’000 R’000
Net (loss) / profit for the year (820 879) 281 470
Other comprehensive income for the year 12 860 7 900
Movement in foreign currency translation reserve 12 936 12 003
Movement in fair value adjustment reserve (76) (5 043)
Deferred tax effect on other comprehensive income - 940
Total comprehensive (loss) / income for the year (808 019) 289 370
Total comprehensive (loss) / income for the year attributable to the following:
Equity shareholders of the company (775 921) 314 158
Retained income (789 938) 310 742
Other reserves 14 017 3 416
Non-controlling interests (32 098) (24 788)
Total comprehensive (loss) / income for the year (808 019) 289 370
Condensed consolidated statement of financial position
Reviewed Audited
31 December 31 December
2014 2013
R’000 R’000
ASSETS
Non-current assets 1 669 708 1 914 321
Property, plant and equipment and investment property 1 086 074 1 143 877
Intangible assets 99 938 411 829
Investments accounted for using the equity method 131 800 186 595
Available-for-sale financial assets 51 289 51 384
Deferred income tax asset 300 607 120 636
Current assets 2 552 957 2 804 193
Inventories 33 067 41 958
Development land 268 022 363 120
Trade and other receivables 905 494 944 531
Work in progress 378 466 129 691
Current income tax asset 57 093 66 768
Cash and cash equivalents 910 815 1 258 125
Non-current assets held-for-sale 53 112 -
4 275 777 4 718 514
EQUITY AND LIABILITIES
Capital and reserves 1 035 552 1 871 258
Stated capital 1 048 025 1 048 025
Retained income 61 513 851 451
Other reserves 24 006 9 989
Non-controlling interests (97 992) (38 207)
Non-current liabilities 259 965 309 768
Interest-bearing borrowings 215 898 263 086
Deferred income tax liability 44 067 46 682
Current liabilities 2 970 241 2 537 488
Trade and other payables 1 180 249 1 044 575
Amounts due to customers 1 102 385 1 095 096
Current portion of borrowings 273 594 163 314
Loans from associates - 5 938
Provisions for other liabilities and charges 318 766 134 651
Current income tax liability 5 011 38 273
Bank overdraft 90 236 55 641
Liabilities directly associated with non-current assets
classified as held-for-sale 10 019 -
4 275 777 4 718 514
Condensed consolidated statement of changes in equity
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
R’000 R’000
Issued capital
Ordinary share capital
Balance at the beginning and end of the year 1 048 025 1 048 025
Retained income
Balance at the beginning of the year 851 451 750 654
Total comprehensive (loss) / income for the year (789 938) 310 742
Transactions with minorities - 20 518
Dividend declared - (230 463)
Balance at the end of the year 61 513 851 451
Other reserves
Balance at the beginning of the year 9 989 875
Total comprehensive income for the year 14 017 3 416
Disposal of subsidiary - 5 698
Balance at the end of the year 24 006 9 989
Non-controlling interests (97 992) (38 207)
Condensed consolidated statement of cash flows
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
R’000 R’000
Operating cash flow (244 333) 406 770
Movements in working capital 126 003 (122 343)
Net cash generated by operations (118 330) 284 427
Net finance (costs) / income (25 310) 13 670
Dividends paid (4) (232 640)
Taxation paid (58 011) (68 172)
Cash flow from operating activities (201 655) (2 715)
Cash flow from investing activities (75 057) 689 926
Cash flow from financing activities (87 374) (506 682)
Effects of exchange rates on cash and cash equivalents (2 734) (23 767)
Movement in cash and cash equivalents (366 820) 156 762
Cash and cash equivalents at the beginning of the year 1 202 484 1 045 722
Cash and cash equivalents at the end of the year 835 664 1 202 484
Included in cash and cash equivalents as per the balance sheet 820 579 1 202 484
Included in the assets of the disposal group 15 085 -
835 664 1 202 484
Additional information to the condensed consolidated financial statements
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
Ordinary and special dividend paid per share (cents) - 175,00
Ordinary and special dividend declared per share (cents)* - 175,00
* Based on the year to which the dividend relates
Number of ordinary shares in issue (’000) 131 686 131 686
Headline (loss) / earnings per share (cents) (362,08) 86,99
Diluted headline (loss) / earnings per share (cents) (362,08) 86,99
Reconciliation of basic earnings to headline earnings R’000 R’000
Basic (loss) / earnings (789 938) 310 742
Adjusted by - Profit on sale of subsidiary 1 479 (193 176)
- Loss on sale of associate 8 010 -
- Profit on sale of property, plant and equipment (730) (1 470)
- Impairment of goodwill 304 370 -
- Fair value gains on revaluation of investment property - (1 538)
Headline (loss) / earnings (476 809) 114 558
Reconciliation between weighted average number of shares
and diluted average number of shares ’000 ’000
Weighted average number of shares 131 686 131 686
Adjusted by - Share Incentive Scheme - -
Diluted average number of shares 131 686 131 686
Net asset value per share (cents) 860,79 1 450,01
Tangible net asset value per share (cents) 784,90 1 137,28
Capital expenditure for the year (R’000) 339 074 257 766
Depreciation (R’000) 342 404 324 292
Impairment of goodwill (R’000) 304 370 -
Amortisation of intangible asset (R’000) 860 860
Non-current assets held for sale
The disposal of LYT Architecture was completed on 1 February 2015 and is therefore disclosed as being held for sale at
the reporting date. LYT Architecture and its subsidiaries formed part of the engineering segment.
In terms of IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" the discontinued operation must be
tested for impairment. The carrying amount of the discontinued operation exceeds the fair value of the discontinued
operation and goodwill of R82,2 million has been impaired as a result.
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
ASSET AND LIABILITIES
Assets of company classified as held for sale
Property, plant and equipment 3 700 -
Intangible assets 8 352 -
Deferred income tax assets 205 -
Contract and trade debtors 21 310 -
Receivables and prepayments 3 514 -
Current income tax asset 860 -
Cash and cash equivalents 15 171 -
53 112 -
Liabilities of company classified as held for sale
Trade and other payables 9 933 -
Bank overdraft 86 -
10 019 -
INCOME STATEMENT OF DISCONTINUED OPERATIONS
Revenue 82 403 276 554
Expenses including impairment of goodwill (160 857) (279 361)
Net finance costs 892 846
Profit before tax of discontinued operations (77 562) (1 961)
Tax (1 099) (1 118)
Profit after tax of discontinued operations (78 661) (3 079)
Movement in fair value adjustment reserve - -
Profit for the year from discontinued operations (78 661) (3 079)
CASH FLOWS OF DISCONTINUED OPERATIONS
Operating cash flows (7 857) 15 377
Investing cash flows (1 425) (3 221)
Financing cash flows - -
Effects of exchange rates on cash and cash equivalents - -
Total cash flows (9 282) 12 156
Commentary
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and
are consistent with those applied in the previous consolidated annual financial statements.
The condensed consolidated financial statements were prepared under the supervision of the chief financial officer,
Amanda Wightman, CA(SA).
The board of directors take full responsibility for the preparation of the provisional report. The financial
information presented has been correctly extracted from the underlying financial statements.
Audit report
These condensed consolidated financial statements for the year ended 31 December 2014 have been reviewed by the
group’s auditors, PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion. A copy of the auditor’s review
report is available for inspection at the company’s registered office together with the financial statements identified
in the auditor’s report.
Forward-looking statements
Statements made throughout this announcement regarding the future financial performance of the company have not been
reviewed or audited by the company’s external auditors. The company cannot guarantee that any forward-looking statement
will materialise and accordingly, readers are cautioned not to place undue reliance on any forward-looking statements.
The company disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if
new information becomes available as a result of future events or for any other reason, other than as required by the JSE
Listings Requirements.
Overview
A challenging construction sector, difficult contractual environment and poor operational performance have contributed
to Basil Read reporting poor results for the 2014 financial year. Loss-making contracts across all construction
disciplines, coupled with a struggling engineering division, have overshadowed stable performances by the mining and
developments divisions.
The newly appointed executive management team took decisive action in the second half to improve the company’s
performance in the next financial year. Overhead costs have been reduced through a rightsizing exercise to an appropriate level
of administrative staff, satellite offices have been closed and a critical evaluation of the overhead cost-base has
been performed to eliminate unnecessary expenditure. The company has been reorganised into an operational structure
comprising two major divisions, construction and mining, assisted by a centralised support team. The company has moved from a
group and subsidiaries structure to a company and divisions structure. Subsidiaries are either being incorporated into
the divisions or fixed and sold.
The results were further impacted by the impairment of goodwill (R304,4 million) and the write-down of development
land (R80,6 million) relating to the company’s investment in Rolling Hills Leisure Estate.
Cash balances reduced to R835,7 million, largely due to the company funding loss-making contracts. Liquidity remains
tight but is being actively managed to ensure the company continues to operate effectively. To support working capital
levels, the company issued two notes under its domestic medium-term note programme on 25 July 2014 - BSR12, for
R60 million maturing on 25 January 2016, and BSR13, for R40 million maturing on 25 July 2016. Despite debt increasing to
R489,5 million, the company remains in a net cash position.
At the reporting date, the group had issued guarantees of R2,2 billion (December 2013: R3,0 billion). These guarantees
have arisen in the ordinary course of business and it is not expected that any loss will arise out of their issue.
Contingent liability
The group has identified a number of instances where subsidiaries in Botswana have not fully complied with the time of
submission requirements as prescribed by the Value Added Tax Act in Botswana. The Botswana entities have made voluntary
submissions to the Botswana Unified Revenue Services (“BURS”) setting out these instances and requesting BURS to issue
revised assessments. This process is ongoing.
No provision for additional taxes has been raised on this VAT issue as legal advice indicates that it is not probable
that a significant liability will arise. It is likely, however, that penalties and interest will be levied by BURS due
to late submission and payments, and Basil Read accrued for these costs in the 2013 financial year.
Corporate activity
On 1 April 2014, the company acquired the entire issued share capital of Hytronix (Pty) Ltd for a cash consideration
of R4,2 million. The core business of Hytronix is the construction of mining equipment.
On 1 November 2014, the company disposed of its 20% stake in BR-Tsima Construction (Pty) Ltd for no consideration. The
transaction resulted in the company recognising a profit on disposal of R0,7 million.
On 1 December 2014, the company disposed of its 51% stake in AngloAfrican Insurance Brokers (Pty) Ltd for no
consideration, resulting in the recognition of a loss on disposal of R1,8 million.
During the year, the company disposed of its 23% stake in Metrowind (Pty) Ltd, resulting in the recognition of a loss
on disposal of R10,5 million. The company subsequently acquired a 23% stake in Rubicept (Pty) Ltd, owner of the
Metrowind Van Stadens wind farm in Port Elizabeth.
Operational review
Safety, health and environmental (“SHE”)
Basil Read’s SHE management system continues to provide a framework for integrating hazard identification, risk
analysis and risk management into all activities. Following surveillance audits in 2014, the company retained both the
OHSAS 18001 and ISO 14001 certifications.
We continue to aim at proactively reducing the frequency and severity of injuries by reviewing strategic safety
objectives annually. As a result, the disabling injury frequency rate (“DIFR”) has been reduced from 0,79 in 2009 to 0,15 in
2014. Although this is a lagging performance indicator, it demonstrates management’s commitment to zero harm.
Regrettably, we recorded two fatal accidents during the year, both in the roads division, and we extend our
condolences to the family and friends of the deceased. Both incidents were investigated thoroughly and lessons learnt communicated
to all sites to prevent similar incidents from recurring.
Construction
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
Revenue (R’000) 4 927 178 4 622 946
Operating (loss) / profit before impairment of goodwill (R’000) (547 190) 12 057
Impairment of goodwill (185 741) -
Operating (loss) / profit (R’000) (732 931) 12 057
Operating margin before impairment of goodwill (%) (11,11) 0,26
Operating margin (%) (14,88) 0,26
Share of losses of investments accounted for using the equity method (R’000) (6 791) (3 175)
Order book (R’000) 6 665 274 8 165 000
The construction division struggled with a number of loss-making contracts in the review period. The company has
submitted a number of claims related to these contracts, which are currently being assessed or are in discussion, and
although we are confident of a positive outcome, the possibility of gains through the claims process, and / or the possible
impact of delay damages have not been recognised in terms of the prevailing accounting standards.
The delay in realising claims has tightened cash resources as the company continues to fund losses. Liquidity is being
further affected by delayed or non-payment of debtors. Despite the cash constraints, Basil Read remains committed to
continuing the various contractual processes to agree claims in a bid to extract maximum shareholder value.
New management teams introduced towards the end of the financial year have stabilised operations and the division has
been awarded contracts exceeding R1 billion since the start of the 2015 financial year. Tender activity remains
competitive and the sector remains under pressure due to delayed roll-out of government work.
The contract to construct an airport on St Helena Island is on track for completion in early 2016. Calibration flights
are set to start in July 2015. The company has also signed a memorandum of understanding with the government of
St Helena to refurbish a hotel facility on the island.
Mining
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
Revenue (R’000) 1 200 741 935 361
Operating profit before impairment of goodwill (R’000) 30 312 58 864
Impairment of goodwill (36 471) -
Operating (loss) / profit (R’000) (6 159) 58 864
Operating margin before impairment of goodwill (%) 2,52 6,29
Operating margin (%) (0,51) 6,29
Share of profits of investments accounted for using the equity method (R’000) 53 872 46 143
Order book (R’000) 3 773 675 3 919 000
The 2014 financial year was a challenging one for contract mining service companies in sub-Saharan Africa. Pressure on
commodity prices and prolonged labour unrest have significantly reduced the number of new opportunities, with many
existing projects being scaled back, delayed or stopped. Competition for work has intensified and margins are under pressure
as a result.
Despite difficulties in the sector, the mining division recovered in the second half to produce a stable set of
results with good revenue growth.
The Majwe Mining joint venture continued to perform well and achieved the client’s target of mining some 84 million tonnes
of waste in the 2014 financial year. Additional drilling capacity was provided to the joint venture through a
six-month plant hire agreement.
Site establishment at the Tschudi copper mine in Namibia began in June 2014 with full production expected in the
second quarter of 2015. The client, Weatherly International plc, has requested the team to accelerate the mining rate by 40%
and negotiations are ongoing.
The results include a bad-debt provision of BWP44 million due to one of the division’s clients, Discovery Metals,
entering a voluntary administration process. The division has completed the de-establishment of its remaining equipment from
the site.
With commodity prices expected to remain subdued in the short term, margins are likely to remain under pressure for
some time.
Developments
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
Revenue (R’000) 223 810 69 897
Operating profit before write down of development land 16 477 6 261
Write down of development land (80 565) (22 572)
Operating loss (R’000) (64 088) (16 311)
Operating margin before write down of development land (%) 7,36 8,96
Operating margin (%) (28,64) (23,34)
Share of profits of investments accounted for using the equity method (R’000) - -
Order book (R’000) 100 000 100 000
Basil Read Developments continues to focus on large-scale mixed-income integrated housing developments. The two
projects currently under way are Savanna City, which is planned to have over 18 000 housing opportunities, and
Malibongwe Ridge, an extension to Cosmo City, which will have over 5 000 opportunities.
These mixed-use developments contain fully and partially subsidised and open-market housing opportunities as well as a
range of social and commercial development opportunities. The viability of these developments therefore depends on a
suitable mix of public and private funding with a critical focus on securing state funding for bulk, link and internal
infrastructure for the subsidised housing units.
During the year, the division secured sufficient funding from the Gauteng Provincial Government to begin installing
services for the first phase of Savanna City. Similarly, bulk funding was secured to progress work at Malibongwe Ridge
where 486 fully subsidised units are at an advanced stage of completion.
Savanna City and Malibongwe Ridge are expected to be completed over the next ten and five years respectively.
The division also continued to generate revenue from the sale of stands in the Cosmo City Industrial Park and
Klipriver Business Park, where sales have been steady.
Prospects for the division’s involvement in top-structure development of affordable housing projects remain good,
especially where it is already the master developer such as Malibongwe Ridge and Savanna City. Demand for affordable housing
is strong, supported by substantial government investment, but rising interest rates, continued high unemployment and
limited household incomes pose a challenge.
Engineering
Reviewed Audited
12 months 12 months
31 December 31 December
2014 2013
Revenue (R’000) 150 678 589 948
Operating (loss) / profit (R’000) (103 059) 618
Operating margin (%) (68,40) 0,10
Share of (losses) / profits of investments accounted for
using the equity method (R’000) (7 542) 2 198
Order book (R’000) - 180 000
The engineering division performed poorly in the year under review largely due to the lack of available work,
resulting in the division having no order book for the year ahead. With commodity prices faltering, mining companies have
delayed capital investment, requiring the division to carry high overhead costs for much of the year, and contributing to
losses incurred.
Due to the poor performance of the division, Basil Read has decided to discontinue its service offering in this
sector. We have retained a few key individuals to ensure completed projects continue to be supported.
Prospects
Following a concerted effort, the company has reduced its overhead costs and streamlined its operating structure, setting
up Basil Read to return to profitability in the 2015 financial year. Of key importance is that Basil Read completes
loss-making contracts as efficiently and quickly as possible while ensuring that claims are systematically pursued.
At R10,5 billion, the order book is satisfactory and we will focus on at least maintaining the order book at this
level. Construction work in excess of R3 billion will be realised as the company continues its large-scale integrated
housing developments.
With a need for infrastructure development and an approved budget in place, South Africa offers opportunities for
growth and Basil Read will seek to capitalise on this, while being mindful of opportunities across the African continent.
The contract to construct the airport on St Helena Island is evidence that Basil Read has the operational capacity and
capabilities to successfully execute a project of this magnitude, on time and within budget.
Corporate governance
The directors and senior management of the group endorse the Code of Governance Principles and Report on Governance,
together referred to as King III. Considering the size of the company, the board believes it substantially complies with
King III as well as with the Listings Requirements of the JSE Limited. The company regularly reviews its corporate
governance policies and practices, striving for continuous improvement.
The following changes to the board took effect in the year under review:
- Mr Marius Lodewucus Heyns retired as chief executive officer and executive director effective 31 May 2014
- Mr Terence Desmond Hughes was appointed as interim chief executive officer with effect from 1 June 2014. He stepped
down from this role on 1 September 2014 and was appointed to the board as a non-executive director on 1 January 2015
- Ms Doris Liana Theresia Dondur was appointed as non-executive director with effect from 24 June 2014
- Mr Charles Peter Davies retired by rotation as non-executive director with effect from 26 June 2014
- Ms Nopasika Vuyelwa Lila retired by rotation as non-executive director with effect from 26 June 2014
- Mr Neville Francis Nicolau was appointed as chief executive officer with effect from 1 September 2014
- Ms Amanda Claire Wightman was appointed as chief financial officer with effect from 13 October 2014
- Mr Sindile Lester Leslie Peteni retired as independent non-executive chairman with effect from 31 December 2014
- Mr Paul Cambo Baloyi was appointed as independent non-executive chairman with effect from 1 January 2015.
The company appointed Grindrod Bank Limited as company sponsor with effect from 1 December 2014.
Dividends
Due to the difficult trading environment and need to retain working capital, the board of directors has resolved not
to declare a dividend.
Post-balance sheet review
Basil Read concluded the disposal of LYT Architecture on 1 February 2015 for a purchase consideration of R42 million.
On behalf of the board
PC Baloyi NF Nicolau
Chairman Chief executive officer
27 March 2015
Company Secretary: A Ndoni
Registered office: The Basil Read Campus, 7 Romeo Street, Hughes Extension, Boksburg, 1459
Auditors: PricewaterhouseCoopers Inc.
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
Sponsor: Grindrod Bank Limited
Directors: PC Baloyi*† (Chairman), NF Nicolau (Chief Executive Officer),
AC Wightman (Chief Financial Officer), DLT Dondur*†, TD Hughes*, Dr C E Manning*†,
ACG Molusi*, SS Ntsaluba*, TA Tlelai* (*Non-executive, †Independent)
www.basilread.co.za
Date: 27/03/2015 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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