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BSR
BSR
BSR - Basil Read Holdings Limited - Audited results for the year ended 31
December 2009 and dividend declaration
BASIL READ HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/007758/06)
("Basil Read" or "the group")
ISIN: ZAE000029781
Share code: BSR
www.basilread.co.za
Revenue R4,7 billion +34%
Operating profit R408,8 million +33%
Headline earnings per share 333,12 cents +25%
Order book of R8,1 billion +29%
Audited results for the year ended 31 December 2009 and dividend declaration
Summarised consolidated income statement
Audited Audited
12 months 12 months
31 December 31 December
2009 2008
R`000 R`000
Revenue 4 662 492 3 474 831
Operating profit for the year 408 750 308 390
Net finance income/(costs) 3 019 (12 314)
Share of profits from associates 10 85
Profit for the year before taxation 411 779 296 161
Taxation (140 869) (90 319)
Profit for the year after taxation 270 910 205 842
Profit for the year attributable to the
following:
Equity shareholders of the company 274 270 204 516
Minority interest (3 360) 1 326
Net profit for the year 270 910 205 842
Earnings per share (cents) 317,15 265,44
Diluted earnings per share (cents) 316,49 262,12
Ordinary dividend per share (cents) 58,00 50,00
Summarised consolidated statement of comprehensive income
Audited Audited
12 months 12 months
31 December 31 December
2009 2008
R`000 R`000
Net profit for the year 270 910 205 842
Other comprehensive income for the year, net of (4 125) 3 803
tax
Movement in foreign currency translation reserve (4 404) 3 792
Disposal of available-for-sale financial asset - 66
Movement in fair value adjustment reserve 279 (55)
Total comprehensive income for the year 266 785 209 645
Total comprehensive income for the year
attributable to the following:
Equity shareholders of the company 269 495 208 319
Retained income 274 270 204 516
Other reserves (4 775) 3 803
Minority interest (2 710) 1 326
Total comprehensive income for the year 266 785 209 645
Summarised consolidated statement of financial position
Audited Audited
31 December 31 December
2009 2008
R`000 R`000
ASSETS
Non-current assets 1 647 284 960 792
Property, plant and equipment 798 490 761 470
Intangible assets 723 174 143 907
Investments in jointly controlled entities 26 324 12 001
Investments in associates 1 383 21 579
Available-for-sale financial assets 25 414 2
Deferred income tax asset 72 499 21 833
Current assets 2 543 292 1 515 927
Inventories 24 928 25 940
Development land 280 718 54 734
Trade and other receivables 782 934 411 804
Work in progress 197 644 73 902
Investments in jointly controlled entities - 705
Current income tax asset 11 029 5 085
Cash and cash equivalents 1 246 039 943 757
4 190 576 2 476 719
EQUITY AND LIABILITIES
Capital and reserves 1 499 704 792 073
Stated capital 948 667 466 134
Retained income 549 213 315 607
Other reserves 3 036 7 811
Minority interests (1 212) 2 521
Non-current liabilities 515 947 348 150
Interest-bearing borrowings 350 852 264 249
Other borrowings 79 357 38 811
Provisions for other liabilities and charges - 5 405
Deferred income tax liability 85 738 39 685
Current liabilities 2 174 925 1 336 496
Trade and other payables 997 740 688 906
Amounts due to customers 485 893 335 894
Current portion of borrowings 459 979 155 646
Provisions for other liabilities and charges 130 174 69 805
Current income tax liability 76 905 86 245
Bank overdraft 24 234 -
4 190 576 2 476 719
Statement of changes in equity
Audited Audited
12 months 12 months
31 December 31 December
2009 2008
R`000 R`000
Issued capital
Ordinary share capital
Balance at the beginning of the year 466 134 233 954
Issued to share incentive scheme (net of 10 42
treasury shares)
Acquisition of subsidiary 482 523 52 581
Private placement - 179 557
Balance at the end of the year 948 667 466 134
Retained income
Balance at the beginning of the year 315 607 117 901
Comprehensive income for the year 274 270 204 516
Share based payment - equity settled 9 612 30 493
Transactions with minorities (128) 517
Dividend declared (50 148) (37 820)
Balance at the end of the year 549 213 315 607
Other reserves
Balance at the beginning of the year 7 811 4 008
Comprehensive income for the year (4 775) 3 803
Balance at the end of the year 3 036 7 811
Minority interests (1 212) 2 521
Summarised consolidated statement of cash flows
Audited Audited
12 months 12 months
31 December 31 December
2009 2008
R`000 R`000
Operating cash flow 624 756 490 382
Movements in working capital (122 419) 211 708
Net cash generated by operations 502 337 702 090
Net finance income/(costs) 3 019 (12 314)
Dividends paid (50 623) (38 423)
Taxation paid (203 095) (52 159)
Cash flow from operating activities 251 638 599 194
Cash flow from investing activities (141 077) (171 681)
Cash flow from financing activities 167 487 81 473
Movement in cash and cash equivalents 278 048 508 986
Cash and cash equivalents at the beginning of 943 757 434 771
the year
Net cash and cash equivalents at the end of the 1 221 805 943 757
year
Summarised consolidated segment report
Operating Operating Operating
Revenue profit margin margin
31 December 31 December 31 December 31 December
2009 2009 2009 2008
R`000 R`000 % %
Construction 3 915 029 288 645 7,37 6,36
Mining 679 187 113 907 16,77 17,30
Developments 68 276 6 198 9,08 17,48
Engineering - - - -
Total 4 662 492 408 750 8,77 8,87
Additional information to the annual financial statements
Audited Audited
12 months 12 months
31 December 31 December
2009 2008
Number of shares in issue (`000) 123 797 86 472
Headline earnings per share (cents) 333,12 267,04
Diluted headline earnings per share (cents) 332,43 263,71
Reconciliation of basic earnings to headline R `000 R `000
earnings
Basic earnings 274 270 204 516
Adjusted by:
- Loss on sale of available-for-sale financial - 48
asset
- Loss on sale of subsidiary 130 -
- Loss/(profit) on sale of property, plant and 2 151 (1 115)
equipment
- Impairment of goodwill - 2 304
- Impairment of assets in disposal group 11 528 -
Headline earnings 288 079 205 753
Reconciliation between weighted average number
of shares and
diluted average number of shares `000 `000
Weighted average number of shares 86 479 77 049
Adjusted by - Share Incentive Scheme 181 974
Diluted average number of shares 86 660 78 023
Net asset value per share (cents) 1 211,42 915.99
Net tangible asset value per share (cents) 627,26 749.57
Capital expenditure for the period (R`000) 170 675 388 128
Depreciation (R`000) 171 669 145 038
Impairment (R`000) 11 528 -
Amortisation of intangible asset (R`000) 20 488 4 947
Commentary
The consolidated abridged annual financial statements have been prepared in
terms of International Financial Reporting Standards, IAS 34 on Interim
Financial Reporting, Schedule 4 of the South African Companies Act 61 of 1973
and the JSE Listings Requirements. The accounting policies used in the
preparation of these annual financial statements are consistent with those
applied in the annual financial statements for the year ended 31 December
2008.
Audit Report
These financial results have been audited by the group`s auditors,
PricewaterhouseCoopers Inc, whose unqualified audit report is available for
inspection at Basil Read`s registered Offices.
Overall review
Basil Read had an exceptional year, despite 2009 being a challenging year that
will be remembered for some time in the world`s economic history books. The
group successfully completed the acquisition of the Gerolemou/Mvela and TWP
groups, strengthening the buildings division and diversifying the group`s
service offering in the process. Importantly, these acquisitions have
contributed to our stated intention to build a company of critical mass for
shareholders.
Another highlight in the year under review was the announcement in October
2009 that Basil Read had won the Sunday Times Business Times Top 100 Companies
survey for the second consecutive year. This prestigious annual survey
acknowledges listed companies that have earned the most wealth for
shareholders over the past five years. This achievement confirms the group`s
status as one of the leading construction groups in the country and is an apt
measure of our ability to sustain this performance.
The board is proud to report steady growth, with net profit attributable to
ordinary shareholders of R274,3 million (2008: R204,5 million), a notable
increase of 34%. Turnover increased by 34% to R4,7 billion (2008: R3,5
billion) with operating profit increasing by 33% to R408,8 million (2008:
R308,4 million). This translated into an operating margin of 8,8% (2008:
8,9%).
Earnings per share increased by 19,5% to 317,15 cents (2008: 265,44 cents).
Headline earnings per share was 333,12 cents (2008: 267,04 cents), an increase
of 24,7%. Write backs for headline earnings include an impairment of R11,5
million relating to the disposal of Stone and Allied Industries Limited.
Cash on hand at the reporting date was R1,2 billion (2008: R943,8 million)
with cash flow from operating activities satisfactory at R251,6 million (2008:
R599,2 million). The decrease in operating cash flows was largely as a result
of increased investment in working capital and a significantly higher amount
of tax paid, mainly as a result of the change in legislation relating to
provisional tax.
Working capital requirements increased in the period under review as debtors
extended their terms due to the prevailing economic environment and money was
invested in property developments, classified as development land held for
sale. Development land comprises land held for the purposes of property
development and subsequent resale. The investment in development land will be
realised when sales gain momentum as the economic recovery gains traction.
A significant amount of taxation was paid in the year under review as the
group`s assessed losses of prior years were completely used and the South
African Revenue Service introduced more stringent collection criteria. The
group tax rate is an effective 34,2% (2008: 30,5%) due to share based payment
expenses disallowed for tax purposes and the effects of secondary taxation on
companies relating to the dividend paid. The group expects the effective tax
rate to normalise in coming years to more closely approximate the current
promulgated company tax rate of 28%.
The group raised R225 million in debt through its domestic medium term note
programme to fund the acquisition of the Gerolemou/Mvela group. Other
borrowings increased as a result of deferred payments relating to acquisitions
during the year. The debt equity ratio now stands at a manageable 28,7% (2008:
38,3%).
Following on from recent years, which have been characterised by significant
investment in new plant to revitalise the group`s fixed asset base,
substantially less plant was invested in, in the year under review. New plant
worth R170,7 million (2008: R388,1 million) was acquired, of which R57,3
million (2008: 205,3 million) was funded by instalment sale agreements. Total
capital expenditure budgeted for the 2010 financial year is R150 million.
The group experienced significant balance sheet growth, with total assets at a
level of R4,2 billion (2008: R2,5 billion), and considers the balance sheet to
be appropriately structured to enable further growth.
The group secured new contracts in the period under review in the amount of
R6,5 billion (2008: R5,6 billion) and the order book is a healthy R8,1 billion
(2008: R6,3 billion). Commensurate with the growth of the group, and in line
with its strategic intentions, Basil Read has successfully targeted large
scale contracts, with several under negotiation.
International opportunities abound and while the group has yet to make an
international acquisition, several expansionary activities are being explored
across Africa, the Middle East and Australia. While the global outlook for
growth remains slow, opportunities for infrastructural development exist in
various countries and Basil Read will look to join forces with international
partners to obtain a share of the work on offer. Our hard work in this area
recently paid off as the roads division was awarded its first cross border
contract in a number of years. The contract, in Namibia, with a total contract
value of R400 million, will be completed in joint venture with a local
partner.
At the reporting date, the group had issued guarantees in the amount of R1,8
billion (2008: R1,1 billion). These guarantees have arisen in the ordinary
course of business and it is not expected that any loss will arise out of the
issue of these guarantees.
Basil Read has maintained its rating as a level 4 BBBEE contributor, meaning
that companies are entitled to recognise 100% of the amount spent with our
group in calculating their procurement spend.
The group still faces challenges in certain areas to reach its goal of real,
sustainable economic empowerment, specifically management control, employment
equity and skills development. Several initiatives are under way to address
these areas, including the monitoring of middle to senior black management and
the provision of support and mentoring to all previously disadvantaged
individuals in the group`s employ.
Corporate activity
Basil Read`s strategy has been to grow its business, not only through organic
growth, but also through acquisition. During the 2009 financial year the group
made significant progress in this regard through a number of transactions.
On 1 March 2009, the group acquired the remaining 66,67% of Sunset Bay Trading
282 (Pty) Limited, thereby increasing its effective holding to 100%. Sunset
Bay is responsible for the development of St Micheils International Leisure
Estate in Mpumalanga. Previously disclosed as an associate, Sunset Bay has
been consolidated from date of acquisition. The acquisition gave rise to the
recognition of a contract based intangible asset of R8,6 million.
On 1 July 2009, the group increased its stake in Newport Construction (Pty)
Limited, one of its empowerment companies, to 70% (2008: 55%). The transaction
resulted in the recognition of a loss on transactions with minorities of R0,1
million. If a suitable empowerment partner is found, the group may consider
reducing its investment in this company.
The acquisition of the Gerolemou/Mvela group, comprising P Gerolemou
Construction (Pty) Limited, Mvela Phanda Construction (Pty) Limited and
Contract Plumbing and Sanitation (Pty) Limited, was successfully completed
during the 2009 financial year and their results have been consolidated from 1
September 2009. The total purchase consideration of R351,5 million was settled
through a cash payment of R245,7 million and the recognition of a deferred
payment liability of R105,8 million. The acquisition gave rise to the
recognition of a contract based intangible asset of R32,2 million and goodwill
of R170,0 million. An amount of R10,8 million relating to the amortisation of
the intangible asset was recognised in the income statement in the year under
review.
The group completed the acquisition of the TWP group on 21 December 2009 and
have consolidated from that date. The total purchase consideration of R721,3
million is payable in two instalments. The first instalment was settled on 21
December 2009 through the issue of 37,3 million shares and a cash payment of
R178,9 million. The remaining R59,9 million is conditional on the TWP group
meeting its profit warranty for the financial year ended 31 December 2010 and
if met, is expected to be paid during the first half of 2011. Due to the high
level of uncertainty surrounding TWP`s results for the 2010 financial year,
this deferred payment has not been provided for. Management will re-assess
this position throughout the coming year and may provide for this liability in
the 2010 financial year. The acquisition gave rise to the recognition of
intangible assets totalling R68,4 million and goodwill of R320,6 million. The
trading results of TWP had no effect on the trading results of Basil Read for
the year to December 2009.
To aid with our transformation goals, the group disposed of 80% of BR-Tsima
Construction (Pty) Limited to two emerging contractors for no consideration,
effective from 1 January 2009. The loss on the transaction was R0,1 million
and has been included in the results to December 2009. Basil Read will
continue to exercise significant influence over the operations of BR-Tsima,
through management support and mentoring to ensure that the black-owned entity
will be successful.
The performance of Stone and Allied Industries Limited, an operator in the
aggregate business with static crushers erected on mine dumps mainly in the
Free State and North West provinces, remained disappointing and Basil Read
disposed of the loss-making operation on 1 July 2009. Impairments relating to
the disposal amount to R11,5 million in the period under review, with no
further loss on disposal reported.
While no significant corporate activity is planned for the 2010 financial
year, the group will continue to explore investment opportunities, both
locally and abroad.
Operational review
Safety, health, environmental, risk management and quality
As part of our commitment to safety, health, the environment, risk management
and quality (`SHERQ`), Basil Read successfully attained ISO14001 certification
in November 2009. The ISO 14000 series provide a framework for a holistic,
strategic approach to environmental policy, plans and actions. SHERQ is the
cornerstone of Basil Read`s operations - the driving force behind project
delivery, teamwork, operational discipline and overall business excellence.
The disabling injury frequency rate (`DIFR`) was a low 0,58 for the period
under review. Unfortunately, we suffered five fatalities at our roads sites
which emphasizes the need to continually train and teach staff regarding the
various hazards associated with construction sites. A comprehensive industrial
theatre road show was launched in the second quarter, performed in three of
the country`s official languages, to remind staff that Basil Read considers
the safety and well-being of all staff as paramount to its success and to
highlight the need for workers to stay alert and attentive to what is going on
around them.
Construction
Basil Read`s largest division continued to perform well in the review period
and reported revenue of R3,9 billion (2008: R2,7 billion) with operating
profit of R288,6 million (2008: R170,4 million). The order book remains
acceptable at a level of R5,1 billion (2008: 5,5 billion).
The roads division has an established reputation in the industry and is seen
by many as one of the leading contractors in this field. The division has
maintained its visibility with a number of high profile projects, particularly
those that are part of the Gauteng Freeway Improvement Project.
The roads division was awarded a further three contracts relating to the
upgrade of the N17 highway, with a total contract value of R621 million. These
include the construction of three toll plazas at Leandra, Bethal and Ermelo.
In June 2009, the group began work on the improvement and rehabilitation of
section 19 of the busy N12 highway in Gauteng, which runs from the R21 to the
Tom Jones offramp. Total contract value is R800 million and will take 30
months to complete.
Work continued on the group`s largest contract - packages D1 and D2 of the
Gauteng Freeway Improvement Project - covering improvements between the
Brakfontein and Flying Saucer interchanges, and the N4 interchanges from
Atterbury to Scientia. Construction on this combined contract valued at some
R1,9 billion is scheduled to be substantially complete before the first-half
2010 deadline.
Roadcrete Africa (Pty) Limited, acquired during the 2008 financial year, has
been successfully integrated into the Basil Read stable of companies and
continues to perform well. Focusing on township infrastructure and related
bulk services, Roadcrete was awarded new contracts with a value of R850
million in the period under review. One of these projects is the upgrading of
Malibongwe Drive between the N14 and Lanseria. The project involves the
expansion of the road into a dual carriageway and should be substantially
complete by 2011.
In line with the group`s stated intention to expand further beyond South
Africa`s border, Roads Africa was established during the year and secured its
first contract in Namibia in October 2009. This is a R400-million project,
which will be fast-tracked over 18 months to upgrade 160km of gravel road to
tar between Gobabis and Otjinandi. Investigations are well advanced in other
countries in Africa.
The acquisition of the Gerolemou/Mvela group further bolstered the buildings
division. The newly acquired group was successfully integrated by the end of
the review period, adding critical mass to the group`s ability to target
larger projects in South Africa and across borders.
The upmarket Regent apartment block was completed in October 2009, adding over
100 luxury apartments and penthouses to the pool of accommodation in the
sought-after high-density area of Morningside, Sandton.
Basil Read is the lead contractor on the Galleria Shopping Centre, a R670-
million project south of Durban on the N2 freeway and close to the city`s
airport. Original plans for this 97 000 m2 centre were amended to include
additional cinemas and a third-floor ice rink. Although progress was affected
by unprecedented weather conditions, construction of the Galleria Shopping
Centre was completed in November 2009. The shopping centre will be a welcome
addition to the rapidly growing South Coast area.
Contracts secured in the period under review include the OR Tambo,
Rhodesfield, Marlboro and Hatfield stations as part of the Gautrain project.
Total contract value for all four stations is R100 million. The contract to
construct the Cosmo City flats was completed during the year under review. The
flats comprise 281 units, split between one- and two-bedroomed configurations,
and are aimed at low- to middle-income earners.
Constructed for clients, the Government Employees Pension Fund and PIC, the
Riverwalk Office Park consists of three separate office blocks, each with
three basement levels and four upper levels, and ancillary external works. It
was completed against stringent deadlines by November 2009.
The division is also busy with the construction of numerous hospitals,
including Paarl Hospital, Germiston Hospital and Natalspruit Hospital. Work
valued at R420 million at Chris Hani/Baragwanath Hospital was completed in
October 2009.
The division is actively pursuing private-public partnerships in joint venture
with various partners. This type of business model enables the group to
partner with larger teams of architects and other development partners, in the
process developing skills and creating jobs.
One of the highlights of the review period was the completion of the Mbombela
Stadium in Nelspruit, despite various setbacks from widespread labour unrest
to freak storms. Handed over well before the FIFA deadline, Mbombela was the
second stadium completed in South Africa, and the first stadium in the group`s
portfolio. Basil Read is now completing external work around the stadium such
as roads and parking.
Work on the R2,9-billion Kusile power station began early in the reporting
period. Located next to the existing Kendal power station in the Witbank area
of Mpumalanga province, Kusile`s expected capacity will be 4 800MW, with the
first unit planned for commercial operation in 2012. This is a joint venture
with three other construction companies and work during the year focused on
planning, piling tests and soil investigation.
Mining
The mining division performed well in the year to December 2009, contributing
revenue of R679,2 million (2008: R719,7 million)and operating profit of R113,9
million (2008: R124,4 million). Despite pressure on commodity prices, the
division`s order book remains promising at a level of R1,4 billion (2008: R685
million).
During the year, work continued at the Rossing uranium mine in Namibia for
owner Rio Tinto, one of the world`s largest mining houses. This is part of a
contract extension awarded in the prior period, with significant progress made
during the year.
The division continues to work at Venetia diamond mine, near Musina in Limpopo
Province, for owner DeBeers, the world`s leading diamond company. The R138-
million contract for the mine`s percussion drilling project began in October
2008 and is expected to be complete in September 2011. Major works include
drilling 165 mm and 127 mm percussion holes at this open-pit mine.
To date, the division has secured contracts valued at R900 million for the
next two years. Negotiations for several other tenders are well advanced.
Developments
The developments division continued to be a stable performer with revenue of
R68,3 million (2008: R77,4 million) and operating profit of R6,2 million
(2008: R13,5 million). Operating margin halved from 17,5% in 2008 to 9,1% at
December 2009. This contraction of margins is largely due to professional fees
paid to technical advisors for work performed relating to existing
developments that are yet to break ground. Preliminary expenses are typical to
this type of project due to the long lead times to bring the project to
fruition.
While being the smallest of Basil Read`s divisions it has the largest socio-
economic impact of all the divisions with a direct investment of R21 billion,
and a total economic impact of R68 billion between current projects and
developments in the planning stages. It is strategically significant given the
focus on sustainable development and the secondary work the division creates
for the group. Some R3 billion in work, which is not yet included in the
group`s order book, will be created for other Basil Read divisions over the
life of current projects.
The development of the Doornkuil site, south of Johannesburg and recently
named Savanna City, will break ground in April 2010 after all approvals were
received late in the review period. Savanna City is being developed in
partnership with the Old Mutual group, which is providing funding, and has the
full support of the Midvaal Municipality. This planned development, a R9-
billion project, will be larger than Cosmo City.
Site development of the 230ha Klipriver Business Park, a pivotal spine between
Johannesburg, Meyerton and Ekurhuleni, is progressing well. Phase 1
infrastructure, including roads and services, was completed in December 2009.
In Cape Town, Basil Read is developing another integrated mixed-use
residential area in partnership with Garden Cities, a non-profit group with an
established track record of 90 years of providing affordable housing. Garden
City New Town, a 700-hectare property has been identified for low-cost, middle-
income and bonded housing. Similar to Cosmo City, the R9,7-billion project
will include schools, community centres, clinics, churches, parks, commercial
and light industrial areas. Regulatory approvals are beginning to flow and
good relationships are being built with stakeholders, including
municipalities, government bodies and communities.
Engineering
In 2009, Basil Read revived its engineering division to meet demand both from
the infrastructural upgrade by local governments across the country, and for
companies that require the full spectrum of services for construction
projects. The group has now brought key skills in-house and concluded a merger
with the multi-disciplinary engineering firm, TWP Holdings, to offer clients a
comprehensive range of specialist services.
Although Basil Read and TWP currently operate in two different spheres, the
acquisition complements both businesses. With prospective clients, especially
those outside the borders of South Africa, looking for a single point of
contact for their projects, the enlarged group will be uniquely equipped to
offer a full service to the world`s construction environment and mining
sectors. While both Basil Read and TWP will continue to grow their core
businesses in their respective sectors, the enlarged group will be able to
accept a wider range of new projects encompassing:
* Public-private partnerships (PPPs) where funding is often part of the
offering
* Build, own, operate and transfer (BOOT)
* Engineer, procure, construct (EPC)
* Plant, process and mine operation.
The value of projects currently under TWP management exceeds R60 billion and
parts of its project pipeline extend beyond 2016. With its core business still
based in engineering design, procurement and construction management, the
union of Basil Read and TWP will see more work conducted in this arena.
Prospects
Basil Read continues to actively pursue growth, both organic and acquisitive,
to build a company of critical mass for shareholders. Despite these uncertain
economic times the trend of development, particularly in sub-Saharan Africa,
is expected to resume in the near future, even if the growth trajectory is
flatter.
Government has reaffirmed its commitment to infrastructure investment and aims
to spend R846 billion over the next three years. Of this, Eskom`s planned
construction of power plants comprises one-third. The other two-thirds will be
spent mainly on transport infrastructure and water supply capacity. Despite
government commitment to infrastructural spend, a definite delay in the roll
out of projects has been noted. Budgetary constraints in certain municipal
areas create opportunities for the group to partner with municipalities in
developing innovative solutions to finance future projects, particularly for
our developments division.
The public-private partnership model continues to evolve and remains a
feasible method of undertaking larger contracts. Given our long-standing and
robust partnerships with international construction conglomerates and turnkey
contractors, such as Bouygues, Sodexo and Alstom, we are well placed to bid on
projects of this nature. Various PPP projects are in the pipeline, including
government office blocks, mixed classification correctional centres and toll
roads. Basil Read has pre-qualified for a number of these and submitted bids,
in joint venture, where applicable.
Government recently announced their intention to broaden the use of PPPs in
the health sector. The flagship PPP hospital project is Chris Hani/Baragwanath
and the new George Mkhari and Polokwane academic health complexes are to be
fast-tracked. Basil Read has particular expertise in this area and aims to
submit bids in due course. The combined construction value for the group`s
targeted PPPs is over R15 billion.
We expect significant water-supply projects to be offered for tender in the
near future. Some R30 billion worth of work is anticipated, specifically to
supply water to power plants under construction. The government has also
committed to upgrading water treatment and waste-water treatment plants to
create much-needed capacity.
Internationally, the group is building a presence in the rest of Africa, in
partnership with selected local contractors. Expansionary opportunities are
also being explored elsewhere, particularly in the Middle East and Australia,
where Basil Read has held discussions with local partners with established
reputations in their respective construction industries. Opportunities for
acquisition will continue to be cautiously explored.
TWPs core mining and process business has seen a significant improvement in
sentiment off the lows of last year. There has been an increase in the number
of new enquiries and projects awarded at feasibility stage. An improvement in
capital markets will be key to these projects moving to the execution phase.
TWP is successfully broadening its product offering into the infrastructure
field, process plant operation and EPC/Turnkey work. The business climate in
Australia, where TWP has a presence, has improved and new contracts have been
secured. TWP has also recently established an office in Peru to target a
growing number of new mining and process opportunities. An excellent working
relationship between Basil Read and TWP has been established and strong
synergy has already developed. On a go forward basis the combined group will
be offering exciting new products to clients and maximising business
efficiency.
On the back of a healthy balance sheet and effective management structure,
Basil Read will adopt a prudent approach to managing the prevailing volatility
to ensure the group continues to grow in a controlled and structured way.
Corporate governance
The directors and senior management of the group endorse the Code of Corporate
Practices and Conduct as set out in the King II report on Corporate
Governance. Having regard for the size of the group, the board is of the
opinion that the group substantially complies with the Code as well as with
the Listings Requirements of the JSE Limited. The group performs regular
reviews of its corporate governance policies and practices and strives for
continuous improvement in this regard. The group is currently assessing the
impact of King III and the new Companies Act.
At the group`s annual general meeting, held on 7 May 2009, Mr Bulelani Ngcuka
resigned as chairman and non-executive director with immediate effect. Mr
Lester Peteni was appointed as the new independent non-executive chairman of
Basil Read, effective from 7 May 2009. Mr Peteni, who holds a BSc (Building
Science) degree obtained from the University of Cape Town has substantial
experience in the construction and property development industries.
The group is pleased to welcome Mr Donny Gouveia to the board in his capacity
as Financial Director.
The board is pleased to further welcome Ms Given Refilwe Sibiya as an
independent non-executive director, who was appointed on 1 July 2009. She is a
qualified chartered accountant and in addition to her board responsibilities,
will serve on the audit/risk committee.
Following the acquisition of the TWP group, Nigel Townshend, chief executive
officer of TWP, was appointed as an executive director. His appointment was
effective from 1 January 2010 and the board welcomes his experience and
expertise.
Dividends
Despite the ongoing economic uncertainty and with regard to the group`s growth
targets, notice is hereby given that the directors have declared a final
dividend of 42 cents per share (2008: 58 cents) in respect of the year ended
31 December 2009. This will result in a dividend paid of R52 million and a
Secondary Taxation on Companies tax charge of R5.2 million. This equates to an
earnings dividend cover of 5.3 times. Had the group not issued 37.3 million
shares on 21 December 2009 in terms of the TWP acquisition, the equivalent
dividend per share would have been 60 cents at a constant earnings dividend
cover of 5.3 times. In order to comply with the requirements of Strate the
relevant details are as follows:
Event Date
Last date to trade cum-dividend Friday,07 May 2010
Share to commence trading ex-dividend Monday, 10 May 2010
Record date (date shareholders recorded in books) Friday, 14 May 2010
Payment date Monday, 17 May 2010
No share certificates may be dematerialised or rematerialised between Monday,
10 May 2010 and Friday, 14 May 2010, both dates inclusive.
Post-balance sheet review
No material events have occurred between the balance sheet date and the date
of these results that would have a material effect on the financial statements
of the group.
On behalf of the board
S L L Peteni (Chairman) M L Heyns (Chief Executive Officer)
11 March 2010
Directors: S L L Peteni*+ (Chairman),
M L Heyns (Chief Executive Officer),
M D G Gouveia (Financial Director), N J Townshend#,
L B Dyosi*, C P Davies*+, S S Ntsaluba*, N Y September*+,
A T Tlelai*, G R Sibiya*+
(* Non-executive, + Independent, # British)
Group Secretary: E Kruger
Registered office: 7 Brook Road, Lilianton, Boksburg, 1459 Auditors:
PricewaterhouseCoopers Inc
Transfer secretaries: Link Market Services South Africa (Pty) Limited
Sponsor: Sasfin Capital (a division of Sasfin Bank Limited) www.basilread-
ir.co.za
Date: 11/03/2010 14:53:04 Produced by the JSE SENS Department.
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