Johannesburg - Construction group
Wilson Bayly Holmes - Ovcon [JSE:WBO] said on Monday that it has approved capital expenditure of R401m for the next financial year, most of which will be used to equip new contracts in Africa and to replace existing items of plant.
To date, R69m of the approved capital budget has been committed, it said.
Capital expenditure amounted to R256m in the year ended June 2010, from R215m in 2009, WBHO said.
The group reported diluted headline earnings per share of 1 741.4 cents for the year ended June 30, 2010, from 1 605.3c previously.
It noted diluted earnings per share of 1 735.5c, from 1 618.8c earlier.
Revenue of R15.2bn was 3% higher, with operating profit up 21% to R1.27bn.
Net cash reduced to R3.9bn, from R4bn, "due to the absorption of early contract payments, the drop in interest rates and the strengthening of the rand. The group has also provided short-term contract financing to a few selected clients," it said.
WBHO said its building and civil division starts the 2011 financial year with an order book of R4.3bn, from R5.8bn, while the total order book at July 1 2010 stood at R12.1bn, from R15.3bn previously.
It said its building and civil engineering division achieved a turnover of R5.5bn from R5.4bn, while operating profit increased 39% to R430m.
"The division concentrated on projects for Eskom, Sasol, Transnet, the mining industry and also contributed to the civil works on two World Cup stadiums. Continuing work on the Duncan dock in Cape Town is progressing well," it said.
The group added that a strong presence has been maintained in the Western Cape. In 2009 the Cape division successfully
expanded into Zambia to exploit opportunities in that country, and further projects are currently being negotiated.
The bulk of the work in KwaZulu-Natal related to the 2010 FIFA World Cup, with hospital projects and commercial developments continuing to be a source of work. "This market is very competitive and we can expect further declines in construction activity," Wilson Bayly said.
The group said its roads and earthworks division achieved a satisfactory result for the year under review, improving both
revenues and operating profits. Revenue improved to R4.6bn from R4.5bn, and the operating profit of R630m showed substantial improvement from R586m.
The order book for this division stands at R3.8bn, the group said.
Resources drive up in Oz and Africa"The roads and earthworks market in South Africa has contracted, competition for work has increased and tender margins are under pressure. Although there is less activity on the upgrade and renewal of provincial roads, Sanral (the SA National Roads Agency) continues to let out work in line with its strategic plan," Wilson Bayly said.
"In the local resources sector, mining houses have resumed investment in infrastructure projects with a consequent
increase in tender activity. The division is optimistic that this trend will continue.
"The resources drive in Africa and Australia continues to improve, and the division has been able to offer its services to a number of its clients in this market," it said.
In Australia, Probuild's revenue of R4.5bn for the year was just below the record R4.7bn achieved in 2009.
WBHO said recovery from the global financial crisis had been slower than initially expected, and the construction industry tended to lag the economic cycle by between 6 and 18 months. "Fixed investment by the private sector has slowed and the industry has put much store in the infrastructural works programme announced by the government," it said.
The group added that Asia had not been affected by the global crisis to the same degree as the industrialised world
and continues to achieve reasonable growth, especially China and India.
"This growth has fortunately increased the demand for resources, particularly from Australia and Africa. It is in this arena that the group is actively pursuing opportunities," the group said as a forward-looking statement.
WBHO said that 2011 and 2012 would be difficult years for the group and the industry, "but it is believed that WBHO is well positioned to meet these challenges," it said.
The group announced a final dividend of 220c/share from 200c, which together with the interim dividend of 110c/share amounts to a total dividend of 330c for the year from 300c, an increase of 10%.
Shares in the group declined 109c at R111.40 in Monday morning trade on the JSE.