Basread final results December 2011
Posted Thu, 22 Mar 2012
Revenue increased to R6.2 billion (R5.4 billion). Operating profit for the year declined to R280.9 million (R369.5 million). Net attributable profit decreased to R141 million (R260.8 million). In addition, headline earnings per share fell to 139.65c (209.25cps).
The economic uncertainty that has characterised the trading environment for the past couple of years prevails. The group continues to monitor developments in the global economy and the potential impact on local conditions. The president's recent state of the nation address once again affirms government's commitment to infrastructural spend and certainly this bodes well for the sector as a whole. The group remains cautiously optimistic given the significant delays in the roll out of projects in recent years.
Fundamentals in the construction sector remain challenging with a real recovery only expected from 2013 onwards. Against this background, Basread remains committed to continued expansion, underpinned by a strong order book. The group has secured a number of key projects which will sustain performance until a real recovery in the sector becomes reality.
As a sector, operating performances in construction are likely to continue to be affected by high cost increases and greater competition. To counter the difficult conditions, the group is concentrating on retaining skills, maximising efficiencies and maintaining capacity for the eventual turnaround.
Construction opportunities exist within the rest of Africa particularly due to the inflow of funding from international sources. The group will continue to pursue contracts on the African continent within its defined set of risk parameters, which include the certainty of committed funding for the contract in question and upfront payments.
The mining industry should remain buoyant through 2012. Demand is outstripping supply in most commodities and, compounding this, many projects have to be executed to replace mining output, let alone increase it. The chosen geographies of South America, Africa and Australasia should all record significant growth over the year. Infrastructure development, on the back of mining activity, is expected to be significant, particularly in developing countries.
Key to the ongoing success of the group will be the effective management of working capital and a commitment to the reduction of debt. Delayed payment from mostly government clients has put pressure on cash flow, but the group is working closely with these clients to resolve issues.
While Basil Read has not been immune to lower industry margins and loss-making contracts, we believe the group has other factors working in its favour. These include an order book of R14 billion at the reporting date, a resurgent mining sector on the back of high commodity prices and judicious acquisitions in high- growth sectors such as renewable energy. The group is also investing in future projects in the alternative energy sector and has submitted a Renewable Energy Feed-in Tariff (Refit) phase two bid for a solar powered development in Beaufort West, in conjunction with the BW Energy Corporation, which if successful could translate into a further R1.5 billion construction contract. Basread is confident that the building blocks are in place for continued growth as the local construction industry recovers and international expansion initiatives gain traction.
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