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CONCO acquisition lifts Buildworks’ FY revenue

18 November 2009

CONCO acquisition lifts Buildworks’ FY revenue
Heavy building materials supplier Buildworks on Tuesday reported that headline earnings a share for the year ended August were 7,14c and basic earnings a share are 5,24c, which was a decline of 35% and 52% respectively over the previous year.

The decline in headline earnings a share was owing to the amortisation charge raised against the intangible assets, increased number of shares in issue and the underperformance of West End Claybrick in the company’s building materials division.

However, the group’s revenue grew by 270% to R745-million, compared with the 2008 figure of R201-million, mainly as a result of the acquisition of Consolidated Power Projects (CONCO).

Buildworks completed the acquisition, implementation and integration of CONCO, becoming the largest turnkey developer of electrical substations in sub-Saharan Africa.

On an annualised basis, over 86% of all Buildworks’ revenue and 81% of Buildworks’ earnings before interest, taxation, depreciation and amortisation were now directly attributable to the power and electrification sector.

The acquisition of CONCO allowed Buildworks to deliver “satisfactory results for the year ended August 2009 in extremely tough economic conditions”, the company stated.

Buildworks said that the pro-forma core headline earnings and the fully diluted core headline earnings a share provided a more meaningful understanding of its results.

Pro-forma core headline earnings for the year ended August were R93,2-million, which was an increase of 87% over the previous year.

Using the pro-forma core headline earnings and fully diluting the earnings for the additional equity to be issued in terms of the CONCO earn out, pro-forma fully diluted core headline earnings a share are 8,20c a share a decline of 27% over the previous year.

The company said that its building materials division had recorded lower trading profits despite a solid, steady performance at Drift Supersand and an operating loss at West End.

Buildworks said that the challenging economic conditions created by the fallout from the global financial crisis appeared to be abating. However, the speed of recovery remained uncertain.

“Our balance sheet remains strong, our gearing remains conservative and we have the capacity to seek out further strategic opportunities. The benefits of improved cash-flow generation and a lower interest rate environment are expected to lower finance charges going forward,” the group said in a statement.

Buildworks said its strategic positioning in the provision of infrastructure to the African power market, with the majority of the clients being South African or African utilities, provided a “fairly robust” buffer against the volatility of the market place.

“The imbalance of substantially higher demand levels for power generation and transmission against the current supply would, however, remain for decades, but the constraints to growth remained a funding capacity for projects and shortage of skills to execute the projects.”

The building materials division should benefit from higher levels of business and consumer confidence, as well as the lower interest rate environment.

“We do not anticipate a significant improvement in trading conditions for the year ahead. The division is currently operating a tightly controlled expense base and we are hopeful that expansion in sales and distribution capacity will increase our market share.”

It was anticipated that the 2010 FIFA World Cup would have a negative impact on trading during the event. However, the expansion of the roads is expected to continue for the remainder of the financial year and should offer a buffer against the weak residential consumer market.