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LETTER FROM THE CHAIRMAN AND MANAGING DIRECTOR
DEAR SHAREHOLDERS ON BEHALF OF THE BOARD, WE ARE DELIGHTED TO PRESENT THE GLOBAL CONSTRUCTION SERVICES LIMITED 2009 ANNUAL REPORT. POSITIVE FINANCIAL RESULT
GLOBAL CONSTRUCTION SERVICES LIMITED HAS DELIVERED A STRONG EARNINGS RESULT OF $10.8 MILLION (2008: $9.8M) ON GROUP REVENUE FOR THE YEAR OF $85.6 MILLION, AN INCREASE OF 22% OVER THE PRIOR YEAR (2008: $69.1M). EBITDA HAS INCREASED TO $23.2 MILLION (2008: $19.4M) WITH THE MARGIN REMAINING CONSISTENT AT 27.1% (2008: 27.7%).
CHARGES FOR DEPRECIATION AND INTEREST HAVE INCREASED AS ADDITIONAL ASSETS HAVE BEEN EMPLOYED IN DEVELOPING THE GENERAL PLANT HIRE BUSINESS AND IN THE RESOURCES & INDUSTRIAL SERVICES DIVISION.
THE GROUP HAS DELIVERED EBIT OF $17.9 MILLION (2008: $15.8M) AT 20.9% MARGIN WHICH IS SLIGHTLY REDUCED FROM THE PRIOR YEAR (22.5%) AND PBT OF $14.2M (2008: $14.1M). THE YIELD FOR THE YEAR IS 12.7% (2008: 14.0%).
THE DIRECTORS HAVE RECOMMENDED THE PAYMENT OF A FULLY FRANKED FINAL DIVIDEND OF 3.5 CENTS PER SHARE, BASED ON TAX PAID AT 30%. THIS BRINGS THE TOTAL DIVIDEND FOR THE YEAR TO 6.5 CENTS, FULLY FRANKED. THE RECORD DATE WAS 4 SEPTEMBER AND THE FINAL DIVIDEND OF $2,928K WAS PAID ON 29 SEPTEMBER 2009 OUT OF RETAINED PROFITS. THE DIVIDEND REINVESTMENT PLAN WAS APPLIED AT 88.0 CENTS PER SHARE, GENERATING A STRONG PARTICIPATION RATE OF 31.2%. THIS WAS COMBINED WITH A PLACEMENT OF 2.27 MILLION SHARES, ALSO AT 88.0 CENTS WHICH RESULTS IN AN EFFECTIVE REINVESTMENT RATE OF 100% OF THE DIVIDEND.
THE DIRECTORS ARE PLEASED TO REPORT THIS STRONG RESULT IN WHAT HAS BEEN ONE OF THE MOST CHALLENGING AND UNCERTAIN ECONOMIC ENVIRONMENTS EVER SEEN.
OPERATIONAL REVIEW
OPERATIONALLY, IT HAS BEEN ANOTHER BUSY AND REWARDING YEAR FOR THE GROUP.
THE COMMERCIAL DIVISION HAS PERFORMED WELL WITH CONTINUED SUCCESS IN SECURING SIGNIFICANT CONTRACTS, INCLUDING THE BROOKFIELD MULTIPLEX CITY SQUARE PROJECT IN THE PERTH CBD. THIS CONTRACT IS VALUED AT $24 MILLION AND CASC CONSTRUCTIONS PTY LTD WILL PROVIDE FORMWORK AND CONCRETE INSTALLATION FOR THE PROJECT OVER AN ESTIMATED 18 MONTH PERIOD THAT COMMENCED IN MAY. THE COMMERCIAL DIVISION HAS HAD SOME DELAYED STARTS TO CONTRACTED WORK WHICH HAS ADVERSELY IMPACTED EARNINGS IN THE SECOND HALF OF THIS FINANCIAL YEAR. IT HAS NOW COMMENCED WORK ON STAGE 2 OF THE CLAREMONT QUARTER REDEVELOPMENT FOR BROOKFIELD MULTIPLEX - VALUED AT $18 MILLION Ð AND IS EXPECTING TO COMPLETE THIS OVER 15 MONTHS FROM JUNE 2009.
THE DIRECTORS ARE ALSO VERY PLEASED WITH THE PERFORMANCE OF NEWAVE, THE GROUPÕS CONCRETE CONTRACTING BUSINESS, WHICH WAS ACQUIRED IN FY08. THE PURCHASE PRICE INCLUDED AN EARN-OUT PAYMENT THAT WAS CONDITIONAL ON THE BUSINESS ACHIEVING SET RESULTS OVER TWO YEARS. IT HAS OUT-PERFORMED INITIAL EXPECTATIONS AND ACHIEVED ITS EARN-OUT REQUIREMENT AFTER ONLY 10 MONTHS OF TRADING UNDER GCS OWNERSHIP.
IN 2008 THE GROUP LAUNCHED GCS HIRE, A GENERAL PLANT HIRE OPERATION, TO SUPPORT ITS EXISTING CUSTOMER BASE. THE BUSINESS HAS EXPANDED AND NOW HAS OPERATIONAL SITES IN BASSENDEAN, REDCLIFFE, KWINANA, BUNBURY AND BUSSELTON. THE GENERAL PLANT HIRE OPERATION IS IN ITS START UP PHASE AND IS GENERATING REVENUE AS BUDGETED HOWEVER IT IS NOT EXPECTED TO POSITIVELY CONTRIBUTE TO THE PROFITS OF THE GROUP UNTIL THE SECOND HALF OF 2010.
2 GLOBAL CONSTRUCTION SERVICES LIMITED - 2009 ANNUAL REPORT
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OPERATIONALLY, IT HAS BEEN ANOTHER BUSY AND REWARDING YEAR FOR THE GROUP
THE RESIDENTIAL DIVISION HAS PERFORMED AS EXPECTED, DELIVERING RESULTS IN LINE WITH ITS SALES TARGETS HOWEVER THIS MARKET SECTOR EXPERIENCED INCREASED MARGIN PRESSURE IN THE SECOND HALF OF THE FINANCIAL YEAR, CONDITIONS THAT ARE EXPECTED TO CONTINUE IN THE FIRST HALF OF 2010. LEVELS OF SUCCESS IN SECURING NEW BUSINESS AND RETAINING EXISTING CUSTOMERS REMAIN CONSISTENT WITH MANAGEMENT EXPECTATIONS AND A SIMILAR RESULT IS EXPECTED IN 2010.
THE COASTAL HIRE BUSINESS ACQUIRED ON 1 JULY 2008 HAS NOT MET ITS TARGETS IN 2009 AS A RESULT OF ECONOMIC CONDITIONS AND THEIR NEGATIVE IMPACT ON THE PACE OF RESIDENTIAL AND COMMERCIAL DEVELOPMENT IN THE SOUTHWEST, HOWEVER A STRONGER RESULT IS EXPECTED IN 2010.
THE RESOURCES & INDUSTRIAL SERVICES DIVISION HAS DELIVERED A GOOD RESULT WITH GCS NORTHWEST CONTINUING TO DELIVER ABOVE THE INITIAL MANAGEMENT EXPECTATION. IT IS WELL ESTABLISHED AND STRATEGICALLY POSITIONED TO TAKE ADVANTAGE OF THE SIGNIFICANT PIPELINE OF NEW OPPORTUNITIES IN THE NORTHWEST.
CORPORATE HIGHLIGHTS
THE GROUP SECURED A SUCCESSFUL EQUITY PLACEMENT IN FEBRUARY 2009, RAISING $5.3M WITH PARTICIPATION FROM BOTH EXTERNAL INVESTORS AND DIRECTORS (AFTER SHAREHOLDER APPROVAL WAS GRANTED AT AN AGM IN MARCH). THE GROUP ALSO OFFERED EXISTING SHAREHOLDERS THE OPPORTUNITY TO PARTICIPATE VIA A CONCURRENT SHARE PURCHASE PLAN (SPP) AT THE SAME PARTICIPATION PRICE OFFERED IN THE PLACEMENT. THE SPP WAS WELL SUPPORTED RAISING AND ADDITIONAL $561,000.
THE BOARD HAS BEEN VERY PLEASED WITH THE SHAREHOLDER SUPPORT OF THE DIVIDEND REINVESTMENT PLAN WHICH OFFERS SHAREHOLDERS THE ABILITY TO REINVEST DIVIDENDS AT A DISCOUNT TO THE PREVAILING MARKET PRICE. IT WAS INITIALLY INTRODUCED FOR THE FINAL DIVIDEND FOR FY08, PAID IN SEPTEMBER 2008 AND ACHIEVED A 42% PARTICIPATION RATE. SUBSEQUENT PARTICIPATION HAS BEEN 34% (APRIL INTERIM DIVIDEND 2009) AND 31% FOR THE FINAL DIVIDEND (SEPTEMBER 2009).
THE GROUPÔS ELECTION TO ADOPT THE TAX CONSOLIDATION REGIME RESULTED IN A REFUND OF $3.15M IN APRIL. ON LODGING THE 2007/2008 TAX RETURNS FOR THE GROUP THE COMPANY TOOK ADVANTAGE OF THE IMMEDIATE AVAILABILITY OF LOSSES IN THE TAX CONSOLIDATED GROUP AND THE IMPACT OF ACCELERATED TAX DEPRECIATION UNDER THE LOW VALUE POOL PROVISIONS WHICH RESULTED IN THE REFUND.
CORPORATE GOVERNANCE
THE BOARD CONTINUES TO REVIEW ITS CORPORATE GOVERNANCE POLICIES AND PROCEDURES TO ENSURE THEY ARE APPROPRIATE FOR THE GROUP AT THIS TIME, THAT IT FULFILS ITS OBLIGATIONS AND CONTINUES TO MEET THE EXPECTATIONS OF STAKEHOLDERS. FURTHER DETAILS ARE SET OUT IN THE CORPORATE GOVERNANCE STATEMENT ON PAGE 18 OF THIS REPORT.
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