WATPAC LIMITED ANNUAL REPORT 2001
Tourism Queensland House - redevelopment of this office building at North Quay on the fringe of Brisbane s CBD is one of a number of projects recently undertaken by Watpac. WATPAC LIMITED ANNUAL REPORT 2001 WATPAC IS ONE OF AUSTRALIA'S MOST SUCCESSFUL CONSTRUCTION GROUPS and the company continues to grow in all areas of its business. Apart from construction, principal activities are focused on refurbishment and property development. Founded in Brisbane in 1983, Watpac listed on the Australian Stock Exchange two years later. The company has developed to a stage where it is a major force within Australia's building construction industry. A measure of Watpac's reputation can be seen in that for many years it has been the recipient of several major building industry awards. These acknowledgements reflect the company's status in the areas of commercial high rise construction, retail, health, residential, entertainment, tourism and sporting projects. Adding to Watpac's involvement in large projects is its recent successful joint venture bid for redevelopment of the Suncorp Metway Stadium at Lang Park. All projects strictly adhere to workplace health and safety responsibilities and environmental protection. Front Cover: Brisbane s CBD viewed from over the Story Bridge. 1
WATPAC LIMITED ANNUAL REPORT 2001 WATPAC LIMITED ANNUAL REPORT 2001 CHAIRMAN S STATEMENT THE 2000/01 RESULT WAS PLEASING for directors, with construction activities returning to normal levels and increased contributions from both the refurbishment and property divisions. Overall, the after-tax profit result of $3.45 million was a respectable 16.47 percent return on shareholders' funds. A final dividend of two cents per share fully franked has been declared resulting in total dividends for the year being three and a quarter cents per share. In reviewing the financial performance of the company over the past five years, it is significant to note that: net tangible assets have grown from $13 million to $20.9 million, return on shareholders' funds has averaged 21.5 percent per annum, and dividends of approximately $11.26 million have been paid. At year-end, the company's reputation as Queensland's leading construction company is backed by a healthy cash position and strong balance sheet. Our financial strength has enabled us to expand property inventories with confidence and to take a sponsorship role on sound construction projects. Financial Summary Net profit after tax $3.45M Net tangible assets per share 28.88 cents Dividends per share 3.25 cents Return on shareholders' equity 16.47 per cent Refurbishment opportunities will arise in the future due to many older buildings in Brisbane requiring external façade upgrade and internal refit as landlords seek to renew expiring longterm tenancies. Construction Division The construction division's performance reflects a return to normal operations with increased work on hand compared to prior year. Management and staff must be congratulated for securing the redevelopment of the Suncorp Metway Stadium at Lang Park. This joint ventured project is one of the largest building construction projects let by the State Government. Notwithstanding the above, the market is intensely competitive with larger projects being keenly sought by competitors. The availability of construction work has eased as a consequence of the State Government reducing its massive capital expenditure programme of the late 1990s. However, the Queensland economy is strong and we believe construction activity will be boosted in the near future by increased demand for inner city and CBD residential apartments, retail, educational and private health facilities. Refurbishment Division The medium term outlook for the division is extremely promising as the division has carved a market niche as the major refurbishment player in South-East Queensland. Opportunities will arise in the future due to many older buildings in Brisbane requiring external façade upgrade and internal refit as landlords seek to renew expiring long-term tenancies. Examples include CBD works completed at the ANZ building and works currently being undertaken at 201 Charlotte Street and 200 Mary Street. Property Division Directors continue to increase property development inventories in line with the company's strategy of undertaking property development projects to counter construction industry cycles. Contributions from this division over the past two years are evidence enough of the success of this strategy. Information Technology The company has continued to invest in information technology to ensure that its overall IT capability provides a solid platform for company processes, providing efficiencies and a competitive edge to support future growth. Board Meetings During the year Directors scheduled two Board meetings on site, thereby assisting with Directors' understanding of operational issues and increasing interaction with employees. Conclusion The excellent financial results achieved during 2001 reflect favourably on the management and staff of Watpac. On behalf of the Board of Directors, I wish to thank them for their dedication and valuable contributions throughout the year. K W Seymour CHAIRMAN 2 3
WATPAC LIMITED ANNUAL REPORT 2001 Directors are pleased to report a pre-tax profit of $5.346 million and an after-tax profit of $3.45 million for the 2000/01 year. These results were achieved on revenue of $161.23 million compared to $178.58 million in the previous year. Return on shareholders' equity was 16.47 percent and averages 21.5 percent over the past five years. Net tangible assets per share grew from 27.49 cents to 28.88 cents after allowing for the 2000/01 dividend of 3.25 cents per share. The group balance sheet remains strong with net assets increasing from $19.2 million to $20.9 million. Total cash on hand was substantial at $24.9 million. Gearing, although minimal, has increased on prior years due to an expanded property development inventory. The forward order book for the 2001/02 year has increased to $134.4 million at year end compared to $81.1 million at the previous corresponding period. This increase is largely due to the company securing redevelopment of the Suncorp Metway Stadium at Lang Park in joint venture with Multiplex Constructions. This project should also contribute a further $50 million towards work on hand at 1 July 2002. Other major construction projects carried forward into the 2001/02 year include the Deepwater Point (Stage I) apartments complex for Australand on the Gold Coast, St Andrew's Hospital redevelopment (Stage I) in Brisbane and the Dundrenan and Metropolis apartments for private developers in Brisbane. Major refurbishment projects carried forward include Stage II of the Myer Centre for the Gandel Group, CBD office refurbishments at 201 Charlotte Street for Grosvenor Limited and 200 Mary Street for Cromwell Limited. This page: The Cleveland Detention Centre near Townsville undertaken by Watpac for the Queensland Government s Families, Youth and Community Care Queensland. Opposite page: The Headland Crest Residential apartment building at Buderim, north of Brisbane, is a major new construction project completed by Watpac. 4 5
WATPAC LIMITED ANNUAL REPORT 2001 THE CONSTRUCTION DIVISION has had another challenging but successful year. Major projects completed included the Rest Inn apartments at the Airport Gateway Estate for the ACCOR group; the Crest apartments at Buderim for the Headland Crest Joint Venture; an in-house company development known as Newstead Commercial Village; Martin College building for Ariadne Australia Limited, and the Wacol Youth Detention Centre for the Queensland State Government. This page: The Deepwater Point (Stage 1) apartments complex (arrowed) for Australand at Labrador on Queensland s Gold Coast being constructed by Watpac offers a selection of 1, 2, and 3 bedroom apartments, penthouses and villas. All apartments feature large live-on verandah rooms which look out to views over the Broadwater. Opposite page: Martin Campus - a multi-storey building in Charlotte Street, Brisbane, built under contract for Ariadne Australia Limited. 6 7
WATPAC LIMITED ANNUAL REPORT 2001 CONSTRUCTION DIVISION (continued) This page: A construction project at Wacol for the Queensland State Government's Families, Youth and Community Care Queensland. Watpac has also completed a similar project (page 4) at Townsville. Opposite page: Construction under way at the Forest Lake State High School which is due for completion in late January 2002 and commissioned by the Queensland State Government s Project Services. 8 9
WATPAC LIMITED ANNUAL REPORT 2001 THE REFURBISHMENT DIVISION has had another record year as turnover surpassed that of previous years. A number of highly visible projects were completed during the year such as the refurbishment of office buildings at 30 Makerston Street and the ANZ Bank's Queensland headquarters in Brisbane's CBD. Major fit-out works in these buildings were completed for Tourism Queensland, Network Design & Construct, and the ANZ Bank. Major works were also completed at Stages I and II of the Myer Centre refurbishment in Brisbane's CBD. Work is continuing on the CBD office refurbishments at 201 Charlotte Street and 200 Mary Street and Stage III of the Myer Centre. This page: Major refurbishment projects include Stages I & II of the Myer Centre in Brisbane s CBD for the Gandel Group. Opposite page: A major project undertaken by Watpac during the period under review was the refurbishment of the ANZ Bank s Queensland headquarters in Brisbane s CBD for Ariadne Australia Limited. 10 11
WATPAC LIMITED ANNUAL REPORT 2001 WATPAC LIMITED ANNUAL REPORT 2001 REFURBISHMENT DIVISION (continued) Right: The refurbished foyer of the ANZ Bank's Queensland headquarters in Brisbane's CBD. Above and at bottom right: Redevelopment at 30 Makerston Street, North Quay on the fringe of Brisbane's CBD included refurbishment of office space for Tourism Queensland. 12 13
WATPAC LIMITED ANNUAL REPORT 2001 WATPAC LIMITED ANNUAL REPORT 2001 THE PROPERTY DIVISION saw an increased focus on development activity continue during 2000/01 as it recorded a contribution of 36 percent of the company's after-tax profit on 14.5 percent of revenue. Profit for the division was derived from the sale of the last three lots at the Airport Gateway Estate near Brisbane Airport, the redeveloped 30 Makerston Street office complex and sale of vacant land at 79 Albert Street, both in Brisbane's CBD, plus the sale of a development site in the inner-city suburb of Milton. During the year Watpac acquired a number of development properties to secure future development profit. These include retail properties at Coolum on the Sunshine Coast and at Ormeau on the Pacific Highway south of Brisbane. The company also completed construction of Headland Crest, a residential property at Buderim and a commercial development known as Newstead Commercial Village at in Brisbane. Sales of these properties are expected to be realised in the 2001/02 financial year. In assessing future prospects, this division is well positioned to provide ongoing contributions to profit, given the build-up of the above property inventory during 2000/01. PERSONNEL At 30 June 2001 the total number of company personnel across all operations was 131 compared to 129 in the previous year. Above: Ormeau Shopping Centre At left and below: The now completed $8.5M Newstead Commercial Village. This project was developed and built by Watpac at Doggett Street,, a strategic fringe location for small business operators. 14 15
WATPAC LIMITED ANNUAL REPORT 2001 CORPORATE DIRECTORY Board of Directors K W Seymour (Chairman) I M Wood (Deputy Chairman) D M Little (Managing Director) W L Douglas R J Lette R B McGruther Company Secretary R Raj Registered Office Fax: 07 3251 6393 Share Registry Office Computershare Investor Services Pty Limited Level 27, Central Plaza One 345 Queen Street Brisbane Queensland 4000 Tel: 07 3237 2173 Auditors KPMG Brisbane Queensland Solicitors Corrs Chambers Westgarth Brisbane Queensland Corporate Locations Watpac Limited Head Office ABN 98 010 562 562 Managing Director David Little Finance & Accounting General Manager Ravin Raj Fax: 07 3251 6393 Watpac Construction General Manager Errol Edwards Fax: 07 3251 6396 Watpac Refurbishments General Manager Errol Edwards Fax: 07 3251 6392 Watpac Design & Construct Manager - Gordon Sutherland Fax: 07 3251 6396 Watpac Property Development Manager - David Lockhart Fax: 07 3251 6395 Watpac Northern Region Manager - Nick Halsey 250 Ross River Road Aitkenvale Queensland 4814 Tel: 07 4729 2290 Fax: 07 4729 2291 Watpac Business Development Manager - Ian Dodds Fax: 07 3251 6395 2 1 Opposite page: Among recent projects undertaken by Watpac in the vicinity of Brisbane Airport are (1) the Rest Inn apartments for the ACCOR group and (2) the Airport Gateway Industrial Estate. 16