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Reviewed consolidated interim results for the six months ended 31 August 2012
Buildmax Limited
(Incorporated in the Republic of South Africa)
Registration number 1995/012209/06
JSE code: BDM ISIN: ZAE000011250
("Buildmax" or "the Company" or "the Group")
HEPS up by 2 500% to 0,52 cents
EBITDA up by 21% to R131,9 million
PBIT up by 342% to R43,9 million
Reviewed consolidated interim results for the six months ended 31 August 2012
Abridged consolidated statement of financial position
Reviewed Reviewed Audited
31 August 31 August 29 February
2012 2011 2012
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and 929 938 690 459 711 649
equipment
Goodwill and other 89 639 95 550 92 596
intangible assets
Environmental 393 - 422
guarantee investment
Deferred taxation 19 094 12 340 17 331
1 039 064 798 349 821 998
Current assets
Inventories 23 348 15 056 21 923
Trade and other 195 623 162 624 162 991
receivables
Taxation receivable 421 4 459 5 087
Bank and cash 54 647 50 764 108 869
balances
274 039 232 903 298 870
Assets classified as 7 897 90 815 -
held for sale
Total assets 1 321 000 1 122 067 1 120 868
EQUITY AND LIABILITIES
Share capital and 2 023 206 2 023 206 2 023 206
premium
Cash flow hedging - (1 152) (280)
reserve
Share-based payment reserve 4 700
Accumulated loss (1 450 962) (1 471 563) (1 468 863)
Attributable to 576 944 550 491 554 063
equity holders of
the Company
Outside (7 025) (7 323) (7 043)
shareholders'
interests
Total shareholders' 569 919 543 168 547 020
interests
Non-current liabilities
Interest-bearing 247 727 128 654 147 943
liabilities
Provisions - 4 751 889
Deferred taxation 55 069 30 938 53 682
302 796 164 343 202 514
Current liabilities
Interest-bearing 258 272 202 398 176 499
liabilities
Derivative - 1 601 389
instruments
Trade and other 188 584 129 673 191 721
payables
Provisions 1 429 18 412 2 300
Taxation payable - 2 313 336
Bank overdrafts - 11 348 89
448 285 365 745 371 334
Liabilities directly - 48 811 -
associated with
assets held for sale
Total equity and 1 321 000 1 122 067 1 120 868
liabilities
Shares in issue at 3 444 716 3 444 716 3 444 716
the end of period
Net asset value per 16,7 16,0 16,1
share (cents)
Net tangible asset 14,7 13,8 13,9
value per share
(cents)
Abridged consolidated statement of comprehensive income
Reviewed Reviewed
6 months 6 months Audited
ended ended year ended
31 August 31 August 29 February
2012 2011 2012
R'000 R'000 R'000
Revenue 656 167 655 150 1 272 052
Operating profit 131 978 109 149 271 853
before depreciation
and amortisation
("EBITDA")
Depreciation (85 068) (90 304) (181 784)
Operating profit 46 910 18 845 90 069
before amortisation
Amortisation of (2 954) (2 954) (5 908)
intangible assets
Operating profit 43 956 15 891 84 161
Loss on disposal of - (5 952) (41 827)
business
Profit before 43 956 9 939 42 334
interest and
taxation ("PBIT")
Net interest paid (17 891) (13 460) (27 534)
Profit/(loss) before 26 065 (3 521) 14 800
taxation ("PBT" or
"LBT")
Taxation (8 146) (4 736) (20 077)
Profit/(loss) for 17 919 (8 257) (5 277)
the period ("PAT" or
"LAT")
Other comprehensive
income for the period:
Recycled portion of 399 1 737 2 905
cash flow reserve
Effective portion (10) 70 113
raised on cash flow
hedge
Taxation (109) (506) (845)
Total comprehensive 18 199 (6 956) (3 104)
profit/(loss) for
the period
Profit/(loss) for the
period attributable to:
Equity holders of 17 901 (8 262) (5 562)
the Company
Outside 18 5 285
shareholders'
interests
17 919 (8 257) (5 277)
Total comprehensive
profit/(loss) for the
period attributable to:
Equity holders of 18 181 (6 961) (3 389)
the Company
Outside 18 5 285
shareholders'
interests
18 199 (6 956) (3 104)
Continuing and discontinued operations
Reviewed Reviewed Audited
6 months ended 6 months ended year ended
31 August 2012 31 August 2011 29 February 2012
Continuing Discontinued Continuing Discontinued Continuing Discontinued
operations operations operations operations operations operations
R'000 R'000 R'000 R'000 R'000 R'000
Revenue 656 167 - 524 700 130 450 1 087 503 184 549
Operating 131 978 - 113 348 (4 199) 278 340 (6 487)
profit/
(loss) before
depreciation
and amortisation ("EBITDA")
Depreciation (85 068) - (86 191) (4 113) (175 867) (5 917)
Operating 46 910 - 27 157 (8 312) 102 473 (12 404)
profit/
(loss) before
amortisation Amortisation (2 954) - (2 954) - (5 908) -
of intangible assets
Operating 43 956 - 24 203 (8 312) 96 565 (12 404)
profit/
(loss)
Loss on - - - (5 952) - (41 827)
disposal of
business
Profit/ 43 956 - 24 203 (14 264) 96 565 (54 231)
(loss) before
interest and taxation
("PBIT" or "LBIT")
Net (17 891) - (12 137) (1 323) (25 449) (2 085)
interest
paid
Profit/(loss) 26 065 - 12 066 (15 587) 71 116 (56 316)
before
taxation
("PBT" or
"LBT")
Taxation (8 146) - (4 572) (164) (19 913) (164)
Profit/(loss) 17 919 - 7 494 (15 751) 51 203 (56 480)
for the
period
("PAT" or
"LAT")
Other comprehensive
income/(loss) for
the period
Recycled 399 - 1 737 - 2 905 -
portion of
cash flow
reserve
Effective (10) - 70 - 113 -
portion
raised on
cash flow
hedge
Taxation (109) - (506) - (845) -
Total 18 199 - 8 795 (15 751) 53 376 (56 480)
comprehensi
ve
income/(loss)
for the
period
Profit/(loss) for
the period attributable
to:
Equity 17 901 - 7 489 (15 751) 50 918 (56 480)
holders of
the Company
Outside 18 - 5 - 285 -
shareholders' interests
17 919 - 7 494 (15 751) 51 203 (56 480)
Total comprehensive
income/(loss)for the
period attributable to:
Equity 18 181 - 8 790 (15 751) 53 091 (56 480)
holders of
the Company
Outside 18 - 5 - 285 -
shareholders'
interests
18 199 - 8 795 (15 751) 53 376 (56 480)
Reconciliation of headline earnings/(loss)
Reviewed Reviewed
6 months 6 months Audited
ended ended year ended
31 August 31 August 29 February
2012 2011 2012
R'000 R'000 R'000
Profit/(loss) for 17 901 (8 262) (5 562)
the period
attributable to
equity holders of
the Company
Add back loss on - 5 952 41 827
disposal of business
Add back loss/deduct 69 2 818 (26 184)
profit on disposal
of property, plant
and equipment
- Gross 96 3 915 (36 238)
- Taxation (27) (1 097) 10 054
Headline earnings 17 970 508 10 081
attributable to
equity holders of
the Company
Continuing and discontinued operations
Reviewed Reviewed Audited
6 months ended 6 months ended year ended
1 August 2012 31 August 2011 29 February 2012
Continuing Discontinued Continuing Discontinued Continuing Discontinued
operations operations operations operations operations operations
R'000 R'000 R'000 R'000 R'000 R'000
Profit/(loss) 17 901 - 7 489 (15 751) 50 918 (56 480)
for the
period
attributable to
equity holders of
the Company
Adjusted for:
Add back - - - 5 952 - 41 827
loss on
disposal of
business
Add back 69 - 2 781 37 (26 045) (139)
loss/deduct
profit on
disposal of
property,
plant and
equipment
- Gross 96 - 3 863 52 (36 087) (151)
- Taxation (27) - (1 082) (15) 10 042 12
Headline 17 970 - 10 270 (9 762) 24 873 (14 792)
earnings/(loss)
attributable to
equity holders of
the company
Supplementary information
Reviewed
6 months Reviewed Audited
ended 6 months year ended
31 August ended 29 February
2012 31 August 2011 2012
Earnings per share cents cents cents
Headline earnings/(loss)
per share (cents)
Continuing and 0,52 0,02 0,29
discontinued
operations
- Continuing 0,52 0,30 0,72
operations
- Discontinued - (0,28) (0,43)
operations
Basic earnings/(loss)
per share (cents)
Continuing and 0,52 (0,24) (0,16)
discontinued
operations
- Continuing 0,52 0,22 1,48
operations
- Discontinued - (0,46) (1,64)
operations
Shares in issue ('000)
- at the end of the 3 444 716 3 444 716 3 444 716
period
- weighted 3 444 716 3 444 716 3 444 716
Reviewed Reviewed
6 months 6 months Audited
ended ended year ended
31 August 31 August 29 February
2012 2011 2012
Diluted earnings per share cents cents cents
Headline earnings/(loss)
per share (cents)
Continuing and 0,51 0,02 0,29
discontinued
operations
- Continuing 0,51 0,30 0,72
operations
- Discontinued - (0,28) (0,43)
operations
Basic earnings/(loss)
per share (cents)
Continuing and 0,51 (0,24) (0,16)
discontinued
operations
- Continuing 0,51 0,22 1,48
operations
- Discontinued - (0,46) (1,64)
operations
Shares used in calculating
diluted earnings ('000)
- at the end of the 3 521 716 3 444 716 3 444 716
period
- weighted 3 521 716 3 444 716 3 444 716
Abridged consolidated statement of cash flows
Reviewed Reviewed
6 months 6 months Audited
ended ended year ended
31 August 31 August 29 February
2012 2011 2012
R'000 R'000 R'000
Operating activities
Profit/(loss) before 26 065 (3 521) 14 800
taxation
Working capital (47 333) (53 090) (3 092)
movement
Other non-cash flow 92 703 103 125 192 759
items
Net interest paid 17 891 13 460 27 534
Cash generated from 89 326 59 974 232 001
operations
Net interest paid in (17 891) (13 460) (27 257)
cash
Taxation 4 212 (1 045) (1 578)
received/(paid)
Cash generated from 75 647 45 469 203 166
operating activities
Investing activities
Purchase of property,
plant and equipment
- Expanding (69) (557) (334)
operations
- Maintaining (334 132) (240 668) (415 522)
operations
Environmental 29 - (600)
guarantee investment
Proceeds on disposal - 2 749 736
of businesses
Proceeds on disposal 22 850 63 265 167 903
of property, plant
and equipment
Net cash utilised by (311 322) (175 211) (247 817)
investing activities
Financing activities
Vendor loans repaid 1 024 - -
Interest-bearing 287 541 178 212 301 233
liabilities raised
Interest-bearing (107 023) (126 822) (265 570)
liabilities repaid
Net cash flows 181 542 51 390 35 663
generated from
financing activities
Net decrease in cash (54 133) (78 352) (8 988)
and cash equivalents
Cash and cash 108 780 117 768 117 768
equivalents at the
beginning of the
period
Cash and cash 54 647 39 416 108 780
equivalents at the
end of the period
Abridged consolidated statement of changes in equity
Share Share- Outside Total
capital Cash flow based Accumu- share- share-
and hedging payment lated holders' holders'
premium reserve reserve loss interest interest
R'000 R'000 R'000 R'000 R'000 R'000
Balances as 2 023 206 (2 453) - (1 463 301) (7 328) 550 124
at 28
February
2011
Total - 1 301 - (8 262) 5 (6 956)
comprehensive profit/(loss)
for the period
Balances as 2 023 206 (1 152) - (1 471 563) (7 323) 543 168
at 31
August 2011 Total - 872 - 2 700 280 3 852
comprehensive
profit
for the period
Balances as 2 023 206 (280) - (1 468 863) (7 043) 547 020
at 29
February
2012
Total - 280 4 700 17 901 18 22 899
comprehensive
profit
for the period
Balances as 2 023 206 - 4 700 (1 450 962) (7 025) 569 919
at 31
August 2012
Abridged segmental analysis
Reviewed Reviewed
6 months 6 months Audited
ended ended year ended
31 August 31 August 29 February
2012 2011 2012
R'000 R'000 R'000
EXTERNAL REVENUE
Continuing 656 167 524 700 1 087 503
operations
Mining Services - 491 620 424 635 888 541
Diesel Power
Mining Services - - 263 566
Equipment Sales and
Rental
Total Mining 491 620 424 898 889 107
Services
Civils and 78 799 21 147 65 794
Earthworks
Aggregates and 85 748 78 655 132 602
Quarries
Discontinued - 130 450 184 549
operations
Construction - 130 450 184 549
Materials
656 167 655 150 1 272 052
INTER-SEGMENT REVENUE
Continuing 31 942 24 945 46 022
operations
Mining Services - 1 076 5 541 5 903
Diesel Power
Mining Services - 12 850 19 404 32 767
Equipment Sales and
Rental
Total Mining 13 926 24 945 38 670
Services
Aggregates and 4 090 - 7 352
Quarries
Discontinued - 1 346 -
operations
Construction - 1 346 -
Materials
31 942 26 291 46 022
EBITDA
Continuing 131 978 113 348 278 340
operations
Mining Services - 127 319 95 613 247 497
Diesel Power
Mining Services - 4 154 9 096 13 788
Equipment Sales and
Rental
Total Mining 131 473 104 709 261 285
Services
Civils and 2 376 (977) 3 023
Earthworks
Aggregates and 9 299 9 616 14 032
Quarries
Corporate Head (11 170) - -
Office
Discontinued - (4 199) (6 487)
operations
Construction - (4 199) (6 487)
Materials
131 978 109 149 271 853
OPERATING PROFIT/(LOSS)
BEFORE AMORTISATION
Continuing 46 910 27 157 102 473
operations
Mining Services - 50 943 20 485 92 996
Diesel Power
Mining Services - 3 113 3 626 4 331
Equipment Sales and
Rental
Total Mining 54 056 24 111 97 327
Services
Civils and 2 376 (979) 3 023
Earthworks
Aggregates and 1 697 4 025 2 123
Quarries
Corporate Head (11 219) - -
Office
Discontinued - (8 312) (12 404)
operations
Construction - (8 312) (12 404)
Materials
46 910 18 845 90 069
MESSAGE TO SHAREHOLDERS
The Buildmax reviewed financial results for the six months ended 31 August 2012 are reported in an integrated manner reflecting those issues that are applicable and materially affect or contribute to the sustainable development of Buildmax in terms of its financial and non-financial performance.
The Group's business units being Mining Services, Civils and Earthworks and Aggregates and Quarries all remain profitable, operating cash positive and are supported by a secure and dedicated management team and workforce.
In comparison to August 2011 (which includes the results of the discontinued Construction Material business unit), salient features include:
- Consolidated revenue increased slightly from R655,2 million to R656,2 million. Continuous operating revenue increased by 25,06%.
- Improved productivity and efficiencies translated into an increase in EBITDA of 20,92% to R132 million and EBITDA margins grew from 16,66% to 20,11%.
- PBIT improved by 342,26% to R43,9 million resulting in an increase in operating margin from 1,52% to 6,70%.
- PAT improved from a loss of R8,3 million to a profit of R17,9 million.
- The Group generated cash from operations of R89,3 million.
- Gross capital expenditure on new equipment was R334 million resulting in interest-bearing debt increasing to R506 million.
- Provisions of R8,9 million and R4,7 million were raised against outstanding loans and the long-term incentive plan respectively. These provisions are separately disclosed in the segmental analysis as "corporate head office".
- The Group's net asset value and tangible net asset value per share improved from 16 to 16,7 cents and 13,8 to 14,7 cents respectively.
- Earnings per share improved from a loss of 0,24 cents to a profit of 0,52 cents and headline earnings per share increased from 0,02 cents to 0,52 cents.
- The Group's Remuneration Policy and Long Term Incentive Plans were approved by shareholders at a General Meeting. The Ownership conditions of the Leverage component were met whilst the other Vesting conditions continues to be complied with.
Our principal business, Mining Services, remains highly dependent on fleet replacement, availability of asset-based funding, a stable and productive workforce and securing reasonable prices for second-hand equipment. We are pleased with the progress that we have made on these fronts.
SUBSIDIARY OVERVIEW
- During the period under review, the Group continued to deliver improved financial and operational performance.
- The Group's flagship brand, Diesel Power, increased revenue by 15,8% to R491,6 million and EBITDA margins improved from 22,5% to 25,9% resulting in an EBITDA profit of R127,3 million.
- Civils and Earthworks reported an increase in revenue of 272,6% to R78,8 million. EBITDA increased to R2,4 million from an EBITDA loss of R1 million reported in the comparative period.
- Although Aggregates and Quarries experienced difficult trading conditions, revenue increased by 9% to R85,7 million. EBITDA margins have reduced from 12,2% to 10,8% resulting in an EBITDA profit of R9,3 million.
SAFETY
Buildmax is committed to making "Efficient Zero Harm Production" a reality and this is achieved with the combined commitment of every member of our team and other relevant stakeholders. No fatalities were recorded at any of our operations. Mining Services achieved a Lost Time Injury frequency rate of 0.07 with no Reportable Injuries for the 6 months under review. This remains an excellent achievement compared to the industry. Various systems and processes are in place to ensure that workplaces are safe. Safety awareness remains a priority and is encouraged and communicated at all levels.
CORPORATE ACTIVITY
- The Group's Remuneration Policy and Long Term Incentive Plan were approved by shareholders at a General Meeting held on 26 March 2012.
- At a subsequent General Meeting held on 16 October 2012 the Company's shareholders approved the following:
- A repurchase of 192,5 million of the issued shares of the Company at 15 cents per share. These shares will be issued to management in terms of the Long Term Incentive Plan referred to above.
- An Odd-lot Offer to shareholders holding less than 1 401 Buildmax shares.
- A Specific Offer to shareholders holding more than 1 400 but less than 19 000 Buildmax shares.
- The implementation of a share consolidation on a ratio of 19 to 1.
TRANSFORMATION
The Group's BEE shareholding has significantly reduced from 17% to 6,75%, due to dilution as a result of the rights issue in November 2010. The Social, Ethics and Transformation Committee has formulated a four-year plan to improve the Group's rating from a Level 6 to a Level 4 contributor. The Ownership requirements in terms of the Mining Charter are being addressed as a priority for implementation early in 2013.
OUR PEOPLE
It is important to the Group that our staff are healthy and cared for. The Wellness Programme aims to identify risks, provide wellness education and influence positive behaviour change amongst our employees.
The educational component of our Wellness Programme encourages employees to live healthier lifestyles. There has been an improvement in our ability to attract key management and operational staff, including female operators.
The Group continues to experience challenges in attracting and retaining technical staff due to the global shortage of skills. To address this challenge we have embarked on robust apprenticeship training programmes.
The Buildmax Group recognises the right of every employee to exercise freedom of association and to join a recognised trade union of their choice to collectively represent their interests. A five-year substantive agreement with the representative trade union has been signed. This agreement expires on 28 February 2018.
OUTLOOK
South Africa's energy intensive economy is overwhelmingly dependent on coal. This fossil fuel provides about 80% of the country's primary energy needs, supports 90% of the electricity generation and provides feedstock for the country's synthetic fuels manufacturing plants. South Africa's coal reserves are large and provide an inexpensive source of energy. The limited availability of alternative energy sources, and the apparent indecision regarding nuclear energy, point towards coal's continued domination of the country's energy mix going forward.
Coal production and consumption in South Africa has remained fairly unbalanced, with rising coal demand on one hand and constrained supply sources on the other. Eskom is currently expanding its power generation capacity by building several new coal fired power plants, and returning into service existing power plants that had been mothballed. The power utility's coal consumption is likely to increase by an additional 50 million tons by 2017, and for the same period the expansion of synthetic fuels would also see coal consumption increasing by an additional 25 million tons per annum.
South Africa's coal is in demand in China, India and the European Union, due to its low ash and sulphur content. Most European Union governments, and the United States, are likely to lift their moratorium on coal fired power plants, in response to the nuclear safety concerns triggered by the Fukushima nuclear plant disaster in Japan. Export demand for South Africa's coal is forecasted to remain strong in the near to medium term.
It is apparent that many opportunities exist for Buildmax to provide its services to the coal industry as well as other sectors of mining. Whilst trading conditions remain competitive, Diesel Power have secured a solid blend of short, medium and long term contracts which position it well for sustainable future growth.
DIVIDEND
No final dividend has been declared. It is the Group's policy to consider the declaration of a dividend annually.
APPROVAL OF THE INTERIM FINANCIAL RESULTS
The reviewed consolidated interim financial results have been prepared in accordance with International Financial Reporting Standards, IAS 34 Interim Financial Reporting, the AC 500 series issued by the Accounting Practices Board, the JSE Listings Requirements and the Companies Act, 71 of 2008. The accounting policies used in the preparation of these interim results are consistent with those used in the annual financial results for the year ended 29 February 2012.
In accordance with the Group's accounting policies, management reviewed the remaining economic useful lives and residual values of all items of property, plant and equipment. This revision identified the need to expand the categories of mining and quarrying plant and equipment in the Group's accounting policies to cater for the different economic useful lives and residual value estimates applied to the various assets. These revised estimates have been implemented prospectively from 1 March 2012.
This report was compiled under the supervision of Mr CS Els, Chief Financial Officer. These results were reviewed by PKF and the unmodified review opinion is available for inspection at the registered offices of the Company.
The interim financial results have therefore been prepared on a going-concern basis as the Directors believe that the Company and the Group will continue to be in operation in the foreseeable future.
The interim financial results were approved by the Board of Directors on 1 November 2012.
ESTIMATES AND CONTINGENCIES
Management makes estimates and judgements concerning the future with regards to opencast mining contracts, remaining life of quarries, future rehabilitation costs, provisions, claims, depreciation methods and residual values when estimating the recoverable amounts of assets.
The resulting estimates and judgements can only approximate the actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business.
It is not anticipated that any material liabilities will arise from the contingent liabilities other than those provided for.
ACKNOWLEDGEMENTS
The Board would like to express its appreciation to all its customers, staff, business partners, shareholders and other stakeholders for their support during the past six months and for their continued belief in the sustainability of the Group and its strong underlying businesses.
On behalf of the Board
Colin Wood
Chairman
Terry Bantock
Chief Executive Officer
Christie Els
Chief Financial Officer
Johannesburg
1 November 2012
BOARD OF DIRECTORS
Independent non-executive Directors:
Colin Wood (Chairman), Colin Brayshaw, David Lamola
Non-executive:
Dennis Mack, Malcolm McCulloch, Graeme Montgomery, Bulelani Ngcuka
Executive:
Terry Bantock (Chief Executive Officer), Christie Els (Chief Financial Officer)
CORPORATE ADVISOR AND SPONSOR
QuestCo (Proprietary) Limited
(Registration number 2002/005616/07)
The Pivot, Entrance D, 2nd Floor,
No 1 Montecasino Blvd
Fourways, 2055
(PO Box 98956, Sloane Park, 2152)
INDEPENDENT AUDITORS TO BUILDMAX
PKF (Jhb) Inc.
(Registration number 1994/001166/21)
42 Wierda Road West
Wierda Valley
Sandton, 2196
(Private Bag X10046, Sandton, 2146)
TRANSFER SECRETARIES
Computershare Investor Services (Proprietary) Limited
(Registration number 2004/003647/07)
Ground Floor
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
COMPANY SECRETARY
Gillian Miller (Chartered Institute of Secretaries and Administrators of Southern Africa)
Date: 06/11/2012 01:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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