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RBA - RBA Holdings Limited - Abridged interim financial statements for the six

Release Date: 26/09/2011 07:05
Code(s): RBA
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RBA - RBA Holdings Limited - Abridged interim financial statements for the six month period ended 30 June 2011 RBA Holdings Limited (Incorporated in the Republic of South Africa) (Registration Number: 1999/009701/06) Share Code: RBA ISIN Code: ZAE000104154 RBA Holdings Limited ("RBA" or "the group") ABRIDGED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2011 Highlights * Revenue up 133% * Operating profit - R4,6 million * Equivalent houses completed - 268 Consolidated Statement of Financial Position Period Period Year
Ended Ended Ended 30 June 30 June 31 Dec 10 11 10 R`000 R`000 R`000
Assets 155 191 160 939 164 663 Non-current assets Investment properties 108 600 115 462 115 227 Property, plant and equipment 13 854 16 708 13 984 Goodwill 7 603 4 694 7 603 Stands held for trading 8 604 9 377 8 433 Deferred tax 12 453 9 431 11 088 Deposits - land and stand 4 077 4 173 5 328 allocations Loans to RBA employees share - 1 094 3 000 trust Current assets 144 248 108 088 139 512 Stands held for trading 106 756 77 131 103 611 Deposits - land and stand 2 664 11 596 2 305 allocations Inventory 828 309 913 Construction contracts in 15 534 5 050 12 264 progress Prepayments and other 16 003 11 442 14 584 receivables Cash and cash equivalents 2 463 2 560 5 835
Total assets 299 439 269 027 304 175 Equity and liabilities Equity 43 190 46 106 45 815 Share capital 30 346 28 396 29 386 Revaluation reserve 2 543 2 600 2 543 Retained income 10 506 29 179 21 760 Minority interest (205) (14 069) (7 874) Liabilities Non-current liabilities 130 317 113 654 132 525 Borrowings 119 783 107 855 123 311 Finance lease obligation 19 309 58 Deferred tax 10 515 5 490 9 156 Current liabilities 125 932 109 267 125 835 Current portion of borrowings 39 271 32 102 41 493 Finance lease obligation 90 275 180 Taxation payable 5 100 7 080 6 613 Trade and other payables 48 958 38 632 46 302 Provisions 750 636 290 Construction contracts in 1 773 731 2 929 progress Loans from directors 3 895 3 385 3 562 Bank overdraft 26 095 26 426 24 466 Total equity and liabilities 299 439 269 027 304 175 Number of shares in issue 340 000 310 000 316 600 000 000 000 Net asset value per share 12.59 14.87 14.47 (cents) Tangible net asset value per 10.38 13.36 12.07 share (cents) Consolidated Statement of Comprehensive Income Period Period Year Ended Ended Ended 31 Dec 10
30 June 11 30 June 10 R`000 R`000 R`000 Revenue 82 937 35 564 108 573 Cost of sales (49 947) (21 152) (70 532) Gross profit 32 990 14 412 38 041 Other income 72 3 015 1 379 Operating costs (28 410) (26 626) (53 843) Operating profit/(loss) 4 652 (9 199) (14 423) Investment Income 164 - 471 Impairment - loan to RBA - - 1 907 employees share trust Loss on sale of Non-Current (1 508) - - Assets Fair value adjustments - - 2 733 Loss from associate companies (11) (26) (49) Finance costs (6 700) (7 834) (14 015) Loss before taxation (3 403) (17 059) (23 376) Taxation (183) 2 568 1 378 Loss for the period (3 586) (14 491) (21 998) Minority interest - loss 1 188 4 112 10 609 Loss for the period (2 398) (10 379) (11 389) Reconciliation of headline (loss) / earnings Loss attributable to ordinary (2 398) (10 379) (11 389) shareholders Adjusted for loss on disposal of 1 508 - 467 property, plant and equipment Impairment - loan to RBA - - (1 907) employees share trust (890) (10 379) (12 829) Normalised loss attributable to ordinary shareholders - (2 350) Fair value adjustment of (2 733) investment properties Headline loss attributable to (890) (13 112) (15 179) ordinary shareholders 338 586 310 000 310 307
Weighted average number of 740 000 397 shares in issue Basic (loss) / earnings per (0.71) (3.35) (3.67) share (cents) Normalised (loss) / earnings per (0.26) (3.35) (4.13) share (cents) Headline (loss) / earnings per (0.26) (4.23) (4.89) share (cents) Consolidated Statement of Cash Flows Period Period Year Ended Ended Ended 31 Dec 10
30 June 11 30 June 10 R`000 R`000 R`000 Cash flows from operating (5 860) (18 599) (25 059) activities Cash generated from /(used in) 2 380 (8 582) (11 499) operations Interest received 164 44 471 Interest paid (6 700) (10 195) (14 015) Taxation paid (1 704) 134 (16) Cash flows from investing 2 444 4 459 (9 458) activities Acquisition of property, plant and (241) (96) (672) equipment Proceeds on disposal of property, - 38 2 309 plant and equipment Acquisition of investment property (12) (3 602) (4 661) Sale of investment property 5 132 - 6 615 Movement in investments in - 7 995 - associates Movement deposits - land and stand 892 2 677 10 814 allocations Movement of land for trading (3 316) 2 935 (25 867) Business combinations (11) (5 488) 2 004 (1 585) 14 273 39 886 Cash flows from financing activities Proceeds on share issue 3 960 - 990 Loans raised/(repaid) (5 751) 14 091 38 884 Loans from directors 334 322 499 Movements in finance lease (128) (140) (487) obligations (5 001) 133 5 369 Cash flows for the period (18 631) (24 000) (24 000) Cash and cash equivalents at beginning of period (23 632) (23 867) (18 631)
Cash and cash equivalents at end of period Segment Report Property development Sectional title Consolidated activities housing rentals R`000 R`000 R`000 30 30 31 Dec 30 30 31 Dec 30 June 30 31 Dec June June 2010 June June 2010 2011 June 2010 2011 2010 R`000 2011 2010 R`000 R`000 2010 R`000 R`000 R`000 R`000 R`000 R`000 Revenue 79 474 33 258 102 804 3 463 2 306 5 769 82 937 35 564 108 573 Cost of (49 (21 (70 - - - (49 (21 (70 sale 947) 152) 532) 947) 152) 532) Gross 29 527 12 106 32 272 3 463 2 306 5 769 32 990 14 412 38 041 profit Operati (26 (25 (51 (1 (888) (2 (28 (26 (53 ng 645) 738) 569) 765) 274) 410) 626) 843) Expense s Revalua - - - - - 2 733 - - 2 733 tion Finance (4 (5 (8 754) (2 (2 (5 (6 700) (7 (14 cost 161) 260) 539) 574) 261) 834) 015) Profit( (2 (15 (24 (841) (1 968 (3 403) (17 (23 Loss) 562) 903) 344) 156) 059) 376) before tax Total 231 200 232 769 71 433 68 455 71 406 302 439 269 304 assets 006 572 027 175 Total 203 171 205 380 52 900 51 571 52 980 256 249 222 258 liabili 349 350 921 360 ties Consolidated Statement of Changes in Equity Share Share Revaluati Accum Minority Total
capital premium on profit interest R`000 R`000 R`000 reserve R`000 R`000 R`000 Balance at 3 28 393 2 543 48 770 (7 162) 72 547 01 Jan 2010 Loss for - - (11 389) (10 609) (21 998) the year Issue of - 990 - - - 990 shares Change in - - - (15 621) 9 897 (5 724) shareholdi ng Balance at 3 29 383 2 543 21 760 (7 874) 45 815 01 Jan 2011 Loss for - - - (2 398) (1 188) (3 586) the year Issue of - 3 963 3 963 shares Change in - - - (8 858) 8 858 - shareholdi ng Balance at 3 33 346 2 543 10 506 (205) 46 190 30 June 2011 OVERVIEW Established in 1997, RBA is a supplier of affordable homes in Gauteng, Polokwane and Kwa-Zulu Natal. The business focuses on 3 distinct areas: * Supplier of traditional bank funded homes * Building of a rental portfolio * Providing housing to mining groups In the segment report above, the results for the housing for mining groups has been included under the property development activities. The reason therefore is that these business focus areas are fundamentally similar. Our business model encompasses the complete property development process viz. the acquisition of land, town planning, project management of services installation, marketing, sale/rental and construction of quality affordable homes. REVIEW OF 2011 INTERIM RESULTS The results for the period confirm the financial recovery that RBA is experiencing. Market conditions remain difficult for the residential property development industry in general. The supply of bank home loans remains tight and household indebtedness is still at high levels. Demand for affordable housing though remains robust and indications are that this sector is showing strong signs of recovery. RBA is happy to announce an increase in revenue of 133% compared to the prior reporting period. The gross profit percentage achieved from property development activities was 37,2% (2010 - 36,4%). The improved gross profit can be attributable to increases in the profit realised through the stand component of our housing packages. RBA historically relied on stand allocations from external developers and since listing in 2007 RBA started to develop its own land with improved margins available to the group. The group`s operating expenses from property development activities increased marginally by 3% against the prior comparative period, mainly attributable to increased marketing spend and inflationary pressures during the period. No revaluations of our long term rental unit property portfolio to market value were recorded during the period. The group achieved an attributable loss of R2,398 million (2010: R10,379 million loss) for the period. The net asset value of the group at 30 June 2011 was 12.59 cents (2010 - 14.87 cents) per share. Stands held for trading consist of land available for residential housing development. In accordance with IFRS this inventory was not revalued to market value. At 30 June 2011 its market value based on external valuations, exceeded book value by R 30 million. This factor should be taken into account when considering the real net asset value of the group and when considering RBA`s level of gearing. During the period 26,400,000 ordinary shares were issued to public shareholders at an issue price of 15 cents per share raising R3,960 million for the group. During the 2010 financial year RBA Holdings consolidated all group companies into four major operating entities. The next step was to absorb the minority interests in these companies and effective 1 January 2011 the shareholding of RBA Holdings Limited in its major subsidiaries is as follows: * RBA Homes- 100% * RBA Developments - 100% * Groundbase - 100% * RBA Building Projects - 82% Description of normalised earnings Headline earnings are adjusted to take into account the non operational requirements set out in the SAICA Circular 08/07 - Headline Earnings (issued February 2008) in terms of which all amounts and adjustments relating to items of investment properties are excluded in headline earnings. However the directors are of the view that the revaluations of the rental portfolio should be taken into account when determining the normalised earnings for the group. BUSINESS REVIEW Key operating indicators 30 June 31 Dec 2010 2011 12 months
6 months Bonds approved awaiting 431 394 registration Submitted deals awaiting bond 353 351 approval Deals registered in the period 215 468 Houses under construction 215 269 Equivalent houses completed 268 379 Note: equivalent houses completed takes into account houses under construction at the beginning of the period, registrations during the period and houses under construction at the end of the period and determines the number of equivalent houses actual completed during the period. Corporate Governance In keeping with its commitment to adhere to the corporate governance principles in King III, David Wentzel has stepped down as chairman of the Board and Leon Theron, previously an independent non executive director of RBA, was appointed by the Board as an independent non-executive chairman effective 23 March 2011. David Wentzel continues to fulfill the role of chief executive officer of RBA. Land The group has secured 4 968 stands zoned as residential 1 (freehold) and 2 657 opportunities zoned as residential 3 (sectional title) at various stages in the township establishment process. Sales As at 30 June 2011 the group had 431 approved sales (2010 - 469) that were awaiting registration at the deeds office. Construction would commence immediately after registration. Rentals Our rental portfolio consisting of 176 sectional title units in Protea Glen, Soweto remains well managed. Construction on the next rental project consisting of 152 units will commence in October 2011. National Housing Finance Corporation Ltd has committed funding to the value of R39 million to this project. Marketing In our target markets the RBA brand remains a trusted supplier of affordable homes. Marketing spend during the period was increased; this translated into improved monthly sales and improved brand awareness. Administration No problems are being experienced with the deeds office. Obtaining clearance certificates from local authorities continues to be a challenge for the entire industry. During the 6 month period the group transferred a total of 215 stands to clients. The group anticipates that 700 stands will be transferred to clients for the 2011 financial year. Production Our construction teams performed well given the increased production levels. No problems are being experienced with plan approvals, council connections and NHBRC enrolments. The group had 215 houses under construction at 30 June 2011. Human capital Staff turnover remains low and we are committed to ensuring that RBA remains an employer of choice. At 30 June 2011 the workforce consisted of 221 employees. Green Policy The group is committed to operating our business in an environmentally friendly manner. Additional resources are being allocated towards improving and monitoring our "green policies." PROSPECTS The financial recovery of the group is underway and the directors anticipate a further improved second half of 2011. Improved screening of client`s applications before submission to the banks has resulted in improved strike rates of approved home loans. Indications are that the appetite of banks towards lending in the affordable housing sector will continue to improve. The cash flow position of the group remains under pressure but is gradually improving as our pipeline of approved sales is unwound. The medium to long term prospects for the group remain positive due to the following factors: * The historic shortage of housing in South Africa remains a problem; * The group has the land, sales, administration and production capacity to meet forecasted demand; * Recent economic events have resulted in reduced competition in the affordable housing market; * Government intervention in creating employment in the economy will result in a larger client base that can be accessed; and * The provision of home loans to RBA`s segment of the residential housing market is still a focal point of the major commercial banks. DIVIDENDS No dividends were declared during the period. The dividend policy of RBA will be reviewed annually in light of RBA`s cash flow, gearing and capital requirements. SUBSEQUENT EVENT The group`s transactional banking facilities have been restructure with our bank overdraft facilities of R25 million at 30 June 2011 being restructured as followed: * R5 million current overdraft * R20 million converted to longer term loans STRENGHTENING OF THE BOARD With the objective of strengthening the board, RBA is proud to announce the appointment of Kutoane Kutoane, Mpho Hlahla and Lyndon Kan as independent non- executive directors effective 1 September 2011. Kutoane Kutoane has an MA in International Financial Economics, has more than 20 years` experience in the field of development finance and is currently CEO of the Gauteng Partnership Fund ("GPF"). The GPF`s mandate is to invest public funds alongside commercial funds in the financing of affordable housing projects in Gauteng. Mpho Hlahla is a qualified and registered town and regional planner with 20 years experience in various aspects of the built environment, such as town and regional planning, transportation planning, property management and development and project management. She serves on the boards of a number of entities. Lyndon Kan has a BSc in Building Science and is currently managing director of Guma Property Holdings. Before that he held various senior positions in Absa Bank and Standard Bank. Leon Theron, chairperson of the board, has resigned as chairperson of the Audit Committee and the Risk Committee. Leon continues to serve on the Audit Committee and chairs the Remuneration Committee. Kutoane Kutoane was appointed as chairperson of the Risk Committee and a member of the Audit Committee. Mpho Hlala was appointed as the chairperson of the Social and Ethics Committee as well as a member of the Risk Committee. Lyndon Kan was appointed as chairperson of the Audit Committee and member of the Remuneration Committee. GROUP CHIEF OPERATING OFFICER Bernard Stegmann has been appointed as chief operating officer of the group effective 21 September 2011. Bernard will take full responsibility for the operations of the group`s sales, land development and construction activities. BASIS OF PREPARATION The consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IAS 34: Interim Financial Reporting. The accounting policies used in the preparation of these results are consistent in all material respects with those used in the annual financial statements for the year ended 31 December 2010. The consolidated interim financial statements have not been audited or reviewed by the group`s auditors. APPRECIATION The group recognises the value of its management teams and staff and thanks them for their loyalty and work ethic. We also thank our bankers, suppliers, business partners, advisors, clients and shareholders for their support and faith in the group. By order of the Board 26 September 2011 L Theron D K Wentzel Chairman Chief Executive Officer CORPORATE INFORMATION Independent non-executive Chairman: L Theron Executive directors: D K Wentzel, J L Mortimer, B A Stegmann Independent non-executive directors: K O Kutoane, L B Kan, M A Hlahla Company Secretary: K M Linstrom Registration number: 1999/009701/06 Registered address: Nedbank Building, Cnr Biccard & Jorissen Street, Braamfontein, 2017 Postal address: P.O Box 30885, Braamfontein, 2017 Telephone: 011 483 5000 Facsimile: 086 516 0873 Web address: www.rbaholdings.co.za Transfer secretaries: Computershare Investor Services (Pty) Limited Auditors: Logista CA (SA) Inc. Chartered Accountants and Registered Auditors Designated Adviser: Exchange Sponsors (2008) (Pty) Limited Date: 26/09/2011 07:05:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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