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BUILDMAX LIMITED - Reviewed Interim Financial Results 31 August 2013

Release Date: 11/11/2013 13:15
Code(s): BDM     PDF:  
Wrap Text
Reviewed Interim Financial Results 31 August 2013

Buildmax Limited
(Incorporated in the Republic of South Africa)
Registration number 1995/012209/06
Share code: BDM       ISIN: ZAE000167318
("Buildmax" or the "Group" or the "Company")

REVIEWED INTERIM FINANCIAL RESULTS 31 AUGUST 2013

- headline earnings
  increased to R36.6 million
  from R17.9 million

- HEPS increased to
  20.2 cents 
  UP 104%
  from 9.9 cents

- earnings
  increased to
  R33.3 million
  from R17.9 million

- earnings per share increased to
  18.4 cents
  UP 85.9%
  from 9.9 cents

- revenue increased to
  R687.1 million
  UP 4.7%
  from R656.2 million

- EBITDA increased to
  R136.3 million
  UP 3.3%
  from R131.9 million

- PBIT increased to
  R58.8 million
  UP 33.9%
  from R43.9 million

- net asset value per share
  improved to
  346.6 cents
  UP 8.9%
  from 318.2 cents

- tangible net asset value
  per share improved to
  309.1 cents
  UP 11.0%
  from 278.4 cents

- net asset value (excluding
  goodwill) improved to
  331.6 cents
  UP 9.3%
  from 303.3 cents

- interest-bearing debt decreased to
  R414.3 million 
  DOWN 18.1%
  from R505.9 million

- gross capital expenditure
  on new equipment was
  R155.8 million

- net debt decreased to
  R345.2 million
  DOWN 23.5%
  from R451.4 million

- cash generated from
  operating activities increased to
  R123.6 million
  UP 63.5%
  from R75.6 million
 
Commentary

Illustrated by a 104% increase in HEPS, the Group's financial performance continues on a positive trend
and has made significant strides towards meeting its strategic objectives due to the investment in new plant
and preventative maintenance coupled with a focus on operator training. Whilst we have improved in this
regard, significant scope exists for further improvement.

One of the key objectives set by management was to reduce concentration by targeting and winning
business with exposure to different mining commodities in diverse geographic locations. Albeit in an extremely
competitive environment, the Group was awarded an iron ore open pit quarry and mining contract in
the Republic of Congo by DMC Iron Congo SA, which is controlled by Exxaro Resources Limited. Due to
the fact that the majority of the assets used in the mining process are owned by the client, the earnings have
contributed positively towards most key financial ratios.

Our strategic focus areas remain relevant and outward looking, and our objective is to continue to grow
organically and by acquisition.

Safety and quality management

The Group boasts a proud track record of more than 5.3 million fatality free production shifts and 50 million
fatality free hours. Safety is a core value of the Buildmax Group and integral to the way it conducts business.
It is demonstrated by commitment to high standards and assignment of specific responsibilities for safety.
The value the Group places on the safety of employees, and subcontractors is reflected in the safety vision,
"Committed to Efficient Zero Harm Production".

The safety policy and framework supports the Group safety vision, provides direction and sets standards
for operations to develop and manage their proactive safety programmes and strategies with the objective
of continuously improving in terms of safety performance.

The Group's operations continue to maintain certification for the OHSAS 1801 health and safety management
standard, and ISO 9001 which specifies requirements for a quality management system.

People

The quality of our people is a critical source of the Group's competitive advantage. We recognise that in order
to achieve the sustained high performance that is necessary for Buildmax to meet the demands of its business
environment, it needs to attract, retain and continuously develop its employees at all levels.

Investment in learning and development remains a top priority across the Group which invested R21 million
in a range of training, learning and career development opportunities during the year. A bursary scheme for
previously disadvantaged individuals ensures that Buildmax attracts an ongoing pipeline of engineering talent
and invests in its transformation strategy.

Operational overview

The Group operates within four strategic business units: mining services, equipment sales and rental, civils
and earthworks and aggregate and quarries.

Mining services and equipment sales and rental

The mining services business unit provides opencast mining, rehabilitation services as well as equipment
sales and rental. The scope of these services include expertise in mine planning, pit designing, production
scheduling, drilling and blasting, opencast mining, pillar mining, surveying and mine rehabilitation.The
companies that form part of the mining services business unit include, Diesel Power South Africa, Buildmax
Equipment and Diesel Power Congo.

Operations in South Africa continue to experience tough trading conditions. This challenging environment has
been offset by the growth in Africa.

Civils and earthworks

Civils and Earthworks, a division of Diesel Power South Africa, is a highly regarded provider of civils and bulk
earthworks services to the mining and property development sector of the economy.

This division contributed significantly to group turnover, however, it has been negatively impacted by the
depressed construction industry in which margins remain subdued.

Aggregates and quarries

Buildmax Aggregates and Quarries ("BAQ"), through its ownership of the Crushco quarry, Alfa & Witdeep
Sand and Stone, delivers aggregates, bulk transportation and retail services of selected building materials.
This division is also making significant strides into the contract crushing and screening industry by investing
in mobile crushing and screening equipment.

BAQ have performed above expectations and short to medium term prospects are promising.

Property, plant and equipment

The improved financial position, coupled with the support of the banks, has enabled the company to
replace plant, where appropriate, on a consistent basis. A positive consequence of the replacement policy,
implemented during 2011, has resulted in excess of 95% of plant having operated for less than 20,000 hours
(this represents 98% of book value).

Management reviewed the current remaining economic useful lives and residual values of all items of plant and
equipment. The following was considered:

- replacement value                                     - reliable availability of spare parts
- market value                                          - maintenance history
- local and international demand                        - operational application
- OEM support and their value perspective               - value in use

A positive consequence of the replacement and maintenance strategy is that the useful lives of various plant
categories now range from 8,000 to 36,000 hours depending on the category and brand of the plant item.

Working capital

Due to the nature of the Group's conservative asset based funding methodology and environment, it is
anticipated that in the foreseeable future, we will reflect a net current liability position. Plant and equipment is
funded over a three year period with no residual values. Generally, deposits are not paid on mining equipment
and 50% of the capital obligation is settled in the first year with the balance over the remaining two years

Sustainability

The board and executive leadership team remain committed to building a sustainable business that takes into
account the economic, social and environmental impacts on the communities in which the Group operates.
This commitment to sustainable development is driven at a group level, endorsed and measured by the board,
and implemented across the operations. The chairman and directors, through their involvement on various
board committees, are accountable for group sustainability performance.

The Buildmax Group is committed to conducting its operational activities in an environmentally responsible
and sustainable manner within its scope of control.

Transformation

It is our vision to make Buildmax Group a home for all South Africans, where there are no divisions or
boundaries and where no-one feels excluded. A successful BEE transaction was concluded which, together
with a focus on all code categories, resulted in Diesel Power South Africa obtaining a Level 4 rating and being
able to achieve an effective shareholding in excess of 25% in terms of the Codes of Good Practice and the
Mining Charter.

Governance

The recently published integrated report outlines how the Group is progressing with its journey to apply the
principles set out in the King Report on Governance for South Africa, 2009. The Buildmax Group complies with
the Companies Act, 71 of 2008 and the Listings Requirements of the JSE Limited.

Outlook and prospects

There are promising mining and civils opportunities in other African countries where investor-friendly conditions
prevail. According to Mining IQ Projects (February 2013) there are a total of 914 open cast mining projects in
exploration, grassroots, prefeasibility, feasibility and bankable phase of execution within the African continent.

We are fortunate to have meaningful, value-adding and service orientated contractual relationships with most
of the leading mining groups in the country. The propensity to outsource remains buoyant and our aim is to
continue to grow these customers' focused strategic alliances.

One of the most significant risks in the industry is labour uncertainty and the looming expectation gap between
unions' increasing demands and the ability by companies to meet these requests. To mitigate against this risk,
good communication is imperative and we are pleased to have signed a five-year wage agreement with our
recognised union.

Dividend

No interim dividend has been declared.

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 confidence in
the sustainability of the Group and its strong underlying businesses.

On behalf of the board

Colin Wood	    Terry Bantock       Christie Els
Chairman	    CEO                 CFO
  
Johannesburg
7 November 2013


Condensed consolidated statement of financial position

                                                                     Reviewed      Reviewed       Audited   
                                                                    31 August     31 August   28 February   
                                                                         2013          2012          2013   
                                                                        R'000         R'000         R'000   
ASSETS                                                                                             
Non-current assets                                                                                 
Property, plant and equipment                                         930 859       929 938       872 592   
Goodwill and other Intangible assets                                   83 731        89 639        86 688   
Environmental guarantee investment                                        940           393         1 002   
Other noncurrent assets                                                1 323                      1 580   
Deferred taxation                                                      26 503        19 094        20 607   
                                                                    1 043 356     1 039 064       982 469   
Current assets                                                                                     
Inventories                                                            28 758        23 348        26 074   
Trade and other receivables                                           201 817       195 623       168 177   
Taxation receivable                                                       184           421         1 477   
Bank and cash balances                                                 69 040        54 647        67 837   
                                                                      299 799       274 039       263 565   
Total assets                                                        1 343 155     1 321 000     1 246 034   
EQUITY AND LIABILITIES                                                                             
Share capital and premium                                           1 994 196     2 023 206     1 994 196   
Foreign currency translation reserve                                    2 297                             
Share-based payment reserve                                            14 376         4 700         8 815   
Accumulated loss                                                  (1 383 794)   (1 450 962)   (1 417 154)   
Attributable to equity holders of the company                         627 075       576 944       585 857   
Outside shareholders' interests                                       (7 158)       (7 025)       (7 105)   
Total shareholders' interests                                         619 917       569 919       578 752   
Non-current liabilities                                                                            
Interest-bearing liabilities                                          177 667       247 727       181 418   
Provisions                                                                886                        886   
Deferred taxation                                                      73 471        55 069        68 754   
                                                                      252 024       302 796       251 058   
Current liabilities                                                                                
Interestbearing liabilities                                          236 615       258 272       214 789   
Trade and other payables                                              224 607       188 584       198 130   
Provisions                                                              1 066         1 429                
Taxation payable                                                        8 926                      1 035   
Bank overdrafts                                                                                   2 270   
                                                                      471 214       448 285       416 224   
Total equity and liabilities                                        1 343 155     1 321 000     1 246 034   
Shares in issue at end of period                                      180 910       181 301       181 250   
Net asset value per share (cents)                                       346.6         318.2         323.2   
Net asset value (excluding goodwill per share) (cents)                  331.6         303.3         308.3   
Tangible net asset value per share (cents)                              309.1         278.4         284.6   


Condensed consolidated statement of comprehensive income

                                                                     Reviewed      Reviewed       Audited   
                                                                   Six months    Six months          Year   
                                                                        ended         ended         ended   
                                                                    31 August     31 August   28 February   
                                                                         2013          2012          2013   
                                                                        R'000         R'000         R'000   
Revenue                                                               687 062       656 167     1 186 428   
Operating profit before depreciation and amortisation ("EBITDA")      136 293       131 978       246 814   
Depreciation                                                         (74 537)      (85 068)     (141 507)   
Operating profit before amortisation                                   61 756        46 910       105 307   
Amortisation of intangible assets                                     (2 954)       (2 954)       (5 908)   
Operating profit                                                       58 802        43 956        99 399   
Profit on disposal of business                                                                    1 100   
Profit before interest and taxation ("PBIT")                           58 802        43 956       100 499   
Net interest paid                                                    (17 431)      (17 891)      (35 646)   
Interest paid                                                        (17 714)      (19 615)      (38 453)   
Interest received                                                         283         1 724         2 807   
Profit before taxation ("PBT")                                         41 371        26 065        64 853   
Taxation                                                              (8 064)       (8 146)      (13 206)   
Profit for the period ("PAT")                                          33 307        17 919        51 647   
Other comprehensive items for the period                                                                   
Foreign currency translation reserve                                    2 297                             
Recycled portion of cash flow reserve                                                  399           399   
Effective portion raised on cash flow hedge                                           (10)          (10)   
Taxation                                                                             (109)         (109)   
Total comprehensive profit for the period                              35 604        18 199        51 927   
Profit for the period attributable to:                                                                     
Equity holders of the Company                                          33 360        17 901        51 709   
Outside shareholders' interests                                          (53)            18          (62)   
                                                                       33 307        17 919        51 647   
Total comprehensive profit for the period attributable to:                                                 
Equity holders of the Company                                          35 657        18 181        51 989   
Outside shareholders' interests                                          (53)            18          (62)   
                                                                       35 604        18 199        51 927   


Reconciliation of headline earnings                                                                      
                                                                     Reviewed      Reviewed       Audited   
                                                                   Six months    Six months          Year   
                                                                        ended         ended         ended   
                                                                    31 August     31 August   28 February   
                                                                         2013          2012          2013   
                                                                        R'000         R'000         R'000   
Profit for the period attributable to shareholders of Buildmax         33 360        17 901        51 709   
Less profit on disposal of business                                                             (1 100)   
Add back loss on disposal of property, plant and equipment              3 221            69         1 231   
 Gross                                                                 4 473            96         1 709   
 Taxation                                                            (1 252)          (27)         (478)   
Headline earnings attributable to ordinary shareholders                36 581        17 970        51 840   


Supplementary information                                                                                
earnings per share                                                                                       
                                                                     Reviewed      Reviewed       Audited   
                                                                   Six months    Six months          Year   
                                                                        ended         ended         ended   
                                                                    31 August     31 August   28 February   
                                                                         2013          2012          2013   
                                                                        cents         cents         cents   
Headline earnings per share ("HEPS") (cents)                            20.22          9.91         28.60   
Basic earnings per share (cents)                                        18.44          9.87         28.53   
Shares in issue ('000)                                                                                   
 at end of the period                                                180 910       181 301       181 250   
 weighted                                                            180 910       181 301       181 250   


Condensed consolidated statement of cash flows

                                                                     Reviewed      Reviewed       Audited   
                                                                   Six months    Six months          Year   
                                                                        ended         ended         ended   
                                                                    31 August     31 August   28 February   
                                                                         2013          2012          2013   
                                                                        R'000         R'000         R'000   
Operating activities                                                                                
Profit before taxation                                                 41 371        26 065        64 853   
Working capital movement                                              (9 847)      (47 333)       (2 138)   
Other non-cash flow items                                              91 830        92 703       154 838   
Net interest paid                                                      17 431        17 891        35 646   
Cash generated from operations                                        140 785        89 326       253 199   
Net interest paid in cash                                            (17 431)      (17 891)      (35 646)   
Taxation received/(paid)                                                  259         4 212         2 791   
Cash generated from operating activities                              123 613        75 647       220 344   
Investing activities                                                                                
Purchase of property, plant and equipment                                                           
 Expanding operations                                                                (69)                
 Maintaining operations                                            (155 819)     (334 132)     (400 031)   
Environmental guarantee investment                                      (245)            29         (580)   
Mine stripping asset                                                     (43)                    (1 580)   
Proceeds on disposal of businesses                                                                1 100   
Proceeds on disposal of property, plant and equipment                  18 544        22 850        94 779   
Net cash utilised by investing activities                           (137 563)     (311 322)     (306 312)   
Financing activities                                                                                
Repurchase of issued shares                                                                    (29 010)   
Vendor loans repaid                                                                  1 024                
Interest-bearing liabilities raised                                   155 472       287 541       402 170   
Interest-bearing liabilities repaid                                 (138 049)     (107 023)     (330 405)   
Net cash flows generated from financing activities                     17 423       181 542        42 755   
Net increase/(decrease) in cash and cash equivalents                    3 473      (54 133)      (43 213)   
Cash and cash equivalents at the beginning  of the period              65 567       108 780       108 780   
Cash and cash equivalents at the end of the period                     69 040        54 647        65 567   


Condensed consolidated statement of changes in equity

Other components of equity

                                                  Other components of equity
                                                                                                        Attributable
                                      Share         Foreign         Cash         Share-                    to equity      Outside
                                    capital        currency         flow          based        Accumu-       holders       share-       Total
                                        and     translation      hedging        payment          lated        of the     holders'      share-
                                    premium         reserve      reserve        reserve           loss       company     interest    holders'
                                      R'000           R'000        R'000          R'000          R'000         R'000        R'000    interest
Balances as at
28 February 2012                  2 023 206                       (280)                  (1 468 863)       554 063      (7 043)     547 020
Share-based payment reserve:
 IFRS2 share-based payment
 reserve cost                                                                  4 700                       4 700                   4 700
Total comprehensive profit
for the period                                                     280                       17 901        18 181           18      18 199
Balances as at  
31 August 2012                    2 023 206                                     4 700    (1 450 962)       576 944      (7 025)     569 919
Share repurchase allocated to:
 Share capital                     (1 934)                                                              (1 934)                 (1 934)
 Share premium                    (27 076)                                                             (27 076)                (27 076)
Share-based payment reserve:
 IFRS2 share-based payment
 reserve cost                                                                  4 115                       4 115                   4 115
Total comprehensive profit
for the period                                                                              33 808        33 808         (80)      33 728
Balances as at
28 February 2013                  1 994 196                                     8 815    (1 417 154)       585 857      (7 105)     578 752
Share-based payment reserve:
 IFRS2 share-based payment
 reserve cost                                                                  4 366                       4 366                   4 366
 BEE IFRS2 costs                                        -                      1 195                       1 195                   1 195
Total comprehensive profit 
for the period                                       2 297                                   33 360        35 657         (53)      35 604
Balances as at
31 August 2013                    1 994 196           2 297                     14 376    (1 383 794)       627 075      (7 158)     619 917


Condensed segmental analysis                                                            
                                                 Reviewed     Reviewed       Audited   
                                               Six months   Six months          Year   
                                                    ended        ended         ended   
                                                31 August    31 August   28 February   
                                                     2013         2012          2013   
                                                    R'000        R'000         R'000   
EXTERNAL REVENUE                                                                       
Total mining services                             488 301      491 620       898 357   
Civils and earthworks                             121 836       78 799       162 792   
Aggregates and quarries                            76 925       85 748       125 279   
                                                  687 062      656 167     1 186 428   
INTERSEGMENT REVENUE                                                                   
Mining services  Diesel Power                      1 680        1 076         4 252   
Mining services  Equipment sales and rental        7 309       12 850        22 315   
Total mining services                               8 989       13 926        26 567   
Aggregates and quarries                            12 120        4 090        10 483   
                                                   21 109       18 016        37 050   
EBITDA                                                                                 
Mining services  Diesel Power                    130 493      127 319       237 677   
Mining services  Equipment sales and rental        3 045        4 154         6 778   
Total mining services                             133 538      131 473       244 455   
Civils and earthworks                             (5 221)        2 376         5 490   
Aggregates and quarries                            12 040        9 299         9 919   
Corporate head office                             (4 064)     (11 170)      (13 050)   
                                                  136 293      131 978       246 814   
OPERATING PROFIT/(LOSS) BEFORE AMORTISATION                                            
Mining services  Diesel Power                     61 504       50 943       110 834   
Mining services  Equipment sales and rental        2 695        3 113         5 346   
Total mining services                              64 199       54 056       116 180   
Civils and earthworks                             (5 221)        2 376         5 485   
Aggregates and quarries                             6 882        1 697       (3 308)   
Corporate head office                             (4 104)     (11 219)      (13 050)   
                                                   61 756       46 910       105 307   


Notes to the reviewed group interim financial results
for the six-month period ended 31 August 2013

This interim report should be read in conjunction with the Buildmax Group 2013 integrated report which is
available at www.buildmax.co.za.

Approval of the interim financial results

The reviewed interim financial results have been prepared in accordance with International Financial Reporting
Standards, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, 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 28 February 2013, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board
(IASB). The reviewed group interim financial results have been prepared on the historical cost basis.

This report was compiled under the supervision of Mr CS Els, Chief Financial Officer. These results were
reviewed by Grant Thornton (Jhb) Inc and the unmodified review opinion is available for inspection at the
registered office of the Company.

The interim financial results have 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 7 November 2013.

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 and contractual guarantees 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.

DIRECTORS                             Registered office
Executive                             515 Pretoria Road, Fairleads, Benoni
TP Bantock (CEO)                      (Postnet Suite 435
CS Els (CFO)                          Private Bag X108 Centurion, 0046)
J Mathebula

Independent non-executive directors   Sponsor
CJM Wood (Chairman)                   QuestCo (Pty) Limited, 2nd Floor
CB Brayshaw                           No 1 Montecasino Blvd, Fourways, 2055
MD Lamola                             South Africa
MW McCulloch                          (PO Box 98956, Sloane Park, 2152
                                      South Africa)

Non-executive directors               Auditors
DJ Mack                               Grant Thornton (Jhb) Inc
BT Ngcuka 
G Montgomery                          Transfer secretaries
                                      Computershare Investor Services (Pty) Limited
                                      70 Marshall Street
Company secretary                     Johannesburg, 2001
GH Miller                             (PO Box 61763, Marshalltown, 2107)




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