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Trading and operational update
RBA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/009701/06)
(JSE code: RBA ISIN: ZAE000104154)
(“RBA” or the “Company”)
Trading and Operational Update
RBA is issuing this Trading Update in terms of section 3.4(b) of the JSE Listings Requirements to: provide more detail
of the performance of the Company in the last quarter of 2013; give shareholders an indication of the Company’s
expected performance in 2014 during which period the Company expects to cement the turnaround that began with
the appointment of the new board in September 2012; and to give shareholders an indication of some of the key
actions that are being taken to ensure the future growth and sustainability of the Company.
Performance in the Second Half of 2013
In September 2013, as part of the RBA’s interim results release, the Company indicated that it expected to return to
profitability in the second half of 2013. At that time it was anticipated that construction would begin on three new
housing development projects (“project(s)”), in the latter part of the year. These projects were expected to account for
half of the Company’s revenue in the last quarter. However, all three projects only became registrable (i.e. the
Company could begin generating revenue from houses under construction on these sites) in December 2013. In the
case of the Lehae and Protea Glen projects this was due to unexpected delays in the council approval processes that
were largely beyond RBA’s control. In the case of the Kirkney project this was due to poor quality installation of
services by the subcontractor responsible for installing services on site. This meant that the Company was forced to
stop production on the Lehae and Protea Glen projects and although production continued on the Kirkney project, the
Company was unable to receive revenue on the houses that were under construction. This, in turn, constrained the
Company’s cash flow and slowed down production across the group.
As a result of the delays in these projects; increases in raw material costs that could not be passed on to consumers;
and input costs incurred on the above projects prior to the realisation of revenue from these projects the Company did
not return to profitability in the second half of 2013 as expected and RBA now anticipates to make a EPS and HEPS
loss of between 1.3 and 2.7 cents per share for the second half of 2013.
Trading Update
The company is in the process of finalising its annual results for the year ended 31 December 2013 and RBA advises
shareholders of the following:
- the loss is expected to be between 4.20 and 5.20 cents per share compared to a loss of 2.35 cents per share for
the comparable period;
- the headline loss is expected to be between 4.20 and 5.20 cents per share compared to headline loss of 0.88
cents per share for the comparable period.
The financial information on which this trading statement is based has not been reviewed or reported on by the
company`s auditors. The results for the twelve month period ended 31 December 2013 are expected to be released
before the end of March 2014
Prospects for 2014
The Company expects that the losses incurred in 2013 will not be repeated in 2014, for the following reasons:
1. Demand for affordable housing remains high
Sales performance has improved dramatically over the course of 2013 with sales levels in the second half growing by
34%. Tellingly, in October 2013 the Company had the highest levels of sales in any month since August 2006. These
improved sales will, however, only be reflected in the 2014 turnover figures.
This improved sales performance has been supported by:
* Restructuring of the sales and marketing division;
* More competitive pricing of the Company’s product offering;
* Improved marketing and sales strategies aimed at its target market through radio advertising campaigns, its
call centre and a new sales website;
* More projects available for sale; and
* Increased credit appetite from banks with the Company now having six banks willing to grant 100% loans to
clients compared to two banks at the start of 2013.
2. Construction system beginning to deliver results
In June/July 2013 RBA piloted a new construction management system in the Bram Fischerville project where it was
able to achieve considerably faster construction times - reducing these from around four to five months to around two
months while also achieving improved consistency in terms of delivery times and quality. This new system was rolled
out to all of the Company’s larger projects in the latter part of the year and early 2014 and it is expected to boost
construction performance markedly as it will be bedded down across the group during the first half of this year.
3. Land availability has improved and downside risks reduced
It is in the nature of the land development industry that delays can and will occur despite efforts to prevent these or
minimise the effects of these. Thus, the board has determined that beyond ensuring that there are effective project
management systems in place, the most effective way to mitigate these risks is to have more projects under way at
all times. This would limit the financial effect of delays that may occur on any particular project as happened in 2013.
In order to achieve this the Company has focused on building a larger and better quality land pipeline:
? 2014 has begun with the Company having five projects (Southern Gateway, Kirkney, Orchards, Lehae and Bram
Fischerville projects) and expects to add three more projects during the course of the year: Devland and
Atteridgeville projects where installation of services has already begun and a further project in Protea Glen.
? This is in contrast to the position in 2013 where the Company began the year with only two projects and the
expectation that five additional projects would be added at various times through 2013 - in the end only one
additional project was added by year end.
Although land availability will continue to be a key constraint on the businesses performance in 2014 the land that is
already serviced and available and expected to be available will allow the business to operate at well above break
even levels for the first time since 2007.
Medium and Long Term Prospects
RBA’s new board was appointed in late 2012 and during 2013 it became evident that the Company’s stock of
available serviced land for sale was insufficient. As a result, the Company has embarked on a programme to improve
its land bank through building stronger business partnerships with existing landowners who do not have RBA’s land
development, sales or construction capabilities. The positive results of these activities do take time to achieve but the
projected available opportunities pipeline has already improved since the beginning of 2013 as per the tables below.
Land Bank Position at the Beginning of 2013 - Freehold houses
Opening Expected to be Total Available Expected to be Remaining Balance Total
Serviced Serviced in in 2013 Available in Expected after
Stands 2013 2014 2014
Secured* 370 478 848 462 200 1 510
Prospect** - 535 535 630 4 530 5 695
Total 370 1 013 1 383 1 092 4 730 7 205
Land Bank Position at the Beginning of 2014 - Freehold houses
Opening Expected to be Total Available Expected to be Remaining Balance Total
Serviced Serviced in in 2014 Available in Expected after
Stands 2014 2015 2015
Secured* 662 1 178 1 840 784 1 296 3 920
Prospect** - 250 250 1 650 6 138 8 038
Total 662 1 428 2 090 2 434 7 435 11 958
* Opportunities are reflected as secured opportunities where the Company directly or indirectly owns the land or in
the case of external land developers an allocation agreement has already been entered into with a land owner.
** Opportunities are reflected as prospects where negotiations are already underway and an agreement is expected
to be reached with the current land owner within a period of approximately six months or where an agreement has
already been finalised but finance has not yet been secured but is expected to be secured within approximately six
months.
The Company’s analysis of the current land bank position is that the risk of underperformance due to a lack of
available land is already considerably lower than in 2013 and that this risk is set to continue decreasing in the future.
In addition to the above opportunities the Company also increased its total sectional title unit opportunities from 1900
to 3452 opportunities during 2013. However, in this market the current constraint is not land availability but rather
securing finance and offtake agreements with institutional investors and funders. The Company is making good
progress in this area but only expects this side of the business to start making a more notable contribution to results
in 2015.
Raising Additional Equity to Support Liquidity and Growth
With the Company now finally positioned for growth the directors have determined that in order to ensure that the
business has sufficient cash resources to support this growth the Company will be raising additional equity. This
additional equity is intended to be deployed to improve the liquidity position of the business to support growth, further
reduce short term debt, improve skill levels in the organisation and implement an ERP system to support the
business’s improved operating systems and growth.
Johannesburg
12 February 2014
Designated Adviser: Exchange Sponsors
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