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Unaudited interim results for the six month period ended 30 June 2014
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”, "the Group" or “the Company”)
Unaudited interim results for the six month period ended 30 June 2014
The Directors present the unaudited condensed consolidated interim results
for the six months ended 30 June 2014 (“the period”).
Summary of business prospects
In line with the turnaround strategy adopted in September 2012, over the
past two years the Company has increased the number of serviced stands
available for sale, improved its project pipeline, increased its construction
capacity and is achieving record levels of sales performance. With these
building blocks in place the major constraint currently preventing the
Company from sustainably operating at levels above breakeven is further
working capital finance.
In order to decisively address working capital constraints and improve the
Company’s balance sheet position, that has come under pressure as a result
of cumulative losses in recent years, RBA plans to complete a transaction to
recapitalise the business during the fourth quarter of 2014.
Shareholders are referred to the SENS announcement released by the Company
on 22 September 2014 advising that the Company has been in discussions
with a strategic investment partner in this regard.
Company overview
Established in 1997, RBA is a supplier of affordable homes in South
Africa. The Company’s business model encompasses the complete property
development process viz. the acquisition of land, town planning, project
management of services installation, marketing, sale and construction of
quality affordable homes.
Key operational activity indicators for the six month period ended
30 June 2014
The Company’s stock of available serviced land continued to improve in
line with expectations. As a result, the active project pipeline is now
sufficient to allow the Company to operate at above break even levels of
production.
In addition, sales levels continued to improve with an average of 76 bank
approvals per month for the first 6 months of the year and average bank
approval levels from July 2014 in excess of 100 per month.
This has resulted in a pipeline of approved sales not yet under construction
at period end of 340 deals compared to 147 at the end of June 2013.
However, this pipeline could not be fully exploited during the first half
of 2014 due to working capital constraints that negatively affected
production. This was the major factor that gave rise to a loss of R21,9
million for the first half of 2014 (2013 – loss of R11,0 million).
Working capital constraints were most acute in the first quarter resulting
in the Company only starting construction on 119 new houses in the first
quarter versus 225 houses during the second quarter of 2014 and handing
over 136 completed houses during the first quarter versus completing 198
houses during the second quarter of 2014. This improvement in the second
quarter was a direct result of improved liquidity during the second
quarter as a result of the successful conclusion of a R31,2 million loan,
debenture subscription and share option transaction where the Company
received R23,7 million during the second quarter with the balance of R7,5
million being received during July 2014.
Unaudited condensed consolidated interim results
Consolidated Statement of Financial Position
30-Jun-14 30-Jun-13 31-Dec-13
R’000 R’000 R’000
Assets
Non-Current Assets 164,149 133,704 161,163
Investment property 10,731 11,431 10,731
Investment property - Rental
Portfolio 107,013 74,881 108,130
Property, plant and
equipment 1,832 1,879 1,309
Goodwill - 1,530 -
Investment in associate 639 - 639
Stands held for trading 11,831 15,921 11,826
Deferred tax 32,103 24,095 28,528
Deposits for land and stand
allocations - 3,967 -
Available for Sale - 35,705 -
Investment property – Rental
portfolio - 35,705 -
Current Assets 134,241 103,639 101,209
Inventories 1,879 859 2,132
Stands held for trading 89,274 67,785 66,948
Revenue recognition in
excess of billings 20,641 7,659 12,675
Trade and other receivables 15,515 21,274 12,396
Deposits for land and stand
allocations 3,387 3,459 3,305
Cash and cash equivalents 3,545 2,603 3,753
Total Assets 298,390 273,048 262,372
Equity and Liabilities
Equity 16,584 57,937 38,544
Share capital 61,470 57,566 61,470
Reserves 2,768 - 2,768
Retained income (45,941) (2,416) (26,042)
Non-controlling interest (1,713) 2,787 348
Liabilities
Non-Current Liabilities 165,565 116,957 142,485
Financial liabilities 93,560 60,744 68.453
Financial liabilities -
Rental Portfolio 66,150 49,879 67,926
Finance lease obligation 410 889 661
Deferred tax 5,445 5,445 5,445
Available for Sale - 19,752 -
Financial liabilities –
Rental Portfolio - 19,752 -
Current Liabilities 116,241 78,402 81,343
Other financial liabilities 22,809 18,952 15,113
Other financial liabilities
– Rental Portfolio 1,690 - 1,648
Loan to be converted to
Debentures 23,726 - -
Current tax payable 1,545 1,550 1,098
Finance lease obligation 237 300 268
Trade and other payables 61,119 51,223 53,856
Construction contracts in
progress 383 127 520
Loans from directors - - 985
Bank overdraft 4,732 6,250 7,855
Total Equity and Liabilities 298,390 273,048 262,372
Shares in issue – Excl share
incentive scheme 599,182,577 560,115,176 599,182,577
Net asset value per share
(cents) 2.77 10.34 6.43
Net tangible asset value per
share (cents) 2.77 10.07 6.43
Consolidated Statement of Comprehensive Income
6 months 6 months 12 months
30-Jun-14 30-Jun-13 31-Dec-13
R’000 R’000 R’000
Revenue 94,891 133,067 198,116
Cost of sales (80,525) (103,932) (154,001)
Gross profit 14,366 29,135 44,115
Other income 62 144 1,023
Profit on disposal of sectional
title units through disposal of
a business - - 2,442
Operating expenses (31,514) (36,942) (75,814)
Operating (loss)/profit (17,086) (7,663) (28,234)
Investment revenue 3 38 44
Impairment of Goodwill - - (1,530)
Profit on sale of non-current assets (288) 5,211 4,335
Fair value adjustments - (4,588) (2,000)
Share of Profit on Associate - - 638
Profit on disposal of Business - - (71)
Finance costs (7,923) (7,817) (16,318)
Loss before taxation (25,294) (14,819) (43,136)
Taxation 3,333 3,744 8,291
Total comprehensive(loss)/profit (21,961) (11,075) (34,845)
(Loss)/profit attributable to:
Owners of the company (19,900) (11,233) (33,670)
Non-controlling interest (2,061) 158 (1,175)
(21,961) (11,075) (34,845)
Reconciliation of headline
earnings/(loss)
Profit/(loss) attributable to
ordinary shareholders (19,900) (11,233) (33,670)
Loss on disposal of property,
plant and equipment 288 (5,211) (4,335)
Profit on disposal of business - - 71
Profit on disposal of sectional
title units through disposal
of business - - (2,442)
Fair value adjustment in associate - - (180)
Impairment of goodwill - - 1,530
Fair value adjustment of
investment property - 4,588 2,000
Tax affect - - 911
Headline (loss)/profit to ordinary
shareholders (19,612) (11,856) (36,115)
Basic earnings/(loss) per share
(cents) (3.32) (2.53) (6.43)
Headline earnings/(loss) per share
(cents) (3.27) (2.68) (6.90)
Consolidated Statement of Cash Flows
6 months 6 months 12 months
30 Jun 2014 30 Jun 2013 31 Dec 2013
R’000 R’000 R’000
Cash flows from operating
activities (53,826) 5,683 (45,798)
Cash (used in)/generated
from operations (45,905) 13,462 (31,796)
Interest received 3 38 44
Interest paid (7,924) (7,817) (14,046)
Cash flows from investing
activities 431 17,294 63,907
Purchase of property, plant
and equipment (1,076) (215) (307)
Proceeds on disposal of
Investment Property – Rental
Portfolio held as available
for sale - - 45,510
Sale of property, plant &
equipment 291 17,509 17,594
Sale of investment property 1,216 - 960
Proceeds on sale of business - - 150
Cash flows from financing
activities 56,309 (24,531) (20,118)
Proceeds on share issue - 10,590 13,219
Loans (repaid)/raised 56,340 (35,102) (33,907)
Loans from directors - (34) 950
Movements in finance lease
obligations (31) 15 (380)
Cash flows for the period 2,914 (1,554) (2,009)
Cash and cash equivalents
at beginning of period (4,102) (2,093) (2,093)
Cash and cash equivalents
at end of period (1,188) (3,647) (4,102)
Consolidated Segmental Report
Property Development
30-Jun-14 30-Jun-13 31-Dec-13
R’000 R’000 R’000
Revenue 89,107 127,363 186,443
Cost of Sales (80,525) (103,932) (154,001)
Gross Profit 8,582 23,431 32,442
Operating Expenses (28,921) (33,951) (69,995)
(Loss)/Profit on
sale of non-current assets (36) 5,211 4,335
Impairment of Goodwill - - (1,530)
Fair vale - - -
Finance cost (4,539) (4,500) (9,630)
(Loss)/Profit before tax (24,849) (9,627) (40,303)
Total assets 188,979 195,860 150,727
Total liabilities 208,922 159,579 148,481
Rental Portfolio
30-Jun-14 30-Jun-13 31-Dec-13
R’000 R’000 R’000
Revenue 5,784 5,704 11,673
Cost of Sales - - -
Gross Profit 5,784 5,704 11,673
Operating Expenses (2,593) (2,991) (5,819)
(Loss)/Profit on sale of
non-current assets (252) - -
Impairment of Goodwill - -
Fair vale - (4,588) (2,000)
Finance cost (3,384) (3,317) (6,688)
(Loss)/Profit before tax (445) (5,192) (2,833)
Total assets 109,411 77,188 111,645
Total liabilities 72,884 55,532 75,347
Consolidated
30-Jun-14 30-Jun-13 31-Dec-13
R’000 R’000 R’000
Revenue 94,891 133,067 198,116
Cost of Sales (80,525) (103,932) (154,001)
Gross Profit 14,366 29,135 44,115
Operating Expenses (31,514) (36,942) (75,814)
(Loss)/Profit on sale of
non-current assets (288) 5,211 4,335
Impairment of Goodwill - - (1,530)
Fair vale - (4,588) (2,000)
Finance cost (7,923) (7,817) (16,318)
(Loss)/Profit before tax (25,294) (14,819) (43,136)
Total assets 298,390 273,048 262,372
Total liabilities 281,806 215,111 223,828
Consolidated Statement of Changes in Equity
Revalu- Share
Share ation option
capital reserve reserve
R’000 R’000 R’000
Balance at 01 Jan 2013 46,976 2,543 -
Loss for the year - - -
Realisation of Reserve - (2,543)
Change in shareholding - - 2,885
Share option expense - - 858
Shares issued on cancellation
of share options 975 - (975)
Issue of shares 13,519 -
Change in shareholding - -
Balance at 01 Jan 2014 61,470 - 2,768
Loss for the year - -
Balance at 30 June 2014 61,470 - 2,768
Accum Minority
profit interest Total
R’000 R’000 R’000
Balance at 01 Jan 2013 7,664 1,239 58,422
Loss for the year (33,670) (1,175) (34,845)
Realisation of Reserve 2,543 - -
Change in shareholding (2,885) - -
Share option expense - - 858
Shares issued on cancellation of
share options - - -
Issue of shares - - 13,519
Change in shareholding 306 284 590
Balance at 01 Jan 2014 (26,042) 348 38,544
Loss for the year (19,900) (2,061) (21,961)
Balance at 30 June 2014 (45,941) (1,713) 16,584
Review of 2014 interim results
The Company has been building operational capacity to deliver on
anticipated growth whilst continuing to be conscious of costs as
reflected in the 15% decrease in operating costs to R31,5 million (2013 -
R36,9 million). At the same time the company increased investment and
staff in the Company’s construction division. As a result the Company was
operationally geared towards higher levels of houses being built during
the period. This is reflected in the fact that Cost of Sales includes
R26 million of direct fixed costs.
Total variable production costs over the period were R54,5 million giving
a contribution to overheads of R40,4 million and a variable cost margin of
42,6%.
However, despite this positive variable cost margin the business continued
to operate at below break even levels during the period due to poor
liquidity that significantly impacted raw material supply and production
output. Indicative of this is the fact that revenue was down 29% to R94,9
million (2013 - R133,0 million) due to the reduction in the number of
freehold houses built during the period despite improved serviced land
availability and sales.
This was the major contributing factor to the Company’s overall loss of
R21,9 million for the period (2013 – loss of R11,0 million).
The losses realised during the period together with cumulative losses
since the financial crisis of 2008 have had a significant negative impact
on the Company’s balance sheet with the Company’s net asset value being
reduced to R16,5 million at 30 June 2014 (30 June 2013 – R57,9 million).
Stands held for trading consist of land available for residential housing
development. In accordance with IFRS this inventory is not revalued to
market value. At 30 June 2014 its market value exceeded book value by
approximately R30 million. It is the view of the directors that this
factor should be taken into account when considering the equity position
of the Company.
Additional business indicators
Activity Indicators
As at As at As at
30-Jun-14 30-Jun-13 31-Dec-13
Completed houses handed over
to clients in the period 334 392 724
Individual houses under
construction at period end 197 139 210
Bank approved sales less
cancellations
during the period 461 341 805
Anticipated approved sales not
yet under construction at period
end 340 147 262
Human capital
At 30 June 2014 the workforce consisted of 203 permanent employees
(December 2013 – 178) and 458 (December 2013 – 493) construction staff
employed on a contract basis. In order to further reduce costs and improve
operational efficiencies the Company has reduced staff complements on our
construction sites by 150 staff in the third quarter resulting in a current
workforce of approximately 546 staff.
The board is committed to investing in staff training and ensuring it has
an appropriately skilled workforce to meet its future opportunities. In
this regard the Company launched an apprenticeship and learnership program
for 29 staff during the period.
Future prospects
High demand for affordable housing
The number of clients wanting to purchase freehold houses and applying for
home loans remains strong and the affordable housing market remains a
focal point of the major commercial banks.
Strategic initiatives
The strategic focus areas for the business identified by management are:
- Recapitalisation of the business and appropriate deployment of this
capital that will support anticipated growth and be value enhancing to
shareholders;
- Automation of business processes and roll out of an Enterprise Resource
Planning system that will support anticipated growth;
- Continuing to build an improved land bank/project pipeline to ensure
sufficient serviced stands are always available for sale and construction;
- Growing additional sources of revenue from clients through the sale of
financial service offerings e.g. homeowners’ cover, credit life policies
and home loan origination fees;
- Improving the Company’s BEE credentials; and
- Institutional sales of rental units.
Dividends
No interim dividend has been declared during the period.
Subsequent events
At a shareholders meeting held on 30 September 2014 the transaction to raise
R31,2 million through the issuing of debentures and the granting of share
options to Riskowitz Capital Management LLC, Protea Asset Management LLC,
Midbrook Lane (Pty) Ltd and Hillside International Holdings Limited was
formally approved by shareholders.
Basis of preparation
These consolidated condensed interim financial results 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 with those used in the annual
financial statements for the year ended 31 December 2013.
The financial statements have been prepared by Mr JL Mortimer (CA)SA and
were approved by the board on 30 September 2014.
These 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 during the year. We also
thank our suppliers, business partners, advisors, clients and shareholders
for their support and faith in the group.
By order of the Board
30 September 2014
L Mokhesi A J Rothman
Chairman Chief Executive Officer
Corporate information
Executive directors: A J Rothman, J L Mortimer, B A Stegmann, F S le Roux
Independent non-executive directors: L S Mokhesi (Chairman), K M Maroga.
Company Secretary: R Kleyn
Registration number: 1999/009701/06
Registered address: Nedbank Corner, Cnr Biccard & Jorissen Street,
Braamfontein, 2017
Postal address: PO Box 30885, Braamfontein, 2017
Telephone: 011 483 5000
Facsimile: 086 516 0873
Web address: www.rbaholdings.co.za
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Auditors: Logista CA (SA) Inc. Chartered Accountants and Registered
Auditors
Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd
Date: 30/09/2014 05:16:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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