Wrap Text
Reviewed condensed provisional results for the year ended 31 December 2014
RBA Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1999/009701/06)
Share Code: RBA ISIN Code: ZAE000199642
RBA Holdings Limited
(“RBA” or “the company”)
Reviewed condensed provisional results for the year ended
31 December 2014
Headlines
- The business operated under severe liquidity constraints for most of
2014 that limited the ability of the business to achieve above break
even levels of production. This resulted in a large operating loss of
R49 million (2013 - R 28 million operating loss). This includes one-off
write downs of R9 million;
- Despite these difficulties the company made significant progress in
increasing the number of serviced stands available for sale;
improving the business’s development pipeline; building additional
construction capacity and achieving better sales and marketing
performance;
- In November, the company secured R156 million in funding in the form
of an equity recapitalisation of R86 million and a working capital
facility of R70 million;
- As a result of the improved fundamentals and also the improved
liquidity position of the business the company is now well positioned
to return to profitability in 2015.
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 and
the sale and construction of quality affordable homes.
After listing in 2007 the company geared up, both financially and
also operationally, for growth based on its performance at the time.
The financial crisis of 2008 severely affected the ability of RBA’s
clients to secure mortgages to purchase homes and also resulted in a
very significant reduction in the availability of finance for the
development of land.
As a result of these circumstances and also the company’s response to
the crisis the company’s position steadily weakened until the end of
2012 when the board was restructured and the company adopted a
turnaround strategy for the business. Having considered various
options, including: scaling back the business to dramatically reduced
overheads and possibly delisting the business, the company decided to
aggressively grow the business instead.
In order to do this the company invested significant resources in
building its sales and marketing capability and also improving its
construction capacity to deal with the expected growth in the
business.
However, the company underestimated the difficulties it would
experience in 2013 and 2014 in securing the required serviced stands
needed for growth and also in understanding the increased working
capital intensity of the business as a result of the company expanding
its own construction capabilities and the growth in the number of houses
being built for clients on a turnkey basis as opposed to being build with
a building loan i.e. where the company had to fund the construction of
houses entirely out of its own resources.
This culminated in a situation where, by the second half of 2014, the
company had sales and construction capacity to operate above break
even but did not have sufficient working capital to do so. The
company’s balance sheet was also under severe strain due to the cumulative
effect of losses since 2008. In order to improve the company’s balance sheet
and liquidity position the company raised funds through various mechanisms
in 2014 including two convertible debenture issues and finally through a
significant transaction to recapitalise the business in November 2014.
Recapitalisation transaction
The Company entered into an agreement with the Housing Impact Fund
South Africa (“HIFSA”), in terms of which HIFSA would subscribe for
550 million shares at 10 cents each in the share capital of RBA for
an amount of R55 million. The company received the R55 million in
November 2014 and the shares were issued in January 2015.
In addition, HIFSA has provided RBA with a R70 million facility for
the acquisition of land and the provision of working capital for the
construction of houses.
HIFSA is a R9,15 billion fund created and managed by Old Mutual
Alternative Investments (Pty) Limited (“Old Mutual”) that invests in
all forms of housing related investments in the affordable housing
market, including physical development, ownership of rental stock and
end-user finance.
HIFSA, via its various investments, thus has significant land
holdings and is a key provider of development finance in the
affordable housing market segment that RBA serves. RBA’s board believe
that the HIFSA investment in RBA will make a decisive impact on the
ability of RBA to expand its operations and thus make a significant
contribution to the delivery of houses in the affordable housing market.
In addition to HIFSA’s investment in RBA, existing debenture holders
also agreed to the early redemption of their debentures and they
subscribed for shares on 11 December 2014. This resulted in an
additional equity injection into the business of R31 million in
December 2014.
Business turnaround
In line with the turnaround and growth strategy adopted in September
2012, the Company has continued to increase the number of serviced stands
available for sale, improved its project pipeline, increased its
construction capacity and in 2014 recorded above break even levels of
sales and marketing performance. With these fundamentals increasingly
in place and with the improved liquidity position of the Company, the
Company is now well positioned to return to profitability in 2015 after
a number of years of poor performance and false starts beginning with
the financial crisis of 2008/9.
Detailed operational activity indicators are included below but
indicative of the turnaround in the business is the fact that the
number of sold houses in 2014 increased by 25% over 2013, that we have
opened 2015 with 490 houses for construction in our sales pipeline
(312 - 2014), we are constructing 15 houses per month on seven major
projects (four major projects - beginning of 2014), 255 start orders were
issued for the construction of houses from Jan - March 2015 (more than
double the 119 in the same period in 2014) and the land pipeline has
grown to a level where we expect to have 3949 serviced stands available
through 2015 (2090 - 2014). A further indication of the improved positioning
of the business is the fact that RBA has been contracted to construct
588 social housing rental units in Devland, Soweto, as part of the
company’s increasing focus on delivering turnkey rental projects to
institutional investors.
Key operational activity indicators for 2014
The Company’s pipeline of available serviced land continued to
improve and the Company’s project pipeline is now projected to be
sufficient to allow the Company to operate at above break even levels of
production in 2015 and 2016. The Company continues to build on the land
pipeline to support future growth.
Sales levels improved year on year with an average of 85 home loans
approved per month in 2014 versus 67 home loans approved in 2013. The
Company had a projected pipeline of sales not yet under construction
of 490 at 31 December 2014.
The Company has sufficient construction capacity to deliver on
anticipated production levels. The company has established
construction teams that consist of full time employees on most of its
construction sites. Construction staff are employed on this basis
rather than using sub-contractors to ensure better quality of
workmanship and on-time delivery of houses to clients.
Auditors review report
The condensed provisional financial information for the year ended
31 December 2014 has been reviewed by the Company’s auditors, Logista CA
(SA) Incorporated. The review was conducted in accordance with ISRE
2410 Review of Interim Financial Information performed by the Independent
Auditor of the Entity. The auditor’s unmodified review report does not
necessarily cover all the information in this announcement. Shareholders
are therefore advised that in order to obtain a full understanding of the
nature of the auditors work they should obtain a copy of that report together
with the accompanying financial information from the registered office of
the company. Any reference to future financial performance included in this
announcement has not been reviewed or reported on by the company’s
auditors.
Reviewed condensed provisional results
The reviewed condensed provisional annual results for the year ending
31 December 2014 are presented below.
Condensed Consolidated Statement of Financial Position
31-Dec-14 31-Dec-13
Reviewed Audited
R’000 R’000
Assets
Non-Current Assets 166,880 161,163
Investment property 12,346 10,731
Investment property - Rental Portfolio 93,879 108,130
Property, plant and equipment 1,490 1,309
Stands held for trading 9,640 11,826
Investment in joint ventures 32 -
Investment in associate 293 639
Loans to group companies 1,349 -
Deferred tax 47,851 28,528
Available for Sale 6,820 -
Investment property – Rental Portfolio 6,820 -
Current Assets 117,924 101,210
Inventories 3,173 2,132
Stands held for trading 75,651 66,948
Revenue recognition in excess of billings 7,777 12,675
Trade and other receivables 9,274 12,396
Deposits for land and stand allocations 2,399 3,305
Cash and cash equivalents 19,650 3,754
Total Assets 291,624 262,373
Equity and Liabilities
Equity 75,069 38,545
Share capital 98,669 61,470
Reserves 2,958 2,768
(Accumulated loss)/Retained income (78,141) (26,042)
Equity Loan (note 4) 55,000 -
Non-controlling interest (3,417) 349
Liabilities
Non-Current Liabilities 147,581 142,485
Financial liabilities 80,615 68,453
Financial liabilities - Rental Portfolio 61,224 67,926
Finance lease obligation 297 661
Deferred tax 5,445 5,445
Available for Sale 4,518 -
Financial liabilities – Rental Portfolio 4,518 -
Current Liabilities 64,456 81,343
Other financial liabilities 12,306 15,113
Financial liabilities - Rental Portfolio 881 1,648
Current tax payable 1,126 1,098
Finance lease obligation 248 268
Trade and other payables 46,376 54,841
Billings in excess of revenue recognition 337 520
Bank overdraft 3,182 7,855
Total Equity and Liabilities 291,624 262,373
Shares in issue (including HIFSA shares) 1,469,182,577 599,182,577
Total number of shares in issue 954,686,749 614,876,352
plus: HIFSA shares - pending issue 550,000,000 -
less: Share Incentive Scheme shares 35,504,172 15,693,775
Net asset value per share (cents) 5.11 6.43
Net tangible asset value per share (cents) 5.11 6.43
Condensed Consolidated Statement of Comprehensive Income
31-Dec-14 31-Dec-13
Reviewed Audited
Continuing operations R’000 R’000
Revenue 181,367 192,632
Cost of sales (157,662) (149,911)
Gross profit 23,705 42,721
Other income 5,079 1,009
Profit on disposal of sectional title units
through business combination - 2,442
Operating expenses (78,540) (74,646)
Operating (loss)/profit (49,756) (28,474)
Investment revenue 2 44
Impairment of Goodwill - (1,530)
Fair value adjustment (4,195) (2,000)
Share of (Loss)/Profit from Associate (313) 639
(Loss)/Profit on Business Combination - (71)
(Loss)/Profit on sale of non-current assets (1,865) 4,476
Finance costs (18,900) (16,247)
Loss before taxation (75,027) (43,163)
Taxation 19,162 8,290
Total comprehensive Loss - continuing operations (55,865) (34,873)
Discontinued operations
Total comprehensive Profit - discontinued operations - 28
Total comprehensive Loss for the year (55,865) (34,845)
Attributable to:
Equity holders of the parent (52,099) (33,669)
Non-controlling interest (3,766) (1,176)
(55,865) (34,845)
Weighted average number of shares in issue 658,141,481 523,713,423
Basic and diluted loss per share (cents) (7.92) (6.43)
Headline and diluted headline loss per
share (cents) (6.99) (6.90)
Condensed Consolidated Statement of Cash Flows
31 Dec 2014 31 Dec 2013
Reviewed Audited
R’000 R’000
Cash flows from operating activities (77,135) (45,798)
Cash generated from operations (62,135) (31,796)
Interest received 2 44
Interest paid (14,939) (14,046)
Taxation paid (63) -
Cash flows from investing activities 3,163 63,908
Proceeds on disposal of Investment Property –
Rental Portfolio held as available for sale - 45,511
Acquisition of property, plant and equipment (1,258) (307)
Proceeds on disposal of property, plant and
equipment 320 17,594
Loan to group company (1,349) -
Business combination - 150
Sale of investment property 5,450 960
Cash flows from financing activities 94,542 (20,119)
Proceeds on share issue 37,200 13,219
Equity loan 55,000 -
Loans raised/(repaid) 2,442 (32,497)
Loans from directors 284 (460)
Movements in finance lease obligations (384) (381)
Cash flows for the year 20,570 (2,009)
Cash and cash equivalents at beginning of year (4,102) (2,093)
Cash and cash equivalents at end of year 16,468 (4,102)
Condensed Consolidated Statement of Changes in Equity
Share
Share Reval option Accum
Capital reserve reserve profit
R’000 R’000 R’000 R’000
Balance at 01 Jan 2013 46,976 2,543 - 7,664
Loss for the year - - - (33,669)
Realisation of Reserve - (2,543) - 2,543
Change in shareholding - - 2,885 (2,885)
Share option expense - - 857 -
Share options cancelled 974 - (974) -
Issue of shares 13,520 - - -
Change in shareholding - - - 305
Balance at 01 Jan 2014 61,470 - 2,768 (26,042)
Loss for the year - - - (52,099)
Share option expense - - 190 -
Issue of shares 37,199 - - -
Equity Loan - - - -
Balance at 31 Dec 2014 98,669 - 2,958 (78,141)
Equity Minority
Loan interest Total
R’000 R’000 R’000
Balance at 01 Jan 2013 - 1,239 58,422
Loss for the year - (1,176) (34,845)
Realisation of Reserve - - -
Change in shareholding - - -
Share option expense - - 857
Share options cancelled - - -
Issue of shares - - 13,520
Change in shareholding - 285 590
Balance at 01 Jan 2014 - 349 38,545
Loss for the year - (3,766) (55,865)
Share option expense - - 190
Issue of shares - 37,199
Equity Loan 55,000 - 55,000
Balance at 31 Dec 2014 55,000 (3,417) 75,069
Notes to the Condensed Financial Statements
1. Basis of preparation
The condensed consolidated financial information for the year ended
31 December 2014 has been prepared in accordance with the requirements
of International Financial Reporting Standards on Interim Financial
Reporting (IAS 34), the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee, the Companies Act 71 of 2008 of
South Africa and the listings requirements of the JSE Limited. The
accounting policies used to prepare these reviewed condensed provisional
annual financial statements are consistent with those applied for the
financial statements for the year ended 31 December 2013. The reviewed
condensed provisional annual financial statements have been prepared by
the CFO, Mr. JL Mortimer (CA) SA and were approved by the board on
2 April 2015.
2. Condensed segmental report
Property Development
31-Dec-14 31-Dec-13
R’000 R’000
Revenue 169,447 186,443
Cost of Sales (157,622) (154,000)
Gross Profit 11,785 32,443
Profit on disposal of sectional title units
through business combination - 2,442
Operating Expenses (72,115) (69,995)
Profit on sale of non-current assets (1,865) 4,335
Impairment goodwill - (1,530)
Fair Value adjustment 140 -
Finance cost (11,985) (9,631)
Loss before tax (69,272) (40,302)
Total assets 186,263 150,728
Total liabilities 145,292 148,481
Rental Portfolio *
31-Dec-14 31-Dec-13
R’000 R’000
Revenue 11,920 11,673
Cost of Sales - -
Gross Profit 11,920 11,673
Profit on disposal of sectional title units
through business combination - -
Operating Expenses (6,425) (5,819)
Profit on sale of non-current assets - -
Impairment goodwill - -
Fair Value adjustment (4,335) (2,000)
Finance cost (6,915) (6,688)
Loss before tax (5,755) (2,834)
Total assets 105,361 111,645
Total liabilities 71,263 75,347
Consolidated
31-Dec-14 31-Dec-13
R’000 R’000
Revenue 181,367 198,116
Cost of Sales (157,662) (154,000)
Gross Profit 23,705 44,116
Profit on disposal of sectional title units
through business combination - 2,442
Operating Expenses (78,540) (75,814)
Profit on sale of non-current assets (1,865) 4,335
Impairment goodwill - (1,530)
Fair Value adjustment (4,195) (2,000)
Finance cost (18,900) (16,319)
Loss before tax (75,027) (43,136)
Total assets 291,624 262,373
Total liabilities 216,555 223,828
*available for sale assets and liabilities are included in property
development activities for purposes of segmental reporting.
3. Headline earnings
Reconciliation of headline loss
Loss attributable to ordinary shareholders (52,099) (33,669)
Profit on disposal of non-current asset 1,865 (4,335)
Impairment of goodwill - 1,530
Profit on disposal of business combination - 71
Profit on disposal of Res 3 Units through business
combination - (2,442)
Re-measurement included in equity-accounted earnings of
associates - (181)
Fair value adjustment of investment properties 4,195 2,000
Total tax effect of adjustments 26 911
Headline loss to ordinary shareholders (46,013) (36,115)
4. Equity loan
The Equity Loan of R55 million relates to the HIFSA transaction concluded in
November 2014 whereby HIFSA would subscribe for 550 million shares at 10 cents
per share. Management believe it appropriate to recognise the R55 million
in equity as the transaction was effectively concluded on 11th December when
the following conditions were met:
Sufficient irrevocable commitments supporting all resolutions
relating to the transaction were obtained from various shareholders
to ensure the resolutions relating to the transaction would be
passed.
Existing debenture holders agreed to the early redemption of their
debentures and subscribed for shares on 11 December 2014. This early
redemption was a suspensive condition of the transaction.
5. Subsequent events
Shareholders were advised in the SENS announcement released on
19 November 2014, that an agreement was entered into with the Housing
Impact Fund South Africa (“HIFSA”), in terms of which HIFSA would subscribe for
550 million shares at 10 cents each in the share capital of RBA for an amount
of R55 million.
In addition, HIFSA would be providing RBA with a R 70 million
facility for the acquisition of land and the provision of working
capital for the construction of houses.
Shareholders are advised that, at a general meeting of RBA
shareholders held on 19 January 2015, all resolutions relating to
this transaction were approved with the required majorities.
As a result of the large number of shares authorised and in issue,
the board reduced the number of authorised and issued shares through
a share consolidation of 10:1. The share consolidation was finalised on
23 January 2015.
Review of 2014 annual results
The Company is aware of the fact that the results for 2014 will be
disappointing to shareholders. The constrained liquidity situation
had the effect of impeding production levels and the anticipated
turnaround was thus delayed further.
RBA’s revenue is generated through:
The marketing and sale of building packages to prospective clients;
and The subsequent construction of houses for clients who have
approved home loans once all town planning approvals have been
achieved on a development site.
In anticipation of significant growth expected in the business, the
company has been building operational capacity and improving systems.
As a result the company is currently highly operationally geared and
thus particularly sensitive to the volume of houses built.
As a result of lower production volumes, gross profit at R23,8
million was well below what was anticipated (2013 – R42,7 million).
This was the major contributing factor to the Company’s overall loss
of R52,1 million for the year (2013 – loss of R33,6 million).
The Company would like to highlight the following items in relation
to the 2014 results:
Other income includes an amount of R4,3 million that relates to
marketing and project management fees from a related company. The
company was set up as a joint venture with a key land development
partner to develop the Devland Ext 33 project. The company is owned
50% by RBA and has been equity accounted in the 2014 results.
Operating expenses of R78,5 million (2013 - R74,6 million) include
impairments of R5,1 million. A fair value adjustment write down of
R4,3 million was recognised against the Company’s rental portfolio.
A loss on sale of non-current assets of R1,9 million relates to the
sale of non-core assets that were sold in the second half of 2014.
The net asset value of the Company at 31 December 2014 was 5.11 cents
(2013 – 6.43 cents) per share.
Additional business indicators
Activity Indicators
As at As at
31-Dec-14 31-Dec-13
Freehold houses completed in the period 747 724
Individual houses under construction at
period end 166 210
Bank approved sales less cancellations
during the period 1,021 805
Anticipated approved sales not yet under
constructionat period end 490 312
Land
The company’s stock of available serviced land continued to improve
and the company’s project pipeline is now projected to be sufficient
to allow the company to operate at above break even levels of
production in 2015 and 2016. The Company continues to build on the
land pipeline to ensure a secured land pipeline that will support
future growth.
Land bank position at 31 December 2014 - freehold houses
Remaining
Expected Expected balance
Opening to be Total to be expected
serviced serviced available available after
stands in 2015 in 2015 in 2016 2016 Total
Secured* 634 1,921 2,555 2,179 5,020 9,754
Prospect** - - - 1,534 9,036 10,570
Total 634 1,921 2,555 3,713 14,056 20,324
Land bank position at 31 December 2014 – institutional housing
Remaining
Expected Expected balance
Opening to be Total to be expected
serviced serviced available available after
stands in 2015 in 2015 in 2016 2016 Total
Secured* 433 961 1,394 532 - 1,926
Prospect** - - - 1,033 8,121 9,154
Total 433 961 1,394 1,565 8,121 11,080
* 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 landowner.
** Opportunities are reflected as prospects where negotiations are
already underway and an agreement is expected to be reached with the
current landowner 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 tables above show that the risk of underperformance due to a lack
of available land is low.
Sales and marketing
Sales and marketing performance has been satisfactory over the course
of 2014 and with increased marketing spend budgeted for 2015 a
further improvement in performance is expected to contribute to
improved revenue in 2015.
Sales and marketing performance has been supported by: Competitive
pricing of the company’s product offering; More projects available
for sale;
Focused marketing and sales strategies aimed at our target market
through radio advertising campaigns, a dedicated call centre and an
improved sales website; and
Increased credit appetite from banks with the company having six
financial institutions willing to grant 100% home loans to clients.
Human capital
At 31 December 2014 the workforce consisted of 570 employees
(December 2013 – 671).
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 has initiated recruitment
efforts to improve the competencies and capacity in some key area’s
in the business.
Future prospects
Demand for affordable housing remains high
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: Automation of business processes and finalising the roll out of
an ERP system in 2015;
Continuing to build an improved land and project pipeline to ensure
sufficient serviced stands are always available for sale and
construction; Expanding on the company’s financial service offerings
to our clients; Improving the Company’s BEE credentials.
Dividends
No dividend has been declared for the year. The dividend policy of
RBA will be reviewed annually in light of RBA’s cash flow, gearing
and capital requirements.
Appreciation
The company 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 bankers, suppliers, business partners, advisors,
clients and shareholders for their support and faith in the company.
By order of the Board
1 April 2015
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 Mokhesi (Chairman),
K M Maroga, K Hopkins.
Company Secretary: R Kleyn
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
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: 02/04/2015 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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