Wrap Text
Audited Provisional Financial Results 2015
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")
AUDITED PROVISIONAL FINANCIAL RESULTS 2015
commentary
The 2015 year has proved to be
extremely disappointing for a number
of reasons. The first 3 months of the
year were affected by heavy rain in the
opencast areas in which we were
operating, resulting in a loss for the
period and negative cash flows.
A combination of events, internationally
and locally, have negatively impacted
the demand for contract mining services.
The downturn in the growth rate of the
Chinese economy, and negligible growth
with the cash crisis in Europe resulted
in a significant drop in the demand
for commodities and overstocking in
the supply chain. Closer to home, the
effect of the prolonged strike in the
platinum sector and growing concerns
about Eskom's ability to provide power
and manage coal supplies, meant that
mining companies substantially reduced
production calls on their contractors
and became extremely cautious in
their capital expenditure programmes.
As a result, the market for opencast
mining services diminished, increasing
competition and lowering contract
prices.
The outcome was a global surplus
of second hand equipment and a
substantial drop in the values of plant.
In South Africa the weaker Rand was
followed by a considerable increase in
the cost of new plant, constraining the
ability to replace and finance equipment.
The Buildmax business model
differentiated itself in the following ways:
- a conservative approach to cash
management by financing equipment
in a shorter period than industry
standard;
- providing high standards of safety,
reliability of equipment, fair treatment
of labour, and professional services;
and
- leveraging intellectual property and
information systems to the benefit of
our customers.
The consequence of this business model
was a high fixed cost structure which was
very successful in previous years when
prices and volumes were stable and
predictable. Buildmax, however, lacked
the agility to respond rapidly enough
to the changed business environment
which requires a more flexible business
model.
Management have responded with the
following turnaround action plan which
enables the company to be more agile
whilst maintaining its high standards:
- right-sized the business to reduce the
fixed cost base;
- terminated loss-making contracts;
- restructured bank financing to improve
liquidity;
- adopted a less asset intensive,
flexible business model;
- diversified into other commodities
and geographies; and
- disposed of non-core businesses
and surplus equipment.
We are confident that there will always
be a demand for reliable quality
opencast contractors and believe that
the current slowdown in the demand for
commodities is cyclical.
safety and quality management
The group has maintained and boasts
a proud track record of more than
57 million fatality free hours. Safety is a
core value of the Buildmax group and is
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's safety vision,
provides direction and sets standards for
operations to develop and manage their
proactive safety programs and strategies
with the objective of continuously
improving their safety performance. The
group's operations continue to maintain
certification for the OHSAS 18001: 2007
health and safety management standard,
as well as the ISO 9001: 2008 quality
management standard.
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. Due
to lower volumes of work, the group ran
3 voluntary retrenchment programmes.
This achieved an annualised saving
of approximately R52 million at a
non-recurring cost of approximately
R28 million, whilst retaining key staff.
Investment in learning and development
remains a top priority across the group
which invested R19.3 million in a range of
training, learning and career development
opportunities during the year. A
bursary scheme and graduate training
programme for previously disadvantaged
individuals ensures that Buildmax attracts
an ongoing pipeline of mining talent and
invests in its transformation strategy.
Our first four black engineers qualified
in 2014 and started working for the
group in 2015 on the graduate training
programme.
operational overview
The group operates within three
strategic business units: mining
services, equipment sales and rental
and civils and earthworks (continuing
operations).
Our aggregates and quarries business
has been reported on as discontinued
operations.
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 design,
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, Diesel Power
Congo and Diesel Power Botswana.
civils and earthworks
Civils and earthworks, a division of Diesel
Power South Africa, provides civils and
bulk earthworks services to the mining
and property development sector.
aggregates and quarries
In August 2014, Buildmax Aggregates
and Quarries ("BAQ") entered into a
sale of business and assets agreement
with Raubex Group and its wholly-
owned subsidiary, Raumix Aggregates
("Raumix"), in terms of which Raumix
acquired certain assets of BAQ for
R54.8 million plus the value of the stock
(including stockpiles, spare parts and fuel).
Letamo Quarry is still owned by the
group and a non-binding expression of
interest has been received to purchase
the quarry and related assets.
BAQ's assets and liabilities have been
classified as "held for sale" at year-end.
plant and equipment
With the continued support of banks
and Original Equipment Manufacturers
("OEM's"), the group continued to
replace plant, where appropriate,
on a consistent basis. A positive
consequence of the replacement policy,
implemented since 2011, has resulted in
excess of 95% of plant having operated
for less than 20,000 hours.
Furthermore, the useful lives of various
mining plant categories range from
12,000 to 36,000 hours depending on
the category and brand of the plant item.
The book value of plant and
equipment for continuing operations is
R754.2 million down by 16.3% from
R901.2 million as a result of additions of
R275.2 million, depreciation amounting
to R165.6 million, impairments of
R4.8 million, disposals of R244.3 million
and R7.5 million classified as "held for
sale".
When reviewing the current
economic useful lives and residual
values of plant, management considers
the following:
- 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.
analysis of mining PE per age category
at 28 february 2015
financial
The financial performance of continuing
operations is summarised as follows:
- decreased revenue from
R1.1 billion to R997.1 million;
- decreased EBITDA from
R255.5 million to R15.6 million;
- headline loss of R108.3 million
compared to a headline profit of
R59.1 million; and
- basic loss of R124.6 million compared
to earnings of R59.9 million.
The most significant non-recurring
factors that influenced the movement in
continuing EBITDA were restructuring
costs of R41.2 million, a loss on sale
of assets of R15.8 million compared
to prior year profit of R1.2 million,
and a negative EBITDA impact of
R25.8 million relating to the closure of the
Congo and the start-up of the Botswana
operations. This aggregated to an
amount of approximately R84 million of
non-recurring costs.
The restructured business is underpinned
by tangible net asset value of
R440.9 million.
debt restructuring
Management approached its major
lenders with a plan to reschedule
the group's asset based funding and
transactional banking facilities. Post
year-end, the banks jointly approved a
plan which has significantly ‘freed up'
working capital in order to facilitate the
start-up of new contracts and implement
further cost cutting and consolidation
initiatives.
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.
transformation
It is our vision to make the Buildmax
group a home for all South Africans,
where there are no divisions or
boundaries and where no one feels
excluded.
Diesel Power South Africa maintains
a Level 4 BEE rating and continues to
achieve an effective shareholding of
26.8% in terms of the Codes of Good
Practice and the Mining Charter.
outlook and prospects
We are fortunate to have meaningful,
value-adding and service orientated
contractual relationships with most
of the leading mining groups in the
country. Whilst activity in the reporting
period has been subdued, management
believe that mine owners will continue to
outsource mining and civils services to
contractors, and our aim is to leverage
these strategic alliances.
In order to unlock our strategy, we are
highly reliant on our ability to maintain
volumes in the coal sector which is under
pressure largely due to low commodity
prices exacerbated by weak global
demand. We are, however, confident that
the current bearish outlook is cyclical
and that we are well positioned to take
advantage of outsourcing opportunities.
We believe that the propensity to
outsource could increase as a result of
mining houses wanting to reduce risk.
Whilst operations in Botswana remain
challenging, largely as a result of the
bearish outlook of copper prices,
post restructuring, the group remain
cautiously optimistic that reduced
operations will slowly gain momentum
over the next 12 to 18 months in terms
of an interim mining plan as agreed with
the client.
Our experience is that demand in the
construction and civils sector of the
economy is slowly gaining momentum.
Margins will remain under pressure
and activity could be further buoyed
by government increasing their much
anticipated infrastructure growth plans.
To this extent we remain optimistic that
our civils business will steadily improve.
The most significant risks in the mining
industry relate to labour uncertainty,
the regulatory framework, and cyclical
demand for commodities in a generally
depressed industry.
Our strategy, in a tough operating
environment, is to continue to
aggressively tender for new work at
sustainable margins both in Southern
Africa and sub-Saharan Africa.
During November 2014, our tenacity
to secure new long-term work was
rewarded, and Diesel Power was
appointed as the preferred service
provider to execute a large ore and
waste handling, crushing, screening,
transport and logistics contract.
This significant award in the local gold
mining industry marks the achievement
of another strategic, growth and
diversification objective of the group.
The initial 36 month contract is valued
in excess of R1.2 billion, with the group
identifying significant further scope for
similar long-term work and growth in this
sector of the local gold mining industry.
Having secured the debt restructure,
reduced our fixed cost base and
introduced a less asset intensive
business model, prospects for 2016 are
significantly better.
Contracts recently secured, amounting
to R1.7 billion revenue over an initial 36
months, are underpinned by a tangible
net asset value per share of R2.47 as at
28 February 2015.
This estimate has not been reviewed or
reported on by the group's auditors.
dividend
In terms of the subscription and shareholders' agreement entered into between Diesel
Power Group Holdings (Pty) Ltd and Tylox (Pty) Ltd, an ordinary dividend in the
amount of R200,000 was declared to Tylox Proprietary Limited.
There was no dividend declared by Buildmax Limited.
acknowledgements
The board would like to express its appreciation to all its customers, staff, business
partners, shareholders and other stakeholders for their support and 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
27 May 2015
summarised consolidated statement of financial position at 28 february 2015
Audited Audited
28 February 2015 28 February 2014
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 754 195 901 169
Goodwill and other intangible assets - 85 450
Environmental guarantee investment - 1 580
Other non-current assets - 2 222
Deferred taxation 43 067 24 978
797 262 1 015 399
Current assets
Inventories 10 668 33 220
Trade and other receivables 175 548 156 914
Taxation receivable 4 811 1 314
Vendor loan receivable 3 315 -
Bank and cash balances 6 291 96 220
200 633 287 668
Assets classified as held for sale 50 500 -
Total assets 1 048 395 1 303 067
EQUITY AND LIABILITIES
Share capital and premium 1 994 196 1 994 196
BEE IFRS 2 cost 1 195 1 195
Foreign currency translation reserve 617 2 632
Share based payment reserve 13 466 12 120
Accumulated loss (1 568 572) (1 356 675)
Attributable to equity holders of the company 440 902 653 468
Outside shareholders' interests (23 018) (6 245)
Total shareholders' interests 417 884 647 223
Non-current liabilities
Interest-bearing liabilities 145 802 83 519
Capitalised Finance Leases 32 613 56 138
Provisions - 1 770
Deferred taxation 27 531 77 931
205 946 219 358
Current liabilities
Interest-bearing liabilities 113 737 197 883
Capitalised Finance Leases 27 935 27 502
Trade and other payables 215 781 192 025
Provisions 2 101 -
Taxation payable - 16 884
Vendor loan payable 650 -
Bank overdrafts 59 177 2 192
419 381 436 486
Liabilities directly associated with assets held for sale 5 184 -
Total equity and liabilities 1 048 395 1 303 067
Shares in issue 178 782 180 910
Net asset value per share (cents) 246.6 361.2
Tangible net asset value per share (cents) 246.6 323.0
summarised consolidated statement of comprehensive income
for the year ended 28 february 2015
Audited Audited
28 February 2015 28 February 2014
Continuing operations R'000 R'000
Revenue 997 124 1 131 962
Operating profit before depreciation & amortisation ("EBITDA") 15 596 255 523
Depreciation (159 964) (140 156)
Operating (loss) / profit (144 368) 115 367
Impairment of property plant and equipment (4 819) -
(Loss) / profit before interest and taxation ("PBIT") (149 187) 115 367
Net interest paid (43 783) (35 211)
- Interest paid (44 170) (35 819)
- Interest received 387 608
(Loss) / profit before taxation ("PBT") (192 970) 80 156
Taxation 52 982 (19 384)
(Loss) / profit for the period ("PAT") (139 988) 60 772
After tax (loss) / profit from discontinued operations (88 482) 567
(Loss) / profit for the period (228 470) 61 339
Other comprehensive (loss) / income for the period:
Foreign currency translation reserve (2 015) 2 632
Total comprehensive (loss) / profit for the period (230 485) 63 971
(Loss) / profit for the period attributable to:
Equity holders of the company (211 697) 60 479
Outside shareholders' interests (16 773) 860
- Continuing operations (15 354) 843
- Discontinued operations (1 419) 17
Total comprehensive (loss) / profit for the year (228 470) 61 339
Total comprehensive (loss) / profit for the period attributable to:
Equity holders of the company (213 712) 63 111
Outside shareholders' interests (16 773) 860
(230 485) 63 971
reconciliation of headline (loss)/earnings
for the year ended 28 february 2015
Audited Audited
28 February 2015 28 February 2014
R'000 R'000
Continuing operations
(Loss)/profit for the period attributable to shareholders of
Buildmax (124 634) 59 929
Adjusted for:
Add back loss/(profit) on disposal of property, plant and
equipment 12 344 (797)
- Gross 17 145 (1 107)
- Taxation (4 801) 310
Impairment of property plant and equipment 4 025 -
- Gross 4 819 -
- Taxation (794) -
Headline (loss)/earnings attributable to ordinary shareholders (108 265) 59 132
Discontinued operations
(Loss)/profit for the period attributable to shareholders of
Buildmax (87 063) 550
Adjusted for:
Add back profit on disposal of property, plant and equipment (930) (79)
- Gross (1 291) (109)
- Taxation 361 30
Impairment of property plant and equipment 57 485 -
- Gross 69 297 -
- Taxation (11 812) -
Headline (loss)/earnings attributable to ordinary shareholders (30 508) 471
supplementary information
Headline (loss)/earnings per share (cents)*
Continuing operations (60.6) 32.6
Discontinued operations (17.1) 0.3
Basic (loss)/earnings per share (cents)*
Continuing operations (69.7) 33.1
Discontinued operations (48.7) 0.3
Shares in issue ('000)
- at end of the period 178 782 180 910
- weighted 178 782 180 910
*There are no dilutionary instruments in issue.
summarised condensed consolidated statement of cash flows
for the year ended 28 february 2015
Audited Audited
28 February 2015 28 February 2014
R'000 R'000
Operating activities
(Loss)/profit before taxation (292 117) 81 227
Working capital movement 29 775 (1 850)
Impairments of property, plant and equipment, goodwill and
intangible assets 74 116 -
Other non-cash flow items 182 664 158 845
Net interest paid 44 172 36 467
Cash generated from operations 38 610 274 689
Net interest paid in cash (44 172) (36 467)
Dividends paid (200) -
Taxation (paid)/received (25 260) 927
Cash (utilised by)/generated from operating activities (31 022) 239 149
Investing activities
Proceeds on disposal of property, plant and equipment 225 817 85 326
Purchase of property, plant and equipment (275 283) (263 628)
- Expanding operations (42 469) -
- Maintaining operations (232 714) (263 628)
Environmental guarantee investment (904) (578)
Mine stripping asset - (642)
Business acquisition (20 667) -
Net cash utilised by investing activities (70 937) (179 522)
Financing activities
Interest-bearing liabilities raised 238 690 256 083
Interest-bearing liabilities repaid (283 645) (287 249)
Net cash flows generated from financing activities (44 955) (31 166)
Net (decrease)/increase in cash and cash equivalents (146 914) 28 461
Cash and cash equivalents at the beginning of the period 94 028 65 567
Cash and cash equivalents at the end of the period (52 886) 94 028
- Bank and cash 6 291 96 220
- Bank overdraft (59 177) (2 192)
summarised consolidated statement of changes in equity
Attributable
Share Foreign to equity Outside Total
Share based BEE currency holders share- share-
capital and payment IFRS2 translation Accumulated of the holders' holders'
premium reserve Costs reserve loss company interest interest
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balances as at
28 February 2013 1 994 196 8 815 - - (1 417 154) 585 857 (7 105) 578 752
Share based
payments - 3 305 1 195 - - 4 500 - 4 500
Total comprehensive
profit for the period - - - 2 632 60 479 63 111 860 63 971
Balances as at
28 February 2014 1 994 196 12 120 1 195 2 632 (1 356 675) 653 468 (6 245) 647 223
Share based
payments - 1 346 - - - 1 346 - 1 346
Total comprehensive
loss for the period - - - (2 015) (211 697) (213 712) (16 773) (230 485)
- Continuing
Operations - - - (2 015) (124 634) (126 649) (15 354) (142 003)
- Discontinued
Operations - - - - (87 063) (87 063) (1 419) (88 482)
Dividends paid - - - - (200) (200) - (200)
Balances as at
28 February 2015 1 994 196 13 466 1 195 617 (1 568 572) 440 902 (23 018) 417 884
summarised segmental analysis for the year ended 28 february 2015
Audited Audited
28 February 2015 28 February 2014
R'000 R'000
EXTERNAL REVENUE
Continuing Operations 997 124 1 131 962
Mining Services - Diesel Power 814 563 941 072
Mining Services - Equipment sales and rental - -
Total Mining services 814 563 941 072
Civils and Earthworks 182 561 190 890
Discontinued Operations 82 157 142 475
Aggregates and Quarries 82 157 142 475
1 079 281 1 274 437
EBITDA
Continuing Operations 15 596 255 523
Mining Services - Diesel Power 9 592 260 189
Mining Services - Equipment sales and rental 4 824 4 659
Total Mining services 14 416 264 848
Civils and Earthworks 5 172 (6 613)
Corporate Head Office (3 992) (2 712)
Discontinued Operations (23 185) 14 283
Aggregates and Quarries (23 185) 14 283
(7 589) 269 806
OPERATING (LOSS)/PROFIT BEFORE
AMORTISATION
Continuing Operations (144 368) 115 367
Mining Services - Diesel Power (149 159) 120 756
Mining Services - Equipment sales and rental 3 678 4 015
Total Mining services (145 481) 124 771
Civils and Earthworks 5 172 (6 613)
Corporate Head Office (4 059) (2 791)
Discontinued Operations (28 838) 3 566
Aggregates and Quarries (28 838) 3 566
(173 206) 118 933
notes to the audited provisional financial results for
the period ended 28 february 2015
approval of the audited provisional financial results
The audited provisional 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 and Financial
Pronuncements as issued by the
Financial Reporting Standards Council,
the JSE Listings Requirements, and the
Companies Act, 71 of 2008.
The accounting policies used in the
preparation of these annual results are
consistent with those used in the annual
financial results for the year ended 28
February 2014, which have been prepared
in accordance with International Financial
Reporting Standards (IFRS) as issued by
the International Accounting Standards
Board (IASB). These provisional financial
results have been prepared on the
historical cost basis.
This report was compiled under the
supervision of Mr CS Els, Chief Financial
Officer CA(SA). The unmodified audit
report, issued by Grant Thornton (Jhb)
Inc, has been done so based on the
underlying annual financial statements
from which these summarised provisional
financial results have been derived. The
auditors' report, together with the annual
financial statements, are available for
inspection at the registered office of
the Company. This summarised report
is extracted from the audited financial
information, but is itself not audited. The
directors take full responsibility for the
preparation of the provisional report and
for the accurate extraction of the financial
information from the underlying annual
financial statements.
The audited provisional results have
been prepared on a going-concern basis
as the directors believe that the group
will continue to be in operation in the
foreseeable future, and were approved
by the board of directors on 27 May 2015.
estimates and contingencies
Management makes estimates and
judgements concerning the future with
regards to opencast mining contracts,
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 anticipated that no material
liabilities will arise from the contingent
liabilities other than those provided for.
assets held for sale and discontinued operations
for the year ended 28 february 2015
In August 2014, Buildmax Aggregates and Quarries ("BAQ") entered into a sale of
business and assets agreement with Raubex Group and its wholly-owned subsidiary,
Raumix Aggregates ("Raumix"), in terms of which Raumix acquired certain assets
of BAQ. In addition, BAQ entered into contract mining agreements with Raumix on
behalf of its subsidiaries Crushco, Alfa, Mystic Blue and Verlesha.
The operating loss of BAQ and its subsidiaries until the date of disposal and the
associated assets and liabilities classified as held for sale are summarised as follows:
Audited Audited
28 February 2015 28 February 2014
R'000 R'000
After tax (loss)/profit from discontinued operations:
Revenue 82 157 142 475
Operating (loss)/profit before depreciation and amortisation
("EBITDA") (23 185) 14 283
Depreciation (5 653) (10 717)
Operating (loss)/profit before amortisation (28 838) 3 566
Amortisation of intangible assets (623) (1 239)
Operating (loss)/profit (29 461) 2 327
Impairment of property plant and equipment, goodwill and
intangible assets (69 297) -
(Loss)/Profit before interest and taxation ("PBIT") (98 758) 2 327
Net interest paid (389) (1 256)
Interest paid (1 745) (1 626)
Interest received 1 356 370
(Loss)/Profit before taxation ["PBT"] (99 147) 1 071
Taxation 10 665 (504)
(Loss)/Profit for the period ["PAT"] (88 482) 567
The re-measurement amount of assets and liabilities held for sale are summarised as
follows:
Continuing Discontinued
assets classified as held for sale operations operations Total
Property, plant and equipment - 8 250 8 250
Intangible asset - 9 188 9 188
Mining right - 30 000 30 000
Environmental guarantee investment - 2 484 2 484
Inventories - 578 578
Assets classified as held for sale 50 500 50 500
Trade and other payables - 600 600
Rehabilitation provision - 4 584 4 584
Liabilities directly associated with
assets classified as held for sale - 5 184 5 184
directors
executive
TP Bantock (CEO)
CS Els (CFO)
J Mathebula
independent non-executive
directors
CJM Wood (Chairman)
CB Brayshaw
MD Lamola
MW McCulloch
non-executive directors
DJ Mack
BT Ngcuka
G Montgomery
company secretary
GH Miller
registered office
515 Pretoria Road, Fairleads, Benoni
(Postnet Suite 435
Private Bag X108, Centurion, 0046)
sponsor
Questco (Pty) Limited, 2nd Floor
No 1 Montecasino Blvd
Fourways, 2055
South Africa
(PO Box 98956, Sloane Park, 2152
South Africa)
auditors
Grant Thornton (Jhb) Inc
52 Corlett Drive
Wanderers Office Park,
Illovo
transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 61763, Marshalltown, 2107)
Date: 29/05/2015 04:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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