Wrap Text
Interim financial results for the six month period ended 31 August 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")
Interim financial results for the six month period ended 31 August 2015
Commentary
Trading conditions in the mining and construction industries remain challenging and macro
drivers continue to weigh heavily on the business sectors that the group serves. The
subdued growth of the Chinese economy and negligible growth in Europe have resulted in a
significant drop in the demand for mining commodities giving rise to over stocking in the supply
chain.
Eskom's management of coal supplies and its ability to provide power have also created uncertainty and
caused mining companies to substantially reduce production calls. Coupled with lower coal prices
mine owners have understandably become cautious to invest in capital projects. As a result, the
market for opencast mining services has diminished, triggering an oversupply, increased
competition, lower prices, cautious lenders, bearish investors and a general liquidity crunch in the
sector.
This environment has been exacerbated by a global surplus of second hand plant and a
substantial drop in second hand values.
Financial
The results are summarised below:
- Revenue from continuing operations decreased by 15.9% to R462.7 million.
- The cost saving initiatives implemented in FY2015 resulted in an increase of 27.6% in
EBITDA to R41.2 million from R32.3 million.
- A reduction in operating loss of 46.1% from R50.5 million to R27.2 million.
- Net overdraft reduced by R32 million.
- Headline loss per share from continuing operations, including the after tax provision for
the Messina Copper (Botswana) Proprietary Limited ("Messina Copper") trade debtor ("trade debtor") of
R35.2 million, increased by 9.1 cents to 30.6 cents from 21.5 cents. To the extent that the impairment of
the trade debtor is eliminated, the headline loss per share is reduced to 10.9 cents from 21.5 cents.
- Headline loss per share from discontinued operations reduced to 0.6 cents from 7.4 cents.
- Basic loss per share from continuing operations increased from 23.7 cents to 39.8 cents due
to after tax impairments amounting to R45.4 million primarily relating to the legal action
against Messina Copper.
- Basic loss per share from discontinued operations reduced to 0.6 cents from 33.2 cents.
- Net asset value per share decreased from 308.1 cents to 206.5 cents.
- Tangible net asset value per share decreased from 299.2 cents to 206.5 cents.
Buildmax's wholly-owned subsidiary, Diesel Power Mining (Pty) Limited, trading as
Diesel Power Botswana ("DP Botswana")
Shareholders are referred to the SENS announcements released by Buildmax on 26 October
and 12 November 2015 wherein stakeholders were advised that DP Botswana had enforced
its contractual right to suspend its mining services as a result of Messina Copper's
inability to meet its payment obligations.
DP Botswana brought an application to the High Court of the Republic of Botswana ("High
Court") for an urgent provisional order for the winding-up of Messina Copper. On 13 November
2015, the High Court placed Messina Copper under provisional order of winding-up and
appointed a provisional liquidator. The matter has been set down for 11 December 2015 for any
interested parties to contest the provisional order.
DP Botswana's expected aggregated pre-tax exposure to Messina Copper is approximately
R60 million. Assuming the liquidation of Messina Copper with no recovery of this debtor, the
pre-tax impairment anticipated is R93 million as a result of writing off the debtor and impairing
the associated plant and equipment.
Debt restructuring in subsidiary Diesel Power Opencast Mining (Pty) Limited ("Diesel Power")
("Debt Restructuring")
In terms of the Debt Restructuring, the current asset based funding facilities of Diesel Power
have been replaced with a term loan which will be repaid over 45 months, repayable in equal
quarterly instalments of approximately R19 million of which the first instalment was paid on
30 September 2015.
The initial value of the Term Loan was R224 million which refinanced outstanding asset based
funding commitments and reduced the current overdraft facility, in both cases converting certain
current debt obligations to non-current debt obligations. In addition, the lenders advanced bridge
financing to Diesel Power of R16 million which was repaid on 30 September 2015.
A further deposit of R10 million has been made to the debt service account as an advance for
the second installment that is due on 31 December 2015.
Interest rates, market related pricing, covenants and security provisions typical of this type of
facility apply.
This Debt Restructuring has strategic alignment, significantly improves the working capital position
of the group and conservatively as well as congruently amortises the remaining life of
the assets that form part of the security pool provided for the facility.
Disposal of mining rights and related properties
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.
BAQ was granted a put option, exercisable between 1 June 2015 and 31 December 2016, to sell
the mining rights in respect of aggregates and quarries held by BAQ's subsidiaries as well as the
related properties (collectively, the "Sale Assets") (the "Option") for an aggregate consideration of
R37 million, payable in cash. On 3 March 2015, BAQ and Raumix mutually agreed to exercise the
Put Option early and Raumix settled the R37 million Option consideration in cash. Ministerial
consent to the cession and transfer of the Mining Rights remains outstanding.
The condensed consolidated statement of comprehensive income in respect of the discontinued
operations is set out below:
After tax loss from discontinued operations:
Unaudited Reviewed Audited
6 months ended 6 months ended year ended
31 August 2015 31 August 2014 28 February 2015
R'000 R'000 R'000
Revenue 1 556 67 311 82 157
Operating loss before depreciation and amortisation ("EBITDA") (964) (9 185) (23 185)
Depreciation - (5 599) (5 653)
Operating loss before amortisation (964) (14 784) (28 838)
Amortisation of intangible assets - (623) (623)
Operating loss (964) (15 407) (29 461)
Impairment of goodwill and intangible assets - (54 824) (69 297)
Loss before interest and taxation ("PBIT") (964) (70 231) (98 758)
Net interest paid (52) (1 154) (389)
Interest paid (101) (1 378) (1 745)
Interest received 49 224 1 356
Loss before taxation ("PBT") (1 016) (71 385) (99 147)
Taxation (57) 12 077 10 665
Loss for the period ("PAT") (1 073) (59 308) (88 482)
The assets and liabilities classified as held for sale are sunnarised as follows:
Unaudited Reviewed Audited
ASSETS CLASSIFIED AS HELD 31 August 31 August 28 February
FOR SALE 2015 2014 2015
R'000 R'000 R'000
Property, plant and equipment 1 250 64 588 8 250
Intangible asset (Letamo Quarry) 9 188 - 9 187
Mining right - 30 000 30 000
Environmental guarantee investment 2 990 2 607 2 485
Inventories 578 - 578
Mine stripping asset - 1 156 -
Assets classified as held for sale 14 006 98 352 50 500
Trade and other payables - - 600
Rehabilitation provision 5 465 - 4 584
Interest-bearing liabilities - 14 003 -
Liabilities directly associated with
assets classified as held for sale 5 465 14 003 5 184
Outlook and prospects
We believe that the current slowdown in the demand for commodities is cyclical. Whilst the
prospects for contract mining and civils contractors have been depressed during the past two
years, we remain confident that there will always be a demand for reliable quality opencast
contractors with experience and world class management and safety systems.
A major concern that is prevalent is the ongoing liquidity crunch being experienced in the sector.
This is largely driven by low commodity prices and bearish sentiment about the prospects in
mining in a highly regulated environment.
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 and continued confidence in the
sustainability of the Buildmax Group and its underlying businesses.
On behalf of the board:
Colin Wood Terry Bantock Christie Els
Chairman CEO CFO
Johannesburg
26 November 2015
Condensed consolidated statement of financial position
Unaudited Reviewed Audited
31 August 2015 31 August 2014 28 February 2015
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 664 638 909 042 754 195
Goodwill and other intangible assets - 21 684 -
Deferred taxation 52 879 31 851 43 067
717 517 962 577 797 262
Current assets
Inventories 12 272 19 644 10 668
Trade and other receivables 150 981 209 355 175 548
Taxation receivable 3 241 6 384 4 811
Vendor loan receivable 3 664 - 3 315
Bank and cash balances 15 800 18 204 6 291
185 957 253 587 200 633
Assets classified as held for sale 14 006 98 353 50 500
Total assets 917 480 1 314 517 1 048 395
EQUITY AND LIABILITIES
Share capital and premium 1 994 196 1 994 196 1 994 196
BEE IFRS 2 cost 1 195 1 195 1 195
Foreign currency translation reserve 1 218 297 617
Share based payment reserve 13 466 13 466 13 466
Accumulated loss (1 640 913) (1 458 383) (1 568 572)
Attributable to equity owners of the parent 369 162 550 771 440 902
Non controlling interest (31 082) (10 916) (23 018)
Total shareholders' interests 338 080 539 855 417 884
Non-current liabilities
Interest-bearing liabilities 24 653 194 871 145 802
Term loan 175 470 - -
Capitalised finance leases 18 385 - 32 613
Deferred taxation 11 575 45 050 27 531
230 083 239 921 205 946
Current liabilities
Interest-bearing liabilities 19 138 255 638 113 737
Term loan 64 779 - -
Capitalised finance leases 23 701 - 27 935
Trade and other payables 198 905 256 080 215 781
Provisions - 2 690 2 101
Taxation payable - 5 409 -
Vendor loan payable 650 - 650
Bank overdrafts 36 678 921 59 177
343 851 520 738 419 381
Liabilities directly associated with assets held for sale 5 465 14 003 5 184
Total equity and liabilities 917 480 1 314 517 1 048 395
Shares in issue at end of period 178 782 178 782 178 782
Net asset value per share (cents) 206.5 308.1 246.6
Tangible net asset value per share (cents) 206.5 299.2 246.6
Condensed consolidated statement of comprehensive income
Unaudited Reviewed Audited
6 months ended 6 months ended year ended
31 August 2015 31 August 2014 28 February 2015
R'000 R'000 R'000
Continued operations
Revenue 462 680 550 038 997 124
Operating profit before depreciation and amortisation ("EBITDA") 41 206 32 291 15 596
Depreciation (68 410) (82 753) (159 964)
Operating loss (27 204) (50 462) (144 368)
Impairment of trade receivable (45 158) - -
Impairment of property, plant and equipment (13 106) - (4 819)
Loss before interest and taxation ("PBIT") (85 468) (50 462) (149 187)
Net interest paid (19 548) (21 756) (43 783)
Interest paid (19 956) (21 756) (44 170)
Interest received 408 - 387
Loss before taxation ("PBT") (105 016) (72 218) (192 970)
Taxation 25 884 25 147 52 982
Loss for the period ("PAT") (79 132) (47 071) (139 988)
After tax loss from discontinued operations (see note below) (1 073) (59 308) (88 482)
Loss for the period (80 205) (106 379) (228 470)
Other comprehensive loss for the period:
Foreign currency translation reserve 601 (2 335) (2 015)
Total comprehensive loss for the period (79 604) (108 714) (230 485)
Loss for the period attributable to:
Equity owners of the parent (72 141) (101 708) (211 697)
Non controlling interest (8 064) (4 671) (16 773)
(80 205) (106 379) (228 470)
Total comprehensive loss for the period attributable to:
Equity owners of the parent (71 540) (104 043) (213 712)
Non controlling interest (8 064) (4 671) (16 773)
(79 604) (108 714) (230 485)
Reconciliation of headline loss
Unaudited Reviewed Audited
6 months ended 6 months ended year ended
31 August 2015 31 August 2014 28 February 2015
R'000 R'000 R'000
Continued operations
Loss for the period attributable to shareholders of Buildmax (71 069) (42 400) (124 634)
Adjusted for:
Add back loss on disposal of property, plant and equipment 6 126 4 049 12 344
- Gross 8 509 5 623 17 145
- Taxation (2 382) (1 574) (4 801)
Impairment of property, plant and equipment 10 223 - 4 025
- Gross 13 106 - 4 819
- Taxation (2 883) - (794)
Headline loss attributable to ordinary shareholders (54 719) (38 351) (108 265)
Unaudited Reviewed Audited
6 months ended 6 months ended year ended
31 August 2015 31 August 2014 28 February 2015
R'000 R'000 R'000
Discontinued operations
Loss for the period attributable to shareholders of Buildmax (1 073) (59 308) (87 063)
Adjusted for:
Add back profit on disposal of property, plant and equipment - (1 060) (930)
- Gross - (1 472) (1 291)
- Taxation - 412 361
Impairment of goodwill and other intangibles - 47 064 57 485
- Gross - 54 824 69 297
- Taxation - (7 760) (11 812)
Headline loss attributable to ordinary shareholders (1 073) (13 304) (30 508)
Supplementary information
Loss per share
Unaudited Reviewed Audited
6 months ended 6 months ended year ended
31 August 2015 31 August 2014 28 February 2015
cents cents cents
Headline loss per share (cents) (31.2) (28.9) (77.6)
Continued operations (30.6) (21.5) (60.6)
Discontinued operations (0.6) (7.4) (17.1)
Basic loss per share (cents) (40.4) (56.9) (118.4)
Continued operations (39.8) (23.7) (69.7)
Discontinued operations (0.6) (33.2) (48.7)
Shares in issue ('000)
- at end of the period 178 782 178 782 178 782
- weighted 178 782 178 782 178 782
Condensed consolidated statement of cash flows
Unaudited Reviewed
6 months 6 months Audited
ended ended year ended
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Operating activities
Loss before taxation (106 032) (143 603) (292 117)
Working capital movement (41 521) 27 879 29 775
Impairment of property, plant and equipment, trade receivable, goodwill and
intangible assets 58 264 54 824 74 116
Other non-cash flow items 77 356 88 739 182 664
Net interest paid 19 600 22 910 44 172
Cash generated from operations 7 667 50 749 38 610
Net interest paid in cash (19 600) (22 910) (44 172)
Dividend paid (200) - (200)
Taxation received/(paid) 1 570 (16 546) (25 260)
Cash (utilised by)/generated from operating activities (10 563) 11 293 (31 022)
Investing activities
Purchase of property, plant and equipment
- Expanding operations - (42 469) (42 469)
- Maintaining operations (10 765) (198 155) (232 714)
Environmental guarantee investment - (569) (904)
Acquisition of Letamo mining right - (21 684) (20 667)
Proceeds on disposal of property, plant and equipment as well as assets held for sale 47 297 102 370 225 817
Net cash generated from/(utilised by) investing activities 36 532 (160 507) (70 937)
Financing activities
Interest-bearing liabilities raised 31 172 232 417 238 690
Interest-bearing liabilities repaid (25 133) (159 949) (283 645)
Net cash flows generated from/(utilised by) financing activities 6 039 72 468 (44 955)
Net increase/(decrease) in cash and cash equivalents 32 008 (76 746) (146 914)
Cash and cash equivalents at the beginning of the period (52 886) 94 028 94 028
Cash and cash equivalents at the end of the period (20 878) 17 282 (52 886)
Condensed consolidated statement of changes in equity
Non Total
Share capital and Share based BEE IFRS2 Foreign currency Accumulated Attributable to equity controlling shareholders'
premium payment reserve costs translation reserve loss owners of the parent interest interest
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
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
Continued operations - - - (2 335) (42 400) (44 735) (4 671) (49 406)
Discontinued operations - - - - (59 308) (59 308) - (59 308)
Balances as at 31 August 2014 1 994 196 13 466 1 195 297 (1 458 383) 550 771 (10 916) 539 855
Total comprehensive loss for the period
Continued operations - - - 320 (82 234) (81 914) (10 683) (92 597)
Discontinued operations - - - - (27 755) (27 755) (1 419) (29 174)
Dividend 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
Total comprehensive loss for the period
Continued operations - - - 601 (71 748) (70 596) (7 936) (78 531)
Discontinued operations - - - - (394) (945) (128) (1 073)
Dividend paid - - - - (200) (200) - (200)
Balances as at 31 August 2015 1 994 196 13 466 1 195 1 218 (1 640 913) 369 162 (31 082) 338 080
Condensed segmental analysis
Unaudited Reviewed Audited
6 months ended 6 months ended year ended
31 August 2015 31 August 2014 28 February 2015
R'000 R'000 R'000
EXTERNAL REVENUE
Continuing operations 462 680 550 038 997 124
Mining Services - Diesel Power 389 769 444 183 814 563
Mining Services - Equipment sales and rental - - -
Total Mining Services 389 769 444 183 814 563
Civils and Earthworks 72 911 105 855 182 561
Discontinued operations 1 556 67 311 82 157
Aggregates and Quarries 1 556 67 311 82 157
464 236 617 349 1 079 281
INTER-SEGMENT REVENUE
Continuing operations 4 181 19 279 16 746
Mining Services - Diesel Power - 10 844 3 985
Mining Services - Equipment sales and rental 4 181 8 435 12 761
Total Mining Services 4 181 19 279 16 746
Civils and Earthworks - - -
Discontinued operations - 5 402 5 800
Aggregates and Quarries - 5 402 5 800
4 181 24 681 22 546
EBITDA
Continuing operations 41 206 32 291 15 596
Mining Services - Diesel Power 40 193 33 521 9 592
Mining Services - Equipment sales and rental (837) 3 868 4 824
Total Mining Services 39 356 37 389 14 416
Civils and Earthworks 7 443 355 5 172
Corporate head office (5 592) (5 453) (3 992)
Discontinued operations (964) (9 185) (23 185)
Aggregates and Quarries (964) (9 185) (23 185)
40 243 23 106 (7 589)
OPERATING LOSS BEFORE INTEREST, AMORTISATION AND IMPAIRMENT
Continuing operations (27 204) (50 462) (144 368)
Mining Services - Diesel Power (27 168) (49 341) (149 159)
Mining Services - Equipment sales and rental (1 768) 3 381 3 678
Total Mining Services (28 936) (45 960) (145 481)
Civils and Earthworks 7 443 355 5 172
Corporate head office (5 711) (4 857) (4 059)
Discontinued operations (964) (14 784) (28 838)
Aggregates and Quarries (964) (14 784) (28 838)
(28 168) (65 246) (173 206)
Notes to the interim financial results for the period ended 31 August 2015
This interim report should be read in conjunction with the Buildmax Group 2015 integrated report
which is available at www.buildmax.co.za.
Approval of the interim financial results
The 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 and Financial Pronouncements 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 interim results are consistent with those
used in the annual financial results for the year ended 28 February 2015, which have been
prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB). The 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 CA (SA).
These results were not reviewed by Grant Thornton Johannesburg Partnership.
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 26 November 2015.
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 future 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.
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
Group company secretary
GH Miller
Registered office
515 Pretoria Road, Fairleads, Benoni
(PO Box 11962, Rynfield, 1514)
Sponsor
Questco (Pty) Limited
2nd Floor, No 1 Montecasino Blvd,
Fourways, 2055
(PO Box 98956, Sloane Park, 2152)
Auditor and independent reporting accountant
Grant Thornton Johannesburg Partnership
Wanderers Office Park, 52 Corlett Drive
Illovo, 2196
Legal advisor
Webber Wentzel
10 Fricker Road, Illovo Boulevard
Illovo, 2196
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg, 2001
(PO Box 61763, Marshalltown, 2107)
27 November 2015
Date: 27/11/2015 03:56:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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