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BUILDMAX LIMITED - Interim results for period ended 31 August 2017

Release Date: 03/11/2017 15:34
Code(s): BDM     PDF:  
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Interim results for period ended 31 August 2017

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")

Unaudited consolidated financial results for the six months ended 31 August 2017
Condensed consolidated statement of financial position

                                                                                      Unaudited       Unaudited             Audited
                                                                                 31 August 2017  31 August 2016    28 February 2017
                                                                                          R'000           R'000               R'000
ASSETS
Non-current assets
Property, plant and equipment                                                           376 358         401 645             359 070
Deferred taxation                                                                        29 448          33 294              38 035
                                                                                        405 806         434 938             397 105
Current assets
Inventories                                                                              15 620          10 744              11 261
Trade and other receivables                                                             173 648         128 939              93 474
Taxation receivable                                                                       5 037           5 594               5 037
Bank and cash balances                                                                    2 844          24 774              12 438
                                                                                        197 149         170 050             122 210
Assets classified as held for sale                                                       16 389          13 979              15 003
Total assets                                                                            619 345         618 967             534 318

EQUITY AND LIABILITIES
Share capital and premium                                                             2 007 662       2 007 662           2 007 662
BEE IFRS 2 cost                                                                           1 195           1 195               1 195
Foreign currency translation reserve                                                     11 135           7 361              12 493
Accumulated loss                                                                    (1 823 126)     (1 816 298)         (1 835 717)
Attributable to owners of the parent                                                    196 866         199 920             185 633
Non controlling interest                                                               (51 860)        (49 726)           ( 54 094)
Total shareholders' interests                                                           145 006         150 194             131 539

Non-current liabilities
Interest-bearing liabilities                                                                  -           7 366               6 694
Term loan                                                                                47 422         123 915              84 194
Capitalised finance leases                                                               24 608           7 238                   -
Deferred taxation                                                                        13 102          14 618              13 102
                                                                                         85 132         153 137             103 990
Current liabilities
Interest-bearing liabilities                                                             28 329          28 189              27 649
Term loan                                                                                64 000          50 887              60 353
Capitalised finance leases                                                               19 962          10 929              12 977
Trade and other payables                                                                229 004         178 300             170 080
Taxation payable                                                                            171               -                 171
Bank overdrafts                                                                          40 003          41 612              20 957
                                                                                        381 468         309 918             292 187

Liabilities directly associated with assets held for sale                                 7 739           5 717               6 602
Total equity and liabilities                                                            619 345         618 967             534 318

Shares in issue at end of reporting period                                              178 782         178 782             178 782
Net asset value per share (cents)                                                         110.1           111.8               103.8

Condensed consolidated statement of comprehensive income
                                                                                      Unaudited       Unaudited             Audited
                                                                                 6 months ended  6 months ended          year ended
                                                                                 31 August 2017  31 August 2016    28 February 2017
                                                                                          R'000           R'000               R'000
Continuing operations
Revenue                                                                                 623 674         420 466             910 462

Operating profit before depreciation and impairment ("EBITDA")                           87 096          33 684              76 170

Depreciation                                                                           (48 114)        (43 281)            (84 015)
Operating profit/(loss) before impairment                                                38 982         (9 597)             (7 845)

Impairment of property plant and equipment                                                    -               -             (1 877)
Profit/(loss) before interest and taxation ("PBIT")                                      38 982        (12 551)             (9 722)

Net interest paid                                                                      (14 304)        (18 239)            (33 927)
Interest paid                                                                          (14 311)        (18 241)            (33 931)
Interest received                                                                             7               2                   4
Profit/(loss) before taxation ["PBT"]                                                    24 678        (30 790)            (43 649)

Taxation                                                                                (8 587)           6 778              13 374
Profit/(loss) for the period ["PAT"]                                                     16 091        (24 012)            (30 275)
After tax loss from discontinued operations (see note below)                            (1 267)         (3 425)            (17 994)
Profit/(loss) for the period                                                             14 825        (27 437)            (48 269)

Other comprehensive (loss)/income for the period:
Foreign currency translation reserve                                                    (1 358)           2 990               8 122
Total comprehensive profit/(loss) for the period                                         13 467        (24 447)            (40 147)

Profit/(loss) for the period attributable to:
Equity holders of the parent                                                             12 591        (22 799)            (42 218)
Non controlling interest                                                                  2 234         (1 683)             (6 051)
                                                                                         14 825        (27 437)            (48 269)

Total comprehensive profit/(loss) for the period attributable to:
Equity holders of the parent                                                            11 233         (22 764)            (34 096)
Non controlling interest                                                                 2 234          (1 683)             (6 051)
                                                                                        13 467         (24 447)            (40 147)

Reconciliation of headline profit/(loss)

                                                                                     Unaudited      Unaudited              Audited
                                                                                6 months ended 6 months ended           year ended
                                                                                31 August 2017 31 August 2016     28 February 2017
                                                                                         R'000          R'000                R'000
Continuing operations
Profit/(loss) for the period attributable to shareholders of Buildmax                  13 850        (19 374)             (25 991)
Adjusted for:

(Deduct profit) / Add back loss on disposal of property, plant and equipment               59           1 565                  (9)
 - Gross                                                                                   82           2 174                 (13)
 - Taxation                                                                              (23)           (609)                    4


Impairment of property, plant and equipment                                                 -               -                1 351
 - Gross                                                                                    -               -                1 877
 - Taxation                                                                                 -               -                (526)

Headline profit/(loss) attributable to ordinary shareholders                           13 909        (17 809)            ( 24 648)

                                                                                    Unaudited       Unaudited              Audited
                                                                               6 months ended  6 months ended           year ended
                                                                               31 August 2017  31 August 2016     28 February 2017
                                                                                        R'000           R'000                R'000
Discontinued operations
Loss for the period attributable to shareholders of Buildmax                          (1 259)        ( 3 425)             (16 227)
Adjusted for:

(Deduct profit) / Add back loss on disposal of property, plant and equipment             (25)           3 259                4 623
 - Gross                                                                                 (32)           4 178                5 926
 - Taxation                                                                                 7           (919)              (1 303)


Headline loss attributable to ordinary shareholders                                   (1 284)           (166)             (11 604)

Supplementary information
Profit/(Loss) per share
                                                                                    Unaudited       Unaudited             Audited
                                                                               6 months ended  6 months ended          year ended
                                                                               31 August 2017  31 August 2016    28 February 2017
                                                                                        cents           cents               cents
Headline earnings/(loss) per share (cents)                                               7.06         (10.09)             (20.28)
Continuing operations                                                                    7.78         (10.00)             (13.79)
Discontinued operations                                                                (0.72)          (0.09)              (6.49)

Basic earnings/(loss) per share (cents)                                                  7.05         (12.70)             (23.62)
Continuing operations                                                                    7.75         (10.80)             (14.54)
Discontinued operations                                                                (0.70)          (1.90)              (9.08)

Shares in issue (excluding treasury shares) ('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       Unaudited             Audited
                                                                               6 months ended  6 months ended          year ended
                                                                               31 August 2017  31 August 2016    28 February 2017
                                                                                        R'000           R'000               R'000
Operating activities
Profit/(loss) before taxation                                                          23 411        (31 723)            (62 106)
Working capital movement                                                             (25 609)        (19 439)             (1 057)
Impairments of property, plant & equipment, goodwill and intangible assets                  -               -               1 877
Other non-cash flow items                                                              49 726          57 274             115 663
Net interest paid                                                                      15 603          19 999              37 124
Cash generated by operations                                                           63 131          26 111              91 502
Net interest paid in cash                                                            (15 603)        (19 999)            (37 125)
Dividends paid                                                                              -           (200)               (200)
Taxation received                                                                           -             440               1 507
Cash generated by operating activities                                                 47 528           6 353              55 684
Investing activities
Purchase of property, plant and equipment
- Maintaining operations                                                             (68 391)         (2 567)            (16 043)
Environmental guarantee investment                                                      (249)           (315)               (159)
Proceeds on disposal of property plant and equipment                                       18          21 500              30 767
Net cash (utilised)/generated by investing activities                                (68 622)          18 618              14 565
Financing activities
Interest-bearing liabilities raised                                                    61 488               -                 402
Interest-bearing liabilities repaid                                                  (69 034)        (45 333)            (82 393)
Net cash utilised by financing activities                                             (7 546)        (45 333)            (81 991)

Net decrease in cash and cash equivalents                                            (28 640)        (20 362)            (11 742)
Cash and cash equivalents at the beginning of the year                                (8 519)           3 223               3 223
Cash and cash equivalents at the end of the year                                     (37 159)        (17 139)             (8 519)

Condensed consolidated statement of changes in equity

                                                                                                                                           Non           Total
                                            Share capital BEE IFRS2      Foreign currency   Accumulated   Attributable to owners   controlling   shareholders'   
                                          and premium pay     costs   translation reserve          loss            of the parent      interest        interest   
                                                    R'000     R'000                 R'000         R'000                    R'000         R'000           R'000   
Balances as at 29 February 2016                 2 007 662     1 195                 4 371   (1 793 299)                  219 929      (48 043)         171 886   
Total comprehensive loss for the year                                                                                                                           
Continuing Operations                                   -         -                     -      (19 374)                 (19 374)       (1 383)        (20 757)   
Discontinued Operations                                 -         -                 2 990       (3 425)                    (435)         (300)           (735)   
Dividends paid by Diesel Power Group                                                                                                                            
Holdings to its empowerment partner                     -         -                     -         (200)                    (200)             -           (200)   
Balances as at 31 August 2016                   2 007 662     1 195                 7 361   (1 816 298)                  199 920      (49 726)         150 194   
Total comprehensive loss for the year                                                                                                                           
Continuing Operations                                   -         -                     -       (6 617)                  (6 617)       (2 901)         (9 518)   
Discontinued Operations                                 -         -                 5 132      (12 802)                  (7 670)       (1 467)         (9 137)   
Balances as at 28 February 2017                 2 007 662     1 195                12 493   (1 835 717)                  185 633      (54 094)         131 539   
Total comprehensive profit/(loss) for                                                                                                                            
the year                                                                                                                                                         
Continuing Operations                                   -                                        13 850                   13 850         2 225          16 075   
Discontinued Operations                                 -         -               (1 358)       (1 259)                  (2 617)             9         (2 608)   
Balances as at 31 August 2017                   2 007 662     1 195                11 135   (1 823 126)                  196 866      (51 860)         145 006   


Condensed segmental analysis
                                                                                    Unaudited       Unaudited             Audited
                                                                               6 months ended  6 months ended          year ended
                                                                               31 August 2017  31 August 2016    28 February 2017
                                                                                        R'000           R'000               R'000

EXTERNAL REVENUE
Continuing Operations                                                                 623 674         420 466             910 462
Mining Services - Diesel Power                                                        622 054         420 466             910 462
Training services                                                                       1 620               -                   -

Discontinued operations                                                                 1 907          17 040              14 735
Africa open cast mining operations (Congo and Botswana)                                     -           9 241               2 984
Civils and Earthworks                                                                       -           5 710               7 749

Aggregates and Quarries                                                                 1 907           2 089               4 002

                                                                                      625 581         437 506             925 197

INTER-SEGMENT REVENUE
Continuing Operations                                                                  29 945           6 987              12 347
Mining Services - Equipment sales and rental                                           28 851           6 987              12 347
Training services                                                                       1 094               -                   -

Discontinued operations                                                                 6 318           9 241              14 797
Africa open cast mining operations (Congo and Botswana)                                 6 318           9 241              14 797

                                                                                       36 263          16 228              27 144   
EBITDA                                                                                      
Continuing Operations                                                                  87 096          33 684              76 170   
Mining Services - Diesel Power                                                         74 344          39 324              93 608   
Mining Services - Equipment sales and rental                                           18 907           2 605               5 245   
Total Mining services                                                                  93 251          41 930              98 853   
Training services                                                                       (190)               -                   -   
Corporate Head office                                                                 (5 965)         (8 246)            (22 683)   
Discontinued operations                                                                 2 953           2 524             (5 991)   
Africa open cast mining operations (Congo and Botswana)                                 3 563           3 837             (5 946)   
Civils and Earthworks                                                                       -         (1 020)                (15)   
Aggregates and Quarries                                                                 (610)           (293)                (30)   
                                                                                       90 049          36 208              70 179   
OPERATING PROFIT/(LOSS) BEFORE IMPAIRMENTS                                                                                          
Continuing Operations                                                                  38 982         (9 597)             (7 845)   
Mining Services - Diesel Power                                                         33 294         (3 537)              10 755   
Mining Services - Equipment sales and rental                                           11 916           2 185               4 162   
Total Mining services                                                                  45 210         (1 351)              14 917   
Training services                                                                       (263)               -                   -   
Corporate Head office                                                                 (5 965)         (8 246)            (22 762)

Discontinued operations                                                                    32         (2 127)            (15 258)   
Africa open cast mining operations (Congo and Botswana)                                   642           (814)            (15 213)   
Civils and Earthworks                                                                       -         (1 020)                (15)   
Aggregates and Quarries                                                                 (610)           (293)                (30)   

                                                                                       39 014        (11 724)            (23 103)
After tax loss from discontinued operations:
                                                                                    Unaudited       Unaudited             Audited
                                                                               6 months ended  6 months ended          year ended
                                                                               31 August 2017  31 August 2016    28 February 2017
                                                                                        R'000           R'000               R'000



Revenue                                                                                 1 907          17 040              14 735

Operating profit/(loss) before depreciation ("EBITDA")                                  2 953           2 524             (5 991)

Depreciation                                                                          (2 921)         (4 651)             (9 267)
Profit/(loss) before interest and taxation ["PBIT"]                                        32         (2 127)            (15 258)
Net interest paid                                                                     (1 299)         (1 760)             (3 198)   
Interest paid                                                                         (1 351)         (1 811)             (3 314)   
Interest received                                                                          52              51                 116   
Loss before taxation ["PBT"]                                                          (1 267)         (3 887)            (18 456)   
Taxation                                                                                    -             462                 462   
Loss for the year ["PAT"]                                                             (1 267)         (3 425)            (17 994)   


Commentary including outlook and prospects

Although the outlook for the global mining industry has improved since the end of 2016 with
increases in both the demand for and prices of commodities trading conditions will remain
challenging.

Global economic growth is expected to dip towards the end of 2017 but then gain momentum
during 2018 backed by growth in emerging economies like India and Indonesia.

In South Africa the publication of the amendments to the Mining Charter has created uncertainty
in the mining industry which resulted in stakeholders approaching the courts to stop the
implementation thereof. The impact on investments in the mining sector remains uncertain and
not promising.

The weaker trading conditions experienced during 2015 and the beginning of 2016 has taken a
heavy toll on the value of certain bulk commodities resulting in several of Buildmax's competitors
making business decisions to reduce their exposure to opencast mining.

Although the macro environment for opencast mining has substantially improved since November
2016, the contract mining business continues to be capital and labour intensive and currency
sensitive. There is very little if any pricing power. Our ability to grow is being hindered by:

-   A global shortage of new and quality second hand plant.

-   The weaker rand causing a considerable increase in the cost of new plant, constraining the
    company's ability to replace equipment when required in terms of the group's current
    replacement policy.

-   Securing affordable asset based funding to finance the group's replacement capital
    expenditure programmes.

-   Any delay in replacing the group's ageing mining equipment will result in an increase in repairs
    and maintenance and limit our ability to maximise operational efficiencies.

-   The annual escalation of mining rates not being adequate to match the:

        -   increase in cost of spares and new equipment;

        -   increase in salaries and wages; and

        -   operational overheads.

-   The ongoing liquidity crunch being experienced in the sector which is largely driven by bearish
    sentiment surrounding the prospects of mining in a highly regulated environment with
    unsettled legislation.

-   Increasing and ongoing demands compounded by community unrest in close proximity to the
    mining sites impacting productivity.

As reported previously, the company has not accounted for any possible benefit from the
liquidation process of Messina Copper Botswana Proprietary Limited in its interim results.
Unforseen delays in the finalisation of the liquidation process has resulted in a significant increase
in liquidation costs with a commensurate decrease in the calculated liquidation dividend. The
longer this matter continues, the smaller the distribution will be for the benefit of the unsecured
creditors.
Whilst the financial results for the period ended 31 August 2017 are an improvement on the
previous corresponding period, historically the second half of the financial year has always been
challenging due to the December holidays and the rainy season. This year, the challenges are
exacerbated by the uncertainity of clients extending or renewing our existing contracts on the
back of uncertain extensions with them agreeing new contracts with Eskom.

Financial

The financial results for the interim period ended 31 August 2017 are summarised below:
-   Revenue from continuing operations increased by 48.3% to R623.7 million.
-   An improvement of 158.6% in EBITDA from continuing operations from R33.7 million to
    R87.1 million.
-   Continuing operations reported an operating profit of R39 million for the first half of the 2018
    financial year compared to an operating loss of R9.6 million for the previous reporting
    period.
-   Improved headline earnings from continuing operations of 7.1 cents per share compared to
    a loss of 10.0 cents per share.
-   Improved basic earnings from continuing operations of 7.0 cents per share compared to a
    loss of 10.8 cents per share.
-   Decline in headline loss from discontinued operations of 0.7 cents per share compared to a
    loss of 0.1 cents per share.
-   Improved basic loss from discontinued operations of 0.7 cents per share compared to a loss
    of 1.9 cents per share.
-   Tangible net asset value and net asset value per share increased from 103.8 cents at the
    end of February 2017 to 110.1 cents at the end of the interim reporting period.
-   Net debt reduced by R23.9 million from R245.4 million to R221.5 million.
-   Cash generation by operating activities improved by R41.0 million from R6.6 million to R47.6
    million.
-   Diesel Power Group Holdings Proprietary Limited ("Diesel Power") met its banking
    covenants.

Going concern

These unaudited interim financial results have been prepared on the basis of accounting policies
applicable to a going concern.

As at 31 August 2017, the group's current liabilities exceed current assets of which 58.8% is due
to the short-term portion of its debt.

The group's opencast mining contracts are all delivering positive operating profit and predictable
positive cash flows. Management's attention is now focused on ensuring that these contracts
deliver acceptable operating margins and returns on invested capital considering each project's
risk profile. This is an on-going process that could result in terminating contracts that do not meet
this criteria and redeploying its assets to contracts that meet minimum hurdle rates.
Management's focus will be on cost control, production efficiencies and the preservation of cash.

The board of directors of Buildmax ("the board") is satisfied that the group is a going concern and
has therefore applied the going concern principle in preparation of these interim financial results.

Safety and quality management

The mining division has maintained and boasts a proud track record of more than 53 million
fatality free injury hours and almost 6 million fatality free shifts. Safety is a core value of the group
and is integral to the way in which it conducts its business. This is demonstrated by its
commitment to high standards and assignment of specific responsibilities for safety. The value the
group places on the safety of employees and sub-contractors is reflected in the safety vision,
"Committed to Efficient Zero Harm Production".

People

Diesel Power reached an agreement on market related conditions with the National Union of Mine
Workers on a new 5-year substantive agreement which will apply from 1 March 2018 until
28 February 2023.

Transformation

Diesel Power has a 42.34% black ownership recognition with 8.98% exercisable voting rights in
the hands of black women.

Management acknowledge that transformation is a business imperative and have identified the
steps that need to be taken in order to increase Diesel Power's BEE shareholding in excess of
51% black ownership. It is anticipated that this process will be completed by 28 February 2018.

Governance

Buildmax complies with the Companies Act, No 71 of 2008, the Listings Requirements of the JSE
Limited and King IV Report on Corporate Governance for South Africa, 2016.

Dividend

There was no interim dividend declared by Buildmax.

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 underlying business.

On behalf of the board:

Colin Wood
Chairman

Justin Colling
CEO

Christie Els
CFO
Benoni
3 November 2017

Notes to the unaudited interim financial results for 6 months ended 31 August 2017

This interim report should be read in conjunction with the Buildmax group 2017 integrated report
which is available at www.buildmax.co.za.

Approval of the interim financial results

The unaudited 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, the Financial
Pronouncements as issued by the Financial Reporting Standards Council, the Listings
Requirements of the JSE Limited and the Companies Act, No 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 2017, 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 and the financial statements were compiled under the supervision of Mr CS Els, Chief
Financial Officer, CA (SA). These interim financial results have not been reviewed by the
company's auditors.

The interim financial results have been prepared on a going concern basis as the board believe
that the company and the group will continue to be in operation for the foreseeable future.

The interim financial results were approved by the board on 1 November 2017.

Estimates and contingencies

Management makes estimates and judgments 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 judgments can only approximate the actual results. Estimates and
judgments 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.

Changes to the Board
Save for the changes to the Board announced in the abridged audited financial statements for the
year ended 28 February 2017 released on SENS on 31 May 2017, there were no other changesduring the six-month 
period. 

Assets held for sale and discontinued operations 
Diesel Power Botswana, Diesel Power Congo SARLU, the Aggregates and Quarries business, and the civils and earthworks 
division have been reported as discontinued operations.

Aggregates and quarries (discontinued operation)
Shareholders are referred to the SENS announcement issued on 11 September 2017, 10 July
2015 and the "Notice of Annual General Meeting 2015" dated 31 August 2015 which incorporated
a category one circular disclosure relating to the disposal by Buildmax, through its wholly-owned
subsidiary, BAQ, of its interests in certain mining rights ("Mining Rights") and related properties to
Raumix. Shareholders are hereby advised that Ministerial consent to the cession and transfer of
the Mining Rights in terms of section 11 of the Mineral and Petroleum Resources Development
Act, No. 28 of 2002, as amended from time to time, has been obtained. Accordingly, all conditions
precedent to the sale of the Mining Rights have been fulfilled and the sale is now unconditional.
The parties will now commence with the transfer of the rehabilation funds from BAQ and its
subsidiaries (excluding Letamo quarry) to Raumix.

Directors
CJM Wood*# (Chairman)
J Colling (CEO)
CS Els (CFO)
CB Brayshaw*#
MD Lamola*#
G Montgomery*
BT Ngcuka*
#Independent
*Non-executive


Company secretary
GH Miller

Registered office
Reef Insurance Brokers Building
2 Mowbray Avenue
Benoni
1500
(PO Box 11962, Rynfield, 1514)

Sponsor
Sasfin Capital (a member of the Sasfin group)

Auditors
Grant Thornton Johannesburg Partnership
Registered Auditors and Chartered Accountants (SA)
52 Corlett Drive, Wanderers Office Park
Illovo, 2196

Transfer secretaries
Computershare Investor Services (Proprietary) Limited
2nd floor, Rosebank Towers
13 Bierman Avenue
Rosebank, 2196
(PO Box 61763, Marshalltown, 2107)

wwww.buildmax.co.za







Date: 03/11/2017 03:34:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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