Wrap Text
Unaudited interim results for the six months ended 31 August 2018
Raubex Group Limited
(Incorporated in the Republic of South Africa)
Registration number 2006/023666/06
Share code: RBX
ISIN code: ZAE000093183
("Raubex" or the "Group")
Unaudited interim results for the six months ended 31 August 2018
Salient features
- Revenue down 4,0% to R4,48 billion (H1 2018: R4,67 billion)
- Operating profit down 57,4% to R157,8 million (H1 2018: R370,6 million)
- HEPS down 72,8% to 35,7 cents per share (H1 2018: 131,1 cents per share)
- Cash flow from operations down 36,8% to R293,3 million (H1 2018: R464,3 million)
- Capex spend of R197,5 million (H1 2018: R253,2 million)
- Order book of R8,41 billion (H1 2018: R7,52 billion)
- Interim dividend of 12 cents per share declared
Rudolf Fourie, CEO of Raubex Group, said:
"We have continued to experience very challenging conditions in the South African
construction industry, particularly in the road construction sector, where the low volume of
work experienced during the first half of the year has resulted in the Group's asphalt and
bitumen supply operations being rightsized in order to adjust to the current level of demand.
"The materials division, which has for many years diversified the Group from exposure to
the road construction sector, has been the main contributor to earnings for the period with
stable conditions in the mining services operations supported by some volume growth from
the Group's commercial quarry operations.
"The infrastructure division has made good progress in the execution of projects in
Cameroon and is well positioned to participate in the roll out of the renewable energy
projects in South Africa, where execution has now commenced on secured work."
Commentary
Financial overview
Revenue decreased 4,0% to R4,48 billion and operating profit decreased 57,4% to
R157,8 million from the corresponding prior period.
Profit before tax decreased 59,7% to R143,0 million (H1 2018: R354,7 million) with the
effective tax rate increasing to 33,0% (H1 2018: 28,1%). The increase in tax rate is due to
the effect of non-tax deductible expenditure on a relatively low taxable income base as
well as a higher contribution towards taxable income from subsidiaries operating in foreign
tax jurisdictions with higher tax rates.
Group operating margin decreased to 3,5% (H1 2018: 7,9%).
Earnings per share decreased 73,4% to 35,7 cents (H1 2018: 134,0 cents) with headline
earnings per share decreasing 72,8% to 35,7 cents (H1 2018: 131,1 cents).
Cash generated from operations decreased 36,8% to R293,3 million (H1 2018:
R464,3 million) before finance charges and taxation.
Net finance costs decreased to R14,0 million (H1 2018: R15,9 million) due to slightly higher
net cash balances during the period. Total non-cash finance costs increased to R6,8 million
(H1 2018: R6,1 million).
The Group has maintained a strong balance sheet during the period considering the
challenging conditions in the construction sector. Working capital has been closely
managed with a focus on strict credit control and inventory management in a period of
elevated customer credit risk. Trade and other receivables increased by 3,1% to
R1,84 billion (H1 2018: R1,78 billion) while inventories decreased 13,0% to R565,6 million
(H1 2018: R649,9 million). The decrease in inventories is mainly attributable to a reduction
in bitumen stock due to lower road maintenance activity as well as the sale and transfer of
residential units by Raudev in their Alto Ridge development in Woodwind Estates.
Construction contracts in progress decreased 3,0% to R332,9 million (H1 2018:
R343,2 million). Trade and other payables increased 5,2% to R1,74 billion (H1 2018:
R1,65 billion).
Capital expenditure on property, plant and equipment decreased 22,0% to R197,5 million
(H1 2018: R253,2 million). Net capital expenditure decreased to R174,4 million (H1 2018:
R182,2 million).
Borrowings decreased 16,2% to R730,9 million (H1 2018: R871,8 million).
The Group had a net cash outflow for the period of R209,9 million and total cash and cash
equivalents at the end of the period of R894,6 million.
Operational review
Materials Division
The materials division comprises three main disciplines including (i) commercial quarries,
(ii) contract crushing and (iii) materials handling and processing services for the mining
industry.
The materials division diversifies the Group from the construction industry and has been
the main contributor to Group operating profit with 121,5% of total operating profit for the
period attributable to this division, mitigating the losses reported in the road surfacing and
road construction divisions.
Stable conditions have been experienced in the mining services sector where operations
have been predominantly focused on the commodities of diamonds, gold, coal, copper,
platinum and iron ore during the period.
Commercial quarry operations have experienced an overall increase in volumes of ~15%
off a low base from the comparative prior period with site specific pockets of improvement.
Contract crushing operations continue to experience weak demand in line with the low
level of activity in the overall construction sector.
Revenue for the division increased 10,2% to R1,52 billion (H1 2018: R1,38 billion) while
operating profit increased by 11,8% to R191,8 million (H1 2018: R171,5 million).
The divisional operating profit margin increased to 12,6% (H1 2018: 12,4%).
The division incurred capital expenditure of R149,0 million during the period (H1 2018:
R173,9 million).
The division has a secured order book of R1,76 billion (H1 2018: R1,98 billion).
Construction Division
The construction division comprises two main disciplines including (i) road surfacing and
rehabilitation and (ii) road construction and earthworks.
Road surfacing and rehabilitation
This division specialises in the manufacturing and laying of asphalt, chip and spray, surface
dressing, enrichments and slurry seals and includes the operations of Tosas, a company
specialising in the manufacture and distribution of value added bituminous products
throughout southern Africa.
The division is primarily dependent on the South African road construction sector and is
directly and indirectly, through asphalt and bitumen supply, exposed to government
expenditure on road maintenance in the country. During the period under review there was
a significant reduction in the volume of work brought out to tender by the South African
National Roads Agency SOC Limited ("SANRAL"). The road surfacing and maintenance
teams were able to partially replace their order book with work on roads operated by
concessionaires. However, the subsidiaries which supply asphalt and bitumen to Raubex
contracts and the external road maintenance market experienced a significant decrease in
earnings due to lower volumes as a result of the absence of SANRAL work. The volume of
asphalt sold decreased by ~35% from the comparative prior period.
Due to the lower volume of work, the division embarked on rightsizing initiatives during the
period to reduce excess capacity. The division has, however, retained some excess capacity
in anticipation of SANRAL resuming its budget spend and will review its position and
market conditions in the second half of the year. The rightsizing initiatives have resulted in
280 employees being retrenched in the division with once off retrenchment costs of
R13,0 million incurred.
Revenue for the division decreased 23,1% to R1,36 billion (H1 2018: R1,77 billion) and
operating profit decreased 115,8% to an operating loss of R18,3 million (H1 2018:
R115,6 million operating profit).
The divisional operating profit margin decreased to an operating loss margin of 1,3%
(H1 2018: 6,5% operating profit margin).
The division incurred capital expenditure of R25,9 million during the period (H1 2018:
R60,9 million).
The division's secured order book decreased slightly to R2,15 billion (H1 2018: R2,23 billion).
Road construction and earthworks
This division includes the road and civil infrastructure construction operations focused on
the key areas of new road construction and heavy road rehabilitation.
The division is primarily dependent on the South African road construction sector and is
exposed to government expenditure on road construction and earthworks in the country.
As is the case in the road surfacing and rehabilitation division, the significant reduction in
the volume of work brought out to tender by SANRAL including also the delay in award of
contracts from provincial government has had a significant impact on the division's results.
Limited rightsizing has taken place in this division in anticipation of an improvement in the
order book both locally and in other African jurisdictions where projects are in advanced
stages of negotiation. Rightsizing has resulted in 29 employees being retrenched in the
division with once off retrenchment costs of R1,8 million incurred.
The period results have also been affected by community unrest in certain areas impacting
production efficiencies as well as a loss making contract, which reported an operating loss
of R19,4 million for the period. This contract has now been completed.
Revenue for the division decreased 35,0% to R541,9 million (H1 2018: R834,1 million) and
operating profit decreased 166,5% to an operating loss of R42,5 million (H1 2018:
R63,9 million operating profit).
The divisional operating profit margin decreased to an operating loss margin 7,8% (H1 2018:
7,7% operating profit margin).
The division incurred capital expenditure of R5,6 million during the period (H1 2018:
R8,6 million).
The division has a secured order book of R1,65 billion (H1 2018: R1,73 billion) which
includes R791,6 million relating to the Link 8000 contracts in Zambia where work remains
suspended due to payment delays from the client.
Infrastructure Division
The infrastructure division specialises in disciplines outside of the road construction sector,
including energy (with a specific focus on renewable energy), rail, telecommunications,
pipeline construction and housing infrastructure and commercial building projects.
The division has experienced favourable conditions during the period and has continued to
expand its affordable housing and commercial building operations. Good progress was
made by Raubex Renovo in the execution of projects in Cameroon and this company has
adopted a conservative approach to revenue recognition until these projects are more
advanced. Although no work was executed in the Renewable Energy Independent Power
Producer Procurement Programme ("REIPPPP"), work has now been secured which is set
to commence in the second half of the financial year.
Limited rightsizing took place in the division resulting in 32 employees being retrenched
with once off retrenchment costs of R0,6 million incurred.
Revenue for the division increased 55,5% to R1,06 billion (H1 2018: R678,6 million) and
operating profit increased 37,5% to R26,9 million (H1 2018: R19,5 million).
The divisional operating profit margin decreased to 2,5% (H1 2018: 2,9%).
The division incurred capital expenditure of R17,1 million during the period (H1 2018:
R9,8 million).
The division has a secured order book of R2,86 billion (H1 2018: R1,59 billion).
International
The Group's international operations consist of materials supply and mining services as
well as construction activities which are located in the African jurisdictions of Botswana,
Cameroon, Namibia and Zambia. The Group has also established a footprint in Western
Australia, through the acquisition of Westforce Construction.
The Westforce acquisition has bedded down well and has delivered results in line with
management expectations for the period. This acquisition has supported growth and
diversified the Group's international revenue streams.
In Namibia, the materials division services diamond and copper mining operations where
results have been stable during the period. Commercial quarry operations in Botswana
have continued to perform well.
In Cameroon, Raubex Renovo has made good progress with the construction of a hotel for
the Onomo Hotel Group as well as the Douala Grand Mall development.
In Zambia, the two Link 8000 road contracts remain suspended. These contracts have been
included in the order book for an amount of R791,6 million as it is the intention to complete
these contracts once the client, the Zambian Road Development Agency, settle their
outstanding account. Solutions to the funding impasse continue to be sought.
International revenue increased 59,6% to R863,5 million (H1 2018: R541,1 million) while
operating profit increased 11,0% to R121,9 million (H1 2018: R109,8 million).
Operating profit margins decreased to 14,1% (H1 2018: 20,3%).
The international order book stands at R2,0 billion (H1 2018: R2,16 billion) and is included
in the individual divisional order books.
Prospects
The Group's secured order book increased 11,9% to R8,41 billion (H1 2018: R7,75 billion)
with 23,7% of the order book representing contracts outside of South Africa in the rest of
Africa and Australia. The order book for SANRAL decreased 61,4% to R562,7 million
(H1 2018: R1,46 billion). This work has been replaced by work on road infrastructure
managed by concessionaires as well as an increase in the order book from private clients
mainly in the affordable housing and commercial building sector as well as work secured in
the REIPPPP.
The Minister of Energy established policy certainty with regards to the country's renewable
energy programme on 4 April 2018 after signing the power purchase agreements for 27
REIPPPP projects. The Group is well positioned to benefit from the roll out of this work and
has secured two projects to the value of R522 million which have reached financial close
and are now included in the order book. A number of other projects are in the process of
being negotiated which will further support the prospects of the infrastructure division over
the medium term. Work on the secured REIPPPP projects will commence in the second
half of the financial year.
The diversified operations and revenue streams from the materials division will continue to
support Group earnings. Stable conditions are expected in the operations exposed to the
mining sector in the second half of the year and it is anticipated that the positive progress
made by government with the new mining charter will establish policy certainty and
encourage more investment in the South African mining sector, which will indirectly support
the mining services offered by the materials division over the medium term. The materials
division will continue to pursue strategic, bolt-on acquisitions in the commercial quarry
space in line with its geographical expansion strategy for this business.
If SANRAL work returns to more normalised levels, there should be a significant
improvement in the road maintenance and road construction operations. Overall conditions
in the South African construction sector are expected to remain challenging and the
short-term outlook is uncertain with the sector very much under pressure from the slow roll
out of general infrastructure spend in the country and the current lower volume of work from
SANRAL. To mitigate the uncertain local conditions the Group is looking to the rest of Africa
for growth and some large project opportunities are being negotiated in both southern and
east African jurisdictions including the Beitbridge border post upgrade in Zimbabwe and
work related to the LAPSSET corridor in Kenya, which, if successful, will supplement the
current order book over the medium term.
The market in Western Australia is supportive of growth and Raubex will continue to explore
this market and look to grow the recently acquired business of Westforce Construction at
a measured pace leveraging off the skills within the Group.
With conditions in the South African construction sector restrained, the Group is expecting
a challenging second half of the year. The Group will continue to focus on maintaining its
balance sheet strength and cash flow management while looking for opportunities to further
diversify revenue streams to restore medium-term growth.
Dividend declaration
The directors have declared a gross interim cash dividend from income reserves of 12
cents per share on 29 October 2018 for the six-month period ended 31 August 2018. The
salient dates for the payment of the dividend are as follows:
Last day to trade cum dividend Tuesday, 20 November 2018
Commence trading ex dividend Wednesday, 21 November 2018
Record date Friday, 23 November 2018
Payment date Monday, 26 November 2018
No share certificates may be dematerialised or rematerialised between Wednesday,
21 November 2018 and Friday, 23 November 2018, both dates inclusive.
In terms of dividends tax ("DT"), the following additional information is disclosed:
- The local DT rate is 20%.
- The number of ordinary shares in issue at the date of this declaration is 181 750 036.
- The dividend to utilise for determining the DT due is 12 cents per share.
- The DT amounts to 2,4 cents per share.
- The net local dividend amount is 9,6 cents per share for shareholders liable to pay the DT.
- Raubex Group Limited's income tax reference number is 9370/905/151.
In terms of the DT legislation, the DT amount due will be withheld and paid over to the
South African Revenue Service by a nominee company, stockbroker or Central Securities
Depository Participant (collectively "Regulated Intermediary") on behalf of shareholders. All
shareholders should declare their status to their Regulated Intermediary, as they may
qualify for a reduced DT rate or exemption.
Group income statement
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Revenue 4 483 609 4 668 172 8 542 247
Cost of sales (4 052 954) (4 055 369) (7 416 511)
Gross profit 430 655 612 803 1 125 736
Other income 12 017 18 827 40 133
Other gains/(losses) - net 15 415 9 893 14 383
Administrative expenses (300 259) (270 961) (508 339)
Operating profit 157 828 370 562 671 913
Finance income 23 742 29 718 59 495
Finance costs (37 790) (45 631) (91 245)
Share of (loss)/profit of investments
accounted for using the equity method (758) 76 477
Profit before income tax 143 022 354 725 640 640
Income tax expense (47 185) (99 767) (187 956)
Profit for the period 95 837 254 958 452 684
Profit for the period attributable to:
Owners of the parent 64 855 242 612 423 573
Non-controlling interest 30 982 12 346 29 111
Basic earnings per share (cents) 35,7 134,0 233,5
Diluted earnings per share (cents) 35,6 134,0 233,5
Group statement of comprehensive income
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Profit for the period 95 837 254 958 452 684
Other comprehensive income
for the period, net of tax
Currency translation differences 22 727 3 170 (14 284)
Actuarial gain on post-employment
benefit obligations - - 374
Total comprehensive income for
the period 118 564 258 128 438 774
Comprehensive income for the period
attributable to:
Owners of the parent 86 310 245 782 410 356
Non-controlling interest 32 254 12 346 28 418
Total comprehensive income
for the period 118 564 258 128 438 774
Calculation of diluted earnings per share
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Profit attributable to owners
of the parent entity 64 855 242 612 423 573
Weighted average number of ordinary
shares in issue ('000) 181 680 181 088 181 381
Adjustments for:
Shares deemed issued for
no consideration
(share options) ('000) 471 - -
Weighted average number of ordinary
shares for diluted earnings
per share ('000) 182 151 181 088 181 381
Diluted earnings per share (cents) 35,6 134,0 233,5
Calculation of headline earnings per share
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Profit attributable to owners
of the parent entity 64 855 242 612 423 573
Adjustments for:
Profit on sale of property, plant
and equipment (60) (11 089) (17 392)
Goodwill written off - 2 799 2 799
Loss of control of subsidiary - - 767
Total tax effects of adjustments 17 3 105 4 870
Basic headline earnings 64 812 237 427 414 617
Weighted average number of
shares ('000) 181 680 181 088 181 381
Headline earnings per share (cents) 35,7 131,1 228,6
Diluted headline earnings per
share (cents) 35,6 131,1 228,6
Group statement of financial position
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 2 507 223 2 384 804 2 410 165
Intangible assets 1 098 372 881 255 947 806
Investment in associates and
joint ventures 129 850 49 433 111 789
Deferred income tax assets 57 765 46 083 39 614
Non-current inventories 59 314 69 030 64 533
Non-current trade and other
receivables 65 871 90 854 81 915
Total non-current assets 3 918 395 3 521 459 3 655 822
Current assets
Inventories 506 312 580 876 600 636
Construction contracts in progress
and retentions 332 852 343 216 280 933
Trade and other receivables 1 772 130 1 691 701 1 489 575
Current income tax receivable 31 475 30 563 28 617
Cash and cash equivalents 894 554 1 045 331 1 084 088
Total current assets 3 537 323 3 691 687 3 483 849
Total assets 7 455 718 7 213 146 7 139 671
EQUITY
Share capital 1 817 1 817 1 817
Share premium 2 059 688 2 059 688 2 059 688
Treasury shares (1 218) (1 218) (1 218)
Other reserves (1 224 689) (1 203 099) (1 219 859)
Retained earnings 3 209 939 3 094 471 3 200 300
Equity attributable to owners
of the parent 4 045 537 3 951 659 4 040 728
Non-controlling interest 243 726 135 938 157 240
Total equity 4 289 263 4 087 597 4 197 968
LIABILITIES
Non-current liabilities
Borrowings 396 594 492 295 411 284
Provisions for liabilities
and charges 102 879 79 055 82 780
Deferred income tax liabilities 326 017 307 600 342 036
Other financial liabilities 114 441 141 196 86 980
Total non-current liabilities 939 931 1 020 146 923 080
Current liabilities
Trade and other payables 1 740 079 1 654 037 1 530 581
Borrowings 334 263 379 502 365 272
Current income tax liabilities 65 382 54 617 31 680
Provisions for liabilities
and charges 10 160 - 15 823
Other financial liabilities 76 640 17 247 75 267
Total current liabilities 2 226 524 2 105 403 2 018 623
Total liabilities 3 166 455 3 125 549 2 941 703
Total equity and liabilities 7 455 718 7 213 146 7 139 671
Group statement of cash flows
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Cash flows from operating
activities
Cash generated from operations 293 324 464 310 1 039 786
Interest received 23 742 29 718 59 495
Interest paid (30 990) (39 555) (74 908)
Income tax paid (68 495) (91 908) (177 950)
Net cash generated from operating
activities 217 581 362 565 846 423
Cash flows from investing activities
Purchases of property, plant
and equipment (197 509) (253 187) (441 286)
Proceeds from sale of property,
plant and equipment 23 064 70 950 95 960
Acquisition of subsidiaries (99 270) (32 889) (81 737)
Loan granted to associates and
joint ventures (17 019) (270) (37 698)
Net cash used in investing
activities (290 734) (215 396) (464 761)
Cash flows from financing
activities
Proceeds from borrowings 204 272 223 132 360 921
Repayment of borrowings (274 551) (302 135) (542 815)
Dividends paid to owners of
the parent (59 954) (81 756) (163 513)
Dividends paid to non-controlling
interests (4 811) (11 888) (14 855)
Disposal of interest in a subsidiary - - 4 423
Acquisition of interest in a subsidiary (1 700) (33 685) (41 185)
Sale of treasury shares - 14 14
Net cash used in financing activities (136 744) (206 318) (397 010)
Net decrease in cash and cash
equivalents (209 897) (59 149) (15 348)
Cash and cash equivalents at
the beginning of the period 1 084 088 1 103 618 1 103 618
Effects of exchange rates on cash and
cash equivalents 20 363 862 (4 182)
Cash and cash equivalents at the end
of the period 894 554 1 045 331 1 084 088
Group statement of changes in equity
Share Share Treasury Other
capital premium shares reserves
R'000 R'000 R'000 R'000
Balance at 1 March 2017 1 817 2 059 688 (23 664)(1 179 094)
Treasury shares issued in
terms of equity-settled
share option scheme - - 22 446 -
Share option reserve
utilised during the period - - - (27 175)
Non-controlling interest
arising on business
combination - - - -
Acquisition of
non-controlling interest - - - -
Profit for the period - - - -
Other comprehensive income
for the period - - - 3 170
Dividends paid - - - -
Balance at 31 August 2017 1 817 2 059 688 (1 218)(1 203 099)
Non-controlling interest arising
on business combination - - - -
Acquisition of non-controlling
interest - - - -
Disposal of interest to
non-controlling interest - - - -
Loss of control of subsidiary - - - -
Profit for the period - - - -
Other comprehensive
income for the period - - - (16 760)
Dividends paid - - - -
Balance at 28 February 2018 1 817 2 059 688 (1 218)(1 219 859)
Change in accounting policy - - - -
Restated balance at
1 March 2018 1 817 2 059 688 (1 218)(1 219 859)
Unutilised share option
reserve reversed - - - (27 267)
Share option reserve - - - 982
Non-controlling interest
arising on business
combination - - - -
Acquisition of non-
controlling interest - - - -
Profit for the period - - - -
Other comprehensive
income for the period - - - 21 455
Dividends paid - - - -
Balance at 31 August 2018 1 817 2 059 688 (1 218)(1 224 689)
Total
attributable
to owners of Non-
Retained the parent controlling Total
earnings company interest equity
R'000 R'000 R'000 R'000
Balance at 1 March 2017 2 938 678 3 797 425 152 300 3 949 725
Treasury shares issued in
terms of equity-settled
share option scheme (22 432) 14 - 14
Share option reserve
utilised during the period 27 175 - - -
Non-controlling interest
arising on business
combination - - 7 059 7 059
Acquisition of
non-controlling interest (9 806) (9 806) (23 879) (33 685)
Profit for the period 242 612 242 612 12 346 254 958
Other comprehensive income
for the period - 3 170 - 3 170
Dividends paid (81 756) (81 756) (11 888) (93 644)
Balance at 31 August 2017 3 094 471 3 951 659 135 938 4 087 597
Non-controlling interest arising
on business combination - - 10 050 10 050
Acquisition of non-controlling
interest 2 215 2 215 (2 215) -
Disposal of interest to
non-controlling interest 4 036 4 036 387 4 423
Loss of control of subsidiary - - (25) (25)
Profit for the period 180 961 180 961 16 765 197 726
Other comprehensive
income for the period 374 (16 386) (693) (17 079)
Dividends paid (81 757) (81 757) (2 967) (84 724)
Balance at 28 February 2018 3 200 300 4 040 728 157 240 4 197 968
Change in accounting policy (22 617) (22 617) - (22 617)
Restated balance at
1 March 2018 3 177 683 4 018 111 157 240 4 175 351
Unutilised share option
reserve reversed 27 267 - - -
Share option reserve - 982 - 982
Non-controlling interest
arising on business
combination (4) (4) 60 835 60 831
Acquisition of non-
controlling interest 92 92 (1 792) (1 700)
Profit for the period 64 855 64 855 30 982 95 837
Other comprehensive
income for the period - 21 455 1 272 22 727
Dividends paid (59 954) (59 954) (4 811) (64 765)
Balance at 31 August 2018 3 209 939 4 045 537 243 726 4 289 263
Group segmental analysis
Road
Road construction
surfacing and and
Materials rehabilitation earthworks
R'000 R'000 R'000
Operating segments
31 August 2018
Segment revenue 1 523 750 1 362 695 541 915
Operating profit/(loss) 191 770 (18 318) (42 485)
Margin 12,6% (1,3%) (7,8%)
31 August 2017
Segment revenue 1 382 835 1 772 675 834 056
Operating profit 171 545 115 626 63 859
Margin 12,4% 6,5% 7,7%
28 February 2018
Segment revenue 2 583 677 3 250 728 1 332 325
Operating profit 366 428 222 399 67 063
Margin 14,2% 6,8% 5,0%
Infrastructure Consolidated
R'000 R'000
Operating segments
31 August 2018
Segment revenue 1 055 249 4 483 609
Operating profit/(loss) 26 861 157 828
Margin 2,5% 3,5%
31 August 2017
Segment revenue 678 606 4 668 172
Operating profit 19 532 370 562
Margin 2,9% 7,9%
28 February 2018
Segment revenue 1 375 517 8 542 247
Operating profit 16 023 671 913
Margin 1,2% 7,9%
Local International Consolidated
R'000 R'000 R'000
Geographical information
31 August 2018
Segment revenue 3 620 080 863 529 4 483 609
Operating profit 35 976 121 852 157 828
Margin 1,0% 14,1% 3,5%
31 August 2017
Segment revenue 4 127 072 541 100 4 668 172
Operating profit 260 796 109 766 370 562
Margin 6,3% 20,3% 7,9%
28 February 2018
Segment revenue 7 429 769 1 112 478 8 542 247
Operating profit 483 463 188 450 671 913
Margin 6,5% 16,9% 7,9%
Employee benefit expense
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Employee benefit expense in the
income statement consists of:
Salaries, wages and contributions 1 171 374 1 129 122 2 173 553
Share options granted to employees 982 - -
Total employee benefit expense 1 172 356 1 129 122 2 173 553
Capital expenditure and depreciation
Unaudited Unaudited Audited
six months six months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Capital expenditure for the period 197 509 253 187 441 286
Depreciation for the period 195 490 188 274 357 280
Amortisation of intangible assets
for the period 5 662 1 406 4 077
Notes
Basis of preparation
These condensed consolidated interim financial statements have been prepared under the
supervision of the Financial Director, JF Gibson CA(SA), in accordance with International
Financial Reporting Standards ("IFRS"), 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 and the
requirements of the South African Companies Act 71 of 2008 and the JSE Listings
Requirements.
A number of International Financial Reporting Standards, Interpretations and amendments
as issued by the International Accounting Standards Board ("IASB") became applicable to
the Group, effective 1 March 2018, which have required changes to our accounting policies.
The following standards had an impact on the Group:
- IFRS 9: Financial Instruments (IFRS 9); and
- IFRS 15: Revenue from Contracts with Customers (IFRS 15).
Refer to the "Changes in accounting policies" note below for further details of the impact
the adoption of these standards have on the Group. The other new standards,
interpretations and amendments that became applicable to the Group during the current
reporting period did not have a significant impact on the Group.
Except for those mentioned above, the principal accounting policies used in the preparation
of the unaudited results for the period ended 31 August 2018 are consistent with those
applied for the year ended 28 February 2018 and for the unaudited results for the six months
ended 31 August 2017 in terms of IFRS.
Business combinations
Acquisitions made during the period
Metadynamics (Pty) Ltd ("Metadynamics")
On 1 March 2018, the Group effectively acquired 49% of Metadynamics, through its
subsidiary OMV (Pty) Ltd who acquired 70% of the shareholding, for a purchase price of
R18,2 million settled in cash. An additional consideration is payable contingent on certain
profit outcomes over the course of the next four years, being 1 March 2018 to 28 February
2022. Metadynamics adds value to various products through calcining and milling
processes in Gauteng that produces value added gypsum and various other products. The
acquisition is in line with the Group's strategy to expand geographically and also provides
an opportunity to diversify its product mix.
The revenue included in the consolidated income statement since 1 March 2018 contributed
by Metadynamics was R20,6 million with a net profit contribution of R2,2 million over the
same period.
Details of the net assets acquired, purchase consideration and goodwill are set out below:
R'000
Consideration
Cash 18 200
Contingent consideration 24 851
Total consideration 43 051
Property, plant and equipment 46 572
Inventories 3 290
Trade receivables 8 272
Cash and cash equivalents (929)
Deferred tax liability (6 177)
Trade and other payables (24 691)
Total identified net assets 26 337
Less: Non-controlling interest (51%) (13 432)
Goodwill attributable to owners of the parent 30 146
Total 43 051
Purchase consideration settled in cash 18 200
Less: Cash and cash equivalents in the
business combination acquired 929
Cash outflow on acquisition for cash flow statement 19 129
Donkerhoek Quarry (Pty) Ltd ("Donkerhoek")
On 18 April 2018, the Group effectively acquired 70% of Donkerhoek, through its subsidiary
Raumix Aggregates (Pty) Ltd, for a purchase price of R31,1 million settled in cash.
Donkerhoek is a commercial quarry operating in Northern Gauteng supplying aggregates
to the construction market. The acquisition is in line with the Group's strategy to expand its
commercial quarry business geographically.
The revenue included in the consolidated income statement since 18 April 2018 contributed
by Donkerhoek was R19,4 million with a net loss contribution of R4,9 million over the same
period.
Details of the net assets acquired, purchase consideration and goodwill are set out below:
R'000
Consideration
Cash 31 142
Total consideration 31 142
Property, plant and equipment 30 400
Intangible asset - mining right 15 500
Inventories 6 891
Trade and other receivables 4
Deferred tax liability (2 015)
Income tax payable (13)
Rehabilitation provision (8 305)
Other provisions (344)
Total identified net assets 42 118
Less: Non-controlling interest (30%) (12 635)
Goodwill attributable to owners of the parent 1 659
Total 31 142
Purchase consideration settled in cash 31 142
Less: Cash and cash equivalents in the business
combination acquired -
Cash outflow on acquisition for cash flow statement 31 142
Transkei Quarries (Pty) Ltd ("Transkei Quarries")
On 3 April 2018, the Group effectively acquired 49% of Transkei Quarries, through its
subsidiary Raumix Aggregates (Pty) Ltd, for a net purchase price of R49 million settled in
cash. An additional consideration is payable contingent on certain profit outcomes over the
course of the next four years, being 3 April 2018 to 28 February 2022. Transkei Quarries
operates two commercial quarries operating in Mthatha and Butterworth supplying
aggregates to the construction market. The acquisition is in line with the Group's strategy
to expand its commercial quarry business geographically.
The revenue included in the consolidated income statement since 3 April 2018 contributed
by Transkei was R53,2 million with a net profit contribution of R7,3 million over the same
period.
Details of the net assets acquired, purchase consideration and goodwill are set out below:
R'000
Consideration
Cash 49 000
Contingent consideration 12 183
Total consideration 61 183
Property, plant and equipment 36 265
Intangible asset - mining right 75 300
Inventories 8 405
Consumables 1 486
Borrowings (24 581)
Deferred tax liability (18 266)
Rehabilitation provision (10 063)
Provisions (381)
Total identified net assets 68 165
Less: Non-controlling interest (51%) (34 764)
Goodwill attributable to owners of the parent 27 782
Total 61 183
Purchase consideration settled in cash 49 000
Less: Cash and cash equivalents in the business
combination acquired -
Cash outflow on acquisition for cash flow statement 49 000
Changes in accounting policies
The Group has adopted the following new International Financial Reporting Standards as
issued by the IASB, which were effective for the Group from 1 March 2018:
- IFRS 9: Financial Instruments (IFRS 9); and
- IFRS 15: Revenue from Contracts with Customers (IFRS 15).
Adoption of IFRS 9
IFRS 9 replaces the provisions of IAS 39 and was adopted by the Group without restating
comparative information in accordance with the transitional provisions included in the
standard (IFRS 9, paragraph 7.2.15 and 7.2.26). The adoption of IFRS 9 had the following
impact on the Group:
- Change in classification of the measurement categories for financial instruments.
- Change from the IAS 39 incurred loss model to the expected credit loss ("ECL") model to
calculate impairments of financial instruments.
Details of the impact are provided below:
Classification, initial recognition and subsequent measurement
IFRS 9 introduces new measurement categories for financial assets. The measurement
categories of IFRS 9 and IAS 39 are illustrated in the table below:
IAS 39* IFRS 9*
Loans and receivables Financial assets at amortised cost
* Only those categories of financial assets applicable to the Group have been disclosed
above.
Effective 1 March 2018, the Group classifies its financial assets in each of the IFRS 9
measurement categories according to the Group's business model for managing the
financial asset together with the cash flow characteristics of the financial asset. The
reclassification into the new measurement categories of IFRS 9 did not have a significant
impact on the Group.
Financial liabilities are measured at amortised cost except for those designated as at fair
value through profit and loss, which are measured at fair value.
Impairment
Prior to the adoption of IFRS 9 the Group's methodology for calculating the allowance for
credit losses was based on an incurred loss model in terms of IAS 39, where at the end of
each reporting period the Group assessed whether any objective evidence of impairment
existed. Had any evidence existed at the time of consideration, an allowance for credit
losses was calculated on the financial asset at amortised cost as the difference between
the financial asset's carrying value and the present value of the estimated future cash flows
discounted at the original effective interest rate (its recoverable amount).
Under IFRS 9, the Group revised its methodology for calculating the allowance for credit
losses on its financial assets to an expected credit loss model.
The Group has two types of financial assets that are subject to IFRS 9's new expected
credit loss model:
- Trade receivables, including receivables under finance leases; and
- Contract assets relating to construction contracts in progress and retentions.
The Group applies the IFRS 9's simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been
grouped together based on their similar credit risk characteristics and the days past due.
The contract assets relate to retentions and unbilled work in progress on construction
contracts which have substantially the same risk characteristics as the trade receivables
for the same types of contracts. The Group has therefore concluded that the expected loss
rates for trade receivables are a reasonable approximation of the loss rates for the contract
assets.
The expected loss rates are based on the revenue payment profiles over a 12-month period
ended 1 March 2018 together with the corresponding historical credit losses experienced
within these periods per customer classification. The historical loss rates are adjusted to
reflect current and forward-looking information on macroeconomic factors affecting the
ability of the customers to settle the receivables. The Group has identified the GDPs,
inflation rates, prime lending rates, US dollar exchange rates and the credit ratings of the
countries in which it operates to be the most relevant factors, and has accordingly adjusted
the historical loss rates based on expected changes in these factors.
Impact on the Group's financial results due to the adoption of IFRS 9
Balance sheet*
Balance at Balance at
28 February IFRS 9 1 March
2018 effect 2018
R'000 R'000 R'000
Assets
Non-current assets
Trade and other receivables 81 915 (2 409) 79 506
Deferred income tax assets 39 614 8 795 48 409
Current assets
Trade and other receivables 1 489 575 (16 873) 1 472 702
Construction contracts in progress
and retentions 280 933 (12 130) 268 803
Equity
Retained earnings 3 200 300 (22 617) 3 177 683
* Only those line items affected by IFRS 9 have been included above.
The Group's opening retained earnings as at 1 March 2018 are as follows:
R'000
Closing balance 28 February 2018 3 200 300
Increase in cost of sales (31 412)
Increase in deferred tax due to impairment provisions 8 795
Opening retained earnings 1 March 2018 3 177 683
Adoption of IFRS 15
In accordance with the transition paragraphs of IFRS 15, the Group decided to recognise
the cumulative effect of initially applying IFRS 15 as an adjustment to opening retained
earnings under the modified retrospective restatement method, where applicable.
The adoption of IFRS 15 from 1 March 2018 has resulted in changes to the accounting
policies with regards to the process followed in order to recognise revenue from the various
sources applicable to the Group. However, these changes have not resulted in the need to
restate any prior period figures.
The Group's revenue is primarily generated from the following sources:
- Contracting revenue
- Commercial quarry revenue
- Bitumen and emulsion products and services
- Plant hire revenue
- Property sales and development fees
IFRS 15 establishes a comprehensive framework for determining whether, how much and
when revenue is recognised. It replaced IAS 18: Revenue, IAS 11: Construction Contracts
and related interpretations. Under IFRS 15, revenue is recognised at an amount that reflects
the consideration to which an entity expects to be entitled for transferring goods or services
to a customer based on the satisfaction of performance obligations.
Revenue is measured based on the consideration specified in a contract with a customer
and excludes amounts collected on behalf of third parties. The Group recognises revenue
when it transfers control over a product or services to a customer.
The nature of the changes in the accounting policies were as follows:
Previous accounting
Revenue treatment under IAS 11 New accounting
type Description and IAS 18 treatment under IFRS 15
Contracting Revenue generated Revenue from The Group recognises
revenue through construction construction contracts revenue over time by
contracts, where the was recognised on the measuring the progress
Group's performance stage of completion towards the satisfaction
creates or enhances method. of performance
customer controlled obligations stipulated
assets. in the construction
contracts.
Progress measured using
the costs incurred to date
over the total estimated
construction cost of
the contract.
Commercial Revenue is generated Revenue from the sale The Group recognises
quarry through the sales of of goods was recognised revenue at a point in
revenue aggregates to the when significant risks time, being when the
construction market. and rewards of ownership customer takes
were passed to the possession of the
customer. goods.
Bitumen Revenue generated Revenue was The Group recognises
and emulsion through the sales of recognised when revenue at a point in
products and bitumen products and significant risks and time, being when the
services the provision of rewards of ownership customer takes
bitumen-related of the goods have possession of the products;
services. passed to the buyer. or
The Group recognises
revenue over time by
measuring the progress
towards the satisfaction of
performance obligations for
bitumen services provided.
Plant hire Revenue generated Revenue from plant The Group recognises
revenue from plant hired out hire is recognised on revenue over time by
to customers. a percentage completion measuring the
basis over time based progress towards
on operating hours. the satisfaction of
performance
obligations.
Progress measured
using operating hours
for which the customer
received and consumed
the benefits provided.
Property sales Property sales: Property sales: Property sales:
and development Revenue generated Revenue was Revenue recognised
fees from the sale of recognised when risks at a point in time once
property. and rewards of ownership ownership has transferred.
were transferred.
Development fees: Development fees: Development fees:
Revenue receivable These fees were Revenue recognised
for project management recognised on the over time based on the
services, development stage of completion satisfaction of
fees and subsidies method. performance obligations
receivable for the stipulated in the
development of housing. contracts with customers.
Events after the reporting period
There were no material events after the reporting period to report up to the date of
preparation of these interim Group financial statements.
On behalf of the board
F Kenney
Chairman
RJ Fourie
Chief Executive Officer
JF Gibson
Financial Director
29 October 2018
Company information
Directors
RJ Fourie
JF Gibson
NF Msiza
F Kenney#
LA Maxwell*
BH Kent*
SR Bogatsu*
# Non-executive Chairman
* Independent non-executive
Company secretary
Ms GM Chemaly
Registered office
Building No 1
Highgrove Office Park
50 Tegel Avenue
Centurion
South Africa
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg
2001
South Africa
Auditors
PricewaterhouseCoopers Inc.
Sponsor
Investec Bank Limited
www.raubex.com
Raubex Group
Rudolf Fourie
+27 (0) 51 406 2000
James Gibson
+27 (0) 12 648 9400
Investor relations
investor.relations@raubex.com
Date: 29/10/2018 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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