BDM
BDM - Buildmax Limited - Unaudited consolidated interim results for the six
months ended 31 August 2009
Buildmax Limited
("Buildmax" or "the group")
(Registration no. 1995/012209/06)
Share Code: BDM & ISIN code ZAE000011250
Unaudited consolidated interim results for the six months ended 31 August 2009
Abridged consolidated statement of financial position
Unaudited at Restated Audited at
31 August Unaudited at 28 February
2009 31 August 2008 2009
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and 1 368 545 1 234 251 1 324 615
equipment
Goodwill 810 578 1 066 021 810 578
Other intangible assets 213 238 234 996 224 117
Deferred taxation 4 316 1 905 2 216
2 396 677 2 537 173 2 361 526
Current assets
Inventories 94 113 92 988 90 911
Trade and other receivables 349 010 330 109 318 589
Taxation receivable 5 686 1 080 1 364
Bank and cash balances 219 652 55 928 326 957
668 461 480 105 737 821
Total assets 3 065 138 3 017 278 3 099 347
EQUITY AND LIABILITIES
Share capital and premium 1 732 382 1 536 144 1 732 382
Cash flow hedging reserve (5 543) - (5 572)
(Accumulated loss)/retained (58 240) 101 110 (91 653)
earnings
Ordinary shareholders' 1 668 599 1 637 254 1 635 157
interests
Outside shareholders' 3 464 9 785 3 604
interests
Total shareholders' 1 672 063 1 647 039 1 638 761
interests
Non-current liabilities
Interest-bearing liabilities 430 116 530 302 525 082
Derivative instruments 2 852 - 4 076
Vendor amount payable 38 482 51 764 50 000
Deferred taxation 205 584 180 245 194 307
677 004 762 311 773 465
Current liabilities
Interest-bearing liabilities 338 722 307 200 358 121
Derivative instruments 4 846 - 3 663
Vendor amount payable 14 083 - 4 526
Trade and other payables 348 824 259 193 264 836
Taxation payable 6 074 41 535 15 942
Bank overdrafts 3 492 - 40 033
716 041 607 928 687 121
Total equity and liabilities 3 065 138 3 017 278 3 099 347
Net asset value per share 160,7 181,5 157,5
(cents)
Abridged consolidated cash flow statement
Unaudited Restated
six months Unaudited six
ended months ended Audited year
31 August 31 August 2008 ended
2009 R'000 28 February
R'000 2009
R'000
Operating activities
Net profit/(loss) before 47 460 122 174 (54 584)
taxation ("PBT")
Non-cash flow items and 152 830 44 913 405 998
changes in working capital
Net interest paid 41 356 44 325 98 504
Cash generated from 241 646 211 412 449 918
operations
Net interest paid in cash (40 882) (44 325) (94 676)
Taxation paid (19 201) (4 811) (36 934)
Cash flows from operating 181 563 162 276 318 308
activities
Investing activities
Acquisition of businesses - (337 773) (338 701)
Settlement of vendor - (64 012) (64 012)
liabilities in acquired
businesses
Purchase of property, plant
and equipment
- Expanding operations (117 745) (327 096) (505 636)
- Maintaining operations (25 480) (24 080) (30 938)
Proceeds on disposal of 10 219 23 001 42 306
property, plant and
equipment
Cash flows from investing (133 006) (729 960) (896 981)
activities
Financing activities
Net proceeds from issue of - 300 475 496 713
shares
Interest-bearing liabilities 111 386 369 886 521 277
raised
Interest-bearing liabilities (230 707) (194 228) (299 872)
repaid
Cash flows from financing (119 321) 476 133 718 118
activities
Net (decrease)/increase in (70 764) (91 551) 139 445
cash and cash equivalents
Cash and cash equivalents at 286 924 16 901 16 901
the beginning of the period
Cash acquired as part of
business combinations
- 130 578 130 578
Cash and cash equivalents at 216 160 55 928 286 924
the end of the period
Segmental analysis
Unaudited Pro-forma
six Unaudited Audited
months six months year ended
ended ended 28
31 August 31 August February
% of 2009 % of 2008 % of 2009
total R'000 total R'000 total R'000
REVENUE
Mining Services 76,0 728 004 67,6 571 749 70,0 1 142 955
Construction 24,0 229 314 32,4 273 993 30,0 490 956
Materials
100,0 957 318 100,0 845 742 100,0 1 633 911
EBITDA
Mining Services 84,3 157 585 78,2 199 459 84,0 380 707
Construction 15,7 29 298 21,8 55 735 16,0 72 744
Materials
100,0 186 883 100,0 255 194 100,0 453 451
OPERATING PROFIT
BEFORE INTEREST,
TAXATION,
AMORTISATION, LOSS
ON DISPOSAL OF
BUSINESS AND
IMPAIRMENT
Mining Services 80,2 81 783 76,4 146 010 82,1 262 003
Construction 19,8 20 137 23,6 45 075 17,9 57 305
Materials
100,0 101 920 100,0 191 085 100,0 319 308
PROFIT BEFORE
TAXATION,
AMORTISATION, LOSS
ON DISPOSAL OF
BUSINESS AND
IMPAIRMENT
Mining Services 75,4 45 695 68,3 95 979 80,3 177 228
Construction 24,6 14 869 31,7 44 494 19,7 43 576
Materials
100,0 60 564 100,0 140 473 100,0 220 804
Abridged consolidated statement of comprehensive income
Unaudited Pro-forma Restated Audited
six months Unaudited Unaudited year ended
ended six months six months 28
31 August ended ended February
2009 31 August 31 August 2009
R'000 2008 2008 R'000
R'000 R'000
Revenue 957 318 845 742 755 336 1 633 911
Operating profit before 186 883 255 194 230 838 453 451
interest, taxation,
depreciation,
amortisation and
impairment ("EBITDA")
Depreciation (84 963) (64 109) (55 273) (134 143)
Operating profit before 101 920 191 085 175 565 319 308
interest, taxation,
amortisation, loss on
disposal of business and
impairment
Amortisation of (10 879) (10 879) (9 066) (19 945)
intangible assets
Operating profit before 91 041 180 206 166 499 299 363
interest, taxation, loss
on disposal of business
and impairment
Loss on disposal of (2 225) - - -
business
Impairment of goodwill - - - (255 443)
Profit before interest 88 816 180 206 166 499 43 920
and taxation ("PBIT")
Interest received 9 704 7 267 5 834 17 378
Finance costs (51 060) (57 879) (50 159) (115 882)
Net profit/(loss) before 47 460 129 594 122 174 (54 584)
taxation ("PBT")
Taxation (14 187) (34 358) (32 607) (54 793)
Net profit/(loss) after 33 273 95 236 89 567 (109 377)
taxation
Other comprehensive
income
Unrealised loss due to 40 - - (7 739)
change in fair value of
cash flow hedge
Taxation (11) - - 2 167
Total comprehensive 33 302 95 236 89 567 (114 949)
income/(loss) for the
year
Net profit/(loss) after
taxation attributable
to:
Equity holders of 33 413 95 253 89 550 (103 213)
Buildmax
Outside shareholders' (140) (17) 17 (6 164)
interests
33 273 95 236 89 567 (109 377)
Total comprehensive
income/(loss) for the
year attributable to:
Equity holders of 33 442 95 253 89 550 (108 785)
Buildmax
Outside shareholders' (140) (17) 17 (6 164)
interests
33 302 95 236 89 567 (114 949)
Abridged consolidated statement of changes in equity
Share Cashflow (Accumulated Outside Total
capital hedging loss)/ shareholders' R'000
and reserve retained interest
premium R'000 earnings R'000
R'000 R'000
Balance as at 42 266 - 11 560 - 53 826
29 February
2008
Shares issued 1 493 878 - - - 1 493 878
and to be
issued
Total - - 89 550 17 89 567
comprehensive
income for the
year
Outside - - - 9 768 9 768
shareholders'
interests in
subsidiaries
acquired
Balance as at 1 536 144 - 101 110 9 785 1 647 039
31 August 2008
Shares issued 196 238 - - - 196 238
Total - (5 572) (192 763) (6 181) (204 516)
comprehensive
loss for the
year
Balance as at 1 732 382 (5 572) (91 653) 3 604 1 638 761
28 February
2009
Total - 29 33 413 (140) 33 302
comprehensive
income/(loss)
for the year
Balance as at 1 732 382 (5 543) (58 240) 3 464 1 672 063
31 August 2009
Reconciliation of headline earnings and core headline earnings
Unaudited Pro-forma Restated Audited
six months Unaudited Unaudited year ended
ended six months six months 28 February
31 August ended ended 2009
2009 31 August 31 August R'000
R'000 2008 2008
R'000 R'000
Net profit/(loss) for the 33 413 95 253 89 550 (103 213)
year attributable to
equity holders of Buildmax
Adjusted for:
Loss on disposal of 2 225 - - -
business
- Gross 2 225 - - -
- Taxation - - - -
Loss/(profit) on disposal 2 962 (8 994) (5 621) (8 004)
of property, plant and
equipment
- Gross 4 114 (10 586) (6 606) (9 746)
- Taxation (1 152) 1 592 985 1 742
Impairment of goodwill - - 248 819
- Gross - - - 255 443
- Outside shareholders' - - - (6 624)
interest
Headline earnings 38 600 86 259 83 929 137 602
attributable to ordinary
shareholders
Adjusted for:
Amortisation of intangible 7 632 7 631 6 360 13 991
assets
- Gross 10 879 10 879 9 066 19 945
- Taxation (3 046) (3 046) (2 538) (5 585)
- Outside shareholders' (201) (202) (168) (369)
interest
Deemed interest incurred 474 2 194 2 194 4 956
on vendor loan
Core headline earnings 46 706 96 084 92 483 156 549
attributable to ordinary
shareholders
Supplementary information
Unaudited Pro-forma Restated Audited year
six months Unaudited Unaudited ended
ended six months six months 28 February
31 August ended ended 2009
2009 31 August 31 August
2008 2008
Headline earnings per 3,7 9,5 11,0 15,8
share (cents)
Core headline earnings 4,5 10,6 12,1 18,0
per share (cents)
Basic earnings/(loss) 3,2 10,5 11,7 (11,9)
per share (cents)
Shares in issue ('000)
- At end of the period 1 040 700 907 366 907 366 1 040 700
- Weighted 1 040 700 907 366 763 106 868 570
Notes to the unaudited consolidated interim results
The format of the financial statements presented has been revised to bring it in
line with the revisions to IAS 1 Presentation of Financial Statements. The group
also adopted IFRS 8 Operating Segments which requires that the segments
presented are consistent with those used internally by management to make
operating decisions. Certain operating segments in the Construction Materials
strategic business unit have been aggregated as they are similar in nature and
have similar economic characteristics. Comparative information has been restated
where necessary. The adoption of these standards and amendments did not impact
the group's financial results.
The previous reported interim results for the period ended 31 August 2008 were
restated due the recognition and amortisation of intangible assets identified
during February 2009 when the provisionally determined fair value of assets,
liabilities and contingent liabilities acquired as a result of the acquisitions
of Diesel Power Open Cast Mining (Pty) Limited and the Buildco group were
finalised.
Commentary
Introduction
The directors of Buildmax present the unaudited interim results for the six
months ended 31 August 2009 ("interim period"). Compared to the prior interim
period the international and local business environment has deteriorated
significantly which, combined with industrial action at Diesel Power Open Cast
Mining ("Diesel Power"), the group's largest subsidiary, negatively impacted
Buildmax's results.
Group Profile
Buildmax is a leading opencast coal mining contractor and supplier of
construction materials in South Africa and is listed on the JSE in the
`Construction and Materials' sector. Buildmax operates through two strategic
business units ("SBU's") namely:
Mining Services
This SBU comprises Diesel Power and Vukuza Earth Works ("Vukuza") and is the
major contributor to group revenue and profitability. The companies are opencast
coal mining and bulk earthworks contractors and together are approved service
providers to the major coal mining and construction groups in the country.
Construction Materials
This SBU quarries, manufactures and distributes a range of aggregates, bricks
and blocks as well as various building materials to the construction industry.
Financial Results
The acquisitions of Diesel Power and the Buildco group became effective in April
2008 and are therefore included for only five months in the unaudited
comparative period results. To assist in meaningful comparison to the
comparative period on a like-for-like basis, unaudited pro forma historical
results are included in this announcement ("pro forma historical results").
Compared to the pro forma historical results the group reported a 13% increase
in revenue to R957 million from R846 million.
Net profit before tax, amortisation of intangibles and loss on disposal of a
business ("NPBT") was R60,6 million, which is 57% lower than the pro forma NPBT
of R140,5 million.
Core HEPS and HEPS
Core HEPS is defined as headline earnings per share ("HEPS") excluding non-cash
flow items relating to amortisation of intangibles and the implied interest
incurred on a deferred vendor consideration as required in terms of
International Financial Reporting Standards.
Core HEPS of 4,5 cents and HEPS of 3,7 cents are 58% and 61% lower than the pro
forma historical core HEPS and HEPS of 10,6 cents and 9,5 cents, respectively.
Earnings per share ("EPS") of 3,2 cents is 70% lower than the pro forma
historical EPS of 10,5 cents.
Net debt and cash
Buildmax reduced its net debt position from R650,8 million at February 2009 to
R605,2 million at the end of the interim period. Cash generated from operations
of R242 million is 15% higher than the cash generated from operations in the
comparative period of R211 million.
Operations
Mining Services
Mining Services delivered revenue growth of 27% but was unable to convert the
higher revenue into increased profits. Industrial action by a significant
portion of the workforce at Diesel Power severely disrupted production and
resulted in strike activity during the months of May and June. Lengthy lead
times for replacement employees resulting from induction programmes further
hampered July's production. However, Diesel Power's operations returned to full
production at the start of August.
The loss in revenue due to the industrial action and the downtime in July
approximated R95 million, while fixed costs remained ongoing and additional HR
costs were incurred.
The credit crisis and economic slowdown led to the decision late in the previous
year to defer capital expenditure where possible in favour of balance sheet
protection. Amongst other effects this resulted in running the plant fleet for
longer at Vukuza, which in turn resulted in reduced margins due to increased
repair, maintenance and running costs, particularly increases in the number of
sub-contractors and the hiring of additional mining equipment.
Operating margins came under pressure due to intensified competition from hard
rock mining contractors and difficulty in passing on cost increases to certain
clients following a softening in the global demand for coal.
Notwithstanding the above factors, no contracts were lost during the interim
period and the Mining Services SBU succeeded in extending its tenure on a number
of large contracts.
The performance of Diesel Power's bulk earthworks division was disappointing as
a result of delays in a number of contracts and the general downturn in
construction activity.
Capital Expenditure
In line with group strategy, capital expenditure of R122 million was incurred
for the interim period, compared to R323 million in the comparative period. The
majority of the capital expenditure was expansionary and committed to in prior
periods. The SBU is reviewing the reliability of its existing fleet and is
considering selective capital expenditure based on plant efficiencies, cost
considerations and production demands.
Construction Materials
Construction Materials reported a decrease in revenue of 16% primarily due to
the severe decline in the residential sector. With the exception of Aggregates
and Quarries, volumes of materials dropped by approximately 30%. The worse than
expected drop in demand has forced management to restructure the businesses
further.
The increase in the product mix to target infrastructure projects led to a 5%
year-on-year increase in volumes in Aggregates & Quarries. However, competition
on public sector contracts restricted margins, and the decline in private sector
demand continued to outweigh the benefits of the increased product range.
Notwithstanding major restructuring Bricks & Blocks continued to underperform
especially in the Western Cape. The delay in the commissioning of the second
kerb plant at Cast Industries, which was originally scheduled for July 2009,
further negatively impacted performance with both kerb plants not operational
until October 2009. Building Materials, comprising most of the historical
businesses of the original Buildmax group, was significantly affected by the
decline in the steel price and reduced demand. During the interim period Ticktin
Timbers was disposed of at a R2,2 million loss in line with the group's strategy
to focus on core businesses.
Capital expenditure
The Construction Materials SBU incurred capital expenditure of R21 million
during the interim period which included the second kerb plant at Cast
Industries and capital expenditure by the Aggregates & Quarries division to
increase its product range.
B-BBEE
Black shareholding in the group currently stands at over 16%. Buildmax was
independently verified as a `Level 6' contributor to B-BBEE and aims to achieve
`Level 4' with a number of priority initiatives being undertaken. To this end
formal B-BBEE policies have been reviewed and improved across the group.
Safety, Health, Environment, Quality (SHEQ)
Buildmax remains committed to the highest standards of SHEQ. However, in August
2009 a fatal accident occurred on a Vukuza site. The loss of life is tragic and
a thorough investigation into the incident has been completed. From September
2009 a new SHEQ Management structure for the Mining Services SBU has been
introduced, with key objectives being to implement and obtain - in line with the
standards and achievements of Diesel Power - the OHSAS18001:2007 and
ISO9001:2008 accreditations at Vukuza.
Prospects
Trading conditions remain challenging. Provided there is no further
deterioration in the local and international economic environment and absenting
abnormally high rainfall the group is optimistic that the results for the second
half of the year will be stronger than for the first half. Buildmax continues to
be cash generative and capital expenditure will largely be restricted to
acquiring items which are at the end of their economic life. Funding for the
capital expenditure will be a combination of the group's own cash resources and
finance leases.
Mining Services
Since returning to full production Diesel Power has traded in line with
expectations.
Despite short-term volatility in the demand for coal, increased sustainable
demand is anticipated over the long-term. Eskom continues to advocate long-term
growth in its demand for coal and additional export markets are opening up for
South African coal producers, particularly the Indian thermal coal market.
The SBU is well positioned to benefit from increased long-term demand for coal
and other opencast coal mining services.
Construction Materials
Management will continue to concentrate on strict working capital management and
cost control for maximum efficiency. Cast Industries has successfully
commissioned its second kerb plant and has a strong order book absorbing the
additional production capacity.
General trading conditions are expected to remain subdued until there is a
recovery in private sector spending, particularly in the residential market. The
SBU will continue to target infrastructure-related projects wherever
geographically viable.
Interim Dividend
It is group policy to consider the payment of a dividend annually. No interim
dividend has been declared.
Appreciation
We greatly appreciate the tenacity, commitment and hard work of our entire team
in the face of difficult conditions. Thank you for your unflagging enthusiasm
and effort. Thank you also to our advisors, customers, clients and stakeholders
for your loyal support.
Basis of Preparation and Accounting Policies
The results for the interim period have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), specifically IAS 34:
Interim Financial Reporting, and comply with the requirements of the South
African Companies Act, 1973 and the Listings Requirements of the JSE Limited.
Except for the adoption of the new and revised accounting standards the
principal accounting policies of the group are consistent with those applied in
the audited consolidated annual financial statements for the year ended 28
February 2009. The interim results have not been audited or reviewed by the
group's auditors.
Paul de Klerk Herman Fourie
Chief Executive Officer Chief Financial Officer
9 November 2009
Directors: PJ de Klerk (Chief Executive Officer); HP Fourie (Chief Financial
Officer); CB Brayshaw*; MD Lamola*; D Mack*; A Maharaj*; M Matisonn*;
R Munitz*; BT Ngcuka*; C Wood*
*Non-executive director
Independent
Registered office: Buildmax Limited, Unit 19, Cambridge Office Park, 5 Bauhinia
Street, Highveld Park, Centurion (Postnet Suite 435, Private Bag X108,
Centurion, 0046)
Sponsor: Java Capital (Pty) Limited
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001 (PO Box 61763, Marshalltown, 2107)
Company secretary: Probity Business Services (Pty) Limited, 3rd Floor, The Mall
Offices, 11 Cradock Avenue, Rosebank, 2196 (PO Box 85392, Emmarentia, 2029)
www.buildmax.co.za
Date: 09/11/2009 16:08:04 Produced by the JSE SENS Department.
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