BDM
BDM - Buildmax - Audited Financial Results For The Year Ended 28 February
2009
Buildmax Limited
(Registration no. 1995/012209/06)
Share Code BDM ISIN code ZAE000011250
("Buildmax" or "the group")
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2009
ABRIDGED CONSOLIDATED INCOME STATEMENT
Audited Unaudited Audited
year ended Pro-forma eleven
28 February year ended months
2009 29 February ended
R'000 2008 29 February
R'000 2008
R'000
Revenue 1 633 911 1 210 948 111 543
Earnings before interest,
taxation, depreciation,
amortisation and impairment
("EBITDA") 453 451 277 221 6 012
Depreciation (134 143) (83 110) (1 894)
Operating profit before
interest, taxation, amortisation
and impairment 319 308 194 112 4 118
Amortisation of intangible
assets (19 945) (19 945) -
Operating profit before
interest, taxation and
impairment 299 363 174 167 4 118
Impairment of goodwill (255 443) - -
Profit before interest and
taxation ("PBIT") 43 920 174 167 4 118
Interest received 17 378 18 890 1 110
Interest paid (115 882) (53 275) (247)
Net (loss)/profit before
taxation (54 584) 139 781 4 981
Taxation (54 793) (41 476) 1 849
Net (loss)/profit after taxation (109 377) 98 306 6 830
Attributable to:
Equity holders of Buildmax (103 213) 100 353 6 830
Outside shareholders' interests (6 164) (2 047) -
(109 377) 98 306 6 830
Supplementary information
Headline earnings per share
(cents) 15,8 11,9 16,2
Core headline earnings per share
(cents) 18,0 14,2 16,2
Basic (loss)/earnings per share
(cents) (11,9) 12,0 16,3
Shares in issue (`000)
- at end of the year 1 040 700 907 366 41 806
- weighted 868 570 835 236 41 806
ABRIDGED CONSOLIDATED BALANCE SHEET
Audited at Audited at
28 February 29 February
2009 2008
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 1 324 615 12 288
Goodwill 810 578 -
Other intangible assets 224 117 -
Prepayments - 2 811
Deferred taxation 2 216 2 186
2 361 526 17 285
Current assets
Inventories 90 911 22 586
Trade and other receivables 318 589 18 921
Taxation receivable 1 364 271
Bank and cash 326 957 16 901
737 821 58 679
Total assets 3 099 347 75 964
EQUITY AND LIABILITIES
Share capital and premium 1 732 382 42 266
Cash flow hedging reserve (5 572) -
(Accumulated loss)/retained earnings (91 653) 11 560
Ordinary shareholders' interests 1 635 157 53 826
Outside shareholders' interests 3 604 -
Total shareholders' interests 1 638 761 53 826
Non-current liabilities
Interest-bearing liabilities 529 158 -
Deferred taxation 194 307 421
723 465 421
Current liabilities
Current portion of interest-bearing
liabilities 361 784 19
Trade and other payables 264 836 21 481
Vendor liability 54 526 -
Bank overdraft 40 033 -
Taxation payable 15 942 217
737 121 21 717
Total equity and liabilities 3 099 347 75 964
Net asset value per share (cents) 157,5 128,8
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
year ended eleven months
ended
28 February 29 February
2009 2008
R'000 R'000
Operating activities
Net (loss)/profit before taxation (54 584) 4 981
Non-cash flow items and changes in working
capital 405 998 1 316
Net interest paid/(received) per income
statement 98 504 (863)
Cash generated from operations 449 918 5 434
Net interest (paid)/received in cash (94 676) 863
Taxation paid (36 934) (474)
Cash flows from operating activities 318 308 5 823
Investing activities
Payments on acquisition of businesses (338 701) -
Settlement of vendor liabilities in
acquired businesses (64 012) -
Purchase of property, plant and equipment
- Expanding operations (505 636) -
- Maintaining operations (30 938) (522)
Proceeds from disposal of property, plant
and equipment 42 306 70
Cash flows from investing activities (896 981) (452)
Financing activities
Net proceeds from shares issued 496 713 -
Interest-bearing liabilities raised 521 277 738
Interest-bearing liabilities repaid (299 872) (29)
Cash flows from financing activities 718 118 709
Net increase in cash and cash equivalents 139 445 6 080
Cash and cash equivalents at the beginning
of the period 16 901 10 821
Cash acquired as part of business
combinations 130 578 -
Cash and cash equivalents at the end of
the period 286 924 16 901
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Share
capital Cash (Accumulated Outside
and flow loss)/ shareholders'
premium hedging retained interests Total
R'000 reserve earnings R'000 R'000
R'000 R'000
Restated as at
31 March 2007 42 266 - 4 730 - 46 996
Net profit for
the
eleven months - - 6 830 - 6 830
At 29 February 42 266 - 11 560 - 53 826
2008
Shares issued 1 690 116 - - - 1 690 116
Outside
shareholders'
interests in
the Buildco
group acquired - - - 9 768 9 768
Unrealised
hedging losses - (5 572) - - (5 572)
Net loss for
the year - - (103 213) (6 164) (109 377)
At 28 February 1 732 382 (5 572) (91 653) 3 604 1 638 761
2009
RECONCILIATION OF HEADLINE EARNINGS AND CORE HEADLINE EARNINGS
Audited Unaudited Audited
year ended Pro-forma eleven
year ended months
28 February 29 February ended
2009 2008 29 February
R'000 R'000 2008
R'000
(Loss)/earnings attributable
to equity holders of Buildmax (103 213) 100 353 6 830
Adjusted for:
Profit on sale of property,
plant and equipment (9 746) (1 356) (63)
Impairment of goodwill 255 443 - -
Tax effect of adjustments 1 742 380 18
Outside shareholders'
interest in adjustments (6 624) - -
Headline earnings
attributable to ordinary 137 602 99 377 6 785
shareholders
Adjusted for:
Amortisation of intangible
assets 19 945 19 945 -
Implied interest on vendor
liability 4 956 4 956 -
Tax effect of adjustments (5 585) (5 585) -
Outside shareholders'
interest in adjustments (369) (369) -
Core headline earnings
attributable to ordinary
shareholders 156 549 118 324 6 785
SEGMENTAL ANALYSIS
Audited Unaudited
year Pro-forma
ended year
% of ended
total 28 29 Increase
February % of February %
2009 total 2008
R'000 R'000
Revenue
Mining Services 70,0% 1 142 955 57,5% 696 009 64,2%
Construction 30,0% 490 956 42,5% 514 939 (4,7%)
Materials
100,0% 1 633 911 100,0% 1 210 948 34,9%
EBITDA
Mining Services 84,0% 380 707 64,0% 177 435 114,6%
Construction 16,0% 72 744 36,0% 99 786 (27,1%)
Materials
100,0% 453 451 100,0% 277 221 63,6%
Operating profit
before interest,
taxation,
amortisation and
impairment
Mining Services 82,1% 262 003 55,4% 107 491 143,7%
Construction 17,9% 57 305 44,6% 86 621 (33,8%)
Materials
100,0% 319 308 100,0% 194 112 64,5%
Net profit before
taxation,
amortisation
and impairment
Mining Services 80,3% 177 228 52,9% 84 562 109,6%
Construction 19,7% 43 576 47,1% 75 164 (42,0%)
Materials
100,0% 220 804 100,0% 159 726 38,2%
CARRYING VALUE OF ASSETS ACQUIRED IN TERMS OF BUSINESS COMBINATIONS
Audited Audited Audited
2 April 2 April 2 April
2008 2008 2008
Total Diesel Buildco
R'000 Power group
R'000 R'000
Non-current assets
Property, plant and equipment 928 637 560 516 368 121
Intangible assets 117 155 - 117 155
Investment in associate 2 925 - 2 925
1 048 717 560 516 488 201
Current assets
Available for sale properties 13 821 - 13 821
Inventories 51 607 4 241 47 366
Trade and other receivables 209 225 102 400 106 825
Taxation receivable 1 133 - 1 133
Bank and cash 132 391 105 238 27 153
408 177 211 879 196 298
Total assets 1 456 894 772 395 684 499
Outside shareholders' interest 4 577 - 4 577
Non-current liabilities
Interest-bearing liabilities 367 055 132 757 234 298
Interest-free loans 94 909 2 215 92 694
Deferred taxation 85 149 71 079 14 070
547 113 206 051 341 062
Current liabilities
Trade and other payables 133 925 70 526 63 399
Current portion of interest-
bearing liabilities 294 724 190 736 103 988
Vendor liabilities 64 012 - 64 012
Bank overdraft 1 813 - 1 813
Taxation payable 40 442 26 072 14 370
534 916 287 334 247 582
Total liabilities 1 086 606 493 385 593 221
Carrying value of net assets
acquired in terms of business 370 288 279 010 91 278
combinations
Consolidation adjustment of
outside shareholders' interest 731 - 731
Goodwill and intangible assets (117 155) - (117 155)
acquired
Carrying value of net tangible
assets acquired in terms of
business combinations 253 864 279 010 (25 146)
Intangible assets acquired and
residual goodwill arising from
business combinations:
- Mining rights acquired 135 885 - 135 885
- Other intangible assets 108 177 81 176 27 001
acquired
- Deferred taxation on
intangible assets acquired (68 337) (22 729) (45 608)
- Outside shareholders' interest
in intangible assets acquired (8 845) - (8 845)
- Residual goodwill arising from
business combinations 1 066 021 136 522 929 499
Total purchase consideration
paid and payable 1 486 765 473 979 1 012 786
Discharged as follows:
Fair value of shares issued and
to be issued* 1 193 403 89 842 1 103 561
Interest-free loan accounts (94 909) (2 215) (92 694)
acquired
Deferred payment due at 2 April
2008 at fair value 49 570 49 570 -
Cash payments on acquisition of
businesses 338 701 336 782 1 919
Total purchase consideration
paid and payable 1 486 765 473 979 1 012 786
Number of ordinary shares issued 686 672 49 912 636 760
in terms of business
combinations ('000)
*Average share price (Rands) 1,74 1,80 1,73
Residual goodwill arising from
business combinations
The purchase price of the
businesses acquired includes
amounts in relation to the
benefit of expected synergies,
revenue growth and the assembled
workforce of these businesses.
These benefits are not
recognised separately from
goodwill as the future economic
benefits arising from them
cannot be reliably measured.
NOTES TO THE AUDITED GROUP FINANCIAL RESULTS
Contingent vendor liability
In terms of the Diesel Power acquisition agreement and as set out in the
Revised Listing Particulars ("RLP"), dated 5 March 2008, an amount of up to
R37,5 million could become due to the vendor of Diesel Power. This amount is
contingent on Diesel Power achieving, for the year ending 31 August 2009, a
profit after taxation target range as set out in the acquisition agreement
and the RLP.
Capital commitments
Authorised capital commitments of the group amounted to R144 million at year-
end
Business combinations effected during the year
Buildmax acquired the following entities on 2 April 2008:
- 100% of the shares in and claims on loan account against Diesel Power Open
Cast Mining (Pty) Limited ("Diesel Power"); and
- The Buildco group, comprising:
- 100% of the shares in and claims on loan account against Hollyberry Props
41 (Pty) Limited
- 100% of the shares in and claims on loan account against Black Ginger 372
(Pty) Limited
- 100% of the shares in and claims on loan account against Clarewick
Investments (Pty) Limited
- 100% of the shares in and claims on loan account against Burnleigh
Investments (Pty) Limited.
Commentary
Introduction
The directors are pleased to present the first annual results for the
reconstituted Buildmax for the 12 months to 28 February 2009 ("the year").
Following the acquisitions of Diesel Power Open Cast Mining (Pty) Limited
("Diesel Power") and the Buildco group of companies ("Buildco") (collectively
"the acquisitions"), Buildmax has been successfully repositioned as a leading
supplier of open cast coal mining contract services and construction
materials.
Group profile
Buildmax is a leading black empowered open cast 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 key
business units:
- Mining Services
This business unit comprises Diesel Power and Vukuza Earth Works and is the
major contributor to group revenue and profitability. The companies are
leading open cast coal mining and bulk earthworks contractors and together
are approved service providers to all major coal mining and construction
groups in the country. Mining Services boasts a fleet of approximately 820
earthmoving and mining vehicles.
- Construction Materials
This business unit quarries, manufactures and distributes a range of
materials to the construction industry through three divisions: Aggregates &
Quarries, Bricks & Blocks, and Building Materials. The well-established
businesses have proven track records of between 20 and 70 years.
Financial Results
Effective 29 February 2008 Buildmax changed its year-end from March to
February. The audited results for the 11 months to 29 February 2008 ("the
prior period") comprise only the historical `Building Materials' division
prior to the acquisitions. As the scope and scale of the group has changed
significantly subsequent to the acquisitions, comparison with the prior
period is not meaningful.
The acquisitions became effective on 2 April 2008 and are therefore
consolidated in the group results for only eleven months. The historical
`Building Materials' operations have been included for the full year. To
assist in meaningful comparison to the prior period on a like-for-like basis
including the acquisitions, unaudited pro forma historical results have been
presented ("pro forma historical results"). The pro forma historical results
have been adjusted to include amortisation of intangibles, implied interest
on a deferred vendor consideration and taxation effects thereof to ensure
comparability.
If the effective dates of the acquisitions had been at the beginning of the
year leading to a full 12 month contribution, the acquisitions would have
contributed to the group revenue of R1 591,8 million and EBITDA of R470,7
million.
The financial results for the year reflect positive year-on-year growth in
key performance indicators compared to the pro forma historical results:
revenue increased 35% to R1 633,9 million (February 2008: R1 210,9 million),
EBITDA was up 64% to R453,5 million (February 2008: R277,2 million) and net
profit before taxation, amortisation of intangibles and impairment of
goodwill grew by 38% to R220,8 million (February 2008: R159,7 million).
Ordinary shares in issue increased from 41,8 million to 1 040,7 million as a
result of the acquisitions, the associated capital raising and the investment
by Brait. Shareholders' funds increased to R1 635,1 million (February 2008:
R53,8 million) and net asset value per share increased from 128,8 cents to
157,5 cents.
Core HEPS and HEPS
Core HEPS is defined as headline earnings per share ("HEPS") excluding non-
cash flow items relating to amortisation of intangibles (R19,9 million) and
the implied interest (R4,9 million) incurred on a deferred vendor
consideration as required in terms of International Financial Reporting
Standards ("IFRS").
Core HEPS of 18,0 cents and HEPS of 15,8 cents for the year are 27% and 33%
higher than the pro forma historical results of 14,2 cents and 11,9 cents,
respectively.
The HEPS forecast of 22,5 cents per share set out in the Revised Listings
Particulars, read together with related assumptions, excluded adjustments for
amortisation of intangibles and impairment of goodwill. Core HEPS is
therefore the best indicator in comparing the year's results with the profit
forecast of 22,5 cents per share.
Core HEPS was 20% below forecast as a result of the general economic slowdown
and a number of factors that were unforeseen at the time of publication of
the interim results in October 2008, as set out in the trading update dated
24 April 2009 and explained more fully below in the `Operational Review'.
The impairment of goodwill referred to below together with the amortisation
of intangibles and the implied vendor consideration interest, resulted in a
loss per share of 11,9 cents compared to pro forma historical earnings per
share of 12,0 cents.
Impairment of goodwill
Buildco was acquired for shares on a relative earnings basis. In compliance
with IFRS the majority of goodwill raised was based on a price per share of
R1,80 at the date the shares were issued, notwithstanding that the share
price had been substantially lower at the time of negotiations. The
subsequent deterioration in trading conditions in the construction sector,
particularly in the residential market, resulted in goodwill relating to
certain acquired Construction Materials businesses being impaired by R255,4
million.
Net debt and cash
The defensive strategy adopted by the group post the interim results to
reduce capital expenditure, decreased the forecast (at interim results) net
debt position from between R800 million and R900 million to R658,5 million at
28 February 2009, with year-end net cash holdings at R286,9 million.
Buildmax's operations are highly cash generative with cash generated from
operations (before debt servicing and capital expenditure) of R449,9 million
for the year equating to 100% of EBITDA.
Operations
Mining Services
Mining Services performed well for the year despite a number of challenges.
The business unit was adversely impacted by abnormally high rainfall in
November 2008 and January 2009. Two large long-term mining contracts
commenced in January 2009, necessitating site establishment costs with no
corresponding production revenue in this financial year. Delays in the
commencement of two additional contracts postponed certain budgeted revenue
to the 2010 financial year while the business unit continued to incur
significant carrying costs relating to these new contracts.
The uncertainty created by the global financial crisis prompted the board to
reduce planned capital expenditure in favour of balance sheet protection.
This strategy resulted in higher sub-contractor and plant maintenance costs
and consequently a reduction in operating margin.
Compared to the pro forma historical results of Mining Services, revenue
increased by 64% to R1 143,0 million (February 2008: R696,0 million), EBITDA
by 115% to R380,7 million (February 2008: R177,4 million) and net profit
before taxation and amortisation of intangibles by 110% to R177,2 million
(February 2008: R84,6 million).
Although all the major coal mining groups in South Africa and a number of
junior coal miners are clients of Mining Services, the business unit will
continue to pursue its strategy of increasing and diversifying its client
base. Mining Services assumes no geological risk.
Capital expenditure
Capital expenditure for the period of R494 million (12% lower than planned
capital expenditure of R564 million) was secured at favourable prices and
exchange rates. Approximately 95% of the capital expenditure was for
expansion. The division remains cautious in committing to unnecessary capital
expenditure for the 2010 financial year. Approximately 40% of the current
fleet was acquired in the last 12 months with formal preventative maintenance
programmes extending the useful life of plant and equipment.
At year-end the board mandated an independent party to verify the existence
and value of all Mining Services' plant and equipment. In accordance with
IFRS, excess fair value compared to book value of approximately R111 million
was not recognised in the financial statements at 28 February 2009.
Construction Materials
Public sector expenditure on infrastructure failed to compensate for the
slowdown in private sector spending, particularly in the residential sector.
In addition delays in contract implementation due to the unusually high
rainfall in November 2008 and January 2009 also negatively affected the
entire business unit.
The Bricks & Blocks division, particularly in the Western Cape, was worst
affected by the slowdown recording a considerable decline in revenue which
necessitated restructuring and retrenchments.
Construction Materials' revenue of R491,0 million decreased marginally
compared to the pro forma historical results. Margins were not maintained as
a result of increased input costs which the business unit was unable to pass
on to customers. EBITDA (excluding a profit of R6,2 million on the sale of a
property) declined to R72,7 million (February 2008: R99,8 million) and net
profit before taxation, amortisation of intangibles and impairment of
goodwill reduced to R43,6 million (February 2008: R75,1 million).
Where it is geographically feasible the businesses have been repositioned to
focus on public sector projects. After several contract delays the Aggregates
& Quarries division is benefiting from expenditure by government agencies,
particularly on roads.
There is a lagged inverse relationship between interest rate movements and
private sector investment so notwithstanding four recent interest rate cuts,
it is doubtful that this sector of the market, particularly residential
housing, will recover before the latter part of 2009 or early in 2010.
Capital expenditure
Capital expenditure for the year of R43 million, primarily to reposition
businesses to service infrastructure projects and to replace old delivery
vehicles with more reliable and fuel-efficient models, was financed by
internal cash resources and term funding. No significant capital expenditure
is forecast in this business unit in the short to medium-term.
BEE
The acquisition of Buildco introduced a new black empowerment partner to the
group. Black shareholding in the group has increased to more than 15% in
total from less than 2% in 2008.
Skills Training and Development
The group currently employs 3 379 staff, the majority of whom received formal
skills enhancement training during the year.
Safety, Health, Environment and Quality (SHEQ)
Buildmax prides itself on providing a safe working environment for all
employees and sub-contractors, with no fatalities or disabling injuries
recorded during the year. The group has successfully initiated a number of
projects to improve SHEQ standards. During the year Diesel Power achieved
ISO9001: 2008 (Quality Management) and OHSAS 18001: 2007 (Occupational
Health and Safety Management) accreditations.
Prospects
Mining Services
Eskom's ongoing roll-out of new coal-fired power stations and its re-
commissioning of some previously mothballed power stations, together with
demand for thermal coal from China, India and the European Union, has led
Eskom to recently conclude that too few coal mines are being commissioned to
meet demand. Despite concerns over emissions, coal is expected to remain the
primary source of energy for the foreseeable future.
The recent drop in the price of coal and strengthening of the Rand against
the US Dollar have not significantly affected local production. Additional
export capacity is coming on stream at Richards Bay, Durban and Maputo to
cater for the anticipated increase in exports. Actual exports from Richards
Bay for the first three months of 2009 are higher than for the corresponding
period in 2008.
The level of general investment in coal mining in South Africa therefore
looks set to continue and Buildmax anticipates continued revenue and earnings
growth for the Mining Services business unit.
Ongoing optimisation programmes to further improve the quality, productivity
and efficiency of resources and to capitalise on the critical mass of Mining
Services are progressing with positive results.
Construction Materials
The business unit will continue to benefit from public sector spend on
infrastructure. The construction industry is expected to continue growing
once the effects of recent interest rate cuts filter through, albeit at a
more muted pace than in the recent past. The performance of the Construction
Materials business unit is accordingly expected to improve in the latter half
of 2009.
Group
The reduced availability and increased cost of capital continue to hamper
growth in the industries in which Buildmax operates. Nonetheless should the
current economic conditions not deteriorate further, the group's performance
is anticipated to improve in the year ahead.
Investment by Brait IV Investment L.P. and Brait IV SA Partnership ("Brait")
During the year Brait subscribed for 133,3 million ordinary shares at an
aggregate consideration of R200 million. In addition Brait acquired a further
125 million ordinary shares from existing Buildmax shareholders, increasing
its shareholding to 24,84% of the total issued share capital of Buildmax. The
Brait investment enhanced the group's balance sheet and introduced a
strategically valuable shareholder which allows Buildmax to pursue growth
opportunities.
Dividend
It is the group's policy to consider the declaration of a dividend annually.
Given the current economic climate and the need to protect the group's
balance sheet, the board of directors has decided not to declare a dividend
for the year ended 28 February 2009.
Basis of Preparation and Accounting Policies
The results for the year ended 28 February 2009 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. The accounting policies of the group are
consistent with those applied for the period ended 29 February 2008. The
audited financial statements and the unqualified audit report of the external
auditors of Buildmax, PKF (Jhb) Inc. are available for inspection at the
registered office of the company.
Appreciation
The continued commitment and support of our fellow directors, management
teams, employees, clients, financiers and suppliers has been integral to the
successful repositioning of the group and the platform created for
sustainable growth. We also thank our shareholders for their support.
Paul de Klerk Herman Fourie
Chief Executive Officer Chief Financial Officer
Directors:
PJ de Klerk (Chief Executive Officer); HP Fourie (Chief Financial Officer);
CB Brayshaw*; MD Lamola*; DJ Mack*; A Maharaj*; M Matisonn*; R Munitz*; BT
Ngcuka*; C Wood*
(*Non-executive director, Independent)
Registered office:
Unit 19, Cambridge Office Park, 5 Bauhinia Street, Highveld Park, Centurion.
(Postnet Suite 435, Private Bag X108, Centurion, 0046)
Auditors: PKF (Jhb) Inc., 42 Wierda Road West, Wierda Valley, Sandton, 2196
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, JHI House, Cradock
Avenue, Rosebank, 2196. (PO Box 85392, Emmarentia, 2029)
www.buildmax.co.za
15 May 2009
Sponsor
Java Capital Proprietary Limited
Date: 15/05/2009 08:51:03 Produced by the JSE SENS Department.
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