BDM - Buildmax Limited - Audited consolidated financial results for the year
2010/05/24, 17:31:00
 
BDM                                                                             
BDM - Buildmax Limited - Audited consolidated financial results for the year    
ended 28 February 2010 and cautionary announcement                              
Buildmax Limited                                                                
("Buildmax" or "the group")                                                     
(Registration no. 1995/012209/06)                                               
Share Code BDM                                                                  
ISIN code ZAE000011250                                                          
AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010 AND  
CAUTIONARY ANNOUNCEMENT                                                         
Abridged consolidated statement of comprehensive income                         
                                     Audited        Unaudited    Audited        
                                     year ended     pro-forma    year ended     
                                     28 February    year ended   28 February    
                                     2010           28 February  2009           
                                     R'000          2009         R'000          
                                                    R'000                       
Revenue                                1 805 584      1 724 317    1 633 911    
Operating profit before depreciation    227 540        477 807      453 451     
and amortisation ("EBITDA")                                                     
Depreciation                           (176 090)      (142 979)    (134 143)    
Operating profit before amortisation    51 450         334 828      319 308     
Amortisation of intangible assets      (21 758)       (21 758)     (19 945)     
Profit before loss on disposal of       29 692         313 070      299 363     
business, impairments, interest and                                             
taxation                                                                        
Loss on disposal of business           (2 467)        -            -            
Impairment losses                      (1 069 166)    (255 443)    (255 443)    
(Loss)/profit before interest and      (1 041 941)     57 627       43 920      
taxation                                                                        
Interest received                       15 430         18 811       17 378      
Interest paid                          (101 856)      (123 602)    (115 882)    
Loss before taxation                   (1 128 367)    (47 164)     (54 584)     
Taxation                                117 518       ( 56 544)    (54 793)     
Loss after taxation                    (1 010 849)    (103 708)    (109 377)    
Other comprehensive income / (loss)                                             
for the year                                                                    
Unrealised profit/(loss) due to         1 711         -            (7 739)      
change in fair value of cash flow                                               
hedge                                                                           
Taxation                               (479)          -             2 167       
Total comprehensive loss for the year  (1 009 617)    (103 708)    (114 949)    
Loss after taxation attributable to:                                            
Equity holders of Buildmax             (1 007 245)    (97 510)     (103 213)    
Outside shareholders' interests        (3 604)        (6 198)      (6 164)      
                                      (1 010 849)    (103 708)    (109 377)     
Total comprehensive loss for the year                                           
attributable to:                                                                
Equity holders of Buildmax             (1 006 013)    (97 510)     (108 785)    
Outside shareholders' interests        (3 604)        (6 198)      (6 164)      
                                      (1 009 617)    (103 708)    (114 949)     
                                                                                
Reconciliation of headline earnings/(loss) and core headline earnings/(loss)    
                                      Audited       Unaudited    Audited        
                                     year ended     pro-forma    year ended     
                                     28 February    year ended   28 February    
                                     2010           28           2009           
                                     R'000          February     R'000          
                                                    2009                        
                                                    R'000                       
Loss for the year attributable to      (1 007 245)    (97 510)    (103 213)     
shareholders of Buildmax                                                        
Adjusted for:                                                                   
Loss on disposal of business            2 467         -            -            
Loss / (profit) on disposal of          4 465         (11 697)     (8 004)      
property, plant and equipment                                                   
- Gross                                6 202         (14 046)     (9 746)       
- Taxation                            (1 737)         2 349        1 742        
Impairment of property, plant and       303 752       -            -            
equipment                                                                       
- Gross                                421 878       -            -             
- Taxation                            (118 126)      -            -             
Impairment losses                       635 459        248 819      248 819     
- Gross                                647 288        255 443      255 443      
- Taxation                            (7 716)        -            -             
- Outside shareholders' interest      (4 113)        (6 624)      (6 624)       
                                                                                
Headline (loss) earnings attributable  (61 102)        139 612      137 602     
to ordinary shareholders                                                        
Adjusted for:                                                                   
Amortisation of intangible assets       15 264         15 263       13 991      
- Gross                                21 758         21 758       19 945       
- Taxation                            (6 092)        (6 092)      (5 585)       
- Outside shareholders' interest      (402)          (403)        (369)         
Deemed interest incurred on vendor       474           4 956        4 956       
loan                                                                            
Core headline (loss) / earnings        (45 364)        159 831      156 549     
attributable to ordinary shareholders                                           
                                                                                
Supplementary information                                                       
                                     Audited        Unaudited    Audited        
                                     year ended     pro-forma    year ended     
                                     28 February    year ended   28 February    
                                     2010           28           2009           
                                                    February                    
                                                    2009                        
Headline (loss) / earnings per share   (5,9)          13,4         15,8         
(cents)                                                                         
Core headline (loss) / earnings per    (4,4)          15,4         18,0         
share (cents)                                                                   
Basic loss per share (cents)           (96,8)         (9,4)        (11,9)       
Shares in issue ('000)                                                          
- at end of the period                1 040 700      1 040 700    1 040 700     
- weighted                            1 040 700      1 040 700     868 570      
                                                                                
Abridged consolidated statement of financial position                           
                                                    Audited       Audited       
                                                   28 February   28 February    
                                                   2010          2009           
                                                   R'000         R'000          
ASSETS                                                                          
Non-current assets                                                              
Property, plant and equipment                         901 997      1 324 615    
Goodwill                                              190 848       810 578     
Other intangible assets                               174 801       224 117     
Deferred taxation                                     20 087        2 216       
                                                    1 287 733     2 361 526     
Current assets                                                                  
Inventories                                           72 049        90 911      
Trade and other receivables                           269 284       318 589     
Taxation receivable                                   5 502         1 364       
Bank and cash balances                                136 447       326 957     
                                                     483 282       737 821      
Total assets                                         1 771 015     3 099 347    
EQUITY AND LIABILITIES                                                          
Share capital and premium                            1 732 382     1 732 382    
Cash flow hedging reserve                            (4 340)       (5 572)      
Accumulated loss                                     (1 098        (91 653)     
                                                   898)                         
Ordinary shareholders' interests                      629 144      1 635 157    
Outside shareholders' interests                      -              3 604       
Total shareholders' interests                         629 144      1 638 761    
Non-current liabilities                                                         
Interest-bearing liabilities                          315 037       525 082     
Derivative instruments                                1 940         4 076       
Provisions                                            3 956         3 956       
Deferred taxation                                     85 487        194 307     
                                                     406 420       727 421      
Current liabilities                                                             
Interest-bearing liabilities                          307 522       358 121     
Derivative instruments                                4 088         3 663       
Vendor loan payable                                   47 000        54 526      
Trade and other payables                              325 254       260 880     
Provisions                                            19 571       -            
Taxation payable                                       344          15 942      
Bank overdrafts                                       31 672        40 033      
                                                     735 451       733 165      
Total equity and liabilities                         1 771 015     3 099 347    
Net asset value per share (cents)                    60,5          157,5        
Net tangible asset value per share (cents)           30,0          64,1         
                                                                                
Abridged consolidated statement of changes in equity                            
                  Share       Cashflow  (Accumulated Outside   Total R'000      
                  capital     hedging   loss)/       sharehol                   
                  and         reserve   retained     ders'                      
                  premium     R'000     earnings     interest                   
                  R'000                 R'000        R'000                      
Balances as at 29    42 266     -        11 560       -           53 826        
February 2008                                                                   
Shares issued       1 690 116  -          -            -         1 690 116      
Total               -           (5 572)   (103 213)    (6 164)   (114 949)      
comprehensive                                                                   
income for the                                                                  
year                                                                            
Outside             -           -         -             9 768     9 768         
shareholders'                                                                   
interests in                                                                    
subsidiaries                                                                    
acquired                                                                        
Balances as at 28   1 732 382   (5 572)   (91 653)      3 604    1 638 761      
February 2009                                                                   
Total              -             1 232    (1 007 245)  (3 604)  (1 009 617)     
comprehensive                                                                   
income / (loss)                                                                 
for the year                                                                    
Balances as at 28   1 732 382   (4 340)   (1 098 898) -           629 144       
February 2010                                                                   
                                                                                
Abridged consolidated statement of cash flows                                   
                                                  Audited       Audited         
                                                 year ended    year ended       
                                                 28 February   28 February      
                                                 2010          2009             
                                                 R'000         R'000            
Operating activities                                                            
Loss before taxation                               (1 128 367)   (54 584)       
Non-cash flow items and changes in working         1 426 597      405 998       
capital                                                                         
Net interest paid                                   86 426        98 504        
Cash generated from operations                      384 656       449 918       
Net interest paid in cash                          (86 985)      (94 676)       
Taxation paid                                      (29 388)      (36 934)       
Cash flows from operating activities                268 283       318 308       
Investing activities                                                            
Acquisition of businesses                         -              (208 123)      
Settlement of vendor liabilities in acquired       -             (64 012)       
businesses                                                                      
Purchase of property, plant and equipment                                       
- Expanding operations                             (151 215)     (505 636)      
- Maintaining operations                           (45 774)      (30 938)       
Proceeds on disposal of property plant and          15 201        42 306        
equipment                                                                       
Net cash outflows from investing activities        (181 788)     (766 403)      
Financing activities                                                            
Net proceeds from issue of shares                 -               496 713       
Interest-bearing liabilities raised                 85 245        521 277       
Interest-bearing liabilities repaid                (353 889)     (299 872)      
Net cash flows (outflows) from financing           (268 644)      718 118       
activities                                                                      
Net (decrease) / increase in cash and cash         (182 149)      270 023       
equivalents                                                                     
Cash and cash equivalents at the beginning of       286 924       16 901        
the year                                                                        
Cash and cash equivalents at the end of the year    104 775       286 924       
                                                                                
Segmental analysis                                                              
                                  Audited     Unaudited      Audited            
                                  year ended  pro-forma      year ended         
                                  28 February year ended     28 February        
                                  2010        28 February    2009               
                                  R'000       2009 R'000     R'000              
REVENUE                                                                         
Mining Services                     1 381 239   1 201 879      1 142 955        
Construction Materials               424 345     522 438        490 956         
                                   1 805 584   1 724 317      1 633 911         
EBITDA                                                                          
Mining Services                      194 888     394 571        380 707         
Construction Materials               32 652      83 236         72 744          
                                    227 540     477 807        453 451          
Operating profit before                                                         
amortisation                                                                    
Mining Services                      37 736      268 207        262 003         
Construction Materials               13 714      66 621         57 305          
                                    51 450      334 828        319 308          
Notes to the audited consolidated annual results                                
Basis of preparation and accounting policies                                    
The results for the year ended 28 February 2010 have been prepared in           
accordance with International Financial Reporting Standards ("IFRS"),           
specifically IAS 34 Interim Financial Reporting and AC 500 Statements, 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 principle accounting policies applied by  
the group in the abridged consolidated financial results for the year ended 28  
February 2010 are consistent with those applied in the consolidated financial   
statements for the year ended 28 February 2009. The audited financial           
statements and unqualified report of the external auditors, PKF (Jnb) Inc. are  
available for inspection at the registered office of the company.               
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   
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.                                                  
Commentary                                                                      
Introduction                                                                    
The directors present the second year's group results for the reconstituted     
Buildmax Limited ("Buildmax") for the 12 months to 28 February 2010 ("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") in 2008 Buildmax was repositioned as a        
supplier of opencast mining services and construction materials.                
The acquisitions became effective on 2 April 2008 and are therefore             
consolidated in the prior period results for only eleven months, while the      
results of the historical operations of Buildmax were included for the full     
twelve months. To assist in comparison to the prior period on a like-for-like   
basis, unaudited pro forma historical results consolidating the acquisitions    
for 12 months have been presented ("pro forma historical results") for the      
year ended 28 February 2009. All comparisons to historical results set out in   
this announcement are to the pro forma historical results.                      
The group operates through two business units: Mining Services and              
Construction Materials.                                                         
Trading results                                                                 
Revenue grew by 5% to R1 805,6 million (February 2009: R1 724,3 million).       
EBITDA decreased by 52% to R227,5 million (February 2009: R477,8 million).      
Including non-cash impairment losses of R619,7 million on goodwill, R27,6       
million on intangible assets and R421,9 million on property, plant and          
equipment ("PPE") (February 2009: R255,4 million on goodwill) the loss before   
taxation increased to R1 128,4 million (February 2009: R47,2 million).          
As more fully explained below, shareholders' funds decreased to R629,1 million  
(February 2009: R1638,8 million), the net asset value per share decreased from  
157,5 cents to 60,5 cents and net tangible asset value per share decreased      
from 64,1 cents to 30,0 cents.                                                  
Impairment of fixed assets                                                      
The industries in which the group operates continue to be affected by the       
global economic crisis. The group's principal business, opencast mining         
services, is dependent on replacing its earthmoving equipment at appropriate    
intervals and on securing reasonable prices for its second-hand equipment. The  
slowdown in the world economy has resulted in a surplus of second-hand          
equipment and vehicles, which has reduced second-hand resale prices by as much  
as 50%. This situation is not expected to reverse before the majority of the    
group's equipment needs to be replaced. The group's construction businesses     
find themselves in a similar position with the continued slowdown in            
construction activity forcing the group to sell a portion of its vehicle fleet  
in a weak second-hand market.                                                   
The original strategy announced last year to extend the useful lives of         
equipment through formal maintenance programmes to compensate for the tougher   
credit climate proved unsuccessful as the increased costs of maintenance and    
down time far outweighed the potential benefit. As a result the group has       
reverted to the business model of selling equipment at the end of its initial   
useful life wherever possible. Buildmax has adopted more conservative           
depreciation estimates going forward and additional depreciation of R50,9       
million will be brought to account for FY 2011.                                 
As in the prior year the board mandated a third party to verify the existence   
and value of the Mining Services equipment and extended the exercise to         
include the Construction Materials fleets. As a result of the critical review   
conducted by the third party and management, the earthmoving equipment and      
vehicle fleets have been valued on a constrained market basis resulting in the  
group impairing the carrying value by R421,9 million before tax.                
Core HEPS and HEPS                                                              
Core HEPS is based on headline earnings per share ("HEPS") excluding non-cash   
flow items relating to amortisation of intangibles (including mining rights)    
and the implied interest incurred on a deferred vendor consideration as         
required in terms of International Financial Reporting Standards ("IFRS").      
Core HEPS is therefore, in management's opinion, the best indicator in          
comparing the year's results with the prior year.                               
The group recorded a core headline loss per share ("Core HLPS") and a headline  
loss per share of 4.4 cents and 5.9 cents for the year compared to the prior    
year position of Core HEPS of 15,4 cents and HEPS of 13,4 cents respectively.   
Shareholders are referred to the trading statement issued by the company on 8   
April 2010 where it was indicated that Core HLPS and headline loss per share    
would be in the ranges of 1,6 cents to 3,6 cents and 3,1 cents to 5,1 cents.    
Subsequent to the issue of the trading statement the group decided to further   
impair a deferred tax asset in the Mining Services business unit.               
The Core HLPS was attributable to the economic slowdown and the factors         
highlighted below, some of which were unexpected at the time of publishing the  
interim results in November 2009 ("interim results"):                           
-    Abnormally high rainfall in the last four months of the year resulting in  
the loss of revenue for both Mining Services and Construction Materials;        
-    The continued slowdown in the construction industry during the period      
under review;                                                                   
-    Industrial action at Diesel Power, a subsidiary of Buildmax's Mining       
Services business unit, by a significant portion of its workforce which         
severely disrupted operations culminating in strike activity during the months  
of May 2009 and June 2009. Normal activities only resumed in August 2009;       
-    The decline in the value of second-hand equipment and the scarcity of      
bank finance for new equipment forced the Mining Services business unit to      
hire in equipment at punitive rates and to increase the use of sub-             
contractors. In addition, the business unit has had to extend the life of its   
yellow metal fleet, resulting in increased maintenance costs and reduced plant  
availability and productivity;                                                  
-    Inability to fully recover internal cost inflation from customers;         
-    Certain loss-making contracts in Vukuza, a subsidiary of Buildmax's        
Mining Services business unit, which contributed to the majority of Vukuza's    
approximately R40 million after tax loss (before plant, goodwill and            
intangible asset impairments). These contracts have been terminated since year- 
end.                                                                            
Loss per share                                                                  
In terms of IAS 36 the carrying value of goodwill must be tested for            
impairment at least annually. This entails calculating the recoverable amount   
of any business (referred to as a cash generating unit ("CGU")) to which the    
goodwill applies and comparing it to the carrying value of that CGU. Where the  
recoverable amount is less than the carrying amount the goodwill is impaired.   
Where the recoverable amount remains lower than carrying value after writing    
off the goodwill then the group is obliged to write down other assets starting  
with intangibles and then PPE until the carrying value equals the recoverable   
amount.                                                                         
The continued deterioration in trading conditions and muted prospects for       
growth resulted in goodwill and intangible assets being impaired by R647,3      
million in total. Combined with the amortisation of intangibles (R21,8          
million) and implied interest on a vendor loan (R0,5 million) this resulted in  
a loss per share of 96,8 cents compared to a prior year loss of 9,4 cents.      
Net debt and cash holdings                                                      
The defensive stance adopted by the group significantly reduced scheduled       
capital expenditure for the year. The gross capital expenditure amounted to     
R196,9 million, 63% lower than the prior year. The group's gross debt position  
at 28 February 2010 was R660,3 million, significantly lower than the gross      
debt at 28 February 2009 of R930,9 million. At 28 February 2010 cash holdings   
were approximately R136,4 million, down 58% from the cash holdings of R326,9    
million at 28 February 2009.                                                    
Capital raising via rights offer to qualifying shareholders and cautionary      
announcement                                                                    
In order to strengthen the group's balance sheet by further reducing interest-  
bearing debt, fund working capital and potentially provide equity for medium    
term capital expenditure for Mining Services the board of directors has         
resolved to raise not less than R150 million through a rights offer to          
qualifying existing shareholders. The group's bankers have agreed to continue   
the current banking facilities and to renegotiate the borrowing covenants once  
the capital raising is completed. The board of directors is pleased to          
announce that it has received a letter from Brait IV ("Brait"), currently a     
24,8% shareholder in Buildmax, in terms of which Brait has offered, subject to  
the fulfilment of certain conditions and on terms to be agreed, to underwrite   
a maximum of R150 million of the capital raising efforts of Buildmax. This      
amount includes a portion to be provided as a convertible loan to Buildmax.     
Given Brait's existing shareholding in Buildmax and their representation on     
the board, the board of directors has constituted a committee of independent    
directors to further consider Brait's offer. Further announcements dealing      
with this corporate action will follow in due course. Shareholders are advised  
to exercise caution when dealing in the company's securities.                   
Operations                                                                      
Mining Services                                                                 
Financial Results                                                               
Compared to the pro forma historical results revenue increased by 15% to R1     
381,2 million (February 2009: R1 201,9 million). EBITDA decreased by 50% to     
R194,9 million (February 2009: R394,6 million). The business unit incurred a    
loss before taxation of R658,0 million including impairments of R605,3 million  
on goodwill, intangible assets and equipment.                                   
Excessive rainfall in the final four months of the year negatively affected     
the productivity of Diesel Power and Vukuza Earth Works ("Vukuza"),             
exacerbated by the industrial action at Diesel Power. The business unit was     
also unable to pass on internal inflation to its customers resulting in         
pressure on margins.                                                            
The strategic decision in 2009 to reduce capital expenditure while still        
seeking to increase its customer base, reduced margins in Vukuza significantly  
resulting in increased subcontractor usage and equipment maintenance costs      
coupled with poorer than anticipated plant utilisation as a result of           
extending the use of equipment past its first economic life. In light of this   
management has concluded that additional capital and debt funding will not      
adequately meet the capital expenditure required to profitably service all      
mining contracts in Vukuza. A decision was therefore taken to substantially     
terminate the loss-making mining contracts in Vukuza, effectively closing the   
business, and focusing management's attention on Diesel Power.                  
Gross capital expenditure for the period of R164,2 million was 67% lower than   
the previous reporting period's expenditure of R493,9 million. Approximately    
75% of the capital expenditure was for expansion purposes. The division         
remains cautious in committing to capital expenditure with forecast capex for   
February 2011 being significantly less than in 2010.                            
Construction Materials                                                          
Financial Results                                                               
Continuing public sector expenditure on infrastructure did not fully            
compensate for the slowdown in private sector spending which continued to       
reduce notwithstanding successive interest rate cuts. Although government has   
announced further significant infrastructure projects there is some scepticism  
about its ability to successfully implement these within the indicated time     
frame. Civil contractors' confidence has dropped significantly and it seems     
doubtful that the construction market will recover before the latter part of    
2010 or early 2011.                                                             
With the exception of disappointing results from the bricks and blocks          
division, the business unit delivered reasonable operating results (before      
providing for the impairment of goodwill, intangible assets and equipment and   
vehicles) in difficult market conditions. The division achieved revenue of      
R424,3 million compared to revenue of R522,4 million in 2009, a decrease of     
19%. Margins were eroded as a result of increased input costs which the         
business units were unable to pass on to customers. EBITDA declined to R32,7    
million (February 2009: R83,2 million). The division incurred a loss before     
taxation of R470,4 million. This loss includes impairments of R463,9 million    
on goodwill, intangible assets and equipment and vehicles.                      
Gross capital expenditure for the year was R32,6 million, 23% lower than        
capital expenditure for 2009 of R42,5 million. Capital expenditure was          
financed primarily by internal cash resources. No significant capital           
expenditure is forecasted in the short- to medium-term for this business unit.  
Transformation                                                                  
Taking into account retail investors, black shareholding in the group has       
remained static at 17%. The Transformation Committee has formulated a 5 year    
transformation plan aimed at ensuring that the group increases to a Level 4     
contributor.                                                                    
Skills Training and Development                                                 
Recent economic developments have seen an increase in the number of suitably    
qualified individuals applying for positions alleviating the skills shortage    
to an extent. To assist with skills development Buildmax currently operates a   
full time training facility in Mpumalanga aimed primarily at operators for the  
Mining Services business unit.                                                  
In Gauteng the group partners with an independent skills development            
organisation to provide unskilled individuals with the opportunity to gain      
recognised qualifications relevant to the company's activities.                 
At year-end the group employed 3 450 people, up from 3 379 at February 2009.    
Safety, Health, Environment & Quality (SHEQ)                                    
Buildmax strives to provide a safe working environment for all employees and    
sub-contractors. However in August a fatal accident occurred on a Vukuza site.  
The group has initiated a number of projects to further improve SHEQ            
standards. These include an increase in the number of SHEQ inspectors,          
adopting standard reporting protocols and setting performance targets.          
Prospects                                                                       
Mining Services                                                                 
Coal remains one of the cheapest sources of energy in the world and its         
abundant reserves compared to other fossil fuels means that coal is likely to   
remain the primary source of energy for decades. While Eskom has curtailed its  
projected demand for coal over the medium term, the continued roll out of coal  
fired power stations, coupled with international demand for thermal coal,       
particularly from China and India should ensure continued growth in this        
sector.                                                                         
Additional export capacity continues to come on stream at Richards Bay, Durban  
and Maputo. Exports from Richards Bay for the first four months of 2010 are     
higher than the corresponding period last year. Transnet has announced that it  
intends to increase the size of its rolling stock fleet which should alleviate  
some of the bottlenecks that coal exporters are currently experiencing.         
The challenge to the group lies not in securing work in this sector but in      
negotiating profitable contracts. The opencast coal mining services sector      
should provide profitable opportunities for the group.                          
While prospects look better for this division, it is anticipated that during    
the first six months of the new financial year, it will incur a loss as a       
result of the strategy to "right-size", cut costs, improve utilisation and      
enter into price negotiations with customers.                                   
Mining Services remains well positioned to participate in further coal mining   
supply chain activities that are not as capital intensive and management are    
currently formalising their strategy of how to approach the market in this      
regard.                                                                         
Construction Materials                                                          
The outlook for the construction industry is dependent on spending by           
government and the private sector. Although government has announced ambitious  
infrastructure programmes for the next five years there is some scepticism      
about its ability to deliver these. Growth in private sector spending is        
expected to recover gradually, but high levels of household debt continue to    
impact negatively on the residential market and the value of plans passed for   
the non residential market continues to show negative growth. The current       
trend in the Construction Materials business unit is accordingly only expected  
to reverse in the latter half of 2010 or the first half of 2011.                
To the extent that it is geographically feasible, the business unit will        
continue to focus on public sector spend on infrastructure with the hope that   
private sector spending does improve in the near future. Our businesses are     
well positioned to benefit from improved trading conditions as and when they    
occur.                                                                          
Group                                                                           
The necessary restructuring of the Mining Services business unit will only be   
completed in the first six months of the new financial year, but management     
expect a significant improvement during the second half of FY 2011. The         
proceeds of the rights issue and the right-sizing of Mining Services will       
significantly improve the financial position of Buildmax with borrowings        
expected to decrease by more than R300 million by the end of FY 2011.           
Management has identified the need to add less capital intensive businesses to  
the Mining Services business unit.                                              
The global economic crisis has adversely affected the industries in which       
Buildmax operates. Forecasting with any degree of certainty is difficult in     
these times but should the economic outlook not deteriorate further the group   
is relatively confident it will meet its performance objectives over the        
medium term.                                                                    
Board of directors                                                              
There have been a number of changes to the board of directors and management    
during the period.                                                              
Mr HP Fourie has taken up a position as an executive director within the        
Mining Services business unit. Further appointments to Mining Services'         
management team will be made in due course.                                     
Mr TP Bantock and Mr CS Els have been appointed as Executive Chairman and CFO,  
respectively.                                                                   
Final dividend                                                                  
In view of the final results no final dividend has been declared. It is the     
group's policy to consider the declaration of a dividend annually.              
Appreciation                                                                    
The transformation of the group has only been possible because of the           
dedication and commitment of our partners, both internal and external. We       
would like to thank our fellow directors, management teams and employees for    
their hard work and dedication under the very difficult conditions. We also     
thank our customers, suppliers, service providers, shareholders and advisors    
for their invaluable support.                                                   
Annual general meeting                                                          
Details concerning the Annual General Meeting will be communicated to           
shareholders in due course.                                                     
Terry Bantock  Paul de Klerk                                                    
Executive Chairman  Chief Executive Officer                                     
24 May 2010                                                                     
Directors: TP Bantock (Chairman); PJ de Klerk (Chief Executive Officer); CS     
Els (Chief Financial Officer); HP Fourie; 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)         
Sponsor: Java Capital (Pty) Limited                                             
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                                                                           
www.buildmax.co.za                                                              
Date: 24/05/2010 17:30:01 Produced by the JSE SENS Department.                  
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