| Tue 17 Nov 2009, 7:56 | | BWK - Buildworks Group Limited - Reviewed Consolidated Results For Financial |
|
BWK
BWK
BWK - Buildworks Group Limited - Reviewed Consolidated Results For Financial
Year Ended 31 August 2009
Buildworks Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2007/004935/06)
Share code: BWK ISIN: ZAE000110219
("Buildworks" or "the group" or "the company")
REVIEWED CONSOLIDATED RESULTS FOR FINANCIAL YEAR ENDED 31 AUGUST 2009
Consolidated income statements
Pro-
forma*
Reviewed Audited Reviewed
Year Year Year
ended ended ended
31 August 31 31 August
2009 August 2009
2008
R`000 R`000 R`000
Revenue 745,323 201,344 1,184,266
Cost of sales (534,353) (92,899) (866,229)
Gross profit 210,970 108,445 318,037
Other income 1,974 325 5,747
Operating expenses (109,092) (25,824) (165,187)
Earnings before interest, taxation, 103,852 82,946 158,597
depreciation and amortisation ("EBITDA")
Depreciation (28,493) (8,252) (41,627)
Impairment of goodwill (13,562) - (13,562)
Profit before interest and taxation 61,797 74,694 103,408
Interest received 7,420 586 7,927
Interest paid (12,197) (7,002) (19,838)
Profit before taxation 57,020 68,278 91,497
Taxation (19,599) (19,221) (30,140)
Profit attributable to ordinary shareholders 37,421 49,057 61,357
Basic earnings per share (cents) 5.24 11.03 6.55
Diluted earnings per share (cents) 4.88 11.03 5.92
Fully diluted earnings per share (cents) 4.57 11.03 5.40
Reconciliation of headline earnings:
Profit attributable to ordinary shareholders 37,421 49,057 61,357
Adjusted for:
(Profit)/loss on disposal of property, plant (33) 39 (33)
and equipment
Impairment of goodwill 13,562 - 13,562
Headline earnings attributable to ordinary 50,950 49,096 74,886
shareholders
Adjusted for:
Amortisation of intangible assets 15,512 1,087 25,436
Tax effect of amortisation of intangible (4,343) (304) (7,122)
assets
Core headline earnings attributable to 62,119 49,879 93,200
ordinary shareholders
Weighted average number of shares in issue 714,067 444,575 936,409
(000`s)
Diluted weighted average number of shares in 766,396 444,575 1,036,409
issue (000`s)
Fully diluted weighted average number of 818,724 444,575 1,136,409
shares in issue (000`s)
Headline earnings per share (cents) 7.14 11.04 8.00
Diluted headline earnings per share (cents) 6.65 11.04 7.23
Fully diluted headline earnings per share 6.22 11.04 6.59
(cents)
Core headline earnings per share (cents) 8.70 11.22 9.95
Core diluted headline earnings per share 8.11 11.22 8.99
(cents)
Core fully diluted headline earnings per share 7.59 11.22 8.20
(cents)
* Pro-forma income statement includes results
from Consolidated Power Projects (Pty) Limited
for the full 12 month period.
Consolidated balance sheet
Reviewed Audited
As at As at
31 August 31
2009 August
2008
R ` 000 R ` 000
ASSETS
Non-current assets 814,646 333,850
Property, plant and equipment 277,967 196,735
Goodwill 482,595 102,423
Intangible assets 51,055 20,656
Deferred tax 2,022 -
Financial assets 1,007 14,036
Current assets 725,741 111,911
Inventories 43,176 38,084
Trade and other receivables 58,055 31,552
Amounts due from contract customers 395,168 -
Taxation receivable 2,451 -
Cash and cash equivalents 226,891 42,275
Total assets 1,540,387 445,761
EQUITY AND LIABILITIES
Equity 762,869 266,364
Issued capital 9 5
Share premium 536,382 217,302
Shares to be issued 140,000 -
Accumulated profits 86,478 49,057
Non-current liabilities 153,413 109,191
Other financial liabilities 38,941 46,212
Environmental obligation 8,084 8,792
Instalment sale agreements 78,970 42,770
Deferred tax 27,418 11,417
Current liabilities 624,105 70,206
Other financial liabilities 60,879 13,708
Trade and other payables 187,091 22,176
Amounts received in advance 49,693 -
Amounts due to contract customers 242,908 -
Bank overdraft 6,920 -
Instalment sale agreements 24,329 11,892
Taxation payable 52,285 22,430
Total equity and liabilities 1,540,387 445,761
Number of shares in issue (000`s) 936,409 470,000
Net asset value per share (cents) 81.47 56.67
Net tangible asset value per share (cents) 24.48 30.49
Abridged reviewed consolidated cash flow statement
Reviewed Audited
Year Year
ended ended
31 August 31
2009 August
2008
R`000 R`000
Cash flows from operating activities 153,070 39,533
Cash flows from investing activities (220,026) (24,554)
Cash flows from financing activities 244,652 27,296
Net increase in cash and cash equivalents 177,696 42,275
Cash and cash equivalents at beginning of year 42,275 -
Cash and cash equivalents at end of year 219,971 42,275
Abridged consolidated statement of changes in equity
Audited Audited
Year Year
ended ended
31 August 31
2009 August
2008
R`000 R`000
Balance at beginning of year 266,364 -
Acquisition of businesses - 90,626
Rights offer - 80,000
Issue of share capital and share issue 319,084 46,681
expenses
Shares to be issued 140,000 -
Net profit for year 37,421 49,057
Balance at end of year 762,869 266,364
SEGMENTAL ANALYSIS
Reviewed Audited Pro-forma Reviewed Audited Pro-
Reviewed forma
Reviewed
31 31 31 August 31 31 31
August August 2009 August August August
2009 2008 2009 2008 2009
R`000 R`000 R`000 R`000 R`000 R`000
Revenue % of % of % of
total total total
Heavy building 162,512 201,344 162,512 22% 100% 14%
materials
West End 63,322 97,137 63,322 8% 48% 5%
Claybrick
Drift Supersand 99,190 104,207 99,190 14% 52% 9%
Power 582,811 - 1,021,754 78% 0% 86%
Corporate - - - 0% 0% 0%
Total 745,323 201,344 1,184,266 100% 100% 100%
Reviewed Audited Pro-forma Reviewed Audited Pro-
forma
31 31 31 August 31 31 31
August August 2009 August August August
2009 2008 2009 2008 2009
R`000 R`000 R`000 R`000 R`000 R`000
EBITDA % of % of % of
total total total
Heavy building 34,516 87,383 34,516 33% 105% 22%
materials
West End 2,163 51,594 2,163 2% 62% 1%
Claybrick
Drift Supersand 32,353 35,789 32,353 31% 43% 21%
Power 73,725 - 128,470 71% 0% 81%
Corporate (4,389) (4,437) (4,389) (4%) (5%) (3%)
Total 103,852 82,946 158,597 100% 100% 100%
Reviewed Audited
31 31
August August
2009 2008
R`000 R`000
Net asset value
Heavy building 196,301 220,860
materials
West End 146,284 182,687
Claybrick
Drift Supersand 50,017 38,173
Power 540,121 -
Corporate 26,447 45,504
Total 762,869 266,364
Commentary
Introduction
We are pleased to report on the successful acquisition, implementation and
integration of Consolidated Power Projects (Pty) Ltd ("Conco"). With this
substantial acquisition Buildworks becomes the largest turnkey developer of
electrical substations in Sub-Saharan Africa. On an annualised basis over 86% of
all Buildworks` revenue and 81% of Buildworks` earnings before interest,
taxation, depreciation and amortisation ("EBITDA") are now directly attributable
to the power and electrification sector.
The acquisition of Conco allowed Buildworks to deliver satisfactory results for
the year ended 31 August 2009 in extremely tough economic conditions. It is the
view of the board of directors that the pro-forma core headline earnings and the
fully diluted core headline earnings per share provide a meaningful
understanding of the results for the period.Pro-forma core headline earnings for
the year ended 31 August 2009 were R93,2 million which is an increase of 87%
over the previous year.
Using the pro-forma core headline earnings and fully diluting the earnings for
the additional equity to be issued in terms of the Conco earn out, pro-forma
fully diluted core headline earnings per share are 8.20 cents per share a
decline of 27% over the previous year.
Headline earnings per share are 7.14 cents and basic earnings per share are 5.24
cents which is a decline of 35% and 52% respectively over the previous year.
The decline in headline earnings per share is due to the amortisation charge
raised against the intangible assets, increased number of shares in issue and
the underperformance of West End Claybrick ("West End") in our Building
Materials Division.
Trading profits reflect an excellent contribution from Conco who performed
exceptionally well. The Building Materials Division recorded lower trading
profits despite a solid, steady performance at Drift Supersand ("Drift") and an
operating loss at West End.
Cash generated by operations remained strong at R190 million as working capital
management improved across the group, and remains an area of critical focus in
an environment of heightened debtor delinquencies.
Financial Overview
Revenue grew 270% to R745 million (2008: R201 million). This is as a result of
the acquisition of Conco.
The trading margin was down at 28.3% (2008: 53.9%), predominantly due to the
lower margins of Conco and a decline in the gross profit margin at West End.
Our balance sheet remains strong and is appropriately capitalised. Total debt,
excluding a vendor liability of R50 million, increased to R153 million (2008: R
115 million) driven by the completion of the fully automated roof-tile plant.
Overall the group`s debt-to-equity ratio declined to 26% which is a significant
improvement on the 43% in the previous year. Interest cover as measured against
EBITDA was 22 times (2008: 12 times). This reflects adequate borrowing capacity.
Net finance charges decreased 32% to R4,8 million due to the interest earned on
the substantial cash on hand. This off-set the effect of higher borrowings which
were incurred as a result of the construction of the roof-tile plant.
The year-end cash position was R220 million (2008:R42 million). The increase on
cash on hand is a result of stringent working capital management and the cash
acquired as part of the Conco acquisition.
Positive goodwill of R93.3 million arose on the acquisition of West End. The
subsequent deterioration in trading conditions in the residential and commercial
building sector resulted in an impairment of goodwill of R13 million being
written off in the current year.
Divisional Overview
Conco
The division had a good year. Revenue was R1,021 billion on a pro-forma basis .
EBITDA rose to R128 million on a pro-forma basis. The conditions were volatile
during the year as major utilities, municipalities and mines re-evaluated their
priorities and their order placement. Conco has over the last five years
experienced 35% growth in its order book. This growth rate has tapered off as
worsening global economic conditions set in.
Businesses focused on improving working capital management, which resulted in a
significant improvement in cash-generation. Capital expenditure was strictly
controlled. However Conco continued to recruit highly skilled personnel to
assist with project execution.
Looking ahead, gradual improvements in trading conditions are expected as
capital markets start to ease. It is evident from the number of enquiries that
substantial demand exists for our product and services but the execution of new
orders is restrained by our clients` access to capital.
Conco managed to maintain its forward orderbook at R1,2 billion. This represents
approximately 1 years` work. Embedded in the order book is a slightly lower
margin. This is a function of our upfront pricing, geographic mix and project
mix.
Building Materials
The division had a tough year. Revenue of R162 million represented a decline of
19% over the previous year. EBITDA was R34.5 million declined by 60% from the
previous year.
Rigorous working capital management and early action to reduce asset levels in
line with lower sales had a positive impact on accounts receivables but we were
unable to significantly reduce the stock holding of finished goods as market
demand reduced at a similar rate to production.
West End delivered an operating loss for the second half of the year ended 31
August 2009 after a breakeven performance in the first 6 months. This was a
function of extremely weak market conditions and the introduction of the fully
automated roof-tile plant in May of 2009. The expected lift in volumes in the
second half failed to materialise and pricing remained weak. Actions taken to
expand the sales footprint failed to deliver any short-term benefits.
Drift also experienced a significant decline in residential and commercial
sectors and the actions taken to replace the volumes in the roads sector went
some way to cushion the blow. Volumes were down 13% but our overall revenue was
only down by 5%. The decline was mitigated to some extent at the business level
with tight cost controls and productivity improvements. The net effect of the
actions at Drift resulted in an EBITDA reduction of 9.6% from the previous year.
Prospects
The challenging economic conditions created by the fallout from the global
financial crisis appear to be abating. However, the speed of recovery remains
uncertain. Our balance sheet remains strong, our gearing remains conservative
and we have the capacity to seek out further strategic opportunities.
The benefits of improved cash flow generation and a lower interest rate
environment are expected to lower finance charges going forward.
The group`s strategic positioning in the provision of infrastructure to the
African Power Market, with the majority of the clients being South African or
African utilities, provides a fairly robust buffer against the volatility of the
market place. The imbalance of substantially higher demand levels for power
generation and transmission against the current supply will remain for decades
but the constraints to growth remain a funding capacity for projects and
shortage of skills to execute the projects.
To deliver growth in Conco the skills base will be strengthened by investing in
additional senior management capacity, business development and project
execution skills. This is an investment which may cost in the short-term but is
expected to yield long-term sustainable growth. The Conco order book continues
to sustain its level at R1,2 billion and we are hopeful that as capital markets
ease funding for utilities, municipalities mines and industries will expand at a
significant rate.
The Building Materials Division should benefit from higher levels of business
and consumer confidence, as well as the lower interest rate environment. We do
not anticipate a significant improvement in trading conditions for the year
ahead. The division is currently operating a tightly controlled expense base and
we are hopeful that expansion in sales and distribution capacity will increase
our market share. It is anticipated that the 2010 FIFA World Cup will have a
negative impact on trading during the event.
It appears after the first 2 months of trading at West End that a slight
improvement is being felt. It is our assessment that this improvement is a
function of the effectiveness of the sales force. Roof-tile sales are now
consistently exceeding single shift production. The goal set for the year ending
31 August 2010 is to achieve a small profit
The significant expansion of the roads is expected to continue for the remainder
of the financial year and should offer a buffer against the weak residential
consumer market. At Drift the revenues for the first two months of the year
ending 31 August 2010 has exceeded our expectations.
Migration to the JSE Main Board
Buildworks intended to migrate to the JSE Main Board during May 2009.It is still
the intention to effect this migration by the end of the first quarter of 2010.
ACQUISITIONS
Effective 18 February 2009 Buildworks acquired 100% of the share capital of
Conco for a total investment of R497,5 million. Assets of R600 million and
liabilities of R492 million were acquired which resulted in a positive
differential to intangibles of R388 million. The transaction was funded through
the initial issue of 150 million Buildworks shares to the vendors of Conco and a
cash payment of R202,5 million.The balance of the purchase price will be settled
in terms of the acquisition agreement during April 2010 once the final warranted
profits have been calculated.
The allocation between goodwill and identifiable intangible assets as a result
of the excess of the cost of the acquisition over the fair value of the net
tangible assets acquired has been valued in terms of IFRS3(2004) in the year-end
financial statements.
As a result of the acquisition of Conco, the group has changed the breakdown in
segments on which it reports, in order to reflect the change in the group.
Fair value of assets and liabilities acquired:
R`000
Property, plant and equipment 14,817
Inventories 46,281
Intangible assets 45,911
Trade and other receivables 444,533
Cash 48,621
Deferred tax liability (20,298)
Trade and other payables (432,519)
Tax liability (32,867)
Borrowings (5,972)
Net tangible assets and liabilities 108,507
Goodwill 388,993
497,500
REVIEW OPINION
These consolidated annual financial results have been reviewed by PKF (JHB) Inc.
Their unqualified review opinion is available for inspection at the company`s
registered address.
DIVIDEND POLICY
The dividend policy will be reviewed periodically taking into account prevailing
circumstances and future cash requirements. At present, all earnings generated
by the company will be utilised to fund future growth.
Accordingly, no dividend has been recommended for the year.
BASIS OF PREPARATION
These consolidated annual results have been prepared in accordance with
International Financial Reporting Standards ("IFRS") specifically IAS 34
(Interim Financial Reporting). The accounting policies applied in preparing
these results are consistent with those applied in the prior year end, and
comply with the South African Companies Act (1973), as amended. This
announcement has been prepared in accordance with the Listings Requirements of
the JSE Limited.
Pro-forma income statement
The pro-forma income statement to 31 August 2009 was prepared on the basis that
the acquisition of Conco had been effective 1 September 2008.
The pro-forma income statement has been prepared in an effort to provide a
meaningful basis of comparison for users of the group`s financial information
and is the responsibility of the directors of Buildworks. By its nature, the pro
forma income statement may not fairly reflect the financial results of the group
after the acquisition of Conco.
An unqualified review opinion was issued on the pro-forma income statement by
the group`s auditors and is available for inspection at the company`s registered
offices.
Appreciation
The directors and management of Buildworks wish to thank all staff for their
focused efforts and loyalty over these challenging times. We also thank our
customers, business partners, advisors, suppliers and our shareholders for their
ongoing support and faith in the group.
By order of the board
Herman Mashaba Raoul Gamsu
Chairman CEO
17 November 2009
Non-executive directors:
HSP Mashaba (Chairman), NC Machingawuta, AD Dixon#, P Voutyritsas*, N Mintah**,
A Geisser**
Executive directors:
RD Gamsu, IM Klitzner, B Berelowitz
# Independent
*Greek, **American
Registration number: 2007/004935/06
Business address: 6A Sandown Valley Crescent, Sandown, Sandton
Business postal address: PO Box 651455, Benmore, Johannesburg 2010
Company secretary: Sandra Saunders BA LLB (WITS) DIP CORP GOV (RAU)
Telephone: 011 722 7430
Facsimile: 011 722 7431
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited
Designated advisor:
Java Capital (Proprietary) Limited
Visit our website: www.buildworksgroup.co.za
Date: 17/11/2009 07:56:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
