| Tue 18 May 2010, 11:00 | | BWK - Buildworks Group Limited - Unaudited consolidated interim results for six |
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BWK
BWK
BWK - Buildworks Group Limited - Unaudited consolidated interim results for six
months ended 28 February 2010
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")
UNAUDITED CONSOLIDATED INTERIM RESULTS FOR SIX MONTHS ENDED 28 FEBRUARY 2010
Condensed consolidated statements of comprehensive income
Pro-forma
Unaudited Unaudited Audited Unaudited
Six Six Year Six
months months ended months
ended ended ended
28 28 31 August 28
February February 2009 February
2010 2009 2009
R`000 R`000 R`000 R`000
Revenue 629,107 136,604 745,323 575,548
Cost of sales (463,764) (85,564) (534,353) (420,440)
Gross profit 165,343 51,040 210,970 155,108
Other income 133 1,105 1,974 4,878
Operating expenses (86,390) (21,876) (109,092) (74,656)
Earnings before interest, taxation, 79,086 30,269 103,852 85,330
depreciation and amortisation
("EBITDA")
Depreciation (15,492) (3,828) (28,493) (10,055)
Impairment of goodwill - - (13,562) -
Profit before interest and taxation 63,594 26,441 61,797 75,275
Interest paid (6,559) (2,675) (4,777) (9,810)
Profit before taxation 57,035 23,766 57,020 65,465
Taxation (15,897) (6,839) (19,599) (19,349)
Total comprehensive income for 41,138 16,927 37,421 46,116
period attributable to ordinary
shareholders
Basic earnings per share (cents) 4.39 3.47 5.24 4.92
Fully diluted earnings per share 3.62 3.47 4.57 4.06
(cents)
Reconciliation of headline
earnings:
Profit attributable to ordinary 41,138 16,927 37,421 46,116
shareholders
Adjusted for:
After tax (profit)/loss on disposal (133) 22 (33) 22
of property, plant and equipment
Impairment of goodwill - - 13,562 0
Headline earnings attributable to 41,005 16,949 50,950 46,138
ordinary shareholders
Adjusted for:
Amortisation of intangible assets 6,132 843 15,512 843
Tax effect of amortisation of (1,717) (236) (4,343) (236)
intangible assets
Core headline earnings attributable 45,420 17,556 62,119 46,745
to ordinary shareholders
Weighted average number of shares 936,409 488,257 714,067 936,409
in issue (000`s)
Fully diluted weighted average 1,136,409 488,257 818,724 1,136,409
number of shares in issue (000`s)
Headline earnings per share (cents) 4.38 3.47 7.14 4.93
Fully diluted headline earnings per 3.61 3.47 6.22 4.06
share (cents)
Core headline earnings per share 4.85 3.60 8.70 4.99
(cents)
Core fully diluted headline 4.00 3.60 7.59 4.11
earnings per share (cents)
Condensed consolidated statements of financial position
Unaudited Unaudited Audited
As at As at As at
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
ASSETS
Non-current assets 811,520 832,520 814,645
Property, plant and equipment 278,519 274,787 277,966
Goodwill 482,595 491,479 482,595
Intangible assets 44,923 65,724 51,055
Deferred taxation 4,476 - 2,022
Financial assets 1,007 530 1,007
Current assets 695,202 611,627 725,748
Inventories 36,247 42,668 43,175
Trade and other receivables 65,747 61,703 58,064
Amounts due from contract customers 342,511 446,524 395,168
Taxation receivable 0 - 2,451
Cash and cash equivalents 250,697 60,732 226,890
Total assets 1,506,722 1,444,147 1,540,393
EQUITY AND LIABILITIES
Equity 804,011 743,713 762,873
Issued capital 9 9 9
Share premium 536,387 537,721 536,387
Shares to be issued 140,000 140,000 140,000
Accumulated profits 127,615 65,983 86,477
Non-current liabilities 140,353 200,794 153,413
Other financial liabilities 25,367 130,141 38,941
Environmental obligation 8,183 7,076 8,084
Instalment sale agreements 80,949 44,080 78,970
Deferred taxation 25,854 19,497 27,418
Current liabilities 562,358 499,640 624,107
Other financial liabilities 59,637 32,430 60,878
Trade and other payables 145,319 140,344 187,092
Amounts received in advance 20,657 17,896 49,693
Amounts due to contract customers 277,883 259,785 242,909
Bank overdraft 9,149 - 6,920
Instalment sale agreements 23,921 12,827 24,329
Taxation payable 25,792 36,358 52,286
Total equity and liabilities 1,506,722 1,444,147 1,540,393
Number of shares in issue (000`s) 936,409 936,409 936,409
Net asset value per share (cents) 85.86 79.42 81.47
Net tangible asset value per share 29.53 19.92 24.48
(cents)
Condensed consolidated statements of cashflow
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
Cash flows from operating activities 44,735 9,624 155,753
Cash flows from investing activities (9,913) (227,278) (236,222)
Cash flows from financing activities (13,244) 236,112 258,165
Net increase in cash and cash 21,578 18,458 177,696
equivalents
Cash and cash equivalents at beginning 219,970 42,274 42,274
of period
Cash and cash equivalents at end of 241,548 60,732 219,970
period
Condensed consolidated statements of changes in equity
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
Balance at beginning of period 762,873 266,363 266,363
Issue of share capital and share issue - 320,423 319,089
expenses
Shares to be issued - 140,000 140,000
Total comprehensive income for period 41,138 16,927 37,421
Balance at end of period 804,011 743,713 762,873
SEGMENTAL ANALYSIS
Unaudit Unaudit Audited Pro- Unaud Unaudit Audit Pro-
ed ed forma ited ed ed forma
Unaudit Unaudit
ed ed
Six Six Year Six Six Six Year Six
months months ended months month months ended months
ended ended ended s ended ended
ended
28 28 31 28 28 31 28
Februar Februar August 28 Febru Februar Augus Februar
y 2010 y 2009 2009 Februar ary y 2009 t y 2009
R`000 R`000 R`000 y 2009 2010 % of 2009 % of
R`000 % of total % of total
total total
Revenue
Heavy 100,443 78,631 162,513 78,631 16% 58% 22%
building 14%
materials
West End 43,059 30,532 63,323 7% 23% 9% 5%
Claybrick 30,532
Drift 57,384 48,099 99,190 48,099 9% 35% 13% 9%
Supersand
Power 528,665 57,973 582,811 496,917 84% 42% 78% 86%
Corporate - - - - 0% 0% 0% 0%
Total 629,107 136,604 745,323 575,548 100% 100% 100% 100%
Unaudit Unaudit Audited Pro- Unaud Unaudit Audit Pro-
ed ed forma ited ed ed forma
unaudit Unaudit
ed ed
Six Six Year Six Six Six Year Six
months months ended months month months ended months
ended ended ended s ended ended
ended
28 28 31 28 28 28 31
Februar Februar August Februar Febru Februar Augus 28
y 2010 y 2009 2009 y 2009 ary y 2009 t Febraur
R`000 R`000 R`000 R`000 2010 % of 2009 y 2009
% of total % of % of
total total total
EBITDA
Heavy 16,766 20,952 34,516 20,952 21% 69% 33% 24%
building
materials
West End 1,038 5,205 2,163 5,205 1% 17% 2% 6%
Claybrick
Drift 15,728 15,747 32,353 15,747 20% 52% 31% 18%
Supersand
Power 66,626 10,175 73,724 65,236 84% 33% 71% 77%
Corporate (4,306) (858) (4,388) (858) (5%) (2%) (4%) (1%)
Total 79,086 30,269 103,852 85,330 100% 100% 100% 100%
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended
28 28 31
February February August
2010 2009 2009
R`000 R`000 R`000
Net asset value
Heavy building materials 108,105 124,359 107,439
West End Claybrick 74,244 103,598 80,140
Drift Supersand 33,881 20,761 27,299
Power 187,519 202,301 146,391
Corporate 508,387 417,053 509,043
Total 804,011 743,713 762,873
Commentary
Introduction
Buildworks is the largest turnkey developer of high voltage electrical
substations in Sub-Saharan Africa and a substantial provider of high voltage
overhead cables and protection and automation systems. The group delivered a
satisfactory set of results for the half year ended 28 February 2010 in
generally tough economic conditions. Core headline earnings increased by 35% to
4.85 cents per share.
It is the view of the board of directors that the core headline earnings and the
fully diluted core headline earnings per share provide a meaningful
understanding of the results for the period.Core headline earnings for the six
months ended 28 February 2010 was R45.4 million which is an increase of 158%
over the previous six months ended 28 February 2009 ("previous comparative
period").
Headline earnings per share are 4.38 cents and basic earnings per share are 4.39
cents which is an increase of 26% over the previous comparative period.
84% of all Buildworks` revenue and earnings before interest, taxation,
depreciation and amortisation ("EBITDA") are now directly attributable to the
power and electrification sector. Trading profits reflect a solid, steady
contribution from Consolidated Power Projects (Pty) Ltd ("Conco") which
performed well in the current trading conditions. The Building Materials
Division recorded lower trading profits despite a satisfactory performance at
Drift Supersand ("Drift") and an operating loss at West End Claybrick ("West
End").
Cash generated from operating activities remained strong at R45 million as
working capital management improved across the group.
Pro-forma income statement
The pro-forma income statement for the six months ended 28 February 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 for illustrative purposes only
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.
The pro-forma income statement has not been reviewed or reported on by the
group`s auditors.
Financial Overview
Revenue for the period grew 360% to R629 million (2009: R137 million). The
trading margin was 26.3% which was lower than the previous comparative period
(2009: 37.4%), predominantly due to the lower margins earned by Conco and a
decline in the gross profit margin at West End.
Our financial position remains strong and is appropriately capitalised. Total
debt, excluding a vendor liability of R50 million, decreased to R139 million
(2009: R169 million). Overall the group`s debt-to-equity ratio declined to 24%
which is a significant improvement on the 30% in the previous year. Interest
cover as measured against EBITDA was 12 times (2009: 11 times). This reflects
adequate borrowing capacity. The year-end cash position was R242 million
(2009:R61 million). The increase on cash on hand is a result of stringent
working capital management.
Divisional Overview
Conco
The business had a steady six months. Conco achieved revenue of R529 million and
EBITDA of
R66.6 million.The conditions were volatile during the period as major utilities,
municipalities, mines and industry 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 and electricity usage declined for the first time since the
end of World War 2.
The business focused on improving working capital management, which resulted in
a significant improvement in cash-generation. Capital expenditure was strictly
controlled. Conco continued to recruit highly skilled personnel to assist with
project execution and to expand our capacity in the medium-term.
Looking ahead, a gradual improvement in trading conditions is expected as
capital markets start to ease and the electricity shortfall on the continent
becomes more acute. 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, capacity to adjudicate the
allocation of work and a continued reluctance by our clients to assume
additional risk.
Conco managed to maintain its forward order book at R1,1 billion. This
represents approximately 1 years` work. Embedded in the order book is a lower
margin. This is a function of our upfront pricing policy, geographic mix and
project mix.
Building Materials
West End delivered an operating loss for the six months ended 28 February
2010.Turnover increased 41% to R43 million as a result of our new roof-tile
sales. EBITDA declined by 80% to R1 million for the six months. This was a
function of extremely weak selling prices and reduced gross margins. Actions
taken to expand the sales footprint delivered higher volumes but at
exceptionally low prices. Based on current trading conditions the West End
business is over leveraged and is currently in breach of certain banking
covenants. As a result, discussions are taking place with their respective
bankers to find a financial solution which requires the restructuring of debt in
order to reduce the pressure on short-term loan and asset repayments.
Drift had a satisfactory six months managing to increase turnover by 19% to R57
million despite the continued decline in the residential and commercial sectors.
The actions taken to replace these volumes with business in the roads sector
resulted in turnover increasing with lower margins. Volumes were 29% higher than
the previous comparative period. The business continued to maintain tight cost
controls and productivity improvements. The net effect of these actions at Drift
resulted in EBITDA remaining in line with the previous six months at R15.7
million.
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 limited funding capacity for projects and
a shortage of skills to execute the projects.
To deliver growth in Conco the skills base will be strengthened by investing in
additional project execution skills. In the current period we have invested in
the Renewable Energy initiative and our Middle East growth by dedicating senior
management to these two divisions. This is an investment which may cost in the
short-term but is expected to yield long-term sustainable growth.
Conco has the technical expertise and competence to provide services to wind
farm energy projects. During the six months ended 28 February 2010 the Renewable
Energy Sector of South Africa has made significant progress with Renewable
Energy Feed in Tariff "Refit" and the technical and commercial framework. It is
our assessment that this sector will provide a significant medium-term growth
opportunity. We are still uncertain as to the implementation time frames of the
first projects. Presently, Conco has submitted pricing proposals to developers
and turbine manufacturers.
In the Building Materials Division 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.
CHANGES TO THE BOARD
During the reporting period Frank Boner was appointed to the board as a non-
executive director and Peter Baird and Alex Darko were appointed to the board as
independent non-executive directors. The board welcomes their appointments which
will benefit from their corporate experience. As part of the restructuring to
the board, Noel Machingawuta resigned from the board. The board wishes to thank
Noel for the role he has played in Buildworks.
MIGRATION TO THE MAIN BOARD OF THE JSE AND PROPOSED NAME CHANGE.
The appointment of the two additional independent non-executive directors to the
board during the reporting period positioned the company to migrate its listing
from the Alternative Exchange to the Main Board of the JSE. As a result of the
proposed migration to the Main Board, Buildworks intends changing its name and
will complete the requisite statutory and JSE actions in due course. It is
anticipated that the name change and the migration will occur before the end of
the current financial year.
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 six months ended 28
February 2010.
BASIS OF PREPARATION
The consolidated interim financial 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 annual financial
statements for the year ended 31 August 2009, 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. These results have
not been audited or reviewed by the group`s auditors.
SUBSEQUENT EVENTS
No material events have occurred subsequent to the interim period and the date
of this announcement.
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
18 May 2010
Non-executive directors:
HSP Mashaba (Chairman), F Boner, AD Dixon#, P Voutyritsas*, N Mintah**, A
Geisser**,
P Baird#**, A Darko#***
Executive directors:
RD Gamsu, IM Klitzner, B Berelowitz
# Independent
*Greek, **American, ***Ghanaian
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
Auditors:
PKF(Jhb) Inc.
Visit our website: www.buildworksgroup.co.za
Date: 18/05/2010 11:00:04 Produced by the JSE SENS Department.
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