| Mon 16 May 2011, 17:43 | | ERB - Erbacon Investment Holdings Limited - Audited condensed provisional |
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ERB
ERB
ERB - Erbacon Investment Holdings Limited - Audited condensed provisional
results for the year ended 28 February 2011
ERBACON INVESTMENT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2007/014490/06) JSE code: ERB
ISIN: ZAE000111571 ("Erbacon" or "the company" or "the Group")
AUDITED CONDENSED PROVISIONAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2011
COMMENTARY
OVERVIEW
Erbacon provides a comprehensive suite of heavy civil engineering, commercial
and industrial building, general construction and plant hire services.
A combination of adverse market conditions and a number of self-inflicted
challenges has resulted in the period under review becoming a watershed year.
Although the Group did not predict the severity of second half trading
conditions, or the extent of the management issues, it nevertheless took many
significant actions during the year to remedy the current situation and to
position the Group for the growth prospects that certainly lie ahead.
Most important of these actions was the recruitment of a Chief Executive Officer
who was external to the Group, which had the effect of corporatising and
rebalancing the owner/manager entrepreneurship culture with a more structured
and risk management style discipline. The new Group executive committee attended
to the merger of the civil businesses (namely Erbacon Construction, Civcon and
Erbacon Roads and Earthworks) and set about restructuring every management team
in the company. It is believed that the aforementioned actions taken will
address the internal issues.
In terms of the external market challenges, the measures undertaken to date to
bulk up the organisation are already targeting project opportunities offering
better sustainable earnings growth. In addition, negotiations continue relating
to a possible acquisition.
FINANCIAL REVIEW
The Group reported a loss after tax of R68,4 million for the year ended 28
February 2011 (2010: profit after tax of R65,3 million). As a result, basic
earnings per share decreased from 45,33 cents per share for the corresponding
prior period to a loss of 34,38 cents per share at 28 February 2011. Headline
earnings per share also decreased from 45,10 cents per share to a loss of 33,36
cents per share. These earnings are stated after taking into account an increase
of 34,2% in the weighted average number of shares in issue.
OPERATIONAL REVIEW
Commercial and Industrial Building
A highly competitive commercial and industrial construction sector resulted in
low margin tendering which limited Armstrong Construction`s otherwise
satisfactory growth.
Civils Construction
The continued low level of project releases from the government`s budgeted
infrastructure spend program, sites affected by heavy rain and construction
delays on several key projects, combined to set back the civil construction
companies. Profits were negatively impacted by unresolved claims in the current
period where the associated costs had already been accounted for. Aggressive
bidding for scarce public sector work at low margins in Erbacon Construction
also resulted in several underperforming contracts, for which appropriate cost
accruals were made at year end.
Small Plant and Formwork
The Small Plant and Formwork segment, the smallest in terms of revenue,
accounted for the largest operating loss. This segment suffered from the
continued weak levels of activity in the general construction sector, and
numerous self-inflicted issues.
Group income statement
Group revenue increased to R1,011 billion (2010: R835 million) with Civils
Construction contributing a combined R610 million (2010: R604 million), or 60%
(2010: 72%) of Group revenue. Had Civcon been consolidated for the full prior
period, the comparative 2010 revenue for the combined Coastal and Inland Civils
segment would have been R846 million. This illustrates the significant decline
in revenue during the period under review, particularly in respect of Erbacon
Construction, which experienced a 62% decline in activity following the
termination of Soccer World Cup (SWC) related projects in 2010, and to the fact
that budgeted infrastructure spend did not materialise to the extent
anticipated. In addition, a change in cost estimate, together with extensive
rectification work, resulted in a reversal of R15,9 million in profits taken to
account on a SWC related contract for Erbacon Construction.
The business of Erbacon Roads and Earthworks made an immaterial contribution to
Civils Construction (Coastal) revenue and recorded a loss of R2,5 million (2010:
Rnil) after winding down three contracts and redeploying staff.
Erbacon Small Plant incorporated the business of BO`s Small Plant Hire cc from 1
October 2010, but produced a disappointing R54 million revenue contribution,
down from R77 million in the prior period. This resulted in an operating loss of
R37,2 million (2010: profit of R18,2 million), including the further scrapping
of plant hire assets and debtor provisions in 2011.
Armstrong Construction had to contend with lower margin work in a very
competitive environment, but nevertheless produced a commendable result,
increasing revenue for the Commercial and Industrial Building segment to R347
million (2010: R153 million), a 127% increase over the prior year.
Corporate overheads increased due to actions taken to bolster expertise and
leadership, and to boost capacity to build a sustainable business and position
the Group for anticipated future growth.
The Group therefore recorded a significant loss before interest, depreciation
and amortisation (EBITDA) amounting to R42,2 million (2010: EBITDA R123 million)
as all operations underperformed the prior year.
The remaining portion of the Civcon contract-based intangible asset amounting to
R3,6 million (2010: R5,9 million) was amortised in the income statement during
the year under review.
The notional interest expense on the liability portion of the convertible
redeemable and participating preference shares amounts to R9,0 million (2010:
R1,8 million), which charge is included under finance costs.
Secondary tax on companies at 10% was paid during the year on dividend number 3
(being 13,39 cents per share). The effective tax rate, excluding the STC charge,
is 27,6% (2010: 27,6%).
Assessable tax losses upon which a deferred tax asset of R21,6 million (2010:
Rnil) has been recognised relate to Civcon, Erbacon Construction, Erbacon Small
Plant and the holding company. The assets are recognised on the basis that the
assessable losses will be recoverable through future taxable income.
A number of non-recurring and non-operational items have been disclosed under
the core headline earnings/(loss) calculation. As a result of these adjustments,
the core headline (loss)/earnings for the period under review was a loss of R51
million (2010: profit of R71 million).
Diluted earnings/(loss) per share and diluted headline earnings/(loss) per share
is calculated based on the current weighted average number of shares in issue,
incorporating the shares issued to the Civcon vendors, contingently issuable
shares, and the convertible redeemable preference shares issued to Medu Capital
in the prior year. The interest charge on the preference shares and related
deferred tax adjustments have been adjusted for in the calculation.
Group balance sheet
The JSE Limited granted approval for the additional allotment and issue of a
further 31 999 500 ordinary shares during the year to the vendors in respect of
the Civcon acquisition, increasing the issued ordinary share capital to 193 823
551 shares. "Shares to be issued" include a further 1 296 746 ordinary shares to
be allocated to the Civcon vendors following a final determination of the 2010
profit warranty. In respect of the payment and settlement of the full purchase
consideration, no further ordinary shares will accrue to the Civcon vendors as
warranted profits after tax for the Civcon financial year ended 28 February 2011
were not achieved.
Total Group assets decreased to R628,5 million (2010: R634,3 million) as plant
purchases for the civil businesses and various tax assets were offset by lower
working capital and reduced cash reserves.
Group cash flow
The Group moved into a more geared position at 28 February 2011 (excluding the
preference share liability portion). Cash and cash equivalents reduced to R34,6
million (2010: R81,7 million). Disappointing losses at the gross profit line,
plus debtor collection difficulties in Erbacon Small Plant contributed to cash
being absorbed by operations to the extent of R25,1 million (2010: R94,5 million
cash generated).
Going concern
The annual financial statements have been prepared on the basis of accounting
policies applicable to a going concern. Since the financial year end the board
has sought, and received, shareholder loan assistance from certain key
shareholders.
The Group also continues to receive the support of its bankers. At year end the
debt/equity ratio of the Group fell out of the range as specified in the bank
covenant. Following the facilities renewal process, bank facilities have been
maintained at current levels and pricing, but with the bank`s risk now secured
by the execution of debtor cessions from the Group`s major operating
subsidiaries.
Developments during the period
At the beginning of the period under review, Erbacon Construction purchased
plant and equipment for R16,5 million from PSC Civil Contractors (Pty) Limited,
a company under judicial management. The final Section 311 application is
expected to be sanctioned in June 2011.
The Group acquired the business of BO`s Small Plant Hire cc for a consideration
of R10 million and a 15% share in Erbacon Small Plant with effect from 1 October
2010, and integrated the business into Erbacon Small Plant.
Post balance sheet event
Certain major shareholders, namely Paladin Capital Limited, the Medu Capital
Fund II partnership, the Medu II Development Fund and three executive directors
approved a Loan Facility Agreement on 13 April 2011 to make available to the
company a capital sum to a maximum amount of R50 million. All amounts plus
interest thereon, must be repaid in full by 1 October 2011 but may be extended
to 28 February 2012 with agreement of all parties.
On 9 May 2011, each of the major operating subsidiaries of the Group executed a
cession of debtors in favour of First National Bank in support of the banking
facilities offered to the Group.
DIVIDEND
In line with the current Group policy, no dividend is proposed for the financial
year ended 28 February 2011.
OUTLOOK
It remains uncertain as to when government`s planned infrastructural spend will
take off.
However, by placing lesser reliance on public sector work and seeking
opportunities elsewhere, management believes that this will strongly position
the Group to meet its targets going forward. The current contracting forward
order book is R870 million.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders were advised on SENS on 25 February 2011 and 12 April 2011
(renewal) that Erbacon had entered into preliminary negotiations relating to a
possible acquisition by the company. Accordingly, shareholders are advised to
continue to exercise caution when dealing in the company`s securities until a
further announcement is made.
AUDIT OPINION
The financial results have been audited by the Group`s external auditors,
PricewaterhouseCoopers Inc. A copy of their unqualified audit report is
available for inspection at the company`s registered office.
For and on behalf of the board
A Dawson SJ Flanagan RK Braithwaite
Chairman Chief Executive Officer Group Finance Director
Durban 16 May 2011
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Restated
Audited Audited
28 February 28 February
Figures in Rand 2011 2010
Revenue 1 011 384 415 834 531 633
(Loss)/earnings before interest, depreciation
and amortisation (42 160 636) 123 011 354
Depreciation (34 940 864) (22 703 413)
Amortisation of intangibles (3 604 553) (5 905 490)
Operating (loss)/profit (80 706 053) 94 402 451
Finance income 4 662 808 7 108 222
Finance costs (13 520 884) (6 112 732)
(Loss)/profit before taxation (89 564 129) 95 397 941
Taxation 21 180 230 (30 055 330)
Total (loss)/profit and comprehensive
(loss)/income for the year (68 383 899) 65 342 611
Total (loss)/profit and comprehensive
(loss)/income for the year attributable to:
Owners of parent (66 520 119) 65 342 611
Non-controlling interests (1 863 780) -
(68 383 899) 65 342 611
Audited Audited
28 February 28 February
Figures in Rand 2011 2010
Reconciliation of headline (loss)/earnings:
(Loss)/profit attributable to owners of the
parent (66 520 119) 65 342 611
Adjustments for non-trading items net of taxation:
Profit on disposal and scrapping of property,
plant and equipment and plant for hire 1 966 960 (323 965)
Headline (loss)/earnings (64 553 159) 65 018 646
(Loss)/earnings per share (cents)
Basic (loss)/earnings per ordinary share (34,38) 45,33
Diluted (loss)/earnings per ordinary share (22,94) 37,81
Headline (loss)/earnings per share (cents)
Basic headline (loss)/earnings per ordinary share (33,36) 45,10
Diluted headline (loss)/earnings per ordinary share (22,19) 37,62
Weighted average number of shares in issue 193 494 218 144 151 421
Diluted weighted average number of shares in
issue 261 660 653 176 289 287
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
28 February 28 February
Figures in Rand 2011 2010
ASSETS
Non-current assets
Plant for hire 67 026 878 72 215 117
Property, plant and equipment 109 999 340 93 570 912
Intangible assets 132 515 932 126 559 949
Deferred income tax assets 21 404 718 1 990 238
330 946 868 294 336 216
Current assets
Intangible assets - 3 577 019
Inventories 33 056 148 24 448 705
Investments - 41 858 077
Trade and other receivables 221 285 853 187 373 080
Cash and cash equivalents 34 614 103 81 731 839
Income tax receivables 8 626 682 1 014 868
297 582 786 340 003 588
Total assets 628 529 654 634 339 804
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital and premium 427 922 508 377 233 636
Common control deficit (177 246 106) (177 246 106)
Share-based payments reserve 2 883 782 1 414 432
Shares to be issued 2 074 794 51 199 199
Retained earnings 20 749 748 122 133 341
276 384 726 374 734 502
Non-controlling interests (1 863 780) -
Total equity 274 520 946 374 734 502
LIABILITIES
Non-current liabilities
Convertible redeemable and participating
preference shares 63 531 175 54 519 158
Borrowings 23 174 578 14 861 192
Deferred income tax liabilities 17 776 286 25 218 197
104 482 039 94 598 547
Current liabilities
Borrowings 42 251 533 11 072 106
Trade and other payables 207 275 136 152 179 611
Income tax liabilities - 1 755 038
249 526 669 165 006 755
Total liabilities 354 008 708 259 605 302
Total equity and liabilities 628 529 654 634 339 804
Total number of shares in issue (net of
treasury shares and including contingently
issuable shares) 193 847 984 192 959 500
Net asset value per share (cents) 141,62 194,20
CONDENSED GROUP STATEMENT OF CASH FLOW
Audited Audited
28 February 28 February
Figures in Rand 2011 2010
Cash receipts from customers 977 471 642 821 233 621
Cash paid to customers, suppliers and
employees (1 002 605 734) (726 751 081)
Cash (used by)/generated from operations (25 134 092) 94 482 540
Finance income 4 662 808 7 108 222
Finance cost (4 508 867) (4 297 732)
Dividends paid (34 863 474) (37 325 014)
Tax paid (15 625 832) (60 226 517)
Net cash outflow from operating activities (75 469 457) (258 501)
Acquisition of property, plant and equipment (40 344 018) (9 602 539)
Acquisition of intangibles (1 486 358) -
Proceeds on disposal of property, plant and
equipment 3 876 295 1 212 205
Acquisition of subsidiary - net of cash acquired - (26 769 369)
Sale/(purchase) of investment 41 858 077 (19 275 077)
Acquisition of plant for hire (11 968 175) (23 300 740)
Proceeds on disposal of plant for hire 6 923 088 5 500 818
Net cash outflow from investing activities (1 141 091) (72 234 702)
Proceeds from issue of convertible redeemable
and participating preference shares - 113 248 800
Proceeds from/(repayment of) borrowings 8 581 071 (16 327 401)
Net cash inflow from financing activities 8 581 071 96 921 399
Net (decrease)/increase in cash and cash
equivalents (68 029 477) 24 428 196
Cash and cash equivalents at the beginning
of the year 81 731 839 57 303 643
Cash and cash equivalents and bank overdrafts
at the end of the year 13 702 362 81 731 839
OTHER INFORMATION
Unaudited Unaudited
28 February 28 February
Figures in Rand 2011 2010
Core headline (loss)/earnings per share (cents)
Headline (loss)/earnings (64 553 159) 65 018 646
Adjustments for non-core items net of taxation:
Amortisation of contract-based intangible 2 575 454 4 251 953
Erbacon Roads and Earthworks losses 2 554 039 -
Interest on convertible redeemable and
participating preference shares 6 488 652 1 306 800
Share-based payments 1 057 932 841 461
Restructuring costs 972 907 -
Core headline (loss)/earnings (50 904 175) 71 418 860
Core headline (loss)/earnings per ordinary share (19,45) 40,51
Core earnings is based on headline earnings, adjusted for non-recurring and non-
operational items, after tax where necessary (i.e. interest on preferences
shares, amortisation, share-based payment expenses). Core earnings per share is
calculated based on the diluted weighted average number of shares.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Figures in Rand Share capital Share premium
Balance at 1 March 2009 1 360 737 292 558 781
Total profit comprehensive income for the year - -
Issue of shares - acquisition of subsidiary 250 209 39 783 193
Treasury shares (1 346) (193 781)
Convertible redeemable and participating
preference shares 674 100 59 870 542
Deferred tax on liability component of convertible
redeemable and participating preference shares - (16 952 500)
Share issue expenses - (116 299)
Value of employee services - -
Dividends - -
Balance at 28 February 2010 2 283 700 374 949 936
Total loss and comprehensive expense for the year - -
Issue of shares - acquisition of subsidiary 319 995 50 879 204
Treasury shares (4 082) (506 245)
Issue of shares - acquisition of subsidiary - -
Value of employee services - -
Dividends - -
Balance at 28 February 2011 2 599 613 425 322 895
Total share Share-based
capital payment
Figures in Rand and premium reserve
Balance at 1 March 2009 293 919 518 572 971
Total profit comprehensive income for the year - -
Issue of shares - acquisition of subsidiary 40 033 402 -
Treasury shares (195 127) -
Convertible redeemable and participating
preference shares 60 544 642 -
Deferred tax on liability component of
convertible redeemable and participating
preference shares (16 952 500) -
Share issue expenses (116 299) -
Value of employee services - 841 461
Dividends - -
Balance at 28 February 2010 377 233 636 1 414 432
Total loss and comprehensive expense for the year - -
Issue of shares - acquisition of subsidiary 51 199 199 -
Treasury shares (510 327) -
Issue of shares - acquisition of subsidiary - -
Value of employee services - 1 469 350
Dividends - -
Balance at 28 February 2011 427 922 508 2 883 782
Common Shares to
Figures in Rand control deficit be issued
Balance at 1 March 2009 (177 246 106) -
Total profit comprehensive income for the year - -
Issue of shares - acquisition of subsidiary - 51 199 199
Treasury shares - -
Convertible redeemable and participating
preference shares - -
Deferred tax on liability component of
convertible redeemable and participating preference shares - -
Share issue expenses - -
Value of employee services - -
Dividends - -
Balance at 28 February 2010 (177 246 106) 51 199 199
Total loss and comprehensive expense for the year - -
Issue of shares - acquisition of subsidiary - (51 199 199)
Treasury shares - -
Issue of shares - acquisition of subsidiary - 2 074 794
Value of employee services - -
Dividends - -
Balance at 28 February 2011 (177 246 106) 2 074 794
Retained
Figures in Rand earnings Total
Balance at 1 March 2009 94 115 744 211 362 127
Total profit comprehensive income for the year 65 342 611 65 342 611
Issue of shares - acquisition of subsidiary - 91 232 601
Treasury shares - (195 127)
Convertible redeemable and participating preference shares - 60 544 642
Deferred tax on liability component of convertible
redeemable and participating preference shares - (16 952 500)
Share issue expenses - (116 299)
Value of employee services - 841 461
Dividends (37 325 014) (37 325 014)
Balance at 28 February 2010 122 133 341 374 734 502
Total loss and comprehensive expense for the year(66 520 119) (66 520 119)
Issue of shares - acquisition of subsidiary - -
Treasury shares - (510 327)
Issue of shares - acquisition of subsidiary - 2 074 794
Value of employee services - 1 469 350
Dividends (34 863 474) (34 863 474)
Balance at 28 February 2011 20 749 748 276 384 726
Non-controlling
Figures in Rand interests Total equity
Balance at 1 March 2009 - 211 362 127
Total profit comprehensive income for the year - 65 342 611
Issue of shares - acquisition of subsidiary - 91 232 601
Treasury shares - (195 127)
Convertible redeemable and participating preference shares - 60 544 642
Deferred tax on liability component of
convertible redeemable
and participating preference shares - (16 952 500)
Share issue expenses - (116 299)
Value of employee services - 841 461
Dividends - (37 325 014)
Balance at 28 February 2010 - 374 734 502
Total loss and comprehensive expense for the
year (1 863 780) (68 383 899)
Issue of shares - acquisition of subsidiary - -
Treasury shares - (510 327)
Issue of shares - acquisition of subsidiary - 2 074 794
Value of employee services - 1 469 350
Dividends - (34 863 474)
Balance at 28 February 2011 (1 863 780) 274 520 946
GROUP SEGMENTAL REPORT
The segment information set out below is based on the requirements of IFRS 8:
Segment Reporting. For management purposes the Group is split into five
distinctive operating segments. The Board of directors has determined the
operating segments based on the reports reviewed that are used to make strategic
decisions. The Board assesses the performance of the operating segments based on
a measure of profit before taxation. This measurement is consistent with the
recognition and measurement principles applied within the statement of
comprehensive income. Sales amongst segments are carried out at arm`s length.
The revenue from external customers reported to the Board is measured in a
manner consistent with that in the statement of comprehensive income. In the
prior year, 29,9% of total external revenue arose from transactions with two
customers, each of which exceeded 10% of total external revenue. The revenue was
included in the Civils Construction (Coastal), R227,7 million and Commercial and
Industrial Building, R22,2 million.
Business segment
Civils Civils Civils
Construction Construction Construction
(Coastal) (Coastal) (Inland)
Figures in Rand 2011 2010 2011
SEGMENT REVENUE AND RESULT
Revenue
Total segment sales 205 499 984 531 039 381 411 884 994
Less: Inter-segment sales (6 057 639) (3 947 510) (924 466)
Total external revenue 199 442 345 527 091 871 410 960 528
Result
Operating (loss)/profit (29 419 386) 56 433 553 (9 498 425)
Finance income 482 268 2 717 225 1 815 382
Finance costs (246 026) (179 392) (888 670)
(Loss)/profit before taxation (29 183 144) 58 971 386 (8 571 713)
Taxation 10 301 134 (15 892 648) 4 490 154
Total (loss)/profit and
comprehensive (loss)/profit
for the year (18 882 010) 43 078 738 (4 081 559)
SEGMENT ASSETS AND LIABILITIES
Assets 90 385 037 116 366 526 315 241 952
Plant for hire - - -
Property, plant and equipment 19 745 025 6 774 218 62 305 221
Goodwill - - 75 812 429
Deferred income tax assets 12 291 372 1 990 238 1 408 569
Intangible assets 240 324 - -
Inventories 9 858 709 3 422 342 16 836 888
Investments - - -
Trade and other receivables 41 264 559 82 953 165 135 367 033
Cash and cash equivalents 4 910 196 21 226 563 19 075 658
Income tax receivables 2 074 852 - 4 436 154
Liabilities 54 796 985 47 154 079 135 749 829
Convertible redeemable and
participating preference shares - - -
Borrowings 7 303 182 377 335 12 290 975
Deferred income tax liabilities - - 4 697 952
Trade and other payables 47 493 803 45 021 706 118 760 902
Income tax liabilities - 1 755 038 -
OTHER INFORMATION
Capital additions 20 017 313 3 694 027 18 590 909
Property, plant and equipment 19 749 455 3 694 027 18 590 909
Plant for hire - - -
Intangible assets 267 858 - -
Depreciation 4 383 037 1 724 091 12 471 443
Amortisation of intangibles 27 534 - 3 577 019
Civils
Construction Small Plant Small Plant
(Inland) and Formwork and Formwork
Figures in Rand 2010 2011 2010
SEGMENT REVENUE AND RESULT
Revenue
Total segment sales 77 400 623 64 917 084 86 675 676
Less: Inter-segment sales - (11 331 030) (9 832 107)
Total external revenue 77 400 623 53 586 054 76 843 569
Result
Operating (loss)/profit 10 816 487 (37 207 025) 18 229 960
Finance income 899 260 - 80 356
Finance costs (704 098) (3 230 211) (3 331 375)
(Loss)/profit before taxation 11 011 649 (40 437 236) 14 978 941
Taxation (2 672 407) 8 563 080 (3 771 617)
Total (loss)/profit and
comprehensive (loss)/profit
for the year 8 339 242 (31 874 156) 11 207 324
SEGMENT ASSETS AND LIABILITIES
Assets 254 724 102 114 139 200 120 888 686
Plant for hire - 67 026 878 72 215 117
Property, plant and equipment 56 679 390 20 992 172 22 234 804
Goodwill 73 737 635 2 422 365 -
Deferred income tax assets - 7 704 777 -
Intangible assets 3 577 019 655 221 -
Inventories 5 952 849 1 972 998 4 266 918
Investments 41 858 077 - -
Trade and other receivables 47 790 385 12 907 698 20 661 534
Cash and cash equivalents 24 491 604 89 621 1 326 193
Income tax receivables 637 143 367 470 184 120
Liabilities 54 897 935 50 212 437 19 933 902
Convertible redeemable and
participating preference shares - - -
Borrowings 8 879 718 44 841 578 14 861 267
Deferred income tax liabilities 8 216 424 - 528 485
Trade and other payables 37 801 793 5 370 859 4 544 150
Income tax liabilities - - -
OTHER INFORMATION
Capital additions 3 477 528 13 160 036 24 731 043
Property, plant and equipment 3 477 528 536 640 1 430 303
Plant for hire - 11 968 175 23 300 740
Intangible assets - 655 221 -
Depreciation 3 953 655 16 485 236 15 366 969
Amortisation of intangibles 5 905 490 - -
Commercial Commercial
and Industrial and Industrial
Building Building Services
Figures in Rand 2011 2010 2011
SEGMENT REVENUE AND RESULT
Revenue
Total segment sales 352 807 953 299 610 157 8 752 307
Less: Inter-segment sales (5 412 465) (146 414 587) (8 752 307)
Total external revenue 347 395 488 153 195 570 -
Result
Operating (loss)/profit 10 388 909 16 310 690 (14 970 126)
Finance income 638 263 2 042 893 1 726 895
Finance costs (116 541) (82 590) (9 039 436)
(Loss)/profit before taxation 10 910 631 18 270 993 (22 282 667)
Taxation (2 050 620) (4 581 769) (123 518)
Total (loss)/profit and
comprehensive
(loss)/profit for the year 8 860 011 13 689 224 (22 406 185)
SEGMENT ASSETS AND LIABILITIES
Assets 108 369 956 126 189 842 393 509
Plant for hire - - -
Property, plant and equipment 6 909 274 7 829 417 47 648
Goodwill 52 822 314 52 822 314 -
Deferred income tax assets - - -
Intangible assets 563 279 - -
Inventories 4 387 553 10 806 596 -
Investments - - -
Trade and other receivables 31 409 860 35 891 850 336 703
Cash and cash equivalents 10 535 745 18 758 961 2 883
Income tax receivables 1 741 931 80 704 6 275
Liabilities 35 501 718 64 261 867 77 747 739
Convertible redeemable and
participating preference shares - - 63 531 175
Borrowings 990 376 1 814 978 -
Deferred income tax liabilities 411 618 279 904 12 666 716
Trade and other payables 34 099 724 62 166 985 1 549 848
Income tax liabilities - - -
OTHER INFORMATION
Capital additions 1 941 591 989 212 88 702
Property, plant and equipment 1 378 312 989 212 88 702
Plant for hire - - -
Intangible assets 563 279 - -
Depreciation 1 551 487 1 614 892 49 661
Amortisation of intangibles - - -
Total Total
Services Group Group
Figures in Rand 2010 2011 2010
SEGMENT REVENUE AND RESULT
Revenue
Total segment sales 5 976 000 1 043 862 322 1 000 701 837
Less: Inter-segment sales (5 976 000) (32 477 907) (166 170 204)
Total external revenue - 1 011 384 415 834 531 633
Result
Operating (loss)/profit (7 388 239) (80 706 053) 94 402 451
Finance income 1 368 488 4 662 808 7 108 222
Finance costs (1 815 277) (13 520 884) (6 112 732)
(Loss)/profit before taxation (7 835 028) (89 564 129) 95 397 941
Taxation (3 136 889) 21 180 230 (30 055 330)
Total (loss)/profit and
comprehensive (loss)/profit
for the year (10 971 917) (68 383 899) 65 342 611
SEGMENT ASSETS AND LIABILITIES
Assets 16 170 648 628 529 654 634 339 804
Plant for hire - 67 026 878 72 215 117
Property, plant and equipment 53 083 109 999 340 93 570 912
Goodwill - 131 057 108 126 559 949
Deferred income tax assets - 21 404 718 1 990 238
Intangible assets - 1 458 824 3 577 019
Inventories - 33 056 148 24 448 705
Investments - - 41 858 077
Trade and other receivables 76 146 221 285 853 187 373 080
Cash and cash equivalents 15 928 518 34 614 103 81 731 839
Income tax receivables 112 901 8 626 682 1 014 868
Liabilities 73 357 519 354 008 708 259 605 302
Convertible redeemable and
participating preference shares 54 519 158 63 531 175 54 519 158
Borrowings - 65 426 111 25 933 298
Deferred income tax liabilities 16 193 384 17 776 286 25 218 197
Trade and other payables 2 644 977 207 275 136 152 179 611
Income tax liabilities - - 1 755 038
OTHER INFORMATION
Capital additions 11 469 53 798 551 32 903 279
Property, plant and equipment 11 469 40 344 018 9 602 539
Plant for hire - 11 968 175 23 300 740
Intangible assets - 1 486 358 -
Depreciation 43 806 34 940 864 22 703 413
Amortisation of intangibles - 3 604 553 5 905 490
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
1. Basis of preparation
These audited results are a summary of the consolidated financial statements and
are prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS), the presentation and
disclosure requirements of IAS 34 - Interim Financial Reporting, the AC 500
Standards as issued by the Accounting Practices Board or its successor, the
Listings Requirements of the JSE Limited and the requirements of the South
African Companies Act, No 61 of 1973, as amended, on a basis consistent with the
prior year except for the following:
The presentation of the Statement of Comprehensive Income has been changed
during the year to provide additional information on the nature of expenses.
Management are of the view that this presents better information about the
activities of the Group. The comparative information has been restated to
reflect the changed presentation.
Group
Statement of Comprehensive Income 2010
As previously reported: Rand
Revenue 834 531 633
Cost of sales (691 752 498)
Gross profit 142 779 135
Other income 1 618 598
Administrative and operating expenses (49 995 282)
Operating profit 94 402 451
As restated in the annual financial statements
Revenue 834 531 633
Other income 1 618 598
Raw materials and consumables (156 359 679)
Subcontractors (333 380 603)
Employee costs (144 592 926)
Plant and transport (63 377 669)
Other expenses (15 428 000)
Earnings before interest, depreciation and amortisation 123 011 354
Depreciation (22 703 413)
Amortisation of intangibles (5 905 490)
Operating profit 94 402 451
2. Share capital
There was no change to the authorised share capital during the year. During the
year, 31 999 500 ordinary shares were issued to Civcontract Civils (Pty) Limited
(Civcon) vendors in respect of the Civcon acquisition concluded in the prior
year. A further 1 296 746 contingently issuable shares are included in shares to
be issued.
3. Acquisition of BO`s Small Plant Hire cc
On 1 October 2010, Erbacon Small Plant (Pty) Limited acquired the business of
BO`s Small Plant Hire cc (BO`s) with the primary purpose of enhancing the small
plant and formwork segment. The purchase consideration was cash of R10 000 000
and a 15% shareholding in Erbacon Small Plant (Pty) Limited.
Group
2011
Rand
Fair value of assets acquired
Goodwill 2 422 365
BO`s - fair value of assets 7 577 635
10 000 000
Purchase consideration
Consideration to be settled in cash 10 000 000
15% shareholding in Erbacon Small Plant (Pty) Limited -
10 000 000
Net cash outflow on acquisition
Cash consideration paid -
Cash acquired -
Net cash outflow on business combination -
The assets and liabilities as at 1 October 2010 arising from the acquisition are
as follows:
Acquiree`s
carrying
Figures in Rand Fair value value
Property, plant and equipment 607 796 397 488
Plant for hire 7 302 659 5 431 503
Inventories 250 000 250 000
Deferred taxation liability (582 820) -
Fair value of net assets acquired 7 577 635 6 078 991
Goodwill 2 422 365 -
Total cost of business acquisition 10 000 000 -
Goodwill of R2 422 365 arising from the acquisition consists largely of the
synergies and economies of scale expected from combining the operations of the
entities. Goodwill is not deductible for income tax purposes.
The non-controlling interest of Erbacon Small Plant (Pty) Limited have an option
to put their shareholding back to the company at fair value determined at the
exercise date, in the event that the company does not reduce its shareholding in
Erbacon Small Plant (Pty) Limited to below 50% by 1 October 2013.
The acquired business contributed revenue of R4 121 174 and net loss before tax
of R581 425 for the period 1 October 2010 to 28 February 2011. If the
acquisition had occurred on 1 March 2010, the acquired would have contributed
revenues of R13 879 242 and a net loss before tax of R844 178.
Group
2011
Rand
4. Dividends
Dividend number three of 9,54 cents per share 24 921 681
Special dividend of 3,85 cents per share 10 057 492
Employee Share Incentive Trust (115 699)
34 863 474
CORPORATE INFORMATION
Directors: A Dawson (Chairman)#, SJ Flanagan (CEO), RK Braithwaite (GFD), DB
Erskine, AH Henning, CHA Ramsay, ZR Angamia*, JA Holtzhausen*, NP Mkwanazi*,
S Totaram*
*Non-executive #Independent non-executive
Company Secretary: D Godfrey
Registered office: 2 Montreal Road, Glen Anil, 4051
Telephone: +27 31 569 2866
Auditor: PricewaterhouseCoopers Inc
Designated and corporate advisor: PSG Capital (Pty) Limited
Website: http://www.erbacon.co.za
Date: 16/05/2011 17:43:08 Produced by the JSE SENS Department.
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