| Thu 17 Nov 2011, 15:50 | | BDM - Buildmax Limited - Reviewed consolidated financial results for the six |
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BDM
BDM
BDM - Buildmax Limited - Reviewed consolidated financial results for the six
months ended 31 August 2011
Buildmax Limited
("Buildmax" or "the group")
(Registration no. 1995/012209/06)
Share Code BDM
ISIN code ZAE000011250
REVIEWED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2011
Revenue from continuing operations down 1,7%
Operating profit from continuing operations improved from a loss of R35,9
million to a profit of R24,2 million
EBITDA margin from continuing operations improved to 21,6%
Headline earningsimproved by R73,4 million
Abridged consolidated statement of comprehensive income
Reviewed
6 months ended 31 August 2011
Continuing Total
operations Discontinued operations
operations
R`000 R`000 R`000
Revenue 524 700 130 450 655 150
Operating profit before depreciation and 113 348 (4 199) 109 149
amortisation ("EBITDA")
Depreciation (86 191) (4 113) (90 304)
Operating profit/(loss) before 27 157 (8 312) 18 845
amortisation
Amortisation of intangible assets (2 954) - (2 954)
Operating profit/(loss) 24 203 (8 312) 15 891
Loss on disposal of business unit - (5 952) (5 952)
Impairment losses - - -
Profit/(loss) before interest and 24 203 (14 264) 9 939
taxation ("PBIT")
Net interest paid (12 137) (1 323) (13 460)
Profit/(loss) before taxation ("PBT") 12 066 (15 587) (3 521)
Taxation (4 572) (164) (4 736)
Profit/(loss) for the period 7 494 (15 751) (8 257)
Other comprehensive income for the period
Unrealised profit due to change in fair 1 807 - 1 807
value of cash flow hedge
Taxation (506) - (506)
Total comprehensive income/(loss) for the 8 795 (15 751) (6 956)
period
Profit/(loss) for the period attributable
to:
Equity holders of the company 7 489 (15 751) (8 262)
Outside shareholders` interests 5 - 5
7 494 (15 751) (8 257)
Total comprehensive income/(loss) for the
period attributable to:
Equity holders of the company 8 790 (15 751) (6 961)
Outside shareholders` interests 5 - 5
8 795 (15 751) (6 956)
Reviewed
6 months ended 31 August 2010
Continuing Total
operations Discontinued operations
operations
R`000 R`000 R`000
Revenue 533 861 195 562 729 423
Operating profit before depreciation and 53 279 8 221 61 500
amortisation ("EBITDA")
Depreciation (80 866) (30 321) (111 187)
Operating profit/(loss) before (27 587) (22 100) (49 687)
amortisation
Amortisation of intangible assets (8 344) - (8 344)
Operating profit/(loss) (35 931) (22 100) (58 031)
Loss on disposal of business unit - - -
Impairment losses (204 468) (89 267) (293 735)
Profit/(loss) before interest and (240 399) (111 367) (351 766)
taxation ("PBIT")
Net interest paid (10 103) (10 918) (21 021)
Profit/(loss) before taxation ("PBT") (250 502) (122 285) (372 787)
Taxation 35 974 1 097 37 071
Profit/(loss) for the period (214 528) (121 188) (335 716)
Other comprehensive income for the period
Unrealised profit due to change in fair 576 576
value of cash flow hedge
Taxation (161) - (161)
Total comprehensive income/(loss) for the (214 113) (121 188) (335 301)
period
Profit/(loss) for the period attributable
to:
Equity holders of the company (207 378) (121 188) (328 566)
Outside shareholders` interests (7 150) - (7 150)
(214 528) (121 188) (335 716)
Total comprehensive income/(loss) for the
period attributable to:
Equity holders of the company (206 963) (121 188) (328 151)
Outside shareholders` interests (7 150) - (7 150)
(214 113) (121 188) (335 301)
Audited
year ended 28 February 2011
Continuing Total
operations Discontinued operations
operations
R`000 R`000 R`000
Revenue 1 047 082 322 132 1 369 214
Operating profit before depreciation and 125 266 7 435 132 701
amortisation ("EBITDA")
Depreciation (171 869) (34 826) (206 695)
Operating profit/(loss) before (46 603) (27 391) (73 994)
amortisation
Amortisation of intangible assets (11 298) - (11 298)
Operating profit/(loss) (57 901) (27 391) (85 292)
Loss on disposal of business unit - - -
Impairment losses (206 453) (89 267) (295 720)
Profit/(loss) before interest and (264 354) (116 658) (381 012)
taxation ("PBIT")
Net interest paid (22 177) (12 786) (34 963)
Profit/(loss) before taxation ("PBT") (286 531) (129 444) (415 975)
Taxation 45 801 (1 557) 44 244
Profit/(loss) for the period (240 730) (131 001) (371 731)
Other comprehensive income for the period
Unrealised profit due to change in fair 2 620 2 620
value of cash flow hedge
Taxation (733) - (733)
Total comprehensive income/(loss) for the (238 843) (131 001) (369 844)
period
Profit/(loss) for the period attributable
to:
Equity holders of the company (233 402) (131 001) (364 403)
Outside shareholders` interests (7 328) - (7 328)
(240 730) (131 001) (371 731)
Total comprehensive income/(loss) for the
period attributable to:
Equity holders of the company (231 515) (131 001) (362 516)
Outside shareholders` interests (7 328) - (7 328)
(238 843) (131 001) (369 844)
Reconciliation of headline earnings/(loss)
Reviewed
6 months ended 31 August 2011
Continuing Total
operations Discontinued operations
operations
R`000 R`000 R`000
Profit/(loss) for the period attributable 7 489 (15 751) (8 262)
to shareholders of Buildmax
Adjusted for:
Loss on disposal of business units - 5 952 5 952
Remeasurement of assets held for sale and - - -
other impairments
Loss/(profit) on disposal of property, 2 781 37 2 818
plant and equipment
- Gross 3 863 52 3 915
- Taxation (1 082) (15) (1 097)
Impairment of property, plant and - - -
equipment
- Gross - - -
- Taxation - - -
Impairment of goodwill and other - - -
intangibles
- Gross - - -
- Taxation - - -
- Outside shareholders` interest - - -
Headline earnings/(loss) attributable to 10 270 (9 762) 508
ordinary shareholders
Reviewed
6 months ended 31 August 2010
Continuing Total
operations Discontinued operations
operations
R`000 R`000 R`000
Profit/(loss) for the period attributable (207 378) (121 188) (328 566)
to shareholders of Buildmax
Adjusted for:
Loss on disposal of business units - - -
Remeasurement of assets held for sale and - - -
other impairments
Loss/(profit) on disposal of property, (110) (1 350) (1 460)
plant and equipment
- Gross (154) (1 874) (2 028)
- Taxation 44 524 568
Impairment of property, plant and 11 934 21 313 33 247
equipment
- Gross 16 575 21 313 37 888
- Taxation (4 641) - (4 641)
Impairment of goodwill and other 155 939 67 954 223 893
intangibles
- Gross 187 893 67 954 255 847
- Taxation (25 791) - (25 791)
- Outside shareholders` interest (6 163) - (6 163)
Headline earnings/(loss) attributable to (39 615) (33 271) (72 886)
ordinary shareholders
Audited
year ended 28 February 2011
Continuing Total
operations Discontinued operations
operations
R`000 R`000 R`000
Profit/(loss) for the period attributable (233 402) (131 001) (364 403)
to shareholders of Buildmax
Adjusted for:
Loss on disposal of business units - - -
Remeasurement of assets held for sale and 2 487 - 2 487
other impairments
Loss/(profit) on disposal of property, (8 021) (1 206) (9 227)
plant and equipment
- Gross (11 140) (1 675) (12 815)
- Taxation 3 119 469 3 588
Impairment of property, plant and 13 919 21 313 35 232
equipment
- Gross 18 560 21 313 39 873
- Taxation (4 641) - (4 641)
Impairment of goodwill and other 155 939 67 954 223 893
intangibles
- Gross 187 893 67 954 255 847
- Taxation (25 791) - (25 791)
- Outside shareholders` interest (6 163) - (6 163)
Headline earnings/(loss) attributable to (69 078) (42 940) (112 018)
ordinary shareholders
Abridged consolidated statement of financial position
Reviewed Reviewed Audited
31 August 31 August 28 February
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 690 459 708 764 613 915
Goodwill 27 111 27 111 27 111
Other intangible assets 68 439 74 348 71 393
Deferred taxation 12 340 14 596 12 124
798 349 824 819 724 543
Current assets
Inventories 15 056 52 225 44 832
Trade and other receivables 162 624 170 646 155 001
Taxation receivable 4 459 5 573 4 425
Bank and cash balances 50 764 33 727 127 029
232 903 262 171 331 287
Assets classified as held for sale 90 815 45 067 53 543
Total assets 1 122 067 1 132 057 1 109 373
EQUITY AND LIABILITIES
Share capital and premium 2 023 206 1 732 382 2 023 206
Cash flow hedging reserve (1 152) (3 925) (2 453)
Accumulated loss (1 471 563) (1 427 464) (1 463
301)
Attributable to equity holders of the 550 491 300 993 557 452
company
Outside shareholders` interests (7 323) (7 150) (7 328)
Total shareholders` interests 543 168 293 843 550 124
Non-current liabilities
Interest-bearing liabilities 128 654 204 110 101 886
Derivative instruments - 1 326 290
Provisions 4 751 3 956 4 751
Deferred taxation 30 938 39 064 28 948
164 343 248 456 135 875
Current liabilities
Interest-bearing liabilities 202 398 262 573 174 764
Derivative instruments 1 601 4 126 3 118
Vendor loan payable - 43 500 -
Trade and other payables 129 673 240 559 190 580
Provisions 18 412 17 710 25 471
Taxation payable 2 313 2 745 883
Bank overdrafts 11 348 18 545 9 261
365 745 589 758 404 077
Liabilities directly associated with 48 811 - 19 297
assets held for sale
Total equity and liabilities 1 122 067 1 132 057 1 109 373
Net asset value per share (cents) 16,0 28,9 16,2
Net tangible asset value per share 13,8 21,2 13,9
(cents)
Net asset value per share (cents)* 16,0 8,7 16,2
Net tangible asset value per share 13,8 6,4 13,9
(cents)*
* Based on shares in issue on 31 August 2011
Supplementary information
Reviewed Adjusted Reviewed Audited
6 months for Originally year ended
ended rights reported 28 February
31 August issue 6 months 2011
2011 6 months ended cents
R`000 ended 31 August
31 August 2010
2010 cents
cents
Headline earnings/(loss)
per share (cents)
Continuing and discontinued - (3,3) (7,0) (4,4)
operations
- Continuing operations 0,3 (1,8) (3,8) (2,7)
- Discontinued operations (0,3) (1,5) (3,2) (1,7)
Basic loss per share
(cents)
Continuing and discontinued (0,3) (15,0) (31,5) (14,3)
operations
- Continuing operations 0,2 (9,5) (19,9) (9,2)
- Discontinued operations (0,5) (5,5) (11,6) (5,1)
Shares in issue (`000)
- at end of the period 3 444 716 3 444 716 1 040 700 3 444 716
- weighted 3 444 716 2 183 655 1 040 700 2 546 426
Abridged consolidated statement of changes in equity
Share Cashflow Accumulated
capital and hedging loss
premium reserve
R`000 R`000 R`000
Balances as at 28 February 2010 1 732 382 (4 340) (1 098 898)
Total comprehensive loss for the - 415 (328 566)
period
Balances as at 31 August 2010 1 732 382 (3 925) (1 427
464)
Share issue 290 824 - -
Total comprehensive loss for the - 1 472 (35 837)
period
Balances as at 28 February 2011 2 023 206 (2 453) (1 463
301)
Total comprehensive loss for the - 1 301 (8 262)
period
Balances as at 31 August 2011 2 023 206 (1 152) (1 471
563)
Attributable Outside Total
to equity shareholders` shareholder
holders interest s` interest
of company
R`000 R`000 R`000
Balances as at 28 February 2010 629 144 - 629 144
Total comprehensive loss for the (328 151) (7 150) (335 301)
period
Balances as at 31 August 2010 300 993 (7 150) 293 843
Share issue 290 824 - 290 824
Total comprehensive loss for the (34 365) (178) (34 543)
period
Balances as at 28 February 2011 557 452 (7 328) 550 124
Total comprehensive loss for the (6 961) 5 (6 956)
period
Balances as at 31 August 2011 550 491 (7 323) 543 168
Abridged consolidated statement of cash flows
Reviewed Reviewed Audited
6 months 6 months year ended
ended ended 28 February
31 August 31 August 2011
2011 2010
R`000 R`000 R`000
Operating activities
Loss before taxation (3 521) (372 787) (415 975)
Working capital movement (53 090) 31 906 29 547
Impairment of plant, - 293 735 295 720
equipment and intangible
assets
Other non-cashflow items 103 125 117 301 183 781
Net interest paid 13 460 21 021 34 963
Cash generated from 59 974 91 176 128 036
operations
Net interest paid in cash (13 460) (21 021) (34 218)
Taxation paid (1 045) (1 691) (3 312)
Cash generated from operating 45 469 68 464 90 506
activities
Investing activities
Purchase of property, plant
and equipment
- Expanding operations (557) (1 669) (5 402)
- Maintaining operations (240 668) (17 521) (84 548)
Proceeds on disposal of 2 749 - -
businesses
Proceeds on disposal of 63 265 20 310 92 199
property plant and equipment
Net cash (utilised (175 211) 1 120 2 249
by)/generated from investing
activities
Financing activities
Net proceeds on share issue - - 290 824
Interest-bearing liabilities 178 212 11 986 89 186
raised
Interest-bearing liabilities (126 822) (171 163) (459 772)
repaid
Net cash flows generated 51 390 (159 177) (79 762)
from/(utilised by) financing
activities
Net (decrease)/increase in (78 352) (89 593) 12 993
cash and cash equivalents
Cash and cash equivalents at 117 768 104 775 104 775
the beginning of the period
Cash and cash equivalents at 39 416 15 182 117 768
the end of the period
Abridged segmental analysis
Audited Reviewed Unaudited Audited
6 months 6 months 6 months year ended
ended ended ended 28 February
31 August 31 August 28 February 2011
2011 2010 2011
R`000 R`000 R`000 R`000
EXTERNAL REVENUE
Continuing operations 524 700 533 861 513 221 1 047 082
Mining Services 524 134 493 744 468 590 962 334
Equipment sales and rental 566 40 117 44 631 84 748
Discontinued operations 130 450 195 562 126 570 322 132
Mining Services - 69 669 - 69 669
Construction Materials 130 450 125 893 126 570 252 463
655 150 729 423 639 791 1 369 214
INTER-SEGMENT REVENUE
Continuing operations 24 945 2 085 19 530 21 615
Mining Services 5 541 737 1 299 2 036
Equipment sales and rental 19 404 1 348 18 231 19 579
Discontinued operations 1 346 - - -
Mining Services - - - -
Construction Materials 1 346 - - -
26 291 2 085 19 530 21 615
EBITDA
Continuing operations 113 348 53 279 71 987 125 266
Mining Services 104 208 53 279 35 919 89 198
Equipment sales and rental 9 140 - 36 068 36 068
Discontinued operations (4 199) 8 221 (786) 7 435
Mining Services - 15 678 - 15 678
Construction Materials (4 199) (7 457) (786) (8 243)
109 149 61 500 71 201 132 701
OPERATING PROFIT/(LOSS)
BEFORE AMORTISATION
Continuing operations 27 157 (27 587) (19 016) (46 603)
Mining Services 23 487 (27 587) (32 611) (60 198)
Equipment sales and rental 3 670 - 13 595 13 595
Discontinued operations (8 312) (22 100) (5 291) (27 391)
Mining Services - (9 529) - (9 529)
Construction Materials (8 312) (12 571) (5 291) (17 862)
18 845 (49 687) (24 307) (73 994)
PROFIT/(LOSS) BEFORE
INTEREST AND TAXATION
Continuing operations 24 203 (240 399) (23 955) (264 354)
Mining Services 20 533 (240 399) (37 550) (277 949)
Equipment sales and rental 3 670 - 13 595 13 595
Discontinued operations (14 264) (111 367) (5 291) (116 658)
Mining Services - (30 842) - (30 842)
Construction Materials (14 264) (80 525) (5 291) (85 816)
9 939 (351 766) (29 246) (381 012)
Commentary
Introduction
The six months under review was a period of further consolidation, strategic
positioning and restructuring of activities, to improve the overall financial
position of the group. Maintaining competitiveness and delivering adequate
returns to Buildmax`s shareholders remains a top priority. Management has
remained steadfast in achieving the substantial on-going initiatives which
commenced during the previous financial year. These initiatives include:
- Strengthening the senior management team through replacement, redirecting
their focus and incentivising senior managers in crucial positions within
the group`s mining division, as well as bolstering the management team in
terms of technical, marketing and human resource skills.
- Re-evaluating our asset portfolio in order to achieve strategic alignment
and improve profitability and cash flow. A careful analysis of performance
and financial forecasts of all operating entities to deliver sustainable
returns has been undertaken. As a result, the sale of Watertite was
approved during the previous financial year and BSB during the period under
review. Various negotiations are underway to dispose of the remaining
entities in the group`s construction business unit.
- Restructuring the Mining Services business unit through appropriate right
sizing, the on-going focus on renegotiating inadequate contract rates,
active marketing, introducing a robust tendering methodology and
implementing improvements in maintenance programmes and facilities.
- On a sustainable basis securing adequate bank funding at market related
rates on acceptable terms to continue with the group`s current fleet
replacement programme and to fund future growth capital expenditure
("capex").
- Strategic repositioning of the group by focusing on transforming the group
into a supply chain management company operating in largely the open cast
mining sector of the economy, striving towards unlocking bottlenecks and
strategic value on behalf of customers. Strategic focus has also been on
reducing the geographic and commodity concentration of the group.
Strategic initiatives deliver as operating results improve from a loss to profit
position
It is encouraging to note that these initiatives have already started to deliver
promising results with a notable improvement in our operating results. The
group`s operating results improved from a loss of R58,0 million during the
previous period to a profit of R15,9 million for the six months under review.
There is also a positive sentiment towards improved trading conditions and
operational efficiencies for the forthcoming six month period.
Financial performance reflect on-going challenging conditions
Our principal business, Mining Services, remains highly dependent on fleet
replacement, availability of asset-based funding, a stable and productive
workforce and securing reasonable prices for second-hand equipment. Whilst we
have experienced a rise in demand for second-hand equipment and vehicles, asset-
based finance required by potential buyers of second-hand equipment has remained
constrained. Whilst the group has spent in excess of R240 million on plant
replacement and growth, the group was compelled to continue with extending the
useful life of certain assets beyond the ideal replacement cycle. Consequently,
although production and plant availability is increasing steadily, the group`s
results are still impacted by exceptionally high investment in maintenance.
However, this investment in maintenance will result in improved plant
availability in the future.
- Revenue from the group`s core business unit - open cast mining - increased
by 9,6% compared to the previous reporting period. The demand for sand and
aggregates mined at the group`s quarries was lower than anticipated and
resulted in a 12,8% decrease in revenue generated by these businesses.
Therefore, revenue from continuing operations was reduced by 1,7% to R524,7
million.
- Revenue from discontinued operations decreased by 33,3% to R130,5 million
due to the finalisation of the Vukuza rationalisation and lower demand for
the business unit`s construction and cement-based products.
- The restructuring initiatives continued to deliver positive results during
the period under review and assisted the group to report, for both
continuing and discontinued operations, an operating profit of R15,9
million compared to an operating loss of R58,0 million at August 2010.
- Overall the group reported a basic loss per share of 0,3 cents compared to
a basic loss of 15 cents (August 2010).
- On the headline earnings level the group reported a profit of R0,5 million
compared to a headline loss of R72,9 million at August 2010.
- Total interest-bearing debt (excluding cash on hand and bank overdrafts)
increased from R276,7 million at the end of February 2011 to R331,1 million
at the end of the reporting period, due to the utilisation of new asset-
based finance facilities negotiated with the IDC and the group`s bankers.
These facilities have been used for the acquisition of new mining equipment
deployed in the group`s open cast mining business. The group`s net cash
position deteriorated from R117,8 million at the end of the 2011 financial
year to R39,4 million due to an investment in un-funded capex of R64,6
million. Included in this amount is R48,2 million that was paid as equity
deposits to secure the new funding facilities. The repayment profiles of
these asset-based funding facilities have been structured to mirror the
production capacity of the assets funded and include the requirement for
equity deposits of at least 20%. During the six months under review the
group repaid R126,8 million of its outstanding interest-bearing debt.
- During the period the group spend on gross capex was R241,2 million.
Recently there has been renewed confidence in Buildmax by traditional and
new potential lenders and this is evidenced by the fact that R176,6 million
of the total gross capex was funded by the IDC and additional facilities
negotiated with the group`s bankers. The balance of the capex was funded
from operating cash flows and proceeds on the sale of surplus second-hand
mining equipment.
- Shareholders` funds decreased marginally from R550,1 million at the end of
February 2011 to R543,2 million at the end of the August 2011.
- Net tangible asset value decreased slightly from R478,9 million to R474,1
million largely as a result of the losses incurred for the six months ended
31 August 2011.
World-class safety standards maintained
The group remains fully committed to proactively achieving fatality free
operations and a zero harm workplace. During the period under review, no
fatalities were recorded at any of the group`s operations. Various systems and
processes are in place to ensure that workplaces are safe. Safety awareness is a
priority and is encouraged and communicated to all levels of employees.
The group`s Mining and Quarrying businesses achieved a lost time injury
frequency rate of 0,2 for the six months under review. This equates to four
minor injuries during the period, an excellent achievement compared to industry
standards.
Operational review
Continuing operations
Mining Services
Revenue for this business unit increased by 6,16% to R524,1 million (August
2010: R493,7 million). Revenue from open cast mining activities increased by
9,6% to R458,6 million as a direct result of improved contract rates and
increased plant availability and efficiency; partly due to the past and current
investment in maintenance programmes and facilities and the acquisition of new
mining equipment. The general construction markets remain weak and thus
negatively impacted the demand for the group`s sand products and aggregates.
Revenue from the group`s quarrying businesses reduced by 12,8% to R65,6 million
compared to the previous financial period.
EBITDA increased by 95,6% to R104,2 million (August 2010: R53,3 million). The
increase in the business unit`s EBITDA was driven by an increase of 134,3% in
the reported EBITDA from the group`s open cast mining entities which are
delivering EBITDA margins in excess of 20% compared to margins of not more than
10% in the previous comparative period. EBITDA margins in the group`s quarrying
businesses reduced from 17,3% in the previous financial period to 15%, due to a
lower than anticipated demand and the business unit`s inability to pass on all
operating cost increases to its customers.
The business unit reported a profit before interest and taxation of R20,5
million compared to a loss of R240,4 million for the comparative period that
included non-cashflow pre-tax impairments of R204,5 million on goodwill,
intangible assets and equipment.
Gross capex for the period amounted to R229,4 million compared to R6,4 million
during the comparative period. In line with the Buildmax Authorities Framework,
management continues to apply strict disciplines for the approval of capex and
as a result, the group aims to only commit to growth capex if new projects meet
acceptable financial criteria within the group`s current risk profile.
Equipment Sales and Rental
The Equipment Sales and Rental business unit generated most of its current
revenue from short-term plant rentals at market related rates, to the Mining
Services business unit. External plant rental revenue for the period under
review decreased to R0,6 million. During the comparative period, the unit rented
most of its plant items to an external customer which acquired certain of the
rented units at the end of the rental period. The division`s EBITDA for the
period under review was R9,1 million and it reported an operating profit of R3,7
million.
The business unit spent R10,3 million on gross capex in the period under review.
The group reported an effective tax rate of 37,9% from continuing operations,
largely as a result of management`s decision not to raise deferred tax on
estimated tax losses of entities where recoverability remains uncertain.
Discontinued operations
Mining Services
During the comparative period, the financial results of Vukuza Earth Works (Pty)
Limited ("Vukuza") - a subsidiary in the Mining Services business unit - was
disclosed as discontinued operations subsequent to a decision taken by
management to close Vukuza`s mining operations and terminate all loss making
open cast mining contracts. The controlled wind-down of this entity was
completed before the end of the previous financial year and accordingly no
current financial results have been presented.
Construction Materials
In line with the group`s stated strategic decision to focus on its core business
activity - open cast mining and quarrying - it was decided to present the
financial results of the entities in the Construction Materials business unit as
discontinued operations. Revenue from this business unit was R130,5 million, an
increase of 3,6% from the R125,9 million reported for the comparative period.
Margins continued to be eroded as a result of increased input costs, which the
division was unable to pass on to customers.
Management introduced certain cost savings initiatives that are slowly starting
to deliver positive results and this assisted the business unit to reduce its
EBITDA loss to R4,2 million from a previous period loss of R7,5 million.
Including the net loss of R5,9 million on the sale of BSB, the business unit
incurred a loss before interest and taxation of R14,3 million compared to a
prior period loss of R80,5 million which included non-cashflow pre-tax
impairments on goodwill and intangible assets of R67,9 million.
Gross capex for the period was R1,4 million being 31% lower than capex for the
comparative period of R2 million. Capex was financed by internal cash resources.
No significant capex is forecasted in the short-term for the business unit.
Our people
It is important to the group that our management team and workforce at all
levels are both healthy and cared for. The group`s Wellness Programme aims to
identify health risks, provide health education and influence positive behaviour
change amongst our employees. The educational component of our Wellness
Programme encourages employees to live healthier lifestyles to reduce the
likelihood of chronic health problems.
There has been a gradual improvement in the group`s ability to attract
operational staff, including female operators.
The group, however, is still experiencing challenges in attracting and retaining
staff on the technical side, largely due to the demise of technical and
apprenticeship training in the country, with the resultant skills shortage. The
group is now embarking on robust apprenticeship training as well as working with
universities, technical institutions and other players in this space to ensure
steps are taken to address this challenge.
Committed to transformation
The group`s BEE shareholding has significantly reduced from 17% to 6,75%, due to
dilution as a result of the rights issue in November 2010. The Transformation
Committee has formulated a four-year plan to improve the group`s rating from a
Level 6 to a Level 4 contributor.
Outlook: Mining Services to drive prospects for the next year
Coal remains one of the cheapest sources of energy available and its abundant
reserves compared to other fossil fuels renders it likely to remain the primary
source of energy for the foreseeable future. Whilst Eskom has reduced its
projected demand for coal over the medium-term and has announced its intention
to introduce alternative energy sources, the continued roll-out of coal fired
power stations coupled with international demand for thermal and coking coal,
particularly from China and India, should ensure continued growth in this sector
for the foreseeable future. Although the growth in coal exports is currently
hampered by bottlenecks in the current rail network, Transnet recently announced
its intention to increase the capacity of the rail network to cope with the
demand for coal from China and India.
We have meaningful contractual relationships with some of the leading mining
groups in the country and our aim is to grow these relationships for the mutual
benefit of both parties as the propensity to outsource by mining houses
continues to grow. Mining Services is therefore well-positioned to reduce
geographic and commodity concentrations risk and participate in mining supply
chain activities that are less capital intensive.
Dividend
No interim dividend has been declared. It is the group`s policy to consider the
declaration of a dividend annually.
Conclusion
I would like to thank the board, our employees, management and all other
relevant stakeholders for their dedication and support towards achieving the
restructuring initiatives we implemented at the beginning of the previous
financial year. Management are confident of their ability to dispose of the
businesses disclosed as discontinued, during the next six to twelve months. The
group is on track to produce a much improved financial performance for the 2012
financial year.
Colin Wood
Independent Non-Executive Chairman
Terry Bantock
CEO
Christie Els
CFO
17 November 2011
Notes to the reviewed consolidated interim results
Basis of preparation and accounting policies
The reviewed interim consolidated financial statements for the six months ended
31 August 2011 have been prepared in compliance with International Financial
Reporting Standards (`IFRS`) specifically IAS 34 Interim Financial Reporting,
the AC 500 series of interpretations as issued by the Accounting Practices
Board, the South African Companies Act, and the Listings Requirements of the JSE
Limited.
The principle accounting policies applied by the group in the reviewed interim
consolidated financial statements for the six months ended 31 August 2011 are
consistent with those applied in the audited consolidated financial statements
for the year ended 28 February 2011. These statements have been compiled under
the supervision of the Chief Financial Officer, Christie Els CA(SA).
The interim consolidated financial statements have been reviewed by the external
auditors, PKF (Jhb) Inc., and their unqualified report is available for
inspection at the registered office of the company.
Estimates and contingencies
Management makes estimates and judgements concerning the future with regards to
open cast mining contracts, provisions, claims, depreciation methods and
residual values when estimating the recoverable amounts of assets.
The resulting estimates and judgements can only approximate the actual results.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Segment reporting
Management, in consultation with the Board, decided to move the group`s
quarrying businesses from the Construction Materials business unit to the Mining
Services business unit, given the similar operating methods, business risks and
legislative challenges. This change became effective in March 2011 and the
segmented financial results for the comparative periods have been restated.
Discontinued operations
In line with the overall group strategy, during the period under review, the
group has disposed of its entire shareholding in Benoni Sand and Buildware (Pty)
Limited ("BSB") and has entered into negotiations to dispose of its shareholding
in the remaining entities in the group`s Business Unit: Construction Materials
- Negotiations to dispose of Columbia DBL (Pty) Limited ("Columbia") to a
consortium led by the Columbia management team are in an advanced stage,
- Relating to S Burde & Company and Kensmark ("Burde"), an independent third
party has been awarded a 30 day exclusivity period to finalise a due
diligence and submit a formal offer for the business to the Buildmax
Limited Board, and
- The current management team in conjunction with an independent third party,
have expressed an interest in acquiring the shares of Cast Industries (Pty)
Limited and Watson Concrete ("Cast").
As a result, the half year results of the following businesses have been
presented as discontinued operations:
- BSB,
- Columbia,
- Burde and Kensmark (both divisions of Buildmax Industries (Pty) Limited),
and
- Cast and Watson Concrete (a division of Buildmax Industries (Pty) Limited).
Contingencies
The group has contingent liabilities in respect of legal claims arising in the
ordinary course of business. It is not anticipated that any material liabilities
will arise from the contingent liabilities other than those provided for.
Directors: C Wood (Chairman)*; TP Bantock (Chief Executive Officer);
CS Els (Chief Financial Officer); CB Brayshaw*; MD Lamola*; DJ Mack*;
MW McCulloch*; BT Ngcuka*; G Montgomery* (*Non-executive director, Independent)
Registered office: 514 Pretoria Road, Fairleads, Benoni. (Postnet Suite 435,
Private Bag X108, Centurion, 0046)
Sponsor: Java Capital
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
www.buildmax.co.za
Date: 17/11/2011 15:50:01 Produced by the JSE SENS Department.
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