| Thu 17 May 2012, 14:22 | | 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 29 February 2012
Erbacon Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2007/014490/06)
Share code: ERB & ISIN: ZAE000111571
("Erbacon", "the Company" or "Group")
AUDITED CONDENSED PROVISIONAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2012
Journey to Best-in-Class
Erbacon provides heavy civil engineering construction and commercial and
industrial building services.
The implementation of the Group`s medium-term strategy of `Best-in-Class`
(comprising quality Order Book Development, Project Execution, and Business
Sustainability) is progressing well. In particular, the business imperatives
of sustainability as relating to the risk assessment process, a culture of
safe behaviour, Black Economic Empowerment, and sound governance remain the
focus of the Board.
During the period under review the Group has delivered on its commitments to
clients, appointed a significant number of experienced senior executives and
managers, focussed its operations into two businesses being Civil Construction
and Commercial and Industrial Building, disposed of non-core operations and
announced a recapitalisation plan which is scheduled for completion in August
2012.
Overview of the Year to 29 February 2012
The Group increased revenue from continuing operations by 20% to R1.137
billion as a result of strong growth in its civil engineering business, while
revenue from building activities was lower than the prior year.
A number of contracts, which were substantially complete by year-end, incurred
significant losses. As a result the Group made an operating loss for the year.
In line with the Group`s strategy to become a focussed `Best-in-Class` civil
engineering and building contractor, the Group`s loss making small plant hire
business (ESP) was disposed of during the year. Losses incurred on ESP have
been disclosed within the Group results as a discontinued operation.
Shareholder loan support has stabilised the Group`s financial position, whilst
the announced recapitalisation of the Group will both strengthen the financial
position and reduce finance costs into the future.
Operational Review
Civils Construction
Revenue increased by 45% as the Group grew its capacity in heavy civil
engineering construction in both public and private sectors. Post the 2010
Fifa Soccer World Cup there were low levels of tenders in the market and this
unfortunately led to poor project selection and tendering which ultimately
resulted in contract losses on certain contracts. Contracts more recently
tendered are being profitably implemented. The Group has material unrecognized
commercial claims in its favour which it is actively pursuing. Tender activity
from the mining industry remains consistent while an increased level of
activity is evident from governmental institutions.
Commercial and Industrial Building
Revenue decreased by 23% as funding for commercial developments remained
constrained and a number of secured contracts were delayed or cancelled. By
year-end the order book had strengthened significantly and margins in the
industry are beginning to harden.
Financial Review
Group revenue from continuing operations increased to R 1,137 billion with
Civils Construction contributing 76% (2011: 63%) of Group revenue.
The Group recorded an operating loss. Estimated losses to completion on loss
making contracts have been fully recognized within the period under review and
accounted for in terms of IAS 11 (Accounting for Construction Contracts).
Overheads increased as the Group rebuilt capacity to become a `Best-in-Class`
leader in its identified markets. Finance costs increased due to increased
borrowings, primarily from shareholders who capitalized the interest to their
loans, and increased amortization of the preference share funding.
Discontinued operations: losses during the year were incurred in the
operations and on disposal of the small plant hire business (ESP). These
losses have been disclosed as discontinued operations in the Statement of
Comprehensive Income. ESP was sold with effect from 29 February 2012. The
Group`s reported Revenue and Operating loss for the 2012 financial year and
comparative year therefore excludes ESP. The Statement of Financial Position
at 29 February 2012 also excludes ESP, as it was sold, while the comparative
prior year position includes ESP.
At 29 February 2012 the net interest bearing debt in the Group was R21,6
million after excluding liabilities that will be converted to equity through
the below mentioned Debt Restructure Plan. After considering the additional
equity (estimated at between R180m and R200m) that will arise on
implementation of the Debt Restructure Plan, the Board considers that the
level of debt is well within acceptable gearing limits.
Post balance sheet events
Shareholders were advised in the SENS announcement published on 27 March 2012
that the Company is pursuing a Debt Restructuring Plan, in terms of which
shareholder loans and the issued preference shares will be converted to
ordinary shares. As part of the Debt Restructure Plan, further capital will be
raised through a general rights issue. Subject to shareholder approvals, the
Debt Restructure Plan is expected to be implemented by the end of August 2012.
Subsequent to year-end certain shareholders and management have provided the
Group with R25.5m in additional loans, which loans form part of the Debt
Restructure Plan.
Dividend
No dividend is proposed for the financial year ended 29 February 2012.
Board of Directors
The Board appointed as directors CJB Vermaak, who leads the Civils
Construction segment, and AR Langham as Group Financial Director. DB Erskine
has retired and consequently resigned as a director. RK Braithwaite has
resigned as a director and has been appointed as Group Company Secretary.
Mr NO Davies has been co-opted as an independent non-executive director until
the next annual general meeting to assist with providing shareholders an
independent opinion on the Debt Restructure Plan.
Prospects
Trading conditions in both the South African building and civil engineering
markets are improving with an increased quantum of tenders coming to market.
The Group has a secured order book in excess of R 1 billion, of which 90% is
to be completed within the period to 28 February 2013. A number of commercial
claims in favour of the Company are still to be agreed with our clients, the
finalisation of which may positively impact the Group`s operating result in
the 2013 financial year.
The Group`s liquidity position remains constrained, however it is forecast to
ease as new profitable contracts are undertaken and commercial claims are
resolved. The solvency of the Group will be significantly improved through
implementation of the Debt Restructure Plan.
The Board is confident that the Group will return to operating profitability
in the 2013 financial year. Various IFRS-related, once-off, non-cash
accounting charges relating to the aforementioned Debt Restructure Plan are
likely to result in an attributable loss for the period to 28 February 2013.
The net asset value of the Group will not be negatively impacted by these non-
cash charges.
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.
The Group`s auditors have not reviewed nor reported on any of the comments
relating to future forecasts.
Renewal of cautionary announcement
As aforementioned, shareholders were advised on SENS on 27 March 2012 that
Erbacon had entered into an agreement with various shareholders and other
related parties in terms of which Erbacon`s debt owing to them will be
restructured through a recapitalization plan, known as the Debt Restructure
Plan. Progress on implementing the Debt Restructure Plan is on track and is
expected to be implemented by the end of August 2012.
Shareholders are accordingly advised to continue to exercise caution when
dealing in the Company`s securities until a further announcement is made,
which will set out the detailed particulars and the pro forma financial
effects on Erbacon of the Debt Restructure Plan.
A General Meeting will be held at the Company`s registered address to consider
and approve the requisite resolutions on or around end June 2012.
For and on behalf of the board
A Dawson
Chairman
SJ Flanagan
Chief Executive Officer
AR Langham
Group Financial Director
Midrand
17 May 2012
AUDITED CONDENSED PROVISIONAL RESULTS
FOR THE YEAR ENDED 29 FEBRUARY 2012
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
29 February 28 February
2012 2011*
Figures in Rand thousands
Revenue 1 137 069 945 196
Loss before interest, depreciation and amortisation (80 442) (18 686)
Depreciation and amortisation (31 568) (22 060)
Operating loss (112 010) (40 746)
Finance income 1 159 4 661
Finance costs (18 764) (12 225)
Banks (2 493) (3 213)
Preference shares (10 502) (9 012)
Shareholder loans (5 769) -
Loss before taxation (129 615) (48 310)
Taxation 19 551 12 617
Total loss and comprehensive loss for the year from
continuing operations (110 064) (35 693)
Total loss and comprehensive loss for the year from
discontinued operations (78 986) (32 691)
Total loss and comprehensive loss for the period (189 050) (68 384)
Total loss and comprehensive loss for the year
attributable to:
Owners of parent (179 009) (66 520)
Non-controlling interests (10 041) (1 864)
(189 050) (68 384)
* Reclassified as a result of discontinued
operations
Headline Earnings Reconciliation
Basic Loss (179 009) (66 520)
Adjusted for non-trading items net of tax;
(Profit)/Loss on sale of assets (440) 1 967
Losses on assets included in discontinued
operations 42 179 -
Headline Loss (137 270) (64 553)
Basic loss and diluted loss per share (cents) (92) (34)
From continuing operations (56) (18)
From discontinued operations (36) (16)
Headline loss and diluted headline loss per share
(cents)
Basic headline loss and diluted headline loss per
ordinary share (71) (33)
From continuing operations (51) (18)
From discontinued operations (20) (15)
Weighted average number of shares in issue 193 848 193 494
Diluted weighted average number of shares in issue 261 258 261 661
Due to the company being in a loss position, the preference shares have an
anti-dilutive effect. In terms of IFRS the anti-dilutive effect should not be
calculated. In the current year the diluted loss per share and diluted headine
loss per share are therefore the same as basic loss per share and headline
loss per share (The prior year comparative figures have been restated
accordingly).
Other Information
Core Headline loss per share (cents)
Headline loss (137 270) (64 553)
Adjustments for non-core items net of taxation:
Contract intangible amortisation - 2 575
Preference share interest 7 561 6 489
Share based payments 569 1 058
Other attributable discontinued operation losses 26 766 2 554
Impairment of property for development inventory 1 260 508
Restructuring costs - 973
Core Headline Loss (101 114) (50 396)
Core diluted headline loss per ordinary share (39) (19)
Core headline loss is based on headline losses, adjusted for non-recurring and
non-operational items, after tax where necessary. Core diluted headline loss
per share is calculated based on the diluted weighted average number of
shares.
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
AS AT 29 FEBRUARY 2012
Figures in Rand thousands Audited Audited Audited
29 February 28 February 28 February
2012 2011** 2010**
ASSETS
Non-current assets
Plant for hire - 67 027 72 215
Property, plant and equipment # 76 575 110 000 93 570
Intangible assets 129 425 132 516 126 560
Deferred income tax assets 26 899 21 405 1 990
232 899 330 948 294 335
Current assets
Intangible asset - - 3 577
Inventories** 3 118 6 764 9 831
Trade and other receivables** # 293 882 239 757 201 991
Cash and cash equivalents 17 610 34 614 123 590
Income tax receivables 3 817 8 627 1 015
318 427 289 762 340 004
TOTAL ASSETS 551 326 620 710 634 339
EQUITY AND LIABILITIES
Equity attributable to owners of
the parent 95 131 276 386 374 734
Ordinary equity related 66 896 240 589 332 449
Preference share related * 28 235 35 797 42 285
Non-controlling interests - (1 864) -
TOTAL EQUITY 95 131 274 522 374 734
Liabilities
Non-current liabilities
Preference share related * 74 033 63 531 54 519
Asset finance 4 868 23 175 14 861
Deferred income tax liabilities 11 365 17 776 25 218
Preference share related * 10 980 13 920 16 444
Related to other timing differences 385 3 856 8 774
90 266 104 482 94 598
Current liabilities
Borrowings 103 098 42 252 11 072
Shareholder loans 68 769 - -
Bank overdraft 27 022 20 912 -
Minority shareholder loan - 10 732 -
Asset finance 7 307 10 608 11 072
Trade and other payables ** 262 831 199 454 152 180
Income tax payable - - 1 755
365 929 241 706 165 007
TOTAL LIABILITIES 456 195 346 188 259 605
TOTAL EQUITY AND LIABILITIES 551 326 620 710 634 339
Total number of shares in issue
(net of treasury
shares and including
contingently issuable shares) 193 848 193 848 192 960
Net asset value per ordinary share
cents 49 143 194
Net asset value per ordinary share
excluding preference share
related equity (cents) 35 124 172
* Total preference share
subscription/redemption value 113 248 113 248 113 248
**Materials on site and construction work in progress has been reclassified in
the prior years from inventory to amounts due from contract customers and/or
amounts due to contract customers to provide more meaningful disclosure (Refer
to note 4).
# Included in trade and other receivables are amounts invoiced to clients
amounting to R104,5m that have been ceded to the Group`s bankers as security
for general banking facilities. The Board has approved the implementation of a
general notarial bond over plant and equipment up to the value of R76,6m as
additional security for general banking facilities.
CONDENSED GROUP STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 29 FEBRUARY 2012
Audited Audited
Figures in Rand thousands 29 February 28 February
2012 2011
Cash receipts from customers 1 102 020 977 472
Cash paid to customers, suppliers and employees (1 184 429) (1 002 606)
Cash used by operations (82 409) (25 134)
Finance income 1 159 4 661
Finance cost (3 739) (4 509)
Dividends paid - (34 863)
Tax received/(paid) 4 384 (15 626)
Net cash outflow from operating activities (80 605) (75 471)
Acquisition of property, plant and equipment (4 836) (41 830)
Proceeds on disposal of property, plant and
equipment 3 671 3 876
Proceeds from sale of subsidiary less cash sold 9 338 -
Sale of investment - 41 858
Acquisition of plant for hire (191) (11 968)
Proceeds on disposal of plant for hire 1 151 6 924
Net cash inflow/(outflow) from investing activities 9 133 (1 140)
Proceeds from shareholder loans 63 000 -
(Repayment of)/proceeds from asset finance (14 642) 8 581
Net cash inflow from financing activities 48 358 8 581
Net decrease in cash and cash equivalents (23 114) (68 030)
Cash and cash equivalents at the beginning of the
year 13 702 81 732
Cash and cash equivalents and bank overdrafts at
the end of the year (9 412) 13 702
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 29 FEBRUARY 2012
Share Share Total share Share-based
Figures in Rand thousands capital premium capital and payments
premium reserve
2 284 374 950 377 234 1 414
Balance at 28 February 2010
Total loss and
comprehensive expense for
the year - - - -
Issue of shares -
acquisition of subsidiary 320 50 879 51 199 -
Treasury shares (4) (506) (510) -
Issue of shares -
acquisition of subsidiary - - - -
Value of employee services - - - 1 470
Dividends - - - -
Balance at 28 February 2011 2 600 425 323 427 923 2 884
Total loss and
comprehensive expense for
the year - - - -
Issue of shares -
acquisition of subsidiary 13 2 062 2 075 -
Value of employee services - - - 790
Release of share based
payment reserve - - - (2 504)
Transfer of common control
deficit - - - -
Non-controlling interests
gain on loan forgiveness
by
owners of the parent - - - -
Non-controlling interests
share of losses recognised - - - -
Sale of businesses - - - -
Balance at 29 February 2012 2 613 427 385 429 998 1 170
Common Shares to be Retained Total
Figures in Rand
thousands control issued earnings
deficit
(177 246) 51 199 122 133 374 734
Balance at 28 February
2010
Total loss and
comprehensive expense
for the year - - (66 520) (66 520)
Issue of shares -
acquisition of
subsidiary - (51 199) - -
Treasury shares - - - (510)
Issue of shares -
acquisition of
subsidiary - 2 075 - 2 075
Value of employee
services - - - 1 470
Dividends - - (34 863) (34 863)
Balance at 28 February
2011 (177 246) 2 075 20 750 276 386
Total loss and
comprehensive expense
for the year - - (179 009) (179 009)
Issue of shares -
acquisition of
subsidiary - (2 075) - -
Value of employee
services - - - 790
Release of share based
payment reserve - - 2 504 -
Transfer of common
control deficit 177 246 - (177 246) -
Non-controlling
interests gain on loan
forgiveness by
owners of the parent - - (3 236) (3 236)
Non-controlling
interests share of
losses recognised - - 200 200
Sale of businesses - - - -
Balance at 29 February
2012 - - (336 037) 95 131
Non - Total
Figures in Rand thousands controlling equity
interests
- 374 734
Balance at 28 February 2010
Total loss and comprehensive expense for the year (1 864) (68 384)
Issue of shares - acquisition of subsidiary - -
Treasury shares - (510)
Issue of shares - acquisition of subsidiary - 2 075
Value of employee services - 1 470
Dividends - (34 863)
Balance at 28 February 2011 (1 864) 274 522
Total loss and comprehensive expense for the year (10 041) (189 050)
Issue of shares - acquisition of subsidiary - -
Value of employee services - 790
Release of share based payment reserve - -
Transfer of common control deficit - -
Non-controlling interests gain on loan forgiveness by
owners of the parent 3 236 -
Non-controlling interests share of losses recognised (200) -
Sale of businesses 8 869 8 869
Balance at 29 February 2012 - 95 131
GROUP SEGMENTAL REPORT
The segment information set out below is based on the requirements of IFRS 8:
Segment Reporting. The Group has been restructured into a single civils
business with the civils coastal and civils inland operating segments being
managed by the same executive. The Group is now split into three distinctive
operating segments, in comparison to five in the prior year. The Board of
directors has determined the operating segments based on the reports that are
used to make strategic decisions. The Board assesses the performance of the
operating segments based on a measure of operating profit/(loss). 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.
Civils Construction Commercial and
Restated Industrial Building
Figures in Rand 2012 2011 2012 2011
Segment revenue and
result
Revenue
Total external revenue 868 988 597 800 268 081 347 396
Result
Loss before interest,
depreciation, tax and
amortisation/EBIDTA (54 402) (15 704) (4 109) 11 883
Operating (loss)/profit (84 143) (36 163) (5 914) 10 331
Segment assets and
liabilties
Assets 359 049 319 825 63 134 55 223
Liabilities (225 911) (182 804) (46 211) (35 176)
Net asset/(liability) 133 138 137 021 16 923 20 047
Total continuing
Figures in Rand thousands Services operations
2012 2011 2012 2011
Segment revenue and result
Revenue
Total external revenue - - 1 137 069 945 196
Result
Loss before interest,
depreciation, tax and
amortisation/EBIDTA (21 931) (14 865) (80 442) (18 686)
Operating (loss)/profit (21 953) (14 914) (112 010) (40 746)
Segment assets and
liabilties
Assets 129 143 129 019 551 326 504 067
Liabilities (184 073) (77 738) (456 195) (295 718)
Net asset/(liability) (54 930) 51 281 95 131 208 349
Figures in Rand
thousands Discontinued operations Total Group
2012 2011 2012 2011
Segment revenue and
result
Revenue
Total external revenue 19 076 66 188 1 156 145 1 011 384
Result
Loss before interest,
depreciation, tax and
amortisation/EBIDTA (75 244) (23 475) (155 686) (42 161)
Operating (loss)/profit (82 548) (39 960) (194 558) (80 706)
Segment assets and
liabilties
Assets - 116 643 551 326 620 710
Liabilities - (50 470) (456 195) (346 188)
Net asset/(liability) - 66 173 95 131 274 522
NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS
1. Basis of preparation
The condensed consolidated financial information for the period ended 29
February 2012 has been 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 JSE Listings Requirements and as per the requirements of
the South African Companies Act, 2008, as amended, on a basis consistent with
the prior year.
The preparation of these financial results was done under the supervision of
the Group Financial Director, Andrew Langham CA(SA).
2. Share Capital
There have been no changes to the authorised share capital during the period.
1 296 746 shares of R0,01 each were issued on 30 May 2011. This related to the
contingent consideration for the acquisition of Civcon. The shares were issued
at the listed price at the effective date of the acquisition.
3. Discontinued operations
Group Group
2012 2011
Figures in Rand thousands
Discontinued operations relate to the disposal of the Erbacon Small Plant
(Pty) Ltd. The sale of the business was effected in February 2012.
The assets and liabilities which related to Erbacon Small Plant (Pty) Ltd.
were presented as discontinued operations held for sale in the August 2011
interim results. The assets within the entity were impaired to their net
realisable value.
Operating cash flows (5 118) (38 062)
Investing cash flows 1 690 (5 665)
Financing cash flows 3 178 21 891
Total cash flows (250) (21 836)
Proceeds on sale of businesses 10 150 -
Assets of disposal groups sold
Property, plant and equipment 13 370 20 995
Plant for hire 4 372 67 027
Intangible assets 273 3 081
Inventory 833 1 973
Trade and other receivables 10 860 15 093
Cash and cash equivalents 811 402
Income tax asset - 367
Deferred tax asset - 7 705
Total assets 30 519 116 643
Non-controlling interests 8 869 1 864
Liabilities of disposal groups sold
Trade and other payables (11 541) (5 628)
Borrowings (17 698) (44 842)
Total liabilities (29 239) (50 470)
Analysis of the result of discontinued operations, and the result recognised
on the re-measurement of assets within the disposal group, is as follows:
Revenue 19 076 66 188
Expenses (38 397) (107 442)
Loss before tax of discontinued operations (19 321) (41 254)
Tax 4 808 8 563
Loss after tax of discontinued operations (14 513) (32 691)
Pre-tax loss recognised on the remeasurement of assets
of the
disposal groups -
(64 473)
Tax - -
After tax loss recognised on the remeasurement of
assets of the
disposal groups (64 473) -
Loss for the year from discontinued operations (78 986) (32 691)
4. Change in classification
In prior years materials on site and construction work in progress was
classified as inventory. In the current year management have taken the view
that materials on site and work in progress at year end comprise part of
contract working capital, which is in line with industry norm. As such
materials on site and construction work in progress has been reclassified to
trade and other receivables and/or trade and other payables. The
reclassification did not have any effect on the statement of comprehensive
income.
Previously
Reclassified reported
Group Group
2011 2011
Inventory 6 764 33 056
Trade and other receivables 239 757 221 286
Trade and other payables (199 454) (207 275)
Total 47 067 47 067
Group Group
2010 2010
Inventory 9 831 24 449
Trade and other receivables 201 991 187 373
Trade and other payables (152 180) (152 180)
Total 59 642 59 642
Designated and Corporate adviser
PSG Capital Proprietary Limited
17 May 2012
Date: 17/05/2012 14:22:01 Produced by the JSE SENS Department.
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