defBanner
LATEST NEWS


Raubex Group Limited - Audited results for the year ended 28 February 2019

~~Raubex Group Limited(Incorporated in the Republic of South Africa)Registration number 2006/023666/06Share code: RBXISIN Code: ZAE000093183("Raubex" or the "group")Audited results for the year ended 28 February 2019Salient featuresRevenue down 0,3% to R8,52 billion (2018: R8,54 billion)Operating profit down 69,2% to R207,0 million (2018: R671,9 million)HEPS down 75,1% to 57,0 cents per share (2018: 228,6 cents per share)Cash generated from operations down 24,1% to R788,9 million (2018: R1,04 billion)Capex spend of R420,9 million (2018: R441,3 million)Order book of R8,01 billion (2018: R8,19 billion)Final dividend of 22 cents per share declared (2018: 33 cents)Rudolf Fourie, CEO of Raubex Group, said:"The 2019 financial year has without doubt been the most difficult I have experienced in my30 years in the South African road construction industry. The lack of work, coupled withviolent community unrest affecting a number of sites, has caused very unfavourableoperating conditions in the South African market. These adverse conditions haveunfortunately resulted in Raubex having to rightsize a number of its operations in order toadapt to the current market conditions."Fortunately, the group's diversification strategy which it embarked on some six years ago,to establish an infrastructure division focused on disciplines outside of the road constructionsector, has now come to fruition. Good progress has been made in the affordable housingspace where conditions are more favourable, including also participation in the RenewableEnergy Independent Power Producer Procurement Programme, where a solid order bookof work has now been secured."Stable results from the materials division, where activities are focused on materials handlingand screening services provided to the mining industry, as well as commercial quarryoperations throughout southern Africa, have supported the group's earnings for the year andwill continue to differentiate the group from the overall construction sector."CommentaryFinancial overviewRevenue decreased by 0,3% to R8,52 billion while operating profit decreased by 69,2% toR207,0 million from the corresponding prior year.Profit before tax decreased by 71,8% to R180,7 million (2018: R640,6 million), with theeffective tax rate increasing to 35,3% (2018: 29,3%). The increase in the tax rate is mainlydue to the effect of the non-tax deductible goodwill impairment charge attributable to theasphalt cash-generating unit.Earnings per share decreased by 86,3% to 31,9 cents with headline earnings per sharedecreasing by 75,1% to 57,0 cents.The following two items had a material impact on the results for the year:(1) A present value charge and work in progress adjustment with respect to the long overdueaccounts receivable balance due from the Road Development Agency ("RDA") in Zambiafor a combined value of R116,7 million before tax (R75,9 million after tax). This chargeeffectively provides for the full accounts receivable balance due from the RDA as at28 February 2019. The company will, however, aggressively pursue the outstanding accountsreceivable from the RDA, although timing of the recovery of this debt is uncertain. Theoutstanding debt relates to the two Link 8000 road contracts in Zambia which have beensuspended, pending resolution of the current funding impasse.(2) A goodwill impairment charge of R51,5 million before tax (R51,5 million after tax),attributable to the asphalt cash-generating unit in the road surfacing and rehabilitationdivision, which is primarily dependent on the South African road construction sector. Theasphalt cash-generating unit has experienced a significant decrease in earnings during theyear due to the lower volume of asphalt supplied to the road construction sector and hasundertaken rightsizing initiatives to reduce excess capacity. The lower asphalt volumes areprimarily as a result of less road maintenance work undertaken by the South African publicsector during the year. The goodwill impaired amounts to 40% of the total goodwillattributable to the asphalt cash-generating unit.If the present value charge and work in progress adjustment with respect to the accountsreceivable balance due from the RDA in Zambia and the goodwill impairment chargeattributable to the asphalt cash-generating unit were to be excluded from the results, thenearnings per share would have decreased by 56,3% to 102,0 cents and headline earningsper share would have decreased by 56,8% to 98,8 cents.Group operating profit margin decreased to 2,4% (2018: 7,9%), while excluding the twoitems above, operating profit margin decreased to 4,4% (2018: 7,9%).Cash generated from operations decreased by 24,1% to R788,9 million (2018: R1,04 billion)before finance charges and taxation.Net finance costs decreased to R25,3 million (2018: R31,8 million) due to an increase in theaverage net cash balances during the year as a result of decreasing borrowings. Totalnon-cash finance costs were R16,1 million (2018: R16,3 million) for the year.The group has maintained a strong balance sheet during the year, with particular focus onworking capital management.Trade and other receivables decreased by 4,4% to R1,50 billion (2018: R1,57 billion).Inventories increased by 15,1% to R765,7 million (2018: R665,2 million), which was mainlydue to an increase in property development stock previously accounted for under investmentsin associates. Due to a change in control, property development stock of R111,6 millionhas now been consolidated into the group results and is included under inventories.Contract assets increased by 4,6% to R294,0 million (2018: R280,9 million).Trade and other payables, including contract liabilities, increased by 10,6% to R1,69 billion(2018: R1,53 billion).Capital expenditure on property, plant and equipment decreased to R420,9 million (2018:R441,3 million). Net capital expenditure increased by 4,5% to R360,7 million (2018:R345,3 million), due to less asset disposals compared to the prior year. The capitalexpenditure for the year includes R44,1 million for the purchase of new office premises andworkshops in Perth, Western Australia, which will position the group to deliver on its organicgrowth strategy in the country.Borrowings decreased by 14,8% to R661,7 million (2018: R776,6 million) and consist mainlyof instalment sale agreements over plant and equipment, which are repayable in monthlyinstalments.The group had a net cash outflow for the year of R133,8 million, with R115,4 million relatingto the acquisition of subsidiaries settled in cash. Total cash and cash equivalents at the endof the year amounted to R962,6 million (2018: R1,08 billion).Operational overviewMaterials DivisionThe materials division comprises three main disciplines including (i) commercial quarries,(ii) contract crushing and (iii) materials handling and processing services for the miningindustry.The materials division diversifies the group from the construction industry and was themain contributor to group operating profit during the year, mitigating the losses reportedin the roads and earthworks division.Stable conditions have been experienced in the mining services sector where operationshave been predominantly focused on the commodities of diamonds, gold, coal, copper,platinum and iron ore during the year. Certain diamond mining contracts reached completiontowards the end of the financial year, this work was mainly replaced with work in the coalsector. A total of 233 employees were retrenched by the division due to end of life andchanges in scope of certain mining contracts, with retrenchment costs of R17,1 millionbeing incurred.Commercial quarry operations have experienced an overall increase in volumes of ~12%off a low base from the prior year with site specific pockets of improvement. However,community unrest at certain sites and Eskom load shedding have had a negative impact onoperations.Contract crushing operations continue to experience weak demand in line with the low levelof activity in the overall construction sector.Revenue for the division increased by 6,5% to R2,75 billion (2018: R2,58 billion) whileoperating profit decreased by 2,2% to R358,5 million (2018: R366,4 million).The divisional operating profit margin decreased to 13,0% (2018: 14,2%).The division incurred capital expenditure of R260,6 million during the year (2018:R225,8 million).The division has a secured order book of R1,93 billion (2018: R1,87 billion).Roads and Earthworks DivisionIn order to streamline reporting, the road surfacing and rehabilitation division and the roadconstruction and earthworks division have been combined into one reportable segment, theroads and earthworks division. This division specialises in road construction and earthworksas well as road surfacing and rehabilitation which includes the manufacturing and laying ofasphalt, chip and spray, surface dressing, enrichments, slurry seals and the manufactureand distribution of value added bituminous products throughout southern Africa.The division is primarily dependent on the South African road construction sector and isdirectly and indirectly, through asphalt and bitumen supply, exposed to governmentexpenditure on road construction and maintenance in the country. During the period underreview there was a significant reduction in the volume of road construction and maintenancework from the public sector. Road construction and maintenance teams were able to partiallyreplace their order book with work on roads operated by concessionaires. However, thesubsidiaries which supply asphalt and bitumen to Raubex contracts as well as the externalmarket, experienced a significant decrease in earnings due to lower volumes supplied. Thevolume of asphalt sold decreased by ~30% from the prior year.Due to the lower volume of work, the division embarked on rightsizing initiatives during theyear to reduce excess capacity. The division has, however, retained some excess capacityin anticipation of an increase in public sector spend and will review its position and marketconditions in the year ahead. The rightsizing initiatives have resulted in 443 employeesbeing retrenched in the division with once-off retrenchment costs of R24,8 million incurred.In addition to the lack of infrastructure spend in the road construction sector, the results forthe year were also adversely affected by violent community unrest in certain areas whichimpacted production efficiencies.The results for this division also include a present value charge and work in progressadjustment with respect to the accounts receivable balance due from the RDA in Zambiafor an amount of R116,7 million and a goodwill impairment charge attributable to the asphaltcash-generating unit for an amount of R51,5 million. Operationally, an onerous contractwas completed on the Moloto road, this contract reported an operating loss of R36,3 millionfor the year.Revenue for the division decreased by 20,7% to R3,63 billion (2018: R4,58 billion) andoperating profit decreased by 184,9% to an operating loss of R245,8 million (2018:R289,5 million operating profit).The divisional operating profit margin decreased to an operating loss margin of 6,8% (2018:6,3% operating profit margin).The division incurred capital expenditure of R61,0 million during the year (2018:R183,6 million).The division has a secured order book of R3,19 billion (2018: R3,69 billion). The order bookexcludes the two Zambia Link 8000 contracts that have been suspended.Infrastructure DivisionThe infrastructure division specialises in disciplines outside of the road construction sector,including energy (with a specific focus on renewable energy), rail, telecommunications,pipeline construction and housing infrastructure and commercial building projects.The division has experienced favourable conditions during the year and has continued toexpand its affordable housing and commercial building operations.Excess capacity was absorbed in the second half of the year due to the commencement ofwork in the Renewable Energy Independent Power Producer Procurement Programme("REIPPPP"). The division is well positioned to benefit from the roll-out of the REIPPPP inwhich a number of contracts are still being negotiated, four of which have been secured tothe total value of R729,0 million.Outside of South Africa, work in Cameroon has progressed well and a conservative approachto revenue recognition has been adopted. The acquisition of Westforce Construction inWestern Australia which was effective 1 January 2018, has now reported its first 12 monthset of results post-acquisition and has contributed to the growth reported in this division.The division undertook limited rightsizing of its operations during the year in anticipation offuture work, which resulted in 48 employees being retrenched and once-off retrenchmentcosts of R1,4 million incurred.Revenue for the division increased by 55,1% to R2,13 billion (2018: R1,38 billion) andoperating profit increased by 488,5% to R94,3 million (2018: R16,0 million).The divisional operating profit margin increased to 4,4% (2018: 1,2%).The division incurred capital expenditure of R99,3 million (2018: R31,8 million). The capitalexpenditure for the year includes R44,1 million for the purchase of new office premises andworkshops in Perth, Western Australia.The division has a secured order book of R2,89 billion (2018: R2,62 billion).InternationalThe group's international operations consist of materials supply and mining services as wellas construction activities which are located in the African jurisdictions of Botswana,Cameroon, Namibia, Zambia and Zimbabwe. The group has also established a footprint inWestern Australia, through the acquisition of Westforce Construction.In Western Australia, the Westforce acquisition has been bedded down and supportedinternational growth while diversifying the group's revenue streams. The financial resultsreported are in line with management expectations for the year.In Namibia, the materials division has serviced diamond and copper mining operationswhere results have been stable during the year, while in Botswana, commercial quarryoperations have continued to perform well. Certain diamond mining contracts reachedcompletion towards the end of the year, which work was largely replaced with work in thecoal sector in South Africa.In Cameroon, good progress has been made with the construction of a hotel for the OnomoHotel group which is estimated to be completed in June 2019, while progress on the DoualaGrand Mall development has now reached ~50% completion.As previously stated, the international results have been negatively affected by a presentvalue charge and work in progress adjustment with respect to the long overdue accountsreceivable balance due from the RDA in Zambia for a combined value of R116,7 millionbefore tax. This charge effectively provides for the full accounts receivable balance due fromthe RDA as at 28 February 2019. The outstanding debt relates to the two Link 8000 roadcontracts in Zambia which have been suspended, pending resolution of the current fundingimpasse.International revenue increased by 37,4% to R1,53 billion (2018: R1,11 billion) whileoperating profit decreased by 33,0% to R126,3 million (2018: R188,5 million). Excluding theR116,7 million charge in Zambia, operating profit increased by 29,0% to R243,1 million(2018: R188,5 million).Operating profit margin decreased to 8,3% (2018: 16,9%), while excluding the R116,7 millioncharge in Zambia, operating profit margin decreased by 1,0% to 15,9% (2018: 16,9%).The international order book has decreased to R1,13 billion (2018: R2,55 billion) and isincluded in the group's divisional order books. The two Link 8000 road contracts in Zambia,which have R791,6 million of work left to complete, have been excluded from the group'sorder book.ProspectsThe group's secured order book, which now excludes the Zambia link 8000 contracts,decreased 2,2% to R8,01 billion (2018: R8,19 billion, of which R835,8 million related to thetwo Link 8000 contracts in Zambia). Of the total order book, 14,1% represents contractsoutside of South Africa in the rest of Africa and Western Australia.Overall conditions in the South African construction sector are expected to remainchallenging and the short-term outlook is uncertain. The sector is still severely underpressure from the slow roll-out of general infrastructure spend in the country. In order tomitigate the uncertain local conditions the group is looking to the rest of Africa for growthand some large project opportunities are being negotiated in southern African jurisdictions,including the Beitbridge border post upgrade in Zimbabwe.In the road construction and maintenance sector, prospects remain uncertain. SANRAL hasreceived a healthy budget allocation from treasury over the 2019/20 period as well as overthe medium-term framework and are expected to bring some large capital projects to themarket. These budget allocations could however be at risk if the Gauteng FreewayImprovement Project ("GFIP") toll collection shortfall is not resolved. If SANRAL work doesreturn to more normalised levels, there should be a significant improvement in the group'sroad construction and maintenance operations.The Minister of Energy established policy certainty with regards to the country's renewableenergy programme on 4 April 2018 by signing the power purchase agreements for 27 REIPPPPprojects. The group is well positioned to benefit from the roll-out of this work and has nowsecured four projects to the value of R729,0 million. A number of other projects are in theprocess of being negotiated which will further support the prospects of the infrastructuredivision over the medium term.The prospects for the group's operations in the affordable housing sector are encouraging,with good growth anticipated over the medium term through the acceleration of the roll-outof Woodwind Estates in Centurion and participation in the Lufhereng Integrated HousingDevelopment in Soweto. Other longer-term opportunities are also being pursued.The construction market in Western Australia is buoyant, driven by activity in the miningsector. The group will continue to explore this market and look to grow its business organicallyat a measured pace leveraging off the skills within the group.Notwithstanding the challenging conditions being faced by the South African constructionindustry, the group is expecting an improvement in its performance in the period ahead,where it is anticipated that earnings will continue to be supported by a stable materialsdivision and a growing infrastructure division. The rightsizing initiatives undertaken duringthe year by the roads and earthworks division have better positioned the group to managethe challenges in the current market, while maintaining sufficient flexibility to participate inany potential increase in activity in the South African construction sector, driven by the newlyelected government, in the period ahead.Dividend declarationThe board has declared a gross final cash dividend from income reserves of 22 cents pershare on 13 May 2019 for the year ended 28 February 2019. The salient dates for thepayment of the dividend are as follows:Last day to trade cum dividend Tuesday, 28 May 2019Commence trading ex dividend Wednesday, 29 May 2019Record date Friday, 31 May 2019Payment date Monday, 3 June 2019No share certificates may be dematerialised or rematerialised between Wednesday,29 May 2019 and Friday, 31 May 2019, both dates inclusive.In terms of Dividends Tax ("DT"), the following additional information is disclosed:- The local DT rate is 20%.- The number of ordinary shares in issue at the date of this declaration is 181 750 036.- The dividend to utilise for determining the DT due is 22 cents per share.- The DT amounts to 4,4 cents per share.- The net local dividend amount is 17,6 cents per share for shareholders liable to pay the DT.- Raubex Group Limited's income tax reference number is 9370/905/151.In terms of the DT legislation, the DT amount due will be withheld and paid over to the SouthAfrican Revenue Service by a nominee company, stockbroker or Central Security DepositoryParticipant (collectively "Regulated Intermediary") on behalf of shareholders. All shareholdersshould declare their status to their Regulated Intermediary, as they may qualify for a reducedDT rate or exemption.Summary group income statementAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000Revenue 8 519 142 8 542 247Cost of sales (7 792 319) (7 416 511)Gross profit 726 823 1 125 736Other income 31 844 40 133Other gains/(losses) - net (24 580) 14 383Administrative expenses (527 042) (508 339)Operating profit 207 045 671 913Finance income 48 612 59 495Finance costs (73 858) (91 245)Share of (loss)/profit of investmentsaccounted for using the equity method (1 115) 477Profit before income tax 180 684 640 640Income tax expense (63 842) (187 956)Profit for the year 116 842 452 684Profit for the year attributable to:Owners of the parent 57 957 423 573Non-controlling interest 58 885 29 111Basic earnings per share (cents) 31,9 233,5Diluted earnings per share (cents) 31,8 233,5Summary group statement of comprehensive incomeAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000Profit for the year 116 842 452 684Other comprehensive income for the year, net of taxCurrency translation differences 14 670 (14 284)Actuarial gain on post-employment benefit obligations 461 374Total comprehensive income for the year 131 973 438 774Comprehensive income for the year attributable to:Owners of the parent 73 045 410 356Non-controlling interest 58 928 28 418Total comprehensive income for the year 131 973 438 774Calculation of diluted earnings per shareAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000Profit attributable to owners of the parent entity 57 957 423 573Weighted average number of ordinary sharesin issue ('000) 181 680 181 381Adjustments for:Shares deemed issued for no consideration(performance shares) ('000) 508 -Weighted average number of ordinary sharesfor diluted earnings per share ('000) 182 188 181 381Diluted earnings per share (cents) 31,8 233,5Calculation of headline earnings per shareAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000Profit attributable to owners of the parent entity 57 957 423 573Adjustments for:Profit on sale of property, plant and equipment (9 930) (17 471)Goodwill written off 51 477 2 799Loss of control of subsidiary - 767Add back: Non-controlling interest's portion ofprofit on sale of property, plant and equipment 1 758 79Total tax effects of adjustments 2 288 4 870Basic headline earnings 103 550 414 617Weighted average number of shares ('000) 181 680 181 381Headline earnings per share (cents) 57,0 228,6Diluted headline earnings per share (cents) 56,8 228,6Summary group statement of financial positionAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000ASSETSNon-current assetsProperty, plant and equipment 2 535 579 2 410 165Intangible assets 1 037 605 947 806Investment in associates and joint ventures 42 566 111 789Deferred income tax assets 94 684 39 614Inventories 67 474 64 533Trade and other receivables 53 978 81 915Total non-current assets 3 831 886 3 655 822Current assetsInventories 698 178 600 636Contract assets 293 993 280 933Trade and other receivables 1 448 393 1 489 575Current income tax receivable 30 541 28 617Cash and cash equivalents 962 611 1 084 088Total current assets 3 433 716 3 483 849Total assets 7 265 602 7 139 671EQUITYShare capital 1 817 1 817Share premium 2 059 688 2 059 688Treasury shares (1 218) (1 218)Other reserves (1 177 135) (1 219 859)Retained earnings 3 181 700 3 200 300Equity attributable to owners of the parent 4 064 852 4 040 728Non-controlling interest 262 272 157 240Total equity 4 327 124 4 197 968LIABILITIESNon-current liabilitiesBorrowings 362 989 411 284Provisions for liabilities and charges 105 625 82 780Deferred income tax liabilities 292 389 342 036Other financial liabilities 119 868 86 980Total non-current liabilities 880 871 923 080Current liabilitiesTrade and other payables 1 366 715 1 302 641Contract liabilities 326 852 227 940Borrowings 298 758 365 272Current income tax liabilities 38 923 31 680Provisions for liabilities and charges 11 359 15 823Other financial liabilities 15 000 75 267Total current liabilities 2 057 607 2 018 623Total liabilities 2 938 478 2 941 703Total equity and liabilities 7 265 602 7 139 671Summary group statement of cash flowsAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000Cash flows from operating activitiesCash generated from operations 788 924 1 039 786Interest received 48 612 59 495Interest paid (57 782) (74 908)Income tax paid (163 926) (177 950)Net cash generated from operatingactivities 615 828 846 423Cash flows from investing activitiesPurchases of property, plant and equipment (420 865) (441 286)Proceeds from sale of property, plantand equipment 60 142 95 960Acquisition of subsidiaries (115 434) (81 737)Loan granted to associates and jointventures (36 919) (37 698)Net cash used in investing activities (513 076) (464 761)Cash flows from financing activitiesProceeds from borrowings 341 286 360 921Repayment of borrowings (481 625) (542 815)Dividends paid to owners of the parent (81 756) (163 513)Dividends paid to non-controlling interests (12 758) (14 855)Disposal of interest in a subsidiary - 4 423Acquisition of non-controlling interest (1 700) (41 185)Sale of treasury shares - 14Net cash used in financing activities (236 553) (397 010)Net decrease in cash and cash equivalents (133 801) (15 348)Cash and cash equivalents at the beginningof the year 1 084 088 1 103 618Effects of exchange rates on cash and cashequivalents 12 324 (4 182)Cash and cash equivalents at the end ofthe year 962 611 1 084 088Summary group statement of changes in equityShare Share Treasurycapital premium sharesR'000 R'000 R'000Balance at 1 March 2017 1 817 2 059 688 (23 664)Treasury shares issued in termsof equity-settled share option scheme - - 22 446Share option reserve utilised duringthe year - - -Non-controlling interest arising onbusiness combination - - -Acquisition of non-controlling interest - - -Disposal of interest to non-controllinginterest - - -Loss of control of subsidiary - - -Profit for the year - - -Other comprehensive income forthe year - - -Dividends paid - - -Balance at 28 February 2018 1 817 2 059 688 (1 218)Change in accounting policy - - -Restated balance at 1 March 2018 1 817 2 059 688 (1 218)Unutilised share option reservereversed - - -Share option reserve - - -Unutilised put option reserve reversed - - -Non-controlling interest arising onbusiness combination - - -Acquisition of non-controlling interest - - -Profit for the year - - -Other comprehensive income forthe year - - -Dividends paid - - -Balance at 28 February 2019 1 817 2 059 688 (1 218)Totalattributableto owners ofOther Retained the parentreserves earnings companyR'000 R'000 R'000Balance at 1 March 2017 (1 179 094) 2 938 678 3 797 425Treasury shares issued in termsof equity-settled share option scheme - (22 432) 14Share option reserve utilised duringthe year (27 175) 27 175 -Non-controlling interest arising onbusiness combination - - -Acquisition of non-controlling interest - (7 591) (7 591)Disposal of interest to non-controllinginterest - 4 036 4 036Loss of control of subsidiary - - -Profit for the year - 423 573 423 573Other comprehensive income forthe year (13 590) 374 (13 216)Dividends paid - (163 513) (163 513)Balance at 28 February 2018 (1 219 859) 3 200 300 4 040 728Change in accounting policy - (22 617) (22 617)Restated balance at 1 March 2018 (1 219 859) 3 177 683 4 018 111Unutilised share option reservereversed (27 267) 27 267 -Share option reserve 6 905 - 6 905Unutilised put option reserve reversed 48 459 - 48 459Non-controlling interest arising onbusiness combination - (4) (4)Acquisition of non-controlling interest - 92 92Profit for the year - 57 957 57 957Other comprehensive income forthe year 14 627 461 15 088Dividends paid - (81 756) (81 756)Balance at 28 February 2019 (1 177 135) 3 181 700 4 064 852NoncontrollingTotalinterest equityR'000 R'000Balance at 1 March 2017 152 300 3 949 725Treasury shares issued in termsof equity-settled share option scheme - 14Share option reserve utilised duringthe year - -Non-controlling interest arising onbusiness combination 17 109 17 109Acquisition of non-controlling interest (26 094) (33 685)Disposal of interest to non-controllinginterest 387 4 423Loss of control of subsidiary (25) (25)Profit for the year 29 111 452 684Other comprehensive income forthe year (693) (13 909)Dividends paid (14 855) (178 368)Balance at 28 February 2018 157 240 4 197 968Change in accounting policy - (22 617)Restated balance at 1 March 2018 157 240 4 175 351Unutilised share option reservereversed - -Share option reserve - 6 905Unutilised put option reserve reversed - 48 459Non-controlling interest arising onbusiness combination 60 654 60 650Acquisition of non-controlling interest (1 792) (1 700)Profit for the year 58 885 116 842Other comprehensive income forthe year 43 15 131Dividends paid (12 758) (94 514)Balance at 28 February 2019 262 272 4 327 124Summary group segmental analysisRoads andMaterials Earthworks Infrastructure ConsolidatedR'000 R'000 R'000 R'000Operating segments28 February 2019Segment revenue 2 750 801 3 634 494 2 133 847 8 519 142Operating profit/(loss) 358 543 (245 796) 94 298 207 045Margin 13,0% (6,8%) 4,4% 2,4%28 February 2018Segment revenue 2 583 677 4 583 053 1 375 517 8 542 247Operating profit 366 428 289 462 16 023 671 913Margin 14,2% 6,3% 1,2% 7,9%Local International ConsolidatedR'000 R'000 R'000Geographical information28 February 2019Segment revenue 6 990 062 1 529 080 8 519 142Operating profit 80 736 126 309 207 045Margin 1,2% 8,3% 2,4%28 February 2018Segment revenue 7 429 769 1 112 478 8 542 247Operating profit 483 463 188 450 671 913Margin 6,5% 16,9% 7,9%Reclassification of comparative figuresIn the prior year, the group reported four operating segments for information purposes, thesebeing (i) materials, (ii) road surfacing and rehabilitation, (iii) road construction and earthworks,and (iv) infrastructure. During the year, the group consolidated the disclosure to that whichis reported to the group's chief operating decision maker, the executive committee andcombined the road surfacing and rehabilitation division and road construction and earthworksdivision into one reportable segment, namely roads and earthworks. Since the two historicalsegments have very similar business drivers, this change allows for a more streamlineddisclosure and does not take anything away from the understanding of the group's businessactivities. The segment disclosure has therefore been amended to include three reportablesegments, i.e. (i) materials, (ii) roads and earthworks and (iii) infrastructure, which hasresulted in the restatement of the prior year figures.Summary group operating segments as previously disclosedRoad RoadSurfacing and ConstructionMaterials Rehabilitation and EarthworksR'000 R'000 R'000Operating segments28 February 2018Segment revenue 2 583 677 3 250 728 1 332 325Operating profit 366 428 222 399 67 063Margin 14,2% 6,8% 5,0%Infrastructure ConsolidatedR'000 R'000Operating segments28 February 2018Segment revenue 1 375 517 8 542 247Operating profit 16 023 671 913Margin 1,2% 7,9%Employee benefit expenseAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000Employee benefit expense in the incomestatement consists of:Salaries, wages and contributions 2 112 943 2 173 553Performance shares granted to employees 6 905 -Total employee benefit expense 2 119 848 2 173 553Capital expenditure and depreciationAudited Audited12 months 12 months28 February 28 February2019 2018R'000 R'000Capital expenditure for the year 420 865 441 286Depreciation for the year 376 887 357 280Amortisation of intangible assets for the year 11 188 4 077NotesBasis of preparationThe summary consolidated financial statements are prepared in accordance with therequirements of the JSE Limited Listings Requirements for abridged reports and therequirements of the Companies Act (2008) applicable to summary financial statements. TheListings Requirements require abridged reports to be prepared in accordance with theframework concepts and the measurement and recognition requirements of InternationalFinancial Reporting Standards ("IFRS") and the SAICA Financial Reporting Guides as issuedby the Accounting Practices Committee and Financial Pronouncements as issued by theFinancial Reporting Standards Council and also, as a minimum, to contain the informationrequired by IAS 34: Interim Financial Reporting.A number of International Financial Reporting Standards, Interpretations and Amendmentsas issued by the International Accounting Standards Board ("IASB") became applicable tothe group, effective 1 March 2018, which have required changes to our accounting policies.The following standards had an impact on the group:- IFRS 9: Financial Instruments ("IFRS 9"); and- IFRS 15: Revenue from Contracts with Customers ("IFRS 15").Refer to the "Changes in accounting policies" note below for further details of the impact theadoption of these standards have had on the group. The other new standards, interpretationsand amendments that became applicable to the group during the current reporting perioddid not have a significant impact on the group.Except for those mentioned above, the principal accounting policies used in the preparationof the audited results for the year ended 28 February 2019 are consistent with those appliedfor the year ended 28 February 2018 in terms of IFRS.These summary consolidated financial statements for the year ended 28 February 2019 havebeen prepared under the supervision of the Financial Director, Mr JF Gibson CA(SA) andaudited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon.The auditor also expressed an unmodified opinion on the annual financial statements fromwhich these summary consolidated financial statements were derived. A copy of the auditor'sreport on the summary consolidated financial statements and of the auditor's report on theannual consolidated financial statements are available for inspection at the company'sregistered office.The auditor's report does not necessarily report on all of the information contained in thisannouncement. Any reference to pro forma or future financial information included in thisannouncement has not been reviewed or reported on by the auditors. Shareholders areadvised that in order to obtain a full understanding of the nature of the auditor's engagementthey should obtain a copy of that report together with the accompanying financial informationfrom the company's registered office.Business combinationsThe following acquisitions were made during the year:Metadynamics (Pty) Ltd ("Metadynamics")On 1 March 2018, the group effectively acquired 49% of Metadynamics, through its subsidiaryOMV (Pty) Ltd who acquired 70% of the shareholding, for a purchase price of R18,2 millionsettled in cash. An additional consideration is payable contingent on certain profit outcomesover the course of the next four years, being 1 March 2018 to 28 February 2022.Metadynamics adds value to various products through calcining and milling processes inGauteng that produces value added gypsum and various other products. The acquisition isin line with the group's strategy to expand geographically and also provides an opportunityto diversify its product mix.The revenue included in the consolidated income statement since 1 March 2018 contributedby Metadynamics was R41,2 million with a net profit contribution of R4,7 million over thesame period.Donkerhoek Quarry (Pty) Ltd ("Donkerhoek")On 18 April 2018, the group effectively acquired 70% of Donkerhoek, through its subsidiaryRaumix Aggregates (Pty) Ltd, for a purchase price of R31,1 million settled in cash.Donkerhoek is a commercial quarry operating in Northern Gauteng supplying aggregates tothe construction market. The acquisition is in line with the group's strategy to expand itscommercial quarry business geographically.The revenue included in the consolidated income statement since 18 April 2018 contributedby Donkerhoek was R40,1 million with a net loss contribution of R3,1 million over the same period.Transkei Quarries (Pty) Ltd ("Transkei Quarries")On 3 April 2018, the group effectively acquired 49% of Transkei Quarries, through itssubsidiary Raumix Aggregates (Pty) Ltd, for a net purchase price of R49,0 million settled incash. An additional consideration is payable contingent on certain profit outcomes over thecourse of the next four years, being 3 April 2018 to 28 February 2022. Transkei Quarriesoperates two commercial quarries in Mthatha and Butterworth supplying aggregates to theconstruction market. The acquisition is in line with the group's strategy to expand itscommercial quarry business geographically.The revenue included in the consolidated income statement since 3 April 2018 contributedby Transkei Quarries was R101,0 million with a net profit contribution of R5,1 million overthe same period.Operations of Forte Demolition Services (Pty) Ltd ("Forte Demolition")On 31 January 2019, the group acquired 100% of Forte Demolition's operations, through itssubsidiary SPH Kundalila (Pty) Ltd, for a purchase price of R18,0 million settled in cash.Forte Demolition provides innovative turnkey demolition, remediation and asbestosabatement solutions to the mining industry.The revenue and net profit contribution included in the consolidated income statement since31 January 2019 contributed by Forte Demolition is immaterial to the group.Turnkey Real Estate Company (Pty) Ltd ("TREC")On 1 October 2018, an agreement was entered into by the group to acquire the remainingissued share capital of TREC through its subsidiary Raubex Building (Pty) Ltd. TREC wasestablished in 2015 to execute property development projects in the Northern Cape in a jointventure relationship with the land owner. The group's effective shareholding was increasedfrom 50% to 77% resulting in a change in ownership. Effective 1 October 2018, TREC hasbeen accounted for as a subsidiary as the group obtained control in terms of IFRS 10.There were no disposals of property development stock held by TREC during the periodand as such the revenue and net profit contribution included in the consolidated incomestatement since 1 October 2018 were immaterial to the group.Details of the net assets acquired, purchase consideration and goodwill are set out below:Meta Donker TranskeiR'000 R'000 R'000ConsiderationCash 18 200 31 142 49 000Contingent consideration 24 851 - 12 183Total consideration 43 051 31 142 61 183Recognised amounts of identifiableassets and acquired liabilities assumedProperty, plant and equipment 46 572 30 400 36 265Intangible asset - mining rights - 15 500 75 300Inventories 3 290 6 891 9 891Trade and other receivables 8 272 4 -Deferred tax asset 171 2 325 2 818Cash and cash equivalents (929) - -Borrowings - - (24 581)Deferred tax liability (6 348) (4 340) (21 084)Income tax payable (82) (13) -Rehabilitation provision - (8 305) (10 063)Trade and other payables (24 609) (344) (381)Total identifiable net assets 26 337 42 118 68 165Non-controlling interest (13 432) (12 635) (34 764)Fair value of previously held investment - - -Goodwill attributable to owners ofthe parent 30 146 1 659 27 782Total 43 051 31 142 61 183Purchase consideration settled in cash 18 200 31 142 49 000Less: Cash and cash equivalents inthe business combination acquired 929 - -Cash outflow on acquisition forcash flow statement 19 129 31 142 49 000Forte TREC TotalR'000 R'000 R'000ConsiderationCash 16 200 1 114 543Contingent consideration 1 800 - 38 834Total consideration 18 000 1 153 377Recognised amounts of identifiableassets and acquired liabilities assumedProperty, plant and equipment 16 700 - 129 937Intangible asset - mining rights - - 90 800Inventories 1 300 103 672 125 044Trade and other receivables - 2 804 11 080Deferred tax asset - 318 5 632Cash and cash equivalents - 38 (891)Borrowings - (105 422) (130 003)Deferred tax liability - - (31 772)Income tax payable - - (95)Rehabilitation provision - - (18 368)Trade and other payables - (2 200) (27 534)Total identifiable net assets 18 000 (790) 153 830Non-controlling interest - 182 (60 649)Fair value of previously held investment - 395 395Goodwill attributable to owners ofthe parent - 214 59 801Total 18 000 1 153 377Purchase consideration settled in cash 16 200 1 114 543Less: Cash and cash equivalents inthe business combination acquired - (38) 891Cash outflow on acquisition forcash flow statement 16 200 (37) 115 434Changes in accounting policiesThe group has adopted the following new International Financial Reporting Standards asissued by the IASB, which were effective for the group from 1 March 2018:- IFRS 9: Financial Instruments ("IFRS 9"); and- IFRS 15: Revenue from Contracts with Customers ("IFRS 15").Adoption of IFRS 9IFRS 9 replaces the provisions of IAS 39 and was adopted by the group without restatingcomparative information in accordance with the transitional provisions included in the standard(IFRS 9, paragraph 7.2.15 and 7.2.26). The adoption of IFRS 9 had the following impact onthe group:- Change in classification of the measurement categories for financial instruments.- Change from the IAS 39 incurred loss model to the expected credit loss ("ECL") model tocalculate impairments of financial instruments.Details of the impact are provided below:Classification, initial recognition and subsequent measurementIFRS 9 introduces new measurement categories for financial assets. The measurementcategories of IFRS 9 and IAS 39 are illustrated in the table below:IAS 39* IFRS 9*Loans and receivables Financial assets at amortised cost* Only those categories of financial assets applicable to the group have been disclosed above.Effective 1 March 2018, the group classifies its financial assets in each of the IFRS 9measurement categories according to the group's business model for managing thefinancial asset together with the cash flow characteristics of the financial asset. Thereclassification into the new measurement categories of IFRS 9 did not have a significantimpact on the group.Financial liabilities are measured at amortised cost except for those designated as at fairvalue through profit and loss, which are measured at fair value.ImpairmentPrior to the adoption of IFRS 9 the group's methodology for calculating the allowance forcredit losses was based on an incurred loss model in terms of IAS 39, where at the end ofeach reporting period the group assessed whether any objective evidence of impairmentexisted. Had any evidence existed at the time of consideration, an allowance for credit losseswas calculated on the financial asset at amortised cost as the difference between the financialasset's carrying value and the present value of the estimated future cash flows discountedat the original effective interest rate (its recoverable amount).Under IFRS 9, the group revised its methodology for calculating the allowance for creditlosses on its financial assets to an expected credit loss model.The group has two types of financial assets that are subject to IFRS 9's new expected creditloss model:- Trade receivables, including receivables under finance leases; and- Contract assets relating to construction contracts in progress and retentions.The group applies the IFRS 9's simplified approach to measuring expected credit losseswhich uses a lifetime expected loss allowance for all trade receivables and contract assets.To measure the expected credit losses, trade receivables and contract assets have beengrouped together based on their similar credit risk characteristics and the days past due. Thecontract assets relate to retentions and unbilled work in progress on construction contractswhich have substantially the same risk characteristics as the trade receivables for the sametypes of contracts. The group has therefore concluded that the expected loss rates for tradereceivables are a reasonable approximation of the loss rates for the contract assets.The expected loss rates are based on the revenue payment profiles over a 12-month periodended 1 March 2018 together with the corresponding historical credit losses experiencedwithin these periods per customer classification. The historical loss rates are adjusted toreflect current and forward-looking information on macroeconomic factors affecting theability of the customers to settle the receivables. The group has identified the GDPs, inflationrates, prime lending rates, US dollar exchange rates and the credit ratings of the countriesin which it operates to be the most relevant factors, and has accordingly adjusted thehistorical loss rates based on expected changes in these factors.Impact on the group's financial results due to the adoption of IFRS 9Statement of financial position*Balance at Balance at28 February IFRS 9 1 March2018 Effect 2018R'000 R'000 R'000AssetsNon-current assetsTrade and other receivables 81 915 (2 409) 79 506Deferred income tax assets 39 614 8 795 48 409Current assetsTrade and other receivables 1 489 575 (16 873) 1 472 702Contract assets 280 933 (12 130) 268 803EquityRetained earnings 3 200 300 (22 617) 3 177 683* Only those line items affected by IFRS 9 have been included above.The group's opening retained earnings as at 1 March 2018 are as follows:R'000Closing balance at 28 February 2018 3 200 300Increase in cost of sales (31 412)Increase in deferred tax due to impairment provisions 8 795Opening retained earnings at 1 March 2018 3 177 683Adoption of IFRS 15In accordance with the transition paragraphs of IFRS 15, the group decided to recognise thecumulative effect of initially applying IFRS 15 as an adjustment to opening retained earningsunder the modified retrospective restatement method, where applicable.The adoption of IFRS 15 from 1 March 2018 has resulted in changes to the accountingpolicies with regards to the process followed in order to recognise revenue from the varioussources applicable to the group. However, these changes have not resulted in the need torestate any prior period figures.The group's revenue is primarily generated from the following sources:- Contracting revenue- Commercial quarry revenue- Bitumen and emulsion products and services- Asphalt supply revenue- Plant hire revenue- Property sales and development feesIFRS 15 establishes a comprehensive framework for determining whether, how much andwhen revenue is recognised. It replaced IAS 18: Revenue, IAS 11: Construction Contractsand related interpretations. Under IFRS 15, revenue is recognised at an amount that reflectsthe consideration to which an entity expects to be entitled for transferring goods or servicesto a customer based on the satisfaction of performance obligations.Revenue is measured based on the consideration specified in a contract with a customerand excludes amounts collected on behalf of third parties. The group recognises revenuewhen it transfers control over a product or services to a customer.The nature of the changes in the accounting policies were as follows:Previous accounting New accountingRevenue treatment under treatment undertype Description IAS 11 and IAS 18 IFRS 15Contracting Revenue generated Revenue from construction The group recognises revenuerevenue through construction contracts was recognised on over time by measuring thecontracts, where the the stage of completion progress towards thegroup's performance method. satisfaction of performancecreates or enhances obligations stipulated in thecustomer controlled construction contracts.assets. Progress measured using thecosts incurred to date over thetotal estimated constructioncost of the contract.Commercial Revenue is generated Revenue from the sale The group recognises revenuequarry through the sales of of goods was recognised when at a point in time, being whenrevenue aggregates to the significant risks and rewards the customer takes possessionconstruction market. of ownership were passed to of the goods.the customer.Bitumen and Revenue generated Revenue was recognised The group recognises revenueemulsion through the sales of when significant risks and at a point in time, being whenproducts bitumen products rewards of ownership of the customer takes possessionand services and the provision of the goods have passed to of the products; orbitumen-related the buyer. The group recognises revenueservices. over time by measuring theprogress towards the satisfactionof performance obligationsfor bitumen services provided.Asphalt Revenue is generated Revenue from the sale of The group recognises revenuesupply through the supply of asphalt was recognised at a point in time, being whenrevenue asphalt to the road when significant risks and the customer takes possessionconstruction market. rewards of ownership were of the asphalt.passed to the customer.Plant hire Revenue generated Revenue from plant hire is The group recognises revenuerevenue from plant hired out recognised on a percentage over time by measuring theto customers. completion basis over time progress towards thebased on operating hours. satisfaction of performanceobligations.Progress measured usingoperating hours for which thecustomer received andconsumed the benefitsprovided.Property Property sales: Property sales: Property sales:sales and Revenue generated Revenue was recognised when Revenue recognised at a pointdevelopment from the sale of risks and rewards of in time once ownership hasfees property. ownership were transferred. transferred.Development fees: Development fees: Development fees:Revenue receivable These fees were recognised Revenue recognised overfor project on the stage of completion time based on the satisfactionmanagement method. of performance obligationsservices, development stipulated in the contractsfees and subsidies with customers.receivable for thedevelopment ofhousing.Events after the reporting periodTransactions with non-controlling shareholdersShisalanga Construction (Pty) Ltd ("Shisalanga")Effective 1 March 2019, the group restructured its asphalt operations in KwaZulu-Natal andeffectively acquired a further 16% of Shisalanga from the non-controlling shareholders througha subscription and buyback agreement. The subscription was settled through the transfer ofassets held by National Asphalt (Pty) Ltd to Shisalanga and the buyback was settled in cash.The total combined value of the transaction was R49,9 million. These transactions increasedthe group's effective interest in Shisalanga from 60% to 76%.No other material events after the reporting period occurred up to the date of preparation ofthese group financial statements.On behalf of the boardF KenneyChairmanRJ FourieChief Executive OfficerJF GibsonFinancial Director13 May 2019Company informationDirectorsRJ FourieJF GibsonNF MsizaF Kenney#LA Maxwell*BH Kent*SR Bogatsu*# Non-Executive Chairman* Independent Non-ExecutiveCompany SecretaryGM ChemalyRegistered officeBuilding No 1Highgrove Office Park50 Tegel AvenueCenturionSouth AfricaTransfer secretariesComputershare Investor Services (Pty) LtdRosebank Towers15 Biermann AvenueRosebank2196AuditorsPricewaterhouseCoopers Inc.SponsorInvestec Bank LimitedContactsRaubex GroupRudolf Fourie+27 (0) 51 406 2000James Gibson+27 (0) 12 648 9400Investor relationsinvestor.relations@raubex.comwww.raubex.com

© Raubex Infra 2022 . All rights reserved. Website design & development by DIGITAL PLATFORMS.
Division of the Raubex Group of Companies.
Click here to visit the Raubex Group Website
footer_logo