Raubex : 2015 Year end results: Advert

Details of the net assets acquired, purchase consideration and goodwill are set out below:

Consideration

Shisa
R'000
OMV R'000
BAQ R'000
Prodev
R'000
Empa
R'000

Total

R'000

Raubex Group Limited (Incorporated in the Republic of South Africa) Registration number 2006/023666/06 Share Code: RBX ISIN Code: ZAE000093183 ("Raubex" or the "Group")

Cash 38 400 70 284 59 695 31 000 25 490 224 869
Contingent consideration (fair value) - 18 874 - - 2 136 21 010

Total consideration 38 400 89 158 59 695 31 000 27 626 245 879

Recognised amounts of identifiable assets acquired and liabilities assumed

Property, plant and equipment 34 070 35 159 54 761 31 000 29 680 184 670
Deferred tax asset 3 420 - 3 756 - 1 372 8 548
Non-current inventories - 95 184 - - - 95 184
Inventories 762 11 253 4 934 - 1 612 18 561
Construction contracts in progress 990 - - - 12 026 13 016
Trade and other receivables 34 765 22 195 3 764 - 25 701 86 425
Current income tax receivable 490 - - - - 490
Cash and cash equivalents 8 209 5 549 - - 8 626 22 384
Borrowings (28 739) (4 484) - - (7 972) (41 195) Provision for liabilities and charges - - (13 415) - - (13 415) Deferred tax liability (5 025) (37 378) - (3 999) (6 214) (52 616) Current income tax liability - - - - (1 671) (1 671) Trade and other payables (7 430) (10 824) - - (26 578) (44 832)

Total identifiable net assets 41 512 116 654 53 800 27 001 36 582 275 549

Non-controlling interest (16 605) (34 996) - - (10 975) (62 576)
Goodwill attributable to owners of the parent 13 493 7 500 5 895 2 799 2 019 31 706
Goodwill attributable to non-controlling interests - - - 1 200 - 1 200

Total 38 400 89 158 59 695 31 000 27 626 245 879

Purchased consideration settled in cash 38 400 70 284 59 695 31 000 25 490 224 869

 Revenues

up 14,5% to

R7,25 billion

Rudolf Fourie, CEO of Raubex Group, said: "We have delivered a strong set of results in a tough environment supported by a great performance from the materials division which now accounts for over 50% of the Group's earnings.

"The recent acquisitions have been successfully integrated and are contributing positively. We will continue to seek earnings enhancing acquisitions that are in line with our integrated model.

"The Group's order book is at an all-time high and the international projects secured in Zambia allow us to be more selective in the work that we tender for in South Africa.

"Our more diversified base, strong balance sheet and cash position will help us navigate the challenging conditions in the South African construction market and deliver growth in the year ahead."

Group income statement

Audited

Group statement of cash flows

Audited
12 months
28 February
2014
R'000

Less: Cash and cash equivalents (8 209) (5 549) - - (8 626) (22 384) Cash outflow on acquisition for cash flow

statement 30 191 64 735 59 695 31 000 16 864 202 485

Events after the reporting period

Belabela Quarries (Pty) Ltd

On 18 April 2015 the Group effectively acquired 74% of Belabela Quarries (Pty) Ltd ("Belabela"), through its subsidiary Loop en Hoop (Pty) Ltd for a purchase price of R43 million to be settled in cash. Belabela is a commercial quarry operating on the outskirts of Gaborone in Botswana. The acquisition will give the Group a base from which it can expand and further develop its operating model in Botswana.

Buildmax Aggregates and Quarries (Pty) Ltd

the former owners of the businesses of Buildmax Aggregates and Quarries (Pty) Ltd.
On 10 March 2015 the Group acquired certain mining rights and properties for an aggregate sum of R37 million in cash from

 Operating profit up 15,2% to R622,2 million

12 months
28 February
2014
R'000

Commentary

Financial overview

Revenue increased 14,5% to R7,25 billion and operating profit increased by 15,2% to R622,2 million from the corresponding prior year. These results were supported by positive contributions from acquisitions concluded during the year and a strong performance from the Group's materials division which contributed 52,0% to total operating profit. The road construction divisions experienced a stable but challenging year due to persistent competitive pressures in this sector.
Profit before tax increased 13,5% to R606,6 million (2014: R534,5 million) with the effective tax rate increasing to 29,4%
from 29,0%.
Earnings per share increased 11,6% to 213,4 cents with headline earnings per share increasing 11,8% to 209,1 cents. Group operating profit margin remained flat at 8,6% (2014: 8,5%).
Cash generated from operations increased 4,5% to R785,1 million (2014: R751,4 million) before finance charges and taxation.

 Group operating profit margin

of 8,6%

Group statement of comprehensive income

Audited
12 months
28 February

Group segmental analysis

Materials

R'000

Reportable segments

28 February 2015

Road surfacing and

rehabilitation

R'000

Road construction and earthworks R'000

Infra- structure R'000

Tosas

R'000

Consoli- dated R'000

Net finance costs increased to R15,7 million (2014: R5,4 million) due to increased borrowings and non-cash finance costs of
R2,7 million relating to the unwinding of discount in the valuation of the contingent consideration and put option granted to the sellers of OMV. Total non-cash finance costs amounted to R4,4 million for the year.
Trade and other receivables increased by 29,5% to R1,38 billion due mainly to the acquisitions concluded during the year and also the inclusion of plant accounted for as receivables under finance leases.
Inventories increased by 25,9% to R529,0 million due mainly to the inclusion of the mine dumps at Stilfontein and the gypsum dump at Potchefstroom on the acquisition of OMV. The value of bitumen stock on hand decreased due to the lower bitumen price which tracks international fuel oil prices.
Borrowings increased 53,3% to R1,10 billion (2014: R717,6 million) due mainly to the financing of plant and equipment for the
Tschudi copper mine project in Namibia and also the Buildmax and Prodev assets acquired.
Capital expenditure on property, plant and equipment increased 5,6% to R510,6 million (2014: R483,3 million).
The Group's net cash inflow for the year was R66,0 million. Total cash and cash equivalents at the end of the year increased
7,6% to R937,3 million (2014: R871,3 million).

Operational overview

2014
R'000
Segment revenue 1 961 342 2 568 538 1 463 953 862 660 388 766 7 245 259
Segment result (operating profit) 323 640 192 462 55 169 39 649 11 251 622 171
Margin 16,5% 7,5% 3,8% 4,6% 2,9% 8,6%

Materials

The materials division, which includes the Raumix operations, comprises three main disciplines including commercial quarries, contract crushing and materials handling and processing for the mining industry.

28 February 2014

Segment revenue 1 624 577 2 505 115 1 179 805 730 759 284 756 6 325 012
The division delivered a strong organic performance for the year and also successfully bedded down the acquisitions of OMV
crushers and the Buildmax Aggregates quarries, which contributed positively to earnings. The commercial quarries reported
Segment result (operating profit) 259 152 209 260 40 026 36 966 (5 529) 539 875
Margin 16,0% 8,4% 3,4% 5,1% (1,9%) 8,5%
solid results for the year with healthy demand experienced from the residential and commercial building markets as well as

 HEPS

infrastructure projects. Conditions also favoured the mining and material handling operations where good results were reported

up 11,8% to

Local

R'000

International

R'000

Consolidated

R'000

despite being affected by a three-week strike at the Namdeb operations in Namibia, which was successfully resolved before
year end. In line with the South African construction sector, contract crushing operations have been operating under competitive conditions and were negatively affected in Mozambique by a one-month production loss due to flooding in the northern region of the country.

209,1 cents

per share

Calculation of diluted earnings per share

Audited
12 months
28 February
2014
R'000

Geographical information

28 February 2015

Segment revenue 6 606 290 638 969 7 245 259
Segment result (operating profit) 538 722 83 449 622 171
Margin 8,2% 13,1% 8,6%

28 February 2014

Segment revenue 5 890 468 434 544 6 325 012
Segment result (operating profit) 459 116 80 759 539 875
Revenue for the division increased 20,7% to R1,96 billion (2014: R1,62 billion) and operating profit increased by 24,9% to
R323,6 million (2014: R259,2 million).
The divisional operating profit margins increased to 16,5% (2014: 16,0%).
The division incurred capital expenditure of R358,3 million during the year (2014: R320,3 million). The division has a secured order book of R1,86 billion (2014: R1,67 billion).

Road surfacing and rehabilitation

This division specialises in the manufacturing and laying of asphalt, chip and spray, surface dressing, enrichments and slurry seals.

Margin 7,8% 18,6% 8,5%
The division delivered a stable performance for the year in an operating environment that remains very competitive. Increased

 Cash flow

from operations up 4,5% to R785,1 million

Calculation of headline earnings per share

Audited
12 months
28 February
2014
R'000

Additional information

Employee benefit expense

Audited
12 months
28 February
2014
R'000
competition in the asphalt market and a lower volume of work awarded in the KwaZulu-Natal provincial market made for
particularly challenging conditions. However, margins have stabilised at the current levels. The division has increased its order book which includes contracts from SANRAL, the N3 Toll Concession and provincial work in the Western and Eastern Cape. Asphalt margins improved slightly during the year supported by the acquisition of Shisalanga Construction.
Revenue for the division increased 2,5% to R2,57 billion (2014: R2,51 billion) with operating profit decreasing by 8,0% to
R192,5 million (2014: R209,3 million).
The divisional operating profit margin decreased to 7,5% (2014: 8,4%).
The division incurred capital expenditure of R63,4 million during the year (2014: R85,5 million). The division has a secured order book of R2,47 billion (2014: R1,78 billion).

Road construction and earthworks

This division is the road and civil infrastructure construction division focused on the key areas of new road construction and heavy road rehabilitation.
The division delivered an improved performance for the year in an operating environment that remains very competitive.
Management has focused its attention on production monitoring and driving efficiencies across the business units to ensure

Capital expenditure and depreciation

Audited

12 months

28 February

Audited
12 months
28 February
that the low margin work available is executed profitably. The progress made on projects in Namibia and Zambia also supported these results. The divisional order book grew significantly following the awards of significant contracts from both SANRAL in
Revenue for the division increased 24,1% to R1,46 billion (2014: R1,18 billion) with operating profit increasing 37,8% to
R55,2 million (2014: R40,0 million).

 Capex spend

2015

R'000

2014
R'000
The divisional operating profit margins increased to 3,8% (2014: 3,4%) with a marked improvement in the last six months due to a number of lower margin contracts being substantially completed in the first half.

of R510,6 million

Group statement of financial position

Audited
12 months
28 February
2014
R'000
Capital expenditure for the year 510 599 483 299
Depreciation for the year 334 997 282 968
Amortisation of intangible assets for the year 280 280

Notes

Basis of preparation

The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for abridged reports, and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require abridged reports to be prepared in accordance with the framework concepts and the
The division incurred capital expenditure of R44,6 million during the year (2014: R51,2 million).
The division has a secured order book of R3,20 billion (2014: R2,07 billion) with R1,49 billion relating to contracts in Zambia and Namibia.

Raubex Infrastructure

The 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 projects.
The division has established its reputation in the market and is supported by a stable order book of work mainly focused on civil construction works related to Eskom's Renewable Energy Independent Power Producer Procurement Programme ("REIPPPP"), residential housing solutions, mine housing solutions and water pipeline infrastructure. The division successfully

 Order book

measurement and recognition requirements of International Financial Reporting Standards ("IFRS") and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements from which the summary consolidated financial statements were derived are in terms of International Financial Reporting Standards and are consistent
completed work on two second round photovoltaic ("PV") solar farms during the first half of the year but the delays experienced in reaching financial closure on round 3 REIPPPP projects pushed the order book out into the new year and impacted the second half performance. The acquisition of Empa Structures has been bedded down and will strengthen the Group's own capacity to tender on projects that require specialist concrete structure work.

of R8,68 billion

with those accounting policies applied in the preparation of the previous consolidated annual financial statements.
These summary consolidated financial statements for the year ended 28 February 2015 have been prepared under the supervision of the Financial Director, Mr JF Gibson CA(SA) and audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the annual financial statements from which these summary consolidated financial statements were derived. A copy of the auditor's report on the summary consolidated financial statements and of the auditor's report on the annual consolidated financial statements are available for inspection at the Company's registered office.
The auditor's report does not necessarily report on all of the information contained in this announcement. Any reference to
pro forma or future financial information included in this announcement has not been reviewed or reported on by the auditors.
Revenue for the division increased 18,0% to R862,7 million (2014: R730,8 million) and operating profit increased 7,3% to
R39,6 million (2014: R37,0 million).
The divisional operating profit margins decreased to 4,6% (2014: 5,1%).
The division incurred capital expenditure of R37,7 million (2014: R22,8 million). The division has a secured order book of R1,01 billion (2014: R909,4 million).

Tosas

Tosas is a manufacturer and distributor of value added bituminous products used primarily for road construction activities.
The company made good progress during the year and returned to profitability through a combination of "right sizing" initiatives
Shareholders are advised that in order to obtain a full understanding of the nature of the auditors' engagement they should
and increased volume through improved marketing and service delivery. The modified bitumen industry is experiencing

 Final dividend

of 36 cents

obtain a copy of that report together with the accompanying financial information from the Company's registered office.

Business combinations

Shisalanga Construction (Pty) Ltd ("Shisalanga")

On 1 June 2014 the Group acquired 60% of the issued share capital and obtained control of Shisalanga for a purchase price of R38,4 million settled in cash. Shisalanga manufactures a range of asphalt products from its plants based in Northern KwaZulu-Natal.
The revenue included in the consolidated income statement since 1 June 2014 contributed by Shisalanga was R101,7 million with a net profit contribution of R7,0 million over the same period. Had Shisalanga been consolidated from 1 March 2014 the consolidated income statement would show pro forma revenue of R123,1 million and net profit of R4,3 million.
challenging trading conditions and margins pressure as new entrants compete for market share. The Group has continued to realise synergies from this acquisition through the efficient supply of bitumen on internal contracts.
Revenue for Tosas increased 36,5% to R388,8 million (2014: R284,8 million) with an operating profit of R11,3 million from a loss of R5,5 million reported in the prior year. Total revenue including internal supply to the Group amounted to R696,1 million (2014: R411,5 million).
Tosas has secured an external order book of R129,4 million (2014: R127,2 million). Tosas incurred capital expenditure of R6,6 million (2014: R3,5 million).

International

The Group's international operations ("Africa") reported stable results for the year supported by the Namibian operations where

OMV Stilfontein (Pty) Ltd and OMV Gypsum Potchefstroom (Pty) Ltd ("OMV")

On 1 July 2014 the Group acquired a 70% interest in OMV's aggregate crushing and ready-mix concrete operations situated near Stilfontein and a 70% interest in OMV's gypsum operations situated near Potchefstroom in the North West province for a purchase price of R70,3 million settled in cash. An additional contingent consideration is payable dependent on future earnings and a put option has been written on the remaining 30% in favour of the non-controlling interest. The contingent consideration liability has been valued at R18,9 million and the put option liability at R48,5 million.
work on the upgrading of the road from Rosh Pinah to Oranjemund is under way as well as various material handling contracts across the country. Material handling operations were adversely affected in the second half of the year by a three-week strike at the Namdeb operations in Namibia, while flooding in Northern Mozambique affected contract crushing operations. In Zambia work commenced on two Link 8000 contracts with activities limited to site establishment, planning and minor works. Major construction works in Zambia are set to commence in the year ahead.
The revenue included in the consolidated income statement since 1 July 2014 contributed by OMV was R89,2 million with a net profit contribution of R9,2 million over the same period. Had OMV been consolidated from 1 March 2014 the consolidated
Internationally, revenue increased 47,0% to R639,0 million (2014: R434,5 million) and operating profit increased by 3,3% to
R83,4 million (2014: R80,8 million).
income statement would show pro forma revenue of R147,1 million and net profit of R12,4 million.

Buildmax Aggregates and Quarries (Pty) Ltd ("BAQ")

On 1 September 2014 the Group acquired certain business operations and assets from BAQ for a purchase price of R59,7 million in cash. The business combination acquired comprises the sand quarry operations of Crushco Quarry and Alpha Sand Quarry and the aggregate crushing operations of Aflease. These operations will give the Group a more diversified product range in the form of building and plaster sand to add to its existing range of aggregates and are located in the Gauteng province.

The revenue included in the consolidated income statement since 1 September 2014 contributed by BAQ was R53,3 million with a net profit contribution of R6,2 million over the same period. Had BAQ been consolidated from 1 March 2014 the consolidated income statement would show pro forma revenue of R98,9 million and net profit of R13,5 million.

Prodev Plant Hire (Pty) Ltd ("Prodev")

Operating profit margins decreased to 13,1% (2014: 18,6%) due mainly to the Rosh Pinah to Oranjemund contract being at
lower margin, more in line with the South African road construction market. The strike in Namibia and flooding in Mozambique put pressure on the materials division margins.

Prospects

The Group has grown its order book by 32,5% to R8,68 billion (2014: R6,55 billion) with 25,4% of the order book now representing contracts in Africa. With a healthy short-term order book secured, the Group will now focus on effective execution of current contracts and selective tendering for replacement work.
A number of earnings enhancing acquisitions were bedded down during the year and the Group will continue to look for acquisitions in the materials sector in the year ahead. In line with this strategy, the Group acquired the Belabela quarry in Gaborone, Botswana on 18 April 2015. This acquisition will give the Group a platform for expansion in the Botswana market.

Directors

JE Raubenheimer#, RJ Fourie, JF Gibson, F Kenney#, LA Maxwell*, BH Kent*, NF Msiza*

# Non-executive * Independent non-executive

Company secretary

Mrs HE Ernst

Registered office

Transfer secretaries

Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg
2001
South Africa

Auditors

On 1 September 2014 Burma Plant Hire (Pty) Ltd acquired 100% of the issued share capital of Prodev for R31 million cash. Prodev is a plant hire company operating in Namibia and the acquisition of this business will increase the Group's presence in Namibia.
The revenue included in the consolidated income statement since 1 September 2014 contributed by Prodev was R22,9 million with a net profit contribution of R4,9 million over the same period. Had Prodev been consolidated from 1 March 2014 the consolidated income statement would show pro forma revenue of R38,1 million and net profit of R10,0 million.

Empa Structures CC and Empa Plant CC ("Empa")

Whilst mindful of the constant risks associated with industrial action in South Africa and the effect of commodity prices on the
mining industry, the Group expects healthy operating conditions to continue in the materials sector.
Raubex's drive to diversify the Group's revenue streams over the past few years has resulted in the materials division now contributing over 50% of the Group's total earnings and the successful development of the infrastructure division. This, together with the higher margin work secured in Zambia, positions the Group well to navigate the challenging conditions in the South African construction market and deliver growth in the year ahead.

Dividend declaration

The Highgrove Office Park
Building No 1
PricewaterhouseCoopers Inc.

Sponsor

On 1 November 2014 the Group acquired a 70% interest in Empa for R25,5 million cash. The company specialises in the construction of concrete structures with its main focus on construction of water treatment plants, waste water treatment plants,
The directors have declared a gross final cash dividend from income reserves of 36 cents per share on 11 May 2015 for the year ended 28 February 2015. The salient dates for the payment of the dividend are as follows:
Tegel Avenue
Centurion
Investec Bank Limited
reservoirs and bridges.

Last day to trade cum dividend Friday, 29 May 2015
South Africa
www.raubex.com
The revenue included in the consolidated income statement since 1 November 2014 contributed by Empa was R48,0 million
with a net profit contribution of R1,1 million over the same period. Had Empa been consolidated from 1 March 2014 the

Commence trading ex dividend Monday, 1 June 2015

consolidated income statement would show pro forma revenue of R152,6 million and net profit of R1,1 million.

YEARS

Record date Friday, 5 June 2015

Payment date Monday, 8 June 2015
www.raubex.com
Non-controlling interest arising on business combination - - - - - 61 376 61 376

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