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BRT - Brimstone - Unaudited results for the six months ended 30 june 2007
highlights
BRIMSTONE INVESTMENT CORPORATION LIMITED
ISIN Number: ZAE000015277
Share Code: BRT, ISIN Number: ZAE000015285 Share
Code: BRN Company Registration Number: 1995/010442/06 (Incorporated in the
Republic of South Africa) ("Brimstone" or "the Company")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 HIGHLIGHTS
- Headline earnings per share up 86.9%
- Assets Exceed R3.2 Billion
- Intrinsic net asset value 849 cents per share
GROUP INCOME STATEMENTS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
R`000 2007 2006 2006
Revenue 265 363 96 048 377 953
Cost of sales (203 635) (64 938) (268 632)
Gross profit 61 728 31 110 109 321
Selling and administration expenses (63 434) (28 698) (79 190)
Fair value gains 363 878 122 000 1 408 997
Exceptional items (181) 5 457 10 721
Profit from operations 361 991 129 869 1 449 849
Income from investments 10 931 4 358 9 558
Finance costs (63 267) (16 897) (190 318)
Share of (losses)/profits of
associates (3 406) 29 915 28 172
Net profit before taxation 306 249 147 245 1 297 261
Taxation (71 207) (22 124) (195 745)
Net attributable profit 235 042 125 121 1 101 516
Attributable to:
Equity holders of the parent 237 068 124 909 1 099 427
Minority interest (2 026) 212 2 089
235 042 125 121 1 101 516
Earnings per share (cents)
Basic 101.1 54.1 474.1
Diluted earnings per share (cents)
Basic 97.4 51.4 458.4
GROUP BALANCE SHEETS
Unaudited Unaudited Audited
30 June 30 June 31 Dec
R`000 2007 2006 2006
ASSETS
Non-current assets 2 866 700 931 825 2 568 137
Property, plant, equipment and
vehicles 42 035 26 486 38 418
Goodwill 17 862 10 148 11 049
Investments in associate companies 436 583 577 064 512 416
Investments 2 370 220 318 127 2 006 254
Current assets 372 770 128 221 198 306
Loan - 8 037 -
Inventories 134 529 59 179 81 354
Trade receivables 112 198 47 110 68 481
Other receivables 19 928 9 194 31 200
Taxation - - 202
Cash and cash equivalents 17 710 4 701 17 069
284 365 128 221 198 306
Non-current asset classified
as held for sale 88 405 - -
TOTAL ASSETS 3 239 470 1 060 046 2 766 443
EQUITY AND LIABILITIES
Capital and reserves 1 771 304 593 873 1 570 691
Share capital 41 39 40
Capital reserves 278 220 270 813 271 325
Revaluation reserves 3 977 3 977 3 977
Retained earnings 1 492 792 321 755 1 297 049
Minority interest (3 726) (2 711) (1 700)
Non-current liabilities 1 092 787 356 083 1 008 652
Long-term interest bearing borrowings 814 843 318 604 797 198
Deferred taxation 277 944 37 479 211 454
Current liabilities 375 379 110 090 187 100
Short-term interest bearing borrowings 71 507 40 573 33 321
Bank overdraft 112 387 10 681 45 709
Trade payables 128 598 40 604 66 410
Other payables 61 673 16 756 39 986
Taxation 1 214 1 476 1 674
TOTAL EQUITY AND LIABILITIES 3 239 470 1 060 046 2 766 443
NAV per share (cents) 754.0 256.6 674.5
Shares in issue at end of period
(000`s) 235 420 232 534 233 104
GROUP CASH FLOW STATEMENTS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
R`000 2007 2006 2006
Operating activities
Profit for the period 235 042 125 121 1 101 516
Adjustments for:
Share of profits of associates (1 079) (32 645) (43 903)
Income from investments (11 259) (4 682) (10 359)
Increase in fair value of
investments (363 697) (127 457) (1 415 444)
Finance costs 63 267 16 897 190 318
Taxation 71 207 22 124 195 745
Depreciation of property, plant,
equipment and vehicles 2 863 872 2 652
Share-based payment expense 1 104 1 104 2 208
Profit on disposal of investments - - (4 274)
Loss on disposal of property, plant,
equipment and vehicles - - 96
Operating cash flows before
movements in working capital (2 552) 1 334 18 555
Increase in inventories (32 276) (10 283) (31 861)
(Increase)/Decrease in receivables (4 457) 11 907 (30 401)
Increase in payables 34 061 1 324 38 176
Cash (utilised in)/generated from
operations (5 224) 4 282 (5 531)
Income taxes paid (5 485) (2 109) (3 724)
Interest paid (20 423) (16 897) (190 318)
Net cash used in operating
activities (31 132) (14 724) (199 573)
Investing activities
Interest received 10 931 4 358 9 558
Dividends received from associates 4 485 2 730 15 731
Dividends received from other
equity investments 328 324 801
Loan repayments and recoveries
from associate and investments 427 919 4 086
Proceeds on disposal of investments - - 43 738
Proceeds on disposal of property,
plant, equipment and vehicles - - 235
Purchase of property, plant,
equipment and vehicles (2 939) (1 203) (2 597)
Acquisition of subsidiaries
- shares acquired and loans advanced (3 557) (11 034) (20 878)
Loan (advanced)/repaid - (1 036) 7 001
Acquisition of investments in
associates (16 674) (1 418) (384 838)
Net cash used in investing
activities (6 999) (6 360) (327 163)
Financing activities
Dividends paid (37 632) (27 928) (27 867)
Repayments of borrowings (11 088) (2 274) (2 734)
Loan advances 18 915 11 113 494 358
Shares repurchased (975) (174) (543)
Proceeds on issue of shares 3 074 3 566 4 058
Increase in bank overdrafts 65 889 2 530 37 550
Net cash from financing activities 38 183 (13 167) 504 822
Net increase/(decrease) in cash
and cash equivalents 52 (34 251) (21 914)
Cash and cash equivalents at
beginning of
period 17 069 36 633 36 633
Cash and cash equivalents acquired
on acquisition of subsidiaries 589 2 319 2 350
Cash and cash equivalents at end of
period
Bank balances and cash 17 710 4 701 17 069
SEGMENTAL INFORMATION
Operating Headline
R`000 Revenue Profit Earnings Assets Liabilities
Financial
services 7 702 6 767 (7 850) 446 333 20 556
Industrial 257 367 505 (11 858) 748 512 557 978
Healthcare 278 364 471 268 507 2 019 807 714 758
Enterprise
development - - (233) 7 782 -
Non-core
investments 16 (14) (1 003) 3 552 1 090
Corporate - (9 738) (10 495) 13 484 173 784
Total 265 363 361 991 237 068 3 239 470 1 468 166
GROUP STATEMENTS OF CHANGES IN EQUITY
Share Capital Revaluation
R`000 capital reserves reserves
Balance at 1 January 2006 - Audited 38 262 346 3 977
Attributable profit for the year ended
31 December 2006 - - -
Minority shareholder share of
accumulated deficit at acquisition of
subsidiary - - -
Recognition of share-based payments - 2 208 -
Dividend paid - - -
Issue of share capital 2 4 056 -
Increase in treasury shares held by
share trust - (542) -
Transfer current year share of
non-distributable reserve of associate - 3 257 -
Balance at 31 December 2006 - Audited 40 271 325 3 977
Attributable profit for the six months
ended 30 June 2007 - - -
Recognition of share-based payments - 1 104 -
Dividend paid - - -
Issue of share capital 1 3 073 -
Increase in treasury shares held by
share trust - (975) -
Transfer current year share of
non-distributable reserve of associate - 3 693 -
Balance at 30 June 2007 - Unaudited 41 278 220 3 977
1 January 2006 to 30 June 2006
Balance at 1 January 2006 - Audited 38 262 346 3 977
Attributable profit for the six months
ended 30 June 2006 - - -
Minority shareholder share of
accumulated deficit at acquisition of
subsidiary - - -
Recognition of share-based payments - 1 104 -
Dividend paid - - -
Issue of share capital 1 3 565 -
Increase in treasury shares held by
share trust - (174) -
Transfer current year share of
non-distributable reserve of associate - 3 972 -
Balance at 30 June 2006 - Unaudited 39 270 813 3 977
Attributable
to equity
Retained holders of Minority
R`000 earnings the parent interest Total
Balance at 1 January
2006 - Audited 228 746 495 107 419 495 526
Attributable profit
for the year ended
31 December 2006 1 099 427 1 099 427 2 089 1 101 516
Minority shareholder
share of accumulated
deficit at
acquisition of
subsidiary - - (4 208) (4 208)
Recognition of
share-based payments - 2 208 - 2 208
Dividend paid (27 867) (27 867) - (27 867)
Issue of share capital - 4 058 - 4 058
Increase in treasury
shares held by share
trust - (542) - (542)
Transfer current year
share of
non-distributable
reserve of associate (3 257) - - -
Balance at
31 December 2006 -
Audited 1 297 049 1 572 391 (1 700) 1 570 691
Attributable profit
for the six months
ended 30 June 2007 237 068 237 068 (2 026) 235 042
Recognition of
share-based payments - 1 104 - 1 104
Dividend paid (37 632) (37 632) - (37 632)
Issue of share capital - 3 074 - 3 074
Increase in treasury
shares held by share
trust - (975) - (975)
Transfer current year
share of
non-distributable
reserve of associate (3 693) - - -
Balance at 30 June
2007 - Unaudited 1 492 792 1 775 030 (3 726) 1 771 304
1 January 2006 to
30 June 2006
Balance at 1 January
2006 - Audited 228 746 495 107 419 495 526
Attributable profit
for the six months
ended 30 June 2006 124 909 124 909 212 125 121
Minority shareholder
share of accumulated
deficit at
acquisition of
subsidiary - - (3 342) (3 342)
Recognition of
share-based payments - 1 104 - 1 104
Dividend paid (27 928) (27 928) - (27 928)
Issue of share capital - 3 566 - 3 566
Increase in treasury
shares held by share
trust - (174) - (174)
Transfer current year
share of
non-distributable
reserve of associate (3 972) - - -
Balance at 30 June
2006 - Unaudited 321 755 596 584 (2 711) 593 873
ACQUISITION OF SUBSIDIARY
On 1 March 2007 the Group acquired 100% of Canterbury International South
Africa (Pty) Ltd through its 51% held subsidiary Fifth Element Marketing (Pty)
Ltd for a consideration of R11.9m. The company manufactures and distributes
sport and casualwear. The transaction has been accounted for on the purchase
method of accounting. Brimstone`s share of losses from date of acquisition to
30 June 2007 amounted to R0.3m.
R`000 Acquisition value
Total assets 53 016
Non-current assets 3 541
Current assets 49 475
Total liabilities 47 964
Non-current liabilities 160
Current liabilities 47 804
Net assets 5 052
Net assets acquired 5 052
Goodwill 6 813
Total consideration 11 865
Paid in cash (1 625)
Balance of purchase price to be paid 10 240
Net cash outflow arising on acquisition
Cash consideration paid 1 625
Cash and cash equivalents acquired 589
1 036
The initial accounting for the subsidiary has not been finalised. This is the
result of uncertainties surrounding the valuation of at acquisition balances.
These uncertainties are expected to be resolved by 31 December 2007.
The Group paid a premium for the acquisition as it believes that Canterbury
will create benefits from revenue growth and future market development to its
existing clothing operations.
There were no fair value adjustments to assets and liabilities acquired.
Pro forma results of the Brimstone Group if the company acquired had been
consolidated from 1 January 2007:
R`000
Revenue 277 122
Headline earnings 227 583
COMMENTARY
The results for the six months to 30 June 2007 are encouraging with headline
earnings increasing to 101.1 cents (30 June 2006: 54.1 cents) per share. Net
asset value per share increased from 674.5 cents at 31 December 2006 to
754 cents at 30 June 2007. Intrinsic net asset value per share increased from
763 cents at 31 December 2006 to 849 cents at 30 June 2007.
RESULTS FOR THE PERIOD
This report has been prepared in compliance with International Financial
Reporting Standards and complies with IAS 34 Interim Financial Reporting. The
accounting policies used in the preparation of the interim report are
consistent with those used in the annual financial statements for the year
ended 31 December 2006.
ISSUE OF SHARES
The following shares were issued to directors and employees during the period
in terms of the share option scheme:
Ordinary "N" ordinary
23 March 2007 1 056 396 1 411 057
INVESTMENTS
HEALTHCARE
Life Healthcare
A significant increase in the underlying value of Life Healthcare contributed
substantially to headline earnings for the period under review. Life Healthcare
is one of South Africa`s largest private hospital groups and Brimstone is
confident that future earnings will continue to grow.
The directors re-evaluated the classification of the investment in Life
Healthcare as at 31 December 2006 to being accounted for at fair value through
profit or loss in terms of IAS 39 whereas previously (including 30 June 2006)
the investment was accounted for as an associate using the equity method.
Consequently the following line items for 30 June 2007 and 30 June 2006 are not
directly comparable:
Income Statements - Fair value gains
- Share of (losses)/profits of associates
Balance Sheets - Investments in associate companies
- Investments
Scientific Group
The Scientific Group continues to perform well and benefits from a wider market
presence. Future prospects are promising and we are confident that this niche
sector of the healthcare industry will continue to expand.
INDUSTRIAL
House of Monatic Group
House of Monatic, Brimstone`s wholly-owned subsidiary, acquired an effective
51% of Canterbury SA on 1 March 2007. Canterbury SA is the official kit
supplier to the rugby Springboks, a high profile contract that is expected to
impact positively on future earnings. We are moving forward with our strategy
to strengthen the House of Monatic Group`s marketing, design and manufacturing
portfolio through the acquisition and development of premium brands.
Lenco
Lenco contributed negatively to equity accounted earnings for the first six
months of 2007 which is in line with the seasonal nature of this business. This
investment was disposed of in July 2007 realising R203 million for Brimstone`s
interest in Lenco. Consequently the investment has been reclassified as a non
current asset held for sale.
Oceana
Oceana experienced positive growth and is a major contributor to equity
accounted earnings for the period. Oceana supplies a diverse product range of
fish, crustaceans and fish products. Sales volumes of Lucky Star canned fish
decreased significantly compared to the previous year because of shortage of
supply. However, the fishmeal operation more than compensated for this decrease
as a result of significantly higher prices achieved in export markets. Oceana
is in a strong position to increase earnings for the full year.
Sea Harvest
Fish stocks have improved over the last six months. Renewed fish supplies
providing sustainable volumes of white fish have positively influenced Sea
Harvest`s results for the period. An uninterrupted supply chain will play an
important role in future returns.
FINANCIAL
Aon South Africa
A steady performance by Aon for the period produced satisfying results. Aon
continues to follow a positive growth trend within a competitive market.
Aon Re Africa
As of 1 March 2007, Brimstone acquired an effective 18% of Aon Re Africa (Pty)
Ltd. Aon Re Africa are established reinsurance brokers operating throughout
sub-Saharan Africa. We are well satisfied with the results achieved to date and
future prospects look promising.
Lion of Africa Insurance Company
The company saw claims from several large industrial fires and, in line with
other major insurance companies throughout South Africa, motor losses have also
seen an increase over previous years. In particular claims for motor own
damage, theft and hijack losses all showed a dramatic increase. The company`s
half year results are down on previous years as a consequence. We are positive
that management has taken the necessary corrective action which will aid a
recovery in the second half of 2007.
Nedbank
Brimstone`s rights to Nedbank Group Limited shares, accounted for as options,
were marginally down, which is a direct result of the reduction in the
underlying Nedbank share price. The Brimstone/Mtha Consortium continues to
contribute positively to Nedbank. This investment is exposed to market
volatility.
Old Mutual
Brimstone`s rights to Old Mutual plc shares, also accounted for as options,
were marginally down, in line with the overall performance of the share markets
and the reduction of Old Mutual`s underlying share price. The Brimstone/Mtha
Consortium continues to contribute positively to Old Mutual. This investment is
exposed to market volatility.
ENTREPRENEURIAL DEVELOPMENT
Brimstone continues to support Hot Platinum and Smart ATM, two fledgling
enterprises acquired through the entrepreneurial investment fund, and is
confident that given sufficient time, our investments will prove profitable. We
will continue to look for opportunities to grow medium sized businesses.
INTRINSIC NET ASSET VALUE
In the annual financial statements as at 31 December 2006, the directors
included a report on Intrinsic Net Asset Value based on a line-by-line
valuation of the underlying investments. A similar exercise was performed at
30 June 2007 which indicated an Intrinsic Net Asset Value of 849 cents
(31 December 2006: 763 cents) per share.
EARNINGS PER SHARE
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2007 2006 2006
Earnings per share (cents)
Headline 101.1 54.1 474.2
Diluted earnings per share (cents)
Headline 97.4 51.4 458.5
Headline earnings calculation (R`000)
Net attributable profit 237 068 124 909 1 099 427
Loss on disposal of property, plant,
equipment and vehicles - - 96
Headline earnings 237 068 124 909 1 099 523
Weighted average number of shares
on which earnings per share
is based (000`s) 234 409 230 992 231 875
Weighted average number of shares
on which diluted earnings per share
is based (000`s) 243 474 243 166 239 815
DIVIDEND
In line with past practice, no interim dividend is payable at half-year.
PROSPECTS
Brimstone continues to actively seek and assess new opportunities for
cash-generative investments while simultaneously evaluating opportunities to
strengthen and grow the value of our existing investment portfolio of unlisted
and listed investments. We are confident that our investment portfolio will
continue to prosper under existing market conditions.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
21 August 2007
Registered Office: Boundary Terraces, 1 Mariendahl Lane, Newlands 7700 Transfer
Secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001 Sponsor: Nedbank Capital, 135 Rivonia Road, Sandton
2196 Website: www.brimstone.co.za | E-mail: info@brimstone.co.za
Date: 21/08/2007 15:08:19 Supplied by www.sharenet.co.za
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