Wrap Text
BRT/BRN - Brimstone - Reviewed results for the year ended 31 December 2010
Brimstone Investment Corporation Limited
(Registration number 1995/010442/06)
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000015277 Share Code: BRT
ISIN Number: ZAE000015285 Share Code: BRN
("Brimstone" or the "Company")
Reviewed results for the year ended 31 December 2010
Condensed Group Statement of Comprehensive Income
Reviewed
Reviewed Restated
Year ended Year ended
31 December 31 December
R`000 2010 2009
Revenue 1 796 904 855 731
Sales and fee income 1 510 815 694 696
Dividends received 286 089 161 035
Operating expenses (1 482 667) (690 120)
Operating profit 314 237 165 611
Fair value (losses)/gains (61 943) 380 679
Exceptional items 2 466 (33 431)
Share of (losses)/profits of associates
and joint venture (4 786) 12 936
Profit before net finance costs 249 974 525 795
Income from investments 24 090 10 481
Finance costs (159 674) (137 529)
Outside unit holders` interest (784) -
Net profit before taxation 113 606 398 747
Taxation 297 659 (66 046)
Profit for the year 411 265 332 701
Other comprehensive income
Net value gain on available-for-sale
financial asset 3 202 4 786
Total comprehensive income for the year 414 467 337 487
Profit attributable to:
Equity holders of the parent 411 457 325 710
Non-controlling interests (192) 6 991
411 265 332 701
Total comprehensive income attributable to:
Equity holders of the parent 413 280 328 436
Non-controlling interests 1 187 9 051
414 467 337 487
Earnings per share (cents)
Basic 171.1 136.7
Diluted earnings per share (cents)
Basic 146.9 135.6
Condensed Group Statement of Financial Position
Reviewed
Reviewed Restated
Year ended Year ended
31 December 31 December
R`000 2010 2009
ASSETS
Non-current assets 2 360 786 4 300 928
Property, plant, equipment and vehicles 306 401 314 677
Goodwill 12 140 12 140
Intangible assets 174 129 195 709
Deferred acquisition costs 39 468 36 236
Investments in associate and joint
venture companies 284 233 285 088
Investments 1 541 021 3 454 854
Deferred taxation 3 394 2 224
Current assets 1 259 044 1 295 320
Inventories 193 412 188 531
Trade and other receivables 472 734 398 610
Reinsurance contracts 400 476 488 638
Taxation 8 085 5 308
Cash and cash equivalents 184 337 214 233
TOTAL ASSETS 3 619 830 5 596 248
EQUITY AND LIABILITIES
Capital and reserves 1 673 122 2 568 462
Share capital 45 43
Capital reserves 304 322 262 506
Changes in ownership (11 839) -
Revaluation reserves 8 576 6 753
Retained earnings 1 269 342 2 196 566
Attributable to equity holders of the parent 1 570 446 2 465 868
Non-controlling interests 102 676 102 594
Non-current liabilities 954 467 1 875 610
Long-term interest bearing borrowings 705 710 1 291 032
Long-term provisions 19 451 18 894
Deferred taxation 229 306 565 684
Current liabilities 992 241 1 152 176
Short-term interest bearing borrowings 99 288 200 088
Bank overdrafts 13 553 17 874
Trade payables 226 269 222 887
Other payables 57 228 48 333
Insurance contracts 563 649 628 129
Outside unit holders` interest 10 609 21 330
Short-term provisions 14 743 13 116
Taxation 6 902 419
TOTAL EQUITY AND LIABILITIES 3 619 830 5 596 248
NAV per share (cents) 643.9 1 030.3
Shares in issue at end of year (000`s) 243 891 239 324
Condensed Group Statement of Cash Flow
Reviewed
Reviewed Restated
Year ended Year ended
31 December 31 December
R`000 2010 2009
Operating activities
Net attributable profit 411 265 332 701
Adjustments for:
Share of profits of associates and
joint venture (33 981) (49 631)
Income from investments (270 404) (134 955)
Decrease/(increase) in fair value
of investments 61 943 (380 679)
Impairment of investment in associate 8 316 -
Profit on disposal of associate (10 820) -
Amortisation of intangible asset 21 580 9 473
Gain on bargain purchase - (40 920)
Finance costs 159 674 137 529
Taxation (297 659) 66 046
Depreciation of property, plant,
equipment and vehicles 54 323 34 268
Share-based payment expense 6 531 2 533
Loss on disposal of associates - 14 146
Decrease in long and short-term provisions 2 184 10 929
Profit on disposal of property,
plant, equipment and vehicles (719) (3 506)
Operating cash flows before movements
in working capital 112 233 (2 066)
Increase in inventories (4 881) (3 404)
(Increase)/decrease in trade and other
receivables (74 124) 80 793
Outside unit holders` interest (10 721) -
Increase/(decrease) in trade and
other payables 12 277 (43 433)
Net decrease in reinsurance contracts 88 162 -
Net increase in deferred acquisition costs (3 232) -
Net decrease in insurance contracts (64 480) -
Cash generated from operations 55 234 31 890
Income taxes paid (36 704) (14 410)
Finance costs (128 824) (86 742)
Net cash utilised in operating activities (110 294) (69 242)
Investing activities
Interest received 24 090 10 615
Dividends received from associates
and joint venture 38 767 36 695
Dividends received from other
equity investments 246 314 124 340
Loan repayments and recoveries from
associate and investments - 39 280
Proceeds on disposal of investments 657 295 178 105
Proceeds on disposal of property,
plant, equipment and vehicles 1 062 14 534
Acquisition of property, plant,
equipment and vehicles (46 390) (38 952)
Acquisition of businesses (30 034) (493 059)
Disposal of businesses - (482)
Acquisition of investments (45 519) (17 426)
Net cash from/(used in) investing activities 845 585 (146 350)
Financing activities
Dividends paid - cash (80 401) (57 389)
Repayments of borrowings (913 116) (627 933)
Loans raised 203 064 999 638
Shares repurchased (9 722) (483)
Proceeds on issue of shares 29 139 3 092
Issue of shares by subsidiary 10 170 66 770
Decrease in bank overdrafts (4 321) (7 227)
Net cash (used in)/from
financing activities (765 187) 376 468
Net (decrease)/increase in cash
and cash equivalents (29 896) 160 856
Cash and cash equivalents at
beginning of year 214 233 53 377
Cash and cash equivalents at end of year
Bank balances and cash 184 337 214 233
Condensed Group Statement of Changes in Equity
Changes
Share Capital in
R`000 capital reserves ownership
Balance at 1 January 2009 42 268 345 -
Attributable profit for the year
ended 31 December 2009 - - -
Other comprehensive income - - -
Total comprehensive income - - -
Recognition of share-based payments - 2 533 -
Dividend paid - - -
Non-controlling shareholders` share
of equity at acquisition - - -
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends - - -
Issue of share capital 1 3 091 -
Treasury shares acquired - (197) -
Increase in treasury shares held
by share trust - (286) -
Transfer to capital redemption
reserve fund - 1 662 -
Transfer current year share of
non-distributable reserve
of associate - (11 160) -
Share of non-distributable
reserves of associate transferred
directly to equity - (1 482) -
Balance at 31 December 2009
- reviewed 43 262 506 -
Attributable profit for the year
ended 31 December 2010 - - -
Other comprehensive income - - -
Total comprehensive income - - -
Recognition of share-based payments - 6 531 -
Dividend paid - - -
Non-controlling interest acquired - - (11 839)
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends - - -
Issue of share capital 2 29 137 -
Treasury shares acquired - (9 722) -
Transfer to capital redemption
reserve fund - 1 808 -
Transfer to statutory
contingency reserve - 13 534 -
Share of non-distributable
reserves of associate
transferred directly to equity - 528 -
Balance at 31 December
- reviewed 2010 45 304 322 (11 839)
Condensed Group Statement of Changes in Equity
Attri-
butable
to equity
Reva- holders
luation Retained of the
R`000 reserves earnings parent
Balance at 1 January 2009 4 027 1 918 747 2 191 161
Attributable profit for the year
ended 31 December 2009 - 325 710 325 710
Other comprehensive income 2 726 - 2 726
Total comprehensive income 2 726 325 710 328 436
Recognition of share-based payments - - 2 533
Dividend paid - (57 389) (57 389)
Non-controlling shareholders` share
of equity at acquisition - - -
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends - - -
Issue of share capital - - 3 092
Treasury shares acquired - - (197)
Increase in treasury shares held
by share trust - - (286)
Transfer to capital redemption
reserve fund - (1 662) -
Transfer current year share of
non-distributable reserve
of associate - 11 160 -
Share of non-distributable
reserves of associate transferred
directly to equity - - (1 482)
Balance at 31 December 2009
- reviewed 6 753 2 196 566 2 465 868
Attributable profit for the year
ended 31 December 2010 - 411 457 411 457
Other comprehensive income 1 823 - 1 823
Total comprehensive income 1 823 411 457 413 280
Recognition of share-based payments - - 6 531
Dividend paid - (1 323 339) (1 323 339)
Non-controlling interest acquired - - (11 839)
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends - - -
Issue of share capital - - 29 139
Treasury shares acquired - - (9 722)
Transfer to capital redemption
reserve fund - (1 808) -
Transfer to statutory
contingency reserve - (13 534) -
Share of non-distributable
reserves of associate
transferred directly to equity - - 528
Balance at 31 December
- reviewed 2010 8 576 1 269 342 1 570 446
Condensed Group Statement of Changes in Equity
Non-
controlling
R`000 interests Total
Balance at 1 January 2009 7 028 2 198 189
Attributable profit for the year
ended 31 December 2009 6 991 332 701
Other comprehensive income 2 060 4 786
Total comprehensive income 9 051 337 487
Recognition of share-based payments - 2 533
Dividend paid - (57 389)
Non-controlling shareholders` share
of equity at acquisition 15 639 15 639
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends 70 876 70 876
Issue of share capital - 3 092
Treasury shares acquired - (197)
Increase in treasury shares held
by share trust - (286)
Transfer to capital redemption
reserve fund - -
Transfer current year share of
non-distributable reserve
of associate - -
Share of non-distributable
reserves of associate transferred
directly to equity - (1 482)
Balance at 31 December 2009
- reviewed 102 594 2 568 462
Attributable profit for the year
ended 31 December 2010 (192) 411 265
Other comprehensive income 1 379 3 202
Total comprehensive income 1 187 414 467
Recognition of share-based payments - 6 531
Dividend paid - (1 323 339)
Non-controlling interest acquired (18 195) (30 034)
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends 17 090 17 090
Issue of share capital - 29 139
Treasury shares acquired - (9 722)
Transfer to capital redemption
reserve fund - -
Transfer to statutory
contingency reserve - -
Share of non-distributable
reserves of associate
transferred directly to equity - 528
Balance at 31 December
- reviewed 2010 102 676 1 673 122
Segmental information
Profit from Headline
R`000 Revenue Operations Profit Assets Liabilities
Fishing 837 281 56 567 (6 259) 879 148 783 007
Insurance 508 823 43 569 41 681 928 630 821 651
Clothing 167 030 485 (4 087) 137 255 118 809
Other 283 770 213 616 384 083 1 674 797 223 241
Total
- reviewed 1 796 904 314 237 415 418 3 619 830 1 946 708
Earnings per Share
Reviewed
Reviewed Restated
Year ended Year ended
31 December 31 December
2010 2009
Headline earnings per share (cents)
Basic 172.7 130.7
Diluted 148.3 129.6
Headline earnings calculation (R`000)
Net profit attributable to equity
holders of the parent 411 457 325 710
Profit on disposal of property,
plant, equipment and vehicles (431) (3,614)
Realised (profit)/loss on disposal
of associate (10 820) 14 146
Gain on bargain purchase - (23 300)
Impairment of investment in associate 8 316 -
Adjustments relating to results of
associates and joint venture 2 214 (1 838)
Total tax effects of adjustments 4 682 194
Headline earnings 415 418 311 298
Weighted average number of shares
on which earnings per share is based (000`s) 240 500 238 238
Weighted average number of shares
on which diluted earnings per
share is based (000`s) 280 125 240 166
Commentary
In a landmark year, BRIMSTONE unlocked significant value for shareholders.
Shareholders benefited significantly from the unbundling of Brimstone`s
investment in Life Healthcare.
Headline earnings for the Group have risen significantly to R415.4 million, from
R311.3 million for the previous year. Headline earnings per share for the year
ended 31 December 2010, are 172.7 cents, in comparison to the headline earnings
per share of 130.7 cents for the comparative period.
As a result, we are pleased to declare a dividend of 15 cents per share payable
to shareholders (2009: 32 cents per share).
Total assets have decreased from R5.6 billion in 2009 to R3.6 billion in the
review period, mainly as a result of the unbundling of the investment in Life
Healthcare. This impacted on the overall net asset value of the Group which at
the reporting date was valued at R1.6 billion (December 2009: R2.5 billion),
representing a net asset value per share of R6.44 at year-end (2009: R10.30).
Intrinsic net asset value as at 31 December 2010 is estimated to be R1.9 billion
or R7.74 per share.
The market capitalisation of Brimstone at 31 December 2010 was R1 714.5 million
(December 2009: R2 106 million). The results were positively impacted by the
inflow of R286 million in dividends received from the various investments (2009:
R161 million).
Auditors` review opinion
The condensed provisional financial information for the year ended 31 December
2010 has been reviewed by the Group`s auditors, Deloitte & Touche. The review
was conducted in accordance with ISRE 2410 `Review of Interim Financial
Information performed by the Independent Auditor of the Entity`. A copy of their
unmodified review report is available for inspection at the Company`s registered
office. Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the Company`s auditors.
Results for the year
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting. The report has been prepared using accounting
policies that comply with IFRS which are consistent with those applied in the
financial statements for the year ended 31 December 2009, except for a change in
the manner in which jointly controlled entities are accounted for. Previously
jointly controlled entities were proportionately consolidated whereas they are
now equity accounted. The change in accounting policy resulted in adjustments to
a number of line items in the condensed Group statements, but had no effect on
the net asset value of the Group.
Issue of shares
The following shares were issued during the year:
Ordinary "N" ordinary
Capitalisation award: 24 May 2010 - 1 305 179
Share option scheme: 23 June 2010 607 200 2 884 859
The Brimstone Black Executives
Investment Trust: 31 December 2010 - 35 140 000
The Brimstone General Staff
Investment Trust: 31 December 2010 - 1 500 000
The Brimstone Broad-based
BEE Trust: 31 December 2010 - 2 500 000
607 200 43 330 038
Brimstone portfolio
SUBSIDIARIES
Sea Harvest
Excellent fishing conditions continued throughout the reporting period. The
marginally higher quota, as a result of a 1% increase in the Total Allowable
Catch (TAC), good catches and efficiency improvements contributed to a reduction
in costs across the entire business.
Export to new markets in North America, Northern Europe and Australia is
increasingly gaining traction and negating the slowdown experienced in Southern
Europe, to an extent. On the local market the retail business performed well and
Sea Harvest maintained its status as the leading frozen white fish supplier in
South Africa.
Revenue for the period to 31 December 2010 declined, driven by the strong Rand
relative to the Euro, Sea Harvest`s major trading currency.
Overall a positive operating result was achieved, in spite of the deteriorating
economic conditions in traditional export markets.
The hake TAC for the 2011 calendar year was increased by 10% and this increase
was applied to all quota holders. The good fishing conditions are expected to
continue over the medium term; however, a continuing strong Rand and depressed
international seafood market could impact margins negatively.
House of Monatic
The effects of the world economy and competition from manufacturers in the East
continues to place pressure on the industry. The company has however managed to
re-focus the business by returning to core manufacturing. This has enabled the
company to present break-even results from continuing operations.
House of Monatic`s offering into retail will be expanded and efficiency
measurements will be implemented in order to trade profitably. Current
Production Incentives being offered by Government will expedite the attainment
of these goals.
Lion of Africa Holdings
Lion of Africa is the country`s largest Black-owned short-term insurer and has
an A-rating from the GCR rating agency for claims paying ability. Gross written
premiums grew strongly at 22.2% to finish at R757.3 million. Net written
premiums showed similar growth at 38.1% to finish at R453.5 million whilst the
net loss ratio improved from 51.1% in 2009 to 49.4% in 2010. Net underwriting
profit improved from R27.9 million in 2009 to R39.9 million in 2010. The
company`s after tax earnings improved from R27.9 million in 2009 to R42.5
million in 2010.
Lion of Africa is also the first insurance company to achieve a Level 1 Broad
Based Black Economic Empowerment rating in terms of the BBBEE Act of 2003.
The initial accounting for the acquisition of Lion of Africa which was only
provisionally determined as at 31 December 2009, has now been finalised. As a
consequence, various re-classifications of assets and liabilities were effected
to the condensed Group Statement of Financial Position, which did not affect
goodwill arising on acquisition.
ASSOCIATES
Oceana
Oceana recorded good results in its 2010 financial year across each of its
operating segments. Headline earnings per share increased by 13% over the
previous year.
From an inshore fishing perspective, canned fish sales volumes increased on the
domestic market as a result of the greater availability of finished product from
both local supply and imports.
Selling prices of fishmeal in US dollar terms were significantly better than the
previous year. Midwater and deep-sea fishing performed well due to extra catch
capacity following vessel upgrades in the prior year. Selling prices were
generally higher in US dollar terms.
Revenue from Cold Storage increased due to higher frozen capacity, a higher
overall occupancy rate and an increase in the number of pallets handled. Overall
operating profit increased on the previous year.
Fishing conditions in the southern African region are expected to remain
relatively stable. Oceana`s South African, other African and Asian markets are
anticipated to show further growth while the company`s European markets are yet
to recover to levels experienced before the global economic crisis. The Rand
exchange rate against the dollar will continue to have a major bearing on
financial performance.
Aon SA
Effective 31 December 2010, the Brimsure consortium, which comprises Brimstone
and Commlife Holdings (Pty) Ltd, sold its 30% stake in Aon South Africa, which
it purchased in 2004, back to Aon.
Aon Re Africa
Aon Re Africa (Pty) Ltd continues to be the largest reinsurance broker licensed
and operating in South Africa and the rest of the continent.
The legal and operational aspects of the Benfield merger were completed in 2010;
all clients were successfully retained post the merger.
Total revenue grew by 36,3% year on year, partly due to the merger as well as
organic and new business growth. Profit before tax experienced significant
growth, after accounting for the purchase transaction.
The Scientific Group
The company experienced a challenging trading period in 2010. Whilst turnover
declined, improved margins and well controlled expenses resulted in improved
profitability. Scientific completed the acquisition of Indigenous Systems, a
company specialising in electro-surgery and other surgical medical devices and
consumables. The acquisition brings a strong product portfolio and a team with
strong relationships within the private hospital groups, offering attractive
growth opportunities.
Subsequent to year end, Scientific`s shareholder structure was realigned when a
consortium consisting of Capitalworks and management acquired the controlling
stake from Adcock Ingram. Brimstone remains a significant non-controlling
shareholder and is excited about the prospects within the industry and renewed
focus of the group.
INVESTMENTS
Life Healthcare (LHC)
Following the LHC transactions, Brimstone retains a 5.5% interest in the company
and remains confident of future prospects and dividend flow.
MTN Zakhele
In November 2010, Brimstone was allotted 1 010 500 MTN Zakhele ordinary shares
as part of the MTN BEE transaction.
The mark-to-market value of these MTN Zakhele shares, accounted for as options,
has been valued at year-end. The independently calculated option valuation was
based on a closing MTN share price of R134.42 per share.
Nedbank
The mark-to-market value of Brimstone`s rights to Nedbank shares, accounted for
as options has been revalued at year end. The independently calculated option
valuation was based on a closing share price of R130.35 per share.
Old Mutual plc
The mark-to-market value of Brimstone`s rights to Old Mutual plc shares,
accounted for as options, has been revalued based on the closing share price of
R12.99 per share.
Rex Trueform and African & Overseas Enterprises (Queenspark)
The underlying business of Queenspark is solid and positive results were posted.
Value unlocking opportunities however remain a challenge, which is being
addressed.
Tiger Brands
The mark-to-market value of Brimstone`s rights to Tiger Brands shares, accounted
for as options has been revalued at year end. The independently calculated
option valuation was based on a closing share price of R193.63 per share.
Intrinsic Net Asset Value
Intrinsic NAV, calculated on a line by line basis, is estimated to be R1.9
billion or R7.74 per share (2009: R2.7 billion or R11.37 per share). This is
after taking into account the unbundling of LHC shares to shareholders amounting
to R1.4 billion.
Prospects
Brimstone is well positioned to take advantage of the recovery of commercial
markets and the general economy, both international and domestic.
Suitable acquisition opportunities within the Group`s chosen investment sectors
will be pursued, while the addition of new sectors will be considered.
We are cautiously optimistic of the prospects ahead and remain confident that
Brimstone will continue to build on its track record of providing multi-entry
exposure to the formal economy for a large number of traditionally marginalised
investors.
Dividend
The board of Brimstone has declared a dividend of 15 cents per share payable on
Monday, 16 May 2011. In compliance with the requirements of Strate, the Company
has determined the following salient dates for the payment of the dividend. The
last day to trade cum dividend is Friday, 6 May 2011. The dividend is payable to
all shareholders of Brimstone recorded in the books of the Company at the close
of business on Friday, 13 May 2011. Shares will commence trading ex dividend
from Monday, 9 May 2011. Shares may not be rematerialised or dematerialised from
Monday, 9 May 2011 to Friday, 13 May 2011, both days inclusive.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
22 February 2011
Directorate: Prof. GJ Gerwel (Chairman), F Robertson (Executive Deputy
Chairman)*, MA Brey (Chief Executive Officer)*, LZ Brozin (Financial)*, PL
Campher, M Hewu, N Khan, MK Ndebele, Y Pahad, LA Parker, AA Roberts, FD Roman
*Executive
Registered Office: Boundary Terraces, 1 Mariendahl Lane, Newlands 7700 Transfer
Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street,
Johannesburg 2001
Sponsor: Nedbank Capital, 135 Rivonia Road, Sandton 2196,
E-mail: info@brimstone.co.za
Date: 22/02/2011 07:46:15 Supplied by www.sharenet.co.za
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