Wrap Text
BRT - Brimstone Investment Corporation Limited - Unaudited Results for the Six
Months ended 30 June 2011
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 2011
Condensed Group Statement of Comprehensive Income
Restated
Unaudited Unaudited Audited
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 Dec
R`000 2011 2010 2010
Revenue 874 253 891 854 1 796 904
Sales and fee income 839 642 706 684 1 510 815
Dividends received 34 611 185 170 286 089
Operating expenses (830 798) (691 840) (1 482 667)
Operating profit 43 455 200 014 314 237
Fair value gains/(losses) 228 383 (109 628) (61 943)
Exceptional items 36 956 (4 273) 2 466
Share of profits of associates
and joint venture 6 681 16 215 (4 786)
Profit before net finance costs 315 475 102 328 249 974
Income from investments 11 434 10 227 24 090
Finance costs (46 155) (113 020) (159 674)
Outside unit holders` interest (168) - (784)
Net profit before taxation 280 586 (465) 113 606
Taxation (51 596) 353 104 297 659
Profit for the period 228 990 352 639 411 265
Other comprehensive income
Net value gain on
available-for-sale financial asset - - 3 202
Total comprehensive income
for the period 228 990 352 639 414 467
Profit attributable to:
Equity holders of the parent 216 621 349 684 411 457
Non-controlling interests 12 369 2 955 (192)
228 990 352 639 411 265
Total comprehensive income
attributable to:
Equity holders of the parent 216 621 349 684 413 280
Non-controlling interests 12 369 2 955 1 187
228 990 352 639 414 467
Earnings per share (cents)
Basic 88,8 146,3 171,1
Diluted 76,1 146,3 146,9
Condensed Group Statement of Financial Position
Restated
Unaudited Unaudited Audited
30 June 30 June 31 Dec
R`000 2011 2010 2010
ASSETS
Non-current assets 2 618 108 2 024 792 2 360 786
Property, plant, equipment and
vehicles and intangible assets 296 354 313 058 306 401
Goodwill and other
intangible assets 187 655 196 863 186 269
Deferred acquisition costs 34 571 30 103 39 468
Investments in associate and
joint venture companies 292 236 297 401 284 233
Investments 1 793 845 1 185 039 1 541 021
Deferred taxation 13 447 2 328 3 394
Current assets 1 249 347 2 940 541 1 259 044
Inventories 192 235 205 328 193 412
Trade and other receivables 442 804 382 755 472 734
Reinsurance contracts 446 269 359 292 400 476
Taxation 5 352 3 388 8 085
Cash and cash equivalents 162 687 391 535 184 337
1 249 347 1 342 298 1 259 044
Non-current asset classified
as held for distribution
to equity holders - 1 485 705 -
Non-current asset classified
as held for sale - 112 538 -
TOTAL ASSETS 3 867 455 4 965 333 3 619 830
EQUITY AND LIABILITIES
Capital and reserves 1 870 143 2 848 574 1 673 122
Share capital 45 45 45
Capital reserves 311 811 272 005 304 322
Revaluation reserves 8 576 6 753 8 576
Changes in ownership (11 839) - (11 839)
Retained earnings 1 443 113 2 464 222 1 269 342
Attributable to equity holders
of the parent 1 751 706 2 743 025 1 570 446
Non-controlling interests 118 437 105 549 102 676
Non-current liabilities 1 023 913 946 323 954 467
Long-term interest bearing
borrowings 724 508 725 799 705 710
Long-term provisions 19 451 18 894 19 451
Deferred taxation 279 954 201 630 229 306
Current liabilities 973 399 1 170 436 992 241
Short-term interest bearing
borrowings 82 598 364 498 99 288
Bank overdrafts 11 845 14 734 13 553
Trade payables 230 064 243 010 226 269
Other payables 38 218 68 516 57 228
Insurance contracts 576 512 465 434 563 649
Outside unit holders` interest 11 895 - 10 609
Short-term provisions 18 952 13 727 14 743
Taxation 3 315 517 6 902
TOTAL EQUITY AND LIABILITIES 3 867 455 4 965 333 3 619 830
NAV per share (cents) 718,3 1 133,5 643,9
Shares in issue at end of
period (000`s) 243 857 241 995 243 891
Condensed Group Statement of Cash Flows
Restated
Unaudited Unaudited Audited
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 Dec
R`000 2011 2010 2010
Operating activities
Net attributable profit 228 990 352 639 411 265
Adjustments for non-cash items (137 838) (302 663) (299 032)
Operating cash flows before
movements in working capital 91 152 49 976 112 233
Decrease/(increase) in inventories 1 177 (14 069) (4 881)
Decrease/(increase) in trade
and other receivables 29 930 20 868 (74 124)
Increase/(decrease) in outside
unit holders` interest 1 286 - (10 721)
(Increase)/decrease in trade
and other payables (15 215) 13 569 12 277
Net (increase)/decrease in
reinsurance contracts (45 793) 129 347 88 162
Net decrease/(increase) in
deferred acquisition costs 4 897 6 133 (3 232)
Net decrease/(increase) in
insurance contracts 12 863 (162 695) (64 480)
Cash generated from operations 80 297 43 129 55 234
Income taxes paid (11 855) (9 905) (36 704)
Finance costs (22 698) (95 345) (128 824)
Net cash from/(used in)
operating activities 45 744 (62 121) (110 294)
Investing activities
Interest received 11 434 10 410 24 090
Dividends received from
associates and joint venture 13 782 3 826 38 767
Dividends received from
other equity investments 20 829 181 344 246 314
Proceeds on disposal of property,
plant, equipment and vehicles 22 588 1 062
Acquisition of property, plant,
equipment and vehicles (20 631) (14 874) (46 390)
Acquisition of businesses (10 500) - (30 034)
Net (acquisition)/disposal
of investments (26 012) 554 622 611 776
Net cash (used in)/from
investing activities (11 076) 735 916 845 585
Financing activities
Dividends paid (36 553) (63 654) (80 401)
Repayments of borrowings (67 632) (489 826) (913 116)
Loans raised 49 675 70 000 203 064
Shares repurchased (100) (26 702) (9 722)
Proceeds on issue of shares - 16 829 29 139
Issue of shares by subsidiary - - 10 170
Decrease in bank overdrafts (1 708) (3 140) (4 321)
Net cash used in financing
activities (56 318) (496 493) (765 187)
Net (decrease)/increase in cash
and cash equivalents (21 650) 177 302 (29 896)
Cash and cash equivalents
at beginning of period 184 337 214 233 214 233
Cash and cash equivalents
at end of period
Bank balances and cash 162 687 391 535 184 337
Condensed Group Statement of Changes in Equity
Share Capital Revaluation
R`000 capital reserves reserves
Balance at 1 January 2010 - audited 43 262 506 6 753
Attributable profit for the year
ended 31 December 2010 - - -
Other comprehensive income - - 1 823
Total comprehensive income - - 1 823
Recognition of share-based payments - 6 531 -
Dividend paid - - -
Non-controlling interest acquired - - -
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 2010 - audited 45 304 322 8 576
Attributable profit for the
six months ended 30 June 2011 - - -
Dividend paid - - -
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends - - -
Treasury shares acquired - (100) -
Transfer to statutory contingency reserve - 6 297 -
Share of non-distributable reserves
of associate transferred
directly to equity - 1 292 -
Balance at 30 June 2011 - unaudited 45 311 811 8 576
1 January 2010 to 30 June 2010
Balance at 1 January 2010 - audited 43 262 506 6 753
Attributable profit for the six
months ended 30 June 2010 - - -
Recognition of share-based payments - 316 -
Dividend paid - - -
Issue of share capital 2 33 181 -
Treasury shares acquired - (26 702) -
Transfer current year share of
non-distributable reserve of associate - 2 020 -
Share of non-distributable reserves
of associate transferred
directly to equity - 684 -
Balance at 30 June 2010 - unaudited 45 272 005 6 753
Condensed Group Statement of Changes in Equity
Attributable
to equity
holders
Changes in Retained of the
R`000 ownership earnings parent
Balance at 1 January 2010 - audited - 2 196 566 2 465 868
Attributable profit for the
year ended 31 December 2010 - 411 457 411 457
Other comprehensive income - - 1 823
Total comprehensive income - 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) - (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 2010 - audited (11 839) 1 269 342 1 570 446
Attributable profit for the
six months ended 30 June 2011 - 216 621 216 621
Dividend paid - (36 553) (36 553)
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends - - -
Treasury shares acquired - - (100)
Transfer to statutory
contingency reserve - (6 297) -
Share of non-distributable reserves
of associate transferred
directly to equity - - 1 292
Balance at 30 June 2011 - unaudited (11 839) 1 443 113 1 751 706
1 January 2010 to 30 June 2010
Balance at 1 January 2010 - audited - 2 196 566 2 465 868
Attributable profit for the
six months ended 30 June 2010 - 349 684 349 684
Recognition of share-based payments - - 316
Dividend paid - (80 008) (80 008)
Issue of share capital - - 33 183
Treasury shares acquired - - (26 702)
Transfer current year share of
non-distributable reserve of associate - (2 020) -
Share of non-distributable reserves of
associate transferred directly to equity - - 684
Balance at 30 June 2010 - unaudited - 2 464 222 2 743 025
Condensed Group Statement of Changes in Equity
Non-
controlling
R`000 interests Total
Balance at 1 January 2010 - audited 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 2010 - audited 102 676 1 673 122
Attributable profit for the
six months ended 30 June 2011 12 369 228 990
Dividend paid - (36 553)
Issue by subsidiary of ordinary
and preference share capital and
accrued preference dividends 3 392 3 392
Treasury shares acquired - (100)
Transfer to statutory contingency reserve - -
Share of non-distributable reserves
of associate transferred
directly to equity - 1 292
Balance at 30 June 2011 - unaudited 118 437 1 870 143
1 January 2010 to 30 June 2010
Balance at 1 January 2010 - audited 102 594 2 568 462
Attributable profit for the
six months ended 30 June 2010 2 955 352 639
Recognition of share-based payments - 316
Dividend paid - (80 008)
Issue of share capital - 33 183
Treasury shares acquired - (26 702)
Transfer current year share of
non-distributable reserve of associate - -
Share of non-distributable reserves
of associate transferred
directly to equity - 684
Balance at 30 June 2010 - unaudited 105 549 2 848 574
Segmental information for the six months ended 30 June 2011
Headline
Profit from (loss)/
Revenue operations profit Assets Liabilities
Fishing 451 723 23 556 (8 408) 883 340 587 304
Insurance 302 534 11 638 14 759 932 862 738 370
Clothing 81 649 3 169 1 384 144 255 55 936
Investment
management 38 347 5 092 190 178 1 906 998 615 702
Total 874 253 43 455 197 913 3 867 455 1 997 312
Headline Earnings per Share
Unaudited Unaudited Audited
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
Headline earnings per share (cents)
Basic 81,2 149,0 172,7
Diluted 69,5 149,0 148,3
Headline earnings calculation
Net profit attributable to equity
holders of the parent 216 621 349 684 411 457
Loss/(profit) on disposal of
property, plant, equipment
and vehicles 9 (474) (431)
Realised profit on disposal
of associate (21 557) - (10 820)
Impairment of investment
in associate - 4 684 8 316
Adjustments relating to
results of associates - - 2 214
Total tax effects of adjustments 2 840 2 275 4 682
Headline earnings 197 913 356 169 415 418
Weighted average number of shares
on which earnings per share
is based (000`s) 243 862 239 065 240 500
Weighted average number of shares
on which diluted earnings per
share is based (000`s) 284 609 239 065 280 125
Commentary
Brimstone reported a satisfactory set of results for the six months ended 30
June 2011, following the unlocking of significant value through the unbundling
and realisation of a portion of its investment in Life Healthcare (LHC) in the
previous financial year.
Headline earnings of R198 million was down 44% on the previous period`s R356
million, partially due to the LHC transactions. Consequently, headline earnings
per share decreased to 81,2 cents from 149 cents.
Revenue of R874 million was reported for the period compared with R892 million
for the six months ended 30 June 2010. Sales and fee income from operating
divisions increased by 19% from R707 million for the six months ended 30 June
2010 to R840 million for the six months ended 30 June 2011. Dividend income
contracted to R35 million (2010: R185 million primarily as a result of the LHC
transactions). The Company managed to significantly reduce debt following the
LHC transactions, which reflects in a reduction in finance costs for the period
to R46 million (2010: R113 million).
Operating expenses increased in line with increased sales, with the operating
margin remaining consistent. Exceptional items relate to the finalisation of the
sale of the Company`s interest in Aon South Africa.
Significant fair value gains of R228 million (2010: fair value losses of R110
million) mainly from LHC and Nedbank contributed to a pre-tax profit of R280
million. A R52 million tax charge resulted in a profit for the period of R229
million, compared to a tax credit of R353 million in the previous period
relating to the LHC transactions, which included a reversal of a provision for
capital gains tax and recognition of secondary tax credits, relating to the LHC
transactions.
Total assets decreased to R3.87 billion (2010: R4.97 billion) due to the LHC
unbundling, consequently the overall net asset value (NAV) of the Company, was
lower at R1.75 billion (2010: R2.74 billion) at the reporting date.
A more appropriate comparison of the Company`s total assets and NAV would be
with the figures at 31 December 2010, as these reflect the effects of the LHC
transactions. Total assets for the review period of R3.87 billion and NAV of
R1.75 billion compare well with the R3.62 billion and R1.57 billion respectively
reported at 31 December 2010.
Results for the period
These results comply with IAS 34: Interim Financial Reporting. The accounting
policies and methods of computation used in the preparation of this report are
consistent with those used in the annual financial statements for the year ended
31 December 2010 which comply with the Companies Act of South Africa and
International Financial Reporting Standards; and are compliant with the Listings
Requirements of the JSE Limited.
Restated results
The results for the six months ended 30 June 2010 were restated as a result of:-
A change in the Company`s policy for accounting for jointly controlled entities
from the proportionate consolidation method to the equity accounting method.
- Finalisation of the initial accounting for the acquisition of Lion of Africa
Holdings, which was only provisionally determined at 31 December 2009,
subsequent to publishing the results at 30 June 2010.
There was no effect on the net asset value of the Company or basic earnings per
share and headline earnings per share for both adjustments.
Brimstone portfolio
Subsidiaries
Sea Harvest
Good fishing conditions were experienced throughout the first half of 2011. A
Total Allowable Catch increase of 10% for the industry was applied at the start
of this financial year. With the additional volumes revenue increased despite
the negative effect of the strong Rand against the Euro in particular. Volumes
through both the local and export markets grew and Sea Harvest maintained its
status as the leading frozen white fish supplier in South Africa. Margins fell
due to pressure on pricing and cost increases in respect of fuel and labour.
Good fishing conditions are expected to continue over the second half however
the volatility of the Rand and local cost inflation continue to place pressure
on the business.
House of Monatic
The industry remains under pressure due to competition from manufacturers in the
East and continued uncertainty surrounding global economic recovery. The
company`s refocus on core manufacturing is however proving successful which,
together with, current Production Incentives offered by government have resulted
in better production efficiencies and lower operational costs, which ultimately
aided the achievement of profitability.
Lion of Africa Insurance
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. It 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.
During the review period, gross written premiums grew strongly by 21.3% to
R371.7 million. Net written premiums showed similar growth by 30.2% to R233.9
million.
Net underwriting profit improved from R4 million for the first half of 2010 to
R11.2 million in the current review period. The company`s after tax earnings
improved to R14.6 million from R8.1 million in the comparative period.
Associates
Oceana
Oceana recorded good results across its operations in the first half of this
year, with the horse mackerel and canned fish business units the main
contributors.
From an inshore perspective, canned fish sales volumes on the domestic market
were higher as a result of significant promotional activity at the start of the
financial year as well as continuous availability of finished product from both
local and offshore suppliers.
Aon Re Africa
Aon Re Africa continues to be the leading reinsurance broker licensed and
operating in South Africa and the rest of Sub Saharan Africa. For the six months
ended 30 June 2011, total revenue dropped slightly compared to the same period
last year, mainly because of the loss of some accounts. Expenses reduced for the
comparable period.
The Scientific Group
During the review period, The Scientific Group`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 in the group (28%).
Investments
Life Healthcare
Brimstone retains a 5.5% interest in LHC. We remain confident of its prospects
and dividend flow.
Galaxy Gold Mining
During the review period Brimstone acquired an initial interest of 6% of the
ordinary shares in issue of Galaxy Gold, a South African gold mining and
exploration company, focused on exploitation of the Barberton Greenstone Belt.
Post the review period, Brimstone increased its stake to 10% of the ordinary
shares in issue of Galaxy Gold.
Rex Trueform and African & Overseas Enterprises (Queenspark)
The underlying business remains satisfactory with positive results expected from
the company.
MTN Zakhele
The mark-to-market value of the MTN Zakhele shares, accounted for as options,
has been independently valued at period end, based on a closing MTN share price
of R143.90 per share (31 December 2010: R134.42 per share).
Nedbank Group
The mark-to-market value of Brimstone`s rights to Nedbank shares, accounted for
as options, has been independently valued at period end, based on a closing
share price of R146.50 per share (31 December 2010: 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 at period end, based on a closing
share price of R14.41 per share (31 December 2010: R12.99 per share).
Tiger Brands
The mark-to-market value of Brimstone`s rights to Tiger Brands shares, accounted
for as options, has been independently valued at period end, based on a closing
share price of R197.50 per share (31 December 2010: R193.63 per share).
Intrinsic Net Asset Value
Intrinsic NAV at 30 June 2011 calculated on a line-by-line basis, is estimated
to be R2.02 billion or 827.8 cents per share. (2010: R2.9 billion or 1 186.7
cents per share). The decrease is mainly as a result of the LHC unbundling to
shareholders. The breakdown of Intrinsic NAV is available on the Company`s
website at www.brimstone.co.za
Dividend
In line with the Company`s policy to consider dividends only at year end, no
dividend is declared.
Prospects
Despite continued economic and political turmoil in international markets, we
remain cautiously optimistic of future prospects. 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.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-executive Chairman Chief Executive Officer
23 August 2011
Registered Office: Boundary Terraces, 1 Mariendahl Lane, Newlands 7700,
info@brimstone.co.za
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70'Marshall
Street, Johannesburg 2001
Sponsor: Nedbank Capital, 135 Rivonia Road, Sandton 2196
Directorate: Prof. GJ Gerwel (Chairman), F Robertson (Executive Deputy
Chairman)*, MA Brey (Chief Executive Officer)*, LZ Brozin (Financial)*, PL
Campher (Lead Independent), M Hewu, N Khan, MK Ndebele, Y Pahad, LA Parker, AA
Roberts, FD Roman * Executive
Date: 23/08/2011 07:06:16 Supplied by www.sharenet.co.za
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