Wrap Text
Unaudited results for the six months ended 30 June 2012
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 2012
Highlights
- Headline earnings increased by 140%
- INAV increased by 19% to R12.12 per share
- Total assets exceed R5 billion
Commentary
Brimstone reported excellent results for the half year. This was mainly due to the increase in value of marked-to-market assets as well as an increase in profitability from underlying operating businesses.
Headline earnings increased by 140% from the previous periods R197.9 million to R474.8 million. Basic headline earnings per share increased by 140% to 194.6 cents per share from 81.2 cents per share in the comparative period.
Net profit before taxation increased substantially to R697.3 million (30 June 2011: R280.6 million) because of fair value gains and an increase in profits from associates and subsidiaries. Profit for the period of R482.2 million increased by 111% on the R229 million reported for the six months ended 30 June 2011.
The taxation charge for the period increased by R66.5 million as a result of applying the new Capital Gains Tax inclusion rates effective 1 March 2012 when calculating the deferred Capital Gains Tax provision.
Total assets increased from R4.6 billion at 31 December 2011 to R5.2 billion at the end of the reporting period, principally as a result of the increased value of assets and the acquisition of stakes in Afena Capital and Taste Holdings. Net asset value increased from R2 billion at 31 December 2011 to R2.4 billion at the end of the review period.
Results for the period
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 and the requirements of the Companies Act of South Africa. 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 2011.
Issue of Shares
The following shares were issued during the period under review:
N Ordinary
30 March 2012
Share option scheme 248 360
Preparation
This announcement on Brimstone Investment Corporation Limiteds unaudited results for the six months ended 30 June 2012 has been prepared and supervised by LZ Brozin (Financial Director) B.Com B.Acc CA(SA) and M ODea (Chief Financial Officer) B.Com CA(SA).
Brimstone portfolio
SUBSIDIARIES
Sea Harvest
Demand for hake has been firm. This has been driven by less supply from Namibia and Argentina. Marginal price increases were experienced in traditional markets and considering the economic crisis in Europe, this was a pleasing performance. Exports to new markets are increasingly making inroads, with the MSC certification of the fishery being a differentiator in these markets.
Sea Harvest experienced declines in volumes in the local retail frozen fish segment, driven primarily by competitor discounting and new private label offerings. As a result, market leadership is changing on a monthly basis. The launch of the new Vegetable and Ready Meals brand, Findus, has positioned Sea Harvest in two new categories in the perishables segment, with good growth potential.
Gains from the slightly weaker Rand exchange rate relative to the Euro, Sea Harvests major trading currency, were offset by higher input costs such as fuel, electricity and water. Revenue increased in comparison to the first half of the 2011 financial year.
For the period under review lower volumes were caught compared to the six months ended 30 June 2011.
The company expects current trading and fishing conditions to remain stable for the second half of the financial year.
Lion of Africa
During the review period, softening market conditions and portfolio rightsizing resulted in gross written premiums contracting by 12.0% to R326.9 million, with net written premiums of R191.5 million trending similarly. The underwriting loss ratio improved from 63.1% in the prior period to 59.4% in the review period, with positive trends in both the property and motor classes.
Net underwriting profit decreased from R11.2 million for the six months to 30 June 2011 to R5.5 million in the reporting period. Significantly higher investment returns resulted in the companys after tax earnings increasing to R15.9 million from R14.6 million in the comparative six months. International Solvency remained solid at 41.5% compared to 45.4% at 31 December 2011.
Lion of Africa is the countrys largest Black-owned short-term insurer and has a zaA- South African national-scale rating from S&P and an A- claims paying ability rating from the GCR rating agency. It is also the first insurance company to achieve a Level 1 rating in terms of the B-BBEE Act.
House of Monatic
The companys renewed focus on core manufacturing yielded positive results during the reporting period. Government incentives have allowed the company to modernise parts of its manufacturing plant resulting in increased efficiencies and lower operational costs, making the business more competitive. House of Monatic successfully contracted to manufacture for another one of South Africas leading fashion brands in addition to increasing production for its regular customers.
ASSOCIATES
Oceana
Brimstone acquired a further 8.5 million shares in Oceana on 21 December 2011 increasing its effective holding to 20.12% (net of treasury shares). As a result of the acquisition being late in the previous financial year, Brimstone is for the first time including its share of profits of the associate at the increased shareholding level. Brimstone recorded satisfactory growth in equity accounted earnings during the period.
Oceana posted good results for their interim period with a 21% increase in headline earnings per share and earnings per share. An improved performance was reported across all operating divisions.
Aon Re Africa
During the period under review, Brimstone repaid the outstanding debt relating to this investment from dividends received from Aon Re. The investment is now cash flow positive.
Aon Re maintained its position as the leading reinsurance broker licensed and operating in South Africa and the rest of the continent. For the six months ended 30 June 2012, total revenue decreased by 5% compared to the same period last year, mainly because of market changes, increased competition, economic pressures on clients and an increase in the risk capacity of clients. While expenses remained flat, profit before tax decreased in line with lower revenue.
The Scientific Group
While trading conditions remain challenging, revenue increased modestly. Profitability has improved over the last quarter with some margin recovery along with strong management of operational costs. Working capital management improved significantly. The financial issues within the Department of Health and National Health Laboratory Services, which had a negative impact on sales and working capital, have also eased with the allocation of the new 2012/2013 budget but some arrear payments and delayed tenders and orders still remain.
Afena Capital
During the period under review, Brimstone acquired a 25.1% shareholding in Afena Capital, which is an investment management firm that offers specialist equity and balanced portfolios serving the South African institutional market. Established in November 2005 by founding partners Tebogo Naledi, Khaya Gobodo, Khulekani Dlamini and Andrew Joannou, Afena Capital had in excess of R20 billion of assets under management at 30 June 2012. The company contributed positively to Brimstones profit for the period.
INVESTMENTS
Life Healthcare
The market price of Life Healthcare increased from R20.64 per share at 31 December 2011 to R31.13 per share at 30 June 2012. This resulted in a revaluation of Brimstones investment in Life Healthcare of R598 million during the period under review. In addition, Brimstone received a dividend of 45 cents per share amounting to R25.7 million.
During the period under review, Life Healthcare acquired a 26% shareholding in Max Healthcare India for R823 million.
Nedbank
Brimstones rights to Nedbank shares, accounted for as options, have been revalued at period end. The independently calculated option valuation was based on a closing share price of R173.89 per share. The investment was revalued upwards by R84.2 million.
Old Mutual
Brimstones rights to Old Mutual plc shares, accounted for as options, have been revalued at period end, based on a closing share price of R19.50 per share. The investment was revalued downwards by R28 million.
MTN Zakhele
Brimstones MTN Zakhele shares, accounted for as options, have been revalued at period end. The independently calculated option valuation was based on a closing MTN share price of R140.92 per share. The investment was revalued downwards by R4 million.
Tiger Brands
Brimstones rights to Tiger Brands shares, accounted for as options, have been revalued at period end. The independently calculated option valuation was based on a closing share price of R244.99 per share. The investment was revalued downwards by R16.4 million.
Rex Trueform and African & Overseas Enterprises (Queenspark)
The market value of the shares held in Rex Trueform and African & Overseas grew by R5.3 million during the period under review.
Galaxy Gold
The company is currently experiencing operational challenges. The investment was revalued downwards by a further R32 million.
Taste Holdings
Taste Holdings is a management group invested in a portfolio of mostly franchised, category specialist and formula driven, quick service restaurants and retail brands including Maxis, Scooters Pizza, The Fish & Chip Co, NWJ and St Elmos. During the reporting period, Brimstone acquired 12.3% of Taste Holdings for an aggregate subscription price of R37 million. The investment was revalued upwards by R35 million.
Headline Earnings per Share
Unaudited Unaudited Audited
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 Dec
2012 2011 2011
Headline earnings per share (cents)
Basic 194.6 81.2 176.3
Diluted 166.1 69.5 151.0
Headline earnings calculation (R000)
Net profit attributable to equity
holders of the parent 478 688 216 621 450 751
(Profit)/loss on disposal of property,
plant, equipment and vehicles (106) 9 (459)
Realised profit on disposal of associate - (21 557) (21 130)
Impairment of investment in associate 5 858 - 428
Adjustments relating to results
of associates (9 663) - -
Total tax effects of adjustments 51 2 840 293
Headline earnings 474 828 197 913 429 883
Weighted average number of shares
on which earnings and headline
earnings per share is based (000s) 243 947 243 862 243 878
Weighted average number of shares
on which diluted earnings and
diluted headline earnings
per share is based (000s) 285 815 284 609 284 673
Intrinsic Net Asset Value (INAV)
Change
Unaudited Unaudited since
30 June 31 Dec 31 Dec
2012 2011 2011
INAV of Brimstone (Rm) 2 964.0 2 491.8 19.0%
INAV per share (cents) 1 212.3 1 019.7 18.9%
Fully diluted INAV per share (cents) 1 153.0 980.6 17.6%
Market price per share (cents)
Ordinary shares 990 1 000 (1.0%)
N Ordinary shares 984 820 20.0%
Discount to INAV
Ordinary shares 18.3% 1.9%
N Ordinary shares 18.8% 19.6%
The breakdown of INAV is available on the companys website at www.brimstone.co.za
Subsequent events
During July 2012, Brimstone disposed of 4 500 000 Life Healthcare ordinary shares at an average price of R31.02 per share on the open market. The gross sale consideration was R139.6 million and Brimstones shareholding in Life Healthcare decreased from 5.47% to 5.04%.
Dividend
No interim dividend is declared.
Prospects
Brimstone is well capitalised and has unutilised credit lines to pursue value enhancing transactions. Brimstones investment criteria of quality assets, strong cash flows and socially responsible policies remain unchanged.
Board of Directors
Shareholders are referred to the announcement released on SENS on 21 May 2012 and are further advised of the retirement of Messrs Y Pahad and AA Roberts as independent non-executive directors of the company.
There were no further changes to the board during the period.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-executive Chairman Chief Executive Officer
23 August 2012
Directorate and Administration
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, Website: www.brimstone.co.za
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^°, LA Parker^°, FD Roman^°
^Non-Executive, ºIndependent, Executive,
Condensed Group Statement of Comprehensive Income
Unaudited Unaudited Audited
6 Months 6 Months Year ended
ended ended ended
30 June 30 June 31 Dec
R000 2012 2011 2011
Revenue 952 356 874 253 1 867 915
Sales and fee income 895 372 839 642 1 759 846
Dividends received 56 984 34 611 108 069
Operating expenses (877 844) (830 798) (1 735 292)
Operating profit 74 512 43 455 132 623
Fair value gains 653 774 228 383 476 858
Exceptional items (6 036) 36 956 36 441
Share of profits of associates
and joint venture 30 840 6 681 22 057
Profit before net finance costs 753 090 315 475 667 979
Income from investments 12 081 11 434 23 735
Finance costs (65 773) (46 155) (93 345)
Outside unit holders interest (2 148) (168) (475)
Net profit before taxation 697 250 280 586 597 894
Taxation (215 040) (51 596) (129 093)
Profit for the period 482 210 228 990 468 801
Other comprehensive income, net of tax (3 918) - 13 211
Cash flow hedges
(Loss)/gain arising during the period (3 918) - 10 974
Net value gain on available-for-sale
financial asset - - 2 237
Total comprehensive income for
the period 478 292 228 990 482 012
Profit attributable to:
Equity holders of the parent 478 688 216 621 450 751
Non-controlling interests 3 522 12 369 18 050
482 210 228 990 468 801
Total comprehensive income attributable to:
Equity holders of the parent 476 411 216 621 458 427
Non-controlling interests 1 881 12 369 23 585
478 292 228 990 482 012
Earnings per share (cents)
Basic 196.2 88.8 184.8
Diluted 167.5 76.1 158.3
Condensed Group Statement of Financial Position
Unaudited Unaudited Audited
30 June 30 June 31 Dec
R000 2012 2011 2011
ASSETS
Non-current assets 4 033 731 2 618 108 3 310 127
Property, plant, equipment
and vehicles 265 321 296 354 285 665
Goodwill and other intangible assets 161 927 187 655 170 370
Deferred acquisition costs 30 862 34 571 39 610
Investments in associate and joint
venture companies 769 972 292 236 697 299
Investments 2 803 321 1 793 845 2 114 843
Deferred taxation 2 328 13 447 2 340
Current assets 1 198 306 1 249 347 1 294 677
Inventories 246 518 192 235 226 803
Trade and other receivables 445 995 442 804 482 113
Reinsurance contracts 369 497 446 269 443 028
Taxation 2 381 5 352 1 685
Cash and cash equivalents 133 915 162 687 141 048
TOTAL ASSETS 5 232 037 3 867 455 4 604 804
EQUITY AND LIABILITIES
Capital and reserves 2 555 071 1 870 143 2 113 630
Share capital 45 45 45
Capital reserves 302 536 311 811 316 904
Revaluation reserves 9 876 8 576 9 876
Cash flow hedging reserve 4 099 - 6 376
Changes in ownership (11 839) (11 839) (11 839)
Retained earnings 2 131 872 1 443 113 1 677 390
Attributable to equity holders
of the parent 2 436 589 1 751 706 1 998 752
Non-controlling interests 118 482 118 437 114 878
Non-current liabilities 1 664 246 1 023 913 1 405 021
Long-term interest bearing borrowings 1 110 715 724 508 1 050 295
Long-term provisions 20 169 19 451 20 169
Deferred taxation 533 362 279 954 334 557
Current liabilities 1 012 720 973 399 1 086 153
Short-term interest bearing borrowings 95 395 82 598 130 581
Bank overdrafts 35 776 11 845 13 363
Trade payables 298 465 230 064 225 287
Other payables 64 070 38 218 78 053
Insurance contracts 480 360 576 512 606 077
Outside unit holders interest 12 118 11 895 10 660
Short-term provisions 15 302 18 952 18 183
Taxation 11 234 3 315 3 949
TOTAL EQUITY AND LIABILITIES 5 232 037 3 867 455 4 604 804
NAV per share (cents) 998.6 718.3 819.6
Shares in issue at end of
period (000s) 243 994 243 857 243 874
Condensed Group Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months Year ended
30 June 30 June 31 Dec
R000 2012 2011 2011
Operating activities
Net attributable profit 482 210 228 990 468 801
Adjustments for non-cash items (425 738) (137 838) (343 310)
Operating cash flows before
movements in working capital 56 472 91 152 125 491
(Increase)/decrease in inventories (19 715) 1 177 (32 692)
Decrease in trade and other receivables 36 118 29 930 5 862
Increase in outside unit holders
interest 1 458 1 286 51
Increase/(decrease) in trade and
other payables 59 195 (15 215) 10 218
Net decrease/(increase) in
reinsurance contracts 73 531 (45 793) (42 552)
Net decrease/(increase) in deferred
acquisition costs 8 748 4 897 (142)
Net (decrease)/increase in insurance
contracts (125 717) 12 863 42 428
Cash generated from operations 90 090 80 297 108 664
Income taxes paid (8 156) (11 855) (24 168)
Finance costs (24 669) (22 698) (81 197)
Net cash from operating activities 57 265 45 744 3 299
Investing activities
Interest received 12 081 11 434 23 735
Dividends received from associates
and joint venture 22 109 13 782 47 068
Dividends received from other
equity investments 34 875 20 829 61 001
Proceeds on disposal of property,
plant, equipment and vehicles 140 22 497
Acquisition of property, plant,
equipment and vehicles (15 781) (20 631) (44 868)
Acquisition of businesses (290) (10 500) -
Acquisition of intangible assets - - (2 886)
Net acquisition of investments (81 814) (26 012) (446 631)
Net cash used in investing activities (28 680) (11 076) (362 084)
Financing activities
Dividend paid (44 729) (36 553) (49 412)
Repayments of borrowings (89 705) (67 632) (219 812)
Loans raised 76 398 49 675 590 000
Shares repurchased (1 465) (100) (107)
Proceeds on issue of shares 1 370 - -
Shares repurchased by subsidiaries - - (4 983)
Increase/(decrease) in bank overdrafts 22 413 (1 708) (190)
Net cash (used in)/from financing
activities (35 718) (56 318) 315 496
Net decrease in cash and cash
equivalents (7 133) (21 650) (43 289)
Cash and cash equivalents at
beginning of period 141 048 184 337 184 337
Cash and cash equivalents at end
of period
Bank balances and cash 133 915 162 687 141 048
Condensed Group Statement of Changes in Equity
Share Capital Revaluation
R000 capital reserves reserves
Balance at 1 January 2011 Audited 45 304 322 8 576
Attributable profit for the year
ended 31 December 2011 - - -
Other comprehensive income - - 1 300
Total comprehensive income - - 1 300
Recognition of share-based payments - 3 723 -
Dividend paid - - -
Subsidiarys accrual for preference
dividends and repurchase of shares - - -
Treasury shares acquired - (107) -
Transfer to statutory contingency reserve - 6 149 -
Share of non-distributable reserves of
associate transferred directly to equity - 2 817 -
Balance at 31 December 2011 Audited 45 316 904 9 876
Attributable profit for the six
months ended 30 June 2012 - - -
Other comprehensive income - - -
Total comprehensive income - - -
Recognition of share-based payments - 4 874 -
Dividend paid - - -
Subsidiarys accrual for preference
dividends and repurchase of shares - - -
Issue of share capital - 1 370 -
Treasury shares acquired - (1 465) -
Transfer from statutory contingency reserve - (19 683) -
Share of non-distributable reserves of
associate transferred directly to equity - 536 -
Balance at 30 June 2012 Unaudited 45 302 536 9 876
1 January 2011 to 30 June 2011
Balance at 1 January 2011 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 current year share of
non-distributable reserve of associate - 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
Condensed Group Statement of Changes in Equity
Cash
flow Changes
hedging in Retained
R000 reserve ownership earnings
Balance at 1 January 2011 Audited - (11 839) 1 269 342
Attributable profit for the year
ended 31 December 2011 - - 450 751
Other comprehensive income 6 376 - -
Total comprehensive income 6 376 - 450 751
Recognition of share-based payments - - -
Dividend paid - - (36 554)
Subsidiarys accrual for preference
dividends and repurchase of shares - - -
Treasury shares acquired - - -
Transfer to statutory contingency reserve - - (6 149)
Share of non-distributable reserves of
associate transferred directly to equity - - -
Balance at 31 December 2011 Audited 6 376 (11 839) 1 677 390
Attributable profit for the six
months ended 30 June 2012 - - 478 688
Other comprehensive income (2 277) - -
Total comprehensive income (2 277) - 478 688
Recognition of share-based payments - - -
Dividend paid - - (43 889)
Subsidiarys accrual for preference
dividends and repurchase of shares - - -
Issue of share capital - - -
Treasury shares acquired - - -
Transfer from statutory contingency reserve - - 19 683
Share of non-distributable reserves of
associate transferred directly to equity - - -
Balance at 30 June 2012 Unaudited 4 099 (11 839) 2 131 872
1 January 2011 to 30 June 2011
Balance at 1 January 2011 Audited - (11 839) 1 269 342
Attributable profit for the six
months ended 30 June 2011 - - 216 621
Dividend paid - - (36 553)
Issue by subsidiary of ordinary and
preference share capital and accrued
preference dividends - - -
Treasury shares acquired - - -
Transfer current year share of
non-distributable reserve of associate - - (6 297)
Share of non-distributable reserves of
associate transferred directly to equity - - -
Balance at 30 June 2011 Unaudited - (11 839) 1 443 113
Condensed Group Statement of Changes in Equity
Attributable
to equity
holders Non-
of the controlling
R000 parent interests Total
Balance at 1 January 2011 Audited 1 570 446 102 676 1 673 122
Attributable profit for the year
ended 31 December 2011 450 751 18 050 468 801
Other comprehensive income 7 676 5 535 13 211
Total comprehensive income 458 427 23 585 482 012
Recognition of share-based payments 3 723 - 3 723
Dividend paid (36 554) (12 858) (49 412)
Subsidiarys accrual for preference
dividends and repurchase of shares - 1 475 1 475
Treasury shares acquired (107) - (107)
Transfer to statutory
contingency reserve - - -
Share of non-distributable
reserves of associate transferred
directly to equity 2 817 - 2 817
Balance at 31 December 2011 Audited 1 998 752 114 878 2 113 630
Attributable profit for the six
months ended 30 June 2012 478 688 3 522 482 210
Other comprehensive income (2 277) (1 641) (3 918)
Total comprehensive income 476 411 1 881 478 292
Recognition of share-based payments 4 874 - 4 874
Dividend paid (43 889) (840) (44 729)
Subsidiarys accrual for preference
dividends and repurchase of shares - 2 563 2 563
Issue of share capital 1 370 - 1 370
Treasury shares acquired (1 465) - (1 465)
Transfer from statutory
contingency reserve - - -
Share of non-distributable
reserves of associate transferred
directly to equity 536 - 536
Balance at 30 June 2012 Unaudited 2 436 589 118 482 2 555 071
1 January 2011 to 30 June 2011
Balance at 1 January 2011 Audited 1 570 446 102 676 1 673 122
Attributable profit for the six
months ended 30 June 2011 216 621 12 369 228 990
Dividend paid (36 553) - (36 553)
Issue by subsidiary of ordinary and
preference share capital and accrued
preference dividends - 3 392 3 392
Treasury shares acquired (100) - (100)
Transfer current year share of
non-distributable reserve of associate - - -
Share of non-distributable
reserves of associate transferred
directly to equity 1 292 - 1 292
Balance at 30 June 2011 Unaudited 1 751 706 118 437 1 870 143
Segmental information for the six months ended 30 June 2012
Profit from Headline
R000 Revenue Operations Profit Assets Liabilities
Fishing 530 026 43 898 3 306 922 468 583 655
Insurance 278 482 16 893 15 907 843 304 639 149
Clothing 87 279 3 839 2 119 155 854 59 166
Investment
management 56 569 9 882 453 496 3 310 411 1 394 996
Total
Unaudited 952 356 74 512 474 828 5 232 037 2 676 966
Date: 23/08/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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