Wrap Text
Reviewed results for the year ended 31 December 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)
Reviewed results for the year ended 31 December 2012
Highlights
Total assets increased by R1.1 billion to R5.7 billion
INAV growth of 44%
NAV up R816 million to R2.8 billion
Net profit before tax increased to R1.1 billion
HEPS increased by 96%
Dividend 25 cents per share
Commentary
Brimstone reported significantly improved results for the year under review.
Headline earnings increased by 96% to R844.4 million from the prior years R429.9 million. Basic headline earnings per share increased to 346.0 cents from 176.3 cents in 2011.
Profit for the year of R842.1 million was up 80% on the previous years R468.8 million. Return on average equity increased to 35.2% from 25.7% in the previous year.
Net profit before taxation increased to R1.1 billion in the current year from R598 million in 2011.
Total assets increased to R5.7 billion in the year under review from R4.6 billion in 2011.
Net asset value of R2.8 billion for the current year compares well with the R2.0 billion reported in the comparative year. Intrinsic Net Asset Value (INAV) was up by 44% from the previous year to R3.6 billion.
Auditors review report
The condensed provisional financial information for the year ended 31 December 2012 has been reviewed by the Groups 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. The auditors unmodified review report does not necessarily cover all the information in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors work they should obtain a copy of that report together with the accompanying financial information from the registered office of the Company. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Companys auditors.
Basis of preparation
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 SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, 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. The condensed financial information was prepared under the supervision of the Group financial director, LZ Brozin, BCom BAcc CA(SA).
Issue of shares
The following shares were issued during the year under review:
N Ordinary
30 March 2012
Share option scheme 248 360
Brimstone Portfolio
SUBSIDIARIES
Sea Harvest
The total allowable catch for hake increased by 10% in 2012 and Sea Harvests quota was increased commensurately. Overall catch rates were approximately 20% lower than those experienced in the previous year. The good fishing conditions experienced in 2011 became sporadic in the first half of 2012 and deteriorated during the second half.
Sea Harvest suffered an unprotected strike in August 2012 and as a result approximately 5 weeks production was lost.
On the local market, Sea Harvest maintained its status as the leading retail brand in frozen fish and increased market share. The expansion into other export markets has been successful and sales volumes are bedding down well. Good demand in serviced markets has enabled price increases despite the continuing global financial crisis.
The weaker exchange rate and recovering global demand for hake should result in an improved performance in 2013 provided catch rates remain reasonable.
Lion of Africa Holdings
Lion of Africa is the countrys largest black-owned short-term insurer and has recently received an A(za) stable credit rating from the Standard & Poors rating agency with an endorsement on the organisations claims paying ability.
Gross written premiums reduced by 2.2%, to R823.0 million from R841.9 million in the prior year. Net written premiums decreased by 9.4%, from R552.1 million in the previous year to R500.0 million in the year under review.
The underwriting result before expenses improved by 2.3% and coupled with strong net investment returns the net profit before tax for the year was R23.3 million compared to R28.3 million in the previous year.
The net operating profit after tax for the year under review dropped by 7.7% from R22.1 million in 2011 to R20.4 million in 2012. Lion of Africa was able to report a net loss ratio of 60%, an improvement from 60.9% in the prior year.
House of Monatic
House of Monatics turnover increased by 7.2% to R174 million whilst net profit grew by 28.8% to R4.9 million. Employment levels have stabilised at around 750 staff.
Department of Trade and Industry incentives will continue to enable House of Monatic to expand and modernise its plant.
ASSOCIATES
Oceana
Oceana recorded good results for the year under review with operating profit before abnormal items increasing by 39%. Improved results were achieved by each of the business segments on the back of 27% higher turnover. The canned fish business performed particularly well and together with the turnaround in the fishmeal operation was the main contributor to the rise in profit.
Basic headline earnings per share for the year ended 30 September 2012 increased by 37% compared to the previous year and basic earnings per share increased by 33%. The company declared total dividends of 301 cents per share for the year, an increase of 37% on 2011.
The group remains well positioned to take advantage of opportunities for further organic and acquisitive growth.
Oceana contributed significantly to Brimstones dividends received and equity accounted earnings for the year.
Aon Re Africa
Aon Re Africa (Pty) Ltd, trading as Aon Benfield, continues to be the leading reinsurance broker licensed and operating in South Africa and the rest of the continent. Brimstone received dividends from Aon Re Africa which were utilised to settle the outstanding debt on this investment.
The Scientific Group
Trading conditions remain challenging and turnover was negatively impacted by the lack of new capital equipment sales driven by the current economic conditions. Profitability was negatively impacted by continued margin pressure and the depreciation of the Rand but strong control of costs saw profitability improve modestly. Brimstone believes that The Scientific Group is well positioned to benefit from the implementation of the governments health insurance program rollout over the coming years.
INVESTMENTS
Life Healthcare
Life Healthcare delivered strong financial results on the back of continued growth and improved operational efficiencies. Group revenue increased by 11.5% to R10.9 billion (2011: R9.8 billion).
Life Healthcare entered the fast growing Indian healthcare market in January 2012 following an acquisition of a 26% stake in Max Healthcare Institute Limited, India.
During July 2012, Brimstone disposed of 4 500 000 Life Healthcare ordinary shares at an average price of R31.04 per share on the open market, for a total consideration of R139.6 million. Brimstone received dividends of R57.2 million during the year. The share bid price at year end was R33.70.
Brimstone remains one of the largest shareholders of Life Healthcare.
Taste Holdings
In January 2012, Brimstone acquired 24 million shares in Taste Holdings Limited at R1.54 per share. Brimstone purchased a further 540 000 shares at ruling market prices during the year. Brimstone received a dividend of R0.96 million during the year.
The acquisition of The Fish & Chips Company has now been fully integrated into Taste. The group remains well positioned and focused on improving franchisee profitability and bedding down its warehousing and distribution business over the short term.
Nedbank
Brimstones rights to Nedbank shares, accounted for as options, have been revalued at year end. This independently calculated option valuation was based on a closing price of R188.00 per share (2011: R145.00 per share).
Old Mutual plc
Brimstones rights to Old Mutual plc shares, accounted for as options, have been revalued at year end, based on a closing price of R24.49 per share (2011: R17.04 per share).
MTN Zakhele
Brimstones MTN Zakhele shares, accounted for as options, have been revalued at year end. The independently calculated option valuation was based on a closing MTN share price of R177.60 per share (2011: R143.72 per share).
Tiger Brands
Brimstones rights to Tiger Brands shares, accounted for as options, have been revalued at year end. The independently calculated option valuation was based on a closing share price of R325.25 per share (2011: R250.88 per share).
Rex Trueform and African & Overseas Enterprises (Queenspark)
The market value of shares held in Rex Trueform and African & Overseas grew by R6.6 million during the year under review.
Galaxy Gold
Galaxy Gold is a junior South African gold mining and exploration company, focused on exploitation of the Barberton Greenstone Belt. Brimstone holds 10% of the ordinary shares in the company. This investment has been written down to its fair value.
Afena Capital
Afena Capital is an investment management firm that offers specialist equity and balanced portfolios serving the South African institutional market. Brimstone acquired a 25.1% interest in the company during the year under review.
Intrinsic Net Asset Value
INAV at 31 December 2012 calculated on a line-by-line basis, totalled R3.6 billion, or R14.74 per share (2011: R2.5 billion or R10.20 per share), representing an increase of 44% from 2011. On a fully diluted basis INAV per share is R13.99 or an increase of 43% on the R9.81 reported in 2011. This is mainly as a result of increases in the market valuation of Life Healthcare and Oceana shares. Some of the option valuations, particularly that of Tiger Brands, increased.
As at 31 December 2012, Brimstone ordinary shares were trading at a discount of 23.7% to intrinsic net asset value (2011: 1.9%). Brimstone N ordinary shares traded at a discount of 18.9% to the Groups intrinsic net asset value (2011: 19.6%).
Capital commitments
The Group has commitments for the acquisition of capital items amounting to R33 million (2011: R21.8 million) to be funded from internal cash resources.
Subsequent events
There are no significant subsequent events affecting these results.
Prospects
Brimstone remains well capitalised to pursue value enhancing transactions based on cash generative quality assets. Management is cognisant of the markets current high earnings multiples and will continue its prudent consideration of investment opportunities.
Dividend
Brimstones board has declared a final dividend of 25 cents per share for the year ended 31 December 2012, payable on 22 April 2013. The dividend has been declared out of income reserves.
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, 12 April 2013. The dividend is payable to all shareholders of Brimstone recorded in the books of the Company at the close of business on Friday, 19 April 2013. Shares will commence trading ex-dividend from Monday, 15 April 2013. Shares may not be rematerialised or dematerialised from Monday, 15 April 2013 to Friday, 19 April 2013, both days inclusive.
The dividend is subject to dividend withholding tax at 15%. In determining dividend withholding tax, secondary tax on companies (STC) credits must be taken into account. Brimstone has sufficient STC credits to cover the dividend withholding tax and the STC credits utilised as part of this declaration amount to R68 590 925 being 25 cents per share, and consequently no dividend withholding tax is payable by shareholders who are normally not exempt from dividend withholding tax. All shareholders will receive the dividend of 25 cents per share.
The number of Brimstone ordinary and N ordinary shares eligible for dividends at the date of this declaration is 46 775 135 and 227 588 564 respectively (this excludes 39 140 000 N ordinary shares held by The Brimstone Black Executives Investment Trust, The Brimstone General Staff Investment Trust and The Brimstone Broad-Based BEE Trust which are not eligible to receive dividends) and the companys tax reference number is 9397002719.
Tribute
Brimstone remembers its former chairman, Prof Jakes Gerwel, who sadly passed away in November 2012. The Company will strive to remain true to the vision of this immense leader and visionary, whose guidance and wisdom was invaluable in establishing and nurturing Brimstone.
On behalf of the board
F. Robertson M.A. Brey
Executive Chairman Chief Executive Officer
5 March 2013
Condensed Group Statement of Comprehensive Income
Reviewed Audited
Year ended Year ended
31 Dec 31 Dec
R000 2012 2011
Revenue 1 946 472 1 867 915
Sales and fee income 1 795 026 1 759 846
Dividends received 151 446 108 069
Operating expenses (1 815 434) (1 735 292)
Operating profit 131 038 132 623
Fair value gains 1 053 311 476 858
Exceptional items (2 280) 36 441
Share of profits of associates and joint venture 27 612 22 057
Profit before net finance costs 1 209 681 667 979
Income from investments 26 410 23 735
Finance costs (131 597) (93 345)
Outside unit holders interest (1 357) (475)
Net profit before taxation 1 103 137 597 894
Taxation (261 021) (129 093)
Profit for the year 842 116 468 801
Other comprehensive income, net of tax (3 938) 13 211
Cash flow hedges
(Loss)/gain arising during the year (11 606) 10 974
Net value gain on available-for-sale financial asset 7 668 2 237
Total comprehensive income for the year 838 178 482 012
Profit attributable to:
Equity holders of the parent 849 398 450 751
Non-controlling interests (7 282) 18 050
842 116 468 801
Total comprehensive income attributable to:
Equity holders of the parent 847 110 458 427
Non-controlling interests (8 932) 23 585
838 178 482 012
Earnings per share (cents)
Basic 348.1 184.8
Diluted 297.2 158.3
Condensed Group Statement of Financial Position
Reviewed Audited
31 Dec 31 Dec
R000 2012 2011
ASSETS
Non-current assets 4 344 407 3 310 127
Property, plant, equipment and vehicles 266 663 285 665
Goodwill 12 140 12 140
Intangible assets 152 169 158 230
Deferred acquisition costs 50 524 39 610
Investments in associate and joint venture companies 781 995 697 299
Investments 3 080 415 2 114 843
Deferred taxation - 2 340
Other financial assets 501 -
Current assets 1 381 057 1 294 677
Inventories 230 226 226 803
Trade and other receivables 407 288 482 113
Reinsurance contracts 418 432 443 028
Taxation 9 090 1 685
Cash and cash equivalents 316 021 141 048
TOTAL ASSETS 5 725 464 4 604 804
EQUITY AND LIABILITIES
Capital and reserves 2 929 986 2 113 630
Share capital 45 45
Capital reserves 310 132 316 904
Revaluation reserves 14 331 9 876
Cash flow hedging reserve (367) 6 376
Changes in ownership (11 839) (11 839)
Retained earnings 2 502 581 1 677 390
Attributable to equity holders of the parent 2 814 883 1 998 752
Non-controlling interests 115 103 114 878
Non-current liabilities 1 470 287 1 405 021
Long-term interest bearing borrowings 888 134 1 050 295
Long-term provisions 20 882 20 169
Other financial liabilities 125 -
Deferred taxation 561 146 334 557
Current liabilities 1 325 191 1 086 153
Short-term interest bearing borrowings 292 934 130 581
Bank overdrafts 15 434 13 363
Trade payables 293 087 225 287
Other payables 71 130 78 053
Insurance contracts 616 860 606 077
Outside unit holders interest 14 495 10 660
Other financial liabilities 2 000 -
Short-term provisions 16 305 18 183
Taxation 2 946 3 949
TOTAL EQUITY AND LIABILITIES 5 725 464 4 604 804
NAV per share (cents) 1 153.1 819.6
Shares in issue at end of year (000s) 244 108 243 874
Condensed Group Statement of Cash Flows
Reviewed Audited
Year ended Year ended
31 Dec 31 Dec
R000 2012 2011
Operating activities
Net attributable profit 842 116 468 801
Adjustments for:
Share of profits of associates and joint venture (103 455) (69 125)
Income from investments (102 013) (84 736)
Increase in fair value of investments (1 053 311) (476 858)
Impairment of investment in associate 252 428
Amortisation of intangible assets 19 079 18 785
Finance costs 131 597 93 345
Taxation 261 021 129 093
Depreciation of property, plant, equipment and vehicles 71 189 65 563
Share-based payment expense 9 815 13 348
Net profit on disposal of associate - (36 855)
Realised loss on disposal of available-for-sale asset 292 -
Additional purchase consideration on acquisition of business 1 736 -
(Decrease)/increase in long and short-term provisions (1 165) 4 158
Profit on disposal of property, plant, equipment and vehicles (204) (456)
Operating cash flows before movements in working capital 76 949 125 491
Increase in inventories (3 423) (32 692)
Decrease in trade and other receivables 58 706 5 862
Outside unit holders interest 3 835 51
Increase in trade and other payables 60 877 10 218
Net decrease/(increase) in reinsurance contracts 24 596 (42 552)
Net increase in deferred acquisition costs (10 914) (142)
Net increase in insurance contracts 10 783 42 428
Cash generated from operations 221 409 108 664
Income taxes paid (37 235) (24 168)
Finance costs (108 359) (81 197)
Net cash from operating activities 75 815 3 299
Investing activities
Interest received 26 410 23 735
Dividends received from associates and joint venture 75 843 47 068
Dividends received from other equity investments 75 603 61 001
Proceeds on disposal of investments 173 977 57 172
Proceeds on disposal of property, plant, equipment and vehicles 773 497
Acquisition of property, plant, equipment and vehicles (52 756) (44 868)
Acquisition of businesses (1 736) -
Acquisition of intangible assets (13 018) (2 886)
Acquisition of investments (131 705) (503 803)
Net cash from/(used in) investing activities 153 391 (362 084)
Financing activities
Dividends paid by company and subsidiaries (44 730) (49 412)
Repayments of borrowings (196 555) (219 812)
Loans raised 185 014 590 000
Shares sold/(repurchased) 292 (107)
Proceeds on issue of trust units/shares 1 994 -
Units/shares repurchased by subsidiaries (2 319) (4 983)
Increase/(decrease) in bank overdrafts 2 071 (190)
Net cash (used in)/from financing activities (54 233) 315 496
Net increase/(decrease) in cash and cash equivalents 174 973 (43 289)
Cash and cash equivalents at beginning of year 141 048 184 337
Cash and cash equivalents at end of year
Bank balances and cash 316 021 141 048
Segmental information
Profit/ Head-
(loss) line
from (loss)/
R000 Revenue operations profit Assets Liabilities
Fishing 1 037 707 49 511 (12 565) 879 564 547 463
Insurance 581 144 (10 134) 20 698 988 065 774 476
Clothing 174 394 8 377 4 759 149 804 53 240
Investments 153 227 83 284 831 470 3 708 031 1 420 299
Total Reviewed 1 946 472 131 038 844 362 5 725 464 2 795 478
Headline earnings per share
Reviewed Audited
Year ended Year ended
31 Dec 31 Dec
2012 2011
Headline earnings per share (cents)
Basic 346.0 176.3
Diluted 295.4 151.0
Headline earnings calculation (R000)
Net profit attributable to equity holders of the parent 849 398 450 751
Profit on disposal of property, plant, equipment and vehicles (456) (459)
Realised loss on disposal of available-for-sale asset 292 -
Realised profit on disposal of associate - (21 130)
Impairment of investment in associate 252 428
Impairment of intangible asset of associate 2 647 -
Additional purchase consideration on acquisition of business 1 736 -
Adjustments relating to results of associates (9 584) -
Total tax effects of adjustments 77 293
Headline earnings 844 362 429 883
Weighted average number of shares on which earnings
and headline earnings per share is based (000s) 244 039 243 878
Weighted average number of shares on which diluted earnings
and diluted headline earnings per share is based (000s) 285 813 284 673
Condensed Group Statement of Changes in Equity
Attri-
butable
Cash to equity
Reva- flow Changes holders Non-
Share Capital luation hedging in Retained of the controlling
R000 capital reserves reserves reserve ownership earnings parent interests Total
Balance at 1 January 2011 Audited 45 304 322 8 576 - (11 839) 1 269 342 1 570 446 102 676 1 673 122
Attributable profit for the year ended 31 December 2011 - - - - - 450 751 450 751 18 050 468 801
Other comprehensive income - - 1 300 6 376 - - 7 676 5 535 13 211
Total comprehensive income - - 1 300 6 376 - 450 751 458 427 23 585 482 012
Recognition of share-based payments - 3 723 - - - - 3 723 - 3 723
Dividend paid - - - - - (36 554) (36 554) (12 858) (49 412)
Subsidiarys accrual for preference dividends and repurchase of shares - - - - - - - 1 475 1 475
Treasury shares acquired - (107) - - - - (107) - (107)
Transfer to statutory contingency reserve - 6 149 - - - (6 149) - - -
Share of non-distributable reserves of associate transferred directly to equity - 2 817 - - - - 2 817 - 2 817
Balance at 31 December 2011 Audited 45 316 904 9 876 6 376 (11 839) 1 677 390 1 998 752 114 878 2 113 630
Attributable profit for the year ended 31 December 2012 - - - - - 849 398 849 398 (7 282) 842 116
Other comprehensive income - - 4 455 (6 743) - - (2 288) (1 650) (3 938)
Total comprehensive income - - 4 455 (6 743) - 849 398 847 110 (8 932) 838 178
Recognition of share-based payments - 9 815 - - - - 9 815 - 9 815
Dividend paid - - - - - (43 890) (43 890) (840) (44 730)
Subsidiarys accrual for preference dividends - - - - - - - 9 881 9 881
Issue of share capital/trust units - 1 363 - - - - 1 363 631 1 994
Repurchase of trust units - (752) - - - - (752) (1 567) (2 319)
Disposal of treasury shares - 292 - - - - 292 - 292
Transfer from statutory contingency reserve - (19 683) - - - 19 683 - - -
Share of non-distributable reserves of associate transferred directly to equity - 2 193 - - - - 2 193 1 052 3 245
Balance at 31 December 2012 Reviewed 45 310 132 14 331 (367) (11 839) 2 502 581 2 814 883 115 103 2 929 986
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
Directorate: F Robertson (Executive Chairman)*,
MA Brey (Chief Executive Officer)*, LZ Brozin (Financial)*, PL Campher (Lead Independent), M Hewu, N Khan, MK Ndebele, LA Parker, FD Roman *Executive
Website: www.brimstone.co.za
E-mail: info@brimstone.co.za
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