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BRIKOR LIMITED - Unaudited results for the six months ended 31 August 2016

Release Date: 01/02/2017 15:30
Code(s): BIK     PDF:  
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Unaudited results for the six months ended 31 August 2016

BRIKOR LIMITED
("the Group")
(Incorporated in the Republic of South Africa)
Registration number 1998/013247/06
JSE code: BIK
ISIN: ZAE000101945

Unaudited results for the six months ended 31 August 2016

PREPARED BY:

The unaudited interim financial results (“interim financial results” or “results”) for the six months ended 31 August 2016 were prepared by
Laura Craig CA(SA) (group financial manager) under the supervision of Andre Hanekom (chief financial officer)(authorised director).

HIGHLIGHTS
  - REVENUE decreased by 1.5 % to R169 million
  - EBIDTA decreased by 41.2 % to R24 million
  - HEADLINE EARNINGS PER SHARE decreased by 64.4 % to 1.6 cents per share
  - CASH AND CASH EQUIVALENTS increased by 0.5% to R29 million
  - TOTAL DEBT decreased by 3,2 % to R191 million
  - NET ASSET VALUE PER SHARE increased by 37,9 % to 9,1 cents per share
  - NET TANGIBLE ASSET VALUE PER SHARE increased by 56,5 % to 7,2 cents per share

OVERVIEW


The directors of Brikor are pleased to present the unaudited/unreviewed interim financial results for the six months ended 31 August
2016, which reflect continued growth and improvement from a sustainability point of view. It is important that the performance indicators
are considered in conjuntion with the commentary in the financial results section below as the 2017 financial year has been a landmark
year where a number of cost items ("Catch-up opex") have been incurred in order to catch-up on reporting which fell behind when the
company was still under provisional liquidation.

Brikor is a diverse manufacturer and supplier of building and construction materials across a broad spectrum of the market from low-cost
housing, residential to commercial, industrial, civil engineering and infrastructure projects. The group operates through three divisions,
namely bricks, aggregates and coal (through its subsidiary, Ilangabi Investments 12 (Pty) Ltd).



The group’s overall financial indicators continued to be healthy in a competitive trading environment when performance relating only to
the 2017 financial year is viewed in isolation from the impact of Catch-up opex. Effective cost management initiatives, sustainable
working capital management techniques and particular focus on the group’s core operations were maintained.

FINANCIAL RESULTS


In a competitive operating environment, revenue decreased to R168,9 million (2015: R171,4 million) and the gross profit percentage
decreased to 23,3% (2015: 28,7%). The decrease in revenue is largely contributed to the decline in the coal segment revenue of R10,3 m
which was inevitable given the efforts which had to be made to rectify inefficient mining methods utilised in the previous years. It must be
said however that decrease in coal revenue was partially offset by a reduction in exposure on rehabilitation expenditure which effectively
increases the gross profit percentage. The overall gross profit percentage declined partially as a result of cost increases in the bricks
segment which could not all be passed through to the customers and also due to the sales mix resulting from the sale of more stock
bricks versus semi-face bricks as availability of semi-faced bricks were limited.


Operating expenses increased to R26,1 million (2015: R21,3 million) as a result of the Catch-up opex which had to be incurred in the
2017 financial year and which relates to a number of statutory and compliance expenditures. The expenses of this nature, included in the
2017 financial period amounted to R6,5 million for the 6 months to 31 August 2016. By excluding the Catch-up opex, no growth on
expenditure is evident when compared to the same period for the 2015 financial year.



Interest earned during the period under review amounted to R0,7 million (2015: R2,6 million). The reduction in interest earned resulted
from the reduction in funds invested as these funds were used in settling the debts of the company during the 2015 financial period in
order to lift the provisional liquidation order. The comparative period therefore still had funds invested for a portion of that financial period.

The group ended the interim period with an attributable profit of R10,2 million (2015: R27,7 million), resulting in earnings per share of 1,6
cents (2015: 4,4 cents) and headline earnings per share of 1,6 cents (2015: 4,5 cents) for the period. With the group's shares still being
suspended, the number of shares in issue in the earnings per share equation remains static. The 2017 financial year is anticipated to be
the last year in which past inefficiences are rectified and neccessary historical expenditure is brought up to date. The sustainable
management practises, time pertinent and consistent reporting in the subsequent financial periods promise to provide more valuable
investor information.
Capital expenditure

For the six months under review capital expenditure amounted to R8,6 million. The material items invested in are as follows:

Plant and equipment of R7,5 million made up as follows:

– Aggregates segment – R5,3 million on mobile plant and R0,9 million on fixed plant;
– Bricks segment – R0,1 million on mobile plant; and
– Coal segment – R1,2 million on mobile plant.

Motor vehicles of R0,5 million made up as follows:

– Aggregates segment – R0,1 million on a truck; and
– Bricks segment – R0,4 million on two motor vehicles.

Furniture and fittings of R0,4 million made up as follows:

– Bricks segment – R0,2 million on the refurbishment of the boardroom, R0,1 million on 8 computers and R0,1 million on new clocking
systems.

Buildings of R0,2 million made up as follows:

– Bricks segment – R0,2 million on electrical upgrades.

Consolidated property, plant and equipment increased to R110,2 million from the February 2016 year end amount of R109,2 million as a
net result of:

- additions to property, plant and equipment of R8,6 million
- disposals of property, plant and equipment of R0,5 million; and
- depreciation of R7,1 million.

UNAUDITED CONSOLIDATED INTERIM STATEMENT OF PROFIT AND OTHER COMPREHENSIVE INCOME
For the six months ended 31 August 2016

                                                                                                                  12 months
                                                                                     6 months          6 months    ended 29
                                                                                     ended 31          ended 31    February
                                                                                  August 2016       August 2015        2016
                                                                          Notes     Unaudited         Unaudited      Audited
                                                                                        R'000             R'000       R'000

Revenue                                                                                168 923         171 480     317 002
Cost of sales                                                                         (129 576)       (122 339)   (230 126)
Gross profit                                                                            39 347          49 141      86 876
Other income                                                                             3 235           4 819       5 376
Administrative expenses                                                                (22 102)        (14 421)    (32 570)
Distribution expenses                                                                   (2 427)         (2 100)     (4 374)
Other expenses                                                                          (1 583)         (4 792)     (6 725)
Operating profit before interest and taxation                                           16 470          32 647      48 583
Finance income                                                                             691           2 628       3 083
Finance costs                                                                           (4 941)         (4 321)    (13 505)
Profit before taxation                                                                  12 220          30 954      38 161
Taxation                                                                                (1 972)         (3 204)     (5 314)
Total profit for the year attributable to equity holders of the company                 10 248          27 750      32 847

EARNINGS PER SHARE

                                                                                                                  12 months
                                                                                     6 months          6 months    ended 29
                                                                                     ended 31          ended 31     February
                                                                                  August 2016       August 2015        2016
                                                                                    Unaudited         Unaudited      Audited
                                                                                    cents             cents        cents

Basic
Continued operations (cents)                                                                 1.6           4.4          5.2
Total                                                                                        1.6           4.4          5.2
Diluted
Continued operations (cents)                                                                 1.6           4.4          5.2
Total                                                                                        1.6           4.4          5.2

Headline earnings
Continued operations (cents)                                                                 1.6           4.5          5.6
Total                                                                                        1.6           4.5          5.6
Diluted headline earnings
Continued operations (cents)                                                                 1.6           4.5          5.6
Total                                                                                        1.6           4.5          5.6

Reconciliation between basic earnings and headline earnings as well as diluted earnings

                                                                                                                  12 months
                                                                                     6 months          6 months    ended 29
                                                                                     ended 31          ended 31    February
                                                                                  August 2016       August 2015        2016
                                                                                    Unaudited         Unaudited      Audited
                                                                                        R'000             R'000       R'000

Six months ended 31 August 2016
Basic and diluted profit                                                                  10 248        27 750      32 847
(Profit)/loss on disposal of property, plant and equipment                                   (42)          806         669
Loss on scrapping of property, plant and equipment                                             -             -       1 449
Headline and diluted headline profit                                                      10 206        28 556      34 965

Number of shares                                                                          '000             '000        '000

Weighed average number of shares                                                      629 342          629 342     629 342
Diluted weighed average number of shares                                              629 342          629 342     629 342

UNAUDITED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
As at 31 August 2016

                                                                                     31 August        31 August   29 February
                                                                                          2016             2015          2016
                                                                                     Unaudited        Unaudited       Audited
                                                                                         R'000            R'000         R'000

ASSETS

Non-current assets                                                                     137 257          140 918       134 445
Property, plant and equipment                                                          110 243          113 447       109 202
Intangible assets                                                                       11 651           12 989        12 320
Other financial assets                                                                  14 242           13 585        12 714
Deferred tax asset                                                                       1 121              897           209

Current assets                                                                         110 402           97 671        96 617
Inventories                                                                             45 219           40 516        45 499
Trade and other receivables                                                             35 689           27 798        29 871
Cash and cash equivalents                                                               29 494           29 357        21 247

Total assets                                                                           247 659          238 589       231 062

EQUITY AND LIABILITIES

Equity attributable to equity holders of the company                                    57 102           41 757        46 854
Stated capital                                                                         228 242          228 242       228 242
Accumulated loss                                                                      (171 140)        (186 485)     (181 388)

Non-current liabilities                                                                106 829           99 308        95 616
Borrowings                                                                               6 342           11 150         5 582
Shareholder loans                                                                       50 230           42 651        43 115
Provisions                                                                              50 257           45 507        46 919

Current liabilities                                                                     83 728           97 524        88 592
Borrowings                                                                               6 384            8 455         9 984
Trade and other payables                                                                61 784           67 763        58 661
Taxation                                                                                15 560           21 306        19 947

Total equity and liabilities                                                           247 659          238 589       231 062

Asset value per share

Net asset value per share (cents)                                                          9.1             6.6           7.4
Net tangible asset value per share (cents)                                                 7.2             4.6           5.5


UNAUDITED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 August 2016


                                                                                                                     12 months
                                                                                      6 months         6 months       ended 29
                                                                                      ended 31         ended 31       February
                                                                                   August 2016      August 2015           2016
                                                                                     Unaudited        Unaudited        Audited
                                                                                         R'000            R'000          R'000

Stated capital                                                                         244 142          244 142        244 142
Treasury shares                                                                        (15 900)         (15 900)       (15 900)
Accumulated loss beginning of year                                                    (181 388)        (214 235)      (214 235)
Profit for the period                                                                   10 248           27 750         32 847
Total equity                                                                            57 102           41 757         46 854

UNAUDITED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 31 August 2016

                                                                                      6 months          6 months      12 months
                                                                                      ended 31          ended 31       ended 29
                                                                                   August 2016       August 2015       February
                                                                                     Unaudited         Unaudited   2016 Audited


Cash flows from operating activities                                                    13 605            34 736         37 086
Cash generated from operations                                                          25 126            37 225         48 010
Finance income                                                                             691             2 628          3 083
Finance costs                                                                           (4 827)           (3 958)        (8 623)
Tax paid                                                                                (7 385)           (1 159)        (5 384)

Cash flows to investing activities                                                      (9 632)           (9 106)       (15 989)
Purchase of property, plant and equipment                                               (8 644)          (11 017)       (18 450)
Proceeds on disposal of plant and equipment                                                540             3 214          4 340
Increases in investments into other financial assets                                    (1 528)           (1 303)        (1 879)

Cash flows from/(to) financing activities                                                4 274           (90 764)       (94 341)
Borrowings raised                                                                        8 244            16 860         18 600
Borrowings repaid                                                                       (3 970)         (107 624)      (112 941)

Net increase/(decrease) in cash and cash equivalents                                     8 247           (65 134)       (73 244)
Cash and cash equivalents at beginning of period                                        21 247            94 491         94 491
Cash and cash equivalents at end of period                                              29 494            29 357         21 247

UNAUDITED SEGMENTAL REPORT
For the six months ended 31 August 2016

                                                                Brick
                                                        Manufacturing               Coal        Aggregates             *Other            Total
Six months ended 31 August 2016 unaudited                       R'000              R'000             R'000              R'000            R'000
Total revenue                                                 94 604             56 839            24 056                   -         175 499
Intersegmental revenue                                              -            (6 576)                 -                  -          (6 576)
Reportable segment revenue                                    94 604             50 263            24 056                   -         168 923

Gross profit                                                    24 229           14 540                 578                   -         39 347
Other income                                                       802            2 032                 401                   -          3 235
Operating profit/(loss) before interest and taxation             9 295            8 964              (1 789)                  -         16 470
Segment assets and liabilities
Segment assets                                                  67 581           68 380             81 082            30 616           247 659
Segment liabilities                                            (38 677)         (77 740)            (8 349)          (65 791)         (190 557)
Other segment information
Depreciation and amortisation included in cost of
sales and operating expenditure                                 (3 219)           (2 911)            (1 645)                  -         (7 775)
Additions to non-current assets                                  1 107             1 264              6 273                   -          8 644


                                                                Brick
                                                        Manufacturing               Coal        Aggregates             *Other            Total
Six months ended 31 August 2015 unaudited                       R'000              R'000             R'000              R'000            R'000
Total revenue                                                 89 638             63 939            21 267                   -         174 844
Intersegmental revenue                                              -            (3 364)                 -                  -          (3 364)
Reportable segment revenue                                    89 638             60 575            21 267                   -         171 480

Gross profit                                                    31 929           15 498               1 714                   -         49 141
Other income                                                     2 455            1 605                 759                   -          4 819
Operating profit before interest and taxation                   22 680            9 527                 440                   -         32 647
Segment assets and liabilities
Segment assets                                                  68 515           67 483             72 338            30 253           238 589
Segment liabilities                                            (48 582)         (73 068)           (11 225)          (63 957)         (196 832)
Other segment information
Depreciation and amortisation included in cost of
sales and operating expenditure                                 (1 820)           (5 474)            (1 313)                  -         (8 607)
Additions to non-current assets                                    325             7 943              2 749                   -         11 017


                                                                Brick
                                                        Manufacturing               Coal        Aggregates             *Other            Total
12 months ended 29 February 2016 audited                        R'000              R'000             R'000              R'000            R'000
Total revenue                                                172 612            114 283            37 935                   -         324 830
Intersegmental revenue                                           -               (7 828)                 -                  -          (7 828)
Reportable segment revenue                                   172 612            106 455            37 935                -            317 002

Gross profit                                                51 801               29 351               5 724               -             86 876
Other income                                                  3 388                 922               1 066               -              5 376
Operating profit before interest and taxation               33 811               12 334               2 438               -             48 583
Segment assets and liabilities
Segment assets                                              68 272               69 446             71 888            21 456           231 062
Segment liabilities                                        (37 720)             (74 265)            (9 161)          (63 062)         (184 208)
Other segment information
Depreciation and amortisation included in cost of
sales and operating expenditure                              (8 546)             (6 963)             (2 578)                  -        (18 087)
Additions to non-current assets                               2 164              12 494               3 792                   -         18 450
*Other segment relates to non segment specific cash and liabilities

Factors used to identify segments are based on geographical location and divisional structuring, this is also how the group reports
financial results to management on a monthly basis.

Segment profit represents the profit earned by each segment without allocation of finance costs and income tax expense. This is the
measure reported to the chief operating decision-maker for the purposes of assessment of segment performance.

No single customer exists upon which the group is significantly dependent on for revenue and revenue is derived solely from the South
African customers.

Other assets and liabilities

For the purposes of monitoring segment performance and allocating resources between segments:
• all assets are allocated to reportable segments other than non-current assets held-for-sale, tax assets, deferred tax assets and cash
and cash equivalents.
• all liabilities are allocated to reportable segments other than general borrowings, shareholders loans, deferred tax liability, taxation and
bank overdraft.
 NOTES TO THE UNAUDITED/UNREVIEWED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 for the six months ended 31 August 2016

1 BASIS OF PREPARATION AND ACCOUNTING POLICIES

 The interim results are prepared in accordance with the requirements of the JSE Listings Requirements for interim reports and the
 requirements of the Companies Act 71 of 2008 of South Africa. The Listings Requirements require provisional reports to be prepared in
 accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting
 Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
 Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by
 IAS 34 Interim Financial Reporting.

 The accounting policies applied are consistent with those applied in the annual financial statements for the year ended 29 February 2016
 and are in terms of IFRS as issued by the International Accounting Standards Board.

 The interim results have been prepared on the historic cost convention, except for certain financial instruments, which are stated at fair
 value. The results are presented in Rand rounded to the nearest thousand (R'000).


2 OTHER LEGAL AND REGULATORY REQUIREMENTS

 On 24 November 2016 the auditors reported reportable irregularities to the Independent Regulatory Board of Auditors in respect on non-
 compliance with the Income Tax Act, No 58 of 1962 and the Mineral and Petroleum Resources Royalties Act, No 29 of 2008. The
 particulars of the reportable irregularities relate to the following instances, which resulted in penanlties and interest being charged to the
 group:

 • Non-submission of annual tax returns and non-timeous payment of provisional tax on due dates, as required by the Income Tax Act, No
 58 of 1962; and

 • Non-registration for Royalty Tax and/or submission of returns and/or payment of Royalty Tax due to SARS, as required by the Mineral
 and Petroleum Resources Royalties Act, No 29 of 2008.

 These non-compliances were due to the provisional liquidation of Brikor and cash flow constraints on the group.

 Management is aware of the above and is in the process of taking corrective steps, particularl since the provisional liquidation of Brikor
 has been lifted to ensure that the relevant non-compliances are adequately addressed. Full provision has been made in the unaudited
 interim financial statements for any related amounts due.

                                                                                                                                     12 months
                                                                                                   6 months          6 months         ended 29
                                                                                                   ended 31          ended 31         February
                                                                                                August 2016       August 2015             2016
                                                                                                  Unaudited         Unaudited           Audited


3 SALIENT FEATURES

 Number of shares in issue (excluding treasury shares)('000)                                        629 342           629 342          629 342

 Net asset value                                                                                     57 102            41 757           46 854
 Adjusted with:
  - Intangible assets                                                                                11 651            12 989           12 320
 Net tangible asset value                                                                            45 451            28 768           34 534

 Net asset value per share (cents)                                                                       9.1               6.6              7.4
 Net tangible asset value per share (cents)                                                              7.2               4.6              5.5

 Reconciliation of EBITDA

 Operating profit before interest and taxation ("EBIT")                                              16 470            32 647           48 583
 Adjusted with:
  - Depreciation and ammortisation                                                                    7 775             8 607           18 087
 Earnings before interest, taxation, depreciation, ammortisation
 and impairment adjustments ("EBITDA")                                                               24 245            41 254           66 670
4 SUBSEQUENT EVENTS

 Management is not aware of any material events, other than as outlined below, which occurred subsequent to the six month period ended
 31 August 2016 and which need adjustment or disclosure.

 Subsequent to the end of the interim period the group has received offers for the sale of two of its properties, namely the Rayton property
 situated at Portion 31 of Witfontein NO.510 - JR District Bronkhorstspruit and the Nigel Schist property situated at Portion 58 of the Farm
 Vrisfewaag 510IR.

 No intention existed at 31 August 2016 to dispose of these properties and at the date of the publication of this unaudited consolidated
 interim financial statements no formal heads of agreement have been drafted or agreed to by any parties. The group has indicated its
 interest in the offers and is in the process of negotiating the terms to be agreed upon. Both properties will be disposed of inclusive of the
 rehabilitation provisions pertaining to each property respectively.

5 GOING CONCERN

 The directors have prepared their budgets and cash flow forecast for the year ahead based on reasonable and supportable assumptions.

 The cash flow forecast and current management results indicates that the group will operate as a going concern for the foreseeable future.



 DATE OF PUBLICATION OF THIS REPORT
 30 January 2017


 G Parkin
 Chief Executive Officer

 Nigel
 1 February 2017



 A Hanekom
 Chief Financial Officer

 Nigel
 1 February 2017

 CORPORATE INFORMATION
 Directors: PM McDonald (Chairman)*; PS Moyanga (Lead independent director)^; G Parkin (CEO); A Hanekom (FD); CB Madolo^; AP
 van der Merwe*
 * Non-executive ^ Independent non-executive

 Registered address: 1 Marievale Road, Vorsterskroon, Nigel 1490

 Postal address: PO Box 884, Nigel 1490

 Telephone: (011) 739 9000

 Facsimile: (011) 739 9021

 Company secretary: CIS Company Secretaries (Pty) Ltd

 Transfer secretaries: Computershare Investor Services (Pty) Ltd

 Auditors: KPMG Inc.

 Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd

 These results and an overview of Brikor are available at www.brikor.co.za

Date: 01/02/2017 03:30:00 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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