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Abridged Audited Consolidated Financial Results for the year ended 28 February 2018
BRIKOR LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013247/06
JSE code: BIK
ISIN: ZAE000101945
(“Brikor” or “the group” or “the company”)
ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS for the year
ended 28 February 2018
PREPARED BY
The summarised abridged audited consolidated financial results
(“abridged financial results” or “results”) for the year ended 28
February 2018 was prepared by Manuel Goncalves CA(SA), MCom
Taxation, group financial manager under the supervision of Laura
Craig CA(SA), group interim financial director.
FINANCIAL HIGHLIGHTS
Revenue* increased by 8,4% to R273 million
EBITDA* increased by 55,0% to R48 million
Profit before interest and taxation* increased by 82,0% to R33
million
Total assets increased by 9,9% to R251 million
Cash and cash equivalents decreased by 20,9% to R11 million
Net tangible asset value per share increased by 42,9% to 3,0
cents per share
Net asset value per share increased by 16,1% to 9,4 cents per
share
Total debt increased by 8,5% to R192 million
Headline earnings* decreased by 54,4% to R15 million
Headline earnings per share* decreased by 53,8% to 2,4 cents per
share
Earnings per share* decreased by 54,9% to 2,3 cents per share
*Continuing operations
AUDITOR’S REPORT for the year ended 28 February 2018
The abridged financial results are extracted from audited
information but is not itself audited. The directors take full
responsibility for the preparation of the abridged financial
results and the correct extraction of the financial information
included herein from the underlying annual financial statements.
The financial statements were audited by KPMG Inc., and the
modified audit report thereon is available for inspection at the
company’s registered office. The auditor’s report contained the
following paragraph with respect to reportable irregularities:
“In accordance with our responsibilities in terms of section
44(2) and 44(3) of the Auditing Profession Act, we report that we
have identified reportable irregularities in terms of the
Auditing Profession Act.
We have reported these matters to the Independent Regulatory
Board for Auditors.” The matters pertaining to the reportable
irregularities have been described in note 9 to the abridged
financial results.
ABRIDGED CONSOLIDATED RESULTS COMMENTARY for the year ended 28
February 2018
1. OVERVIEW
The results for the year under review reflect the final
chapter in a number of consecutive years of realignment,
consolidation, refinement and establishment of a sustainable
foundation on which to grow the future business of the Brikor
group. The disposal of non-core operations, including the
Donkerhoek business, will further assist in reducing the
group’s risk portfolio.
The group’s overall financial indicators evidenced the
continued endeavours by management to cement a sustainable
operating platform for the group through ongoing settlement
of liabilities pertaining to past compliance matters, which
management is diligently and consistently working to resolve.
The competitive operating environment continued to drive
selling prices downward, which placed pressure on revenue and
gross profit margins. The combination of limited capacity in
the production of bricks, brought about by the limited power
supply available to the brick plants, led to operational
challenges with the concomitant financial implications. The
coal segment showed an increase in revenue of 12,0%, albeit
not at optimal levels, with the bricks segment increasing
revenue by 6,6%, mainly attributable to buy-ins at reduced
margins from a related party of the group.
Notwithstanding the reduction of gross profit margins as
indicated above, the change of estimate on environmental
restoration provisions has mitigated the reduction of gross
profit percentage to a net margin change overall.
2. FINANCIAL OVERVIEW
The group’s positive financial performance in a year
challenged by ever-changing market and climate conditions
indicates management’s continuous commitment to focus on core
business activities. Revenue increased by 8,4% to R273,1
million (2017: R251,9 million), driven equally by revenue
increases in both the bricks and coal segments. Gross profit
increased by 12,5% to R74,3 million (2017: R66,0 million),
driven primarily by the bricks segment rand value increase of
R5,8 million versus the coal segment which only increased by
a rand value of R2,4 million. Operating profit before
interest and taxation increased by 82,0% to R33,5 million
(2017: R18,4 million). This increase is a result of increased
gross profit attributable to the group and reduced operating
expenses. The reduction of operating expenses is due to non-
recurring once-off expenses experienced in the previous year.
REVENUE
Revenue steadily increased by 7% in brick manufacturing to
R178,7 million (2017: R167,6 million) and 12% in coal
extraction to R94,4 million (2017: R84,3 million). With less
rain in F2018 than experienced in F2017, the group managed to
produce more bricks and extract more coal. The group also
focused on building clay stockpiles which could weather over
longer periods of time, which resulted in an increased yield
of high quality bricks.
GROSS PROFIT
Gross profit increased by 12,5% to R74,3 million (2017: R66,0
million). The increase is mainly due to the change of
rehabilitation methodology from a free-drainage approach to a
pit-void approach. This change in estimate resulted in a R8,9
million positive effect on the gross profit.
Continuous and more effective rehabilitation methodologies
are being implemented to lower the financial impact of the
rehabilitation liability whilst still in line with regulatory
requirements.
OPERATING PROFIT BEFORE INTEREST AND TAXATION
Operating profit before interest and taxation increased by
82,1% to R33,5 million (2017: R18,4 million). This change
resulted from the increase of gross profit as disclosed above
and the reduction of once-off historical expenses to the
value of R6,7 million.
EARNINGS PER SHARE AND HEADLINE EARNINGS PER SHARE
Earnings per share increased by 71,4% to 1,2 cents per share
(2017: 0,7 cents per share), mainly due to the impairments
experienced in F2017 for the discontinued operation being a
once-off adjustment.
Headline earnings decreased by 74,5% to 1,2 cents per share
(2017: 4,7 cents per share). The decrease in headline
earnings per share is mainly attributable to the raising of
the deferred tax asset in 2017. The deferred tax asset
resulted in a large tax credit in F2017, not recurring in
F2018.
NET ASSET PER SHARE AND TANGIBLE ASSET PER SHARE VALUES
The group continued to generate profits and invest in
property, plant and equipment. This has resulted in increases
in net asset value per share by 16,1% to 9,4 cents per share
(2017: 8,1 cents per share), and net tangible asset value per
share by 42,9% to 3,0 cents per share (2017: 2,0 cents per
share).
CAPITAL EXPENDITURE
Major capital investments made by the group during the year
under review comprise R10,5 million on fixed plant at the
coal segment in order to improve the crushing and screening
of coal; R1,5 million on a second-hand excavator for the coal
segment; and R3,9 million on two new front-end loaders for
the bricks segment to improve efficiencies in the extraction
from the stockpiles.
All commentary has been based on continuing operations only.
3. GOING CONCERN
At 28 February 2018, the group’s current liabilities exceeded
its current assets (excluding assets-held-for sale) by R5,4
million (2017: Current assets exceeded current liabilities by
R8,5 million). The group’s total assets, however, still
exceed its total liabilities by R58,7 million (2017: total
assets exceed total liabilities by R51,1 million).
The financial statements are prepared on the basis of
accounting policies applicable to a going concern. This basis
presumes that funds will be available to finance future
operations and that the realisation of assets and settlement
of liabilities will occur in the ordinary course of business.
The directors previously approved that specifically
identified non-core assets and operations be disposed of, in
an effort to focus only on more profitable core business
activities.
To this extent, the total assets includes assets held-for
sale amounting to R44,7 million, which is further detailed in
note 3 to the abridged financial results. The assets held-
for-sale include the Donkerhoek discontinued operations. This
Donkerhoek disposal was formally approved subsequent to year-
end and the resultant proceeds, amounting to R27,3 million,
was received subsequently. The proceeds were utilised to
settle, in part, the royalty tax and income tax liabilities
(included in current liabilities at year-end). Refer to
paragraph 4 (Subsequent events) for further details of the
amounts received and settlement of liabilities after year-
end. The settlement of these liabilities is expected to have
a permanent impact on reducing the overall current
liabilities of the group, which balances are still remnants
from the period whilst the company was under business rescue.
This settlement effects that current liabilities as reported
at year-end are reduced by an amount of R19,7 million, which
in turn allows for current assets to exceed current
liabilities.
The directors also considered that the group reported a
profit from continuing operations in the last three years and
applied similar operating principles in preparing a cash flow
forecast for the next twelve months.
Considering the positive impact on working capital following
the cash proceeds from the Donkerhoek disposal and the cash
flows projects for the next twelve months the financial
statements were prepared on the basis applicable to a going
concern.
4. SUBSEQUENT EVENTS
SALE OF DONKERHOEK
Further details of the disposal of the Donkerhoek business
together with the impact of the transaction on the results of
Brikor was disclosed in the circular to shareholders
published on 14 March 2018.
At the general meeting of shareholders held on 17 April 2018,
all the resolutions as set out in the notice of general
meeting were passed by the requisite majority of
shareholders. This triggered the effective date as defined in
the sale agreement.
The final purchase consideration amounted to R44,5 million of
which R27,3 million has been received in respect of the
disposal of plant and equipment (R20,4 million) and inventory
(R6,9 million). On transfer of the properties and shares,
payment of the balance of the purchase consideration, being
R17,2 million, will be effected.
In order to reduce the risk of the group, the funds received
have been applied against the group’s debt portfolio to the
amount of R29,7 million as follows:
– R16,4 million towards capital outstanding for royalty tax;
– R3,3 million towards historical provisional income tax
outstanding; and
– R10,0 million towards loans outstanding for the Estate
Late GvN Parkin.
The difference between proceeds received and debt repaid,
amounting to R2,4 million, was funded from the group’s
continuing operations.
OTHER
Management is not aware of any material events, other than as
outlined above, which occurred subsequent to the year ended
28 February 2018 and which need adjustment or disclosure.
5. DIVIDEND
No dividend has been declared or paid during the year under
review.
6. CHANGES TO THE BOARD OF DIRECTORS
Our chairman, Ina McDonald resigned on 12 January 2018. The
board wish to express their appreciation for her valuable
contribution to the board during her tenure and wish her all
the best in her future endeavours.
The board of directors welcomes Allan Pellow, independent
non-executive chairman of Brikor with effect from 21 February
2018 and looks forward to a long and mutually rewarding
relationship and his valuable contribution, experience and
expertise to the board.
André Hanekom resigned as chief financial director with
effect from 31 January 2018 and the board wishes him well in
his future endeavours.
Laura Craig was appointed as interim financial director on 6
February 2018. Laura has been part of the finance team for
the last five years. The board wishes Laura well in her new
appointment. We look forward to her continued valuable
contribution to the group.
7. PROSPECTS AND OPPORTUNITIES
The board of directors remain positive about the potential
which can be unlocked from the group, given the consistent
improvement of the statement of financial position, with the
last major debts outstanding being those amounts owing to
related parties and the South African Revenue Services.
A priority during the year ahead will be the strengthening of
Brikor’s broad-based black economic empowerment status.
With a lower risk profile going forward, the group should be
in a position to gain access to financing and investment to
explore growth opportunities.
8. OTHER MATTERS
During the current and prior year(s) reportable
irregularities had been identified and reported by the
independent external auditors under the Auditing Profession
Act to the Independent Regulatory Board of Auditors with
regard to transactions relating to:
– Non-compliance with the Income Tax Act, no 58 of 1962, in
that:
– annual income tax returns had not all been submitted.
– Non-compliance with the Companies Act, no 71 of 2008, in
that:
– statutory individual company annual financial
statements had not been audited, signed and approved
within six months of the respective financial year-
ends.
Subsequent to the reporting date, the reportable
irregularities in respect of royalty tax and provisional tax
payments have been resolved and finalised.
9. MINERAL RESOURCES AND MINERALS RESERVES
The Competent Person’s Report was approved by the
Johannesburg Stock Exchange on 30 May 2018.
Mineral and Coal Resources were updated from the 2017
estimates based on mining depletions and additional
exploration drilling that has been completed in this recent
financial year. The changes in the declared Coal and Mineral
Resource statements can be attributed to the inclusion of an
additional eight drillholes in the Vlakfontein section and
five drillholes on the Plant 1 section with the associated
change in the seam model and qualities and clay horizon
models.
Vlakfontein Seam 1 coal tonnages for 2018 were stated at an
increase of 16% for 0,41 Mt GTIS at a 1% increase in CV to
19,28 MJ/kg. Seam 2 Coal Resources were stated at a 7%
tonnage increase to 10,85 Mt GTIS at a 2% increased CV to
18,07 MJ/kg. Most significantly, Seam 3 Coal Resources
increased by 644% to 0,89 Mt GTIS at a 5% CV increase to
16,08 MJ/kg. Seam 1 and Seam 3 Coal Resources at Grootfontein
increased by 75% and 72% for 0,82 Mt GTIS and 0,45 Mt GTIS,
respectively, at respective CVs of 19,37 MJ/kg and 15,97
MJ/kg (no change from the previous declaration). Seam 2 Coal
Resources for the project area decreased by 1% to 4,43 Mt
GTIS at a -1% CV of 17,74%.
Despite mining of portions of the Clay Resources, the total
Clay Mineral Resources as investigated at the Nigel projects
(Vlakfontein, Grootfontein and Plant 1) saw an increase of
some 3,1 Mm3 of Indicated and 0,7 Mm3 of Inferred Mineral
Resources. The difference is a result of a change in the clay
horizon classification where middlings were included in the
2018 Clay Mineral Resource. The Rayton Clay Resources
remained unchanged from the 2017 declaration.
During 2017, a total of 57 687 m³ of Quartzite Indicated
Mineral Resources were mined while some 47 116 m³ of
Silverton Shale Zone Inferred Mineral Resources were mined at
the Donkerhoek aggregate operations. The Donkerhoek Aggregate
Mineral Resources decreased marginally to 19,10 Mm3 and 5,95
Mm3 from 19,16 Mm3 and 6,00 Mm3 in the Indicated and Inferred
categories, respectively.
No changes to the Aggregate Mineral Resources for the
Marievale No. 5 Rock Dump were recorded.
No Mineral or Coal Reserves have been declared for any of the
projects.
10. NOTICE OF ANNUAL GENERAL MEETING
Shareholders are advised that the Company’s 2018 integrated
annual report, which incorporates Brikor’s consolidated
financial statements for the year ended 28 February 2018, was
posted to shareholders on Wednesday, 6 June 2018.
Shareholders are further advised that the integrated annual
Report and competent person’s report will be made available
on the Company’s website (www.brikor.co.za) from Wednesday, 6
June 2018.
Notice is hereby given that the annual general meeting of
shareholders of Brikor will be held at Brikor, 1 Marievale
Road, Vorsterskroon, Nigel at 10:00 on Friday, 6 July 2018 to
deal with the business as set out in the notice of annual
general meeting in the integrated annual report 2018.
Record date for the purpose of
determining which shareholders are
entitled to receive the notice of
annual general meeting Friday, 1 June 2018
Mailing of integrated annual report Wednesday, 6 June 2018
Last day to trade for the purposes
of being entitled to attend,
participate in and vote at the
annual general meeting Tuesday, 26 June 2018
Record date on which members must
be recorded as such in the register Friday ,29 June 2018
Proxy forms to be lodged with the
transfer secretaries by 10:00 Wednesday, 4 July 2018*
* Any form of proxy not delivered to the transfer secretaries
by this time may be handed to the chairman of the annual
general meeting prior to the commencement of the annual
general meeting.
For and on behalf of the board of directors
Allan Pellow Garnett Parkin
Independent non-executive chairman Chief executive officer
Laura Craig CA(SA)
Interim financial director
Nigel
6 June 2018
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 28 February
2018 2017
Note R’000 R’000
ASSETS
Non–current assets 128 610 144 363
Property, plant and equipment 73 591 89 757
Intangible assets 4 784 10 198
Other financial assets 20 316 16 326
Deferred tax asset 29 919 28 082
Current assets 77 732 80 540
Inventories 36 607 44 432
Trade and other receivables 29 877 21 883
Cash and cash equivalents 11 248 14 225
Assets held-for-sale 3 44 711 3 571
TOTAL ASSETS 251 053 228 474
EQUITY AND LIABILITIES
Equity attributable to owners
of the company 58 659 51 073
Stated capital 228 242 228 242
Accumulated loss (169 583) (177 169)
Total liabilities 192 394 177 401
Non–current liabilities 100 796 103 454
Borrowings - 2 624
Shareholders’ loans 43 544 45 228
Provision for environmental
restoration 4 52 262 54 281
Deferred tax liability 4 990 1 321
Current liabilities 83 181 72 041
Borrowings 6 565 7 280
Trade and other payables 5 70 561 57 679
Taxation 6 055 7 082
Liabilities held-for-sale 3 8 417 1 906
TOTAL EQUITY AND LIABILITIES 251 053 228 474
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND
OTHER COMPREHENSIVE INCOME for the year ended 28 February
Restated*
2018 2017 2017
Note R’000 R’000 R’000
Continuing
operations
Revenue 6 273 128 300 486 251 904
Cost of sales (198 846) (231 210) (185 893)
Gross profit 74 282 69 276 66 011
Other income 7 805 5 965 5 041
Administrative expenses (39 524) (42 228) (37 198)
Distribution expenses (6 197) (5 070) (5 018)
Other expenses (2 878) (34 633) (10 439)
Operating profit before
interest and taxation 33 488 (6 690) 18 397
Finance income 901 1 670 1 606
Finance costs (12 133) (13 798) (13 357)
Profit before taxation 22 256 (18 818) 6 646
Taxation (7 724) 23 037 (25 262)
Profit from continuing
operations 14 532 4 219 31 908
Discontinued operations
Loss from discontinued
operations net of tax (6 946) – (27 689)
Profit for the year 7 586 4 219 4 219
Other comprehensive
income net of tax - - –
Total comprehensive
income for the year
attributable to owners
of the company 7 586 4 219 4 219
Restated*
EARNINGS PER SHARE 7 2018 2017
cents cents
Basic
Continuing operations 2,3 5,1
Discontinued operations (1,1) (4,4)
Total 1,2 0,7
Diluted
Continuing operations 2,3 5,1
Discontinued operations (1,1) (4,4)
Total 1,2 0,7
* See note 2 to the abridged financial results for
reclassification of prior year recoveries incorrectly included in
revenue and note 3 to the abridged financial results for
restatement as a result of classification of discontinued
operations.
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February
Accumu-
Stated Treasury lated Total
capital shares loss equity
R’000 R’000 R’000 R’000
Balance at
28 February 2016 244 142 (15 900) (181 388) 46 854
Total comprehensive
income for the year – – 4 219 4 219
Balance at
28 February 2017 244 142 (15 900) (177 169) 51 073
Total comprehensive
income for the year – – 7 586 7 586
Balance at
28 February 2018 244 142 (15 900) (169 583) 58 659
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS for the
year ended 28 February
2018 2017
R’000 R’000
Cash flows from operating activities 22 960 22 229
Cash generated from operations 30 170 41 393
Finance income 867 1 620
Finance costs (4 239) (3 593)
Tax paid (3 838) (17 191)
Cash flows to investing activities (16 916) (22 349)
Additions to property, plant and
equipment (15 940) (21 956)
Proceeds on disposal of property,
plant and equipment 1 966 2 506
Increase of investments in other
financial assets (2 942) (2 899)
Cash flows to financing activities (9 021) (6 902)
Borrowings raised 33 6 305
Borrowings repaid (9 054) (13 207)
Net decrease in cash and
cash equivalents (2 977) (7 022)
Cash and cash equivalents at
beginning of year 14 225 21 247
Cash and cash equivalents at
end of year 11 248 14 225
ABRIDGED AUDITED CONSOLIDATED SEGMENTAL ANALYSIS for the year
ended 28 February
SEGMENT REVENUES AND RESULTS
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.
Reportable segment revenue relates to external customers only.
Revenue is derived solely from South African customers.
The following is an analysis of the group’s revenue and results
from operations by reportable segments.
Bricks Coal Other# Total
R’000 R’000 R’000 R’000
Segment profit
reconciliation
2018
Total revenue 178 685 111 971 - 290 656
Intersegment
revenue - (17 528) - (17 528)
Reportable segment
revenue 178 685 94 443 - 273 128
Gross profit 38 680 35 602 - 74 282
Other income 1 913 5 892 - 7 805
Impairments 810 - - 810
Operating profit
before interest
and taxation 11 556 21 932 - 33 488
Segment assets and
liabilities
Segment assets 77 561 81 862 91 630 251 053
Segment liabilities (50 795) (74 451) (67 148) (192 394)
Other segment
information
Depreciation and
amortisation included
in cost of sales and
operating
expenditure (4 784) (9 165) (1 076) (15 025)
Additions to
non-current assets 4 647 14 968 185 19 800
# Other segment relates to non-segment specific cash assets and
liabilities which includes the aggregate segment classified as
held-for-sale.
Aggre-
Bricks Coal gates Other# Total
R’000 R’000 R’000 R’000 R’000
Segment
profit
reconci-
liation
2017
Total
revenue 171 517 96 643 44 638 - 312 798
Interseg-
ment
revenue - (12 312) - - (12 312)
Reportable
segment
revenue 171 517 84 331 44 638 - 300 486
Gross
profit 32 843 33 168 3 265 - 69 276
Other
income 2 286 2 755 924 - 5 965
Impair-
ments (1 344) - (23 941) - (25 285)
Operating
profit
before
interest
and
taxation 4 223 14 174 (25 087) - (6 690)
Segment
assets and
liabi-
lities
Segment
assets 60 341 67 644 54 611 45 878 228 474
Segment
liabi-
lities (42 697) (71 604) (7 563) (55 537) (177 401)
Other
segment
information
Deprecia-
tion and
amorti-
sation
included
in cost of
sales and
operating
expendi-
ture (5 691) (5 692) (4 191) - (15 574)
Additions
to non-
current
assets 3 295 11 214 7 447 - 21 956
Segment
profit
reconci-
liation
2017
Restated*
Total
revenue 167 573 96 643 - - 264 216
Interseg-
ment
revenue - (12 312) - - (12 312)
Reportable
segment
revenue 167 573 84 331 - - 251 904
Gross
profit 32 843 33 168 - - 66 011
Other
income 2 286 2 755 - - 5 041
Impair-
ments (1 344) - - - (1 344)
Operating
profit
before
interest
and
taxation 4 223 14 174 - - 18 397
Segment
assets and
liabi-
lities
Segment
assets 60 341 67 644 54 611 45 878 228 474
Segment
liabi-
lities (42 697) (71 604) (7 563) (55 537) (177 401)
Other
segment
infor-
mation
Depre-
ciation
and amor-
tisation
included
in cost
of sales
and
opera-
ting
expen-
diture (5 691) (5 692) - (4 191) (15 574)
Additions
to non-
current
assets 3 295 11 214 7 447 - 21 956
* See note 3 to the abridged financial results for restatement as
a result of classification of discontinued operations.
# Other segment relates to non-segment-specific cash and
liabilities.
NOTES TO THE ABRIDGED AUDITED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 28 February 2018
1. STATEMENT OF COMPLIANCE, BASIS OF PREPARATION AND AUDIT
REPORT
The abridged financial results are prepared in accordance
with the requirements of the JSE Listings Requirements for
abridged reports, and the requirements of the Companies Act
applicable to summary financial statements. The Listings
Requirements require abridged 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 in the preparation of the
consolidated financial statements from which the summary
abridged consolidated financial statements were derived, are
in terms of International Financial Reporting Standards and
are consistent with those accounting policies applied in the
preparation of the previous consolidated annual financial
statements, except for the adoption of new and revised
standards and interpretations.
The abridged financial results are presented in South African
rand and all financial information has been rounded to the
nearest Rand thousands, except when otherwise indicated.
These abridged financial results was extracted from audited
information but is not itself audited.
The directors take full responsibility for the preparation of
the abridged financial results and that the financial
information has been correctly extracted from the underlying
audited consolidated financial statements.
2. RESTATEMENT OF FINANCIAL RESULTS FOR THE YEAR ENDED
28 FEBRUARY 2017
The financial results for the year ended 28 February 2017
have been restated due to:
– Reclassification of cost recoveries to cost of sales; and
– Reclassification of financial liabilities to non-financial
liabilities.
During 2017, Brikor incorrectly included cost recoveries as
part of revenue. These recoveries have been re-allocated to
be included in the cost of sales line item of the statement
of profit or loss and other comprehensive income. The royalty
tax accrual and employee-related liabilities were incorrectly
classified as financial liabilities and have been
reclassified as non-financial liabilities. The bonus and
leave provisions have been reclassified to employee-related
liabilities. The effect of these errors has been corrected in
these statements.
The effect of the restatement when applied consistently in
the 28 February 2017 financial year had the following impact
on the statement of profit or loss and other comprehensive
income:
Previously Adjust-
reported ment Restated
R’000 R’000 R’000
RECLASSIFICATION OF
COST RECOVERIES
Revenue 255 848 (3 944) 251 904
Cost of sales 181 949 3 944 185 893
The reclassification of financial liabilities to non-
financial liabilities had the following impact on “Trade and
other payables” as well as “Financial Instruments:
Information on financial risks”:
Previously Adjust-
reported ment Restated
R’000 R’000 R’000
TRADE AND OTHER
PAYABLES
Financial liabilities
Trade payables 15 941 - 15 941
Other payables 37 549 (33 760) 3 789
53 490 (33 760) 19 730
Non-financial liabilities
Receipts in advance 2 077 - 2 077
Value Added Tax 264 - 264
Bonus and leave
provision 1 848 (1 848) -
Royalty tax accrual - 29 181 29 181
Employee-related
liabilities - 6 427 6 427
4 189 33 760 37 949
57 679 - 57 679
There has been no material impact on the group’s basic or
diluted earnings per share and no impact on the total
operating, investing or financing cash flows for the year
ended 28 February 2017.
3. ASSETS AND LIABILITIES HELD-FOR-SALE AND DISCONTINUED
OPERATIONS
On 20 September 2016 and 17 November 2016, the company
committed to sell two of its properties, namely the Rayton
property situated at Portion 31 of Witfontein NO.510 – JR
District Bronkhorstspruit “Rayton” and the Nigel Schist
property situated at Portion 58 of the Farm Vrisgewaag 510IR
“Schist”, respectively.
RAYTON PROPERTY
During the 2017 financial year the Rayton property was
classified as held-for-sale and impaired to its recoverable
amount of R2,2 million. The offer received for Rayton
amounting to R2,2 million, which is inclusive of the
transfer of the environmental restoration obligation, was
accepted and signed by the company on 17 April 2017. In 2018
the environment provision on this property continued to
unwind and had a change in estimate to the value of R0,4
million. Accordingly, in order to realign the property to its
recoverable amount, R0,4 million of the previous impairment
was reversed.
The non-recurring fair value determination of the non-current
assets held-for-sale of R2,2 million has been classified as
level 2 fair value.
The sale is subject to the approval in terms of section 11(1)
of the Mineral and Petroleum Resources Development Act, no 28
of 2008, (“the Act”) being granted by the minister in respect
of the cession and transfer of the mining right to the
purchaser.
Management has taken timely action to submit all the
required documentation and remains confident that the
regulatory approval will be obtained in due course.
SCHIST PROPERTY
An interested buyer has been identified and the directors are
in the process of finalising a sale agreement to the value of
R0,2 million. Conditions precedent for the signature thereof
is that a Section 11 closure certificate is received from the
Department of Mineral Resources and that the purchaser fences
the property off.
Cumulative income or expenses included in profit/(loss) and
other comprehensive income:
Rayton Schist
property property Total
R’000 R’000 R’000
2018
Change in estimate for
environmental
rehabilitation
provision (338) (12) (340)
Impairment reversal 452 – 452
Net financing cost (125) – (125)
Loss from operating
activities (no tax
effect) (1) (12) (13)
2017
Change in estimate for
environmental
rehabilitation
provision (83) (547) (630)
Depreciation of
decommissioning asset (9) – (9)
Net financing cost (114) – (114)
Loss from operating
activities (no tax
effect) (206) (547) (753)
DISCONTINUED OPERATIONS
Donkerhoek Quarries and its operations (“Donkerhoek
business”) is a division of Brikor and produces aggregates of
a wide variety of sizes and technical specifications with
products including stone, gravel and sand for large and
small-scale civil engineering and infrastructure projects. As
per management’s assessment, the Donkerhoek business division
is a separate cash-generating unit, being the smallest group
of assets that generate cash inflows largely independent of
the cash inflows from other assets or groups of assets.
Donkerhoek business is capable of functioning independently
of Brikor from a staffing, cash flow, profitability and
funding perspective and constitutes a going concern with
separately identifiable and assignable assets and
liabilities, distinguishable by geographic location, VAT
registration and accounting records. It, however, is not
separately registered for income tax and therefore tax
disclosed as part of the discontinued operation is
attributable to the deferred tax asset of Brikor. It
constitutes the aggregates segment in its entirety (as
previously segment reported by the group). No other
considerations are included into or excluded from the
Donkerhoek business operations in order to derive the values
disclosed in previous reporting periods as the aggregates
segment.
Donkerhoek business had been incurring significant losses in
the previous financial period as a result of a lack of
contract revenue which drives volume and yields profits in
excess of largely fixed overheads. During the 2017 financial
year the Brikor board focused on strengthening the sales
force and emphasizing more informative decision-making
processes, such as developing accurate product costing tools,
driving more profitable sales and reducing overheads.
With the marginal profitability in mind, no certainty of the
effectiveness of implemented changes and knowing that
aggregates do not form part of Brikor’s core business, the
board had always been open to offers for the Donkerhoek
business, despite no specific marketing drive being embarked
upon at the commencement of the 2017 financial reporting
period.
During the 2018 financial reporting period, the board was,
however, approached with the possibility that a potential
buyer may exist for the Donkerhoek business. During July
2017, the board mandated Exchange Sponsors, the current
designated advisors of Brikor, to broker the transaction,
thereby initiating an active programme to find a potential
buyer and demonstrating management’s commitment to sell the
Donkerhoek business.
Subsequently, the potential buyers were requested to present
their offers and on 15 August 2017 the most favourable offer
in terms of quantitative and qualitative considerations,
amounting to R50,2 million, was accepted.
The final agreement for the sale of the Donkerhoek business
was signed on 27 October 2017 with conditions precedent,
including shareholder approval, subsequent to the release of
the required category 1 circular. The category 1 circular was
posted and notice on the general meeting was issued on SENS
on 14 March 2018. The general meeting in terms of the
disposal was held on 17 April 2018, during which the disposal
of the division was approved by a quorum of shareholders
present. Refer to paragraph 4 of the commentary to the to the
abridged financial results for further disclosure on
subsequent events in terms of the disposal of the
discontinued operations.
The Donkerhoek division has been incurring significant losses
in the previous financial period and, based on the losses, an
impairment trigger was identified. The recoverable amount of
the Donkerhoek division was calculated and an impairment of
R23,9 million was recognised in 2017. The impairment losses
during the 2017 financial year were allocated to reduce the
carrying value of the mineral reserves and mining rights by
R23,0 million and R0,9 million, respectively.
The impairment was calculated by comparing the carrying value
of the cash-generating unit to the recoverable amount. The
recoverable amount of a cash-generating unit is the higher of
its fair value less costs of disposal and its value in use.
The recoverable amount of the Donkerhoek division was
determined based on the fair value less cost of disposal (the
fair value less cost of disposal is higher than the
calculated value in use of the division).
The fair value of the Donkerhoek division has been classified
as a level 2 fair value. The market comparison technique was
used for the fair value of the Donkerhoek division.
The tables below analyse the results relating to the
discontinued operations:
2018 2017
R’000 R’000
Revenue and other income 37 828 45 563
Expenses (48 637) (46 709)
Net financing costs (393) (377)
Impairment reversal/(impairment) 906 (23 941)
Loss from operating activities (10 296) (25 464)
Taxation 3 350 (2 225)
Loss after taxation (6 946) (27 689)
ASSETS AND LIABILITIES HELD-FOR-SALE
The non-current assets held-for-sale were stated at the lower
of carrying value or fair value less cost to sell and
comprised the following:
Donker-
Rayton Schist hoek
property property business Total
R’000 R’000 R’000 R’000
2018
Assets
held-for-sale
Property, plant
and equipment 4 021 13 28 370 32 404
Intangible
assets – – 5 074 5 074
Inventory – – 7 233 7 233 *
4 021 13 40 677 44 711
Liabilities
held-for-sale
Environmental
rehabilitation
provision 1 821 560 5 662 8 043
Salary accruals – – 374 374
1 821 560 6 036 8 417
* Inventory includes consumables to the value of R0,3
million, which were recovered through a normal trade basis.
Rayton Schist
property property Total
R’000 R’000 R’000
2017
Non-current assets
held-for-sale
Property, plant and
equipment 3 558 13 3 571
3 558 13 3 571
Non-current liabilities
held-for-sale
Environmental rehabilitation
provision 1 358 548 1 906
1 358 548 1 906
The tables below summarise the cash flow effects relating to
the discontinued operations:
2018 2017
R’000 R’000
Cash flow
Net cash flows from/(to) operating
activities 158 (3 015)
Net cash flows from/(to) investing
activities 315 (6 206)
Net cash flows from/(to) financing
activities - (564)
Net increase/(decrease) in cash flow 473 (9 785)
4. PROVISIONS
2018 2017
R’000 R’000
Environmental rehabilitation 52 262 54 281
Total 52 262 54 281
Provision: Environmental rehabilitation
Opening balance 54 281 46 919
Unwinding of interest 4 718 4 321
Rehabilitation performed (659) (577)
Change in estimate (416) 5 524
Recognised in profit or loss (8 890) 2 402
Recognised in property, plant
and equipment 8 474 3 122
Transfer to liabilities held-for-sale (5 662) (1 906)
Closing balance 52 262 54 281
The rehabilitation provision relates to the estimated costs
of correcting any disturbance relating to mining activities
and those incidental thereto. The level of provision is
commensurate with work completed to date. The current gross
closure cost of rehabilitation was estimated at R66,5 million
(2017: R72,3 million). The future expected cost of the
provision was calculated by escalating current gross closure
cost at CPI of 6% (2017: 6%) per annum over the life of the
operations ranging between 2 to 15 years (2017: 2 to 16
years). This future cost is discounted at the South African
Government Bond Rate ranging between 6,72% and 8,78% (2017:
7,71% and 9,31%) to arrive at a carrying value of R52,3
million (2017: R54,2 million).
The group has invested funds into various environmental
trusts to be utilised by the group as and when restoration
activities are incurred. Investments made during the year
into these funds amounted to R2,9 million (2017: R2,9
million). The total amount held in these trusts amounted to
R20,3 million (2017: R16,3 million) at year end.
The Department of Minerals and Energy hold guarantees in
their favour for the mining rehabilitation to the amount of
R17,5 million (2017: R22,2 million).
MATERIAL CHANGES IN ESTIMATES
Recognised in property, plant and equipment
Portion 7, Farm Draaikraal No.166 (Plant 1)
The group had previously submitted a Section 11 closure
application for this property. This application was, however,
withdrawn in the current financial year as the group has
decided that there is sufficient motivation to rather extract
the remaining rich clay minerals. When the group submitted
the Section 11 closure to the Department of Mineral
Resources, the buildings were submitted as being repurposed
for manufacturing due to the buildings being that of the main
brick manufacturing plant and the holding company’s
administration block. Hence, the provision for dismantling
these buildings was excluded from the previous years’
estimates.
This change resulted in an increase of the decommissioning
cost of buildings and plant of R7,8 million of the gross
provision and R5,4 million to the net present value of the
obligation.
Portion 70, Varkensfontein no. 169 (Plant 3)
A section 11 application for Plant 3 has been submitted, with
the buildings being demarcated for manufacturing as per Plant
1 above. However, since no consent has yet been obtained from
the Department of Mineral Resources the provision for
dismantling of these buildings has been included in the
current year’s estimate.
With the change in approach, as detailed above, the provision
was adjusted to include all the legal requirements of the
original mine plan as approved by the Department of Mineral
Resources (including the dismantling of the buildings).
This change resulted in an increase of the decommissioning
cost of buildings and plant of R4,7 million of the gross
provision and R2,7 million in the net present value of the
obligation.
Recognised in profit or loss
Farm Vlakfontein 281IR (Ilangabi mine)
For the 2017 estimate, provision was made for the backfilling
of the opencast void, but in such a way to restore the
natural drainage of the site. Further analysis of the
surrounding environment and the detail requirements of the
approved rehabilitation plan resulted in establishing a
different rehabilitation approach that was applied in
estimating the 2018 gross provision. This amended approach
allows for the establishment of an internal depression in the
middle of the property, which will naturally fill-up with
water and become a water storage facility. This resulted in a
significant change in cost between the two financial
reporting periods as this approach reduces the quantity of
backfilling that would be required. The Department of Mineral
Resources has found this approach to be acceptable
considering the location of the properties.
This change in approach resulted in a decrease of R16,5
million on the gross provision and R14,1 million in the net
present value of the obligation that was recognised as a
credit in profit or loss.
Portion 27, Varkensfontein No. 169 (Portion 27)
Mining at this property has ceased and the group has applied
for a Section 11 closure application from the Department of
Mineral Resources. This property has no infrastructure. The
change resulting from the section 11 submission resulted in
an increase of R4,0 million in the net present value of the
obligation and was charged to profit or loss.
5. TRADE AND OTHER PAYABLES
Restated*
2018 2017
R’000 R’000
Financial liabilities
Trade payables 25 959 15 941
Other payables 5 421 3 789
31 380 19 730
Non-financial liabilities
Receipts in advance 2 180 2 077
Value Added Tax 1 299 264
Royalty tax accrual 30 360 29 181
Employee related liabilities 5 342 6 427
39 181 37 649
70 561 57 679
* See note 2 to the abridged financial results for
restatements.
The average credit period on purchases is 48 days from the
date of statement. The group has financial risk management
policies in place.
LIQUIDITY RISK
Trade payables and other payables are all due to be settled
within twelve months from reporting date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of trade payables and other payables
approximate their carrying value due to their short-term
maturities.
6. REVENUE
Restated*
2018 2017
R’000 R’000
Sale of goods
Clay products 153 478 142 950
Coal 87 310 78 550
Ancillary products and services 32 340 30 404
Closing balance 273 128 251 904
* See note 3 to the abridged financial results for
restatement as a result of classification of discontinued
operations and note 2 to the abridged financial results for
reclassification of prior year recoveries incorrectly
included in revenue.
7. EARNINGS PER SHARE
Restated*
2018 2017
cents cents
Basic
Continuing operations 2,3 5,1
Discontinued operations (1,1) (4,4)
Total 1,2 0,7
Diluted
Continuing operations 2,3 5,1
Discontinued operations (1,1) (4,4)
Total 1,2 0,7
Headline earnings
Continuing operations 2,4 5,2
Discontinued operations (1,2) (0,5)
Total 1,2 4,7
Diluted headline earnings
Continuing operations 2,4 5,2
Discontinued operations (1,2) (0,5)
Total 1,2 4,7
* See note 3 to the abridged financial results for the
restatement as a result of classification of discontinued
operations.
The calculation of the basic profit or loss per share
attributable to the ordinary equity holders is based on the
following information:
Reconciliation between basic earnings and headline earnings
as well as diluted earnings
Conti- Discon-
nuing tinued
opera- opera-
tions tions Total
R’000 R’000 R’000
2018
Basic and diluted profit 14 532 (6 946) 7 586
Profit on disposal of
property, plant and
equipment (290) – (290)
Loss on disposal of
property, plant and equipment 2 153 155
Loss on scrapping of
property, plant and equipment 5 – 5
Impairment of assets 810 (906) (96)
Headline and diluted
headline profit 15 059 (7 699) 7 360
2017 Restated*
Basic and diluted profit 31 908 (27 689) 4 219
Profit on disposal of
property, plant and
equipment (261) (28) (289)
Impairment of assets 1 344 23 941 25 285
Headline and diluted
headline profit 32 991 (3 776) 29 215
2018 2017
‘000 ‘000
Number of shares
Weighted average number of shares 629 342 629 342
Diluted weighted average number
of shares 629 342 629 342
See note 3 to the abridged financial results for the
restatement as a result of classification of discontinued
operations.
8. CONTINGENCIES
CONTINGENT LIABILITIES
The group’s operations are located in Nigel and is in close
proximity to the Blesbokspruit watercourse (the Blesbokspruit
watercourse is classified as a RAMSAR wetland). The precise
particulars of the operation’s proximity to the watercourse
still needs to be formally delineated by a wetland
specialist.
However, considering the current location of the group’s
operations and the potential movement of groundwater and
drainage towards the Bleksbokspruit watercourse, and allowing
for the current rehabilitation approach (as further detailed
in note 4 to the abridged financial results) that was
consistently applied for Vlakfontein, Plant 1 and 3 as well
as Portion 27, further analysis and monitoring would be
required in assessing the potential future impact on water
quality that might occur, after mine closure.
The proximity assessment and results from the water
monitoring is required to assess and confirm a justifiable
approach (as required by the National Water Act) that does
not pose a long-term water quality-related risk at eventual
quarry closure. The cost determination of water quality
related effects and water use requirements (in terms of the
National Water Act) remains uncertain at this stage and is
not currently reasonable quantifiable.
Additional information that are obtained from further studies
and monitoring could result in a future obligation that would
require the group to recognise additional cost provisions for
environmental rehabilitation.
9. OTHER LEGAL AND REGULATORY REQUIREMENTS
On 16 May 2018 the auditors reported reportable
irregularities to the Independent Regulatory Board of
Auditors in respect of non-compliance with the Income Tax
Act, No. 58 of 1962, and the Companies Act, No 71 of 2008.
The particulars of the reportable irregularities relate to
the following instances, which resulted in penalties and
interest being charged to the group:
– non-submission of annual tax returns, as required by the
Income Tax Act, No 58 of 1962;
– non-compliance with section 30 of the Companies Act in
terms of preparing and approving of annual financial
statements within six months after the end of its
financial year.
These non-compliances originated in the time of the
provisional liquidation of Brikor Limited and resultant cash
flow constraints on the group.
The directors are aware of the above and are in the process
of taking corrective steps, particularly 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 consolidated financial
statements for any related amounts due. All provisional
income tax returns have been submitted and paid as at the
date of signature of the report.
10. DIRECTORS’ EMOLUMENTS
2018 2017
R’000 R’000
EXECUTIVE
Directors
Short-term employee benefits 4 292 4 376
Post-employment benefits 194 173
Prescribed officer
Short-term employee benefits 2 553 2 405
Post-employment benefits 107 100
NON-EXECUTIVE
Directors
Short-term employee benefits 2 499 2 368
BRIKOR LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013247/06
JSE code: BIK
ISIN: ZAE000101945
(“Brikor” or “the group” or “the company”)
DIRECTORS:
Allan Pellow (Chairman)#
Peter Moyanga (Lead independent director)#
Garnett Parkin (Chief executive officer)
Laura Craig (interim financial director)
Mamsy Mokate#
Collen 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:
Fusion Corporate Secretarial Services (Pty) Ltd
TRANSFER SECRETARY:
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: 07/06/2018 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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