| Mon 1 Oct 2007, 16:32 | | ABK - African Brick - Private Placing And Listing |
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JSE
ABK
ABK - African Brick - Private Placing And Listing Of African Brick On The
Alternative Exchange Of The JSE Limited
AFRICAN BRICK CENTRE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/006214/06)
Share code: ABK & ISIN: ZAE000105169
("African Brick" or "the company")
PRIVATE PLACING AND LISTING OF AFRICAN BRICK ON THE ALTERNATIVE EXCHANGE OF
THE JSE LIMITED
This abridged prospectus is not an invitation to the public to subscribe for
shares in African Brick. It is issued in compliance with the Listings
Requirements of the JSE Limited ("JSE") for the purpose of providing
information to the public and investors with regard to African Brick.
1. INTRODUCTION AND HISTORY
1.1 PSG Capital (Proprietary) Limited ("PSG Capital") is authorised to
announce that, subject to the achievement of the required spread of public
shareholders, the JSE has formally approved the listing of 320 000 000
ordinary shares, with a par value of 0.1 cent each, in the share capital of
African Brick on the Alternative Exchange ("ALTX") of the JSE from the
commencement of trade on Monday, 8 October 2007. The shares will trade under
the abbreviated name "Afbrick", with share code "ABK" and ISIN ZAE000105169.
1.2 An amount of R45 million before expenses will be raised by African Brick
in terms of an offer for subscription of 45 000 000 African Brick shares at a
subscription price of 100 cents per share ("the offer for subscription") and
R55 million will be realised by African Brick vendors in an offer for sale of
55 000 000 African Brick shares at a sale price of 100 cents per share ("the
offer for sale") (collectively, "the private placing"). Further details
relating to the private placing are contained in paragraph 8 below.
1.3 African Brick`s business consists of clay mining, manufacturing of clay
semi-face bricks and a strong "wet trade" retail section. The growth of the
business over the last couple of years has been a result of the strong growth
in the building industry, increased productivity at its manufacturing
facilities and the aggressive roll-out of a network of retail outlets. African
Brick currently has 24 retail outlets in 5 provinces with 7 outlets opened
since January 2007.
1.4 Since 1983, African Brick has sold close to 1 billion face bricks which
have been built into more than 20 000 homes and other buildings. As these
bricks have unique colours, African Brick`s products are the natural first
choice when additions and/or improvements to these homes and other buildings
are undertaken.
1.5 African Brick was incorporated in South Africa under the name "African
Brick Centre (Proprietary) Limited" on 25 March 1999 and converted to a public
company under registration number 1999/006214/06 on 6 September 2007.
2. OVERVIEW OF AFRICAN BRICK
African Brick`s group structure may be depicted as follows:
SEE PRESS RELEASE FOR GRAPH
The business of African Brick is transacted through its subsidiaries. A brief
description of the activities conducted by these subsidiaries follows.
2.1 Manufacturing operations
Landton Properties (Proprietary) Limited ("Landton Properties") owns the
premises on which the manufacturing facilities of African Brick Krugersdorp
are situated. The Krugersdorp facility is 90 hectares in extent and consists
of a factory building and an administrative building. The Lenasia facility is
located on a leased property of some 6 hectares in extent. The lease expires
in 2008 but has been extended in terms of an option until 2018.
2.1.1 African Brick ("Proprietary") Limited ("African Brick Krugersdorp")
- The core of the current manufacturing facilities at the Krugersdorp
factory was built in 1984 and extensively upgraded in 1994. The manufacturing
process was designed in-house in 1994 and is today still copied by independent
brick makers.
- The Krugersdorp facility is the closest face brick aesthetic ("FBA")
manufacturing facility to the Rustenburg and West Rand growth points, with the
Rustenburg growth point being recognised as a fast growing area in South
Africa.
- The nature of the clay reserves allows the factory to produce a brick
with a dark blue colour. No other manufacturer can duplicate the features of
this product, which commands a premium price. The clay reserves at the current
projected production rate are sufficient for the next 15 years.
2.1.2 African Brick Lenasia ("Proprietary") Limited ("African Brick Lenasia")
- African Brick expanded its manufacturing capacity in 1990 and the
Lenasia factory was commissioned. The factory currently produces 40 million
bricks per annum.
- In 1996 the mining rights to the nearby Syferfontein clay deposit were
acquired to supply raw material for the Lenasia factory. The raw material
(clay) resource at the Syferfontein mine, some 15 km from the Lenasia facility
and 100 hectares in extent, is of an exceptionally high quality and scarce in
occurrence west of Johannesburg. This results in a competitive advantage as
other brick manufacturers have to transport their product over much longer
distances to the market. The clay reserves at the current projected production
rate are sufficient for the next 18 years.
- In anticipation of growing demand, African Brick acquired the strategic
Zuurbekom property in 2003, which lies in close proximity to the large
Syferfontein reserves and which the company intends to develop as its third
manufacturing facility.
2.1.3 Output from the manufacturing operations of the African Brick
group is sold to the retailing arm of the company at market related wholesale
prices. This is a key strategy in ensuring that a consistent pricing policy is
being applied over the full spectrum of wholesale and retail customers of the
African Brick group.
2.2 Retail operations
2.2.1 Having its own retail distribution arm has allowed African Brick to
spread its operational and credit risks significantly. Demand for products is
now spread evenly over the calendar year and over a larger geographical area.
2.2.2 African Brick sells its production through 8 of its own and 16
franchisee operated centres in 5 provinces and is the first manufacturer
distributing through centres that have a complete range of hardware components
on its shelves.
2.2.3 The franchisee operated centres operate under the African Brick Centre
trademark and are granted exclusive marketing rights for a particular
geographical area. The product range on offer includes all building supplies,
but to date the focus has been on bricks. African Brick receives a royalty
from the franchisee on total sales (excluding cement and plaster bricks) of
2,5% on all products sold.
2.2.4 The majority of African Brick`s competitors sell production only to
large wholesale consumers such as project developers and Government. African
Brick sells on average 120 million bricks per annum, of which 90 million are
face bricks. Sales in Gauteng amount to a 15% FBA market share in that region.
The real distinction between African Brick and other producers lies in the
fact that African Brick sells its products through its own retail outlets.
3. PROSPECTS
3.1 The African Brick group owns a 70 hectare site in Zuurbekom on which it
plans to build a third manufacturing facility. The competitive advantage
herein lies in the close proximity of the property to the large Syferfontein
clay reserves. This industrial site was acquired in 2003 and all regulatory
approvals have been granted for the factory to be commissioned. The layout and
necessary planning of the facility has been finalised and Eskom has, in-
principle, approved the provision of electricity to this new facility.
3.2 The estimated cost of the facility is R15 million and construction will
commence shortly after listing. The plant should be operational within 30
weeks after construction has commenced. This new facility will have the
capacity to produce an additional 40 million bricks per annum.
3.3 It is African Brick`s intention to use a portion of the capital raised
during the listing process to assist in the funding of a proposed BEE
transaction. Depending on the viability of the financial structure of such a
BEE transaction, all of the individual divisions within African Brick will
introduce a suitable BEE partner into their businesses. It is African Brick`s
intention to introduce such a BEE partner in respect of a minimum of a 26%
equity stake in the businesses.
3.4 African Brick is actively expanding its number of retail outlets
throughout South Africa using the franchise concept. The group intends to open
at least 6 new outlets in the next 12 months, with 4 of these new outlets
already under negotiation with third parties. New provinces that will be
covered are the Northern Cape and Kwa-Zulu Natal.
3.5 In addition, the group is continuously entering into agreements with
third party suppliers of building materials (some on an exclusive basis)
thereby increasing the sales per outlet, making it more efficient and
profitable. An exciting recent development was the signing of an exclusive
distribution agreement for the whole of the South Africa market with a
neighbouring country`s clay brick maker that manufactures bricks similar in
style, colour and finish as that of one of the industry`s major players.
3.6 African Brick will continue to explore the opportunity to increase sales
and margins by increasing its range of products offered to customers, for
example paint, floor and wall tiles, sanitary ware and plumbing.
4. MAJOR AND CONTROLLING SHAREHOLDERS AND SHAREHOLDER SPREAD
4.1 Save for the Piet Gouws Family Trust holding 25 265 799 shares (7,3%),
Beno van Graan (a director) holding 129 156 732 shares (40,4%) and Bernard
Reynecke (a director) holding 20 933 469 shares (6,5%), no other shareholder,
save for the directors, beneficially held, directly or indirectly, 5% or more
of the issued share capital of African Brick prior to listing.
4.2 Following the private placing, African Brick`s controlling shareholder
(as defined in the Listings Requirements of the JSE will remain the van Graan
family by virtue of their combined 45% shareholding in the company.
5. DIRECTORS
5.1 The full names, ages, occupations and business address of the directors of
African Brick are set out below:
Full name Age Occupation Business Address
Dr Benoni van Graan 74 Non-executive 5 Panorama, Struben
Chairman Rant en Dal Drive
Krugersdorp 1739
Benoni van Graan 48 Group Chief 31 Biccard Street
Executive Officer Krugersdorp 1739
Full name Age Occupation Business Address
Hendrik Bernard 42 Managing Director 31 Biccard Street
Johannes Reyneke Krugersdorp 1739
Tielman Christiaan Meyer 41 Financial Director 31 Biccard Street
Krugersdorp 1739
Mkhuseli John Jack 50 Non-executive Director 9 St John`s Avenue
Walmer 6070
Dawid Mostert 70 Non-executive Director 9 The Valley Road
Westcliffe 2193
5.2 All directors are South African citizens.
5.3 The directors of African Brick:
- have considered all statements of fact and opinion in the prospectus;
- accept, collectively and individually, full responsibility for the
accuracy of such statements; and
- certify that, to the best of their knowledge and belief, there are no
omissions of facts or considerations which would make any statements of fact
or opinion contained in the prospectus false or misleading and that all
reasonable enquiries to ascertain such facts have been made and that this
prospectus contains all information required by law and the JSE Listings
Requirements.
6. SHARE CAPITAL AND DIVIDENDS
6.1 Authorised and issued share capital
6.1.1 The authorised and issued share capital of African Brick is set out
below:
Number Share
capital of shares
Authorised
Preference shares with a par value
of 0,1 cent per share 250 000 000 R250 000
Ordinary shares with a par value
of 0,1 cent per share 1 000 000 000 R1 000 000
Issued before the private placing
Ordinary shares with a par value
of 0,1 cent per share 275 000 000 R275 000
Issued after the private placing
Ordinary shares with a par value
of 0,1 cent per share 320 000 000 R320 000
6.1.2 The share premium of African Brick on listing will be R123 130 000.
6.2 Dividends
Given the growth profile and strategy of African Brick, it is anticipated that
earnings generated by the group will be re-invested to fund future growth and
development. Accordingly, African Brick intends following a dividend policy
based on a dividend cover of approximately 4 times. It is the intention of the
company to periodically review this dividend policy and to take account of
prevailing circumstances and future cash requirements.
7. EXTRACTS OF HISTORICAL AND FORECAST FINANCIAL INFORMATION
Set out below is an extract from the forecast income statements for the
financial years ending 28 February 2008 and 28 February 2009, the preparation
of which is the responsibility of the directors.
Aggregated(2) Forecast(3)(5) Forecast
Year ended Year ending Year ending
February February February
2007 2008 2009
R`000 R`000 R`000
Revenue 95 900 152 000 182 400
Cost of sales (57 437) (88 160) (103 968)
Gross profit 38 463 63 840 78 432
Other income 923 - -
Operating expenses (16 683) (16 500) (17 800)
Operating profit 22 704 47 340 60 632
Investment revenue 438 2 000 4 300
Fair value
adjustments(6) 38 048 - -
Finance costs (394) - -
Profit before taxation 60 796 45 340 56 332
Taxation(7) (16 888) (13 149) (16 339)
Profit for the period 43 908 32 191 39 996
Number of shares in issue 100 275 000 000(4) 275 000 000(4)
Earnings per share (cents) 11,7 14,5
Headline earnings per
share (cents) 11,7 14,5
Earnings yield at 100 cents
per share issue price (%) 11,7 14,5
Price: Earnings ratio at 100
cents per share
issue price (times) 8,6 6,9
Notes:
(1) Prepared in accordance with ISAE 3400 - The Examination of Prospective
Financial Information and the SAICA Revised Guide on Forecasts and is the
responsibility of the directors of African Brick.
(2) Extracted from the aggregated information of the African Brick group.
(3) Based on the assumption that the restructuring had been effective for
the full financial year ending 28 February 2008 (i.e. that the subsidiaries
were wholly-owned by African Brick for such financial year).
(4) As no benefit from the capital raised pursuant to the private placing
has been taken into account, the forecast earnings per share and headline
earnings per share have been calculated on the basis of only 275 000 000
shares in issue
(5) The forecast for the financial year ending 28 February 2008 includes the
aggregated results of the African Brick group and will not be comparable to
numbers that will appear in audited annual financial statements as such
audited annual financial statements will only contain the results of African
Brick Krugersdorp, African Brick Lenasia and Landton Properties from September
2007 to February 2008 (i.e. for a period of six months) as the restructuring
was effective from 1 September 2007 and it is only from that date that the
results of African Brick Krugersdorp, African Brick Lenasia and Landton
Properties may be consolidated with those of the holding company, African
Brick. Aggregated results for the full year ending 28 February 2008 will,
however, be published at the same time.
(6) Fair value gain on change of policy in respect of investment properties.
Assuming the fair value gain was not included, attributable earnings of
African Brick for the year ended 28 February 2007 would have been R15 974 000.
(7) Inclusive of a deferred taxation charge as a result of the fair value
gain amounting to R10 114 000.
8. THE PRIVATE PLACING
8.1 The salient features of the private placing are as follows:
- Offer price per share 100 cents per share
- Number of ordinary shares offered in terms
of the offer for subscription 45 000 000
- Number of ordinary shares offered in terms
of the offer for sale 55 000 000
- Issue consideration R45 million
- Sale consideration R55 million
- Opening date of the private placing at 09:00 on Tuesday, 2 October 2007
- Closing date of the private placing at 12:00 on Wednesday, 3 October 2007
- Private placing monies paid by Wednesday, 3 October 2007
- Results of the private placing announced on SENS on Friday, 5 October 2007
- Results of the private placing published
in the press on Monday, 8 October 2007
- Anticipated listing date on ALTX on Monday, 8 October 2007
8.2 The main purpose of the offer for subscription and listing is to provide
the African Brick group with sufficient funding to accelerate the planned
expansion of the African Brick brand and its retail network, facilitate the
introduction of further products to African Brick`s existing range, facilitate
a part-funding for a suitable BEE transaction in the near future and fund the
planned third production plant at the Zuurbekom industrial site. The offer for
sale also provides the van Graan family with a mechanism to realise a portion
of their wealth created over many decades.
8.3 The listing will also raise the African Brick group`s profile with its
suppliers and clients and provide a mechanism for future capital raising in
terms of potential acquisitions. The current shareholders will continue to
hold approximately 70% of the issued share capital of African Brick on
listing.
8.4 No offer will be made to the public in respect of the private placing.
The private placing is open to select applicants only.
9. COPIES OF THE PROSPECTUS
9.1 This abridged prospectus is a summary of the full prospectus and has
been prepared and issued in relation to the private placing and the listing of
African Brick on ALTX. It contains the salient features of the prospectus
dated 2 October 2007, which should be read in its entirety for a full
appreciation thereof.
9.2 Copies of the full prospectus, in English, may be obtained during office
hours at the following addresses:
9.2.1 the registered office of the company: 31 Biccard Street, Krugersdorp
1740; and
9.2.2 the office of the designated and corporate adviser of African Brick,
PSG Capital: Building 8, Woodmead Estate, 1 Woodmead Drive, Woodmead 2198.
Johannesburg
1 October 2007
Designated and corporate adviser
PSG CAPITAL
Attorneys
Rossouws
Auditors and joint reporting accountants
D.Arvanitis & Co.
Joint reporting accountants
PKF
Accountants & business advisers
Date: 01/10/2007 16:32:45 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.
