| Tue 19 Aug 2008, 14:16 | | BRT / BRN - Brimstone - Unaudited Results For The Six Months Ended 30 June 2008 |
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BRT BRN
BRT
BRT / BRN - Brimstone - Unaudited Results For The Six Months Ended 30 June 2008
BRIMSTONE INVESTMENT CORPORATION LIMITED
Share code: BRT & ISIN: ZAE000015277
Share code: BRN & ISIN: ZAE000015285
Company Registration Number: 1995/010442/06
(Incorporated in the Republic of South Africa)
("Brimstone" or "the company")
Unaudited results for the six months ended 30 June 2008
Condensed Group Income Statements
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
R`000 2008 2007 2007
Revenue 282 769 265 363 623 723
Cost of sales (203 447) (203 635) (454 327)
Gross profit 79 322 61 728 169 396
Selling and administration expenses (92 015) (63 434) (144 834)
Fair value (losses)/gains (74 089) 363 878 1 100 897
Exceptional items - (181) 102 796
(Loss)/profit from operations (86 782) 361 991 1 228 255
Income from investments 2 607 10 931 19 173
Finance costs (64 658) (63 267) (176 804)
Share of profit/(loss) of associate 41 250 (3 406) 7 314
Net (loss)/profit before taxation (107 583) 306 249 1 077 938
Taxation 11 622 (71 207) (232 627)
Net attributable (loss)/profit (95 961) 235 042 845 311
Attributable to:
Equity holders of the parents (99 224) 237 068 842 050
Minority interest 3 263 (2 026) 3 261
(95 961) 235 042 845 311
Earnings per share (cents)
Basic (42.1) 101.1 359.8
Headline (42.1) 101.1 321.5
Diluted earnings per share (cents)
Basic (41.3) 97.4 349.2
Headline (41.3) 97.4 312.0
Weighted average number of shares
on which earnings per share
is based (000`s) 235 709 234 409 234 005
Weighted average number of shares
on which diluted earnings per share
is based (000`s) 240 170 234 474 241 157
Condensed Group Balance Sheet
Unaudited Unaudited Audited
30 June 30 June 31 Dec
R`000 2008 2007 2007
ASSETS
Non-current assets 3 557 491 2866 700 3 632 945
Property,plant, equipment and vehicles 63 565 42 035 64 499
Goodwill - 17 862 -
Other intangible assets 26 742 - 26 742
Investments in associate companies 500 452 436 583 456 202
Investments 2 966 732 2 370 220 2 085 502
Current assets 335 093 372 770 316 621
Inventories 159 454 134 529 126 189
Trade receivables 100 269 112 198 58 669
Other receivables 20 015 19 928 55 805
Taxation 208 - 436
Cash and cash equivalents 55 147 17 710 75 528
335 093 284 365 316 621
Non-current asset classified as
held for sale - 88 405 -
TOTAL ASSETS 3 892 584 3 239 470 3 949 566
EQUITY AND LIABILITIES
Capital and reserves 2 206 489 1 771 304 2 376 896
Share capital 42 41 41
Capital reserves 263 959 278 220 267 418
Revaluation reserves 4 027 3 977 4 027
Retained earnings 1 931 766 1 492 792 2 101 978
Minority interest 6 695 (3 726) 3 432
Non-current liabilities 1 261 020 1 092 787 1 182 388
Long-term interest-bearing borrowings 867 471 814 843 766 239
Deferred taxation 393 549 277 944 416 149
Current liabilities 425 075 375 379 390 282
Short-term interest-bearing borrowings 66 776 71 507 60 204
Preference shares for redemption 137 000 - 137 000
Bank overdraft 35 941 112 387 18 233
Trade payables 143 975 128 598 105 775
Other payables 36 435 61 673 45 220
Taxation 4 948 1 214 23 850
TOTAL EQUITY AND LIABILITIES 3 892 584 3 239 470 3 949 566
NAV per share (cents) 928.9 754.0 1 012.9
Shares in issue at end of period
net of treasury shares (000`s) 236 820 235 420 234 315
Condensed Group Cash Flow Statements
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
R`000 2008 2007 2007
Operating activities
Net attributable (loss)/profit (95 961) 235 042 845 311
Adjustments for non-cash items 79 435 (237 594) (841 587)
Operating cash flows before movements
in working capital (16 526) (2 552) 3 724
Increase in inventories (33 271) (32 276) (35 954)
(Increase)/decrease in receivables (5 810) (4 457) 1 831
Increase/(decrease) in payables 29 415 34 061 (1 496)
Cash utilised in operations (26 192) (5 224) (31 895)
Taxation paid (29 652) (5 485) (6 502)
Finance costs (21 772) (20 423) (76 863)
Net cash used in operating activities (77 616) (31 132) (115 260)
Investing activities
Interest received 2 607 10 931 19 173
Dividends received from associates 8 316 4 485 26 586
Dividends received from other
equity investments 423 328 1 970
Loan repayments and recoveries from
associates and investments 49 220 427 73 921
Proceeds on disposal of investments - - 205 978
Proceeds on disposal of property, plant,
equipment and vehicles - - 285
Replacement of property, plant,
equipment and vehicles (2 719) (2 939) (31 265)
Acquisition of subsidiaries - (3 557) (6 442)
- shares acquired - (3 557) (8 865)
- loans advanced - - 2 423
Acquisition of associates and
investments (7 538) (16 674) (78 956)
Net cash from/(used in) investing
activities 50 309 (6 999) 211 250
Financing activities
Dividends paid (75 774) (37 632) (37 633)
Repayments of borrowings (13 877) (11 088) (36 498)
Loans raised 78 795 18 915 69 481
Shares repurchased (3 283) (975) (8 749)
Proceeds on issue of shares 3 357 3 074 3 074
Increase/(decrease) in bank overdrafts 17 708 65 889 (27 670)
Net cash from/(used in) financing
activities 6 926 38 183 (37 995)
Net (decrease)/increase in cash and
cash equivalents (20 381) 52 57 995
Cash and cash equivalents at
beginning of period 75 528 17 069 17 069
Cash and cash equivalents acquired on
acquisition of subsidiaries - 589 464
Cash and cash equivalents at
end of period
Bank balances and cash 55 147 17 710 75 528
Condensed Group Statements of Changes in Equity
Share Capital Revaluation
R`000 capital reserves reserves
Balance at 1 January 2007 -
Audited 40 271 325 3 977
Attributable profit for the
year ended 31 December 2007 - - -
Gain on available-for-sale
investment - - 50
Total recognised income and
expense for the year - - 50
Recognition of share-based
payments - 2 281 -
Dividend paid - - -
Issue of share capital 1 3 073 -
Treasury shares acquired - (3 512) -
Increase in treasury shares held
by share trust - (5 237)
Transfer to capital redemption
reserve fund - 138 -
Transfer current year share
of non-distributable reserve
of associate - (650) -
Minority interest written off - - -
Balance at 31 December 2007 -
Audited 41 267 418 4 027
Attributable loss for the six
months ended 30 June 2008 - - -
Recognition of share-based payments - 1 254 -
Dividend paid - - -
Issue of share capital 1 3 356 -
Treasury shares acquired - (2 748) -
Increase in treasury shares held
by share trust - (535) -
Transfer current year share
of non-distributable reserve
of associate - (4 786) -
Balance at 30 June 2008 -
Unaudited 42 263 959 4 027
1 January 2007 to 30 June 2007
Balance at 1 January 2007 -
Audited 40 271 325 3 977
Attributable profit for the six
months ended 30 June 2007 - - -
Recognition of share-based payments - 1 104 -
Dividend paid - - -
Issue of share capital 1 3 073 -
Increase in treasury shares held
by share trust - (975) -
Transfer current year share
of non-distributable reserve
of associate - 3 693 -
Balance at 30 June 2007 -
Unaudited 41 278 220 3 977
Attributable
to equity
Retained holders of
R`000 earnings the parent
Balance at 1 January 2007 - Audited 1 297 049 1 572 391
Attributable profit for the year ended
31 December 2007 842 050 842 050
Gain on available-for-sale investment - 50
Total recognised income and expense
for the year 842 050 842 100
Recognition of share-based payments - 2 281
Dividend paid (37 633) (37 633)
Issue of share capital - 3 074
Treasury shares acquired - (3 512)
Increase in treasury shares held by
share trust - (5 237)
Transfer to capital redemption reserve fund (138) -
Transfer current year share of
non-distributable reserve of associate 650 -
Minority interest written off - -
Balance at 31 December 2007 - Audited 2 101 978 2 373 464
Attributable loss for the six months ended
30 June 2008 (99 224) (99 224)
Recognition of share-based payments - -
Dividend paid (75 774) (75 774)
Issue of share capital - 3 357
Treasury shares acquired - (2 748)
Increase in treasury shares held by
share trust - (535)
Transfer current year share of
non-distributable reserve of associate 4 786 -
Balance at 30 June 2008 - Unaudited 1 931 766 2 199 794
1 January 2007 to 30 June 2007
Balance at 1 January 2007 - Audited 1 297 049 1 572 391
Attributable profit for the six months
ended 30 June 2007 237 068 237 068
Recognition of share-based payments - 1 104
Dividend paid (37 632) (37 632)
Issue of share capital - 3 074
Increase in treasury shares held by
share trust - (975)
Transfer current year share of
non-distributable reserve of associate (3 693) -
Balance at 30 June 2007 - Unaudited 1 492 792 1 775 030
Minority
R`000 interest Total
Balance at 1 January 2007 - Audited (1 700) 1 570 691
Attributable profit for the year ended
31 December 2007 3 261 845 311
Gain on available-for-sale investment - 50
Total recognised income and expense
for the year 3 261 845 361
Recognition of share-based payments - 2 281
Dividend paid - (37 633)
Issue of share capital - 3 074
Treasury shares acquired - (3 512)
Increase in treasury shares held by
share trust - (5 237)
Transfer to capital redemption reserve fund - -
Transfer current year share of
non-distributable reserve of associate - -
Minority interest written off 1 871 1 871
Balance at 31 December 2007 - Audited 3 432 2 376 896
Attributable loss for the six months ended
30 June 2008 3 263 (95 961)
Recognition of share-based payments - 1 254
Dividend paid - (75 774)
Issue of share capital - 3 357
Treasury shares acquired - (2 748)
Increase in treasury shares held by
share trust - (535)
Transfer current year share of
non-distributable reserve of associate - -
Balance at 30 June 2008 - Unaudited 6 695 2 206 489
1 January 2007 to 30 June 2007
Balance at 1 January 2007 - Audited (1 700) 1 570 691
Attributable profit for the six months
ended 30 June 2007 (2 026) 235 042
Recognition of share-based payments - 1 104
Dividend paid - (37 632)
Issue of share capital - 3 074
Increase in treasury shares held by
share trust - (975)
Transfer current year share of
non-distributable reserve of associate - -
Balance at 30 June 2007 - Unaudited (3 726) 1 771 304
Segmental information
Operating Headline
R`000 Revenue (loss)/profit earnings
Financial services 10 360 (181 277) (138 909)
Industrial 272 186 (16 779) (24 106)
Healthcare 185 122 695 86 376
Enterprise development - - 211
Corporate 38 (11 421) (22 770)
Total - Unaudited 282 769 (86 782) (99 198)
R`000 Assets Liabilities
Financial services 318 249 43 482
Industrial 755 299 625 490
Healthcare 2 720 179 943 998
Enterprise development 13 782 -
Corporate 85 075 73 125
Total - Unaudited 3 892 584 1686 095
COMMENTARY
Results for the six months to 30 June 2008 show a headline loss of 42.1 cents
per share (30 June 2007: earnings of 101.1 cents).
All Brimstone`s associate companies delivered strong earnings growth. However,
the decrease in the price of both Old Mutual plc and Nedbank Group Ltd shares,
to which Brimstone holds acquisition rights, resulted in the decline in headline
earnings for the period. The results were also negatively impacted by
Brimstone`s clothing subsidiaries, which produced disappointing results.
For the same reasons, net asset value per share decreased from 1 012.9 cents at
31 December 2007 to 928.9 cents at 30 June 2008. Intrinsic net asset value per
share decreased from 1 065.6 cents per share at 31 December 2007 to 972.1 cents
at 30 June 2008.
RESULTS FOR THE PERIOD
This report has been prepared in compliance with International Financial
Reporting Standards and complies with IAS 34 Interim Financial Reporting.
The accounting policies used in the preparation of this report are consistent
with those used in the annual financial statements for the year ended
31 December 2007.
Issue of shares
The following shares were issued to directors and employees during the period in
terms of the share option scheme.
Ordinary "N" ordinary
25 March 2008 1 273 600 1 831 201
BRIMSTONE PORTFOLIO
HEALTHCARE
Life Healthcare
Life Healthcare Group (Pty) Ltd (LHG) has continued to grow its business as
measured by patient days. Selected facilities have been expanded where licencing
approvals have been obtained and the business continues to focus on operating
efficiencies and product innovation. The commitment to nurse training has been
increased due to nursing skills requirements. The investment in Partnership
Health Group in the UK, which was a small part of the business, was sold to the
joint venture partners, Care UK plc, effective 31 July 2008.
The management of LHG have succeeded in both focusing and optimising the
business of South Africa`s second biggest healthcare operation. This has
resulted in a continuation of the strong performance seen over the last few
years. The company is generating substantial cash flows which enabled LHG to
repay shareholder loans of R500 million in the past 12 months. By virtue of the
above there has been an accretion of value to Brimstone and LHG represents the
most substantial percentage of Brimstone`s investments. Brimstone has
traditionally adopted a conservative valuation methodology for LHG and for that
reason and as a result of the good performance of the company, the directors
have found no reason to adjust the valuation methodology notwithstanding the
downturn in the JSE.
Scientific Group
The Scientific Group delivered strong earnings for the period following the
conclusion of a number of lucrative contracts. We are confident that this niche
sector of the healthcare industry will continue to expand.
INDUSTRIAL
House of Monatic
House of Monatic`s performance was disappointing and was impacted by the
economic slow-down and tougher trading conditions in the local textile industry.
In particular, Fifth Element Marketing (Pty) Ltd performed poorly mainly due to
unprofitable retail chain store business. Corrective action has been taken to
return the company to profitability.
In July 2008, Brimstone, through House of Monatic, acquired the remaining 49% of
the shares in clothing companies, Fifth Element Marketing (Pty) Ltd - which owns
Canterbury International South Africa (Pty) Ltd - and O`Neill South Africa (Pty)
Ltd. Brimstone now owns 100% of Fifth Element Marketing and O`Neill South
Africa. This acquisition is consistent with Brimstone`s strategy of
strengthening House of Monatic Group`s marketing, design and manufacturing
portfolio through the acquisition and development of premium brands.
Rex Trueform/Queenspark
The long-term prospects for Queenspark remain attractive for Brimstone,
notwithstanding the current retail downturn. Results for the year ended
30 June 2008 are expected to be announced soon.
Oceana
Oceana Group Ltd recorded increased turnover and earnings compared to the
previous year. Pilchard landings have been disappointing, but local production
was supplemented by substantial imports resulting in Lucky Star achieving
increased market share. Fishmeal profitability was adversely affected by higher
production costs, including higher fuel and energy costs. Profitability of
lobster, squid, horse mackerel and hake exports benefited from higher selling
prices in international markets and a weaker rand. The cold storage division
increased profits mainly as a result of higher occupancies in most stores.
Sea Harvest
Sea Harvest remains ahead of prior year and budgeted operating profit and grows
market share despite spiralling fuel costs and a global economic slow-down.
Improved winter catch rates and higher export realisations mitigated the full
impact of increased fuel costs.
FINANCIAL SERVICES
Aon South Africa
Insurance broker, Aon South Africa, continued to produce satisfying results in a
challenging and competitive environment. Aon South Africa has been appointed
broker to the Organising Committee of the 2010 FIFA World Cup.
Aon Re Africa
Aon Re Africa is an established reinsurance broker operating throughout
sub-Saharan Africa. Since Brimstone`s acquisition of an effective 18% stake
in Aon Re in March 2007, it has displayed a solid performance and good growth.
Brimstone is well satisfied with the results achieved to date and future
prospects look promising.
Lion of Africa Insurance Company
The first half of this year has seen Lion of Africa`s "A" rating for claims
paying ability reaffirmed by Global Credit Ratings and has shown a return to
profitability. This comes at a time when most other insurance companies have
reported significant declines in earnings as weather, fire and motor related
claim ratios increased following a number of years of abnormally low claims
ratios.
The action taken by Lion of Africa last year to apply stricter underwriting
standards, adjust premium rates and control claims and management expenses more
closely all resulted in an improved operating performance. The new IT platform
implemented in 2007 also helped to improve efficiency levels and service.
For the remainder of 2008, Lion of Africa will continue to improve its back
office and service and broaden its product range to provide a firm platform for
growth in 2009.
Nedbank
Brimstone`s rights to Nedbank Group Ltd shares, accounted for as options, were
significantly down, in line with the overall performance of the share
markets and the reduction of Nedbank`s underlying share price to R91.95
(31 December 2007: R136.00).
Old Mutual
Brimstone`s rights to Old Mutual plc shares, accounted for as options,
were significantly down, in line with the overall performance of the share
markets and the reduction of Old Mutual`s underlying share price to R14.38
(31 December 2007: R22.91). The Brimstone/Mtha Consortium continues to
contribute positively to Old Mutual.
ENTERPRISE DEVELOPMENT
In keeping with its empowerment and positive social impact philosophy, Brimstone
continues to seek opportunities to support smaller businesses to turn around,
stabilise and/or grow. A 30% interest was acquired recently in Cleardata (Pty)
Ltd, a local entrepreneurial solution for the confidential, safe and secure
destruction of physical documents.
INTRINSIC NET ASSET VALUE
In the annual financial statements as at 31 December 2007, the directors
included a report on Intrinsic Net Asset Value based on a line-by-line valuation
of the underlying investments. A similar exercise was performed at 30 June 2008,
which indicated an Intrinsic Net Asset Value of 972.1 cents (31 December 2007:
1 065.6 cents per share).
DIVIDEND
In line with past practice, no interim dividend is payable at half-year.
PROSPECTS
Despite the decrease in headline earnings, Brimstone`s portfolio comprises
quality, sustainable and resilient businesses that are intrinsically valuable.
The current market environment provides good value opportunities and Brimstone
management continues to carefully build its deal pipeline.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-executive Chairman Chief Executive Officer
19 August 2008
Registered Office: Boundary Terraces, 1 Mariendal Lane, Newlands 7700
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001
Sponsor: Nedbank Capital, 135 Rivonia Road, Sandton 2196
Website: www.brimstone.co.za
E-mail: info@brimstone.co.za
Directorate: Prof GJ Gerwel (Chairman), F Robertson (Executive Deputy
Chairman)*, MA Brey (Chief Executive Officer)*, LZ Brozin*, PL Campher, M Hewu,
N Khan, MK Ndebele, Y Pahad, LA Parker, TMF Phaswana, AA Roberts, FD Roman,
Dr O Shisana
Executive
Date: 19/08/2008 14:16:01 Produced by the JSE SENS Department.
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