| Fri 30 Jan 2009, 16:58 | | BRT/BRN - Brimstone - Information relating to House of Monatic taking steps to |
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BRT BRN
BRT
BRT/BRN - Brimstone - Information relating to House of Monatic taking steps to
minimise risk exposure in one of its subsidiaries and cautionary announcement
Brimstone Investment Corporation Limited
(Registration number 1995/010442/06)
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000015277 Share Code: BRT
ISIN Number: ZAE000015285 Share Code: BRN
("Brimstone" or the "Company")
Information relating to House of Monatic taking steps to minimise risk exposure
in one of its subsidiaries and cautionary announcement
House of Monatic , a wholly-owned subsidiary of Brimstone, has applied to the
High Court to liquidate its interests in Fifth Element Marketing (Pty) Ltd
("Fifth Element") - the clothing design and wholesale business which owns
fashion and sportswear supplier Canterbury International SA (Pty) Ltd and surf-
wear and fashion brand, O`Neill SA ("collectively the businesses").
The businesses - like many other businesses in the clothing industry have been
faced with challenges despite receiving funding, commitment and support from
House of Monatic. Evidence of possible financial irregularities perpetrated in
the businesses was recently uncovered during an ongoing co-operative
investigation by House of Monatic and the South African Revenue Services (SARS).
These irregularities appear to have been the cause of the current financial
position in which liabilities exceed the assets within these three entities.
House of Monatic has therefore been left with no alternative but to liquidate
the entities concerned. This action is being undertaken in order to protect the
interests of all stakeholders.
The acquisition of Fifth Element Marketing and O`Neill SA was made in 2006 and
formed part of a strategy to expand the capabilities and competitiveness of 100
year-old House of Monatic whilst enhancing its transformation from a
commoditised clothing supplier into a leading fashion brand house.
Iqbal Khan, House of Monatic Group Chief Executive Officer said, "the findings
of our preliminary investigations are of such a serious nature that we needed to
act firmly and responsibly in accordance with our corporate governance
disciplines. The investigations are continuing and House of Monatic and its
subsidiaries are co-operating fully with SARS. We intend to pursue our rights
in criminal and civil law to the full extent, should the investigation affirm
the allegations of impropriety"
Given the nature of Brimstone`s business as an investment holding company and
the liquidation process to follow, the financial impact of the liquidation of
the three companies on the net asset value of Brimstone`s investment portfolio
at 31 December 2008 is unclear but not expected to be material while the impact
on earnings for the year ended 31 December 2008 is not quantifiable at this
stage. Shareholders are therefore advised to exercise caution when dealing in
Brimstone securities until the Company is able to provide its shareholders with
further information. The businesses collectively contributed a loss of 11.7
cents per Brimstone share for the six months ended 30 June 2008 and reflected a
negative net asset value of 14.9 cents per Brimstone share at 30 June 2008.
Of concern to Brimstone is the impact on, and potential job losses to, employees
of Fifth Element and its subsidiaries. House of Monatic is actively seeking
ways in which these jobs could potentially be saved.
"Although this recent action has impacted on our aspirations to refocus our
energies on building the capabilities and growing the brands within House of
Monatic, it has not diminished our mission of realising our values, to be
profitable, empowering and to have a positive social impact over the longer-
term", said Khan.
Cape Town
30 January 2009
Sponsor
Nedbank Capital
Date: 30/01/2009 16:58:01 Produced by the JSE SENS Department.
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