| Mon 23 Feb 2009, 17:33 | | BRT - Brimstone Investment Corporation Limited - Reviewed results for the year |
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BRT BRN
BRT
BRT - Brimstone Investment Corporation Limited - Reviewed results for the year
ended 31 December 2008
Brimstone Investment Corporation Limited
ISIN Number: ZAE000015277
Share Code: BRT
ISIN Number: ZAE000015285 Share Code:
BRN Company Registration Number: 1995/010442/06
(Incorporated in the Republic of South Africa) ("Brimstone" or "the Company")
Reviewed results for the year ended 31 December 2008
Salient Features
R153 million cash from Life Healthcare
Dividend 24c per share
NAV R2.2 billion (R9.27 per share)
R67 million mark-to-market losses
Fifth Element Group losses provided for
Commentary
In challenging trading conditions the Group continues to derive good returns
and has started to see healthy cash inflows from its underlying investments.
Equity accounted earnings have grown strongly from R7.3 million to R42.5
million and dividends received have increased from R28.6 million to R32.8
million, whilst fees received from underlying investments amounted to R22.6
million (2007: R8.0 million). Shareholder loans repaid to Brimstone by the Life
Healthcare Group ("LHG")-during the year amounted to R153.3 million.
Group liquidity has improved, with Net Current Assets of R120.5 million as at
31 December 2008, compared to Net Current Liabilities of R73.7 million at
December 2007.
However, results for the year to 31 December 2008 reflect a decline in Net
Asset Value ("NAV") of 7.7% from R2 373.5 million (R10.13 per share) to R2
191.2 million (R9.27 per share). Intrinsic NAV as at 31 December 2008,
calculated on a line-by-line basis, was R2 255.6 million (2007: R2 496.8
million), translating to R9.55 per share (2007: R10.66) As an investment
vehicle, the Group considers its balance sheet and NAV to be very important
measures of its performance.
The Group reported an attributable loss of-R110 million (2007: R842.1 million
profit), equating to a loss per share of 46.6 cents (2007: 359.8 cents -
earnings per share).
The decline in NAV and-earnings fluctuation relative to 2007 are attributable
to the following:
- Operational losses by Brimstone`s clothing subsidiaries as reported in June
2008 were exacerbated by further operational and exceptional losses in the
second half of the year. At year end, a Group loss of R54 million (22.9 cents
per share) was recorded. R54.4 million (23 cents per share) of this amount
relates to the Fifth Element Group. Following-evidence of gross irregularities
(as communicated to shareholders on 30 January 2009), the Company is vigorously
pursuing every available course of action to seek financial redress.
Nevertheless, the directors have seen it fit and prudent to make full
-provision in these results for the maximum possible loss.
- Fair value losses of R67.0 million compared to gains of R1,100.9 million in
2007 arose from the valuation of the rights to 2.6 million Nedbank Group
Limited and 19.4 million Old Mutual plc shares, accounted for as options,
deteriorating by R233.1 million due to a sharp drop in the share prices of
these entities.
LHG`s contribution to fair value gains of R161.2 million in 2008 is not
comparable to the R1 073.5 million recorded in 2007 as:
There was a non-recurring increase in the carrying value of LHG in 2007
-following the change from using historic Earnings Before Interest, Tax,
Depreciation and Amortisation ("EBITDA") in 2006 to using forward EBITDA to
value the investment in LHG;
There was an increase in the value allocated to minorities in LHG;
2007 EBITDA included R120 million from LHG`s UK joint-venture, Partnership
Health Group ("PHG"), which was disposed of during the year.
Auditors` review opinion
The results have been reviewed by Deloitte & Touche whose unmodified review
report is available for inspection at the company`s registered office.
Results for the year
These results comply with IAS 34: Interim Financial Reporting. The accounting
policies and methods of computation used in the preparation of this report are
consistent with those used in the annual financial statements for the year
ended 31 December 2007 which comply with the Companies Act of South Africa and
International Financial Reporting Standards.
Issue of shares
The following shares were issued to directors and employees during the year in
terms of the share option scheme.
Ordinary "N" ordinary
25 March 2008 1 273 600 1 831 201
Brimstone portfolio
Healthcare
Life Healthcare Group
One of South Africa`s largest private hospital groups, The Life Healthcare
Group comprises a wide geographic spread of acute care facilities across the
-country. The acute care business is complemented by related healthcare
services businesses, facilitating an integrated healthcare delivery system.
LHG`s focus on operating efficiencies, product innovation and commitment to
nurse training is expected to boost performance and profitability accordingly.
LHG`s performance has exceeded the investment case with continuing operations
recording 13% revenue growth and delivering an operating EBITDA margin of 18%
(R1.6 billion) for 2008. Good cash generation together with the proceeds from
the disposal of PHG has enabled distributions to shareholders, including R153
million to Brimstone. LHG has a healthy balance sheet and is well positioned to
grow through the expected increased demand for health care services in the
years ahead and will benefit from the counter cyclical nature of the business.
Legislative and regulatory reviews are not expected to have material negative
consequences for the businesses of LHG.
Life Hospitals
LHG owns and operates 7,400 beds at 59 hospitals countrywide. Demand for
-private health services, measured by patient days, grew by 5% to 1.69 million
in 2008. This comprised organic growth at existing facilities, new services
introduced and new facilities and technology. LHG continues to selectively
expand and upgrade its facilities, as well as opening new facilities where
licences have been procured. Life Fourways is now fully on-stream and Brimstone
is encouraged by the prospects presented by the other major developments at
Vincent Pallotti (Cape Town), St Georges (Port Elizabeth) and, in 2009, Beacon
Bay (East London).
Life Esidimeni
In October 2007 LHG acquired the 45% interest in Life Esidimeni held by Real
Africa Holdings. Life Esidimeni is the oldest and largest public private
partnership in the country, operating 5,200 beds at 14 facilities and providing
over 1.7 million patient days a year for long stay mental health, frail care
and chronic TB patients. It also operates 400 beds at 2 acute care community
hospitals, providing 95,000-in-patient days and 100,000 out-patient visits
annually.
Life Occupational Health
Life Occupational Health is the country`s leading provider of contracted,
on-site occupational and primary healthcare services to employer groups in
commerce, industry, mining and prisons. The group manages 260 clinics and takes
care of over 150,000 employees.
Partnership Health Group, United Kingdom
PHG was a joint venture providing contract services to the UK`s National Health
Services (NHS). The interest in this business was disposed of in July 2008,
following a strategic review after a change in NHS policy. The disposal brought
in additional cash at an IRR of 47%.
Scientific Group
The Scientific Group continues to perform well and benefits from a wider market
presence. Future prospects are promising and we are confident that this niche
sector of the healthcare industry will continue to expand. Brimstone continues
to evaluate its long-term strategic options relating to this investment.
Industrial
Sea Harvest
Despite a cut in the Hake Total Allowable Catch and increase in the average
fuel price, Sea Harvest increased operating profit whilst maintaining margins.
This was achieved through conscious migration up the value chain and improved
export volumes and prices, boosted by exchange rate gains from the
deteriorating Rand. Sea Harvest also grew its share of the local retail market
in the period under review.
The key strategic initiatives of Sea Harvest management remain to:
- Contribute to the sustainable management of the fish resource;
- Maximise the profitability of every kilogram of fish caught; and
- Optimise fish catch at best cost.
Brimstone is increasing its shareholding in Sea Harvest to an effective 55%.
Implementation of the transaction - which is subject to Competition Commission
approval - is expected to be completed in the first half of 2009. Sea Harvest
will then become a subsidiary of Brimstone. In 2008, Sea Harvest contributed
R10.2 million to dividends received and R11.6 million to Brimstone`s share of
income from associates.
Oceana
Oceana`s performance was well ahead of last year, following improved results in
most its business units. Horse mackerel activities produced exceptional results
-benefiting from good catch rates, stable markets and favourable Rand/Dollar
exchange rates. Sales of Lucky Star canned fish rose due to imports of product
to supplement lower supplies from local producers. Fishmeal volumes increased
and prices were good. Lobster export markets were good until the latter part of
the year and profit benefited from the effect of a weaker Rand exchange rate.
House of Monatic
The decision to place the Fifth Element Group under provisional liquidation,
following-evidence of gross irregularities, was a direct action taken to
protect the interests of all stakeholders.
From a manufacturing perspective, the pressure exerted on retailers by
prevailing-market conditions has impacted negatively on margins. Initiatives
being taken to improve operating efficiencies within the 100 year-old business,
together with the effective management of viable employment levels are showing
improvements in competitiveness.
Rex Trueform / African & Overseas Enterprises
The mark-to-market revaluation of the ordinary and N ordinary shares in Rex
Trueform Limited and African & Overseas Limited increased by R9.9 million with
R2 million (2007: R1.3 million) being received in dividends from the two
companies. This reflected the relatively good performance of Queenspark in a
year in which most retailers were, and continue to be, under pressure.
Financial services
Aon South Africa
Aon South Africa`s growth continued during 2008 with Aon now being the largest
insurance broker and risk manager on the African continent. During the year,
Aon South Africa made one acquisition in the employee benefit arena and two
acquisitions in the short-term business division. Aon has experienced
particularly good growth in its nine branches across South Africa.
Aon Re Africa
Following the purchase of the Benfield Group worldwide by Aon Re Global, in
South Africa Aon Re will be merging with Benfield SA to become the largest and
most innovative reinsurance broker in Southern Africa. The Brimsure Consortium
currently has a 30% stake in Aon Re Africa. Aon Re Africa reported excellent
results in 2008 with margins exceeding international benchmarks.
Lion of Africa Insurance
The Lion of Africa has had a disappointing second half of the year after they
reported a modest improvement in their underwriting results for the half-year.
Floods in Kwa-Zulu Natal and in the Western Cape combined with some of the
largest market fire losses in the history of the industry, have contributed to
the company`s second successive year of underwriting losses at year-end. The
generally poor investment environment in the year also meant that investment
income was at a reduced level compared to previous years. Management have made
significant progress in the implementation of their new IT platform and hope to
further leverage the efficiencies of the new system in 2009. They expect a
lower cost base and a commensurate improvement in profitability for the company
in 2009.
Nedbank Group
The mark-to-market value of Brimstone`s rights to 2.6 million Nedbank shares,
accounted for as options, was significantly down at year end, in line with the
overall performance of the share markets and banks in particular. The
independently-calculated option valuation was based on a closing share price
for Nedbank of R95.50 (2007: R136) per share. The original strike price of the
options at the date of the transaction was R74.75 per share. The performance
contract between the underlying businesses of Nedbank and the Brimstone-Mtha
Consortium, which Brimstone leads, continues to deliver for Nedbank, with
Brimstone earning performance fees of R6.2 million for the 12 months to 30
November 2008.
Old Mutual plc
The mark-to-market value of Brimstone`s rights to 19.4 million Old Mutual plc
shares, accounted for as options, suffered a severe deterioration over the year
as the Old Mutual plc share price dropped by 67% from R22.91 per share at 31
December 2007 to R7.60 per share at 31 December 2008. The original strike price
of the options at the date of the transaction was R14.95 per share. The
relationship with Old Mutual is healthy and the Brimstone-Mtha Consortium
continues to contribute positively in terms of its performance contract with
Old Mutual South Africa Limited. Brimstone earned performance fees of R8.4
million for the year.
Headline earnings per share
Reviewed Audited
Year ended Year ended
31 December 31 December
R`000 2008 2007
Headline (loss)/earnings per share (cents) (33.0) 321.5
Diluted headline (loss)/earnings per share (cents) (32.4) 312.0
Headline earnings calculation
Net (loss)/profit attributable to equity
holders of the parent (110 043) 842 050
Loss on disposal of property, plant,
equipment and vehicles 492 27
Impairment of property, plant, equipment
and vehicles 5 448 -
Realised gain on disposal of associate - (117 104)
Impairment of goodwill - 11 049
Impairment of trademark 26 742 -
Impairment of investment in associate 2 212 1 388
Adjustments relating to results of associate (2 690) (5 488)
Total tax effects of adjustments - 20 468
Headline (loss)/earnings (77 839) 752 390
Weighted average number of shares
on which earnings per share is based (000`s) 236 122 234 005
Weighted average number of shares on
which diluted earnings per share is based
(000`s) 240 369 241 157
Prospects
Brimstone`s portfolio of investments in the financial services, healthcare and
-industrial sectors and its partnership approach to managing these investments
are on a solid footing in spite of the uncertainty of current economic
conditions.
Brimstone will continue to exercise prudence in its investment approach;
consolidate existing interests and, where appropriate, make strategic
disposals and/or acquisitions. By seeking out meaningful investment
opportunities that will bring benefits to shareholders, of whom many are from
the disadvantaged communities of our society, Brimstone remains fixed on a
course that will generate cash and long-term shareholder wealth while actively
contributing to accelerating positive social change.
Dividend
The board of Brimstone has declared a dividend of 24 cents per share payable on
Monday, 25 May 2009. In compliance with the requirements of Strate, the company
has determined the following salient dates for the payment of the dividend. The
last day to trade cum dividend is Friday, 15 May 2009. The dividend is payable
to all shareholders of Brimstone recorded in the books of the company at the
close of-business on Friday, 22 May 2009. Shares will commence trading ex
dividend from Monday, 18 May 2009. Shares may not be rematerialised or
dematerialised from Monday, 18 May 2009 to Friday, 22 May 2009, both days
inclusive.
Board of Directors
Changes to the Board were effected as follows:
The Board welcomed the appointment of Ms Felicia Roman and Dr Olive Shisana as
-independent non-executive directors of the company in March 2008. They bring
a wealth of experience and their appointment boosts the-gender diversity of
the Board.
Mr Lawrie Brozin was appointed as financial director of the company on 19
February 2009.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
23 February 2009
Directorate
Prof. GJ Gerwel (Chairman), F Robertson (Executive Deputy Chairman)*,
MA Brey (Chief Executive Officer)*, LZ Brozin (Financial)*, PL Campher,
M Hewu, N Khan, MK Ndebele, Y Pahad, LA Parker, TMF Phaswana, AA Roberts,
FD Roman, Dr O Shisana * Executive
Group Income Statements
Reviewed Audited
Year ended Year ended
31 December 31 December
R`000 2008 2007
Revenue 555 164 623 723
Cost of sales (403 328) (454 327)
Gross profit 151 836 169 396
Selling and administration expenses (173 796) (144 834)
Fair value (losses)/gains (66 965) 1 100 897
Exceptional items 47 185 102 796
(Loss)/profit from operations (41 740) 1 228 255
Income from investments 9 836 19 173
Finance costs (128 759) (176 804)
Share of profits of associates 42 546 7 314
Net (loss)/profit before taxation (118 117) 1 077 938
Taxation (11 670) 232 627
Net attributable (loss)/profit (106 447) 845 311
Attributable to:
Equity holders of the parent (110 043) 842 050
Minority interest 3 596 3 261
(106 447) 845 311
(Loss)/earnings per share (cents)
Basic (46.6) 359.8
Diluted (loss)/earnings per share (cents)
Basic (45.8) 349.2
Group Balance Sheets
Reviewed Audited
31 December 31 December
R`000 2008 2007
ASSETS
Non-current assets 3 443 199 3 632 945
Property, plant, equipment and vehicles 58 604 64 499
Intangible assets - 26 742
Investments in associate companies 502 845 456 202
Investments 2 875 685 3 085 502
Deferred taxation 6 065 -
Current assets 331 356 316 621
Inventories 123 647 126 183
Trade receivables 85 613 58 669
Other receivables 68 698 55 805
Taxation 21 436
Cash and cash equivalents 53 377 75 528
TOTAL ASSETS 3 774 555 3 949 566
EQUITY AND LIABILITIES
Capital and reserves 2 198 189 2 376 896
Share capital 42 41
Capital reserves 268 345 267 418
Revaluation reserves 4 027 4 027
Retained earnings 1 918 747 2 101 978
Attributable to equity holders of the parent 2 191 161 2 373 464
Minority interest 7 028 3 432
Non-current liabilities 1 365 506 1 182 388
Long-term interest bearing borrowings 967 477 766 239
Deferred taxation 398 029 416 149
Current liabilities 210 860 390 282
Short-term interest bearing borrowings 86 389 60 204
Preference shares for redemption - 137 000
Bank overdrafts 30 717 18 233
Trade payables 51 984 105 775
Other payables 37 829 45 220
Taxation 3 941 23 850
TOTAL EQUITY AND LIABILITIES 3 774 555 3 949 566
NAV per share (cents) 927.3 1 012.9
Shares in issue at end of year (000`s) 236 302 234 315
Segmental information
(Loss)/profit Headline
from (loss)/
R`000 Revenue Operations profit
Financial services 23 793 (214 300) (171 149)
Industrial 530 998 46 925 46 197
Healthcare 370 160 766 100 475
Enterprise development - (2 212) (20)
Corporate 3 (32 919) (53 342)
Total - reviewed 555 164 (41 740) (77 839)
R`000 Assets Liabilities
Financial services 275 576 40 246
Industrial 746 597 370 332
Healthcare 2 656 185 946 030
Enterprise development 5 760 -
Corporate 90 437 219 758
Total - reviewed 3 774 555 1 576 366
Group Cash Flow Statements
Reviewed Audited
Year ended Year ended
31 December 31 December
R`000 2008 2007
Operating activities
Net attributable (loss)/profit (106 447) 845 311
Adjustments for:
Share of profits of associates (72 531) (33 900)
Income from investments (12 643) (21 143)
Decrease/(increase) in fair value
of investments 66 965 (1 100 897)
Impairment of investment in associate 2 212 1 388
Impairment of goodwill - 11 049
Impairment of intangible asset 26 742 -
Impairment of property, plant,
equipment and vehicles 5 448 -
Minority interest written off - 1 871
Finance costs 128 759 176 804
Taxation (11 670) 232 627
Depreciation of property, plant,
equipment and vehicles 6 068 5 410
Share-based payment expense 2 479 2 281
Profit on disposal of investments - (117 104)
Loss on disposal of property, plant,
equipment and vehicles 492 27
Operating cash flows before movements
in working capital 35 874 3 724
Decrease/(increase) in inventories 2 536 (35 954)
(Increase)/decrease in trade and
other receivables (39 837) 1 831
Decrease in trade and other payables (61 182) (1 496)
Cash used in operations (62 609) (31 895)
Income taxes paid (32 009) (6 502)
Finance costs (80 178) (76 863)
Net cash utilised in operating activities (174 796) (115 260)
Investing activities
Income from investments 9 836 19 173
Dividends received from associates 29 985 26 586
Dividends received from other equity investments 2 807 1 970
Loan repayments and recoveries from
associate and investments 154 166 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 (6 114) (31 265)
Acquisition of subsidiaries
-shares acquired and loans advanced - (6 442)
Acquisition of associates and investments (14 314) (78 956)
Net cash from investing activities 176 366 211 250
Financing activities
Dividends paid (75 774) (37 633)
Repayments of borrowings (150 994) (36 498)
Loans raised 192 837 69 481
Shares repurchased (5 631) (8 749)
Proceeds on issue of share capital 3 357 3 074
Increase/(decrease) in bank overdrafts 12 484 (27 670)
Net cash used in financing activities (23 721) (37 995)
Net (decrease)/increase in cash and
cash equivalents (22 151) 57 995
Cash and cash equivalents at beginning of year 75 528 17 069
Cash and cash equivalents acquired on
acquisition of subsidiaries - 464
Cash and cash equivalents at end of year
Bank balances and cash 53 377 75 528
Group Statements of Changes in Equity for the year ended 31 December 2008
Share Capital Revaluation Retained
R`000 capital reserves reserves earnings
Balance at 1 January
2007 - audited 40 271 325 3 977 1 297 049
Attributable profit for the
year ended 31 December 2007 - - - 842 050
Gain on available-for-sale
investment - - 50 -
Total recognised
income and expense
for the year - - 50 842 050
Recognition of
share-based payments - 2 281 - -
Dividend paid - - - (37 633)
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 - (138)
Transfer current year share of
non-distributable reserve
of associate - (650) - 650
Minority interest written off - - - -
Balance at 31 December
2007 - audited 41 267 418 4 027 2 101 978
Attributable
(loss)/profit for the year
ended 31 December 2008- - - (110 043) (110 043)
Recognition of
share-based
Payments - 2 479 - -
Dividend paid - - - (75 774)
Issue of share capital 1 3 356 - -
Treasury shares acquired - (4 731) - -
Increase in treasury
shares held by share trust - (900) - -
Transfer to capital
redemption reserve fund - 2 - (2)
Transfer current year
share of non-distributable
reserve of associate - (2 588) - 2 588
Share of non-distributable
reserves of associate
transferred directly to equity - 3 309 - -
Balance at 31 December
2008 - reviewed 42 268 345 4 027 1 918 747
Attributable
to equity
holders of Minority
R`000 the parent interest Total
Balance at 1 January 2007 - audited 1 572 391 (1 700) 1 570 691
Attributable profit for the
year ended 31 December 2007 842 050 3 261 845 311
Gain on available-for-sale investment 50 - 50
Total recognised income and
expense for the year 842 100 3 261 845 361
Recognition of share-based payments 2 281 - 2 281
Dividend paid (37 633) - (37 633)
Issue of share capital 3 074 - 3 074
Treasury shares acquired (3 512) - (3 512)
Increase in treasury shares
held by share trust (5 237) - (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 2 373 464 3 432 2 376 896
Attributable (loss)/profit for the year
ended 31 December 2008 - 3 596 (106 447)
Recognition of share-based
Payments 2 479 - 2 479
Dividend paid (75 774) - (75 774)
Issue of share capital 3 357 - 3 357
Treasury shares acquired (4 731) (4 731)
Increase in treasury shares held
by share trust (900) - (900)
Transfer to capital redemption
reserve fund - - -
Transfer current year share of
non-distributable reserve of associate - - -
Share of non-distributable reserves
of associate transferred directly
to equity 3 309 - 3 309
Balance at 31 December
2008 - reviewed 2 191 161 7 028 2 198 189
Registered Office: Boundary Terraces, 1 Mariendahl Lane, Newlands 7700
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001 Sponsor: Nedbank Capital, 135 Rivonia Road, Sandton
2196 E-mail: info@brimstone.co.za
www.brimstone.co.za
Date: 23/02/2009 17:33:01 Produced by the JSE SENS Department.
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