| Fri 12 Jun 2009, 13:26 | | BIK - Brikor Limited - Reviewed Condensed Consolidated Financial Results for |
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BIK
BIK
BIK - Brikor Limited - Reviewed Condensed Consolidated Financial Results for
the year ended 28 February 2009
BRIKOR LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1998/013247/06)
JSE code: BIK
ISIN: ZAE000101945
("Brikor" or "the company" or "the group")
REVIEWED CONDENSED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2009
Condensed Consolidated Income Statements
Reviewed Audited
February February
2009 2008
R`000 R`000
Revenue 339 335 311 908
Cost of sales (275 386) (174 070)
Cost of sales depreciation (18 514) (13 719)
Gross profit 45 435 124 119
Other income 645 894
Government grants - 6 303
Operating expenses (56 593) (36 930)
Depreciation and amortisation (6 456) (1 700)
Impairment of goodwill (3 747) -
(Loss) / Profit before interest and (20 716) 92 686
taxation
Investment revenue 4 545 13 005
Finance costs (19 749) (6 780)
(Loss) / Profit before taxation (35 920) 98 911
Taxation 7 747 (25 869)
(Loss) / Profit attributable to (28 173) 73 042
ordinary shareholders
Reconciliation of headline earnings:
(Loss) / Profit attributable to (28 173) 73 042
ordinary shareholders
Adjusted for: (7) -
IAS 16 profit on disposal of
property, plant and equipment
Impairment of goodwill 3 747 -
Grant received - (6 303)
Headline (loss) / earnings (24 433) 66 739
attributable to ordinary shareholders
Weighted average shares in issue 622 673 309 560 227 730
Treasury shares (issued to the Brikor 15 900 000 9 017 260
Share Incentive Scheme)
Fully diluted weighted average shares 638 573 309 569 244 990
in issue (000)
(Loss) / Earnings per share (cents) (4.5) 13.0
Headline (loss) / earnings per share (3.9) 11.9
(cents)
Fully diluted (loss) / earnings per (4.5) 11.7
share (cents)
Fully diluted headline (loss) / (3.9) 12.8
earnings per share (cents)
Dividend per share (cents) 1.5 -
Condensed Consolidated Balance Sheets
Reviewed Audited
February February
2009 2008
R`000 R`000
ASSETS
Non-current assets 555 976 327 275
Property, plant and equipment 458 119 299 832
Intangible assets 19 448 30
Goodwill 77 037 27 207
Other financial assets 1 372 206
Current assets 135 447 198 692
Inventories 78 027 65 225
Trade and other receivables 52 295 37 768
Cash and cash equivalents 5 125 95 699
Total assets 691 423 525 967
EQUITY AND LIABILITIES
Equity 375 705 412 035
Issued capital 62 62
Share premium 227 380 225 980
Retained earnings 148 263 185 993
Non-current liabilities 185 058 57 442
Borrowings 116 278 14 198
Deferred taxation 56 300 37 442
Environmental obligation 12 480 5 802
Current liabilities 130 660 56 490
Current portion of borrowings 49 276 8 977
Other financial liabilities 11 003 4 003
Taxation 15 918 16 110
Trade and other payables 36 776 27 400
Bank overdraft 17 687 -
Total equity and liabilities 691 423 525 967
Number of shares in issue at year end 639 640 637 094
308 853
Number of shares in issue (excluding 623 740 621 194
treasury shares) 308 853
Net asset value per share (cents) 60.2 66.3
Net tangible asset value per share 45.8 61.9
(cents) (excludes deferred tax
liability related to intangible
assets)
Condensed Consolidated Statements of Changes in Equity
Share Share Retained Total
capital premium earnings equity
R`000 R`000 R`000 R`000
Balance 1 March 2007 - - 112 951 112 951
Share capital issued 64 - - 64
Premium on share - 251 095 - 251 095
capital issued
Share issue expenses - (9 217) - (9 217)
Less treasury shares (2) (15 898) - (15 900)
Profit for the year - - 73 042 73 042
Balance 1 March 2008 62 225 980 185 993 412 035
Share capital issued - 1 400 - 1 400
Dividend declared - - (9 557) (9 557)
Loss for the year - - (28 173) (28 173)
Balance 28 February 62 227 380 148 263 375 705
2009
Condensed Consolidated Cash Flow Statements
Reviewed Audited
February February
2009 2008
R`000 R`000
Cash flows from operating activities (17 086) 25 921
Cash flows from investing activities (235 480) (74 000)
Cash flows from financing activities 144 305 140 894
Net (decrease) / increase in cash and (108 261) 92 815
cash equivalents
Cash and cash equivalents at beginning 95 699 2 884
of year
Cash and cash equivalents at end of year (12 562) 95 699
Segmental Reporting
Brikor Brikor Consolidat
Inland Coastal ed
R`000 R`000 R`000
2009
Revenue 243 333 96 002 339 335
Gross profit before 38 811 25 138 63 949
depreciation
Depreciation and 20 380 4 590 24 970
amortisation
Total current assets 111 344 24 103 135 447
Total current 107 231 23 429 130 660
liabilities
Capital expenditure 60 549 4 159 64 708
OVERVIEW
The directors of Brikor present the reviewed condensed consolidated financial
results for the year ended 28 February 2009 ("2009 year"). Brikor is a
manufacturer and supplier of building and construction materials to the
building industry, servicing all segments of the market ranging from low-cost
housing, residential, commercial to construction projects. The diversification
strategy to expand its concrete division and the acquisition of two quarries,
Zululand Quarries and Donkerhoek Quarries during the 2009 year minimised the
inherent risks of a traditional brickmaking business and ensured a spread of
product offerings.
The local economic environment was characterised by high inflation and
interest rates which impacted on market sentiment and consumer confidence. The
interest rate cycle resulted in declining property prices, a considerably
lower level of residential building plans being passed and a consequential
slowdown in the building and construction industry, especially in the
residential market. The recent interest rate moderation is only likely to have
a positive impact on market conditions in the latter part of the current
financial year and early into the next financial year.
Market conditions in the building industry remained subdued during the 2009
year, mainly impacted by reduced consumer spending, tightening of available
bank funding as well as cautious market sentiment. Significant rainfall
hampered clay brick and ready-mix concrete operations. The group`s results
for the 2009 year were affected by the knock-on effects of the global economic
downturn, credit crunch and increased input costs as well as delays and
cancellations in building and construction projects. The severe decline in
building activity resulted in an unexpected and unprecedented overstocked
situation.
During the 2009 year, Brikor was also severely affected by a strike. Business
operations were hampered throughout the strike period, resulting in a decrease
in business activity as well as the loss of production. Throughout the strike
period the company was able to service its major customers and project
commitments. Brick and roof tile sales decreased significantly during the
strike period. The strike was resolved in mid-October 2008 and sales and
production levels returned to 60% of pre-strike levels by the end of November
2008. A new wage agreement was reached and the platform for a long-term
relationship with unions has been set.
The negotiation process relating to the strike necessitated substantial
spending on increased safety precautions and legal action which resulted in
non-recurring expenditure and production losses of approximately R14 million
(R6 million is included under cost of sales and the balance is included in
operating expenses).
The concrete manufacturing facility in Olifantsfontein yielded negative
returns during the first half of the year as a result of the late
commissioning of a section of the plant due to unforeseen mechanical problems
in the commissioning phases together with production management problems which
have been addressed.
The brick handling automation and the burning process upgrade in Vereeniging
has been successfully commissioned. The Stanger plant at Zululand Quarries is
performing to expectations and the surrounding market appears stable.
Donkerhoek Quarries is expanding its product range and is expected to grow its
market share.
FINANCIAL RESULTS
The group`s consolidated revenue increased by 8.8% to R339.3 million (2008:
R311.9 million), mainly as a result of the inclusion of the Zululand Quarries
acquisition from 1 March 2008 and the Donkerhoek acquisition from 1 August
2008. Gross profit decreased by 63.4% to R45.4 million (2008: R124.1 million)
and gross profit margins decreased from 39.8% to 13.4% as a result of the
continued increased input costs, such as labour (including the strike action),
energy, fuel and raw materials.
Margins remained under pressure due to lower margin products in the sales mix
combined with a lower growth in demand, exacerbated by the group`s inability
to pass input cost increases on to its customers as a result of price pressure
and competition for volume. Subsequent to the financial year end, the group
returned to profitability and overall gross profit margins improved. It is not
anticipated that the group will achieve the same gross profit margin levels as
reported in 2008 in the medium term.
The reduction in the group`s gross profit, combined with higher operating
expenses, increased depreciation charges for the larger asset base and finance
costs, resulted in a loss per share of 4.5 cents (2008 earnings: 13.0 cents).
Fully diluted headline loss per share was 3.9 cents (2008 earnings: 12.8
cents).
The increase in fixed assets, goodwill, intangible assets, inventories and
trade and other receivables relate to the acquisitions of Zululand Quarries
and Donkerhoek Quarries. Additions to property, plant and equipment amounted
to R64.7 million, largely attributable to the upgrading of facilities to
maintain, improve and increase current production capabilities.
BORROWINGS
The increase in borrowings to finance the acquisitions amounted to R113.2
million. The interest charged reduced the earnings per share and headline
earnings per share by 1.3 cents.
BUSINESS COMBINATIONS
Zululand Quarries was acquired on 1 March 2008 for R102 million. These
aggregate and concrete operations are located on the North Coast of KwaZulu-
Natal in the Ballito and Mandini areas. Zululand Quarries contributed revenue
of R96 million and after tax profit of R4.2 million to the group for the
period ended 28 February 2009. Goodwill in respect of acquisition amounted to
R29.5 million and intangible assets amounted to R11.9 million.
Brikor also acquired Donkerhoek Quarries with effect from 1 August 2008 for
R70 million. This aggregate business is located in the Donkerhoek area, east
of Pretoria. Donkerhoek Quarries contributed revenue of R15.7 million and a
net loss after tax of R2.9 million for the seven months ended 28 February
2009. Goodwill amounted to R20.4 million after an impairment loss of R3.7
million and intangible assets amounted to R7.5 million. Taking into account
current market sentiment and the pressure on the building industry, the board
believes it prudent to provide for an impairment loss of R3.7 million on
goodwill.
POST BALANCE SHEET EVENTS
Management is not aware of any material events, other than as outlined above,
which occurred subsequent to the year ended 28 February 2009. There has been
no material change in the group`s contingent liabilities since the financial
year-end.
STATEMENT ON GOING CONCERN
The reviewed condensed consolidated annual financial statements for the year
ended 28 February 2009 have been prepared on the going concern basis as the
directors have every reason to believe that that the group has adequate
resources to continue in operation for the foreseeable future.
DIRECTORATE
Mr Mitesh Patel resigned as an independent non-executive director of the
company and as Chairperson of the Audit Committee on 18 March 2009 due to a
conflict of interest with another board appointment.
Mr Elmar Grobbelaar (CA (SA)) was appointed to the board on 24 April 2009 as a
non-executive director and as Chairman of the Audit Committee.
Mr Alwyn Cronje resigned on 8 June 2009 as an executive director of the
company in order to pursue personal interests.
PROSPECTS
The challenging economic conditions are likely to continue over the medium
term as the consequences of the global economic crisis take effect and while
market confidence remains weak and uncertainty continues. The group remains
committed to its diversification strategy, underpinned by its product offering
and exposure to identified market segments, being non-residential
(construction industry, commercial building and offices) and residential
(affordable and low-cost housing), to counter the risks associated with the
worldwide economic climate and to sustain growth.
The Board continues to be positive about Brikor`s long-term growth prospects
as:
- The group is well positioned to participate significantly in the
infrastructure improvement programme and volume growth will be further
supported by the acceleration of consequential building activity from
large infrastructure projects. The group has recently tendered for a
number of large infrastructure projects.
- Through the alignment of its businesses, assets will be exploited by
maximising synergies and economies of scale.
- The geographical footprint of the group increases its ability to present
its offering to other market segments with specific needs where
differentiation can be achieved.
No major capital expenditure in the clay and concrete divisions is planned for
the year as the plants are running at low capacity. Existing projects will be
completed and capital expenditure will be limited to maintenance of plant and
equipment. This is not expected to exceed R10 million for the 2010 year.
Capital expenditure on the aggregates division is planned for expansions to
increase capacity to meet demands and is expected not to exceed R15 million.
Margin improvement will be driven through improved internal efficiencies and
optimised production. Key focus areas will remain cash flow generation and
strict working capital management. The directors are confident that Brikor is
well positioned to take advantage of any improvement in the current economic
environment.
CORPORATE GOVERNANCE
The group subscribes to the principles of, and implements where possible, the
recommendations of the King II Code on Corporate Governance.
DIVIDEND POLICY
After taking cognisance of market conditions, the current availability of
credit and recent acquisitions made by the company, the directors consider it
prudent to conserve cash and do not propose a dividend in respect of the 2009
year. It remains the policy of the group to review the dividend policy
annually in light of cash flow, gearing and capital requirements.
BASIS OF PREPARATION
The reviewed condensed consolidated financial statements for the year have
been prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards, the disclosure requirements of
IAS34: Interim Financial Reporting and in the manner required by the JSE
Limited Listings Requirements and the South African Companies Act, 1973. The
accounting policies and method of measurement and recognition applied in
preparation of the reviewed consolidated annual financial statements are
consistent with those applied in the group`s annual financial statements for
the year ended 29 February 2008, which comply with International Financial
Reporting Standards.
REVIEW OPINION
These reviewed condensed consolidated annual financial statements have been
reviewed by the group`s auditors, RSM Betty & Dickson (Tshwane), and their
unmodified review opinion is available for inspection at the company`s
registered office.
By order of the Board
12 June 2009
G v N Parkin H Botha
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non executive directors: EG Dube; E Grobbelaar
Executive directors: G v N Parkin (Chairman and CEO); H Botha (Financial
Director); G Parkin (Jnr) (Alternate)
Registration number: 1998/013247/06
JSE code: BIK
ISIN: ZAE000101945
Registered address: 1 Marievale Road, Vorsterskroon, Nigel
Postal address: PO Box 884, Nigel, 1490
Company secretary: Hanleu Botha
Telephone: (011) 739 9000
Facsimile: (011) 739 9021
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Vunani Corporate Finance
Auditors: RSM Betty & Dickson (Tshwane)
These results and an overview of Brikor are available at www.brikor.co.za.
Date: 12/06/2009 13:26:01 Produced by the JSE SENS Department.
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