| Thu 20 Aug 2009, 16:51 | | BRT/BRN - Brimstone - Unaudited Results For Six Months Ended 30 June 2009 |
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BRT BRN
BRT
BRT/BRN - Brimstone - Unaudited Results For Six Months Ended 30 June 2009
Brimstone Investment Corporation Limited
Share Code: BRT & ISIN Number: ZAE000015277
Share Code: BRN & ISIN Number: ZAE000015285
Company Registration Number: 1995/010442/06
(Incorporated in the Republic of South Africa) ("Brimstone" or "the Company")
Unaudited results for six months ended 30 June 2009
Commentary
The unaudited results for the six months to 30 June 2009 show an attributable
profit of R12.8 million (5.4 cents per share) compared to the attributable loss
of R99.2 million (42.1 cents per share) for the same period to 30 June 2008 and
the R110 million attributable loss reported for the year ended 31 December
2008.
The increase in earnings is largely attributable to:
- net fair value gains of R15.2 million in 2009, versus fair value losses of
R74.1 million in 2008 following an increase in the fair value of Brimstone`s
rights to Old Mutual plc shares and a reduced downward revaluation of the
group`s rights to Nedbank Group Limited shares;
- dividend income of R35.1 million received from Life Healthcare Group ("LHG")
during the six months under review (2008: Rnil).;
- losses recorded by House of Monatic are significantly down from the R33.4
million losses reported in June 2008, which is attributable to the
discontinuance of the Fifth Element group (placed into liquidation in January
2009) and the continued efforts being made to improve efficiencies and
profitability within Brimstone`s clothing sector interests;
- net exceptional items of R6 million arising from the acquisition of control
of the Sea Harvest group on 28 May 2009.
In the past six months, the group has also announced two significant
transactions consolidating Brimstone`s interests in both the food (Sea
Harvest) and financial services (Lion of Africa) sectors.
The Sea Harvest transaction has been concluded and the Sea Harvest group
results have been consolidated into the group from 1 June 2009.
Brimstone`s acquisition of a 56.94% controlling share in the Sea Harvest group
has significantly increased Brimstone`s interests in the fishing industry
sector and makes Sea Harvest the group`s second largest anchor investment after
LHG.
Results for the period
The 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 2008 which comply with the Companies Act of South Africa and
International Financial Reporting Standards.
Issue of shares
The following shares were issued to directors during the period in terms of
the share option scheme.
Ordinary "N" ordinary
13 May 2009 1 273 596 1 726 405
Brimstone portfolio
Healthcare
Life Healthcare Group
LHG has continued to grow its business to meet demand for its services,
recording good growth in patient days. The group has a number of major
projects, including the new Beacon Bay hospital in East London, which are due
for completion during 2009. Revenue from continuing businesses also showed good
growth and cash generated from operations has shown resilience.
Brimstone received cash payments from LHG of R74.4 million in loan account
repayments (R39.3 million) and dividends (R35.1 million) in the six months
under review. LHG has now repaid its shareholder loans in full.
The fair value of Brimstone`s investment in LHG remains unchanged from that at
31 December 2008, partly to reflect prevailing investment market conditions
and share ratings. LHG is now carried at a valuation based on historic rather
than forward earnings.
The Scientific Group
The Scientific Group, a supplier of bio-technology, imaging, hospital
equipment and diagnostics to the healthcare market, enjoyed good trading
performance and contributed positively to Brimstone`s equity accounted
earnings.
Industrial
Sea Harvest
The Sea Harvest transaction was concluded following approvals from the
Competition Tribunal in March of this year and the unanimous consent of
Brimstone shareholders at the General Meeting held on 28 May 2009. Based on the
price at which control was acquired this makes Sea Harvest the second largest
investment in the Brimstone portfolio. The transaction was hailed as the
largest empowerment deal in the South African fishing industry to date. As part
of the transaction, Sea Harvest was required to raise borrowings and the effect
of such increased borrowings on Brimstone`s earnings and headline earnings is
0.9 cents per share for the period under review.
The Sea Harvest Group`s profitability continues to improve, with good catching
conditions, resource availability (including optimal sizes) and resilient
markets.
Brimstone is confident that Sea Harvest will continue to deliver results in
line with the business case of the acquisition.
Oceana
Oceana has shown good profits in the first half of the year with revenues from
canned fish improving and operating profits in horse mackerel up considerably
with good catches overall contributing favourably to revenues. Cold storage
earnings were lower as a result of generally reduced customer demand.
Over the period under review, Brimstone recorded equity accounted earnings in
excess of R15 million in respect of its 11.6 million Oceana shares.
House of Monatic
Brimstone`s investments in the clothing and apparel sector remain under
pressure. Whilst manufacturing operations continue to be negatively impacted
by adverse market conditions, losses within House of Monatic ("HOM") have been
noticeably reduced with the closure of Monatic Atlantis which for some time
has incurred losses; the liquidation of the Fifth Element group and focused
rationalisation of costs in the core business.
Of the R8.1 million loss recorded by the HOM group during the period under
review, R3.1 million was incurred at Monatic Atlantis (whose operations have
since been discontinued and the assets are being sold) and a loss of R2.4
million was incurred at Monatic Sportswear division.
Rex Trueform and African & Overseas Enterprises
In spite of poor retail trading, clothing manufacturer and retail company Rex
Trueform grew bottom line profits through strong performances from its
Queenspark retail outlets in the first part of the year. The upmarket clothing
chain now has 48 stores in South Africa, one in Namibia and one in Botswana.
The investment in Rex Trueform "N" Ordinary shares was revalued downwards in
the six months to 30 June 2009, due to a decline in the share price.
Financial services
Old Mutual plc
Brimstone`s rights to 19.4 million Old Mutual plc shares are accounted for as
options. Since reaching R7.60 at 31 December 2008, the share has recovered to
R10.13 at 30 June 2009, resulting in a R21 million upward revaluation.
Nedbank Group
The mark-to-market value of Brimstone`s rights to 2.6 million Nedbank shares,
accounted for as options remain depressed given the overall performance of the
share markets.
Lion of Africa Insurance Company
Subject to Competition Commission and regulatory approvals, Brimstone will be
acquiring an additional 21% shareholding in Lion of Africa Insurance Company
("Lion") - increasing its original shareholding from an effective 39% of Lion
to a controlling 60%. At the same time, joint shareholder, Commlife Holdings is
increasing its shareholding in Lion from 26% to 40%.
Apart from now reflecting a 100% black-ownership, Lion is the largest insurer
to local authorities, the third largest specialist underwriter in the
engineering sector and one of the top ten underwriting firms in South Africa.
The company has a unique opportunity to assume its own -independence and move
confidently into its next phase of growth.
From a financial perspective, Lion has had a much improved start to the year in
relation to the prior financial year and paid out a dividend of R27.5 million
during the six months to 30 June 2009 of which Brimstone received R10.7
million.
Aon Re Africa
Aon Re Africa, the continental re-insurance brokerage, continues to perform
exceptionally well. Recently, Aon Re Africa`s operations merged with those of
Benfield South Africa, following the global merger of their respective parent
companies. This development bodes well for future prospects.
Aon South Africa
Aon South Africa is now the largest risk manager and insurance broker in
Africa, recording good profits year on year.
Entrepreneurial development
Hot Platinum and Cleardata continue to weather the challenges of the current
global down-turn. With Brimstone`s on-going active business development, risk
management, administrative and accounting support we are optimistic of their
future.
Headline earnings per share
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2009 2008 2008
Headline earnings/(loss) per share
From continuing and discontinued
operations
Headline earnings/(loss)
per share (cents) 1.8 (42.1) (33.0)
Diluted headline loss
per share (cents) 1.8 (41.3) (32.4)
From continuing operations
Headline earnings/(loss) per share
(cents) 1.8 (30.4) (40.9)
Diluted headline earnings/loss per
share (cents) 18 (29.8) (40.2)
Headline earnings/(loss) calculation
Net profit/(loss) attributable to
equity holders of the parent 12 810 (99 224) (110 043)
Loss on disposal of property, plant,
equipment and vehicles - 26 492
Impairment of property, plant,
equipment and vehicles - - 5 448
Realised loss on disposal of
associate 15 660 - -
Gain on acquisition of businesses (23 301) - -
Impairment of goodwill 86 - -
Impairment of intangible asset - - 26 742
Impairment of investment in
associate - - 2 212
Adjustments relating to results of
associate (1 259) - (2 690)
Total tax effects of adjustments 209 - -
Headline earnings/(loss) 4 205 (99 198) (77 839)
Weighted average number of shares on
which loss per share is
based (000`s) 237 112 235 709 236 122
Weighted average number of shares on
which diluted loss per share is
based (000`s) 238 908 240 170 240 369
Intrinsic net asset value
Intrinsic NAV, calculated on a line by line basis, is estimated to be R2 426.1
million or R10.13 per share.
Dividend
Consistent with past practice, no interim dividend has been declared at half
year.
Prospects
Whilst the economic outlook remains uncertain, focused attention is being
directed at containing costs within the overall business, improving cash flows
and actively seeking out transactions that will deliver long-term value and
dividends to shareholders.
Overall, the underlying investments are solid and the outlook for good
long-term growth is positive.
On behalf of the board
Prof GJ Gerwel M A Brey
Non-Executive Chairman Chief Executive Officer
20 August 2009
Condensed Group Statements of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2009 2008 2008
Continuing operations
Revenue 213 337 114 526 260 566
Sales and fee income 162 853 105 787 227 774
Dividends received 50 484 8 739 32 792
Cost of sales (124 766) (78 733) (168 854)
Gross profit 88 571 35 793 91 712
Selling and administration expenses (52 574) (32 518) (62 905)
Fair value gains/(losses) 15 163 (74 089) (66 965)
Exceptional items 6 002 - (52 711)
Profit/(loss) from operations 57 162 (70 814) (90 869)
Income from investments 5 232 2 607 9 836
Finance costs (48 117) (52 598) (98 765)
Share of profits of associates 23 701 41 250 42 546
Net profit/(loss) before taxation 37 978 (79 555) (137 252)
Taxation (13 471) 11 110 12 123
Profit for the period from
continuing operations 24 507 (68 445) (125 129)
Discontinued operations
(Loss)/profit from discontinued
operations - (27 516) 18 682
Profit/(loss) for the period 24 507 (95 961) (106 447)
Total comprehensive income
for the period 24 507 (95 961) (106 447)
Profit/(loss) and total
comprehensive
income for the period attributable to:
Equity holders of the parent 12 810 (99 224) (110 043)
Non-controlling interests 11 697 3 263 3 596
24 507 (95 961) (106 447)
Earnings/(loss) per share (cents)
From continuing and discontinued
operations
Basic 5.4 (42.1) (46.6)
Diluted 5.4 (41.3) (45.8)
From continuing operations
Basic 5.4 (30.4) (54.5)
Diluted 5.4 (29.9) (53.6)
Condensed Group Statements of Financial Position
Unaudited Unaudited Audited
30 June 30 June 31 December
R`000 2009 2008 2008
ASSETS
Non-current assets 3 741 282 3 557 491 3 443 199
Property, plant, equipment and
vehicles 338 573 63 565 58 604
Intangible assets 210 827 26 742 -
Investments in associate companies 328 529 500 452 502 845
Investments 2 856 726 2 966 732 2 87 5 685
Deferred taxation 6 627 - 6 065
Current assets 606 883 335 093 331 356
Inventories 181 926 159 454 123 647
Trade receivables 22 7095 100 269 85 613
Other receivables 39 985 20 015 68 698
Taxation 130 208 21
Cash and cash equivalents 151 163 55 147 53 377
600 299 335 093 331 356
Non-current asset classified as
held for sale 6 584 - -
TOTAL ASSETS 4 348 165 3 892 584 3 774 555
EQUITY AND LIABILITIES
Capital and reserves 2 167 205 2 206 489 2 198 189
Share capital 43 42 42
Capital reserves 271 068 263 959 2 68 345
Revaluation reserves 4 027 4 027 4 027
Retained earnings 1 872 977 1 931 766 1 918 747
Attributable to equity holders of
the parent 2 148 115 2 199 794 2 191 161
Non-controlling interests 19 090 6 695 7 028
Non-current liabilities 1 914 976 1 261 020 1 365 506
Long-term interest bearing
borrowings 1 380 288 867 471 967 477
Long-term provisions 19 495 - -
Deferred taxation 515 193 393 549 398 029
Current liabilities 265 984 425 075 210 860
Short-term interest bearing
borrowings 38 911 66 776 86 389
Preference shares for redemption - 137 000 -
Bank overdrafts 18 298 35 941 30 717
Trade payables 97 924 143 975 51 984
Other payables 102 794 36 435 37 829
Taxation 8 057 4 948 3 941
TOTAL EQUITY AND LIABILITIES 4 348 165 3 892 584 3 774 555
NAV per share (cents) 897.6 928.9 927.3
Shares in issue at end of period
net of treasury shares (000`s) 239 308 236 820 236 302
Condensed Group Cash Flow Statements
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2009 2008 2008
Operating activities
Net attributable profit/(loss) 24 507 (95 961) (106 447)
Adjustments for non-cash items (48 691) 79 435 142 321
Operating cash flows before
movements in working capital (24 184) (16 526) 35 874
Increase/(decrease) in inventories 5 573 (33 271) 2 536
Decrease/(increase) in receivables 69 917 (5 810) (39 837)
(Decrease)/increase in payables (11 033) 29 415 (61 182)
Cash generated from/(utilised in)
operations 40 273 (26 192) (62 609)
Taxation paid (7 370) (29 652) (32 009)
Finance costs (31 249) (21 772) (80 178)
Net cash from/(used in) operating
activities 1 654 (77 616) (174 796)
Investing activities
Interest received 5 232 2 607 9 836
Dividends received from associates 15 357 8 316 29 985
Dividends received from other
equity investments 35 127 423 2 807
Loan repayments and recoveries
from associates and investments 43 180 49 220 154 166
Proceeds on disposal of investment
in associate 169 292 - -
Replacement of property, plant,
equipment and vehicles (14 209) (2 719) (6 114)
Acquisition of businesses (498 424) - -
Disposal of businesses (482) - -
Acquisition of associates
and investments (148) (7 538) (14 314)
Net cash (used in)/from
investing activities (245 075) 50 309 176 366
Financing activities
Dividends paid (57 388) (75 774) (75 774)
Repayments of borrowings (569 343) (13 877) (150 994)
Loans raised 971 881 78 795 192 837
Shares repurchased (232) (3 283) (5 631)
Proceeds on issue of shares 3 092 3 357 3 357
(Decrease)/increase in bank
overdrafts (6 803) 17 708 12 484
Net cash from/(used in) financing
activities 341 207 6 926 (23 721)
Net increase/(decrease) in cash and
cash equivalents 97 786 (20 381) (22 151)
Cash and cash equivalents
at beginning of period 53 377 75 528 75 528
Cash and cash equivalents
at end of period
Bank balances and cash 151 163 55 147 53 377
Condensed Group Statements of Changes in Equity
Share Capital Revaluation Retained
R`000 capital reserves reserves earnings
Balance at 1 January
2008 - Audited 41 267 418 4 027 2 101 978
Attributable
(loss)/profit for the
year ended 31 December 2008 - - - (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 - Audited 42 268 345 4 027 1 918 747
Attributable profit
for the six months
ended 30 June 2009 - - - 12 810
Recognition of
share-based payments - 1 254 - -
Dividend paid - - - (57 388)
Issue of share capital 1 3 091 - -
Increase in treasury
shares held by share trust - (232) - -
Non-controlling
interest arising on
acquisition of subsidiary - - - -
Transfer current year
share of non-distributable
reserve of associate - 1 192 - (1 192)
Share of non-distributable
reserves of associate
transferred directly
from equity - (2 582) - -
Balance at 30 June
2009 - Unaudited 43 271 068 4 027 1 872 977
1 January 2008 to
30 June 2008
Balance at 1 January
2008 - Audited 41 267 418 4 027 2 101 978
Attributable loss for
the six months ended
30 June 2008 - - - (99 224)
Recognition of
share-based payments - 1 254 - -
Dividend paid - - - (75 774)
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) - 4 786
Balance at 30 June
2008 - Unaudited 42 263 959 4 027 1 931 766
Attributable
to equity Non-
holders of controlling
R`000 the parent interests Total
Balance at 1 January 2008 -
Audited 2 373 464 3 432 2 376 896
Attributable (loss)/profit for
the year ended 31 December 2008 (110 043) 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 -
Audited 2 191 161 7 028 2 198 189
Attributable profit for the six
months ended 30 June 2009 12 810 11 697 24 507
Recognition of share-based
payments 1 254 - 1 254
Dividend paid (57 388) - (57 388)
Issue of share capital 3 092 - 3 092
Increase in treasury shares held
by share trust (232) - (232)
Non-controlling interest arising
on acquisition of subsidiary - 365 365
Transfer current year share of
non-distributable reserve of
associate - - -
Share of non-distributable
reserves of associate
transferred directly from equity (2 582) - (2 582)
Balance at 30 June 2009 -
Unaudited 2 148 115 19 090 2 167 205
1 January 2008 to 30 June 2008
Balance at 1 January 2008 -
Audited 2 373 464 3 432 2 376 896
Attributable loss for the six
months ended 30 June 2008 (99 224) 3 263 (95 961)
Recognition of share-based
payments 1 254 - 1 254
Dividend paid (75 774) - (75 774)
Issue of share capital 3 357 - 3 357
Treasury shares acquired (2 748) - (2 748)
Increase in treasury shares held
by share trust (535) - (535)
Transfer current year share of
non-distributable reserve of
associate - - -
Balance at 30 June 2008 -
Unaudited 2 199 794 6 695 2 206 489
Segmental information
Headline
Operating earnings/
R`000 Revenue profit/(loss) (loss)
Financial services 16 131 33 376 26 149
Industrial 161 894 5 863 (19 487)
Healthcare 35 238 35 168 27 302
Enterprise development 74 74 221
Corporate - (17 319) (29 980)
Total 213 337 57 162 4 205
R`000 Assets Liabilities
Financial services 288 406 38 601
Industrial 1 340 838 1 067 399
Healthcare 2 618 099 954 447
Enterprise development 10 785 -
Corporate 90 037 120 513
Total 4 348 165 2 180 960
Acquisition of businesses
On 28 May 2009, the Group acquired 56.94% of the issued share capital of Sea
Harvest Holdings (Pty) Ltd, the new holder of 100% of the shares in Sea Harvest
Corporation Ltd (Sea Harvest), in which Brimstone held 21.52% prior to the
transaction. Sea Harvest is a fishing company involved in the catching and
processing of hake. The group has early adopted IFRS3: Business Combinations in
accounting for the acquisition. Brimstone acquired the investment in Sea
Harvest to gain control of a profitable business that it has been involved in
as a minority shareholder for many years.
R`000 Acquisition value
Total assets 1 128 086
Non-current assets 511 911
Current assets 616 175
Total liabilities 298 365
Non-current liabilities 133 248
Current liabilities 165 117
Net assets 829 721
Gain on acquisition of businesses (40 921)
788 800
Less cash and cash equivalents acquired (290 376)
Acquisition of businesses 498 424
The initial accounting for the subsidiaries acquired has not been finalised.
This is the result of uncertainties surrounding the valuation of certain
tangible and intangible assets. These uncertainties are expected to be resolved
by 31 December 2009.
Pro forma results of the Brimstone group if the Sea Harvest group had been
consolidated from 1 January 2009:
R`000
Revenue from continuing operations 605 494
Profit for the period from continuing operations 47 549
Amounts included in Brimstone group results since date of
acquisition
Revenue 65 969
Profit for the period from continuing operations 18 538
The receivables acquired (which principally comprised trade receivables) with a
fair value of R161.1 million had gross contractual amounts of R161.4million. It
is expected that the fair value will be recovered.
Brimstone`s acquisition costs of R2.6m have been recognised as an expense in
the "Selling and administration" line item in the statement of comprehensive
income.
The gain on acquisition of businesses arose due to previously unrecognised
fishing quotas being recognised upon acquisition, at a provisional value.
Disposal of businesses
On 28 January 2009, Fifth Element Marketing (Pty) Ltd and its subsidiaries
including Canterbury International South Africa (Pty) Ltd were placed into
liquidation.
As a result, the group disposed of assets and liabilities as set out below.
R`000 Disposal value
Total assets 130 273
Non-current assets 22 123
Current assets 108 150
Total liabilities 130 273
Non-current liabilities 39 663
Current liabilities 90 610
Net assets -
Net cash outflow on disposal
Cash and cash equivalents disposed of 482
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 * Executive
www.brimstone.co.za
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
Date: 20/08/2009 16:51:01 Produced by the JSE SENS Department.
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