| Tue 15 Jun 2010, 16:06 | | BIK - Brikor Limited - Reviewed condensed consolidated financial results for the |
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BIK
BIK
BIK - Brikor Limited - Reviewed condensed consolidated financial results for the
year ended 28 February 2010 and cautionary announcement
BRIKOR LIMITED
Registration number: 1998/013247/06
JSE code: BIK
ISIN: ZAE000101945
("Brikor" or "the company" or "the group")
REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY
2010 AND CAUTIONARY ANNOUNCEMENT
Condensed consolidated statement of COMPREHENSIVE INCOME
for the year ended 28 February 2010
Reviewed Audited
2010 2009
R`000 R`000
Revenue 280 279 339 335
Cost of sales (220 177) (276 076)
Cost of sales depreciation (21 502) (19 741)
Gross profit 38 600 43 518
Other income 3 812 645
Depreciation and amortisation (8 279) (5 229)
Operating expenses (53 714) (56 593)
Operating loss (19 581) (17 659)
Impairment losses (102 202) (4 912)
Interest received 2 763 4 647
Finance costs (27 963) (18 124)
Loss before taxation (146 983) (36 048)
Taxation 22 606 7 748
Total loss for the year (124 377) (28 300)
Total comprehensive loss (124 377) (28 300)
Reconciliation of headline loss
Basic loss attributable to
ordinary shareholders (124 377) (28 300)
Impairment of goodwill 66 494 4 912
Impairment of assets 20 493 -
Impairment of intangibles 5 217 -
Profit and losses on the sale
of fixed assets (2 147) (7)
Headline loss attributable to
ordinary shareholders (34 320) (23 395)
Weighted average shares in issue
on which earnings are based 624 656 746 622 673 309
Treasury shares (issued to the
Brikor Share Incentive Scheme) 15 900 000 15 900 000
Fully diluted weighted average
shares in issue 640 556 746 638 573 309
Basic loss per share (cents) (19,9) (4,5)
Headline loss per share (cents) (5,5) (3,8)
Fully diluted loss per share (cents) (19,4) (4,5)
Fully diluted headline loss
per share (cents) (5,4) (3,7)
Dividend per share (cents) - 1,5
Condensed consolidated statement of FINANCIAL POSITION
as at 28 February 2010
Reviewed Audited
2010 2009
R`000 R`000
ASSETS
Non-current assets 436 130 555 976
Property, plant and equipment 410 741 458 119
Intangible assets 10 997 19 448
Non-current assets held for sale 1 450 -
Goodwill 10 825 77 037
Other financial assets 2 117 1 372
Current assets 109 546 131 362
Inventories 66 067 77 337
Trade and other receivables 35 010 49 110
Cash and cash equivalents 8 469 4 915
Total assets 545 676 687 338
EQUITY AND LIABILITIES
Equity 251 502 375 579
Share capital 63 62
Share premium 227 680 227 380
Retained earnings 23 759 148 137
Non-current liabilities 197 262 200 054
Borrowings 153 968 131 274
Deferred taxation 33 654 56 300
Provisions 9 640 12 480
Current liabilities 96 912 111 705
Borrowings 15 349 39 957
Taxation 15 912 14 595
Trade and other payables 40 609 39 466
Bank overdraft 25 042 17 687
Total equity and liabilities 545 676 687 338
Capital commitments - 10 000
Number of shares in issue
(excluding treasury shares) 625 240 308 623 740 308
Net asset value per share (cents) 40,2 60,2
Net tangible asset value
per share (cents) 37,2 45,6
Condensed consolidated statement of CASH FLOWS
for the year ended 28 February 2010
Reviewed Audited
2010 2009
R`000 R`000
Cash flows from operating activities 6 976 (11 761)
Cash flow from investing activities (9 163) (235 690)
Cash flow from financing activities (1 614) 138 980
Net increase in cash and cash equivalents (3 801) (108 471)
Cash and cash equivalents at beginning
of the year (12 772) 95 699
Cash and cash equivalents at end of year (16 573) (12 772)
Condensed consolidated statement of CHANGES IN EQUITY
for the year ended 28 February 2010
Reviewed Audited
2010 2009
R`000 R`000
Balance at beginning of year 375 579 412 035
Issue of share capital 300 1 400
Total comprehensive loss for the year (124 377) (28 300)
Dividend declared - (9 556)
Balance at end of year 251 502 375 579
SEGMENTAL REPORTING
for the year ended 28 February 2010
Segment revenues and results
The following is an analysis of the company`s revenue and results from
operations by reportable segments:
Segmental profit reconciliation
Brikor
Brikor Brikor Donker-
Inland Coastal hoek Company
R`000 R`000 R`000 R`000
Year ended 28 February 2010
Reviewed
Revenue 164 013 97 034 19 232 280 279
Cost of sales (144 856) (76 830) (19 993) (241 679)
Gross profit 19 157 20 204 (761) 38 600
Other income 3 538 - 274 3 812
Depreciation and
amortisation (6 350) (1 385) (544) (8 279)
Operating expenses (41 406) (8 099) (4 209) (53 714)
Operating (loss)/ profit (25 061) 10 720 (5 240) (19 581)
Impairments (28 891) (18 645) (54 666) (102 202)
Unallocated expenses
Interest received 2 763
Finance costs (27 963)
Loss before taxation (146 983)
Taxation 22 606
Total comprehensive loss (124 377)
Segment assets and
liabilities
Segment assets 403 603 107 277 34 796 545 676
Segment current
liabilities 79 316 6 593 11 003 96 912
Other segmental information
Depreciation and
amortisation included
in cost of sales and
operating expenditure 22 579 5 197 2 005 29 781
Additions to non-current
assets 11 743 715 2 317 14 775
Year ended 28 February 2009
Audited
Revenue 227 631 96 003 15 701 339 335
Cost of sales (207 048) (75 055) (13 714) (295 817)
Gross profit 20 583 20 948 1 987 43 518
Other income 576 66 3 645
Depreciation and
Amortisation (3 566) (1 378) (285) (5 229)
Operating expenses (46 610) (8 360) (1 623) (56 593)
Operating (loss)profit (29 017) 11 276 82 (17 659)
Impairments - - (4 912) (4 912)
Unallocated expenses
Interest received 4 647
Finance costs (18 124)
Loss before taxation (36 048)
Taxation 7 748
Total comprehensive loss (28 300)
Segment assets and
liabilities
Segment assets 460 846 131 688 94 804 687 338
Segment current
liabilities 97 529 9 740 4 436 111 705
Other segmental information
Depreciation and
amortisation included
in cost of sales and
operating expenditure 19 337 4 590 1 043 24 970
Additions to non-current
assets 57 475 5 296 2 865 65 636
COMMENTARY
OVERVIEW
The directors of Brikor present the reviewed condensed consolidated financial
results for the year ended 28 February 2010.
Brikor is a manufacturer and supplier of building and construction materials to
the building industry, servicing all segments of the market from low-cost
housing, residential, commercial and construction projects. The global recession
of 2009 had a marked impact on all levels of business and society. The
residential market slowed down significantly, evidenced by a decline of 30% -
50% in building plans passed, depending on the region, and subdued new
residential construction activity. This slowdown was exacerbated by the
conservative approach of financial institutions to lending. The non-residential
market and the market for additions and alterations have also been negatively
impacted by the adverse macro economic circumstances, albeit to a lesser degree.
The severe trading conditions impinged on the results of the company for the
year under review. Delays and cancellations in building and construction
projects further hampered performance.
Reduced demand and margin pressures continued to impact on the trading results
and liquidity during the year under review. The priority remains cash
generation, working capital management and realising the value in inventory and
receivables.
Corrective measures have been taken to reduce costs and right-size the group,
the full benefits of which will be realised in 2011. Rigorous cost controls
remain a key point of focus as Brikor aligns its operational cost structures
with lower production volumes while maintaining its reputation for service
delivery excellence and expanding its focus on the low cost housing sector.
FINANCIAL RESULTS
The company`s revenue decreased by 17% to R280,3 million (2009: R339,3 million),
mainly as a result of lower demand and lower selling prices. Gross profit
decreased by 11% to R38,6 million (2009: R43,5 million).
Margins at 13,7% (2009: 12,8%) remained under pressure due to lower margin
products in the sales mix combined with a lower growth in demand, exacerbated by
continued increased input costs, such as energy, fuel, gas and raw materials.
The company was unable to pass these increased input costs fully on to its
customers as a result of price pressure and competition for volume.
Operating expenses decreased by 5,1% to R53,7 million (2009:R56,6 million) due
to rigorous cost controls.
The reduction in the company`s gross profit, combined with increased
depreciation charges for the larger asset base, and finance costs resulted in a
headline loss per share of 5,5 cents for the year (headline loss per share 2009:
3,8 cents). Fully diluted headline loss per share increased to 5,4 cents (fully
diluted headline loss per share 2009: 3,7 cents).
Property, plant and equipment reduced to R410,7 million (2009: R458,1 million)
mainly attributable to the depreciation charge, the impairment of certain plant
and equipment and the sale of certain land and buildings. Capital expenditure
amounted to R14,7 million of which R6,4 million was financed by financial
institutions and related to transport vehicles and plant, the balance of R8,3
million was financed through working capital.
The company tests goodwill annually for impairment, or more frequently if there
is indication that goodwill might be impaired. The value-in-use of the cash-
generating units, namely Brikor, Stanger and Donkerhoek Quartzite, were lower
than the carrying amount and therefore an impairment of goodwill of R66,5
million (2009: R4,9 million) was required.
The value-in-use of Donkerhoek Quartzite was determined to be lower than the
carrying amount and therefore certain assets within the division were impaired,
resulting in an impairment of tangible assets of R27,3 million.
Intangible assets decreased to R11,0 million (2009: R19,4 million) mainly as a
result of a contract-related impairment in Donkerhoek Quartzite of R7,2 million.
PROSPECTS
With the pace of South Africa`s economic recovery remaining slow and the
consequential upswing in the building industry gradually recovering, the trading
environment is expected to remain challenging.
The Board is, however, confident that underlying fundamentals will continue to
improve as a result of:
- more accessible funding for customers due to the relaxing of
lending criteria by financial institutions;
- the lower interest rate environment contributing to an
improvement in consumer confidence and the general trading
environment; and
- increased pressure on government to deliver on infrastructure
and housing requirements.
New business opportunities arose after the reporting period and production
capacity was increased to satisfy the new demand.
- The Vereeniging brick plant has been re-commissioned to produce
light face brick at higher yields and at full capacity.
- The Rooftile and Paver plants were re-commissioned due to
pursuance of market segment opportunities and sales growth.
- A brick plant in Nigel was re-commissioned to produce clay
products for the new demand.
Brikor incurred additional expenditure in commissioning of these plants which
has put some pressure on short-term cash flow. Government contracts are secured
and increase in demand indicates that the levels of production will increase.
Brikor increased the supply of coal to satisfy the increased demand, especially
from power suppliers.
The company therefore continues to be well-positioned to benefit from gradual
improvement in market conditions.
BASIS OF PREPARATION
The reviewed condensed consolidated results for the year ended 28 February 2010
have been prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards
("IFRS") and the AC500 standards as issued by the Accounting Standards Board or
its successor, IAS 34: Interim Financial Reporting, the Companies Act (Act 61 of
1973), as amended, and the JSE Limited Listings Requirements. The accounting
policies used to prepare these year-end financial statements, which are in terms
of IFRS, are consistent with those applied at the previous year-end, with the
exception of the adoption of IAS 1 (Revised): Presentation of Financial
Statements as well as the first time adoption of IFRS 8: Operating Segments.
EVENTS AFTER THE REPORTING DATE
Negotiations have been entered into relating to the sale of the Donkerhoek
Quartzite operation and the Stanger Brick and Tile operation as the company
decided to concentrate on its traditional core business. Negotiations are at
such a stage that a reliable estimate of the financial effects of the
transaction cannot be made.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the basis of accounting policies
applicable to a going concern. This basis presumes that the funds will be
available to finance future operations and that the realisation of assets and
settlement of liabilities, contingent obligations and commitments will occur in
the ordinary course of business.
The ability of the Group to continue as a going concern is dependent on a number
of factors. The most significant of these is that profitable operations can be
continued and the continued support of the Group`s financiers.
The statement of comprehensive income indicates that the company has incurred a
loss of R124,4 million for the year ended 28 February 2010 which includes non-
cash flow impairments of R102,2 million.
The company`s financiers remain fully apprised of the company`s results,
liquidity challenges, future business and contingency plans. The Board
acknowledges that the continued support of the company`s financiers remains
vital to the company`s future success.
REVIEW REPORT
The condensed financial results have been reviewed by Brikor`s independent
auditors, RSM Betty & Dickson (Tshwane). The auditors` review report contains an
emphasis of matter as follows:
"Without qualifying our opinion we draw attention to the condensed consolidated
statement of comprehensive income for the year ended 28 February 2010 according
to which a total loss of R124,4 million was incurred during the financial year
and the note on going concern in the commentary of the directors. The ability
of the group to continue as a going concern is dependent on several factors
which inter alia include that profitable operations can be continued and the
continued support of the group`s financiers." A copy of the auditor`s review
report is available for inspection at the company`s registered office.
DIVIDEND POLICY
No dividend has been declared for the year.
CHANGES TO THE BOARD
The following changes to the Board occurred during the year under review:
- Mr Mitesh Patel resigned as an independent non-executive
director and chairman of the Audit Committee on 18 March 2009.
- Mr Elmar Grobbelaar was appointed as a non-executive director
and chairman of the Audit Committee on 24 April 2009.
- Mr Alwyn Cronje resigned as an executive director on 6 May
2009.
- Ms Evelyn Chimombe-Munyoro was appointed as a non-executive
director on 29 October 2009.
- Mr Ethan Dube resigned as a non-executive director on
29 October 2009.
- Mr Werner Kruger was appointed as an executive director and
Chief Operating Officer on 20 November 2009.
WITHDRAWAL OF EXISTING CAUTIONARY ANNOUNCEMENT AND NEW CAUTIONARY ANNOUNCEMENT
Shareholders are advised that negotiations have been entered into relating to
the sale of the Donkerhoek Quartzite operation and the Stanger Brick and Tile
operation and that negotiations are ongoing relating to the debt restructuring,
which if successfully concluded, may have an effect on the price of the
company`s securities. Accordingly, shareholders are advised to exercise caution
when dealing in the company`s securities until further announcements are made
regarding these matters.
By order of the Board
G v N Parkin H Botha
Chief Executive Officer Chief Financial Officer
Nigel
15 June 2010
CORPORATE INFORMATION
Non-executive directors:
E Chimombe-Munyoro; E Grobbelaar
Executive directors:
G v N Parkin (Chairman and CEO); W Kruger (COO); H Botha (CFO);
G Parkin (Jnr) (Alternate director to the CEO)
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
Auditors: RSM Betty & Dickson (Tshwane)
Designated Adviser: Vunani Corporate Finance
These results and an overview of Brikor are available at www.brikor.co.za
Date: 15/06/2010 16:06:04 Produced by the JSE SENS Department.
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