| Wed 9 Feb 2011, 16:35 | | 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
six months ended 31 August 2010
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 CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2010
Shareholders are referred to the Reviewed Interim Results announcement released
on SENS on 24 December 2010, as well as the withdrawal of these Interim Results
in the announcement released on SENS on 3 February 2011. As explained in the
announcement on 3 February 2011, the withdrawal results from a round robin
resolution, authorising the publication of Brikor`s Interim Results for the six
month period ended 31 August 2010 ("interim results"), not being signed by all
the directors over the festive season, as required by Brikor`s Articles.
The interim results, as approved at a directors` meeting held on Friday, 21
January 2011, are disclosed below. These interim results are identical to the
interim results released on SENS on 24 December 2010.
Condensed consolidated statement of COMPREHENSIVE INCOME
Reviewed Unaudited Audited
6 months 6 months year
ended ended ended
31 Aug 31 Aug 28 Feb
2010 2009 2010
R`000 R`000 R`000
Revenue 147 667 155 451 280 279
Cost of sales (112 896) (107 534) (220 177)
Cost of sales - depreciation (10 402) (10 776) (21 502)
Gross profit 24 369 37 141 38 600
Other income 1 344 4 120 3 812
Depreciation and amortisation (2 347) (2 680) (8 279)
Operating expenses (24 578) (22 565) (53 714)
Operating (loss)/profit before
impairment losses (1 212) 16 016 (19 581)
Impairments - (7 553) (102 202)
Operating (loss)/profit before
interest and taxation (1 212) 8 463 (121 783)
Interest received 212 1 377 2 763
Finance costs (13 452) (13 153) (27 963)
Loss before taxation (14 452) (3 313) (146 983)
Taxation 3 978 (1 022) 22 606
Total loss for the period
attributable to equity holders
of the Company (10 474) (4 335) (124 377)
Total comprehensive loss for
the period attributable
to equity holders of the Company (10 474) (4 335) (124 377)
Reconciliation of headline earnings:
Loss attributable to equity holders
of the Company (10 474) (4 335) (124 377)
Adjusted for impairment of goodwill - 7 553 66 494
Adjusted for impairment of assets - - 25 710
Adjusted for profit on disposal of
non-current assets (372) (2 662) (2 147)
Headline loss attributable to equity
holders of the Company (10 846) 556 (34 320)
Weighted average shares in issue
on which earnings are based (`000) 624 657 623 913 624 657
Treasury shares (issued to the
Brikor Share Incentive
Scheme) (`000) 15 900 15 900 15 900
Fully diluted weighted average
shares in issue (`000) 640 557 639 813 640 557
Loss per share (cents) (1,7) (0,7) (19,9)
Headline (loss)/earnings
per share (cents) (1,7) 0,1 (5,5)
Fully diluted loss
per share (cents) (1,6) (0,7) (19,4)
Fully diluted headline (loss)/
earnings per share (cents) (1,7) 0,1 (5,4)
Condensed consolidated statement of FINANCIAL POSITION
Reviewed Unaudited Audited
31 Aug 31 Aug 28 Feb
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non-current assets 426 801 540 581 436 130
Property, plant and equipment 401 175 449 659 410 741
Intangible assets 10 529 18 840 10 997
Non-current assets held for sale 1 450 - 1 450
Goodwill 10 825 69 484 10 825
Other financial assets 2 822 2 598 2 117
Current assets 107 873 151 019 109 546
Inventories 69 833 86 238 66 067
Trade and other receivables 30 926 59 304 35 010
Cash and cash equivalents 7 114 5 477 8 469
Total assets 534 674 691 600 545 676
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the Company 241 028 371 544 251 502
Share capital 62 62 62
Share premium 227 680 227 680 227 680
Retained earnings 13 286 143 802 23 760
Non-current liabilities 76 459 199 585 197 262
Borrowings 37 143 132 900 153 968
Deferred taxation 29 676 57 330 33 654
Provisions 9 640 9 355 9 640
Current liabilities 217 187 120 471 96 912
Borrowings 130 143 38 413 15 349
Taxation 14 552 16 543 15 912
Trade and other payables 47 500 43 350 40 609
Bank overdraft 24 992 22 165 25 042
Total equity and liabilities 534 674 691 600 545 676
Number of shares in issue
(excluding treasury shares) 625 240 308 625 240 308 625 240 308
Net asset value
per share (cents) 38,5 59,4 40,2
Net tangible asset value
per share (cents) 35,6 45,6 37,2
Condensed consolidated statement of CASH FLOWS
Reviewed Unaudited Audited
6 months 6 months year
ended ended ended
31 Aug 31 Aug 28 Feb
2010 2009 2010
R`000 R`000 R`000
Cash flows from operating activities 3 630 (4 432) 7 276
Cash flow from investing activities (2 903) 434 (9 163)
Cash flow from financing activities (2 032) 82 (1 914)
Net decrease in cash and cash
equivalents (1 305) (3 916) (3 801)
Cash and cash equivalents at
beginning of period (16 573) (12 772) (12 772)
Cash and cash equivalents at
end of period (17 878) (16 688) (16 573)
Condensed consolidated statement of CHANGES IN EQUITY
Reviewed Unaudited Audited
6 months 6 months year
ended ended ended
31 Aug 31 Aug 28 Feb
2010 2009 2010
R`000 R`000 R`000
Balance at beginning of period 251 502 375 579 375 579
Issue of share capital - 300 300
Total comprehensive loss
for the period (10 474) (4 335) (124 377)
Balance at end of period 241 028 371 544 251 502
SEGMENTAL REPORTING
Brikor Brikor Brikor
Main Stanger Donkerhoek Total
R`000 R`000 R`000 R`000
Six months ended
31 August 2010 (Reviewed)
Revenue 92 510 43 027 12 130 147 667
Cost of sales (76 730) (38 254) (8 314) (123 298)
Gross profit 15 780 4 773 3 816 24 369
Other income 1 087 - 257 1 344
Depreciation and
amortisation (1 577) (707) (63) (2 347)
Operating expenses (19 368) (3 760) (1 450) (24 578)
Operating loss before
impairment losses (4 078) 306 2 560 (1 212)
Impairments - - - -
Operating (loss)/profit
before interest
and taxation (4 078) 306 2 560 (1 212)
Interest received 212
Finance costs (13 452)
Loss before taxation (14 452)
Taxation 3 978
Total comprehensive loss (10 474)
Total assets 394 035 103 802 36 837 534 674
Six months ended
31 August 2009 (Unaudited)
Revenue 88 969 55 150 11 332 155 451
Cost of sales (68 843) (42 470) (6 997) (118 310)
Gross profit 20 126 12 680 4 335 37 141
Other income 3 908 - 212 4 120
Depreciation and
amortisation (1 618) (781) (281) (2 680)
Operating expenses (15 711) (3 940) (2 914) (22 565)
Operating profit before
impairment losses 6 705 7 959 1 352 16 016
Impairments - - (7 553) (7 553)
Operating profit/(loss)
before interest
and taxation 6 705 7 959 (6 201) 8 463
Interest received 1 377
Finance costs (13 153)
Loss before taxation (3 313)
Taxation (1 022)
Total comprehensive loss (4 335)
Total assets 454 235 140 650 96 715 691 600
Year ended
28 February 2010 (Audited)
Revenue 164 013 97 034 19 232 280 279
Cost of sales (144 856) (76 830) (19 993) (241 679)
Gross (loss)/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 before
impairment losses (25 061) 10 720 (5 240) (19 581)
Impairments (28 891) (18 645) (54 666) (102 202)
Operating loss before
interest and taxation (53 952) (7 925) (59 906) (121 783)
Interest received 2 763
Finance costs (27 963)
Loss before taxation (146 983)
Taxation 22 606
Total comprehensive loss (124 377)
Total assets 403 603 107 277 34 796 545 676
COMMENTARY
OVERVIEW
The directors of Brikor present the reviewed condensed consolidated financial
results for the six months ended 31 August 2010 ("the interim period").
Brikor is a manufacturer and supplier of building and construction materials to
the building industry, across a broad spectrum of the market from low-cost
housing, residential and commercial to construction projects. The lagging
economic recovery, with its significant impact on all levels of business and
society, resulted in severe adverse trading conditions continuing in the
building and construction sectors. Notwithstanding the sharp decrease in the
mortgage rate, financial institutions maintained their rigid approach to
lending, which contributed to subdued activity in the residential market.
Residential construction activity was mainly attributable to the contributions
of the unrecorded additions and alterations market. Rural demand started to show
the impact of retrenchments on consumer spending.
Market conditions continued to impact the results of the Group during the
interim period, exacerbated by delays and cancellations in building and
construction projects, most notably, the awarding of tenders by the metropolitan
municipalities. Some local governments appeared to be delaying new projects, as
their income from rates and taxes declined due to the recession, while capital
expenditure budgets seemed to have been reduced to cover current expenditure.
Reduced demand in a very competitive landscape increased pressure on margins
with the resultant effect on the Group`s trading results and liquidity during
the period under review. The priority remains cash generation, working capital
management and realising the value in inventory and receivables.
Key management focus areas remain sales growth, margin management, productivity
improvement and cash and working capital management. Corrective measures have
been taken to reduce costs and right-size the Group. 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 5% to R147,7 million (2009: R155,5 million),
mainly as a result of lower demand. Gross profit decreased by 34% to R24,4
million (2009: R37,1 million).
Gross margins at 16,5% (2009: 23,9%) 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 increased by 8,9% to R24,6 million (2009:R22,6 million) due
to a provision made for doubtful debts of R5,2 million (2009: R1,7 million). The
reduction in the Group`s gross profit and finance costs resulted in a loss per
share of 1,7 cents for the period (loss per share 2009: 0,7 cents) and a fully
diluted headline loss per share of 1,7 cents (fully diluted headline earnings
per share 2009: 0,1 cents).
Property, plant and equipment reduced to R401 million (February 2010: R410
million) mainly attributable to the depreciation charge and the sale of certain
land and buildings. Capital expenditure amounted to R3 million and related to
the maintenance of production capacities.
Brikor is currently in breach of covenants as set out by Rand Merchant Bank
regarding the RMB loan. The current carrying value of the loan is R118 million.
The full amount of the loan is reflected as part of current liabilities as a
result of the breach of covenants.
Brikor is currently negotiating the sale of non-core assets to remedy the
situation. Negotiations are taking place with RMB to discuss ways and means of
remedying the breach of covenant.
PROSPECTS
The pace of South Africa`s economic recovery remains uncertain and it is
anticipated that further restrictive and volatile trading conditions will
prevail in the short to medium term.
The Board is, however, confident that the residential sector will benefit from
increased levels of private credit facilities extended by banks and low interest
rates with the subsequent flow through of demand for Brikor`s product ranges.
Energy and mining expansion are expected to create further demand from
consequential housing activity. Government is also experiencing increased
pressure to deliver on infrastructure and housing requirements.
The Group therefore continues to be well-positioned to benefit from a gradual
improvement in market conditions.
BASIS OF PREPARATION
The reviewed condensed consolidated results for the six months ended 31 August
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, IAS 34: Interim Financial Reporting, the Companies Act of South Africa,
as amended, and the JSE Limited Listings Requirements. The accounting policies
used to prepare these interim financial statements, which are in terms of IFRS,
are consistent with those applied in the preparation of the annual financial
statements for the year ended
28 February 2010.
REVIEW REPORT AND EMPHASIS OF MATTER
The financial information for the six months ended 31 August 2010 was reviewed
by the company`s auditors and their current review report is available for
inspection at the Company`s registered office. The auditor`s review report
includes the following emphasis of matter:
Going concern
"whereby the auditors, without qualifying their report, draw attention to the
total comprehensive loss of R10,5 million incurred during the interim period and
the Group`s ability to continue as a going concern as addressed in the
directors` commentary on going concern".
Compliance with laws and regulations
In accordance with the auditors` responsibilities in terms of sections 44(2) and
44(3) of the Auditing Profession Act, a matter was reported to the Independent
Regulatory Board for Auditors. The matter relates to certain acts or omissions
that was committed by persons responsible for the management of Brikor, that was
identified by the auditors and which constitutes a reportable irregularity in
terms of the Auditing Profession Act, 2005 (No. 26 of 2005).
The reportable irregularity relates to the erroneous release by the company of
its interim results for the six months ended 31 August 2010 on 24 December 2010
in circumstances where the procedure to obtain the appropriate authority from
the Board of the company as required by the Articles of Association of the
company had not been adequately followed.
The auditors have subsequently notified the Regulatory Board for Auditors that
the interim results have since been approved by the Board of the company and
that they are satisfied that the reportable irregularity has been rectified.
Withdrawal of review opinion
In light of the above reportable irregularity, the review opinion of the
Company`s auditors on the interim results for the six months ended 31 August
2010, which was erroneously released on 24 December 2010, was withdrawn.
AUDIT COMMITTEE
The audit committee of Brikor reviewed the financial results for the six months
ended 31 August 2010 and confirmed that they were satisfied therewith. The
unauthorised announcement on 24 January 2011 by the previous designated adviser,
Vunani Corporate Finance, to the contrary, is therefore incorrect.
Brikor`s audit committee has been reconstituted and two new members will be
appointed from the ranks of the newly appointed independent non-executive
directors.
EVENTS AFTER THE REPORTING DATE
Negotiations are continuing regarding the sale of non-core assets.
STATEMENT ON GOING CONCERN
The interim 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 the sale
of assets, 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 several
factors, including profitable operations, the sale of certain assets and the
continued support of the Group`s financiers and creditors.
The statement of comprehensive income indicates that the Group has incurred a
loss of R10,5 million for the six months ended 31 August 2010, included in this
loss are finance costs amounting to R13,5 million and bad debt provisions of
R5,2 million for the period.
The Group`s financiers remain fully apprised of the Group`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 Group`s
future success.
DIVIDEND POLICY
No dividend has been declared for the period.
LIFTING OF THE HALTING OF TRADING IN SECURITIES
In light of the publication of this announcement, the JSE Limited has agreed to
lift the halting of trading in the securities of Brikor.
By order of the Board
G v N Parkin H Botha
Chief Executive Officer Chief Financial Officer
Nigel
9 February 2011
CORPORATE INFORMATION
Non-executive directors: E Chimombe-Munyoro; E Grobbelaar R van Rooyen; J H Wood
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: Hanlieu Botha
Telephone: (011) 739 9000
Facsimile: (011) 739 9021
Transfer secretaries: Computershare Investor Services (Pty) Limited
Auditors: RMS Betty & Dickson (Tshwane)
Designated Adviser: Exchange Sponsors
These results and an overview of Brikor are available at www.brikor.co.za
Date: 09/02/2011 16:35:13 Produced by the JSE SENS Department.
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