| Tue 31 May 2011, 14:18 | | 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 2011
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
2011
Condensed consolidated statement of COMPREHENSIVE INCOME
Reviewed Audited
year year
ended ended
28 Feb 28 Feb
2011 2010
R`000 R`000
Revenue 273 638 280 279
Cost of sales (223 779) 220 177)
Cost of sales - depreciation (21 465) (21 502)
Gross profit 28 394 38 600
Other income 2 022 3 812
Depreciation and amortisation (4 510) (8 279)
Operating expenses (54 066) (53 714)
Operating loss before impairment charges (28 160) (19 581)
Impairments (196 568) (102 202)
Operating loss before interest and taxation (224 728) (121 783)
Interest received 409 2 763
Finance costs (29 132) (27 963)
Loss before taxation (253 451) (146 983)
Taxation 34 497 22 606
Total comprehensive loss for the year
attributable to equity holders
of the Company (218 954) (124 377)
Reconciliation of headline earnings:
Loss attributable to equity holders
of the Company (218 954) (124 377)
Adjusted for impairment of goodwill 10 825 66 494
Adjusted for impairment of assets 166 187 25 710
Adjusted for profit/(loss) on disposal
of non-current assets 284 (2 147)
Headline loss attributable to equity
holders of the Company (41 658) (34 320)
Weighted average shares in issue on
which earnings are based 627 274 313 624 656 746
Treasury shares (issued to the Brikor
Share Incentive Scheme) 15 900 000 15 900 000
Fully diluted weighted average
shares in issue 643 174 313 640 556 746
Loss per share (cents) (34,9) (19,9)
Headline loss per share (cents) (6,6) (5,5)
Fully diluted loss per share (cents) (34,0) (19,4)
Fully diluted headline loss
per share (cents) (6,5) (5,4)
Condensed consolidated statement of FINANCIAL POSITION
Reviewed Audited
28 Feb 28 Feb
2011 2010
R`000 R`000
ASSETS
Non-current assets 218 837 436 130
Property, plant and equipment 208 672 410 741
Intangible assets 6 639 10 997
Non-current assets held for sale - 1 450
Goodwill - 10 825
Other financial assets 3 526 2 117
Current assets 86 044 109 546
Inventories 50 554 66 067
Trade and other receivables 28 978 35 010
Cash and cash equivalents 6 512 8 469
Total Assets 304 881 545 676
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the Company 33 048 251 502
Share capital 63 62
Share premium 228 180 227 680
Retained (loss)/earnings (195 195) 23 760
Non-current liabilities 50 456 197 262
Borrowings 40 328 153 968
Deferred taxation - 33 654
Provisions 10 128 9 640
Current liabilities 221 377 96 912
Borrowings 136 123 15 349
Taxation 15 063 15 912
Trade and other payables 43 522 40 609
Bank overdraft 26 669 25 042
Total equity and liabilities 304 881 545 676
Number of shares in issue (excluding
treasury shares) 629 342 031 625 240 308
Net asset value per share (cents) 5,3 40,2
Net tangible asset value per
share (cents) 4,2 37,2
Condensed consolidated statement of CASH FLOWS
Reviewed Audited
year year
ended ended
28 Feb 28 Feb
2011 2010
R`000 R`000
Cash (outflow)/inflow from operating
activities (2 822) 7 276
Cash outflow from investing activities (7 895) (9 163)
Cash inflow/(outflow) from financing
activities 7 133 (1 914)
Net decrease in cash and cash equivalents (3 584) (3 801)
Cash and cash equivalents at beginning
of year (16 573) (12 772)
Cash and cash equivalents at end of year (20 157) (16 573)
Condensed consolidated statement of CHANGES IN EQUITY
Reviewed Audited
year year
ended ended
28 Feb 28 Feb
2011 2010
R`000 R`000
Balance at beginning of year 251 502 375 579
Issue of share capital 500 300
Total comprehensive loss for the year (218 954) (124 377)
Balance at end of year 33 048 251 502
SEGMENTAL REPORTING
Brikor Brikor Brikor
Main Stanger Donkerhoek Total
R`000 R`000 R`000 R`000
Year ended 28 February 2011
(Reviewed)
Revenue 175 686 72 357 25 595 273 638
Cost of sales (163 114) (63 955) (18 175) (245 244)
Gross profit 12 572 8 402 7 420 28 394
Other income 1 528 - 494 2 022
Depreciation and
amortisation (3 382) (1 005) (123) (4 510)
Operating expenses (37 746) (10 341) (5 979) (54 066)
Operating (loss)/profit
before impairment
charges (27 028) (2 944) 1 812 (28 160)
Impairments (159 405) (37 163) - (196 568)
Operating (loss)/profit
before interest and
taxation (186 433) (40 107) 1 812 (224 728)
Interest received 409
Finance costs (29 132)
Loss before taxation (253 451)
Taxation 34 497
Total comprehensive loss (218 954)
Total assets 206 951 61 828 36 102 304 881
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 profit/(loss) 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 profit/(loss)
before impairment
charges (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 year ended 28 February 2011 ("the financial year").
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.
Adverse trading conditions continued in the building and construction sectors
with a continued decline in residential and commercial building activities and
very competitive pricing. Financial institutions maintained their rigid approach
to lending, contributing further to the subdued activity in the residential
market. The unrecorded additions and alterations market, which maintained levels
of activity during the economic slowdown, also showed a decrease.
The Group`s results for the financial year continued to be impacted by market
conditions, in particular the delays and cancellations in building and
construction projects, most notably, the awarding of tenders by metropolitan
municipalities. Some local governments` capital expenditure budgets seemed to
have been reduced to cover only current expenditure as their income from rates
and taxes declined due to the recession, thereby resulting in the delay of new
projects.
The very competitive trading environment, underpinned by reduced demand,
increased pressure on margins with the resultant effect on the Group`s trading
results and liquidity during the financial year under review. Brikor`s 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 marginally by 2,4% to R273,6 million (2010:
R280,3 million), mainly as a result of lower demand. Gross profit decreased by
26,4% to R28,4 million (2010: R38,6 million).
Gross margins at 10,4% (2010: 13,8%) 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 continued price pressure and competition for volume.
Tight controls resulted in operating expenses being maintained at R54,1 million
(2010: R53,7 million) showing a slight increase of 1%. The reduction in the
Group`s gross profit and finance costs resulted in a loss per share of 34,9
cents for the year (loss per share 2010: 19,9 cents) and a fully diluted
headline loss per share of 6,5 cents (fully diluted headline loss per share
2010: 5,4 cents).
Property, plant and equipment reduced to R208 million (2010: R410 million)
mainly attributable to the depreciation charge, impairments and the sale of
certain land and buildings. The expectation of the future economic viability of
certain plants deteriorated to such an extent that management had to impair
those assets to their recoverable amount. Therefore, an amount of R196,6 million
was impaired. Capital expenditure amounted to R4,6 million and related to the
maintenance of production capacities.
Brikor is currently in breach of covenants as set out by Rand Merchant Bank
("RMB") regarding the RMB loan. The current carrying value of the loan is R125
million. The full amount of the loan is reflected as part of current liabilities
as a result of the breach of covenants.
As discussed under events after the reporting date, Brikor is currently
negotiating the sale of non-core assets to correct the situation. Negotiations
are taking place with RMB to discuss ways and means of remedying the breach of
covenants.
PROSPECTS
The pace of South Africa`s economic recovery, in particular in the building and
construction sectors, 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 to demand for Brikor`s product ranges.
Energy and mining expansion are also expected to create further demand from
consequential housing activity. Government is also experiencing increased
pressure to deliver on infrastructure and housing requirements.
The corrective measures taken to reduce costs and right-size the Group, combined
with an aggressive sales drive, a renewed focus on the Group`s core business
activities and the coal operations, position the Group well to benefit from a
gradual improvement in market conditions.
BASIS OF PREPARATION
The reviewed condensed consolidated results for the year ended 28 February 2011
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 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 in the preparation of the annual financial statements for the year
ended 28 February 2010.
REVIEW REPORT AND EMPHASIS OF MATTER
The condensed financial results have been reviewed by Brikor`s independent
auditors, RSM Betty & Dickson (Tshwane). The auditors` review report concluded
that, based on their review, nothing has come to their attention that caused
them to believe that the condensed financial results are not prepared, in all
material respects in accordance with International Financial Reporting Standards
and the AC 500 standards as issued by the Accounting Standards Board or its
successor, the JSE Listings Requirements and in the manner required by the
Companies Act of South Africa.
The auditors` review report also includes an emphasis of matter whereby the
auditors, without qualifying their report, draw attention to the total
comprehensive loss of R218,954 million incurred during the year ended 28
February 2011 and that this indicate a material uncertainty that may cast
significant doubt on the Group`s ability to continue as a going concern. 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 resumed and
the continued support of the Group`s financiers and creditors as set out by the
directors as part of the "Statement on Going Concern".
A copy of the auditors` review report is available for inspection at the
Company`s registered office.
Report on other legal and regulatory requirements
On 20 January 2011 the auditors reported a reportable irregularity to the
Regulatory Board for Auditors pertaining to the release of the interim results
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. They notified the Regulatory Board for Auditors on 8
February 2011 that the reportable irregularity had been rectified.
CORPORATE ACTIVITIES
Following the termination of Vunani Corporate Finance as Designated Advisor of
Brikor, Exchange Sponsors (2008) (Pty) Limited was appointed Designated Adviser
of Brikor in January 2011.
Messrs R van Rooyen and JH Wood have been appointed as independent non-executive
directors to the Brikor Board of Directors with effect from 21 January 2011.
EVENTS AFTER THE REPORTING DATE
Changes to the Board of Directors and Board Committees
Mrs E Chimombe-Munyoro resigned as non-executive director from the Board with
effect from 15 March 2011. Mr E Grobbelaar resigned as non-executive director
from the Board with effect from 18 March 2011. The Board of Brikor would like to
thank them for their efforts and wish them well in their future endeavours.
Mrs H Botha resigned as company secretary and CIS Company Secretaries (Pty)
Limited was appointed with effect from 18 March 2011.
Ms RJ Magoele and Mr NM Anderson were appointed as non-executive directors of
the Board with effect from 18 March 2011.
The Board of Brikor would like to welcome Ms Magoele and Mr Anderson and looks
forward to a long and valued working relationship.
In compliance with the King Report on Governance for South Africa 2009 ("King
III") the roles of the CEO and the Chairman have been split with Mr R van Rooyen
being appointed as Chairman and Mr G v N Parkin continuing as CEO.
In terms of Brikor`s commitment to Corporate Governance and as a result of the
above appointments to the Board, the Board has decided to re-constitute its sub-
committees as follows:
Audit Committee
The following non-executive directors were appointed as the members of the Audit
Committee:
Ms RJ Magoele (Chairman);
Mr R van Rooyen;
Mr NM Anderson; and
Mr JH Wood.
Remuneration Committee
The following non-executive directors were appointed as the members of the
Remuneration Committee:
Mr JH Wood (Chairman); and
Ms RJ Magoele.
Sale of non-core and unprofitable assets
Negotiations are continuing regarding the sale of non-core assets.
The sales of non core and unprofitable assets are in line with Brikor`s strategy
to strengthen the Group`s cash resources as well as improving its current debt
position.
The proposals are subject to various conditions precedent which are customary in
transactions of this nature, inter alia shareholders` and other regulatory
approvals.
The parties have not concluded final agreements as yet and therefore
shareholders were advised on 29 March 2011, which cautionary announcement was
renewed on 19 May 2011, to continue exercising caution when dealing in their
Brikor shares until such time as detailed announcements, containing inter alia
the full financial effects, are made.
STATEMENT ON GOING CONCERN
The 2011 year-end financial statements have been prepared on the basis of
accounting policies applicable to a going concern. This basis presumes that the
necessary 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 R219 million for the year ended 28 February 2011. Included in this loss
are finance costs amounting to R29,1 million, impairments of R196,6 million and
bad debts written off of R7,2 million.
As a result of the attributable comprehensive loss for the year ended 28
February 2011, as well as that of prior years, coupled with the current macro
economic climate, the directors have entered into a comprehensive restructuring
programme to restore operations to profitability, and to strengthen the Group`s
financial position.
To execute the different activities of the restructuring plan, the Board is in
the process of finalising the appointment of a Chief Restructuring Officer
("CRO"). The CRO will facilitate the restructuring process and play an important
role, together with the Board and management, to successfully implement and
execute this critically important initiative of the Company.
The restructuring programme includes inter alia:
- Internal restructuring. The Company aims to reduce operating
expenses to its historical level of no more than 12% of revenue. To
achieve this goal, the Company`s staff complement was reduced to
support its core operations at its Nigel plants. This
restructuring, along with the re-assessment of all operating
expenses - including salaries and wages - should result in an
estimated saving of R11 million per annum. The restructuring was
completed by 31 May 2011. The financial benefit is expected to
materialise from June 2011 onwards.
In order to increase its gross profit margin, an assessment of all
costs relating to the manufacturing process was also conducted. The
implementation of cost-saving measures on items such as labour,
transport and materials will have an estimated impact of R30
million for the 2012 financial year.
- Termination of unprofitable businesses, namely the
Bronkhorstspruit, Vereeniging and Olifantsfontein operations.
Products produced at these factories proved to be economically
unviable due to current market prices, high production costs and
high logistics costs. Production at the Company`s Vereeniging plant
was stopped in October 2010, with operations at the
Bronkhorstspruit and Olifantsfontein plants terminated at 30 April
2011. All movable equipment was relocated to the Nigel operations.
Stock produced at these plants is being sold off, which is
scheduled to continue until July 2012. A caretaking staff will
maintain the plants at a total cost of R310 000 per month for the
three plants until these plants are sold or re-commissioned. The
total cost-saving due to the closure of these plants is R50
million.
- Sale of non-core assets. The Stanger business has been identified
as non-core to the main business of Brikor. The parties to the sale
of the Stanger Brick & Tile operations have entered into a
Sale Agreement on 11 March 2011, subject to certain suspensive
conditions. The purchaser is currently finalising the transaction
structure in order to meet the suspensive conditions in the Sale
Agreement.
- Sale of other surplus or redundant assets. Some transport vehicles
and other equipment were sold on auction on 17 May 2011 for a total
consideration of R9 million.
- Logistics. In order to improve its transport efficiencies, the
Company has formulated a strategy that outsources its transport
requirement to sub-contractors. Utilisation of sub-contractors will
provide financial flexibility and reduce transport-related expenses
to the amount of R4 million.
- Coal plant. Brikor`s coal operations will contribute to the
profitability of the Group and management at the coal plant will be
strengthened to optimise the potential of the coal operations.
- Debt restructuring. As part of its debt restructuring plan, the
Company plans to reduce its unacceptably high debt and financing
costs levels.
- Cash flow management. As cash flow management is critical to the
success of the restructuring programme, the CRO will oversee the
preparation and management of a rolling quarterly cash flow to be
submitted to the Board. The Board will report to shareholders as
and when required on the cash flow situation and any other
significant deviations or variances in respect of the restructuring
plans in place.
Based on the Group`s restructuring plans being successfully executed and
implemented, budgets and cash flow forecasts for the ensuing year, (which are
based on the current expected economic and market conditions), and the continued
support of the Group`s financiers (who remain fully apprised of the Group`s
results, liquidity challenges, future business and contingency plans), the
directors believe that the Company and the Group have adequate financial
resources to continue as a going concern during the ensuing year. Accordingly,
the directors have adopted the going concern basis in preparing the annual
financial statements.
DIVIDEND POLICY
No dividend has been declared for the year.
By order of the Board
G v N Parkin H Botha
Chief Executive Officer Financial Director
Nigel
31 May 2011
CORPORATE INFORMATION
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")
Non-executive directors: R van Rooyen (Chairman); NM Anderson; RJ Magoele; JH
Wood
Executive directors: G v N Parkin (CEO); W Kruger (COO); H Botha (Financial
Director); G Parkin (Jnr) (Alternate director to the CEO)
Registered address: 1 Marievale Road, Vorsterskroon, Nigel
Postal address: PO Box 884, Nigel 1490
Telephone: (011) 739 9000
Facsimile: (011) 739 9021
Company secretary: CIS Company Secretaries (Pty) Limited
Transfer secretaries: Computershare Investor Services (Pty) Limited
Auditors: RMS Betty & Dickson (Tshwane) per Paul den Boer, designated auditor
Designated Adviser: Exchange Sponsors (2008) (Pty) Limited
These results and an overview of Brikor are available at www.brikor.co.za
Date: 31/05/2011 14:18:01 Produced by the JSE SENS Department.
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