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ABK
ABK
ABK - African Brick Centre - Reviewed results for the year ended 28 February
2011
AFRICAN BRICK CENTRE LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1999/006214/06)
Share Code: ABK
ISIN Code: ZAE000105169
("African Brick Centre" or "Company")
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2011
HIGHLIGHTS
Headline loss R9.408 million
Revenue R83.597 million
Headline LPS 1.67 cents
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
Figures in Rand Reviewed as Audited as
at at28
28 February2010
February2011
Assets
Non-current assets 60,063,376 64,471,892
Current assets 26,940,143 32,175,796
Total assets 87,003,519 96,647,688
Equity and liabilities
Capital and reserves 48,385,418 50,239,904
Non-current liabilities 21,122,762 25,731,543
Current liabilities 17,495,339 20,676,241
Total equity and liabilities 87,003,519 96,647,688
Net asset value per share (cents) 6.8 16.1
Net tangible asset value per 6.5 14.4
share (cents)
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Figures in Rand Reviewed for Audited for
the year the year
ended ended
28 28
February2011 February2010
Gross revenue 83,596,844 89,779,903
Operating costs (93,574,913) (102,108,742
)
Other income 1,365,866 5,274,441
Loss before disclosable items (8,612,203) (7,054,398)
Impairment of assets (2,610,048) (5,017,250)
Profit on sale of assets 39,973 219,113
Depreciation and amortization (3,007,124) (4,148,617)
Fair value gain 35,000 -
Operating loss (14,154,402) (16,001,152)
Finance costs (2,171,550) (1,966,008)
Investment revenue 32,095 203,108
Loss before taxation (16,293,857) (17,764,052)
Taxation 4,350,453
2,384,302
Loss after tax (11,943,404) (15,379,750)
Loss attributable to:
Non-controlling interest - -
Owners of the parent (11,943,404) (15,379,750)
(11,943,404) (15,379,750)
Headline Loss
Loss attributable to ordinary (11,943,404) (15,379,750)
shareholders
Impairment of assets 2,610,048 3,677,184
Fair value gain (35,000) -
Profit on sale of assets (39,973) (157,761)
Headline loss attributable to (9,408,329) (11,860,327)
ordinary shareholders
Loss per share
Loss attributable to ordinary (11,943,404) (15,379,750)
shareholders
Loss attributable to ordinary (11,943,404) (15,379,750)
shareholders
HEPS (Cents) / (HLPS) (1.67) (2.95)
EPS (Cents) / (LPS) (2.12) (3.82)
Shares in issue 705,517,039 312,238,960
Shares in issue - weighted 563,416,972 402,368,505
average
There are no factors existing during this reporting period
which require the disclosure or calculation of diluted EPS
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(CONTINUE)
Figures in Rand Reviewed for Audited for
the year the year
ended ended
28 28
February2011 February2010
Comprehensive Income
Loss after tax (11,943,404) (15,379,563)
Comprehensive (loss)/income for
the year
Change in tax rate on revaluation - 20,187
of property, plant and equipment
Los on property revaluation (1,024,496) -
Taxation related to loss on 148,153 -
property revaluation
Total comprehensive loss (12,819,747) (15,359,563)
Total comprehensive loss
attributable to:
Non-controlling interest - -
Owners of the parent (12,819,747) (15,359,563)
(12,819,747) (15,359,563)
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
Figures in Rand Reviewed for Audited for
the year the year
ended ended
28 28
February2011 February2010
Opening balance as previously 50,239,904 60,380,383
reported
Restatement of opening balance - - 5,219,084
prior period error
Opening balance as restated 50,239,904 65,599,467
Total comprehensive loss (12,819,747) (15,359,563)
attributable to owners
Issue of Shares 11,085,261 -
Purchase of treasury shares (120,000) -
Total 48,385,418 50,239,904
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Figures in Rand Reviewed for Audited for
the year the year
ended ended
28 28
February2011 February2010
Cash used in operations (3,538,731) (2,378,948)
Interest income 32,095 203,108
Finance costs (1,988,740) (1,634,627)
Tax received (paid) 668,320 (288,917)
Net cash applied in operating (4,827,056) (4,099,384)
activities
Net cash applied in investing (2,246,723) (1,050,725)
activities
Net cash from financing 7,078,080 874,896
activities
Total cash movement for the year 4,301 (4,275,213)
Cash at the beginning of the year (5,927,070) (1,651,857)
Total cash at the end of the year (5,922,769) (5,927,070)
CONSOLIDATED CONDENSED SEGMENT REPORT
Figures in Rand Reviewed for Audited for
the year the year
ended ended
28 28 February
February2011 2010
Consolidated revenue
External Customers 76,812,400 82,282,138
Retail 76,812,400 82,283,138
Manufacturing 6,784,444 6,580,303
Corporate - 916,462
Inter-segment revenue
Retail - -
Manufacturing 33,574,081 24,997,011
Eliminations (33,574,081) (24,997,011)
Consolidated revenue 83,596,844 89,779,903
Segment result before disclosed (8,612,203) (7,054,398)
items
Retail (856,399) (3,510,778)
Manufacturing (8,896,560) (6,439,645)
Corporate (Head office) (1,587,937) (1,252,592)
Profit / (loss) with sale of 39,973 219,113
assets
Retail 44,428 29,496
Manufacturing (1,109) 189,617
Corporate (Head office) (3,346) -
Impairment of assets (2,610,048) (5,017,250)
Retail - -
Manufacturing (2,610,048) (5,017,250)
Depreciation and amortization (3,007,124) (4,148,617)
Retail
Manufacturing
Corporate (Head office)
Reportable segment profit / (14,189,402) (16,001,152)
(loss)
Retail (1,120,402) (3,481,282)
Manufacturing (11,477,717) (11,267,278)
Corporate (Head Office) (1,591,283) (1,252,592)
Operating profit / (loss) (14,189,402) (16,001,152)
Finance costs (2,171,550) (1,966,008)
Fair Value Adjustment 35,000 -
Investment Revenue 32,095 203,108
Profit / (loss) before taxation (16,293,857) (17,764,052)
Taxation 4,350,453 2,384,302
Profit / (loss) after tax (11,943,404) (15,379,750)
CONDENSED CONSOLIDATED SEGMENT REPORT (CONTINUE)
Figures in Rand Reviewed for Audited for
the year the year
ended 28 ended
February 28 February
2011 2010
Reportable Segment Assets
Retail 17,762,602 24,168,890
Manufacturing 65,286,679 70,526,935
Corporate 34,531,280 22,743,901
Eliminations (30,577,042) (20,792,038)
Total 87,003,519 96,647,688
Reportable Segment Liabilities
Retail (9,655,538) (13,519,001)
Manufacturing (41,743,445) (39,530,044)
Corporate (17,796,159) (14,150,777)
Eliminations 30,577,042 20,792,038
Total (38,618,100) (46,407,784)
Net asset value 48,385,418 50,239,904
INTRODUCTION
African Brick Centre`s business consists of clay mining, manufacturing of clay
semi-face-, stock bricks and a "wet trade" retail section. The growth of the
business up to February 2008 was the result of the strong growth in the building
industry. Since the recession, the Group closed its Lenasia Plant and only
retained one retail branch in Honeydew Johannesburg.
REVIEW OF RESULTS
The Group experienced mixed fortunes with revenue decreasing by 6.9% and an
increase in gross margins by 29.4% from 6.8% to 8.8%. A moderate increase in
demand for semi face bricks and a promising increase in gross margins during the
last quarter supported margins.
Demand for stock bricks remained unchanged in the Eastern Cape with intense
competition in the retail sector due to a struggling residential development
market.
Operating expenses reduced by 16%. The retail arm of the Group was re-structured
during the first quarter of the financial year in order to reduce operating cost
in an effort to increase net profit margins but volumes were lacking throughout
the reporting period.
Finance cost increased from R1.9 million to R2.2 million as result of an
increase in borrowings against working capital facilities. The sale and
leaseback of the Honeydew Property failed to realise by the third quarter of the
financial year limiting the Group`s ability to increase production levels and
the retirement of debt.
Net loss for the year reduced by 22.3% from R15.4 million to R11.9 million,
taking into consideration a further impairment of clay reserves, a direct result
of not increasing production volume, limited cash resources available to support
a required increased in production capacity in the Krugersdorp factory and a
reduction in the deferred tax liability against the revaluation of the
Krugersdorp property used for manufacturing purposes.
A rights offer was successfully concluded during September 2010, raising R11.1
million after costs which was used to fund operating activities of R4.8 million,
investment into a debt redemption policy of R2.1 million, repayment of debt to
the amount of R3.8 million and a minor CAPEX investment.
Liquidity ratio remained unchanged for the period under review. However the
short term portion of long-term debt significantly reduced with a significant
increase in trade payables.
PROSPECTS
The Board of Directors ("Board") are of the view that African Brick Centre can
return to profitability but this requires a further investment in operating
activities at the Krugersdorp factory and an investigation into the available
options to raise capital of at least R5 million. The realisation of capital
through the sale of non-performing investments or property is unrealistic
considering the low risk appetite of commercial banks and the credit risk
associated with brick making production plants in the current economy.
The Board is confident that it will be in a position to announce a restructuring
plan which will create a capital injection in the near future.
None of the prospects information contained in this announcement has been
reviewed or reported on by the Group`s auditors.
CHANGES TO THE BOARD
Mr Linda Yanta resigned as an independent non-executive director and member of
the Audit Committee with effect from Thursday 9 September 2010.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed results were prepared in accordance with the framework concepts and
the measurement and recognition requirements of International Financial
Reporting Standards ("IFRS") and the AC 500 standards as issued by the
Accounting Practices Board or its successor, and must also as a minimum contain
the information required by IAS 34: Interim Financial Reporting.
The accounting policies applied in the preparation of these condensed financial
statements, which are based on reasonable judgments and estimates, are in
accordance with IFRS, the disclosure requirements of IAS 34 - Interim Financial
Reporting and are consistent with those applied in the annual financial
statements for the year ended 28 February 2010. These reviewed consolidated
condensed financial statements as set out in this report comply with the
Companies Act, 71 of 2008, as amended, and the Listings Requirements of the JSE
Limited.
Going Concern
The financial statements have been prepared on the going concern basis. The
company acknowledges the challenges that lie ahead to raise further capital but
also highlights the strengths of the Group and low long-term debt levels and is
confident that it can raise further capital in the near future.
As a result of the challenges being experienced, the directors have embarked on
the following restructuring initiatives in order to reduce operating costs:
a further reduction in staff numbers or a reduction in salaries as an
alternative to reduce payroll costs;
further right sizing of the retail operations to only focus on core product
lines and the recovery of cash resources invested in stock;
restructured the term loan from Standard Bank which will free up R170,000 in
cash on a monthly basis as from June 2011;
reduction of head office operating and payroll costs; and
reduction in executive and non-executive director`s salaries.
These initiatives are tailored to reduce monthly cash operating costs by
approximately R400 000.
BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continue)
Review opinion
The auditors, SAB&T Chartered Accountants Incorporated ("SAB&T") have reviewed
the preliminary condensed consolidated annual financial statements for the year
ended 28 February 2011. The auditors modified review report is available for
inspection at the company`s registered offices.
The review report contains the following emphasis of matter paragraph:
Going concern
The Group has been unable to renegotiate or obtain the required financing to
support its current working capital requirements. The ability of the Group to
honour its commitments and provide adequate working capital to sustain its
operations are dependent on a combination of factors including the successful
outcome of negotiations, procuring additional funding, the realization of non-
core assets and/or refinancing certain operations as well as a return to
profitability. This situation indicates the existence of a material uncertainty
which may cast significant doubt on the Group`s ability to continue as a going
concern and therefore it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
The auditors of African Brick Centre, SAB&T, have reviewed the financial
information in terms of section3.18 of the Listings Requirements of the JSE.
APPRECIATION
We thank our loyal staff for their commitment and also thank our business
partners, financiers, advisors, clients, and most importantly our shareholders,
for their ongoing support.
By order of the Board
31 May 2011
MP Shangase B Blom SA Tati
Managing Director Financial Director Chairman
CORPORATE INFORMATION
Directors
Executive
M.P. Shangase (Managing Director)
B Blom (Financial Director)
Non-executive
S.A. Tati (Chairperson)
W.A.F. Strydom
M.M. Patel (Independent)
D. Msibi (Independent)
Registration number: 1999/006214/06
Registered office Unit 28, First Floor
WaterfordOffice Park
Fourways
Johannesburg
2188
Business address Farm 246, Luipaardsvlei
Krugersdorp
1739
Postal address PO Box 99
Rant en Dal
Krugersdorp
1751
Holding company Yakani Infraco (Proprietary) Limited
incorporated in South Africa
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Designated Adviser: Grindrod Bank Limited
Date: 31/05/2011 17:33:08 Produced by the JSE SENS Department.
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