|
BAT
BRAIT
BAT - Brait S.A. Societe Anonyme - Audited condensed consolidated financial
results for the year ended 31 March 2011
Brait S.A. Societe Anonyme
(Incorporated in Luxembourg)
(RC Luxembourg B-13861)
Share code: BAT & ISIN: LU0011857645
("Brait", "Company" or "Group")
AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH
2011
Key Highlights
Strategic Highlights
- New business model proposed for Brait
- Raising of R5.9 billion through fully underwritten, renounceable rights
offer ("Rights Offer") approved by shareholders post year-end
Earnings Highlights
- Attributable earnings decreased by 6% to R174.8m (2010: R185.6m).
- Private Capital`s operating profit up 7% to R198.1 m (2010: R185.6m).
- Group profit from operations decreased by 3% to R259.8m (2010: R267.3m).
Other Financial Highlights
- Total assets under management ("AUM") increased from R13.6bn to R14.6bn
- Cash generated of R54.1 m (2010: R232.1m)
Operational Highlights
- Steady operational performance from Brait III and IV portfolio companies
- Successful unwind of Sitogo BEE transaction
Salient features
for the year ended 31
March
Supplementary US$ information *
Audited Audited
2010 2011 2011 2010 %
US$m US$m Rm Rm Change
34.1 36.2 Profit from operations 259.8 267.3 (2.8)
23.6 27.6 Private capital 198.1 185.6
8.2 8.4 Public markets 60.6 64.0
2.3 0.2 Treasury capital 1.1 17.7
(6.6) (6.9) Finance costs (49.4) (52.1)
0.4 - Capital items - 3.1
27.9 29.3 Profit before taxation 210.4 218.3 (3.6)
(4.2) (5.0) Taxation (35.6) (32.7)
23.7 24.3 Attributable/Headline 174.8 185.6 (5.8)
earnings
PERFORMANCE MEASURES
Headline earnings per
share (cents)
22.3 21.6 - Basic 155.7 174.8 (10.9)
22.1 21.3 - Diluted 153.4 173.2 (11.4)
Attributable earnings
per share (cents)
22.3 21.6 - Basic 155.7 174.8 (10.9)
22.1 21.3 - Diluted 153.4 173.2 (11.4)
23.74 10.74 Dividends per share 74.24 179.54 (58.6)
(cents)
11.85 10.74 - Interim paid 74.24 89.77 -
11.89 - - 89.77 -
- Final proposed/paid
176.2 188.7 Net asset value per
share (cents) 1 278.3 1302.4 (1.8)
243.6 Proforma net asset - -
value per share (cents) 1 650.0
**
13.7% 12.3% Return on equity (%)
*** 12.2% 12.8%
FINANCIAL STATISTICS
301.2 329.4 Market capitalisation 2 231.0 2226.3 0.2
110.5 119.0 Shares in issue (m) 119.0 110.5 7.7
Weighted average shares
in issue (m)
106.1 112.3 - Basic 112.3 106.1 5.8
107.2 113.9 - Diluted 113.9 107.2 6.3
272.6 276.8 Closing share price 1 875.0 2 015.0 (6.9)
(cents per share)
Rand/US$ exchange rates
0.1353 0.1476 - closing 6.7740 7.3926
0.1274 0.1391 - average 7.1913 7.8474
* The disclosure above is for information purposes only and does
not form part of the Group`s annual financial statements.
** Pro forma net asset value per share is the restated NAV on the
same basis as the Rights Offer Circular distributed to shareholders
on 18 April 2011. See Note 5 below.
*** The ROE is calculated as attributable earnings / average
capital for the year.
Condensed Consolidated Statement of
Comprehensive Income
for the year ended 31 March
Supplementary
US$
information *
Audited Audited
2010 2011 2011 2010
US$m US$m Notes Rm Rm
36.4 43.2 Investment income 310.3 285.4
(1.4) (3.4) Investment expenses (24.6) (11.1)
35.0 39.8 Profit from investment 285.7 274.3
operations
27.5 32.6 Fund management income
234.7 216.0
(29.1) (36.8) Fund management expenses
(265.0) (228.1)
(1.6) (4.2) Loss from fund management
operations (30.3) (12.1)
0.7 0.6 Income from associates 4.4 5.1
34.1 36.2 Profit from operations
259.8 267.3
(6.6) (6.9) Finance costs (49.4) (52.1)
0.4 - Capital items - 3.1
27.9 29.3 Profit before taxation
210.4 218.3
(4.2) (5.0) Taxation (35.6) (32.7)
23.7 24.3 Profit attributable to
equity holders 174.8 185.6
Other comprehensive
income
(18.0) Net translation (60.8) (133.4)
(9.0) adjustments
5.7 Total comprehensive 114.0 52.2
15.3 income for the year
Attributable earnings per
share (cents)
22.3 21.6 - Basic 155.7 174.8
22.1 - Diluted 153.4 173.2
21.3
23.74 10.74 Dividends per share 74.24 179.54
(cents)
11.85 10.74 - Interim paid 74.24 89.77
11.89 - - Final proposed/paid - 89.77
* The disclosure above is for information purposes only and does not
form part of the Group financial statements.
Condensed Consolidated Statement of
Financial Position
as at 31 March
Supplementary US$ information
Audited Audited
2010 2011 2011 2010
US$m US$m Note Rm Rm
s
ASSETS
247.4 299.7 Non-current assets 2 030.1 1 828.6
242.8 294.4 Investments 1 994.2 1 795.2
4.5 5.3 Other non-current 35.9 33.4
assets
51.6 18.3 Current assets 124.0 381.4
4.9 1.8 Financial assets and 12.0 36.0
other current assets
1.8 0.1 Loans and advances 0.7 13.4
5.0 6.8 Accounts receivable 45.8 36.7
1.9 0.1 Taxation 1.0 14.1
38.0 9.5 Cash and cash 64.5 281.2
equivalents
298.9 318.0 Total assets 2 154.1 2 210.0
EQUITY AND LIABILITIES
187.0 220.1 Equity and reserves 1 491.2 1 382.5
68.3 84.3 Non-current liabilities 569.8 505.2
54.8 66.5 Redeemable preference 450.0 405.0
shares
13.6 17.8 Other non-current 119.8 100.2
liabilities
43.5 13.6 Current liabilities 93.1 322.2
11.5 12.8 Accounts payable 87.3 85.4
6.1 - Redeemable preference - 45.0
shares
26.0 0.9 Other non-current 5.8 191.9
liabilities
298.9 318.0 Total equity and 2 154.1 2 210.0
liabilities
176.2 188.7 Net asset value per 1 278.3 1 302.4
ordinary share (cents)
Condensed Consolidated Statement of Cash Flows
for the year ended 31 March
Audited Audited
2011 2010
Rm Rm
Cash flows from:
Operations (15.3) 27.9
Dividends received 12.9 12.7
Interest received 21.9 17.3
Interest paid (55.5) (61.8)
Taxation paid (2.7) (19.5)
Changes in working capital 3.6 (11.3)
Cash utilised in operating activities (35.1) (34.7)
Cash flows generated from investing activities 15.7 174.2
Cash flows (utilised in)/generated from (19.4) 139.5
operating and investing activities
Dividends paid (182.3) (195.5)
Cash inflows from financing activities 2.6 -
Net decrease in cash and cash equivalents (199.1) (56.0)
Effects of exchange rate changes on cash and (17.6) (92.9)
cash equivalents
Cash and cash equivalents at beginning of year 281.2 430.1
Cash and cash equivalents at end of year 64.5 281.2
Condensed Consolidated Statement of Changes in Equity
for the year ended 31 March
Attributable to equity holders of the parent
Share Foreign Total
capital currency equity
and Legal Equity translat Retained and
ion
premium reserv Reserv reserve reserves reserves
e es
Rm Rm Rm Rm Rm Rm
Audited Balance 256.2 29.1 31.2 114.3
at 31 March 2009 1 093.2 1 524.0
Net translation - - - (133.4) - (133.4)
adjustments
Attributable - - - - 185.6 185.6
earnings
Share - - 1.8 - - 1.8
entitlements
Ordinary - - - - (195.5) (195.5)
dividends
Transfer between - 19.2 - - (19.2) -
other reserves
Audited Balance 256.2 48.3 33.0 (19.1)
at 31 March 2010 1 064.1 1 382.5
Net translation - - - (60.8) - (60.8)
adjustments
Issue of shares - 166.0 - - - - 166.0
Sitogo unwind
Sale of treasury 18.9 - - - - 18.9
shares
Delivered share - - (8.6) - - (8.6)
scheme shares
Attributable - - - - 174.8 174.8
earnings
Share - - 0.7 - - 0.7
entitlements
Ordinary - - - - (182.3) (182.3)
dividends
Transfer between - 10.5 - - (10.5) -
reserves
Audited Balance 441.1 58.8 25.1 (79.9) 1 046.1 1 491.2
at 31 March 2011
Consolidated Segmental Report
for the year ended 31 March
Audited Audited
2011 2010
Rm Rm
BUSINESS ANALYSIS
Segment income
Investment income 310.3 285.4
- Private capital 269.2 235.9
- Public markets 25.5 41.0
- Treasury capital 15.6 8.5
Fund management income 234.7 216.0
- Private capital 92.8 107.5
- Public markets 137.3 106.0
- Treasury capital 4.6 2.5
Total segment income 545.0 501.4
Segment result 259.8 267.3
- Private capital 198.1 185.6
- Public markets 60.6 64.0
- Treasury capital 1.1 17.7
Finance costs (49.4) (52.1)
Capital items 3.1
-
Profit before taxation 210.4 218.3
Segment assets and liabilities 2 154.1 2 210.0
- Private capital 1 898.7 1 636.5
- Public markets 132.6 174.9
- Treasury capital 122.8 398.6
Total assets per balance sheet 2 154.1 2 210.0
Segment liabilities 662.9 827.4
- Private capital 67.9 79.0
- Public markets 8.8 13.1
- Treasury capital 586.2 735.3
Total liabilities per statement of financial 662.9 827.4
position
Consolidated Segmental Report (continued)
for the year ended 31 March
Audited Audited
2011 2010
Rm Rm
BUSINESS ANALYSIS (continued)
Segment net assets 1 491.2 1 382.5
- Private capital 1 830.8 1 557.5
- Public markets 123.8 161.7
- Treasury Capital (463.4) (336.7)
Total net assets per statement of financial position 1 491.2 1 382.5
GEOGRAPHICAL ANALYSIS
Segment income
Investment income 310.3 285.4
- International 104.3 43.9
- South Africa 206.0 241.5
Fund management income 234.7 216.0
- International 17.3 19.1
- South Africa 217.4 196.9
Total segment income 545.0 501.4
Segment profit from operations 259.8 267.3
- International 84.0 37.1
- South Africa 175.8 230.2
Finance cost (49.4) (52.1)
Capital items 3.1
-
Profit before taxation 210.4 218.3
Segmentassets
- International 544.8 597.6
- South Africa 1 609.3 1 612.4
Total assets per statement of financial position 2 154.1 2 210.0
1. Basis for preparation
The financial statements of the Group are prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union, on the going concern principle using the historical cost basis except
where otherwise indicated. The Group`s condensed consolidated financial
results have been prepared in accordance with the recognition and measurement
criteria of IFRS, interpretations issued by the International Financial
Reporting Interpretation Committee (IFRIC) and the presentation and disclosure
requirements of IAS 34 (Interim Financial Reporting). In preparation of these
condensed consolidated financial results the Group has applied assumptions
concerning the future and other inherent uncertainties in recording various
assets and liabilities. These assumptions were applied consistently to the
condensed consolidated financial results for the year ended 31 March 2011. The
accounting policies and methods of computation are consistent with those
applied in the prior year, except for the change in the accounting for
performance fees on Public Markets business. This is now accounted on an
accrual basis rather than when paid. The change did not have a material impact
on either the current or prior year numbers.
2. Presentation currency
The Group has two functional currencies: SA rand (rand) for its South African
operations and US dollar (US$) for its international operations. The Group`s
condensed consolidated financial results are prepared, consistent with the
previous year, using rand as its presentation currency.
3. Supplementary dollar information
The statements of comprehensive income and financial position of the Group
have also been presented in US$ for the convenience of non - South African
stakeholders in the Group and accordingly has not been reviewed by the Group`s
independent auditors. The supplementary US$ results have been converted from
the rand results using a closing rate of R6.7740 to US$1 (2010: R7.3926) for
the statement of financial position and an average rate of R7.1913 to US$1
(2010: R7.8474) for the statement of comprehensive income.
4. Subsequent events
The Group is in the midst of a change in its business model and strategy, as
announced to the market on 2 March 2011. In order to continue to benefit from
the extensive investment experience of its investment team while raising
capital in a more efficient manner, the Company will now be raising capital,
from time to time, in the public equity capital markets and invest this
capital directly into predominantly privately owned companies located
primarily in South Africa.
In this regard, Brait is finalising a fully underwritten, renounceable rights
offer ("Rights Offer") with a view to raising ZAR5.9 billion. The Rights Offer
will consist of the issue and listing of a maximum of 356 961 963 new Brait
Shares ("New Brait Shares"). As set out in the Circular to shareholders on 18
April 2011, the Rights Offer and the changes listed below (collectively "the
Transactions") will result in the following:
- Realisation of Brait`s Pepkor and Premier stakes in Brait III and IV
respectively for total proceeds of R910 million for the Group;
- Brait will apply the proceeds of the Rights Offer to acquire an effective
34.9% and 49.9% stakes in Pepkor and Premier respectively;
- Target shareholding of 33.33% and 18% by Titan and the Investment Team
respectively as part of their underwriting responsibilities;
- Restructure of the Company`s domicilium from Luxembourg to Malta by
October/November 2011;
- A new Board of Directors which will be fully non-executive and become the de
facto investment committee of the Group;
- A change in the executive leadership of the Group;
- Cost reduction exercise that will include retrenchments and early vesting
plus termination of the Group`s share incentive schemes; and
- A change in the Company`s dividend policy going forward.
The Brait shareholders voted in favour of the above proposed changes at an
Extra Ordinary General Meeting ("EGM") on 4 May 2011.
The above Transactions will result in a fundamental change in Brait`s business
model. The new performance measures for the Group will be communicated to the
market as soon as the Transactions have been concluded.
5. The pricing of the Rights Offer to shareholders referred to above was done
on the basis of the pro forma NAV for the Group as at 30 September 2010. Set
out in the table below are the unaudited pro forma effects of the Transactions
on the number of shares in issue and the NAV per share as at 31 March 2011,
assuming the same basis as the Rights Offer pricing and that the Transactions
had taken place on 31 March 2011.
Headline and basic earnings per share numbers have not been calculated on the
basis that pro forma earnings figures would be misleading and not comparable
without the inclusion of fair value adjustments for the acquisitions and funds
management units which have been carried at the acquisition prices.
The existing accounting policies of Brait have been used in calculating the
pro forma financial information. The directors of Brait are responsible for
the preparation of the pro forma financial effects.
Unadjusted Rights Offer, Pro forma
31 March 2011 Placements 31 March 2011
and
Fair Value
Adjustments
Number of ordinary
shares in issue 116 655 161 389 864 622 506 519 783
(million)
NAV per share (Cents)
1278 1760 1650
Commentary
Value drivers
Traditionally Brait`s performance has been affected by the following core
value drivers:
Assets under Management (AUM).
Investment product performance.
Private Equity Fund-to-Fund cycle.
New product developments.
The change in the business model to an investment vehicle will result in Brait
making sizeable investments in underlying assets where growth in the value of
those investments will translate into NAV growth. This will be the key
component in addition to other value drivers and performance metrics. The
Company plans to communicate these changes to the market at the end of July
2011 once the Transactions have been finalised. The current year analysis has
therefore been limited to the financial results.
Financial results
The Group`s attributable earnings of R174,8 million (2010: R185,6 million) are
down by 6% compared to prior year. Postponement in raising Brait V as well as
the impact of the strong rand on management fees negatively impacted the
results.
Private Capital`s operating profits were up by 7% to R198.1 million
(2010:185.6 million) on the back of steady operational performance by
portfolio companies, while Public Markets` operating profits of R60.6 million
(2010: R64 million) were weighed down by lower average AUM for the year,
despite consistent strong fund performance. Treasury Capital recorded an
operating profit of R1.1 million (2010: R17.7 million profit) largely due to
the impact of the strong rand on its US$ cash and cash equivalents.
Investment income R310,3 (2010: R285,4 million)
The positive increase was underpinned by positive contributions from Brait III
and Brait IV assets while Public Markets` funds contributed towards investment
income on the Group`s seed capital as well as on Treasury Capital`s surplus
cash invested in the hedge fund products.
Investment expenses R24,6 (2010: R11,1 million)
Investment expenses relate to Brait`s share of the fund expenses and the
increase in the current year is largely due to the write-off of the Brait V
fundraising costs.
Fund management income R234,7 million (2010: R216,0 million)
Management fees decreased by 9% to R129, 5 million (2010: R142.0 million) as a
result of the impact of the strong rand on the US$ Brait IV commitments, as
well as postponement in raising Brait V. In addition, the average AUM was
lower for Public Markets in the current year compared to prior year due to
outflows from Brait Solutions.
Performance fees for Public Markets increased by 39% to R96.6 million (2010:
R69, 4 million) due to strong performance in the CMT products, particularly
the Brait Matrix Fixed Income Fund.
Fund management expenses R265,0 million (2010: R228,1 million)
Expenses increased by 16% from the prior year due to the performance fee
linked incentives for the Public Markets business. In addition, LTIP payments
related to the Transactions saw an above inflation increase in the
remuneration expenses.
Finance costs R49,4 million (2010: R52,1 million)
The finance costs relate to the preference dividends on the R450 million
redeemable preference shares and interest paid on the R150 million overdraft
facility held by the Group. The decrease in the current year is due to the
lower prime rate of interest and the expiry of the fixed interest rate swap.
Taxation R35,6 million (2010: R32,7 million)
The Group`s taxation is largely driven by its long-term investment activities,
which are capital in nature. Current taxation charge is in line with the 14 -
20% effective tax rate range for the Group`s various operational
jurisdictions.
Capital items Rnil (2010: R3,1 million)
The capital items previously related to the hedge costs on BSAL`s net asset
value ("NAV") as well as the charges relating to the Brait BEE transaction
with Sitogo Holdings (Pty) Limited, both of which have since fallen away.
Group cash and funding position
The Group`s cash position decreased by R217 million in the current year mainly
as a result of the R182 million dividend payment which was not matched to the
realisation of mature assets during the year. In view of the fully
underwritten R5.9 billion Rights Offer to be concluded by 4 July 2011, the
directors believe that the Group is adequately funded.
Besides shareholders` equity of R1,5 billion, the Group is also funded by R450
million redeemable preference shares and a R150 million overdraft facility.
The Group has kept the option to early settle its current facilities from
future realisations of investments. After the Transactions, the Group will
have approximately R8 billion shareholders` funds and cash and unutilised
credit lines of around R2 billion.
Sitogo unwind
Brait has successfully completed the buy-back of its 26% holding in BSAL sold
to Sitogo in September 2004 as part of its BEE transaction. This was in line
with the planned liquidity mechanism provided for in the initial transaction
agreements. Sitogo acquired its original interest based on a Tangible Net
Asset Value ("TNAV") formulation, and had a put option on substantially the
same terms as at 31 March 2010. Sitogo exercised this put option on 22 June
2009 with a 31 March 2010 effective date. Upon conclusion of this buy back,
Brait now owns 100% of BSAL.
According to the exit arrangements laid out in the original agreement entered
into in September 2004, the parties agreed to a net cash amount payable to
Sitogo of R102 000 000 after the payment of R68 500 000 to Old Mutual as the
primary financiers. The Company issued 8.5 million Brait shares to Sitogo on
24 August 2010 as the estimated shares required to settle the R170.5 million
cash liability. On 2 September 2010, Deutsche Bank placed the 8.5 million
shares under an accelerated book build and achieved a price per share of
R19.75. The total net proceeds from the placement were R165.5 million, with
Brait contributing a further R5.0 million to settle the cash liability of
R170.5 million. Following the completion of the placement, the Sitogo shares
were listed on 6 September 2010 with the simultaneous transfer to the
investors who bought the shares from the placement being booked on the same
day. The cash settlements to Sitogo and Old Mutual were effected on 13
September 2010.
The financial impact on Brait of the unwind of the BEE transaction is an
accretion to current shareholders of R166.0 million of equity reserves.
Brait`s BEE Status
Brait has been advised by its empowerment rating agency that it will be
credited with ownership points for a period of two years following Sitogo`s
exit.
New Dividend Policy
As a consequence of Brait`s new business model, there will be no final
dividend proposed for the current financial year. Going forward, dividends
will be considered annually in light of the results for each year. The factors
to be taken into account in determining the extent of any dividends will be
the net operating cash flows of the business, payments received on the
realisation of loans and investments from time to time and cash flows
earmarked for new projects or required for liquidity.
Group Outlook
The Transactions being undertaken by the Group will result in the Company
being well placed to pursue its new strategic initiatives to drive the
performance of its underlying investments which should translate into
significant growth in Brait`s NAV and HEPS commencing in the 2012 financial
year.
Audited results
Deloitte & Touche, the Group`s independent auditors, have audited the
consolidated annual financial statements of the Group from which the
summarised financial results have been derived, and have expressed an
unmodified audit opinion on the consolidated annual financial statements. The
condensed consolidated financial results comprise the consolidated statement
of financial position at 31 March 2011, consolidated statement of
comprehensive income, consolidated statement of changes in equity, condensed
consolidated statement of cash flows for the year ended and explanatory notes.
The audit report is available for inspection at the Group`s registered office.
PJ Moleketi
Non-Executive Chairman
On Behalf of the Board
Luxembourg
2 June 2011
Administration:
Registered office
Brait S.A.
42, rue de de la Vallee
L-2661, Luxembourg
Tel: +352 269255 3297
Fax: +352 269255 3642
Brait South Africa Limited
9 Fricker Road, Illovo Boulevard
Illovo, Sandton, South Africa
Tel: +27 11 507 1000
Fax: +27 11 507 1001
Listing agent:
M Partners
56, rue Charles Martel
L-2134 Luxembourg
Tel: +352 263 868
Fax: +352 263 868 66
Transfer agent
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Tel: +27 11 370 5000
Fax: +27 11 668 5200
Legal advisors to the Company
M Partners
56, rue Charles Martel
L-2134 Luxembourg
Tel: +352 263 868
Fax: +352 263 868 66
Independent auditors
Deloitte S.A.
560, rue de Neudorf
L-2220 Luxembourg
Tel: +352 451 452 693
Fax: +352 451 452 666
Domiciliary agent and registrar
Experta Luxembourg S.A.
42, rue de la Vallee
L-2661, Luxembourg
Tel: +352 269 255 3297
Fax: +352 269 255 3642
JSE and LSE issuer name and code
Issuer long name - Brait S.A.
Issuer code - BRAIT
Instrument alpha code/
Ticker symbol - BAT
ISIN - LU 0011857645
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Directors (all non-executive):
PJ Moleketi (Chairman)*, AC Ball*, Dr. CH Wiese*,C Keogh##, RJ Koch##, CS
Seabrooke*,HRW Troskie**, SJP Weber#
*South African, #Luxembourgish, ##British, **Dutch.
The Company is primarily listed on the Euro MTF market of the Luxembourg Stock
Exchange and secondarily listed on the Johannesburg Stock Exchange.
Date: 02/06/2011 17:00:02 Produced by the JSE SENS Department.
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