| Mon 28 Nov 2011, 7:07 | | BIK - Brikor Limited - Reviewed condensed consolidated financial results for |
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BIK
BIK
BIK - Brikor Limited - Reviewed condensed consolidated financial results for
the six months ended 31 August 2011
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 2011
The interim results, as approved at a meeting of the Board of Directors held
on 22 November 2011, are disclosed below:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed Audited
6 months 6 months year
ended ended ended
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`000 R`000 R`000
Revenue 84 662 104 641 201 281
Cost of sales (70 466) (84 525) (181 289)
Gross profit 14 196 20 116 19 992
Other income 2 972 1 344 2 022
Depreciation and amortisation (694) (2 347) (4 510)
Operating expenses (17 319) (21 337) (43 723)
Operating loss before impairment (845) (2 224) (26 219)
Impairment of continuing operation (14 000) - (159 405)
Operating loss before interest and (14 845) (2 224) (185 624)
taxation
Interest received 8 212 312
Finance costs (13 530) (13 299) (27 554)
Loss before taxation (28 367) (15 311) (212 866)
Taxation - 2 516 23 262
Total loss attributable to equity (28 367) (12 795) (189 604)
holders of the Company
Profit/(loss) from discontinued 2 185 2 321 (29 350)
operations held for sale
Total comprehensive loss (26 182) (10 474) (218 954)
attributable to equity holders of
the Company
Earnings per share
Basic loss per share (cents) (4,2) (1,7) (34,9)
Fully diluted loss per share (cents) (4,1) (1,6) (34,0)
Headline loss per share (cents) (1,9) (1,7) (6,6)
Earnings per share - continuing
operations
Basic loss per share (cents) (4,5) (2,0) (30,2)
Fully diluted headline loss per (1,9) (1,7) (6,5)
share (cents)
Headline loss per share (cents) (2,3) (2,1) (7,4)
Reconciliation of headline earnings
Loss attributable to ordinary (26 182) (10 474) (218 954)
shareholders
Adjusted for impairments 14 509 - 177 012
Adjusted for profit on disposal of (398) (372) 284
non-current assets
Headline loss attributable to (12 071) (10 846) (41 658)
ordinary shareholders
Reconciliation of headline earnings
from continuing operations
Loss attributable to ordinary (28 367) (12 795) (189 604)
shareholders
Adjusted for impairments 14 000 - 142 658
Adjusted for (loss)/profit on (548) (372) 284
disposal of non-current assets
Headline loss attributable to (14 915) (13 167) (46 662)
ordinary shareholders
Weighted average shares outstanding 629 342 624 657 627 274
during the period (`000)
Treasury shares issues to the Brikor 15 900 15 900 15 900
Share Incentive Trust (`000)
Fully diluted weighted average 645 242 640 557 643 174
shares in issue (`000)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 150 941 425 351 218 837
Property, plant and equipment 140 892 401 176 208 672
Intangible assets 6 639 10 528 6 639
Goodwill - 10 825 -
Other financial assets 3 410 2 822 3 526
Current assets 114 716 109 323 86 044
Inventories 33 397 69 833 50 554
Trade and other receivables 16 574 30 926 28 978
Cash and cash equivalents 6 695 7 114 6 512
Non-current assets held for sale 58 050 1 450 -
Total assets 265 657 534 674 304 881
EQUITY AND LIABILITIES
Equity attributable to equity 6 866 241 028 33 048
holders of the Company
Share capital 63 62 63
Share premium 228 180 227 680 228 180
(Accumulated loss)/retained earnings (221 377) 13 286 (195 195)
Non-current liabilities 49 553 76 459 50 456
Borrowings - interest-bearing 39 364 37 143 40 328
Deferred taxation - 29 676 -
Provisions 10 189 9 640 10 128
Current liabilities 209 238 217 187 221 377
Borrowings - interest-bearing 135 192 130 143 136 123
Taxation 12 899 14 552 15 063
Trade and other payables 24 267 47 500 43 522
Bank overdraft 26 230 24 992 26 669
Non-current liabilities held for 10 650 - -
sale
Total equity and liabilities 265 657 534 674 304 881
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Reviewed Audited
6 months 6 months year
ended ended ended
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`000 R`000 R`000
Balance at the beginning of the 33 048 251 502 251 502
period
Changes in share capital - - 500
Total comprehensive loss (26 182) (10 474) (218 954)
Balance at the end of the period 6 866 241 028 33 048
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Reviewed Audited
6 months 6 months year
ended ended ended
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`000 R`000 R`000
Cash flows from operating activities (5 696) 3 630 (2 822)
Cash flows from investing activities 6 362 (2 903) (7 895)
Cash flows from financing activities (44) (2 032) 7 133
Net increase/(decrease) in cash 622 (1 305) (3 584)
Balance at the beginning of the (20 157) (16 573) (16 573)
period
Balance at the end of the period (19 535) (17 878) (20 157)
Cash and cash equivalents 6 695 7 114 6 512
Bank overdraft (26 230) (24 992) (26 669)
(19 535) (17 878) (20 157)
SEGMENTAL REPORTING
Brikor Donker- Total
Main hoek
R`000 R`000 R`000
Reviewed 6 months ended 31 Aug 2011
COMPREHENSIVE INCOME
Revenue from external customers 74 270 10 392 84 662
Cost of sales (62 237) (8 229) (70 466)
Gross profit 12 033 2 163 14 196
Other income 2 878 94 2 972
Depreciation and amortisation (624) (70) (694)
Operating expenses (15 067) (2 252) (17 319)
Operating loss before impairments (780) (65) (845)
Impairments (14 000) - (14 000)
Operating loss before interest and (14 780) (65) (14 845)
taxation
Interest received 8
Finance costs (13 530)
Loss before taxation (28 367)
TOTAL ASSETS
Continuing operations 173 498 34 109 207 607
Discontinued operations 58 050 - 58 050
Total assets 231 548 34 109 265 657
Reviewed 6 months ended 31 Aug 2010
COMPREHENSIVE INCOME
Revenue from external customers 92 511 12 130 104 641
Cost of sales (76 211) (8 314) (84 525)
Gross profit 16 300 3 816 20 116
Other income 1 087 257 1 344
Depreciation and amortisation (2 284) (63) (2 347)
Operating expenses (19 887) (1 450) (21 337)
Operating (loss)/profit (4 784) 2 560 (2 224)
Interest received 212
Finance costs (13 299)
Loss before taxation (15 311)
TOTAL ASSETS
Continuing operations 496 387 36 837 533 224
Discontinued operations 1 450 - 1 450
Total assets 497 837 36 837 534 674
Audited year ended 28 Feb 2011
COMPREHENSIVE INCOME
Revenue from external customers 175 686 25 595 201 281
Cost of sales (163 114) (18 175) (181 289)
Gross profit 12 572 7 420 19 992
Other income 1 528 494 2 022
Depreciation and amortisation (4 387) (123) (4 510)
Operating expenses (37 744) (5 979) (43 723)
Operating (loss)/profit before (28 031) 1 812 (26 219)
impairments
Impairments (159 405) - (159 405)
Operating (loss)/profit before (187 436) 1 812 (185 624)
interest and taxation
Interest received 312
Finance costs (27 554)
Loss before taxation (212 866)
TOTAL ASSETS
Continuing operations 268 779 36 102 304 881
Discontinued operations - - -
Total assets 268 779 36 102 304 881
COMMENTARY
OVERVIEW
The directors of Brikor present the reviewed condensed consolidated financial
results for the six months ended 31 August 2011 ("the interim period").
Brikor is a manufacturer and supplier of building and construction materials
to the industry, across a broad spectrum of the market from low-cost housing,
residential to commercial and industrial projects and has clay and coal
mining operations. The continuing difficult general economic conditions
throughout the economy affected the building and construction sectors.
Notwithstanding relatively low mortgage rates, financial institutions
maintained their rigid credit approach to mortgage bonds, which continued to
subdue Brikor`s markets throughout the period. The residential market was
sustained by ongoing small orders from the additions and alterations sector,
accounting for the majority of construction activity on which Brikor
focussed.
These market conditions continued to impact the results of the Group during
the interim period, exacerbated by delays and the lack of new projects in the
residential and construction markets, most notably, the awarding of tenders
by the metropolitan municipalities. Local governments` spending continued to
delay new projects.
Margins remained under pressure in a competitive environment, as evidenced in
the Group`s results. The priority remained the management of cash flows
through ardent cost-cutting and working capital management measures.
Corrective measures adopted to reduce costs and right-size the Group included
the use of external consultants to assist in re-structuring the Group
together with aggressive cost cuts and the closing of unprofitable
operations. The disposal of the Stanger aggregates operation, which is still
pending shareholder approval, and the disposal of the Olifantsfontein
operation, which is awaiting purchaser funding approval, are both in line
with the restructuring objective of the Group and will assist in reducing
debt and the applicable interest thereon.
Subsequently, the scaled down operations are focussed on the clay brick
production operations in Nigel and the aggregates business at Donkerhoek. At
the end of the reporting period Brikor was granted a mining license, which is
in the process of being registered and which will allow for the opening of
its mining operations at Vlakfontein, giving it access to additional clay and
coal deposits.
FINANCIAL RESULTS
The Company`s revenue decreased by 19,1% to R84,7 million (2010: R104,6
million), mainly as a result of discontinued operations. Gross profit
decreased by 29,4% to R14,2 million (2010: R20,1 million).
Gross margins at 16,8% (2010: 19,2%) decreased as a result of the exclusion
of discontinued operations, off-set by a changed sales mix and the general
lower growth in demand. Competitive pressure remained throughout the period,
inhibiting the Group`s ability to fully pass input increases on to customers.
Operating expenses decreased by 18,8% to R17,3 million (2010:R21,3 million)
as a result of cost-saving initiatives due to the implementation of the
restructuring plan and tighter management controls in respect of debtors.
These measures led to the Group`s operating loss decreasing by 62,0% to R0,8
million (2010: Loss R2,2 million). A R14,0 million (2010: Nil) impairment of
the Olifantsfontein operation has been provided, resulting in the
attributable loss of R26,2 million (2010: loss R10,5 million). The slightly
higher finance costs resulted in a loss per share of 4,2 cents (2010: loss
per share 1,7 cents) for the period and a fully diluted headline loss per
share of 1,9 cents (2010: fully diluted headline loss per share of 1,7
cents).
Property, plant and equipment reduced to R140,9 million (2010: R401,2
million) as a result of impairments amounting to R14,0 million (2010: Nil),
the disposal of operations, amounting to R58,1 million, the sale of redundant
plant and equipment amounting to R9,7 million (2010: R1,5 million), as well
as an impairment of R175,7 million at year-end in respect of certain plants
where the expectation of the future economic viability of these plants
deteriorated to such and extent that those assets had to be impaired to their
recoverable amounts. Brikor is currently in breach of the financing covenants
of its FirstRand Bank facilities. The current carrying value of the loan is
R132,1 million (2010: R118,1 million). As a result of the breach of
covenants, the portion of the loan relating to continuing operations is
reflected under current liabilities. The Group`s financiers are fully
informed of the Group`s ongoing strategies to resolve the breach and have
been consulted on all potential disposals, cost- saving initiatives and
future business opportunities.
In this light, Brikor has entered into the sale of the Stanger operations in
August 2011 (currently awaiting shareholder approval) and has entered into an
agreement in October 2011 for the disposal of the Olifantsfontein operation,
previously mothballed, in an effort to remedy the breach.
DISCONTINUED OPERATIONS
On 18 August 2011 the Company entered into an agreement for the sale of the
Stanger operations for R50 million; to be settled through the payment of R30
million in cash and R20 million in 72 monthly instalments. As a result of
this transaction, the results of the Stanger division have been treated as
discontinued held for sale as at 31 August 2011. The condensed results of the
Stanger operation are as follows:-
Discontinued operations
Reviewed Reviewed Audited
6 months 6 months year
ended ended ended
31 Aug 31 Aug 28 Feb
2011 2010 2011
R`000 R`000 R`000
Revenue 33 761 43 027 72 356
Cost of sales (27 802) (38 774) (63 955)
Depreciation - (1 539) (3 380)
Cost of sales (27 802) (37 235) (60 575)
Gross profit/(loss) 5 959 4 253 8 401
Impairments (509) - (37 163)
Depreciation - (707) (1 005)
Expenses (3 284) (3 241) (10 343)
Profit/(loss) 2 166 305 (40 110)
Interest received 132 47 97
Finance costs (5 611) (5 603) (12 248)
Add back interest on intergroup loan 5 499 5 450 10 670
Profit/(loss) before tax 2 186 199 (41 591)
Taxation on ordinary discontinued - 1 462 11 235
operation
Profit/(loss) from discontinued 2 186 1 662 (30 355)
operations
Basic profit/(loss) per share 0,3 0,3 (4,8)
(cents)
Fully diluted profit/(loss) per 0,3 0,3 (4,7)
share (cents)
Headline profit per share (cents) 0,4 0,3 1,1
Cash flow from (used in)
discontinued operations
Operating activities 2 166
Investing activities -
Financing activities -
Net cash flows 2 166
Effect of disposal on the financial
position of the Group
Property, plant and equipment 43 291
Other financial assets 821
Inventories 6 162
Trade and other receivables 7 776
Borrowings - interest-bearing (1 850)
Provisions (821)
Trade and other payables (7 979)
Net assets and liabilities 47 400
Consideration receivable 50 000
Other financial assets (821)
Net cash inflow 49 179
RELATED PARTIES
Ultimate controlling party
The Group`s ultimate controlling party is G v
N Parkin.
Related party transactions
Transaction value Balance
for the 6 months outstanding
ended
31 Aug 31 Aug 31 Aug 28 Feb
2011 2010 2011 2011
R`000 R`000 R`000 R`000
Sale of goods
Cavaletto 45 (Pty) Ltd - 224 - 5
Cyndara 113 (Pty) Ltd 531 258 329 4
Kuvula Trade 40 (Pty) Ltd 1 047 420 318 35
Leomega (Pty) Ltd - - - -
Vecto Trade 449 (Pty) Ltd - 2 362 218 218
Scarlet Sun 33 (Pty) Ltd 1 276 688 - -
E-Fuel (Pty) Ltd - 2 - -
Purchase of goods
Cavaletto 45 (Pty) Ltd - 855 - 40
Cyndara 113 (Pty) Ltd 726 191 450 62
Kuvula Trade 40 (Pty) Ltd 2 626 2 074 1 314 144
Leomega (Pty) Ltd 45 13 10 2
Vecto Trade 449 (Pty) Ltd 281 13 036 - 270
Scarlet Sun 33 (Pty) Ltd - 54 - 51
E-Fuel (Pty) Ltd - - 17 3 714
All transactions with related parties are carried out at arm`s length in the
normal course of business.
PROSPECTS
The South African economic recovery remains stagnant and it is anticipated
that the credit restrictions and slow trading conditions will continue for
the foreseeable future.
However, the built-up backlog demand for housing continues. 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 2011 have been prepared in accordance with the measurement and
recognition requirements of International Financial Reporting Standards
("IFRS") and the presentation and disclosure requirements of IAS 34: Interim
Financial Reporting, the AC500 standards as issued by the Accounting
Standards Board, the Companies Act of South Africa, and the JSE Limited
Listings Requirements. These interim financial statements do therefore not
include all of the information required for full annual financial statements.
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
2011, except for the standard noted that became effective on 1 January 2011:
IAS 24 (Related Party Disclosures). The interim financial statements have
been prepared by the Chief Financial Officer, Mrs H Botha.
REVIEW REPORT AND EMPHASIS OF MATTER
The condensed Group financial statements of Brikor for the six months ended
31 August 2011 have been reviewed by the Company`s auditor, KPMG Inc. In
their review report dated 24 November 2011, which is available for inspection
at the Company`s registered office, KPMG Inc. state that their review was
conducted in accordance with the International Standard on Review Engagements
2410, Review of Interim Information Performed by the Independent Auditor of
the Entity, and have expressed an unmodified conclusion on the condensed
Group interim financial statements. The auditor`s review report includes the
following emphasis of matter:
"Without qualifying our conclusion, we draw attention to the going concern
paragraph in the directors` commentary which indicates that the Group
incurred a loss of R26,2 million for the interim period ended 31 August 2011.
These conditions, along with other matters set out in the commentary,
indicate the existence of a material uncertainty that may cast significant
doubt on the Company`s ability to continue as a going concern."
EVENTS AFTER THE REPORTING DATE
The sale of the Stanger operation for R50 million, concluded at the end of
the reporting period, and an option to acquire 10% of the Group`s shares,
granted to the Group`s restructuring officer, Matuson and Associates, are
awaiting shareholder approval at a general meeting scheduled for 30 November
2011. On 11 August 2011 Brikor was granted a mining license which is in the
process of being registered and which will allow for the opening of its
mining operations at Vlakfontein, giving it access to additional clay and
coal deposits. On 11 October 2011 the Olifantsfontein operation was sold for
R19,0 million, subject to purchaser funding approval.
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 statement of comprehensive income indicates that the Group has incurred a
loss of R28,4 million (2010: R12,8 million), before discontinued operations,
for the six months ended 31 August 2011.
Based on the Group`s:
- restructuring plans being successfully executed and implemented,
which should result in future profitable operations;
- budgets and cash flow forecasts for the ensuing year, (which are
based on the current expected economic and market conditions);
- 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 sale of certain assets as
discussed earlier; and
subject to the success of the above actions, the directors believe that the
Group has 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 interim financial statements.
DIVIDENDS
No dividend has been declared for the period.
By order of the Board
G v N Parkin H Botha
Chief Executive Officer Chief Financial Officer
Nigel
25 November 2011
CORPORATE INFORMATION
Non-executive directors: R van Rooyen (Chairman); MN Anderson;
RJ Magole; J H Wood
Executive directors: G v N Parkin (CEO); 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: CIS Company Secretaries (Pty) Ltd
Telephone: (011) 739 9000
Facsimile: (011) 739 9021
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Auditors: KPMG Inc.
Designated Adviser: Exchange Sponsors
These results and an overview of Brikor are available at
www.brikor.co.za
Date: 28/11/2011 07:07:53 Produced by the JSE SENS Department.
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