| Tue 6 Mar 2012, 7:05 | | BRT/BRN - Brimstone Investment Corporation Limited - Reviewed results for the |
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BRT BRN
BRT
BRT/BRN - Brimstone Investment Corporation Limited - Reviewed results for the
year ended 31 December 2011
Brimstone Investment Corporation Limited
ISIN Number: ZAE000015277 Share Code: BRT ISIN Number: ZAE000015285 Share Code:
BRN Company Registration Number: 1995/010442/06 (Incorporated in the Republic of
South Africa) ("Brimstone" or "the Company")
Reviewed results for the year ended 31 December 2011
- Total assets increased by R1 billion
- INAV growth 31%
- Acquisition of additional 8.5% stake in Oceana
- Dividend 18 cents per share
Commentary
Brimstone reported excellent results for the year under review mainly as a
result of the increase in value of marked-to-market assets as well as an
increase in sales and fee income from underlying operating businesses. Return on
average equity was 25.3% for the year.
Headline earnings of R429.9 million were up 3.5% on the previous year`s R415.4
million. Basic headline earnings per share increased to 176.3 cents from 172.7
cents in the prior year.
Profit for the year of R468.8 million was up 14% on the previous year`s R411.3
million. In comparing the 2011 and 2010 results it should be noted that the 2010
profit for the year included a reversal of a provision for capital gains tax and
recognition of secondary tax credits, relating to the unbundling of Life
Healthcare shares to the shareholders of Brimstone.
Net profit before taxation increased significantly from R114 million in 2010 to
R598 million in the current year because of fair value gains, an increase in
profits from associates, a surplus on the disposal of an associate and a
significant reduction in finance costs after the reduction and restructuring of
debt in 2010.
Total assets increased from R3.6 billion in 2010 to R4.6 billion in the current
year principally as a result of the increased shareholding in Oceana and the
increase in fair value of investments. Net asset value of R2 billion for the
current year compares well with R1.6 billion in 2010.
Auditors` review report
The condensed provisional financial information for the year ended 31 December
2011 has been reviewed by the Group`s auditors, Deloitte & Touche. The review
was conducted in accordance with ISRE 2410 "Review of Interim Financial
Information performed by the Independent Auditor of the Entity". A copy of their
unmodified review report is available for inspection at the Company`s registered
office. Any reference to future financial performance included in this
announcement has not been reviewed or reported on by the Company`s auditors.
Results for the year
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting and the requirements of the Companies Act of
South Africa. The report has been prepared using accounting policies that comply
with IFRS which are consistent with those applied in the financial statements
for the year ended 31 December 2010.
Preparation
This announcement on Brimstone Investment Corporation Limited`s reviewed results
for the year ended 31 December 2011 has been prepared and supervised by LZ
Brozin (Financial Director) B.Com B.Acc CA(SA) and M O`Dea (Chief Financial
Officer) B.Com CA(SA).
Brimstone portfolio
SUBSIDIARIES
Sea Harvest
The good fishing conditions experienced in the previous year continued
throughout the reporting period and were further positively impacted by a 10%
increase in hake Total Allowable Catch which came into effect from the start of
the 2011 calendar year.
Exports to new markets in North America, Northern Europe and Australia continued
to gain traction with a modest recovery in Southern European markets.
On the local market the retail business performed well and Sea Harvest
maintained its status as the leading frozen white fish supplier in South Africa.
Revenue for the year under review increased, driven by higher volumes, marginal
price increases and the weaker Rand exchange rate relative to the Euro, Sea
Harvest`s major trading currency. Despite good catches and efficiency
improvements, cost increases were ahead of inflation driven mainly by the fuel
price and other regulated costs such as electricity. Overall a positive
operating result was achieved despite the continued depressed economic
conditions in traditional export markets.
The good fishing conditions are expected to continue over the medium term,
however a stronger Rand, rising costs and the continued lacklustre international
seafood market could impact margins negatively.
Lion of Africa Holdings
Lion of Africa is the country`s largest Black-owned short-term insurer and has
an A-rating from the GCR rating agency for claims paying ability. It is also the
first insurance company to achieve a Level 1 Broad Based Black Economic
Empowerment rating in terms of the BBBEE Act of 2003.
During the review period, gross written premiums showed good growth of 11.2% to
R841.9 million. Net written premiums similarly performed well and increased by
12.4% to R552 million whilst the net loss ratio deteriorated from 49.4% in the
prior year to 64.1% in the year under review, mainly as a result of a
deterioration in the motor class.
Net underwriting profit decreased from R39.9 million in 2010 to R10.2 million
for the 2011 financial year. The company`s after tax earnings similarly
decreased to R22.1 million from R42.5 million in the prior year. International
Solvency remained solid at 45.4% compared to 50.2% in 2010.
House of Monatic
The company`s refocus on core manufacturing is beginning to deliver positive
results. House of Monatic has successfully contracted to manufacture for one of
the foremost South African brands in addition to increased production for its
regular customers.
Government incentives have allowed the company to modernise parts of the
manufacturing plant and enjoy the commensurate benefits associated therewith in
terms of efficiencies and lower operational costs. House of Monatic reported a
small profit this year.
ASSOCIATES
Oceana
In the review period Brimstone acquired 8 500 000 Oceana Group Limited ordinary
shares on the open market for a total purchase consideration of R382.5 million,
increasing Brimstone`s shareholding in Oceana to 20.12% (net of treasury
shares).
Oceana recorded good results for the year under review with operating profit
before abnormal items increasing by 6% in line with a 7% increase in turnover.
Significant improvements in the horse mackerel and canned fish business units
were largely offset by disappointing results in the fishmeal and certain other
business units. Headline earnings per share for the year rose by 6% and earnings
per share by 13%.
The group remains well positioned to take advantage of opportunities for further
organic and acquisitive growth.
Aon Re Africa
Aon Re Africa (Pty) Ltd continues to be the leading reinsurance broker licensed
and operating in South Africa and the rest of the continent. Total revenue
declined year-on-year mainly as a result of market changes, increased
competition, economic pressures on clients and increase in the financial
capacity of clients. Profit before tax decreased in line with revenue.
The Scientific Group
While trading conditions remained challenging, turnover increased modestly.
Profitability was negatively impacted by margin pressure and costs incurred in
moving into the company`s own premises. Brimstone believes that The Scientific
Group is well positioned to benefit from the implementation of the government`s
health insurance program rollout scheduled for later this year.
INVESTMENTS
Life Healthcare (LHC)
Life Healthcare performed well during the period under review. Group revenue
increased by 11.7% to R9.8 billion (2010: R8.8 billion). The business generated
healthy cash flows as the group continues to focus on driving efficiencies
across the business.
In its financial year end 30 September 2011, activities as measured by hospital
paid patient days increased by 5.4% as a result of additional hospital beds
combined with the increased demand for hospital services.
Subsequent to its financial year end, LHC completed the acquisition of a 26%
interest in Max Healthcare Institute in India.
Brimstone remains confident of future prospects and dividend flow from LHC.
Nedbank
Brimstone`s rights to Nedbank shares, accounted for as options, have been
revalued at year end. The independently calculated option valuation was based on
a closing share price of R145.00 per share.
Old Mutual plc
Brimstone`s rights to Old Mutual plc shares, accounted for as options, have been
revalued at year end, based on a closing share price of R17.04 per share.
MTN Zakhele
Brimstone`s MTN Zakhele shares, accounted for as options, have been revalued at
year end. The independently calculated option valuation was based on a closing
MTN share price of R143.73 per share.
Tiger Brands
Brimstone`s rights to Tiger Brands shares, accounted for as options, have been
revalued at year end. The independently calculated option valuation was based on
a closing share price of R250.88 per share.
Rex Trueform and African & Overseas Enterprises (Queenspark)
The retail business of Queenspark continues to trade well despite relatively
subdued consumption patterns of late. The market value of the shares held in Rex
Trueform and African & Overseas delivered satisfactory growth during the year,
reflecting increasing recognition of the value locked in the underlying assets.
Galaxy Gold
During the review period, Brimstone acquired 10% of the ordinary shares of
Galaxy Gold.
Galaxy Gold is a junior South African gold mining and exploration company,
focused on exploitation of the Barberton Greenstone Belt.
Intrinsic Net Asset Value (INAV)
INAV at 31 December 2011 calculated on a line-by-line basis, totalled R2.5
billion or R10.20 per share (2010: R1.9 billion or R7.78 per share),
representing an increase of 31% from 2010. On a fully diluted basis INAV per
share is R9.81 or an increase of 26.7% on the R7.74 reported in 2010. This is
mainly as a result of increases in the market valuation of Life Healthcare and
Oceana shares. Some of the option valuations, particularly that of Tiger Brands,
increased and the intrinsic value of Sea Harvest was positively adjusted on the
back of an improved performance during the review period.
As at 31 December 2011, Brimstone ordinary shares were trading at a discount of
1.9% to intrinsic net asset value (2010: 2.3%). Brimstone`s "N" ordinary shares
traded at a discount of 19.6% to the Group`s intrinsic net asset value (2010:
34.4%).
INAV per share has been calculated using the CGT rate as at 31 December 2011. As
a result of the increase in CGT rates announced by the Minister of Finance which
are effective 1 March 2012, future disclosure of INAV will be based on the
higher CGT rate. This change in rate is estimated to negatively impact INAV by
R108 million in 2012.
Capital commitments
The Group has commitments for the acquisition of capital items amounting to
R21.8 million (2010: R5.9 million) to be funded from internal cash resources.
Subsequent events
Post year-end Brimstone subscribed for 24 000 000 ordinary shares or 12.3% of
the authorised share capital of Taste Holdings Limited for an aggregate
subscription price of R37 million.
Prospects
Brimstone is well capitalised and has the team and experience to pursue value
enhancing transactions based on quality assets, strong cash flows and socially
responsible policies.
Dividend
The board of Brimstone has declared a dividend of 18 cents per share payable on
Monday, 7 May 2012. In compliance with the requirements of Strate, the Company
has determined the following salient dates for the payment of the dividend. The
last day to trade cum dividend is Wednesday, 25 April 2012. The dividend is
payable to all shareholders of Brimstone recorded in the books of the Company at
the close of business on Friday, 4 May 2012.
Shares will commence trading ex dividend from Thursday, 26 April 2012. Shares
may not be rematerialised or dematerialised from Thursday, 26 April 2012 to
Friday, 4 May 2012, both days inclusive.
On behalf of the board
Prof. GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
6 March 2012
Condensed Group Statement of Comprehensive Income
Reviewed Audited
Year ended Year ended
31 December 31 December
R`000 2011 2010
Revenue 1 867 915 1 796 904
Sales and fee income 1 759 846 1 510 815
Dividends received 108 069 286 089
Operating expenses (1 735 292) (1 482 667)
Operating profit 132 623 314 237
Fair value gains/(losses) 476 858 (61 943)
Exceptional items 36 441 2 466
Share of profits/(losses) of
associates and joint venture 22 057 (4 786)
Profit before net finance costs 667 979 249 974
Income from investments 23 735 24 090
Finance costs (93 345) (159 674)
Outside unit holders` interest (475) (784)
Net profit before taxation 597 894 113 606
Taxation (129 093) 297 659
Profit for the year 468 801 411 265
Other comprehensive income, net of tax 13 211 3 202
Cash flow hedges
Gain arising during the year 10 974 -
Net value gain on available-for-sale
financial asset 2 237 3 202
Total comprehensive income
for the year 482 012 414 467
Profit attributable to:
Equity holders of the parent 450 751 411 457
Non-controlling interests 18 050 (192)
468 801 411 265
Total comprehensive income attributable to:
Equity holders of the parent 458 427 413 280
Non-controlling interests 23 585 1 187
482 012 414 467
Earnings per share (cents)
Basic 184.8 171.1
Diluted earnings per share (cents)
Basic 158.3 146.9
Condensed Group Statement of Financial Position
Reviewed Audited
31 December 31 December
R`000 2011 2010
ASSETS
Non-current assets 3 310 127 2 360 786
Property, plant, equipment and vehicles 285 665 306 401
Goodwill 12 140 12 140
Intangible assets 158 230 174 129
Deferred acquisition costs 39 610 39 468
Investments in associate companies and joint venture 697 299 284 233
Investments 2 114 843 1 541 021
Deferred taxation 2 340 3 394
Current assets 1 294 677 1 259 044
Inventories 226 803 193 412
Trade and other receivables 482 113 472 734
Reinsurance contracts 443 028 400 476
Taxation 1 685 8 085
Cash and cash equivalents 141 048 184 337
TOTAL ASSETS 4 604 804 3 619 830
EQUITY AND LIABILITIES
Capital and reserves 2 113 630 1 673 122
Share capital 45 45
Capital reserves 316 904 304 322
Revaluation reserves 9 876 8 576
Cash flow hedging reserve 6 376 -
Changes in ownership (11 839) (11 839)
Retained earnings 1 677 390 1 269 342
Attributable to equity holders of the parent 1 998 752 1 570 446
Non-controlling interests 114 878 102 676
Non-current liabilities 1 405 021 954 467
Long-term interest bearing borrowings 1 050 295 705 710
Long-term provisions 20 169 19 451
Deferred taxation 334 557 229 306
Current liabilities 1 086 153 992 241
Short-term interest bearing borrowings 130 581 99 288
Bank overdrafts 13 363 13 553
Trade payables 225 287 226 269
Other payables 78 053 57 228
Insurance contracts 606 077 563 649
Outside unit holders` interest 10 660 10 609
Short-term provisions 18 183 14 743
Taxation 3 949 6 902
TOTAL EQUITY AND LIABILITIES 4 604 804 3 619 830
NAV per share (cents) 819,6 643,9
Shares in issue at end of year (000`s) 243 874 243 891
Condensed Group Statement of Cash Flows
Reviewed Audited
Year ended Year ended
31 December 31 December
R`000 2011 2010
Operating activities
Net attributable profit 468 801 411 265
Adjustments for:
Share of profits of associates and joint venture (69 125) (33 981)
Income from investments (84 736) (270 404)
(Increase)/decrease in fair value of investments (476 858) 61 943
Impairment of investment in associate 428 8 316
Amortisation of intangible assets 18 785 21 580
Finance costs 93 345 159 674
Taxation 129 093 (297 659)
Depreciation of property, plant,
equipment and vehicles 65 563 54 323
Share-based payment expense 13 348 6 531
Net profit on disposal of associates (36 855) (10 820)
Increase in long and short-term provisions 4 158 2 184
Profit on disposal of property,
plant, equipment and vehicles (456) (719)
Operating cash flows before movements
in working capital 125 491 112 233
Increase in inventories (32 692) (4 881)
Decrease/(increase) in trade and other receivables 5 862 (74 124)
Outside unit holders` interest 51 (10 721)
Increase in trade and other payables 10 218 12 277
Net (increase)/decrease in reinsurance contracts (42 552) 88 162
Net increase in deferred acquisition costs (142) (3 232)
Net increase/(decrease) in insurance contracts 42 428 (64 480)
Cash generated from operations 108 664 55 234
Income taxes paid (24 168) (36 704)
Finance costs (81 197) (128 824)
Net cash from/(used in) operating activities 3 299 (110 294)
Investing activities
Interest received 23 735 24 090
Dividends received from associates and joint venture 47 068 38 767
Dividends received from other equity investments 61 001 246 314
Proceeds on disposal of investments 57 172 657 295
Proceeds on disposal of property, plant,
equipment and vehicles 497 1 062
Acquisition of property, plant, equipment
and vehicles (44 868) (46 390)
Acquisition of businesses - (30 034)
Acquisition of intangible assets (2 886) -
Acquisition of investments (503 803) (45 519)
Net cash (used in)/from investing activities (362 084) 845 585
Financing activities
Dividends paid by company and subsidiaries (49 412) (80 401)
Repayments of borrowings (219 812) (913 116)
Loans raised 590 000 203 064
Shares repurchased (107) (9 722)
Proceeds on issue of shares - 29 139
Issue of shares by subsidiary - 10 170
Shares repurchased by subsidiaries (4 983) -
Decrease in bank overdrafts (190) (4 321)
Net cash from/(used in) financing activities 315 496 (765 187)
Net decrease in cash and cash equivalents (43 289) (29 896)
Cash and cash equivalents at beginning of year 184 337 214 233
Cash and cash equivalents at end of year
Bank balances and cash 141 048 184 337
Condensed Group Statement of Changes in Equity
Reva-
Share Capital luation
R`000 capital reserves reserves
Balance at 1 January 2010 43 262 506 6 753
Attributable profit for the year
ended 31 December 2010 - - -
Other comprehensive income - - 1 823
Total comprehensive income - - 1 823
Recognition of share-based payments - 6 531 -
Dividend paid - - -
Non-controlling interest acquired - - -
Issue by subsidiary of ordinary and
preference share capital and
accrued preference dividends - - -
Issue of share capital 2 29 137 -
Treasury shares acquired - (9 722) -
Transfer to capital redemption
reserve fund - 1 808 -
Transfer to statutory
contingency reserve - 13 534 -
Share of non-distributable reserves
of associate transferred
directly to equity - 528 -
Balance at 31 December 2010
- Audited 45 304 322 8 576
Attributable profit for the year
ended 31 December 2011 - - -
Other comprehensive income - - 1 300
Total comprehensive income - - 1 300
Recognition of share-based payments - 3 723 -
Dividend paid - - -
Subsidiary`s accrual for preference
dividends and repurchase of shares - - -
Treasury shares acquired - (107) -
Transfer to statutory
contingency reserve - 6 149 -
Share of non-distributable reserves
of associate transferred
directly to equity - 2 817 -
Balance at 31 December 2011
- Reviewed 45 316 904 9 876
Condensed Group Statement of Changes in Equity
Cash
flow Changes
hedging in Retained
R`000 reserve ownership earnings
Balance at 1 January 2010 - - 2 196 566
Attributable profit for the year
ended 31 December 2010 - - 411 457
Other comprehensive income - - -
Total comprehensive income - - 411 457
Recognition of share-based payments - - -
Dividend paid - - (1 323 339)
Non-controlling interest acquired - (11 839) -
Issue by subsidiary of ordinary and
preference share capital and
accrued preference dividends - - -
Issue of share capital - - -
Treasury shares acquired - - -
Transfer to capital redemption
reserve fund - - (1 808)
Transfer to statutory
contingency reserve - - (13 534)
Share of non-distributable reserves
of associate transferred
directly to equity - - -
Balance at 31 December 2010
- Audited - (11 839) 1 269 342
Attributable profit for the year
ended 31 December 2011 - - 450 751
Other comprehensive income 6 376 - -
Total comprehensive income 6 376 - 450 751
Recognition of share-based payments - - -
Dividend paid - - (36 554)
Subsidiary`s accrual for preference
dividends and repurchase of shares - - -
Treasury shares acquired - - -
Transfer to statutory
contingency reserve - - (6 149)
Share of non-distributable reserves
of associate transferred
directly to equity - - -
Balance at 31 December 2011
- Reviewed 6 376 (11 839) 1 677 390
Condensed Group Statement of Changes in Equity
Attri-
butable
to equity
holders Non-
of the controlling
R`000 parent interests Total
Balance at 1 January 2010 2 465 868 102 594 2 568 462
Attributable profit for the year
ended 31 December 2010 411 457 (192) 411 265
Other comprehensive income 1 823 1 379 3 202
Total comprehensive income 413 280 1 187 414 467
Recognition of share-based payments 6 531 - 6 531
Dividend paid (1 323 339) - (1 323 339)
Non-controlling interest acquired (11 839) (18 195) (30 034)
Issue by subsidiary of ordinary and
preference share capital and
accrued preference dividends - 17 090 17 090
Issue of share capital 29 139 - 29 139
Treasury shares acquired (9 722) - (9 722)
Transfer to capital redemption
reserve fund - - -
Transfer to statutory
contingency reserve - - -
Share of non-distributable reserves
of associate transferred
directly to equity 528 - 528
Balance at 31 December 2010
- Audited 1 570 446 102 676 1 673 122
Attributable profit for the year
ended 31 December 2011 450 751 18 050 468 801
Other comprehensive income 7 676 5 535 13 211
Total comprehensive income 458 427 23 585 482 012
Recognition of share-based payments 3 723 - 3 723
Dividend paid (36 554) (12 858) (49 412)
Subsidiary`s accrual for preference
dividends and repurchase of shares - 1 475 1 475
Treasury shares acquired (107) - (107)
Transfer to statutory
contingency reserve - - -
Share of non-distributable reserves
of associate transferred
directly to equity 2 817 - 2 817
Balance at 31 December 2011
- Reviewed 1 998 752 114 878 2 113 630
Segmental information
Profit from Headline
R`000 Revenue Operations Profit Assets Liabilities
Fishing 970 861 65 890 2 661 911 918 585 565
Insurance 615 368 11 900 22 558 958 476 756 433
Clothing 163 283 7 211 3 235 154 317 59 437
Investment
management 118 403 47 622 401 429 2 580 093 1 089 739
Total -
Reviewed 1 867 915 132 623 429 883 4 604 804 2 491 174
Headline earnings
Reviewed Audited
Year ended Year ended
31 December 31 December
R`000 2011 2010
Headline earnings per share (cents)
Basic 176.3 172.7
Diluted 151.0 148.3
Headline earnings calculation (R`000)
Net profit attributable to equity
holders of the parent 450 751 411 457
Profit on disposal of property,
plant, equipment and vehicles (459) (431)
Realised profit on disposal of associate (21 130) (10 820)
Impairment of investment in associate 428 8 316
Adjustments relating to results of associates - 2 214
Total tax effects of adjustments 293 4 682
Headline earnings 429 883 415 418
Weighted average number of shares
on which earnings and headline
earnings per share is based (000`s) 243 878 240 500
Weighted average number of shares
on which diluted earnings and diluted
headline earnings per share is based (000`s) 284 673 280 125
Sponsor
Nedbank Capital
Date: 06/03/2012 07:05:30 Produced by the JSE SENS Department.
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