| Mon 5 Nov 2001, 0:00 | | Brait S.a. - Interim Report For The Six Months End |
|
BRAIT S.A.
Interim Report for the six months ended 30 September 2001
- Diluted earnings per share of 100 cents, marginally up by 2% on the prior
year
- Attributable earnings of R90,3 million, similar to the prior year
- Tangible net asset value growth of 9%, before dividends
- Interim dividend of 25 cents per share
- Group well positioned for improvement in its specific market segments
Commentary
Group profile
Brait is an international investment and merchant-banking group listed on
the Luxembourg, London and Johannesburg stock exchanges, with shareowners'
funds of R1,23 billion (in excess of US$135 million). As an international
group, Brait operates in Southern Africa, Mauritius and Europe, and is
currently developing operations in Australia. The group also has investments
in these regions as well as in Israel, Eastern Europe and North America.
Brait's core areas of activity are funds management, advisory services,
investing, trading, margin business and investment of group capital. Brait's
earnings are derived from:
- fees from private equity funds management;
- fees from advisory services;
- returns on the group's principal investments;
- direct returns from investment of the group's liquid capital;
- margin income from money market and debt financing; and
- trading in equity and capital markets.
Group results
Trading conditions for the first half of the financial year have been
difficult. The capital market sectors in which the group is focused through
its investing operations have been volatile with little positive direction.
At the same time the global retreat in economic activity has also
contributed to a general decline in the demand for financial and advisory
services.
Diluted earnings per share for the half-year at 100 cents is marginally
ahead of the prior year and considered satisfactory under present trading
conditions. Attributable earnings remain at the same level of R90 million.
Revenue growth during the period was 21%. Operating expenditure includes R21
million of provisions raised against advances. Excluding these provisions,
the interim operating costs have increased by 28% over the prior year but
have declined against expenditure in the second half of the prior financial
year. The reduced taxation charge reflects the impact of dividend income,
deferred taxation reversals and foreign tax differentials. This rate is not
considered sustainable in the long term. Importantly, the group has
continued to demonstrate earnings stability and net asset value growth since
the beginning of the financial period.
Tangible net asset value growth for the half year was 9%, before dividends.
At the same time, through Brait's international accounting and reporting
practices, there is consistency and reliability in the earnings and net
asset value measurements.
The segmental results reflect improved contributions from funds management,
investing and trading activities and decreased earnings from advisory
services, margin business and group capital.
Funds management
Funds management income, which is primarily derived from the group's private
equity funds under management, has improved in line with short-term
expectations and benefited from a relatively better performance of small to
mid cap equities on the JSE. The unit is still performing below its
potential earnings capacity but is well poised for any positive market
trends. The contribution from African Alliance and ipac South Africa also
increased in aggregate. Both operations continue to increase assets under
management and operational growth.
Advisory services
Advisory services earnings have been affected by the general decline in
corporate finance, M&A and commercial advisory activities in all of the
group's markets and, in particular, in South Africa. The pipeline of work is
reasonable at present with some potentially large mandates, which could come
to fruition in the second half of the financial year.
Investing
Investing activities which leverage off the investing processes and skills
of the group have reported improved earnings despite the lack of any
direction in the market segments focused on by Brait. The average annualised
return for the period on the group's investment portfolio is 15%. In
absolute terms the return is below Brait's long-term ROE target, but it has
outperformed the relative returns of the industrial/mid market cap sectors.
Group capital
The group's capital is invested predominantly in cash and short-term liquid
assets. These are primarily held as cover against a wide range of risks
managed by the banking operations and the group as a whole. The average
annualised return on group capital, after costs, for the half-year was 8%.
Margin business
Margin business in the group has performed disappointingly, primarily as a
result of the cautious approach taken by the group to increase provisions on
advances by R21 million in the current weak economic cycle. These provisions
now stand at 3,3% of advances which is conservative by industry standards,
particularly given the predominantly secured nature of lending by Brait. The
group's lending operations have been reorganised during the period to
enhance profitability and return on capital. The operations will now focus
principally on developing debt structuring, origination and syndication
services and also to provide securitisation and distribution capabilities.
Funding activities are prudently structured and the group has continued to
grow its fixed deposit base.
Trading
Trading operations, in aggregate, reflect an improved performance for the
year to date. Interest rate trading, in particular, was well positioned for
the bull run in the South African market during the period. Equity trading
conditions were volatile and non-trending, which made trading difficult.
Investment banking had a quiet period although some promising transactions
were in progress at the period end.
Strate
Shareowners are advised that, in accordance with the intentions of the JSE
Securities Exchange South Africa to progress to an electronic settlement
environment, the company's shares are expected to be converted to the Share
Transactions Totally Electronic (STRATE) system on 10 December 2001. In this
regard, shareowners are referred to the Chairman's letter addressed to
shareowners and to STRATE's `Essential Shareholders Facts', copies of which
are enclosed with the interim report.
Prospects
Once again the group finds itself in the position where any prediction of
earnings depend very much on conditions in the specific markets in which the
group is focused. Certainly the group cannot at this stage predict any
growth over the prior year results with any degree of confidence.
In the longer term Brait is committed to growth and value creation. The
group is presently well positioned through its substantial human and capital
resources, its integrated service offering and its international reach to
deliver on these goals.
Dividend
Brait recognises that dividend distributions are an important part of long-
term shareowners' wealth creation and particularly so, in periods of weak
equity market performance. As the company is in a comfortably strong
financial position the board has declared an interim dividend of 25 South
African cents per share.
Notice is hereby given that the register of members will be closed from 24
November to
30 November 2001, inclusive. The dividend will be paid on 7 December 2001 to
members registered as such on the record date, namely 23 November 2001.
For and on behalf of the board
M E King A C Ball
Chairman Group Chief Executive
5 November 2001
Salient features
For the six months ended 30 September
2001 2000 Change
%
Profit before tax (Rm) 91,1 95,2 (4)
Funds management 29,9 18,3 63
Advisory services 5,4 8,6 (37)
Investing 23,0 4,8 379
Group capital 24,3 49,8 (51)
Margin business (5,4) 8,5 (164)
Trading income 13,9 5,2 167
Attributable earnings (Rm) 90,3 90,0 0
Earnings per share (cents)
Basic 100 98 2
Diluted 100 98 2
Dividend per share (cents)
Final - declared and paid 60 75 (20)
Interim - declared 25 nil
Shares in issue (millions) 93,5 93,5 0
Tangible net asset value per
share (cents) 1 325 1 185 12
Group income statements
For the six months ended 30 September
Convenience conversion
Audited Unaudited Unaudited Unaudited Unaudited Audited
31 Mar 30 Sept 30 Sept 30 Sept 30 Sept 31 Mar
2001 2000 2001 001 2000 Change 2001
US$m US$m US$m Rm Rm % Rm
52,4 26,5 25,8 Revenue 232,4 191,8 21 420,0
(30,8) (13,3) (16,0) Operating (144,1) (96,3) (246,8)
expenses and
provisions
21,6 13,2 9,8 Profit from 88,3 95,5 (8) 173,2
operations
1,5 0,1 0,5 Income from 4,1 0,5 12,2
associates
1,0 (0,2) 0,8 Profit/(loss) 7,5 (1,8) 8,0
from joint
ventures
0,7 0,7 - Disposal of - 5,4 5,5
strategic
investments
(0,2) - (0,7) Finance costs (6,4) - (1,7)
(1,3) (0,6) (0,3) Amortisation of (2,4) (4,4) (10,8)
intangibles
23,3 13,2 10,1 Profit before 91,1 95,2 (4) 186,4
taxation
(0,5) (0,7) (0,1) Taxation (0,8) (5,2) (3,9)
22,8 12,5 10,0 Attributable
earnings 90,3 90,0 0 182,5
Group balance sheets
At 30 September
Convenience conversion
Audited Unaudited Unaudited Unaudited Unaudited Audited
31 Mar 30 Sept 30 Sept 30 Sept 30 Sept 31 Mar
2001 2000 2001 2001 2000 2001
US$m US$m US$m Rm Rm Rm
Shareowners'
funds
150,3 157,0 136,3 Shareowners'
interest1 230,7 1 136,3 1 204,5
- - 0,3 Outside
shareowners' 2,5 - -
interest
150,3 157,0 136,6 Total
shareowners'
interest 1 233,2 1 136,3 1 204,5
Liabilities
25,0 11,6 22,6 Long-term
liabilities 204,1 84,2 200,2
239,4 259,8 214,7 Current
liabilities 1 937,3 1 879,7 1 918,2
264,4 271,4 237,3 Total
liabilities 2 141,4 1 963,9 2 118,4
Assets
165,0 177,5 164,2 Long-term
assets 1 481,8 1 284,1 1 321,9
119,6 136,6 135,5 Investments 1 222,8 988,6 958,7
45,4 40,9 28,7 Other long-term
assets 259,0 295,5 363,2
249,7 250,9 209,7 Current assets 1 892,8 1 816,1 2 001,0
414,7 428,4 373,9 Total assets 3 374,6 3 100,2 3 322,9
150,3 157,0 136,6 1 233,2 1 136,3 1 204,5
Notes to the financial statements
1.The financial statements of the group are prepared in accordance with
International Accounting Standards and the provisions of IAS 34 "Interim
Financial Reporting". The accounting policies used at the interim are
consistent with those set out in the financial statements for the year ended
31 March 2001. An adjustment has been made to revenue and operating expenses
in the comparative figures to provide consistency with the results at 31
March 2001. This restatement had no effect on profits before or after
taxation.
2. The convenience conversion US dollar figures have been disclosed using
the closing rand/US dollar exchange rate at the period end. The conversion
of the results into US dollar amounts therefore does not comply with
International Accounting Standards and is solely for the convenience of non-
South African users.
3. All liabilities are interest bearing save R176 million in respect of
accounts payable, accruals and deferred taxation.
30 Sept 30 Sept 31 Mar
2001 2000 2001
Rm Rm Rm
4. The following items are
included in the results:
Interest capitalised 0,2 3,1 2,1
Dividends received 55,3 37,6 76,5
Depreciation 3,7 1,1 3,5
Related party transactions
- Interest received 11,9 14,2 25,4
- Interest paid 0,4 3,7 6,2
- Fees received - 13,3 -
5.Investments
- Listed
- cost - 3,8 -
- market value - 3,8 -
- Unlisted
- carrying value 1 068,3 984,8 958,7
- directors' valuation 1 122,6 1 039,4 994,2
6. Commitments, guarantees and
contingent liabilities 283,1 331,6 508,8
7. Capital expenditure authorised
and contracted for - 3,9 -
8. Related party balances
- Liabilities 38,3 91,4 48,4
- Assets 151,3 245,7 154,5
Group cash flow statements
For the six months ended 30 September
Audited
Unaudited Unaudited Year
30 Sept 30 Sept 31 Mar
2001 2000 2001
Rm Rm Rm
Cash flows from operating activities 61,7 34,5 146,0
Change in working funds 144,1 26,0 (133,4)
Cash generated/(utilised) by
operating activities 205,8 60,5 12,6
Cash (outflows)/inflows from
funding activities (65,7) (57,4) 50,9
Cash (outflows)/inflows from
investment activities - (53,9) (43,5)
Net increase/(decrease) in cash
and cash equivalents 140,1 (50,8) 20,0
Cash and cash equivalents at
beginning of period 107,1 87,1 87,1
Balance at end of period 247,2 36,3 107,1
Group statement of changes in equity
For the six months ended 30 September
Audited
Unaudited Unaudited Year
30 Sept 30 Sept 31 Mar
2001 2000 2001
Rm Rm Rm
Balance at beginning of period 1 204,5 1 102,5 1 102,5
Currency translation adjustments 16,0 13,8 18,1
Attributable earnings 90,3 90,0 182,5
Dividends - Annual (55,1) (70,1) (68,9)
- Interim (22,6) - -
Treasury shares (2,4) - (29,7)
Balance at end of period 1 230,7 1 136,2 1 204,5
Group segmental reports
For the six months ended 30 September
Convenience conversion
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2000 2001 2001 2000
US$m US$m Rm % Rm %
Segmental
26,6 25,8 Revenue 232,4 100 91,8 100
4,9 5,4 Funds management 48,9 21 35,3 19
4,0 2,8 Advisory services 25,2 11 28,6 15
3,7 5,0 Investing 45,0 19 27,0 14
7,0 5,7 Group capital 51,7 22 50,4 26
3,6 2,9 Margin business 25,8 11 25,7 13
3,4 4,0 Trading income 35,8 16 24,8 13
13,2 10,1 Profit before taxation 91,1 100 95,2 100
2,5 3,4 Funds management 29,9 33 18,3 19
1,2 0,6 Advisory services 5,4 6 8,6 9
0,7 2,5 Investing 23,0 25 4,8 5
6,9 2,7 Group capital 24,3 27 49,8 52
1,2 (0,6) Margin business (5,4) (6) 8,5 9
0,7 1,5 Trading income 13,9 15 5,2 6
Geographical
13,2 10,1 Profit before taxation 91,1 100 95,2 100
2,8 2,4 Europe 22,1 24 20,5 21
7,2 2,3 South Africa 20,0 22 51,9 55
3,2 5,4 Other Africa 49,0 54 22,8 24
Registered office: Brait S.A., 69, route d'Esch, L-2953, Luxembourg
Brait South Africa Limited: 9 Fricker Road, Illovo Boulevard, Illovo,
Sandton
Domiciliary and listing agent: Dexia Banque Internationale Luxembourg, 69,
route d'Esch, L-2953, Luxembourg
Registrar: Dexia Banque Internationale Luxembourg, 69, route d'Esch, L-
2953, Luxembourg
Transfer agents: United Kingdom: CAPITA IRG plc, Bourne House, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU
South Africa: Mercantile Registrars Limited, 10th Floor, 11 Diagonal Street,
Johannesburg 2001
www.brait.com
