| Mon 18 Mar 2002, 0:00 | | Brimstone - Audited Results |
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Brimstone Investment Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1995/010442/06)
(ISIN Number ZAE000015277 Share code : BRT)
(ISIN Number ZAE000015285 Share code : BRN)
Audited Results for the 15 months ended 31 December 2001
Group Income Statements
Audited Audited
15 Months 12 Months
ended ended
R'000 31 Dec 2001 30 Sept 2000
Revenues 213 903 13 665
Cost of sales (149 211) -
Gross profit 64 692 13 665
Selling and administration expenses
(48 829) (7 055)
Profit from operations before depreciation
15 863 6 610
Depreciation property, plant and equipment
(3 122) -
Profit from operations 12 741 6 610
Income from investments 2 379 868
Finance costs (11 747) (5 488)
Goodwill amortisation (1 779) -
Exceptional items 1 109 (10 203)
Net profit/(loss) before taxation
2 703 (8 213)
Taxation (235) -
Net profit/(loss) after taxation
2 468 (8 213)
Equity accounted retained
earnings of associates
5 690 9 310
Net attributable profit for
the period
8 158 1 097
Earnings per share (cents)
Headline 4.5 5.8
Net attributable 4.2 0.6
Comparable headline earnings 5.8 7.5
Number of shares used
in calculation (`000):
195 628 195 628
Headline earnings calculation:
Net attributable profit 8 158 1 097
Exceptional items (1 109) 10 203
Goodwill write-down 1 779 -
Headline earnings 8 828 11 300
Comparable headline earnings
calculation:
Headline earnings 8 828 11 300
Incentive fee on
investment disposals
2 513 3 315
Comparable headline earnings 11 341 14 615
Group Balance Sheets
Audited Audited
R`000 31 Dec 2001 30 Sept 2000
ASSETS
Non-current assets 142 878 169 545
Property, plant and equipment 25 553 22 300
Goodwill in associate 7 115 -
Interest in non-consolidated
subsidiaries
- 23 017
Interest in associate companies 101 934 73 644
Investments and loans 8 276 50 584
Current assets 87 080 17 903
Trading investments - 50
Inventory 35 070 -
Trade receivables 35 245 17 841
Other receivables 10 774 -
Cash resources 5 991 12
TOTAL ASSETS 229 958 187 448
EQUITY AND LIABILITIES
Capital and reserves 157 714 149 658
Share capital and premium 152 269 152 371
Non-distributable reserves 45 -
Retained income 5 400 (2 713)
Non-current liabilities 15 134 14 769
Long-term interest-bearing
Borrowings
14 899 14 769
Deferred taxation 235 -
Current liabilities 57 110 23 021
Short term interest-bearing
borrowings
24 058 16 604
Bank overdraft 10 133 431
Trade and other payables 21 468 4 535
Taxation provision 1 451 1 451
TOTAL EQUITY AND LIABILITIES 229 958 187 448
NAV per share (cents) 80.6 76.5
Shares in issue at end
of period (`000)
195 628 195 628
Group Cash Flow Statements
Audited Audited
15 Months 12 Months
ended ended
R`000 31 Dec 2001 30 Sept 2000
Cash generated from trading 15 680 3 516
Movement in working capital (4 120) (16 670)
Cash generated from/
(utilised in) operating activities
11 560 (13 154)
Investment income 1 365 868
Finance costs (11 747) (5 184)
Taxation paid - (4 777)
Cash retained from/(utilised in)
operations
1 178 (22 247)
Cash flows from investing activities
10 899 26 641
Investments acquired (11 249) (36 381)
Proceeds on investments disposed of
26 102 63 022
Net reserves in subsidiaries
re-consolidated
651 -
Additions to property, plant
and equipment
(4 670) -
Proceeds on disposal
of plant and equipment
65 -
Net cash inflow 12 077 4 394
Cash flows from financing
activities
(15 799) (5 101)
Share buy-back by
subsidiary company
(102) -
Long-term loan advances
during the period
283 -
Repayment of long-term
loans during the period
(153) -
Short-term loan advances during the period
776 7 774
Repayment of short-term loans during the period
(16 603) (12 875)
Net (decrease) in net cash resources
(3 722) (707)
Net cash resources at beginning of period
(419) 288
Closing net overdraft (4 141) (419)
Schedule of exceptional items for the 15 months
15 Months 12 Months
ended ended
R`000 31 Dec 2001 30 Sept 2000
Realised gains/(losses) :
Disposal of listed investments 117 3 416
Disposal of unlisted investments 17 554 15 881
Disposal of subsidiary 101 2
Recovery on unlisted investment
previously
written off - 2 000
Total realised 17 772 21 299
Unrealised gains/(losses):
Revaluation of listed investments 13 531 (375)
Impairment of unlisted investments (28 417) (29 702)
Impairment of investment property (1 777) (1 425)
Net unrealised (16 663) (31 502)
Net exceptional items 1 109 (10 203)
Statement of changes in equity for the 15 months ended 31 Dec 2001
Share Share Non-distribut- Distributable
Capital Premium able reserves Reserves Total
Balance at
30 September 1999:
As previously stated
42 152 329 - (5 233) 147 138
Change in
accounting policy
- - - 1 423 1 423
Restated balance
42 152 329 - (3 810) 148 561
Attributable
profit for the
twelve months
ended
30 September 2000
- - - 1 097 1 097
Balance at 30
September 2000
42 152 329 - (2 713) 149 658
Attributable
profit for the
fifteen months
ended
31 December 2001
- - - 8 158 8 158
Share buy-back
by subsidiary
- (102) - - (102)
Transfer to
capital redemption
reserve in respect
of preference
shares in subsidiary
- - 45 (45) -
Balance at 31 Dec 2001
42 152 227 45 5 400 157 714
Segmental
information
for the 15
months ended 31 Dec 2001
Operating Headline Impairment
Revenue Profit Earnings Losses Assets Liabilities
Financial services
- - (5 802) (19 639) 4 618 -
Industrial
208 383 16 617 27 792 13 291 188 802 52 988
"Investments in transition"
5 414 5 175 (2 722) 7 175 28 851 14 617
Corporate
106 (9 051) (10 440) 282 7 688 4 640
Total
213 903 12 741 8 828 1 109 229 959 72 245
Comments on Results
Change of Financial Year End
The company's financial year end was changed from 30 September to 31
December with effect from 31 December 2001. The period reported upon in this
announcement is hence fifteen months. This change was prompted by
Brimstone's investment in Peoples Bank, which has a December year end, as
does associate company, Lion of Africa Insurance Company Limited, together
with the fact that December is an administratively convenient year end for
subsidiary Brimstone Clothing Corporation (Pty) Ltd.
Accounting Policies
Brimstone changed its accounting policy relating to the non-consolidation of
certain of its subsidiary companies during the period. The Registrar of
Companies granted consent in terms of Section 291 of the Companies Act to
the non-consolidation of the two companies concerned. The companies were not
consolidated in either the 1999 or 2000 financial years. During the review
period the requirements of Accounting Statement number AC132 of the South
African Statements of Generally Accepted Accounting Practice (GAAP) came
into effect. The Statement no longer allows for non-consolidation on the
basis previously applied by Brimstone. The results of Brimstone Clothing
Corporation (Proprietary) Limited and BrimBrands (Proprietary) Limited have
accordingly been consolidated in the fifteen months ended 31 December 2001.
Besides this change, the financial statements were prepared on the same
basis and utilising the same accounting policies as the financial statements
at 30 September 2000. The accounting policies of Brimstone and its
subsidiaries are in accordance with GAAP.
Focus and Direction
Brimstone is concentrating on two areas of investment, one being financial
services and the other industrial. The common theme through both investment
areas, is that of partnership. Brimstone seeks to enter into alliances with
parties who have the expertise and experience necessary to manage the
enterprise in question and who are seeking a partner to add the other
necessary facets which Brimstone is capable of doing. These could include
all or a number of the following:
- impeccable empowerment credentials
- deal structuring skills
- access to capital
- corporate governance and financial management disciplines
- access to markets
These factors have come to the fore in the Peoples Bank investment
(effective date 1 January 2002) and Lion of Africa Insurance Company Limited
in the financial services arena and Nando's Group Holdings Limited, Sea
Harvest Corporation Limited, The Scientific Group (Pty) Limited and fashion
retailer Spitz, in the industrial arena.
Certain investments remain under the "in transition" category which
management is dedicated to disposing of in the year ahead.
Results for the Period
Industrial
Three of the investments in this category, namely Sea Harvest Corporation
Limited ("Sea Harvest"), The Scientific Group (Pty) Limited ("Scientific")
and Pybus 104 (Pty) Limited trading as Spitz ("Spitz) are held via the
BrimEquity joint venture with Coronation Capital Limited. Sea Harvest
performed superbly during its financial year ended 30 September despite
problems in its Namibian operation and incurring a R10 million charge in
respect of Secondary Tax on Companies on the special dividend paid during
the year. This performance continued into the quarter ended 31 December
2001, exports being aided by the sharp fall in the Rand. Certainty on quotas
for a four year period was also achieved in December. Sea Harvest
contributed R2.3 million to Brimstone's revenue via management fees and
dividends and a further R14.9 million in equity accounted earnings.
Scientific, which sells medical equipment to state and private
healthcare institutions, had a difficult year. Turnover did not meet
expectations, costs remained too high and it was discovered that inventory
had been over stated in the previous year. Cost-cutting and improved
turnover contributed to a profit in the first quarter of the 2002 financial
year. Brimstone equity accounted a loss of R4.5 million in its fifteen month
period. Spitz continued to trade well despite the relatively soft retail
trading conditions. It is a niche market operator serving the quality and
brand conscious sector. It also has a number of prime sites. Spitz
contributed R0.7 million to Brimstone's headline earnings.
Brimstone also has an effective 12.1% interest in the listed Nando's
Group Holdings Limited ("Nando's"). Since changing its emphasis from company
owned stores to franchises, the financial performance of Nando's has
improved, witnessed by its published results for the 6 months ended 31
August 2001. Headline earnings increased by 45% and interest-bearing
borrowings reduced by R11 million from 28 February 2001. The performance of
its 36% owned UK operation contributed to an increase of over 200% in income
from associates. Because it has significant influence at board level,
Brimstone equity accounts its Nando's stake which contributed R4.5 million
to group earnings in the period.
The performance of 100% held clothing manufacturing subsidiary
Brimstone Clothing Corporation (Pty) Ltd ("House of Monatic") also defied
sluggish local clothing retail conditions, thanks in part to assistance from
its well developed export operation. House of Monatic has been exporting to
the United Kingdom since 1989 and made its first real foray into the United
States market in 1998, well before the introduction of the Africa Growth and
Opportunities Act (AGOA) in the United States. AGOA has obviously assisted
as has the sharp deterioration of the Rand in 2001. As far as the local
market is concerned, House of Monatic's well established brands give it an
advantage. The operation contributed R9.4 million to Brimstone's headline
earnings during the period. House of Monatic was consolidated for the first
time since 1998 and Brimstone is committed to retaining the business and
ensuring its continued health.
Corporate costs include fees paid to the management company,
incorporating an incentive fee on disposal of Ocfish Holding Company Limited
shares in the period, the costs of maintaining a JSE Securities Exchange
listing and finance costs on corporate borrowings. The management agreement
is currently under review and shareholders will be kept informed in this
regard.
Financial Services
Brimstone's two financial services investments held throughout the period
were its effective 0.9% interest in African Harvest Limited ("Harvest") held
via its 25.05% stake in NECorp Holdings (Pty) Limited ("NECH") and a 30%
interest in Lion of Africa Insurance Company Limited ("Lion"). African
Harvest experienced a further dramatic drop in earnings in its financial
year ended 30 September 2001 accompanied by a fall in its share price. The
share price continued to fall post 31 December despite announcements that
the empowerment shareholding in the company has been strengthened, the board
restructured and a further R1 per share in capital has been returned to
shareholders. Brimstone hence equity accounted only R0.2 million during the
period and took a write-down of R19.6 million on the investment. Through a
proposed process of unbundling, Brimstone will hold its shares directly in
Harvest by mid-year.
Lion grew gross premium income from R70.6 million in 2000 to R269.7 million
in 2001 but felt the strains of the rapid growth and incurred an
underwriting loss (before investment income and contingency reserve) of R15
million. Personal lines business and, in particular, motor insurance, has
proved the problem area, which has been true for all short term insurers.
Measures have been taken to improve the quality of the personal lines book,
unprofitable branches have been closed and costs cut. A much improved result
is expected in the 2002 year. The business was also further capitalised
during the year.
Investments in Transition
Management is committed to disposing of the remainder of these investments
during the year ahead. As stated earlier, the bulk of the group's investment
in Ocfish Holding Company Limited was sold during the period and the sale of
Cape Town CBD property Keerom Street Chambers has been concluded subject to
the resolution of certain conditions. Further impairment losses have been
accounted for on certain of the investments in the period to reduce them to
estimated realisable value.
Group Balance Sheet
Stated net asset value per share rose from 76.5 cents at 30 September 2000
to 80.6 cents at 31 December 2001. Net asset value at directors' valuation
was 91.2 cents at the latter date. The receipt of the proceeds on sale of
the group's investment in KFM Radio Station (Pty) Limited together with the
sale proceeds on the bulk of its investment in Ocfish Holding Company
Limited, net of the cost of the additional shares taken up in Sea Harvest,
meant that the holding company had approximately R6 million cash at the end
of the period. Completion of the necessary formalities on the sale of the
group's property known as Keerom Chambers, will yield a further R6 million.
The borrowings appearing in the group financial statements are in respect of
the secured loan on said property and the debt in the clothing subsidiary.
The interest-bearing borrowings in the clothing subsidiary represented only
25% of the net assets of the company.
Prospects
All the group's investments are budgeting for improved performance in the
year ahead. In the course of incorporating the budgets into its own forecast
for the year, Brimstone management have taken a conservative line, but are
nevertheless confident that Brimstone will achieve its stated targets for
growth in earnings and increase in net asset value.
Dividend
No dividend is proposed at this time as Brimstone has only just returned to
a cash positive situation and the directors are currently considering
various options for future growth.
By order of the Board
Prof GJ Gerwel MA Brey
Chairman Deputy Chairman
Cape Town
18 March 2002
