| Wed 12 Jun 2002, 0:00 | | Brait - Audited Results For The Year Ended 31 |
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Brait - Audited Results for the year ended 31 March 2002
BRAIT S.A.
Refocused on core activities
* Earnings per share
- continuing operations, 27% up at 210 cents
- before realisation adjustment, unchanged at 200 cents
- after realisation adjustment, down 56% to 89 cents
* Total dividend for year, unchanged at 60 cents per share
* Confirmation of intention to deregister banking licence
www.brait.com
Group profile
Brait is an international investment banking group focused on private equity
and alternative funds management, advisory and specialised finance services,
and proprietary investing. It is listed on the Luxembourg, London and
Johannesburg stock exchanges, with shareowners` funds of R1,2 billion
(approximately US$104 million).
Brait`s continuing earnings are derived from:
- fees from private equity and alternative funds management;
- fees from corporate and debt advisory services;
- returns on the group`s principal investments; and
- direct returns from investment of the group`s capital.
Strategic review
Each of Brait`s business units has been reviewed relative to the group`s
strategic theme, financial goals, structures, capital and tools available to
support them. The review process is continuous and it is in this context
that Brait recently announced its intention to apply for deregistration of
the banking licence held by the group.
There were weak performances in our trading businesses, for the second year
in a row, and also in our margin business. Both these segments had
historically depended on the banking structure. Management had come to the
conclusion that this dependency was flawed, and that it could successfully
develop profitable trading and debt businesses without a banking structure.
Consequently, from the commencement of the year, Brait set about actively
developing a specialised funds management business (which gives shareowners
a much enhanced risk/return exposure to equity and interest rate markets)
and developing the debt businesses as originators, structurers and
arrangers, rather than holders of debt assets. Parallel to this, management
committed itself to making the banking structure work, by increasing the
deposit base and lengthening the term of the deposits. This was starting to
bear fruit, but then the second-tier banking crises occurred. Deposit taking
took an irretrievable setback following adverse ratings by a rating agency,
after a medium sized retail bank was placed into curatorship. These events
have had material adverse consequence on all small banks operating in South
Africa. Brait took the view that the costs of holding a banking licence
exceed its benefits, based on:
- the combination of time and effort to rebuild the deposit base;
- significant infrastructural costs associated with holding a banking
licence; and
- financial risks placed on the group.
The cost of this decision amounts to approximately R165 million, of which
R100 million relates to specific provisions and fair value adjustments
arising from the unwinding of bank structure positions and the accelerated
realisation of banking assets. The balance of R65 million will be incurred
in future financial periods and relates to closure and associated costs.
Brait will continue to offer its clients a full range of investment banking
products and services, including debt, and continue to offer its shareowners
access to investment banking related exposure to equity and interest rate
markets.
Group results
As in 2001, Brait experienced a slow start to the financial year. This was
evident in the interim report, which caused the group to express caution on
the outcome for any material growth in earnings for the full financial year
unless market conditions improved. While conditions in the second half did
improve particularly in the advisory, investing and group capital segments,
income declined substantially in the group`s trading and margin operations.
Funds management income matched its creditable first half result. The net
effect on attributable income, on a pre-realisation adjustment basis, leaves
earnings unchanged at 200 cents per share for the year, and 89 cents per
share after realisation adjustments. Earnings on continuing operations of
R189,8 million are 26% ahead of the comparison of R150,8 million last year.
The group tax position reports a credit of R3,5 million for the year. This
reflects the net effect of normal tax charges in the group`s non-banking
operations and a large reversal of the deferred taxation provision in the
bank arising from a release of provisions and taxable losses on the year`s
trading results.
Whilst the group sees these results as disappointing, the action taken in
respect of the non-performing activities in the banking structure will serve
to eliminate loss making operations from future results and enhance the
group`s return on equity.
The group`s cash position improved significantly by R207 million during the
year to R314 million, following the decision to reduce the advances book.
Operating highlights
Funds management
Results from funds management activities have contributed R61,3 million to
the group profit before tax for the year. This is a 48% increase over the
R41,4 million reported in the prior year. The contribution from Brait`s
associated operation, African Alliance, also increased to R7 million (2001:
R5 million) and the loss attributable to the joint venture in ipac South
Africa declined to R2 million (2001: R4 million).
The private equity funds management focus this year has been to enhance the
prospects and returns on existing portfolio investments. This goal is
already bearing fruit with all portfolio companies in the later stage funds
operating ahead of budget or last year`s levels.
The group`s new specialised funds management initiative, focusing on
absolute return strategies in the public markets, recorded a successful
first year with the launch earlier in the year of its pioneer fund.
Advisory services
The advisory business had a satisfactory year despite the general decline in
corporate activity. Earnings before tax were R23,3 million, down 23% on last
year`s record results of R30,2 million. This is considered a strong
performance, particularly from the growing international merger and
acquisition operations.
The group`s specialised finance activities have restructured during the year
and comprise a full range of debt advice solutions for clients to lower
their cost of capital with acceptable risk.
Investing
Brait`s proprietary investing activities have strategically placed greater
emphasis this year on established business opportunities in the industrial
and commercial sectors rather than new economy investments.
These results reflect general improvement in market indices on the
industrial and commercial sectors but more particularly the specific
performance of Brait`s portfolio. Most notable was the profit recorded on
the realisation of the group`s investment in a Russian beer brewing group.
The effect of the sharp depreciation of the rand on the group`s non-South
African investments also contributed overall to a much improved performance
from proprietary investing activities. Earnings before tax and realisation
adjustment was R69,9 million against R1,4 million in the prior period and
the average return on capital invested for the year on this basis was 21%.
Group capital
Group capital has been held as cover against the wide range of risks managed
within the banking structure and the group at large. It is invested
predominantly in cash and short-term assets, and includes some residual
structured assets. Income for the year arises primarily from interest,
dividends and translation gains on non-South African liquid assets. Earnings
before tax and realisation adjustment for the year were R86,1 million, an
increase of 5% against R81,7 million in 2001. The average annualised return
on group capital for the year, before the realisation adjustments, was 12%
(2001: 11%).
Discontinuing operations
The group`s Trading operations, comprising of trading in equities, interest
rates, securities, treasury and money market activities, have been
discontinued, either during the year or as part of the deregistration of the
bank. This also applies to the group`s Margin business, comprising asset-
based finance and other balance-sheet lending activities. As set out above,
realisation adjustments have been raised in this financial year, and further
closure provisions will be made in future financial periods. The combined
loss from these operations for the year amounted to R109,4 million,
inclusive of realisation adjustment provisions of R45,6 million.
Dividend
The board has proposed a final dividend of 35 South African cents per share
based on the six months results to 31 March 2002. This brings the aggregate
dividend for the year, including the interim dividend declaration of 25
South African cents per share, to 60 South African cents per share.
Members will be asked to approve the declaration of the final dividend and
endorse the payment of the interim dividend at the general meeting of
shareowners to be held on Wednesday, 31 July 2002, in Luxembourg.
The year ahead
From the harsh environment in the investment markets served by Brait and the
painful decision taken to apply for the deregistration of the group`s South
African banking licence, Brait is confident that it emerges stronger, more
stable and relevant. The group faces an improving prospect with top-class
businesses, fitter for the experience of the difficult times past.
The new financial year offers some specific challenges for Brait. The
primary focus will be on returning cash to the group from its banking
structure assets, further investment momentum in Fund III and planning the
group`s next fund raising strategies. Financially the group is strong, its
risk profile improved and it is now much better positioned to meet its
longer-term earnings growth and equity return targets.
For and behalf of the board
M E King A C Ball
Chairman Group Chief Executive 12 June 2002
Group income statements
For the year ended 31 March
Continuing operations Discontinuing Total
2002 2001 Change 2002 2001 Change 2002 2001 Change
Rm Rm % Rm Rm % Rm Rm
%
Revenue 379,7 279,0 36 6,5 * 93,8 (93) 386,2 372,
4
Operating (193,3) (140,0) 38 (113,1) (59,6) (90) (306,4) (199,6) (54)
expenses
Normal (138,9) (140,0) (67,5) (59,6) (206,4) (199,6)
operations
Realisation (54,4) - (45,6) - (100,0) -
adjustments
Profit from 186,4 139,0 34 (106,6) 34,2 (412) 79,8 173,2 (54)
operations
Finance (10,4) (1,7) - - (10,4) (1,7)
costs
Income from 8,3 12,2 - - 8,3 12,2
associates
Income from
joint
ventures 6,7 8,0 - - 6,7 8,0
Disposal of - 5,5 - - - 5,5
investment
Amortisation
of
intangibles (4,8) (8,3) (2,8) (2,5) (7,6) (10,8)
Profit 186,2 154,7 20 (109,4) 31,7 (445) 76,8 186,4 (59)
before
taxation
Taxation 3,5 (3,9) - - 3,5 (3,9)
Profit after 189,7 150,8 26 (109,4) 31,7 (445) 80,3 182,5 (56)
taxation
Minority 0,1 - - - 0,1 -
interest
Attributable 189,8 150,8 26 (109,4) 31,7 (445) 80,4 182,5 (56)
earnings
Earnings per
share
- 210,4 165,4 27
continuing
operations -
diluted
(cents)
- before 200,2 201,4 (1)
realisation
adjustment -
basic
(cents)
- before 200,0 200,0 -
realisation
adjustment -
diluted
(cents)
- basic 89,2 201,4 (56)
(cents)
- diluted 89,1 200,0 (55)
(cents)
Dividends 60,0 60,0
per share
(cents)
- interim 25,0
(declared)
- final 35,0
(proposed)
* Revenue is stated net of losses on trading activities.
Group statement of changes in equity
For the year ended 31 March
2002 2001
Rm Rm
Balance at 1 204,5 1 102,5
beginning of period
Currency (18,0) 18,1
translation
adjustments
Attributable 80,4 182,5
earnings
Dividends (75,2) (68,9)
Treasury shares (9,5) (29,7)
Balance at end of 1 182,2 1 204,5
period
Salient features
At 31 March
Profit
before Realisation
adjustment adjustment*
2002 2002 2002 2001
Rm Rm Rm Rm %
Profit before 176,8 (100,0) 76,8 186,4 (59)
taxation
- Continuing 240,6 (54,4) 186,2 154,7 20
operations
Funds management 61,3 - 61,3 41,4
Advisory 23,3 - 23,3 30,2
Investing 69,9 (20,0) 49,9 1,4
Group capital 86,1 (34,4) 51,7 81,7
- Discontinuing (63,8) (45,6) (109,4) 31,7 (445)
operations
Margin business 1,2 (45,6) (44,4) 40,9
Trading (65,0) - (65,0) (9,2)
Taxation 3,5 3,5 (3,9)
Minority interest 0,1 0,1 -
Attributable 180,4 80,4 182,5 (56)
earnings
Financial
statistics
Return on 15 7 16
shareowners`
funds (%)
Six year (2001:
five year)
compound growth 37 20 47
in EPS (%)
Market
capitalisation
- 31 March (Rm) 804 1 070 (25)
Shares in issue 93,5 93,5
(m)
Weighted average
shares in issue:
- basic (m) 90,1 90,6
- fully diluted 90,2 91,2
(m)
Closing share
price
- 31 March 860 1 145 (25)
(cents)
Tangible net
asset value
per share (cents) 1 276,0 1
285,4
Average
shareowners`
interest (Rm) 1 193 1 153 3
Note: * Following the announcement of the group`s intention to deregister
its banking licence, the Board has approved an accelerated disposal of a
large proportion of the assets in its banking structure and certain other
assets, some of which are held in the Group Capital and Investing segments.
This action has necessitated an abnormal non-recurring adjustment to the
carrying value of these assets at 31 March 2002.
A more detailed preliminary report has been posted to shareowners, placed on
the group`s website and is available at the company`s offices and agents.
The annual report will be released at the end of June 2002.
Cash flow statements
For the year ended 31 March
2002 2001
Rm Rm
Cash flows from 107,2 146,0
operating
activities
Change in working 216,0 (133,4)
funds
Cash generated by 323,2 12,6
operating
activities
Cash (113,0) 50,9
(outflows)/inflows
from funding
activities
Cash outflows from (3,1) (43,5)
investing
activities
Net increase in 207,1 20,0
cash and cash
equivalents
Cash and cash 107,1 87,1
equivalents at
beginning of year
Balance at end of 314,2 107,1
year
Group balance sheets
At 31 March
2002 2001
Rm Rm
Shareowners` funds
Share capital and 802,1 803,0
premium
Non-distributable 13,7 3,9
reserves
Foreign currency 24,0 42,0
translation reserve
Distributable 342,4 355,6
reserves
Total shareowners` 1 182,2 1 204,5
interest
Liabilities
Long-term 167,6 200,2
liabilities
Current liabilities 1 369,9 1 918,2
Total liabilities 1 537,5 2 118,4
Assets
Long-term assets 1 193,5 1 321,9
Current assets 1 526,2 2 001,0
Total assets 2 719,7 3 322,9
Net assets 1 182,2 1 204,5
Net asset value per 1 312,1 1 329,5
share (cents)
Notes to the financial statements
1. The financial statements of the group are prepared in accordance with
International Accounting Standards. The accounting policies are consistent
with the previous financial year. IAS 39 (AC 133): Recognition and
Measurement of Financial Instruments has been fully adopted in the
preparation of the financial statements.
2. Reclassifications have been made to revenue and operating expenditure in
the comparative figures to provide a better appreciation of the results and
consistency with disclosure at 31 March 2002.
Registered office: Brait S.A., 69, route d`Esch, L-2953, Luxembourg, Tel:
09352-4590-2180, Fax: 09352-4590-3641
Brait South Africa Limited: 9 Fricker Road, Illovo Boulevard, Illovo,
Sandton, Tel: +27 11 507 1000 Fax: +27 11 507 1001
JSE and LSE issuer name and code: Issuer long name - Brait S.A., Issuer code
- BRAIT, Instrument alpha code/Ticker symbol - BAT, JSE ISIN - LU 0011857645
Domiciliary and listing agent: Dexia Banque Internationale a Luxembourg, 69,
route d`Esch, L-2953, Luxembourg, Tel: 09352-4590-2180, Fax: 09352-4590-3641
Registrar: Dexia Banque Internationale a Luxembourg, 69, route d`Esch, L-
2953, Luxembourg, Tel: 09352-4590-2180, Fax: 09352-4590-3641
Transfer agents: United Kingdom: Capita IRG plc, Bourne House, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU, United Kingdom, Tel: 0944-208-639-2000, Fax:
0944-208-639-2342
South Africa: Computershare Investor Services Limited, 11 Diagonal Street,
Johannesburg, 2001 or PO Box 1053, Johannesburg, 2000, Tel: +27 11 370 5000
Fax: +27 11 370 5487
Directors: M E King (Chairman)^*, A C Ball+*, J E Bodoni^#, R T Dalais
*, F
Z Haller^$, R J Koch^-, A M Rosenzweig^*, C J Tayelor
*, S J P Weber
#, P L
Wilmot^*
Executive ^Non-executive *South African #Luxembourgish $American -
British
Date: 12/06/2002 05:10:00 PM Produced by the SENS Department
