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Brait - Interim Results (unaudited) For The Six Months Ended 30 September 2002
Release Date: 07/11/2002 17:05:04 Code(s): BAT
Brait - Interim results (unaudited) for the six months ended 30 September 2002
Brait S.A., Socit Anonyme, Incorporated in Luxembourg (R C Luxembourg B-13861)
www.brait.com
"Your Investment Banking Partner"
*Earnings per share:
- continuing operations - 44 cents (down 52%)
- attributable - 18 cents (down 82%)
*Interim dividend of 25 cents per share (maintained)
*Strong balance sheet and cash position
*Banking licence deregistration completed on schedule
The business of Brait
Brait is an international investment banking group focused on private equity and
alternative funds management, advisory and specialised finance services, and
proprietary investing.
Our core value is reflected in our mission to be Your Investment Banking
Partner.
Partnering is a fair, positive and enduring relationship seeking shared reward.
Fair
We commit ourselves with good faith, professionalism and integrity for a
balanced solution.
Positive
We commit ourselves to all we do with passion, energy and a pioneering spirit of
enterprise.
Enduring
We invest our intellectual and financial capital for long-term value beyond
today`s transactions.
Shared reward
We discover, grow and participate in the benefits we realise together.
Salient features
For the six months ended 30 September
Unaudited Unaudited
30 Sept 30 Sept
2002 2001 Change
Rm Rm %
Profit before
taxation 21,4 91,1 (77)
- Continuing
operations 44,1 82,6 (47)
Funds
management 24,3 29,9 (19)
Advisory 11,0 5,4 104
Investing 8,0 23,0 (65)
Group capital 0,8 24,3 (97)
-
Discontinuing
operations (22,7) 8,5 (367)
Taxation (4,9) (0,8) 513
Attributable
earnings 16,5 90,3 (82)
Performance
Earnings per
share -
attributable
(cents) 18,4 100,0 (82)
Earnings per
share -
continuing
operations
(cents) 43,8 90,6 (52)
Dividends per
share -
interim
(cents)* 25,0 25,0 -
Net asset
value per
share (cents) 1 299,8 1 370,2 (5)
Tangible net
asset value
per share
(cents) 1 265,0 1325,0 (5)
Financial
statistics
Return on
shareowners`
funds (%)
- Continuing
operations 6,7 13,4
- Continuing
and
discontinuing
operations 2,8 14,8
Market
capitalisation
- 30 September
(Rm) 869,5 1 262,3 (31)
Shares in
issue (m) 93,5 93,5
Weighted
average shares
in issue -
basic (m) 89,6 90,0
- fully
diluted (m) 89,6 90,3
Closing share
price - 30
September
(cents) 930,0 1 350,0 (31)
Average
shareowners`
funds (Rm) 1 173,4 1 218,9 (4)
* Declared
after the
period end
Group income statements
For the six months ended 30 September
Unaudited
Continuing
operations
30 Sept 30 Sept
2002 2001 Change
Rm Rm %
Revenue 122,6 155,8 (21)
Operating (79,3) (76,0) 4
expenses
Profit from 43,3 79,8 (46)
operations
Finance (5,5) (6,4)
costs
Income from 6,2 4,1
associates
Income from
joint 2,2 7,5
ventures
Amortisation
of
intangibles (2,1) (2,4)
Profit 44,1 82,6 (47)
before
taxation
Taxation (4,9) (0,8)
Profit after 39,2 81,8 (52)
taxation
Minority - -
interest
Attributable 39,2 81,8 (52)
earnings
Earnings per
share
(cents)
- basic
- diluted
-
continuing
operations
Dividends
per share
(cents)
- interim
(declared)
- final
(proposed
and paid)
Group income statements
For the six months ended 30 September
Unaudited
Discontinuing operations
30 Sept 30 Sept
2002 2001 Change
Rm Rm %
Revenue 9,7 61,6 (84)
Operating (32,4) (53,1) (39)
expenses
Profit from (22,7) 8,5 (367)
operations
Finance - -
costs
Income from - -
associates
Income from
joint - -
ventures
Amortisation
of
intangibles - -
Profit (22,7) 8,5 (367)
before
taxation
Taxation - -
Profit after (22,7) 8,5 (367)
taxation
Minority - -
interest
Attributable (22,7) 8,5 (367)
earnings
Earnings per
share
(cents)
- basic
- diluted
-
continuing
operations
Dividends
per share
(cents)
- interim
(declared)
- final
(proposed
and paid)
Group income statements
For the six months ended 30 September
Unaudited
Total
30 Sept 30 Sept
2002 2001 Change
Rm Rm %
Revenue 132,3 217,4 (39)
Operating (111,7) (129,1) 13
expenses
Profit from 20,6 88,3
operations
Finance (5,5) (6,4)
costs
Income from 6,2 4,1
associates
Income from
joint 2,2 7,5
ventures
Amortisation
of
intangibles (2,1) (2,4)
Profit 21,4 91,1 (77)
before
taxation
Taxation (4,9) (0,8)
Profit after 16,5 90,3 (82)
taxation
Minority - -
interest
Attributable 16,5 90,3 (82)
earnings
Earnings per
share
(cents)
- basic 18,4 100,3 (82)
- diluted 18,4 100,0 (82)
- 43,8 90,6 (52)
continuing
operations
Dividends
per share
(cents)
- interim 25,0 25,0
(declared)
- final
(proposed
and paid)
Group income statements
For the six months ended 30 September
Audited
Year
31 Mar
2002
Rm
Revenue 386,2
Operating expenses (306,4)
Profit from 79,8
operations
Finance costs (10,4)
Income from 8,3
associates
Income from
joint ventures 6,7
Amortisation of
intangibles (7,6)
Profit before 76,8
taxation
Taxation 3,5
Profit after 80,3
taxation
Minority interest 0,1
Attributable 80,4
earnings
Earnings per share
(cents)
- basic 89,2
- diluted 89,1
- continuing 210,4
operations
Dividends per share
(cents)
- interim 25,0
(declared)
- final (proposed 35,0
and paid)
Group balance sheets
At 30 September
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2002 2001 2002
Rm Rm Rm
Assets
Intangibles 31,2 37,5 32,5
Long-term 580,2 1 444,3 1 161,0
assets
Investments 479,5 1 222,8 818,9
Other long- 100,7 221,5 342,1
term assets
Current 1 060,1 1 892,8 1 526,2
assets
Total assets 1 671,5 3 374,6 2 719,7
Shareowners`
funds
Shareowners` 1 164,6 1 230,7 1 182,2
interest
Outside - 2,5 -
shareowners`
interest
Total 1 164,6 1 233,2 1 182,2
shareowners`
interest
Liabilities
Long-term 106,5 204,1 167,6
liabilities
Current 400,4 1 937,3 1 369,9
liabilities
Total 506,9 2 141,4 1 537,5
liabilities
Total equity 1 671,5 3 374,6 2 719,7
and
liabilities
Net asset
value per
ordinary
share
(cents)
- book value 1 299,8 1 370,2 1 312,1
Group cash flow statements
For the six months ended 30 September
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2002 2001 2002
Rm Rm Rm
Cash flows from 71,2 61,7 35,4
operating
activities
Change in working (41,6) 144,1 296,4
funds
Cash generated by 29,6 205,8 331,8
operating
activities
Cash outflows from (61,1) (65,7) (121,6)
funding activities
Cash outflows from - - (3,1)
investment
activities
Net (31,5) 140,1 207,1
(decrease)/increase
in cash and cash
equivalents
Cash and cash 314,2 107,1 107,1
equivalents at
beginning of period
Balance at end of 282,7 247,2 314,2
period
Group statement of changes in equity
For the six months ended 30 September
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2002 2001 2002
Rm Rm Rm
Balance at 1 182,2 1 204,5 1 204,5
beginning of
period
Currency (0,8) 16,0 (18,0)
translation
adjustments
Attributable 16,5 90,3 80,4
earnings
Dividends (31,9) (77,7) (75,2)
Treasury (1,4) (2,4) (9,5)
shares
Balance at 1 164,6 1 230,7 1 182,2
end of period
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 2002. IAS 39 (AC
133): Recognition and Measurement of Financial
Instruments has been fully adopted in the preparation of
the financial statements. An adjustment has been made to
revenue and operating expenses in the comparatives to
provide consistency with the results at 31 March 2002.
The restatement has no effect on profits before or after
taxation.
2. All liabilities are interest bearing save R42,8 million
in respect of accounts payable, accruals and deferred
taxation.
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2002 2001 2002
Rm Rm Rm
3. The following items are
included in profit from
operations:
Interest capitalised - 0,2 2,1
Dividends received 31,9 55,3 86,6
Depreciation 3,4 3,7 7,1
Related party
transactions
- Interest received 9,0 11,9 25,4
- Interest paid 0,2 0,4 6,2
- Fees received 0,5 - -
4. Reconciliation between earnings and headline earnings
As International Accounting Standards do not recognize the
concept of headline earnings, a reconciliation between
earnings and headline earnings has been provided for
illustrative purposes for South African users, based on South
African statements of Generally Accepted Accounting Practice.
Attributable Earnings 16,5 90,3 80,0
Amortisation of 2,1 2,4 7,6
intangibles
Costs on Termination of 23,5 - 100,0
discontinuing operations
Headline earnings 42,1 92,7 187,6
- Continuing operations 41,3 92,7 156,0
- Discontinuing 0,8 - 33,0
operations
Headline earnings per 47,0 102,7 209,5
share (cents)
- Continuing operations 46,1 102,7 172,9
- Discontinuing 0,9 - 36,6
operations
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2002 2001 2002
Rm Rm Rm
5. Investments
- Listed - there are no
listed investments
- Unlisted
- carrying value 479,5 1 222,8 818,9
- directors` valuation 487,5 1 277,1 827,8
6. Commitments, guarantees 163,5 283,1 365,1
and contingent
liabilities
7. There is no capital
expenditure, either
authorised and
contracted.
8. Related party balances
- Liabilities 27,8 38,3 26,9
- Assets 76,0 151,3 124,5
Group segmental reports
For the six months ended 30 September
Unaudited Unaudited
30 Sept 30 Sept
2002 2002
Rm % 2001 2001
Segmental Rm %
Revenue 132,3 100
- Continuing 122,6 93 217,4 100
operations
Funds 42,6 32 155,8 72
management
Advisory 35,7 27 48,9 22
Investing 9,8 7 25,2 12
Group capital 34,5 26 30,0 14
- 9,7 7 51,7 24
Discontinuing
operations
Operating 111,7 100 61,6 28
expenses
- Continuing 79,3 71 129,1 100
operations
Funds 23,9 21 76,0 59
management
Advisory 22,6 20 19,0 15
Investing 4,6 4 19,8 15
Group capital 28,2 25 7,0 5
- 32,4 29 30,2 23
Discontinuing
operations
Profit before 21,4 100 53,1 41
taxation
- Continuing 44,1 206 91,1 100
operations
Funds 24,3 114 82,6 91
management
Advisory 11,0 51 29,9 33
Investing 8,0 37 5,4 6
Group capital 0,8 4 23,0 25
- (22,7) (106) 24,3 27
Discontinuing
operations
Geographical 8,5 9
Profit before 21,4 100
taxation
- Continuing 44,1 206 91,1 100
operations
Europe (16,0) (75) 82,6 91
South Africa 27,2 127 22,1 24
Other Africa 32,9 154 11,5 13
- (22,7) (106) 49,0 54
Discontinuing
operations
South Africa (22,7) (106) 8,5 9
Commentary
Group profile
Brait S.A. 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 at 30 September 2002 of R1,16 billion (approximately US$110
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.
Trading report and financial results
The group has met its timetable announced on 7 May this year for the full
repayment of its depositors` accounts and the cancellation of its banking
licence. As a consequence of this action all speculative trading, treasury
operations (including deposit-taking) and corporate advances, previously carried
out within the former banking structure, have ceased. Since this announcement,
Brait has refocused itself to offer clients a full range of investment banking
products and services, including debt advice, and to give its clients access to
investment banking related exposure in equity and interest rate markets through
its specialised funds operations.
Considerable energy has been applied since May to an accelerated realisation
process of the advances and investment books held in the former bank structure.
Good progress has been made to date. The recovery is planned to be materially
completed within the announced eighteen month timeframe and impairment cost
estimate. The discontinuing operations and closure costs are also expected to be
materially in line with the estimates announced in May 2002.
Trading conditions for the first half of the financial year have continued to be
difficult. Through its investing operations, Brait is considerably leveraged to
the performance of capital markets, which have persisted with the trend of
excessive volatility and show no signs yet of sustainable recovery. This in turn
has impacted on the level of corporate activity, which has contributed to a
general decline in financial and advisory services.
Earnings per share of 18 cents for the half year are 82% down on the prior half-
year results, while earnings per share from continuing operations of 44 cents
per share have declined by 52%.
Profit before tax from continuing operations has declined by R38 million or 47%.
Excluding currency translation losses of approximately R36 million incurred on
the group`s non-South African assets compared with gains of some R20 million in
the prior period, profit from continuing operations has increased by R17 million
or 28% for the half year. In discontinuing operations, closure costs and winding
down expenses have turned the prior period profit of R8 million into a loss of
R22 million.
The increase in the group taxation rate to 23% arises principally from the non-
deductibility of losses on currency translation and losses incurred in the
banking structure during the period.
The group`s liquidity position is sound following the repayment of some R1
billion of depositors` funds during the period. Cash on hand at 30 September was
R283 million and is expected to improve as assets from discontinued operations
are realised in the second half of the year.
Funds management
Earnings from private equity operations are slightly behind last year as a
result of the strength of the rand on dollar-based management fees. This
operation is still performing below potential earnings capacity but should
benefit from any positive market trends. Income from associates, including
African Alliance and ipac, is ahead of last year.
Advisory services
Earnings are well ahead of last year`s low base. A number of large M&A mandates
were concluded in the period, which contributed meaningfully to the overall
results. Satisfactory earnings contributions were generated by the group`s
structured finance and specialised debt finance teams. In general though, the
advisory market deal flow and M&A climate is weak, both internationally and in
southern Africa, and has not spared the "entrepreneurially"-managed company
sector.
Investing
Profit from investing activities has declined. By nature these earnings are
irregular because of market volatility and the group`s policy of measuring these
assets on a fair value basis. On a relative market performance basis, the
investing portfolio has yielded a positive return for the half-year against a
decline in market values. In addition, the results would have been much better
but for currency translation losses incurred on the group`s non-South African
investments due to the appreciation of the rand this year.
Group capital
Group capital has marginally broken even for the year to date. There are two
reasons for this: First, the strategy in the group`s banking operations during
the A2 banking crisis was to protect capital rather than yield, and second, a
large portion of the group`s capital is invested in currencies with low yields
and has been subject to currency losses on translation into the rand for
reporting purposes. By comparison the prior year results included significant
currency translation gains.
For as long as the group measures its results in rand, volatile emerging market
currency movements will have a marked impact on group capital earnings. This
will be all the more so in future as some 90% of Brait`s capital base is either
physically held or has been hedged into currencies other than the rand.
Discontinued operations
The group`s trading operations, comprising trading in equities, interest rates,
securities, treasury, money market and margin activities have ceased. The plan
for an accelerated realisation of these assets and liabilities is proceeding
satisfactorily. More than R1 billion of assets have been recovered during the
period and a further R500 million is expected to be returned within the next
twelve months.
Losses on discontinued operations for the half-year amounted to R23 million,
comprising R10 million of revenue and R33 million of discontinuance expenses.
The forecast estimate of R65 million for closure and wind-down costs should be
sufficient, subject to any significant unexpected event or claim. Revenues and
costs in these operations are expected to decline in the second half of the
year.
Prospects for the remainder of the year
While the group is strong financially, it will not meet its performance targets
in the current financial year largely because of closure costs and potential
currency translation losses. Consequently, attributable earnings, measured in
rand, are expected to be significantly lower than last year.
The group`s priorities for the remainder of the year are to manage the wind-down
of the banking operations, provide new impetus to established operations and
increase the discretionary capital under its management. It will also develop
and articulate a strategy for the capital expected to be released from the
former banking structure.
Dividend
Brait holds the view that dividend distributions are an important part of long-
term wealth creation. In volatile industries and market environments, dividends
provide a measure of financial assurance and consistency. As Brait is
financially strong and liquid, the board has declared an interim dividend of 25
South African cents per share to match the equivalent interim declaration last
year.
Notice is hereby given that the dividend will be paid on Monday, 2 December 2002
to shareowners recorded in the register at the close of business on the record
date, namely Friday, 29 November 2002. The last day to trade `cum div` will be
Friday, 22 November 2002, and the share will commence trading `ex dividend` on
Monday, 25 November 2002. Shareowners not registered on the South African
register will receive the US dollar equivalent based on the currency conversion
rate prevailing on the day immediately preceding the record date, namely
Thursday, 28 November 2002.
No dematerialisation or rematerialisation of share certificates on the South
African register may take place between 25 November 2002 and 29 November 2002
For and on behalf of the board
M E King A C Ball
Chairman Group Chief Executive
7 November 2002
Administration
Registered office
Brait S.A.
69, route d`Esch
L-2953, Luxembourg
Tel: +352-4590-2180
Fax: +352-4590-3641
Brait South Africa Limited
9 Fricker Road
Illovo Boulevard
Illovo
Sandton
Tel: +27-11-507-1000
Fax: +27-11-507-1001
Domiciliary and listing agent
Dexia Banque Internationale Luxembourg
69, route d`Esch
L-2953, Luxembourg
Tel: +352-4590-2180
Fax: +352-4590-3641
Transfer agents
United Kingdom
Capita IRG plc
Bourne House
34 Beckenham Road
Beckenham
Kent, BR3 4TU
United Kingdom
Tel: +44-208-639-2000
Fax: +44-208-639-2342
South Africa
Computershare Investor Services Limited
70 Marshall Street
Johannesburg, 2001
or
PO Box 61051
Marshalltown
2107
Tel: +27-11-370-5000
Fax: +27-11-370-5487
Legal advisors to the
company
Elvinger, Hoss & Prussen
2, Place Winston Churchill
L-2014, Luxembourg
Tel: +352-446-6440
Fax: +352-44-2255
Independent auditors
Deloitte & Touche S.A.
3, route d`Arlon
L-8009 Strassen
Luxembourg
Tel: +352-45145-2417
Fax: +352-45145-2407
Registrar
Dexia Banque Internationale Luxembourg
69, route d`Esch
L-2953, Luxembourg
Tel: +352-4590-2180
Fax: +352-4590-3641
JSE and LSE issuer name and code
Issuer long name - Brait S.A.
Issuer code - BRAIT
Instrument alpha code/
Ticker symbol - BAT
ISIN - LU 0011857645
Website: http://www.brait.com
Directors
M E King (Chairman)@* R J KochX
A C Ball* A M Rosenzweig@X
J E Bodoni@# C J Tayelor*
R T Dalais* S J P Weber#
F Z Haller@+ P L Wilmot@*
@Non-executive (all independent)
+American ^British XDutch #Luxembourgish *South African
Financial information for the six months ended 30 September 2002
is also available on the Brait website at www.brait.com
Date: 07/11/2002 05:05:00 PM Produced by the JSE SENS Department
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