| Wed 16 Apr 2003, 9:45 | | Brait S.a. |
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Brait S.A.
Soci Anonyme
(Incorporated in Luxembourg)
(RC Luxembourg B-13861)
Share code: BAT ISIN: LU0011857645
TRADING STATEMENT
* Results at 31 March 2003
* Strategic alignment of the business
* Brait South Africa Board
* Executive Equity Participation
* Special Dividend
* Conclusion
Results at 31 March 2003
Shareowners are advised that in terms of International Accounting practice,
Brait S.A. has adjusted its measurement currency from the South African Rand to
the US dollar in order to more accurately recognise the substance of the
underlying business of the company.
Brait S.A. will accordingly, prepare and present its group financial
statements for the financial year ended 31 March 2003 using the US dollar as its
measurement currency. To assist users with their understanding of the results,
the group will prepare a full reconciliation between the US dollar and South
African Rand measurement earnings for the year ended 31 March 2003 as well as
group Rand convenience conversion statements.
The application of the US dollar as the measurement currency will have the
effect of significantly reducing the recent earnings volatility of the group
caused by emerging market currency volatility, particularly in respect of
Brait"s South African investments. These variations will now be reflected
through the foreign currency translation reserve in the balance sheet.
Furthermore, it was reported in the interim results that Brait would hedge some
50% of its tangible capital base invested in emerging markets into its
measurement currency, namely the US dollar. All losses arising from this hedge
due to the recent strength of the Rand against the US dollar have been reflected
against income, but group NAV will only be partially affected because of
corresponding gains arising from the translation of the group"s South African
assets.
It was also disclosed in the interim report that the group"s attributable
earnings, were expected to be significantly lower than last year. The continued
strength of the Rand against the US dollar since the interim, as well as losses
from discontinued operations in the former banking operations and softer
financial performance from it"s major business units, will result in a
significant loss in the Group"s attributable earnings for the year ended 31
March. This loss is expected to be in line with analysts" Rand measurement HEPS
forecasts for the year.
Strategic alignment of the business
Brait relinquished its banking licence in September 2002 and commenced a
process of rationalisation of all components of the business that were linked
with the bank structure. This process is complete and the majority of the
discontinuation and rationalisation costs will have been accounted for in the
results for the year ended 31 March 2003 within the previously reported
estimates
While management"s attention has focused on unwinding the banking structure,
it has also carefully considered Brait"s strategy going forward. In essence the
company is renewing focus on its core strengths:
* Private Equity: the successful completion of SAPEF III"s investment
programme and strategic divestitures will be important priorities in the next 12
months. This should create the platform for the raising of SAPEF IV, which would
then be likely to commence capital raising in April 2004. Management of the
Brait Technology and Innovation Fund ("Braitec") has been restructured and the
team is now fully focused on managing Braitec off its written-down base. Brait
continues to make private equity investments on its own balance sheet where
special opportunities arise which fall outside the mandate of its various funds.
* Advisory Services: This operation has been restructured into three business
operations.
- Brait Corporate Finance, includes Brait specialists in mergers and
acquisitions.
- Brait"s structuring and deal support group, including its legal and
professional team.
- Brait"s debt businesses will continue to originate, structure and
distribute debt products for institutional and corporate clients.
* Specialised Funds: This operation has achieved its strategic goals of
creating a powerful product platform through its successful incubator programme,
and through strategic relationships entered into with managers who have
demonstrated a strong investment record. The operation is well placed to
accelerate the taking on of third party capital and expand its product platform.
The process of refocusing is substantially complete following the realisation
of Brait"s non-core investments in iPac and African Alliance. Additionally,
measures will continue to be taken to simplify the group"s structure and reduce
costs.
The financial strategy will be to maximise distribution of surplus cash until
such time as capital markets improve and attribute a premium rating to capital
successfully employed by companies such as Brait. Accordingly, a series of
special dividends are to be proposed.
Black economic empowerment remains an important strategic priority. A number
of initiatives are under review, which will be reported on as and when
consummated.
Brait South Africa Limited Board
The Board of Brait South Africa Limited which houses Brait S.A."s South
African operations, has been reorganised in order to broaden participation and
focus efforts on strategic priorities. Senior executives, Eduardo Garcia, Walter
Hirzebruch, Bruce MacRobert, Chad Smart and Robin Smith join Antony Ball, Polly
Carr, Neill Davies, John Gnodde, Georgina Mariouklas and Chris Tayelor in the
newly constituted Board. Paul Botha, a former member of the Board of Brait South
Africa, has relinquished his managerial responsibilities, but will remain in a
professional capacity with Brait. He has accordingly resigned from the Board of
Brait South Africa Limited. He is thanked for his contribution to the Board.
Executive equity participation
The Board of Brait S.A. has concluded that executive management participation
in the equity of the Group should, as far as possible, be more closely aligned
to the risk and rewards borne by shareholders. It is therefore proposed that
certain key executives of the group relinquish their entitlements under the
existing share incentive scheme in favour of a new scheme which has, as a
critical ingredient, an upfront, material financial contribution by all
participants towards their new equity entitlements.
Shareowners will be given the opportunity to consider the nature and terms of
the new scheme in a shareowners" meeting to be convened shortly for this
purpose.
Special dividend
The Board has carefully considered its options regarding the surplus cash
held in the group following the closure of its South African banking operations
and the recovery of a large part of its capital previously invested in this
business. It has resolved that the interests of the group will be best served by
reducing its capital base through a special distribution of surplus cash
balances. Sufficient cash will be retained to enable the group to fulfil
obligations of its hedging strategy until it can be reassessed in September
2003, and for the needs of its ongoing operations.
It is proposed that an initial distribution will be effected at the end of
June 2003 and a further distribution made at the end of September 2003. It is
possible that a third distribution may be made once the final tranche of banking
assets has been realised by the end of March 2004.
The quantum of these dividends is significantly dependant on exchange rates,
asset recovery rates and the capital needs of the group"s various investment
programmes. Based upon management"s assumptions of these factors, the aggregate
amount of these dividends is anticipated to be approximately 30 US cents per
share.
As a consequence of these proposed distributions and the anticipated weak
financial results of the group at 31 March 2003, the Board will recommend to the
shareowners at the annual general meeting in July that no final dividend be
declared in respect of the financial year ended 31 March 2003.
Conclusion
The 2003 financial year has been one of reorganisation and restructure
following the closure of the banking structure. Brait enters its new financial
year with a commitment to focusing on its core strengths, appropriately sized
for the market opportunities, and with its senior executives committed to its
future strategy.
Illovo
16 April 2003
Lead sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)
Joint sponsor
Brait
