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Brait - Reviewed Group Results For The Year Ended 31 March 2003
Release Date: 06/06/2003 07:00:06 Code(s): BAT
BRAIT - Reviewed group results for the year ended 31 March 2003
Brait S.A
JSE ISIN - LU 0011857645
- Earnings
The company has reported its results using the USD as its measurement currency
for the year ended 31 March 2003. As this is the first period it has reported on
this basis, summarised Rand measurement currency results have been presented to
assist users in this transitional year.
Previous New presentation
presentation USD measurement
Rand measurement currency
currency (USD cents per share)
(R cents per
share)
Pro forma
2002 2003 2003 2002
148,1 (174,4) Headline (loss)/earnings (4,8) (2,2)
89,1 (312,3) Attributable (19,0) (8,4)
(loss)/earnings
1 312,1 955,7 Net asset value 121,4 115,6
- Secure balance sheet: 35% of net assets held in cash
- Proposed extraordinary special dividend payments
- Deregistration of banking licence
- Substantial completion of business rationalisation
"This has been a challenging year which has seen the group overcome many
hurdles, not least the closure of its banking structure and a substantial
rationalisation of its operations. Importantly, it has emerged from these with a
renewed focus on its core strengths and a committed purpose to deliver on its
potential."
www.brait.com
group income statements
For the years ended 31 March
2002 2002 2003 2003 2002 2002
Audited Pro Reviewed Reviewed Pro Reviewed
forma* forma*
Rm Rm Rm US$m US$m US$m
386,3 233,6 110,9 Revenue 11,4 24,5 40,6
379,8 227,1 104,1 Continuing 10,7 23,8 39,9
operations
6,5 6,5 6,8 Discontinuing 0,7 0,7 0,7
operations
(306,4) (306,4) (206,3) Operating (21,2) (32,2) (32,2)
expenses
(193,3) (193,3) (145,0) Continuing (14,9) (20,3) (20,3)
operations
(113,1) (113,1) (61,3) Discontinuing (6,3) (11,9) (11,9)
operations
79,9 (72,8) (95,4) (Loss)/profit (9,8) (7,7) 8,4
from operations
186,5 33,8 (40,9) Continuing (4,2) 3,5 19,6
operations
(106,6) (106,6) (54,5) Discontinuing (5,6) (11,2) (11,2)
operations
(10,4) (10,4) (12,6) Finance costs (1,3) (1,1) (1,1)
8,3 8,3 4,9 Income from 0,5 0,9 0,9
associates
6,7 6,7 1,9 Income from 0,2 0,7 0,7
joint ventures
Amortisation
and impairment
(7,6) (7,6) (75,9) of goodwill (7,8) (0,8) (0,8)
76,9 (75,8) (177,1) (Loss)/profit (18,2) (8,0) 8,1
before taxation
186,3 33,6 (122,6) Continuing (12,6) 3,5 19,6
operations
(109,4) (109,4) (54,5) Discontinuing (5,6) (11,5) (11,5)
operations
3,5 3,5 11,7 Taxation 1,2 0,4 0,4
3,5 3,5 11,7 Continuing 1,2 0,4 0,4
operations
- - - Discontinuing - - -
operations
80,4 (72,3) (165,4) (Loss)/profit (17,0) (7,6) 8,5
after taxation
189,8 37,1 (110,9) Continuing (11,4) 3,9 20,0
operations
(109,4) (109,4) (54,5) Discontinuing (5,6) (11,5) (11,5)
operations
80,4 (72,3) (165,4) Attributable (17,0) (7,6) 8,5
(loss)/earnings
*Refer to note 4 for explanation of the pro forma results
Rand Rand Rand US US US
Cents Cents Cents Cents Cents Cents
(Loss)/earnings
per share
148,1 (21,2) (46,6) - headline (4,8) (2,2) 15,6
89,1 (80,2) (184,4) - attributable (19,0) (8,4) 9,4
Ordinary
dividends per
share
25,0 25,0 - interim 2,7 2,5
35,0 - - final - 3,2
group balance sheets
At 31 March
2002 2003 2003 2002
Audited Reviewed Reviewed Reviewed
Rm Rm US$m US$m
Assets
1 193,5 316,4 Long-term assets 40,2 105,2
1 526,2 942,8 Current assets 119,8 134,6
2 719,7 1 259,2 Total assets 160,0 239,8
Shareowners" funds
802,1 960,9 Share capital and 122,1 122,1
premium
13,7 20,5 Non-distributable 2,6 2,0
reserves
24,0 (361,2) Foreign currency (45,9) (74,0)
translation reserves
342,4 236,1 Distributable reserves 30,0 54,1
1 182,2 856,3 Total shareowners" 108,8 104,2
interest
Liabilities
167,6 79,4 Long-term liabilities 10,1 14,8
1 369,9 323,5 Current liabilities 41,1 120,8
1 537,5 402,9 Total liabilities 51,2 135,6
2 719,7 1 259,2 Total equity and 160,0 239,8
liabilities
Rand Rand US US
Cents Cents Cents Cents
Net asset value per
ordinary share
1 312,1 955,7 - book value 121,4 115,6
1 337,5 968,1 - directors" valuation 123,0 117,9
1 276,0 955,7 Tangible net asset 121,4 112,5
value per ordinary
share
Financial statistics
2002 2003 2003 2002
Market capitalisation
804,0 607,6 - 31 March (Rm)
- 31 March ($m) 77,3 70,9
93,5 93,5 Shares in issue (m) 93,5 93,5
Weighted average shares in
issue
90,1 89,6 - basic (m) 89,6 90,1
90,2 89,7 - fully diluted (m) 89,7 90,2
Closing share price
860,0 650,0 - 31 March (Rand cents)
- 31 March (USD cents) 82,6 75,8
Rand/Dollar exchange rate
11,34 7,87 - closing 0,1271 0,0882
9,50 9,73 - average 0,1028 0,1052
group statement of changes in equity
For the years ended 31 March
Share Foreign
capital currency Total
and transla- Group share-
share Legal tion retained owners"
premium reserves reserves earnings interest
Reviewed Reviewed Reviewed Reviewed Reviewed
US$m US$m US$m US$m US$m
Balance at 31 122,2 0,8 (61,9) 54,2 115,3
March 2001
Net exchange - - (12,1) - (12,1)
rate
adjustments -
current year
Attributable - - - 8,5 8,5
earnings
Dividends - - - (6,5) (6,5)
Treasury (0,1) - - (0,9) (1,0)
shares
Transfer - 1,2 - (1,2) -
to/(from)
other
reserves
Balance at 31 122,1 2,0 (74,0) 54,1 104,2
March 2002
Net exchange - - 27,4 - 27,4
rate
adjustments -
current year
Attributable - - - (17,0) (17,0)
loss
Dividends - - - (5,8) (5,8)
Transfer - 0,6 0,7 (1,3) -
to/(from)
other
reserves
Balance at 31 122,1 2,6 (45,9) 30,0 108,8
March 2003
cash flow statements
For the years ended 31 March
2003 2002
Reviewed Reviewed
US$m US$m
Cash flows from operating activities (4,5) 3,2
Change in working funds 17,9 26,1
Cash generated by operating activities 13,4 29,3
Cash outflows from funding activities (7,7) (10,7)
Cash from investing activities (0,2) (0,3)
Effects of exchange rate changes on 4,4 -
cash and cash equivalents
Net increase in cash and cash 9,9 18,3
equivalents
Cash and cash equivalents at beginning 27,7 9,4
of year
Balance at end of year 37,6 27,7
notes to the financial statements
For the years ended 31 March
1. Reviewed results
The results for the year ended 31 March 2003 have been reviewed by the company"s
auditors, Deloitte & Touche, and their unqualified review opinion is available
for inspection at the company"s registered office. The pro forma results have
not been reviewed nor the supplementary information presented in the Schedule of
supplementary information, consequently no opinion has been expressed thereon.
2. Basis of preparation
The financial statements of the group are prepared in accordance with
International Accounting Standards (IAS). The accounting policies are consistent
with the previous financial year end.
3. Measurement currency
Due to a change over a period of time in the substance of the underlying
business and circumstances of the group"s holding company, Brait S.A. the
company has changed its measurement currency from South African rands (Rand) to
United States dollars (USD). Accordingly, the group statements at 31 March 2003
have been prepared using the USD as the measurement currency.
4. Pro forma comparatives
As noted in 3 above, Brait S.A. has changed its measurement currency from Rand
to USD. If the measurement currency of Brait S.A. were USD for the year to 31
March 2002, $16,1 million of foreign currency translation gains would not have
been recognised. Pro forma results, which are not in compliance with IAS, have
been presented to enable users to assess the impact of this change. Accordingly,
pro forma results at 31 March 2002 have been presented to enable users to
compare results on a similar measurement basis to those at 31 March 2003. The
pro forma results have not been reviewed.
5. Supplementary Rand information
The results of the group have also been presented in Rand for the convenience of
South African stakeholders in the group. The supplementary Rand results have
been converted from the USD measurement results using a closing rate of R7,8651
to USD1 (2002: R11,34 to USD1) for the balance sheet and an average rate of
R9,7263 to USD1 (2002: R9,503 to USD1) for the income statement.
6. Headline (loss)/earnings
As International Accounting Standards do not recognise the concept of headline
earnings, a reconciliation between earnings and headline earnings has been
provided for illustrative purposes for South African users, based on adjustments
required by South African Statements of Generally Accepted Accounting Practice.
31 31 31 March 31 March 31 31 March
March March March
2002 2002 2003 2003 2002 2002
Audited Pro Reviewed Reviewed Pro Reviewed
forma forma
Rm Rm Rm US$m US$m US$m
80,4 (72,3) (165,4) Attributable (17,0) (7,6) 8,5
(loss)/earnings
53,2 53,2 123,6 Headline 12,7 5,6 5,6
(loss)/earnings
adjustments
7,6 7,6 75,9 Amortisation 7,8 0,8 0,8
and impairment
of goodwill
45,6 45,6 52,5 Discontinuing 5,4 4,8 4,8
termination
costs
- - (4,8) Profit on (0,5) - -
disposal of
joint venture
133,6 (19,1) (41,8) Headline (4,3) (2,0) 14,1
(loss)/earnings
197,3 44,6 (39,8) - Continuing (4,1) 4,7 20,8
operations
(63,7) (63,7) (2,0) - Discontinuing (0,2) (6,7) (6,7)
operations
Headline
(loss)/earnings
148,1 (21,2) (46,6) per share (4,8) (2,2) 15,6
(cents)
218,7 49,4 (44,4) - Continuing (4,6) 5,2 23,0
operations
(70,6) (70,6) (2,2) - Discontinuing (0,2) (7,4) (7,4)
operations
group segmental reports
For the years ended 31 March
2002 2002 2003 2003 2002 2002
Audited Pro Reviewed Reviewed Pro Reviewed
forma forma
Rm Rm Rm US$m US$m US$m
Segmental
76,9 (75,8) (177,1) (Loss)/profit (18,2) (8,0) 8,1
before
taxation
186,3 33,6 (122,6) - Continuing (12,6) 3,5 19,6
operations
61,4 34,9 38,9 Funds 4,0 3,7 6,5
management
23,3 9,3 (22,4) Advisory (2,3) 1,0 2,5
49,9 (26,1) 36,0 Investing 3,7 (2,8) 5,3
51,7 15,5 (175,1) Group capital (18,0) 1,6 5,3
(109,4) (109,4) (54,5) - (5,6) (11,5) (11,5)
Discontinuing
operations
Geographical
76,9 (75,8) (177,1) (Loss)/profit (18,2) (8,0) 8,1
before
taxation
186,3 33,6 (122,6) - Continuing (12,6) 3,5 19,6
operations
37,4 1,2 (113,8) Europe (11,7) 0,1 3,9
5,6 5,6 (9,7) South Africa (1,0) 0,6 0,6
143,3 26,8 0,9 Other Africa 0,1 2,8 15,1
(109,4) (109,4) (54,5) - (5,6) (11,5) (11,5)
Discontinuing
operations
(109,4) (109,4) (54,5) South Africa (5,6) (11,5) (11,5)
Schedule of Supplementary information
The following supplementary information reconciles the currently reported USD
measurement earnings of the group at 31 March 2003, to the results as they would
have been presented in the past on a Rand measurement basis. This information
has not been prepared in accordance with IAS nor has it been reviewed.
31 March 31 March
2003 2002
Attributable USD measurement (US$m) (17,0) 8,5
(loss)/earnings
Add: Translation losses (on USD (US$m) (11,8) -
assets of the group)
Adjusted USD measurement (US$m) (28,8) 8,5
(loss)/earnings
Less: Headline (loss)/earnings (US$m) 12,7 5,6
adjustments
(US$m) (16,1) 14,1
HEPS Rand measurement (Rm) (156,4) 133,6
(loss)/earnings
HEPS Rand measurement (R cents) (174,4) 148,1
(loss)/earnings per share
commentary
Group profile
Brait S.A is an international investment and financial services group focused on
private equity and alternative funds management, advisory and specialised
financial services, and proprietary investing. It is listed on the Luxembourg,
London and Johannesburg Stock Exchanges, with shareowners funds of US$108,8
million at 31 March 2003.
Brait"s continuing earnings are derived from:
- fees from private equity and alternative funds management;
- fees from corporate and debt advisory services;
- returns on the group"s proprietary investing; and
- direct returns from investment of the group"s capital.
Strategy
Brait relinquished its banking licence in September 2002 and has rationalised
all businesses in that structure. The costs of the rationalisation are within
the previously reported estimates. At the same time, Brait has undertaken to
implement a strategy of refocusing on the group"s core operations of Private
Equity, Specialised Funds and Advisory Services, and to simplify the group
structure and reduce its cost base. As a consequence of this, Brait has also
disposed of its non-core investments in ipac and, subsequent to the year end,
African Alliance.
Financial results
The group financial statements have been measured and presented in US dollars
for the first time this year as reported in note 3 to the statements. The impact
of this change needs to be assessed for a proper appreciation of the results. In
addition, the results of both the current and prior years include some
significant abnormal items and currency gains and losses, which also need to be
considered to understand the relative performance of the group this year and its
normalised earnings.
The impact of these items has been adjusted in the following analysis of loss
before tax so as to provide a measurable comparison of the underlying
performance of the group"s operations.
31 March 31 March
2003 2002
US$m US$m
Loss before taxation (18,2) (8,0)
Less/(add): Currency swap loss 19,5 -
Goodwill amortised
and impaired 7,8 0,8
Currency (gains)/losses
in income (3,9) 8,6
Normalised earnings 5,2 1,4
Being:
Continuing operations 10,8 12,9
Funds management 4,0 3,6
Advisory services 0,6 1,4
Investing (0,2)
5,8
Group capital 6,4 2,1
Discontinuing operations (5,6) (11,5)
Normalised earnings 5,2 1,4
From this analysis, the normalised earnings of the group at $5,2 million have
increased over the comparable $1,4 million. Continuing earnings at $10,8 million
are 16,3% down on the comparable result of $12,9 million. Group Capital profit
was ahead of the prior results, Funds management was marginally up while
Investing and Advisory income declined. This performance, reflecting the
stagnant trading conditions during the year, has fallen short of the targets the
group set itself. Market conditions as a whole have continued to be difficult
and investment opportunities have been limited.
The currency swap loss of $19,5 million relates to the loss arising on the
group"s previously reported currency risk strategy of hedging the tangible net
asset value of its emerging markets subsidiaries into US dollars. The contrary
effect of this has been an equivalent translation gain on these assets, which is
recorded in the group"s balance sheet as a foreign currency translation reserve.
The goodwill charge for the year of $7,8 million relates to the write off of all
intangibles which are principally the impairment of the group"s investment in
Rabin, van den Berg & Pelkowitz Advisory Services (Pty) Ltd and rights held over
the group"s private equity funds.
Currency gains for the year of $3,9 million recorded against income arise
primarily from the profit of private equity participations held by the group.
This compares to a loss of $8,6 million in the prior year. The group"s policy of
hedging all assets into US dollars will minimise these fluctuations in future.
A deferred tax asset of $2,6 million has been raised in the year against losses
incurred on operations in the group.
Group net asset value has increased by 4,4% during the year from $104,2 million
to $108,8 million. The effect of operating losses for the year on net asset
value has been primarily offset by the movement on the foreign currency
translation reserve as reported above.
Segmental results
Funds management
Normalised earnings from Private Equity operations are in line with last year,
but still performing below its potential. They should, however, benefit from any
positive market trends. Specialised Funds is well placed to significantly
increase its third party funds under management. Income from associates,
including African Alliance and ipac, is up on last year due to the gain on
realisation of ipac immediately prior to the year end.
Advisory services
Normalised operating profits of the Advisory businesses, which exclude
amortisation and impairment of goodwill in Rabin, van den Berg & Pelkowitz
Advisory Services (Pty) Ltd, declined this year to $0,6 million.
The international and South African advisory market deal flows and merges and
acquisitions climate have been weak across all sectors, including the
"entrepreneurial" small to mid-cap sector, which is Brait"s niche focus.
Corporate Finance and the group"s Debt Advisory operations have contributed
positively to earnings in the year, but results from the Commercial Advice and
Execution function were disappointing.
Investing
Normalised earnings from investing activities, which excludes currency gains and
losses, declined significantly this year. However, despite the marked decline in
equity markets this year, the net value of the portfolio has remained relatively
unchanged. By nature, investing earnings are lumpy because of capital and
currency market volatility and also because of the group"s policy of measuring
these assets on a fair value basis.
Group capital
Normalised group capital earnings includes, treasury activities net of corporate
expenditure, but excludes the loss for the year on the currency hedge of the
group"s emerging market assets, and impaired goodwill charges. The increase in
income for the year has been derived from the substantial cash resources held in
group treasury.
The group continues to consistently apply its policy of either physically
holding or hedging a large portion of its tangible capital base in its
measurement currency, the US dollar. Currency volatility will continue to have
an impact on the group"s earnings going forward, although Brait has capped a
portion of its exposure to Rand strength since the financial year end.
Discontinued operations
The group"s trading operations, comprising trading in equities, interest rates,
securities, treasury, money market and margin activities, were terminated early
in the financial year. The loss for the year is attributable to termination
costs which are still within the announced estimate of R65 million. The majority
of assets and liabilities from these operations have been recovered or settled
during the year. The outstanding unrecovered net assets after provisions at the
year-end were approximately $20 million. The bulk of these are expected to be
realised by 31 March 2004.
The year ahead
Brait has been severely tested and has had to manage many substantial challenges
this past year. It has emerged from these with a renewed focus on its core
strengths and a committed purpose to deliver superior performance and returns.
The group"s priorities for the new financial year are to: successfully complete
its investment programme in SAPEF III and make some strategic divestitures;
raise significant new funds under management in Specialised Funds; further
reduce the group"s asset base; simplify its structure and reduce costs;
distribute surplus cash to shareowners, and deliver on its black economic
empowerment strategy in its South African operation.
Special Dividend
The board has proposed a first special dividend of 15 US cents per share to be
paid to shareowners on Monday, 14 July 2003. Members will be asked to approve
the dividend at an extraordinary general meeting of shareowners to be held on
Friday, 27 June 2003 in Luxembourg. A circular in this regard was posted to
shareowners on 2 June 2003. Subject to members" approval the record date for the
dividend is the close of business on Friday, 11 July 2003. The last date to
trade `cum dividend" will be Friday, 4 July 2003 and the share will commence
trading `ex dividend" on Monday, 7 July 2003.Share certificates may not be
dematerialised or rematerialised between Monday 7 July 2003 and Friday , 11 July
2003, both days inclusive. Shareowners on the South African register will
receive the Rand equivalent based on the currency conversion rate at the close
of business in Luxembourg on Friday, 27 June 2003.
As a consequence of these proposed special dividends and the losses reported for
the year ended 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.
For and on behalf of the board
ME King AC Ball
Chairman Group Chief Executive
5 June 2003
ADMINISTRATION
Registered Office
Brait S.A.
180 rue des Aubepines
L-1145, Luxembourg
Tel: +352-4590-4794
Fax: +352-4590-3642
Brait South Africa Limited
9 Fricker Road
Illovo Boulevard, Illovo, Sandton
Tel: +27-11-507-1000
Fax: +27-11-507-1001
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
Domiciliary and Listing Agent
Dexia Banque Internationale
a Luxembourg
69, route d"Esch
L-2953, Luxembourg
Tel: +352-4590-2180
Fax: +352-4590-3641
Registrar
Dexia Banque Internationale
a 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
P O Box 61051
Marshalltown, 2107
Tel: +27-11-370-5000
Fax: +27-11-370-5487
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
To view these results, go to www.brait.com
Directors
M E King (Chairman) *, R T Dalais (Deputy Chairman) *, A C Ball*, J E Bodoni #,
F Z Haller @,
R J Koch -, A M Rosenzweig **, C J Tayelor*, S J P Weber#, P L Wilmot *
Non-executive *South African #Luxembourgish @American -British **Dutch
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