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BRAIT S.A. - UNAUDITED INTERIM GROUP RESULTS FOR THE PERIOD ENDED
30 SEPTEMBER 2003
BRAIT S.A.
Incorporated in Luxembourg
R.C. Luxembourg B-13861
JSE Alpha code: BAT
ISIN: LU0011857645
Issuer Code - BRAIT
("Brait " or "the company")
UNAUDITED INTERIM GROUP RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2003
* Attributable earnings before currency hedge loss and discontinued
operations:
- 9,7% down on prior interim results
- Substantial improvement on preceding six month period
* Net asset value (net of dividends paid) maintained
* Special dividend of 13,8% of capital distributed during the period
* Balance sheet healthy
- 25% of group capital held as cash
* A further special dividend planned before the financial year-end
SALIENT FEATURES FOR THE SIX MONTHS ENDED 30 SEPTEMBER
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2002 2003 2003 2002
Rm Rm US$m US$m
Continuing
operations
24,3 12,9 Funds management 1,7 2,3
11,0 (7,6) Advisory (1,0) 1,1
8,0 44,6 Investing 5,9 0,8
36,8 - Group capital - 3,5
80,1 49,9 Continuing 6,6 7,7
profit before
currency hedge
loss
- (71,0) Currency hedge (9,4) -
(Note 1)
80,1 (21,1) Continuing (2,8) 7,7
(loss)/profit
before taxation
(22,7) (5,3) Discontinuing (0,7) (2,2)
loss before
taxation
(4,9) (0,8) Taxation (0,1) (0,5)
52,5 (27,2) Attributable (3,6) 5,0
(loss)/profit
Note 1: A
portion of the
currency hedge
loss is set-off
by a gain of
US$7,1 million
in equity on
translation of
the group"s Rand
assets into US
dollars.
Performance
(Loss)/earnings
per share
87,2 (30,2) - headline (4,0) 8,4
(cents)
58,6 (30,4) - attributable (4,0) 5,6
(cents)
Ordinary
dividends per
share
25,0 - - interim - 2,7
(cents) paid
- 112,1 - special 15,0 -
(cents) paid
1 299,8 740,2 Net asset value 106,8 123,3
per share
(cents)
1 265,0 740,2 Tangible net 106,8 120,0
asset value per
share (cents)
Financial
statistics
Market
capitalisation
869,4 589,0 - 30 September
(Rm)
- 30 September 85,0 82,5
(US$m)
93,5 102,3 Shares in issue 102,3 93,5
(m)
Weighted average
shares in issue
89,6 89,5 - basic (m) 89,5 89,6
89,6 89,5 - fully diluted 89,5 89,6
(m)
Closing share
price
930,0 576,0 - 30 September
(Rand cents)
- 30 September 83,1 88,2
(US cents)
Rand/US Dollar
exchange rates
10,5400 6,9309 - closing 0,1443 0,0949
10,4370 7,5593 - average 0,1323 0,0958
GROUP INCOME STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2002 2003 2003 2002
Rm Rm US$m US$m
168,3 137,6 Revenue 18,2 16,1
158,6 139,1 Continuing 18,4 15,2
operations
9,7 (1,5) Discontinuing (0,2) 0,9
operations
(111,7) (98,3) Operating (13,0) (10,7)
expenses
(79,3) (94,5) Continuing (12,5) (7,6)
operations
(32,4) (3,8) Discontinuing (0,5) (3,1)
operations
56,6 39,3 Profit from 5,2 5,4
operations
79,3 44,6 Continuing 5,9 7,6
operations
(22,7) (5,3) Discontinuing (0,7) (2,2)
operations
(5,5) (10,6) Finance costs (1,4) (0,5)
- (71,0) Currency hedge (9,4) -
6,2 19,7 Income from 2,6 0,6
associates
2,2 (3,8) (Loss)/income (0,5) 0,2
from joint
ventures
(2,1) - Goodwill - (0,2)
57,4 (26,4) (Loss)/profit (3,5) 5,5
before taxation
80,1 (21,1) Continuing (2,8) 7,7
operations
(22,7) (5,3) Discontinuing (0,7) (2,2)
operations
(4,9) (0,8) Taxation - (0,1) (0,5)
continuing
operations
52,5 (27,2) (Loss)/profit (3,6) 5,0
after taxation
75,2 (21,9) Continuing (2,9) 7,2
operations
(22,7) (5,3) Discontinuing (0,7) (2,2)
operations
52,5 (27,2) Attributable (3,6) 5,0
(loss)/profit
GROUP STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
Balance at beginning of period 108,8 104,3 104,2
Currency translation 7,1 4,3 27,4
adjustments
Attributable (loss)/earnings (3,6) 5,0 (17,0)
Dividends (15,2) (3,1) (5,8)
Treasury shares - options (1,5) - -
repurchased
Balance at end of period 95,6 110,5 108,8
GROUP BALANCE SHEETS AT 30 SEPTEMBER
Audited Unaudited Unaudited
Year
31 Mar 30 Sept 30 Sept
2003 2002 2003
Rm Rm Rm
Assets
- 31,2 - Intangibles
316,4 580,2 274,4 Long-term assets
236,1 479,5 197,5 Investments
80,3 100,7 76,9 Other long-term assets
1 011,0 1 060,1 789,4 Current assets
295,9 282,7 164,2 Cash and cash equivalents
715,1 777,4 625,3 Other current assets
1 327,4 1 671,5 1 063,8 Total assets
856,3 1 164,6 662,5 Shareowners" funds
Liabilities
79,4 106,5 92,2 Long-term liabilities
391,7 400,4 309,1 Current liabilities
262,6 357,6 162,9 Interest bearing
129,1 42,8 146,2 Non-interest bearing
471,1 506,9 401,3 Total liabilities
1 327,4 1 671,5 1 063,8 Total equity and liabilities
Net asset value per ordinary
share (cents)
1 312,1 1 299,8 740,2 - book value
1 337,5 1 308,7 740,2 - market and directors"
valuation
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
Assets
Intangibles - 3,0 -
Long-term assets 39,6 55,0 40,2
Investments 28,5 45,5 30,0
Other long-term assets 11,1 9,5 10,2
Current assets 113,9 100,6 128,5
Cash and cash equivalents 23,7 26,8 37,6
Other current assets 90,2 73,8 90,9
Total assets 153,5 158,6 168,7
Funds
Shareowners" 95,6 110,5 108,8
Liabilities
Long-term liabilities 13,3 10,1 10,2
Current liabilities 44,6 38,0 49,7
Interest bearing 21,9 33,9 33,4
Non-interest bearing 22,7 4,1 16,3
Total liabilities 57,9 48,1 59,9
Total equity and liabilities 153,5 158,6 168,7
Net asset value per ordinary share
(cents)
- book value 106,8 123,3 121,4
- market and directors" valuation 106,8 124,2 123,0
GROUP CASH FLOW STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
Cash flows from:
Operating activities 5,8 6,8 15,0
Currency hedge (9,4) - (19,5)
Dividend paid (15,2) - (5,8)
Change in working funds 2,3 (3,9) 17,9
Cash (utilised)/generated by (16,5) 2,8 7,6
operating activities
Cash outflows from funding (0,5) (5,8) (1,9)
activities
Cash inflows/(outflows) from 2,5 - (0,2)
investing activities
Effects of exchange rate 0,6 - 4,4
changes on cash and cash
equivalents
Net (decrease)/increase in (13,9) (3,0) 9,9
cash and cash equivalents
Cash and cash equivalents at 37,6 29,8 27,7
beginning of period
Cash and cash equivalents at 23,7 26,8 37,6
end of period
NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER
1. The financial statements of the group are prepared in accordance with
International Financial Reporting Standards (IFRS) 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 2003. The group financial statements at 31 March
2003 were prepared using the US Dollar as the functional currency of Brait
S.A. The interim results at 30 September 2002 were not prepared on this
basis and have accordingly been restated to comply with the presentation
adopted by the group at 31 March 2003. The net effect of the revision has
been the elimination of R36 million of translation losses from continuing
operations income at 30 September 2002. Accordingly, the Supplementary Rand
attributable earnings at 30 September 2002 as previously reported of R16,5
million, have been restated to R52,5 million.
IAS 39 "Recognition and Measurement of Financial Instruments" has been
fully adopted in the preparation of the financial statements.
2. Supplementary Rand Information
The balance sheet and income statement of the group have also been
presented in Rands for the convenience of South African stakeholders in the
group. The supplementary Rand results have been converted from the US
Dollar measurement results using a closing rate of R6,9309 to US$1 (2002:
R10,54 to US$1) for the balance sheet and an average rate of R7,5593 to
US$1 (2002: R10,437 to US$1) for the income statement.
3. Headline (Loss)/Profit
As IFRS does not recognise the concept of headline earnings, a
reconciliation between earnings and headline earnings has been provided for
illustrative purposes for South African users, based on adjustments
required by South African Statements of Generally Accepted Accounting
Practice.
Audited Unaudited Unaudited
Year
31 Mar 30 Sept 30 Sept
2003 2002 2003
Rm Rm Rm
(165,4) 52,5 (27,2) Attributable (loss)/profit
123,6 25,6 0,2 Headline (loss)/earnings
adjustments
75,9 2,1 - Amortisation and impairment
of goodwill
52,5 23,5 4,4 Costs on termination of
discontinuing operations
- - 6,3 Interest rate adjustment on
debt restructuring
- - 3,8 Impairment of joint venture
(4,8) - (14,3) Profit on disposal of
associates
(41,8) 78,1 (27,0) Headline (loss)/profit
(39,8) 77,3 (26,2) - Continuing operations
(2,0) 0,8 (0,8) - Discontinuing operations
(46,6) 87,2 (30,2) Headline (loss)/profit per
share (cents)
(44,4) 86,3 (29,3) - Continuing operations
(2,2) 0,9 (0,9) - Discontinuing operations
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
Attributable (loss)/profit (3,6) 5,0 (17,0)
Headline (loss)/earnings 2,5 12,7
adjustments
Amortisation and impairment - 0,2 7,8
of goodwill
Costs on termination of 0,6 2,3 5,4
discontinuing operations
Interest rate adjustment on 0,8 - -
debt restructuring
Impairment of joint venture 0,5 - -
Profit on disposal of (1,9) - (0,5)
associates
Headline (loss)/profit (3,6) 7,5 (4,3)
- Continuing operations (3,5) 7,4 (4,1)
- Discontinuing operations (0,1) 0,1 (0,2)
Headline (loss)/profit per (4,0) 8,4 (4,8)
share (cents)
- Continuing operations (3,9) 8,3 (4,6)
- Discontinuing operations (0,1) 0,1 (0,2)
4. Interest-Bearing Liabilities
All liabilities are interest bearing save US$22,7 million in respect of
accounts payable, accruals, provisions and deferred taxation.
Audited
Unaudited Unaudited Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
5. The following items are
included in profit from
operations:
Dividends received 2,9 3,1 1,2
Depreciation 0,2 0,3 0,8
Related party transactions
- Interest received 0,5 0,9 1,6
6. Investments
Unlisted
- carrying value 27,9 45,5 30,0
- directors" valuation 27,9 46,3 31,4
7. Commitments, guarantees 31,9 15,5 35,4
and contingent liabilities
(At 30 September 2003, the
group had aggregate
commitments of US$25
million to invest in its
Private Equity Funds and
to repurchase shares)
8. The group has no capital
expenditure commitments,
either authorised or
contracted.
9. Related party balances
- Liabilities - 2,6 -
- Assets 5,7 7,2 6,1
GROUP SEGMENTAL REPORTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER
Unau Unaudited Unaudited Unaudited
dite
d
30 30 Sept 30 Sept 30 Sept
Sept
2002 2003 2003 2002
Rm Rm US$m US$m
Segmental
Revenue
158, 139,1 Continuing 18,4 15,2
6 operations
42,6 39,3 - Funds 5,2 4,1
management
35,7 10,6 - Advisory 1,4 3,4
9,8 56,7 - Investing 7,5 0,9
70,5 32,5 - Group capital 4,3 6,8
9,7 (1,5) Discontinuing (0,2) 0,9
operations
168, 137,6 Total revenue 18,2 16,1
3
(Loss)/profit
before taxation
80,1 49,9 Continuing 6,6 7,7
operations
24,3 12,9 - Funds 1,7 2,3
management
11,0 (7,6) - Advisory (1,0) 1,1
8,0 44,6 - Investing 5,9 0,8
36,8 - - Group capital - 3,5
80,1 49,9 Profit before 6,6 7,7
currency hedge
loss and taxation
- (71,0) - Currency hedge (9,4) -
80,1 (21,1) Continuing (2,8) 7,7
operations
(22, (5,3) Discontinuing (0,7) (2,2)
7) operations
57,4 (26,4) (Loss)/profit (3,5) 5,5
before taxation
Geographical
(Loss)/profit
before taxation
80,1 (21,1) Continuing (2,8) 7,7
operations
20,0 (71,0) - Europe (9,4) 1,9
27,2 18,1 - South Africa 2,4 2,6
32,9 31,8 - Other Africa 4,2 3,2
(22, (5,3) Discontinuing (0,7) (2,2)
7) operations
(22, (5,3) - South Africa (0,7) (2,2)
7)
57,4 (26,4) (Loss)/profit (3,5) 5,5
before taxation
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 $95,6
million at 30 September 2003.
Brait"s continuing earnings are derived from:
* fees from private equity and alternative funds management;
* fees from corporate and debt advisory services;
* returns from the group"s proprietary investing; and
* direct returns from investment of the group"s capital.
FINANCIAL RESULTS
The group has reported an attributable loss of $3,6 million for the first half
of the 2004 financial year against a profit of $5,0 million for the same period
in 2003. The results include a currency hedge loss of $9,4 million and
discontinued operations costs of $0,7 million. Net of these abnormal
adjustments, the group"s continuing operations reflect an attributable profit of
$6,5 million for the period against $7,2 million for the comparable half year or
$6,6 million against $7,7 million on a pre-tax basis.
The continuing operations attributable results, although 9,7% down on the strong
first half profits of 2003, are substantially ahead of the 2003 second half
continuing operations results. This is a direct consequence of the restructuring
and refocus of the group, which has taken place over the last twelve months. The
group has maintained its opening net asset value, net of dividends paid, despite
the charges taken against income on its currency hedge. Discontinued operations
costs have declined as the group"s former banking loan book has been collected
and its infrastructure wound down. The balance sheet remains healthy and
comfortably liquid, even after the distribution of a special dividend of
approximately 14% of its tangible capital in July 2003.
Market conditions have tended to move sideways for Brait since the last
reporting date. Some improvements in international and South African equity
markets have been offset by weak underlying global market fundamentals.
SEGMENT REVIEW
Funds Management
Private Equity deal activity has increased noticeably this year resulting in a
number of material exits from the group"s private equity funds. In addition, the
team is well placed to make some sizeable new investments in Fund III before the
financial year-end.
The group"s new Specialised Funds unit continues to make good progress. The
unit"s infrastructure and team is now well developed, the core funds are
entrenched and investment performance on initial selected third party and group
seed capital has more than exceeded expectations.
Earnings from Funds Management for the period to date of $1,7 million ($2,3
million to 30 September 2002), includes no material participation contributions
and is recorded net of the start-up costs of Specialised Funds. All investing
income on the group"s capital investments in its Private Equity and Specialised
Funds are disclosed in Investing income.
Advisory Services
This has been a difficult half-year for the Advisory business. The unit has
continued to redefine its activities by unwinding its commercial lawyering
business and disposing of its Structured Finance operation to focus on its core
M&A, Corporate Finance and Debt Advisory capabilities. The costs incurred on
unwinding the lawyering business have been absorbed in full in the loss of $1,0
million recorded to 30 September 2003 (profit $1,1 million to 30 September
2002).
Deal flow in the remaining core business is positive. The team has hired new
staff to meet this demand and will continue to position itself as a top tier
advisory team with a strong franchise in its South African and niche cross-
border segments.
Investing
Proprietary investing is an integral part of Brait"s operations. Earnings are by
nature volatile and dependent on opportunistic timing as well as overall market
and specific investment conditions. The group"s portfolio is consistently
measured on a fair value basis. Several realised and unrealised gains have been
recognised during the period, including profits on the seed capital invested in
Specialised Funds, which have been partially offset by impairments in other
portfolio investments. The net effect is a gain after operating costs of $5,9
million compared with $0,8 million to 30 September 2002. The current year"s
earnings equate to an annualised return of approximately 25% on average capital
invested.
Group Capital
The group capital segment primarily incorporates treasury income net of
corporate expenditure. Earnings have broken even for the period compared with a
profit of $3,5 million to 30 September 2002. This is principally due to the
reduction in capital retained in the Corporate division following the increase
in funds allocated to investing operations and the distribution of a special
dividend to shareowners since September 2002. In addition, the group has made
certain impairments and provisions against assets and liabilities in the
Corporate division.
Discontinued Operations
The realisation of the former banking loan book has continued satisfactorily.
The book currently stands at approximately $15 million at 30 September 2003. No
further provisions have needed to be raised on the loan book. Discontinued
losses for the half year amounted to $0,7 million ($2,2 million to 30 September
2002).
CURRENCY HEDGE
As reported in Brait"s results announcement at 31 March 2003, the group has
continued to implement its policy of hedging the majority of its tangible net
assets into its reporting currency, the US dollar.
At 30 September 2003, approximately 80% of the group"s capital was effectively
maintained in US dollars. The balance of the capital is held in a mix of
developed economy and emerging market currencies, dominated by the South African
Rand.
Included in the 80% US dollar capital cover is a $34 million cross currency swap
taken out during the period against the tangible net asset investment by the
group in its South African operation. This replaced the previous swap taken out
in October 2002 and which was due to expire in September 2003. The primary terms
of the new swap include a settlement date at the end of December 2003, a spot
rate of R7,2700 and a forward rate of R7,8255 to the US dollar. As part of the
restructure, Brait purchased a put option to sell $34 million against the Rand
at a rate of R7,2700 to the US dollar in order to protect the group against any
further cash flow margining obligations arising from US dollar weakness against
the Rand. This option also expires in December 2003.
The board intends to continue its policy of retaining at least 80% of its
capital in US dollars for the foreseeable future and is accordingly likely to
renew or restructure its existing hedge strategy before the end of December 2003
to retain the integrity of its capital currency policy.
The currency hedge loss of $9,4 million recorded in the period arises primarily
from substantial US dollar weakness against the Rand and other currencies during
the period, and in particular, on the old swap structure which was closed out in
May 2003. This loss is offset by a corresponding gain of $7,1 million arising
from the translation of the group"s non-US dollar assets into US dollars at 30
September 2003. The gain has been recorded in the foreign currency translation
reserve and not through the income statement, in compliance with the group"s
International Financial Reporting Statement practice.
PROSPECTS AND DIVIDEND
Brait has come through some turbulent challenges and is now focused on its core
activities.
Because of the incorporation of the above mentioned put option into the group"s
currency hedge structure, potential future losses from the hedge will exclude
Rand/US dollar market risk and will be limited to the underlying costs of the
hedge.
DIVIDEND
The board has announced that it has resolved to reduce its capital base through
a distribution of surplus cash balances by 30 March 2004, which it indicated
should amount to approximately 30 US cents per ordinary share subject to certain
trading and market conditions.
The first special dividend of 15 US cents was paid on 14 July 2003. Market
conditions since the announcement was made, in particular the US dollar/Rand
exchange rate, have had a negative impact on the group"s surplus cash holdings.
Nonetheless, the board is still planning to meet its original distribution
estimate and intends to pay a further dividend during the next quarter.
For and on behalf of the board
ME King AC Ball
Chairman Group Chief Executive
6 November 2003
ADMINISTRATION
REGISTERED OFFICE
Brait S.A.
180 rue des Aubepines
L-1145, Luxembourg
Tel: 09352-4590-4794
Fax: 09352-4590-3642
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
INDEPENDENT AUDITORS
Deloitte & Touche S.A.
3, route d"Arlon
L-8009 Strassen
Luxembourg
LISTING AGENT
Dexia Banque Internationale
a Luxembourg
69, route d"Esch
L-2953, Luxembourg
REGISTRAR AND DOMICILIARY AGENT
Experta Luxembourg S.A.
180, rue des Aubepines
L-1145, Luxembourg
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 Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Tel: +27-11-370-5000
Fax: +27-11-370-5390
JSE and LSE Issuer Name and Code
Issuer Long Name - Brait S.A.
Issuer Code - BRAIT
Instrument Alpha Code/
Ticker Symbol - BAT
ISIN - LU0011857645
Website: http://www.brait.com
DIRECTORS
ME King (Chairman)
*, RT Dalais
*, AC Ball*, JE Bodoni
#, FZ Haller
=,
RJ Koch
+, AM Rosenzweig
**, CJ Tayelor*, SJP Weber#, PL Wilmot
*
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