| Thu 11 Mar 2004, 17:06 | | Reviewed Results For The Year |
|
Brimstone Investment Corporation Limited - Reviewed Results For The Year Ended
31 December 2004 and Further Cautionary announcement
Brimstone Investment Corporation Limited
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000015277 Share Code: BRT
ISIN Number: ZAE000015285 Share Code: BRN
("Brimstone" or "the Company")
REVIEWED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
HIGHLIGHTS
Growth in net asset value to 140.3 cents per share
A net cash position of R48.4 million
Commendable performances from underlying investments during a difficult trading
year
Dividend of 8 cents per share
Closing of discount to NAV in share price
Comments on results
Brimstone continued to create value for its shareholders in the 2003 financial
year, posting a 47.2% increase in net asset value to 140.3 cents per share,
compared to 95.3 cents for the previous year. This is in spite of difficult
trading conditions in the markets of Brimstone"s core underlying industrial and
financial services investments, which left headline earnings per share flat.
The strengthening Rand and highly competitive business environment saw a
reduction in revenue to R206.9 million from R226.2 million and a reduction in
headline earnings to R20.7 million from R28.9 million in 2002.
This translated into headline earnings per share of 14.8 cents, which is
the same as in 2002, as there were less shares in issue following the specific
repurchase of shares in April 2003.
During the year Brimstone finalised the specific repurchase of its shares
and concluded a number of deals, including the R51.8 million acquisition of a
25% interest in Lenco Holdings Limited, and a doubling of the existing stake in
Sea Harvest Corporation to 21.52% for an additional R85.3 million. The
consideration for these acquisitions, which included an interest component, was
funded by a short term loan of R137 million which was converted into preference
shares shortly after the year end. Brimstone also finalised the disposal of its
stake in Nando"s Holdings, Faizyme, Spitz, and its Keerom Chambers property in
Cape Town. These items accounted for R19.5 million of exceptional items
totalling R21 million.
The group net cash position is at a healthy R48.4 million up from R0.5
million at the end of the previous year. Also gratifying to see is the reduction
in the discount to NAV in the market share price.
Results for the year
Accounting Policies
The accounting policies used in preparing this report are consistent with those
used in the annual financial statements which have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice on a
basis consistent with the previous year.
An exception is the implementation of accounting statement AC133, which
establishes the principles for recognising and measuring information about
financial instruments.
Accounting statement AC133 requires all financial instruments to be
classified according to definitions contained in the statement. Brimstone"s
financial instruments were analysed and it was found that certain investments
needed to be classified in terms of AC133 and these have accordingly been
reclassified as "available for sale" assets and loan.
Available for Sale Assets
These are assets which are not part of a portfolio of assets for which there is
a pattern of trading for the purposes of generating profits from short-term
price fluctuations. Brimstone has elected to recognise fair value gains or
losses on these assets directly in the income statement. The fair values of
these assets have been determined at the beginning of the current year and the
financial effects have been disclosed in the "Statement of changes in equity" as
an adjustment to opening retained income. Any movements thereafter have been
taken directly to the income statement.
Review Opinion
The financial information included herein has been reviewed by our auditors,
Deloitte & Touche, whose unqualified review opinion is available for inspection
at the registered office of the company.
Industrial
House of Monatic
Results for this high-end men"s clothing manufacturer were adversely impacted by
the strengthening of the Rand, as well as sluggish local retail demand.
Lenco
Brimstone acquired a 25% plus one share interest in Lenco for a total
consideration of R51.8 million, effective 31 December 2003. Lenco is a world-
class packaging company servicing the consumer, agricultural and food and
beverage sectors, and has two main divisions, Versapak and Xactics, which
produce disposable plastic packing and extrusion blow moulded containers
respectively for the local and international market. No income from this
investment accrued to the group during the 2003 year.
Sea Harvest
Poor export demand and greatly reduced hake catch volumes, saw reduced profits
for this deep sea fishing company. Reflecting its confidence in the long term
sustainability of the fishing industry, Brimstone acquired a further effective
10.76% in Sea Harvest during the year for a total consideration of R85.3
million. No income from this additional investment accrued to the group during
the 2003 year.
Scientific Group
This supplier of medical equipment, in which Brimstone holds a 20% stake, did
well in a tight margin market.
Spitz
The investment was disposed of effective 31 December 2003 for a gross
consideration of R21.7 million.
Financial services
Lion of Africa Insurance Company Limited
During a year of consolidation Lion of Africa contributed reduced earnings.
Peoples Bank
Subsequent to the year-end Brimstone has, subject to certain suspensive
conditions, sold its 10% stake in Peoples Bank to Nedcor for a consideration of
R6.7 million to be settled by the issue of Nedcor shares. It is intended to
reverse Peoples Bank back into the Nedcor stable under the retail cluster of its
businesses. This transaction will be accounted for in 2004.
Investments in transition
Faizyme, a niche producer of enzymes for the pharmaceutical industry, deserves
special mention. During the financial year Brimstone sold its 30% stake in this
company to the founder and realised a profit. Brimstone is proud to have
assisted a true empowerment company, and to have enabled it to successfully
export products across the world.
Prospects
Brimstone continues to expand its footprint into the industrial and financial
services markets. It will continue to look for ways of improving its balance
sheet, disposing of non core investments and focusing on acquisitions that can
add significant value, and quality, sustainable earnings.
Black empowerment companies, particularly small cap companies, have not had an
easy ride. It is through hard work and passion, and a belief in the core tenets
of our business combined with a strong sense of corporate governance, that your
company now finds itself grouped within a small minority of black empowerment
success stories. Positive results are expected for the 2004 financial year with
real growth for our shareholders.
Further cautionary announcement
Further to the cautionary announcement dated 28 January 2004, relating to the
offer by Business Venture Investments No. 790 (Proprietary) Limited ("BIDCO") to
acquire all of the issued share capital of Afrox Healthcare Limited, holders of
ordinary and "N" ordinary Brimstone shares ("shareholders") are advised that
discussions are still in progress regarding Brimstone"s participation in BIDCO
as well as the acquisition of certain hospitals by Medi-Clinic Corporation
Limited from BIDCO. Accordingly, shareholders are advised to continue to
exercise caution when dealing in the company"s securities until a further
announcement is made.
Dividend
The board of Brimstone has declared a dividend of 8 cents per share payable to
shareholders. This is the second dividend in successive years, and represents a
vote of confidence in the sustainability of Brimstone"s business model.
In compliance with the requirements of STRATE, the electronic settlement and
custody system used by the JSE Securities Exchange South Africa, the company has
determined the following salient dates for the payment of the dividend. The last
day to trade cum dividend is Tuesday 6 April 2004. The dividend is payable to
all shareholders of Brimstone recorded in the books of the company at the close
of business on Friday 16 April 2004. Shares will commence trading ex dividend
from Wednesday 7 April 2004. The dividend is payable on Monday 19 April 2004.
Shares may not be rematerialised or dematerialised from Wednesday 7 April 2004
to Friday 16 April 2004, both days inclusive.
Prof GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
Cape Town
11 March 2004
Group Income Statements
Reviewed Audited
year year
ended ended
31 Dec 31 Dec
R"000 2003 2002
Revenue 206 904 226 151
Cost of sales (152 235) (157 736)
Gross profit 54 669 68 415
Selling and administration expenses (45 734) (45 976)
Goodwill amortisation (1 779) (1 779)
Exceptional items 21 034 617
Profit from operations 28 190 21 277
Income from investments 3 880 2 329
Finance costs (6 731) (8 390)
Equity accounted retained income of
associates 5 463 16 428
Net profit before taxation 30 802 31 644
Taxation (233) (3 107)
Net attributable profit 30 569 28 537
Earnings per share (cents)
Headline 14.8 14.8
Basic 21.8 14.6
Comparable headline earnings 14.8 16.4
Dividends per share
(declared after reporting date) 8.0 4.0
Number of shares used in calculation
("000) 139 959 195 628
Headline earnings calculation
Net attributable profit 30 569 28 537
Profit on sale of associates (13 191) -
Disposal/(revaluation) of
investment property 1 493 (1 435)
Goodwill amortisation 1 779 1 779
Headline earnings 20 650 28 881
Comparable headline earnings
calculation
Headline earnings 20 650 28 881
Incentive fee on investment
disposals - 3 230
Comparable headline earnings 20 650 32 111
Group Balance Sheets
Reviewed Audited
31 Dec 31 Dec
R"000 2003 2002
ASSETS
Non-current assets 235 745 146 269
Property, plant, equipment and
vehicles 18 025 16 926
Goodwill on investment in associate 40 082 5 336
Investments in associate companies 164 804 115 931
Available for sale assets 12 834 -
Other investments and loans - 8 076
Current assets 128 930 121 369
Land and buildings - 21 958
Loan 3 205 -
Inventory 35 374 42 472
Trade receivables 28 095 31 655
Other receivables 8 983 14 645
Cash and cash equivalents 53 273 10 639
TOTAL ASSETS 364 675 267 638
EQUITY AND LIABILITIES
Capital and reserves 168 492 186 353
Share capital and premium 105 675 152 371
Non-distributable reserves 3 280 45
Distributable reserves 59 537 33 937
Non-current liabilities 10 397 11 311
Long-term interest bearing borrowings 8 852 10 655
Deferred taxation 1 545 656
Current liabilities 185 786 69 974
Short-term interest bearing borrowings 20 289 36 909
Short-term loan convertible into
preference shares 137 035 -
Bank overdraft 4 827 10 161
Trade and other payables 22 348 18 766
Taxation 1 287 4 138
TOTAL EQUITY AND LIABILITIES 364 675 267 638
NAV per share (cents) 140.3 95.3
Shares in issue at end of year ("000) 120 091 195 628
Cash Flow Statements
Reviewed Audited
year year
ended ended
31 Dec 31 Dec
R"000 2003 2002
Cash generated from trading 11 963 25 788
Movement in working capital 16 031 (10 931)
Cash generated from operating
activities 27 994 14 857
Investment income 3 880 2 329
Finance costs (6 731) (8 390)
Dividend paid (7 825) -
Taxation paid (2 196) -
Cash retained from operations 15 122 8 796
Cash flows from investing activities (39 070) (12 782)
Investments acquired (137 293) -
Proceeds on investments disposed of 81 885 2 463
Additions to property, plant and
equipment (5 044) (15 365)
Proceeds on disposal of property,
Plant and equipment 21 382 120
Net cash outflow (23 948) (3 986)
Cash effects of financing activities 71 916 5 274
Repurchase of ordinary shares (46 696) -
Long-term loan advances - 11 441
Repayment of long-term loans (1 803) (1 667)
Short-term loan advances 137 035 -
Repayment of short-term loans (16 620) (4 500)
Net increase in net cash resources 47 968 1 288
Net cash resources at beginning of year 478 (810)
Closing net cash resources 48 446 478
Statement of changes in equity for the year ended 31 December 2003
Share Share Non-distribut- Distribut-
R"000 Capital Premium able Reserves able
Reserves Total
Balance at
31 December 2001 42 152 329 45 5 400 157 816
Attributable profit for
the year ended
31 December 2002 - - - 28 537 28 537
Balance at 31 December
2002 as previously
reported 42 152 329 45 33 937 186 353
Effect of change in
accounting policy
AC 133 transitional
Adjustment - - - 3 550 3 550
Balance at 1 January
2003 42 152 329 45 37 487 189 903
Attributable profit
for the year ended
31 December 2003 - - - 30 569 30 569
Dividend paid - - - (7 825) (7 825)
Shares repurchased (4) (46 692) - - (46 696)
Share of non-
distributable reserve
of associate - - 2 541 - 2 541
Transfer current year
share of non-
distributable reserve
of associate - - 694 (694) -
Balance at 31 December
2003 38 105 637 3 280 59 537 168 492
Segmental information for the year ended 31 December 2003
Operating Headline Impairment
R"000 Revenue Profit Earnings Losses Assets Liabilities
Financial services 709 709 1 486 - 5 523 -
Industrial 205 555 34 647 20 944 (1 779) 294 586 187 430
Investments in
transition 640 283 1 417 (1 493) 3 862 16
Corporate - (7 449) (3 197) - 60 704 8 737
Total 206 904 28 190 20 650 (3 272) 364 675 196 183
Date: 11/03/2004 04:52:51 PM Produced by the JSE SENS Department
