| Wed 26 May 2004, 17:30 | | Reviewed group results for the year ended 31 March |
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BRAIT - Reviewed group results for the year ended 31 March 2004
BRAIT S.A.SOCIETE ANONYME
(Incorporated in Luxembourg)
(RC Luxembourg B-13861)
Share code: BAT ISIN: LU0011857645
(`Brait` or `the company`)
Reviewed group results for the year ended 31 March 2004
Highlights
- Continuing profit after tax increased by 88% to US$15,2 million (before
capital item)
- Tangible NAV increased by 17% in USD (after adjustment for special dividend
distributions)
- ROE on continuing operations 15% in USD (excluding capital item)
- Special cash dividends of 32,5 US cents distributed during the period (31% of
shareowners` interests)
- Balance sheet remains strong - 17% of group capital held in cash at year end
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$88,8
million at 31 March 2004.
Brait`s continuing earnings are derived from:
- fees and participations 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.
GROUP RESULTS
Earnings: Comments on the components of the attributable earnings for the year
are as follows:
- Profit from continuing operations - US$16,2 million
Earnings from continuing operations, before taxation and currency hedge cost
adjustments, has increased 135% from US$6,9 million to US$16,2 million for the
year. This result has been derived primarily from a strong performance in the
group`s private equity proprietary investing activities.
- Loss from discontinuing operations - US$2,1 million
The loss for the year from discontinuing operations, net of funding costs, has
decreased to US$2,1 million from US$5,6 million. Costs have declined as the
group`s former banking loan book has been collected and its infrastructure wound
down.
- Capital item - currency hedge loss - US$11,3 million
The cost of hedging the group`s assets into its US Dollar measurement currency
was US$11,3 million for the year compared to a cost of US$19,5 million in the
prior year. The cost is more than offset by a translation gain of US$15,3
million which has been taken directly to the reserves account in the balance
sheet (US$27,4 million in the prior year).
Cash flow: The group generated strong cash flow from operating activities during
the year. It returned US$33,2 million amounting to 31% of its capital to
shareholders from its former banking operations as special dividends. At the
year end, the balance sheet remains strong and comfortably liquid with
approximately 17% of shareowners` capital held in cash.
ROE: Net of the dividend distributions, the group has increased its net asset
value by 17% and yielded a return on average shareowners` interests of 15% in US
Dollars.
SEGMENT REVIEW
Funds Management
Private Equity deal activity has increased noticeably this year resulting in the
successful conclusion of some large and significantly promising investments by
its funds under management. As a consequence, the group`s Fund III is now
substantially invested. Additionally, eleven exits have also been successfully
concluded in line with target returns and realised by the funds during the year.
The group`s new Specialised Funds unit continues to make very satisfactory
progress. The principal product, Brait Absolute South Africa, now has a seven
manager platform. The unit has actively begun to raise third party funds on the
back of its well developed infrastructure and its excellent investment
performance to date.
Revenue from Funds Management for the year increased to US$12,4 million due to
continued Rand strength and increased contributions by Specialised Funds. Costs
have increased similarly from the Rand`s gains and also from enlarging the
skills resources, principally in the Specialised Funds unit. Investing revenue
on the group`s capital investments in its Private Equity and Specialised Funds
activities are disclosed in investing income.
Advisory Services
Brait`s Advisory Services businesses have operated in a challenging corporate
advisory climate this year. Early in the year the unit unwound its commercial
layering business and disposed of its Structured Finance operation to focus on
its core M&A, Corporate Finance and Debt Advisory capabilities. Although the
team is now smaller, it has maintained its revenue base and remains profitable
in its continuing core operations, notably, in Specialised Debt, Corporate
Finance and M&A. Once off costs from closure charges incurred on unwinding the
lawyering business, resulted in a net loss in the unit as a whole for the year.
Investing
The group`s results from proprietary investing have increased significantly this
year.
On balance sheet investments are an integral part of Brait`s operations and are
by nature volatile and subject to prevailing market and specific investment
conditions. The group consistently measures its proprietary investments on a
fair value basis, which does cause earnings from this activity to be lumpy and
often unpredictable.
The year`s performance was attributable to gains on both realised and unrealised
proprietary investments, trading investments and gains from seed capital
invested in the group`s Specialised Funds. Adverse fair value adjustments have
been recognised on some investments in the portfolio where necessary.
The current year`s pre-tax earnings equate to a return of approximately 20% on
average capital invested in this activity.
Group Capital
Group Capital is invested predominantly in cash and short-term assets. Results
for the year include the effect of settling some residual structured assets.
Earnings include treasury activities net of corporate expenditure, but exclude
the currency hedge loss.
Net performance improved primarily as a consequence of interest income earned on
cash balances held prior to the special dividend distributions.
Discontinuing Operations
The realisation of the former banking loan book has continued satisfactorily
with US$7 million realised during the course of the year. The advances book at
31 March 2004 was US$14,5 million. It has not been necessary to raise any
further provisions on the book this year.
The remaining assets are expected to be addressed in the new financial year and
no further losses are anticipated from the collection. Consequently, this
operation will not be a material part of the business going forward.
CURRENCY HEDGE
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 31 March 2004, approximately 90% of the group`s capital, inclusive of the
currency hedge, 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 90% US Dollar capital cover is a US$40,0 million cross currency
swap taken out in December 2003 against the tangible net asset investment by the
group in its South African operation. This replaced the previous swap taken out
in May 2003 and which expired in December 2003. The primary terms of the new
swap include a settlement date at the end of March 2005, a spot rate of R6,53
and a forward rate of R7,04 to the US Dollar. As part of the restructure, Brait
purchased a put option to sell US$40,0 million against the Rand at a rate of
R6,53 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.
The currency swap cost of US$11,3 million reported for the year arises primarily
from substantial US Dollar weakness against the Rand and other currencies during
the period, and in particular, on the original swap which was restructured in
May 2003. This cost is more than offset by a corresponding gain of US$15,3
million arising from the translation of the group`s non-US Dollar assets into US
Dollars at 31 March 2004. The gain has been recorded in the foreign currency
translation reserve in the balance sheet and not through the income statement,
in compliance with the group`s International Financial Reporting Statement
practice.
PROSPECTS
Despite uncertainty in global capital and political markets, there are many
encouraging economic fundamentals surfacing in emerging markets. In particular
with regard to South Africa, this gives cause to project an optimistic and
positive macro outlook for the future. On a micro level, Brait`s funds
management, its proprietary capital and its advisory service units are well
positioned for the potential corporate growth, which is anticipated.
Brait will also enter a new chapter in its development when it commences its
initiatives for the raising of its next private equity fund (Fund IV), following
the completion of its investment programme during the year of its remaining
committed capital in Fund III.
Brait has continued its commitment to sharpening its focus. It can now report
that the organisational focusing from downsizing, rigorous performance
management and the realignment of the management ownership schemes have had a
positive impact on performance and morale.
An imperative of the group in the new financial year will be to again exceed
both operational earnings growth and ROE performance measurement targets.
DIVIDEND
Brait ceased paying normal dividends from its operations soon after the closure
of its banking business in 2002. Following the recovery of a substantial portion
of the banking assets, the company paid a first special dividend of 15,0 US
cents in July 2003 and a second special interim dividend of 17,5 US cents in
December 2003. No further special dividends are proposed from the unwinding of
the banking structure.
Brait has consistently maintained that dividend distributions are an important
part of long-term wealth creation and, in uncertain and volatile market
conditions, consistent dividend distributions provide a measure of assurance and
stability.
Although Brait has returned a substantial part of its capital to shareholders
this year, earnings from operations have increased materially and the company`s
balance sheet remains strong. Accordingly, the board has resolved that the
company should restore its policy of paying normal dividends from operations.
The board has therefore proposed a final dividend of 3,25 US cents per share for
the year ended 31 March 2004.
Members will be asked to approve the declaration of the final dividend and
endorse the payment of the special interim dividend of 17,5 US cents paid on 15
December 2003, at the annual general meeting of the company to be held on
Wednesday, 28 July 2004 in Luxembourg.
For and on behalf of the board
ME King AC Ball
Chairman Group Chief Executive
26 May 2004
Salient features
For the years ended 31 March
Supplementary Rand information
Audited Reviewed Reviewed Audited
2003 2004 2004 2003
Rm Rm US$m US$m
Continuing operations
38,9 17,2 Funds Management 2,4 4,0
(22,4) (2,9) Advisory Services (0,4) (2,3)
36,0 80,8 Investing 11,3 3,7
14,6 20,8 Group Capital 2,9 1,5
67,1 115,9 Profit from continuing 16,2 6,9
operations before
taxation
11,7 (7,2) Taxation (1,0) 1,2
78,8 108,7 Profit from continuing 15,2 8,1
operations after
taxation
(54,5) (15,0) Loss from discontinuing (2,1) (5,6)
operations after
taxation
24,3 93,7 Profit after taxation 13,1 2,5
(189,7) (80,8) Capital item - currency (11,3) (19,5)
hedge (note 1)
(165,4) 12,9 Attributable 1,8 (17,0)
earnings/(loss)
Performance
Basic earnings/(loss)
per share
87,9 121,5 - continuing profit 17,0 9,0
(before capital item
after taxation) (cents)
(46,7) 46,4 - headline (cents) 6,5 (4,8)
(184,6) 14,4 - attributable (cents) 2,0 (19,0)
Diluted earnings/(loss)
per share
87,8 116,0 - continuing profit 16,2 9,0
(before capital item
after taxation) (cents)
(46,6) 44,3 - headline (cents) 6,2 (4,8)
(184,4) 13,8 - attributable (cents) 1,9 (19,0)
Ordinary dividends per
share
25,0 - - interim paid (cents) - 2,7
- (note 2) - final proposed 3,25 -
(cents)
- 224,6 - special paid (cents) 32,5 -
955,7 624,4 Net asset value per 99,2 121,4
share (cents)
955,7 624,4 Tangible net asset 99,2 121,4
value per share (cents)
FINANCIAL STATISTICS
Market capitalisation
607,6 746,5 - 31 March (Rm)
- 31 March (US$m) 118,6 77,3
93,5 102,3 Shares in issue (m) 102,3 93,5
Weighted average shares
in issue
89,6 89,5 - basic (m) 89,5 89,6
89,7 93,7 - fully diluted (m) 93,7 89,7
Closing share price
650,0 730,0 - 31 March (Rand cents)
- 31 March (US cents) 116,0 82,6
Rand/Dollar exchange
rate
7,87 6,29 - closing 0,1589 0,1271
9,73 7,15 - average 0,1398 0,1028
Note 1: The currency hedge loss is set-off by a corresponding balance sheet gain
of US$15,3 million in equity on translation of the group`s Rand assets into US
Dollars (2003: US$27,4 million gain).
Note 2: The Rand dividend will depend on the Rand/US$ exchange rate following
the annual general meeting in July 2004.
Group balance sheets
At 31 March 2004
Supplementary Rand information
Audited Reviewed Reviewed Audited
2003 2004 2004 2003
Rm Rm US$m US$m
Assets
316,4 101,9 Non-current assets 16,2 40,2
236,1 32,7 Investments 5,2 30,0
80,3 69,2 Other long-term 11,0 10,2
assets
1 011,0 700,4 Current assets 111,3 128,5
1 327,4 802,3 Total assets 127,5 168,7
Shareowners` funds
856,3 558,8 Shareowners` interest 88,8 108,8
Liabilities
79,4 6,9 Non-current 1,1 10,2
liabilities
391,7 236,6 Current liabilities 37,6 49,7
471,1 243,5 Total liabilities 38,7 59,9
1 327,4 802,3 Total equity and 127,5 168,7
liabilities
Net asset value per
ordinary share
(cents)
955,7 624,4 - book value 99,2 121,5
968,1 624,4 - market and 99,2 123,1
directors` valuation
Group statement of changes in equity
For the years ended 31 March
Share
capital
and Legal
share
premium reserves
US$m US$m
Balance at 31 122,1 2,0
March 2002
Net exchange - -
rate adjustments
- current year
Attributable - -
loss
Dividends - -
Transfer - 0,6
(from)/to other
reserves
Balance at 31 122,1 2,6
March 2003
Net exchange - -
rate adjustments
- current year
Attributable - -
earnings
Dividends - -
Treasury shares (1,5) -
Transfer (50,0) -
to/(from)
reserves/capital
Balance at 31 70,6 2,6
March 2004
Foreign Distributable
currency reserves/ Total
translation retained shareowners`
reserves earnings interest
US$m US$m US$m
Balance at 31 (74,0) 54,1 104,2
March 2002
Net exchange 27,4 - 27,4
rate adjustments
- current year
Attributable - (17,0) (17,0)
loss
Dividends - (5,8) (5,8)
Transfer 0,7 (1,3) -
(from)/to other
reserves
Balance at 31 (45,9) 30,0 108,8
March 2003
Net exchange 15,3 - 15,3
rate adjustments
- current year
Attributable - 1,8 1,8
earnings
Dividends - (35,6) (35,6)
Treasury shares - - (1,5)
Transfer - 50,0 -
to/(from)
reserves/capital
Balance at 31 (30,6) 46,2 88,8
March 2004
Group cash flow statements
For the years ended 31 March
Reviewed Audited
2004 2003
US$m US$m
Cash flows from:
Operating activities 10,4 4,6
Currency hedge (12,7) (19,5)
Change in working funds 21,0 28,3
Cash generated by operating activities 18,7 13,4
Cash outflow from dividends (35,6) (5,8)
Cash outflow from financing activities (18,7) (1,9)
Cash inflow/(outflow) from investing 10,6 (0,2)
activities
Effects of exchange rate changes on 2,4 4,4
cash and cash equivalents
Net (decrease)/increase in cash and (22,6) 9,9
cash equivalents
Cash and cash equivalents at beginning 37,6 27,7
of year
Cash and cash equivalent at end of 15,0 37,6
year
Group income statements
For the years ended 31 March
Supplementary Rand information
Audited Reviewed Reviewed Audited
2003 2004 2004 2003
Rm Rm US$m US$m
300,6 289,7 Revenue 40,5 30,9
293,8 294,0 Continuing operations 41,1 30,2
6,8 (4,3) Discontinuing (0,6) 0,7
operations
(206,3) (176,6) Operating expenses (24,7) (21,2)
(145,0) (165,9) Continuing operations (23,2) (14,9)
(61,3) (10,7) Discontinuing (1,5) (6,3)
operations
(81,7) (12,2) Other (1,7) (8,4)
(expenses)/income
(12,6) (3,6) Finance costs - net (0,5) (1,3)
4,9 0,7 Income from associates 0,1 0,5
1,9 (9,3) (Loss)/income from (1,3) 0,2
joint ventures
(75,9) - Amortisation and - (7,8)
impairment of goodwill
12,6 100,9 Profit from operations 14,1 1,3
67,1 115,9 Continuing operations 16,2 6,9
(54,5) (15,0) Discontinuing (2,1) (5,6)
operations
Capital item
(189,7) (80,8) Currency hedge (11,3) (19,5)
(177,1) 20,1 Profit/(loss) before 2,8 (18,2)
taxation
(122,6) 35,1 Continuing operations 4,9 (12,6)
(54,5) (15,0) Discontinuing (2,1) (5,6)
operations
11,7 (7,2) Taxation (1,0) 1,2
(165,4) 12,9 Attributable 1,8 (17,0)
earnings/(loss)
78,8 108,7 Continuing operations 15,2 8,1
(189,7) (80,8) Continuing capital (11,3) (19,5)
item
(110,9) 27,9 Continuing - total 3,9 (11,4)
(54,5) (15,0) Discontinuing (2,1) (5,6)
operations
Notes to the financial statements
1. Reviewed results
The results for the year ended 31 March 2004 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.
2. Basis of preparation
The financial statements of the group are prepared in accordance with
International Financial Reporting Standards (IFRS). The accounting policies are
consistent with those applied in the previous financial year end. During the
period under review, Brait has early adopted IAS 28 (revised) accounting for
investments in associates.
3. Supplementary Rand Information
The balance sheet and income statement of the group have also been presented in
Rand for the convenience of South African users in the group. The supplementary
Rand results have been converted from the USD measurement results using a
closing rate of R6,2925 to US$1 (2003: R7,8651 to US$1) for the balance sheet
and an average rate of R7,1541 to US$1 (2003: R9,7263 to US$1) for the income
statement.
4. Headline earnings/(loss)
As IFRS does not recognise the concept of headline earnings, a reconciliation
between earnings and headline earnings has been provided for illustrative
purposes for South African users, based on adjustments required by South African
statements of Generally Accepted Accounting Practice.
Supplementary Rand information
31 March 31 March 31 March 31 March
2003 2004 2004 2003
Audited Reviewed Reviewed Audited
Rm Rm US$m US$m
(165,4) 12,9 Attributable 1,8 (17,0)
earnings/(loss)
123,6 28,6 Headline 4,0 12,7
earnings/(loss)
adjustments
52,5 10,7 Costs on termination 1,5 5,4
of discontinuing
operations
- 8,6 Interest rate 1,2 -
adjustment on debt
restructuring
- 12,9 Impairment of joint 1,8 -
venture
(4,8) (3,6) Profit on disposal (0,5) (0,5)
of associates
75,9 - Amortisation and - 7,8
impairment of
goodwill
(41,8) 41,5 Headline 5,8 (4,3)
earnings/(loss)
(39,8) 45,8 - Continuing 6,4 (4,1)
operations
(2,0) (4,3) - Discontinuing (0,6) (0,2)
operations
(46,6) 44,3 Headline 6,2 (4,8)
earnings/(loss) per
share (cents)
(44,4) 48,9 - Continuing 6,8 (4,6)
operations
(2,2) (4,6) - Discontinuing (0,6) (0,2)
operations
5. Commitments, guarantees and 30,9 35,4
contingent liabilities
6. Earnings per share
The group has included attributable earnings per share from continuing
operations (excluding capital item) in its earnings per share disclosure in the
salient features. This compares the sustainable performance of Brait`s operating
activities during the year against the group`s key earnings performance
measurement target.
Group segmental reports
For the years ended 31 March
Supplementary Rand information
Audited Reviewed Reviewed Audited
2003 2004 2004 2003
Rm Rm US$m US$m
BUSINESS ANALYSIS
Revenue
293,8 294,0 Continuing operations 41,1 30,2
83,6 88,7 - Funds Management 12,4 8,6
44,7 35,8 - Advisory Services 5,0 4,6
46,7 124,5 - Investing 17,4 4,8
118,8 45,0 - Group Capital 6,3 12,2
6,8 (4,3) Discontinuing (0,6) 0,7
operations
300,6 289,7 Total revenue 40,5 30,9
Profit/(loss) before
taxation
67,1 115,9 Continuing operations 16,2 6,9
38,9 17,2 - Funds Management 2,4 4,0
(22,4) (2,9) - Advisory Services (0,4) (2,3)
36,0 80,8 - Investing 11,3 3,7
14,6 20,8 - Group Capital 2,9 1,5
(189,7) (80,8) Capital item - (11,3) (19,5)
currency hedge
(122,6) 35,1 Continuing operations 4,9 (12,6)
(54,5) (15,0) Discontinuing (2,1) (5,6)
operations
(177,1) 20,1 Profit/(loss) before 2,8 (18,2)
taxation
GEOGRAPHICAL ANALYSIS
Profit/(loss) before
taxation
(122,6) 35,1 Continuing operations 4,9 (12,6)
(161,5) (32,9) - Europe (4,6) (16,6)
38,9 68,0 - Africa 9,5 4,0
(54,5) (15,0) Discontinuing (2,1) (5,6)
operations
(54,5) (15,0) - Africa (2,1) (5,6)
(177,1) 20,1 Profit/(loss) before 2,8 (18,2)
taxation
Registered office: Brait S.A., 180, rue des Aubepines, L-1145, Luxembourg, Tel:
09352 269255 2180, Fax: 09352 269255 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
Domiciliary agent and registrar: 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 Investor Services 2004 (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001 or PO Box 61051, Marshalltown, 2107, Tel: +27 11 370
5000, Fax: +27 11 668 5200
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
Directors: ME King (Chairman)*, AC Ball*, JE Bodoni#, SJP Weber#, PL Wilmot*, RJ
Koch-, AM Rosenzweig**, CJ Tayelor*, FZ Haller
Non-executive Independent #Luxembourgish American -British **Dutch *South
African
Date: 26/05/2004 05:15:14 PM Produced by the JSE SENS Department
