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Brait - Unaudited interim group results
BRAIT S.A.
Incorporated in Luxembourg
R.C. Luxembourg B-13861
Share code: BAT
ISIN: LU0011857645
(`Brait ` or `the Company`)
Unaudited interim group results
for the six months ended 30 September 2004
Highlights
- Attributable profit (before capital item) increased by
66% to US$10,3 million
- Return on equity (annualised) 17,5%
- Interim dividend - 3,5 US cents (21,47 SA cents)
- Tangible net asset value (including dividends paid)
increased by 9% since 31 March 2004
- Strong balance sheet - US$25 million cash on hand
- Introduction of BEE shareholder into South African
business
Salient features
For the six months ended 30 September
Rand supplementary information (note 1)
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2003 2004 2004 2003
ZAR`m ZAR`m US$`m US$`m
47,6 71,3 Profit from 11,0 6,3
operations
12,9 7,3 Funds management 1,1 1,7
(7,6) - Corporate finance - (1,0)
44,6 57,4 Investing 8,9 5,9
(2,3) 6,6 Group capital 1,0 (0,3)
(71,0) (14,4) Capital item - (2,2) (9,4)
currency hedge
(23,4) 56,9 Profit/(loss) 8,8 (3,1)
before taxation
(0,8) (2,9) Taxation (0,5) (0,1)
(24,2) 54,0 Profit/(loss) 8,3 (3,2)
after taxation
(5,3) - Discontinued - (0,7)
operations
- (1,1) Minority interest (0,2) -
(29,5) 52,9 Attributable 8,1 (3,9)
earnings/(loss)
Performance
Attributable
earnings per
share (before
capital item)
(note 3)
52,3 75,2 - Basic (cents) 11,5 6,9
52,3 70,3 - Diluted (cents) 10,8 6,9
Headline
earnings/(loss)
per share
(32,7) 59,1 - Basic (cents) 9,1 (4,4)
(32,7) 55,3 - Diluted (cents) 8,5 (4,4)
Attributable
earnings/(loss)
per share
(33,0) 59,1 - Basic (cents) 9,1 (4,4)
(33,0) 55,3 - Diluted (cents) 8,5 (4,4)
Ordinary
dividends per
share
- 21,47 - Interim (cents) 3,5 -
112,1 - - Interim special - 15,0
paid (cents)
740,3 684,2 Net asset value 106,0 106,8
per share (cents)
740,3 684,2 Tangible net 106,0 106,8
asset value per
share (cents)
Financial
statistics
Market
capitalisation
589,2 771,3 - 30 September
(ZAR`m)
- 30 September 119,5 85,0
(US$`m)
102,3 102,3 Shares in issue 102,3 102,3
(m)
Weighted average
number of shares
in issue
89,5 89,5 - basic (m) 89,5 89,5
89,5 95,7 - fully diluted 95,7 89,5
(m)
Closing share
price
576 754 - 30 September
(ZAR cents)
- 30 September 116,8 83,1
(US cents)
ZAR/US Dollar
exchange rates
6,9309 6,4534 - closing 0,1550 0,1443
7,5593 6,4747 - average 0,1544 0,1323
Note 1: The disclosure above is for information purposes and does not form part
of the group financial statements.
Note 2: The dividend has been declared after 30 September 2004. The Rand
dividend will be determined by the ZAR/US$ exchange rate in Luxembourg at 12:00
on Wednesday 3 November 2004.
Note 3: The group has included attributable earnings per share (before capital
item) in its earnings per share disclosure. This compares the sustainable
performance of Brait`s operating activities during the year against the group`s
key earnings performance measurement target.
Group income statements
For the six months ended 30 September
Rand supplementary information
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2003 2004 2004 2003
ZAR`m ZAR`m US$`m US$`m
139,1 165,0 Revenue 25,5 18,4
(96,8) (87,3) Operating (13,5) (12,8)
expenses
5,3 (6,4) Other (1,0) 0,7
(expenses)/income
(10,6) (6,5) Finance costs (1,0) (1,4)
19,7 0,1 Income from - 2,6
associates
(3,8) - Loss from joint - (0,5)
ventures
47,6 71,3 Profit from 11,0 6,3
operations
(71,0) (14,4) Capital item - (2,2) (9,4)
currency hedge
(23,4) 56,9 Profit/(loss) 8,8 (3,1)
before taxation
(0,8) (2,9) Taxation (0,5) (0,1)
(24,2) 54,0 Profit/(loss) 8,3 (3,2)
after taxation
(5,3) - Discontinued - (0,7)
operations
- (1,1) Minority interest (0,2) -
(29,5) 52,9 Attributable 8,1 (3,9)
earnings/(loss)
46,8 67,3 Operations 10,3 6,2
(71,0) (14,4) Capital item (2,2) (9,4)
(5,3) - Discontinued - (0,7)
operations
Group balance sheets
At 30 September
Rand supplementary information
Audited Unaudited Unaudited
year
31 30 Sept 30 Sept
March
2004 2003 2004
ZAR`m ZAR`m ZAR`m
ASSETS
101,9 274,4 134,8 Non-current assets
32,7 197,5 63,2 Investments
15,7 20,1 15,5 Other non-current assets
53,5 56,8 56,1 Property and equipment
701,1 789,5 811,3 Current assets
94,4 164,2 164,6 Cash and cash equivalents
606,7 625,3 646,7 Other current assets
803,0 1 063,9 946,1 Total assets
EQUITY AND LIABILITIES
558,8 662,6 612,4 Shareowners` funds
Liabilities
6,9 11,1 111,7 Non-current liabilities
237,3 390,2 222,0 Current liabilities
102,6 232,9 100,7 Interest bearing
134,7 157,3 121,3 Non-interest bearing
244,2 401,3 333,7 Total liabilities
803,0 1 063,9 946,1 Total equity and liabilities
Net asset value per ordinary
share (cents)
624,5 740,3 684,2 - book value
624,5 740,3 684,2 - market and directors`
valuation
Unaudited Unaudited Audited
year
30 Sept 30 Sept 31 March
2004 2003 2004
US$`m US$`m US$`m
ASSETS
Non-current assets 20,9 39,6 16,2
Investments 9,8 28,5 5,2
Other non-current assets 2,4 2,9 2,5
Property and equipment 8,7 8,2 8,5
Current assets 125,7 113,9 111,4
Cash and cash equivalents 25,5 23,7 15,0
Other current assets 100,2 90,2 96,4
Total assets 146,6 153,5 127,6
EQUITY AND LIABILITIES
Shareowners` funds 94,9 95,6 88,8
Liabilities
Non-current liabilities 17,3 1,6 1,1
Current liabilities 34,4 56,3 37,7
Interest bearing 15,6 33,6 16,3
Non-interest bearing 18,8 22,7 21,4
Total liabilities 51,7 57,9 38,8
Total equity and liabilities 146,6 153,5 127,6
Net asset value per ordinary
share (cents)
- book value 106,0 106,8 99,2
- market and directors` 106,0 106,8 99,2
valuation
Group statements of changes in equity
For the six months ended 30 September
Unaudited Unaudited Audited
year
30 Sept 30 Sept 31 March
2004 2003 2004
US$`m US$`m US$`m
Balance at beginning of 88,8 108,8 108,8
period
Prior year adjustment (note - (1,3) (1,3)
4)
Currency translation (0,5) 7,1 15,3
adjustment
Attributable earnings/(loss) 8,1 (3,9) 0,6
Dividends (3,1) (15,2) (35,6)
Treasury shares - options - (1,5) (1,5)
repurchased
Equity reserve 0,4 1,6 2,5
Ordinary shareowners` 93,7 95,6 88,8
interest
Minority interest 1,2 - -
Balance at end of period 94,9 95,6 88,8
Group cash flow statements
For the six months ended 30 September
Unaudited Unaudited Audited
year
30 Sept 30 Sept 31 March
2004 2003 2004
US$`m US$`m US$`m
Cash flows from:
Operating activities 5,2 5,8 10,4
Currency hedge (1,0) (9,4) (12,7)
Changes in working funds (3,4) 2,3 21,0
Net operating cash flow 0,8 (1,3) 18,7
Dividend paid (3,1) (15,2) (35,6)
Cash utilised by operating (2,3) (16,5) (16,9)
activities
Cash inflows/(outflows) from 17,5 (0,5) (18,7)
financing activities
Cash (outflows)/inflows from (4,6) 2,5 10,6
investing activities
Effects of exchange rate (0,1) 0,6 2,4
changes on cash and cash
equivalents
Increase/(decrease) in cash 10,5 (13,9) (22,6)
and cash equivalents
Cash and cash equivalents at 15,0 37,6 37,6
beginning of period
Cash and cash equivalents at 25,5 23,7 15,0
end of period
Group segmental reports
For the six months ended 30 September
Rand supplementary information
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2003 2004 2004 2003
ZAR`m ZAR`m US$`m US$`m
BUSINESS
ANALYSIS
139,1 165,0 Revenue 25,5 18,4
39,3 46,7 Funds management 7,2 5,2
10,6 12,9 Corporate 2,0 1,4
finance
56,7 87,7 Investing 13,6 7,5
32,5 17,7 Group capital 2,7 4,3
47,6 71,3 Profit from 11,0 6,3
operations
12,9 7,3 Funds management 1,1 1,7
(7,6) - Corporate - (1,0)
finance
44,6 57,4 Investing 8,9 5,9
(2,3) 6,6 Group capital 1,0 (0,3)
(71,0) (14,4) Capital item (2,2) (9,4)
(23,4) 56,9 Profit/(loss) 8,8 (3,1)
before taxation
GEOGRAPHICAL
ANALYSIS
47,6 71,3 Profit from 11,0 6,3
operations
50,6 24,7 - International 3,8 6,7
(3,0) 46,6 - South Africa 7,2 (0,4)
(71,0) (14,4) Capital item (2,2) (9,4)
(23,4) 56,9 Profit/(loss) 8,8 (3,1)
before taxation
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 2004
except for the early adoption of IFRS 2 (Share Based
Payments). The effect thereof is disclosed in note 4.
The group financial statements are prepared using the
USD as the functional currency of Brait S.A.
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 USD measurement results using a closing rate of
ZAR 6,4534 to US$1 (2003: ZAR 6,9309 to US$1) for the
balance sheet and an average rate of ZAR 6,4747 to
US$1 (2003: ZAR 7,5593 to US$1) for the income
statement.
3. SALE OF 26% SHARE IN SUBSIDIARY
With effect from 30 September 2004, Brait has sold 26%
of its wholly-owned South African business to a BEE
shareholder. The transaction has given rise to
financial instruments and has been recorded in
compliance with IAS 32 (Financial Instruments:
Disclosure and Presentation).
Unaudited Unaudited Audited
2004 2003 2004
US$`m US$`m US$`m
4. Effect of adopting IFRS
2
Share entitlement (0,4) (0,3) (1,2)
expenses
Retained income brought - (1,3) (1,3)
forward in 2003
Prior year earnings and retained income brought
forward have been restated accordingly.
Unaudited Unaudited Audited
2004 2003 2004
US$`m US$`m US$`m
5. The following items are
included in profit from
operations
Dividend received 0,7 2,9 3,3
Depreciation (0,4) (0,2) (0,9)
Related party
transactions
- Interest received 0,5 0,5 1,0
6. Investments
Unlisted
- carrying value 9,8 27,9 5,2
- directors` valuation 9,8 27,9 5,2
7. Commitments, guarantees 27,0 31,9 20,7
and contingent
liabilities
The group has no capital expenditure commitments,
either authorised or contracted.
(At 30 September 2004, the group had aggregated
commitments of US$15,9 million to invest in its
Private Equity funds and to deliver shares in terms of
its employee schemes.)
8. Related party balances
- Liabilities 15,7 - -
- Assets 8,2 5,7 6,0
9. Securities Exchange requirements
This interim report has been prepared in accordance
with the listings requirements of the Luxembourg, JSE
Securities Exchange South Africa and the London Stock
Exchange.
10. Interest-bearing liabilities
All liabilities are interest bearing save for US$23,9
million (2003: US$16,3 million) in respect of the BEE
transaction, accounts payable, accruals, provisions
and deferred taxation.
11. Corporate governance
The group subscribes to and complies, in all material
respect, with the principles embodied in appropriate
international corporate governance codes including
those contained in the second King Report on Corporate
Governance in South Africa.
12. Headline earnings/(loss)
As IFRS does not recognise the concept of headline
earnings, a reconciliation between earnings and
headline earnings has been provided for illustrative
purposes for South African users, based on adjustments
required by South African Statements of Generally
Accepted Accounting Practice.
Audited Unaudited Unaudited
year
31 30 Sept 30 Sept
March
2004 2003 2004
ZAR`m ZAR`m ZAR`m
4,3 (29,5) 52,9 Attributable earnings/(loss)
Headline (loss)/earnings
28,6 0,2 - adjustments
Costs on termination of
10,7 4,4 - discontinued operations
Interest rate adjustment on
8,6 6,3 - debt restructuring
12,9 3,8 - Impairment of joint venture
(3,6) (14,3) - Profit on disposal of
associate
32,9 (29,3) 52,9 Headline earnings/(loss)
118,0 42,5 67,3 - Profit from operations
(80,8) (71,0) (14,4) - Currency hedge
(4,3) (0,8) - - Discontinued operations
Headline earnings/(loss)
36,8 (32,7) 59,1 per share (cents)
131,8 47,5 75,2 - Operations
(90,2) (79,3) (16,1) - Currency hedge
(4,8) (0,9) - - Discontinued operations
Unaudited Unaudited Audited
year
30 Sept 30 Sept 31 March
2004 2003 2004
US$`m US$`m US$`m
Attributable earnings/(loss) 8,1 (3,9) 0,6
Headline (loss)/earnings
adjustments - - 4,0
Costs on termination of
discontinued operations - 0,6 1,5
Interest rate adjustment on
debt restructuring - 0,8 1,2
Impairment of joint venture - 0,5 1,8
Profit on disposal of - (1,9) (0,5)
associate
Headline earnings/(loss) 8,1 (3,9) 4,6
- Profit from operations 10,3 5,6 16,5
- Currency hedge (2,2) (9,4) (11,3)
- Discontinued operations - (0,1) (0,6)
Headline earnings/(loss)
per share (cents) 9,1 (4,4) 5,1
- Operations 11,5 6,2 18,4
- Currency hedge (2,4) (10,5) (12,6)
- Discontinued operations - (0,1) (0,7)
Commentary
GROUP PROFILE
Brait S.A. is an international investment and financial services group focused
on private equity and alternative funds management, corporate financial
services, and proprietary investing. It is listed on the Luxembourg, London and
JSE Securities Exchange, with shareowners` funds of US$94,9 million at 30
September 2004.
Brait`s earnings are derived from:
fees from private equity and alternative funds
management;
fees from corporate finance and debt advisory services;
returns from the group`s private equity and alternative
fund investing; and
direct returns from investment of the group`s capital.
FINANCIAL RESULTS
Earnings
Attributable profit (before capital item) - US$10,3
million
Earnings have increased 66% from US$6,2 million to
US$10,3 million for the period. This improvement is
primarily attributable to the continued growth in income
from investing activities.
Loss on capital item - US$2,2 million
The cost of hedging the group`s tangible assets into its
US dollar measurement currency was US$2,2 million for
the period compared to a cost of US$9,4 million in the
prior period. The income effect of the cost of the hedge
has been limited by a `cap` on US dollar weakness
against the rand, which has been incorporated into the
current hedge structure.
Return on equity
The annualised average return on equity of the group for
the six-month period ended 30 September 2004, net of
dividend distributions, was 17,5%. Net asset value
growth since 31 March 2004 amounted to 9%.
Cash flow
Net cash inflows during the period under review amounted
to US$10,5 million. At 30 September 2004, the balance
sheet was liquid with approximately 25% of shareowners`
capital held in cash and cash equivalents.
SEGMENT REVIEW
Funds management
Private Equity deal activity continues to remain strong. Some notable new
investments were concluded during the period under review and, as a consequence,
the investment programme on Fund III is now substantially complete.
The process for raising a new private equity fund from South African and
International investors was initiated during the period under review. The
indicative prospects for a first closing of this fund in the current financial
year are encouraging. The private equity environment in South Africa is buoyant
at present and offers significant investment opportunities. Taken together with
Brait`s investment performance and track record, this should ensure Brait is in
a good position to increase its funds under management by the year-end.
Specialised Funds Division has continued to develop its market leading
infrastructure, product offering and manager platform. Performance has exceeded
expectations with exceptionally low volatility. Assets under management have
grown during the period.
Earnings from Funds Management for the period are US$1,1 million (US$1,7 million
for September 2003). Management fees have declined as assets under management
have been realised in Funds II and III and also as a consequence of increased
costs on translation into US dollars arising from a stronger rand against the US
dollar over the corresponding period and an increase in the Specialised Funds
infrastructure. All investing income earned from the group`s capital investments
in its Private Equity and Specialised Funds operations is disclosed in the
investing segment.
Corporate Finance
The group`s Corporate Finance activities have been focused on building new
relationships and expanding the unit`s revenue base. The number of advisory
mandates on record is encouraging. Whereas some of these were finalised during
the period, the majority are expected to be completed by the financial year-end.
The unit has enhanced its capacity to complete BEE deals and has been appointed
to advise on several BEE transactions.
Revenue for the period has increased by 43%, albeit off a low base. At the
profit before tax level, the unit reversed the prior year loss by breaking even.
The improvement in profitability is expected to carry over into the second half
of the financial year and Corporate Finance will continue to position itself as
a top tier advisory team with a strong franchise in its South African and niche
cross-border segment.
Investing
Proprietary investing has once again contributed significantly to the group`s
earnings performance and reflects the opportunities available in the private
equity market and the depth of management in the private equity team. These
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. Profits for the period include
realised and unrealised returns on proprietary and trading investments,
interests in the group`s private equity funds and returns on seed capital
invested in Specialised Funds.
The profit from investing after operating costs of US$8,9 million has increased
by 51% compared with US$5,9 million at 30 September 2003. This equates to an
annualised return of approximately 23% on average capital invested.
Group Capital
The group`s capital is primarily invested in cash and short-term assets.
Earnings are derived from treasury income net of corporate expenditure. For the
period under review profits before tax amounted to US$1,0 million compared with
a marginal loss at 30 September 2003. The improved performance is primarily due
to a reduction of corporate expenditure arising from the reorganisation and
refocus of the group`s operations.
CURRENCY SWAP
As reported in Brait`s annual report at 31 March 2004, the group has continued
to implement its policy of hedging the majority of its tangible net assets into
its reporting currency, the US dollar. The policy and terms of the hedge are
fully set out in the group`s annual report.
The income effect of the currency hedge for the period amounted to a charge of
US$2,2 million on a fair value measurement basis.
BLACK ECONOMIC EMPOWERMENT INITIATIVE
Brait`s sale of 26% of its wholly owned South African business to a consortium
of black economic empowerment (BEE) investors, which included several black
entrepreneurs and community organisations, became effective on 30 September
2004. Brait is a minority financier in the transaction and its intention is to
refinance its funding participation in due course.
The BEE consortium is led by Business Unity of South Africa CEO Bheki Sibiya and
consists of many individuals and organisations brought together under four
groupings:
- Norho Financial Services - principal Bheki Sibiya;
- Africa Vanguard - principal Sandile Zungu;
- Usante Capital - principal Ms Kagiso Chikane and patron,
Vivian Reddy; and
- Representative Investments - principal Mandla Ngcobo.
The board is confident that Brait has forged an alignment of interests with a
new generation of South African business people who will add significant value
to the business.
PROSPECTS
Brait has made a promising start to the financial year. At this stage the board
expects this performance to continue in the second half of the year.
DIVIDEND
The board holds the view that dividend distributions are an important part of
long-term shareowners` wealth creation and an indication of the current good
health of the group.
After taking into consideration the financial and cash position of the group the
board has resolved to declare an interim dividend of 3,5 US cents (21,47 SA
cents) per share.
The interim dividend will be payable to shareowners on Monday, 22 November 2004.
The record date for the dividend is the close of business on Friday, 19 November
2004. The last date to trade `cum dividend` will be Friday, 12 November 2004 and
the share will commence trading `ex dividend` on Monday, 15 November 2004. Share
certificates may not be dematerialised or rematerialised between Monday, 15
November 2004 and Friday, 19 November 2004, both days inclusive. Shareowners on
the South African register will receive the rand equivalent based on the
currency conversion rate in Luxembourg at 12:00 on Wednesday, 3 November 2004.
For and on behalf of the board
ME King AC Ball
Chairman Group Chief Executive
4 November 2004
Administration
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.
560, rue de Neuhof
L-2220
Luxembourg
Tel: 09352 4466440
Fax: 09352 4462255
LISTING AGENT
Dexia Banque Internationale
a Luxembourg
69, route d`Esch
L-2953, Luxembourg
Tel: 09352 45901
Fax: 09352 45902010
Domiciliary agent and registrar
Experta Luxembourg S.A.
180, rue des Aubepines
L-1145, Luxembourg
Tel: 09352 269255 2180
Fax: 09352 269255 3040
Transfer Agents
United Kingdom
Capita IRG plc
Bourne House
34 Beckenham Road
Beckenham
Kent, BR3 4TU
United Kingdom
Tel: 0944 208 639 2157
Fax: 0944 208 639 2342
South Africa
Computershare Investor Services 2004
(Pty) Limited,
70 Marshall Street
Johannesburg, 2001
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
ISIN - LU 0011857645
Website: http://www.brait.com
Directors
ME King (Chairman)*, AC Ball*, JE Bodoni#, FZ Haller, RJ Koch, AM Rosenzweig**,
CJ Tayelor*, SJP Weber#, PL Wilmot*
Non-executive Independent #Luxembourgish American British **Dutch *South
African
Financial information for the six months ended 30 September 2004 is also
available on the Brait website at www.brait.com
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