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Brimstone Investment Corporation - Unaudited Results For The Six Months Ended 30
June 2005
BRIMSTONE INVESTMENT CORPORATION
Company Registration Number: 1995/010442/06
(Incorporated in the Republic of South Africa)
(`Brimstone` or `the Company`)
ISIN Number: ZAE000015277 Share Code: BRT
ISIN Number: ZAE000015285 Share Code: BRN
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
GROUP INCOME STATEMENTS
Restated Restated
Unaudited Unaudited Unaudited
6 Months 6 Months 12 Months
ended ended ended
30 June 30 June 31 December
R`000 2005 2004 2004
REVENUE 86 300 83 909 187 626
Cost of sales (63 785) (62 322) (141 939)
GROSS PROFIT 22 515 21 587 45 687
Selling and administration
expenses (22 038) (22 263) (44 265)
Negative goodwill released
to income 989 -- 444
Exceptional items 2 612 6 136 11 073
PROFIT FROM OPERATIONS 4 078 5 460 12 939
Income from investments 3 773 5 269 10 033
Finance costs (14 727) (7 979) (17 306)
Share of profit of associates 23 246 10 842 19 752
NET PROFIT BEFORE TAXATION 16 370 13 592 25 418
Taxation 83 (324) (344)
NET ATTRIBUTABLE PROFIT 16 453 13 268 25 074
Attributable to:
Equity holders of the parent 16 349 13 268 25 074
Minority interest 104 -- --
16 453 13 268 25 074
EARNINGS PER SHARE (CENTS)
Headline 12.5 11.2 20.7
Basic 13.3 11.2 21.1
DILUTED EARNINGS PER SHARE (CENTS)
Headline 12.3 11.1 20.5
Basic 13.1 11.1 20.8
Weighted average number of shares
on which earnings per share is
based (000`s) 124 093 118 748 118 799
Weighted average number of
shares on which diluted earnings
per share is based (000`s) 126 013 119 713 120 385
HEADLINE EARNINGS CALCULATION
Net attributable profit 16 453 13 268 25 074
Negative goodwill released
to income (989) -- (444)
HEADLINE EARNINGS 15 464 13 268 24 630
GROUP BALANCE SHEETS
Restated Restated
Unaudited Unaudited Unaudited
30 June 30 June 31 December
R`000 2005 2004 2004
ASSETS
Non-current assets 551 427 255 192 287 782
Property, plant, equipment
and vehicles 18 526 21 597 19 711
Investments in
associate companies 508 273 214 454 247 440
Available for sale investments 24 628 19 141 20 631
Current assets 90 947 118 197 106 259
Inventory 30 360 39 360 31 347
Trade receivables 29 523 35 084 34 049
Other receivables 10 471 9 978 17 184
Taxation 707 -- --
Cash and cash equivalents 19 886 33 775 23 679
TOTAL ASSETS 642 374 373 389 394 041
EQUITY AND LIABILITIES
Capital and reserves 289 072 173 662 185 446
Share capital 38 37 37
Capital reserves 215 109 109 405 113 987
Revaluation reserves 3 977 2 265 2 265
Distributable reserves 69 948 61 955 69 157
Minority interest 104 -- --
Non-current liabilities 308 346 147 482 156 924
Long-term interest
bearing borrowings 305 768 145 205 154 314
Deferred taxation 2 578 2 277 2 610
Current liabilities 44 852 52 245 51 671
Short-term interest
bearing borrowings 20 535 23 977 25 504
Bank overdraft 1 316 7 716 7 449
Trade payables 6 783 7 295 10 895
Other payables 16 218 12 894 7 774
Taxation -- 363 49
TOTAL EQUITY AND LIABILITIES 642 374 373 389 394 041
NAV per share (cents) 139.6 146.2 156.2
Shares in issue at
end of period (`000) 207 081 118 748 118 718
GROUP STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2005
Share Capital
R`000 capital reserves
Balance at 1 January 2004 as previously reported 37 109 284
Effect of change in accounting policies
Gain on revaluation of property -- --
Deferred tax arising on revaluation
of land and buildings -- --
Recognition of share-based payments -- 55
As restated 37 109 339
Attributable profit for the year
ended 31 December 2004 -- --
Recognition of share-based payments -- 132
Dividend paid -- --
Increase in treasury shares held by share trust -- (62)
Transfer current year share of
non-distributable reserve of associate -- 4 578
Balance at 31 December 2004 37 113 987
Attributable profit for the six months
ended 30 June 2005 -- --
Deferred tax rate change -- --
Recognition of share-based payments -- 982
Gain on available for sale investment -- --
Dividend paid -- --
Issue of share capital 1 96 451
Transfer current year share of
non-distributable reserve of associate -- 3 689
Balance at 30 June 2005 38 215 109
1 January 2004 to 30 June 2004 (restated)
Balance at 1 January 2004 as previously reported 37 109 284
Effect of change in accounting policies
Gain on revaluation of property -- --
Deferred tax arising on revaluation
of land and buildings -- --
Recognition of share-based payments -- 55
As restated 37 109 339
Attributable profit for the
six months ended 30 June 2004 -- --
Recognition of share-based payments -- 66
Dividend paid -- --
Balance at 30 June 2004 37 109 405
Revaluation Retained
R`000 reserves earnings
Balance at 1 January 2004 as previously reported -- 58 209
Effect of change in accounting policies
Gain on revaluation of property 3 236 --
Deferred tax arising on revaluation
of land and buildings (971) --
Recognition of share-based payments -- (55)
As restated 2 265 58 154
Attributable profit for the year
ended 31 December 2004 -- 25 074
Recognition of share-based payments -- --
Dividend paid -- (9 493)
Increase in treasury shares held by share trust -- --
Transfer current year share of
non-distributable reserve of associate -- (4 578)
Balance at 31 December 2004 2 265 69 157
Attributable profit for the six months
ended 30 June 2005 -- 16 349
Deferred tax rate change 32 --
Recognition of share-based payments -- --
Gain on available for sale investment 1 680 --
Dividend paid -- (11 869)
Issue of share capital -- --
Transfer current year share of
non-distributable reserve of associate -- (3 689)
Balance at 30 June 2005 3 977 69 948
1 January 2004 to 30 June 2004 (restated)
Balance at 1 January 2004 as previously reported -- 58 209
Effect of change in accounting policies
Gain on revaluation of property 3 236 --
Deferred tax arising on revaluation
of land and buildings (971) --
Recognition of share-based payments -- (55)
As restated 2 265 58 154
Attributable profit for the
six months ended 30 June 2004 -- 13 268
Recognition of share-based payments -- --
Dividend paid -- (9 467)
Balance at 30 June 2004 2 265 61 955
Attributable to
equity holders Minority
R`000 of the parent interest
Balance at 1 January 2004 as previously
reported 167 530 --
Effect of change in accounting policies
Gain on revaluation of property 3 236 --
Deferred tax arising on revaluation
of land and buildings (971) --
Recognition of share-based payments -- --
As restated 169 795 --
Attributable profit for the year
ended 31 December 2004 25 074 --
Recognition of share-based payments 132 --
Dividend paid (9 493) --
Increase in treasury shares held by share trust (62) --
Transfer current year share of
non-distributable reserve of associate -- --
Balance at 31 December 2004 185 446 --
Attributable profit for the six months
ended 30 June 2005 16 349 104
Deferred tax rate change 32 --
Recognition of share-based payments 982 --
Gain on available for sale investment 1 680 --
Dividend paid (11 869) --
Issue of share capital 96 451 --
Transfer current year share of
non-distributable reserve of associate -- --
Balance at 30 June 2005 289 072 104
1 January 2004 to 30 June 2004 (restated)
Balance at 1 January 2004 as previously
reported 167 530 --
Effect of change in accounting policies
Gain on revaluation of property 3 236 --
Deferred tax arising on revaluation
of land and buildings (971) --
Recognition of share-based payments -- --
As restated 169 795 --
Attributable profit for the
six months ended 30 June 2004 13 268 --
Recognition of share-based payments 66 --
Dividend paid (9 467) --
Balance at 30 June 2004 173 662 --
R`000 Total
Balance at 1 January 2004 as previously reported 167 530
Effect of change in accounting policies
Gain on revaluation of property 3 236
Deferred tax arising on revaluation
of land and buildings (971)
Recognition of share-based payments --
As restated 169 795
Attributable profit for the year
ended 31 December 2004 25 074
Recognition of share-based payments 132
Dividend paid (9 493)
Increase in treasury shares held by share trust (62)
Transfer current year share of
non-distributable reserve of associate --
Balance at 31 December 2004 185 446
Attributable profit for the six months
ended 30 June 2005 16 453
Deferred tax rate change 32
Recognition of share-based payments 982
Gain on available for sale investment 1 680
Dividend paid (11 869)
Issue of share capital 96 451
Transfer current year share of
non-distributable reserve of associate --
Balance at 30 June 2005 289 176
1 January 2004 to 30 June 2004 (restated)
Balance at 1 January 2004 as previously reported 167 530
Effect of change in accounting policies
Gain on revaluation of property 3 236
Deferred tax arising on revaluation
of land and buildings (971)
Recognition of share-based payments --
As restated 169 795
Attributable profit for the
six months ended 30 June 2004 13 268
Recognition of share-based payments 66
Dividend paid (9 467)
Balance at 30 June 2004 173 662
GROUP CASH FLOW STATEMENTS
R`000 Unaudited 6 Restated Restated
months ended unaudited 6 unaudited 12
30 June 2005 months ended months ended 31
30 June 2004 December 2004
Operating activities
Profit for the year 16 453 13 268 25 074
Adjustments for:
Share of profit of
associates (25 100) (13 854) (26 008)
Income from investments (4 190) (5 552) (10 399)
Increase in fair value of
available for sale
investments (2 612) (6 136) (11 073)
Finance costs 14 727 7 979 17 306
Taxation (83) 324 344
Depreciation of property,
plant, equipment and
vehicles 1 402 1 972 3 880
Negative goodwill
released to income
Share based payment
expense (989) - (444)
Loss on disposal of
property, plant,
equipment and 982 66 132
vehicles - - 11
Operating cash flows
before movements in
working capital 590 (1 933) (1 177)
Decrease/(increase) in
inventories 987 (3 986) 4 027
Decrease/(increase) in
receivables 11 239 (7 934) (14 105)
Increase/(decrease) in
payables 4 332 (1 734) (3 354)
Cash generated from
operations 17 148 (15 587) (14 609)
Income taxes paid (673) (1 487) (1 488)
Interest paid (14 727) (7 979) (17 341)
Net cash from/(used in)
operating activities 1 748 (25 053) (33 438)
Investing activities
Interest received 3 773 5 269 10 033
Dividends received from
associates 1 854 3 012 6 256
Dividends received from
other equity investments 417 283 366
Proceeds on disposal of
available for sale
investments 1 165 2 949 12 260
Proceeds on disposal of
property, plant, equipment
and vehicles 69 - 184
Purchase of property,
plant, equipment and
vehicles (286) (2 308) (2 503)
Acquisition of
investments in associates (237 468) - (29 496)
Net cash (used in)/from
investing activities (230 476) 9 205 (2 900)
Financing activities
Dividends paid (11 869) (9 467) (9 493)
Repayments of borrowings (9 904) (647) (1 838)
Loan advances 156 389 3 653 15 515
Shares repurchased - (78) (62)
Proceeds on issue of
shares 96 452 - -
(Decrease)/increase in
bank overdrafts (6 133) 2 889 2 622
Net cash from/(used in)
financing activities 224 935 (3 650) 6 744
Net decrease in cash and
cash equivalents (3 793) (19 498) (29 594)
Cash and cash equivalents
at beginning of period 23 679 53 273 53 273
Cash and cash equivalents
at end of period
Bank balances and cash 19 886 33 775 23 679
SEGMENTAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE 2005
Operating Headline
R`000 Revenue Profit Earnings
Financial services 402 (3) 4 734
Industrial 85 615 7 420 15 833
Available for
sale investments 283 3 248 3 171
Corporate -- (6 587) (8 274)
Total 86 300 4 078 15 464
R`000 Assets Liabilities
Financial services 66 214 11 212
Industrial 541 077 305 362
Available for
sale investments 14 749 221
Corporate 20 334 36 403
Total 642 374 353 198
COMMENTARY
The results for the six month period are considered to be -positive in light of
the impact of non-recurring costs relating to the acquisition of investments
which had a direct and -significant effect on headline earnings.
Headline earnings for the six months to end June 2005 increased by 16.5% to
R15.5 million from R13.3 million for the comparable period in 2004, translating
to headline earnings per share of 12.5 cents (2004: 11.2 cents).
Revenue for the half year amounted to R86.3 million (2004: R83.9 million). The
results were bolstered by the inclusion of equity accounted earnings of Life
Healthcare (formerly Afrox Healthcare) for the first time, contributing
significantly to profits after accounting for financing costs and deal
expenses.
With more shares in issue net asset value moved to 139.6 cents per share (2004:
156.2 cents). Net asset value was impacted during the six months by the
Claw-back offer to shareholders and a dividend of 10 cents per share.
RESULTS FOR THE PERIOD
Adoption of new and revised International Financial Reporting Standards (IFRS)
The Group has adopted all of the new and revised standards and interpretations
issued by the International Accounting Standards Board (the IASB) and the
International Financial Reporting Interpretations Committee (IFRIC) of the IASB
that are relevant to its operations and effective for accounting periods
beginning on 1 January 2005. The adoption of these new and revised standards
and interpretations has resulted in changes to the Group`s accounting policies
in the following areas that have affected the amounts reported for the current
or prior years:
- Share-based payments (IFRS 2)
- Goodwill (IFRS 3)
- Accounting for associate`s Zimbabwe subsidiary (IAS 27)
- Available for sale assets (IAS 39)
The interim results presented may differ from IFRS actually in effect at 31
December 2005 as a result of ongoing review and possible - amendments by
interpretive guidance from the IASB and IFRIC.
Claw-back offer
During the period under review Brimstone undertook a claw-back offer of 100 076
155 Brimstone `N` ordinary shares to shareholders at R1.10 per share in the
ratio of 75 offer shares for every 100 Brimstone shares held. The offer was
extremely well received with 94% of shareholders taking up their options. The
balance of the offer was taken up by the underwriter, Rand Merchant Bank.
INDUSTRIAL
Life Healthcare (formerly Afrox Healthcare)
On 22 March, Brimstone acquired an -effective 18.156% share in Life Healthcare.
While -financing and deal costs related to the - transaction were substantial,
Life Healthcare still contributed positively to equity accounted -earnings. It
is expected that Life Healthcare will be a substantial -contributor to
-earnings in future.
Sea Harvest
Results continued to be adversely impacted by the Rand exchange rate, poor
fishing stock levels and the results of its Namibian - associate, Namfish. Sea
Harvest`s results were also affected a R16 million -impairment in value of a
fishing vessel. The advent of true winter -weather in the Cape has had a
positive effect on fishing -conditions.
Scientific Group
Adcock Ingram has acquired 74% of Scientific Group. The Criticare Division of
Adcock Ingrim will be acquired by Scientific Group.These transactions are
subject to Competition Commission approval. Brimstone will continue to hold
26.042% of the enlarger company.
Lenco
Lenco achieved a satisfactory performance for the six month period. In line
with the seasonal nature of the packaging industry, particularly within the
food and beverage sectors, the bulk of earnings should be achieved during the
latter half of the financial year. The accounting for the Zimbabwe subsidiary
of Lenco increased Brimstone`s share of profit of associates by 1.1 million.
House of Monatic
While production and sales volumes of men`s clothing remained strong, trading
has continued to be negatively affected by the reduced Rand value of exports
into core US and UK markets. Positive indicators for the remainder of the
financial year include a strong forward order book. House of Monatic has
recently entered into an agreement for the lease of Rex Trueform`s Salt River
clothing manufacturing facilities. The agreement, which is subject to
Competition Commission approval, becomes effective 1 January 2006.
FINANCIAL
Lion of Africa Insurance Company
Brimstone has successfully concluded the acquisition of an additional 9% of
Lion of Africa Insurance Company from Santam Limited. The acquisition increases
Brimstone`s holding to 39%. Lion of Africa Insurance again enjoyed buoyant
conditions in the insurance industry to report strong profit after tax.
Management is confident that -budgeted earnings will be achieved.
Aon South Africa
Brimstone holds an effective 18% in Aon South Africa, a subsidiary of Dutch
company Aon Holdings bv. Aon performed satisfactorily for the period.
Old Mutual empowerment transaction
Post balance sheet Brimstone paid R7.4 million in settlement of its -initial
commitment to the Mutual BEE deal. Brimstone management has started delivering
on their contractual performance obligations.
Nedcor empowerment transaction
Post balance sheet Brimstone paid R4.9 million in settlement of its -initial
commitment to the Nedcor BEE deal. Brimstone management has started delivering
on their contractual performance obligations.
PROSPECTS
Brimstone has built a successful company on the back of deal flow and astute
management of its underlying investments. During the financial period under
review a number of deals that were initiated during 2004 were brought to
successful fruition, which the directors of Brimstone are confident will be to
the ultimate benefit of Brimstone shareholders, its business partners and
employees.
The lifeblood of any investment company is its credentials. We are proud of the
relationships we have built up, the partnerships we have forged and our
impeccable empowerment credentials. We are -confident of the profit generating
strength of our portfolio, and we will therefore continue to evaluate
investments that create wealth for our stakeholders and for the communities to
which we are profoundly indebted.
IMPACT OF CHANGES IN ACCOUNTING POLICY
Reconciliation of previous SA GAAP to IFRS
30 June 31 December 1 January
2004 2004 2004
Equity as previously reported 168 210 173 816 167 530
Non IFRS adjustment (1 347) -- --
Adjustment on adoption of IFRS 6 799 11 630 2 265
Equity as reported under IFRS 173 662 185 446 169 795
Equity adjustments
Gain on revaluation of property 3 236 3 236 3 236
Deferred tax arising on revaluation
of land and buildings (971) (971) (971)
Goodwill amortisation reversed 4 534 9 365 --
6 799 11 630 2 265
Assets and liabilities adjustments
Property, plant, equipment and
vehicles 3 236 3 236 3 236
Investments in associates 4 534 9 365 --
Deferred taxation (971) (971) (971)
6 799 11 630 2 265
On behalf of the board
Prof GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
23 August 2005
Date: 24/08/2005 07:31:04 AM
Produced by the JSE SENS Department
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