| Mon 6 Mar 2006, 14:38 | | Brimstone - Reviewed results for the 12 months end |
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BRN BRT
BRT
Brimstone - Reviewed results for the 12 months ended 31 December 2005
BRIMSTONE INVESTMENT CORPORATION
(Incorporated in the Republic of South Africa)
Company Registration Number: 1995/010442/06
("Brimstone" or "the Company")
ISIN Number: ZAE000015277 & Share Code: BRT
ISIN Number: ZAE000015285 & Share Code: BRN
REVIEWED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2005
HIGHLIGHTS:
PARTICIPATED IN THREE OF THE YEAR"S MOST PROMINENT BEE DEALS
RECORD HEADLINE EARNINGS UP 338% TO 91.1 CENTS PER SHARE
INCREASED DIVIDEND TO 12 CENTS PER SHARE
GROUP INCOME STATEMENTS
Restated
Reviewed Reviewed
year ended year ended
31 December 31 December
R"000 2005 2004
REVENUE 188 752 187 626
Cost of sales (135 804) (141 425)
GROSS PROFIT 52 948 46 201
Selling and administration
expenses (48 000) (44 324)
Negative goodwill released
to income 990 382
Fair value gain on options 143 558 -
Exceptional items 6 476 11 073
PROFIT FROM OPERATIONS 155 972 13 332
Income from investments 7 928 10 033
Finance costs (33 149) (17 306)
Share of profit of associates 38 622 19 501
NET PROFIT BEFORE TAXATION 169 373 25 560
Taxation (15 398) (497)
NET ATTRIBUTABLE PROFIT 153 975 25 063
Attributable to:
Equity holders of the parent 153 556 25 063
Minority interest 419 -
153 975 25 063
EARNINGS PER SHARE (CENTS)
Headline 91.1 20.8
Basic 91.7 21.1
DILUTED EARNINGS PER SHARE (CENTS)
Headline 87.7 20.5
Basic 88.3 20.8
Weighted average number of shares
on which earnings per share is
based (000"s) 168 002 118 799
Weighted average number of
shares on which diluted earnings
per share is based (000"s) 174 461 120 385
HEADLINE EARNINGS CALCULATION
Net attributable profit 153 975 25 063
Negative goodwill released
to income (990) (382)
HEADLINE EARNINGS 152 985 24 681
GROUP BALANCE SHEETS
Restated
Reviewed Reviewed
31 December 31 December
R"000 2005 2004
ASSETS
Non-current assets 757 548 310 912
Property, plant, equipment
and vehicles 23 781 23 869
Investments in
associate companies 545 172 266 412
Investments 188 595 20 631
Current assets 123 684 106 259
Loan 7 001 -
Inventory 28 858 31 347
Trade receivables 35 831 34 049
Other receivables 14 544 17 184
Cash and cash equivalents 35 633 23 679
Taxation 817 -
TOTAL ASSETS 881 232 417 171
EQUITY AND LIABILITIES
Capital and reserves 495 526 206 661
Share capital 38 37
Capital reserves 262 346 113 987
Revaluation reserves 3 977 2 265
Retained earnings 228 746 90 372
Minority interest 419 -
Non-current liabilities 331 339 158 109
Long-term interest
bearing borrowings 312 181 154 514
Deferred taxation 19 158 3 595
Current liabilities 54 367 52 401
Short-term interest
bearing borrowings 25 181 25 304
Bank overdraft 8 151 7 449
Trade payables 8 760 10 895
Other payables 12 275 8 704
Taxation - 49
TOTAL EQUITY AND LIABILITIES 881 232 417 171
NAV per share (cents) 216.4 174.1
Shares in issue at
end of period ("000) 228 813 118 718
GROUP STATEMENTS OF CHANGES IN EQUITY FOR THE 12 MONTHS ENDED 31 DECEMBER 2005
Share Capital
R"000 capital reserves
Balance at 1 January 2004 as previously reported
(audited) 37 109 284
Effect of change in accounting policies
Gain on revaluation of property - -
Deferred taxation thereon - -
Recognition of share-based payments - 55
Recognition of negative goodwill in associate - -
Reassessment of useful life of fixed assets - -
Deferred taxation thereon - -
Impact on investment in associates - -
Operating lease adjustment - -
Deferred taxation thereon - -
As restated (reviewed) 37 109 339
Attributable profit for 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
Restated balance at 31 December 2004 (reviewed) 37 113 987
Attributable profit for the year ended 31 December 2005 - -
Balance at 1 January 2004 as previously reported 37 109 284
Deferred tax rising on revaluation of land and buildings - -
Recognition of share-based payments - 2 043
Gain on investment - -
Dividend paid - -
Issue of share capital 1 142 988
Transfer current year share of no-distributable
Reserve of associate - 3 328
Balance at 31 December 2005 (reviewed) 38 262 346
Revaluation Retained
R"000 reserves earnings
Balance at 1 January 2004 as previously reported
(audited) - 58 209
Effect of change in accounting policies
Gain on revaluation of property 3 236 -
Deferred taxation thereon (971) -
Recognition of share-based payments - (55)
Recognition of negative goodwill in associate - 17 266
Reassessment of useful life of fixed assets - 3 404
Deferred taxation thereon - (1 021)
Impact on investment in associates 2 019
Operating lease adjustment - (631)
Deferred taxation thereon - 189
As restated (reviewed) 2 265 79 380
Attributable profit for the year ended 31 December 2004 - 25 063
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)
Restated balance at 31 December 2004 (reviewed) 2 265 90 372
Attributable profit for the year ended 31 December 2005 - 153 556
Deferred tax arising on revaluation of land and buildings 32 -
Gain on investment 1 680 -
Dividend paid - (11 854)
Issue of share capital - -
Transfer current year of non-distributable
Reserve if associate - (3 328)
Balance at 31 December 2005 (reviewed) 3 977 228 746
Attributable to
equity holders Minority
R"000 of the parent interest
Balance at 1 January 2004 as previously
Reported (audited) 167 530 -
Effect of change in accounting policies
Gain on revaluation of property 3 236 -
Deferred taxation thereon (971) -
Recognition of share-based payments - -
Recognition of negative goodwill in associate 17 266 -
Reassessment of useful life of fixed assets 3 404 -
Deferred taxation thereon (1 021) -
Impact on investment in associates 2 019 -
Operating lease adjustment (631) -
Deferred taxation thereon 189 -
As restated (reviewed) 191 021 -
Attributable profit for the year ended
31 December 2004 25 063 -
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 - -
Restated balance at 31 December 2004 206 661 -
Attributable profit for the year ended
31 December 2005 153 556 419
Deferred tax arising on revaluation
of land and buildings 32 -
Recognition of share-based payments 2 043 -
Gain on investment 1 680 -
Dividend paid (11 854) -
Issue of share capital 142 989 -
Transfer current year share of non-distributable
Reserve of associate - -
Balance at 31 December 2005 (reviewed) 495 107 -
R"000 Total
Balance at 1 January 2004 as previously reported (audited) 167 530
Effect of change in accounting policies
Gain on revaluation of property 3 236
Deferred taxation thereon (971)
Recognition of share-based payments -
Recognition of negative goodwill in associate 17 266
Reassessment of useful life of fixed assets 3 404
Deferred taxation thereon (1 021)
Impact on investment in associates 2 019
Operating lease adjustment (631)
Deferred taxation thereon 189
As restated (reviewed) 191 021
Attributable profit for the year ended 31 December 2004 25 063
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 -
Restated balance at 31 December 2004 206 661
Attributable profit for the year ended 31 December 2005 153 975
Deferred tax arising on revaluation of land and buildings 32
Recognition of share-based payments 2 043
Gain on investment 1 680
Dividend paid (11 854)
Issue of share capital 142 989
Transfer current year share of non-distributable
reserve of associate -
Balance at 31 December 2005 (reviewed) 495 526
GROUP CASH FLOW STATEMENTS
R"000 Restated
Reviewed Reviewed
year ended year ended
31 December 31 December
2005 2004
Operating activities
Net attributable profit 153 975 25 063
Adjustments for:
Share of profit of associates (43 719) (25 756)
Income from investments (8 533) (10 399)
Increase in fair value of investments (150 034) (11 073)
Finance costs 15 398 497
Taxation 324 344
Depreciation of property, plant,
equipment and vehicles 2 932 3 127
Negative goodwill released to income (990) (382)
Share-based payment expense 2 043 132
Loss/(profit) on disposal of property,
plant, equipment and vehicles 161 (11)
Operating cash flows before movements in
working capital 4 382 (1 496)
Decrease in inventories 2 489 4 027
Decrease/(increase) in receivables 858 (14 105)
Increase/(decrease) in payables 1 436 (3 034)
Cash generated from/(used in) operations 9 165 (14 608)
Income taxes paid (870) (1 488)
Interest paid (33 149) (17 341)
Net cash used in operating activities (24 654) (33 437)
Investing activities
Interest received 7 928 10 033
Dividends received from associates 5 098 6 256
Dividends received from other equity investments 605 366
Loan repayments and recoveries from
Associate and investments 1 391 12 260
Proceeds on disposal of property, plant,
equipment and vehicles 111 184
Purchase of property, plant, equipment and
vehicles (3 116) (2 503)
Acquisition of associates and investments (256 789) (29 496)
Net cash used in investing activities (251 773) (2 900)
(2 900)
Financing activities
Dividends paid (11 854) (9 493)
Repayments of borrowings 159 635 (1 838)
Loans raised 3 653 15 515
Shares repurchased (13 091) (63)
Proceeds on issue of shares 156 080 -
Increase in bank overdraft 702 2 622
Net cash from financing activities 289 381 6 743
Net increase (decrease) in cash and
cash equivalents 12 954 (29 594)
Cash and cash equivalents at beginning of year 23 679 53 273
53 273
Cash and cash equivalents at end of year
Bank balances and cash 36 633 23 679
SEGMENTAL INFORMATION FOR THE 12 MONTHS ENDED 31 DECEMBER 2005
Profit from Headline
R"000 Revenue Operations Earnings
Financial services 750 147 775 136 036
Industrial 185 826 17 483 8 655
Healthcare 1 593 1 581 17 659
Investments in transition 355 4 300 4 373
Corporate 266 (15 167) (13 738)
Total (reviewed) 188 752 155 972 152 985
R"000 Assets Liabilities
Financial services 231 998 11 646
Industrial 326 023 191 570
Healthcare 260 771 129 584
Investments in transition 19 499 43
Corporate 42 941 52 883
Total (reviewed) 881 232 385 706
IMPACT OF CHANGES IN ACCOUNTING POLICIES
Reconciliation of previous SA GAAP to IFRS and SAICA Circular 7/2005
R"000 31 December 1 January
2004 2004
Equity as previously reported 173 816 167 530
Adjustments on adoption of IFRS and SAICA circular 32 845 23 491
Equity as reported under IFRS and SAICA circular 206 661 191 021
Equity adjustments:
Gain on revaluation of property 3 236 3 236
Deferred taxation thereon (971) (971)
Recognition of negative goodwill in associate 17 266 17 266
Reassessment of useful life of fixed assets 4 157 3 404
Deferred taxation thereon (1 247) (1 021)
Impact on investment in associates 1 707 2 019
Operating lease adjustment (930) (631)
Deferred taxation thereon 262 189
Goodwill amortisation reversed 9 365 -
32 845 23 491
Assets and liabilities adjustments
Property, plant equipment and vehicles 7 393 6 640
Investments in associates 28 338 19 285
Deferred taxation (1 956) (1 803)
Other payables (930) (631)
32 845 23 491
WINNER: FINANCIAL MAIL TOP EMPOWERMENT COMPANIES - 2005 - FINANCIAL SERVICES
COMMENTARY
Brimstone celebrated its 10th year of doing business with the conclusion of
three major transactions and the delivery of record earnings. The Group raised
R110 million from its shareholders to fund the acquisition of an 18.156%
interest in hospital group Life Healthcare. The other two transactions
were the acquisition of rights to 19.4 million Old Mutual plc shares (.71%) at
R14.95 per share,and 2.6 million Nedbank Limited shares (.91%) at R74.75 per
share.
All three transactions contributed strongly to earnings with Life Healthcare
contributing R15.2 million after allowing for finance costs, and Old Mutual and
Nedbank (treated as options) contributing R56.2 million and R66.6 million after
tax to headline earnings respectively. As a result Brimstone delivered record
Group headline earnings of R153 million (2004: R24.7 million), translating to
headline earnings of 91.1 cents (2004: 20.8 cents) per share, with net asset
value (at book value) surging to 216.4 cents per share, from 174.1 cents in
2004.
Reflecting positive shareholder and market sentiment, the market capitalisation
of Brimstone Ordinary and "N" Ordinary shares on the JSE Limited was valued at
approximately R1 billion at year end 2005, from R220 million at the end of 2004.
RESULTS FOR THE YEAR
Auditors" review opinion
The results have been reviewed by Deloitte & Touche whose unqualified review
report is available for inspection at the company"s registered office.
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 the accounting period
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)
- Presentation of borrowings (IAS 1)
- Property, plant, equipment and vehicles (IAS 16)
- Accounting for associate"s Zimbabwe subsidiary (IAS 27)
- Available-for-sale investments (IAS 39)
This report complies with the requirements of IAS 34. On 2 August 2005 SAICA
issued circular 7/2005 clarifying the interpretation of AC 105: Leases for South
African Companies. The Group has now conformed with this interpretation of the
accounting for operating leases and now accounts for the operating expense on a
straight-line basis over the period of the lease. Operating lease expenses were
previously accounted for on a contract basis. The financial statements of the
prior period have been restated to reflect these changes.
It is important to note that the adoption of IFRS represents an accounting
change only and does not affect Brimstone"s underlying operation or cash flows.
UNDERLYING INVESTMENTS
INDUSTRIAL
House of Monatic
The results of House of Monatic were encouraging in view of the detrimental
effect of rand strength and the continued onslaught of cheaper imports. A focus
on local markets and a stronger retail offering have had a positive effect on
results. We are pleased with the support of local retailers in regard to filling
our order books, particularly in view of the recent lease agreement with Rex
Trueform"s Salt River factory. We are confident that this operation will yield
profits on the strength of quality production. Diversification into new and
younger brands through Fifth Element acquired after year end will enhance this.
Lenco
The seasonal nature of its operations allowed plastics company Versapak to shrug
off the negative impact of a price war early in 2005. We are enthusiastic about
opportunities afforded by the recent rigid plastics supply contract with soft
drink giant Amalgamated Beverage Industries (ABI) for which Lenco has invested
R60 million into the Xac-Pet Wadeville plant in Gauteng, establishing the most
technologically advanced PET facility in the southern hemisphere. Billions of
soft drink pre-forms are to be produced for ABI over the next few years.
Sea Harvest
The results of Sea Harvest continued to be impacted by higher catch costs,
as a result of increased fuel prices, and poor catch rates. The high incidence
of small fish in the catch and the requirement to fish in deeper waters,
persisted throughout the year, putting further pressure on margins. The total
allowable catch (TAC) of hake was reduced by 8 000 tonnes for 2006. Of concern
is the further reduction as a result of the long-term rights allocation process
which, taken together with the reduction in the TAC, resulted in a 20% decline
in Sea Harvest"s quota for 2006. This is likely to have a severe effect on
operations and Sea Harvest is appealing the decision. To counter these various
challenges Sea Harvest implemented several cost saving and revenue enhancing
initiatives during the year, the most important being the conversion of vessels
to burn lower cost fuel blends and the creation of attractive export markets for
fish products produced from small fish. These initiatives are expected to make
a positive contribution to the performance of the business in the year ahead.
HEALTH CARE
Life Healthcare
Equity accounted earnings from Brimstone"s effective 18.156% interest in
Life Healthcare represented a significant part of overall earnings for the year,
attributed to improved operational efficiencies and a focus on quality. For the
first time in the business" history, revenues exceeded R5 billion. We believe
there are extensive opportunities to expand Life Healthcare"s business interests
going forward.
Scientific Group
During the year Scientific Group formalized its merger with the Criticare
division of Adcock Ingram. Brimstone continues to hold 26% of the enlarged
company. Scientific contributed meaningfully to earnings during the year and we
are confident that the alignment with an industry leader will translate into
ongoing improved profitability.
FINANCIAL SERVICES
Aon South Africa
Aon South Africa, in which Brimstone holds an effective 18% interest,
benefited from general buoyant trading conditions during the year, reporting
an improvement in gross revenue of 16%, excluding acquisitions of QED
Actuaries & Consultants and Shield Financial Services. Key new brokerage
accounts include Eskom, Alcatel, Barloworld and MTN. We are confident of
enhanced earnings going forward.
Lion of Africa Insurance Company
During the year Brimstone acquired an additional effective 9% of Lion of Africa
Insurance Company, thereby increasing its stake to 39% and bringing black equity
in the company to 65%. As the leading black owned insurance company in South
Africa, Lion represents an important growth investment for Brimstone and results
for the year have reaffirmed this commitment, as gross written premiums improved
strongly from R567m to R665m. Positive net underwriting results also reflect the
company"s resilience in responding to two large fire claims during the year,
while improvements in investment income - despite the adoption of a conservative
investment approach - combined with higher cash flows from the growth in the
underwriting account, saw the international solvency margin improve from 38% to
43%. Following expansion into regional core markets, we are confident the Lion
is positioned for significant growth.
Old Mutual
Brimstone and Wiphold led two consortia, respectively the Brimstone and
Wiphold consortia, as the Black Business Partners (BBPs) in the Old Mutual
Group"s R7.2 billion BEE transaction. The deal was celebrated as a landmark
due to its size, reach and broad-based structure. Brimstone is fulfilling the
terms of its contractual performance obligations, and we are confident that the
international expansion of Old Mutual holds the promise of a significant
increase in the value of the option in coming years.
Nedbank
In a transaction linked with the Old Mutual BEE transaction, the BBPs acquired
an effective 1.82% of Nedbank Limited. The Brimstone consortium participated in
50% of the BBP transaction in this regard, acquiring an effective 0.91% of
Nedbank Limited.
DIRECTORS" VALUATION OF UNDERLYING INVESTMENTS
The directors have undertaken a fair market value assessment of the Group"s
underlying investments. Based on this exercise, they are of the opinion that the
intrinsic net asset value of the Group was 505 cents per share at 31 December
2005.
PROSPECTS
Our strategy remains to pursue opportunities that offer growth and sustainable
returns, across any sector of the economy. The year was once again notable
in terms of the number of deals concluded. That Brimstone was invited to be
part of transactions of this size and quality reflects the company"s excellent
credibility as a partner-of-choice with well established industry leaders.
In view of our track record, and the relationships which we have built up
during a decade of doing business, we are convinced of the future of our
company. Our efforts will continue to be directed at preserving and enhancing
a quality and lucrative book of assets, with a focus on delivering real value
for all our stakeholders.
DIVIDEND
The board of Brimstone has declared a dividend (number 5) of 12 cents per
share payable on Monday 3 April 2006. In compliance with the requirements of
STRATE, the company has determined the following salient dates for the payment
of the dividend. The last day to trade cum dividend is Friday 24 March 2006. The
dividend is payable to all shareholders of Brimstone recorded in the books of
the company at the close of business on Friday 31 March 2006. Shares will
commence trading ex dividend from Monday 27 March 2006. Shares may not be
rematerialised or dematerialised from 27 March to 31 March 2006, both days
inclusive.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
6 March 2006
Date: 06/03/2006 02:38:19 PM Produced by the JSE SENS Department
