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BRN BRT
BRT
Brimstone - Unaudited results for the six months ended 30 June 2006
and cautionary announcement
BRIMSTONE INVESTMENT CORPORATION
(Incorporated in the Republic of South Africa)
Company Registration Number: 1995/010442/06
ISIN Number: ZAE000015277 Share Code: BRT,
ISIN Number: ZAE000015285 & Share Code: BRN
("Brimstone" or "the Company")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 AND CAUTIONARY
ANNOUNCEMENT
- HIGHLIGHTS:
- Assets exceed R1 billion
- NAV up 18.6% to 256.6 cents
- Headline earnings up 336%
GROUP INCOME STATEMENTS
Unaudited Unaudited Audited
6 Months 6 Months 12 months
ended ended ended
30 June 30 June 31 December
R"000 2006 2005 2005
REVENUE 96 048 86 300 188 752
Cost of sales (64 938) (63 785) (135 804)
GROSS PROFIT 31 110 22 515 52 948
Selling and administration
expenses (28 698) (22 038) (48 000)
Negative goodwill released
to income - 989 990
Fair value gain on options 122 000 - 143 558
Exceptional items 5 457 2 612 6 476
PROFIT FROM OPERATIONS 129 869 4 078 155 972
Income from investments 4 358 3 773 7 928
Finance costs (16 897) (14 727) (33 149)
Share of profit of associates 29 915 23 246 38 622
NET PROFIT BEFORE TAXATION 147 245 16 370 169 373
Taxation (22 124) 83 (15 398)
NET ATTRIBUTABLE PROFIT 125 121 16 453 153 975
Attributable to:
Equity holders of the parent 124 909 16 349 153 556
Minority interest 212 104 419
125 121 16 453 153 975
EARNINGS PER SHARE (CENTS)
Headline 54.1 12.4 20.7
Basic 54.1 13.2 91.4
DILUTED EARNINGS PER SHARE (CENTS)
Headline 51.4 12.5 87.4
Basic 51.4 13.3 88.0
Weighted average number of shares
on which earnings per share is
based (000"s) 230 992 124 093 168 002
Weighted average number of
shares on which diluted earnings
per share is based (000"s) 243 166 123 170 174 461
HEADLINE EARNINGS CALCULATION
Net attributable profit 124 909 16 349 153 556
Negative goodwill released
to income -- (989) (990)
HEADLINE EARNINGS 124 909 15 360 152 566
GROUP BALANCE SHEETS
Unaudited Unaudited Audited
30 June 30 June 31 December
R"000 2006 2005 2005
ASSETS
Non-current assets 931 825 551 427 757 548
Property, plant, equipment
and vehicles 26 486 18 526 23 781
Investments in
associate companies 577 064 508 273 545 172
Investments 318 127 24 628 188 595
Current assets 128 221 90 947 123 684
Loan 8 037 -- 7 001
Inventory 59 179 30 360 28 858
Trade receivables 47 110 29 523 35 831
Taxation -- 707 817
Cash and cash equivalents 4 701 19 886 36 633
TOTAL ASSETS 1 060 046 642 374 881 232
EQUITY AND LIABILITIES
Capital and reserves 593 873 289 176 495 526
Share capital 39 38 38
Capital reserves 270 813 215 109 262 346
Revaluation reserves 3 977 3 977 3 977
Retained earnings 321 755 69 948 228 746
Minority interest (2 711) 104 419
Non-current liabilities 356 083 308 346 331 339
Long-term interest-
bearing borrowings 318 604 305 768 312 181
Deferred taxation 37 479 2 578 19 158
Current liabilities 110 090 44 852 54 367
Short-term interest
bearing borrowings 40 573 20 535 25 181
Bank overdraft 10 681 1 316 8 151
Trade payables 40 604 6 783 8 760
Other payables 16 756 16 218 12 275
Taxation 1 476 -- --
TOTAL EQUITY AND LIABILITIES 1 060 046 642 374 881 232
NAV per share (cents) 256.6 139.6 216.4
Shares in issue at
end of period ("000) 232 534 207 081 228 813
GROUP STATEMENTS OF CHANGES IN EQUITY
Share Capital
R"000 capital reserves
Balance at 1 January 2005 as previously reported 37 113 987
Effects of changes in accounting policies and SAICA
Circular -- --
Balance at 1 January 2005 as restated 37 113 987
Attributable profit for the year ended 31 Dec 2005 -- --
Deferred tax arising on revaluation of land
and buildings -- --
Gain on available-for-sale asset -- --
Total recognised income and expense for the year -- --
Recognition of share-based payments -- 2 043
Dividend paid -- --
Issue of share capital 1 142 988
Transfer current year share of non-distributable
reserve of associate -- 3 328
Balance at 31 December 2005 38 262 346
Attributable profit for the six months
ended 30 June 2006 -- --
Minority shareholder share of accumulated deficit
at acquisition of subsidiary -- --
Recognition of share-based payments -- 1 104
Dividend paid -- --
Issue of share capital 1 3 565
Increase in treasury shares held by share trust -- (174)
Transfer current year share of non-distributable
reserve of associate -- 3 972
Balance at 30 June 2006 39 270 813
1 January 2005 to 30 June 2005
Balance at 1 January 2005 37 113 987
Attributable profit for the six months ended
30 June 2005 -- --
Deferred tax arising on revaluation of land and
buildings -- --
Gain on available-for-sale asset -- --
Total recognised income and expense for the period -- --
Recognition of share-based payments -- 982
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
GROUP STATEMENTS OF CHANGES IN EQUITY (continued)
Revaluation Retained
R"000 reserves earnings
Balance at 1 January 2005 as previously reported 2 265 90 372
Effects of changes in accounting policies and SAICA
circular -- 21 215
Balance at 1 January 2005 as restated 2 265 90 372
Attributable profit for the year ended 31 Dec 2005 -- 153 556
Deferred tax arising on revaluation of land
and buildings 32 --
Gain on available-for-sale asset 1 680 --
Total recognised income and expense for the year 1 712 153 556
Recognition of share-based payments -- --
Dividend paid -- (11 854)
Issue of share capital -- --
Transfer current year share of non-distributable
reserve of associate -- (3 328)
Balance at 31 December 2005 3 977 228 746
Attributable profit for the six months
ended 30 June 2006 -- 124 909
Minority shareholder share of accumulated deficit
at acquisition of subsidiary -- --
Recognition of share-based payments -- --
Dividend paid -- (27 928)
Issue of share capital -- --
Increase in treasury shares held by share trust -- --
Transfer current year share of non-distributable
reserve of associate -- (3 972)
Balance at 30 June 2006 3 977 321 755
1 January 2005 to 30 June 2005
Balance at 1 January 2005 2 265 69 157
Attributable profit for the six months ended
30 June 2005 -- 16 349
Deferred tax arising on revaluation of land and
buildings 32 --
Gain on available-for-sale asset 1 680 --
Total recognised income and expense for the period 1 712 16 349
Recognition of share-based payments -- --
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
GROUP STATEMENTS OF CHANGES IN EQUITY (continued)
Attributable
to equity
holders of Minority
the parent interest
R"000
Balance at 1 January 2005 as previously reported 185 446 --
Effects of changes in accounting policies and SAICA
circular 21 215 --
Balance at 1 January 2005 as restated 206 661 --
Attributable profit for the year ended 31 Dec 2005 153 556 419
Deferred tax arising on revaluation of land
and buildings 32 --
Gain on available-for-sale asset 1 680 --
Total recognised income and expense for the year 155 268 419
Recognition of share-based payments 2 043 --
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 495 107 419
Attributable profit for the six months
ended 30 June 2006 124 909 212
Minority shareholder share of accumulated deficit
at acquisition of subsidiary -- (3 342)
Recognition of share-based payments 1 104 --
Dividend paid (27 928) --
Issue of share capital 3 566 --
Increase in treasury shares held by share trust (174) --
Transfer current year share of non-distributable
reserve of associate -- --
Balance at 30 June 2006 596 584 (2 711)
1 January 2005 to 30 June 2005
Balance at 1 January 2005 185 446 --
Attributable profit for the six months ended
30 June 2005 16 349 104
Deferred tax arising on revaluation of land and
buildings 32 --
Gain on available-for-sale asset 1 680 --
Total recognised income and expense for the period 18 061 104
Recognition of share-based payments 982 --
Dividend paid (11 869) --
Issue of share capital 96 452 --
Transfer current year share of non-distributable
reserve of associate -- --
Balance at 30 June 2005 289 072 104
GROUP STATEMENTS OF CHANGES IN EQUITY (continued)
R"000 Total
Balance at 1 January 2005 as previously reported 185 446
Effects of changes in accounting policies and SAICA
circular 21 215
Balance at 1 January 2005 as restated 206 661
Attributable profit for the year ended 31 Dec 2005 153 975
Deferred tax arising on revaluation of land
and buildings 32
Gain on available-for-sale asset 1 680
Total recognised income and expense for the year 155 687
Recognition of share-based payments 2 043
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 495 526
Attributable profit for the six months
ended 30 June 2006 125 121
Minority shareholder share of accumulated deficit
at acquisition of subsidiary (3 342)
Recognition of share-based payments 1 104
Dividend paid (27 928)
Issue of share capital 3 566
Increase in treasury shares held by share trust (174)
Transfer current year share of non-distributable
reserve of associate --
Balance at 30 June 2006 593 873
1 January 2005 to 30 June 2005
Balance at 1 January 2005 185 446
Attributable profit for the six months ended
30 June 2005 16 453
Deferred tax arising on revaluation of land and
buildings 32
Gain on available-for-sale asset 1 680
Total recognised income and expense for the period 18 165
Recognition of share-based payments 982
Dividend paid (11 869)
Issue of share capital 96 452
Transfer current year share of non-distributable
reserve of associate --
Balance at 30 June 2005 289 176
GROUP CASH FLOW STATEMENTS
Unaudited 6 Unaudited 6 Audited 12
months ended months ended months ended 31
30 June 2006 30 June 2005 December 2005
Operating activities
Profit for the period 125 121 16 453 153 975
Adjustments for:
Share of profit of
associates (32 645) (25 100) (43 719)
Income from investments (4 682) (4 190) (8 533)
Increase in fair value of
available for sale
investments (127 457) (2 612) (150 034)
Finance costs 16 897 14 727 33 149
Taxation 22 124 (83) 15 398
Depreciation of property,
plant, equipment and
vehicles 872 1 402 2 932
Negative goodwill
released to income - (989) (990)
Share based payment
expense 1 104 982 2 043
Loss on disposal of
property, plant,
equipment and
vehicles - - 161
Operating cash flows
before movements in
working capital 1 334 590 4 382
Decrease/(increase) in
inventories (10 283) 987 2 489
Decrease/(increase) in
receivables 11 907 11 239 858
Increase in payables 1 324 4 332 1 436
Cash generated from
operations 4 282 17 148 9 165
Income taxes paid (2 109) (673) (670)
Interest paid (16 897) (14 727) (33 149)
Net cash from/(used in)
operating activities (14 724) 1 748 (24 654)
Investing activities
Interest received 4 358 3 773 7 928
Dividends received from
associates 2 730 1 854 5 098
Dividends received from
other equity investments 324 417 605
Loan repayments and recoveries
From associate and investments 919 1 165 1 391
Proceeds on disposal of
property, plant, equipment
and vehicles - 69 111
Acquisition of subsidiaries
shares acquired and loans
advanced (11 034) - -
Purchase of property, plant
equipment and vehicles (1 203) (286) (3 116)
Loan advances (1 036) - (7 001)
Acquisition of associates and
investments (1 418) (237 468) (256 789)
Net cash used in investing
activities (6 360) (230 476) (251 773)
Financing activities
Dividends paid (27 928) (11 869) (11 854)
Repayments of borrowings (2 274) (9 904) (2 091)
Loan advances 11 113 156 389 159 635
Shares repurchased (174) - (13 091)
Proceeds on issue of
shares 3 566 96 452 156 080
(Decrease)/increase in
bank overdrafts 2 530 (6 133) 702
Net cash from/(used in)
financing activities (13 167) 224 935 289 381
Net (decrease)/increase in
cash and cash equivalents (34 251) (3 793) 12 954
Cash and cash equivalents
at beginning of period 36 633 23 679 23 679
Cash and cash equivalents
at end of period
Bank balances and cash 4 701 19 886 36 633
SEGMENTAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE 2006
Operating Headline
R"000 Revenue Profit Earnings
Financial services 4 943 128 374 113 277
Industrial 90 537 6 152 (4 543)
Healthcare 185 170 24 411
Investments in transition 372 4 352 4 327
Corporate 11 (9 179) (12 563)
Total 96 048 129 869 124 909
R"000 Assets Liabilities
Financial services 358 875 10 313
Industrial 379 379 248 618
Healthcare 291 208 135 796
Investments in Transition 19 922 56
Corporate 10 662 71 390
Total 1 060 046 466 173
ACQUISITION OF SUBSIDIARIES
On 31 May 2006, the Group acquired 51% of the issued share capital of Fifth
Element Marketing (Pty) Ltd and O"Neill South Africa (Pty) Ltd for a cash
consideration of R5.5 million and R1.1 million respectively. Both companies
are involved in the design and marketing of leisurewear. This transaction
has been accounted for by the purchase method of accounting. Brimstone"s
share of profits from these operations from date of acquisition to 30 June
2006 amounted to 0.2 million.
Acquisition Value:
R"000 Fifth Element O"Neill Total
Total assets 39 801 6 320 46 121
Non current assets 5 624 303 5 927
Current Assets 34 177 6 017 40 194
Total liabilities 46 895 6 047 52 942
Non current liabilities 10 719 - 10 719
Current liabilities 36 176 6 047 4 223
Net (liabilities)/assets (7 094) 273 (6 821)
Brimstone share (51%) (3 618) 139 (3 479)
Goodwill 9 168 980 10 148
Total consideration 5 550 1 119 6 669
Net cash outflow arising
on acquisition
Cash consideration 5 550 1 119 6 669
Cash and cash equivalents
Acquired 2 132 187 2 319
3 418 932 4 350
There were no fair value adjustments to assets and liabilities acquired.
COMMENTARY
The results for the six months to 30 June 2006 have been positive and
resulted in significant increases over the comparative period for 2005,
with headline earnings increasing to 54.1 cents (30 June 2005: 12.4 cents)
pe3r share. Net asset value per share increased to 256.6 cents from 216.4
cents at 31 December 2005. Intrinsic net asset value per share (refer to
comment below) has also increased from 505 cents to 585.5 cents.
RESULTS FOR THE PERIOD
This report has been prepared in compliance with International Financial
Reporting Standards and complies with IAS 34 Interim Financial Reporting.
The accounting policies used in the preparation of the interim report are
consistent with those used in the annual financial statements for the year
ended 31 December 2005.
Issue of shares
On 17 March 2006 the company issued 1,490,804 ordinary shares and 2,229,745
"N" ordinary shares to non executive and executive directors in terms of
the share option scheme.
INVESTMENTS
HEALTHCARE
Life Healthcare
Brimstone holds an effective 18.156% in Life Healthcare, which it acquired
during the first half of 2005. As one of the largest private hospital
operations outside of the USA, the group operates 62 acute care facilities
with a comprehensive geographic spread in seven SA provinces and into
Botswana. The company was a substantial contributor to equity accounted
earnings for the period under review and Brimstone expects this important
investment to continue to yield significant returns.
Scientific Group
During the prior financial year the Scientific Group successfully merged
with the Criticare division of Adcock Ingram, which now holds a 74% stake
in Scientific. Brimstone continues to hold 26% of the company and has -
benefited from a larger market presence with enhanced earnings for the
period. We continue to be excited by prospects for this investment.
INDUSTRIAL
House of Monatic
House of Monatic, Brimstone"s only wholly-owned subsidiary, has benefited
from the increasing support of local retailers following the well
documented troubles in the apparel market led by the surge in imports. The
company has defended its market position through a refocus on the local
market, an enhanced retail offering and importantly, the addition of
younger brands to the mix including trademarks such as RipTear and Barbie
through its stake in marketing house Fifth Element and O"Neill SA,
transactions that were finalised and brought to book from 1 June 2006.
Lenco
Tight market conditions and the seasonal nature of the packaging industry,
particularly within the beverage sector, resulted in a small loss for the
packaging company. Earnings are expected to accrue during the latter half
of the year.
Sea Harvest
Brimstone has a 21.52% shareholding in fishing company Sea Harvest
Corporation Limited, one of the largest employers on the West Coast and a
major player in the deep sea fishing sector. Results for this company
continued to be adversely impacted by continued poor fishing stock levels,
difficult international trading conditions and industrial action. In line
with the cyclical nature of the sector, and evidence of improved fishing
conditions, the directors are confident that Sea Harvest will be a
substantial contributor to earnings in future.
FINANCIAL
Aon South Africa
Aon South Africa, in which Brimstone holds an effective 18%, continued to
benefit from the generally buoyant trading conditions of the period,
reporting an overall improvement in gross revenues. Earnings were impacted
however, by the costs of bedding down acquisitions including that of QED
Actuaries & Consultants and Shield Financial Services. Aon has secured a
number of new brokerage accounts and we are confident of improved results
for the remainder of the year.
Lion of Africa Insurance Company
Lion of Africa Insurance Company, in which Brimstone holds a 39% stake,
continued to benefit from buoyant conditions in the short term insurance
industry, and has become a major contributor to equity accounted earnings
for Brimstone. It has taken Lion a relatively short six years to move into
the top 10 short term insurers in South Africa, from a start-up position,
and its ranking as the largest Black owned and managed insurer in the
domestic market augurs well for the future.
Nedbank
Brimstone"s rights to 2 643 586 Nedbank shares, accounted for as options,
contributed significantly to earnings for the period, in line with the
overall performance of the share markets and Nedbanks"s continuing
recovery.
Old Mutual
Brimstone"s rights to 19 376 400 Old Mutual shares, also accounted for as
options, contributed meaningfully to earnings in line with the overall
performance of the share markets over the period and Old Mutual"s
successful acquisition of Skandia which has given it a diversified
geographical spread of businesses.
Cautionary announcement
Shareholders are advised that Brimstone is currently in negotiations which,
if successfully concluded, may have a material effect on the price of the
company"s securities. Accordingly shareholders are advised to exercise
caution when dealing in the company"s securities until a further
announcement is made.
Intrinsic Net Asset Value
In the annual financial statements at 31 December 2005, the directors
included a report on Intrinsic Net Asset Value based on a line-by-line
valuation of the underlying investments. A similar exercise was performed
at 30 June 2006 which indicated in Intrinsic Net Asset Value of 585.8 cents
(2005: 505 cents) per share.
PROSPECTS
The recent history of Brimstone has been marked by substantial acquisition
and asset building, essentially redefining the nature and underlying value
of our company and its prospects. The market has reacted positively, re-
rating our share price in recognition of the company"s underlying intrinsic
worth.
We are confident that the solid nature of our investments will continue to
yield positive returns, and the company is committed to pursuing
opportunities that will be drivers of wealth creation for all our
stakeholders.
On behalf of the board
Prof GJ Gerwel MA Brey
Non-Executive Chairman Chief Executive Officer
22 August 2006
Sponsor: Nedbank Capital
Date: 22/08/2006 05:26:24 PM Produced by the JSE SENS Department
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