| Wed 28 Feb 2007, 8:52 | | BRT / BRN - Brimstone Investment Corporation - Rev |
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BRT BRN
BRT
BRT / BRN - Brimstone Investment Corporation - Reviewed Results For The 12
Months Ended 31 December 2006
BRIMSTONE INVESTMENT CORPORATION
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000015277 Share Code: BRT,
ISIN Number: ZAE000015285 Share Code: BRN
Company Registration Number: 1995/010442/06
("Brimstone" or "the Company")
REVIEWED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2006
HIGHLIGHTS:
HEADLINE EARNINGS EXCEED 1 BILLION
DIVIDEND OF 16 CENTS PER SHARE
GROUP INCOME STATEMENTS
Reviewed Audited
year ended year ended
31 December 31 December
R`000 2006 2005
REVENUE 377 953 188 752
Cost of sales (268 632) (135 804)
GROSS PROFIT 109 321 52 948
Selling and administration
expenses (79 190) (48 000)
Negative goodwill released
to income - 990
Fair value gains 1 408 997 143 558
Exceptional items 10 721 6 476
PROFIT FROM OPERATIONS 1 449 849 155 972
Income from investments 9 558 7 928
Finance costs (190 318) (33 149)
Share of profit of associates 28 172 38 622
NET PROFIT BEFORE TAXATION 1 297 261 169 373
Taxation (195 745) (15 398)
NET ATTRIBUTABLE PROFIT 1 101 516 153 975
Attributable to:
Equity holders of the parent 1 099 427 153 556
Minority interest 2 089 419
1 101 516 153 975
EARNINGS PER SHARE (CENTS)
Headline 474.2 90.9
Basic 474.1 91.4
DILUTED EARNINGS PER SHARE (CENTS)
Headline 458.5 87.5
Basic 458.4 88.0
Weighted average number of shares
on which earnings per share is
based (000`s) 231 875 168 002
Weighted average number of
shares on which diluted earnings
per share is based (000`s) 239 815 174 461
HEADLINE EARNINGS CALCULATION
Net attributable profit 1 099 427 153 556
Loss on disposal of property,
plant, equipment and vehicles 96 161
Negative goodwill released to
Income - (990)
HEADLINE EARNINGS 1 099 523 152 727
GROUP BALANCE SHEETS
Reviewed Audited
31 December 31 December
R`000 2006 2005
ASSETS
Non-current assets 2 568 137 757 548
Property, plant, equipment
and vehicles 38 418 23 781
Goodwill 11 049 -
Investments in
associate companies 512 416 545 172
Investments 2 006 254 188 595
Current assets 198 306 123 684
Loan - 7 001
Inventory 81 354 28 858
Trade receivables 68 481 35 831
Other receivables 31 200 14 544
Cash and cash equivalents 17 069 36 633
Taxation 202 817
TOTAL ASSETS 2 766 443 881 232
EQUITY AND LIABILITIES
Capital and reserves 1 570 691 495 526
Share capital 40 38
Capital reserves 271 325 262 346
Revaluation reserves 3 977 3 977
Retained earnings 1 297 049 228 746
Minority interest (1 700) 419
Non-current liabilities 1 008 652 331 339
Long-term interest
bearing borrowings 797 198 312 181
Deferred taxation 211 454 19 158
Current liabilities 187 100 54 367
Short-term interest
bearing borrowings 33 321 25 181
Bank overdraft 45 709 8 151
Trade payables 66 410 8 760
Other payables 39 986 12 275
Taxation 1 674 -
TOTAL EQUITY AND LIABILITIES 2 766 443 881 232
NAV per share (cents) 674.5 216.4
Shares in issue at
end of period (`000) 233 104 228 813
Group Cash Flow Statements
for the year ended 31 December 2006
Reviewed Audited
year ended year ended 31
December 31 DecemberR`000 2006
2005Operating activitiesProfit for the year 1 101 516
153 975 Adjustments for:Share of profits of associate (43 903)
(43 719)Income from investments (10 359) (8 533)Increase
in fair value of investments (1 415 444) (150 034)Finance costs
190 318 33 149 Taxation 195 745
15 398 Depreciation of property, plant,
equipment and vehicles 2 652 2 932 Negative goodwill
released to income - (990)Share-based payment expense
2 208 2 043 Profit on disposal of investments (4
274) - Loss on disposal of property, plant,
equipment and vehicles 96 161 Operating cash flows
before
movements in working capital 18 555 4 382 (Increase)/decrease
in inventory (31 861) 2 489 (Increase)/decrease in receivables
(30 401) 858 Increase in payables 38 176
1 436 Cash (used in)/generated from
operations (5 531) 9 165 Income taxes paid
(3 725) (670)Interest paid (190 318)
(33 149)Net cash used in operating activities (199 574) (24
654)Investing activitiesInterest received 9 558
7 928 Dividends received from associates 15 731 5 098 Dividends
received from other
equity investments 801 605 Loan repayments and
recoveries from
associate and investments 4 086 1 391 Proceeds on
disposal of investments 43 738 - Proceeds on disposal of
property, plant, equipment
and vehicles 235 111 Purchase of property,
plant,
equipment and vehicles (2 596) (3 116)Acquisition of
subsidiaries-shares acquired and loans advanced (20 878) - Loan
repaid/(advanced) 7 001 (7 001)Acquisition of
investments in
associates (384 838) (256 789)Net cash used in
investing activities (327 162) (251 773)Financing activitiesDividends
paid (27 867) (11 854)Repayments of borrowings
(2 734) (2 091)Loan advances 494 358
159 635 Shares repurchased (543) (13
091)Proceeds on issue of shares 4 058 156 080 Increase in
bank overdrafts 37 550 702 Net cash from financing
activities 504 822 289 381 Net (decrease)/increase in cash
and
cash equivalents (21 914) 12 954 Cash and cash
equivalents at
beginning of year 36 633 23 679 Cash and cash
equivalents acquired
on acquisition of subsidiaries 2 350 - Cash and cash
equivalents at
end of year 17 069 36 633
Acquisition of subsidiariesOn 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. 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 31 December 2006 amounted to R389 107.
On 31 October 2006 the Group acquired 100% of the issued share capital of WCP
Garment Manufacturing (Pty) Ltd. The company manufactures casualwear at its
factory in Atlantis. The transaction has been accounted for on the purchase
method of accounting. Brimstone`s share of losses from date of acquisition to
31 December 2006 amounted to R1 260 291.
R`000 Acquisition valueTotal
assets 57 175 Non current
assets 15 023 Current assets
42 152 Total liabilities 55 920
Non current liabilities 2 721
Current liabilities 53 199 Net
assets 1 255 Brimstone
share 5 464 Goodwill
11 049 Total consideration (satisfied by cash) 16 513
Net cash outflow arising on acquisition Cash consideration
16 513 Cash and cash equivalents acquired 2 350
14 163 The initial accounting for the subsidiaries acquired has not been
finalised. This is the result of uncertainties surrounding the valuation of
inventory and payables. These uncertainties are expected to be resolved by 30
June 2007.There were no material fair value adjustments to assets and
liabilities acquired.
Pro forma unaudited results of the Brimstone Group if the companies acquired had
been consolidated from 1 January 2006:R`000 Revenue
448 984 Headline earnings 1 093
986
Segmental information for the
year ended 31 December 2006
Operating HeadlineR`000
Revenue Profit Earnings Assets LiabilitiesFinancial
services 19 423 214 537 196 448 446 039 10 414
Industrial 357 801 29 457 15 727 646 377 455 282
Healthcare 370 1 218 035 905 286 1 653 848 617 637
Entrepreneurial
development - - (22) 6 264 -
Investments in
transition 359 7 210 7 840 4 037 152
Corporate - (19 390) (25 756) 9 878 112 267
Total 377 953 1 449 849 1 099 523 2 766 443 1 195 752
Group Statements of Changes in Equity for the year ended 31 December 2006R`000
Share Capital Capital Revaluation
Reserves Reserves
Balance at 1 January
2005 37 113 987 2 265
Attributable profit for
the year ended 31 Dec
2005 - - -
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
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 3 977
Attributable profit for the year
ended 31 December 2006 - - -
Minority shareholder share of
accumulated deficit at acquisition
of subsidiary - - -
Recognition of share-based
payments - 2 208 -
Dividend paid - - -
Issue of share capital 2 4 056 -
Increase in treasury shares
held by share trust - (542) -
Transfer current year share
of non-distributable reserve of
associate - 3 257
Balance at 31 December 2006 40 271 325 3 977
Retained Attributable Minority Total
Earnings to equity Interest
holders of
the parent
Balance at 1 January
2005 90 372 206 661 - 206 661
Attributable profit for
the year ended 31 Dec
2005 153 556 153 556 419 153 975
Deferred tax arising on
revaluation of land and
buildings - 32 - 32
Gain on available for
sale asset - 1 680 - 1 680
Total recognised income and
expense for the year 153 556 155 268 419 155 687
Recognition of share-based
Payments - 2 043 - 2 043
Dividend paid (11 854) (11 854) - (11 854)
Issue of share capital - 142 989 - 142 989
Transfer current year share of
non-distributable reserve of
associate (3 328) - - -
Balance at 31 December 2005 228 746 495 107 419 495 526
Attributable profit for the
Year ended 31 December 2006 1 099 427 1 099 427 2 089 1 101 516
Minority shareholder share of
accumulated deficit at acquisition
of subsidiary - - (4 208) (4 208)
Recognition of share-based
Payments - 2 208 - 2 208
Dividend paid (27 867) (27 867) - (27 867)
Issue of share capital - 4 058 - 4 058
Increase in treasury shares
held by share trust - (542) - (542)
Transfer current year share
of non-distributable reserve of (3 257) - - -
associate
Balance at 31 December 2006 1 297 049 1572 391 (1700) 1570 691
COMMENTARYResults for the financial year to 31 December 2006 were the result of
healthy performances across the group`s portfolio of underlying investments.
Revenues increased to R378 million (2005: R188.8 million), and net attributable
profit to R1.1 billion (2005: R154 million). The group`s JSE market
capitalisation increased to R1.65 billion at year end, from R963 million at the
end of 2005. The company is becoming a prominent feature in the portfolios of
financial institutions and private investors. Group assets increased to R2.8
billion.
Results for the year Auditors review opinion
The results have been reviewed by Deloitte & Touche, whose unmodified report is
available for inspection at the company`s registered office.
These condensed results comply with IAS 34 Interim Financial Reporting. The
accounting policies used in the preparation of this report are consistent with
those used in the annual financial statements for the year ended 31 December
2005 which has been prepared in accordance with International Financial
Reporting Standards.
Issue of sharesThe following shares were issued to non executive and executive
directors during the year in terms of the share option scheme.
Ordinary "N" ordinary17 March 2006 1 490
804 2 229 745 19 October 2006 217 204
503 344 1 708 008 2 733
089 Brimstone Portfolio
Healthcare
Life HealthcareIn a series of transactions, Brimstone increased its effective
holding in Life Healthcare to 21.9%, from 18.156% during the year. The
acquisition reflects the group`s confidence in the prospects for what is one of
South Africa`s biggest group of hospitals. Over the coming year, the group will
be embarking on an upgrade to its local facilities throughout its national grid
of 62 acute hospitals and four NHS contracted treatment centres in the United
Kingdom through the Partnership Health Group.
Following this further acquisition, the directors have re-evaluated the
classification of the investment in the Life Healthcare Group, which is now
being accounted for at fair value through profit or loss in terms of IAS 39,
whereas -previously the investment was accounted for as an associate utilising
the equity method. The directors are of the opinion that this basis of
accounting for this investment more fairly reflects the inherent value of the
underlying investment. During the year under review this has added R905 million
to headline earnings whilst finance charges have increased by R132 million due
to accounting for profit carry costs due to funders.
Scientific GroupSynergies resulting from last year`s merger of the Scientific
Group with the Criticare division of Adcock Ingram have translated into enhanced
earnings and the company contributed -meaningfully to equity accounted earnings
for the year. The company`s status as a major supplier of established brand name
consumables and equipment into the healthcare sector, positions it well in this
growing, niche sector of the market.
INDUSTRIALHouse of Monatic During the year House of Monatic focused on
integrating new marketing and branding opportunities with other assets in
Brimstone`s stable of clothing interests, while concluding the acquisition of a
51% stake in Fifth Element Marketing and O`Neill SA. Subsequent to the year end,
the long term rights to the Canterbury South Africa label throughout Africa and
the Indian Ocean islands were acquired from Canterbury International. Order
books remain healthy and we are confident that Monatic will continue to yield
profits.
Lenco While results for Lenco were negatively impacted by higher crude oil
prices for the year, prospects are promising in light of continued demand for
its rigid plastics products -particularly in bottling, and the strength of new
opportunities for bottle closures, where Lenco are investing a further R60
million.
Sea HarvestSea Harvest`s results improved towards the year end on the back of
the weakening of the Rand and right sizing of the workforce. With long-term
fishing quotas now in place, and cost savings, equipment and fleet renewal
initiatives reflecting through to the bottom line, earnings are expected to be
positive in the coming year. While fish resource levels continue to be of
concern, we are -confident in the management of Sea Harvest and believe they
have charted the right direction for this company.
Oceana In September 2006 Brimstone finalised the acquisition of a strategic 10%
stake in fishing group Oceana Group Limited for a consideration of R176.4
million. Oceana, which holds interests in catching, processing, marketing and
trading of a wide range of fish and fish products including canned pilchards
under the Lucky Star label in SA and Glenryck in the UK, is also involved in
cold storage. The acquisition is aligned with the group`s strategy of
strengthening its interests across all species in the fishing sector in Southern
Africa. The investment is accounted for as an associate.
FINANCIAL SERVICESAon South AfricaBuoyant market conditions resulted in an
improvement in profits. With a number of new brokerage accounts we are confident
of enhanced earnings going forward.
Lion of Africa Insurance CompanyLion of Africa continued to consolidate its
position within the corporate and commercial sectors during the year, while
exiting its alternative risk transfer business. Positive results for the year
are especially pleasing given the aggressive stance of the market, as well as
adverse weather conditions, crime, a number of large fires and an escalation in
motor claims. While these are challenges that will remain for the coming year,
we are confident of continued positive growth
NedbankBrimstone`s rights to Nedbank Group Limited shares, accounted for as
options, contributed significantly to earnings for the year. In its first year
of delivering value to Nedbank, the Brimstone consortium generated performance
fees in the process, part of which, in terms of the agreement, will be applied
to acquiring additional Nedbank shares. We are confident that the foundation we
have laid in the period under review positions Brimstone well for its future
relationship with Nedbank.
Old MutualRights to Old Mutual plc shares, accounted for as options, were again
a significant contributor to earnings. Performance fees were generated during
the year, part of which will be applied to debt funding in the investment
structure and the remainder will be received in cash. With a better
understanding of the Old Mutual businesses, the consortium is well placed to
improve performance and bolster performance fees.
ENTREPRENEURIAL DEVELOPMENT"Commercial success" underpins Brimstone`s
empowerment philosophy. In line with this, the company has formed an
entrepreneurial investment fund, which will identify and develop new
entrepreneurs. The fund concluded two small transactions during the year. In
October 2006 a 20% stake was acquired in Hot Platinum, which provides complete
casting solutions for platinum, gold and other metals primarily to the jewellery
market. The other acquisition was a stake in Smart ATM, a fledgling provider of
hardware and software for ATM, debit and credit card, airtime and other
electronic transactions.
PROSPECTSBrimstone will continue to build a quality, sustainable book of assets,
evaluating opportunities for investment in profit generating businesses with
exceptional growth potential. With current investments extending across
healthcare, financial services and consumer linked enterprises, the group
represents a well diversified investment option.
DIVIDENDThe board of Brimstone has declared a dividend (number 6) of 16 cents
per share payable on Monday 2 April 2007. 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, 23 March 2007.
The dividend is payable to all shareholders of Brimstone recorded in the books
of the company at the close of business on Friday, 30 March 2007. Shares will
commence trading ex dividend from Monday, 26 March 2007. Shares may not be
rematerialised or dematerialised from Monday, 26 March 2007 to Friday, 30 March
2007, both days inclusive.On behalf of the boardProf GJ Gerwel
MA Brey
Non-Executive Chairman Chief Executive Officer27 February 2007
T COMPANIES - 2005 - FINANCIAL SERVICES
Sponsor: Nedbank Capital
Date: 28/02/2007 08:52:05 Produced by the JSE SENS Department.
