UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015

Transcription

1 Profitability. Empowerment. Positive Social Impact. ISIN Number: ZAE Share Code: BRT ISIN Number: ZAE Share Code: BRN Company Registration Number: 1995/010442/06 (Incorporated in the Republic of South Africa) ( Brimstone or the Company ) UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015 SIGNIFICANT EVENTS Strong dividend income from investments Old Mutual and Nedbank transactions concluded Reduction of debt Downward revaluation of Grindrod, Life Healthcare and Tiger Brands Losses at subsidiary Lion of Africa Insurance Company COMMENTARY The company reported a loss for the period under review of R480.1 million compared to a profit of R309.7million in the comparative period. The significant contributor to this reduction in earnings was the downward revaluation of investments, the effect of which can be found in both fair value adjustments and equity accounted losses of associates and joint ventures. This was compounded by poor results from operating subsidiary Lion of Africa Insurance Company. Gross assets decreased to R7.6 billion, from R7.9 billion at 31 December Intrinsic Net Asset Value decreased to R4.1 billion from R4.9 billion at 31 December Underlying investments 1

2 Brimstone Portfolio SUBSIDIARIES Sea Harvest (58.44%) Catches during the first six months of the year were 8% lower than the prior period as a result of challenging fishing conditions which was partly offset by improved vessel utilisation across the fleet. Sales volumes grew by 6% on average, with particularly strong growth in export markets, where firm international demand for hake was supported on the supply side by the successful integration into the fleet of a new freezer vessel, the Atlantic Peace. Local sales volumes were under pressure due to a stagnant economic environment, pricing action and competitive activity. Revenue was 2% higher than last year, with volume growth and strong price increases being partly offset by weaker foreign exchange rates. Operating profit before interest increased by 35% to R89.3 million benefiting from price increases, efficient cost control and the lower fuel price. Lion of Africa Insurance Company (100%) Lion of Africa reported an underwriting loss at 30 June 2015 of R102.5 million. Net loss for the six months is reported as R105.2 million. While the results are disappointing the specific program of remedial action is expected to yield positive results. Operational reform has commenced in all key business areas under a turnaround team. Lion of Africa has secured a commercial arrangement with Zurich Insurance Company South Africa Limited in respect of Corporate and Local Authority business. Lion of Africa was further capitalized by Brimstone with R150 million during the period under review. House of Monatic (100%) Turnover increased to R104.2 million for the six months mainly as a result of increased sales from company owned branded retail stores and corporate business. Net profit increased to R2.8 million and employment levels increased to 840 permanent staff. House of Monatic is continuing to expand its retail presence with two further C 2 branded stores, including one franchised store, being opened. ASSOCIATES AND JOINT VENTURES Oceana (16.81%) Oceana s share price closed at R97.00 per share, down from R per share at 31 December Brimstone received dividends of R21.3 million from Oceana during the period under review and recorded R24.9 million in equity accounted earnings based on its reported six month earnings to 31 March Oceana announced that it would be acquiring 100% of the share capital of the processing operations of US-based Daybrook Fisheries Inc. and 25% of Westbank LLC, its related marine operations. Brimstone has signed irrevocable letters of commitment to follow its rights to 2.8 million shares at R75 per share in the proposed rights offer resulting from this transaction. Brimstone is pleased to report that subsequent to the period end the company has repaid all debt in the Oceana SPV structure. Brimstone owns 20.1 million Oceana shares of which 11.6 million are now debt free. Aon Re Africa (18%) Aon Re Africa is the leading reinsurance broker licensed and operating in South Africa and the rest of Africa. Aon Re Africa continued to successfully secure new business across all divisions which resulted in solid organic growth, especially outside of South Africa. Brimstone received a dividend of R11 million from Aon Re Africa and recorded R4.3 million in equity accounted losses during the period under review. Afena Capital (28.79%) Afena Capital is an investment management firm that offers specialist equity and balanced portfolios serving the South African and Botswana institutional markets. Afena made a small contribution to earnings. Obsidian Health (25.07%) During the period under review Brimstone disposed of its investment in The Scientific Group realising a profit on disposal of R36.1 million. As part of the transaction, the medical division of The Scientific Group was transferred to a new company Obsidian Health in which Brimstone holds a 25.07% interest. 2

3 Grindrod (4.97%) Grindrod is an operationally integrated company providing end-to-end solutions for the movement of cargo by road, rail and sea using specialised assets and infrastructure focused on dry-bulk and liquid-bulk commodities, vehicles and containers. Brimstone accounts for its share of the results in the Consortium SPV as a joint venture. Brimstone s share of the consortium losses amounted to R288.5 million. Grindrod s share price closed at R13.45 down from R22.40 per share at 31 December Brimstone s share of the losses of the joint venture comprise the following: R 000 Unaudited 6 months 30 June 2015 Dividends received Fair value losses ( ) Net finance costs (19 091) Other net expenses (54) Taxation Equity accounted loss ( ) From 1 July 2015 to 12 August 2015 Brimstone acquired an additional Grindrod shares directly in the market. This is in addition to its existing 4.97% indirect shareholding in Grindrod. At 12 August 2015, Brimstone held an effective 5.2% in Grindrod. INVESTMENTS Life Healthcare (5.04%) Life Healthcare s share price closed at R37.53 per share, down from R42.76 per share at 31 December The investment was revalued downwards by R274.6 million to R million. Brimstone received a dividend of 68 cents per share resulting in total dividend receipts from Life Healthcare of R35.7 million, down from R85.6 million last year which included a special dividend of R52.5 million. MTN Zakhele (2.71%) Brimstone acquired a further MTN Zakhele shares during the period under review at an average cost of R per share. The share price closed at R121.50, up from R per share at 31 December The investment was revalued upwards by R28.6 million to R266.4 million. Brimstone now holds MTN Zakhele shares. Nedbank (0.11%) Following the conclusion of the Nedbank transaction Brimstone held Nedbank shares. Brimstone sold of these shares realising R444.9 million. The remaining shares were valued at the closing market price of R per share and are carried in the books at R127.7 million at 30 June Old Mutual (0.11%) The Old Mutual transaction concluded on 1 May After settlement of debt in terms of the contract, Brimstone held Old Mutual plc shares. Brimstone sold of these shares, realising R73.4 million. The remaining shares were valued at the closing market price of R38.70 per share and are carried in the books at R215.3 million at 30 June Phuthuma Nathi (5.13%) Brimstone acquired a further Phuthuma Nathi shares at an average cost of R per share during the period under review. The Phuthuma Nathi 1 shares and Phuthuma Nathi 2 shares closed at R and R respectively. The investment was revalued upwards by R67.7 million to R537.1 million. Phuthuma Nathi has declared a dividend payable to shareholders in September Based on the number of shares held at 30 June 2015, Brimstone is expected to receive a total dividend of R63.6 million. Rex Trueform and African & Overseas Enterprises (Queenspark) (22%) The Rex Trueform and African & Overseas Enterprises N shares were revalued downwards by R4.7million. Taste Holdings (13.08%) Taste Holdings share price closed at R4.30 per share, up from R3.20 per share at 31 December The investment was revalued upwards by R41.5 million to R162.3 million. On 2 July 2015 in terms of a specific issue of shares for cash approved by Taste Holdings shareholders, Brimstone acquired a further Taste Holdings shares at R3.05 per share. Brimstone now holds an effective 15.5% in Taste Holdings. Tiger Brands (0.94%) Brimstone s rights to Tiger Brands shares, accounted for as options, have been revalued at period end. The independently calculated option valuation was based on a closing share price of R per share, down from R per share at 31 December The investment was revalued downwards by R144.2 million to R197.4 million. 3

4 Basis of preparation The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standard, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, and the requirements of the Companies Act of South Africa. The report has been prepared using accounting policies that comply with International Financial Reporting Standards which are consistent with those applied in the financial statements for the year 31 December The condensed financial information was prepared under the supervision of the group financial director, Lawrie Zev Brozin, B.Com B.Acc CA(SA). Share repurchase During the review period Brimstone repurchased Brimstone ordinary shares at R17.00 per share for a total consideration of R and Brimstone N ordinary shares at R16.50 per share for a total consideration of R This specific repurchase of shares was from the Brimstone Investment Corporation Limited Share Trust, a trust controlled by Brimstone and as such was done intra-group with no cash flow implications, except for related expenses. The repurchased shares were listed as treasury shares in Brimstone s last annual financial statements and the Company applied to the JSE for the cancellation of these shares, which were duly cancelled and delisted on 12 March Dividend In line with previous years, no interim dividend is declared for the half year. Prospects The Group s assets are characterised by strong underlying businesses with positive dividend paying ability. Whilst the current results were subject to significant fair market value losses, the Group maintains its positive long term view on its investments. On behalf of the board F Robertson Executive Chairman MA Brey Chief Executive Officer 18 August 2015 Directorate and administration Registered office: Boundary Terraces, 1 Mariendahl Lane, Newlands 7700, Cape Town Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2001 Sponsor: Nedbank CIB, 135 Rivonia Road, Sandton 2196 Directorate: F Robertson (Executive Chairman)*, MA Brey (Chief Executive Officer)*, LZ Brozin (Financial)*, PL Campher (Lead Independent), M Hewu, N Khan, KR Moloko, MK Ndebele, LA Parker, FD Roman *Executive Website: info@brimstone.co.za 4

5 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the 6 months 30 June 2015 Unaudited Unaudited Audited Year 30 June 30 June 31 Dec R Revenue Sales and fee income Dividends received Operating expenses ( ) ( ) ( ) Operating profit Fair value (losses)/gains ( ) Exceptional items (28 286) Share of (losses)/profits of associates and joint ventures ( ) (65 431) (Loss)/profit before net finance costs ( ) Income from investments Finance costs (98 370) (86 544) ( ) Outside unit holders interest (440) (970) (449) Net (loss)/profit before taxation ( ) Taxation (81 575) (28 712) (Loss)/profit for the period ( ) Other comprehensive (loss)/income, net of tax (7 661) Items that may be reclassified subsequently to profit and loss Cash flow hedges (Loss)/profit arising during the period (7 661) Net value loss on available-for-sale financial asset (15 887) Total comprehensive (loss)/income for the period ( ) (Loss)/profit attributable to: Equity holders of the parent ( ) Non-controlling interests ( ) Total comprehensive (loss)/income attributable to: Equity holders of the parent ( ) Non-controlling interests ( ) (Loss)/earnings per share (cents) Basic (204,7) 120,9 105,8 Diluted (175,4) 103,1 90,4 5

6 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2015 Unaudited Unaudited Audited 30 June 30 June 31 Dec R ASSETS Non-current assets Property, plant, equipment and vehicles Goodwill and other intangible assets Investments in associate companies and joint ventures Investments Deferred taxation Insurance assets Other financial assets Current assets Inventories Trade and other receivables Insurance assets Taxation Investments Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Share capital Capital reserves Revaluation reserves Cash flow hedging reserve Changes in ownership (11 839) (11 839) (11 839) Retained earnings Attributable to equity holders of the parent Non-controlling interests Non-current liabilities Long-term interest bearing borrowings Long-term provisions Other financial liabilities Insurance liabilities Deferred taxation Current liabilities Short-term interest bearing borrowings Bank overdrafts Trade payables Other payables Insurance liabilities Outside unit holders interest Other financial liabilities Short-term provisions Taxation TOTAL EQUITY AND LIABILITIES NAV per share (cents) 1 107, , ,3 Shares in issue at end of period (000 s)

7 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months 30 June 2015 R 000 Share capital Capital reserves Revaluation reserves Cash flow hedging reserve Changes in ownership Retained earnings Attributable to equity holders of the parent Noncontrolling interests Total Balance at 1 January 2014 Audited (4 847) (11 839) Attributable profit for the year 31 December Other comprehensive income (9 080) Total comprehensive income (9 080) Recognition of share-based payments Dividend paid (97 939) (97 939) (3 000) ( ) Subsidiary s accrual for preference dividends Redemption of preference shares by subsidiary (26 804) (26 804) Share of distribution made by associate (58 945) (58 945) (58 945) Share of distribution made by subsidiary for change in shareholding (42 115) (42 115) (29 953) (72 068) Reduction of subsidiary s share capital (6) (6) Issue of share capital Repurchase of trust units (744) (744) 651 (93) Share of non-distributable reserves of associates transferred directly to equity Balance at 31 December 2014 Audited (11 839) Attributable (loss)/profit for the six months 30 June 2015 ( ) ( ) ( ) Other comprehensive loss (4 476) (4 476) (3 185) (7 661) Total comprehensive (loss)/income (4 476) ( ) ( ) ( ) Recognition of share-based payments Dividend paid ( ) ( ) (20 679) ( ) Subsidiary s accrual for preference dividends Non-controlling interest arising on recognition of subsidiary Repayment of capital by subsidiary (21 258) (21 258) Issue of share capital Change in equity of subsidiary Share of non-distributable reserves of associates transferred directly to equity (56) Balance at 30 June 2015 Unaudited (11 839) January 2014 to 30 June 2014 Unaudited Balance at 1 January 2013 Audited (4 847) (11 839) Attributable profit for the six months 30 June Other comprehensive income Total comprehensive income Recognition of share-based payments Dividend paid (97 939) (97 939) (3 000) ( ) Subsidiary s accrual for preference dividends Redemption of preference shares by subsidiary (26 804) (26 804) Share of distribution made by associate (58 995) (58 995) (58 995) Share of distribution made by subsidiary for change in shareholding (38 194) (38 194) (23 967) (62 161) Issue of share capital Repurchase of trust units (185) (185) (77) (262) Change in shareholding in subsidiary (53) (53) Share of non-distributable reserves of associates transferred directly to equity (221) (221) Balance at 30 June 2014 Unaudited (11 839)

8 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS for the six months 30 June 2015 Unaudited Unaudited Audited 6 months 6 months Year 30 June 30 June 31 Dec R Operating activities Net attributable (loss)/profit ( ) Adjustments for non-cash items ( ) ( ) Operating cash flows before movements in working capital (44 543) Decrease/(increase) in inventories (34 071) (14 968) (Increase)/decrease in trade and other receivables ( ) Outside unit holders interest (2 703) Increase/(decrease) in trade and other payables (34 799) (13 192) Net increase in insurance assets ( ) ( ) (60 326) Net increase in insurance liabilities Cash generated from operations Interest received Dividends received from associates and joint ventures Dividends received from other equity investments Income taxes paid (23 180) (1 782) (17 184) Finance costs (60 605) (52 231) ( ) Net cash from operating activities Investing activities Loan repayments and recoveries from associates and investments Proceeds on disposal of investments Proceeds on disposal of property, plant, equipment and vehicles Acquisition of property, plant, equipment and vehicles (32 101) (45 305) ( ) Acquisition of intangible assets (820) (356) (1 156) Acquisition of investments ( ) ( ) ( ) Net cash from/(used in) investing activities ( ) ( ) Financing activities Dividends paid by company and subsidiaries ( ) ( ) ( ) Repayments of borrowings ( ) (88 274) ( ) Loans raised Proceeds on issue of trust units/shares Issue of shares by subsidiary Shares repurchased by subsidiary (6) Repayment of capital by subsidiary (21 258) Redemption of non-controlling shareholder s preference shares (24 579) Share of distribution made by subsidiary (38 194) (42 115) Units/shares repurchased by subsidiaries (315) (93) Increase/(decrease) in bank overdrafts (22 630) (34 789) Net cash (used in)/from financing activities ( ) (44 810) Net increase/(decrease) in cash and cash equivalents ( ) (39 594) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Bank balances and cash

9 HEADLINE EARNINGS PER SHARE Unaudited Unaudited Audited Year 30 June 30 June 31 Dec Headline (loss)/earnings per share (cents) Basic (213,2) 120,9 116,9 Diluted (182,7) 103,1 99,8 Headline (loss)/earnings calculation (R 000) Net (loss)/profit attributable to equity holders of the parent ( ) (Profit)/loss on disposal of property, plant, equipment and vehicles (87) Realised profit on disposal of associate (36 087) Impairment of investment in associate Adjustments relating to results of associates (63) (1 937) Total tax effects of adjustments (37) 505 Headline (loss)/earnings ( ) Weighted average number of shares on which (loss)/earnings and headline (loss)/earnings per share is based (000 s) Weighted average number of shares on which diluted (loss)/earnings and diluted headline (loss)/earnings per share is based (000 s) INTRINSIC NET ASSET VALUE (INAV) Unaudited 30 June 2015 Unaudited 31 Dec 2014 Change since 31 Dec 2014 INAV of Brimstone (Rm) % INAV per share (cents) % Fully diluted INAV per share (cents) % Market price per share (cents) Ordinary shares % N Ordinary shares % Discount to INAV Ordinary shares 4.3% 14.1% N Ordinary shares 10.5% 16.6% The breakdown of INAV is available on the company s website at 9

10 FURTHER INFORMATION 1. Taxation The tax charge is disproportionate to the loss before taxation because of the tax treatment of income and expenditure included in the result. Non-taxable items include dividends received, equity accounted gains or losses of associates, preference dividends included in finance costs and the non-recognition of a deferred tax asset for Lion of Africa losses. Fair value gains or losses and gain on disposal of associate are included at the CGT rate. 2. Segmental information Information reported to the Company s operating decision makers for the purpose of resource allocation and assessment of segment performance is specifically focused on the individual entity in which Brimstone has invested. The Company s reportable segments under IFRS 8 are therefore fishing, insurance, clothing and investments. Investments include investments in associates, available-for-sale investments, investments at fair value through profit or loss and the Company s property portfolio. Segmental information for the six months 30 June 2015 Profit/(loss) from Headline R 000 Revenue Operations Profit/(loss) Assets Liabilities Fishing Insurance ( ) ( ) Clothing Investment management ( ) Total Unaudited ( ) Segmental information for the six months 30 June 2014 Profit/(loss) from Headline R 000 Revenue Operations Profit/(loss) Assets Liabilities Fishing Insurance (59 543) (31 822) Clothing Investment management Total Unaudited Segmental information for the year 31 December 2014 Profit/(loss) from Headline R 000 Revenue Operations Profit/(loss) Assets Liabilities Fishing Insurance ( ) ( ) Clothing Investments Total Audited

11 2. Segmental information (continued) Unaudited Unaudited Audited Year 30 June 30 June 31 Dec Segment (loss)/profit from operations Fishing Insurance ( ) (59 543) ( ) Clothing Investment management Total profit from operations Fair value (losses)/gains ( ) Exceptional items (28 286) Share of (losses)/profits of associates and joint ventures ( ) (65 431) Income from investments Finance costs (98 370) (86 544) ( ) Outside unit holders interest (440) (970) (449) (Loss)/profit before taxation ( ) Fair value measurements Fair value of the Company s financial assets and financial liabilities that are measured on a fair value basis on a recurring basis. Some of the Company s financial assets and financial liabilities are measured at fair value at the end of each financial reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used). The directors consider that the carrying amounts of financial assets and financial liabilities not measured at fair value on a recurring basis (but fair value disclosures are required) recognised in the consolidated financial statements approximate their fair values. 30 June 2015 Level 1 Level 2 Level 3 Total Financial assets at FVTPL Derivative financial assets Listed shares Unlisted shares and loan ¹ Other investments Available-for-sale financial assets Unlisted shares ² Unlisted shares 2 218¹ Total Financial liabilities at FVTPL Derivative financial liabilities

12 3. Fair value measurements (continued) 30 June 2014 Level 1 Level 2 Level 3 Total Financial assets at FVTPL Derivative financial assets Listed shares Unlisted shares and loan ¹ Other investments Available-for-sale financial assets Unlisted shares Unlisted shares 2 154¹ Total Financial liabilities at FVTPL Derivative financial liabilities December 2014 Level 1 Level 2 Level 3 Total Financial assets at FVTPL Derivative financial assets Listed shares Unlisted shares and loan ¹ Other investments Available-for-sale financial assets Unlisted shares ² Unlisted shares 2 218¹ Total Financial liabilities at FVTPL Derivative financial liabilities The table provided analyses financial instruments that are measured subsequent to initial recognition at fair value, grouped in Levels 1 to 3 based on the degree to which fair value is observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 1. At cost or historical valuation. 2. Discounted cash flow method using a discount rate of 15% over 10 years. 12

13 3. Fair value measurements (continued) Unaudited Unaudited Audited Year 30 June 30 June 31 Dec Reconciliation of level 3 fair value measurements Opening balance Total gains or losses in other comprehensive income (19 535) Advances 64 Closing balance Unaudited Unaudited Audited 30 June 30 June 31 Dec Share Capital In issue (number) Ordinary shares Held as treasury shares ( ) ( ) N ordinary shares Held as treasury shares ( ) ( ) ( ) Total net of treasury shares Weighted average number of shares on which (loss)/ earnings and headline (loss)/earnings per share is based: Weighted average number of shares on which diluted (loss)/earnings and diluted headline (loss)/earnings per share is based: Reconciliation of weighted average number of shares between basic and diluted (loss)/earnings per share and headline and diluted headline (loss)/earnings per share. Basic Dilutive share options Diluted Share options treated as anti-dilutive: Closing share price (cents) Ordinary shares N ordinary shares

14 4. Share Capital (continued) The following share movements occurred during the period under review Ordinary N ordinary Shares issued 9 March April June Shares repurchased and cancelled 12 March Acquisition of subsidiary during the six months 30 June 2015 With effect from 1 May 2015, Brimstone acquired control over a 67% shareholding in Brimstone Mtha UK SPV Limited. Prior to the completion of the transaction with Old Mutual plc, Old Mutual plc controlled Brimstone Mtha UK SPV Limited and therefore, even though Brimstone owned 67% of the company, it was not permitted to consolidate the company. Old Mutual plc s control was removed on 1 May 2015 following Brimstone and its partner s fulfilment of their obligations in terms of the contract. Before the settlement of the obligations in terms of the contract, Brimstone accounted for its share of the investment as an option. On settlement, Brimstone converted its option asset into an investment in a subsidiary. No goodwill arose on conversion to an investment in a subsidiary. The non-controlling interest of 33% is measured at its proportionate share of the aquiree s identifiable net assets. 14