RNS Number:7460R
Brait S.A.
06 November 2003
Unaudited interim group results
for the period 30 September 2003
* Attributable earnings before currency hedge loss and discontinued operations:
- 9,7% down on prior interim results
- Substantial improvement on preceding six month period
* Net asset value (net of dividends paid) maintained
* Special dividend of 13,8% of capital distributed during the period
* Balance sheet healthy
- 25% of group capital held as cash
* A further special dividend planned before the financial year-end
SALIENT FEATURES
For the six months ended 30 September
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2002 2003 2003 2002
Rm Rm US$m US$m
Continuing operations
24,3 12,9 Funds management 1,7 2,3
11,0 (7,6) Advisory (1,0) 1,1
8,0 44,6 Investing 5,9 0,8
36,8 - Group capital - 3,5
80,1 49,9 Continuing profit before currency hedge loss 6,6 7,7
- (71,0) Currency hedge (Note 1) (9,4) -
80,1 (21,1) Continuing (loss)/profit before taxation (2,8) 7,7
(22,7) (5,3) Discontinuing loss before taxation (0,7) (2,2)
(4,9) (0,8) Taxation (0,1) (0,5)
52,5 (27,2) Attributable (loss)/profit (3,6) 5,0
Note 1: A portion of the currency hedge loss is
set-off bya gain of US$7,1 million in equity on
translation of the group's Rand assets into
US dollars.
Performance
(Loss)/earnings per share
87,2 (30,2) - headline (cents) (4,0) 8,4
58,6 (30,4) - attributable (cents) (4,0) 5,6
Ordinary dividends per share
25,0 - - interim (cents) paid - 2,7
- 112,1 - special (cents) paid 15,0 -
1 299,8 740,2 Net asset value per share (cents) 106,8 123,3
1 265,0 740,2 Tangible net asset value per share (cents) 106,8 120,0
Financial statistics
Market capitalisation
869,4 589,0 - 30 September (Rm)
- 30 September (US$m) 85,0 82,5
93,5 102,3 Shares in issue (m) 102,3 93,5
Weighted average shares in issue
89,6 89,5 - basic (m) 89,5 89,6
89,6 89,5 - fully diluted (m) 89,5 89,6
Closing share price
930,0 576,0 - 30 September (Rand cents)
- 30 September (US cents) 83,1 88,2
Rand/US Dollar exchange rates
10,5400 6,9309 - closing 0,1443 0,0949
10,4370 7,5593 - average 0,1323 0,0958
GROUP INCOME STATEMENTS
For the six months ended 30 September
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2002 2003 2003 2002
Rm Rm US$m US$m
168,3 137,6 Revenue 18,2 16,1
158,6 139,1 Continuing operations 18,4 15,2
9,7 (1,5) Discontinuing operations (0,2) 0,9
(111,7) (98,3) Operating expenses (13,0) (10,7)
(79,3) (94,5) Continuing operations (12,5) (7,6)
(32,4) (3,8) Discontinuing operations (0,5) (3,1)
56,6 39,3 Profit from operations 5,2 5,4
79,3 44,6 Continuing operations 5,9 7,6
(22,7) (5,3) Discontinuing operations (0,7) (2,2)
(5,5) (10,6) Finance costs (1,4) (0,5)
- (71,0) Currency hedge (9,4) -
6,2 19,7 Income from associates 2,6 0,6
2,2 (3,8) (Loss)/income from joint ventures (0,5) 0,2
(2,1) - Goodwill - (0,2)
57,4 (26,4) (Loss)/profit before taxation (3,5) 5,5
80,1 (21,1) Continuing operations (2,8) 7,7
(22,7) (5,3) Discontinuing operations (0,7) (2,2)
(4,9) (0,8) Taxation - continuing operations (0,1) (0,5)
52,5 (27,2) (Loss)/profit after taxation (3,6) 5,0
75,2 (21,9) Continuing operations (2,9) 7,2
(22,7) (5,3) Discontinuing operations (0,7) (2,2)
52,5 (27,2) Attributable (loss)/profit (3,6) 5,0
GROUP STATEMENTS OF CHANGES IN EQUITY
For the six months ended 30 September
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
Balance at beginning of period 108,8 104,3 104,2
Currency translation adjustments 7,1 4,3 27,4
Attributable (loss)/earnings (3,6) 5,0 (17,0)
Dividends (15,2) (3,1) (5,8)
Treasury shares - options repurchased (1,5) - -
Balance at end of period 95,6 110,5 108,8
GROUP BALANCE SHEETS
At 30 September
Audited Unaudited Unaudited Unaudited Unaudited Audited
Year Year
31 Mar 30 Sept 30 Sept 30 Sept 30 Sept 31 Mar
2003 2002 2003 2003 2002 2003
Rm Rm Rm US$m US$m US$m
Assets
- 31,2 - Intangibles - 3,0 -
316,4 580,2 274,4 Long-term assets 39,6 55,0 40,2
236,1 479,5 197,5 Investments 28,5 45,5 30,0
80,3 100,7 76,9 Other long-term assets 11,1 9,5 10,2
1 011,0 1 060,1 789,4 Current assets 113,9 100,6 128,5
295,9 282,7 164,2 Cash and cash equivalents 23,7 26,8 37,6
715,1 777,4 625,3 Other current assets 90,2 73,8 90,9
1 327,4 1 671,5 1 063,8 Total assets 153,5 158,6 168,7
856,3 1 164,6 662,5 Shareowners' funds 95,6 110,5 108,8
Liabilities
79,4 106,5 92,2 Long-term liabilities 13,3 10,1 10,2
391,7 400,4 309,1 Current liabilities 44,6 38,0 49,7
262,6 357,6 162,9 Interest bearing 21,9 33,9 33,4
129,1 42,8 146,2 Non-interest bearing 22,7 4,1 16,3
471,1 506,9 401,3 Total liabilities 57,9 48,1 59,9
1 327,4 1 671,5 1 063,8 Total equity and liabilities 153,5 158,6 168,7
Net asset value per ordinary share
(cents)
1 312,1 1 299,8 740,2 - book value 106,8 123,3 121,4
1 337,5 1 308,7 740,2 - market and directors' valuation 106,8 124,2 123,0
GROUP CASH FLOW STATEMENTS
For the six months ended 30 September
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
Cash flows from:
Operating activities 5,8 6,8 15,0
Currency hedge (9,4) - (19,5)
Dividend paid (15,2) - (5,8)
Change in working funds 2,3 (3,9) 17,9
Cash (utilised)/generated by operating activities (16,5) 2,8 7,6
Cash outflows from funding activities (0,5) (5,8) (1,9)
Cash inflows/(outflows) from investing activities 2,5 - (0,2)
Effects of exchange rate changes on cash and cash equivalents 0,6 - 4,4
Net (decrease)/increase in cash and cash equivalents (13,9) (3,0) 9,9
Cash and cash equivalents at beginning of period 37,6 29,8 27,7
Cash and cash equivalents at end of period 23,7 26,8 37,6
NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 30 September
1. The financial statements of the group are prepared in accordance with International Financial Reporting Standards
(IFRS) and the provisions of IAS 34 "Interim Financial Reporting". The accounting policies used at the interim are
consistent with those set out in the financial statements for the year ended 31 March 2003. The group financial
statements at 31 March 2003 were prepared using the US Dollar as the functional currency of Brait S.A. The interim
results at 30 September 2002 were not prepared on this basis and have accordingly been restated to comply with the
presentation adopted by the group at 31 March 2003. The net effect of the revision has been the elimination of
R36 million of translation losses from continuing operations income at 30 September 2002. Accordingly, the
Supplementary Rand attributable earnings at 30 September 2002 as previously reported of R16,5 million, have been
restated to R52,5 million.
IAS 39 "Recognition and Measurement of Financial Instruments" has been fully adopted in the preparation of the
financial statements.
2. Supplementary Rand information
The balance sheet and income statement of the group have also been presented in Rands for the convenience of South
African stakeholders in the group. The supplementary Rand results have been converted from the US Dollar
measurement results using a closing rate of R6,9309 to US$1 (2002: R10,54 to US$1) for the balance sheet and an
average rate of R7,5593 to US$1 (2002: R10,437 to US$1) for the income statement.
3. Headline (loss)/profit
As IFRS does not recognise the concept of headline earnings, a reconciliation between earnings and headline
earnings has been provided for illustrative purposes for South African users, based on adjustments required by
South African Statements of Generally Accepted Accounting Practice.
Audited Unaudited Unaudited Unaudited Unaudited Audited
Year Year
31 Mar 30 Sept 30 Sept 30 Sept 30 Sept 31 Mar
2003 2002 2003 2003 2002 2003
Rm Rm Rm US$m US$m US$m
(165,4) 52,5 (27,2) Attributable (loss)/profit (3,6) 5,0 (17,0)
123,6 25,6 0,2 Headline (loss)/earnings adjustments 2,5 12,7
75,9 2,1 - Amortisation and impairment of goodwill - 0,2 7,8
Costs on termination of discontinuing
52,5 23,5 4,4 operations 0,6 2,3 5,4
- - 6,3 Interest rate adjustment on debt restructuring 0,8 - -
- - 3,8 Impairment of joint venture 0,5 - -
(4,8) - (14,3) Profit on disposal of associates (1,9) - (0,5)
(41,8) 78,1 (27,0) Headline (loss)/profit (3,6) 7,5 (4,3)
(39,8) 77,3 (26,2) - Continuing operations (3,5) 7,4 (4,1)
(2,0) 0,8 (0,8) - Discontinuing operations (0,1) 0,1 (0,2)
(46,6) 87,2 (30,2) Headline (loss)/profit per share (cents) (4,0) 8,4 (4,8)
(44,4) 86,3 (29,3) - Continuing operations (3,9) 8,3 (4,6)
(2,2) 0,9 (0,9) - Discontinuing operations (0,1) 0,1 (0,2)
4. Interest-bearing liabilities
All liabilities are interest bearing save US$22,7 million in respect of accounts payable, accruals, provisions and
deferred taxation.
Unaudited Unaudited Audited
Year
30 Sept 30 Sept 31 Mar
2003 2002 2003
US$m US$m US$m
5. The following items are included in profit from operations:
Dividends received 2,9 3,1 1,2
Depreciation 0,2 0,3 0,8
Related party transactions
- Interest received 0,5 0,9 1,6
6. Investments
Unlisted
- carrying value 27,9 45,5 30,0
- directors' valuation 27,9 46,3 31,4
7. Commitments, guarantees and contingent liabilities 31,9 15,5 35,4
(At 30 September 2003, the group had aggregate commitments of US$25 million to
invest in its Private Equity Funds and to repurchase shares)
8. The group has no capital expenditure commitments, either authorised or contracted.
9. Related party balances
- Liabilities - 2,6 -
- Assets 5,7 7,2 6,1
GROUP SEGMENTAL REPORTS
For the six months ended 30 September
Unaudited Unaudited Unaudited Unaudited
30 Sept 30 Sept 30 Sept 30 Sept
2002 2003 2003 2002
Rm Rm US$m US$m
SEGMENTAL
Revenue
158,6 139,1 Continuing operations 18,4 15,2
42,6 39,3 - Funds management 5,2 4,1
35,7 10,6 - Advisory 1,4 3,4
9,8 56,7 - Investing 7,5 0,9
70,5 32,5 - Group capital 4,3 6,8
9,7 (1,5) Discontinuing operations (0,2) 0,9
168,3 137,6 Total revenue 18,2 16,1
(Loss)/profit before taxation
80,1 49,9 Continuing operations 6,6 7,7
24,3 12,9 - Funds management 1,7 2,3
11,0 (7,6) - Advisory (1,0) 1,1
8,0 44,6 - Investing 5,9 0,8
36,8 - - Group capital - 3,5
80,1 49,9 Profit before currency hedge loss 6,6 7,7
and taxation
- (71,0) - Currency hedge (9,4) -
80,1 (21,1) Continuing operations (2,8) 7,7
(22,7) (5,3) Discontinuing operations (0,7) (2,2)
57,4 (26,4) (Loss)/profit before taxation (3,5) 5,5
GEOGRAPHICAL
(Loss)/profit before taxation
80,1 (21,1) Continuing operations (2,8) 7,7
20,0 (71,0) - Europe (9,4) 1,9
27,2 18,1 - South Africa 2,4 2,6
32,9 31,8 - Other Africa 4,2 3,2
(22,7) (5,3) Discontinuing operations (0,7) (2,2)
(22,7) (5,3) - South Africa (0,7) (2,2)
57,4 (26,4) (Loss)/profit before taxation (3,5) 5,5
COMMENTARY
GROUP PROFILE
Brait S.A. is an international investment and financial services group focused on private equity and alternative funds
management, advisory and specialised financial services, and proprietary investing. It is listed on the Luxembourg,
London and Johannesburg stock exchanges, with shareowners' funds of $95,6 million at 30 September 2003.
Brait's continuing earnings are derived from:
* fees from private equity and alternative funds management;
* fees from corporate and debt advisory services;
* returns from the group's proprietary investing; and
* direct returns from investment of the group's capital.
FINANCIAL RESULTS
The group has reported an attributable loss of $3,6 million for the first half of the 2004 financial year against a
profit of $5,0 million for the same period in 2003. The results include a currency hedge loss of $9,4 million and
discontinued operations costs of $0,7 million. Net of these abnormal adjustments, the group's continuing operations
reflect an attributable profit of $6,5 million for the period against $7,2 million for the comparable half year or $6,6
million against $7,7 million on a pre-tax basis.
The continuing operations attributable results, although 9,7% down on the strong first half profits of 2003, are
substantially ahead of the 2003 second half continuing operations results. This is a direct consequence of the
restructuring and refocus of the group, which has taken place over the last twelve months. The group has maintained its
opening net asset value, net of dividends paid, despite the charges taken against income on its currency hedge.
Discontinued operations costs have declined as the group's former banking loan book has been collected and its
infrastructure wound down. The balance sheet remains healthy and comfortably liquid, even after the distribution of a
special dividend of approximately 14% of its tangible capital in July 2003.
Market conditions have tended to move sideways for Brait since the last reporting date. Some improvements in
international and South African equity markets have been offset by weak underlying global market fundamentals.
SEGMENT REVIEW
Funds management
Private Equity deal activity has increased noticeably this year resulting in a number of material exits from the
group's private equity funds. In addition, the team is well placed to make some sizeable new investments in Fund III
before the financial year-end.
The group's new Specialised Funds unit continues to make good progress. The unit's infrastructure and team is now well
developed, the core funds are entrenched and investment performance on initial selected third party and group seed
capital has more than exceeded expectations.
Earnings from Funds Management for the period to date of $1,7 million ($2,3 million to 30 September 2002), includes no
material participation contributions and is recorded net of the start-up costs of Specialised Funds. All investing
income on the group's capital investments in its Private Equity and Specialised Funds are disclosed in Investing
income.
Advisory services
This has been a difficult half-year for the Advisory business. The unit has continued to redefine its activities by
unwinding its commercial lawyering business and disposing of its Structured Finance operation to focus on its core M&A,
Corporate Finance and Debt Advisory capabilities. The costs incurred on unwinding the lawyering business have been
absorbed in full in the loss of $1,0 million recorded to 30 September 2003 (profit $1,1 million to 30 September 2002).
Deal flow in the remaining core business is positive. The team has hired new staff to meet this demand and will
continue to position itself as a top tier advisory team with a strong franchise in its South African and niche
cross-border segments.
Investing
Proprietary investing is an integral part of Brait's operations. Earnings are by nature volatile and dependent on
opportunistic timing as well as overall market and specific investment conditions. The group's portfolio is
consistently measured on a fair value basis. Several realised and unrealised gains have been recognised during the
period, including profits on the seed capital invested in Specialised Funds, which have been partially offset by
impairments in other portfolio investments. The net effect is a gain after operating costs of $5,9 million compared
with $0,8 million to 30 September 2002. The current year's earnings equate to an annualised return of approximately 25%
on average capital invested.
Group capital
The group capital segment primarily incorporates treasury income net of corporate expenditure. Earnings have broken
even for the period compared with a profit of $3,5 million to 30 September 2002. This is principally due to the
reduction in capital retained in the Corporate division following the increase in funds allocated to investing
operations and the distribution of a special dividend to shareowners since September 2002. In addition, the group has
made certain impairments and provisions against assets and liabilities in the Corporate division.
Discontinued operations
The realisation of the former banking loan book has continued satisfactorily. The book currently stands at
approximately $15 million at 30 September 2003. No further provisions have needed to be raised on the loan book.
Discontinued losses for the half year amounted to $0,7 million ($2,2 million to 30 September 2002).
CURRENCY HEDGE
As reported in Brait's results announcement at 31 March 2003, the group has continued to implement its policy of
hedging the majority of its tangible net assets into its reporting currency, the US dollar.
At 30 September 2003, approximately 80% of the group's capital was effectively maintained in US dollars. The balance of
the capital is held in a mix of developed economy and emerging market currencies, dominated by the South African Rand.
Included in the 80% US dollar capital cover is a $34 million cross currency swap taken out during the period against
the tangible net asset investment by the group in its South African operation. This replaced the previous swap taken
out in October 2002 and which was due to expire in September 2003. The primary terms of the new swap include a
settlement date at the end of December 2003, a spot rate of R7,2700 and a forward rate of R7,8255 to the US dollar. As
part of the restructure, Brait purchased a put option to sell $34 million against the Rand at a rate of R7,2700 to the
US dollar in order to protect the group against any further cash flow margining obligations arising from US dollar
weakness against the Rand. This option also expires in December 2003.
The board intends to continue its policy of retaining at least 80% of its capital in US dollars for the foreseeable
future and is accordingly likely to renew or restructure its existing hedge strategy before the end of December 2003 to
retain the integrity of its capital currency policy.
The currency hedge loss of $9,4 million recorded in the period arises primarily from substantial US dollar weakness
against the Rand and other currencies during the period, and in particular, on the old swap structure which was closed
out in May 2003. This loss is offset by a corresponding gain of $7,1 million arising from the translation of the
group's non-US dollar assets into US dollars at 30 September 2003. The gain has been recorded in the foreign currency
translation reserve and not through the income statement, in compliance with the group's International Financial
Reporting Statement practice.
PROSPECTS AND DIVIDEND
Brait has come through some turbulent challenges and is now focused on its core activities.
Because of the incorporation of the above mentioned put option into the group's currency hedge structure, potential
future losses from the hedge will exclude Rand/US dollar market risk and will be limited to the underlying costs of the
hedge.
DIVIDEND
The board has announced that it has resolved to reduce its capital base through a distribution of surplus cash balances
by 30 March 2004, which it indicated should amount to approximately 30 US cents per ordinary share subject to certain
trading and market conditions.
The first special dividend of 15 US cents was paid on 14 July 2003. Market conditions since the announcement was made,
in particular the US dollar/Rand exchange rate, have had a negative impact on the group's surplus cash holdings.
Nonetheless, the board is still planning to meet its original distribution estimate and intends to pay a further
dividend during the next quarter.
For and on behalf of the board
ME King AC Ball
Chairman Group Chief Executive
6 November 2003
ADMINISTRATION
REGISTERED OFFICE
Brait S.A. LISTING AGENT South Africa
180 rue des Aubepines Dexia Banque Internationale Computershare Limited
L-1145, Luxembourg a Luxembourg Ground Floor
Tel: 09352-4590-4794 69, route d'Esch 70 Marshall Street
Fax: 09352-4590-3642 L-2953, Luxembourg Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Brait South Africa Limited REGISTRAR AND DOMICILIARY AGENT Tel: +27-11-370-5000
9 Fricker Road Experta Luxembourg S.A. Fax: +27-11-370-5390
Illovo Boulevard, Illovo, Sandton 180, rue des Aubepines
Tel: +27-11-507-1000 L-1145, Luxembourg JSE AND LSE ISSUER NAME
Fax: +27-11-507-1001 AND CODE
Issuer Long Name - Brait S.A.
LEGAL ADVISORS TO THE COMPANY TRANSFER AGENTS Issuer Code - BRAIT
Elvinger, Hoss & Prussen United Kingdom Instrument Alpha Code/
2, Place Winston Churchill Capita IRG plc Ticker Symbol - BAT
L-2014, Luxembourg Bourne House ISIN - LU 0011857645
34 Beckenham Road
INDEPENDENT AUDITORS Beckenham
Deloitte & Touche S.A. Kent, BR3 4TU
3, route d'Arlon United Kingdom
L-8009 Strassen Tel: 0944-208-639-2000
Luxembourg Fax: 0944-208-639-2342
Website: http://www.brait.com
DIRECTORS
ME King (Chairman)++*, RT Dalais++*, AC Ball*, JE Bodoni++#, FZ Haller++(S),
RJ Koch++*, AM Rosenzweig++**, CJ Tayelor*, SJP Weber#, PL Wilmot++*
++Non-executive *South African #Luxembourgish (S)American *British **Dutch
This information is provided by RNS
The company news service from the London Stock Exchange
END
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