BRIMSTONE INVESTMENT : Reviewed preliminary condensed consolidated financial results for the year ended 31 December 2016

SENS Release

BRIMSTONE INVESTMENT CORPORATION LIMITED - Reviewed preliminary condensed consolidated financial results for the year ended 31 December 2016
27 February 2017 17:27
BRT BRN 201702270062A Reviewed preliminary condensed consolidated financial results for the year ended 31 December 2016 Brimstone Investment Corporation Limited ISIN Number: ZAE000015277 Share Code: BRT ISIN Number: ZAE000015285 Share Code: BRN Company Registration Number: 1995/010442/06 (Incorporated in the Republic of South Africa) ("Brimstone" or "the Company" or "the Group") Reviewed preliminary condensed consolidated financial results for the year ended 31 December 2016 Highlights - Dividend income increased by 10.3% to R339.9 million - Net profit before tax of R283.5 million - INAV increased by 21.4% to over R5 billion - Dividend declared increased by 20% to 42cps - Sea Harvest listing expected March 2017 Commentary The Company reported a profit for the year under review of R197.3 million compared to a loss of R668.1 million in the prior year. The significant contributors to this improvement in earnings were: - An increase in operating profit of R273.7 million, due to a significant improvement in the results of Lion of Africa and an excellent result produced by Sea Harvest; - Share of profits of associates and joint ventures which is up from a loss of R341.5 million in 2015 to a profit of R98.3 million in 2016; and - Fair value losses reduced from R429.6 million in 2015 to R70.8 million in 2016. Intrinsic gross assets increased to R9.3 billion. Intrinsic Net Asset Value (INAV) increased by 22.9% to R5.13 billion (R21.40 per share) at 31 December 2016 from R4.23 billion or R17.41 per share at 31 December 2015. Brimstone Portfolio (unreviewed) SUBSIDIARIES Sea Harvest (85%) In July 2016, Sea Harvest increased its shareholding in Australian-based listed agri-business Mareterram Limited ("Mareterram") from 19.9% to a controlling interest of 55.9%. The group's revenue increased by 41% to R1.9 billion (including Mareterram's revenue of R279.7 million) compared to the prior year, due to good sales volume growth and higher prices in both the local and international markets. The group's earnings before interest and tax increased by 115% to R250.2 million, with earnings before interest tax depreciation and amortisation up by 80% to R368 million. The growth in profitability is attributable to investments made in two freezer trawlers in the last two years as well as the factory optimisation project. The positive impact of these investments started to show in 2016. The benefits of the weakening Rand were not completely realised as the company posted a R55 million hedging loss. Lion of Africa Insurance Company (Lion of Africa) (100%) Lion of Africa reported a net loss for the year under review of R15.4 million compared to a loss of R179.6 million in the prior year. This loss includes once-off reorganisation costs and legacy claims. The turnaround is driven by the significant improvement in the gross underwriting results, with a gross loss ratio of 66.3% compared to 104.4% in the prior year. The result has also improved significantly due to the remedial action and strategic changes made in the business. These include more stringent risk acceptance procedures to clearly define the acceptance of risks being covered; a new underwriting system and a new experienced executive team. Lion of Africa continues to focus on intermediated relationships focusing on commercial business, public sector (including municipalities), marine and engineering. Lion of Africa's Capital Adequacy Ratio comfortably exceeded the statutory requirement at year end. House of Monatic (Monatic) (100%) Revenue decreased by 3% to R207.7 million (2015: R214 million) and a small profit was reported. This is mainly due to the poor retail climate affecting Monatic's own retail outlets as well as sales to independent retailers, and a significant chain customer (Stuttafords) going into business rescue. Monatic now has a retail footprint of 9 stores. ASSOCIATES AND JOINT VENTURES Oceana (17%) Brimstone now holds 23 million Oceana shares with a market value of R2.8 billion. Oceana's share price closed at R120.00 per share at 31 December 2016, up from R117.00 per share at 31 December 2015. Brimstone received dividends of R107.9 million (2015: R80.6 million) from Oceana during the year under review and recognised R67.7 million (2015: R35.1 million) in equity accounted earnings based on Oceana's reported full year earnings to 30 September 2016. Grindrod (6.7%) Brimstone accounts for its share of the results in the Consortium SPV as a joint venture. Brimstone had written its investment in the consortium down to nil at 31 December 2015. Since then the share price has recovered resulting in the carrying value of the investment via the Consortium SPV increasing to R21 million. Grindrod's share price closed at R13.45 at 31 December 2016, up from R11.29 per share at 31 December 2015. Aon Re Africa (18%) Aon Re Africa is a leading reinsurance broker licensed and operating in South Africa and the rest of Africa. Brimstone recorded R5.7 million in equity accounted losses after receiving a dividend of R14.3 million from Aon Re Africa during the year under review. South African Enterprise Development (SAED) (25%) SAED is an investment vehicle providing equity capital to high growth potential small and medium sized enterprises. During the year under review, SAED concluded investments in Decision Inc. (Pty) Ltd (a business intelligence and data analytics solutions provider), ASG Holdings (Pty) Ltd (involved primarily in the wholesale distribution of high-end branded cycling products) and ZAR X (Pty) Ltd (a newly formed licensed stock exchange). SAED made a positive contribution to earnings during the year under review. Obsidian Health (25.07%) The company remains positive in its outlook of building a world class medical device solutions provider in the longer term given the healthcare challenges faced locally and in Africa. Brimstone recorded R0.7 million in equity accounted earnings during the year under review. INVESTMENTS Equites (10%) Equites' share price closed at R15.80 per share at 31 December 2016, up from R12.75 per share at 31 December 2015. Brimstone acquired an additional R100 million worth of Equites shares during the second half of the year under review. Brimstone received a dividend of R29.6 million from Equites during the year under review. The investment was revalued upwards by R94 million to R551 million at year end. Life Healthcare (4.7%) Life Healthcare's share price closed at R32.60 per share at 31 December 2016, down from R35.07 per share at 31 December 2015. The investment was revalued downwards by R118 million to R1 635 million at year end. Brimstone received dividends of R82.8 million from Life Healthcare during the year under review, up from R80.9 million for the prior year. MTN Group and MTN Zakhele Futhi (1.5%) The MTN Zakhele transaction matured in November 2016. Brimstone elected to convert the majority of its holding in MTN Zakhele into MTN Group ordinary shares with the balance being reinvested in the newly formed MTN Zakhele Futhi. At year end, Brimstone held 570 000 MTN Group ordinary shares and 1 818 795 MTN Zakhele Futhi ordinary shares after selling 286 916 MTN Group ordinary shares to settle the related debt. Brimstone received a dividend of R0.4 million and revalued reinvestments upwards by R12.1 million during the year under review. Phuthuma Nathi (7%) The Phuthuma Nathi 1 shares and Phuthuma Nathi 2 shares closed at R129.60 and R132.99 per share at 31 December 2016 (R165 and R163 per share at 31 December 2015) respectively. The investment was revalued downwards by R158.6 million to R619.9 million. Brimstone received a dividend of R91.3 million from Phuthuma Nathi during the year under review, up from R65 million for the prior year. Tiger Brands (0.9%) Brimstone's right to Tiger Brands shares, accounted for as an option, has been revalued at year end. The independently calculated option valuation was based on a closing share price of R397.83 per share at 31 December 2016, up from R316.44 per share at 31 December 2015. The investment was revalued upwards by R123.3 million to R373.3 million. This option matures in December 2017 and has been reclassified as a current asset. INAV INAV at 31 December 2016 calculated on a line-by-line basis, totalled R5.13 billion, or R21.40 per share (31 December 2015: R4.23 billion or R17.41 per share), representing an increase of 21.4% from 2015 (an increase of 22.9% on a per share basis). As at 31 December 2016, Brimstone Ordinary shares were trading at a discount of 39.3% to INAV (31 December 2015: 22.5%). Brimstone "N" Ordinary shares traded at a discount of 43.9% to Brimstone's INAV (31 December 2015: 27.1%). The analysis of INAV is available on the Company's website at www.brimstone.co.za. SHARE REPURCHASES Specific repurchase During the year under review Brimstone repurchased 8 802 969 Brimstone "N" Ordinary shares following the exercise of the Unencumbered Brimstone Share Call Option as set out in the circular to shareholders dated 15 August 2016. The shares were acquired from The Brimstone Black Executives Investment Trust, The Brimstone General Staff Investment Trust and The Brimstone Broad-Based BEE Trust, in terms of the trust deeds. The shares were duly delisted and cancelled on 7 November 2016. Acquisition of treasury shares During the year under review Brimstone acquired, via a wholly-owned subsidiary, 319 987 Brimstone Ordinary shares and 4 759 174 Brimstone "N" Ordinary shares in the open market for an aggregate consideration of R60.4 million at an average price of R11.90 per share including costs. These shares have been accounted for as treasury shares. DIVIDEND DECLARED Brimstone's board has declared a final dividend of 42 cents per share for the year ended 31 December 2016 (2015: 35 cents per share) payable on Monday, 24 April 2017. The final dividend has been declared out of income reserves. In compliance with the requirements of Strate, the Company has determined the following salient dates for the payment of the final dividend: Last day to trade cum dividend Tuesday, 18 April 2017 Shares commence trading ex dividend Wednesday, 19 April 2017 Record date Friday, 21 April 2017 Payment date Monday, 24 April 2017 Shares may not be rematerialised or dematerialised from Wednesday, 19 April 2017 to Friday, 21 April 2017, both days inclusive. The final dividend is subject to Dividends Withholding Tax (DWT) at 20%. The net local dividend amount is 33.6 cents per share for shareholders liable to pay DWT and 42 cents per share for shareholders exempt from paying DWT. The number of Brimstone Ordinary and "N" Ordinary shares eligible for the final dividend at the date of this declaration is 42 757 604 and 208 777 687 respectively (this excludes 29 646 000 "N" Ordinary shares held by The Brimstone Black Executives Investment Trust, The Brimstone General Staff Investment Trust and The Brimstone Broad-Based BEE Trust which are not eligible to receive dividends) and the Company's tax reference number is 9397002719. PROSPECTS The Group is defined by bona fide empowerment credentials, and its long-term ability to enhance NAV and pay dividends. The Group will continue to maintain its positive long-term view on its investments and pursue value accreting opportunities. On behalf of the board F Robertson MA Brey Executive Chairman Chief Executive Officer 27 February 2017 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)*, GG Fortuin (Financial)*, MI Khan (Chief Operating Officer)*, PL Campher (Lead Independent), M Hewu, N Khan, KR Moloko, MK Ndebele, LA Parker, FD Roman *Executive Website: www.brimstone.co.za E-mail: [e-mail] CONDENSED CONSOLIDATED INCOME STATEMENT Reviewed Audited Year ended Year ended 31 December 31 December R'000 Notes 2016 2015 Revenue 2 688 490 2 208 137 Sales and fee income 2 348 592 1 899 954 Dividends received 339 898 308 183 Operating expenses (2 229 010) (2 022 394) Operating profit 459 480 185 743 Fair value losses (70 803) (429 562) Exceptional items 30 189 32 846 Share of profits/(losses) of associates and joint ventures 98 300 (341 545) Profit/(loss) before net finance costs 517 166 (552 518) Income from investments 4 27 042 30 991 Finance costs 4 (260 708) (224 237) Net profit/(loss) before taxation 283 500 (745 764) Taxation 5 (86 173) 77 625 Profit/(loss) for the year 197 327 (668 139) Profit/(loss) attributable to: Equity holders of the parent 170 739 (698 978) Non-controlling interests 26 588 30 839 197 327 (668 139) Earnings/(loss) per share (cents) Basic 70.9 (284.8) Diluted 68.7 (284.8) CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Reviewed Audited Year ended Year ended 31 December 31 December R'000 2016 2015 Profit/(loss) for the year 197 327 (668 139) Other comprehensive income, net of tax 43 479 188 Items that may be reclassified subsequently to profit or loss Cash flow hedges Profit/(loss) arising during the year 94 658 (98 115) Foreign currency translation Loss arising during the year (44 292) - Share of non-distributable reserves of associates (12 662) 89 171 Items that will not be reclassified subsequently to profit or loss Share of non-distributable reserves of associates 5 775 9 132 Total comprehensive income/(loss) for the year 240 806 (667 951) Total comprehensive income/(loss) attributable to: Equity holders of the parent 209 680 (657 955) Non-controlling interests 31 126 (9 996) 240 806 (667 951) CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Reviewed Audited 31 December 31 December R'000 2016 2015 ASSETS Non-current assets 5 406 092 5 996 570 Property, plant, equipment and vehicles 607 721 499 942 Goodwill 116 364 12 140 Intangible assets 363 569 92 455 Investments in associate companies and joint ventures 1 171 960 1 114 419 Investments 3 043 768 4 044 276 Deferred taxation 45 896 25 489 Insurance assets 55 581 204 057 Other financial assets 1 233 3 792 Current assets 2 274 169 1 656 025 Inventories 385 097 258 831 Trade and other receivables 561 938 604 366 Insurance assets 396 753 532 498 Other financial assets 46 800 2 456 Taxation 15 242 8 500 Investments 373 257 - Cash and cash equivalents 495 082 249 374 TOTAL ASSETS 7 680 261 7 652 595 EQUITY AND LIABILITIES Capital and reserves 2 588 031 2 626 972 Share capital 41 41 Capital reserves 380 181 427 049 Revaluation reserves 14 143 14 143 Cash flow hedging reserve 32 534 (42 414) Foreign currency translation reserve (29 119) - Changes in ownership (163 938) (11 839) Retained earnings 2 193 293 2 143 330 Attributable to equity holders of the parent 2 427 135 2 530 310 Non-controlling interests 160 896 96 662 Non-current liabilities 3 509 121 3 387 466 Long-term interest bearing borrowings 2 783 204 2 624 018 Long-term provisions 31 209 25 427 Deferred grant income 13 733 - Other financial liabilities 82 448 - Insurance liabilities 75 377 270 525 Deferred taxation 523 150 467 496 Current liabilities 1 583 109 1 638 157 Short-term interest bearing borrowings 452 094 174 003 Bank overdrafts 24 390 21 644 Trade payables 409 482 508 884 Other payables 90 014 226 484 Insurance liabilities 529 784 685 787 Other financial liabilities 21 121 - Short-term provisions 47 754 19 180 Taxation 8 470 2 175 TOTAL EQUITY AND LIABILITIES 7 680 261 7 652 595 NAV per share (cents) 1 011.5 1 044.0 Shares in issue at end of year (000's) 239 956 242 371 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW Reviewed Audited Year ended Year ended 31 December 31 December R'000 2016 2015 Operating activities Net attributable profit/(loss) 197 327 (668 139) Adjustments for non-cash items 70 150 650 360 Operating cash flows before movements in working capital 267 477 (17 779) (Increase)/decrease in inventories (23 992) 6 785 Decrease/(increase) in trade and other receivables 117 999 (6 031) Outside unit holders' interest - (16 145) Decrease in trade and other payables (181 238) (20 334) Net decrease/(increase) in insurance assets 284 221 (8 670) Net decrease in insurance liabilities (351 151) (177) Cash generated from/(utilised in) operations 113 316 (62 351) Interest received 27 042 30 991 Dividends received from associates and joint ventures 130 980 110 148 Dividends received from other equity investments 208 918 198 035 Income taxes paid (64 177) (77 979) Finance costs (207 545) (173 877) Net cash generated from operating activities 208 534 24 967 Investing activities Loan repayments and recoveries from associate and investments 1 098 21 756 Proceeds on disposal of investments 658 802 955 628 Proceeds on disposal of property, plant, equipment and vehicles 3 829 7 080 Acquisition of property, plant, equipment and vehicles (126 084) (172 472) Acquisition of subsidiaries - shares acquired and loans advanced (195 859) - Acquisition of intangible assets (7 611) (1 451) Proceeds from receipt of a government grant 15 831 - Acquisition of investments (134 548) (1 209 785) Net cash generated from/(utilised in) in investing activities 215 458 (399 244) Financing activities Dividends paid by Company and subsidiaries (91 517) (151 140) Repayments of borrowings (248 716) (689 879) Loans raised 490 472 1 274 372 Further investment in subsidiary (167 287) - Shares repurchased (62 950) (51 962) Disposal of treasury shares by subsidiary 3 938 - Proceeds on issue of trust units/shares 19 870 13 812 Redemption of non-controlling shareholder's preference shares (85 756) - Share of distribution made by special purpose entities (38 923) - Units/shares repurchased by subsidiaries (108) - Increase in bank overdrafts 2 746 6 829 Net cash (utilised in)/generated from financing activities (178 231) 402 032 Net increase in cash and cash equivalents 245 761 27 755 Cash and cash equivalents at beginning of year 249 374 221 619 Foreign exchange differences (53) - Cash and cash equivalents at end of year Bank balances and cash 495 082 249 374 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Capital Revaluation R'000 capital reserves reserves Balance at 1 January 2015 - audited 45 342 032 14 143 Attributable (loss)/profit for the year ended 31 December 2015 - - - Other comprehensive income/(loss) - 98 359 - Total comprehensive income/(loss) - 98 359 - Recognition of share-based payments - 11 615 - Dividend paid - - - Subsidiary's accrual for preference dividends - - - Non-controlling interest arising on recognition of subsidiary - - - Acquisition of non-controlling interest in subsidiary - - - Issue of share capital - 11 526 - Sale of trust units - - - Treasury shares acquired (4) (51 958) - Share of non-distributable reserves of associates transferred directly to equity - 15 475 - Balance at 31 December 2015 - audited 41 427 049 14 143 Attributable profit for the year ended 31 December 2016 - - - Other comprehensive profit/(loss) - (6 888) - Total comprehensive profit/(loss) - (6 888) - Recognition of share-based payments - (9 788) - Amount reclassified to share options reserve - 17 747 - Dividend paid - - - Subsidiary's accrual for preference dividends - - - Non-controlling interest arising on recognition of subsidiary - - - Acquisition of non-controlling interest in subsidiary - - - Redemption of preference shares by subsidiary - - - Disposal of treasury shares by subsidiary - - - Distributions made to participants of share trusts - - - Reduction of subsidiary's share capital - - - Issue of share capital - 15 524 - Sale of trust units - 992 - Recognition of change in value of share option liability directly in equity - (1 535) - Treasury shares acquired - (62 950) - Further acquisition of investment in subsidiary - - - Share of non-distributable reserves of associates transferred directly to equity - 30 - Balance at 31 December 2016 - reviewed 41 380 181 14 143 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) Foreign R'000 Cash flow currency Changes hedging translation in reserve reserve ownership Balance at 1 January 2015 - audited 14 922 - (11 839) Attributable (loss)/profit for the year ended 31 December 2015 - - - Other comprehensive income/(loss) (57 336) - - Total comprehensive income/(loss) (57 336) - - Recognition of share-based payments - - - Dividend paid - - - Subsidiary's accrual for preference dividends - - - Non-controlling interest arising on recognition of subsidiary - - - Acquisition of non-controlling interest in subsidiary - - - Issue of share capital - - - Sale of trust units - - - Treasury shares acquired - - - Share of non-distributable reserves of associates transferred directly to equity - - - Balance at 31 December 2015 - audited (42 414) - (11 839) Attributable profit for the year ended 31 December 2016 - - - Other comprehensive profit/(loss) 74 948 (29 119) - Total comprehensive profit/(loss) 74 948 (29 119) - Recognition of share-based payments - - - Amount reclassified to share options reserve - - - Dividend paid - - - Subsidiary's accrual for preference dividends - - - Non-controlling interest arising on recognition of subsidiary - - - Acquisition of non-controlling interest in subsidiary - - - Redemption of preference shares by subsidiary - - - Disposal of treasury shares by subsidiary - - - Distributions made to participants of share trusts - - - Reduction of subsidiary's share capital - - - Issue of share capital - - - Sale of trust units - - - Recognition of change in value of share option liability directly in equity - - - Treasury shares acquired - - - Further acquisition of investment in subsidiary - - (152 099) Share of non-distributable reserves of associates transferred directly to equity - - - Balance at 31 December 2016 - reviewed 32 534 (29 119) (163 938) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) Attributable to equity holders Non- R'000 Retained of the controlling earnings parent interests Balance at 1 January 2015 - audited 2 965 681 3 324 984 109 421 Attributable (loss)/profit for the year ended 31 December 2015 (698 978) (698 978) 30 839 Other comprehensive income/(loss) - 41 023 (40 835) Total comprehensive income/(loss) (698 978) (657 955) (9 996) Recognition of share-based payments - 11 615 - Dividend paid (123 373) (123 373) (27 767) Subsidiary's accrual for preference dividends - - 7 983 Non-controlling interest arising on recognition of subsidiary - - 123 078 Acquisition of non-controlling interest in subsidiary - - (108 343) Issue of share capital - 11 526 1 748 Sale of trust units - - 538 Treasury shares acquired - (51 962) - Share of non-distributable reserves of associates transferred directly to equity - 15 475 - Balance at 31 December 2015 - audited 2 143 330 2 530 310 96 662 Attributable profit for the year ended 31 December 2016 170 739 170 739 26 588 Other comprehensive profit/(loss) - 38 941 4 538 Total comprehensive profit/(loss) 170 739 209 680 31 126 Recognition of share-based payments - (9 788) 665 Amount reclassified to share options reserve - 17 747 - Dividend paid (85 791) (85 791) (5 726) Subsidiary's accrual for preference dividends - - 3 238 Non-controlling interest arising on recognition of subsidiary - - 141 973 Acquisition of non-controlling interest in subsidiary - - (15 188) Redemption of preference shares by subsidiary - - (88 994) Disposal of treasury shares by subsidiary 3 938 3 938 - Distributions made to participants of share trusts (38 923) (38 923) - Reduction of subsidiary's share capital - - (108) Issue of share capital - 15 524 - Sale of trust units - 992 (1 576) Recognition of change in value of share option liability directly in equity - (1 535) - Treasury shares acquired - (62 950) - Further acquisition of investment in subsidiary - (152 099) - Share of non-distributable reserves of associates transferred directly to equity - 30 (1 176) Balance at 31 December 2016 - reviewed 2 193 293 2 427 135 160 896 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) R'000 Total Balance at 1 January 2015 - audited 3 434 405 Attributable (loss)/profit for the year ended 31 December 2015 (668 139) Other comprehensive income/(loss) 188 Total comprehensive income/(loss) (667 951) Recognition of share-based payments 11 615 Dividend paid (151 140) Subsidiary's accrual for preference dividends 7 983 Non-controlling interest arising on recognition of subsidiary 123 078 Acquisition of non-controlling interest in subsidiary (108 343) Issue of share capital 13 274 Sale of trust units 538 Treasury shares acquired (51 962) Share of non-distributable reserves of associates transferred directly to equity 15 475 Balance at 31 December 2015 - audited 2 626 972 Attributable profit for the year ended 31 December 2016 197 327 Other comprehensive profit/(loss) 43 479 Total comprehensive profit/(loss) 240 806 Recognition of share-based payments (9 132) Amount reclassified to share options reserve 17 747 Dividend paid (91 517) Subsidiary's accrual for preference dividends 3 238 Non-controlling interest arising on recognition of subsidiary 141 973 Acquisition of non-controlling interest in subsidiary (15 188) Redemption of preference shares by subsidiary (88 994) Disposal of treasury shares by subsidiary 3 938 Distributions made to participants of share trusts (38 923) Reduction of subsidiary's share capital (108) Issue of share capital 15 524 Sale of trust units (584) Recognition of change in value of share option liability directly in equity (1 535) Treasury shares acquired (62 950) Further acquisition of investment in subsidiary (152 099) Share of non-distributable reserves of associates transferred directly to equity (1 146) Balance at 31 December 2016 - reviewed 2 588 031 HEADLINE EARNINGS /(LOSS) PER SHARE Reviewed Audited Year ended Year ended 31 December 31 December R'000 2016 2015 Headline earnings/(loss) per share (cents) Basic 48.0 (295.3) Diluted 46.5 (295.3) Headline earnings/(loss) calculation (R'000) Net profit/(loss) attributable to equity holders of the parent 170 739 (698 978) Profit on disposal of property, plant, equipment and vehicles (2 098) (2 119) Realised loss/(profit) on disposal of associates 9 451 (44 841) Gain on remeasurement of previously held interest in associate (38 649) - Impairment of investment in associate - 11 994 Adjustments relating to results of associates (28 727) 65 Total tax effects of adjustments 4 865 9 338 Headline earnings/(loss) 115 581 (724 541) Weighted average number of shares on which earnings/(loss) and headline earnings/(loss) per share is based (000's) 240 733 245 392 Weighted average number of shares on which diluted earnings/(loss) and diluted headline earnings/(loss) per share is based (000's) 248 409 245 392 FURTHER INFORMATION 1. Auditor's review report The preliminary condensed consolidated financial statements for the year ended 31 December 2016 have been reviewed by the Company's auditors, Deloitte & Touche. The review was conducted in accordance with ISRE 2410 Review of Interim Financial Information performed by the Independent Auditor of the Entity. The auditor's unmodified review conclusion does not necessarily cover all the information in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's work they should obtain a copy of the review conclusion report together with the accompanying financial information from the registered office of the Company. Any reference to future financial performance and Intrinsic Net Asset Value included in this announcement has not been reviewed or reported on by the Company's auditors. 2. Basis of preparation The preliminary condensed consolidated financial statements have been prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the preliminary condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements. The preliminary condensed consolidated financial statements were prepared under the supervision of the Group financial director, Geoffrey George Fortuin BCom(Acc)(Hons), CA(SA). 3. Significant accounting policies These preliminary condensed reviewed consolidated financial statements for the year ended 31 December 2016 have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The accounting policies and methods of computation applied in the presentation of the financial results are consistent with those applied for the year ended 31 December 2015. Reviewed Audited Year ended Year ended 31 December 31 December R'000 2016 2015 4. Income from investments Interest received on bank deposits and loans to associates and subsidiaries 27 042 30 991 Finance costs Interest on borrowings 72 315 36 059 Interest rate swap 2 337 - Preference dividends 185 900 188 038 Interest on obligations under instalment sale agreements 156 140 260 708 224 237 5. Taxation Current normal and deferred tax charge/(credit) 84 909 (81 286) Dividends tax 453 417 Securities transfer tax 811 3 244 86 173 (77 625) 6. Capital commitments Commitments for the acquisition of property, plant, equipment and vehicles: Contracted for 8 677 9 989 Authorised by directors but not contracted for 6 142 18 716 14 819 28 705 7. Segmental information Information reported to the Group'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 Group's reportable segments under IFRS 8: Operating Segments 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 Group's property portfolio. Segment revenues and results Segment revenue Fishing 1 931 979 1 373 457 Insurance 208 679 310 303 Clothing 207 651 214 778 Investments 340 181 309 599 Total revenue 2 688 490 2 208 137 Segment profit/(loss) from operations Fishing 196 562 121 653 Insurance (30 868) (178 676) Clothing 5 918 10 707 Investments 287 868 232 059 Total profit from operations 459 480 185 743 Fair value losses (70 803) (429 562) Exceptional items 30 189 32 846 Share of profits/(losses) of associates and joint ventures 98 300 (341 545) Income from investments 27 042 30 991 Finance costs (260 708) (224 237) Profit/(loss) before taxation 283 500 (745 764) Reviewed Audited Year ended Year ended R'000 31 December 31 December Segment assets and liabilities 2016 2015 Segment assets Gross Net Gross Net Fishing 1 873 269 1 873 269 1 117 341 1 117 341 Insurance 931 652 931 652 1 300 444 1 300 444 Clothing 195 445 195 445 193 775 193 775 3 000 366 3 000 366 2 611 560 2 611 560 Investments 5 967 671 4 679 895 5 854 165 5 041 035 Intergroup balances 1 287 776 - 813 130 - Other 4 679 895 4 679 895 5 041 035 5 041 035 Total segment assets 8 968 037 7 680 261 8 465 725 7 652 595 Segment liabilities Fishing 1 586 588 1 028 111 1 064 334 838 091 Insurance 1 171 667 788 733 1 525 085 1 260 151 Clothing 150 255 68 905 148 628 76 317 2 908 510 1 885 749 2 738 047 2 174 559 Investments 2 183 720 2 183 720 2 287 576 2 287 576 Total segment liabilities 5 092 230 4 069 469 5 025 623 4 462 135 Reviewed Audited Year ended Year ended 31 December 31 December R'000 2016 2015 Other segmental information Depreciation and amortisation Fishing 118 712 89 761 Insurance 1 590 3 089 Clothing 6 506 4 640 Investments 1 200 721 Total segment depreciation and amortisation 128 008 98 211 Additions to non-current assets Fishing 110 614 152 488 Insurance 4 797 3 160 Clothing 14 540 10 140 Investments 3 746 8 136 Total segment additions to non-current assets 133 697 173 924 8. Fair value measurements This note provides information about how the Group determines fair values of various financial assets and financial liabilities. Fair value of the Group's financial assets and financial liabilities that are measured on a fair value basis on a recurring basis Some of the Group'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. R'000 2016 Reviewed Level 1 Level 2 Level 3 Total Financial assets at FVTPL* Derivative financial assets - 488 086(3) - 488 086 Listed shares 2 329 599 - - 2 329 599 Unlisted shares and loan 619 885 - 5(1) 619 890 Available-for-sale financial assets Unlisted shares - - 25 265(2) 25 265 Unlisted shares - - 2 218(1) 2 218 Total 2 949 484 488 086 27 488 3 465 058 Financial liabilities at FVTPL* Derivative financial liabilities - 103 569(3) - 103 569 2015 Audited Level 1 Level 2 Level 3 Total Financial assets at FVTPL* Derivative financial assets - 256 231(3) - 256 231 Listed shares 2 914 598 - - 2 914 598 Unlisted shares and loan 778 459 - 5(1) 778 464 Other investments 73 748 - - 73 748 Available-for-sale financial assets Unlisted shares - - 25 265(2) 25 265 Unlisted shares - - 2 218(1) 2 218 Total 3 766 805 256 231 27 488 4 050 524 * FVTPL = Fair value through profit or loss Notes 1. At cost or historical valuation. 2. Value determined by an independent valuer using market values. 3. The following methods and inputs are used in valuing level 2 financial assets and liabilities: - Options are independently valued using the Monte Carlo method, taking into account the number of option shares, the spot price per share, the risk free rate, dividend yield, volatility and outstanding debt of the relevant share. - The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. - The fair value of forward exchange contracts is determined using forward exchange spot and forward rates at the reporting date. There are no changes to unobservable inputs that might result in a significantly higher or lower fair value measurement within level 2 and level 3 financial assets and 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). There were no transfers between levels 1, 2 and 3 in the current or prior year. Reviewed Audited Year ended Year ended 31 December 31 December R'000 2016 2015 9. Share Capital (number) In issue (number) Ordinary shares 42 757 604 42 757 604 Held as treasury shares (4 273 074) (3 953 087) 38 484 530 38 804 517 "N" ordinary shares 238 423 687 244 103 200 Held as treasury shares (36 952 419) (40 536 751) 201 471 268 203 566 449 Total net of treasury shares 239 955 798 242 370 966 Weighted average number of shares on which earnings and headline earnings per share is based is 240 732 715 (2015 - 245 392 252) Weighted average number of shares on which diluted earnings and diluted headline earnings per share is based is 248 409 451 (2015 - 245 392 252) Reconciliation of weighted average number of shares between basic and diluted earnings per share and headline earnings and diluted headline earnings per share. Basic 240 732 715 245 392 252 Dilutive instruments 7 676 736 - Diluted 248 409 451 245 392 252 Number of instruments treated as anti-dilutive 25 805 605 41 748 046 Closing share price (cents) Ordinary shares 1 299 1 350 "N" ordinary shares 1 200 1 270 10. Business combinations In July 2016, the Group acquired an additional 35.99% interest in Mareterram, a fishing and fish processing business situated on the Australian West Coast and listed on the Australian Stock Exchange. The acquisition from previous equity holders was done through the Australian Stock Exchange. Sea Harvest expects to benefit from synergies, revenue growth and future market development of Mareterram. The Group gained a controlling interest in Mareterram through this acquisition, and has accounted for the 55.89% interest as a non-wholly owned subsidiary, with its results from July 2016 being fully consolidated with that of the Group's results. The Group has elected to measure the non-controlling interests in the acquiree at its proportionate percentage of the recognised amounts of the acquiree's identifiable net assets. At the time of acquisition, the initial interest held (19.9%) was fair valued using the market price on the Australian Stock Exchange. The resulting gain was recognised in profit or loss and the fair value of the previously held interest was used in the determination of goodwill in accordance with the provisions of IFRS 3: Business Combinations. Reviewed Year ended R'000 31 December 2016 Assets acquired and liabilities recognised at date of acquisition Property, plant and equipment 105 723 Intangible assets 310 918 Deferred tax assets 30 181 Financial derivative assets 230 Inventory 111 854 Trade and other receivables 85 240 Short-term financial derivative assets 1 566 Cash and cash equivalents 131 Long-term interest bearing borrowings (131 812) Employee related liabilities (3 043) Fishing licence liability (89 542) Trade and other payables (60 684) Short-term interest bearing borrowings (25 027) Short-term fishing licence liability (23 308) Short-term financial derivative liabilities (602) 311 825 Goodwill 115 722 Non-controlling interests (137 546) Existing interest of Brimstone at date of acquisition (94 011) Consideration transferred 195 990 Goodwill arising on acquisition Consideration transferred 195 990 Existing interest of Brimstone at date of acquisition 94 011 Add: Non-controlling interests (proportionate percentage of net identifiable assets) 137 546 Less: Fair value of assets acquired and liabilities assumed (311 825) Goodwill 115 722 Goodwill is attributable to a control premium as well as the benefit of expected synergies, revenue growth and future market development of Mareterram. Goodwill is not expected to be deductible for tax purposes. The initial accounting for the acquisition of Mareterram has not been finalised. This is the result of uncertainties surrounding the valuation of certain intangible assets. These uncertainties are expected to be resolved by 31 December 2017. Net cash (outflow)/inflow on acquisition of subsidiary Consideration paid in cash (195 990) Less: Cash and cash equivalents acquired 131 (195 859) Impact of the acquisition on the results of the Group Amounts included in Brimstone Group results since date of acquisition: Revenue 279 743 Profit for the year 22 000 Pro forma results of the Brimstone Group if Mareterram had been consolidated from 1 January 2016: Revenue 2 525 592 Profit for the year 196 327 Acquisition related costs Acquisition costs of R4,2 million were recognised in profit or loss for the 2016 year. These costs relate to share registry costs and legal fees relating to the acquisition. 11. Subsequent events On 8 February 2017, Brimstone announced the proposed listing of Sea Harvest on the JSE. A capital raising of up to R1.5 billion will be undertaken by Sea Harvest by way of a private placement simultaneously with the proposed listing. Brimstone remains committed and supportive of Sea Harvest and will hold more than 50% post the listing. Date: 27/02/2017 05:27:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.