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Brikor interim results for period ending August 2018
Date: 2 November 2018 Category: Stock Market Share price at time of writing: R0.09 |
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We take a look at the interim results for the period ending end of August 2018 of Brikor. Their primary business is the manufacturing and selling bricks.
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About Brikor
In August 1994 Garnett Parkin senior, an entrepreneur, formed Marievale Brickworks which acquired certain immovable properties in Nigel from Marievale Gold Mine Limited. He and his son Garnett van Niekerk Parkin through Marievale Brickworks built a brick factory for the manufacture of semi-face bricks. This factory initially produced 15 million bricks per annum.
PME was formed by Garnett Parkin senior at the same time. It acquired a fleet of two trucks and three trailers, which were primarily responsible for farming operations, the transport of clay and coal, as well as the distribution of bricks.
In 1996 Garnett van Niekerk Parkin acquired 100% of the entire issued share capital of Marievale Brickworks and PME when Garnett Parkin senior passed away.
Basfour (Pty) Limited was incorporated as a private company on 10 July 1998 and acquired factory land in Nigel. A second brick plant was commissioned by the company with a production capacity of 14 million bricks per annum.
Marievale Bamford was formed in November 1999 and it purchased land and plant in Olifantsfontein where the group’s third face brick plant, with a gas firing tunnel kiln with a production capacity of 16.7 million bricks per annum, was commissioned in March 2000.
In 2000 PME acquired further land in Rayton to supply clay to the brick plant in Olifantsfontein.
Basfour (Pty) Limited changed its name to Brikor (Pty) Limited on 19 November 2001 and the brick manufacturing and sales operations of the group, including those conducted by Marievale Brickworks, were consolidated into Brikor. Since 2001 coal underlying the clay deposits was commissioned to service the needs in the group’s industry, which ensured that the group became self sufficient from the supply of coal.
On 18 May 2007 Brikor was converted to a public company. Brikor was listed on the AltX in August 2007.
On Saturday, 17 January 2015, Garnett van Niekerk Parkin, chief executive officer of Brikor tragically passed away in a motor car accident. Garnett’s legacy is continued at Brikor through the appointment of his son, Garnett Parkin, as chief executive officer and the loyal support of Brikor’s management and staff.
PME was formed by Garnett Parkin senior at the same time. It acquired a fleet of two trucks and three trailers, which were primarily responsible for farming operations, the transport of clay and coal, as well as the distribution of bricks.
In 1996 Garnett van Niekerk Parkin acquired 100% of the entire issued share capital of Marievale Brickworks and PME when Garnett Parkin senior passed away.
Basfour (Pty) Limited was incorporated as a private company on 10 July 1998 and acquired factory land in Nigel. A second brick plant was commissioned by the company with a production capacity of 14 million bricks per annum.
Marievale Bamford was formed in November 1999 and it purchased land and plant in Olifantsfontein where the group’s third face brick plant, with a gas firing tunnel kiln with a production capacity of 16.7 million bricks per annum, was commissioned in March 2000.
In 2000 PME acquired further land in Rayton to supply clay to the brick plant in Olifantsfontein.
Basfour (Pty) Limited changed its name to Brikor (Pty) Limited on 19 November 2001 and the brick manufacturing and sales operations of the group, including those conducted by Marievale Brickworks, were consolidated into Brikor. Since 2001 coal underlying the clay deposits was commissioned to service the needs in the group’s industry, which ensured that the group became self sufficient from the supply of coal.
On 18 May 2007 Brikor was converted to a public company. Brikor was listed on the AltX in August 2007.
On Saturday, 17 January 2015, Garnett van Niekerk Parkin, chief executive officer of Brikor tragically passed away in a motor car accident. Garnett’s legacy is continued at Brikor through the appointment of his son, Garnett Parkin, as chief executive officer and the loyal support of Brikor’s management and staff.
So to the numbers we go
- REVENUE increased by 0,6 % to R153,6 million
- EBITDA decreased by 48,2 % to R16,2 million
- NET ASSET VALUE increased by 1,9 % to 10,5 cents per share
- NET TANGIBLE ASSET VALUE increased by 34,1 % to 5,9 cents per share
- CASH AND CASH EQUIVALENTS decreased by 20,5 % to R12,8 million
- EARNINGS PER SHARE from continuing operations decreased by 85,7 % to 0,3 cents per share
- HEADLINE EARNINGS PER SHARE from continuing operations decreased by 85,0 % to 0,3 cents per share
The numbers quoted below is anything but encouraging for the small company whose one and only focus is selling bricks.
- EBITDA decreased by 48,2 % to R16,2 million
- NET ASSET VALUE increased by 1,9 % to 10,5 cents per share
- NET TANGIBLE ASSET VALUE increased by 34,1 % to 5,9 cents per share
- CASH AND CASH EQUIVALENTS decreased by 20,5 % to R12,8 million
- EARNINGS PER SHARE from continuing operations decreased by 85,7 % to 0,3 cents per share
- HEADLINE EARNINGS PER SHARE from continuing operations decreased by 85,0 % to 0,3 cents per share
The numbers quoted below is anything but encouraging for the small company whose one and only focus is selling bricks.
So any comments from management on the results?
Below a fee extracts from Brikors management on the financial results.
"The competitive South African economic environment continues to put strain on selling prices in the brick segment. The brick segment is also experiencing a change in demand of product range mixes with lower gross profit yielding products prevailing. As a direct result the revenue in the brick segment has reduced by 3,9% to R88,9 million (August 2017: R92,5 million) with the gross profit reducing by 32,9% to R15,3 million (August 2017: R22,8 million). The increased supply of coal segment product range, which yields higher prices resulted in an increase of 16,6% to R79,4 million (August 2017: R68,1 million) which therefore resulted in an overall increase in the revenue for the group. Gross profit for the coal segment, however, reduced by 11,4% to R17.1 million (August 2017: R19,3 million), this was a result of a new sizing plant which was commissioned for the group and took several weeks of installation resulting in increased cost of production per ton due to the lack of volumes in March and April 2018 with fixed costs remaining unchanged. Other income reduced by 24,4% to R3,1 million (August 2017: R4,1 million) due to the expiry of certain rental agreements as well as profit on sale of equipment in August 2017 which was a once of occurrence. Administration, distribution and other expenses increased to R27,1 million (August 2017: R21,9 million), mainly due to the cost incurred with the earlier release of the integrated annual report to the extent of R1,9 million and R1,9 million increased spend on Broad Based Black Economic Empowerment targets set by the group. The balance is a result of annual inflationary increases. Finance costs during the period reduced to R3,9 million (2017: R5,8 million) due to the settlement of the royalty tax liabilities capital portion of R16,4 million, provisional tax liabilities of R3,3 million and the repayment of the estate late GvN Parkin interest bearing loans to the extent of R20,0 million. This has positively influenced the current assets versus current liabilities ratio which is now 1,4 times previously 1,1 times in August 2017. The debt to equity ratio has greatly reduced from 3,0 times to 2,3 times, reducing overall credit risk for the group."
"The competitive South African economic environment continues to put strain on selling prices in the brick segment. The brick segment is also experiencing a change in demand of product range mixes with lower gross profit yielding products prevailing. As a direct result the revenue in the brick segment has reduced by 3,9% to R88,9 million (August 2017: R92,5 million) with the gross profit reducing by 32,9% to R15,3 million (August 2017: R22,8 million). The increased supply of coal segment product range, which yields higher prices resulted in an increase of 16,6% to R79,4 million (August 2017: R68,1 million) which therefore resulted in an overall increase in the revenue for the group. Gross profit for the coal segment, however, reduced by 11,4% to R17.1 million (August 2017: R19,3 million), this was a result of a new sizing plant which was commissioned for the group and took several weeks of installation resulting in increased cost of production per ton due to the lack of volumes in March and April 2018 with fixed costs remaining unchanged. Other income reduced by 24,4% to R3,1 million (August 2017: R4,1 million) due to the expiry of certain rental agreements as well as profit on sale of equipment in August 2017 which was a once of occurrence. Administration, distribution and other expenses increased to R27,1 million (August 2017: R21,9 million), mainly due to the cost incurred with the earlier release of the integrated annual report to the extent of R1,9 million and R1,9 million increased spend on Broad Based Black Economic Empowerment targets set by the group. The balance is a result of annual inflationary increases. Finance costs during the period reduced to R3,9 million (2017: R5,8 million) due to the settlement of the royalty tax liabilities capital portion of R16,4 million, provisional tax liabilities of R3,3 million and the repayment of the estate late GvN Parkin interest bearing loans to the extent of R20,0 million. This has positively influenced the current assets versus current liabilities ratio which is now 1,4 times previously 1,1 times in August 2017. The debt to equity ratio has greatly reduced from 3,0 times to 2,3 times, reducing overall credit risk for the group."
As the group continuously and consistently reduces its debts with the South African Revenue Services and related parties in order to cement the statement of financial position into a secure solvent and liquid position, the Brikor board is looking for future investment opportunities to grow the group's foothold in the relevant markets it trades in. The directors of Brikor are pleased to present the condensed consolidated interim financial results for the period
ended 31 August 2018, which reflect the Brikor group’s commitment to its core focus of risk management and
sustainability in a distressed economic trading environment.
The group’s overall financial indicators mirror the constraints experienced in the current economic climate.
So should you buy their shares?
Absolutely not. Earnings coming in at 0.3c a share, and with a share price as low as 9c, even that looks expensive. At their current price they trading at a PE ratio of 15, and a dividend yield of 0%. The worry for us is the fact that the management felt the need to add to the results a summary of the company's "going concern". Basically a going concern is the question of whether the company can still operate and will keep the doors open in the coming months. If trading conditions does not improve quickly for the group, we doubt that they would be operating in a year's time. We therefore recommend investors AVOID this share at all costs.