Brikor : Financial Results - Year Ended 28 February 2021

BRIKOR LIMITED

Incorporated in the Republic of South Africa Registration number: 1998/013247/06 JSE code: BIK

ISIN: ZAE000101945

("Brikor" or "the Group" or "the Company")

ABRIDGED AUDITED

CONSOLIDATED

FINANCIAL RESULTS

for the year ended 28 February 2021

THE SPIRIT OF BRICKMAKING

BRIKOR LIMITED ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS for the year ended 28 February 2021

PREPARED BY:

The abridged audited consolidated financial results ("abridged financial results" or "results") for the year ended 28 February 2021 was prepared by Ms Joaret Botha CA(SA), Financial Director.

FINANCIAL HIGHLIGHTS

Revenue

DECREASED BY

11,9% to R257,9 million

Headline earnings per share

INCREASED BY

2 000,0% to 2,1 cents

Cash and cash equivalents

INCREASED BY

285,2% to R15,3 million

Tangible net asset value per share

INCREASED BY

33,9% to 7,9 cents per share

Acid test ratio

INCREASED BY

Earnings per share

INCREASED BY

850,0% to 1,9 cents

Total equity

INCREASED BY

17,5% to R80,5 million

Net asset value per share

INCREASED BY

17,4% to 12,8 cents per share

Current asset ratio

DECREASED BY

2,2% to 1,31:1

The abridged financial results are extracted from audited information but is not itself audited. The directors take full responsibility for the preparation of the abridged financial results and the correct extraction of the financial information included herein from the underlying annual financial statements.

28,8% to 0,8:1

The financial statements were audited by Nexia SAB&T, and the unmodified audit report thereon is available for inspection at the Company's registered office.

BRIKOR LIMITED ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS for the year ended 28 February 2021

COMMENTARY

OVERVIEW

Brikor is a diverse manufacturer and supplier of building and construction materials used across a broad spectrum of application from low-cost housing to residential, commercial, industrial, civil engineering and infrastructure projects. The Group operates through two segments, namely Bricks and Coal (the latter being through its wholly-owned subsidiary, Ilangabi Investments 12 (Pty) Ltd).

The directors of Brikor are pleased to present the abridged audited consolidated financial results for the year ended 28 February 2021, which reflect positive operating profits before interest and taxation and cash generated from operations despite the impact of the COVID-19 pandemic and a distressed economic trading environment.

The initial lockdown period required that the Bricks segment be closed until the end of April 2020, whilst the Group's coal mining operation, Ilangabi Investments 12 (Pty) Ltd, was allowed to continue to operate at 50% of its capacity during the lockdown period, as the supply of coal was considered an essential service to the electricity supply-chain.

As from 1 May 2020, the country moved into alert level 4 and the Bricks segment was able to operate at 50% of production capacity. Management took the decision to follow a phased-in approach with regards to the start-up of production. No production occurred for May 2020 and a phased-in approach commenced during June 2020, returning to full production towards the third week in July 2020. This was also in line with the country moving to alert level 3 from 1 June 2020, which allowed the Bricks segment to operate at 100% production. Sales volumes in the Bricks segment increased to pre-lockdown levels during August 2020. The Group's Coal segment was permitted to operate at 100% capacity from 1 May 2020 with a limited impact on sales and production as from May 2020.

The Coal segment, however, experienced the affect of the initial lockdown period during the last two quarters of the reporting period, with increased supply in the local coal markets adding pressure on sales prices and demand.

Unusual heavy rainfall during the last quarter of the reporting period added additional pressure on sales volumes for the Bricks and Coal segments during January 2021 and February 2021.

Despite various challenges as well as uncertain economic activities, gross profit increased to R65,0 million for the year ended 28 February 2021 (2020: R62,5 million), with profit after taxation increasing to R12,0 million (2020: 1,5 million). The Group generated positive cash flows from operations as a result of phasing in production, savings in variable costs during levels 4 and 5 of the lockdown period as well as strict cost-saving initiatives.

DIRECTORS' RESPONSIBILITY

The directors take full responsibility for the preparation of the abridged audited consolidated financial results and confirm that the financial information has been correctly extracted from the underlying financial statements.

FINANCIAL OVERVIEW

Revenue decreased to R257,9 million (2020: R292,7 million) as a direct result of the Bricks segment being closed until the end of April 2020, whilst the Group's coal mining operation, Ilangabi Investments 12 (Pty) Ltd, was allowed to continue to operate at 50% capacity during the initial lockdown period. The last quarter of the reporting period experienced unusual high levels of rainfall, which also had a direct impact on sales volumes during January 2021 and February 2021. The gross profit percentage increased to 25,2% for the year ended 28 February 2021 (2020: 21,4%), mainly as a result of cost savings and improved efficiencies in both the Coal and Bricks segments.

The Group realised an operating profit before interest and taxation of R21,0 million for the year ended 28 February 2021 (2020: R8,5

million) and profit after tax of R12,0 million (2020: R1,5 million). The increase in profit for the reporting period was mainly due to strict cost savings as well as a section 43 closure certificate received in respect of one of the Group's rehabilitation sites. As a direct result of the closure certificate, the gross closure cost of R8,0 million relating to the environmental rehabilitation provision, has resulted in a credit to the statement of profit or loss.

Cash and cash equivalents (net of bank overdraft) increased to R15,3 million as at 28 February 2021 (2020: R4,0 million). The increase was mainly attributable to the Group having had sufficient stock available at the time when the Group was able to return to operations on 1 May 2020. The decision to phase in production also resulted in savings on variable costs, specifically during levels 5 and 4 of the lockdown period.

1

BRIKOR LIMITED ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS for the year ended 28 February 2021

Commentary

continued

Revenue

Revenue in the Bricks segment decreased by 10,1% to R144,9 million (2020: R161,2 million) as a direct result of the impact of the COVID-19 pandemic, which resulted in no sales in the Bricks segment during April 2020 and limited sales during May 2020. Sales volumes in the Bricks segment returned to pre-lockdown levels during August 2020, with sales volumes for January 2021 and February 2021 decreasing slightly as a result of heavy rainfall experienced during the last quarter of the reporting period. Revenue in the Coal segment decreased by 14,0% to R113,0 million (2020: R131,5 million). The Coal segment was allowed to continue to operate at 50% capacity during the initial lockdown period and returned to 100% capacity as from May 2020. The Coal segment, however, experienced the aftermath of the initial lockdown period during the last quarter of the reporting period, with increased supply in the local markets adding pressure on sales prices and demand, which directly impacted on sales volumes and prices.

Gross profit

Gross profit increased by 3,9% to R65,0 million (2020: R62,5 million) with the gross profit percentage increasing to 25,2% (2020: 21,4%). Gross profit increased mainly as a result of improved production efficiencies in the Coal and Bricks segments as well as variable cost savings during levels 4 and 5 of the lockdown period.

Operating profit before interest and taxation

Operating profit before interest and taxation increased by 147,8% to R21,0 million (2020: R8,5 million). On 1 May 2020, when the Group was able to return to operations, the Bricks segment had sufficient stock available to enable it to phase in production, whilst still being able to meet revenue targets without incurring additional variable costs. During the last quarter of the reporting period, the Group obtained a closure certificate for one of its rehabilitation sites, which resulted in a decrease in the environmental rehabilitation liability and a credit of R8,0 million to the statement of profit or loss.

Administrative and other expenditure decreased significantly as a result of savings in salaries and wages, staff training and legal fees in comparison to the prior year. During the previous reporting period, the Group provided for R3,8 million in respect of legal fees relating to pending court cases and the Group was, therefore, able to utilise the provision during the 2021 financial year.

Earnings per share and headline earnings per share

Earnings per share increased by more than 100% to 1,9 cents per share (2020: 0,2 cents per share), mainly due to the increase in profit for the reporting period as noted above. Headline earnings per share also increased by more than 100% to 2,1 cents per share (2020: 0,1 cents per share), mainly due to the variable costs savings, the decrease in the rehabilitation provision during the last quarter of the reporting period as well as savings in administrative and other expenditure.

Net asset and tangible asset values

The Group continued to generate profits and invest in property, plant and equipment. This has resulted in an increase in net asset value per share of 17,4% to 12,8 cents per share (2020: 10,9 cents per share), and net tangible asset value per share of 33,9% to 7,9 cents per share (2020: 5,9 cents per share).

Capital expenditure

Major capital investments made by the Group during the reporting period comprised R1,2 million for the replacement of the factory roof at the Bricks segment as well as the building of an eating area for the employees. Additions to plant and equipment during the reporting period amounted to R8,1 million, which included a right-of-use asset to the value of R4,3 million.

During January 2021, the Group entered into a lease agreement for the lease of certain production equipment for its Bricks segment. This resulted in the capitalisation of a right-of-use asset, in terms of IFRS 16: Leases, to the value of R4,3 million.

2

BRIKOR LIMITED ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS for the year ended 28 February 2021

Commentary

continued

GOING CONCERN

The 2021 financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that adequate cash is generated by operations and the necessary funds be available to finance future operations and that the realisation of the sale of assets, settlement of liabilities, contingent obligations and commitments occur in the ordinary course of business. The directors have prepared their budgets and cash flow forecast for the year ahead based on reasonable and supportable assumptions. The cash flow forecast and current management results indicate that the Group will operate as a going concern for the foreseeable future - refer to note 8.

CORPORATE ACTIVITY DURING THE REPORTING PERIOD

COVID-19 pandemic and lockdown

On 11 March 2020, the World Health Organisation declared the COVID-19 outbreak a pandemic. Many governments are taking increasingly stringent steps to help contain the spread of the virus, including self-isolation/quarantine by those potentially affected, implementing social distancing measures, and controlling or closing borders and "locking-down" cities/regions or even entire countries. There has also been a significant increase in economic uncertainty, evidenced by more volatile asset prices, currency exchange rates and a significant decrease in long-term interest rates.

The South African economy was affected by the news of the first confirmed cases of the virus in the country early in March 2020 and this led to the President of the Republic of South Africa declaring a national disaster on 15 March 2020. The President made a further announcement on 23 March 2020 that the country will effectively be placed in a lockdown from midnight on 26 March 2020 until 16 April 2020, with only essential services permitted to operate during this time. On 9 April 2020, the President announced the extension of the lockdown period by an additional 14 days and a risk-adjusted strategy was announced with various different risk alert levels (alert levels 5 to 1), which the country would follow in the gradual relaxation of lockdown restrictions and return of economic activity.

The Group acted swiftly in ensuring that all the necessary protocols were put in place, as directed by government.

Lifting of suspension and re-listing on the AltX of the Johannesburg Stock Exchange (JSE)

During the reporting period, the Company met all the outstanding JSE Listings Requirements. The most important of these being the finalisation and submission of the statutory annual financial statements for the financial year ended 28 February 2019 of the subsidiary, Ilangabi Investments 12 (Pty) Ltd, and Brikor Company to the JSE. On 29 June 2020, Ms Joaret Botha CA(SA) was appointed as Financial Director. On 23 July 2020, the suspension of Brikor's listing was uplifted and trading in the Company's shares re-commenced on that date.

LITIGATION

Further particulars relating to litigation in which the Group is involved are disclosed in note 5.

DIVIDEND

No dividend has been declared or paid during the reporting period.

CORPORATE GOVERNANCE

The directors endorse and accept full responsibility for the application of the principles necessary to ensure that effective corporate governance is practiced consistently throughout the Group. Brikor is committed to the principles of openness, integrity and accountability to all stakeholders and the Board of Directors accepts its duty to ensure that the principles and practices (as applicable to Brikor), set out in the King Report of Corporate Governance for South Africa - 2016 (King lV™), are implemented on an apply and explain basis.

3