BDL 0.00% 13.5¢ brandrill limited

Announcement - Restructure

  1. 259 Posts.
    Funding Update & Restructuring Plan

    Document date: Wed 22 May 2002 Published: Wed 22 May 2002 19:05:16
    Document No: 216631 Document part: A
    Market Flag: Y
    Classification: Placement , Other

    HOMEX - Perth

    Brandrill reported in its ASX First Half Review, dated 11 March 2002,
    that it has been:

    * Seeking appropriate long term funding (including equity capital)
    for its overseas operations and ongoing PCF(TM) developments and
    commercialisation strategies; and

    * Developing a strategy to control and reduce its expenditure,
    particularly on its PCF(TM) technology operations.

    This announcement is an update on the Company's progress on these


    It was announced on 8 and 23 April 2002, that the Company has
    completed placements to raise $3,000,000. A further placement to a
    potential strategic partner in the South African mining industry has
    been under discussion. However, Brandrill has now been advised that
    although a strategic partnership at an operational level is a strong
    option, the South African mining company is not in a position to make
    an equity investment.

    Brandrill continues to investigate other capital raising options and
    is engaged in discussions with its bankers, Commonwealth Bank of
    Australia, concerning ongoing funding requirements.


    Brandrill made a strategic decision to develop a dual operational and
    technology focus during the late 1990's with the acquisition and
    further development of PCF(TM) technology.

    At that time the Australian equity market was supportive of growth
    technology stocks. Investors wanted to see rapid development of
    PCF(TM) and the Company adopted an accelerated PCF(TM)
    commercialisation program.

    The accelerated PCF(TM) commercialisation program budgeted for
    additional capital to be invested in research and development (R&D).

    The planned capital raisings budgeted for 2002 have been affected by
    the deterioration in equity market support for technology related
    stocks and also by specific and negative sentiment towards Brandrill
    based on failure to achieve certain milestones. As a result the
    capital raising program could not be completed within the time frame
    originally scheduled.

    The Board has assessed the impact of delays to the capital raising
    program, against the background of the following analysis of the
    Company's position and prospects:

    1. Brandrill's contracting operation in Australia is generating cash
    and profit before supporting additional costs for PCF(TM)
    overheads and regional expansion initiatives.

    2. RockTek's current PCF(TM) business will break even within a short
    timeframe from sale of products already developed and beyond that
    has good prospects of ongoing profits.

    3. Brandrill's 51% owned BTX contracting business in South Africa is
    generating cash and profit, although due to the devaluation of the
    Rand its performance in Australian dollar terms has been below
    original expectations.

    The Company has completed an overall review of its business plan
    going forward. As a result of the review it has restructured its
    businesses, cut costs and adopted revenue improvement measures. These
    measures are summarised below. The cost cutting program will result
    in cash savings of at least $700,000 per month by July 2002.

    The Company will review the carrying value of its assets once the
    restructure of businesses, cost cutting and revenue improvement
    measures have been implemented. Decreases in the carrying values of
    assets will be reported as significant items in the year-end results.


    * Will focus on selling PCF(TM) products that are already developed
    and available in the market using a commission/distributor based
    sales strategy.

    * Will reduce R&D expenditure from $5,000,000 in the current
    financial year to $500,000 for the 12 months to 30 June 2003.

    * Will only undertake intellectual property expenditure on PCF(TM)
    technology where there is a short-term opportunity for
    commercialisation or where funded by a third party.

    * Has restructured costs and overheads so that they can readily be
    reduced in the event that PCF(TM) sales do not match forecast.

    * Has restructured the North American operations and closed the
    Denver R&D office. Distributors supported out of Canada will now
    handle North American sales.


    * As the largest contributor to the Brandrill Group EBITDA and cash
    flow, will reduce costs and overheads so as to improve and maintain
    margins and free cash.

    * Will dispose of unutilised plant and non-core properties.

    * Will reduce its overheads and operating costs to reflect the
    discontinuance of the accelerated growth strategy for PCF(TM).

    * Is in the process of closing offices in Singapore and Hong Kong.


    * Brandrill will seek to recapitalise BTX by the introduction of
    outside equity.


    * The Company's resolve to reduce overhead costs is demonstrated by
    executive and non-executive directors and senior management
    agreeing to 20% to 50% salary reductions effective immediately.
    The West Perth office will be closed.

    Mr Jeff Branson, Managing Director of Brandrill, said the streamlined
    strategy outlined today was appropriate for a robust company which
    has good prospects, but is passing through a difficult trading

    He said that Brandrill was focusing on BCA, which has been
    contracting profitably and successfully for 22 years, to develop a
    steady operating platform with low risk cash flows whilst retaining a
    focused commission and distributorship based sales approach for its
    PCF(TM) product range.

    These measures aim to lift the financial performance of the Brandrill
    Group by increasing contract margins, liberating cash from the sale
    of surplus assets, increasing the return on capital invested,
    reducing the cash burn rate on PCF(TM) R&D and reducing BCA overheads
    by closing underperforming regional offices.


    Mr Branson also announced that Mr Michael Bowen will resign as an
    executive director and become a non-executive director effective 1
    July 2002. Mr Bowen will continue to have a role with Brandrill to
    assure the continuity of his function.

    The Company is now seeking to appoint an additional non-executive
    director with an industry and commercial background to enhance
    non-executive director skills. It is speaking to several candidates
    and will make an appointment as soon as practicable.

    For further information: Jeff Branson, MANAGING DIRECTOR or
    Phone: +618 9531 1777

    For Company profile and Information on Brandrill refer to
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