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 BRANDRILL LIMITED 2002-05-22 ASX-SIGNAL-G
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 matters.
FUNDING
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.
RESTRUCTURING PLAN
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.
ROCKTEK
* 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.
BRANDRILL CONTRACTING AUSTRALIA (BCA)
* 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 TORREX (PTY) LTD (BTX)
* Brandrill will seek to recapitalise BTX by the introduction of outside equity.
BRANDRILL CORPORATE
* 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 period.
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.
BOARD COMPOSITION
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 Mathew Whyte, COMPANY SECRETARY Phone: +618 9531 1777
For Company profile and Information on Brandrill refer to www.brandrill.com
BDL Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
