Brimstone Investment Corporation Limited reported a loss for the year to December 2015 of R668.1 million compared to a profit of R277.8 million in the prior year. This was mainly attributable to volatile market conditions which negatively impacted the value of certain of its listed holdings, and operating losses at subsidiary Lion of Africa Insurance Company. Notwithstanding these factors the company still received strong dividend income, and its Net Asset Value proved resilient. Brimstone declared a 35 cent dividend payable to all shareholders.
Mustaq Brey, Chief Executive Officer, says despite the loss at Lion of Africa Insurance Company, its other subsidiaries Sea Harvest and House of Monatic both reported profits in challenging market conditions. “We are pleased with the performance of our other subsidiaries and associate companies but are naturally disappointed with the insurance subsidiary which has had some operational challenges which we are now rectifying. The loss is attributable to a decrease in premium income and large claims and one-off charges incurred. We have put in place a new management team and we have jointly developed a focused strategy to return the company to profitability over the next few years,” Brey says.
At Sea Harvest, the company increased operating profit by 10% to R121.6 million and EBITDA by 9% to R205 million. Revenue grew by 1% despite a 5% reduction in fish catch volumes. “Sea Harvest continued with its capital investment programme by investing in an additional freezer trawler as well as upgrading its fresh fish plant. In the last two years over R200 million has been invested in vessels and plant upgrades,” says Fred Robertson, Executive Chairman of Brimstone. Sea Harvest acquired a 19.9% stake in Mareterram Limited, a vertically integrated agri-business which listed on the ASX in Australia, an investment Robertson says secures Sea Harvest’s route to a critical market and providing a platform for future international growth.
“In the last two years over R200 million has been invested in vessels and plant upgrades.” – Fred Robertson
Associate and joint venture companies which performed well during the year under review include Oceana Group where Brimstone received R80.6 million in dividends; Aon Re Africa which paid Brimstone dividends of R12.9 million (2014: R4.5 million) and at Life Healthcare, where Brimstone received dividends of R80.9 million. Brimstone remains one of the largest shareholders in Life Healthcare.
During the period under review Brimstone sold its investment in The Scientific Group for a profit of R44.8 million. Brimstone increased its shareholding in the Grindrod Consortium SPV from 59.2% to 72.4% and acquired 4.2 million Grindrod shares directly. Brimstone also subscribed for 28 million shares in JSE-listed specialist logistics property developer and owner, Equites Property Fund for R350 million, representing a 10% shareholding in Equites.
The company sold its shares in Nedbank realising R568.5 million, while in Old Mutual, Brimstone’s BEE transaction had matured on 1 May 2015 which left Brimstone with 7.4 million shares after repaying its debt. It then sold 3.4 million shares, realising R131.4 million, and subsequent to the year-end, Brimstone sold the remaining 4 million shares for R148.3 million.
“We have always had a co-leadership approach and Lawrie’s good counsel and network has assisted immensely in seeing us through the most challenging times.” – Fred Robertson
In a separate development, Robertson announced the retirement of Lawrie Brozin as Financial Director of Brimstone with effect from 9 May 2016. Lawrie joined the company in 1996 and has seen the group grow from a small unlisted Cape-based empowerment group with start-up capital of R3.5 million to a JSE-listed company with assets in excess of R7.6 billion. “Lawrie has always been a key part of the partnership between Mustaq and me. We have always had a co-leadership approach and Lawrie’s good counsel and network has assisted immensely in seeing us through the most challenging times.”
Geoffrey Fortuin will be appointed as Financial Director. Geoffrey was previously a partner of Deloitte & Touche for 15 years during which time he was responsible for a number of South African listed companies, including the audit of Brimstone. He was also a member of the Deloitte South Africa Board.
Iqbal Khan will be appointed as Chief Operating Officer and Executive Director. Iqbal is a chartered accountant and former partner of EY. He has worked at Brimstone in various roles over 7 years which was interrupted by a two-year stint as Chief Operating Officer of Old Mutual Investment Group.
“Both Geoffrey and Iqbal have been close to the group for many years, Geoffrey as external audit partner, and Iqbal as part of the management team. Collectively they have an intricate understanding of our business model, culture, values, proposition and stakeholders. We are confident that their appointments will stand us in good stead in growing Brimstone as a vehicle that will continue to create significant value for all stakeholders,” concludes Robertson.