Brimstone reports positive results, declares dividend

The Group reported a profit for the year of R324.5 million, a decrease from R920.9 million in the prior year. This decrease in profit is mainly due to a decrease in operating profit of R185.5 million, a decrease in fair value gains of R239.6 million, an increase in finance costs of R87.3 million, and the prior year recognition of profit from discontinued operation of R157.7 million.

Total assets increased by 11% to R11.7 billion from R10.5 billion in the prior year. Net asset value per share increased to R13.40 per share from R11.80 per share at prior year end. Brimstone declared a dividend of 33 cents per share, up from 30 cents per share in the previous year.

“In a period where we experienced increasing interest rates, higher fuel costs, supply chain disruptions, increased incidence of load shedding and increases in international freight costs, these results still prove the resilience of the Group and its portfolio companies. This reporting period saw the announcement of the FRAP allocations, which brings certainty to our major fishing assets,” says Brimstone’s CEO Mustaq Brey.

FOOD SECTOR

Brimstone’s subsidiary, JSE-listed Sea Harvest Group experienced a challenging year to 31 December 2022. Despite 10% volume losses from the Fishing Rights Allocation Process (FRAP) and a reduction in the total allowable catch, revenue was up in all segments with firm demand in all markets and strong pricing in all channels. This firm demand was, however, offset by unprecedented cost inflation, supply chain disruptions (including load shedding) and significant increases in local and international freight rates.

Sea Harvest’s revenue for the year increased by 27% to R5.88 billion up from R4.62 billion in the prior year. Earnings before interest and tax decreased to R500 million from R670 million and headline earnings per share decreased to 105 cents from 157 cents.

The fair value of Brimstone’s investment in Sea Harvest at year end was R1.9 billion. Brimstone will receive a dividend of R60.6 million from Sea Harvest on 11 April 2023.

“Sea Harvest experienced unprecedented cost inflation and the further impact of loadshedding as it translated into higher energy costs and supply chain disruptions.  Sea Harvest completed the acquisition of MG Kailis on 23 May 2022, with this transformative transaction representing a significant step in the execution of the group’s investment strategy of acquisitive growth in the international seafood space that focuses on businesses of scale in high-value seafood species. MG Kailis complements and diversifies the group’s existing business operations in Australia from a wild-caught fishing, trading, engineering and sales perspective,” says Fred Robertson, Executive Chairman of Brimstone.

Brimstone held 32.7 million shares (25.1% stake) in Oceana with a market value of R2.1 billion at year end. Brimstone recognised R195.4 million as its share of profits from Oceana based on Oceana’s reported earnings for the year to 30 September 2022. Brimstone received dividends of R194.1 million from Oceana during the year under review which included a delayed final dividend of R80.9 million from Oceana in respect of the 2021 financial year.

OTHER SUBSIDIARY

Brimstone owns 70% of Obsidian Health, a leading supplier of innovative healthcare solutions to both the private and public healthcare sectors within Sub-Saharan Africa.

Obsidian contributed R5.2 million to Group profit during the year under review, down from R20.7 million in the prior year. As Covid-19 regulations lifted during the year, sales of antigen rapid tests and related personal protective equipment dropped off rapidly. Elective surgery caseloads increased since the pandemic.

OTHER ASSOCIATES

Brimstone’s 18% stake in Aon Re Africa, a leading reinsurance broker licensed and operating in Sub-Saharan Africa and the rest of Africa, contributed R13.9 million to profits and delivered a dividend of R12.7 million during the year under review.

South African Enterprise Development (SAED), an investment vehicle providing equity growth capital to high potential small and medium sized enterprises, of which Brimstone owns 25%, contributed R1.9 million in equity accounted earnings for the period. Brimstone accrued a dividend of R1.6 million from SAED for the year under review.

Milpark Education is a leading provider of higher education and training qualifications. Milpark contributed R14.6 million in equity accounted earnings during the year under review, up from R8.3 million in the prior year. Brimstone received a dividend of R15.1 million from Milpark during the year under review. The Group invested a further R20.4 million in Milpark to early-settle the acquisition of the business of CA Connect during the year under review.

INVESTMENTS

The Group’s investment in Equites (a JSE listed REIT) was revalued downwards by R85.8 million to R235.1 million at year end. Brimstone received a dividend of R23.2 million from Equites during the year under review.

FPG Property Fund is a Cape-based black-owned and managed unlisted property fund specialising in the retail convenience market. It owns 26 convenience shopping centres in South Africa with an expanding footprint in the United Kingdom. The property portfolio is valued in excess of R7.5 billion on a gross basis. Brimstone participated in a rights issue and invested a further R27 million in the fund during the year. The investment was revalued upwards by R55.7 million to R312.2 million at year end. Brimstone received a dividend of R3.3 million from FPG Property Fund during the year under review.

Brimstone’s stake in MTN Zakhele Futhi was revalued downwards by R21.1 million to R35.3 million at year end. This scheme matures in November 2024.

Brimstone’s 2.8% stake in Phuthuma Nathi was also revalued downwards by R3.5 million to R252.3 million at year end. Brimstone received a dividend of R42.1 million from Phuthuma Nathi during the year under review. Brimstone owns a 5.1% stake in listed higher education group STADIO which was revalued upwards by R50.5 million to R213.9 million at year end. Brimstone received a maiden dividend from STADIO of R2 million during the year under review.

“Despite the challenges presented by an extremely difficult macro-economic environment, overlaid by uncertainty and business interruptions manifested through events like loadshedding, our Group has still delivered credible profits and declared a dividend to shareholders.  As one of the older truly black owned B-BBEE groups, a responsible employer with a workforce of over 5000 people in our subsidiaries, we add our voice and call on government to urgently and constructively address the energy crisis and consider all the solutions to stabilise our energy resources, ” concluded Robertson.