Brimstone CEO Mustaq Brey says the company’s internal team is looking at transactions, but there is nothing to report yet.
Gallo Images/Hetty Zantman
- Brimstone CEO Mustaq Brey is optimistic about the investment holding company’s outlook, saying it has shed excess weight.
- All its operating subsidiaries were classified as essential service providers and continued to operate through the country’s Covid-19 lockdown.
- Sea Harvest and Oceana collectively represent approximately 78% of the company’s gross asset value.
Investment holding company Brimstone has been “busy in the gym” and is now ready to hit the road again having shed excess weight, its CEO Mustaq Brey said on Tuesday at its results briefing for the six months ended 30 June 2021.
After two years of losses, the company reported a profit of R430.2 million, up from a loss of R97.8 million in the comparative period.
The profit was mainly due to strong performances by certain of the group’s subsidiaries, such as Sea Harvest, together with the upward revaluation of some of its investments, an increase in the share of profits of associates and joint ventures, and a drop in finance costs.
“We are optimistic about the outlook. We have turned the company around. We said we will reduce costs and we did. Our internal team is looking at transactions, but there is nothing cautionary yet. There are plenty of opportunities around – many of companies are under stress and, as they say, one man’s debt is another’s gain,” said Brey.
“All our operating subsidiaries were classified as essential service providers and continued to operate through extended tough Covid-19 lockdown conditions. These results point to the resilience of these investments.”
Brey said that, at the start of the lockdowns last year, the group set itself a target to reduce debt. “We are delighted that our total debt has reduced by approximately R2 billion since the start of lockdown level 5 last year.”
“As a group we continue to consider all value enhancing mechanisms including buying back our own shares. During the period the company repurchased 5.7 million Brimstone shares, which is value enhancing to all our shareholders. We had also aimed to reduce costs at company level, which we have done successfully. The total effect of these cost reductions should be seen in the full year’s results.”
Apart from additional safety costs and security measures related to the Covid-19 pandemic, Brey said that one of the key challenges the group is facing is uncertainty about fishing quotas.
Growth in earnings and dividends
Brimstone’s subsidiary Sea Harvest delivered headline earnings for the period ended 30 June 2021 of R202.2 million, up by 19% on the comparative period. Earnings per share increased by 27% to 77.7 cents. The fair value of Brimstone’s investment in Sea Harvest at 30 June 2021 was R2.2 billion.
Brimstone holds 32.6 million shares in Oceana, with a market value of R2.1 billion at period end, equivalent to a 25.01% stake in the group. Brimstone recognised R81 million as its share of profits from Oceana and R35.9 million in dividends during the period under review.
Sea Harvest and Oceana collectively represent approximately 78% of Brimstone’s gross asset value. While these are very different businesses operating in different markets, they are both subject to the fishing rights allocation process which has restarted in October 2020 and expect to conclude by the end of this year, said Brey,
Brimstone also owns 80% of Obsidian, a supplier of healthcare solutions to both the private and public healthcare sectors within sub-Saharan Africa. Obsidian contributed R12.5 million, up from R2.5 million, to Brimstone’s profit during the period under review.
Clothing supplier and manufacturer House of Monatic, meanwhile, disposed of its manufacturing assets and transferred related factory staff to a subsidiary of TFG on 1 April 2021. Amid tough trading conditions, the company reported a loss of R18.6 million compared to a loss of R29.3 million in the prior comparative period.
Brimstone’s 18% stake in Aon Re Africa, a reinsurance broker licensed and operating in Africa, contributed R17.1 million to profits and delivered a dividend of R8.1 million during the period.
Milpark Education, a provider of higher education and training qualifications, contributed R7.5 million in equity-accounted earnings during the period under review, up from R25.6 million in losses in the comparative period. Brimstone also received a dividend of R17.1 million from Milpark during the period under review.
The holding company’s investment in Equites, meanwhile, was revalued upwards by R21.1 million to R263.5 million at period end. Brimstone received a dividend of R11.2 million from the property fund.
Brimstone’s stake in MTN Zakhele Futhi was revalued upwards by R10.6 million to R28.2 million at period end. Its investment in MultiChoice’s Phuthuma Nathi was revalued upwards by R44.1 million to R269.2 million at period end. Brimstone expects to receive a dividend of R42.1 million from Phuthuma Nathi in September 2021.
Lastly, the group’s investment in listed higher education group STADIO was revalued upwards by R49.7 million to R134.6 million at period end.