Brimstone Investment Corporation: Navigating economic challenges with resilience

Brimstone Investment Corporation’s headline earnings a share increased by 35% in the year to June 30 from R295.7m, boosted by the 127% increase in the contribution of Sea Harvest and mixed performances from its other investments.

Headline earnings a share came to 96.9 cents, an increase also attributed to lower finance costs and lower operating costs. Sea Harvest's contribution to attributable profit increased to R174.2m. Brimstone repurchased 1 548 356 shares through the year for R7.2m.

“Despite a turbulent global and domestic economic environment, Brimstone delivered a strong performance, with attributable profit improving to R252.1m, compared to a loss of R295.7m in the prior period, driven primarily by Sea Harvest,” said CEO Mustaq Brey.

“Brimstone is 30 years old and has come a long way as a predominant broad-based BEE company. Over the years, the group has weathered multiple global and domestic economic cycles, maintaining a long-term investment approach. Brimstone has consistently acted not only as a shareholder but also as a strategic partner to its investee companies,” he said.

During the prior comparative period, Sea Harvest acquired certain subsidiaries of Terrasan Group. As part of the transaction, Sea Harvest issued new shares to Terrasan, resulting in the dilution of existing shareholders.

Consequently, Sea Harvest ceased to be a subsidiary of Brimstone - its shareholding fell to 44.5% from 53.4% - and has been accounted for as an associate from May 14, 2024.

In the current reporting period, Sea Harvest was accounted for as an associate, whereas in the prior comparative period it was treated as a subsidiary for most of the period and as an associate thereafter.

Brimstone held a 25.2% stake in Oceana Group, with a market value of R1.7bn at period end, compared with R2.2bn at December 31, 2023. Oceana’s share price closed at R52.37 per share, down from R67.48 per share at December 31, 2023. Brimstone recognised R115.2m (R187m as its share of profits from the associate). Brimstone received dividends of R36m (R63.8m) from Oceana.

Brimstone held a 44.5% stake in Sea Harvest with a market value of R1.3bn at period end (R1.3bn). Sea Harvest’s share price closed at R8.15 per share, down from R8.35 per share at December 31, 2023.

Brimstone recognised R174.2m (R90.2m) as its share of profits from the associate. Brimstone received dividends of R35.1m (R63.8m) from Sea Harvest.

Brimstone’s 18% stake in Aon Re Africa, a reinsurance broker licensed and operating in Sub-Saharan Africa and the rest of Africa, contributed R28.6m to profits and delivered a dividend of R20.2m.

Brimstone holds 10% in FPG Property Fund, a Cape-based, black-owned and managed unlisted property fund specialising in the retail convenience market. It owns 32 convenience shopping centres in South Africa with an expanding footprint in the UK.

The property portfolio is independently valued in excess of R11bn on a gross basis. This investment was revalued upwards by R21.8m to R462.2m at period end.

Brimstone held 1.4% in FPG investments. FPG Investments is an investment company that owns 87% of FPG Property Fund and 87% of FPG Foods, which owns a chain of retail fast-food outlets; and 30% of Polar Ice Cream, an ice cream manufacturer with a network of retail outlets in South Africa. The investment was revalued upwards by R4.1m to R54.1m.

Brimstone’s subsidiary Obsidian Health is a supplier of healthcare solutions to both the private and public healthcare sectors in Sub-Saharan Africa. Obsidian contributed R11.2m (R6.1m) to group profit. Brimstone received a R4.9m dividend from Obsidian.

Revenue growth was driven by the Life Sciences division and Point of Care division, as well as the inclusion of a new agency, QuidelOrtho.

MTN Zakhele Futhi’s share price closed at R17.10, up from R8 at December 31, 2023. The shares were revalued upwards by R14.2m to R26.7m. Subsequent to period end, a special distribution, by way of return of contributed tax capital, of R20 per share, amounting to R31.3m, was received. A further special dividend was expected to be received.

Phuthuma Nathi’s share price closed at R60 per share, down from R81.01 at December 31, 2023. The shares were revalued downwards by R18.8m to R53.7m.

South African Enterprise Development (SAED), an investment vehicle providing equity growth capital to high-potential small and medium-sized enterprises, is 25% owned by Brimstone. SAED contributed R1.8m in equity accounted earnings. Brimstone accrued a dividend of R1.6m from SAED.

Looking ahead, Brey said signs of easing inflation and recent interest rate cuts had offered some relief to consumers, while structural reforms in energy and logistics were beginning to lay a foundation for recovery in South Africa’s economy.

“We are optimistic these positive developments will further benefit our performance in the next reporting period,” said Brimstone executive chairman Fred Robertson.

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