BRIMSTONE REPORTS STRONG RESULTS, CONTINUES TO REDUCE DEBT

The Group reported headline earnings per share of 71.9 cents (2023: 34.2 cents), up 110%

over the comparative period. This was mainly due to fair value gains of R76.2 million compared to fair value losses of R40.3 million in the prior period, and the increase in Brimstone’s share of profits of Oceana from R94.9 million in the prior period to R187 million in the period under review.

“The economic environment during the period under review was challenging with a volatile Rand, high interest rates, persistently high unemployment and consumers under pressure. Despite these economic challenges Brimstone produced a solid results reporting an increase in headline earnings of 110%. In interpreting our results for the period, while our financial statements may seem vastly different to the prior period, one has to recognise the fundamental change in the treatment of Sea Harvest from a subsidiary to an associate,” says Brimstone’s CEO Mustaq Brey.

FOOD

Brimstone held 159.6 million shares (44.5% stake) in Sea Harvest with a fair value of R1.3 billion at period end (31 Dec 2023: R1.5 billion). Sea Harvest’s share price closed at R8.09 per share, down from R9.45 per share at 31 December 2023.

During the period under review, Sea Harvest concluded its acquisition of certain subsidiaries of Terrasan, which resulted in Sea Harvest issuing 60 million shares to Terrasan, which diluted existing shareholders. Consequently, Sea Harvest is no longer a subsidiary of Brimstone, and has been accounted for as an associate, with effect from 14 May 2024. This deconsolidation of Sea Harvest, resulted in a loss on deemed disposal of R562.1 million.

After the effective date, Brimstone recognised R90.2 million as its share of profits of the associate based on Sea Harvest’s reported profit for the period to 30 June 2024.

Brimstone held 32.7 million shares (25.1% stake) in Oceana Group with a market value of R2.4 billion at period end (31 Dec 2023: R2.3 billion). Oceana’s share price closed at R71.85 per share, up from R70.67 per share at 31 December 2023. Brimstone recognized R187.0 million as its share of profits of the associate based on Oceana’s reported profit for the period to 31 March 2024.

Brimstone received cash dividends of R63.8 million from Oceana during the period under review.

FINANCIAL SERVICES AND PROPERTY

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 R24.9 million to profits and delivered a dividend of R24.3 million during the period under review.

FPG Property Fund is a Cape-based, black-owned and managed unlisted property fund specialising in the retail convenience market. It owns 36 convenience shopping centres in South Africa with an expanding footprint in the United Kingdom. The property portfolio is independently valued in excess of R9 billion on a gross basis. The investment was revalued upwards by R38.8 million to R401.4 million at period end.

During the period under review, Brimstone disposed of 9 838 393 Equites shares for a total cash consideration of R137.4 million. Equites’ share price closed at R12.79 per share, down from R13.95 per share at 31 December 2023. The remaining shares held at period end were revalued downwards by R4.8 million to R52.7 million. Brimstone received a dividend of R3.4 million from Equites during the period under review.

HEALTHCARE

Brimstone’s subsidiary Obsidian Health is a leading supplier of innovative healthcare solutions to both the private and public healthcare sectors within Sub-Saharan Africa.

Obsidian contributed R6.1 million (2023: R2.8 million) to Group profit during the period under review. Obsidian experienced revenue growth of 40% mostly due to the inclusion of the new Life Sciences division. There remains significant cost increases, driven by Rand weakness and large increases from suppliers, which cannot fully be passed on to customers. However, strong control over operational expenses and working capital has ensured that cash flows have remained positive.

RESTRICTED B-BBEE STRUCTURES

MTN Zakhele Futhi’s share price closed at R14.12 per share, down from R17.17 per share at 31 December 2023. During the period under review, Brimstone disposed of 137 582 MTN Zakhele Futhi shares for a total cash consideration of R2.0 million. The remaining shares were revalued downwards by R5.1 million to R23.7 million at period end.

Phuthuma Nathi’s share price closed at R98.50 per share, up from R93.00 per share at 31 December 2023. During the period under review, Brimstone disposed of 1 million Phuthuma Nathi shares for a total cash consideration of R100 million. The remaining shares were revalued upwards by R4.9 million to R88.2 million at period end.

Brimstone stake in listed higher education group STADIO was revalued upwards by R1.3 million to R228.7 million at period end. Brimstone received a dividend from STADIO of R4.4 million during the period under review.

OTHER INVESTMENTS

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 R2 million in equity accounted losses for the period. Brimstone accrued a dividend of R0.5 million from SAED for the period under review.

CONCLUSION

“Brimstone has clearly indicated that it would reduce its debt. The Company has disposed of certain investments and repaid funders R357.6 million. We are committed to reducing debt especially in this punitively high interest rate environment. We have also repurchased our own shares during the period, which we believe to be a key mechanism to restore value to all shareholders,” says Fred Robertson, Executive Chairman of Brimstone.

“I am pleased that South Africa held peaceful elections this year and that the outcome has had a positive effect on domestic investment markets. The election results are indicative of a maturing democracy and that it will take a collective to tackle and solve the challenges we are faced with in South Africa. I am delighted that the energy crisis seems to have abated, inflation has eased and lower interest rates may be on the horizon. All these factors should have an overwhelmingly positive impact on the economy in the near future, which we all look forward to,” concluded Robertson.