- Debt repayment to funders in excess of R1 billion
- Reduction of R129.8m in finance costs
- 7m raised from disposal of portion of Equites and Phuthuma Nathi stakes
- 4m raised from disposal of portion of Life Healthcare stake
- Improved debt and liquidity ratios
- Brimstone’s shareholding in Oceana Group increased to 25.01%
[Cape Town, 3 March 2021] Brimstone today released its Group results for the year ended 30 December 2020 reporting a reduction of over R1 billion in debt during the year.
Brimstone’s two largest investments, Sea Harvest and Oceana Group, produced strong results in an extremely difficult operating and trading period exacerbated by the COVID-19 pandemic.
Profit before net finance costs decreased to R481.4 million compared to R658.9 million in the previous year. The decrease in profit is mainly due to downward adjustments in the fair value of listed investments; increased trading losses and asset impairments incurred by soon to be sold subsidiary House of Monatic; and additional provisions, reserves, impairments and underwriting losses incurred by Lion of Africa Insurance Company which is in run-off since 2018.
“Downward revaluation of investments including Equites and Multichoice Group contributed to the after tax loss of R43.8 million. Markets were hard hit by the COVID-19 pandemic – both by the direct impact and the uncertainty. While many of our investments were classified as essential service providers during the national lockdown, it did come at a cost as the Group spent more than R40 million in direct COVID-19 related costs ensuring strict health and safety protocols for our staff, suppliers and customers alike. Whilst varying degrees of the impact of the pandemic were experienced across the Group, subsidiary House of Monatic was hardest hit,” says Brimstone’s CEO Mustaq Brey.
“Despite the extremely challenging year, we stuck to our plan of reducing debt by more than R1 billion. Part disposals of interests in Equites, Phuthuma Nathi and Life Healthcare yielded R938 million in cash which was utilised in reducing debt. Given the uncertainty in the economy we believe it is prudent and responsible to reduce debt,” continues Brey.
FOOD SECTOR
Brimstone’s subsidiary, JSE-listed Sea Harvest Group delivered a strong set of results proving its resilient and defensive nature, reporting attributable profit of R430.8 million, up from R412.5 million in the previous year. The fair value of Brimstone’s investment in Sea Harvest at year end was R2.2 billion and Brimstone will receive a dividend of R71.8 million from Sea Harvest in April 2021.
“Sea Harvest reported a 10% increase in revenue to R4.38 billion, up from R3.97 billion in the previous year. Sea Harvest was classified as an essential service provider and management and staff worked so well together in the face of the onslaught of this pandemic to protect lives and livelihoods which also led to good performances from the Sea Harvest fishing segment. Cape Harvest Foods which includes Ladismith Cheese and the Australian operations also presented good results in the period. COVID-19 did however have a severe impact on the Aquaculture segment,” says Fred Robertson, Executive Chairman of Brimstone.
During the period, Brimstone acquired an additional 120 000 shares in Oceana Group for R7.1 million, increasing its shareholding to 25.01%. The fair value of Brimstone’s investment in Oceana was R2.1 billion at 30 December 2020. Brimstone received dividends of R128.2 million from Oceana during the year.
OTHER SUBSIDIARIES
During the year Brimstone acquired an additional 55% interest in Obsidian Health for a cash consideration of R36.0 million, increasing its total shareholding to 80%. Obsidian is a leading supplier of innovative healthcare solutions to both the private and public healthcare sectors within Sub-Saharan Africa. Obsidian contributed R6.9 million in attributable profit and
R0.8 million in equity accounted earnings during the year under review.
Obsidian’s product portfolio includes capital equipment and medical devices within the key focus areas of cardiology, cardiovascular, theatre, ICU and high care, orthopaedics as well as point of care diagnostic testing. Although Obsidian was classified as an essential service provider, the first half of 2020 remained challenging due to reductions in elective theatre cases, restrictions of onsite visits, and low margins due to pressures on the Rand. The easing of COVID-19 restrictions, the strengthening of the Rand and strategic additions to the product portfolio such as, COVID-19 rapid antigen testing kits, rapid HIV screening tests and personal protective equipment, led to an improvement in results with strong growth during the latter part of the year.
COVID-19 and the resultant national lockdown has had a severe impact on trading conditions for House of Monatic, as well as its customers. The pandemic has profoundly changed the social behaviour of consumers and has normalised remote working. These changes had the effect of severely decreasing demand for formal wear, which is Monatic’s core product. Revenue decreased by 57% to R58.6 million and the company reported a loss of R104.8million. This loss included impairments on fixed assets and stock of R38.8 million and retrenchment costs of R6.1million incurred during the year. Subsequent to year end, the company entered into a binding heads of agreement with another clothing manufacturer to dispose of the factory’s manufacturing assets and transfer of the related factory staff. The agreement is subject to the fulfilment of certain conditions precedent normal for a transaction of this nature.
At subsidiary Lion of Africa Insurance Company the run-off plan is progressing well. The company reported a loss of R57.8 million compared to a loss of R65.2 million in the prior year after recognising additional provisions, reserves and asset impairments and incurring underwriting losses in the second half of the year.
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 R10.7 million to profits and delivered a dividend of R4.1 million during the year.
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 R17.1 million in equity accounted losses. These losses were primarily due to the fair value adjustment of ZARX which was disposed of by SAED.
INVESTMENTS
Brimstone disposed of 20.9 million shares in Equites for R321.4 million effectively realising a loss on disposal of R97.4 million. The remaining investment was revalued downwards by R36.7 million. Brimstone received dividends of R37.2 million from Equites during the year.
The investment in FPG Property Fund was revalued upwards by R8.8 million to R182.6 million at year end. FPG Property Fund is a Cape-based black-owned and managed unlisted property fund specialising in the retail convenience market. The fund owns more than 22 convenience shopping centres in SA and the UK and is valued in excess of R5.5billion on a gross basis. Brimstone received a dividend of R2.2 million, up from R2.0 million from FPG Property Fund during the year.
During the year under review Brimstone announced that it would exit its investment in Life Healthcare. Further to that announcement Brimstone has disposed of 16.5 million shares in Life Healthcare in two equal tranches realising R441.4 million. The sale proceeds was utilised to settle related debt.
Brimstone disposed of 1.9 million shares in Phuthuma Nathi for a cash consideration of R175.3 million, reducing its shareholding to 2.8%. The proceeds of this disposal was used the reduce debt. Brimstone received a dividend of R63.2 million from Phuthuma Nathi during the year. At year end Brimstone held 1.9 million shares in Phuthuma Nathi with a fair value of R225 million.
Brimstone’s stake in MTN Zakhele Futhi was revalued downwards by R6.4 million to R17.6 million at year end. Milpark Education contributed R40.1 million in equity accounted losses mainly as a result of the fair value adjustment to the price of a company which it acquired, by virtue of that company’s out-performance. Brimstone received a dividend of R11.3 million from Milpark during the year under review. The investment in Stadio was revalued down by R2.2 million to R85 million at year end.
“The COVID-19 pandemic has brought challenges, uncertainty, volatility and sadly many fatalities to whom we extend our condolences. In such a complex environment, Brimstone has successfully continued to de-gear, disposing of certain investments and thus reducing debt by over R1 billion in the past year. We have further reduced costs wherever possible. As an exemplary Level-1 B-BBEE company with a 25 year track record we will continue on a path that promises long-term value for shareholders,” concluded Robertson.