- Group profit before tax up 540% to R430.2 million
- Earnings per share up 232% to 97.9 cents
- Headline earnings per share up 230% to 100.8 cents
- Finance costs down by R151.9 million (58%)
- Debt reduction of more than R900 million from disposal of the remaining Life Healthcare shares
- Repurchase of 5.7 million “N” ordinary shares for R34.8 million
- Improved debt and liquidity ratios
[Cape Town, 31 August 2021] Brimstone today released its Group results, reporting a stellar performance for the six month period ended 30 June 2021.
The Group reported a 540% increase in profit before tax of R430.2 million, up from a loss of R97.8 million in the comparative period. The profit is mainly due to strong performances by certain of the Group’s subsidiaries, the upward revaluation of investments held at fair value through profit or loss, an increase in share of profits of associates and joint ventures and a significant reduction in finance costs compared to the comparative period.
“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. At the start of the lockdowns last year, we also set ourselves 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,” says Brimstone’s CEO Mustaq Brey.
“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,” says Brey.
FOOD SECTOR
Brimstone’s subsidiary, JSE-listed Sea Harvest Group delivered a strong set of results proving its resilient and defensive nature. Continuing the sound performance of 2020 and despite the ongoing volatility caused by COVID-19, Sea Harvest delivered headline earnings for the period ended 30 June 2021 of R202.2 million up by 19% on the comparative period, while 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.
“Sea Harvest’s revenue for the period increased by 5% to R2.1 billion (2020: R2.0 billion), benefitting from good performances from the South African Fishing segment, the Cape Harvest Foods segment (which includes Ladismith Cheese) and the Australian operations. The Aquaculture segment, while showing an improving revenue trend, continues to be severely impacted by the effects of COVID-19,” says Brimstone’s Executive Chairman Fred Robertson.
Brimstone held 32.6 million shares in Oceana with a market value of R2.1 billion at period end, equivalent to a 25.01% stake in Oceana. 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. Whilst these are very different businesses operating in different markets, they are both subject to the fishing rights allocation process (FRAP) which has restarted in October 2020 and expect to conclude by the end of this year. We are hopeful that their new allocations will enable them to continue their incredible journey of being major economic drivers and quality job creators in their respective sectors,” says Robertson.
OTHER SUBSIDIARIES
Brimstone owns 80% of Obsidian, a leading supplier of innovative 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 Group profit during the period under review. Although elective surgery caseloads have improved over the course of 2021, they were still negatively impacted by the varying degrees of COVID-19 lockdown regulations and restrictions within hospital theatres. The Point of Care business unit however continued to outperform targets and produce strong growth driven by rapid Antigen COVID-19 testing and HIV screening testing, supported by sales of PPE through the Hospital business unit. The stabilisation of the Rand also assisted with relieving margin pressure, which resulted in increased profitability during the period under review.
Lion of Africa Insurance Company is currently in the third year of run-off. The number of outstanding claims has decreased from in excess of 6 600 to under 300 since the run-off commenced. The company reported a loss of R9.4 million during the period under review. The run-off is expected to continue into the 2022 year.
House of Monatic disposed of its manufacturing assets and transferred related factory staff to a subsidiary of TFG Limited on 1 April 2021. In very 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.
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 R17.1 million to profits and delivered a dividend of R8.1 million during the period.
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 R0.7 million in equity accounted earnings for the period. Brimstone accrued a dividend of R0.7 million from SAED for the period under review.
Milpark Education is a leading provider of higher education and training qualifications. Milpark 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 received a dividend of R17.1 million from Milpark during the period under review. Brimstone invested a further R30.1 million in Milpark to early-settle the acquisition of the business of CA Connect during the period under review. CA Connect has performed exceptionally in terms of student numbers and profitability.
INVESTMENTS
The investment in Equites was revalued upwards by R21.1 million to R263.5 million at period end. Brimstone received a dividend of R11.2 million from Equites during the period under review.
FPG Property Fund owns, manages, develops and acquires investment properties with long-term growth potential. The Fund’s portfolio has a gross value of R5.7 billion of which 81% comprises convenience retail and neighbourhood shopping centres located in major urban areas in South Africa and the United Kingdom. Brimstone’s 9.9% stake in FPG Property Fund investment was revalued upwards by R19.1 million to R201.7 million at period end.
Brimstone’s stake in MTN Zakhele Futhi was revalued upwards by R10.6 million to R28.2 million at period end. The investment in 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. Brimstone’s investment in listed higher education group STADIO was revalued upwards by R49.7 million to R134.6 million at period end.
“It is pleasing that our de-gearing strategy embarked upon during last year has had a positive impact on our results. Despite the third wave of the COVID-19 pandemic proving to be more deadly than previous waves, Brimstone’s major investments have produced resilient results and are expected to continue to do so, while keeping employees safe.
We are confident that the current vaccination programme, which is now open to all adults, will boost our defence against the pandemic, minimise fatalities and bring us closer to a post-pandemic era. We are proud that our subsidiary Sea Harvest and associate Oceana have both played a critical role in establishing vaccination sites in the communities in which they operate. These initiatives again prove our commitment to our philosophy of being profitable, empowering, and having a positive social impact,” concluded Robertson.
