General downward valuation of listed investments impacts Brimstone's interim results

The general downward valuation of listed investments had an unfortunate impact on Brimstone's interim results - contributing to a loss of R227m compared to a loss of R201m for the same period last year, CEO Mustaq Brey said on Tuesday.

He was commenting on the group's interim results for the six months ending June 30, 2018.

Brimstone [JSE:BRT] recorded an 18% increase in operating profit to R184m the group said when releasing its interim results for the six months ending June 30, 2018 on Tuesday.

Gross asset value for the Group decreased from R8.7bn to R7.8bn, while intrinsic net asset value dropped from R4.3bn to R4bn.

“On the positive side, the impact was partially offset by reduced loss from subsidiary Lion of Africa Insurance Company and increases in both dividend income and equity accounted earnings,” said Brey.

Joint ventures and associates

He added that the performance of joint ventures and associates over the recorded period has been generally encouraging. One of the significant developments within this portfolio was the acquisition with STADIO Holdings of an effective 30% stake in Milpark Education through an asset-for-share agreement.

Brimstone received R25.8m in dividends from Oceana, in which it owns 23 million shares. Brimstone recorded R46.2m in equity accounted earnings based on Oceana’s reported six-month earnings to 31 March 2018. A decrease in Oceana’s foreign currency translation reserves was a major contributing factor to the R101m which was recorded as Brimstone’s share of Oceana’s other comprehensive loss.

Aon Re Africa delivered a dividend of R5.1m and recorded R6.3m in equity accounted earnings. Brimstone’s 25% stake in the South African Enterprise Development (SAED) secured R15.4m in equity accounted earnings, while their 49% stake in Vuna Fishing Company realised a contribution of R0.9m in equity accounted earnings for the group.

Sea Harvest
 
Over the recorded period, Sea Harvest delivered headline earnings of R111.3m, up 1% from the R110.6m delivered for the same period last year.

“Perhaps the most exciting news over the last six months for Brimstone’s subsidiaries was Sea Harvest’s acquisition of Viking Fishing and a 51%-stake in Viking Aquaculture as part of a BBBEE consortium,” says executive chair Fred Robertson.

“This significant transformational transaction enabled Sea Harvest to achieve Level 1 BBBEEE contributor status, making it one of the most transformed businesses in SA’s fishing sector.”
 
Another major development for Sea Harvest was the announcement on 27 August that their wholly-owned subsidiary Cape Harvest Food Group is acquiring the Ladismith Cheese Company in a share purchase agreement to the value of R527m.

Although the transaction is still subject to approval by the competition authorities, this is exciting news for Robertson, for Sea Harvest and Brimstone are confident in their ability to use this acquisition to successfully expand into the food and agriculture sector.

Lion of Africa Insurance Company

Brimstone’s close oversight and strategic remedial action for Lion of Africa Insurance Company has started to bear fruit. The company’s reported net loss of R7.7m is a marked improvement from the R38m loss reported for the same period last year.

House of Monatic’s exposure to a poor retail climate resulted in decrease of revenue by 12% to R78m and a loss of R17.9m compared to R17.5m in the comparative period.

Investments
 
The company’s investment in Phuthuma Nathi and Long4Life performed well over the last six months, with investments being revalued upwards by R28.8m to R498.9m, and by R25.9m to R199.9m respectively. Phuthuma Nathi has recommended a dividend payable in September at approximately R92.7m for Brimstone.

Brimstone’s investment in Equities was revalued downwards by R118.6m to R614.2m by period end, while the investment in MTN Zakhele Futhi was revalued downwards by R24m to R46.5m. After the asset-for-share transaction with STADIO for Milpark shares, the investment was revalued downwards by R144.6m to R178.2m.

Brimstone disposed of 15.3 million Life Healthcare shares for an aggregate consideration of R409.1m. Although the total investment in Life Healthcare was revalued downwards by R158.2m to R1.23bn, Brimstone received R18.8m in total dividend receipts over the recorded period.

“Given the challenging economic climate over the last six months, weaker share prices and decreased profits of associates and joint ventures were anticipated as part of the cyclic nature of investments. We remain confident that the mid to long term prospects of the poor performers in our portfolio will improve, and we are poised to make positive interventions where required," said Brey.

"We expect that our long term approach to investments will continue to deliver increased value and benefit all our shareholders.”

By late afternoon trade Brimstone's share price was up 10.81% at R10.25.

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