Brimstone Successfully Decreases Debt by R500 Million

Brimstone, the investment group listed on the JSE, has made significant strides in reducing its debt, announcing on Tuesday that it paid back R516.8 million during its financial year ending December 2024.

Based in Cape Town, the company experienced a 51% increase in headline earnings per share (Heps), reaching 108 cents, up from 71.6 cents the previous year.

Listen/read: Brimstone’s profit increases by 30%, with a continuous emphasis on debt reduction strategy.

Despite the impressive Heps results, the deconsolidation of Sea Harvest—following its acquisition of specific subsidiaries of the Terrasan Group—led to a “loss on deemed disposal” amounting to R562.1 million.

“When comparing these financial results to the previous year, it’s important to acknowledge the change in accounting treatment and classification of Sea Harvest from a subsidiary to an associate, which resulted in this loss,” commented CEO Mustaq Brey.

“In simpler terms, we still own the same number of shares in Sea Harvest, but our ownership percentage has decreased from 53.4% to 44.5%, hence the change in accounting treatment.”

Debt reduction and capital allocation

Brimstone continues to prioritize its debt reduction strategy. The company divested its stakes in Milpark Education, Stadio, and Equites, along with partial disposals from Phuthuma Nathi and MTN Zakhele Futhi, raising R673.6 million.

By the end of the year, long-term debt decreased from R2.2 billion to R1.7 billion, with the group aiming to reduce it by a total of R600 million by the close of 2025.

Additionally, the company returned capital to shareholders through share buybacks, repurchasing 4.5 million shares for R21.7 million over the year. An additional 861,325 shares were acquired for R4.3 million following the year-end.

Sector performance

Food

Brimstone retained its 25.1% investment in Oceana Group, valued at R2.2 billion at year-end. The company received R162 million in dividends and reported R299.6 million in profits from Oceana’s earnings.

In Sea Harvest, Brimstone’s shareholding remained at 44.5% (159.6 million shares) with a fair value of R1.3 billion. Following the Terrasan transaction, Sea Harvest issued 60 million shares, which diluted existing shareholders and caused Brimstone’s loss on deemed disposal.

Listen/read:
Sea Harvest faces challenges from fuel and input costs
Brimstone returns to profitability after three years of losses
Sea Harvest’s earnings up by 23%

Brimstone subsequently recorded R111.4 million in profits from Sea Harvest, now classified as an associate.

Financial services and property

Brimstone’s 18% stake in Aon Re Africa, a reinsurance broker operating in Africa, earned R21.3 million in profits and yielded R24.3 million in dividends. The investment in FPG Property Fund, now valued at R440.4 million following a R77.8 million upward revaluation, generated a R5.3 million dividend.

Additionally, Brimstone invested R50 million to acquire 1.6 million shares in FPG Investments, which has interests in the fast-food sector and an ice cream manufacturing business.

Telecoms

Brimstone sold 137,746 MTN Zakhele Futhi shares for R2 million, with the remaining shares revalued down by R15.4 million. It also sold one million Phuthuma Nathi shares for R100 million, with the remaining shares adjusted to R72.5 million. The company received an R18.2 million dividend from Phuthuma Nathi.

Healthcare and other investments

Obsidian Health, a subsidiary focused on healthcare solutions, contributed R13.8 million in profits, an increase from R3.7 million, driven by a 29% growth in revenue and a 63% rise in Ebitda (earnings before interest, tax, depreciation, and amortization).

Brimstone’s investment in South African Enterprise Development (Saed), which supports small and medium-sized enterprises, yielded R0.2 million in equity earnings and R3.5 million in dividends.

What sectors will fuel Brimstone’s future growth?

In an interview with Moneyweb, Brey emphasized that growth will be driven by financial services, property, and healthcare.

On the property front, he stated that the group has invested in FPG Property Fund, and the value of this investment now exceeds R400 million.

“In the healthcare sector, we have a small company, Obsidian, which secured a new agency during the last financial year, demonstrating a significant income increase from around R3 million to R4 million after tax, to R13 million in the current year. This shows they have increased capacity, warehouse space, and infrastructure, including the addition of another agency which indicates strong profitability,” said Brey.

Executive chair Fred Robertson noted: “In line with our objective of reducing debt through asset disposals, Brimstone fully exited three investments and partially disposed of two more during the year.

This decisive action led to a debt reduction of at least half a billion rand. The process is ongoing, and we will continue to streamline the portfolio.”

Brimstone announced a dividend of 40 cents per share, unchanged from the prior year.

Stay updated with Moneyweb’s comprehensive finance and business news on WhatsApp here.