Brimstone reports 51% surge in annual earnings as it continues to slash debt and trim assets

Brimstone Investment, a South African investment holding company, reported a 51% surge in headline earnings for the year ended December 31, 2024, as the company aggressively cut debt through asset disposals, though a hefty accounting loss tempered the overall picture.

During the year, the investment group continued to slash debt, with R516.8 million used to repay obligations. By year-end, the group’s long-term debt stood at R1.7 billion, down from R2.2bn the previous year.

In 2024, the group fully disposed of its investments in Milpark, STADIO, and Equites, and partially disposed of its stakes in Phuthuma Nathi and MTN Zakhele Futhi, generating a total consideration of R673.6m. This aligned with its stated objective to reduce debt through disposals.

The debt-reduction process remains ongoing, with the group on target to meet its goal of cutting debt by R600 million by the end of 2025, with ten months left. In an interview with Business Report, CEO Mustaq Brey said that despite current market volatility caused by US President Donald Trump, they are committed to repaying the remaining R100m debt by December, and this won’t hinder their progress toward this goal.

However, the increase of headline earnings per share at 108c, up from 71.3 cents the prior year,  was offset by a R562.1m loss on the disposal of its stake in Sea Harvest, following a Terrasan Group deal that reduced Brimstone’s holding from 53.4% to 44.5%. This reclassified Sea Harvest as an associate, contributing to an unspecified overall loss per share for the year. The intrinsic net asset value of Brimstone fell by 10% to R2.7bn.

Brey explained, “When comparing these financial results to the prior year, one has to recognise the change in accounting treatment and classification of Sea Harvest from a subsidiary to an associate, and its resultant impact causing a loss on deemed disposal. In simple terms, we still hold the exact number of shares in Sea Harvest, but our percentage holding has decreased from 53.4% to 44.5%, therefore changing the accounting treatment.”

Brimstone flagged a grim economic landscape, citing a volatile rand, elevated interest rates, and strained infrastructure. Despite these challenges, Brey noted, “Notwithstanding these economic circumstances, Brimstone still produced strong results, reporting a 51% increase in headline earnings per share to 108 cents per share.”

He said there was improved confidence in the economy after loadshedding abated and with the Government of National Unity, which has resulted in an economic pickup.

Brey pointed to the delayed Budget speech as a positive, calling it “democracy at work.” However, he urged the government to cut the bloated Parliament and reduce the number of ministers to realize cost savings in the Budget, set to be delivered next week, while noting it was positive that stakeholders are collaborating to find solutions for the Budget and the country.

Fred Robertson, the executive chairman of Brimstone, said, “This decisive action [of asset disposals] resulted in debt reduction of at least half a billion rand during the year. This process is ongoing, and we will continue to rationalise the portfolio. We have also continued to repurchase our own shares as we believe it presents considerable value and remains a means to restore value to all shareholders.”

Brimstone repurchased 4.5 million shares for R21.7m in 2024, followed by an additional 861,325 shares for R4.3m since year-end. Shareholders pocketed a dividend of 40 cents per share, unchanged from the prior year. Robertson also noted that ongoing portfolio rationalisation and cost cuts are set to yield gains in 2025.

In its food arm, Brimstone’s 25.1% stake in Oceana Group delivered R299.6m in profits and R162m in dividends, though its market value slipped to R2.2bn from R2.3bn. Sea Harvest, now valued at R1.3bn down from R1.5bn, saw its share price fall to R8.35 from R9.45, yet contributed R111.4m in profits post-deconsolidation.

Financial services and property held steady. Aon Re Africa, an 18% stake, added R21.3m in profits and a R24.3m dividend. FPG Property Fund’s portfolio, valued over R10bn, rose by R77.8m to R440.4m, paying R5.3min dividends. A R50m investment in FPG Investments, linked to fast-food and ice cream, returned a slim R0.4m dividend.

The healthcare unit, Obsidian Health, boosted profits to R13.8m from R3.7m, driven by 29% revenue growth and a 63% Ebitda leap.

Looking ahead, after reducing debt, Brey said the company will pursue further investments while remaining “very cautious,” as the share is trading at a discount. The share price was unchanged in morning trade on the JSE at 10.12am. 

BUSINESS REPORT