The good performance of most of its investment companies, subsidiaries and associate companies resulted in black-empowered investment group Brimstone’s profit for the year ended December 31, 2012, having increased by 80% to R842.1-million from the previous year’s R468.8-million, CEO Mustaq Brey told Engineering News Online.

Return on average equity increased to 35.2% from 25.7% in the previous year, while headline earnings increased by 96% to R844.4-million from the prior year’s R429.9-million and basic headline earnings a share grew to 346c from 176.3c in 2011.

The group’s net profit before tax increased to R1.1-billion in 2012, up from R598-million in 2011, while its net asset value of R2.8-billion for 2012 compared well with the R2-billion reported in 2011.

Despite an unprotected strike at Brimstone’s subsidiary fishing company Sea Harvest’s South African operations in August, which resulted in five weeks of lost production, expansion of the business into other export markets had been successful and sales volumes were bedding down well, said Brey.

However, Brimstone’s other subsidiary, short-term insurance company Lion of Africa, did not fare as well. Its gross written premiums reduced by 2.2% to R823-million from R841.9-million in the prior year, while its net written premiums decreased by 9.4% from R552.1-million in 2011 to R500-million in the year under review.

Lion of Africa’s after-tax net operating profit fell by 7.7% to R20.4-million in 2012.

But Brey insisted that this was on par with other short-term investment companies, whose results had been “all around poor”.

“Others had the same underwriting; the whole insurance industry was hit hard in the last quarter of last year with the floods, hail storm and fires,” he noted.

INVESTMENTS

Brey indicated that Brimstone’s basket of investments was strong, which had proven pivotal to its performance in 2012.

Although remaining the largest stakeholder, Brimstone disposed of 4.5-million of its ordinary shares in Life Healthcare at an average price of R31.04 a share on the open market, for a total consideration of R139.6-million. Brimstone received dividends of R57.2-million during the year.

Life Healthcare delivered strong financial results on the back of continued growth and improved operational efficiencies. Group revenue increased by 11.5% to R10.9-billion.

In January 2012, Brimstone acquired 24-million shares in Taste Holdings at R1.54 apiece and purchased a further 540 000 shares at ruling market prices throughout the year. Brimstone received a dividend of R960 000 from this investment in 2012.

Brimstone’s rights to Nedbank shares, accounted for as options, were revalued at year-end and were based on a closing price of R188 a share, up from R124 apiece in 2011.

The revaluation, at year-end, of the investment company’s rights to Tiger Brands shares, also accounted for as options, was based on a closing share price of R325.25 a share, up from R250.88 a share in 2011.

Brey said Brimstone’s associate company Oceana performed well in terms of earnings and equity, recording a 39% increase in operating profit before abnormal items. This contributed significantly to its dividends received and equity accounted earnings for the year.

Brimstone’s board declared a final dividend of 25c a share for the year, payable on April 22.

PROSPECTS

Meanwhile, Brimstone indicated that it remained well capitalised to pursue value-enhancing transactions based on cash-generative quality assets.

“Management is cognisant of the market’s current high earnings multiples and will continue its prudent consideration of investment opportunities,” the company said in a statement; however, Brey said no transactions had been finalised yet.

The group had commitments for the acquisition of capital items amounting to R33-million, an increase from R21.8-million the previous year.

Brey was confident of the company’s ability to weather continuing challenging economic circumstances in the year ahead.

“Our economy is going through a difficult patch, but, at the same time, we are in some defensive industries, such as healthcare and insurance and we have also gone into the food sector,” he said.