JSE-listed Brimstone Investment Corporation has reported a total asset increase of R1.1-billion to R7.9-billion for the year ended December 31, with investments in the food sector contributing 40% of the company’s intrinsic gross asset value.

In its reviewed preliminary condensed consolidated financial results for the year, Brimstone’s intrinsic net asset value increased 16.1% to R4.86-billion from the R4.19-billion achieved in the previous year.

Brimstone, which trades on the JSE under BRN and BRT, noted that its shares performed well during the year with the ordinary share price growing by 21.4% and the "N” ordinary share price growing by 17.9% over the year.   

However, profit for the year under review decreased as a result of losses incurred by subsidiary Lion of Africa Insurance Company, lower fair value gains on underlying investments, reduced equity accounted earnings and an impairment of an investment in an associate.

Brimstone CEO Mustaq Ahmed Brey said the company, which first invested in fishing company Oceana in 1995, had a strong balance sheet and access to facilities, and was defined by its ability to enhance net asset value, when addressing shareholders at a results presentation on Tuesday.

“We have a solid record of unlocking value, [and] decisive action being taken at underperforming investment. We will continue to seek opportunities that will create long-term value for shareholders and we also have a long-term view on underlying investment,” he outlined, noting that the company had been involved with several assets for more than 15 years.

In the context of fishing company Sea Harvest, of which Brimstone holds 58.44%, Brimstone financial director Lawrie Bronzin highlighted that catches for 2014 were 18% higher than the prior year, owing to improved vessel use and increased catch rates.

Both the wet fish and freezer fleets performed well during the year, while sales were strong locally and internationally with continued demand for hake. “This resulted in reasonable price increases being achieved in the local market and prices being maintained in the low inflationary export markets, which further benefited from favourable exchange rates,” Brimstone explained.

Revenue was 10% higher than last year, as Sea Harvest maintained its position as a market leader in the South African frozen fish retail segment. Earnings before interest, taxes, depreciation and amortisation increased to R198-million, while refinancing in March led to a significant saving in finance costs. Operating profit before interest and exceptional items increased by 58% to R109-million.

Sea Harvest, which depended on government allocated fishing rights, expanded its fleet with the acquisition of a new vessel Harvest Atlantic Peace at a cost of R130-million. The new vessel, built in Norway in the Sterkoder AS yard, was launched at the V&A Waterfront, in Cape Town, in October.

The fishing trawler included an on-board factory and currently had the capacity to catch and process 6 500 to 7 000 green-weight tons of Cape Hake a year and freeze 40 t/d of the fish. The vessel, with a crew of 60, would be at sea for between 30 and 40 days.

Fishing and commercial cold storage company Oceana, which accounted for 26% of Brimstone’s intrinsic gross asset value, experienced lower horse mackerel catch rates but was positively impacted by the weaker exchange rate on export sales, noted Bronzin.

Oceana’s share price closed at R104.86 a share, up from R82 a share, at December 31, 2013. Brimstone, which currently owned 16.81% of Oceana, received dividends of R75.8-million during the year under review and recorded R29.8-million in equity accounted earnings.

Oceana made a distribution to its staff share trust in April, which involved the payment of R289-million to employee beneficiaries of the Oceana Empowerment Trust, as value created through harvesting fishing rights was unlocked and converted into shared broad-based value. The trust had 2 650 beneficiaries across the country at various operating locations.

Brimstone's share – R58.9-million – was charged directly to retained earnings.

During 2014, Taste Holdings, in which Brimstone currently had a 14.21% share, concluded a master franchise agreement with Domino's Pizza, enabling it to develop the Domino's Pizza brand in seven Southern African countries.

Taste Holdings raised R180-million through a rights issue to partly fund the Domino's Pizza rollout and to pursue other opportunities. Taste Holdings also acquired luxury watch and jewellery retailer Arthur Kaplan Jewellers in the fourth quarter of 2014.

Brimstone acquired a further 13.2-million Taste Holdings shares during 2014 at R3 a share, with the share price closing at R3.20, down from R3.75 a share, at December 31, 2013. Brimstone's shares were revalued downward by R11-million.   

Meanwhile, Brimstone's rights to packaged goods company Tiger Brands shares, accounted for as options, were revalued upward by R161-million at year-end. These rights would mature on December 31, 2017.

The independently calculated option valuation was based on a closing share price of R368.06 a share, up from R266.93 a share, as at December 31, 2013. 

Brimstone currently owned 0.94% of Tiger Brands.

The company, founded on the Cape Flats, in the Western Cape twenty years ago, declared a final dividend of 30c a share, on par with the prior comparable period, and a special dividend of 20c a share, up 10c on 2013, for the year under review.

The final dividend and the special dividend, payable on March 23, have been declared out of income reserves.