FD Geoff Fortuin says the group's subsidiaries and associates delivered outstanding performance.
Brimstone Investment Corporation has reported an eight percent increase in sales revenue for the year ended 31 December 2020. FD Geoff Fortuin says this was mainly due to a R409 million increase in Sea Harvest’s sales revenue and consolidating R179 million in sales revenue from Obsidian Health, which became a subsidiary in February 2020.
“The outstanding performance of our major investments – subsidiary Sea Harvest, and associate Oceana – is particularly noteworthy,” Geoff says, adding that the company was fortunate that all of its operating subsidiaries and major associates were classified as essential service providers during the national lockdown. “The manner in which these companies coped with Covid-19 and measures to curb its spread, particularly the disruption to local and global supply chains and markets, says a lot about their resilience and agility.”
He explains that the increase in sales revenue was offset to an extent by the decrease in House of Monatic’s sales revenue of 57 percent to R58 million. In addition, the premium income of short-term insurance subsidiary, Lion of Africa, decreased by R170 million, which was always expected, as the company is in run-off.
Geoff says that the Lion of Africa run-off has progressed to the point where the more than 7,000 outstanding claims have been decreased to under 500. “Finalisation of the run-off is a priority for us,” he says.
He adds that the sale of Monatic’s factory operation and the orderly run-down of the retail operation during the forthcoming months is also an area of focus for Brimstone.
“Although it is very sad to dispose of the House of Monatic factory operation, the impact of Covid-19 on Monatic has been catastrophic, to put it mildly,” explains Geoff. “The formal wear clothing market has virtually disappeared from a Monatic point of view and orders dried up, making the business completely unsustainable. We are, however, delighted that we were able to find a large clothing manufacturer to sell the manufacturing assets to, who will also continue to employ factory-related staff.”
Brimstone also reported a dividend income decrease for the year due to the disposal of a portion of its Phuthuma Nathi and Equites investments. The R500 million proceeds from these sales were used to repay the company’s debt.
“We were able to reduce our debt by more than R1 billion during the 2020 year,” Geoff says. “It had the effect of improving our debt ratio and significantly improving our liquidity ratios.”
Tied to this is Brimstone's decision in early 2019 to raise R1.2 billion in debt against its Life Healthcare investment in a zero cost collar funding arrangement. “So while the quoted price of the Life Healthcare shares has steadily declined since then, because of the zero cost collar we were able to raise R441.4 million on the disposal of 16.5 million of our 49.5 million shares, at a price of R26.75 per share, and reduce the debt,” says Geoff. This price was significantly above the quoted price of the Life Healthcare shares. Once the zero cost collar has fully unwound in April 2021, Brimstone’s debt ratio will improve further.
The company has already commenced its cost cutting and containment measures in 2020. “We are immensely proud of our people who have, as part of this process, agreed to salary reductions and bonus cuts,” Geoff says, adding that this is an ongoing initiative, and any further opportunities to reduce costs and streamline operations will be pursued “with vigour”.
