Brimstone Investment Corporation Limited (BRT) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. A very warm welcome to you to the Results Presentation of Brimstone Investment Corporation for the Financial Year Ended 31 December. I welcome our new investors because I see a number of you have entered our shareholder register, and I welcome you to this presentation as I welcome all those investors who've been with us for a long time. Our presentation, as you -- some of you will know, Brimstone, in this overview, I will go over some of the things that you might well know. But for the new investors, here we go. Brimstone formed in 1995 and listed in 1998. And our ethos has always been profitability, empowerment and have a positive social impact. This is true to the core of Brimstone. We have remained true to this philosophy of ours. Brimstone now currently is the longest listed black owned and managed company. We bring this presentation to you in very difficult times. However, there is the easing of inflation in South Africa. We are currently at a 21-year low in the inflation rate. There has been lower interest rate. We're in a lower interest rate environment, stronger rand against all major currencies, and we've been removed from the gray list of the Financial Action Task Force, all auguring well for Brimstone -- for South Africa and obviously, also for Brimstone. We had a credit upgrade at South Africans. There has been -- and continues to be a commodity price boom. Electricity grid has been stable. The reduction in load shedding on a day-by-day basis has improved by 98%. This is really exceptional. We have a stable GNU and investment -- the investor sentiment has improved quite a lot. We do have issues in South Africa and globally. We've got a modest GDP growth. We need this to be a lot higher. There has been a slight improvement in the transfer infrastructure, and that has improved. In fact, the rail volumes have improved by about 15%. The global tariff uncertainty plays havoc with all in every country on the areas that is very, very worrying. Global geopolitical tensions and conflicts, the war continues in Ukraine and the war in the Middle East is exploding across quite a number of countries. In South Africa, there is persistent high unemployment and particularly youth unemployment, which again does not work well currently with the high unemployment and also with youth unemployment, it doesn't work well for the future. The South African consumer remains under pressure, albeit all those positive things that I've mentioned previously, the South African consumer remains under pressure. The high crime levels at the national level and also in our townships is absolutely unacceptable. Our people do need peace. We need to have confidence that at political levels and all national levels, we need honesty and good governance. The police need to do their work. Water and sanitation infrastructure is under huge pressure, especially in the Gauteng area. Climate change, which affects all of us, whether it's floods on land or uncertainty on the oceans and in the agri sector continues, and we all need to do something about that. At Brimstone, our investment ethos has been to be -- take a long-term view, and this has proven very, very well for Brimstone. Our first investment, Oceana, we invested ZAR 2.60 per share. That share has continuously paid dividends over the last 30 years and is now standing over ZAR 50, having reached some other heights in time. But we've stuck with those -- that investment. The same applies in Sea Harvest as well. Investment in -- we invest in diversified businesses with multicurrency income streams. We will later touch on to all the income streams and the different businesses that we have. We are actively involved and participate in our companies. We're just not a passive investment holding company. We are actively involved in it. We are ESG conscious, and we monitor that aggressively. Currently, we are concentrated in the food sector, particularly the fishing sector. Sea Harvest came out with their results this morning, and you can please follow that in the media. We are not invested in alcohol, tobacco, gambling and micro lending, et cetera. It is scandalous that our people and our society are spending so much money on gambling and online gambling or whatever. It can't go well for our society. The group at the 31st December 2025 has invested in food, as we said, in Sea Harvest, Oceana Group and SeaVuna. Financial services sector and property, we group that together under Aon Re, FPG Property Fund and FPG Investments. Restricted BEE structures is Phuthuma Nathi or PN, as we call them. And we also invested in the health care of Obsidian Health. The other sectors are South African enterprise development, Hot Platinum and African Legends. All of those companies, Sea Harvest, Oceana, SeaVuna, Aon, they have global reach and export in a multicurrency. FPG Property and FPG Investments also have exposure to the U.K. market. We -- our group and associate brands is Lucky Star, one of the most phenomenal brands in South Africa and also in the rest of Africa. Sea Harvest exporting to Europe on about just more than 50% of their fish. We have the property -- FPG Property Fund, FPG investments, Selecta, Saldanha can -- And these Lucky Star -- between Lucky Star and Saldanha, well, Lucky Star has got more than 90% of that market in the sardine and Saldanha canning is also around about 6% or 7%. But covering our communities very, very well, and it's a great food stuff and a very affordable communities. Daybrook is an American company owned by Oceana. Diamond is one of the big vessels and a recognized brand. And we also invested in Polar. This was a community-owned business, which -- with more than 100 retail outlets, which is both owned and franchised. That's Polar Ice Cream, which is owned by FPG Investments. Some of our other products from the group is Lucky Star Middlecut, Lucky Star Pilchards, Lucky Star Corn, Lucky Star Chicken Livers, which has also taken -- the market has taken to very well. And at Sea Harvest, we have the fish cakes, we have fish fingers, and then also, obviously, grill bake ready-to-eat meals. Saldanha -- Sea Harvest own Saldanha and FPG, as I say, owns the Polar brands. Contribution by sector to the intrinsic gross asset value. As you can see in Oceana, Sea Harvest, FPG, Aon, Obsidian, South African Enterprise Development, PN and others plus cash makes up ZAR 3.6 billion with food -- the food sector being 75% of our intrinsic gross asset value. The headlines for the year to 31 December. The headline earnings per share is up 98% to ZAR 2.13 as opposed to 2024, which was ZAR 1.08. Our attributable profit increased to ZAR 44 million as opposed to a loss of ZAR 200 million in the previous year. Dividend declared is ZAR 0.42, which is 5% up on last year of ZAR 0.40. We sold 11.95 million Oceana shares for a total cash contribution of ZAR 633 million. Our net debt reduction was ZAR 520 million. The previous year, we settled debt of ZAR 516 million. So over the 2 years, we actually reduced our debt by just over ZAR 1 billion. We heard you, as shareholders, reduce debt, repurchase your own shares, and that's what we did. We did very good cost management at head office level, and we also repurchased 1.5 million shares back into the company for ZAR 7.2 million. Our underlying investment performance will now be presented by Nisaar Pangarker.

Good afternoon to everybody who's online, and thank you, Fred, for the preceding slides. I'm just going to be running through the underlying investments, and we'll go through one by one. So let's start. So we have the Oceana Group. As you all know, we've been a shareholder here for just on almost 31 years. And in last year, towards the end of the year in December, we disposed of about 11.95 million shares in Oceana for a total cash consideration of ZAR 633 million. Prior to the disposal, we held about 25% of Oceana and our shareholding since that is obviously down to 16% and Oceana now accounts for 32% of Brimstone's intrinsic gross asset value. We currently have 20.8 million Oceana shares, which had a market value at the end of last year of ZAR 1.2 billion. Compared to the prior year, we had 32.7 million Oceana shares, which was valued at ZAR 2.2 billion. In the year, we recorded ZAR 181 million in equity accounted earnings from Oceana. That's through the year to September 2025. That was down. In the prior year, Oceana had some -- a really exceptional performance, largely driven by the very high oil -- fishmeal and fish oil prices. So comparatively, in 2024, we had earnings there of ZAR 299.6 million. Commensurate with that, we received cash dividends of ZAR 72.4 million in the year from Oceana down from -- as expected from ZAR 162 million in the prior year. And the Oceana share closed at ZAR 55.74 at 31st of December 2025, and that again was down from ZAR 67.48 the prior year. And this share, Oceana closed at ZAR 53.50 last night. I then move on to Sea Harvest. Sea Harvest accounts for 42% of Brimstone's intrinsic gross asset value. Importantly, in the prior year, again, you would remember in 2024, Sea Harvest concluded the Terrasan transaction and issued 60 million new shares. Obviously, that caused the dilution and our shareholding went down from about 54% of Sea Harvest down to 44.2%. And as a result, in the prior year, we partially recorded Sea Harvest as a subsidiary and the other part, obviously, as an associate. We now still own 159.6 million shares, so that hasn't changed. The market value of those shares at the end of December 2025 was ZAR 1.5 billion, up nicely from ZAR 1.3 billion in the prior year. We recorded ZAR 151.5 million in earnings for the year compared to ZAR 111.4 million in the prior year. And again, Sea Harvest released their results, very good results this morning, and I would encourage you to have a look at that. We received cash dividends from Sea Harvest last year of ZAR 35.1 million, and that was down from ZAR 63.8 million, but Sea Harvest did announce a really nice dividend this morning. The closing share price at the end of December was ZAR 9.49, and that was up from ZAR 8.35 in the prior year. And last night, the Sea Harvest share closed at ZAR 10 per share. FPG Property Fund, we hold currently 10% of that investment. It's largely a Western Cape-based black-owned and managed property portfolio. And the assets here, the property portfolio is valued independently in excess of about ZAR 12 billion. They own 35 retail convenience shopping centers in South Africa and an increasing portfolio in the U.K. This investment was valued -- revalued upwards by ZAR 52 million to ZAR 492.4 million at year-end, and we received dividends from FPG Property Fund in the amount of ZAR 6.1 million, also nicely up from ZAR 5.3 million in the prior year. FPG Investments, this is an investment company that owns 87% of FPG Property Fund, which I've just spoken about. They own 87% of FPG Foods, which owns and operates about 71 fast food franchised outlets, both in South Africa and the U.K. And as the Chairman mentioned earlier, FPG Investments also owns 30% of Polar Ice Cream. They have an increasing retail network, partly owned of about in excess of 100 stores at the moment throughout South Africa. And this investment was revalued upwards by ZAR 6.3 million to ZAR 56.3 million at the year-end, and we received a dividend of ZAR 1 million, up from ZAR 400,000 in the prior year. Obsidian Health, our only operating subsidiary at the moment. It's a leading supplier of health care solutions in both the public and private sectors in South Africa, in Sub-Saharan Africa and the growth in the last year was driven by the Life Sciences and the Point of Care division. And on the left, you'll see a very fancy looking piece of equipment, which is actually used mostly in the laboratory environment. It's a Quidel Ortho machine, and it does a really high-volume clinical chemistry testing. We do over about 1,000 tests an hour with that machine. We've had improved performance this year due to the stronger rand, obviously, them being an importer and an improved basket of products, which they sell. So the rand strength has bode well for us in the past year. And they've just signed a new agency called Sebia Diagnostics and their products are focused on diagnosing and monitoring chronic diseases in the oncology space in diabetes and autoimmune diseases. The Obsidian contributed about ZAR 20 million to group profit last year, and that was nicely up from ZAR 13.8 million in the prior year. And we received a dividend of ZAR 4.9 million from Obsidian, up also from ZAR 3.5 million in the prior year. Aon Re Africa, that's a leading reinsurance broker operating in South Africa and the rest of Africa. We own effect of 18%. We accounted -- we have equity accounted earnings from Aon Re of just over ZAR 20 million in the past year, which is slightly down from ZAR 21.3 million in the prior year. In our books, it's in at an intrinsic gross asset value of ZAR 100.8 million, up from ZAR 87 million in the prior year, and we received a dividend from Aon Re of ZAR 20.2 million, also up from -- down from ZAR 24.3 million in the prior year. Moving on to the Phuthuma Nathi structure. We currently hold about 1.3% in there, very small holding. The closing share price at the end of December was ZAR 46, down from ZAR 81 in the prior year. So this investment was subsequently revalued downwards by ZAR 31.3 million and to ZAR 41.2 million at the December year-end. We did receive a dividend from Phuthuma Nathi of ZAR 10 million and that was down also from ZAR 18.2 million in the prior year. And the closing price as at last night was ZAR 52, up from ZAR 46 at year-end. SAED, we still own 25% of SAED, which is a fund providing equity capital -- growth capital to high potential small- and medium-sized businesses and some of the larger holdings include ASG Holdings and Decision Inc., a data analytics business. SAED contributed ZAR 2.5 million in equity accounted losses this year. And last year, there was a small profit they contributed of ZAR 0.2 million, and we received a dividend from SAED of ZAR 3 million. We accrued a dividend of ZAR 3 million from SAED to December, and that was down from the accrual in the prior year of ZAR 3.5 million. That talks to the underlying investments, and I'd like to hand over to Geoff Fortuin, who will go through the financial results. Over to you, Geoff.

Super. Thank you, Nisaar. As Nisaar said, I will be talking you through the financial results. [Foreign Language] Good afternoon, everyone. The group income statement, I'll talk to first. But before I get into the numbers, just to explain the issue of comparability, Nisaar mentioned it in the prior year, that's December 2024 year-end. Sea Harvest was both a subsidiary for 4 months and an associate for 8 months. So there's a mix of line items affected in different ways, which impacts comparability this year. This is the last year we have these numbers that will fall off after this financial year. So I have included a separate slide just indicating which numbers relating to Sea Harvest was included in the prior year, if you are interested to strip numbers out. Just getting into the slides. As far as dividends go, dividends increased by 92% year-on-year from about ZAR 32 million last year to ZAR 61 million this year, slightly misleading, and I've got a separate slide. These are just the dividends that we are allowed to recognize in the income statement. As far as operating profit is concerned, it decreased by 56%, once again, largely because of Sea Harvest. They contributed ZAR 85 million to our operating profit last year. If we strip that out, the rest of the group made a loss of ZAR 22 million, which gives you this year's ZAR 28 million, that's a ZAR 60 million swing year-on-year. Fair value gains decreased by ZAR 86 million, I've got -- 86%, my apologies. I've got a separate slide talking to that. Other investment gains decreased by 78% in 2024. We sold our interest in Milpark and made a gain of ZAR 73 million. And in this -- in 2025, we sold House of Monatic, yes, House of Monatic and made a gain of about ZAR 13 million, ZAR 13.4 million. One of the big items in our income statement this year, rather complex as well, is a net loss on partial sale of investment in associate being the sale of ZAR 11.95 million Oceana shares, which resulted in a loss of ZAR 264 million, not all of which are cash, it is a book loss. In the prior year, we had a net loss on deemed disposal of subsidiary. That is when Sea Harvest went from subsidiary to associate, and we booked a loss of ZAR 562 million. Share of profits of associates and JVs decreased by 17%. I've got a separate slide that talks to that. Finance costs decreased by 41% year-on-year. Once again, that's affected by the 4-month consolidation of Sea Harvest, and I've got a slide detail or analyzing the finance costs as well. In terms of tax, we've got a tax income as opposed to a tax charge that we had last year, and that's mainly because of previously unrecognized deferred tax assets that were recognized in the current year. The most interesting number on this slide is HEPS. If you recall, in 2024, the loss of control resulted in a loss of ZAR 562 million. That loss, we backed out of earnings in order to arrive at headline earnings. In the current year, we had a loss on sale of the Oceana shares to the tune of ZAR 264 million. That's backed out of earnings to get to headline earnings. And our share of Sea Harvest impairments that we spoke to this morning of ZAR 234 million is also backed out, resulting in an increase in HEPS year-on-year from ZAR 1.08 last year to ZAR 2.136. This slide is just an indication of the items included in the Brimstone Group figures, which relates to Sea Harvest compared to this year. The only item I really look at is the profit for the year attributable to equity holders of the parent, that's the earnings, increased by 55% from ZAR 98 million to ZAR 151.5 million in the current year. Moving on to the analysis and reconciliation of dividends received, the recon to dividends as disclosed in the income statement. Our total dividends received amounted to ZAR 195 million compared to ZAR 280 million last year, and that's largely because a drop in the Oceana dividend of about ZAR 90 million. To a lesser extent, also the drop in the Sea Harvest dividend from ZAR 64 million to ZAR 35 million this year, but you would have heard some good news this morning. Sea Harvest declared a dividend of ZAR 76 million. That should result in us receiving a dividend of about ZAR 121 million in the next couple of weeks. And the dividends received recognized in profit or loss, ZAR 61 million versus ZAR 32 million last year, and that reconciles to our income statement. If we move to the analysis of fair value movements, the biggest contributor is FPG Group. When I say FPG Group, I mean FPG Property Fund and FPG Investments together. Nisaar already mentioned their respective movements in fair value. And the one item that's not there this year that was there last year is the financial liability, what we call the financial liability with contingent settlement provisions. We had a provision or a liability of ZAR 100 million. And last year, we released about ZAR 60 million on Lion and our estimate of exposure there is now ZAR 40 million. If we move on to our share of profits of associates, Oceana, as you all know, decreased by 40% year-on-year and Sea Harvest coincidentally increased by about 39%. So the overall reduction of 17% is largely due to Oceana. Net finance costs. Sea Harvest is obviously excluded this year. The interest costs, Brimstone, Newshelf 1063, our funding vehicle at interest cost of about ZAR 164 million versus ZAR 200 million last year, and that's a function of lower interest rates, lower debt, and that number is going to come down a lot more in 2026 because of our settlement of debt late last year -- in 2025, sorry. In terms of the group balance sheet, it's untainted, unaffected by the treatment of Sea Harvest. Sea Harvest is now purely included as an associate in both years. And the noncurrent assets decreased because of the sale or largely because of the sale of Oceana shares. Current assets decreased because of the reclassification of PN, Phuthuma Nathi used to be carried as noncurrent asset held for sale. We no longer satisfy the requirements for that classification. So it's moved back to noncurrent assets. In terms of total liabilities, we used the proceeds on sale of Oceana shares to repay debt. Just a bit on our ratios in terms of liquidity. Our current ratio improved quite a bit compared to the prior year. In 2024, it was 1.43x, and it improved to 1.69x. Our gearing ratio, our debt ratio improved from 40% in 2024 to 34.4% in the current year. Adjusting for CGT on FPG, that will disappear at the end of January 2026 as we speak, that would have happened already because at that point, certain unutilized assets will become available for use or losses -- tax losses will become available for use, and that percentage will then drop to 32.4%. Just moving on to our INAV. The 2 most interesting items, once again, Sea Harvest, close value at ZAR 1.5 billion. You'll notice that there's no CGT, and that's because we are able to unbundle Sea Harvest using Section 46 of the corporate rules. That's in the Income Tax Act free of CGT because we're in excess of 25%. In fact, we're in excess of 35%. Oceana, we used to be able to apply the same provision when it was in excess of 25%. We can no longer do that because we have sold down to 16%. However, the Oceana's tax base cost is considerably higher than the trading price. And the same for Sea Harvest, if we lost that, the trading price of about ZAR 10 last night, Nisaar, is below the tax base cost. The interesting item on the unlisted investments, the CGT I mentioned, FPG Property Fund has got about ZAR 72 million CGT against it. At the end of January, it will disappear when losses become available for utilization. If we move on to the summary of listed versus unlisted, listed is still 75%. It used to be significantly more. So it is decreasing. Unlisted is 23% and cash 2%. INAV is made up of gross just over ZAR 15, ZAR 15.5. The debt against it is roughly ZAR 5. CGT rather small at ZAR 0.19 and our INAV is more or less ZAR 10, ZAR 9.88. Some other key stats. I don't want to read everything. What I want to point out is, if you look at our book NAV, it decreased by 6%, but our book NAV per share decreased by 5.6%. And the same for INAV. INAV went down by year-on-year, 11.3% and INAV per share by 11% and that difference is purely the effect of share buybacks. To conclude, as Fred mentioned, we've continued with our cost management and strict cost control. We also committed to paying down ZAR 600 million in debt over 3 years to December 2025. Our net debt reduction, as you've heard earlier, was ZAR 520.3 million for the year December 2025 and ZAR 516.8 million in the year ended December 2024. So that's in excess of ZAR 1 billion that we have settled. Debt reduced from ZAR 2.2 billion at December 2022 to ZAR 1.2 billion at December 2025. In addition, we've repurchased a further 1.5 million Brimstone shares during the year. Thank you for listening, and we're happy to take your questions.

Thank you, ladies and gentlemen. We are open to questions now.

Our first question comes from Matthew Robarts from Blue Quadrant. Congrats on a good set of results. With regards to the Canal+ takeover, how do you view the remaining Phuthuma Nathi holding? What will happen to this? Or will Brimstone look at disposal once part of the new structure?

I'm happy to answer that one. Thanks. We're unsure at the moment as to exactly what's going to happen with MultiChoice and Canal+. So we're just playing a waiting game to see exactly what's going to happen. As the share price has been down much lower, it sort of bounced back a bit now, it's gone up to about ZAR 52 moving in the right direction. It was at ZAR 81 a year ago. So at this stage, we're waiting to see when the final documents come out and see the actual plans of Canal+ as to how they're going to integrate it. There's still some confusion as to what license code and all that top thing. So until all of that is clarified, we're sitting on our hands. We're not going to do anything with that investment.

Thank you, Mustaq. Any other questions?

No questions at this time.

There are no other questions. Are we...

Just give them some time.

We will give a bit of time for questions because last time when we closed the session so early, we had a few people moaning that they did not get a chance to ask any questions. So please bear with us. Let's see if there's any coming up.

Another question from Matthew Robarts from Blue Quadrant. Can we expect further share buybacks? Is the limitation going forward willingness or liquidity of the share?

There is a willingness to buy back. During the close period, we bought back some more shares as well. We are putting the structure in place. So yes, we are continuously buying back shares. There is definitely a willingness to buy back further shares as we go forward. We see great value in the actual shares, so we're happy to buy back.

Next question comes from Mr...

Sorry, can I just add, but it has been literally a dripping tap. There's not a huge availability.

Next question comes from MIBFA, Mr. Rajaratnam. Can you please comment on your sale of Oceana through share price levels?

Yes. We had a commitment with our funders that we will reduce debt by December 2025 to the tune of ZAR 600 million when we had renegotiated our debt package at the end of December 2022. We had to sell some shares to meet our targets. And the actual, we exceeded our target by more than ZAR 100 million. The share price was much lower than it was the previous year. We sold the shares at ZAR 53. At December 2024, the share price was ZAR 67. So we understand that we did take a lower price. But to honor our commitment with funders, we did that and sold off those shares.

A follow-up question from Mr. Rajaratnam. What is the sustainable head office costs going forward?

We are at the moment at net head office cost in the vicinity of about ZAR 40 million, and we're hoping to trim on that as well.

Next question comes from [ Pakamisa ]. If you sold ZAR 500 million worth of Sea Harvest, Phuthuma Nathi, sell MTN, what would happen to your cash flow and finance costs in 2026?

Is it ZAR 500 million?

ZAR 500 million of Sea Harvest, sell Phuthuma Nathi and sell MTN, what would happen to your cash flow and finance costs in 2026?

The MTN has really come and gone. I mean we already got that money in the bank.

ZAR 300,000 net debt.

That's nothing really in there. So really, you're talking about the ZAR 500 million, our debt cost at the moment, which is 8% per annum.

Yes.

So it's ZAR 40 million on an annual basis. So, obviously, for 3 quarters of the year, it will be ZAR 30 million adjustment to the interest factor. So depending if we do sell it and when we sell it, but it will have a knock-on effect. Against that, we'll obviously lose the dividend income, which we'll be getting on the shares that we sell. So it's a net debt calculation.

Next question from Dirk Van Vlaanderen from Camissa Asset Management. What is the timing of any required future debt repayments in the next few years?

Our structure in place at the moment is still the end of December 2027. So there are no further commitments. We are completely up to date with all our interest payments and that type of thing. So there's no -- we are under no pressure at the moment. We're ahead of where we told our funders we will be in the current scenario. And we've got until the end of December 2027, and we'll probably start renegotiating with them early in the new year.

Another question from Mr. Rajaratnam from MIBFA. Are there any BEE requirements/limitations to selling more Oceana to the same buyer?

No, there are no BEE restrictions selling to the same buyer. We could, for instance, go and sell more to the same buyer, but it's a qualified BEE shareholder that's bought the shares. So there's absolutely no restrictions on that.

There's no further questions at this time. There's another one. Matthew Robarts from Blue Quadrant. The sale of Oceana was to reduce debt. Can we then assume there won't be any further sales of Oceana soon? Or is there a possibility of another monetization? Is management happy with the current portfolio balance?

We're happy with the current portfolio balance at the values -- at the trading price at the currently of the shares of Oceana, we're not looking at selling more at the current prices. If the shares spike to a much higher level, we will reconsider and do what's right for the company.

Yes, I think important to note also that we have reduced our debt by about ZAR 1 billion over 2 years, more than ZAR 1 billion. We have restructured head office and reduced and managed costs significantly lower by almost close to 50%. And -- so we are looking very closely at the portfolio. We have also bought back shares. And these are all things that we got feedback from our investors who are keen to stay in and we listen. And so I think overall, we've come out at a fair place. We want to improve and make this better for all our shareholders.

So no further questions at this time.

Well, we thank you very much for your presence, patience, questions and for your commitment to Brimstone Investment Corporation. Thank you so much.