Brimstone writes down its R100m investment in Grindrod amid losses

By Nompumelelo Magwaza Time of article published Feb 25, 2015

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Nompumelelo Magwaza

BLACK-owned investment company Brimstone has had to write down the investment it made last year in listed integrated logistics service supplier Grindrod by R100 million.

However, Brimstone chief executive Mustaq Brey said yesterday it was a long-term investment and the company was happy with the long-term prospects of Grindrod.

Brey acknowledged that the group’s investment in Grindrod got off to a bad start.

“We bought the shares at R25 a share and at year-end they were R22.40 a share, and this has since come down by another R2 or R3 a share,” he said.

Consortium

Brimstone, via a consortium of investors including Calulo Investments and Solethu Investments, in July last year subscribed for 64 million Grindrod ordinary shares at a price of R25 a share and now owns 4.97 percent of Grindrod.

Brey was hopeful the investment in Grindrod would eventually add value to Brimstone.

Brimstone yesterday reported 16.1 percent growth in intrinsic net asset value to R4.86 billion in the year to December from R4.19bn in the previous year.

But profit for the year shrank by 41 percent to R277.8 million from R473.4m, largely because of losses incurred by insurance subsidiary Lion of Africa and the impairment of the investment in Grindrod.

Revenue rose by 6 percent to R2.2bn from R2.08bn. Operating profit increased by 58 percent to R101.8m from R64.4m.

Diluted headline earnings a share declined by almost 38 percent to 99.8c from 160.9c.

An unchanged dividend of 30c a share was declared. But a special dividend of 20c a share was declared following the conclusion of the exercise by Nedbank of its call option and the upward revaluation by R151m of Brimstone’s investment in Nedbank.

Brey said Brimstone had reported a solid set of results despite losses by Lion of Africa and impairment of the Grindrod investment.

Lion of Africa reported a loss from operations of R180m, which included a charge of R86m resulting from the annual impairment review of reinsurance assets.

The investment has been written down to R20m from R140m at the end of the previous year.

Brey said Brimstone was doing a strategic review of the firm and introducing new management.

“The company has come a long way and to take it forward and make it profitable again we need to infuse some new life blood.”

Milestone

The group had reached a milestone in its investments in Nedbank and Old Mutual, which would mature this year, he said.

Brimstone, as part of the consortium that owns The Scientific Group, had entered into an agreement with the newly listed healthcare group Ascends Health for the disposal of 100 percent of the diagnostics business.

The effect of the disposal would be accounted for once certain conditions had been met.

“We are keeping a small portion of the business, which will see where to place it going forward,” said Brey.

Brimstone’s share price closed unchanged yesterday at R17.20 on the JSE.

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