Focus is on the long haul, not quick return

INVESTMENT holding group Brimstone said on Friday it would continue to buy stakes in local companies, despite the fact that South Africa’s economy was growing at a snail’s pace. Over the years, Brimstone has invested in companies it believes will add value in the long term.

Chief executive Mustaq Brey said the group did not focus on a quick return, but looked at a period of 20 years.

“We have invested in companies like Oceana and Life Healthcare, which are good assets. We continue to look at investment opportunities, but we decided to stay out of gambling and alcohol stocks,” Brey said. Brimstone received R20.7 million in dividends from Oceana during the period and recorded R18.9m in equity accounted earnings.

However, Oceana, in which Brimstone holds a 17 percent stake, recorded a drop in non-distributable reserves, largely attributable to the decrease in its foreign currency translation and cash flow hedging reserves.

Oceana’s share price closed at R90.90, down from R120 a share at the end of December.

In the results for the six months to end June, Brimstone reported a 27 percent increase in operating profit to R155.9m, while the groups’ gross assets increased from R7.7bn to R8.2bn and intrinsic net asset value fell from R5.1bn to R4.5bn.

It said its results were impacted primarily by the downward valuation of investments, which is evidenced by both the share value adjustments and the share of profits of associates and joint ventures, and the relatively poor performance of the group’s subsidiaries, Lion of Africa Insurance Company and House of Monatic.

Brey said it had been a tough six months with many of the group’s investments under strain. “The downward valuation of some of our investments was not entirely unexpected in this climate. I am optimistic that the cyclical nature of our investments will soon see the poor performers move back into profitability…”