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Brimming with confidence

Cape Town based empowerment group Brimstone Investment Corporation has celebrated its 20th anniversary this year – marking the remarkable journey from a community-based initiative with start- up capital of just R3m to a JSE-listed counter with assets of over R7bn. What’s perhaps more impressive that from this humble beginning Brimstone now employs more than 3,500 employees in its subsidiaries and in excess of 24,000 in its associates and investments.

Two decades is quite an achievement considering that many of the empowerment companies – including New Africa Investments (NAIL) and Real Africa Investments (RAIL) – have fallen by the wayside.

In Brimstone’s annual report co-founders Fred Robertson and Mustaq Brey reiterated the company’s purpose was enshrined in a philosophy based on three founding principles – “to be profitable, empowering and to have a positive social impact on society.”

While Brimstone has delivered (in bucketloads) on all three tenets, both Robertson and Brey conceded that in a period of extreme uncertainty on various fronts – including economic, social, political, technological and the natural environment – it became more challenging to deliver on the philosophy.

Anyone reading Brimstone’s annual report would perhaps disregard Robertson and Brey’s cautious note – especially the segment that outlines the major events that shaped the company over the last 20 years. These serve as a timely reminder that companies do indeed suffer the “slings and arrows of outrageous fortune” – but those that stick to a disciplined game plan usually win in the long term.

Brimstone – after Robertson and Brey convinced local communities to part with a dollop of their hard earned savings – clinched its first transaction when it made a R7,5m investment in fishing group Oceana Group. This investment turned out to be an anchor investment, and one that still fortifies Brimstone’s investment portfolio to this day with a gross value of more than R2bn. Robertson points out that the initial purchase price for Oceana was 275c, and that 20 years later dividends received from the fishing company amounted to 365c/share.

In its second year of operation, Brimstone raised a further R13m from share holders and acquired stakes in Cape Town-based businesses like Plessey Cellular, broadcaster KFM Radio and assurance company Norwich Holdings.

In 1997 Brimstone raised R45m from previously disadvantaged shareholders as well as another R104m from institutional investors. In 1998 another R85m was raised through various share issues, which helped Brimstone build an asset base of R300m and successfully apply to list on the JSE. The stake in Norwich was sold for a profit of R21m, and clothing manufacturer House of Monatic was acquired from the late Doug de Jager’s Lenco Holdings. A number of non-core assets were sold to raise R62m, which allowed Brimstone to fund investments in hake fishing business and chicken eaterie group Nando’s.

Tough market conditions heralded in a tough 1999 for Brimstone – so much so that Brimstone’s directors opted to return 150c/share to shareholders. But it did acquire a 30% stake in short-term insurer Lion of Africa and appoint respected academic Jakes Gerwel as chairman.

The new millennium ushered in some testing times for Brimstone as some investors interpreted the return of capital in the previous year as a sign of capitulation. But Brimstone soldiered on, acquiring a stake in Peoples Bank. The company also sold its stake in KFM and started BrimEquity – a joint venture with Coronation Capital.

Things did not get any easier in 2001. Brimstone – in a bid to hone its investment focus – disposed of certain property investments and mobilised the funds to increase its stake in Sea Harvest. At one point Brimstone’s shares dropped so low on the JSE that the company’s market value slipped below R40m.

In 2002 Brimstone’s stoic resilience started to pay off, and a maiden dividend of 4c/share was declared.

In 2003 the stake in Nando’s was sold while a 25% stake in packaging group Lenco was acquired for R52m and the stake in Sea Harvest doubled to 21,52% for R85,3m.

There was not much corporate activity in 2004, save for the fact that Brimstone successfully bedded down its newer investments.

In 2005 Brimstone acquired stakes in Old Mutual and Nedbank as well as a 18% interest in private hospitals group Life Healthcare (owner of the Claremont Hospital and the Vincent Palloti Hospital in Cape Town.) Brimstone also raised R100m in a clawback offer.

A further 10% stake in Oceana was acquired in 2006 for R176m, while the stake in Life Healthcare was increased to 21,9%.

The next year the stake in Lenco was sold for R203m, and a stake of 18% acquired in financial services company Aon Re Africa.

Brimstone also made a surprise pounce on Slat River-based fashion retailer Rex Trueform, snagging an effective 34,6% stake in the Shub family controlled business.

In 2008 – the tenth year of the company being listed on the JSE – Brimstone acquired shares in empowerment company Phuthuma Nathi, and the following year did a flurry of deals that included increasing the stake in Sea Harvest to 75,7%, pushing the stake in Lion of Africa to 74% and securing an option to subscribe for 1% of consumer brands giant Tiger Brands.

In 2010 Brimstone unbundled most of its holding in Life Healthcare to its shareholders as a dividend in specie and also acquired the remaining 26% of Lion of Africa. It also picked up shares in another empowerment vehicle, MTN Zakhele.

In 2011 Brimstone increased its stake in health care specialist Scientific Group to 28,2%. But the key deal that year was the inspired decision to take another 8,5 million shares in Oceana for R382m.

In 2012 Brimstone added to its food basket by acquiring 12,3% of fast food franchisor Taste Holdings. The company also sold another 4.5 million shares in Life Healthcare, realizing R140m. A 25,1% stake was acquired in asset management business Afena Capital.

Not much happened on the deal-making front in 2013, but Brimstone reaped the fruits of its investment strategies with total assets increasing by R1,1bn.

In 2014 Brimstone acquired a 4,97% stake in shipping and logistics giant Grindrod as well as picking up another 1,16 million MTN Zakhele shares and another 1,1 million Phuthuma Nathi shares.

In 2015 Brimstone subscribed for an additional 2,8 million shares in Oceana via a rights issue and acquired another 19,7 million shares in Taste Holdings. Last year also saw the Old Mutual and Nedbank transactions maturing – realising a significant profit for Brimstone. The company also sold out of the Scientific Group at a profit of R44.8m. The shareholding in Grindrod was increased to 6,62%.

Another 1,96 million shares were acquired in Phuthuma Nathi, and a 10% stake in Cape Town-based property group Equites was secured for R350m.

This year Brimstone has continued its energetic corporate activity, selling off its stake in fashion retailer Rex Trueform and proposing a deal to acquire a larger stake in Sea Harvest, which is in the throes of buying outright control of Australian fishing enterprise Marreteram.

This year also saw the retirement of long serving FD Lawrie Brozin, and the appointment of George Fortuin as the new FD. Iqbal Khan – who looked after House of Monatic for years – was appointed as chief operating officer and executive director – signalling that the next generation of Brimstone’s prime movers are slowly being ushered in with an eye on the next decade.

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