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Business Highlights of the Week: Altron, Value Capital, Consolidated Infrastructure, MTN, Famous Brands

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Stephen Gunnion is a financial journalist and news anchor.

While Altron shareholders were cheering the fantastic price it hopes to achieve for shares in Bytes when it lists the UK business on the London Stock Exchange, one wonders if they gave any thought to how it has got to this point – and who has been driving the turnaround at the technology group.

Without a doubt, CEO Mteto Nyati, who took over in 2017 as the Venter family relinquished control, has done a great job. Behind him, however, is Value Capital Partners (VCP), the investment company headed by former Brait executives Anthony Ball and Sam Sithole. Starting with a R400-million capital investment, VCP has built its minority stake in Altron, as it has in a number of other undervalued companies where Ball and Sithole use their private equity skills to maximise returns.

VCP describes itself as an engaged shareholder, working “collaboratively” with the boards of the companies to improve profitability. The rationale for the Bytes listing is to unlock value for shareholders as the true worth of the UK company is not reflected in Altron’s own share price. And it seems to be working. Since announcing it aimed to achieve a minimum offer price that would give Bytes UK a market capital of £450-million – which was higher than its own market value at the time – its shares have climbed about 20%. After the listing, it will be unbundled to shareholders, including VCP.

The announcement coincided with the release of its interim results, which were pretty solid despite the impact of Covid-19 following a big cleanup of the company over the past three years and a number of disposals.

Other companies that VCP is invested in have been going through similar cleanups, with varying degrees of success so far.

Adcorp’s shares have climbed more than 170% since the middle of the month when it said it would post a first-half profit following recent losses after slashing debt and cutting costs. It has also been selling businesses deemed non-core, with its Dare Australia business the latest to be auctioned off as it explores opportunities to exit Australia following a review of its portfolio of businesses. VCP first invested in Adcorp in 2017 and has since doubled its stake to about 25%. Even with the recent improvement in its share price, it still has some way to go before it sees a return on its investment. It is probably also playing the long game at PPC, with the cement company’s shares hovering near all-time lows, making a planned rights issue very expensive as it tries to clean up its balance sheet. Disposals are on the cards and its CEO was replaced just over a year ago.

Perhaps companies sometimes need a large, unemotional shareholder, one with no history with the company, to help make those tough decisions.

Fairfax disengaging from CIG?

Staying with large, engaged shareholders, something is afoot at Consolidated Infrastructure Group (CIG) – and may already have occurred by the time you read this.

All three directors nominated by major shareholders Fairfax Africa to its board quit this week, including chairman Michael Wilkerson and non-executive directors Quinn McLean and Ahmad Mazhar. Apart from being its largest shareholder, the Canadian investment holding company holds R300-million of CIG’s convertible debt, so the departures seem odd.

Smalltalk Daily Research’s Anthony Clark says he’s heard Fairfax is restructuring its SA interests, which include a stake in unlisted Afgri, following a tie-up with Helios Investment Partners. The directors may be dashing for the exit on two possible permutations: a minority buyout to remove the ignominy of a large loss from a publicly listed company, or placing it into some form of restructuring and business rescue.

With its other SA assets not doing well, it may be that Fairfax just wants out, says Clark. Hence the partnership with Helios.

It comes as CIG battles to restructure an unsustainable debt position, with the process no doubt impacted by Covid-19 and lockdowns across the markets it operates in. Its problems predate the pandemic by a long way. The company has autonomous structures in place for its subsidiaries and poor oversight of power infrastructure business Consolidated Power Projects (Conco) has left it battling for survival due to a dearth of new contracts and large impairments.

Clark says there are excellent assets within CIG such as Conlog prepaid meters and building materials that would attract interest. He hears that CIG also wants out of its Angolan oil services business AES, a one-time star that is now suffering from low oil prices and political interference in Angola.

Results for the six months to end-June are imminent (it changed its year-end to align with Fairfax’s) so all may soon be clear.

MTN builds its risk defences

News that MTN is redeploying Ferdi Moolman, CEO of its Nigerian business, to the post of group chief risk officer is timely given risks the company continues to face across its global operations. The announcement came a day after reports that it’s likely to face a US court case over alleged protection money it paid to the Taliban to safeguard operations in Afghanistan.

It is one of the countries MTN entered as it expanded its cellphone empire across Africa and the Middle East. It’s a country it plans to exit over three to five years as it narrows its focus back to Africa. In Iran, it’s been accused of paying incentives to clinch MTN Irancell’s operating licence – which it denies.

Moolman has experience putting out fires after five years as CEO of MTN Nigeria, a period over which he helped stabilise the business and set it on a sustainable growth path, says MTN. He was put in the position following the massive $5.2-billion fine the company was hit with for failing to disconnect millions of unregistered SIM cards there.

While that fine was greatly reduced it was followed by a settlement with Nigeria’s central bank after the company was accused of repatriating dividends from that country without following the proper processes. Oh, and there were accusations of underpaying taxes by the country’s Attorney General.

Given what he’s already dealt with, he seems just the man for the job.

Famous Brands starts second half with a cleaner plate

Famous Brands may be disingenuous when it says it is cautiously optimistic the second half of its financial year will be better than the first. It could hardly be worse. Following another impairment, this time of R1.3-billion, it values its investment in the UK’s Gourmet Burger Kitchen (GBK) at zero. And with the cash-guzzling, lossmaking burger chain in administration, it will no longer be consolidated into Famous Brands’ accounts.

Sure, there is the possibility of more stringent lockdown conditions but its quick service (fast food) and casual dining restaurants will be prepared this time. Delivery and takeaway systems have been fine-tuned to respond quickly if customers are barred from sitting down. There’s more cleaning up to do as it refines its offering and exits fancier signature brands that look great in its portfolio but don’t deliver the high returns it’s now focusing on. But with GBK out of the picture, it can get back to basics. DM/BM

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