| Tue 1 Mar 2005, 11:12 | | Mvelaphanda Group releases first financials |
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Mvelaphanda Group releases first financials
Rob Rose
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Classic Business Day Transcript: Mvela interim results
Chief Reporter
TOKYO Sexwale’s Mvelaphanda Group released its first financial results yesterday and said it would raise a war chest of R500m-R700m in the next six months, partly to buy stakes in two JSE Securities Exchange SA-listed companies before the end of the year.
With a market capitalisation of R2,6bn, the new Mvelaphanda entity is the largest diversified empowerment company operating in SA and its performance is seen as a benchmark for black-owned investment companies.
This is the first time that Sexwale’s group has been exposed to public scrutiny after its merger with services company Rebserve in December.
CEO Stephen Levenberg said yesterday Mvelaphanda was looking to sew up empowerment deals this year with two companies that are listed among the JSE’s top 40 companies.
“Each of these deals could add between R300m and R400m to our value”.
Levenberg would not disclose the specific companies, but said Mvelaphanda was looking at the retail, media, energy and liquid fuels, gaming and construction sectors.
“The empowerment wave has already swept through the mining and finance sectors, and it is inevitable that other areas, such as retail, will come into play sooner or later,” he said.
The JSE’s top 40 All Share Index includes retailers Edcon, JD Group and Pick ’n Pay.
None of these companies have sold equity to black shareholders.
Andisa Securities analyst Evan Walker said that although an empowerment deal was not essential for a retailer, most of them “are looking at angles to beef up their empowerment credentials”.
The cash requirements for these deals are considerable, however, especially as Mvelaphanda’s cash flow statement showed it had only R230m in liquid funds, after the company paid out R208m during the past six months.
Its total interest-bearing liabilities of R284m illustrate that Mvelaphanda will need to raise money for future deals.
To fund deals, Levenberg said, Mvelaphanda would raise between R500m and R700m before August. However, the company would not want to issue new shares and possibly dilute its majority black ownership, which remains its largest competitive advantage.
Levenberg said that, with this in mind, “we are looking at raising this money using some form of convertible debt or similar instrument, which could have a component allowing it to be partially converted into ordinary shares in the long term, for example”.
The war chest would give Mvelaphanda scope to tie-up “about five or six large deals”, he said.
The results for the six months to December released yesterday were its first financial indicators since the merger and illustrated how badly Rebserve needed Mvelaphanda in order to grow.
Mvelaphanda’s only contribution to income was a R35m gain from the increased value of its holdings in banking group Absa and African Life. Mvelaphanda Resources results were not included in these results.
The rest of the group’s income came from Rebserve, and overall the company showed a 2% drop in revenue to R1,7bn and a 15% drop in operating profits to R111m, although overall pretax profits were 16% higher at R150m.
