Olympia Capital Holdings Ltd (OCH) releases 1H 2006 Results

The Interim 1H 2006 results were released in record time (within 30 days of the end of the Half Year) at the 2005 AGM held at Nairobi Club on July 28 2006.

The shares have been trading around the 16/- mark for the past few months.

OCH is a Holding Company & owns/controls the following:

• 100% of Dunlop Industries Ltd (DIL) which is a Kenya based manufacturer of PVC tiles & rubber solutions.
• 53% of Olympia Capital Corporation (OCC) which in turn owns 100% of Kalahari Floor Tiles (KFT) a Botswana based manufacturer of PVC tiles & rubber solutions. KFT also supplies the S.African market. KFT has a chemical division acquired in 2006 that manufactures & distributes industrial cleaning solutions.

Other Info:

• Chairman - Chris Obura
  
• CEO - Michael Matu
• 10 Million Shares in issue
• OCC is listed on the Botswana Stock Exchange
• DIL is the sole PVC tile manufacturer in the East African region
  

My comments in BLUE.

The growth in profits was limited to Kenya but generally Botswana provides the bulk of the profits.

The info is for 1H 2006 vs 1H 2005

Turnover: +9%
PBT: -1%
PAT attributable to OCH: +41% (primarily due to lower "minority interest charge")
EPS: +41%

The 1H EPS is almost the same as the entire 2005 (1.13 vs 1.14) therefore OCH can do much better in 2006 vs 2005 if they maintain the current "streak".

CEO's Commentary (per the Announcement):

During the six months under review, we did not see a significant improvement in the group profitability before tax. The key difference in the results was an improvement in the Kenyan operations where we own 100% of the equity versus a decline in the results of the Botswana operation where we own 53% of the equity.

Prior to any acquisition we expect the second half of the year to be similar to the first half.

Our Botswana subsidiary is in the final stages of making a significant acquisition in South Africa. This acquisition, if successful, will have a significant effect on the profitability of the company. We will make every effort to meet our equity funding requirements to retain majority shareholding in the subsidiary during the acquisition. We expect this acquisition to be complete during the second half of the year.

Michael Matu

The South African Acquisiton:

• The cost of the acquistion?
• Will it be accretive to earnings in 2006?
• Ownership structure?
• How much will OCC need to to acquire the SA firm?
• OCC plans to raise the funds by acquiring debt & raising equity i.e. Rights Issue
  

Since OCH intends to maintain its "control" in OCC & replace the aging Kenya DIL plant (2005 Annual Report), it will need to raise funds to fulfill both needs.

Bottomline:

OCHL's 2005 AR states that "Our aim will be to meet our rights to ensure we maintain majority shareholding in our Botswana listed subsidiary" thus raising the bar to meet funding for the DIL plant & OCC Rights. The new plant is expected to increase DIL's profitablilty.