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Monday, July 07, 2008

Olympia Capital Holdings - Final Results 2007-8

OCHL has gone through an interesting year as follows:
  • Rights Issue (over-subscribed) which raised 420mn
  • "Loss" of OCC (Botswana) as a subsidiary but later regained after OCHL's Rights Issue
  • Inclusion of Paul Wanderi Ndungu (of CMC & KQ fame) as a director
  • Increase in Issued Shares from 10mn to 40mn
  • Change of year end from 31 Dec to 28 Feb (see the prospectus)
The results of 2007-8 were not anything to write home about. They can be downloaded from www.investinginafrica.net but the commentary was interesting (pasted below). Clicking on the subject header above will link to a Business Daily story on OCHL.

OCHL's financing costs in 2007-8 were horrendously high but the process of a Rights Issue in Kenya takes too long so funds were 'borrowed' in the meantime. The Rights Issue in Botswana was concluded much sooner than in Kenya coz faster approvals. The repurchase of shares in OCC(B) did hurt OCHL since they were purchased at 50% more than what they were issued at 6 months earlier.

Plush is OCC's largest subsidiary & has been performing below par in 2007. I hope it's performance improves. Kalahari Floor Tiles is the 'star' of OCC's subsidiaries but OCHL gets only 51% of the benefits/profits from KFT.

The other acquisitions (Natwood & Mather+Platt) benefits, if any, will show up in 2009. I have said that 2009 is when OCHL is expected to shine as its cash (420mn) will have been fully invested. 2008 remains an acquisition year for OCHL. Of course, that is mere conjecture on my end hoping that Kenya & S.Africa remain peaceful & grow!

There was an increase of 20% ownership of Avon Properties but the property firm cannot be consolidated since it is less than 50%.

There will be substantial costs associated with the new PVC tile plant including paying for it, installing it & working capital. I hope the marketing team is up-to-speed since the production is expected to triple vs the old plant. The prospectus had some rosy numbers for Dunlop plant.

A housing/construction slowdown in Kenya will severely hurt Dunlop since the plant will be commissioned as the construction industry sees a slowdown. I hope Dunlop can export to COMESA as well as compete & lock out the PVC tiles from China & Egypt. The core product/ingredient is petroleum based & that is a concern in the future. A plus for Dunlop is that higher transport costs from Egypt/China to Kenya may make Dunlop's products more competitive though the Kenyan market will shrink with higher prices.

All in all, I see a better 2008 (got to get that PE down to reasonable levels) and an even better 2009. Of course, I hope Kenya and S.Africa does not see a recession or violence!

Commentary
The 14-month period ended 29th February 2008 was a very eventful time for the group.
• Our subsidiary, which is listed on the Botswana Stock Exchange, Olympia Capital Corporation (OCC) migrated to the main board from the venture capital board and had a successful 1:1 rights issue in March 2007. This was to pay off debt used in the acquisition of 74% of Plush products (pty) Limited and resulted in our slipping from a majority position. In August 2007, we purchased shares putting us back in a controlling position in OCC.
• In September 2007, we had an oversubscribed 3:1 rights issue on the Nairobi Stock Exchange (NSE) and raised Ksh 420 million. These funds have enabled us to look for expansion in existing and new areas. It is difficult to compare the year ended Dec 2006 with the period under review, mainly because of the acquisition of Plush in Dec 2006, which has now been consolidated for the full period and that the cash raised on the NSE, was raised in the later part of the period under review. Board Appointments: Following our rights issue in September 2007, we invited Mr. John Simba and Mr. Paul Wanderi Ndungu to our board. Thus increasing the number of directors to seven and we also had an increase of executive directors from one to two, with the appointment of Mwangi Wamae as Chief Operations Officer. Financials: As expected, turnover increased significantly from Ksh 397 million to Ksh 1.4 Billion. Profit from operations increased from Ksh 30m to Ksh 74m. Unfortunately, due to heavy borrowing, prior to the rights issue, interest costs rose from Ksh 4m to Ksh 36m. Without factoring new acquisitions and due to the rights issue being held at the end tail of the period, we expect this to come down significantly in the next year. Dividend: Our AGM will be held on 4th August 2008, and we intend to pay a dividend of Ksh 0.20 per share on 11thAugust 2008 to shareholders registered in our books at the close of business on 23rd July 2008. Our books closure dates will be 24th and 25th July. Post Balance Sheet Events: Following the end of our financial year on 29th Feb 2008, we have made three key investments. OCC entered into agreements to purchase 50% + 1 share in a Cape Town based business called Natwood (www.natwood.co.za). Olympia Capital Holdings Limited (OCH) entered into agreements to purchase 49% of a Kenyan business in the provision of Fire Systems, Water Services and Mechanical Installations called Mather + Platt Kenya Limited (www.mplattkenya.com) OCH has also increased it’s shareholding in Avon, the property company from 27.5% to 47.5%. Our focus is now on the growth and profitability of the businesses in our stable. I am also please to note that the new tile plant for our Kenyan subsidiary Dunlop Industries Limited is now on the high seas to Kenya. We expect this plant to be on line by October 2008.

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