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Tuesday, June 23, 2009

Olympia Capital Holdings Ltd - Cautionary Statement



Olympia Capital Holdings Limited (OCHL) owns 51% of Olympia Capital Corporation Limited (OCC), a company listed on the Botswana Stock Exchange. In December 2006, OCC purchased 74% of Plush Products (pty) Limited (Plush).

For the fnancial periods ended December 2006, February 2008 and February 2009, Plush did not contributed positively to the bottom line of the group. From September 2008, following the slipping of the South African economy into a recession, we saw a signifcant drop in our sales that made the company go into a loss making situation.

We believe in the products and the market, but not the model to market that we have used to date. A decision has been made to close the company, sell the assets to meet our obligations and consider re-entering the market with a leaner model.

The closure of Plush will not have any negative effect on the operational group proftability, however we will only tell with time the effect that the loss of the actual investment will have on our group balance sheet.

Michael Matu

Chief Executive

23rd June 2009

Many folks have been asking about Olympia Capital Holdings (Kenya). The shares' trading was suspended on Monday at 11am but resumed trading on Tuesday after the statement was released. We will have to wait for the FY 2008-9 results expected by 30 June 2009.

The conventional wisdom in financial markets is that the longer the delay in announcing results, the worse they are.

[KQ released their 2008-9 results 1 week later than usual. Well, there was a Kes 7.5bn charge to profits relating to hedging.]

It is highly likely that OCHL will have to write off the ENTIRE equity injection into Plush-Yokota. And there is a chance that the profitable units might suffer as well from the cash drain or 'connection'. Nevertheless, OCHL's acquisition of Plush has set Olympia back many years.

That said, Plush has NEVER contributed to the bottomline for OCC (Botswana). So this action will stop the cash outflows for now.


MainaT said...

CT, I have a few qustions (the strategy one I'll leave because nobody had an answer even on SK).
On completing its various takeovers last yr, OC said that turnover grew by Ksh0.7bn to Ksh1bn. I am assuming a lot of this was from SA. The cautionary statement said SA had suffered mmmh.
Next, deadline is next Tuesday, why didn't OC just announce its results? Does this mean it won't make next Tuesday's deadline?
How much you want to bet the dividend last yr will be the last for a while?

Isn't this plush thing a post-balance sheet adjusting event in normal accounting circumstances?

coldtusker said...

1) Strategy? I do not know but you should e-mail them

2) Story in Nation. Turnover went up but profits went down as the retailers squeezed the manufacturers. Profits & cashflow not turnover count at the end of the day!

3) SA's economy has slowed considerably more than Kenya's & the debt servicing caught up with Plush.

4) I am sure they will have to release the results now that the pressure is on from shareholders, CMA & NSE.

5) Dividend... LOL... good luck to that!

6) It would be post-balance sheet BUT I think the problems were evident in Feb 2009 thus the auditors probably insisted on the loss being provided for and/or contingent liability.

coldtusker said...

MainaT: For their own sale, I hope they purge out all the crap/goodwill to enable a new start!

Anonymous said...

So bought a company that was not making much of a profit, did not make a profit in good economic times, and then got rid of the company during an economic downturn.

Sounds like a good business case study.

At least they are acknowledging the problem, and not looking for a govt. handout.

Village Analyst said...

I found the statement quite interesting; rather opaque at best if the intention was to pass it off as a profit warning. ...The mgt doesn't like the operation model, loves the market and believes in the product yet opts to shut down?
Isn't this euphemism for "we made a blunder and now we have cashflow issues" hence the statement's balance sheet emphasis and longer-term caution?

coldtusker said...

VA: In English... we made a boo-boo...

There was a article/interview in the Nation that had more details but apparently Plush was breaking even on an operational basis... and a huge loss after financing costs...

coldtusker said...

VA - I am on twitter... are you?

Re: Why banks aren't going to Burundi & Ethiopia...

1) Burundi is very small & not as stable as Rwanda BUT I think KCB & DTBK are going into Burundi.

2) Ethiopia is socialist. Interest rates are regulated thus margins for banks are very low. Most Ethiopian banks are local banks.

MainaT said...

ct-was only asking you about the strategy as it was my understanding that you are shareholder and thus you'd know this as part of your due diligence. O/wise I have many others of finding out the same info...

coldtusker said...

MainaT: Honestly... I have no idea! In Kenya, they have bought real estate... while in S.Africa they bought Plush (which does/did not sell flooring)...

Village Analyst said...

CT: I'm not on twitter yet

MainaT said...

CT-get in touch via twitter or em.


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