Finweek English Edition - - Companies & Markets - ANDILE MAKHOLWA

AFRICAN BANK IN­VEST­MENTS LTD (ABIL) is yet to har­vest prof­its from its re­tail fur­ni­ture busi­ness El­ler­ine since its ac­qui­si­tion in Jan­uary last year. Over the past 15 months or so, the group has been hard at work try­ing to turn around El­ler­ine amid the doom and gloom of the re­ces­sion that has neg­a­tively af­fected num­bers at some of South Africa’s ma­jor fur­ni­ture re­tail­ers.

Abil – whose pri­mary busi­ness is mi­cro-lend­ing – de­liv­ered less im­pres­sive re­sults for the six months to March 2009, which saw a 7% de­cline in head­line earn­ings per share to 116,6c/share and the slash­ing of the in­terim div­i­dend by 19% to 85c. El­ler­ine’s bad debt charge as a per­cent­age of av­er­age credit granted also rose from 11,4% to 16,5%.

Abil bought the El­ler­ine group (which in­cluded FurnCity, TownTalk and Savelles Faird­eal) for R10,6bn as part of the bank’s strat­egy to broaden its lend­ing busi­ness and take ad­van­tage of con­sumers’ need for credit when buy­ing fur­ni­ture. Chris Gilmour, of Absa As­set Man­age­ment Pri­vate Clients, says the qual­ity of El­ler­ine’s book is ob­vi­ously not as good as was orig­i­nally thought and Abil has spent a lot of time clean­ing it up. How­ever, he be­lieves the “El­ler­ine deal will prove to be good for Abil” over the long run. OP­POR­TU­NI­TIES credit when buy­ing fur­ni­ture.

buy­ers is be­lieved to be a suc­cess story over the long term. RISKS

in­crease its bad debt risk.

the du­ra­tion of 2009 into early 2010.

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