NOT YET HARVEST TIME
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.