Beige Hold­ings

Finweek English Edition - - INVESTMENT -

Fol­low­ing the some­what event­ful last two quar­ters of 2012, it has since been a rather painful jour­ney tr ying to f ig­ure out what is go­ing on with Beige Hold­ings. Beige, a con­tract man­u­fac­turer of phar­ma­ceu­ti­cal and cos­met­ics prod­ucts for ma­jor fast-mov­ing con­sumer goods (FMCG) com­pa­nies, was ac­quired by the pri­vately owned The Lion Match Com­pany in Au­gust last year. Lion Match paid R45m for the 35% stake for­merly held by Thebe In­vest­ment Cor­po­ra­tion, tak­ing its hold­ing in Beige to 79%. Lion Match also owns 100% of the is­sued pref­er­ences shares in Beige.

Es­tab­lished in 1905, The Lion Match Com­pany, with its fa­mous Lion Matches brand, has in re­cent times diver­si­fied its port­fo­lio to in­clude shoe pol­ish as well as shav­ing and male groom­ing prod­ucts. The strength of Lion Match is found in the ex­ten­sive dis­tri­bu­tion net­work that it has in South Africa and sur­round­ing coun­tries.

The ques­tion, how­ever, is whether this ac­qui­si­tion of Beige Hold­ings by The Lion Match Com­pany would lead to a for­ma­tion of the next big FMCG com­pany. Fin­week man­aged to get a word from Beige chair­man, Gora Ab­doola, about the plans Mar­ket cap P/E ra­tio EPS Div­i­dend Div­i­dend yield Shares out­stand­ing R65.27m -4.66 -1.69 0.00 0.00% 1.63bn for the com­pany.

“This ac­qui­si­tion will cre­ate the plat­form for Lion Match to grow into a top FMCG com­pany. Beige has been a prob­lem­atic com­pany on the AltX Board for some time. The his­tory of neg­a­tiv­ity has fol­lowed it. Lion Match will cre­ate a plat­form of sta­bil­ity. Ob­vi­ously, there will be some teething prob­lems and when Lion Match got in­volved, we dis­cov­ered huge is­sues in con­trols and man­age­ment. There were changes to the CEO, fi­nan­cial di­rec­tor and op­er­a­tional man­age­ment as well. Dur­ing the last 12-month pe­riod, a ma­jor cost-cut­ting ex­er­cise was done and proper con­trols that were lack­ing in var­i­ous busi­ness units were in­stalled.”

Lion Match is f ur­ther look­ing at ex­ploit­ing ex­port op­por­tu­ni­ties, which Gora says had “dried up” due to a strong ex­change rate. “How­ever, the tide has turned and the favourable ex­change rate has made ex­ports lu­cra­tive once again.”

Lion Match’s ini­tial plan was to delist Beige but that has since been shelved by the board. To ce­ment its con­fi­dence i n Beige, Lion Match is go­ing to un­der­write a rights is­sue, which will be done in early 2014 to re­cap­i­talise the strug­gling AltX-listed counter.

Ac­cord­ing to Gora, “Beige is, at present, in a re­build­ing phase. The share price will bot­tom out and will grow at a con­sis­tent pace as the com­pany set­tles and beds down its costs. Share­hold­ers are ad­vised to watch this space as the turn in the com­pany will be in this new fi­nan­cial year.”

VIEW ON THE COM­PANY The com­pany had done con­sid­er­ably well un­der the lead­er­ship of Mark Di Ni­cola (for­mer CEO of Beige Hold­ings, now the com­pany’s non-ex­ec­u­tive di­rec­tor). The mys­tery around the ins and outs of man­age­ment, as well as the com­pany strat­egy go­ing for­ward, is a wor­ry­ing fac­tor. The shelved delist­ing and the planned rights of­fer point to a turn­around strat­egy which, we be­lieve, can be re­alised with the mus­cle be­hind the Lion Match suc­cess.

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