Great things ahead for diversified Torre Industries
Torre Industries has come a long way in a relatively short period of time, but still has a bright future ahead of it. In 2011, the company consisted of one major business specialising in tower cranes ( Potain brand) and was predominately active in South Africa (l isted as SA French Limited). Since then the business has changed its name ( torre meaning tower in Spanish) and moved to the main board of the JSE.
The company has become a more scalable industrial group, operating t hrough si x business units i n t he manufacturing, automotive, construction, agricultural and mining sectors, both domestically and throughout Africa. The new management team has acquired various business and well-known brands, such as Gabriel, as part of its drive to develop a strong and defensive business.
We originally allocated capital to the business when the market was offering the company to us for almost half the value of the net assets on the balance sheet. However, we were well aware that value could be eroded very quickly if the business did not reverse the losses it was generating due to its lack of diversification and the tough economic environment in which it operated.
We backed a new and highlyenergised management team, who focused on eliminating unnecessary overhead costs. As management bought a substantial stake of the business (with their own money), the company quickly took on a more owner-manager culture and every effort was made to reduce costs, which rapidly began to deliver margin improvements and better cash f lows.
Improved cash f lows and strategic acquisitions, in conjunction with wellexecuted capital raisings, have enabled management to reduce debt levels and reliance on expensive finance facilities that were put in place when the business was under pressure.
In its recent set of interim results, headline earnings increased 118% and the company declared a maiden dividend (which happened sooner than we were expecting), which further illustrates the confidence the board has in sustaining earnings going forward.
To put the recent numbers and growth of the group into perspective: for the 12 months in 2012, the company produced a loss of around R3.5m. Compare this now to a profit of over R47m rand for the recent six-month period and one gets a feel for the success of the implemented strategy. Over this period, the net asset value per share of the business has moved from 85 cents (taking a 10 for one consolidation of its shares into account) to its current R1.73 per share.
The company recently announced that the Competition Commission had approved its purchase of previously-listed Set Point from Sabvest (Sabvest will in turn hold 11.84% of Torre). Warranties are in place and Set Point will only fully contribute to the group’s earnings in financial year 2016.
The company also raised R348.5m by issuing new shares to the Mineworkers Investment Company ( MIC) and Safika Holdings, which will now own 12.95% and 11.05% of Torre respectively. Together with management’s stake of 23.14%, 60% of the company is in the hands of solid long-term investors. Directors and management continue to back the future of the business and are regular purchases of shares in the market.