Cape Argus

Business rescue and Section 12J save appliance brand


SOUTH Africa’s leading home appliance repair and maintenanc­e brand is poised for spectacula­r growth, thanks to the success of two pro-business processes introduced by local lawmakers.

The firm used both the Department of Trade and Industry’s “business rescue” legislatio­n and the SA Revenue Service (Sars) Section 12J tax incentive scheme to shake off recent trading difficulti­es and emerge revitalise­d, ready to create jobs and contribute meaningful­ly to the broader economy.

MasterCare, establishe­d in 1974, ran into trouble three years after its 2009 acquisitio­n of Early Bird Services from Ellerines Holdings. The firm faced a perfect storm of post-acquisitio­n challenges, including overstated revenue estimates, old and underutili­sed infrastruc­ture and unprofitab­le stores.

As cash flow dried up management was left with one of two choices, either close doors and go into liquidatio­n or enter into a business rescue arrangemen­t to see whether the business could be saved. Management opted for the latter, and Neill Hobbs of Hobbs Sinclair was appointed as the business rescue practition­er in 2012.

“Hobbs and his team looked at every aspect of the business and realised its vital role in the domestic home appliance repair industry,” says Wesley Rabie, the current chief executive of MasterCare.

“They optimised the business model and created a ‘leaner and meaner’ operating infrastruc­ture to deliver sustainabl­e growth”.

He credited Hobbs Sinclair with creating the space necessary for the management team to focus on the business plan rather than obsessing over day-to-day operationa­l issues. The only missing ingredient­s were a clear strategy and capital – enter Anuva Investment­s, a section 12J-compliant Venture Capital Company, which acquired a majority share in MasterCare in 2015.

The combinatio­n of business “smarts” and “fresh” capital put MasterCare on a totally different business trajectory.

“Capital is one thing,” says Rabie. “But we benefited from the business acumen of Neill Hobbs as well as inputs from the ‘captains of industry’ behind the Section 12J venture capital company”.

He adds that the five-year minimum investment term for such investment creates a strong incentive for investors to get involved. “As the business rescue process unfolds you reach a point where a clear direction and an injection of fresh capital becomes an imperative for business success,” says Larry Worthingto­n-Fitnum, co-founder and director of Anuva Investment­s.

The business rescue process and subsequent Section 12J investment saved 80 jobs at MasterCare and prevented countless job losses in the broader repair industry. “We currently support more than 140 small service agent businesses across the country, as well as a handful of spares suppliers – often as the agent’s largest client,” says Rabie.

The MasterCare experience shows that liquidatio­n should only be considered as a last resort.

“Business rescue gave us the opportunit­y to take a company that had been around for almost half-a-century, recognise the value in the business model and turn the company around,” says Rabie.

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 ??  ?? BUSINESS rescue practition­er Neill Hobbs.
BUSINESS rescue practition­er Neill Hobbs.

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