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Enacy Mapakame
MARKET watchers bet that Innscor Africa Holdings’ share price is likely to recover between 85 percent and 95 percent from the current six-year low of USc18 on the back of a restructuring exercise that is expected to boost efficiency, cut costs and unlock value.
While stockbrokers IH Securities project that the stock will rise 94 percent to USc35 within the next 12 months, Lynton-Edwards Securities forecast 87 percent growth.
Innscor’s stock has plummeted 40 percent, shedding more than US$64 million in value.
In the past 52 weeks, the stock touched a high of USc70 and a low of USc18.
“We anticipate an uplift in revenue from continuing operations in full-year 2016, as the group grows volumes through price reductions,” said IH Securities in a research note last week.
The group’s revenues for the 2016 fiscal year are, however, forecast to slow to US$621,4 million from US$814 million a year earlier.
Net profit is projected to remain largely flat at US$18,1 million against $18,3 million in 2015.
In the past three years, Innscor has not only restructured, but has also shown appetite for acquisitions.
Recently, the company spun off its quick service restaurant unit, Simbisa Brands, which listed separately in 2015.
Innscor sold six supermarkets under the Spar franchise and bought motor spares distributor Transerve, and is also pushing to increase its stake in stockfeeds maker Profeeds from the current 49 percent.
There are plans to unbundle the specialty retail and distribution arm that also includes TV Sales and Home before listing separately on the Zimbabwe Stock Exchange.
The unit accounts for over 20 percent of Innscor Africa Holdings Ltd’s revenue and 31 percent of pre-tax profit.
In 2010, the industrial conglomerate unbundled Padenga Holdings Ltd, the crocodile skins exporter, before listing it independently.
Company secretary Mr Andrew Lorimer told The Sunday Mail Business that the restructuring would help the business focus on its core functions of food manufacturing and distribution.
“The continuing operations have been on a revenue growth trajectory since 2012 and going forward a key spot for value accretion is likely to be cost efficiency and the resultant impact on margins.
“Currently, we have a more upbeat outlook for Innscor’s financial year 2016 second half performance as volumes pick up and profit margin shows stronger than expected recovery momentum,” said Lynton Edwards Securities in its latest report, Investor Alert.
Innscor’s interim financials for the period ending December 30, 2015 and released on March 11 showed across-the-board volume growth.
Volumes climbed 13 percent at National Foods Ltd, 14 percent at Profeeds and six percent at Irvines. NatPak and bread factories reported volumes increase of 62 percent and 22 percent respectively on price reductions.
Volumes at refrigerator maker Capri dropped 12 percent due to competition from cheaper imports.
Revenue for the six months rose two percent to US$301 million, in line with market expectations, while net profit soared 23 percent to US$15,9 million.
Innscor Africa Holdings Ltd will give shareholders USc0,3 per share in dividends in addition to the USc5,44 dividend in specie from Simbisa Brands’ unbundling.
“We believe the strategy to dispose of the Spar stores, and Spar Zambia, will further strengthen earnings given the operational management challenges that have led to huge losses.
“We further anticipate profitability will be enhanced by the increase in shareholding in Profeeds,” added IH Securities.
Innscor Africa Ltd owns some of Zimbabwe’s leading companies and brands including National Foods Ltd, Colcom Holdings Ltd, Bakers Inn, TV Sales and Hire, Capri, Irvine’s, Chicken Inn and others.
In 2014, it became the first local company to generate more than a billion US dollars in revenues.
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