Long4Life intent on doubling market cap after declaring maiden dividend
'We need to find a big deal that will step us up,' says deal-making doyen Brian Joffe
Long4Life, the recently formed investment company headed by deal-making doyen Brian Joffe, is intent on doubling its market capitalisation to R10bn by making smart acquisitions.
Speaking after the release of financial results for the 11 months to end February, Joffe said that despite making acquisitions worth a collective R3.6bn since listing in April 2017, the company was still sub-scale, with a market capitalisation of about R5bn.
“Having a market capitalisation of R10bn makes you a player … we need to find a big deal that will step us up.”
Long4Life has already bagged a handful of acquisitions — most notably sports and outdoor-gear retailer Holdsport, beverages companies Inhle and Chill, as well as beauty therapy franchisor Sorbet.
Although these businesses only contributed for four months of the trading period, Long4Life — which incurred operating costs for 11 months — showed an ebitda (earnings before interest, tax, depreciation and amortisation) of R170m and headline earnings of 30c a share.
On an annualised basis, ebitda would have come in at more than R510m.
Long4Life finished the trading period with net cash of R1.5bn (earning a chunky R12m in interest). The cash pile would reduce to R1.2bn after the recent acquisition of Chill.
Joffe said Long4Life’s next step would hopefully be a large acquisition — but said the company would proceed cautiously in seeking targets. “We don’t want to scale up on an uncommercial price, where we could lose credibility and our rating.”
He said there were not many big opportunities that were well priced. “There are still quite high expectations from people wanting to get out of assets [but] we’ll need to find a business that is poorly managed or where we can markedly improve returns.”
Long4Life has made initial forays into venture capital, with a R100m allocation and a deal to back footwear business Veldskoen Shoes. Joffe said that venture capital activities would be restricted to enterprises that feed into Long4Life’s broader lifestyle investment strategy in a bid to support and nurture fresh disruptive activities.
Looking ahead, Joffe said Long4Life was ideally placed to take advantage of opportunities that would arise as the local economy transformed further under new political leadership.
“This relates not only to the current portfolio of assets that have the capability of expansion and an ability to enhance efficiencies to adapt to current market circumstances, but also to pursue other value enhancing businesses,” he said. The company’s overriding objectives continued to be expansion at a pragmatic rate and delivering above-average growth.
“This will be achieved by ensuring quality operating earnings from strong cash-generating businesses and acquisitions with appropriately assessed risk characteristics,” Joffe explained.
His confidence was underscored by a maiden dividend of 5.4c a share with a dividend cover of about 2.5 times. Long4Life’s net asset value — often seen as an important gauge for an investment counter — was R4.5bn, or 506c a share.
Long4Life shares, which dipped as low as 421c in December, finished marginally higher at 555c on Wednesday.