Marc Hasenfuss Editor-at-large

I’m sure there was more than just morbid fascination with the relisting of African Phoenix — the old African Bank Investments (Abil) — on the JSE this week.

As a holder of several Abil preference shares — some bought hours before the share was suspended when the bank was placed into curatorship a few years ago — I watched developments with a good deal of interest. It’s always heartening to see efforts to salvage some value for shareholders, and I wish there were more successful bids to rescue companies that have got themselves in a pickle.

I suspect most investors give up hope when a listed company opts for business rescue or curatorship.

Once suspended by the JSE, companies can be guilty of not enlightening shareholders to key developments — or even providing much-needed disclosure (especially when directors quickly desert the sinking ship). These trying matters are, understandably, prolonged affairs, and unfortunately the odds are usually stacked against shareholders (as the backers of Chemspec have learnt). But the belated release of year to end-February glossies for building materials company Brikor caught my eye recently. Brikor has been suspended from the JSE since July 2013, but has done a fairly decent job of keeping its shareholders in the loop as to important developments. Since being suspended Brikor has survived a liquidation application, flirted with business rescue, reshaped its operational structure by taking a tilt at coal and set its sights on reclaiming its position on the JSE.

Brikor, which listed on the AltX in mid-2007, is a supplier of aggregates and bricks as well as coal through its subsidiary, Ilangabi Investments. It’s not the most enticing business I’ve laid eyes on but there is a rough appeal. The main operational thrust is in two clay brick manufacturing plants in Nigel, which have production capacities of more than 155m semi-face clay bricks a year. The company’s Donkerhoek plant churns out a variety of aggregates at a rate of 400,000-500,000t/year – mainly stone, gravel and sand for large and small-scale civil engineering and infrastructure projects.

I’m not saying Brikor is another Afrimat. Actually, far from that ...

But the glossies suggest the testing time endured by the company in the past few years has reinforced management’s will to build a sturdier business model.

In the past financial year Brikor held its revenue line at R317m, but operating profits were 92% higher at R49m with margins stacked up to 15% from 8% in the previous financial year. Headline EPS, backed by R48m in operational cash flow, came in at 5.6c/share. I stand to be corrected, but when Brikor’s shares were suspended in 2013 I seem to recall a last-traded price of somewhere between 9c and 10c.

Plans still unclear

The relisting of Brikor’s shares could be quite an event for shareholders so long in limbo. Exact plans about relisting are not entirely clear. The annual report notes an application will be made to lift the suspension of the shares once the integrated annual report and interim report to end-August 2016 are published. I can’t imagine it can be too much longer to wait for the interims, in which the solid trading trend will hopefully continue.

One issue that might need to be addressed is Brikor’s gearing. Total debt was reduced by more than a third to R184m in 2016, but for a company with bottom-line earnings of less than R35m and a tangible net asset value of about R350m, this level of gearing may be a burden. Should the market take a liking to the resuscitated Brikor, would convincing upward moves in the share price prompt directors to consider a small rights issue or issue of parcels of shares for cash?

Should the market ignore the relisting and the shares trundle along at the 10c level — inferring a market capitalisation of about R65m — then I’d imagine some of the bigger shareholders (most notably Investec) perhaps being pestered to part with their scrip by bigger rivals or opportunistic investors.

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