TN Group Will Not Fall - Nyambirai [opinion]
(AllAfrica Via Acquire Media NewsEdge) IT is difficult to convince Zimbabweans that positive results can be achieved out of a rapid and aggressive corporate expansion, more so if the business concerned has taken sharp twists and turns.
In an environment where even the big multinationals are moving away from conglomeration, the idea of a robust, fast expanding conglomerate with interests in "everything" is unimaginable, more so if the company is domiciled in Zimbabwe where corporates are still smarting from the effects of hyperinflation and a decade-long economic crisis which ended in 2009.
Inevitably, the market can only smell doom.
TN Holdings' Group Chief Executive Officer, Tawanda Nyambirai, who leads the country's fastest growing conglomerate post crisis, has created 1 600 jobs in three years, and turned a financial services group into an asset-thirsty investment with limitless appetite for acquisitions.
But he has so many questions to answer from critics of his strategy.
"What is wrong with that (expansion)," Nyambirai retorted after being asked about the sustainability of the group growth by this reporter.
"TN Holdings will not fall, we are solid," he said.
The TN CEO had empirical arguments on his side.
He had just reported a 308 percent growth on post-tax profit to US$3,58 million during the year to December 31, 2011, from a US$1,72 million loss during the full-year to December 31, 2010.
TN's flagship banking operation, TN Bank Limited, which has a footprint in 27 locations in Zimbabwe, generated US$13,9 million in total income during the review period, from US$8,4 million in 2010.
Revenue from sales climbed by 195 percent to US$34,9 million in 2011, from US$13,5 million during the prior comparative period in 2010.
From a small asset management firm in 2008, TN has expanded into commercial banking, furniture manufacturing and distribution, pharmacies, supermarkets and fast foods, increasing its asset base to US$140 million in 2011, from US$62 million in 2010.
It has been Nyambirai's acquisition strategy, and an announced de-merger, that put him under tremendous pressure to explain his strategy given a liquidity crisis in Zimbabwe.
The planned de-merger, which will see TN Bank separately listing on the Zimbabwe Stock Exchange (ZSE), was driven by a realisation that the climate demanded that successful managers would have to diversify income streams.
"We are a banking group that realised we need an expansive distribution network," said Nyambirai, who runs a commercial bank in each of his furniture outlets.
"What will come out after de-merging the bank, you will have to help us define," he told analysts.
It appeares Nyambirai's strategy would be value creation.
De-merger, if successful, would give him time to carefully look at all businesses and take timely interventions to arrest decline in value, said an analyst.
In 2003, Delta Corporation, now Delta Beverages, rebranded and weaned off non-core operations, which later separately listed on the domestic bourse under new ownership.
Retail giant, OK Zimbabwe Limited, furniture concern, Pelhams and tourism giant, Zimbabwe Sun, now African Sun, were separately quoted after the unbundling.
"It (the Delta unbundling) created value," said stock market analyst, Isaac Kwesu.
"Delta's value was reduced by some of the poorly performing non-core operations. De-merging is good when it creates value. By taking that route, one may not doubt that they (TN) know what they are doing. I am sure they have carried out due diligence," said Kwesu, who stressed there was nothing wrong in diversifying.
He said TN shareholders that have no interest in non banking sectors would have the opportunity to concentrate on banking.
"Some shareholders started with the banking side, are they happy in a diversified company?" he asked.
The planned de-merger and listing of TN Bank follows that of pan African conglomerate, Innscor Af-rica Limited, which has de-merged and listed Padenga, a crocodile farming company.
TN Holdings has concluded a US$20 million transaction with offshore investors to expand the bank.
"We have found a partner to inject US$20 million into the bank. We are looking at strategic partners to inject more capital to drive the expansion that we need. We have realised that strong growth going forward is not on generating interest inc-ome alone. Partnering (mo-bile phone giant) Econet (Wireless Zimbabwe) on Ecocash was one way of ensuring future growth for the bank. We are positioned to capitalise on new products that Econet will bring. That will require us to de-merge the bank. You will see a quoted, de-merged bank with an international outlook that does not have Tawanda Nyambirai as CEO," Nyambirai said.
But has TN not digressed from the Banking Act by dabbling in non-core operations and what are the regulators saying?
Does the group still have the capacity to cement an expanded operation that added 6 900 square metres of retail space and 26 000 new bank customers in 2011?
"I am only a lawyer," Nyambirai said.
"What I learnt over the years is that my role is that of leading. I am privileged to lead educated people who know what they are doing. I am one person who, if a strategy does not work, I am not embarrassed to drop it. I am a business leader and I know my role. The first thing that I need is to know there are so many things that I don't know so I recruit people who know. We have acquired skills, ladies and gentleman, the very best skills in the country," he said.
TN has added three new executives-a divisional CEO for the furniture business and two managers for TN Grill, the fast food operation, and TN Supermarkets.
Copyright Financial Gazette. Distributed by AllAfrica Global Media (allAfrica.com).
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