Ellerine sale unlikely to affect ABIL’s balance sheet - CNBC Africa

Ellerine sale unlikely to affect ABIL’s balance sheet

Southern Africa

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Ellerines is just one of the companies in the Ellerine Holdings portfolio. PHOTO: Furnime

“If it was to sell Ellerine, it’s unlikely to have much of an effect on the balance sheet because it’s not likely to sell it at a profit,” Kooyman, head of global funds at SIM, told CNBC Africa.

“Where it does help [is] Ellerine’s operating loss is about 400 million rand a year so at least African Bank’s income statement starts improving from here on – that drag on the earnings just falls away.”

[DATA ABL:ABIL] recently announced that it had entered into negotiations regarding the possible disposal of Ellerine Holdings and its subsidiaries.

(READ MORE: ABIL expects R3 bln H1 headline loss)

Kooyman indicated that while there has been speculation that Ellerine could be sold to a furniture store, it is still highly unlikely.

“A lot of press commentators have been speculating a tie up with a furniture store – JD Group was mentioned quite a while ago. I just can’t see that the competition board would allow that. There’s also been talk of another retailer potentially,” he said.

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“Furniture has, historically, been very volatile or very cyclical – it does well when the economy does well but very poorly when the economy deteriorates so I don’t think a normal retailer would try and complicate its business further.”

Following the announcement by ABIL, its share price rose 25 per cent at one point. Kooyman stated that while there is still a lot of speculation around the sale of Ellerine, if it is sold, it would go fairly cheap.

(READ MORE: Moody’s downgrades ABIL)

ABIL had also restated its commitment to Ellerine following the appointment of Mano Moodley as CEO of the company and Alan Schlesinger as non-executive chairman in February. 

“These appointments highlight our commitment to EHL. I’m delighted to welcome individuals of this calibre to ABIL. Given their respective skill sets and industry experience, we believe they will play an integral part to improving the outlook for EHL,” ABIL chief executive, Leon Kirkinis said at the time.

“Both Mano and Alan have faced significant challenges in their careers and the positive outcomes they have achieved add to our belief that the future for the group continues to look brighter. We are excited about the new chapter we have entered.”

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