Masawara Plc seek to raise private equity capital, as Mutasa spells out future
Insurance24 Reporter
Harare, Masawara Plc, post de-listing from the AIM will seek to raise private equity capital to grow its various businesses.
The group is an investment company focussed on Zimbabwe and neighbouring countries, other than South Africa.
“I am confident of the Group’s ability to attract development and growth capital from the increasing number of Africa focused private equity funds and from longer term strategic investors and development finance Institutions,” said shareholder Shingai Mutasa in a letter.
He said the Group will continue to develop existing business lines of insurance, hospitality, property and
technology as its core platforms.
“I still believe in the investment policy encapsulated in the AIM admission document of August 2010. I believe Zimbabwe will see a rebirth of its once notable agricultural sector, and that the resources sector will again thrive, presenting both new investment opportunities for the Company and a stronger economy for its existing business to thrive,” he said.
He added that the group is encouraged by the adoption and implementation of positive economic policies that are expected to drive economic performance and create a conducive investment environment.
Read Full Letter Below
LETTER FROM MR SHINGAI MUTASA, DIRECTOR OF OXFORD HOLDINGS
LIMITED AND FMI HOLDINGS (PRIVATE) LIMITED
INTENTION TO CANCEL ADMISSION OF ORDINARY SHARES TO TRADING ON AIM
Introduction
I am writing to you in my capacity as a director of Oxford and FMI to give you some background to the
proposed Delisting and as to why I consider it to be in the best interest of Shareholders as a whole to delist the Company from AIM at this time.
I appreciate that Shareholders may have questions, including why the Company is being delisted. I will
endeavour to answer some of those questions in this letter and in person at a question and answer forum at Norton Rose Fulbright LLP, 3 More London Riverside, London SE1 2AQ on 23 January 2018. I would
encourage you to attend in order to fully understand why the Delisting is being proposed. Those that
cannot personally attend can still participate via a webcast. Those Shareholders that wish to participate
via the webcast should contact the Company at [email protected] and provide a valid email address
to which the Company shall send login details in order to access the webcast. Following the acquisition of
50,760,456 Ordinary Shares in the capital of the Company by Oxford, approximately 90% of the
Company’s shares is now held by the Concert Parties, with the remaining approximate 10% held by
approximately 70 other Shareholders.
Rationale for Delisting
Noting the material lack of liquidity in the Ordinary Shares (since Admission in 2010 to the end of
September 2017, a total of approximately 8.2 million Ordinary Shares have traded in the market,
representing approximately 6.7 per cent. of the Company’s issued share capital as at the date of this
Circular) and the likely increase in the illiquidity of the Ordinary Shares that will arise as a result of the
acquisition by Oxford (a concert party of the Company’s principal shareholder, FMI) of 50,760,456
Ordinary Shares, I am of the view that it would be in the best interests of Shareholders for the Company
to cancel the Admission.
The Company sought admission to trading on AIM in the expectation that it would be able to access
capital to exploit the significant opportunities existing in Zimbabwe. However, due to the regulatory
environment in Zimbabwe and in particular the prevailing and stringent indigenisation laws, the Company
is unable to raise further capital through AIM without impacting on its indigenisation status. Indigenisation
status presents the Company with significant opportunities and it is currently a legal requirement for all
companies and businesses in Zimbabwe to be indigenous.
I believe that Zimbabwe remains a country with significant opportunities, and that with access to capital,
the Company would be well placed to exploit such opportunities. Private equity capital for investment in
Africa has grown significantly since the Company was admitted to trading on AIM. With innovative
structuring, I believe that it would be possible for the Company to access this private equity capital to
exploit Zimbabwe’s opportunities, whilst remaining indigenous.
I believe that the substantial cost of maintaining a listing is not justified based on the current benefits to
the Company. It is however hoped that the Company will return to the international markets when a more
favourable regulatory and macroeconomic environment pertains in Zimbabwe and the Zimbabwe discount
is a thing of the past.
Group Performance
I believe that the businesses of Masawara will continue to perform well.
The Company’s NAV per share has grown by 8 per cent from approximately 60.2 cents
as at 31 December 2010, to approximately 65.1 cents as at 30 June 2017. This return has been volatile
and insufficient given the level of risk inherent in smaller emerging markets. The trading performance of
the Ordinary Shares has been disappointing, and I am conscious of the discount to NAV per share at
which the Ordinary Shares have traded since the beginning of 2015. I believe that this discount in part is
a result of the increased difficulty of transferring funds out of Zimbabwe as a result of the regulatory
environment and a generally negative risk perception of Zimbabwe by investors. The situation in the
financial markets in Zimbabwe has been discouraging, relative to the Company’s expectations at the time
of Admission in 2010. Markets in many neighbouring countries have also performed poorly, reflecting the
lower pricing of mineable resources over this period.
Notwithstanding those factors, the Company has always sought to make significant real returns from its
assets, and notes the substantial progress made by many of the businesses within the Company. With
net insurance premium revenue having made up approximately 53.8 per cent of net total revenue for
Masawara for the six months ended 30 June 2017, the insurance cluster in particular shows the potential
for excellent returns in a growing business where clear focus and strong management teams continue to
add value.
The fact that this growth was achieved in very challenging market circumstances that have prevailed in
much of the last six years, gives good reason to be optimistic about Masawara’s future. The management
teams within individual operating entities are able to quickly adapt to changes in the environment and are
committed to delivering strong returns, As such I expect that the recent successes of Masawara’s
businesses will continue and that strong returns will be achieved.
I am mindful of the substantial growth in private equity capital, which is now a key component of today’s
African economic story, from both local and foreign investors and available across a wide range of
sectors.
Whilst Masawara expects volatility to remain a notable feature of African markets, I am confident that the
Company’s expertise, broad network, ability to add operational discipline and international levels of
governance will ensure that it is well positioned to benefit from the most rewarding opportunities available.
Availability of capital to grow the asset base of Masawara from its current level of $312.9 million as at 30
June 2017 is a core element to the future success of the Company.
In its unaudited results for the six months ended 30 June 2017, Masawara announced that it had faced
headwinds in its core markets, particularly the steadily worsening liquidity conditions within Zimbabwe.
However, despite that background, the Company, on a consolidated basis, made a profit after tax of $3.6
million (for the six months ending 30 June 2016, a profit after tax of $2.3 million) on net revenue of $52.2
million (for the six months ended 30 June 2016, $49.2 million). Masawara also increased its NAV per
share to 65.1 cents per Ordinary Share (for six months ending 30 June 2016, 63.9 cents per Ordinary
Share), whilst total assets increased to $312.9 million (for the six months ending 30 June 2016, $288.0
million).
Future strategy
While Masawara as an AIM company has not been required to comply with any recognised corporate
governance code, the Board has maintained high standards of corporate governance and intends to
continue to comply with the provisions of the Quoted Companies Alliance Guidelines following Delisting,
as far as practicable.
As an investment company with a shareholder base in and focus on southern Africa, it is expected that
the composition of the board will more closely reflect this regional emphasis after Delisting.
Masawara will seek to raise private equity capital to grow its various businesses. As I have noted above, I
am confident of the Group’s ability to attract development and growth capital from the increasing number
of Africa focused private equity funds and from longer term strategic investors and development finance
Institutions.
The Group will continue to develop existing business lines of insurance, hospitality, property and
technology as its core platforms. I still believe in the investment policy encapsulated in the AIM admission
document of August 2010. I believe Zimbabwe will see a rebirth of its once notable agricultural sector,
and that the resources sector will again thrive, presenting both new investment opportunities for the Company and a stronger economy for its existing business to thrive.
We are encouraged by the adoption and implementation of positive economic policies that are expected
to drive economic performance and create a conducive investment environment. I truly believe the future
for the Company is promising and urge current Shareholders to continue in their investment.
Question and answer forum
I will be holding a question and answer forum in person on 23 January 2018 at the offices of Norton Rose
Fulbright LLP, 3 More London, Riverside, London SE1 2AQ. I welcome all Shareholders to attend and to
hear why the Admission is being cancelled and what the future holds if you remain an investor in the
Company.
I look forward to seeing as many Shareholders as possible and hope that you decide to remain invested
through the Masawara Preference Share Conversion.
Shingi Mutasa
