Omnia
Omnia is a manufacturer and dealer of a range of products to the agricultural, mining, and chemical sectors in South Africa, in addition to a growing footprint in West Africa, Indonesia, Australia, and North America, with the same customer as its local operations.
Strong tailwinds as a result of a bumper agricultural season and a commodity boom resulted in a significant turnaround of the company’s fortunes, from a highly geared operation to that of a strong balance sheet.
Cash on hand for the year ended 31st March 2021, swung from a debt of R1.9bn to a positive balance of R1.3 bn assisted by the chemical product profile of its customer base. This was a massive achievement in the face of the prevailing Covid-19 pandemic conditions.
A new management team was instrumental with a disciplined approach to costs, which saw a working capital reduction of 24% with curtailed capex management. This resulted in margin expansion and strong cash generation in addition to the sale of the non-core Oro–Agri operation.
The new CEO Seelan Gobalsamy, said that “nothing has been normal. It’s been a topsy turvy time and this is a credit to the quality of management execution in abnormal times - aided by a R2 bn capital raise during the past year.”
The geographic expansion is a positive for Omnia, with a resumption of global growth in its core areas of operations such as mining and Agriculture. Global growth prospects for its operations look positive.
The strong balance sheet, due to proactive management, will enable Omnia to gradually grow its presence in existing markets where it already operates outside of SA, in the areas of its core operations in the mining and agricultural segments.
Such was the success of the turnaround and cash pile on the balance sheet, that the company has announced a distribution to shareholders of R1bn in the form of an ordinary dividend of R2.00 per share and a Special dividend of R4.00 per share.
This constitutes the resumption of dividend payments after three years of no dividends payments. This was due to the highly indebted position of the company under the previous regime which went on an extensive expansion in a period of major global downturn, and was impacted by the prevailing Covid pandemic. Management believes that there is still work to be done to enhance profitability and dispose of assets such as property and other non-core assets, with a focus on increasing returns on invested capital.
The company operations are cyclical and investors should be aware of the volatility impacting on the groups’ operations. However, the company is a high quality business, with strong cash generation, prospects of global diversification, a competent management team, and can be accumulated in period of market weakness. The PE ratio of around 14.6x is not onerous, with the prospects of attractive dividend and a market cap of R9.3bn.
