Mettle to be peddled again

Financial services Source: Google Images

BELLVILLE-based financial services boutique Mettle looks set for another change of ownership.

Mettle has certainly endured an interesting corporate history over the last two decades.
Mettle has its roots in the mid-nineties when it was initially known as Boland Financial Services. The company morphed into Mettle, which listed on the JSE in the late nineties and was subsequently delisted in 2003.

After the delisting ownership passed to empowerment giant Hosken Consolidated Investments (HCI), which later relinquished control of the business.

In 2014 Mettle was acquired by Christo Wiese controlled property group Tradehold, which also owned financial services assets in the UK. About three years ago Tradehold unbundled its controlling stake in Mettle, which then listed on the JSE along with the property company’s UK financial services operations and a budding solar services operation.

So, if the buyout offer for Mettle is unsuccessful, it will be the second time in less than 20 years that Mettle will delist from the JSE.

How it will work is that Cape Town-based financial services company Genfin will offer R118 million to buy out minority shareholders in Mettle. Excluded from the offer are entities controlled by Christo Wiese and certain individuals that will remain on-board Mettle as shareholders.

Interestingly, Mettle CEO Friedrich Esterhuyse will be selling his shareholding.
While there are no specifics around Genfin’s plans for Mettle, an official note to shareholders reckoned the company (and its subsidiaries) were more suited to operating in an unlisted environment and that the current JSE listing provided little benefit to the company at this stage of its operating cycle.

Genfin is described as an investment holding company focused on building a portfolio of companies that provide finance to small and medium enterprises and a smaller portfolio of other financial services focussed assets. So both Mettle’s local and UK-based specialist lending operations will fit Genfin’s strategy perfectly.

Genfin seems awfully keen on Mettle, and has already accumulated a material shareholding (around 14%) in Mettle over the past 12 months.

Once Mettle is back in an unlisted environment Genfin will provide additional capital in order to facilitate and support organic and acquisitive growth.

Mettle has scored from strong performances from its UK lending operation Reward, but its local operations have struggled.

In the six months to end August 2019, Reward contributed R122 million (£6.6 million) to revenue and R23.4 million (£1.3 million) to bottom line profits.

Mettle said Reward had traded in line with expectations despite the UK’s political impasse over Brexit.

Reward appears to be prudently managed with its loan and invoice discounting book increased steadily from R1.2 billion (£63.1 million) at the end of February 2019 to R1.3 billion (£67.4 million).

In contrast, the performance of the South African businesses was negatively impacted by the impairment of an investment in Lendcor Proprietary of R5 million.

Lendcor provides unsecured loans for home improvements to the lower LSM market through a network of building supply merchants.

Certain changes to the collection methodology relating to a segment of its lending book were imposed. Mettle said Lendcor had reduced its exposure to this segment – but this has, to date, reduced profitability.

Overall Mettle’s local operations generated revenues of around R19.5 million, but posted a loss of R2.7 million.