Innscor losing lustre and value

Since 2010, Innscor has basically split into four distinct companies, having grown into a behemoth conglomerate through strategic acquisitions.

It became a darling of investors on the stock market in the same vein as heavies Delta and Econet. Its interests spanned from consumer facing food business, retail, distribution, agriculture and through associates, food processing.

Its interests spread beyond the borders into over 27 countries across Africa, clearly diversifying risk within an already diversified portfolio.

In 2014, Innscor became the first Zimbabwean company to pass the $1 billion mark in revenue generated. But even then, signs of disintegration were evident from a slowdown in operating profit (EBITDA) and a high cost to income ratio.

Size was already weighing on the company, affecting profitability — a sign of bad management which Innscor admitted to in its 2014 and 2015 financials.

The group said roles were duplicated and structures had become complicated, especially in the fast foods business (QSR), necessitating a restructuring and the resultant spin-offs.

Management’s stated goal for the unbundling of specialist units was to unlock investor value. Evidence so far suggests that this is not working. A simple way to look at it is to ascertain how the market valued the business before the unbundling and the performance post the exercise as splits.

Our findings show that Innscor is worse off and has not generated any incremental value for shareholders via the spin-offs.

There, of course, are several factors at play in the market such as the general sentiment, which affects overall valuations, and market direction which are discounted for.

In 2010, the Innscor group composed of the light manufacturing businesses, distribution, wholesale, retail, silo, recreational and crocodile farming, fast-foods and Innscor Zambia businesses.

Under the light manufacturing businesses was Innscor Bread, Colcom, Capri and Snacks. National Foods and Irvines were associate companies.

The distribution and wholesale businesses composed of Innscor transport, Distribution Group Africa and Spar Distribution.

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