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Furnishings & DecorAfrican table is laid
Larry Claasen
Universal Industries’ R224m takeover of catering equipment distributor BCE Foodservice Equipment is a step in a new direction.
Universal Industries makes display freezers and ovens for the retail sector. And though it dabbles in distribution, taking over BCE will take it out of its comfort zone of manufacturing and into the realm of buying and selling.
Universal Industries CEO Daryl Paynter is not overly concerned about this. He points out there is an agreement in place that obliges BCE’s management team to stay with the company for up to three years after the merger.
Paynter says Universal Industries gains by getting BCE to piggyback on its operations in Africa and sell equipment across the continent.
“BCE is SA’s leading distributor of catering equipment by far, but it is not represented well on the continent,” he says. Universal Industries has made some inroads in doing business in other African countries, with export revenue increasing to R42m from R14m for the year to end-December.
BCE recorded R33m in net profit in its last financial year. If it just matches the past year’s net profit over the next few reporting cycles, it will pay for itself in five years.
In paying for BCE, Universal Industries took a surprising decision for a small-cap company. It opted not to pay in shares but rather through a loan from Investec Paynter says the group chose to finance the transaction this way because it wanted to have a balanced approach in funding the purchase.
“There’s no use issuing paper for the sake of it,” he says.
Universal Industries might have made a perfectly sensible decision not to pay in shares but doing so would have increased its free float. The group is tightly held with a mere 28 shareholders owning 95% of the shares. Paynter admits the free float is an issue but, for now, it is not a priority. “Over time this problem will solve itself,” he says.
At a share price of 119c and a p:e ratio of 10,44, Universal Industries looks like a buy — if you can get it.
Financial Mail
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