Several years ago prudent market watchers might have looked on quizzically as a handful of large investment institutions underwrote a sizeable rights issue for debt-laden chemicals group Omnia.
At the time there were scurrilous murmurings that Omnia, one of the most enduring industrial companies on the JSE, was in danger of hitting the wall. The share price had tumbled alarmingly to just a fifth of its high of R147 in early 2018, and the group was forced to embark on a heavily discounted rights issue to raise R2bn.
The 100-million rights offer shares were pitched at R20 a share. The sceptics held sway, initially. In the months after the rights issue the share traded between R22 and R25. Even as late as the end of September 2020, when turnaround traction became evident, Omnia was still dribbling along under R30.
Its new leadership, though, wasted little time in disposing of noncore assets (at rather decent price tags) and refocusing on core markets in the agricultural and mining sectors. This week Omnia showed the ongoing benefits of prudent capital allocation, disciplined cost management, intense customer focus and a strong emphasis on cash generation — delivering, in a tough trading environment, a 13% hike in revenue and a 28% jump in operating profit on the back of reinforced margins.
For the investors who backed the turnaround plan — including significant shareholders M&G, Allan Gray and Foord — there have been eyewatering returns. In six years a collective R39 a share has been returned in ordinary and special payouts, almost double the rights issue price. If share repurchases are factored in, Omnia has forked out R6.8bn to shareholders. This is a startling change of fortune, considering the group held a market value of around R2bn ahead of the 2019 rights issue.
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