Johannesburg - Don't count against private equity group Mayibuye and its ability to turn Blue Financial Services [JSE:BFS]
That is the word from Mayibuye chief executive Johan Meiring, who is spearheading the turnaround of the troubled microlender.
"We've done this before and we are putting our money where our mouth is," Meiring told Fin24.com on Wednesday.
He said that while Mayibuye might not be well known, his management team had built a business which turned over profits of R252m and had a net asset value of R800m by February 2010.
The rapid expansion of BFS into African markets, coupled with weak credit management systems, had seen this darling of the Alt-X fall from grace over the last two years, with the share plummetting from R6.70 in 2008 to trade at around 13c. The relatively unknown Mayibuye was seen as a white knight attempting to rescue the business.
"We are very good at taking businesses and fixing them," Meiring said, pointing to the turnaround enacted at homeloan business Integer, acquired by Mayibuye in 2009.
Fin24.com pointed out that BFS shareholders, who had seen a lot of wealth destroyed, remained wary of claims that a turnaround was in place and would need to see some hard evidence to believe the Mayibuye story.
Asked for specific examples of where investors could see Mayibuye's work, Meiring pointed to the retention of auditing firm Deloittes instead of making use of Mayibuye's cheaper auditors, PwC. This is the first time BFS has retained the same auditors two years in a row, and Meiring believes it sends a clear message around corporate governance.
"The continuity was important for us," he said.
On top of this, much of the BFS credit scoring had been moved on to existing Mayibuye systems. This would give the company a better snapshot of the quality of the book, and early indicators that this was having an operational impact would be a reversal in the bad debt provisioning.
Asked if investors would see a turnaround as early as February 2011, Meiring responded: "I think the results will be clearer by the interims next year (August 2011), but by February 2012 we should have turned the corner."
He added that it might take another 18 months before a successful rebound could be declared.
After a rocky 18 months, most BFS shareholders would be pleased to simply know that there is a plan in place. However, there remains a big question mark about the company's strategy.
Meiring said that one of the areas where he was particularly excited was the exposure to 14 other African countries, particularly in those countries where BFS had secured payroll deduction codes, which were no longer being issued to new participants.
These codes are a huge entry barrier for microlenders looking to make deductions directly from a borrower's salary.
Another area he felt had not been emphasised was the way in which Mayibuye had been able to restructure its agreements with the original BFS funders.
The company has arranged that it would only need to service the interest repayments to the lenders for the next three years, while still being able to use the credit lines for lending.
He added the company had also ringfenced the original assets and liabilities in the BFS balance sheet, meaning that any new businesses established in the listed entity would not be vulnerable to claims from the original funders.
By midday on Wednesday, BFS shares in BFS were trading up 1c (7.7%) at 14c.