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AWETHU BREWERIES generated around R3m in turnover in the year to end-June 2010 – which is probably equivalent to what some large corporations spend on stocking their koi ponds. Finweek doubts that turnover figure is going to look any sprightlier in its new financial year for Awethu. A post-balance sheet event reflected in the annual report (which was only approved on 11 January) shows it’s sold off its Carletonville property, along with certain brewery assets, for R6,5m.

As a going concern, the future of Awethu depends on directors procuring funding for its ongoing operations. Somehow I don’t think there are going to be too many traditional financiers falling over themselves to provide funding to Awethu – unless its directors can pull off an inspired reverse listing transaction.

Awethu’s ongoing funding is perhaps the most intriguing part of its annual report. Interest-free loans from CEO Tony Ford – who held back on directors’ emoluments in its past financial year – topped R9,3m at end-June last year.

The value of Ford’s loans now totals almost three times Awethu’s market value – which really begs the question of whether the CEO, who also owns 53% of the company, is wee-weeing his money away.

The funding arrangements at Awethu recall a similar arrangement at Kingco, a small cap that specialised in pub ’n grub franchises and food distribution. Major shareholder Tony Cotterrel provided a heap load of funding to keep the struggling Kingco’s head above water. Cotterrel eventually made an offer to long-suffering minorities and bought out Kingco for what some regarded as an absolute bargain.

Finweek’s not sure Ford is planning to pitch an offer to minorities – even though Awethu’s share price is as flat as a glass of six-day-old lager. Although proceeds from the sale of property and assets will reinforce Awethu’s brittle balance sheet somewhat, we still think Ford is driving a hard road in the small brewery game.

If Ford – presuming he’s prepared to dilute his shareholding – can find more promising operational assets to lump into Awethu then it’s a totally different story.
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