Sankorp 'treasure' gives Sanlam a leg up
Sankorp has for the first time opened its portfolio to public perusal, writes SVEN LUNSCHE
This week Sankorp for the first time provided a full picture of the performance of its portfolio, a picture recently tainted by its poor investments in Sentrachem, Murray & Roberts and Automakers (Nissan's holding company).
Despite these setbacks, the investment portfolio surged from R9.7-billion in September 1993 to R30.9-billion this week - a rise of R21.2-billion at a yearly compound growth rate of 34.5%. In comparison the JSE overall index improved only 18.8% a year.
The majority of Sankorp's strategic investments have been reduced through unbundling, to the extent they now form part of Sanlam's portfolio investments. Sankorp chief executive David Brink says by the end of the year the group will have reduced remaining industrial interests in Servgro, Malbak and Sappi sufficiently to pass them to Sanlam as portfolio investments.
Sanlam plans to build on Sankorp's financial services interests in Absa, short-term insurer Santam and investment trust Genbel/Gensec to aid Sanlam's drive to be a specialist financial service provider.
Sanlam chairman Marinus Daling said this week the life assurer's primary focus would be to develop an integrated financial services company offering strong synergies between the various operations.
"Once we have unlocked these synergies we will decide whether to raise our holdings in the financial subsidiaries," says Daling.
Sankorp itself will be dissolved towards the end of the year, and three of its four executive directors (David Brink, Tony Routledge and Attie du Plessis) redeployed in the new group. The fourth, Stef Naude, is retiring. Brink will retain the chairmanships of Absa and Murray & Roberts, while du Plessis will look after the remaining non-financial investments.
The evaluation of Sankorp's portfolio is important for policyholders. Not only has it added strong growth to their policies over the past four years but it will contribute significantly to "free reserves" available for distribution to policyholders if Sanlam decides to demutualise.
Daling says the board will decide next year whether to recommend to its estimated 2.5-million policyholders whether to demutualise and list on the JSE.
Analysts argue that Sanlam has lost a march on rival Old Mutual, which announced two weeks ago it favoured demutualisation in about two years. Sanlam also has a weaker free reserve position. Its capital reserves, says Daling, amounted to about R12-billion at the end of last year, compared to Old Mutual's estimated R31-billion in June, 1997.
Unlike Old Mutual, he wants to approach policyholders towards the end of 1998 and "give them a complete package" before they decide on Sanlam's future.
He did not want to speculate about the outcome of the decision, but said demutualisation created a more profit-orientated culture while allowing Sanlam to raise funds for expansion.
Sankorp's investment performance figures have surprised analysts in view of recent bad news at Automakers, M & R and Sentrachem. Since September 1993 the value of Sankorp's stake in Gencor/Billiton has more than tripled to R7.55-billion. Over the same period the holding in Genbel/Gensec surged from R956-million to R3.48-billion; in Dimension Data from R210-million to R2-billion; Servgro from R432-million to R3-billion; and the Metlife holding is now worth R2.33-billion compared with R720-million four years ago.
Among other holdings are Malbak, R1.93-billion (1993: R1.19-billion); Sappi, R980-million (R327-million); and Nail, R590-million.
Even the three troubled subsidiaries have shown positive returns, albeit not at the same rate as the remaining investments. Sankorp's stake in M & R was worth R1.38-billion this week ( R840-million), in Automakers R500-million (R284-million) and in Sentrachem R580-million (R380-million). Sankorp this week agreed to sell its 39% in the chemical group to Dow Chemicals of the US.
Brink disclosed that Sankorp was in negotiations with black empowerment groups for the sale of its stake in Foodcorp. M & R, which has reported a R270-million annual loss, would remain a strategic investment "because we believe it will offer significant shareholder value over the next few years."
For purposes of evaluation of its portfolio, Sankorp invested the proceeds from sold companies at a rate equivalent to the growth of the JSE overall index.