ENL Ltd
ANNUAL REPORT: 2015-06-30
CEO’S REVIEW
Dear Shareholder,
Your company maintained its growth momentum during the year: Consolidated turnover increased from Rs 10.6bn to Rs 12.3bn (up 16%) and profit after tax grew by 7% to reach Rs 1.4bn. We also recorded a 23% increase in cash flow which amounted to Rs 990m.
This good performance was achieved despite a decrease in the price of sugar and the recession in the construction industry. More precisely, this year’s results are attributable to: > A larger contribution from the Rogers group,
> Higher profits from the sale of land and investments and,
> Bigger shares of profit received from associated companies and jointly- controlled entities, namely Bagaprop, Avipro, MADCO and New Mauritius Hotels.
BETTER PERFORMANCE ACROSS THE GROUP
With the notable exception of agriculture, we registered an improvement in the performance of all of the group’s operational segments:
> ENL Agribusiness was severely impacted by the significant drop in the price of sugar and the contraction of its landscaping activities. However, it remained profitable owing to strict cost control and efficiency optimisation.
> ENL Property stayed on a healthy growth path. Despite an oversupplied market, its residential products sold well and demand for its office space offering went up.
> ENL Commercial recorded an increase in turnover led by Axess which improved its market share, Plastinax Austral which renewed with profitability after a long time and Nabridas which launched a new line of product. However a net loss was incurred as a result of difficult operating conditions.
> ENL Investment was positively impacted by the good results of its subsidiary, namely the Rogers group, which recorded significant growth in most of its operational sectors. The associated company, the Food and Allied group, also made a healthy contribution to the performance in this cluster.
> ENL Lifestyle continued to grow and successfully launched two new brands, Voilà Meetings and Savinia Bistrot.
Significant investments were made to strengthen existing operations and to acquire new businesses. As a result, net debt increased by Rs 1.1bn from last year to reach Rs 9.3bn. Net debt to equity was nevertheless contained at a reasonable level of 28%.
(Read more about our segmental performance on pages 12 to 31)
Over the year, we grew our total assets by 5%. Equity holders’ interests improved from Rs 16.3 billion to Rs 16.5 billion, with the NAV per share going up from Rs 76.16 to Rs77.07. We upheld the company’s practice of consistently remunerating its shareholders and increased dividend pay-out by 5% to 78 cents per share.
FOUNDATION FOR FUTURE GROWTH
While ensuring a robust performance in all sectors, we continued to lay the founding stones for the future growth of the ENL group. Our progress was guided by our strategic plan for the 2014-2017 period which emphasises innovation, regional expansion, customer centricity and performance through greater focus on people and processes as key drivers of growth.
We thus created two new instruments to drive innovation, namely ENL Corporate Ventures and the Turbine, a business incubator which aims to encourage a start-up culture on the island. ENL Corporate Ventures has a mission to invest in Mauritian innovative companies as well as African companies within ENL’s domain of expertise.
We set up the Africa Desk to provide a common pool of intelligence to guide our ventures in Africa. We are currently working at giving concrete form to our plans to build a first shopping mall in Kenya and have signed a memorandum of understanding with a local strategic partner in this respect. Feasibility studies for the project have reached an advanced stage and we expect to clear new milestones in the coming year.
Attaining customer centricity is a matter of business culture as much as it is a matter of people and processes. During the year, we invested in training designed at enabling our teams to refocus on the brand promise of the specific products and services they are working for. We also finalised the creation of a group marketing function to guide our teams through the proposed cultural shift.
Last, but not least, we have laid much emphasis on further streamlining our business processes and increasing the engagement levels of our teams with a view to sustainably enhance performance. Several of our subsidiaries thus embraced the lean enterprise methodology. This was especially the case in the ENL Commercial cluster which is faced with challenging market conditions.
PROMOTING EMPLOYEE ENGAGEMENT
An engaged workforce being a more productive workforce, we also had a closer look at ways of increasing the level of engagement of ENL team members towards their respective companies and, ultimately, towards ENL. We thus conducted a survey with the help of independent consultants to measure engagement levels across the group. The findings are being used to fine-tune our human resource management strategy. This was the first time that we compiled such data and we intend to carry out regular updates in order to track progress (read more on page 51).
We also upheld our commitment to be a responsible corporate citizen and continued to invest resources to empower local communities hosting our operations, to support youth development and to protect and preserve the natural environment (more on page 56). We take a keen interest in the new framework proposed by government to harness energies nationally in order to eradicate absolute poverty and the social/ economic exclusion that it breeds.
Likewise, we pursued our 100 engagements pour demain programme, an initiative aimed at enabling our teams to actively live the founding values of ENL in their day-to-day at work. We remain convinced that the programme makes for a greater sense of belonging and a higher level of employee engagement within ENL. We thus continue to encourage the voluntary adhesion of all ENL team members to the programme.
KEEPING THE GROWTH MOMENTUM
We are confident that the initiatives taken this year will continue to feed the dynamism of the group, thus enabling ENL to continue generating significant recurring income and cash flows and to enhance shareholder value over time. We expect most business segments to perform well and show better operational results in 2016 as the group continues to develop, both organically and through acquisitions.
We expect the most significant developments to occur in the property development cluster, with the materialisation of our African venture. Closer to home, the Smart City Scheme introduced by government to encourage sustainable urbanisation of the island, should provide a fertile ground for initiative and enterprise. We are already reviewing our master plan for Moka with a view to obtain the Smart City certification.
The hospitality sector showed signs of turning around this year and is expected to continue on this trend in the coming year. This comforts our strategic decision to strengthen our presence in the sector, by acquiring an additional 3.48% stake in New Mauritius Hotels, bringing the group’s holding to 23.4%. This premier group of hotel underwent a change in leadership, with Gilbert Espitalier-Noël succeeding Herbert Couacaud at the helm of business. (more about the ensuing reorganisation of ENL Property on page 51)
The Rogers group is expected to continue to make strong contributions to our overall performance. Its logistics sector is set to experience a major boost considering the national plans to invest in an overhaul of the port infrastructure and the group’s strategy to increase its regional/ international footprint.
AMALGAMATION FOR A STRONGER ENL LAND
This year marked our return to the financial services sector following the expiry, in December 2014, of the non-competition agreement with CIM. Rogers Capital acquired two global business management companies to spur on operations. We are determined to succeed by developing a business model that is less India-centric and which builds on the international and local strengths of our group.
In many ways, however, the year ahead will be dominated by the proposed amalgamation of our two subsidiaries, ENL Investment and ENL Land, with the latter being the surviving entity.
We are confident that the amalgamation will generate a new dynamism which will enhance shareholder value. It will bring a diversified set of businesses under one umbrella and thus give birth to a stronger ENL Land which will have broader asset and activity bases and will be capable of generating significant operational profits and cash flows. The new ENL Land will also have the advantage of size and scale to enable our group to pursue its dynamic development, both locally and in the region.
On behalf of ENL’s Board, we thank our operational teams for their continued commitment and invite them to keep the enthusiasm alive. We would also like to thank you, our shareholder, for your support that allows us to create value over time.
Hector Espitalier-Noël
CEO