What makes a good entrepreneur – by one who specialises in buying them
OneLogix topped the table of the best gainers on the JSE today, closing 16% higher. The R665m company's interim results, released this morning, are the obvious reason. Not so obvious is the investment momentum that has been building for a transport-themed mini-conglomerate which buys and incorporates entrepreneurs and their businesses. I used the opportunity of this interview with CEO Ian Lourens to tap into his ideas of what makes an entrepreneur – and how, from experience, he has been able to differentiate between the good and the bad. – AH
ALEC HOGG: Logistics Company OneLogix has reported an increase in the Interim Results for the six months to the end of November 2013. Joining us to explain more is OneLogix Chief Executive Ian Lourens. It's Interesting. We're going to be talking to Geoff Blunt a little bit later from Canon Asset Management and he makes the point that last year, the big caps were down in their profits, and yet their ratings improved. The small caps were up 20 percent in their profits, and yet their ratings went down. You've just emphasised that. Your core earnings are up by 35 percent in this period. Your share price has really hopped today, but up until now, you must be a bit disappointed at the way the market's depreciating.
IAN LOURENS: Actually, I'm quite happy. From a personal point of view, it might be a problem in terms of acquiring shares, but by and large, we're very happy with what's happening.
ALEC HOGG: Did the markets depress the small caps?
IAN LOURENS: How we've responded to today's results…yes we are, but the way we look at it Alec, is that we just get on and do our business and the markets will look after themselves in due course.
ALEC HOGG: Do you get calls from investment analysts? Are the institutions coming to visit?
IAN LOURENS: They do…I think on occasion, they do come and have a look at us down at the lower end of the pile, and they do ask a couple of probing questions. By and large, as I've said, our mission is really just to carry on doing what we do well, and put our heads down.
ALEC HOGG: But management works for shareholders and it's nice to have strong shareholders if you do bigger acquisitions.
IAN LOURENS: Of course, don't forget OneLogix shareholders have about 60 percent of the shareholding in any event, but we're getting some nice interest out in the marketplace, which I'm very happy about. Of course, I think people over time, watch and see how you perform according to what you said you were going to do and thankfully, that's what we've been able to do. This period shows our fifth consecutive positive result, post the downturn.
ALEC HOGG: Well, you're coming onto radar screens, because today the share price is up 22 percent, and that's a big hop in your market cap. The business is interesting. I described it as almost…like a mini Bidvest. It's a mini conglomerate in some ways. You do have a theme, but when you have a panel beater, Post Net, and some of the other business you have – the logistics businesses – it is spread.
IAN LOURENS: Yes, you're quite right. We do see the theme as logistics in Southern Africa, but the fact is that we are decentralised. We believe we're quite empowering. The other word we use very often is 'we're entrepreneurial'. In fact, we've identified entrepreneurs who run businesses who've kind of reached a ceiling, we provide them with platform to step up, and then we take them further along. All of us in the group that run the businesses are entrepreneurs, so all the businesses are run by the guys that started those businesses. The way we like to think of entrepreneurs is they are people that not only can see things that others can't – because they're a dime a dozen – but the fact is that you have to translate that into action. You have to turn it into something tangible that adds sustainable value. I think the mix of management that we have now, kind of does that more than it doesn't, so we're getting that right we believe.
ALEC HOGG: Do you have a kind of a task team that looks at potential acquisitions, given that you're looking at the person you're buying, rather than necessarily the business?
IAN LOURENS: That's correct. The answer is, it's not formal, but there's informal radar that we have out in the marketplace all the time. Whenever we interact with the market – which is often – whether its suppliers or customers etcetera, we pretty much keep our eyes open as to what's going on and we have a model that starts to work. Over the period of time that we've been on…we were Arctic's in 2004, so that gives us about 10 years and we've just recently moved to the main board – we've acquired nine companies and sold off four. What we sold off was out of the media space. We were moving newspapers.
ALEC HOGG: Moving newspapers: very smart move to get out of that one.
IAN LOURENS: We have that kind of right. We've acquired nine companies, they've proven to be reasonably successful, so we think we know what we're looking for, we think we know who we're looking for, and I think we also know what we need to do to integrate it and bed it down properly into the organisation. There's a very clear model that we have and thankfully, we get it more right than we get it wrong.
ALEC HOGG: For whom? Good and bad: two personality types perhaps – from experience…
IAN LOURENS: Well, it's a very instinctive thing. You kind of just get an idea when you walk into a business. You can feel the vibe, that the person running it is respected, his opinion counts, and he has an enabling culture that makes a lot of sense. You then look at it right throughout the whole spectrum, once you get into due diligence etcetera, and just see if that is consistent with what you're seeing. If they are able to produce results and they have the kind (we call it) that makes sure this hangs together and sustains itself going forward; that's what makes sense to us. There's not a huge amount of science in it. A lot of it…we just know that it's right, but of course, we go through all the objective process we have to in terms of the due diligences etcetera. You always look at that thread.
ALEC HOGG: What do you learn from the inverse though, from your mistakes?
IAN LOURENS: We've learned that you have to make sure that you allow people space to grow, but you counter that with a quiet, gentle, and controlling element. In other words, we have budgets for example, that we set together. We don't make sure that the guys have to stretch themselves to ridiculous levels. They know they're not going to get it and they lose enthusiasm right up front, for example. We sit down properly and we say 'what can we realistically deliver?' We then agree to commit to that, off they go and do it, and we come behind and just make sure on a periodic basis – more informally than formally, by the way – as to how they're going. If they're going well…great, go and do it. If they're not, then we'll step in and do what we need to do. We obviously get together as a group. We celebrate our successes. If there's anything tough that needs to be done it's done outside of the meeting, so it's a kind of 'praise in public and deal with difficult issues in private' kind of approach.
ALEC HOGG: You have a formula that's working, Ian. We'll be watching your shares in future. I'm sure there are many people who have bought them today, who will be watching them even more closely. Over the past period you got as high as four bucks. You're down to R3.50, but you've more than doubled since 2012 and at a nearly 600 million market cap now. Just an off the wall question…the budget coming up the end of the month: any thoughts on what you might hope to see there.
IAN LOURENS: We like this idea that infrastructure is getting a lot of attention. It makes sense for logistics companies to do that. We're focusing very heavily on Africa – Southern Africa, particularly – so we would like to see things, like not only the seaports but the land ports, to become much more efficient so that's the sort of thing we'd be looking at. Other than the more general things about tax etcetera, we think that we would just like to see an environment that really looks at enabling a business and of course, since we've been talking 'entrepreneurship' I often think that those entrepreneurs that are out there are unsung heroes. We give a lot of verbal input into supporting them, but we don't really seem to do a hell of a lot about it. I'd like to see a lot more practical steps that are implemented – to kind of put that forward because if we're looking to create jobs, that's where it's going to happen.