Armitage’s Anchor heads for JSE – zero to R180m valuation in 2 years
I met Peter Armitage in the early 1990s when the young chartered accountant decided to switch from auditing to Investor Relations and work for my dear friend the late David Carte. They had fun together and Carte always spoke highly of Armitage, but knew he was always destined for more than building reputations of others. Highly entrepreneurial, Armitage was one of the South Africa's early Internet pioneers. But when the bubble burst in January 2000, dusted himself off and re-entered field of investment analysis. He was enormously successful as an analyst, rated number one a record 21 times in the Financial Mail's annual survey. Two years ago, Armitage gave in to entrepreneurial instincts again and left Investec to start Anchor Capital, a high energy fund management business backed by self-made KZN billionaire Ivan Clark. Having successfully placed around a third of its equity in raising R60m, Anchor is scheduled to hit the AltX lists on the JSE next month. We invited Peter to tell us about it today on CNBC Africa's Power Lunch. – AH
ALEC HOGG: The Anchor Group plans to list on the AltX of the Johannesburg Stock Exchange early next month. There are currently 62.6-million shares in the business. They're going to be issuing another 30m at R2 each, raising R60m. Peter Armitage, founder of Anchor Capital is with us in the studio. Peter, you've had a lot of businesses in the past. Have you listed one before?
PETER ARMITAGE: No, I've never been involved.
ALEC HOGG: Why this one?
PETER ARMITAGE: I think we are just doing very nicely. There's a nice path and I think the conditions are conducive. Our business is really a staff business, so one of the incentives was getting all the staff involved in the equity of the business. Yes, we've got some plans to take it forward.
ALEC HOGG: Ivan Clark, I see he is one of your biggest supporters, is he a shareholder?
PETER ARMITAGE: Yes, when I gave Ivan a call three years ago, he always said 'if you want to go into business, I'll come with you'. He put in a bit of money and yes hopefully, we'll make him some nice money off it.
ALEC HOGG: Is he on your Board?
PETER ARMITAGE: He's on our Board and post-listing he'll earn a bit of money from it.
ALEC HOGG: For those who don't know, Ivan's the driver behind Grindrod. He took them from a small company into a substantial group.
PETER ARMITAGE: Yes, I think when he took over as CEO it was R2 per share. It is now the equivalent of R100 per share.
GUGULETHU MFUPHI: Before the break, we were talking about offshore explorations and activities there, and it does seem as though you are looking to go offshore yourself, once you manage to raise capital here.
PETER ARMITAGE: Yes, I think having a bit of capital enables you to do that. We are a very small business, in the South African context. There's a hell of a lot to do in South Africa, before one does that but I think you've got to think forward and I think every South African business realises that we're part of the globe now.
GUGULETHU MFUPHI: So where are you looking to go?
PETER ARMITAGE: Well, we've got no plans in the next year or two, to do anything offshore but I think it would be a logical step in South Africa. We'll be establishing a London office shortly but that's more about analysing global companies. Actually having an operation offshore is a few years away.
ALEC HOGG: But listing after just two years, surely you should wait a little longer. Aren't you giving away a bit too much now?
PETER ARMITAGE: That is certainly something we went through but I quite like the discipline that comes with a listing. We've been through three months of absolute corporate rigor and discipline. It makes your business very clean and it enables growth. We've kind of got a factory, which is our investment process, and we want to add people to that, and allowing people to participate in it via share options and them buying shares in it gives people that sense of ownership.
ALEC HOGG: But you are also far too clever to mis-time the sale of a business. Do you feel that the market is now getting to an area where you can get a good value for your equity?
PETER ARMITAGE: Yes, I think one has to be pragmatic. None of the shareholders will be selling shares. I'm buying more shares in the listing. Certainly, it's a long-term plan for us, this is our passion, and, as you've said, I've been involved in different businesses. This is my home and what I do. Also, the money we've raised is largely from staff, existing shareholders, and friends…
ALEC HOGG: So you've raised it already?
PETER ARMITAGE: Yes, well we've got commitments for an excess of the R60m and it is strategic players, in our business, who've invested with us and helped us develop.
ALEC HOGG: Any asset management companies?
PETER ARMITAGE: No.
ALEC HOGG: So you didn't go and do the road show and…
PETER ARMITAGE: No, we haven't done any road show whatsoever.
GUGULETHU MFUPHI: Any reasons why?
PETER ARMITAGE: Well, just because there isn't enough money to, we're not raising enough to interest an institution.
ALEC HOGG: (But with Moneyweb in 1999…) We raised R10m and we used to get a rooms full of people….
PETER ARMITAGE: Yes, but in today's terms that's probably R30m or R40m.
ALEC HOGG: I wonder if you aren't going to regret listing, sometime in the future.
PETER ARMITAGE: Yes, we've asked ourselves that.
ALEC HOGG: Why are you listing?
PETER ARMITAGE: I think, as you say, to be frank we're at a time in the market when one can raise capital and, as you know, we've both been through market ups and downs, and that window can close for two or three years. We're quite ambitious in terms of what we want to do. Some of that involves having some cash available, and in our business, credibility is important. It adds a sense of credibility having capital.
ALEC HOGG: Gugu asked you about the international exposure, so that's not, really, right on the front burners. What are you going to do with the rest of the R60m? I know you're buying property for R6m, but apart from that…
PETER ARMITAGE: We've got some shareholder loans, the initial shareholders, and that's largely Grindrod Bank and Ivan Clark. A part of their funding was Shareholder's Capital, so that's part of it but, obviously not a primary driver. We think the premises we're in, we think are fantastic. We want to secure them but that again is not a primary driver but the capital, I think, will largely be, used on doing kind of bolt-on acquisitions.
ALEC HOGG: Of what?
PETER ARMITAGE: Of asset management or people with books. The financial advisor market out there is one that's in flux. You've got Old Mutual and PSG Konsult…there's worries about regulation, so the ability to have a bit of cash and some shares, I wouldn't expect us to go and do a big R200m acquisition.
GUGULETHU MFUPHI: What if someone wants to buy you out……are you open to, maybe a big player like Coronation, coming in and saying…?
PETER ARMITAGE: I don't think they would be interested. Coronation, I can't remember the number exactly, but they probably get in a month or two the size of our asset base (R5bn). We are a 100th of size of Coronation, so obviously the dream is to, on a ten-year journey, to become a big player.
ALEC HOGG: But that's where Leon Campher, Dave Barnes, and Gavan Ryan began (Coronation's founders), they all started the same way.
PETER ARMITAGE: Yes, they were all there at the same time.
ALEC HOGG: Yes, so keep the dream. Peter Armitage, the founder of Anchor Capital. There's a big buzz about this company anywhere around the JSE.