The Madison Financial Services Group has come a long way from the glory days of the ambitious Greek supremo Andrew Sardanis (Founder of Madison). They were the first to market with an insurance offering post 1992. With shareholder interests being managed by Lawrence Sikutwa & Associates, the 2004 increase in shareholding to 100% in Madison Insurance set the group of companies on a trip with destiny that eventually lead to the IPO of 2012.
At present, MFSG can boast of a plethora of companies that seek value in various financial sectors. Their bet on property has had a huge impact on the bottom line as macroeconomic turbulence ranging from exchange losses, rising inflation and rising monetary policy rates from the central bank. According to its Chairman in the 2015 Annual Report, these had a huge bearing on the group’s performance. However, technology seems to be the key to unlocking value going forward. Furthermore, there remains a huge untapped micro-insurance market that remains untapped.
Now the numbers are quite interesting. Investors may not be pleased by the fall in EPS. This was largely due to the negative bottom-line in 2015. Furthermore, the groups gearing has leapfrog from 66% (2014) to 122% (2015). This can be a source of concern in the near term however, the numbers also show that the company is restructuring its capital structure. They are now looking at long term debt as opposed to short term (due within a year type debt). This will provide for some easing. Furthermore, they are very stable when it comes to covering their current obligations and have positive working capital.
The company may need to be more aggressive is sweating its non-current assets. The chairman indicates that their property outfit enjoyed the most growth between 2014 and 2015. There remains a lot of potential there.
Overall, the group’s prospects are tied to how well the macroeconomic environment evolves. The Chairman is bullish on ensuring they can minimize the impact it causes. In addition, they will be looking internally to help improve operating performance.
This stock is a hold for the long term. But I would keep an eye on that debt. Gearing north of 100% can bad for a services company if not managed well.