• Tuesday, June 25, 2024
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A silent transformation in Odu’a targets new frontiers for investment

Odu’a Investment Company Limited

“To be the engine room for the economic development of the southwest,” reads the mandate of Odu’a Investment Company Limited, which is unarguably the only regional business interest in Nigeria. The company, also referred to as Odu’a’ Group, is owned by the six states of the South-West region (Lagos, Oyo, Ondo, Ogun, Osun, Ekiti), but with a turbulent journey to viability.

Even though the company would have existed for 45 years this October, its roots can be found in the Western Nigeria Development Corporation, which predates the country’s independence in 1960.

A culture of corporate governance issues (mostly because of ownership tied to government) kept the company from achieving its expected potentials, with its shareholdings in invested companies sacrificed to stay afloat at different times. Paying dividends to shareholder states was a pipe dream for decades until about seven years ago when it became constant.

When the company had its annual general meeting last month, it approved payment of cash dividend of N364 million to its shareholders, which represents a 14 percent increase over the previous year. This dividend payment for the 2020 Financial Year marks the seventh consecutive year that the company is declaring and paying dividends to shareholders.

Read Also: Odu’a investment nets N5.203bn in 2020, declares dividend of N364m

Odu’a recorded a Group Profit After Tax (PAT) of N5.203billion in 2020 from N4.665billion in 2019, which Segun Aina, the group chairman attributed to “astute oversight of the Board and the focus of management despite the global economic shock of a pandemic year”.

The company’s profitability even in a year the coronavirus pummelled businesses and economies, was described by Adewale Raji, the Group Managing Director/CEO as “a quantum leap up by 112 percent from N1.809billion in FY 2019 to N3.842billion in FY 2020”. He further explained that the company’s PBT increased dramatically to N3.75billion from N890million in 2019.

These results were despite the company experiencing the headwinds of the 2020 global Covid-19 pandemic particularly in its hospitality and real estate segments.

Fintech is the latest phenomenon in financial services. We want to see how we can play heavily in that area, to support our existing financial services institutions and create new financial services as well

A recent virtual engagement by the company with business leaders from the southwest, themed ‘Odu’a investment and emerging business opportunities’, was an opportunity to gain insight into the transformations now being recorded.

The road to recovery

The transformation journey of Odu’a commenced in 2012, according to Joseph Tegbe, a senior partner at KPMG in a presentation. He noted that the company has gone through different stages, starting from the time KPMG was commissioned by the Southwest governors to carry out what was described as “a net check and state of business review”.

As Tegbe explained, in 2012, KPMG reviewed the business model of Odu’a, looking at all the industries, the products and services, the alliances, customers and the entire ecosystem of the company. And of course, the corporate and organisational structure.

“We x-rayed the challenges of the corporate governance with the involvement of government and the hindrances that the involvement of government was causing,” he said. “We also looked at the financial performance of Odu’a.”

An evaluation of the strategic health was aimed at repositioning Odu’a for optimal performance by understanding businesses that needed to be discontinued, divest and the businesses that should be repositioned for growth.

In 2015, the first wave of the business transformation started with the development of a new strategy for the company. The strategy document and the strategic plan covered 2015 to 2019. While the implementation was faced with challenges, a major transformation commenced in 2020, with more political will backing the transformation agenda. The need to revive the company’s assets became the focal point.

“There were a lot of moribund businesses; half of the businesses Odu’a was operating in were moribund,” Tegbe said. A mapping was subsequently done and presented to governors of the owner-states. It was decided to discontinue some of the businesses, divest from some, and ensure that the focus shifts from operating businesses but having alliances with technical partners who can actually operate better than Odu’a could do.

The organisational structure was also an issue, particularly of board members. Tenures varied from six months to five years, depending on the tenure of the governor that appointed them to the board. By implication, if there was a change in government at a state level, the new governor removes the board member whether he/she is performing or not.

The financial performance also revealed inadequate financial operations. The return on asset and equity was poor. There was low cash generation from operations and the business was being run by sale of shares, according to the presentation by Tegbe.

After the strategic session, it became imperative to redefine the company’s aspirations. The mission was redefined for Odu’a to be the leading Nigerian conglomerate in chosen sectors, delivering above par performance in growth and profitability.

Core values were also redefined but anchored on six strategic pillars;

· The group’s revenue needed to grow by 2019 to 20 billion

· Transition Odu’a into a leading operating company

· Achieve a PBT margin of at least 15percent by 2019

· Strengthen oversight over the investing companies

· Sweat the group’s portfolio of assets to achieve 12percent return on assets by 2019

· Build a highly motivated workforce to deliver on the company’s goals and objectives.

In 2020, during a meeting with the state governors, the need for political will to reset the organization was emphasised. Consequently, a new set of corporate statements was carved out and the board and governance structure was strengthened.

The board’s charter was revised, haphazard removal of board members was discontinued through introduction of a tenure system, and self appraisal on the basis of performance. Following these reforms, the company was repurposed to be “a world class conglomerate”, with a mission to deliver sustainable returns for all stakeholders, and enhancing the legacy of future generations.

Positioning for the future

“We have always said that Odu’a is supposed to create thousands and millions of jobs within the southwest,” emphasised Aina, the group chairman. “Our two main objectives are to create shareholder value and social impact”.

For social impact, it is to create significant employment, empower the people economically, and improve the welfare of people, particularly of the owner states, he explained.

To drive the agenda of spurring job creation in the southwest region, the company with a long history of holding a range of valuable assets, many underutilised, plans to “sweat those assets and derive maximum benefits from them”.

As Aina explained, the company now has a fully functional investment department and has created an investment framework, so that when entering into partnerships, its actions are adequately guided.

Odu’a currently has 100percent ownership in some of its subsidiaries, but now more inclined towards bringing in competent partners that are experienced in managing such organizations. “It is better for us to have 30percent of a company that is generating money for us, than to have 100percent of a company that we will even be pumping money into,” said Aina.

Some sectors were identified, where the company wants to focus its operations, even though it is already active in some of them.

Hospitality: While the company already plays in this space and owns the Lagos airport hotel, described as a great, valuable, well located piece of real estate, its returns over the years have not been impressive. The ultimate goal, according to Aina, is to partner with a global brand that will run the hotel and make it deliver optimally.

It also owns the Western hotels, which is made up of two hotels: the Premier hotel in Ibadan and the Lafia hotel. While some proposals for turning around the Premier hotel are being considered, the company says it is open for other partners that are interested in running the hotels.

Real Estate: Odu’a group’s flagship real estate business is Wemabod, which even started before the company was created. As Aina explained, the company will not only be involved in managing real estate that it has, but also creating new properties and packaging real estate for other institutions. In that respect, the company will be setting up a facility management company, which would be managing those properties.

That company will be owned with a partner that has experience in the real estate sector. Wemabod limited will also be creating new projects and expanding opportunities for new properties.

Agriculture: This is an area the company considers important and dear to everyone in Nigeria and, particularly, in the southwest. There is a new company that was formed, Southwest Agric Company called SWAgCo.

The company is to be a platform for aggressive investment in agricultural businesses within the southwest, through partnerships that are being put together and working with the best in the sector. It is to drive an agenda for food security, not only in Nigeria and the southwest, but also creating a platform for exporting surplus food.

Technology: A newly incorporated Southwest Innovation and Technology Company, is said to hold a lot of promise for the young population. Odu’a according to Aina, is currently looking for partners to create an innovation village amongst other plans. The company will also offer investment into holding technology and innovation driven entities, particularly within the southwest so as to create jobs.

Oil and Gas: Last year, the company made inroads into the oil and gas sector, when it won a bid for the Bita oil field located in Ondo state. As Aina notes, a lot of money is required for investment in the oil and gas business, making it another area of opportunity for willing investors to join hands with the company to achieve its objectives.

Financial Service: The Company’s initial foray into financial services was through its early investments in Wema bank but now wants to create new entities in those areas, particularly through fintech.

“Fintech is the latest phenomenon in financial services. We want to see how we can play heavily in that area to support our existing financial services institutions and create new financial services as well,” said Aina.

Healthcare: For healthcare, COVID has brought attention to the need for aggressive investment in healthcare, noted Aina. This has made it even more important for the company to be active in the sector as well.

These are areas the company needs immediate partnerships and investments, it was emphasised. A target of N40 billion naira revenue by 2025 has been set, and the company’s redefined approach to investment, and utilisation of assets is expected to drive the attainment of this goal.

“Our idea is that Odu’a should be transformed into the sovereign wealth fund for the stakeholders, particularly from the southwest, harnessing resources, and investing to galvanize the economic development of the entire people of the southwest and beyond,” said Aina.