Coffee with Jon Rokk on Valmore’s hard-currency turn

Valmore Holding (FKA Egypt Kuwait Holding) is selling mature Egyptian assets to buy foreign-currency (FCY) earnings exit Delta Ins. to Morocco’s Wafa Assurance latest earnings (pdf)

Jon Rokk ( LinkedIn ) has led the group since February 2024 told a year ago

We sat down with Rokk to talk about what’s actually driving the numbers

Edited excerpts from our conversation:

: Reported income came down this half. What was actually driving the underlying numbers?

That’s the strategic shift of the last 18 months showing up. The point isn’t that we have told these businesses what to do from the center. It’s that each of them is agile enough to handle whatever arrives in their sector, whether that’s an opening or a problem.

: Hard-currency revenues are at 57% of the group top line. Where do you want that number, and how do you get there?

Where Egypt is genuinely competitive is manufacturing cost. There’s a good talent pool and a low cost base for fabrication, installation, and manufacturing. The trick is finding businesses that are export-focused. AlexFert and ONS are examples of Egypt-based businesses that generate foreign currency for the group. Our investment team is looking for more of those, and there is a lot of potential.

: You’re earning here and deploying in KSA and the UK. Is that confidence in those markets or a hedge against this one?

: Delta is the clearest example of this strategy. Walk us through the logic.

So we sold, and the proceeds were used directly to capitalize and invest in the UK project. Once that reaches its first two phases, it will deliver significantly higher net income and cashflow than Delta did. That’s the model, and it’s the bit that gets missed. It isn’t just exiting a mature asset to fund a greenfield one. It’s recognizing that the returns on the other side are going to be materially better. We have also de-risked the EGP element, because those will be GBP earnings.

: AlexFert ran at full utilization all quarter because the gas held out. How reliable is that becoming?

: Would you build a new gas-intensive plant in Egypt today?

Let me answer it in a different way. Any gas-intensive project, wherever it is, has to clear the same tests. Is there a market? Can you guarantee the source of supply? Is there price certainty or stability? Is it a hard-currency earner? Those are the KPIs, whether it’s Egypt or anywhere else.

: EKACOM prequalified in February for five Saudi industrial cities, and bids were due in April. Where did that land?

Dammam Third Industrial Zone

: What has to be true about a company or a project before you will sign?

Sector-wise, we know our strengths, but I’m also trying to bring balance. Gas was the theme of this business when I took it over: drilling for it, distributing it, using it as feedstock, burning it for power. That’s great, but I don’t want to be entirely dependent on one element. We have expanded into adjacent spaces, including non-banking financial services and ins., alongside the industrial portfolio, so it’s not as if we are suddenly launching into the unknown by diversifying. Then it’s the returns, asking whether it meets our internal rate of return, and whether it generates cashflow.

The NBFI business is a good example of the balance actually working. We launched it from scratch, it hasn’t been a heavy drain on CapEx, and it grew well in the first few years. The sector had a hard year in Egypt — interest rates, the conflict — but the market is there, and you can see it in what competitors are being valued at. We added consumer finance to microfinance this year because Egypt is different from some of the other territories we operate in, and there’s clearly a place for non-banking services here.

: Three years out, what does success look like, and would that include listing one of the subsidiaries?

On the pipeline more broadly, I can’t give you specifics. What I would say is that two years ago we weren’t explaining our model to the market and we weren’t demonstrating it. Now we can. We have divested, unlocked capital, and put it into new investments. The board signed off on a new five-year plan at the end of last year, and the team is responding to it. A good M&A team has plenty in the pipeline, because you won’t conclude everything you look at.

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