Shareholders pay the price as Mantengu’s story unravels

Mantengu’s half-year results read like the inevitable outcome of a company consumed by its own hubris, with loud accusations directed outward, worsening numbers accumulating inward, growing risks left unmanaged, and accountability seemingly nowhere to be found.

For the market, the figures mark a decisive break from the share price conspiracy Mantengu has spent a year selling. And for shareholders, the numbers are brutal.The scale of value destruction becomes clear when viewed through Mantengu’s earnings. In just twelve months, the company has swung from a modest profit to an R81.8 million loss, while earnings per share have collapsed from 2 cents to a loss of 27 cents – a deterioration of more than 1 400%.

That collapse in per share earnings reflects a sharp erosion of the underlying value available to shareholders, long before the market even reacts to the company’s worsening fundamentals.The most revealing number in the results is not even the company’s loss – troubling as it is –but the cash burn, as Mantengu consumed R108.3 million in operating cash in just six months, leaving it with only R5.2 million in cash in the bank.

A company can survive poor earnings. It cannot survive running out of money, and Mantengu is burning cash at a rate that implies deep structural issues.The balance sheet confirms this, with only R379.8 million in current assets against short-term liabilities of R556.8 million, leaving a R177 million deficit that threatens a potentially catastrophic liquidity crunch.

Yet instead of confronting these realities, CEO Mike Miller has spent much of the past year promoting an ever expanding conspiracy theory that now ropes in a bizarre assortment of traders, business rivals, Johannesburg Stock Exchange (JSE) personnel, police officials, and unnamed “networks” he claims are targeting Mantengu’s shares.

But his theatrics appear to have done nothing to stabilise the company. If anything, they have widened the gap between the story Miller tells the public and the situation outlined in Mantengu’s own financial statements.And then there is the issue of executive pay. At a time when shareholders are staring at collapsing revenues and mounting losses, Mantengu’s top two executives have never had it better. Miller was rewarded with R6.53 million in six months, including a R1.7 million bonus.

Chief financial officer Magen Naidoo earned another R6 million. To put this into perspective, Miller and Naidoo’s combined R12.5 million remuneration represents roughly 15% of the company’s entire loss for the period. This raises yet another pressing question that Miller has wisely sidestepped in his mediatours to date – how does a leadership team justify enriching itself to this extent while the business it oversees is sliding into a liquidity crisis, and shareholders are facing a body blow?

Making matters worse, the statement notes that the group’s ability to continue operating may depend on drawing down further on its GEM Global share subscription facility – a funding source that injects cash by issuing new shares. In other words, the company is propping up its operations not through performance or profit, but by repeatedly selling pieces of itself to stay afloat.

What the financials make clear is that blame for Mantengu’s deterioration lies at its own doorstep. A company that cannot generate cash, maintain margins or contain costs cannot point fingers at outsiders for the consequences. Until its leadership confronts what the financials so plainly reveal, Mantengu’s crisis will remain self-inflicted – and its shareholders will continue to pay the price.

BUSINESS REPORT