Booming hospitality, a growing craft beer industry and solid shipbuilding and retail sectors

03 Apr Booming hospitality, a growing craft beer industry and solid shipbuilding and retail sectors

Arnaud Lagesse, Group CEO of IBL Ltd, discusses the fruits of the company’s merger

IBL Ltd is a diversified group with investments in 280 companies worldwide. In 2016, you led a merger between GML Ltée and Ireland Blyth Limited, which led to the creation of the IBL Ltd we know today. What kind of synergies arose from this, and what are the biggest drivers of growth for the company ever since?

Indeed, the merger was quite a breakthrough for all stakeholders. The story of this group began a long time ago, with the Ireland Blyth side being founded in the 1830s and the GML side coming into play in around 1938.

The two groups evolved in parallel and united for the first time in 1972, with GML taking a larger stake in around 2012, and the final merger happening in 2016. Both firms brought many diverse activities to the table, constituting what is today the group with its eight clusters. We took the opportunity to sell two entities to fuel the growth of our new entity.

In terms of synergies, we have a central team at Head Office, one group CEO and CFO, a single Human Capital department and a common board at holding level. We find one team to be both the leanest and most efficient setup.

GML brought hospitality (LUX*), sugar (Alteo), beverages (Phoenix Beverages), banking (AfrAsia Bank) and reinsurance brokering inter alia, while Ireland Blythe brought seafood operations, the retail cluster (Winner’s supermarket chain), the engineering sector with Manser Saxon, the logistics sector, wholesale activities with BrandActiv/HealthActiv and the shipyard with CNOI.

All those activities are standalone and no real synergies have been derived from operations. Instead, they have come more from a head office and global policy standpoint in terms of human capital, financing and IT infrastructure. The enablers, such as digital transformation and ESG policies, are common for the whole group and that’s where the real synergy starts.

What else can you tell us about IBL’s evolution and expansion over the past several years?

In 2016, we hired McKinsey to help us outline the future of the group. They did an important study in early 2017 during which a clear strategy was put in place for all our business units. We have seen quite a bit of growth in retail, seafood, ship building and repairs, hospitality and financial services since.

COVID-19 brought everyone to a halt, of course, but the balance sheet of the group and the quality of our people really got us through the crisis. We are now turning our attention to Africa, where we are seeing some great opportunities. We have increased our turnover by 1.5 during the past five to six years, and the market cap has nearly tripled.

What is your evaluation of IBL’s resilience during the pandemic? What are the challenges and opportunities of having such a diversified portfolio?

The main asset of the group is the quality of our people and the leadership we have at all levels. We have been focusing a great deal on making sure that each and every business and all our activity is organized around strong board governance with diversified profiles within those boards, and strong leadership at executive levels.

Alongside our impressive staff, I would say our solid balance sheet, diverse activities, clear strategy and excellent execution have given us a high degree of resiliency during the pandemic. The market cap was naturally affected, but to a much lesser extent compared to our peers, namely senior conglomerates quoted on the exchange here.

As far as the challenges go, you need to make sure that each and every business has its own capacity for growth. When you need to fuel the growth of shipping and retail at the same time, you may be tempted at some point to do some arbitrage to see where you allocate your resources, be that cash, human capital or the attention of the board and its strategy. Overall, we have been able to manage that quite smartly and we see lots of opportunities for the group going forward.

Can you comment on human capital in the context of the current global challenges? How do you get the qualified staff that you need?

Indeed, it is quite a challenge; we do a bit of everything. We employ a lot of Mauritians, but we also hire quite a few ex-pats at various levels, as well as top executives if need be. The CEO of our beverage company is a Belgian guy; for the shipyard we have a Frenchman; and the hospitality cluster CEO is an English fellow. The rule of thumb is that we aim for the best talent be that local or foreign, with quite a few of our top executives being women.

We do a fair amount of in-house training, but we also leverage external capabilities through a leadership program with Stellenbosch University. At the same time, we are just about to create our very own academy, which will help align our talent so that we are all moving in the same direction.

In various operations, such as in LUX* which is our hospitality cluster, we do a lot of training in-house. In fact, we have one of the highest hours of training per staff per year; even better than the Four Seasons which is an important benchmark in the industry.

Part of the strategy of the merger was an emphasis on human capital as a critical element for success, along with the digital transformation and the sustainability part of the business.

What new sectors are you exploring for the future?

We are pushing for renewable energies and health and wellness, with a special focus on the African territories. We consider the size of the local market to be quite small and our group quite big, so our ventures outside Mauritius make sense in our quest for double-digit growth. That does not take away from our aspirations to develop growth and innovation within our own country as well.

Will you be applying for any of the local tenders here for renewables?

In fact, we have been applying and are already a player in the PV, wind and renewable bagasse space. The MARENA scheme is extremely interesting to us. We see ourselves capable of deploying six to 10 megawatts of PV facilities quite rapidly, providing a quick and viable answer to the rise of fossil energy prices. I would favor inland activities over offshore in that there is more than enough to be getting on with in the area of PV. We are involved with a German supplier financed by the AFD (Agence française de développement) to produce wind energy. Additionally, the waste from our seafood activities is being used to produce methane gas.

What is IBL’s roadmap for digital transformation in order to remain resilient and competitive? How do you evaluate the company’s strengths in this area, and what are your priorities in this regard moving forward?

The digital transformation has been one of the group’s most important enablers since the merger. We have a dedicated team that follows the whole process. Naturally, there are many stages, and different activities move at different rhythms. The shipyard may be slower than financial services, for example. During the pandemic, digitalization was a prerequisite to keeping our business afloat. Fortunately, we were already equipped in many areas. The working-from-home and flextime policy were already implemented before COVID hit. That made the transition during lockdown quite easy for us; we were able to go online seamlessly.

The biggest challenge to the acceleration of the digital transformation is the lack of talent in that space. You do not see many Mauritians with expertise in digital, and if you do, they are likely to be approached to work abroad.

It is not as easy as it might seem to get talent from overseas to come and work here, either. Traditionally, we had a large influx of Indian workers but, for the most part, they have returned home because salaries have increased there with the shift that has occurred toward India being a hub for international IT talent. Rapid upskilling is a significant challenge these days.

Why is there a focus on East Africa? How do you see this region as a winning bet for expanding your operations?

Before jumping to East Africa, I must say that we have been long-term operators in Réunion which is just next door. We have two hotels there, a leading beverage facility producing water and soft drinks and a few trading activities. Therefore, the region starts with Réunion first and that’s why we are continuing to look for opportunities there.

Our next move would probably be Madagascar, but we have been operating largely on the GML side there without much success. Consequently, we are most likely going to wait on that and look more toward opportunities in East Africa. McKinsey is helping us to understand more about the region, its drivers, the principal countries that are pulling the market, and the strengths and weaknesses in terms of the local currencies. Based on this consultancy work, we decided to spearhead our development from Nairobi where we already have our business development office. We are moving a few more staff, starting in July, to open an IBL regional head office, and from there we are negotiating a few deals in retail, logistics, healthcare and property. We have also been operating from our sugar facilities in Tanzania for the past 20 years and in Kenya for the past seven years. We know the region, but it will be the first time you will see IBL Ltd getting into the space directly with its own infrastructure.

IBL is one of several conglomerates in the country and in the region. What do you believe gives IBL a competitive advantage and how do you stay ahead of the competition, both domestically and internationally?

Again, we start from a place of a strong governance approach to business, and I personally believe it pays off. This includes strong leadership and core values in doing business. All of this allows us to look toward the future with clearly aligned interests across the board. It is vital that we share a clear vision and this is the case at all levels of IBL.

However, we are making sure that we duplicate what we believe is good to be able to grow at an operational level. Based on those strong leadership values, we are growing strongly, and weathering the storms quite well. We see that people are interested in coming to work for IBL, not only because the balance sheet is solid and a better tomorrow is ensured for them, but also because we have a clear vision; we know how to execute with a clear frame of mind.

We are not fly-by-night investors. Our partnerships are created for the long term, both locally and internationally, from small families to big corporations. This is important because often it is the minority shareholder that possesses the most know-how, such as in the case in the shipyards. I have no problem having them running the business, provided they deliver positive results and value for all stakeholders.

We have a strong partnership with the Ciel Group, for example, dating back to 1948. If you respect your partners and work together from a set of common values, there is no reason why you can’t thrive.

CSR and sustainability are major parts of your corporate strategy. In what ways are you giving back, in order to reduce poverty, increase access to education and empower local communities?

My group, like many others, is very aware of the fragility of society here, and even more so after two years of COVID. We have set up the Fondation Joseph Lagesse, named after my grandfather and headed by Martine de Souza, who is solidly grounding the foundation.

We are not a check-writing foundation that simply dishes out funding and sends people on their way. Rather, our main resources are deployed on the ground with a local communities approach. Chemin Rail and Bois Marchand in the east and outside of Port Louis, respectively, are two poverty-stricken regions where we are giving practical help such as supporting children getting to school and aiding their mothers’ quests to find and keep a job. We are alos collaborating with the US-based NGO CADCA, which has excellent services for tackling drug addiction.

Bois Marchand is more of a longer-term project, given that it is a large community of over 350 families. However, in the north we are working with some 25 families at Chemin Rail and the whole community now has their own houses, their kids are attending school, and we are trying to help with birth control. We are seeing many positive results and we are putting lots of energy into getting those communities on their feet.

Of all the companies you are working with, which offers the most exciting opportunity at the moment?

I am having fun with all of them, but hospitality is probably the sexiest because it’s about creating hotels and environments where people go to enjoy themselves.

Our latest opening is the LUX* Grand-Baie which is a five-star iconic hotel. It is seen as the best hotel in the region: the place to be. I had a lot of fun with the architects – Jean François Adam and Paul Jones, the CEO of our hospitality cluster and an absolute guru in the hospitality sector.

It’s not only fun, but it also creates well-being. I am having a lot of fun in the financial services space, too. I created AfrAsia Bank 15 years ago from a blank sheet of paper and I am quite proud of it. Then there’s the work done by the Winners retail chain, which shows we are clear leaders and are close to the community through our 25 locations across the island. The drydock shipyard is another project that makes us particularly proud.

Spending time at the beverage company and listening to the craft beer producers is fun in order to understand how it works and to see the final product launch in the market. Overall, if I were forced to pick just one “favorite”, it might just be the hospitality side of things.

Do you have a final message for readers?

Mauritius provides a fantastic work-life balance. I am Mauritian, born and raised, and I can attest to our wonderful environment, great infrastructure and excellent internet connectivity.

The airport is starting to get back to normal. There are flights four times a day to Europe and twice to Africa, with Asia is starting to open up again, too. The roads are of high quality, healthcare is rapidly improving and many large players – like us – are coming into the fold, which will allow us to offer even more first-rate facilities.

Security is also good. All in all, we find the best talent one way or another. Mauritius is a fantastic base from which to do business in the wider region.