Profitability is rooted in providing a useful service to farmers Many people in small towns dream of leaving and hitting the big time in the big city. Bethal (population 15 000) in Mpumalanga is about as far as you can get from the bright lights of Johannesburg. So when the farmers of the Oostelike Transvaalse Landbou Koöperatiewe Vereniging (OTK) of Bethal decided they were going to take their place among the big boys of the Johannesburg Stock Exchange, they knew it would be no small feat. But everyone dreaming of taking their business all the way to the stock exchange could take a leaf out of OTK's book if they don't want to be one-day wonders. The group, founded in 1923 primarily to handle grain produced by its members, has come a long way from its long-socks-and-veldskoene farmer roots. It has grown into a company that provides services including funding, supply of equipment and insurance to its farmer clients. Now OTK operates in the grain, cotton and animal-feed sectors, among others. The 1996 listing, which had been in the pipeline for five years, brought to an end 76 years as a co-operative . The boys from Bethal were well prepared. "It was not something that popped up one morning . It was an active decision taken under the leadership of then MD Joos du Plessis," says OTK finance director De Wet Goosen. During the years of preparation, OTK established a track record - important when considering going public, says Goosen. " By the time we listed we had 15%-20% audited net profit growth over five years." OTK management had cut debt, eliminated unprofitable operations, informed co-operative member farmers of the advantages of listing and converted the co-op into a public company. Previously, OTK, like other co-operatives, had kept open unprofitable operations for the sake of serving the farmers. When OTK realised that this was not workable, the group closed down about 10 unprofitable businesses. Finally, there was the tricky task of creating a capital structure that left existing shareholders with membership funds in the same position as before listing, but was also acceptable to potential investors. Goosen says OTK was one of the first co-operatives to change its way of doing business. Farmers were kept informed so that they knew what was going on and why. Management had to get to grips with talking to investors. Luckily , Goosen says, they had Standard Corporate & Merchant Bank (SCMB) with them all the way. " That was something new for us; it took us a long time. Now we are getting used to it. That isn't to say we're perfect, though," says Goosen. Investors could be forgiven for thinking the agri company has lost its oomph recently. But big changes are on the way for the company. They started with the September appointments of two new directors - Graham Ebedes and Jeff Wright. Both have experience in the agriculture business. Wright is the former chairman of Tiger Agri-Poultry and Ebedes a former director in the Tiger Brands group. Both were appointed after the board reshuffle in which six new corporate directors joined . Of the 15 present board members, only four are farmers. The group has begun shedding its noncore assets, including its egg and red-meat interests. That and an overhaul of the balance sheet (by refinancing the debtors book) should free up cash which may be used to pay a dividend or for acquisitions. Though they have not yet decided what to buy, there is an interest in Tiger Brands' agri-poultry division . "If the Tiger agri-poultry division comes on the market and at a realistic price, we will look at it," Wright says. Expansion plans further into Africa are also on the cards. OTK does business in Zambia, Swaziland and Namibia. African expansion would take place only when things at home were solid. Ebedes has experience working in Africa north of SA from his time with Tiger Agri-Poultry. "He understands the risks involved in operating in foreign African markets, and the swings that currencies in these countries go through," says Wright . Other fresh ideas include that of a digital marketplace. The company is looking for first-mover advantage in the market and for international technology partners for the venture. The market will be personalised for individual farmers and will let them have information unique to them about their farming, hedge against the cyclical nature of their produce, follow their account and even track shipments of goods they have ordered. The new buzzwords at OTK are increasing shareholder wealth, economic value added (EVA) and adding value. The company wants to increase the value of the company by making farmers who are clients and shareholders more profitable. "OTK needs to eat, sleep and breathe farmers and vice versa if the group is going to make farmers and OTK profitable. We want to offer personalised service and become indispensable," says Ebedes. Though the journey from Bethal to the JSE started four years ago last week, the company only recently opened an office in Johannesburg. The main activity remains in Bethal. The forecast for the year remains unchanged, says Ebedes, with a 3%-5% increase in EPS.