The “Enron of Egypt” sets out to clean up its act. Arabia Investments (AIND) posted a normalized net profit after tax and minority of EGP 14.9 mn in 2017, the company said in a disclosure yesterday (pdf).

Why is AIND emphasizing normalized results? After coming in to find their auditor referred to the company as the “Enron of Egypt” and had offered a “heavily qualified opinion,” a new lead shareholder and new management team took the bullet and recognized a previously unrealized foreign exchange loss of EGP 387 mn from CDCM, its automotive business, in FY2016 and re-stated its financials for that year. The normalized figures set aside most of that as well as EGP 195.4 mn in non-cash impairments the company has booked for FY2017. Its statutory financials show a net loss after minority interest of EGP 189 mn for the year ending 31 December 2017.

What’s this “Enron” stuff about, anyway? Arabia is trying hard to clean up its act under new chairman and lead shareholder Gamal Abdel Fattah after what a new management team is positioning as years of mismanagement. That “Enron of Egypt” line? It’s a direct quote from Rania Afifi, AIND’s Chief Investment Officer, who admits that’s how the company’s auditor positions the outfit when he teaches it as a case study in business school. “When we came in, there was one negative surprise after another. Every time we looked at a new holding … let’s just say there are just five companies that matter, around which we can build a turnaround story,” she told us yesterday.

The car business is a sideshow for now. According to Afifi: “There could be value in CDCM,” which recently lost the rights to Peugeot in Egypt to the Mansour group after a decades-long run, “but there were so many negative surprises there that we fully impaired the goodwill of the business. It’s upside: If the auto division were to enter into a partnership with a new global brand, that’s upside for shareholders. We have huge legacy issues and we’re addressing each and every one of them. We are transparent and we’re going to remain open to shareholders and the market as we focus on creating value at some very healthy assets.”

So, what does AIND do? “We’re an investment holding company, and we have some very good assets in both non-bank financial services and construction and building materials,” says Afifi, a former director of investment banking at Beltone, where she had a 12-year run. Afifi (bio here in pdf) started her career at EFG Hermes on the institutional sales side of the business before moving over to investment banking. “We’re in the midst of a radical cleanup on the financial and operational sides and have found we have two very strong verticals in building materials and non-bank financial services. We’re not turning our back on automotive, but we won’t invest more capital unless it makes sense on an opportunity-cost basis.”

Who’s on board? The board (members and bios here in pdf) is led by Gamal Abdel Fattah, an Egyptian with a long track record in construction and real estate in the UAE, who began building a position in AIND in 1Q2017 and brought in a new board last May. The company is led by CEO Hazem Zifzaf, who joined in June 2017, having earlier risen through the ranks at Pepsi to handle all of Latin America for the global FMCG giant. He also served at Lafarge Holcim as a senior exec.

In related news, AIND’s CDCM is seeking a EUR 150 mn compensation from Peugeot-Citroen for terminating its representation contract, Youm7 reports. AIND had announced in November that it had formally started legal proceedings against the French car maker after an unexpected end to their 41-year-old partnership. Peugeot-Citroen chose a consortium of Mansour Group and Dubai-based Scope Investment to be its licensed distributor of Peugeot vehicles in Egypt. CDCM is said to now be looking to replace Peugeot with a Chinese brand and could be kicking tires at Bisu Auto or GAC Motors, according to the domestic press.