Can Nutun (JSE:NTU) Rebound from a 90% Share Price Drop?

The 90% plunge in Nutun Limited's (JSE:NTU) share price since its 2024 restructuring has left investors questioning whether the company can recover from its struggles in the debt recovery and BPO sectors. While the firm's aggressive cost-cutting and strategic refocusing have stabilized its liquidity, the path to long-term value creation remains fraught with challenges. This analysis evaluates Nutun's fundamental turnaround potential, weighing its operational restructuring, market positioning, and the risks that could derail its recovery.

The Restructuring: A Foundation for Survival, Not Yet Growth

Nutun's 2024 restructuring marked a dramatic simplification of its operations. By splitting into two divisions—Nutun South Africa (debt collection and recovery) and Nutun International (BPO services)—the company eliminated non-core assets like WeBuyCars and Nutun Australia, reducing overheads by R118 million through debt settlements. The half-year 2025 results show a narrowing of core losses from R104 million to R71 million, driven by lower interest costs and streamlined operations. However, this improvement is transitional. The company's core loss of R71 million in H1 2025 still reflects the early stages of its two-year transformation plan.

The liquidity boost is a critical win. Nutun secured funding commitments from major banks until 2027, enabling it to re-enter the unsecured non-performing loan (NPL) acquisition market. This is vital for its debt recovery business, which relies on purchasing distressed portfolios at a discount and recouping value through collections. Yet, the company's cautious approach—strict credit policies and pricing disconnects in certain sectors—has delayed portfolio growth.

Strategic Refocusing: A Dual-Track Approach

Nutun South Africa has shifted to targeting “strategic, scalable, and sizeable mandates,” even as it reduced its client base by 6%. This pivot aims to prioritize high-impact deals over volume, a move that could stabilize revenue if successful. Meanwhile, Nutun International has diversified its BPO client base to 35 clients across the UK, US, and Australia, operating 2,069 billable seats by H1 2025. This geographic spread reduces reliance on any single market, but the division's flat revenue growth suggests it has yet to capitalize on its expanded footprint.

The BPO sector itself is evolving rapidly. Automation, AI-driven analytics, and outcome-based pricing models are reshaping the industry. Nutun's ability to adopt these technologies will determine its competitiveness. For instance, AI-powered debt collection tools could improve recovery rates, while BPO clients increasingly demand data-driven insights. However, the company's current focus on cost-cutting may limit near-term investment in innovation.

Challenges in the Debt Acquisition Portfolio

The most pressing issue lies in Nutun South Africa's debt acquisition portfolio. Purchased book debt (PBD) revenue fell by 9% in H1 2025 compared to the prior year, driven by reduced NPL acquisitions and an aging portfolio. Amortisation costs rose by 5% to R422 million, reflecting deteriorating collections and economic headwinds in South Africa. The carrying value of PBD declined marginally to R4.388 billion, but the estimated remaining collections (R7.8 billion) suggest the portfolio still holds potential—if Nutun can re-enter the acquisition market aggressively.

The company's conservative approach to portfolio expansion is understandable given the risks of overpaying for distressed assets. However, this caution could also stifle growth. Nutun must balance risk mitigation with the need to scale its debt recovery operations. A key test will be its ability to acquire high-quality NPL portfolios at attractive prices while navigating South Africa's challenging economic environment.

Industry Risks and Geopolitical Uncertainties

Nutun's BPO operations face broader industry risks. The rise of AI and automation is forcing competitors to invest heavily in upskilling staff and adopting new technologies. Nutun's current focus on cost reduction may leave it lagging in this race. Additionally, compliance with data privacy standards like ISO27001 and SOC2 is non-negotiable in the BPO sector. Any lapses could damage its reputation and client relationships.

Geopolitical risks, particularly in the US—a key market for Nutun International—add another layer of complexity. While no immediate impact has been observed, the company's exposure to the US financial services and utility sectors could amplify volatility if regulatory or economic conditions worsen.

Investment Implications: A High-Risk, High-Reward Play

Nutun's restructuring has laid the groundwork for long-term value creation, but the company remains in a transitional phase. The improved liquidity and simplified structure are positives, but the debt acquisition portfolio's performance and BPO growth are still unproven. Investors must weigh the following:

1. Liquidity and Funding: Nutun's access to funding until 2027 provides breathing room to execute its strategy. However, its ability to reinvest in high-quality NPL portfolios will determine whether this liquidity translates into growth.
2. Operational Execution: The success of Nutun South Africa's strategic mandates and Nutun International's client diversification hinges on effective execution. Delays in scaling these initiatives could prolong losses.
3. Industry Trends: The BPO sector's shift toward AI and automation presents both opportunities and threats. Nutun must invest in technology to remain competitive, but this could strain its cash flow.

Conclusion: A Rebound Is Possible, But Time Is a Critical Factor

Nutun's 90% share price drop reflects the market's skepticism about its ability to turn around. While the restructuring has stabilized its finances, the company's long-term success depends on its capacity to grow its debt acquisition portfolio and scale its BPO operations. The next 12–18 months will be pivotal: if Nutun can re-enter the NPL market aggressively, adopt AI-driven tools, and demonstrate consistent revenue growth, the stock could see a rebound. However, investors should remain cautious, as macroeconomic risks, portfolio challenges, and industry competition could delay or derail this recovery. For now, Nutun remains a speculative bet with high upside potential—but one that demands patience and a long-term horizon.