DStv Media Sales admits to price fixing

By Staff Writer

DStv Media Sales has admitted to price fixing and the fixing of trading conditions in contravention of SA’s Competition Act.

The admission forms part of a consent agreement concluded between the company and the Competition Commission.

In terms of the consent agreement filed with the Competition Tribunal on Thursday‚ DStv Media Sales has agreed to an accumulative remedy of R180m. It agreed to pay an administrative penalty amounting to R22.2m.

The company will also pay R8m to the Economic Development Fund over three years‚ to enable the development of small‚ black-owned media or advertising agencies requiring assistance with start-up capital‚ and to assist black students requiring bursaries to study media or advertising‚ among other things.

This will be managed by the Media Development and Diversity Agency and audited annually.

DStv Media Sales has further agreed to provide 25% in bonus airtime for every rand of airtime bought by qualifying small agencies. This aims to help smaller agencies participate in the market. The bonus airtime will be provided for three years and is subject to a total annual airtime cap of R50m.

The matter relates to a November 2011 investigation which found that‚ through the Media Credit Co-ordinators (MCC)‚ various media companies agreed to offer similar discounts and payment terms to advertising agencies that place advertisements with MCC members. MCC-accredited agencies were offered a 16.5% discount for payments made within 45 days of the statement date‚ while non-members were offered 15%.

The commission found that the practice restricted competition among the companies as they did not independently determine an element of price in the form of discount or trading terms. This amounts to price fixing and the fixing of trading conditions.

The consent agreement is awaiting confirmation as an order by the tribunal.

Source:BDproDate: 2017/05/26

Old Mutual unit’s listing on the cards

The dual listing of Old Mutual plc’s emerging-markets unit on the Johannesburg and London bourses is expected soon after the release of its results for the 2017 financial year and will be named Old Mutual Limited, the insurer says.

It would also implement a demerger — to the benefit of existing shareholders — and a small initial public offering of Old Mutual Wealth around the same time, it said on Thursday.

Old Mutual plc, which is in the middle of a “managed separation” of its four core business units — including the wealth business Old Mutual Emerging Markets and banker Nedbank — usually releases its results towards the end of February or early March.

“The timing for the next stage of managed separation will in part be dependent on receipt of regulatory approvals, but we currently anticipate the listing of Old Mutual Wealth and the South African holding company to take place at the earliest opportunity in 2018 after Old Mutual plc’s 2017 full-year results,” said CEO Bruce Hemphill. “The subsequent distribution of a significant proportion of the shareholding in Nedbank from Old Mutual Limited would follow in due course.”

Old Mutual plc would be absorbed into Old Mutual Limited, which would retain a small stake in Nedbank.

So far, the insurer has offloaded its majority interest in its US asset manager to HNA Capital and other investors, reducing its interest to 22.4%.

Source:Business DayDate: 2017/05/26

Unlisted Wafima buys Winhold for cash

By Robert Laing

Small cap industrial holding company Winhold’s share price jumped 30% to R1.17 on Friday after announcing it had received a buyout offer at R1.25 a share.

Winhold‚ the owner of Gundle Plastics and Inmins‚ said it received an offer from unlisted Wafima Manufacturing and Distribution to buy it for cash. The R1.25 per share offer values Winhold at R158m.

Investors owning 68% of Winhold’s shares in issue have already accepted the offer‚ Friday’s statement said.

Winhold is scheduled to release its interim results for the six months to end-March on Monday. It said in a trading statement on May 15 it expected to report headline earnings per share grew in the range of 275% and 281%‚ or between 6c and 6.1c‚ from the matching period’s 1.6c.

Source:BDproDate: 2017/05/26

Easter threw out Tiger Brands’ results’

Transcript service‚ May 24 2017

Lawrence MacDougall is CEO of Tiger Brands.


Tiger Brands has reported a 7% increase in first-half headline earnings per share and has also highlighted to investors that it plans to focus on reviving its domestic business‚ as an economic rebound in the rest of Africa is unlikely.

Earlier BDTV sat down with Tiger Brands CEO Lawrence MacDougall to find out more about those numbers and also the shift in strategy.


Yes‚ the biggest falls were really in snacks and treats and in our beverage business. Snacks and treats was primarily though our range rationalisation and SKUs (selling/stock keeping unit) that we’ve trimmed and some of that was planned.

On the beverages side‚ it was really driven by a strike that we had earlier in the year which left us short of volume and we’ve struggled to catch up since then. Those are the two key parts of the consumer division that dragged the volume down. We also had a significant shift in Easter with it being later in the year‚ which gave us the impact in March. So we think of our overall 3% decline about 2% of that can be related to the shift in Easter.


So is it wrong then‚ to read into the volume decline‚ consumer that is seriously stressed‚ specifically if we look to the second half of the year‚ which you seem to be very downbeat on ... more issues within Tiger Brands than in the consumer environment at large?


No‚ not at all. The consumer is definitely under stress and we’ve seen a decline in most of our categories. The division that has performed the best is grains and milling‚ particularly around bread‚ rice and pasta and things like that‚ where the consumer is clearly buying more starch and staples to fill their plate. But the rest of the divisions are seriously under stress and I think that consumer stress will continue into the second half.

We’ve heard that inflation is going to come down and we will see some of that with the maize pricing. There willdefinitely be deflation in maize and we’re hoping that some of that consumer discretionary spend will then move back to the other categories and therefore try and boost that in the second half.


What’s going to be more acute for you‚ a drop in maize prices‚ which have (come) down significantly‚ or the Western Cape drought‚ which is presumably going to affect wheat prices. Which are bigger for you or are they equally important?


They are equally important. The maize prices have not come down yet. Everybody had positions — we’ll see those come down in the latter part of the year‚ definitely‚ so that will give the consumer some relief. Wheat prices have stabilised primarily and that’s played itself out in the market already. So I don’t think the current

drought in the Western Cape is going to impact this year. What I’m more worried about is the impact it’s going to have on fruit and vegetables and stuff like that going into next year. So the impact that the 30% reduction on usage that they’re asking farmers and consumers to have is going to play itself out in the agri industry next year.

BDTV: Because you’ve already had a difficult six months as far as deciduous fruit exports were concerned. I’m just curious about the 25% drop in operating profits in the exports and international division. You refer to the rand being much stronger and comparatively it was‚ but if you look (at) a three-year basis‚ we’re still with a weak currency compared with where we were a few years ago?


Yes‚ versus last year is the impact‚ so although when you look at our performance at a constant currency in Cameroon and in Nigeria‚ our performance is improved. And then when you translate it back into the rand‚ that’s when you’re seeing the dilution in the operating margins. Our deciduous business‚ obviously the exports from Langeberg and Ashton are priced against forward cover so we actually agree those prices for the crops ahead of time and that’s where you’ll see the dilution. Their volumes were actually up so volumes up but the overall impact of the business was negative.


Have you had rethink any of your hedging? Obviously‚ you would have seen one of your big competitors‚ Pioneer Foods took a real whack on their maize hedging policy. Has it caused you any pause?


Our internal governance is pretty tight. We’re not commodity traders and we don’t propose to be in the future‚ therefore we take very clear positions and we make sure that our positions can be either priced out in the market‚ or we’ve compensated for with marketing spend or pack sizes or something else. We’re just very sure that we need to stay as a consumer-branded company‚ we’re definitely not commodity traders. And although we’re in that space we have very strong brands and that’s what we have to focus on.


Okay‚ so let’s talk about what you’re going to focus on because you’ve been in the role for just about a year now....


Just over a year.


You’ve completed this gargantuan strategic review. In a nutshell what is it that Tiger Brands has set itself to do over the next five years?


It’s very simple. We’ve looked at what the true potential is on each of our categories and each of our brands‚ where the opportunities are to grow and which of the segments we have opportunity to expand in right alongside the core categories we participate in‚ so our growth strategy is very clearly aligned‚ where we want to play and how we’re going to win in each of those categories. And we’ve outlined the growth drivers in each of those.

So it is marketing 101‚ but over the last five years the business hasn’t focused on those things. We therefore see a big opportunity in looking at weighted and numeric distribution‚ focusing on pack sizes‚ looking at price relativities‚ making sure we’re picking up on new consumer trends and therefore our innovation and our introduction of new products and SKUs will be related to that. So the growth strategy is very clear. We’ve then looked at our costs and our margins and said where are the opportunities for us to improve efficiencies and where are the opportunities for us to take costs out of the business.

Some of that is around trimming down the number of SKUs or brands that we have or that we try to support and therefore focusing on fewer‚ bigger‚ better bets.


I have to ask you what an SKU is for those of us who don’t know. That’s a selling unit. Within a brand you have many units‚ each of those is a selling unit.

Okay‚ and then very lastly because you have actually attached some numbers for what you expect here. What should the market‚ or investors‚ be focusing on?


The way the numbers play themselves out‚ you can see there’s an improvement in our gross margins that we’re forecasting and that basically drops to the bottom line. So that’s where we will get the efficiencies in our factories‚ the SKU rationalisation‚ improved efficiencies‚ as I said. What we’ve then done is looked at what amount of money we need out of our variable overheads‚ so not out of the people but out of the discretionary spend in our business and we believe there are about another 100 basis points on margin there that we want to reinvest in our marketing spend.

I have repeatedly said that our marketing spend is under indexing versus global and local benchmarks and therefore putting money back into our brands and supporting those at the right levels is really important to us.

Source:BDproDate: 2017/05/26

Onerous aqueduct project splashes Esor results with red ink

Civil engineering and construction group Esor swung into a loss for the year to February because of its struggling Northern Aqueduct project and other asset write-downs.

The group reported a loss of R139.8m compared with profit of R3.7m in the prior financial year. The group has struggled over the past few years and its share price has fallen about 83% over the past five.

It reported revenue of R1.4bn to February 2017.

There was an increase in its order book to R1.54bn from R1.4bn at the end of the first half of its financial year .

CEO Wessel van Zyl said the top-line performance was satisfactory given the losses on the additional repair work that Esor completed at Northern Aqueduct, which amounted to R102m for the 2017 financial year.

The Northern Aqueduct is being built in Umhlanga and forms part of long-term plans to facilitate efficient delivery of water to the north of Durban.

“It remains an onerous contract to complete, given the nature of the repair work....

“A number of factors prevented completion by year-end, including rain and community unrest, resulting in cost overruns,” said Van Zyl.

Esor expects to complete the project in December and is finalising an agreement on the replacement of bedding materials. Esor’s initial professional indemnity insurance claim relating to the repair costs of the defective welds at the project has been accepted and R48m has been given to Esor.

Van Zyl said profitability had also been affected by the impairment of Esor’s goodwill to the value of R51m.

He said Esor was in a healthy position to successfully navigate the next two years. Pending awards of R1.6bn at May 2017 meant Esor had secured sufficient work to see the group through the cycle ahead.

Investec chief economist Annabel Bishop said there were weaknesses in building and construction in SA.

“Building plans passed fell in the first quarter of 2017, suggesting there would be weak building activity in the second and third quarters of the year as the housing market is constrained by costs and affordability following on from rising interest rates and unemployment over the past few years,” said Bishop.

Source:Business DayDate: 2017/05/26

MiX’s new customers big boost to revenue

MiX Telematics added 55,800 new customers during the year to March, taking its total base to 622,000. This increased the vehicle tracking group’s subscription revenue by 7.1% to R1.23bn.

MiX provides software that helps companies and individuals track their vehicles in about 120 countries in Europe, Africa, the Middle East, the Americas, Australia and Brazil.

CEO Stefan Joselowitz said the group was starting to benefit from previous investments.

“During fiscal 2017, the company reached an inflection point in regards to margin accretion, particularly as MiX is moving out of a heavy investment cycle into a phase where we are starting to enjoy the returns on these investments,” he said.

Profit for the year was R121.4m compared with R182.5m in financial 2016.

MiX’s biggest market is subSaharan Africa, which contributes the bulk of the company’s customers.

The region is driven largely by South African consumers who have installed MiX tracking devices such as Beame in their vehicles and in their other moveable assets.

Joselowitz said Brazil was the best-performing region, though from a low base, and the company recently won a number of contracts there. Subscription revenue from Brazil rose 80.8% to R32.6m.

Source:Business DayDate: 2017/05/26

Big four worry about Capitec taking clients

Moyagabo Maake

Bank shareholders have been approaching the four largest banks about upstart Capitec’s customer numbers, worried that it is eating into their customer base and stealing market share. But customer growth across the big four has analysts wondering where the Stellenbosch-based lender, which aims to cover all of its operating costs from transactional fees by 2020, finds its clients.

Capitec reported 1.3-million new customers in the year to February, swelling the ranks to 8.6-million, 46% of whom had Capitec as primary banker.

The increase in customers, coupled with the expansion in Capitec’s ATM and branch network and customers’ increased use of self-service banking, has resulted in a 30% increase to R3.9bn in transaction income. This covered 72% of operating costs.

“Capitec’s ability to further grow unsecured loans and advances is constrained by their large market share, so the growth driver for Capitec has become growth in transactional revenue,” says Bradley Preston, chief investment officer at Mergence Investment Managers.

Meanwhile, Absa held on to its 9.1-million customers in the year to December, unchanged on the previous period. At Nedbank’s retail and business bank, customers numbered 7.4million at the end of December, 4.8% more than the year before.

“FNB reported 5% growth in the consumer segment [to December], which is the bottom end of the market, and 8% in the premium segment,” says FirstRand head of investor relations Sam Moss.

Standard Bank does not report customer numbers.

A banking insider said Capitec may be grabbing market share among people who earn less than R300,000 a year. “It would be difficult for Capitec to take market share on the upper end. [It] just got a credit card, no home loans, no premium products.… Why would customers move for a transactional account only?”

But this perhaps betrays a misunderstanding of Capitec’s business model. Capitec CEO Gerrie Fourie has said that about 70% to 80% of its new customers in 2016 financial year switched from other banks, frustrated with high fees and complex products.

“Capitec’s model of winning transactional clients has been through winning deposit clients with attractive rates and converting them to transactional in time. This is different to the big four, who typically have won clients by winning home-loan business, for example, and then building the transactional relationship around that,” says Preston.

Still, this leaves questions about customer growth at most banks unanswered.

Source:Business DayDate: 2017/05/26

Implats plunges on convertible bond plan

The Impala Platinum (Implats) share price fell as much as 12% on Thursday after the world’s second-largest platinum producer unveiled plans to raise about $400m in a convertible bond to replace a similar bond due in February 2017, instead of adding billions of rand of debt to its balance sheet.

Implats has a $200m convertible bond and a R2.67bn convertible bond due in 2017.

While the company has undrawn debt facilities of about R4bn in place to repay these bonds, it opted to approach the market with a dollar and rand convertible bond repayable in 2022 to replace the existing bond without putting debt on its balance sheet in an uncertain market.

The news sent the shares price tumbling 12% before closing 9.77% lower at R37.50, despite some analysts saying that the decision was a positiveone for the company in a weak and uncertain platinum price environment.

Goldman Sachs said on Thursday, that despite boosting Implats’s interest costs by R140m, the decision removed “any near-term balance sheet risk”. Implats had approached bondholders to test the appetite to replace the existing bond and found a large degree of support for the measure, which protected its balance sheet by not adding debt to it in an uncertain operating environment and weak global platinum market, spokesman Johan Theron said.

The coupon for the new dollar bond, which will raise up to $300m, and the rand bond, which will raise up to R2.6bn, will be set after the book building exercise that will test market appetite for the bond.

The 2022 rand bond was expected to bear interest of between 6% and 6.75%, while the dollar bond would be in a range of 2.875% to 3.625%.

The 2018 rand bond, by comparison, bore interest of 5% and the dollar note 1%.

There would be no premium offered to existing bond holders that Implats wants to buy out.

The attraction of the new bond for existing holders would be a higher yield than the one issued four years ago.

Implats had opted for the convertible bond instead of a normal corporate bond, which would need a credit rating on the business as a standalone entity, a costly and timeconsuming exercise, Theron said. Implats was fully funded to bring its new 16 and 20 shafts into production and would not need to raise further capital.

Source:Business DayDate: 2017/05/26

Tiger Brands to be vigilant on continent

Tiger Brands is refining its rest of Africa strategy, saying it will adopt a more focused approach when entering new territories. This comes after the disposal of operations in East Africaand Nigeria.

Speaking on Thursday, new CEO Lawrence Mac Dougall said, historically, the pursuit of geographic diversification had led to a loss of focus and thinly spread resources. “The intention is to reverse this cycle of underperformance by creating fuel for growth through focusing the portfolio and distorting investment where appropriate. Defining the core is therefore critical to building portfolio strength and performance.”

Mac Dougall stressed that Africa and emerging markets remained a key part of Tiger Brands growth strategy but that a new refined approach would be taken with regards to these territories. “Looking ahead, we will prioritise core category opportunities based on market attractiveness, strategic fit and our right to win. Similarly, the role of associates will be reviewed continuously,” he said.

Mergence portfolio manager Peter Takaendesa said the company had published key performance indicators with a fiveyear target as part of the review that looked at aspects such as gaining market share, improving profitability and lifting the group’s return on investment.

“We prefer management teams that provide clearly defined and measurable targets aimed at improving return on investment,” he said.

What was concerning, said Takaendesa, was the group’s outlook statement for the rest of its financial year. “It points to challenging volumes in the South African business for the remainder of the year as volumes have slowed significantly in the second quarter to March 2017 and a recovery in exports and the international business is not imminent. This appears to be a general theme in the food producers sector based on the recent results reported by their peers,” said Takaendesa.

In the six months to March, Tiger Brands reported a 25% decline in operating income in exports to R194m. Overall volumes in the domestic business declined by 4% due, in part, to the Easter period falling in March 2016 compared with April in the current year, said Tiger Brands.

Takaendesa said in line with many other companies exposed to the South African consumer, Tiger Brands would be affected by weaker consumer spend.

“However, we expect the company to be relatively defensive compared to other consumer-focused firms and could outperform their peers over the next two to three years if they execute well to achieve their published five-year targets,”

Source:Business DayDate: 2017/05/26

Massmart sales outlook gloomy

ales for diversified retailer Massmart Holdings in the first five months of this year were disappointing and no noticeable improvement was expected in the local consumer sector for the rest of this year, CEO Guy Hayward told shareholders at the group’s annual general meeting on Thursday.

Massmart’s shares slid 6.75% to R110.75 by mid-afternoon on Thursday, back to levels last seen in November 2016.

Although Massmart was hopeful in February of a recovery in the sector in the second half of this year, based on positive early indicators, political developments in March and April changed the outlook.

Hayward said there was a notable downturn in discretionary purchases after these events, reflecting both weak consumer confidence and underlying economic issues.

Although sales growth was weak, Massmart grew its market share in all key categories.

For the first 21 weeks of this year, Massmart’s total sales grew 0.3%, but comparable sales growth was -1.9%. Comparable sales from stores in SA were down 0.4% in this period, while outside SA, comparable sales were 15.7% lower.

Massdiscounters, the division that includes Game stores and DionWired, saw comparable sales fall 3.3%, but food and liquor sales from Game outlets continued to perform strongly.

Masswarehouse, which includes Makro and The Fruitspot, grew comparable sales 0.7% and again food and liquor sales were stronger than general merchandise. Online sales grew 48% over the same period last year.

At Masscash, which includes wholesale brands such as Jumbo Cash & Carry and retail brands such as Cambridge Food, comparable sales dropped 3.7%.

Hayward said it was difficult to provide any useful trading expectations for the rest of the year in the current political and economic climate.

Source:Business DayDate: 2017/05/26

TFG acquires Australian menswear group RAG

TFG is the latest retailer to enter the Australian market, announcing on Thursday that it would acquire menswear group, Retail Apparel Group (RAG), for up to R3bn.

CEO Doug Murray said the move was a strategic decision aimed at diversifying income streams, but analysts expressed concerns about the entry into the Australian market, saying South African retailers had struggled in that country.

TFG’s share price dropped 5.79% to close at R132.34.

Murray said that diversifying the business through the acquisition of a well-run and wellmanaged company such as RAG made good business sense.

“Australian retailers have easily come to our backyard and we have always thought that we could trade there.

“We know Australian retail is very tough, but it is also tough here at home, one just has to look at the figures coming out of retailers.

“But RAG is an outstanding business, with a great trade record. The business is of size, but not so big that it will cause risk to the mother ship,” Murray said.

TFG said that it would pay cash, and the agreed price was capped at seven times RAG’s audited normalised earnings before interest, tax, depreciation and amortisation (ebitda) for the year to June 2017, up to a maximum of A302.5m, or R3bn.

Electus Fund Managers equity analyst Damon Buss said South African businesses that made acquisitions in Australia had generally struggled as the market was extremely competitive. These included Woolworths and Mr Price.

Buss said RAG’s revenue (compound annual growth rate) over the past three years compared with ebitda indicated that margins were declining.

“The Australian consumer is under significant pressure,” he said.

TFG completed a number of acquisitions in the past two years including Whistles inthe UK.

Murray said “further acquisitions would never be entirely off the cards as long as there were good opportunities about”.

In the year to March 2017, TFG said turnover for TFG Africa was up 8%, with comparable sales growth of 2.8%. TFG Africa is the retailer’s operations on the African continent. TFG International reported turnover growth of 45% in sterling.

Kagiso Asset Management associate portfolio manager Simon Anderssen said it was concerning that comparable store sales declined from 3.7% over the nine months of the financial year to just 0.2% in the fourth quarter.

Buss said the like-for-like sales for the second half of the retailer’s 2017 financial year were all the more concerning as the figures were for before the cabinet reshuffle and the ratings downgrades, which had affected consumer confidence.

Anderssen said a positive from the group’s results was that costs had remained “relatively well managed” and had benefited from lower debtor costs. However, the outlook for the company was not optimistic.

“Trading clearly slowed after Christmas and it’s reasonable to expect that it slowed further from April because of weaker consumer confidence related to domestic politics and the sovereign bond rating downgrade,” he said.

Sanlam Private Wealth investment analyst Renier de Bruyn said despite TFG achieving better sales growth than peers over recent years, cash conversion had been much weaker.

“This is as a result of aggressive space growth and slower inventory turn given its mix of merchandise. Management has emphasised sales growth in the past, but will likely aim to improve cash flow over the next few years,” he said.

Buss said it was pleasing to see that the business continued to generate cash, up 27% to R3.3bn in the period under review. Net bad debts also decreased 5.4% — a combination of a slowdown in new accounts and “very good credit management by TFG”.

“While the inflation outlook is improving, which will improve consumers disposable income, higher taxes and deteriorating consumer confidence post the cabinet reshuffle and ratings downgrades will see retailers revenues come under further pressure,” he said.

“We think the results of retailers are going to get worse over the coming months,” Buss said.

Murray said it was unlikely that the trading conditions would improve soon. “But we have a very innovative team here and great management.” Murray, whose contract has been extended to at least the end of the 2018 financial year, said TFG was building a business of scale.

“I will be here until the end of this coming financial year. If I leave then, or even now, I would be happy with what we have done,” Murray said.

“At TFG we look quite far into the future and we are setting the group up to have fantastic success in the years to come”.

Source:Business DayDate: 2017/05/26

Local named to lead Edcon

Edcon will again be under the leadership of a South African in 2018, when Bernie Brookes steps down as CEO to make way for former Massmart top man Grant Pattison.

Pattison would take the role of chief operating officer and CEO designate on June 5, ahead of the CEO position in 2018, Edcon said on Thursday.

“I’m not going to be naive and say that this job won’t come with challenges,” Pattison said on Thursday. “But someone has to step up to the plate.

“The challenge of restoring Edcon to its former glory is a privilege. Opportunities like this don’t come along often.”

Pattison’s appointment puts local talent back in charge of SA’s largest nonfood retailer following stints by American Stephen Ross, German national Jürgen Schreiber and Australian-born Brookes.

Brookes was appointed on a two-year contract. He steered the debt-to-equity deal that saw Edcon come under the control of its creditors.

Pattison has the challenge of revitalising the CNA brand, extending Edcon’s footprint in the rest of the continent and orchestrating a strategy for the future for the company.

Pattison was at the helm of Massmart from 2007 to 2014. He navigated the sale of a majority stake in Massmart to USbased Walmart.

36One Asset Management analyst Evan Walker said the news of Pattison’s appointment was unexpected.

“Pattison is a good retailer but he has no experience in fashion and apparel. It certainly does come as a surprise. I’m sure he is very capable but I think he has the hardest job in the world,” said Walker.

In the year to March 25 2017, Edcon said that its group sales decreased 6.7% to R25bn.

Sales at comparable stores fell 6.7%.

Edcon concluded a new agreement with Absa in late November 2016 to acquire 80% of all new credit applications for Edcon’s in-house second look credit book. As a result, the inhouse book had grown more than 150% compared with the year-earlier period.

“Selling the credit book to Absa to begin with wasn’t a great decision,” said Brookes.

“But Bain would have sold their children if they could have at that point just to keep the business afloat. But the new agreement with Absa has contributed positively to stronger new credit sales.”

Absa bought Edcon’s debtors’ book in 2012. It was worth about R8.8bn then.

Brookes said Edcon had no interest in buying the book back and was happy to grow its own, which now reflected a value of about R800m.

The Edgars division, which includes Edgars stores, reported total retail sales of R10.2bn, a decrease of 6.7% compared with the year-earlier period.

Within the discount division, which includes Jet and Jet Mart stores, sales decreased 6.3% to R8.9bn, while comparable store sales decreased 5.7%.

The speciality division, which includes Boardmans, Red Square, Edgars Active, Edgars Shoe Gallery, Legit, CNA and the monobranded stores, reported retail sales of R5.5bn, a 6% less than the previous year.

“If I was younger, I would have loved to stay on for another three years or so,” said Brookes.

“But we are pleased with the appointment of Grant and we look forward to the improving fortunes of Edcon,” he said.

Source:Business DayDate: 2017/05/26

Implats shares fall after convertible bond announcement

By Allan Seccombe

Impala Platinum shares fell as much as 18% to R33.92 on Thursday morning after the world’s second-largest platinum producer unveiled plans to raise $450m in a convertible bond to roll over debt due in February 2018.

Impala has a $200m convertible bond and a R2.67bn convertible bond falling due in February 2018. While the company has undrawn debt facilities of about R4bn in place to repay these bonds it has opted to approach the market with a dollar and rand convertible bond repayable in 2022 to replace the existing bond.

Implats had approached bondholders to test the appetite to replace the existing bond and found a large degree of support for the measure‚ which protected the company’s balance sheet by not adding debt to it in an uncertain operating environment and weak global platinum market‚ said spokesperson Johan Theron.

The coupon for the new dollar bond‚ which will raise up to $300m‚ and the rand bond‚ which will raise up to R2.6bn‚ will be set after the book building exercise that will test the market’s appetite for the bond.

There would be no premium offered to existing bond holders that Implats wants to buy out.

The attraction of the new bond for existing holders would be a higher yield on the bond than the one issued four years ago.

Implats opted for the convertible bond instead of a normal corporate bond‚ which would need a credit rating on the business as a standalone entity‚ a costly and time-consuming exercise‚ Theron said.

Implats was fully funded to bring its new 16 and 20 shafts into production and would not need to raise further capital‚ he said.

Source:BDproDate: 2017/05/26

Massmart CEO loses hope of trading environment improving in 2017

By Robert Laing

Massmart’s share price fell 3.6% to R114.73 on Thursday morning after CEO Guy Hayward said his hopes of a better trading environment in 2017‚ which he forecast in February‚ had been dashed.

“The current levels of political‚ business and consumer uncertainty make it difficult to provide any useful trading expectations for the remainder of the 2017 financial year‚ but we do not expect the South African consumer economy to show any noticeable improvement during this time‚” Hayward said at the Walmart subsidiary’s annual general meeting on Thursday.

“As regards our stores in countries outside of SA‚ this second quarter marks the annualisation of the severe currency weakness in many of those countries and so it is possible that our reported rand sales will soon show a relative improvement in growth.”

In the 21 weeks since Massmart’s 2016 financial year ended on December 25‚ total sales growth was 0.3%. But excluding new stores‚ sales declined 1.9% while its inflation averaged at 4.4%.

Measured in rand‚ total sales for stores outside of SA declined 13.3%. Excluding new stores‚ the decline was 15.7%.

In SA‚ total sales grew 1.8%‚ but declined 0.4% excluding new stores.

“In late February this year‚ in the Massmart’s December 2016 annual results release‚ we expressed cautious optimism about the 2017 financial year. This was predicated on signs of green shoots in the economy‚ including the drought ending resulting in declining food inflation‚ a stronger rand‚ potentially lower interest rates‚ and the recent improvement in the [South African Reserve Bank’s] leading indicator‚” Hayward said.

“The nascent signs that some or all of these positive influences were coming to bear were unfortunately washed away by the negative economic impact of political events in late March and April that culminated in two credit-rating downgrades.”

Source:BDproDate: 2017/05/26

Quantum sees profits scrambled as egg division records a R22m loss

By Robert Laing

Poultry group Quantum Food’s decision to sell its abattoir to Sovereign for R120m so as to focus on eggs‚ feed and broiler farming helped it grow interim revenue‚ but its profit halved.

Quantum reported 13% interim revenue growth to R2bn‚ but its after-tax profit fell 47% to R32m in the six months to end-March‚ according to its results released on Thursday.

The group splits itself into four segments‚ of which only two were profitable.

Animal feeds contributed 37% of the group’s revenue‚ and its R40m profit contribution helped compensate for a R22m loss from its egg division and R9.3m loss from its rest of Africa division.

The feeds division grew revenue 21%‚ which was not simply due to the drought pushing up crop prices because its profit grew 29%. The division was boosted by the acquisition of a feed mill at Olifantskop in February.

Its broiler farming division contributed a third of the group’s revenue and R37m profit. Its revenue grew 8.6% and profit 19%.

Its egg division grew revenue 3% to R498m‚ or 24% of the group’s total‚ but its loss widened to R22m from R21m in the matching period.

“Volumes in the egg segment were 2% lower than the comparative period due to lower production on own farms as well as reduced volumes of eggs procured from contract producers‚” Quantum said.

It managed to grow the egg division’s revenue despite lower production‚ thanks to an average 5.9% increase in egg prices‚ according to the results statement.

Quantum’s rest of Africa division grew revenue 47% to R105m‚ which only accounted for 5% of the total. It fell into a loss from the matching period’s R3m profit.

“The Zambian business remained profitable‚ but losses were incurred in both Uganda and Mozambique. In Zambia‚ satisfactory operational performance was achieved while operational performance in Uganda was below expectations‚” Quantum said.

“The Galovos egg business in Mozambique performed considerably below expectation. Significant layer-hen mortality that resulted from a period of extreme heat‚ combined with below-expected farm production efficiencies‚ negatively impacted the financial results.”

Source:BDproDate: 2017/05/26

Grant Pattison to take up CEO-designate role at Edcon from June

By Staff Writer

Former Massmart CEO Grant Pattison will replace Bernie Brookes as Edcon CEO in February 2018.

Pattison’s role on Edcon’s board will change from nonexecutive director to executive director‚ and he will take the position of chief operating officer and CEO designate on June 5‚ ahead of the CEO position next year‚ Edcon said on Thursday.

Brookes’s contract‚ which was to expire in September‚ has been extended until the end of January.

“Grant will assume immediate responsibility for the group’s strategic implementation process‚ the CNA brand‚ Edcon’s growing cellular offering‚ as well as its Africa business‚ where Edcon operates in eight countries on the continent‚ in addition to SA‚” Edcon chairperson Gareth Penny said.

“We are delighted that Grant‚ who is undoubtedly one of SA’s most respected and experienced retailers‚ has accepted the appointment as chief operating officer‚ transitioning to the CEO position in early 2018. He has been closely involved in various aspects of the group’s strategic direction and working closely with Bernie on a day-to-day basis over the coming months will result in seamless continuity.

“Bernie’s leadership over the last two years has not only ensured the group’s survival‚ but has positioned Edcon appropriately in rebuilding the business and ensuring long-term sustainability. We will always be grateful for his significant contribution and the guidance and knowledge he has passed-on to the Edcon team‚” Penny said.

Source:BDproDate: 2017/05/26

Tiger Brands reports interim HEPS up 7% to R10.36

Fast moving consumer goods group Tiger Brands on Thursday reported a 7% increase in interim headline earnings per share (HEPS) to R10.36 for the period to end-March.

The company declared a dividend of R3.78 per share‚ an increase of 4% from the previously comparable period.

Group operating profit was up 10% to R2.2bn.

The company said a strong domestic performance

was partially diluted by “tough trading conditions in exports” and its international business‚ coupled with a “decline in income from associates”.

Group turnover from continuing operations increased 7% to R16.4bn.

The company overall volumes declined 3% attributing its growth in turnover to‚ in part‚ an increase in prices.

Source:BDproDate: 2017/05/25

TFG to buy Australian menswear group

By Robert Laing

TFG‚ the JSE-listed holding company of fashion chain Foshini‚ is acquiring Australian menswear group Retail Apparel Group (RAG) for up to R3bn.

TFG said it would pay cash‚ and the agreed price was seven times RAG’s audited normalised earnings before interest‚ tax‚ depreciation and amortisation (ebitda) for the year to end-June 2017‚ up to a maximum of A$302.5m.

The South African retailer is buying 100% of the Australian chain from private equity group Navis Capital and RAG’s founder Stephen Leibowitz along with other members of management.

RAG operates 400 stores trading under five brands: Tarocash‚ yd‚ Connor‚ Johnny Bigg and Rockwear.

“TFG believes that the product and value offerings of RAG are well aligned with the current brand and value offering of TFG. In conjunction with TFG’s recent value-enhancing acquisitions of Phase Eight and Whistles‚ the acquisition will further diversify its international expansion into its chosen geographies. RAG’s strong store and online platform is expected to catalyse the expansion of TFG’s brands into Australia‚” the company said.

“We are excited to be able to realise our ambition to expand into Australasia through the very successful RAG business and its well-established and experienced management team‚” TFG CEO Doug Murray said.

Source:BDproDate: 2017/05/25

Esor reports increase in final order book but reports losses on several projects

By Staff Writer

Civil engineering and construction group Esor has reported revenue of R1.4bn to end-February 2017.

In it’s final results released on Thursday‚ it reported an increase in its order book to R1.54bn from R1.4bn at the end of its first half.

The company said profitability had been “severely impacted” by losses of R102m incurred on its Northern Aqueduct project‚ impairment of goodwill of R50m and the write down/fair value adjustment of R51m of the Franki Africa contingent consideration following losses

incurred by Franki Africa.

“The Northern Aqueduct remains an onerous contract to complete given the challenges of addressing the legacy quality issues‚ which remain the key factor to getting off site.

Initially set for completion in August 2015 the project was delayed due to quality issues and rain and community unrest.

It said the delays had resulted in a total loss of R147.1m over the past two financial years.

It now expects the project to be completed in December 2017.

“East Coast revenue was further hard hit by three delayed contract awards‚ with revenue

losses amounting to R100m. We had already reallocated resources in preparation for

contract starts‚ which were then delayed‚” it said.

Source:BDproDate: 2017/05/25

Schroder REIT reports interim profit of EUR4.2m to end-March

By Staff Writer

Schroder REIT which owns property in Western Europe has reported an interim profit of EUR4.2m for the period ended March 31.

The company said on Thursday net asset value provided a total return on 2.5% on the previous period‚ which ended on September 30 2016.

During the period the company bought an office building in Paris for EUR30m. The investment is expected to yield income of 9.5%.

The company said its portfolio was now valued at 6.7% above its purchase price.

It declared a dividend of 2.2 euro cents per share‚ which represented a 29% increase on the previous half-year period.

Nonexecutive board chairman Sir Julian Berney said it had been a period “of good progress for the company‚ against a background of political and economic uncertainty”. He said the company was targeting a dividend yield of 5.5%.

The company said its portfolio was set to benefit “from structural trends of urbanisation‚ demographics‚ infrastructure improvements and economic recovery in Europe”‚ adding that 100% of its portfolio was “located in winning cities and regions”.

Source:BDproDate: 2017/05/25

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