DiamondCorp raises about £1m in share and warrant placement

By Allan Seccombe

Cash-strapped DiamondCorp‚ which is building a new underground mine near Kroonstad in the Free State‚ has raised about £1m in a share and warrant placement and paid creditors in a similar way.

The money‚ along with an insurance payout‚ will give DiamondCorp enough cash to keep working until mid-April at which time it will conduct a second-capital raising exercise.

DiamondCorp‚ whose shares trade on the JSE and London’s Alternative Investment Market‚ has run into difficulties at its Lace mine‚ with a series of setbacks last year culminating in the temporary suspension of mining and putting further strain on its balance sheet.

Trade in DiamondCorp shares is suspended and Lace is in a business rescue programme managed by Deloitte & Touche.

DiamondCorp told the market earlier in January about the placing to recapitalise the company and on Monday said it had conducted the placement of 25.4-million shares at four pence a share‚ which each come with a warrant that can be exercised for 1p between November this year and end-June 2019.

DiamondCorp will use the proceeds to pay for care and maintenance at Lace as well as mine remediation costs as well as paying labour‚ ahead of restarting the mine if the business rescue process was successful.

Care and maintenance will absorb £649‚000‚ business rescue costs £285‚000 and general corporate costs a further £190‚000.

DiamondCorp issued 3.15-million shares and associated warrants to pay professional fees and some of its debt.

One of the interesting conditions attached to the placement was a labour agreement with the Association of Mineworkers and Construction Union (Amcu).

“The placing is also anticipated to enable the group to reach an agreement with Amcu in the very near term‚ which is critical to the implementation of care and maintenance programme and to the success of the ongoing business rescue process‚” DiamondCorp said earlier in January.

“Notwithstanding a successful labour agreement and completion of the placing‚ in the event that the business rescue process and concurrent additional phase 2 fund-raise is not successfully concluded by early April 2017‚ it is likely that the group will not be a going concern at that point and will enter into insolvency proceedings.

“It should further be noted that the company’s shares will remain suspended and it is expected that a lifting of the suspension shall not be sought until a successful conclusion of the business rescue process and completion of the anticipated phase 2 fund-raise‚” it said.

Source:BDproDate: 2017/01/23

Insurers shrug off healthcare regulations

Clientele and Hollard, two major insurers that offer hospital cash plans, have indicated they will not be adversely affected by the Treasury’s new healthcare demarcation regulations.

The regulations, a joint Treasury and Department of Health exercise, are designed to protect consumers by curbing abuses in the market. The regulations will come into force in April and are intended to differentiate between medical healthcare schemes and health insurance.

Clientele group MD Basil Reekie said benefits which would be offered on new policies would be the same, or similar, to the ones being phased out. The company would make minor tweaks as a result of the regulations, but would still offer hospital cash plans.

“Clientele has been involved in the consultative process and has ensured that policy terms on new business have been changed over time to mirror the expected changes,” he said.

Reekie said Clientele would not be able to use “hospital” in its products, and its use in marketing would have to adhere to stringent guidelines.

Hollard spokesman Warwick Bloom said that in the past most products differentiated rates based on policyholders’ age, gender and claims history. This would have to change under the new regulations.

Bloom said hospital cover would be capped at R3,000 a day and insurers would be prohibited from refusing to take on new clients.

The company was evaluating the regulations to understand if it was possible, and sensible, to continue offering hospital cash plans. Hollard has more than 150,000 hospital cash plan policies on its books.

The Treasury said last week that the regulations were introduced to create a level playing field for insurance products and medical schemes. With Michelle Gumede

Source:Business DayDate: 2017/01/23

Hulamin expects full-year HEPS to double

Staff Writer

Hulamin‚ which makes aluminium products‚ expects its full-year headline earnings per share (HEPS) to double after a strong manufacturing performance delivered record sales volumes.

In a trading update on Monday‚ the KwaZulu-Natal-based company said HEPS for the year to December were expected to surge as much as 227% to R1.21 from the year-earlier period.

“[Hulamin] rolled products has benefited from consistent investment in operational excellence and risk management to achieve record sales volumes of 214‚000 tonnes for the year under review‚” the company said in a statement.

The company exports two-thirds of its products‚ mainly to the US‚ Europe and southern Africa. The rest is used in SA.

The financial performance was achieved despite the stronger rand and relatively stable prices on the London Metal Exchange‚ it said.

The improved profit performance and capital discipline allowed the company to improve cash flows in the second half. Net borrowings were down about R350m after closing at R952m at the end of June 2016.

The results are expected on February 27.

Source:BDproDate: 2017/01/23

AB InBev to slash 1,000 manager jobs in SA

Ten weeks after SABMiller shareholders gave the go-ahead for the third-largest merger in corporate history, Anheuser Busch InBev (AB InBev) sent out a voluntary severance offer to more than 1,000 of its management employees in SA.

This is the first time in recent history that South African Breweries has undertaken a retrenchment exercise on any scale. Plant modernisation in the 1980s was the cause of the last round of retrenchments.

“The group’s been in expansion mode since then so retrenchment was never on the cards,” said a former executive.

A memo was issued on December 12, which had a January 20 deadline to accept what one recipient said was a “very generous offer”. A reminder was sent out 12 days ago, just days after many of the managers had returned to their desks after their year-end break. The deadline has been extended.

AB InBev will not say what retrenchment figure the voluntary severance offer is targeting but stressed it would not interfere with the commitment given to Economic Development Minister Ebrahim Patel and the competition authorities on postmerger employment, in terms of which AB Inbev is required to maintain the number of employees in SABMiller’s South African operations for five years after the date of the merger.

There can be no forced retrenchments in perpetuity resulting from the merger.

The condition also ruled out AB InBev undertaking any voluntary separation arrangements within the category of Hay Grade 12 (supervisory) employee and below for five years.

“The voluntary severance offer, which is entirely voluntary, has been made available only to mid-level employees and above,” said Robyn Chalmers, head of media and communications.

She explained that some changes were being introduced to processes, ways of working and the structure of the business as well as roles.

“We understand that during this period of change some employees may wish to voluntarily exit the business, which is why we have introduced a voluntary severance offer.”

Chalmers said it was too early to say how many people might opt for the offer or what the effect in terms of cost savings might be.

Given the requirement to maintain job numbers and AB InBev’s cost-cutting objective it is inevitable that any management jobs cut will be replaced by job creation below supervisory level. Even before the £79bn merger was given shareholder approval, AB InBev had announced plans to cut 5,500 jobs from the global workforce in a bid to secure the 1.4bn of annual savings it promised investors.

The speedy action in SA is in keeping with the aggressive management style and costcutting focus of the Brazilian team that drives AB InBev.

CEO Carlos Brito famously eschews travel by private jet and will only fly business class for five-hour plus flights.

Within weeks of acquiring Anheuser Busch in 2008 his team moved quickly to cut jobs and costs.

Similar severe cost-cutting exercises appear to have been launched in SA with employees reporting the moves already include restrictions on photocopying, which must now be double-sided and not in colour.


Source:Business DayDate: 2017/01/23

Stillwater bid 'stymied merger'

Lonmin, the world’s thirdlargest platinum miner, and Sibanye Gold were “just weeks away” from agreeing a transaction tying their assets together.

Two sources close to the matter said talks had been under way for some time when Sibanye suddenly unveiled a 2.2bn cash bid for US-based Stillwater Mining. One of the sources said: “It was so, so close. It was just weeks away from something being finalised.”

Lonmin CEO Ben Magara said: “We never comment on market speculation.”

Sibanye spokesman James Wellsted said Sibanye had spoken to nearly all platinum companies in its quest to grow its platinum business, which now included the whole of Aquarius Platinum and the neighbouring Rustenburg mines owned by Anglo American Platinum.

“We said from the start we were looking at all opportunities in the PGM [platinum-group metals] space. Given our footprint on the Western Limb we were obviously considering opportunities in that area and could have included any of those operations,” he said.

The premium cash deal for Stillwater, the largest primary source of platinum group metals outside SA and Russia, will be funded by a $2.7bn debt and equity package, including a rights issue of between $750m and $1bn, with some analysts pointing to a chunky discount.

“In our view and based on an analysis of rights issues, equity issues and bookbuilds in SA’s gold and PGM market over the past five years, the discount is likely to be in the order of 25%, which we believe will be having a meaningful impact on the value of the future Sibanye share,” Nedbank analysts Leon Esterhuizen and Arnold van Graan said in a note last week.

Sibanye could have bought Lonmin for a fraction of the Stillwater price.

On Friday, Lonmin had a market capitalisation of $584m as one of the strongest gainers on the JSE’s platinum index, rising 20% so far this year and 172% in a 52-week period.

Sibanye CEO Neal Froneman said in December, when the Stillwater deal was announced, that the company, which has strategy to be in the top three of platinum producers, wanted to add a third South African platinum asset to its business.

Whether the Lonmin deal could still be on the cards is unclear given the size of debt Sibanye is adding to its balance sheet to grow its footprint outside SA and Zimbabwe where its platinum assets are based.

A simplistic comparison of market capitalisations ignored the fact that Stillwater had a high-grade ore body and very low production costs, allowing it to ride out the low PGM prices.

Lonmin, on the other hand, had more expensive mines, a much larger workforce, underspending on growth projects for the future and enormous social responsibilities, including the need to build decent accommodation for 11,500 employees, just under half its workforce.

Cash bid Sibanye unveiled for US-based Stillwater Mining


Debt and equity package to fund the largest primary source of platinum group metals outside SA and Russia

Source:Business DayDate: 2017/01/23

African Bank on track for expansion

African Bank is revamping all its branches and opening in new areas as it gears up to launch its transactional banking product in the fourth quarter of 2017, which will include a credit card offering, says CEO Brian Riley.

“We plan to compete on pricing, functionality and product,” Riley said on Friday, discussing its transactional banking offering, which he said would be omnichannel, meaning customers could engage with the bank in whatever way they chose.

African Bank, relaunched on April 4 2016, surprised shareholders when it reported operating profit after tax of R269m for the period to the end of September. The forecast was for an operating loss of R280m.

Today the bank has a gross loan book of roughly R30bn, reflecting its more conservative approach to lending.

The bank rejected just more than half of the 150,000 monthly loan applications it received, said finance chief Gustav Raubenheimer .

That it would launch without any legacy systems was an advantage, he said.

While it had discontinued a pilot joint venture with Sanlam to sell long-term insurance and investment products to clients, it hoped to have a contract in place with a new partner by the end of March, said Riley.

The bank was already selling a funeral insurance product at branches and wanted to sell advice-based products, he said.

Its five-year performance plan includes growing noninterest revenue to more than R300m and lifting customer numbers from 1.2-million to more than 2.5-million.

The bank has enough cash to honour payments on its bonds until 2019


Source:Business DayDate: 2017/01/23

ARC seals deal

Patrice Motsepe’s African Rainbow Capital (ARC) has clinched its latest deal in the financial services sector, with shareholders of the Alexander Forbes’ group approving its R753m bid to buy its African operations.

On Friday, these shareholders approved ARC’s deal to buy 10% of Alexander Forbes Limited, the vehicle in which the retirement administrator holds its African operations, which delivered R475m in profits to the group in its last financial year.

Alexander Forbes CEO Andrew Darfoor said on Friday any conflicts of interest between ARC co-CEO Johan van Zyl, who will take over as chairman of the Sanlam board in June 2017, will be managed appropriately. Sanlam operates an employee benefits business, a direct rival to some of Alexander Forbes’ units. “We are a commercial partner with Sanlam across a number of business areas,” said Darfoor.

“In relation to Dr Van Zyl — we welcome and value his future contribution to our strategic agenda alongside that of ARC. Where clear conflicts of interest arise, Dr Van Zyl will be recused, in a similar manner to how we recuse Mercer board directors where similar conflicts arise with either [Marsh & McClennan Companies or Mercer].”

Health, retirement and investment consulting firm Mercer is Alexander Forbes’ largest single shareholder, holding 33% of its shares; and William Simon O’Regan, an executive at the US company, has served on the Alexander Forbes board since 2014. Darfoor said the deal with ARC did not need to be approved by the Competition Commission.

The deal will accelerate Darfoor’s plans to refocus the group on Africa, which gained traction with its December announcement that it would sell its 60% interest in UK actuaries Lane, Clark & Peacock to that company’s partners and Inflexion Private Equity for £75.4m.

Source:Business DayDate: 2017/01/23

Naspers fights proposal for rotating auditors of listed companies every 10 years

By Reitumetse Pitso

Media group Naspers has objected to a plan to make listed companies rotate their audit firms every 10 years.

Africa’s largest internet and media group made a formal submission to the Independent Regulatory Board of Auditors this week.

Taking issue with the way the regulator was introducing the requirement‚ Naspers called for thorough investigation and proper public consultation‚ involving the National Treasury‚ on the potential impact of the board’s proposed framework.

Naspers chief financial officer Basil Sgourdos said SA’s auditing standards were rated “best in the world”‚ raising the question of why the board wanted to introduce a “failed concept”.

Naspers said mandatory audit firm rotation had failed in the markets where it was tried. The board said the move was intended to strengthen audit quality and improve protection for investors and the public.

Naspers said the regulator did no independent research‚ and ignored the views of those opposed to the move. Other JSE-listed companies have also objected.

The CFO Forum‚ representing chief financial officers of major JSE-listed companies‚ said the proposal was made despite having been rejected by the vast majority of foreign markets. Its introduction would cost “billions”. Challenges and negative consequences outweighed any perceived benefits.

The forum called for proper investigation of the state of audit independence before considering new regulatory framework for mandatory audit firm rotation.

CFO Forum chairwoman Christine Ramon queried the regulator’s evidence on auditor independence in SA‚ saying it had not shown measures implemented so far to entrench auditors’ independence had failed‚ or that there were “any significant deficiencies in the current levels of audit independence”.

In its submission‚ the forum said there were the flaws in the regulator’s reasons for implementing the new regulation‚ saying its assessment of global developments relating to mandatory audit firm rotation were selective‚ limited to developments in the European Union and “nowhere else in the world”.

It also said references used to justify audit failures took place “more than 10 years ago‚ while the market and standards have evolved significantly since then”.

Sgourdos said mandatory audit firm rotation had “proved to be a disaster in virtually every market where it has been introduced”.

Citing Europe‚ he said it cost an estimated €16bn to implement‚ although the private sector believed the cost could have been as much as €32bn.

“As in other markets that went down this road and later reversed their decisions‚ there is no evidence to date that it has done anything at all to increase audit independence.”

Ramon said the regulator’s process was not sufficiently transparent. “We still believe this issue should be handled through a formal parliamentary commentary process‚” she said.

Sgourdos said this should include formulation of a white paper and independent research.

But the Public Investment Corporation (PIC)‚ the most powerful investor on the JSE‚ backs the move.

Business Day reported in December 2016 that in the September quarter‚ the PIC voted against the reappointment of auditors at no fewer than 11 annual general meetings. The PIC voted against the reappointment of the external auditors at Naspers‚ Mr Price‚ TFG‚ Richemont‚ Mediclinic‚ Tongaat Hulett‚ Trencor‚ Adcorp‚ Tradehold and Altron‚ Business Day reports.

The PIC was no longer in favour of the big four audit firms — PwC‚ KPMG‚ Deloitte and EY — as it thought they were no longer independent of their clients. Its cut-off for maintaining independence was 10 years.

Source:BDproDate: 2017/01/23

Lonmin must still build housing for more than 11‚000 employees

By Allan Seccombe

Lonmin‚ the world's third-largest platinum miner‚ has to build accommodation for 11‚500 of its employees‚ but the weak platinum price is working against major housing investment‚ CEO Ben Magara said on Friday.

Lonmin has 33‚000 people working on its mines near Rustenburg‚ of which 25‚000 are its employees. It has built accommodation for more than half of those‚ with 11‚500 still "in need of decent accommodation‚" he said.

Lonmin has converted its single-sex hostels and has built apartments near those hostels. It has also donated land to the government to build houses‚ he said.

"We are 50% of the way there and the rest of our employees are living in areas where we feel they deserve better‚" Magara said at a media briefing. "But we need to be profitable."

"We unfortunately cannot build as fast as we want to because the platinum price is not there‚" he said.

The apartment programme‚ which cost R500m over five years‚ entailed building accommodation on vacant land near the converted hostels‚ where there were bulk services such as water and sewage and for which Lonmin did not need permits to build.

Lonmin is engaged in talks with the Association of Mineworkers and Construction Union to determine what exactly was needed for the 11‚500 employees living in substandard conditions in informal settlements around its mines.

It plans to take the outcome of this engagement to the government to prove its intentions to provide its employees with housing‚ after President Jacob Zuma singled the company out for failing to comply with the obligations around its mining rights.

There has been a threat that Lonmin could forfeit its mining rights if it fails to meet its housing obligations.

Magara was clear that Lonmin could not build the housing for 11‚500 people alone and needed assistance from the government and other parties.

Source:BDproDate: 2017/01/20

Woolworths in need of therapy

A war to capture the dwindling spending power of SA consumers is raging in the retail sector, with promotions and aggressive pricing the weapons of choice.

In the clothing segment it’s especially fierce. Of Woolworths’ bid to defend its turf, Evan Walker of 36One Asset Management says: “In the run-up to Christmas, Woolworths had the biggest promotions drive I have seen in over a decade. Prices were slashed by 30%-40%.”

The price cutting by the retailer, headed by Ian Moir, was even more dramatic in some instances. As an example, the price of a line of men’s shirts in the Sandton City store was cut from R499 to R80, says Alec Abraham of Sasfin Securities.

Even this slashing of prices, though, was not enough to stop the rot.

In a trading update for the 26 weeks to December 25 Woolworths reported clothing sales volume down 3.8% after adjustment for 7.3% internal inflation. On a like-for-like (same store) basis, sales volume was down 6.1%, barely bettering the 6.2% fall in the 19 weeks to November 11.

Walker sees little hope of the clothing segment lifting out of its depressed state any time soon. “It is going to be a very tough year,” he says.

In the food segment Woolworths continued to roll out trading space aggressively, adding 7.9% in the latest update period. It bought the retailer a feeble 0.3% increase in sales volume after adjusting for 9.2% internal inflation. Likefor-like sales volume fell 3.6%, a poor showing compared, for example, with Pick n Pay, which upped like-for-like sales volume 3.5% in its six months to August.

Woolworths, it appears, has no alternative but to discount food prices heavily.

“It has the luxury of high margins to do it,” says Abraham.

The food margin of Woolworths was a hefty 7.2% in its year to June, way ahead of closest rival Shoprite’s 5.6%. But whether lowering its margin will generate a commensurate rise in sales volume remains to be seen.

Woolworths has also not been having it all its own way in Australia, the source of almost half its pretax profit.

In particular, fashion retailer Country Road Group (CRG) has disappointed of late, with sales in the latest update period falling 0.9%. Sales growth in CRG’s market segment is running at 5.5%, says Abraham.

CRG is now the subject of a wide-reaching restructuring in which focus is on areas such as repositioning womenswear and stock availability. It suggests that all has not been right at CRG.

New CEO Scott Fyfe’s pending arrival at CRG bodes well if progress made by Woolworths’ department store retailer David Jones (DJs) is anything to go by. He’s a former Marks & Spencer executive, as is John Dixon, who took the reins at DJ’s last January. It delivered 4% sales growth in the latest update period in a department store segment where Abraham says sales fell 3.1%.

There is still a long way to go at the department chain, with issues such as a virtual absence of a customer relationship management system before Dixon’s arrival being addressed. Then there’s supply chain and the expansion of its private label range, and the introduction of food into a number of DJs stores.

Walker has doubts about the potential of food in DJs. He says the top end of the Australian food sector is characterised by the presence of a large number of independent store operators, unlike in SA.

With the trading update indicating an adjusted interim headline EPS fall of up to 5%, Woolworths appears to be facing a no-profit growth year to June.

Despite this, its share price is up 8% since its early-December three-year low and appears to have the legs to go a good deal higher. Seemingly, it reflects a share where the bad news has been more than fully discounted by the halving of its rating since its October 2015 peak.

Source:Financial MailDate: 2017/01/20

Premier Fishing's abalone business might catch investor interest

The prelisting circular for Premier Fishing — which will be spun out of Iqbal Survé’s African Empowerment Equity Investments (AEEI) and listed on the JSE in March — offers an informative breakdown of the operating segments and the potential for corporate activity.

But it is the latest annual report for unlisted abalone farming enterprise Abagold that might provide more fundamental insight into the longer-term potential of PremFish than the official listing documentation.

PremFish has mainly been regarded as a play on export-orientated lobster (both South Coast and West Coast species). The circular confirms that lobster still accounted for 46% of PremFish’s R405m turnover in the 2016 financial year. Margins are reassuringly good on the lobster segment, coming in at a succulent 24% in 2016.

What’s also heartening is the growth since 2014 in the pelagic operations (from R56m to R94m with a 35% operating margin).

No doubt these segments will be expanded, with rumours already circulating around the quays that PremFish is looking at other opportunities in pelagic operations and squid.

But what might catch the eye of growth-hungry investors is the PremFish’s abalone business.

AEEI has been a little cagey on financial detail on PremFish’s fledgling abalone endeavours over the years. So the circular’s financial revelations are gold for investors who have been pondering whether this high-value seafood speciality has potential in vibrant markets in the Far East.

In the 2016 financial year the abalone farming operations — trading under the Marine Growers banner — generated almost R40m in revenue.

That’s equivalent to only 10% of PremFish’s total turnover, but it’s worth remembering that a chunk of the capital raised for the listing will be used to markedly boost the Marine Growers abalone farm from the current production capacity of 120t/year to 320t.

The operating margin at the abalone farming facility was an impressive 32.5%, but it was as fat as 38% as recently as 2014.

If it’s reasonable to presume at least a doubling of production capacity — and factor in additional efficiencies and new markets — in the next five years, then a medium-term operating profit of between the R50m and R70m mark might well be pencilled in.

The latest financials from Abagold, which has its facilities not far from PremFish’s Gansbaai operation, is hugely helpful in assessing the profit potential of abalone farming ventures.

The year to end-June annual report for Abagold, which is chaired by Trencor director Hennie van der Merwe, reflects a turnover of R188m from annual production of 565t.

Gross profit came in at R129m with operating profit recorded 55% higher at R44m — meaning an operating margin of 34%. Appetising prospects for 2017 are firmly underlined by a 120% hike in the dividend to 16c/share. Operational cash flow was a reassuring R51.5m.

PremFish has a surfeit of land available adjacent to its existing Gansbaai operations.

The Financial Mail understands that the environmental impact assessment was approved late last year — but investors must still take into account the long lead time needed to grow abalone to marketable size.

Vunani Securities small to mid cap analyst Anthony Clark points out that PremFish has been “stockpiling” baby abalone in holding tanks. “So when the new facility is up and running PremFish will have an immediate supply of product that can be matured to point-of-sale.”

Clark reckons the payback for the abalone site expansion will be two to three years.

“There is strong demand, principally from China, for quality abalone and SA is recognised as a premier international producer.”

He adds that current demand for SA abalone is more than 2,000t, with the current supply at just 1,000t.

The Abagold annual report adds another perspective.

Van der Merwe says that while demand for dried abalone continued to improve during the latter part of 2015 and through Chinese New Year 2016, the dollar price has still not recovered to pre-2012 levels. He also adds that large volumes of illegal SA abalone continued to be sold in China.

“Though general demand for the farmed dry abalone is improving, full price recovery may take a few more years.”

Van der Merwe says live abalone had again been the most stable form of sales for the industry. He reckons the pressure on pricing was less severe in this format with consistent strong demand.

What should be encouraging for prospective PremFish shareholders is that Abagold has in the past year broken into new geographies beyond its core market in Hong Kong. These include Singapore, Japan, Korea, Taiwan, Thailand and Malaysia.

Van der Merwe indicates that while more than 75% of abalone volume is still sold in Hong Kong, the other regions have notched up double-digit growth.

Perhaps, then, it’s not so surprising that Abagold’s board has approved an initial investment in an abalone farming project in Oman.

Source:Financial MailDate: 2017/01/20

Cotton On's nimble approach to fashion

There exist a few lesser known truths about Cotton On’s expansion across SA.

For instance, the CEO of one of the largest mall operators in the country once tried to sneak out of his office to avoid a meeting with the (then) little-known Australian retailer.

Today it would be hard to find a shopping centre in SA where Cotton On — through its seven brands — is not a tenant.

When, in 2011, it opened its first store in SA at Clearwater Mall on the West Rand, which by some accounts could be considered the retail boonies, there wasn’t much in the way of a “fast-fashion” offering for local shoppers. This retail model, most synonymous with Inditex’s Zara and Hennes & Mauritz (H&M), is, essentially, nimbleness in interpreting trends. Retailers, through integrated manufacturing and logistics systems, deliver small batches of product on a (sometimes) daily, weekly or bi-weekly basis. Inventory turns over quickly, the newness keeps shoppers coming back and there’s very little overstock. If something doesn’t work, it can be pulled from stores with relative ease.

Though not widely recognised, by 2011 the Australian start-up had adopted advanced replenishment systems, having moved to direct sourcing at least a decade before. Retail was becoming too competitive to have a middleman.

Until then, and to all outward appearances, privately owned Cotton On was just another clothing brand selling “stuff”. However, expansion outside its home market was gaining pace, with new store openings in New Zealand, Singapore, Hong Kong, Malaysia and Dubai.

Upheaval had also created opportunity.

The global financial crisis was seen as a chance to enter the US — sites were suddenly available in centres that they couldn’t otherwise have afforded.

Cotton On, when it opened in SA, had a different view on cost of production, timelines and lead orders, very foreign to the way SA retailers were operating, says Sasfin’s Alec Abraham.

“They [the local retailers] were all cut from the same cloth, as it were . and had a certain perception of distribution and the dynamics of fashion because they only really competed against each other,” he says.

The same year, another store opened in SA, in Sandton City. It remains one of Cotton On’s top 10 global stores by sales.

There was a span of just eight weeks between signing the deal with Sandton City coowners Liberty Group and Pareto and opening the then 1,200m² store on November 11 2011.

The store fit-out was built in two weeks, it took four weeks to get to SA by ship and a further two to be installed in Sandton City.

For a brand that at one time was not wholly convinced that the country was even a right fit, Cotton On, in less than five years, amassed a footprint just shy of 200 stores in SA.

It has three distribution centres — Pomona near Johannesburg, Pinetown near Durban, and Kuils River in Cape Town. Last year it trialled local manufacturing for menswear and books.

“We’ve had above 30% year-on-year growth all the five years that we’ve been in SA and we’ve had positive [comparable] growth for all those five years,” says CFO Michael Hardwick. “We did just on R1.8bn [in sales] in SA in our last financial year. The plan for the current year, and we’re at June year-end — three or four months into the new financial year — is to achieve around R2.25bn.”

It’s widely conceded that SA retailers have always been stronger on operational execution than innovation and creativity.

So when Cotton On brought something experientially different through the look of their stores and with their merchandise, it resonated with local customers.

According to consumer consultant and TED speaker Joseph Pine, experiences are a distinct economic offering — as distinct from services as services are from goods. Time, he says, is the currency of all experiences, and the more time customers spend with retailers, the more money they will spend now and in the future.

This concept of “dwell time” is quite an integral part of Cotton On Group’s positioning. Whether through phone-charging stations, roomier fitting rooms, free yoga sessions, kiddies’ playtime areas or even DJ decks and photo booths, stores — through what is effectively retail theatre — aim to create stickiness between customers and their brands.

“We would rather be seen as a place than a store,” says Felicity McGahan, Cotton On’s global general manager.

“It’s about engaging with the customer — bringing the fun back to shopping — and that has got to be what we focus on, otherwise we give too much to online [shopping platforms] because that’s what they can’t offer, the personal contact, the experience.”

The average basket size at the Cotton On brand is between R300 and R400. At Cotton On Kids it’s R480 and R510, and at stationery brand Typo, where 5% of the range is localised, it’s roughly R200.

“[Cotton On] made the SA market become more fashion observant,” says independent retail analyst Syd Vianello. “They made other retailers pay more attention to fashion. The mere fact that they could get tons of stores up and running so quickly made people look up.”

In retail, the understated approach is not all that unusual. There are owners and companies for whom flash or the spotlight is not de rigueur Take Ingvar Kamprad, the Swedish founder of the Ikea furniture franchise, or Zara founder Amancio Ortega, for example. Both favour introversion over the limelight, letting their senior guard of executives take centre stage.

The opposite end of the spectrum would include the likes of Topshop’s Sir Philip Green or Solomon Lew of Country Road infamy.

Cotton On, for most of its 25 years, has led an under-the-radar, almost self-effacing existence — an extension of its founder, Nigel Austin.

He has only ever given two interviews — this report contains one of them, and it didn’t take place in a boardroom over tea and biscuits.

Cotton On, if anything, is not conventional.

At its HQ, based out of Geelong — a regional city on Melbourne’s surf coast — employees can bring their dogs to work; in lieu of death by PowerPoint the company does monthly braais (or “barbies”) to update staff on sales and plans; and it employs the services of full-time personal trainers and offers mindfulness training.

Globally, fluorescent lighting and beige walls are steadily becoming a provocation of the past as workspaces, particularly in creative fields, become more aesthetically inviting and collaborative. Studies have found that this boosts morale, stimulates employee productivity, and ultimately reflects and reinforces company culture. Twitter’s San Francisco headquarters are designed to resemble a giant birdhouse and Google, in its London hub, has a 90m running track and sleep pods.

It’s hard to articulate what Cotton On’s Geelong office is like, except to say it reminds one of a scrapbooking project on steroids. There’s a giant slide in the centre of the Cotton On Kids office and a cafeteria that sells organic kombucha and beetroot chips. It has a wall of fame for staffers and the kids they sponsor in Uganda through the Cotton On Foundation (the group has raised A50m over nine years through instore sales of tissues, water and bracelets).

It’s on a 14,000m² industrial estate flanked by an automotive repair store, a fire station and a joinery. And what is seemingly incongruous whereabouts for a global fashion company actually epitomises Cotton On Group’s “feet on the ground” vim.

“We own everything we build on,” says CEO Peter Johnson. “We want to create an environment that’s conducive not only to productivity but is also just somewhere pleasant to work. We moved here nine years ago, our grassroots are in Geelong. We started with 50 people and today there are 1,400 of us.”

We’re sitting on a pink couch in one of the group’s pause areas when he rolls out the design plan to show me. The envisioned size following the redevelopment will be 30,000m².

It includes more breakout spaces, a sustainable café that will grow its own vegetables, and new amenities in its health and wellness facility — like a spin studio and an on-site osteopath.

I ask about new markets.

“We forward-plan three years. We always look at making sure we have future growth in the pipeline and we know a new country adds another level of complexity. So when, in year two or three, the growth opportunities start to slow down or dry up, we then say it’s time to add another country. A new country will take between 12 months and three years to get volume so it’s important we have this overlapping strategy.”

China is on the agenda, as are more cities in North America.

I meet Austin (who owns 90% of the business) at Cotton On’s flagship store in the Melbourne CBD at Bourke Street Mall, where he stands outside with cousin (on his mother’s side) and co-owner Ashley “Ash” Hardwick, who owns the remaining stake.

The pair (and, plainly, most of the executive team) resemble the cast of the BBC’s Peaky Blinders rather than rheumatic shopkeepers who run a global operation of more than 1,300 stores in 18 countries.

Austin and Ash Hardwick are soft spoken, initially, but become increasingly ebullient as we do a walkabout of the store — they are, after all, on their own turf and talking retail.

If there’s one thing SA has turned out to be for Cotton On Group, it’s a surprise.

They both recall visiting years ago and being unsure about setting up shop in SA, owing to a mall environment that didn’t seem that sophisticated and “girls that were really not dressing in fashion”.

The draw, however, was that none of their international competitors were in SA yet and the market didn’t exist. Whether by wily knowingness or pluck, the bet paid off.

“What I’m really seeing in the SA market now is how well the girls are dressing — it’s really changed,” says Austin. “A lot of it is things like Instagram — shoppers are so connected digitally.” He adds that structured products like blazers, “bodycon” dresses — short for “body conscious” (read: tight and hugs all the curves) — and denim are big in SA.

“There’s a lot more stretch [in the denim Cotton On sells in SA] and higher rises for the bigger booties,” he says.

They get together every quarter with the local teams, who present the attributes of their markets that are different to the core assortment. Buyers then select accordingly.

Daniel Isaacs, an equity analyst at 36One Asset Management, says that in SA, other than Mr Price, cheaper clothes weren’t stylish or stylish clothes could be relatively expensive (requiring credit from the credit retailers to purchase them).

“I would say the main thing Cotton On brought here was more of an offering in that ‘stylish at attractive prices’ category, and as we can see, it is a lucrative category. Cotton On has probably been the most successful international retailer in SA so far,” he says.

I ask Austin and Ash Hardwick, as we make our way to the group’s other stores in the mall, if they had any apprehension coming into an apparel market that was historically characterised by store-card credit and not cash. Internationally, retailers don’t typically sell on credit.

“Credit was an interesting philosophical discussion about whether or not we wanted our kids going into debt. It was something we wrestled with for a while,” Austin says.

Ash Hardwick adds: “It was also the most compelling part of the offer from some of the [local] retailers, but not necessarily what we wanted to be known for.”

Cotton On Group does offer store credit now through RCS — but it’s less than 1% of the SA business.

For all intents and purposes, Cotton On Group is really a big fat family, held together by a gossamer of cousins and friends. The company has an advisory team and executive teams for brands, support functions and regions.

The story goes that Austin, while studying business in 1988, started selling acid-wash denim jackets from the boot of his car at the Beckley Market in Geelong to get through university. His first trip to the market wasn’t a success — he made A30.

The following week, he dropped his prices after negotiating with his supplier and subsequently sold out.

His supplier happened to be his father, the late clothing wholesaler Grant Austin.

Austin Jnr went on to open his first retail store in Geelong in 1991, behind his grandfather’s butcher shop.

“I used to talk to my dad twice a day. Also, I grew up around my granddad, he was a merchant,” he says.

While in school, Austin worked in his father’s Hong Kong office and frequented trade fairs to find suppliers, with many of whom Cotton On still has a relationship.

James Stewart, a Melbournebased partner at Ferrier Hodgson, says Cotton On Group was one of the few Australian retailers to rapidly scale its business and move to direct sourcing, “which gave them first-mover advantage”.

About a year ago, the company reached out to leadership big cheese Jim Collins (he’s written books like Good to Great, Built to Last and How the Mighty Fall). After six months of prep, about 32 execs went to Colorado in the US to attend one of his coveted workshops,

“He told me that Warren Buffett made 95% of his wealth after he was 50,” Austin says. “He reminded me that we were just getting started — it made us small again and gave us clarity. We were struggling to articulate our strategy and it forced us to get clear.

“We asked ourselves whether whatever had been successful for us in the past, was still going to be good enough. Our [Austin and Ash Hardwick’s] roles have changed from seeing and executing, to seeing and coaching.”

IPO talk always seems to dog the group. And its always said it prefers autonomy. The founders agree they can take more risks with the company as a private player.

“We’re only answerable to ourselves. There’s also a different filter — we start with, ‘What’s the right thing to do? What will the customer love?’ We don’t have to commercialise everything. It’s not about every quarter but the next five to 10 years,” says Ash Hardwick.

As is customary in retail, Cotton On has had some infamy: it was fined A1m for selling highly flammable children’s sleepwear, misleadingly labelled as “low fire danger”. It also recalled earth globes from Typo stores that named Palestine but omitted to label Israel.

The only region it’s pulled out of has been Germany.

When I ask (but only towards the end of our interview) why the company is not that publicity averse any more, Austin says: “It’s a big serious business. We have all the right checks and balances and ethical frameworks in place. We didn’t want people guessing who we were.”

It does, of course, also have to do with attracting the right talent as a thriving global business. Often this talent will need to come from competitors, says New Zealand-based retail consultant Chris Wilkinson from First Retail Group.

“Advisers may be working with other leading brands and be cautious about relationships — and commercial partners such as property owners — or suppliers may not fully understand the brand, its back story and potential,” he adds.

About 33% of the group’s global brand managers in its adult business are South African. Its recent recruitment blitz has, according to local analysts, has been to the detriment of Mr Price.

“The guys who run Australia and Malaysia for us now are South African. The level of talent to come out of SA also really surprised us,” Austin says.

For more on Cotton On Group, see Shop Talk on page 46

Source:Financial MailDate: 2017/01/20

Big spender Naspers is worth less than the sum of its parts

When the financial history of SA in the first two decades of the 21st century is written, the role played by Naspers will be a prominent one. Its achievements reflect many of the important themes of our financial times, providing outstanding returns to shareholders that have made Naspers by far the most important contributor to the JSE. Market value rose from R7bn in 2003 to nearly R850bn by the end of 2016.

The value added for shareholders came from participating in the new digital economy and by taking advantage of SA’s access to global markets. The most valuable action of Naspers management was the decision taken in 2001 to purchase 46.5% of Tencent (a Chinese internet business listed in Hong Kong) for 34m. This stake has since been reduced to 34.33%.

For all its past success, the management and directors of Naspers have a very large problem with investors. The market reveals that Naspers would be worth much more to its shareholders if it sold off all its assets and paid off its debts. The assets it has invested so heavily in (in addition to its investment in Tencent) would have significant positive value in other hands, surely many hundreds of billions of rand. Such sales or an unbundling of assets is regarded as very unlikely — hence the lower sum of parts value attached to Naspers.

What the market is telling management is that its impressive investment programme is expected to destroy many billions of rand in shareholder value. That is, the cash to be invested by Naspers is thought to be worth many billions more than the value of the extra assets the company will come to own and manage. This investment programme is very ambitious. In its 2016 financial year the company reported development expenditure of $961m and merger and acquisition activity of $1.5bn. This activity was facilitated by additional equity and debt raised of $4.47bn, of which 2.27bn was applied to repaying existing debts.

Management must believe differently — that the cash it intends to invest on such a large scale will add value for shareholders by returning more than the cost of this capital (achieve an internal return of at least 8% per annum when measured in dollars or 14% in rand). If it achieves such returns, it will add value for shareholders.

But there is room for an important compromise between sceptical investors and confident managers. And that is to separate the Tencent investment from the rest of the business. If all the dividends received from Tencent, of the order of R2.7bn in financial 2017, were ceded directly to Naspers shareholders, these dividends, which have been growing since 2007 at an annual average rate of about 50% in rand and 40% in dollars, would be valued generously, as are all Tencent dividends. The current dividend yield is 0.24% (that is, the price is 400 times the dividend).

If Naspers established a tracking stock that passed on the dividends directly to its shareholders, it would be valued at about 400 times R2.7bn, or R1.08-trillion, about R200bn more than the current market value of Naspers itself. This tracking stock would be a pure clone of Tencent and would be expected to trade on the same dividend-generating basis as Tencent itself.

Shareholders would surely greatly appreciate an immediate R200bn-plus value add — and the growing dividend flows from Tencent — via Naspers. The quality of Naspers management could then be measured much more clearly without the complication and comfort of its Tencent stake.

Kantor is chief economist and strategist at Investec Wealth & Investment. He writes in his personal capacity.

Source:Business DayDate: 2017/01/20

Sibanye meets US antitrust condition

ibanye Gold, which has designs on becoming a major platinum group metals player, has met a major antitrust condition in the US as part of its $2.2bn takeover of Stillwater Mining, the largest platinum group metal producer outside SA and Russia.

Sibanye, which will hold a rights issue of between $750m and $1bn to fund the deal, expects to close the transaction in the second quarter of this year, giving it an important offshore business, diversifying its geographical and political risk away from SA and Zimbabwe.

Sibanye said on Thursday it had received “early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act”.

The act stipulates that companies must submit detailed documents to the US Federal Trade Commission and the Department of Justice, which will then decide whether the merger or acquisition could negatively affect US commerce.

“The effect of the early termination is that the antitrust condition required for the transaction has now been satisfied,” Sibanye said of the deal it announced last December and which it expects to close before the end of June.

“Satisfying the … antitrust condition in a timely manner is an important first step towards concluding the acquisition of Stillwater,” said Sibanye CEO Neal Froneman.

“We have made very positive progress since the announcement of the transaction and continue to work towards satisfying the outstanding conditions as soon as possible.”

Sibanye will fund the $2.2bn purchase price with a loan organised by HSBC and Citi through a $2.7bn debt and equity package, with the need to raise between $750m and $1bn in a rights issue.

Stillwater and Sibanye shareholders must approve the deal.

The market has not reacted positively to the transaction, with Sibanye’s shares losing 15% of their value on the day the deal was announced. On Thursday, the shares were trading nearly 6% lower at R27.20.

Source:Business DayDate: 2017/01/20

Commodity fillip for South32

Like many of its peers, South32 benefited from higher commodity prices and has been flexible enough at some of its operations to ramp up sales into improved prices, with manganese in SA and Australia one of the examples that have put the company in a financially stronger position at the end of 2016.

“While stronger commodity prices and our significant operating leverage have enabled us to strengthen our financial position further, we continue to focus on the basics; the safety of our people and the optimisation of our operations,” CEO Graham Kerr said.

South32, which houses the assets spun out of BHP Billiton, most notably stepped up manganese sales on the back of higher prices. Its aluminiumrelated businesses had a sound performance. “We have demonstrated the flexibility of our manganese business to respond to favourable market conditions by opportunistically increasing ore production,” Kerr said of the company’s mines in SA and Australia. In SA, saleable manganese ore production shot up 23% to 934,000 tonnes in the six months to end December as a recovery in the price and demand for manganese led South32, the 60% owner of the South African business, and its partner Anglo American, to tap into stockpiles of concentrate.

The manganese business used relatively expensive trucking to move higher amounts of ore to the port to take advantage of the improved market.

However, the ore from the Wessels mine in the Northern Cape is fine-grained and achieved a 10% discount to the index price for 37% manganese content ore, which realised an average of $4.42 a tonne in the second half of 2016.

As strong as the market was, South32 kept its manganese alloy output constrained, operating just one of four furnaces in SA. Production was down 20% in the six months at 37,000 tonnes because of “instability” at the furnace.

In Australia, manganese output fell 6% from a record level to 1.5-million tonnes due to grade and plant difficulties affecting its high-grade circuit, which was offset by increased production of lower-grade material.

South32 maintained its 3.1-million tonnes production target, but warned its lowergrade material with 40% manganese would make up a higher proportion of that output.

Its high-grade material has 44% manganese, which fetched 5.04/tonne in the second half of 2016.

Source:Business DayDate: 2017/01/20

Stassen rides indomitable Capitec's rise

In September 2013, when Capitec CEO Riaan Stassen announced his retirement from the company he had helped to set up, he owned 2-million of the company’s shares. At the time they were worth R408m. This week, 2-million Capitec shares are worth R1.4bn.

On January 13, when the shares were trading at R706, Stassen sold 50,000 for R35.3m. This is substantially more than the former CEO realised when he sold 135,000 of his shares back in April 2014. That deal grossed Stassen R35m.

Although he has generated well more than R150m from the sale of chunks of his Capitec shareholding since 2013, company sources say the bulk of his wealth is still in Capitec. The regular exercising of relatively cheap share options, awarded since his retirement as part of the remuneration scheme, has helped to top up his holdings.

On Thursday the company was unable to provide precise details of his holdings, but said it was well more than a million.

In the past Stassen explained that much of the postretirement selling was prompted by the need to balance his share portfolio. It is unlikely any shares he bought since 2013 performed as well as Capitec.

Following the sale in November 2016 of R68m worth of shares, Stassen told the Financial Mail the proceeds were going into a new venture. He gave no details other than to say it was not in finance or banking. Those who know Stassen, who is a keen Formula One fan and owns a Ferrari, believe his new venture will be linked to highend manufacturing and design.

Whatever he does next, Stassen is unlikely to repeat the outstanding returns generated by his first entrepreneurial venture. He was co-founder of the bank, which was listed on the JSE in 2002 at about R30.

A strong push into transactional banking and sustained inroads into the largely low end of the lending market have helped to more than treble Capitec’s share price from R201 at the end of 2013 to where it is now at R715.

“The group has consistently generated strong earnings growth and has been rewarded by a steady increase in its rating,” said one analyst, who noted its price:earnings ratio of 23 was in line with the overall market.

When Stassen resigned from his executive position — he remains a nonexecutive director of the bank — market commentators feared the strong share price performance of the previous three years would come to an end. They watched closely for signs that the market was turning against Capitec’s unique growth proposition as senior executives sold blocks of shares. They are still watching.

Source:Business DayDate: 2017/01/20

Mutual & Federal annual results hit by big claims

hort-term insurers, including Mutual & Federal, would post strained underwriting results for the 2016 financial year following a number of large claims last year, said Mutual & Federal CEO Raimund Snyders.

“[Last year] was tough from a claims perspective,” Snyders said on Thursday, citing hailstorms, countrywide fires and floods in Johannesburg.

Insurers incur underwriting losses when the amount they pay out in claims and claims administration exceeds the amount collected in premiums.

For the six months to June 2016, Mutual & Federal posted a R57m underwriting loss — a 133% decline on the previous comparable period. Rival Santam posted an underwriting profit of R618m for the same period — a 24% decline on the prior period.

Short-term insurers have been battling weak economic growth and high unemployment, leading to fewer individuals buying assets that need to be insured, resulting in lower premium income.

Mutual & Federal, a wholly owned subsidiary of Old Mutual, had spent the past year bedding down property and casualty as part of Old Mutual Emerging Markets’ (Omem) wider strategy, Snyders said.

Omem will be spun out of Old Mutual plc by the end of 2018 and listed on the JSE. Mutual & Federal would remain within the emerging markets group and was an integral part of its strategy, akin to asset management or wealth, he said.

In anticipation of increased expenditure on infrastructure, Mutual & Federal was looking to specialist lines of insurance business, such as construction and engineering, for growth opportunities, said Snyders.

There were also opportunities for technological disruption in insurance, he said.

The impact of technology on insurance would be even more significant than it had been on banking, particularly when insurers started to put the same financial firepower into technology investments that banks had, Snyders said.

Mutual & Federal, which had between 2,500 and 3,000 active brokers selling its products, expected to see consolidation in the broker market, he said.

The Retail Distribution Review (RDR), which imposes stricter rules on the way financial products are distributed, places added regulatory pressure on brokers.

RDR would be Mutual & Federal’s main focus from a regulatory perspective in 2017, Snyders said.


Source:Business DayDate: 2017/01/20

Cashbuild key to success in lowerend

Mark Allix

Cashbuild’s meteoric rise since 2009 came just as stock exchanges around the world imploded into the global financial crisis.

The JSE was no different, but Cashbuild held a steady course northwards. It has had a few tricks up its sleeve. Not least it has raised the wages of workers when other firms were shedding employees. It also charges the lowest prices possible, but is firm on margins.

Since its listing in 1986, Cashbuild’s share price has risen from R1.10 to about R340. Since January 2009 the share has risen about six times from R56, or 607%.

CEO Werner de Jager puts this down to “focusing on our strategy, understanding our model and managing the business in detail”.

“We are focused on a very specific market sector — the middle to lower LSM’s [Living Standards Measure] where a lot of housing delivery and housing improvement have happened over the years.”

From 182 stores in January 2009, the group has added 57 Cashbuild stores, 10 Cashbuild do-it-yourself stores, and most recently 44 P&L hardware stores. It operates in several southern African countries.

One of its main competitors, Build it, a franchise division of the Spar Group, is a full-service builder’s merchant.

Massbuild, a part of Massmart, has Builders Warehouse, Builders Express and Builders Trade Depot. Both Cashbuild and Massbuild serve residential markets, although Massbuild sells to the bonded market while Cashbuild has more cash-in-hand sales, especially of bricks and cement.

Vunani Securities small and medium companies analyst Anthony Clark says much of Cashbuild’s business is for cash and is in rural areas. “Their customers [are] untracked and in the cash economy,” he says. This comprises mainly building and renovation work that is not captured formally.

Other general retailers in the building space, such as Italtile, have also targeted lower-end business. Through its TopT stores, customers upgrade their homes or build them slowly over years in areas where planning permission is seldom recorded. Italtile owns the CTM tiles and Tivoli taps brands, among others. “Much the same is true for Cashbuild,” Clark says. It is extending its reach into previously underserviced parts of the country, including urban areas.

But Clark says when former “whirlwind CEO Pat Goldrick stepped down” in 2012 his successor Werner de Jager pulled back the rapid pace of expansion that Cashbuild had undertaken. This slowed growth and let competitors move into its markets.

But shortly after that Cashbuild made some strategic acquisitions, including the R350m P&L Hardware buyout, effective from June 2016.

“Thus we have seen a dramatic rise in sales and earnings [which are] outstripping the struggling building and construction sector,” Clark says.

It remains to be seen whether the informal building boom will continue. SA faces a possible downgrading of its sovereign credit ratings amid continuing volatility in global markets. The group says overall revenue, including from 44 P&L Hardware stores, showed growth of 15% for the first half of 2017 when compared with the same period previously.

Electus Fund Managers equity analyst Damon Buss says the drivers of Cashbuild’s growth over the past 10 years have been its low- to middleincome customer base. Allied to the expansion of SA’s social grant system, which reaches 17-million people, he says an increase in state employment and above-inflation salary increases has enabled people to upgrade their homes, both in urban and rural areas.

Significant urbanisation combined with a lack of affordable housing in urban areas have also resulted in many people building rooms on their properties to rent out.

Meanwhile, competition in SA’s overtraded cement markets has allowed Cashbuild to limit inflation. “Cashbuild management have also done a very good job of controlling costs which has led to gross profit margin expansion [to 26% in June 2016], which has resulted in them delivering very strong cash-flow growth,” Buss says. But most of the key drivers of growth have now run their course and Cashbuild is likely to find it a lot tougher to deliver results, he says.

Source:Business DayDate: 2017/01/20

FNB probes safety deposit box heists

FNB CEO Jacques Celliers says the bank has appointed external investigators to work with the Hawks to investigate the theft of hundreds of safety deposit boxes from two FNB branches during December.

“We deeply regret the impact this has on our loyal customers. It’s a monster thing that affects a lot of people. We’ve had a messy few weeks [but] none of our messiness comes close to what people are going through,” Celliers said on Thursday.

Safety deposit boxes belonging to hundreds of customers were stolen from FNB’s Randburg and Parktown branches on December 18 and 31 respectively. Losses ranged from R100,000 to R4m, said a spokesman for victims.

“It hurts. We work hard on our trust and to keep our loyal customers. These things have a major impact on us, our brand and our teams,” said Celliers.

FNB had put together an “admin office” to help customers who had lost important documents. It would cover printing and courier costs, he said. The bank would also help customers who had insurance to process claims. It would consider covering the excess on a case-bycase basis, Celliers said.

He would not be drawn on whether FNB would reimburse customers who had no insurance, saying only that the bank would need to wait for the investigation to be finalised.

“We’re hoping that a big portion did have insurance,” he said, referring to safety deposit box contracts that placed this responsibility with customers.

Celliers urged all customers, whether insured or not, to come forward and specify what was in their boxes to clarify as much of the detail as possible.

It was premature to say whether or not it was an inside job, he said. “If there was internal involvement we’ll take the appropriate actions.”

Affected FNB customers and members of the public who might have information regarding the thefts can e-mail

Source:Business DayDate: 2017/01/20

BHP Billiton and Vale settle civil claim for Samarco tragedy

By Robert Laing

BHP Billiton and Vale have agreed to pay 155-billion real (about $47.5bn) to settle a civil claim for the Samarco tailings dam disaster in November 2015.

This means BHP and Vale have abandoned their offer to pay 6-billion real over 15 years in their “framework agreement” announced in March‚ which they claimed Brazilian authorities accepted‚ but was disputed by the Brazilian federal prosecutors’ office.

Under the new agreement‚ Brazilian federal prosecutors would drop criminal proceedings against Samarco and its owners‚ BHP said in a statement on Thursday morning.

The $47.5bn settlement appears to have been anticipated by investors‚ with BHP’s share price rising 0.64% to A$26.69 in Sydney following the announcement.

Vale closed 4.52% higher at $9.94 in New York on Wednesday.

BHP said a final settlement was likely be announced in June based on the conclusions of experts the federal prosecutors would appoint.

“Any restart of operations at Samarco is subject to a separate set of negotiations with relevant parties and will occur only if it is safe‚ economically viable and has the support of the community‚” BHP’s statement said.

“Resuming operations would require government approvals‚ the granting of licences by state authorities‚ the restructure of Samarco’s debt‚ and the completion of commercial arrangements with Vale regarding the use of its infrastructure.”

Known as the Bento Rodrigues dam disaster‚ an iron ore tailings dam owned by Samarco suffered a catastrophic failure on November 5 2015‚ causing flooding and at least 17 deaths and 16 injuries.

Source:BDproDate: 2017/01/19

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