Pallinghurst flags deeper first-half loss

By Staff Writer

Pallinghurst Resources expects to sink deeper into the red when it reports its financial results for the six months to June.

Headline loss per share for the period is expected to be R1.39‚ up from loss of 67c a year ago‚ the investment group said in a statement on Thursday.

The company attributed the poor performance to decreases in the valuation of its investments.

“The fall in the Gemfields share price accounts for the majority of the unrealised loss for the six-month period‚” the company said.

Net asset value fell to R4.7bn from R5bn as at December‚ while net asset value per share dropped to R4.36 from R6.61.

The share price was off 2.28% to R2.57 in mid-morning trade on the JSE‚ giving the company a market value of R3.68bn.

Source:BDproDate: 2017/09/21

Luxury goods group Richemont sharpens online focus with two new appointments

By Tammy Foyn

Luxury goods retailer Richemont has signalled a shift in focus with the creation of a new role — chief technology officer.

The first incumbent is Jean-Jacques van Oosten‚ a retail industry veteran who has held the post of chief information officer at several companies including Tesco‚ Kingfisher‚ EDS and Unilever.

Van Oosten is also a doctor of molecular genetics and a London Business School graduate.

Richemont chairman Johann Rupert said of the move: “The creation of the chief technology officer position and Jean-Jacques van Oosten's appointment reaffirms Richemont's commitment to meet the demands of today's environment.”

Van Oosten “brings over 15 years of experience in scaling‚ transforming and internationalising online and multichannel businesses.”

Richemont recently issued a better than expected trading update for the first five months of the current year.

That follows a tough prior year‚ when earnings were hit by stock buybacks of underperforming luxury watch brands.

Richemont also announced a new head of human resources.

Sophie Guieysse is a former HR director at Richemont rival LVMH‚ who also spent 10 years at Canal + in asimilar role.

“Since 2016‚ Ms Guieysse had been advising Dior on the future of luxury in a connected world‚“ Richemont said in its statement on Thursday.

She replaces Thomas Lindermann‚ a 20-year Richemont veteran.

Source:BDproDate: 2017/09/21

AfriSam upbeat on PPC merger

AfriSam is confident that its proposed merger with SA’s largest cement maker, PPC, has the potential to create significant benefits for all stakeholders.

African cement markets have changed drastically in the past decade, with global and regional cement powerhouses negatively affecting PPC and AfriSam operations, it says.

“Both companies have recently commenced new businesses or commissioned new capacity in the rest of Africa. This provides significant growth opportunities and market diversity but does present start-up risks and liquidity challenges,” Phuthuma Nhleko, AfriSam chairman, said on Wednesday.

Consolidation in world cement markets had included the merger of Holcim-Lafarge and Heidelberg-ItalCementi. “This is why we believe that a merged South African national champion, with strong empowerment credentials from AfriSam and PPC’s existing black shareholders, will not only be competitive in this changing market but will be able to pursue empowerment and social agendas that are critical to its success,” he said.

PPC said last week it had received a nonbinding “communication of interest” from Nigerian company Dangote Cement to buy the entire share capital of the company.

PPC’s share price fell 2.05% on Wednesday to close at R6.21. It jumped as much as 5.7% to about R6.40 last Thursday after the Dangote announcement.

Earlier in September, AfriSam submitted a revised merger proposal to PPC in tandem with an undertaking by Canada’s Fairfax Africa Investments to buy R2bn in ordinary shares at R5.75 a share.

The revised merger proposal included a R4bn recapitalisation of AfriSam before any merger.

“We believe that the combined entity, with a significant equity commitment of R6bn from Fairfax, can build an even better future for its shareholders, Rob Wessels, AfriSam acting CEO, said on Wednesday.

Source:Business DayDate: 2017/09/21

Vukile has to make Atlantic Leaf offer

Vukile Property Fund was forced to make a formal mandatory offer for Atlantic Leaf Properties on Wednesday after its shareholding in the UK-focused real estate group exceeded 34%.

But Vukile has no intention of taking control of Atlantic Leaf, saying that it would prefer that the group, which it viewed as a strategic offshore investment, grows independently.

Vukile, which has investments in Spain and the UK, increased its stake in Atlantic Leaf through a bookbuild last week by the UK-focused owner of industrial real estate.

Atlantic Leaf undertook an accelerated bookbuild in order to fund its recent acquisition of a portfolio of 11 assets tenanted by sofa maker DFS. Vukile was allocated about 23-million new shares at a subscription price of R17.60 per share.

“Pursuant to this allocation, Vukile’s shareholding in Atlantic Leaf would increase to 34.90% of the enlarged issued share capital, thereby triggering the requirement for Vukile to make a mandatory offer in accordance with the securities takeover rules of Mauritius,” Atlantic Leaf said.

But Vukile reported that shareholders holding 52% of the shares in Atlantic Leaf had agreed not to take up the mandatory offer.

“The waiver by the majority of the institutional shareholders, including all shares held by the management team sends a further strong message of support for the company. Many of the shareholders who provided Vukile with waivers to the offer also participated in the bookbuild,” said Atlantic Leaf CEO Paul Leaf-Wright.

“Our management team works closely with Vukile CEO Laurence Rapp and his team to source new opportunities and in growing Atlantic Leaf into a stronger and larger business. We believe that Vukile’s circa 35% shareholding will underpin any future initiatives we undertake,” said Leaf-Wright.

Rapp said his group was “strongly supportive of Atlantic Leaf’s strategy of investing in quality assets in the UK with an attractive forward yield”.

shareholding percentage that Vukile Property Fund holds in Atlantic Leaf Properties, after the Mauritianbased company undertook a bookbuild to fund an acquisition

Source:Business DayDate: 2017/09/21

ELB back to profit on strong order book

ELB Group, a JSE-listed engineering solutions provider and capital equipment supplier, posted an R82m profit for the year ended-June 2017, after a difficult 12 months previously.

Headline earnings of 243c per share from a loss of 519c per share in financial 2016 were helped by a stronger order book and the award of delayed projects.

The group operates mainly in mining, power, ports, construction and industrial markets in Australasia and Africa. Cash generation from operations was R198m in the period. “The return to profitability this year can be attributed to improved market demand — mainly in the equipment segments — the strengthening of some commodity prices, the commencement of previously delayed projects, further inroads into the industrial sector, as well as the favourable effects of a stronger rand,” CEO Stephen Meijers said on Wednesday.

The right-sizing and repositioning of the group in the previous financial year had enabled the turnaround, Meijers said. Many initiatives and projects in recent years had caused positive outcomes in the latest period. These included the award of the Vedanta Zinc Gamsberg mining project near Aggeneys, Northern Cape, one of the world’s biggest undeveloped zinc ore bodies.

ELB also recently announced a strategic partnership for minerals and metals-processing projects in sub-Saharan Africa with China ENFI Engineering, providing better project execution capability.

The implementation of the Asanko gold mine conveyor project in Ghana that was awarded in the second quarter, had been deferred to financial 2018. ELB had also further diversified into “alternative energy” sector projects providing power plants of up to 50MW, and said it had gained expertise in the fast-moving consumer goods sector.

With China ENFI, it had a partnership with Germany’s Haver & Boecker, which made packing and screening machines for raw-material processing, including for minerals, cement, building materials, chemicals and fertiliser.

ELB said global commodity prices had stabilised and were underpinned by the positive effects of a stronger rand.

Source:Business DayDate: 2017/09/21

Agarwal to boost his Anglo share

Anglo American will soon have a new dominant shareholder after Indian billionaire Anil Agarwal’s family owned Volcan Investments said it would top up its 12.43% holding in the diversified miner by a further £1.25bn to £1.5bn.

At prevailing prices this would take Volcan’s stake to 20%, but the company, which is issuing a bond to pay for the shares, insisted this was not a takeover play for the miner of platinum, diamonds, copper and bulk commodities such as iron ore, coal and manganese.

“In relation to the UK takeover code, Volcan confirms it does not intend to make an offer to acquire Anglo American plc. Accordingly, Volcan and all persons acting in concert with Volcan, including Vedanta Resources plc, will be bound by the restrictions in rule 2.8 of the code,” Volcan said in a statement on Wednesday evening.

Under UK laws, a share holding of 30% triggers a takeover offer

Anglo declined any comment on the latest announcement from Volcan.

Volcan’s wholly owned subsidiary, Volcan Holdings II, will issue a three-year mandatory exchangeable bond in London, led by JP Morgan as the sole bookrunner.

The coupon on the bonds would be set in London later on Wednesday.

The bond, which will be issued on October 10, would be secured against Anglo shares owned by Volcan. Volcan said it would buy Anglo’s shares in the market “via a combination of purchases from investors in the mandatory exchangeable bond and on market purchases, subject to certain conditions, until or close to the closing date”.

Agarwal has said in the past that he favours Anglo’s asset suite and exposure to SA where Vedanta, which is a diversified Indian mining company 69% owned by Volcan, has zinc mines which were once owned by Anglo.

In March, Agarwal caused a ripple of excitement among Anglo American investors, spending £2bn to buy the 12.43% stake. It prompted widespread speculation on what exactly his intentions with Anglo were, after it had undergone a hefty restructuring and debt reduction programme. “We are encouraged by the performance of Anglo American since our original investment earlier this year.

“The company has made good progress in its operational and financial performance and remains an attractive investment for our family trust,” Agarwal said.

Agarwal has to date refused to take a seat on Anglo’s board and it is not clear whether as a one-fifth holder of the company he would want some say in its strategy and direction.

He has in the past spoken of wanting to merge assets owned by Vedanta with Anglo, a suggestion Anglo has rejected.

Source:Business DayDate: 2017/09/21

Not much joy for Sasol Inzalo investors

The majority of black shareholders in Sasol’s Inzalo — the R28bn empowerment structure launched by the oil and chemicals group in 2008 to hold 10% of its shares — will have gained nothing but a portion of dividend distributions when the scheme matures in 2018, unless the shares appreciate rapidly.

This underlines the hazards of heavily geared equity ownership structures in volatile commodities companies for new black shareholders with no capital. Although a few Sasol Inzalo shareholders bought in using their own money, most of the 270,000 participants — who included the public, customers and suppliers, employees and an educational foundation — were funded by debt designed to be repaid from dividends and appreciation in the share price.

Inzalo’s participants earned R2.5bn of R7.6bn paid in dividends over 10 years, while R5.1bn went to service debt.

Sasol’s shares, at R370 on Wednesday, are barely above the R366 at which the scheme was priced. The shares largely track oil prices and the rand.

Sasol’s other shareholders are likely to be asked to support an accelerated bookbuild to raise R12bn-R13bn to repay the banks that financed Inzalo.

Joint CEO Bongani Nqwababa said other fundraising options would be considered.

Sasol shareholders will be diluted 1.5% more than the 4% dilution agreed to in 2008.

They will also be diluted 1%1.3%, depending on the share price, when Sasol launches a replacement black economic empowerment structure, Sasol Khanyisa, which will cost the group R7.3bn over 10 years, half of which will be borne in the 2018 financial year.

Sasol shares fell 7% on the JSE as shareholders reacted to the costs and dilution of Inzalo and its replacement.

Sasol chief financial officer Paul Victor said lessons learnt from Sasol Inzalo were being applied to the design of the R21bn Sasol Khanyisa.

Khanyisa will be fully funded by Sasol, not banks, and will hold a 25% stake in the South African operations, which include synfuels, chemicals and gas businesses.

The international operations, where huge capital projects are under way at Lake Charles in Louisiana and in southern Mozambique, are excluded. So too are Sasol Mining and Sasol Oil, which have existing empowerment structures.

Bright Khumalo, portfolio manager at Vestact, said Sasol was not the only group to have to assist a geared empowerment scheme. Naspers had done the same with Welkom Yizani.

Khumalo said the structure of Khanyisa was more solid than Inzalo, since the local operations were efficient and costcompetitive. It was quite likely they would repay debt in the structure in less than 10 years.

Victor said Khanyisa’s debt would be repaid from free cash flow from operations, not share price appreciation.

Khanyisa will not offer shares to the public. It will issue shares to Inzalo participants who choose to move into the new structure and the employee share ownership plan.

the amount that Sasol’s Inzalo participants earned out of R7.6bn paid in dividends over 10 years, while R5.1bn went to service debt

Source:Business DayDate: 2017/09/21

Steinhoff Africa soars on JSE debut

The listing of Steinhoff Africa Retail (Star) brought some much-needed cheer to the JSE on Wednesday, almost doubling the market capitalisation of the retail sector from R91.5bn to more than R160bn.

The share price briefly peaked at R22.46 but slipped back to end its first day of trading at R21.77.

Within minutes of the opening bell more than 14-million shares changed hands. By the end of the day just more than 69-million shares had traded. Star is the 14th listing to be added to the JSE in 2017.

Its retail chains include Pep, Ackermans, Timbercity, Pennypinchers, HiFi Corp, Incredible Connection and Shoe City. Pep and Ackermans account for the dominant portion of the group’s revenue.

CEO Ben la Grange said he could not confirm when the Shoprite leg of the Star listing would be completed as it first required approval from the competition authorities.

The inclusion of a 26% economic interest in Shoprite, and just more than 50% voting control, is expected to boost Star’s market capitalisation to about R100bn. La Grange described Star as a “fantastic story about growth in SA and Africa”.

He said Steinhoff International’s decision to list its African assets in a separate entity made a lot of sense in terms of the price it had received for the Star shares.

Steinhoff is expected to retain about 76% of Star. In response to speculation of an eventual unbundling of all of its African operations, La Grange, who is also head of finance at Steinhoff International, said the Frankfurt-listed furniture retailer had made it clear it would like to maintain control of the African businesses.

A working group has been set up to identify cross-marketing opportunities within the Shoprite-Star group of businesses. La Grange said the main focus would be on services provided by the various retail chains rather than their products. Many of their customers came into the stores to do money transfers or pay for DStv subscriptions.

He said the combination of Shoprite and Star’s outlets would create huge leverage in the provision of these services.

“We will be able to offer customers more convenience to do what they need to do on a monthly or daily basis.”

Star records 360-million transactions a year but this is dwarfed by Shoprite’s 1.1-billion transactions. He said Star’s chains accounted for 20% of the spending of their customers. That would increase to 70% once Shoprite was included.

Both La Grange and Markus Jooste, CEO of Steinhoff International, refused to entertain any questions on the legal battle between Steinhoff International and former joint venture partner Andreas Siefert.

A Dutch court is due to hear an application from Siefert on Thursday for an investigation into Steinhoff International’s 2016 annual accounts. Siefert claims the accounts do not accurately reflect his minority holding in Conforama, a European-based furniture retailer.

Jooste said earlier he was confident the court would dismiss the application, which was part of a larger legal battle that involved the German authorities.

Source:Business DayDate: 2017/09/21

Aveng in big drive to settle claims

Construction group Aveng has thrown the kitchen sink at a host of long-outstanding claims – and plans to book a R2.7bn impairment charge as a result.

That will push it to a full-year headline loss of between R6.3bn and R6.6bn — a staggering figure given that its market cap at Wednesday’s close was R1.46bn. Yet the news helped drive Aveng shares 28% higher at one point. They closed 20.7% up.

Aveng is keen to emphasise that the impairment will have no cash consequence on its results and it has also reached agreement with its major funding banks to renew and extend its debt, some of which is moving close to maturity. This means that the company “now has sufficient liquidity to execute on its plans to return the business to a position of sustainable profitability”, according to a statement.

Lentus Asset Management portfolio manager Nic NormanSmith said the clarity on its liquidity was “one of the most positive” aspects of the update.

“It provides a bit more certainty — there were a number of items hanging over the company,” Norman-Smith said.

“Can you draw a line in the sand? One would hope so but the environment will play a key part,” he said.

The news also means that Aveng is now no longer trading under cautionary.

Its results will be made public on Tuesday after management has delayed their release. The company, whose shares have halved over the past year, said its decision to take such a big write-down was partly influenced by the recent award of R508m to it over the Queensland Curtis Liquefied Natural Gas project in Australia, which was “substantially less” than the carrying value.

Aveng said the “increasing complexity” of claims, the “everincreasing and protracted litigious environment and costly process” in settling claims and the disruptive effect on management and the group’s reputation were behind its decision to finally close the book.

However, a long-standing dispute between Aveng and Genrec Engineering — owned by Murray and Roberts — has been settled in Aveng’s favour, which means a cash award of R238m to Aveng.

That includes a final value of R124m and interest of 15.5% backdated to September 2011.

Still, business is not improving. Its McConnell Dowell and Aveng Grinaker-LTA divisions were expected to return to profit in 2017 but their turnaround “has taken longer than anticipated”. Aveng cites weakness in the South African construction market, as well as the “scale and complexity” of intervention efforts in both units.

Aveng’s exposure to the steel industry is not helping, either. The company plans to book an additional R272m charge against certain of its steel assets, worth 69c a share.

The toxic finale to its writedown frenzy is a deferred tax asset charge of R531m, equivalent to 134c a share.

Source:Business DayDate: 2017/09/21

Miner: more gold, lower cost

Pan African Resources management is focusing on three new projects to generate more gold for the company, some of it lowcost production that will drag down the group’s average costs, putting behind it an annus horribilis in which its gold output and profits fell hard.

The 2017 financial year to end-June was one for the management to learn tough lessons after gold output fell 15% to 173,285oz and post-tax profit tumbled 43%, to R310m. Pan African stuck to its guns on dividend payments, despite starting a R1.74bn tailings retreatment project at its Evander mine.

It declared a R185m dividend for the year, translating to R0.08279 per share.

The all-in cost during the year shot up to R540,693/kg, which includes capital expenditure on growth projects, compared with 2016’s R410,206/kg.

The received rand gold price was flat at R542,773/kg, compared with 2016.

The past financial period was also the year in which Pan African drew a line under two investments, selling its Uitkomst Colliery and agreed the sale of its Phoenix Platinum tailings retreatment project, which sucked up R309m and is being sold for R89m.

Pan African CEO Cobus Loots was keen on Wednesday to show the company had a handle on the difficulties at the Evander mine — which was shut for 55 days for repairs on its No7 shaft, dragging output down to 45,304oz for the year from 73,496oz the year before — and the Barberton mine, where production fell by about 13,000oz to 71,763oz, extending a decline in output since 2013.

Pan African has set the 2018 financial year’s gold output target at 190,000oz at an all-in sustaining cost below $1,000/oz.

The all-in cost metric would be high due to the heavy investment in the Elikhulu tailings project at Evander.

The project will deliver an extra 56,000oz of low-cost gold from December 2018.

Combined with the small Evander tailings retreatment project as well as the Barberton tailings retreatment project, Pan African will have a total of 91,000oz of gold a year coming from surface sources, delivering gold at an all-in sustaining cost of $516/oz.

This would bring the group’s total all-in sustaining cost close to $900/oz, cheaper by far than SA’s four larger gold miners — Sibanye Gold, Gold Fields, Harmony Gold and DRDGold.

Pan African would start a R100m project at its Fairview mine at Barberton, which would allow a doubling of ore haulage along a shaft, Loots said.

The company is also finalising a decision to mine an area of untapped ore at Evander near the No7 shaft. The mills at Evander have a monthly capacity of 80,000 tonnes but are only half filled with prevailing underground production. There is enough capacity at the gold plant for ore from the project called the 2010 Pay Channel, which is in a feasibility study phase.

Source:Business DayDate: 2017/09/21

Prices rise as flu spreads to more chicken farms

RCL Foods and Quantum Foods became on Wednesday the latest major poultry producers to report cases of bird flu, whose effect is beginning to play out in higher meat prices as producers cull birds to contain the spread of the disease.

RCL Foods, owner of Rainbow Chicken, said it culled bird flock on at least two of its farms in the Western Cape and Gauteng, representing 5% of its breed stocks, at a cost of R26m.

Quantum Foods is also reeling from the outbreak, which hit two of its Western Cape commercial layer farms.

Quantum Foods and RCL joined Sovereign Foods and Astral Foods, which recently reported similar cases, pointing to a growing challenge that is now found in most provinces in SA, although still isolated.

“AI [avian influenza] has been spreading across SA, with over 50 reported cases since June 2017. AI is not known to affect humans, so there is no concern from a chicken consumption perspective,” RCL Foods said.

Exports of raw meat, eggs and live birds from SA to some trade partners have been disrupted as a result, according to the Department of Agriculture, Forestry and Fisheries.

At least 3-million birds have either been culled or have died since the strain was detected in June, according to Agbiz agricultural economist Wandile Sihlobo, who linked the rise in meat price inflation to the outbreak of the disease.

Meat price inflation rose to an annual rate of 15% in August, from 14.4% in July, according to Statistics SA data. Sihlobo said cattle restocking added to the uptick in meat inflation.

The bird flu came at a time when the poultry industry was recovering from the 2015-16 drought, which drastically pushed up the cost of feed, which in turn squeezed profits.

Since then, prices of primary ingredients such as maize and soya have come off their historic highs as a result of the expected bumper harvest.

Maize, for example, is projected at a record 16.4-million tons for 2017. With lower input costs, the earnings of poultry producers are expected to improve in the coming months despite the avian flu.

To this end, Astral expects headline earnings per share in the year to September to shoot up 65%, to R15.92. The expected increase in earnings is partly attributable to a low base effect from the comparable period a year earlier.

Astral’s share price ended 7% higher at R155.79 on the JSE, giving it a market value of R6.7bn. Quantum Foods settled 8% lower at R2.90, while RCL Foods, which has a more diverse portfolio than just poultry, gained 0.5%, to R14.68.


Source:Business DayDate: 2017/09/21

RCL Foods detects bird flu at its farm

By Elsie Nyalela

RCL Foods confirmed on Wednesday that it had detected an outbreak of the highly pathogenic H5N8 strain of avian influenza or bird flu at the its Heuningdal breeder farm in the Western Cape.

Previously the group also experienced an outbreak at Viva breeder farm near Muldersdrift in Gauteng.

Bird flu has spread rapidly across SA, with over 50 reported cases since June 2017. H5N8 strain of avian influenza is not known to affect humans.

The affected sites had been depopulated, and the loss amounted to about 5% of the company’s total breeder stock, RCL Foods said.

The cumulative direct costs associated with bird flu amounted to about R26m, and the poultry and food industry said it is evaluating all opportunities to minimise

the possible impact of this reduced volume.

Together with the government, RCL Foods said it would continue to implement the strict biosecurity measures at all sites to safeguard the health of its flocks.

Source:IRESSDate: 2017/09/21

Aveng secures extensions on its current debt, share price leaps

By Giulietta Talevi

Construction group Aveng has thrown the kitchen sink at a host of long-outstanding claims – and plans to book a R2.7bn impairment charge as a result.

That will push it to a full-year headline loss of between R6.3bn and R6.6bn - vastly outstripping its market cap of R1.46bn‚ as of Wednesday’s close.

Yet the news helped drive Aveng shares as much as 28% higher at one point. They ended 20.7% up‚ at R3.50.

Aveng was keen to stress that the impairment will have no cash consequence on its results – and it has also reached agreement with its major funding banks to renew and extend its debt – some of which is close to maturity.

This means that the company “now has sufficient liquidity to execute on its plans to return the business to a position of sustainable profitability‚” according to a statement.

Lentus Asset Management portfolio manager Nic Norman-Smith said the clarity on its liquidity was “one of the most positive” aspects of the update.

“It provides a bit more certainty – there were a number of items hanging over the company. Can you draw a line in the sand? One would hope so but the environment will play a key part‚” he said.

The news also means that Aveng is now no longer trading under cautionary. Its results will be made public on Tuesday‚ September 26‚ after management delayed their release.

Source:BDproDate: 2017/09/21

Remgro reports headline earnings drop of 3.4%

By Mark Allix

Remgro said on Wednesday its performance in the year ended June 2017 was “commendable given the current economic climate”.

Headline earnings per share shot up 32.7%‚ but headline earnings per share excluding once-off costs and option remeasurement fell by 3.4%.

The year under review also included a positive fair value adjustment of R687m. Excluding these items‚ headline earnings increased by 1.9% from R7.39bn to R7.53bn‚ while headline earnings per share fell from 1‚409c to 1‚361.3c.

“We are very cognisant of the deteriorating South African economic conditions and uncertain political environment. However‚ Remgro will continue to support its existing investments and continue to look at viable investment opportunities‚” CEO Jannie Durand said.

Remgro said its banking and insurance investments provided good returns‚ while industrial and infrastructure contributions to headline earnings showed a “noticeable improvement” compared to the June 2016 results.

It said that consumer products investments were mainly affected by a rights issue at RCL Foods and once-off transaction costs of R788m incurred with the Mediclinic rights issue and Al Noor Hospitals Group transaction‚ as well as a negative fair value adjustment of R730m.

Remgro’s intrinsic net asset value per share fell sharply by 17.9% to R251.48 at end-June 2017‚ mainly due to a 40.4% drop in the market value of the Mediclinic investment‚ as well as the dilutive effect of the rights issue. The drop in Mediclinic’s market value was a direct result of the rand strengthening against sterling and “problems experienced in the Middle East”‚ Remgro said‚ without elaborating.

Source:BDproDate: 2017/09/21

Sasol announces new R21bn empowerment deal‚ with Inzalo under water as it nears its end

By Allan Seccombe and Charlotte Mathews

Sasol‚ the coal-to-liquid fuel maker‚ unveiled a fresh R21bn empowerment scheme for its South African assets‚ after the first scheme was under water as it approached the end of its vesting period.

In an enormously complicated transaction‚ Sasol is terminating its Inzalo empowerment scheme and replacing it with the Khanyisa transaction‚ which will result in at least 25% black ownership of Sasol’s wholly owned subsidiary‚ Sasol South Africa‚ for 10 years from 2018.

Sasol shareholders need to approve the transaction‚ which includes an employee share ownership scheme‚ public investment in the company’s shares‚ 54 selected customers‚ suppliers‚ franchisees and nongovernmental organisations as well as a foundation.

Black Sasol employees have received R1.6bn in dividend payments through the Inzalo scheme‚ worth about R52‚000 per employee‚ but with the Sasol share price measured at R389 per share in early September‚ the indication was that there would be no distribution of Sasol shares to those employees at the end of the scheme in 2018.

The structure of Khanyisa was designed to achieve a “sustainable” broad-based black economic empowerment (BBEEE) transaction “at an acceptable economic cost and within market norms”‚ Sasol said.

“Sasol will be providing notional and other vendor funding for Sasol Khanyisa‚” it said‚ adding that the shares in the scheme would be unencumbered.

Sasol will issue up to 43-million shares to buy back preferred ordinary shares in the Inzalo scheme.

Sasol Inzalo was put in place in 2008‚ when Sasol sold 10% of its shares to various black groups‚ including employees‚ customers and suppliers‚ the public and the Sasol Inzalo Foundation (which supports technical education). It matures in the middle of next year.

The price at which the shares were sold was R366‚ representing an 11% discount to the prevailing share price of R410.

The deal was valued at R26bn.

Most participants were funded by debt‚ provided either by banks or Sasol itself‚ but some investors bought the shares using their own cash.

The plan was to service the debt through dividend payments‚ with the expectation that the appreciation in Sasol’s share price over this period would be more than enough to settle any debt remaining at the end of the 10-year lock-in period. But that has not happened.

Sasol’s share price responds mainly to crude oil prices and the rand/dollar exchange rate. In May 2008‚ when Inzalo participants bought into the scheme‚ Brent crude oil was trading at about $128 a barrel. Although Sasol’s shares touched a peak of R652.99 in mid-2014‚ when oil prices were at $112 a barrel‚ they have since fallen to about R395‚ tracking oil prices that are now about $55 a barrel.

Source:BDproDate: 2017/09/20

Avian flu hits two Quantum Foods farms

By Andries Mahlangu

Quantum Foods became the latest major South African poultry producer to report a bird flu outbreak‚ when it said on Wednesday that a highly contagious strain had affected at least two of two of its commercial layer farms in the Western Cape.

“The outbreak has only been confirmed at two layer houses but as a preventative measure‚ management has decided to depopulate the two sites in totality‚” Quantum Foods said in a statement.

“This affects 9% of the group’s current national table egg supply. This outbreak occurred despite stringent bio-security measures in place at all Quantum Foods farms.”

Sovereign Foods last week culled at least 5‚000 birds at its Uitenhage production pipeline.

Late in August‚ Astral Foods said the outbreak of avian flu at certain of its farms had cost the group R50m.

The outbreaks have been mainly reported in Mpumalanga‚ Gauteng‚ Western Cape and Eastern Cape.

Shares of Quantum Foods‚ which was unbundled from Pioneer Foods several years ago‚ were flat at R3.15 in early trade on the JSE on Wednesday.

Source:BDproDate: 2017/09/20

Steinhoff’s Star is up 2.5% in its first session

By Karl Gernetzky

Steinhoff Africa Retail (Star)‚ which listed on the main board of the JSE on Wednesday‚ gained more than 2% at the open of its first session.

Star‚ which incorporates Steinhoff’s African retail assets‚ such as Pep‚ Incredible Connection and Ackermans‚ brings the number of broadline retailers on the local bourse to six‚ the JSE said on Wednesday.

It is the 14th company to list on the JSE this year‚ with the broadline retailer sub-sector now having total market capitalisation of R91.5bn‚ and contributing 1% to the overall market

The Star group operates across sectors including apparel‚ footwear‚ household goods‚ furniture‚ appliances‚ consumer electronics and building materials‚ while also providing financial and mobile services. Steinhoff International has described the separation of assets as “a natural progression‚ given the business’s distinct strategic and geographic focus”.

At 10.30am‚ Star was up 2.5% at R22.29‚ coming off an intra-day best of R22.45.

At the same time‚ Steinhoff International had lost 0.56% to R62.48‚ and 12.43% this year‚ with the company coming under pressure in August when it emerged that CEO Markus Jooste was being investigated by German authorities for alleged corruption related to tax affairs.

Source:BDproDate: 2017/09/20

Pan African declares dividend‚ forecasts rising output after steep fall in profit

By Allan Seccombe

Pan African Resources‚ an SA-focused gold miner‚ reported a steep drop in full-year profit because of lower gold production at a time when the rand price for the metal was flat.

Nonetheless‚ it declared a dividend and outlined improved expectations for the year ahead.

Pan African‚ which is traded on the JSE and London’s Alternative Investment Market (AIM)‚ reported a 43% drop in post-tax profit to R310m for the year to end-June. It declared a R185m dividend for the year‚ translating to 8.279c per share.

Pan African’s gold output fell to 173‚285oz‚ a 15% decline‚ because of difficulties at its Evander gold mine in Mpumalanga.

The gold price was flat year on year at R542‚773/kg‚ while the all-in sustaining cost rose to R514‚435/kg from R405‚847/kg.

Evander was suspended for 55 days during the year to refurbish a shaft‚ while the Barberton mines near the Swaziland border were disrupted by community unrest.

Both mines were issued temporary safety stoppage notices by the Department of Mineral Resources.

Pan African’s net debt fell to R67m by the end of June from R340m the year before‚ as cash holdings more than tripled to R160m. The company issued shares for nearly R700m during April.

Cash from operations fell by R453m to R339m.

Looking ahead‚ Pan African pegged its full-year production at 190‚000oz.

Pan African has started its R1.74bn Elikhulu tailings retreatment project at Evander‚ which will add 56‚000oz of gold from the end of 2018.

The company will complete a drilling programme at an undeveloped area that can be accessed from its 7 Shaft‚ a project previous owner Harmony Gold had wanted to advance but did not.

Pan African will wrap up an R89m sale of its Phoenix Platinum subsidiary to Sylvania‚ a tailings retreatment specialist. This marks the second major disposal by the company‚ which sold its Uitkomst Colliery to Coal of Africa for a profit of R91m during the 2017 financial year.

Source:BDproDate: 2017/09/20

ELB's turnaround gathers steam

By Tammy Foyn

Engineering services and equipment firm ELB Group’s turnaround persisted in the second half‚ and the company posted a full-year profit after a loss the previous year.

The group‚ which earlier this year reported a return to profit in the first half to end-December‚ said on Wednesday that it made an after-tax profit of R82m in the year to end-June‚ from a full-year after-tax loss of R189m a year ago.

Headline earnings per share (HEPS) of 243c compare with a headline loss per share of 519c.

It declared a final dividend of 50c per share‚ for total dividend for the year of 82c. In the prior year ELB paid only an interim dividend of 30c.

Where the 2016 year was characterised by pressure on margins‚ foreign exchange losses‚ the costs of restructuring and repositioning the business‚ and delayed contracts‚ the 2017 year saw the start of those contracts‚ relief from a stronger rand‚ and improved commodity prices.

In the equipment division‚ sales rose to R875m from R686m‚ thanks to “improving market demand and increased market penetration”. Pretax profit rose to R86m from R2m.

The engineering services division grew sales to R1.2bn from R761m‚ and posted a pretax profit of R15m from a pretax loss of R235m before‚ as delayed contracts were started.

This division booked another R30m in project closure costs and claims settlements for projects completed in the 2016 year‚ but ELB said these legacy issues were now resolved.

In Australasia sales rose to R454m from R336m and the pretax profit leapt to R30m from R1m‚ thanks to recoveries in both volumes and margins‚ improved cost management and more favourable exchange rates.

ELB said it continued to invest in new initiatives to diversify further.

These include the provision of alternative energy power plants of up to 50MW; projects in the fast-moving consumer goods field; and involvement in the minerals beneficiation and fine powder handling sectors‚ through partnerships with China’s ENFI and Germany’s Haver & Boecker.

Source:BDproDate: 2017/09/20

Rolfes restates results after accounting errors

Rolfes Holdings announced on Wednesday it had restated its financial results following "accounting errors and understatements of impairments", painting a dimmer picture of the manufacturing and technology holdings group.

The financial results in question include full-year results to June 2016 and interim results to December 2016.

Headline earnings per share (HEPS) was restated to 25.0c to 29.0c (reported: 28.4c) for the six months to December 2016 from 37.8c in December 2015.

Normalised HEPS was restated to 28.0c to 32.0c (reported: 37.8c) for the interim period to December 2016 from 28.4c previously.

On the annual basis, HEPS was restated to 36.9c to 45.1c (reported: 53.2c) for the full-year to June 2016 from 38.2c in the corresponding period in 2015.

Normalised HEPS was revised downward to 39.9c to 48.1c (reported: 55.9c) for the year to June 2016 from 38.2c in 2015.

Rolfes said "accounting errors and understatements of impairments" had been identified by its new auditors and the acting CFO, Richard Buttle.

"The understatements of impairments and accounting errors primarily relate to the Botswana water business and the previously manufactured lead chrome pigment product ranges disposed of since plant closure and during the interim period at a negative margin," Rolfes said in a statement that included a trading statement.

Its Silica mining operations were discontinued in the current reporting period as a result of the useful life of mine and the economic environment and accordingly the current year results would be stated to show continuing and discontinued operations separately, the company said.

In its trading statement, Rolfes said its directors believed that normalised HEPS from continuing operations of between 47.8c and 56.3c was a meaningful measure for evaluating the group's operational performance.

Source:IRESSDate: 2017/09/20

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