Chinese fuel giant to buy 75% of Chevron business in SA and Botswana
By Robert Laing
On Wednesday‚ China’s largest fuel company‚ Sinopec‚ confirmed that it had reached an agreement to acquire 75% of US oil multinational Chevron’s businesses in SA and Botswana for about $900m.
“The other 25% equity of Chevron SA will continue to be held by a group of local shareholders‚ as requested by South African regulation. The sales and purchase agreement has already been filed with the Chinese government and remains subject to regulatory approvals in SA and Botswana‚” Sinopec said in a statement.
Sinopec‚ whose full name is China Petroleum & Chemical Corporation‚ said the assets it’s acquiring include Chevron’s Cape Town refinery‚ which has a refining capacity of 100‚000 barrels per day; its lubricants manufacturing plant in Durban; a network of more than 820 service stations (with 220 convenience stores) across SA and Botswana; and storage tanks and oil depot distribution facilities.
“It is Sinopec’s intention to maintain the entirety of the local workforce and ensure that the operations and services to customers are uninterrupted during the ownership transition. Sinopec looks forward to continued support from the local partners‚ including the black economic empowerment shareholders. It will retain the existing Caltex brand for the retail fuel stations for a period of five to six years before launching a re-branding strategy‚” the statement said.
Reuters reported on Friday that other bidders‚ including Total and Gencor‚ balked at committing to keep Chevron’s aging Cape Town refinery running‚ whereas Sinopec was willing to spend an estimated $1bn upgrading it to produce Euro-V fuel.
“Sinopec has vast experience designing and implementing effective solutions to upgrade legacy systems and facilities‚” Wednesday’s press release said. “Subject to the transaction being approved by relevant regulatory authorities‚ Sinopec intends to enable technological improvements and upgrades for all of the acquired assets to help meet increasing local demand for quality products‚ as well as contribute to the development of the indigenous oil industry.”
Nedbank way ahead of its peers in terms of employment equity
By Linda Ensor
Nedbank was clearly the leader in the banking sector in terms of employment equity at the top layers of its management structure‚ MPs noted on Wednesday. They were commenting on a presentation by Nedbank CEO Mike Brown during a public hearing on the transformation of the financial services sector organised by Parliament’s finance and trade and industry committees.
Presentations by other major banks during a previous public hearing indicated that they had not made much progress in terms of black representation within their management’s top layers.
Brown told MPs that Nedbank had maintained its Level 2 broad-based black economic empowerment ranking for the eighth consecutive year. Transformation‚ he said‚ was firmly embedded in its corporate strategy and was not just a question of compliance.
Brown said the bank realised it had to continue to transform and play a catalytic role in society‚ telling MPs that Nedbank’s score under the financial sector charter in 2006 was 56.6‚ improving to 98.6 in 2016‚ the highest among the bank’s peer group.
Brown noted that the charter score was very important to the bank for attracting customers‚ as the higher the score‚ the higher the procurement points its customers could earn on their own scorecards. Of its more than 32‚000 employees‚ 78% were black and of its 7.7-million clients‚ 78% were also black.
On representation‚ Brown said two of the three executive directors of Nedbank are black; of the 10 independent‚ non-executive directors‚ seven are black. Blacks were also represented in the executive team running the operations of the bank. Black top management represented 54% of the total; black middle management 60%; and black junior management 88% — all above the average for South African businesses.
On ownership‚ Brown noted that Nedbank audited direct and indirect black shareholding‚ including the see-through from parent company Old Mutual‚ which was 37% in 2016. The direct black ownership was 5.44%.
He said Nedbank was institutionally owned‚ with foreign mandated investments representing 18%; domestic institutions 76% (including Old Mutual owning 54%); the empowerment scheme 4%; and individuals 2%. Individuals were not major owners of banks‚ Brown said.
Replying to a question by ANC MP Sfiso Buthelezi‚ Brown said he did support the “once empowered‚ always empowered” principle as it applied to entities with regulated capital‚ such as banks. If a bank financed its own black economic empowerment (BEE) deal‚ this meant it sterilised a part of the regulated capital base of the bank and meant there was less money to lend to the economy. It would be inappropriate and prejudicial to Nedbank if one of its BEE shareholders cashed in and sold to an institution and/or bought a big stake in another black bank.
CitiBank given whistle-blower status in banking collusion scandal
By Staff Writer
CitiBank did not have to disclose the revenue of its local currency trading operation at a competition authority hearing on the forex collusion scandal. The Competition Tribunal held a hearing in Pretoria on Wednesday regarding the fairness of a R69.5m settlement CitiBank reached for its role in alleged anti-competitive behaviour by 14 banks relating to forex trading.
CitiBank has been granted leniency in exchange for acting as a whistle-blower.
At Wednesday’s hearing‚ Fiona Tregenna‚ of the tribunal‚ said: “I know that the penalty does not exceed the 10% of the turnover. What percentage is it exactly?”
Makgale Mohlala‚ head of Competition Commission’s cartel division‚ said he was advised that‚ due to a confidentiality claim by CitiBank‚ he was not allowed to reveal the amount. “This might just reveal how much CitiBank is making‚” he said.
CitiBank legal representative‚ Isabel Goodman‚ confirmed that the bank had claimed confidentiality over the information. She said‚ however‚ that the information would be provided to the tribunal on a confidential basis.
Mohlala said the settlement agreement was designed “to entice the respondents to come forward and assist the commission in the prosecution of this complex conduct ... We tend not to insist on higher penalties during settlements as the penalties we will get‚ as the commission‚ for settling are huge.”
The tribunal’s judgment is expected to be released later on Wednesday or on Thursday.
Consumers are moving to the used‚ lower end of the vehicle market
WesBank’s Rudolph Mahoney tells Business Day TV why he expects the SA vehicle market to accelerate in 2017
BUSINESS DAY TV:
After a dismal year last year‚ sales of new vehicles are expected to tick up this year‚ due to the firmer rand‚ steady interest rates and an improving economy.
That’s the prediction of WesBank‚ which was almost spot on with last year’s decline of 11.4%. Joining us with more is Rudolph Mahoney‚ he’s head of brand and communications at WesBank.
Rudolph‚ so you point out in a release last week that there had been three years of declines in auto sales in SA.
Let’s put it into perspective: before that‚ we had a number of very good years didn’t we‚ so are things just leveling off?
Yes. So we had a couple of good years post the recession 2008-09. We had five or six years of consecutive growth and the last few years have seen the vehicle sales decline‚ mainly as a result of the depreciation of the rand. About 75% of the cars that we sell locally are imported and therefore subject to currency risk and‚ as we know‚ the rand has taken a beating the last few years and that has forced manufacturers to increase car prices quite significantly‚ well outside our CPI or what the average household income would increase with‚ taking into consideration your salary growth every year.
So new cars have become less affordable for your average consumer and we’ve seen a lot of the demand shift from the new to the used market. So‚ yes‚ we saw an 11% decline last year. The year before that‚ also a 10% decline‚ so it’s been a tough couple of years for the market.
To what extent is this triggering a shift in product offering and what car-makers are actually bringing to market right now‚ where affordability constraints are a hindering factor still?
Yes‚ so we’re seeing a lot of activity at the bottom end of the market‚ so that’s where consumers are shifting. I guess it’s an effect of affordability that they just have to downsize their budgets according to what they can afford and so the luxury segment is definitely struggling much more than the market as a whole.
We had FirstRand’s results out a couple of weeks ago and [they are] looking pretty good‚ particularly from WesBank’s perspective. So are you just getting a lot further into that second-hand car market and financing more second-hand vehicles?
We shift our credit appetite as the market shifts‚ so by virtue of the market shifting to the used market‚ we’re a little bit more aggressive in that space too. So‚ yes.
Having said that‚ look at the rand strength that’s been playing out so far; how much of a potential pressure alleviator do you see that acting as on the pricing front?
In the short to medium term‚ the impact will be that the manufacturers will not increase car prices as aggressively through the course of this year‚ and where there is some benefit for the consumers‚ they will pass it back onto the customer through very aggressive marketing incentive programmes‚ such as cash-backs‚ trading assistance‚ etc‚ which will help customers get out of the old car into the new car.
Do you expect the customer to be in a better space this year‚ with more applications for credit at places like WesBank — and‚ I suppose‚ less bad debts from customers as interest rates stabilise and‚ perhaps‚ even start to decline?
What we’ve seen is customer demand has not reduced at all over the course of the last three years. Even though new vehicle sales has declined‚ we’ve received a record number of applications for 2016. So consumer demand is still remaining fairly robust. Of course‚ it has shifted to the used market where we’re now getting about two and half used applications for every one new application. It’s just the matter of demand shifting to the used market.
You highlight that in your report‚ but another distinction that’s highlighted is that dealer sales are still under pressure‚ but you expect overall sales growth to be driven by government buying — so talk us through that emerging trend.
We are seeing‚ because of the consumers being under pressure‚ dealer sales also being under pressure. Interestingly enough‚ the rental market and government as you alluded to ... we do see some growth in those segments. The rental market will really push the passenger vehicle sales and that’s because of the growth that we’re seeing in tourism‚ and we forecast for tourism during 2017.
Government‚ on the other hand‚ are pushing light commercial vehicles and the heavier commercial vehicles‚ which is‚ of course‚ excellent looking at those are the type of assets required for service delivery‚ etc. So I think our government are acquiring the right kind of assets for service delivery.
How about the general market for light commercial‚ and even trucks ... are you seeing any growth coming through there because that would imply economic growth‚ wouldn’t it?
We’re seeing growth in the light commercial vehicles also in the dealer channel...
Bakkies‚ yes‚ light commercials. We call it the bakkie war. Ford released their new bakkie last year‚ and so did Toyota. VW are bringing a new car to the market this year. Nissan is upgrading their bakkie; Fiat launched a bakkie; and Mitsubishi is launching their new bakkie‚ so I think that’s going to ... I hope the competition always works out best for the consumer. So there’s going to be a lot of marketing activities and good deals for the consumers and that will attract customers from the traditional passenger market to the light commercial vehicle market.
I don’t think it’s really because of the economy doing so well‚ it’s more just the competition that ends up with good deals for the consumer.
What kind of implications does that have for our export market in SA‚ which has remained pretty robust overall?
I do believe that we will have a record year in terms of vehicles produced and exported. Not quite sure what the exact numbers were‚ but we had a very strong year here last year‚ and so I think that trend will continue.
Of course‚ WesBank had the South African Car of the Year awards last Wednesday‚ and tell us about the winner?
Yes‚ the Opel Astra was the winner. I think the Opel Astra won 10 years ago to the date‚ so it was very exciting to see the Opel Astra being the winner. It is a phenomenal car‚ well priced‚ well “specced” and a pleasure to drive. So a deserving winner.
I’m sure you’ll be looking forward to more credit applications for Opel Astras.
Pallinghurst stages strong turnaround in 2016
By Staff Writer
On Wednesday‚ Pallinghurst Resources said it was reasonably certain that its net profit after tax would be $45m for the year ended December 31 2016‚ compared to a net loss after tax of $149m for the previous year — a 130% increase.
In rand terms‚ net profit after tax would be R656m compared to a net loss after tax of R1.9bn for the previous comparative period — an increase of 135%.
The earnings and headline earnings per share (HEPS) were expected to be 6c (US) compared to a loss and headline loss per share of 20c‚ or in rand terms HEPS of 86c versus a R2.50 loss per share for the previous year.
Settlement of long-running lawsuit swells Advtech’s earnings
By Tammy Foyn
Private education group Advtech reported a 67% increase in after-tax profit for the year to end-December‚ to R377.9m‚ swelled partly by receipt of a R23m settlement of a long-running lawsuit.
Excluding that item‚ after-tax profit was up 55% to R350.4m.
Revenue rose 24% to R3.35bn.
The group’s 78 schools — which include the Crawford‚ Abbotts College and Advtech Academy brands — remained the primary source of revenue‚ at R1.64bn‚ which was up 15% from the year before.
Tertiary education revenue grew 28% to R1.25bn‚ accounting for 37% of group revenue.
Revenue in the resourcing division rose 55% to R460.9m‚ but profit in that division fell 31%. The group said this was a result of difficult economic conditions that had led to delays in finalising appointments‚ but it reported seeing an improvement in the second half and into early 2017.
Advtech has been expanding its tertiary division and now operates 27 campuses across SA. Acquisitions during the year included Capsicum Culinary Studio and a 51% stake in distance learning group Oxbridge.
Operating profit overall was up 36%‚ with schools rising 16% to R354.4m and the tertiary division up 67% to R223.3.
The settlement of Advtech’s lawsuit against Andry Welihockyj‚ Marina Welihockyj and Meridian closes the chapter on a 10-year-long case.
A final dividend of 19c per share was declared‚ for a full-year dividend of 32.5c‚ up more than 10% from 29.5c in 2015.
Eastplats to fight Alpha Global claim over deal
Eastplats, the owner of the mothballed Crocodile River platinum mine near Brits, intended opposing a R30m claim by Alpha Global Capital relating to a 2007 transaction, Eastplats said on Monday.
Eastplats, which is listed on the JSE and Toronto Stock Exchange, is facing other legal claims after a complete change of management and strategyin 2016.
In 2015, a Chinese entity, Hebei Zhongbo Platinum, made a $225m buyout offer for all Eastplats’ assets including various projects and its stake in Crocodile River held through an 87.5% holding in Barplats Investments. The deal fell through because of lengthy delays in securing approvals.
Another company, Hebei Zhongheng Tianda Platinum, made a $50m offer for Barplats last June, which was accepted by previous management but rejected by Barplats shareholders at a meeting in February.
In July, an unknown group called Ka An Development bought 13.79% of Eastplats and the entire board and management team was changed. Ka An has since raised its stake in Eastplats to 23.89%.
Hebei Zhongheng has taken legal action to enforce the sale agreement and Eastplats has applied to have its action dismissed with costs. The latest claim, from Alpha Global, stems from an April 25, 2007 agreement in connection with Eastplats’ purchase of an additional 5% in Barplats.
According to a note in Eastplats’ financial statements, the agreement was that Alpha Global would receive $2.6m, or R30.8m at prevailing exchange rates, as soon as 40% or more of Eastplats’ assets were sold.
Eastplats management said in a statement it did not believe any sum was due to Alpha Global and it intended to have the claim struck down as “frivolous and vexatious”, with costs awarded against Alpha.
In the September quarter report, management said it had incurred $1m in legal and investigation costs but was looking at ways to minimise the bill for care and maintenance at its assets. It would only resume development at its Mareesburg project when justified by market and operating conditions.
Eastplats shares have tracked steadily downwards from R13.65 to R5.15 since the new shareholders took over management of the company, but platinum prices have also weakened in the same period, from $1,100/oz to $963/oz.
Source:Business DayDate: 2017/03/22
Tiso Blackstar’s special payout
Media group Tiso Blackstar, the publisher of Business Day, will pay a special dividend of R40m after it closes the sale of its 22.9% interest in Kagiso Tiso Holdings.
The R1.5bn deal is part of Tiso Blackstar’s sale of noncore assets and is expected to be closed in May.
Tiso Blackstar reported improved performance for the half-year to December, lifting earnings before interest, tax, depreciation and amortisation (ebitda) to R269.5m, from R248.5m. The traditional media business, made up of newspapers, magazines, digital and distribution operations, grew ebitda 16.7% to R86.9m. Cost reduction and the introduction of new revenue streams helped drive substantial growth in earnings in flagship titles such as Sunday Times and Business Day.
CEO Andrew Bonamour said these titles bucked the trend ahead of competitors. During the six months to December, Tiso Blackstar launched a central business news website and in February, introduced a paywall, which has attracted more than 2,000 subscribers so far.
“The strategic intent behind the creation of a new site and brand was to amalgamate the best of the group’s business copy, as well as the heavyweight international partners, to instil a greater perception of value and then launch a premium, paid layer across all the titles,” said Bonamour.
Tiso Blackstar’s turnover increased to R4.5bn from R4.3bn. The group is looking for acquisitions outside SA. It already owns media assets including radio stations in Nigeria, Ghana and Kenya.
Tiso Blackstar said it had received approval to transfer from a secondary listing on the JSE’s Alternative Exchange to a dual primary listing on the main board. It will have primary listings on London’s AIM and on the JSE, which it said would widen its potential investor base, develop its governance framework and facilitate its longer-term growth ambitions.
Source:Business DayDate: 2017/03/22
Wiphold plans to buy 25.1% stake in Sasfin
Women Investment Portfolio Holdings (Wiphold) is bolstering its financial services portfolio with a planned purchase of 25.1% of the shares in JSE-listed specialist banker Sasfin.
Sasfin provides transactional banking services to high- net-worth individuals, small- and medium-sized businesses and corporates.
Sasfin said last week it had accepted an expression of interest from Wiphold, which has interests in Nedbank and Old Mutual. The bank had given the investment company — majority owned and managed by women — “a reasonable period of time” to get regulatory and other approvals in the bag, and clinch a final agreement with Sasfin.
“It is premature for Wiphold to have any detailed story on the acquisition,” said WipCapital CEO Gloria Serobe. WipCapital is Wiphold’s financial services arm. Serobe said she would provide more information at a later stage.
Sasfin did not place a value on the potential deal, but it represented about R462m of its market capitalisation on Monday. The deal would be fully funded by Wiphold.
Sasfin CEO Roland Sassoon said the bank had decided to invite empowerment institutions to invest in the bank more than a year ago. “Wiphold was one of the parties that lodged an expression of interest, which we then pursued,” he said.
The investment company’s expression of interest won out over at least eleven others, according to Sasfin executive director Michael Sassoon. The full funding of the deal gave Wiphold an edge along with its prior experience as an investor in Old Mutual and Nedbank.
A Nedbank spokesman confirmed Wiphold had remained invested in the bank following the maturing of Nedbank’s Eyethu empowerment deal in 2015, which delivered R8.2bn in wealth to its beneficiaries. “We are still working with them on our legacy project since the transaction matured in 2015.”
Project Imbizo — a joint venture between Wiphold, Nedbank and Mutual & Federal — focused on financial inclusion, sustainable entrepreneurship and self-reliance.
It has also retained its interest in Nedbank parent Old Mutual, which in turns holds a minority stake in Wiphold. At 0.5% and 0.6% respectively, Wiphold only has a small slice of Old Mutual and Nedbank. The Sasfin deal, if concluded, would mark a return to large transformative deals in the financial services sector for Wiphold. Wiphold purchased a 49% stake in stockbroker Legae Securities in 1999 and 40% of Futuregrowth Asset Management in 2002, later raising this to 70%. It sold Futuregrowth to Old Mutual in 2008.
For Sasfin, a deal with Wiphold would replace an expired empowerment scheme with InnoVent, which bought a 10% share in the bank for R66.7m in 2006.
InnoVent has since sold out.
“We will expand on the use of the proceeds in a subsequent announcement,” Roland Sassoon said.
Source:Business DayDate: 2017/03/22
Spear to pay less for Long St building
pear Reit, the first Western Cape region-specific property fund to list on the JSE, has announced that the purchase consideration for the acquisition of 2 Long Street, Cape Town, had been reduced to R389m.
On March 3, Spear advised shareholders that it had, through its Spear One subsidiary, entered into an agreement with Capital Propfund 1 to acquire, as a going concern, the letting enterprise operated on the office property on Erf 9363 Cape Town, situated at 2 Long Street.
Spear would hold a 70% interest in Spear One, with the balance being held by acquisition partners. The 30% interest that would be held by the acquisition partners would be funded by Spear at the going prime interest rate plus two percentage points.
Spear, led by Cape property expert Mike Flax, listed on AltX in November. The relatively small real estate investment trust (Reit) has assets worth about R1.6bn and a market capitalisation of about R962m.
Flax said that Spear would appeal to people who were seeking to invest in a specialised property company with high growth potential.
He said the Cape metropolitan area had grown about 7% in 2016, while the country as a whole was struggling to grow at 0.5%.
“We are investing in a diverse range of assets in the Cape and believe we can offer dividend growth in the teens each financial year for the next five or so,” said Flax.
Some of the fund’s property is situated in Cape Town’s central business district and in the suburbs of Newlands, West Beach, Woodstock, Milnerton and Tyger Valley.
Spear listed at R9.25 a share. It closed at R9.80 on Monday. The JSE was closed on Tuesday for Human Rights Day.
Source:Business DayDate: 2017/03/22
Property group Globe Trade Centre opens the door to regular dividends
By Alistair Anderson
Poland-based real estate group Globe Trade Centre (GTC), which develops and manages properties in eastern Europe, has decided to pay regular dividends, thanks to a better than expected performance since listing in August 2016.
South African investors have wanted the group to pay dividends, having been concerned it held too much risk as a pure net asset value (NAV) play.
The company has seen strong NAV and net profit growth in its portfolio in recent months. It listed with the intention of attracting South African investors who wanted to invest in a currency hedge stock.
The company’s NAV per share increased 20% during the year to December to 8.62 zloty ($2.18) from 7.21 zloty, financial results released on Monday showed. The group dividends are declared in zloty, while it reports its results in euros.
It achieved a net profit of €160m in 2016, compared with €44m the year before, showing 266% growth.
The GTC group was established in Poland in 1994. GTC, listed on the Warsaw Stock Exchange in 2004, changed its strategy from development to one of development and asset management in 2015.
It has operations in that country, Hungary, Romania, Croatia, Serbia and Bulgaria.
It holds land in Ukraine through a subsidiary.
In 2016, GTC increased its income-generating portfolio by expanding its asset base 20% to €1.261bn through investing €140m in value-accretive office properties and the completion of assets. The group’s property portfolio is worth €1.624bn. As of December 31, the group’s completed properties in its three most significant markets — Poland, Hungary and Romania — constitute 44%, 17% and 15%, respectively of the total book value of completed properties.
"GTC delivered solid results in 2016, with several value-accretive acquisitions and completions of office projects having contributed significantly to NAV and net operating income growth," CEO Thomas Kurzmann said.
"We will deliver a strong performance over the next years … as our income-generating portfolio will expand and boost rental income through further accretive acquisitions and the completion of development projects," he said.
More than 139,000m² gross leasable area of retail and office space were under construction. An additional 181,000m² were at planning stages supported by a strong cash position. Chief financial officer Erez Boniel said GTC was in a position to reward shareholders with a dividend.
Source:Business DayDate: 2017/03/22
Speculation around Sinopec’s plans good news for SA
By Robert Laing
If reports that China’s Sinopec plans to buy Chevron’s South African assets for $1bn are true‚ it would be good news for the government’s drive to introduce Euro-V fuel standards‚ BMI Research said in a note on Tuesday.
Reuters reported on March 17 that Sinopec was the sole remaining bidder for Chevron’s 75% stake in its South African business‚ which includes a fuel refinery in Cape Town‚ about 800 Caltex-branded service stations‚ and a lubricants plant in Durban.
The remaining 25% of Chevron’s South African business is owned by black economic empowerment (BEE) partners and an employee trust.
French oil firm Total‚ and commodity traders Glencore and Gunvor bowed out of the auction because of the South African government’s desire to keep Chevron’s 110‚000 barrels a day Cape Town refinery running.
This was a major stumbling point because they believed the site could be more profitably used as a storage terminal‚ Reuters said‚ quoting industry insiders who declined to be named.
“The South African government is pushing for a widespread upgrade of domestic refining capacity to Euro-V fuel standards‚” BMI said.
“Upgrading existing capacity is likely to be expensive‚ with the estimated cost of upgrading the Cape Town refinery thought to be around $1bn. The previous experience that Sinopec has in upgrading refineries to higher fuel standards in China is likely to be a key aspect to the company's bid. In particular‚ this will win support from the South African government‚ which is keen to continue the push to higher fuel quality standards .”
BMI said the deal made broad commercial sense for Chevron due to the underperformance of its South African operations.
“The potential investment into a higher-quality product slate is unlikely with Chevron as operator; however‚ Sinopec may view the upgrade as a longer-term opportunity within the country.”
Tiso Blackstar Group raise interim dividend by 20% to 4.47275c per share
By Robert Laing
Businesslive’s owner Tiso Blackstar Group raised its interim dividend by 20% to 4.47275c per share for the six months to end-December from the matching period’s 3.74c.
Shareholders will receive a special dividend of R40m once the group’s sale of its 22.9% stake in Kagiso Tiso Holdings (KTH) for R1.5bn has been completed.
The company said in Monday’s interim results statement that the sale was expected to be completed in May‚ and the per share value of the special dividend would be calculated then. The group has been repurchasing its own shares‚ spending R10.7m buying back shares during the reporting period.
The group’s overall interim revenue grew 6% to R4.5bn‚ with sales growth from its subsidiaries — Consolidated Steel Industries (CSI) and Robor — offsetting declines in its media and retail solutions divisions.
CSI grew interim revenue 28% to R1.2bn and Robor grew interim revenue 12.3% to R1.1bn while the media division’s revenue shrank 7.4% to R1.3bn and retail solutions’ revenue shrank 4.4% to R865m.
The results provided a breakdown of earnings before interest‚ tax‚ depreciation and amortisation (ebitda).
Here CSI was again the best performer‚ growing its ebitda contribution 16.5% to R46m.
Retail solutions‚ which houses Hirt & Carter and Uniprint‚ contributed 51% of the group’s total R269.5m ebitda‚ although it contributed only 19% of revenue.
Robor suffered a 79% decline in ebitda to R3m.
“Anticipated completion of delayed project work should improve results in the second half of the financial year‚” the results statement said.
The media division grew ebitda 6.2% to R92m‚ contributing 34% of ebitda and 29% of revenue.
Overall ebitda grew 8.4%‚ boosted by a 61% decline in losses from divisions labelled “other”.
“The traditional media business — newspapers‚ magazines‚ digital and distribution — grew ebitda by 16.7% to R86.9m‚” the company said in its results statement.
The group’s newspapers‚ which include Business Day‚ Sunday Times and Sowetan‚ grew their advertising market share to 25.9% from 25.4% in the matching period.
Magazines produced almost 40% earnings growth off a 7% increase in revenue‚ the company said.
Underground complex key to South Deep's mechanisation
Piped music and air conditioning for a small team of engineers and mechanics working in a brand- new warren of workshops 2.7km underground at South Deep is one small indication of the changes at the R29bn mine that Gold Fields has struggled to bring to account over the past decade.
The mollycoddling of the mechanics is more than just Gold Fields allowing its employees a degree of comfort in what are dangerous and uncomfortable conditions. It goes to the very heart of what management wants to achieve, injecting nearly R3bn more into a mine it bought in 2007 to bring it to profitable, completely mechanised production over the next six years.
The new plan will deliver far less gold than previous plans indicated, but analysts Leon Esterhuizen from Nedbank and Derryn Maade from HSBC say it is realistic and achievable.
An initial plan pegged output as high as 800,000oz a year by 2014, with a revision to 680,000oz a few years later. In 2017, it has been reduced to 500,000oz, using purely mechanised mining, keeping the number of employees as low as possible and as safe and productive as possible.
The new system entails work to destress the enormous ore body, which expands as it dips, growing in thickness from 2m to 120m. The deposit was laid down in an alluvial fan in an ancient sea or lake. The work to take pressure out of the rock for the long-hole stoping mining method means large voids can be blasted into the ore, with a fleet of loaders and trucks removing thousands of tonnes of broken rock.
The jagged voids are then filled with cement-laced tailings pumped underground after the gold has been extracted. Gold Fields is testing a new mechanised method to build a wall quickly and cheaply to contain the wet slurry within the void. The new system, as used elsewhere in the world, takes three or four days before it is ready for use, compared with the 12 days with the old labour-intensive system.
Gold Fields spent R152m and took 30 months to build 1,400m of tunnels for a workshop complex to tackle the underperformance of its underground fleet. It includes a storeroom stocked with spares worth R40m.
It will take up to two days to bring something from a surface warehouse to the workshop, so the programmes to rebuild or maintain the 111-strong fleet of machines underground are well planned, says engineering manager Ruaan Greeff.
The workshop was commissioned in December and it has taken 12 weeks to rebuild one ore hauler, but the target is to cut the time to eight weeks. In the past, worn-out machines would be parked and left. Now a machine can be refurbished and put back to work at just 39% of the replacement cost.
Gold Fields CEO Nick Holland says the workshop is one of the big game-changers for South Deep. Mechanised mines around the world work to a standard of 80% utilisation of 80% of their fleet, but at South Deep, there was less than 40% of about 70% of the available fleet.
“The facility here will make a big difference to those numbers and it’s a key part of the plan we have for South Deep,” he says.
At the steady state all-in cash cost of $875/oz — the mine was operating at double that in 2013 and 2014 — South Deep would make money, he says. In rand terms, it will break below the R500,000/kg mark in 2020 and reach close to R400,000/kg in 2022.
The gold price on Friday was near R500,000/kg. For the next three years, the mine will operate at above R550,000/kg.
Under Gold Fields’ management, the production high-tide mark was in 2013, when the mine produced 9.4tonnes or 302,000oz of gold. It generated net earnings in only three of the 10 years it has been in the company.
The twin-shaft complex with a 37-million ounce reserve has the single longest vertical shaft in the world, reaching down 3km.
Source:Business DayDate: 2017/03/20
Shaft Sinkers regains a firm financial footing as mining activity picks up
Shaft Sinkers, the 55-yearold specialist mining contractor, had put its business back on a firm footing and had bid for about $12bn of work globally in the past year as it saw activity picking up in the sector, executive chairman Marius Heyns said this week.
Shaft Sinkers was one of the pioneers in sinking vertical shafts in hard rock, when SA’s gold mining industry started to build the world’s deepest mines in the 1960s and 1970s.
The company listed in London in 2010, but in 2015 the listing was suspended as its South African subsidiary was placed in business rescue. Other units were unaffected.
The main contributors to the South African company’s financial problems were a 917m damages claim by EuroChem for substandard work on a Russian potash mine, which cost Shaft Sinkers 20m in legal fees to defend.
The five-month strike in 2014 at Rustenburg platinum mines added to its financial difficulties. Shaft Sinkers had contracts with Impala Platinum, Royal Bafokeng Platinum and Lonmin. The former two contracts were cancelled.
Heyns, a former CEO of Basil Read who had retired to Knysna, was recruited in August 2014 to turn Shaft Sinkers around. He said despite its problems, the brand was still well regarded in the mining industry and the group had been supported by its clients, as well as Standard Bank and its main shareholder, a Londonbased private equity firm.
The group was reorganised into a simpler structure centralised under a London holding company, Underground Mining Services (UK).
It now has three divisions. Shaft Sinkers sinks shafts and develops underground infrastructure. Mining Engineering Technical Services (Mets), which was the internal design arm, was established as a standalone entity, Mets Design, to do work for external clients. A new division, Mets Projects, was set up to provide engineering, procurement and construction services.
Heyns and the management team spent months visiting and reassuring established and potential clients. In the past year the order book had swelled to 150m, Heyns said.
Heyns spent 2015 “putting out fires”. Shaft Sinkers SA and EuroChem reached a clean settlement. An unprofitable contract at a chrome mine in Kazakhstan was fortunately cancelled and the firm exited other unprofitable contracts.
The headcount was cut from about 3,000 to 1,500 without retrenchments and it is now 1,300, through natural attrition.
The business rescuers of Shaft Sinkers SA, which has been ring-fenced, are still winding up its affairs to settle its obligations .
In SA, Shaft Sinkers is completing work at Lonmin’s K3 shaft. It has picked up smaller contracts at Styldrift and Evander and a larger contract at Kumba Iron Ore’s Kolomela mine. It is also bidding for work on three large local mining projects.
Elsewhere in Africa, it will finish its contract for Randgold Resources and AngloGold Ashanti at the Kibali gold mine in the Democratic Republic of Congo by the end of 2017 .
In India, Shaft Sinkers still has two years to go on a contract to sink three shafts for Vedanta Resources’ Hindustan Zinc mine.
It has bid for other work in India, Europe and Canada.
Although the recent upturn in commodity prices had encouraged mining companies to revive projects, and margins on work in SA were still satisfactory, it could take up to a year between bidding and being awarded a contract, Heyns said.
Now that Shaft Sinkers, which remains a private company, is profitable, Heyns’ goal is to build up the order book to $300m-400m.
THE GROUP WAS REORGANISED INTO A SIMPLER STRUCTURE CENTRALISED UNDER A LONDON HOLDING COMPANY
employees still work at Shaft Sinkers, down from about 3,000 when Marius Heyns was recruited to turn the company around
Source:Business DayDate: 2017/03/20
Sanlam dialling up on Africa
A will still account for more than half of Sanlam’s profits within four to five years, but its contribution will decline from about 65% now as the group builds its businesses in emerging markets, particularly Africa.
“We are dialling up on Africa,” Sanlam CEO Ian Kirk said in an interview last week, following the release of annual results.
They showed Sanlam Emerging Markets posted a 30% rise in net operating profits to R1.5bn for the year to end- December, making it the group’s second-most significant cluster after its Personal Finance business in SA, which increased net operating profit 7% to R4bn. Emerging market new business volumes rose 63% to R23bn.
With the group putting in one of the best showings of the large listed life assurers for the latest period, analysts are asking how it is going to consolidate and grow the businesses it now has in Africa and other emerging markets, as well as where the growth will be in the more mature South African market.
In 2016, Sanlam took its stake in Morocco’s Saham Financial Services to almost 47% in a 1.3bn deal, after it first bought into Saham three years ago.
Sanlam started expanding in Africa in 2005. Through its own direct stakes and the operations of Saham, which is Africa’s largest insurance company outside SA, the Sanlam group now has a presence in more than 30 countries in Africa outside SA.
Kirk said the only markets in Africa that it still wanted to break into were Egypt and Ethiopia. Saham would take the group into Egypt, while Sanlam itself would go into Ethiopia when the opportunity presented itself, though Ethiopia’s insurance market was still very closed to foreign investment.
Though Sanlam has significant operations in India and Malaysia, Kirk said the real focus was on Africa.
Over the past three years, the group’s strategy has been to position itself as the “go-to market for corporates”, providing South African corporates and others in Africa with insurance for their premises (via subsidiary Santam) and other liabilities, as well as retirement fund, asset management, health and individual insurance products.
The group targets the big international brokers (such as Marsh and Aon, which service corporate clients) as well as networks of brokers in Africa, enabling them to place cover with Sanlam across their networks on consolidated terms.
In SA, each segment of the market is growing but the main movement is from entry level to the middle market segment. There was very little movement from the middle market to the affluent segment, Kirk said.
He was not surprised at the Treasury’s estimate that just 103,000 individuals earn upwards of R1.5m and so are affected by the new top tax bracket of 45%. He said the top end of the market was small and fiercely contested. But Sanlam’s operations at that end of the market did particularly well.
Sanlam has the largest affluent market share, market players estimate. Old Mutual dominates the mass market, followed by Sanlam. Sanlam, Old Mutual and Metropolitan lead the middle market.
Source:Business DayDate: 2017/03/20
Standard Bank shareholders shrug off gloomy outlook
tandard Bank shareholders have shrugged off a “sell” recommendation on the stock by the group’s stockbroking subsidiary, which has lowered earnings forecasts for the bank over the next three years.
Vincent Anthonyrajah, a research analyst at Standard Bank Group Securities, said in a note on March 9 that Standard Bank was a “sell” at R160 — roughly the level at which the share is trading.
The stock is up about 4% since the note was sent, mostly to portfolio managers, in line with the gain in the banks index. This could be because Anthonyrajah has rated the stock a “sell” since August 2016 and is generally bearish on banking shares: he has “sell” recommendations on Nedbank and Capitec and “hold” recommendations on Barclays and FirstRand.
Still, his outlook for Standard Bank – particularly its domestic personal and business banking (PBB) franchise — is gloomy.
He flagged an 11% increase in the unit’s costs over 6% growth in noninterest revenue, pointing to the loss of credit card and current accounts. Over the period, credit card accounts fell 6% to about 1.5-million, while active current accounts dropped 3% to 2.4-million, Standard Bank’s results show.
“Were it not for the mortgage book, personal banking’s earnings [in SA] would not have grown. PBB’s revenue growth has been flattered by endowment and keeping client deposit interest rates low,” he said.
Despite a recovery in commodity prices, rand strength would hurt the corporate and investment bank, which derived a large chunk of revenue from the rest of Africa, he said.
Weak advances growth in 2016 and the effect of rand strength on fee income would mute revenue growth this year. “At a 1.9x [price-to-book], the valuation is not compelling in our view. Our… earnings forecasts [for 2018 and 2019] have also been slightly lowered.”
Avior Capital Markets said its one-year target price for the share was R176.67.
Source:Business DayDate: 2017/03/20
Keen Sea Harvest demand
Fishing company Sea Harvest, which will list on the JSE later in March, has raised more than R1.3bn in a prelisting share placement exercise.
Sea Harvest said on Friday that strong demand for its shares had prompted a decision to increase the offer size to investors. The shares were placed at R12.50/share, which is at the lower end of the indicative placement range of R12/share to R14.50/share.
The net proceeds of the offer will be used to settle bank debt and a preference shares redemption loan as well as to repay shareholder loans and management loans. The funds raised will also be mobilised to make investments in landbased and vessel-efficiency gains as well as to pursue acquisitions in SA and in Australia.
Sea Harvest, which is controlled by empowerment group Brimstone, is a major player in the South African hake sector, but also holds a controlling stake in Australian-listed seafood business Mareterram.
The share placement price infers a market capitalisation of about R3.1bn, markedly bigger than Premier Fishing, which listed earlier in March and has a market cap of about R1.2bn.
Sea Harvest showed normalised revenue of about R2bn and pretax profit of R151m in the 2016 financial year. An investment presentation showed the new capital structure after the R1.3bn share placement would have boosted Sea Harvest’s pretax profit to more than R217m.
Source:Business DayDate: 2017/03/20
Industrial hub brings cheer to Remgro
Investment giant Remgro endured a tough six months to the end of December — but the group’s unlisted industrial portfolio showed its mettle in the interim period.
An investment presentation on Friday showed Remgro’s industrial hub — which carries an intrinsic value of about R11bn — chipped in a solid R426m to headline earnings.
The star performer was the 24.9% stake in oil company Total SA, which doubled its contribution to headline earnings to R102m despite only a slender increase in sales to R26.7bn.
Remgro CEO Jannie Durand said the increase in revenue was mainly due to sales to other oil companies being hampered by the transport strike.
But he said Total SA’s results were positively affected by lower stock revaluation losses of R156m (last year a loss of R802m) due to a decrease in the average basic fuel price during the interim period.
Another surprisingly strong performer was Remgro’s 100%owned building supplies specialist Wispeco, which saw revenue up 9% to R1.16bn and operating profit up 32% to R132m. The contribution to Remgro’s headline earnings was R90m — 67% higher than the interim period in 2015.
Durand said Wispeco’s revenue growth resulted from slightly higher selling prices as well as higher sales volumes.
He said that sales margins were higher than expected due to the volatility in raw-material costs — but said that the situation was recently reversed as world-wide primary aluminium prices rose.
The perennially profitable industrial gasses business Air Products — in which Remgro holds a 50% stake — managed a 6% hike in revenue to R1.45bn and a 2.3% increase in operating profit to R436m. Air Products contributed R151m to Remgro’s headline earnings, a 6.3% improvement on the previous interim period.
Durand said Air Products experienced difficult trading conditions with depressed demand for the company’s products in most sectors - especially in packaged gases.
Remgro also saw encouraging results from 37.7%-owned glass business PGSI, which has proved a difficult investment for the group in recent years.
PGSI pushed up revenue 6.5% to R2.1bn with normalised operating profit coming in 18% higher at R159m. The contribution to headline earnings was R25m – nearly 40% up.
Durand said PGSI’s results were helped by positive growth in the building and automotive industries as well as profitable growth in the African markets.
Remgro also benefitted from a huge turnaround in its 34.9% investment in empowerment company KTH, which donated R58m to headline earnings after a hefty loss of R260m in the 2015 interims.
Source:Business DayDate: 2017/03/20
Greenbay to move to main board of JSE at month end
By Alistair Anderson
Greenbay Properties, a group that invests in a diverse range of European property markets, will move to the main board of the JSE at the end of March.
Greenbay is a hybrid property company that invests in other property stocks and directly in real estate. The company was created by the Resilient group, led by industry stalwart Des de Beer.
"The company is pleased to announce that the JSE Limited has approved the transfer of its listing from the JSE’s Alternative Exchange to the JSE’s Main Board with effect from March 29 2017. The transfer will not affect the company’s current listing on the Stock Exchange of Mauritius," it said.
After the transfer, Greenbay will have primary listings in both Mauritius and Johannesburg.
Last week, Greenbay announced its first investment in Portugal. It acquired Locaviseu-Sociedade de Gestao de Imoveis and its two retail assets, the Forum Coimbra and Forum Viseu malls.
The deal was administered on a 50-50 basis for €219.25m.
Greenbay sourced and concluded the transaction and brought Resilient in as a 50% partner because of the size of the investment and to access the retail and development expertise of Resilient for the malls.
"We bought these assets because Portugal is a neglected market and these assets offer good, long-term growth prospects," said Greenbay CEO Stephen Delport.
Greenbay’s initial plan is to invest in listed European property funds and distressed real estate assets. Delport said the fund was highly opportunistic and could veer from that mandate, depending on the deals it came across.
Source:Business DayDate: 2017/03/20