Today in business: Telkom agrees to R870m 'payment plan' with SARS, rand hits best level since February
Telkom agrees to R870m 'payment plan' with SARS
In a trading update, Telkom said it has entered into a payment plan with the South African Revenue Services (SARS) to pay an outstanding liability (including interest) of R870 million. The money has to be paid by end-March.
Telkom lost a case in the Supreme Court of Appeal earlier this year over the liability, which dates back to 2012. It relates to a disputed R3.96 billion foreign exchange loss following the sale of a subsidiary.
Telkom also reported on the impact of the coronavirus crisis on its business. It said that group revenue showed "resilience in the face of this pandemic.
The mobile business continued to gain market share from its peers, to become the third largest mobile telecom in South Africa in a period of ten years of establishment.
The consumer business benefited from the increased demand from people working from home and online schooling, while BCX and Small Medium Business (SMB) were negatively impacted by the national lockdown as corporate customers were under severe financial pressure.
Rand hits best level since February
The rand reached R16.15567/$ overnight - a level last seen in February. It was trading at R16.23 this morning, almost R3 stronger than the R19.26 it reached in April at the height of pandemic uncertainty.
The rand benefited from a bout of dollar weakness. Traders are looking for currencies that offer higher interest rates after the Fed pledged to keep rates ultra-low for a prolonged period this week. Yesterday, SA's central bank kept the repo rate unchanged at 3.5%, and warned that no further cuts are expected in the near term, while two rate increases are seen in the third and fourth quarters of 2021.
Other emerging market currencies also benefited – except for the Turkish lira, which hit a record low. Moody’s cut its investment rating of Turkish debt to its lowest-ever level this week.
Spar’s sales in SA flat during lockdown
In an updated entitled “Trading in surreal conditions”, Spar reported a 12.4% increase in group sales to R112 billion for the year to end-August – thanks in part to a strong performance of its Swiss stores.
In Southern Africa, sales grew by less than 5%, with alcohol sales down 16.4%. In the first half of the year, sales grew by almost 8% - but in the following months (during lockdown) turnover only grew by 1%. Prices in local shops rose by 4.1% (annualised) for the first six months, increasing by 4.6% for the second half.
While the lockdown hit its building supplies chain Build it, the group says once the sector was re-opened in May, sales have been surprisingly strong.
In euro, Spar Ireland increased its turnover by 5.5%, while Spar Switzerland's revenue saw an “extraordinary” increase of 11.4% (in Swiss franc currency).
Surprisingly weak SA sales update from Spar (although Switzerland did very well). Compared with Shoprite, who also lost liquor sales, even weaker, especially considering that Spar is often in convenience centers close to people's home and not in large malls.— Dave Hazelwood (@hazelwood_dave) September 18, 2020
Interest rate remain unchanged - two hikes expected in 2021
The monetary policy committee kept the repo rate unchanged at 3.5%, and governor Lesetja Kganyago said that the Reserve Bank's models do not make provision for further repo rate cuts in the near term, but foresee two rate increases in the third and fourth quarters of 2021.
Two members of the committee preferred a 25 basis point cut and three preferred to hold rates at the current level.
The decision to leave rates unchanged gave the rand a boost - it was last trading at R16.24/$. Lower interest rates hurt the currency's appeal to traders looking to earn interest.
SAA creditors to meet as state money is still not forthcoming
The business rescue practitioners of SAA have convened a meeting of creditors as government still hasn't provided at least R10 billion that is needed for its restructuring. The meeting will discuss funding and the future of the company.
Foschini gets go-ahead to buy Jet stores
The Foschini Group received approval from the Competition Commission to take over some Jet stores from Edcon.
The approval is subject to Foschini retaining at least 381 Jet stores and the employment of at least 4664 Jet employees.
Foschini also undertook to employ Edcon employees if vacancies arise in the Jet business for the next three years, and to procure local goods for the stores.
Woolworths profit down 65% - despite strong food sales
Woolworths' headline profit fell by 65% over the past year - despite an exceptional performance by its food business in SA.
Despite lengthy bans on alcohol and hot food (including its rotisserie chicken) sales, its food sales grew by more than 13% in the past six months, and almost 11% for the full year. Online food sales almost doubled in the second half.Fashion, beauty and home sales fell by 24% in the second half of the year due largely to lockdown regulations.
Its Australian unit David Jones saw sales fall by more than 17% in the second half of the year, down 6% for the full year. Online sales doubled. The group said it has potential buyers for David Jones properties in Australia, after selling one property for R1.4 billion recently. Its share price rocketed by almost 7%.
Woolworths has suspended its dividend payments.
Ex-Clicks director tired of ‘dancing around the issues of inclusion and diversity’
In an interview with Fin24, former Clicks director Nonkululeko Gobodo said she found it frustrating that the country was still grappling with issues of prejudice and racism and that it was time company boards took a stand.
"As a person, I am tired that we are still dancing around the issues of inclusion and diversity," she told Fin24. Gobodo resigned in the wake of controversy about a shampoo ad featured on the Clicks site, which depicted blonde hair as "normal" versus black hair, which was described as "dry and damaged" and "frizzy and dull".
Gobodo has established a new organisation, Awakened, which is aimed at fighting racism and prejudice against women and children.
Discovery hit by 94% profit slump - but medical scheme benefited
Discovery’s share price dipped almost a percent after the company posted a 94% slump in its headline profit per share for the year to end-June. The group set aside a provision of R3.4bn for Covid-19-related claims and policy lapses in the future.
Discovery Health – which manages SA’s biggest medical scheme - saw its operating profit grew by 5% to almost R3.2 billion, and total revenue rose by 8% to R8.4 billion. Discovery Health Medical Scheme grew its market share to almost 57% in a “declining” market. Its reserves were boosted thanks, in part, to lower claims as fewer South Africans went to hospital for elective surgeries during the pandemic. Discovery says hospital admissions were down almost 28% at the end of August.
Its recently launched Discovery Bank had 489,000 accounts as at mid-September, with total credit limits of R5.5 billion.
No final dividend was declared.
Retail sales slump
South African retail sales fell 9% in the year to end-July. Sales were 1% lower than in June.
Retailers selling food, beverages and tobacco saw sales fall 18% from a year earlier, while clothing shops saw a decline of almost 14%, Statistics SA reports.
Rand rallies to six-month high
The rand reached R16.30/$ on Wednesday afternoon, its best level in half a year. The rand is the best performing emerging market currency this month, after Mexico's peso and Brazil's real.
The dollar was under pressure as the market waits for the Fed to announce its view on monetary policy after a two-day meeting. It is expected that the US central bank will stick to its zero-interest rate policy amid a still-weak economy.
There was also some more optimism in global markets about Covid-19 vaccines, with AstraZeneca resuming its British and South African clinical trials after a brief suspension, and Pfizer expanding its trials.
The news that Chinese retail sales rose 0.5% in August, the first positive growth in 2020, also gave emerging market currencies a boost, with the Chinese yuan hitting a 19-month high.
SA's monetary policy committee started a two-day meeting on Wednesday, and may announce another rate cut tomorrow after a dismal second-quarter GDP number.
Springs mill left without power for almost a month
Mpact says its Spring Paper mill, which produces cartonboard for food packaging and toilet rolls, has been without electricity since 19 August.
An explosion and fire at the municipal sub-station in Ekurhuleni has interrupted electricity provision to the mill.
"The company was initially advised by the Ekurhuleni Municipality that electricity supply would be restored to the Mill by no later than 7 September 2020. This has regrettably not happened," the company said.
Mpacts has declared a force majeure. "While power interruption is an insurable event in terms of the Company’s insurance policy, any impact on the Group’s earnings remains uncertain." The Mill has a production capacity of approximately 140,000 tons per annum and its total revenue in 2019 was approximately R1.3 billion.
High-profile Clicks director resigns
Clicks non-executive director Nonkululeko Gobodo has resigned from 14 September, citing personal reasons.
Fin24 reports that Gobodo recently called a controversial advert on Clicks' website "a crime against black people" and women. She called for a full investigation on how the TRESemmé advert - which described blonde hair as "normal", while black hair was "dry" and "frizzy" - was published without anyone noticing its racial undertones. She also asked for people at Unilever signed off the advert to be named.
Gobodo, who in 1987 became the first black female chartered accountant in South Africa, founded one of the country’s largest accounting firms, Sizwe Ntsaluba Gobodo.
Nedlac agrees on economic recovery plan
Nedlac has agreed on a plan for the country's economic recovery, which president Cyril Ramaphosa welcomed on Tuesday. Details of the plan will be announced once it is finalised by Cabinet, and it includes an agreement to address Eskom's R480bn debt crisis "in a sustainable manner".
Foschini share price slumps after warning
The Foschini Group’s share price fell by almost 5% after the company warned that its turnover for the half year to end-August fell by almost 30%. Its UK operations saw the biggest fall (-58%) in sales. Locally, sales declined by 26%.
Apart from taking a hit due to the pandemic, the company also bemoaned the impact of load shedding, which caused the loss of 15,000 trading hours from May to August.
Sales of homeware and cellphones, comprising nearly 23% of local retail turnover, have however posted good growth since the re-opening of stores on May 1. Local online sales have doubled.
Super Group says Covid-19 cost it R5bn in sales
The logistics and fleet management company Super Group, which also owns car dealerships, says the coronavirus pandemic reduced its revenue by an estimated R5.2 billion.
Its annual results show that revenue fell by almost 9% to R34.6 billion, while headline profit fell by almost 60% to R547 million.
New Look creditors approve plan
Creditors of struggling British fashion retailer New Look approved its latest restructuring plan at a meeting on Tuesday, Reuters reported.
South African investment company Brait, which also owns Virgin Active, bought a stake in New Look five years ago, but has since wrote off billions as the UK company struggled.
Eskom gets farms from indebted municipality
Eskom has received farmland valued at R2.5 billion as security for debt owed by the Matjhabeng Municipality in the Free State.
"In its ongoing efforts to recover more than R3.4 billion in unpaid debt owed by the Matjhabeng Municipality, the municipality has agreed to hand over to Eskom 139 farms belonging to the municipality as security on the debt," Eskom said. The title deeds of the farms were signed over to Eskom, which recently attached the municipality's bank account. It has now agreed to release the account.
Wierzycka accuses IRR of threats
Magda Wierzycka, CEO of asset manager Sygnia, has accused the Institute of Race Relations of threatening her after she failed to give the organisation a response on her views on prescribed assets.
The IRR sent letters to 15 fund managers asking for their position on prescribed assets, Business Day reports.
“In the letter, IRR said it would launch a social media campaign identifying corporate entities such as Sygnia and seeking to provide clarity to members of the public as to whether such entities ‘are likely or unlikely to act in the best interests of their clients in opposing prescribed assets as possible government policy’, Business Day reported.
Yesterday, Wierzycka tweeted that the IRR threatened her:
We have been threatened with a social media campaign against corporations which don’t answer their questions. Prescribed assets are not on the table right now. If they are we will play our part to protect the savings of South Africans. Threats are never OK.— Magda Wierzycka (@Magda_Wierzycka) September 14, 2020
In a later tweet, she clarified Sygnia's view on prescribed assets:
Sygnia will oppose any attempt at re-introduction of prescribed assets should it become clear that there is where we are heading. The issue is more complex than Twitter allows. We’ll put out an explanatory note to our clients in the next 2 days. Will make it available on Twitter. https://t.co/gl3J6UdVpq— Magda Wierzycka (@Magda_Wierzycka) September 14, 2020
Harmony suffers loss despite 25% gold price hike
Harmony suffered a headline loss of R828 million for the past year, despite a 9% increase in revenue.
The company saw a 15% drop in gold production due to the lockdown and load shedding. This is thanks to a 25% increase in the average gold price. But it took a R1.8 billion hit from its derivative contracts. No dividend was declared.
Transaction Capital sees big profit slump as taxi owners struggle to repay loans
Transaction Capital, which finances minibus taxis and is involved in debt collection in South Africa and Australia has warned that its profit for the year will be up to 70% lower. The minibus taxi industry remains under financial strain, and Transaction now expects loan repayments to only normalise to pre-Covid levels early in 2021.
Civil servant pensions now own more than 15% of Shoprite
The Public Investment Corporation, which manages civil servant pensions, now owns more than 15% of Shoprite, the company said on Monday.
Shoprite's share price gained another 37c to R149.64 on Monday, after a monster rally this week. Its share price rallied 28% after a strong set of results.
Grand Parade Investment to suffer a loss
Grand Parade Investments, which owns casino interests including Grand West, warned that it will suffer a loss of as much as 14.96c per share for the year to end-June, after being profitable in the previous year.
The company is currently selling Burger King South Africa and Grand Foods Meat Plant for a combined enterprise value of R593 million. “The value to be realised from these disposals is greater than the group's current outstanding debt. We remain fully focused on completing these sales to reduce debt and become dividend-active once more.
Zeder, French group establish seed joint venture
The agricultural group Zeder is forming a joint venture dedicated to maize seeds. All of its field seed activities – via its subsidiaries Zaad and Klein Karoo Seed – will be merged with those of the French group Vilmorin & Cie (which is the holding company of Limagrain Europe) and Seed Co SA. Vilmorin also owns a stake in Seed Co.
The new venture, controlled by Vilmorin & Cie, will be called Limagrain Zaad.
“The joint venture will be one of the leading players in South Africa, proposing a specific multi- crop approach and benefiting from critical mass in an already highly consolidated field seed market,” Zeder said in a statement. The company will have a combined headcount of around 300 employees.
“Fully integrated into Vilmorin & Cie’s worldwide field seeds research organisation, it will also be able to benefit from genetic resources from the Americas and Europe to increase the efficiency of its research work.”
Glut of frozen chicken hits Astral
The poultry group Astral says its headline profit for the year to end-September is expected to be down by up to 25%. Operating profit is expected to fall by 15%.
The company was hit by the closure of fast-food outlets during the first phase of the lockdown
Given the absence of demand, chicken pieces were frozen in response, says Astral. “This resulted in downward pressure on selling prices to the consumer market which negatively affected the financial results for the 2020 financial year.”
AngloGold Ashanti sells last of its SA mines
AngloGold Ashanti has concluded the sale of its last remaining mines in South Africa to Harmony following the necessary approval from government.
Harmony is paying around $200 million in cash for the tailings companies Mine Waste Solutions and Mponeng mine, in Carletonville - the world’s deepest mine.
Harmony will pay another $100 million as part of the gold production from the mine for the next six years.
“While the decision to sell our South African assets was not an easy one, we are pleased that the assets are going to Harmony, a capable and responsible operator that will ensure their long-term sustainability,”
Christine Ramon, interim CEO of AngloGold Ashanti said. “We can now sharpen our focus to pursue high return projects at several of our key assets, deliver new ounces from the world class Obuasi mine in Ghana, and advance studies in Colombia, a new frontier for our business.”
Trellidor profit slumps
Trellidor expects that its headline profit for the year to end-June will be up to 75% lower. The group could not trade during the first phase of the national lockdown, and given the depressed conditions, the group impaired a part of its business.
Rand steady ahead of possible rate cut
Ahead of a possible interest rate cut on Thursday, the rand was steady at R16.71/$ this afternoon – almost exactly where it was a week ago. It recovered from a slump to R17.00 after worse-than-expected GDP numbers were released last week.
The grim GDP data was was much worse than the Reserve Bank predicted. So while consumer inflation spiked unexpectedly to 3.2% in July, and two of the five monetary policy committee members already voted against another cut in July, the dismal economy may convince them to squeeze out another repo rate on Thursday.
So far this year, rates have been cut by 300 basis points, to the lowest level in half a century.
Bidvest profit down 23%, but revenue is stable
In its annual results, Bidvest posted a 23% drop in headline profit, while its revenue from continuing operations was slightly higher at R76.5 billion. The company generated R9.2 billion in cash from its operations - 38% higher than a year before.
Bidvest is involved in a range of business-to-business services, including freight and financial services. The group also has a stake of almost 54% in Adcock Ingram, and it has a range of car dealerships. It says these operations were "decimated" during lockdown. But it added that recent new and used car sales, as well as workshop volumes, were "surprisingly positive" when compared to the pre-Covid February month.
"The impact of large-scale retrenchments across the SA economy and constrained disposable income could disrupt the demand rebound in the coming months." The company decided to exit its car rental business.
Bidvest's share price jumped almost 5% by Monday afternoon.
Shoprite gains almost 30% in a single week
Shoprite’s latest set of annual financial results triggered an almighty 28% rally in its share price this week.
Shoprite says the group has now gained market share for 16 consecutive months, and in the past year stole R4.9 billion in sales from its competitors.
At its South African supermarkets, sales grew by almost 9%, with their trading profit jumping 13% to more than R18 billion
While the company reported record revenue, its share price is still down 44% from highs in 2018.
No load shedding planned for the weekend
After narrowly avoiding prolonged load shedding this week, Eskom says its generating capacity recovered enough to avoid load shedding over the weekend.
SA to get a new airline
The founder of kulula.com, Gidon Novick, is planning a new airline as a joint venture with Global Aviation, a South African aircraft leasing company and a licensed domestic airline.
Fin24 reports that the airline will initially offer domestic routes with regional services planned down the line.
Death at Harmony mine
An employee of Harmony Gold died in an underground drilling-related incident on Thursday, at the company’s Doornkop mine near Soweto.
Hospital demand helps Afrox
Afrox posted its half-year results this morning, with headline profit down almost a third, while its revenue fell 10% to R2.7 billion.
The group, which is the biggest SA supplier of medical and industrial gases and welding products, reported lower volumes across all segments due to the Covid-19 lockdown restrictions. However, this was mitigated by stable sales in its healthcare business. Afrox has contracts to supply oxygen and other gasses to public and private hospitals.
Nersa approves grid extension
The National Energy Regulator of South Africa has paved the way for more than 11,000 MW of additional power to be added to a strained electricity grid from 2022. More than half of this will come from renewables.
PIC now owns 15% of Mr Price
Mr Price confirmed that the Public Investment Corporation, which manages civil servant pensions, now owns more than 15% of the retailer.
EFF meets with Unilever, Clicks
The EFF met executives from both Unilever and Clicks yesterday. Unilever vowed to pull TRESemmé products from stores for 10 days, while Clicks confirmed donations of 50,000 sanitary towels as well as 50 000 sanitisers and masks to rural informal settlements, and the launch of new scholarships. In turn, the EFF undertook to work with the police to bring those responsible for vandalism at Clicks stores to book
Harmony to suffer loss despite record gold price
Harmony Gold has warned that it will suffer a headline loss for the past year. This is despite an increase in revenue thanks to a much stronger gold price.The weaker rand hit its dollar-denominated debt, and it also suffered a loss on a derivative contract.
Bidvest warns of steep profit dive
Bidvest expects its headline profit will be down by more than 70% for the past year.
The group incurred a charge of R1.6 billion which relates to Covid-19, including provisions for unsold inventory, additional costs incurred to comply with health and safety protocols, a reduced offer accepted for our stake in the Mumbai International Airport Limited and once-off restructuring charges resulting from a strategic business review.
FirstRand write-offs for bad debt up 136%
FirstRand - which owns FNB, RMB and Wesbank - saw its normalised profit for the year fall by 38% to R27.9 billion.
It wrote off R24.383 billion in bad-debt credit impairments - up 132% since last year.
The group warns that the economic impact of Covid-19 will continue to place "acute pressure" on its performance, and it does not expect its the credit performance to materially improve.
"Given the South African government’s limited capacity to inject further stimulus into the economy, there will be ongoing permanent damage to household and business balance sheets," the group said in a statement. "This will limit the extent to which the economy will be able to recoup the output losses sustained during the first half of the year. As a result, private sector credit growth will remain weak and activity levels will continue to trend lower than pre-crisis."
Firstrand results year to June. Earnings down 38%. No dividend as per directive. Earnings before debt provisions basically flat. Bad debt +150%. Same as all banks, this provision is probably the maximum bad debts for next few years. Sets stage for dramatic earnings bounce— Wayne McCurrie (@WayneMcCurrie) September 10, 2020
Medupi conveyor belt fixed
The notorious coal conveyor belt that feeds the Medupi power plant was fixed after it snapped overnight. While the system remains constrained, load shedding is no longer on the cards.
The conveyor belt first snapped in October last year, triggering rolling blackouts over many days.
New business boosts Sanlam profit
Sanlam reported a 10% increase in headline profit, as new business volumes increased by 40% to R157 billion in the past six months. Its investment business was the main contributor, helped by "satisfactory" general insurance sales. Its life insurance business lagged due to the restrictions on face-to-face sales during lockdown.
Sales of funeral policies to Capitec clients as part of a relatively new partnership, grew by 9% over the past six months. No interim dividend was declared
Sanlam's share price closed marginally lower at R56.41.
Pick n Pay, Shoprite withdraw TRESemmé products
Pick n Pay and Shoprite have followed Clicks in withdrawing TRESemme products from their shelves. All Clicks stores in the country remained closed today as staff receive counselling following protests and attacks by EFF members.
A TRESemmé shampoo advertisement that depicted blonde hair as “normal” has triggered violence in South Africa.
The ad for Unilever-owned haircare brand TRESemmé described the hair of two black women as "dry and damaged" and "frizzy and dull", while a white woman’s hair was deemed "normal".
Zeder considers new strategy, CEO quits
The agricultural investment group Zeder - which owns Capespan and other companies like Kaap Agri - has announced that it is reconsidering its future strategy.
The group recently sold stakes in Pioneer Foods and Quantum Foods. One option is to unlock value in its current holdings in a "responsible way", the company said. It will make further announcements later.
"Following inter alia a potential change in strategy", its CEO Norman Celliers has resigned.
Aspen profit up as it cuts its debt
Pharmaceutical company Aspen saw its annual headline profit increase by 9%, with group revenue rising to R38.6 billion. Revenue from its manufacturing unit increased by 22%. Its profitability received a boost from lower financing costs, as its net borrowings declined by R3.8 billion to R35.2 billion.
US investment firm buys Luno
Naspers-backed cryptocurrency exchange Luno has been acquired by a US investment firm Digital Currency Group, according to a Bloomberg report.
Luno, which is headquartered in London and has an office in Cape Town, has almost 400 employees and more than five million customers. Rand Merchant Investment Holdings is also backer of the exchange, which was established by South Africans in 2013
Growthpoint’s SA vacancies jump by 10%
Growthpoint, South Africa’s biggest listed property group, reported a grim set of results for the year to end-June.
The pandemic wreaked havoc on its properties, especially in South Africa, where vacancies jumped almost 10% over the past year.
Its office vacancies rose by more than 15% over the past year, while retail vacancies were more than 5% higher.
While its revenue grew to more than R12 billion, it suffered a basic loss of almost 230c per share, from a profit of 215c last year.
The group warned that due to the distressed state of the SA economy “we have a tough couple of years ahead”.
Momentum struggles with increased claims
Momentum Metropolitan has suffered a 58% fall in its headline profit in the year to end-June.
The company says it continues to be impacted by more claims, lower new business volumes, increased risk of policy lapses or withdrawals, lower investment returns, and additional expenses related to the coronavirus pandemic.
While it delivered headline earnings of R1.5 billion for the full year – it suffered a loss of R251 million for the second half of the year.
Its share price slumped by almost 3% on Monday morning.
Taxi company buys big stake in WeBuyCars
The minibus taxi finance company Transaction Capital has bought a 49.9% stake in WeBuyCars.
Last year, the competition authorities blocked Naspers’ plans to take a 60% stake in the used-car trader.
Transaction Capital will pay a maximum of R1.84 billion for its new share.
Protests continue at Clicks stores
A number of Clicks stores remained closed on Tuesday, as the EFF continued its protests. The Gauteng High Court granted Clicks an interdict against the EFF. EFF members are not allowed to intimidate Clicks staff and customers or incite violence.
Meanwhile, Clicks has removed the TREsemme brand from its shelves and vowed to expand its range of local hair products. It has also suspended all the employees involved in the advertising campaign.
After half of its 880 stores were closed yesterday amid EFF protests. One store in Mpumalanga was petrol-bombed, and another in Alberton was hit by a small fire. Five suspects were arrested for the attack.
The EFF blamed a "third force" for the vandalism.
It is continuing with its protests for the rest of the week, after the retailer failed to meet a list of demands in response to an offensive advertisement last week.
A shampoo ad on the chain's website described the hair of two black women as "dry and damaged" and "frizzy and dull", while a white woman’s hair is deemed "normal".
SA economy falls off a cliff
South Africa’s economy shrank by more than 16% from the first quarter to the second quarter, and an annualised 51%– worse than economists feared.
The only bright spot in the economy during the three months to end-July, which saw a stringent first phase of lockdown, was agriculture. Thanks to good rains and near-record harvests, the sector grew by 15%.
Unfortunately, agriculture represents only 4% of the total economy:
In the second quarter of 2020, the economy was 17% smaller than the second quarter of 2019.
Colleague pointed out one of scariest stats of latest SA GDP number. After Q2 crash, level of real GDP now back to where it was in 2007Q2. That is correct, 13 years of GDP advancement wiped out. Will this reality cause policymakers to wake up from their implementation paralysis?— Hugo Pienaar (@hugopien) September 8, 2020
Worst hit was the manufacturing industry which declined by almost 75% from the first quarter, which contributed almost 11 percentage point of a 51% annualised decline. The restaurant trade and hotel sector shrank by more than two-thirds, while the mining industry declined by 73%.
The new data shows that household spending on clothing, shoes, booze and restaurant meals dropped by an annualised rate of more than 90% in the second quarter of the year. There were only slight increases in spending on communication, as South Africans spent more to buy data as they were working from home.
Gross fixed capital formation (GFCF) - basically investment in fixed assets like buildings, roads and infrastructure - fell by 60%.
GDP Q2 2020: Most worrying stat for me: Gross Fixed Capital Formation plunges by 59.9%. This follows declines of -18.6% and -10% in the prior two quarters. We are simply not investing in the bricks-and-mortar infrastructure which would support desperately needed future growth. pic.twitter.com/bX3QPXrVol— Karin Richards (@Richards_Karin) September 8, 2020
The rand slumped a percent in reaction and was last trading at R16.90/$.
Aspen sells European unit
This morning, Aspen announced that it will sell its thrombosis business in Europe for almost R13 billion. This will help the company address its debt burden of almost R40 billion.
Aspen: Sells commercial rights and intellectual property re thrombosis business in Europe to Mylan for EUR 641.9 million (R12.6bn). Aspen will still manufacture & supply the product and will retain the Emerging Markets biz. Seems an excellent deal. https://t.co/r6Ew4sCKXd— Karin Richards (@Richards_Karin) September 8, 2020
Load shedding planned for Wednesday
Load shedding was suspended on Tuesday, but will be implemented from 16:00 to 22:00 tomorrow.
Shoprite sales in SA jumps 9%
This morning, Shoprite reported a 6.4% increase in sales to a R156.9 billion for the year to end-June. Its sales in South Africa alone jumped almost 9% to R122.4 billion.
While its operating profit fell by 1.5%, the board declared a final dividend of 227c - up from 163c last year.
Shoprite net cash, volume and market share gains, earnings basically flat & dividend up +20% y/y. These are ridiculously good results from Shoprite.— Keith McLachlan (@keithmclachlan) September 8, 2020
A recession. Where?Shoprite year-end to June 2020 results: -Group sales ?? 6.4% to a “record” R156.9bn- ???? supermarket business sales ?? 8.7% to R122.4bn & volume growth ?? 2.3%- Group trading margin ?? 5.3%- Profit after tax ?? 9.5% to R3.5bn- Dividend ?? 20% to R3.83— Ray Mahlaka (@RayMahlaka) September 8, 2020
Shoprite's share price jumped 11% to R129 following the results.
Capitec warns of even bigger profit slump
Capitec has warned that its profit will slump by an even bigger margin that it previously expected.
While it expected in July that its headline profit will be down by 70% in the six months to end-August, it now sees a fall of 78% to 82%. Its results will be announced on September 30th.
EFF declares war on Clicks
A number of Clicks stores were forced to shut their doors on Monday with EFF members demonstrating outside the outlets.
The High Court dismissed an urgent application by Clicks to stop the EFF protests.
A Clicks store was petrol-bombed, while another was damaged by fire as EFF members wreak havoc on the chain on Monday. A petrol bomb was hurled at a shop in Emalahleni, which suffered only “minimal fire damage”.
Another store in Alberton was attacked by fifteen protesters, who wielded hammers and set fire to parts of the store.
The EFF has threatened to shut Clicks stores today after the retailer failed to meet a list of demands in response to an offensive advertisement last week.
The ad described the hair of two black women as "dry and damaged" and "frizzy and dull", while a white woman’s hair is deemed "normal".
The retailer has apologised for the advertisement.
But - among other demands - EFF now wants Clicks to publicly list the names of all the executives and employees who were involved in the commissioning of advert, and that they should be dismissed.
Clicks failed to adhere to these demands, and EFF announced over the weekend that it would target its stores today.
But the retailer says it will continue trading as normal - with contingency plans are in place to keep both customers and staff safe.
Also: it will take legal action against EFF's leaders if any Clicks stores are attacked.
Milestone for African Bank: it can now issue bonds
Shareholders in African Bank – including the SA Reserve Bank - have agreed to support the company in issuing new bonds. This will be the first time African Bank will be able to raise money this way after the collapse of its parent, African Bank Investments Limited in 2014. In 2016, African Bank was launched as a separate company.
Two stages of load shedding till Wednesday
Stage 1 load shedding continues this morning from 08:00 - 16:00 and thereafter moves to stage 2 until 22:00. Eskom warns that this may continue until Wednesday.
Tea, biscuit sales grow during lockdown
AVI - owner of I&J and brands like Five Roses, Frisco, Bakers and Willards - reported revenue growth of 0.4% during the past year.
Headline profit fell by almost 9% to R1.55 billion, but a final dividend of 250c a share was declared.
The company saw a solid increase in sales of tea and biscuits during lockdown, while I&J's revenue declined by 7% as the stringent lockdown hit fishing and processing.
ELB warns of large loss
The engineering and construction group ELB warned that it will suffer a basic headline loss of up to R14.24 a share for the past year – compared to a loss of 167c in the previous year.
GDP slump expected
Tomorrow, a grim second-quarter GDP number is expected. Reserve Bank expects that the economy shrank by a third during the three months to end-June – the height of SA’s stringent lockdown period - while even the most optimistic economists can’t see a decline of less than 20%.
The rand bounces back
The rand closed Friday at R16.58/$ - a gain of almost 1.5% on the day.
Despite the Turkish currency hitting a record low against the dollar on Friday, an index of emerging market currencies ended the week higher for the second consecutive week after the head of the Federal Reserve, Jerome Powell, announced a big shift in its policy to deal with inflation, which could mean delays in hiking interest rates. The Fed will tolerate higher levels of inflation, through "average inflation targeting" going forward, he said.
The Fed will aim for an average 2% inflation rate. Powell also indicated that interest rates will remain at or near zero, as the US economy struggled to recover from the coronavirus crisis.
Lower interest rates can be negative for a currency, because traders earn less when they hold the currency.
Ethiopian Airlines has confirmed "discussion" about SAA
Ethiopian Airlines has confirmed ongoing rumours that it may be SAA's saviour – or at least that talks of some kind are in progress.
The airline’s CEO told Reuters that “some discussion” is underway between it and the SA government, but described things as being "at a very initial level and part of a general overview of pan-African cooperation".
Ethiopian had recently been a little coy about the state of negotiations, telling SimplyFlying in late August only that it was "desirous", in the context of SAA.
Over the last decade Ethiopian has cemented a reputation as a well-run airline and recorded impressive growth – at least until the 2019 crash of a Boeing 737 MAX killed all 157 people aboard.
Ethiopian has been consistently cited by insiders as a potential equity partner for SAA
Eskom suspends power station managers
Eskom suspended the Tutuka and Kendal power station managers after breakdowns triggered stage 4 load shedding this week.
"While it is true that the aging fleet is plagued by legacy issues of neglect and omitted maintenance and is therefore susceptible to unpredictable breakdowns, it is also true that the situation is exacerbated by serious issues of apathetic behaviour by some management staff," Eskom said in a statement on Friday. The managers are suspended pending disciplinary inquiries.
Eskom said "apathetic behaviour" worsened problems at Eskom's power stations, which have seen twelve generating units break down in the past week.
2020 is already the worst year for load shedding on record.
Stage 3 load shedding will continue until 22:00 on Friday, and Eskom warned that it will drag on into the weekend as the system "remains unreliable and vulnerable".
Two more units suffered breakdowns.
Icasa delays spectrum auction
The highly anticipated auction for spectrum licences has been delayed by three months, to the end of March 2021, Icasa announced.
It blamed the delay on “the prioritisation of the release of the Covid-19 emergency spectrum, the additional considerations particularly on the viability of the WOAN as well as the fact that Council was almost inquorate for a period close to three months”.
Spar has a new CEO
Spar has appointed Brett Botten as its new group CEO.
Botten is currently managing director of Spar South Rand, and replaces Graham O’Connor, who is retiring next year. O’Connor will be the new chairman of the board. Bott2n is a chartered accountant and has been with Spar since 1994.
US tech darlings slaughtered
Overnight, there was a bloodbath in US tech stocks – which plummeted by 6% in a single session.
There was no obvious trigger for the slump, but tech shares have been running hard for months. Another market darling, Tesla, lost as much as 15% during the day after its largest outside shareholder, the asset manager Baillie Gifford, trimmed its share in the company.
Gold also slumped to $1,922 per ounce (it was trading at $1,936 this morning), while Brent oil fell 3%, to $43.15 a barrel amid reports that Iraq could delay production cuts for two months.
The JSE opened on the backfoot on Friday, losing almost half a percent at the start. Naspers, which owns the consumer internet group Prosus, lost 2% to fall below R3,000 after the tech rout on Wall Street overnight.
The rand was also down, last at R16.75/$.
Ethiopian Airlines wants to support SAA
Bloomberg reports that Ethiopian Airlines has approached government to provide "support" to SAA. The company is not expected to supply funding, but wants to provide operational expertise.
More Spur directors resign
Two more directors of Spur have resigned from the company.Mntungwa Morojele, who is starting a new business, and Dineo Molefe, who is joining MTN as chief financial officer, announced their resignations.
Last week, Spur's Chief Operating Officer, Mark Farrelly, resigned only six weeks after the company's CEO Pierre van Tonder said he will retire.
Caxton warns more of its businesses may close
The media company Caxton/CTP warned of a fall of up to 80% in its headline earnings.The company also said that itm may close some of its buinesses that have been in decline before Covid-19.
Earlier this year, Caxton and CTP Publishers & Printers announced that it would close its titles like Bona, Country Life, Essentials, Food & Home, Garden & Home, People, Rooi Rose, Vrouekeur, Woman & Home and Your Family.
Truworths hit by profit drop
Truworths' headline earnings for the year fell 28%, while its sales were down more than 8% to R18 billion.
Its struggling UK business, Office, saw a 34% drop in its sales to £81 million.
Truworths’ retail sales for the first nine weeks of its 2021 financial year were 11% lower than in the same period last year.
Telkom soars 4% after denial
Telkom's share price jumped more than 4% after the company denied that it is planning a rights issue.Its share price was last trading at R23.42 - 70% lower than a year ago.
City Lodge suffers loss
City Lodge has suffered a net loss of almost R500 million for the year to end-June, from a profit of R206 million last year.
In South Africa, its hotel occupancies decreased from 58% in the previous financial year to 41%. In the three months to end-June, only 4% of its available rooms were occupied. By August, this recovered to 10% as lockdown regulations were eased.
Kulula could fly by December
A new consortium - which includes former Comair directors - has presented a turnaround plan to the business rescue practitioners of Comair. If accepted, the airline, which operates its own low-cost airline Kulula.com as well as British Airways in South Africa, could start flying again in December. It has been grounded since end- March.
The turnaround plan is focused on reducing operating costs, which could mean that 400 jobs will be cut to leave a workforce of 1,800.
Steinhoff suffers big loss
Steinhoff reported a loss of almost R12 billion in the six months to end-March, despite its revenue increasing by 6.5% to R37.6 billion. Steinhoff made a large provision of more than R9 billion for legal claims and also saw a sharp increase in debtors' costs.
Pepkor Africa - which includes Pep and Ackermans - saw a 6% increase in revenue, but the group was hit by increased debtors’ costs.
Stage 4 load shedding till 22:00
Due to multiple generation breakdowns, stage 4 load shedding will continue until 22:00 tonight.
Santam profit down 33%
Santam’s interim headline profit per share fell by 33%, as the pandemic hit its results.
While group gross written premium grew by 7%, its investment income fell from R800 million to R582 due turmoil in the markets. It was also hit by write-offs of its investment in Moroccan-based insurance company Saham.
Santam, which is currently facing a lawsuit from businesses who are fighting its failure to pay business interruption claims, referred to a recent ruling against Guardrisk, which lost a case in a similar suit.
“It is important to note that Santam’s reinsurance programme will only respond to claims covered under the terms of our policies. In order to formulate a reinsurance claim under a different interpretation of the policy wording to our own, such interpretation would have to be definitively decided by the South African courts.”
Given “the current uncertainty around the eventual outcome of Covid-19-related claims”, Santam decided not to declare an interim dividend.
Implats posts 430% profit jump
Implats generated R14.4 billion in free cash flow over the past year, with the revenue it received in rand rising by 57% to R24 863/oz.
Its headline profit jumped from R3 billion to more than R16 billion.
While production declined by 8% due to lockdown disruption, the release of excess inventory helped sales, Implats said. Production rates at most operations have normalised back to near full capacity by end-June, Implats says.
A final dividend of R4.00 per share was declared, bringing the year’s total to R5.25.
Stage 4 load shedding starts
Due to strong power demand due to cold weather, and continued breakdowns, Eskom has escalated load shedding from Stage 2 to Stage 4 from 15:00.
Makro, Game owner's American CEO just used his own money to buy R8m in shares
The American CEO of Massmart, which owns Makro, Game and Builders Warehouse, has just bought almost R8.2 million in shares in the company.
In three transactions, his family trust bought 300,000 shares at an average price of R27.29.
“The transaction is not part of Mitch’s executive remuneration. Rather it is an expression of his confidence in Massmart,” a spokesperson told Business Insider SA.
The 52-year old Slape joined Walmart-owned Massmart a year ago. Described as a “Walmart old hand”, Slape has been with the US giant for almost a quarter of a century. For much of that time, he was involved in Walmart’s businesses outside of the US – in Mexico, India and Japan.
UIF commissioner suspended
The Unemployment Insurance Fund (UIF) commissioner Teboho Maruping has been placed on "precautionary suspension" following a probe by the auditor-general probe into the UIF's Temporary Employer/Employee Relief Scheme (TERS). TERS payments are meant for workers who were hit by the coronavirus crisis.
"The Auditor-General has now released publicly the final first special audit report into Covid government expenditure – including UIF Covid 19 Ters transactions – indicating serious risks and violations. In the light of this, and because this occurred on his watch, this morning, I suspended the UIF Commissioner," said Minister of Employment and Labour, Thulas Nxesi, told journalists on Wednesday.
Last week, the UIF had to halt these payouts amid the investigation.
The TERS payouts have been hit by instances of fraud, with one group of fraudsters receiving a payment of R5.7 million which was intended for 1,400 workers. Payouts have also been made to the accounts of minors and prison inmates.
The UIF has also picked up thousands of claims that have been submitted on behalf of dead South Africans, and found that 100,000 fake ID numbers were used in claims.
Libstar sees sharp jump in snack sales
Libstar, which owns Lancewood, Denny and other brands, and produces food products for fast-food outlets and Woolworths, reported a 1.9% increase in revenue for the past six months, but its normalised headline profit was down almost 18%.
The closure of fast-food restaurants during the first phase of lockdown hit its revenue, sales of snacks and confectionery jumped 18%.
Stefanutti hit by hackers
The construction company Stefanutti Stocks uncovered a cyber attack on its IT systems in the early hours of 31 August."This will cause a temporary disruption to certain central administrative functions. Notwithstanding this, site operations will continue unaffected," the company said.
More load shedding on Wednesday
Stage 2 loadshedding will continue tomorrow, from 08:00 to 22:00 after ten generation units broke down.
Strong recovery in manufacturing
The Absa Purchasing Managers’ Index (PMI), which is an indicator of manufacturing activity, rose to 57.3 index points in August, up from 51.2 in July. The improvement in demand was not only due to South Africa moving to a lower lockdown level, but was also supported by an uptick in export orders.
Production levels in some subsectors may indeed be back (or even exceed pre-COVID levels) in August, the Bureau for Economic Research found.
Rand recovers after whiplash
On Friday, the rand enjoyed a monster rally of almost 3% - which was followed by a sharp fall on Monday, which almost saw it break through R17/$.
It bounced back on Tuesday, and was last trading around R16.64/$.
This is mostly due to a faltering dollar, which is at its weakest level against the Chinese and Australian currencies in almost two years as markets digest the impact of the Fed's monetary policy shift, says Andre Botha, senior dealer at TreasuryONE.
Last week, the head of the Federal Reserve, Jerome Powell, announced a big shift in its policy to deal with inflation, which could mean delays in hiking interest rates. The Fed will tolerate higher levels of inflation, through "average inflation targeting" going forward.
The Fed will aim for an average 2% inflation rate. Powell also indicated that interest rates will remain at or near zero, as the US economy struggled to recover from the coronavirus crisis.
Lower interest rates can be negative for a currency, because traders earn less when they hold the currency.
Unease about the US economy has also hit the dollar, says Lukman Otunuga, Senior Research Analyst at FXTM. With more than six million confirmed cases of Covid-19 in the US, GDP contracted by an alarming annual rate of 31.7% in the second quarter while more than 57 million American have sought unemployment aid since March. "To rub salt into the wound, economic data remains shaky with the latest US retail sales for July printing below expectations with growth of 1.2% compared to the 8.4% witnessed in the previous month."
Otunuga believes the rand could challenge R16.50/$ in the short term on the back of dollar weakness.
DRDGold posts fat profit after 'extraordinary' gold run
For the year to end-June, DRDGold generated almost a billion in free cash, and increased its revenue by 52%. This was thanks to a 9% increase in gold production, as well as an "extraordinary" 33% rise in the average rand gold price received (to R768,675/kg)/.
The company's market capitalisation mushroomed from R3 billion to more than R23 billion over the past six months.
It posted a four-fold increase in operating profit to R1.6 billion.The company declared a total dividend of 85c per share for the year.
Loadshedding is back after mass breakdowns
Stage 2 loadshedding is starting at midday today, and will only stop at 22:00 tonight after ten generation units at seven power stations broke down.
D-Day for Santam
A key court case starts in Cape Town today, and will determine whether Santam will have to pay business interruption claims. The same court ruled in July that another insurer, Guardisk, should pay lockdown-related claims
Big loss for Old Mutual
This morning, Old Mutual reported a loss of R5.6 billion for the past six months, as it struggled with selling new policies and products during lockdown. Brokers were unable to sell due to the partial closure of the branch network and lack of access to customers’ homes and workplaces. It didn't declare a dividend, and plans to save costs of R750 million over the next months.
Monday, 31 August
Ramaphosa hits back against 'choreographed campaign'
In a briefing to the media following the ANC's NEC meeting, President Cyril Ramaphosa said that there was a "choreographed campaign" against him, amid attempts to "confront the scourge of corruption".
Commenting on Tony Yengeni's demand that Ramaphosa should resign, ANC national chairperson Gwede Mantashe said Yengeni was alone in the suggestion. "Nobody supported it."
Ramaphosa also dismissed the scathing open letter by former president Jacob Zuma, saying he 'won't publicly entertain his (Zuma's) criticism'
Another trade surplus for SA
South Africa exported more than it imported in July - and recorded a trade surplus for the fifth month this year.
This is despite a 22% increase in imports from June. Exports grew by 6.1%.
For the first seven months of the year, South Africa has now recorded a surplus of R95.6bn.This is mostly due to weak demand for import products in the struggling domestic economy.
However, a trade surplus is good for the rand, as countries which import goods from South Africa have to buy the local currency.
Sasol’s Lake Charles to remain shut after hurricane
Sasol is keeping its Lake Charles facility closed after a hurricane resulted in widespread electrical blackouts and other damage.
The company says it doesn’t look as if there are damage to process equipment and no flooding damage has been seen as a result of storm surge. But the high wind speeds caused damage to the project’s cooling towers.
“Start-up of the plants will depend on the availability of electricity, industrial gases, other feedstocks and the restoration process,” Sasol says.
The company is currently looking for a partner to buy a stake in the embattled Lake Charles plant.
“We do not envisage that the hurricane will have an adverse impact on any potential divestment transaction related to Sasol’s base chemical portfolio in the United States,” the company said.
Sasol’s share price fell by more than 3% on Monday.
Diesel cheaper, but slight rise in petrol
Diesel price will fall by 21c a litre on Wednesday, while 93 and 95 grades of petrol will increase by 1c.
Sun International wants to retrench 2,300 SA workers
Sun International has suffered a loss of R885 million for the year to end-June as its income slumped by 56% to R3.7 billion as its casinos were forced to close during lockdown.
The companies wants to cut 2,300 jobs in South Africa - which will mainly be at Sun City, the Maslow Sandton hotel, the Boardwalk casino and hotel in PE, The Table Bay hotel and Wild Coast resort, Reuters reports.
Income has started to recover as SA started to lift restrictions on casinos, and in July, income was at 39% of a year before. In the first 27 trading days of August, this increased to 56%.
Sun International has lodged a business interruption claim with its insurer.
Life Healthcare says July income still 14% below last year
In a trading update, hospital group Life Healthcare warned that the pandemic has “significantly impacted” its performance in the second half of its financial year.
In April, fewer than 40% of its acute hospital beds were occupied in southern Africa, due to lockdown level 5 and no elective cases. The occupancy levels have improved to around 61% currently.
Its revenue for April was some 40% below April 2019. This has recovered, but last month’s revenue was still around 14% below July 2019.
Spur COO quits, short on the heels of CEO
Spur's Chief Operating Officer, Mark Farrelly, has resigned only six weeks after the company's CEO Pierre van Tonder said he will retire.
Farrelly has been Spur's COO since 2012,st and will focus on his own restaurant interests. He's the master franchisee for Spur International in New Zealand where he owns the Spur restaurant in Auckland.
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