19 of 2020

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                                                              Newsletter No. 19 / 29 May 2020                             

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Labour Relations Act: National Bargaining Council for Clothing Manufacturing Industry: Extensio1 to non-parties of the Coronavirus COVID-19 Lockdown ll Collective Agreement: Amendment (English / isiZulu) PDF icon https://www.gov.za/sites/default/files/gcis_document/202005/43354rg11122gon593.pdf

SA’s retail sales up 2% in Febraury

South Africa’s retail trade sales increased by 2% year-on-year in February 2020, according to Statistics South Africa.

The main contributors to growth were: all ‘other’ retailers (8,9%); retailers in household furniture, appliances and equipment (4,7%); and retailers in textiles, clothing, footwear and leather goods (1,5%).

Siphamandla Mkhwanazi, senior economist at FNB, says the February spike in the “Other” category was driven by increasing online sales in SA, as well as demand related to Valentine’s Day, including sales of jewellery and watches. By contrast, Pharmaceuticals and retailers of Hardware and paint saw their sales volumes decline by 2% and 0.5% y/y respectively in January.

Seasonally adjusted retail trade sales declined by 0.4% m/m, from an increase of 0.5% m/m in January (revised down from 0.9%). Retail sales inflation remained low, averaging just 2.9% y/y in February.

“We note that retail sales inflation has not broken above the 3% mark in over 30 months. This depicts a muted consumer demand environment, and is consistent with rising unemployment, slowing income growth and depressed consumer sentiment,” comments Mkhwanazi.

The February data does not take into account the impact of the lockdown, which was only instituted in March.

Consumer spending to take significant knock

Looking ahead, Mkhwanazi says FNB expects a spike in the March volume sales to reflect a wave of panic buying by SA consumers in anticipation of the national lockdown.

“Over the medium term, however, we expect consumer spending to take a significant knock due to lockdown restrictions, loss of income because of the pandemic and heightened uncertainty, which could result in an increase in precautionary savings by high-income households.

“This view is supported by SA’s mobility data, which shows that foot traffic to grocery shops and pharmacies spiked in anticipation of lockdown restrictions (“panic buying”). During the lockdown period, data shows a collapse in volume (frequency and time spent in the shop) of these trips, which we read as an indication of muted shopping activity. This is further supported by internal card transactions data, which shows a spike in spending in the days before lockdown, and a sharp decline afterwards.”

Mkhwanazi adds that we can expect a decline in household spending in the medium to longer-term, particularly on “non-essential” goods.

“Nevertheless, there are some factors that could lend support to the consumer during this time. These include aggressively lower interest rates, rising deflationary pressures (including very low oil prices and rental inflation), as well as marginally lower income taxes – which should somewhat boost discretionary income. However, these, in our view, will be counteracted by the impact of a prolonged recession, via weaker labour market outcomes and consumer sentiment shocks.” Bizcommunity

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Minister Khumbudzo Ntshavheni announces further COVID-19 aid for informal businesses

South Africa’s small business development minister Khumbudzo Ntshavheni recently announced the second-wave of COVID-19 support for informal, micro and small enterprises, including cooperatives based in townships and villages. These includes the small-scale and micro clothing and textile business support scheme for enterprises in townships and villages.

The dedicated support programmes for township and village-based enterprises were in line with the small business development department’s (DBSD) Township and Rural Entrepreneurship Programme (TREP) approved by the cabinet in February this year, DSBD said in a statement.

The small-scale and micro clothing and textile business support scheme will help in seizing opportunities in the sector like production of personal protective equipment (PPE), participating in rebuilding and restructuring the clothing and textile sector as necessitated by the emergence of the new world order, and improving the quality and competitiveness of small-scale clothing and textile enterprises for both domestic supply and export market.

The scheme covers the cost of production inputs, access to credit, assistance with compliance and technical skills improvement, business and financial management training, and productivity management.  www.dsbd.gov.za

Mr Price – distribution of circular

Mr Price Group wishes to affect a capital raise of up to 10% of the company’s ordinary issued shares at an appropriate point in time and as market conditions permit.

The COVID-19 pandemic has brought about and highlighted significant risks across all business sectors. The company has established plans to mitigate these as best as possible in a very volatile and uncertain environment, with a focus on protecting existing operations. The nationwide lockdown in late March and April 2020 resulted in the group not being able to generate revenue. Despite this, the group’s current financial position remains sound, with positive cash resources and a debt-free balance sheet to support current business operations. This position has been achieved as a result of focus on a proven business model and strong financial discipline. Cash flow generation and balance-sheet strength will continue to be central to the group’s strategy and is aligned with the company’s founders’ mentality.

Internal market research has identified attractive growth areas and a capital raise will enable the company to pursue and accelerate these growth opportunities, whether they are organic or acquisitive in nature. The board and management are of the view that market conditions will allow strong companies to capitalise on these opportunities whilst maintaining financial flexibility. The group needs to be well positioned to respond, with speed and agility, without being compromised by the status of prevailing equity markets at a particular time.

In considering possible acquisitions, the company has set clear guidelines, including geography, market sector, growth opportunity, size and valuation. There is no ‘must acquire’ mentality as this would diminish financial discipline and the ongoing unwavering focus on investing for the long term. For the sake of providing further clarity to shareholders and potential investors, the company’s current focus is on identifying several growth opportunities in South Africa rather than favouring a single large acquisition or foreign markets.

The following authorities will accordingly be requested from shareholders:
• the control of 10% of the authorised but unissued ordinary shares (equating to a maximum number of 25 704 573 ordinary shares);
• an issue of ordinary shares for cash not exceeding 10% of the issued ordinary share capital (equating to 25 704 573 ordinary shares); and
• the signature of documents.

Distribution of circular and notice of general meeting
The circular has been disseminated electronically and posted to shareholders today, Wednesday, 20 May 2020 and will contain the relevant notice to convene the general meeting of shareholders to be held at the Mr Price Group boardroom at Upper Level, North Concourse, 65 Masabalala Yengwa Avenue, Durban, on Monday, 29 June 2020 at 14h00 for the purpose of considering and, if deemed fit, passing with or without modification, the relevant proposed resolutions required to implement a specific issue of ordinary shares for cash.

Copies of the circular may also be obtained from the group’s website at www.mrpricegroup.com or requested from the company secretary at jcheadle@mrpg.com.

Salient dates and times
Posting record date to determine which shareholders are entitled to receive the circular Friday, 15 May 2020
Circular distributed to shareholders and announcement released on SENS Wednesday, 20 May 2020
Last date to trade in order to appear in the register on the meeting record date Monday, 15 June 2020
Meeting record date to determine which shareholders are entitled to vote at the general meeting Friday, 19 June 2020
Forms of proxy to be lodged with the transfer secretaries, for administrative purposes, by 14h00 on Thursday, 25 June 2020
General meeting held at 14h00 on Monday, 29 June 2020
Results of general meeting released on SENS on Monday, 29 June 2020

Action required by shareholders in relation to the general meeting
As a result of the COVID-19 pandemic and the resultant lockdown restrictions on travel and the holding of public gatherings, it is no longer permissible nor possible to hold a shareholder meeting in person.

Consequently, the general meeting will only be accessible through electronic participation, as permitted by the JSE Ltd. and the provisions of the Companies Act and the company’s Memorandum of Incorporation.

To this end, the company together with its share transfer secretaries, Computershare Investor Services (Pty) Ltd. (Computershare) shall host the general meeting on an interactive electronic platform, to facilitate remote participation by shareholders. Computershare shall also act as meeting scrutineer.

Shareholders who wish to participate electronically at the general meeting are required to contact Computershare on proxy@computershare.co.za; or alternatively contact their office on +27 11 370 5000 as soon as possible, but in any event, for administrative purposes only, by no later than 14h00 on Tuesday, 23 June 2020. However, this will not in any way affect the rights of shareholders to register for the general meeting after this date, provided, however, that only those shareholders who are fully verified (as required in terms of section 63(1) of the Companies Act) and subsequently registered at the commencement of the general meeting, will be allowed to participate by electronic means. Shareholders wishing to vote, shall be assisted by Computershare where required and only through means of submitting their vote on the appropriate proxy form issued by Computershare as provided at the general meeting.

Shareholders are strongly encouraged to submit votes by proxy before the general meeting. If dematerialised shareholders without “own name” registration wish to participate in the general meeting, they should instruct their CSDP or broker to issue them with the necessary letter of representation to participate remotely in the general meeting in person, in the manner stipulated in their respective custody agreements. These instructions must be provided to the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature.

Aside from the costs incurred by the company as a result of the hosting of the general meeting by way of a remote interactive electronic platform, which shareholders can choose to access, shareholders will be liable for their own network charges in relation to electronic participation at the general meeting. Any such charges will not be for the account of Mr Price Group and / or Computershare. Neither of Mr Price Group or Computershare can be held accountable in the case of loss of network connectivity or other network failure due to insufficient airtime, internet connectivity, internet bandwidth and / or power outages which prevents any such Shareholder from participating at the general meeting.

Voting remotely through the above platform will not be allowed or possible. However, shareholders are reminded that they are still able to vote normally through proxy submission, despite deciding to so participate either electronically or not at all in the general meeting. Shareholders are strongly encouraged to submit votes by proxy in advance of the general meeting.

Completed proxy forms should be delivered by email at proxy@computershare.co.za or by post to, Computershare, Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, before the person(s) so empowered seeks to exercise any right granted to it under such instrument, and are requested to be lodged timeously so as to be received, for administrative purposes, by 14h00 on Thursday, 25 June 2020.

The chairman may reject or accept any form of proxy which is completed and/or received otherwise than in accordance with the proxy notes, provided that he is satisfied as to the manner in which the shareholder concerned wishes to vote.

Proxy forms delivered on the day of the meeting must be delivered by email to the company at proxy@computershare.co.za with a copy thereof to the company secretary of the company at jcheadle@mrpg.com to be received by both of them before the person so empowered seeks to exercise any right granted to it under such instrument.

Woolies – trading update

Further to the operational update published by the Company on the Stock Exchange News Service (SENS) of 6 April 2020, the spread of COVID-19 continues to have a pronounced impact on the Group. Given these unprecedented times, the Company provided shareholders with an update on the trading and operational environment across the business and the strategic initiatives underway to reposition the Group to deliver sustainable long-term shareholder value.

Trading update
As previously reported, Group turnover and concession sales in the first nine weeks (to 1 March) of the second half of the financial year (“H2”) was broadly in line with that of the prior comparable period (+1.9% in constant-currency terms). The temporary closure of the majority of the Group’s non-food stores, coupled with the significant decline in foot traffic and consequent loss of trade, saw turnover and concession sales decline by 18.5% in the subsequent eight weeks to 26 April (-18.8% in constant-currency terms). The pace of decline has since slowed as lockdown restrictions have begun to ease. The 2019 financial year included a 53rd week, which resulted in a shift in trading weeks in 2020 compared to the prior financial year. Adjusting for this, Group turnover and concession sales grew by 4.2% in the first nine weeks of H2, versus a decline of 17.0% in the subsequent eight weeks (all other sales growth figures referenced below adjust for this same shift in trading weeks to provide a more comparable basis of performance).

The Group expects constrained trading conditions to persist over the remainder of the second half of the financial year. Management has intensified its focus on liquidity, minimising operating and capital expenditure and managing working capital across the Group. Investments in strengthening online capabilities continue to be prioritised, given the growing importance of this channel. To stimulate trade and manage inventory levels throughout this period, management has executed a series of focused promotional and clearance initiatives targeted at generating and preserving cash, which will negatively impact this financial year’s gross profit margin.

Notwithstanding the considered actions taken by management, the wide-ranging effects of the pandemic and consequent lockdowns will be likely to have an adverse impact on the Group’s Adjusted headline earnings per share (HEPS) and cash flow in the second half of the financial year. A further trading statement to that issued on 6 April 2020 will be issued to provide specific guidance once the Group is reasonably certain regarding the HEPS and earnings per share (EPS) ranges for the 52-week period ending 28 June 2020.

Current focus and strategic initiatives
Given the high levels of uncertainty and significant business disruptions during this period, management has been focused on the health and safety of our customers and employees, stabilising the operations, and cash flow. To this end, a range of cash generation and preservation initiatives, which were expanded upon in our update of 6 April 2020, is being successfully implemented across all business units.

The board and management team have also initiated several key strategic projects across the business, targeted at protecting and strengthening our balance sheet and establishing a platform which enables us to position the Group for sustainable, longer-term growth.

In support of the strategic project work, a number of underpinning initiatives have been launched including, amongst others, the following:
*Proactively engaging with the Group’s South African funders – given the continued impact of the adverse trading environment across the Southern African operations (notably in FBH), the Group has had positive discussions with the South African banks with regard to any potential covenants impacts. The business has significant liquidity headroom in terms of its forecast cash flows and existing facilities. The Group has also successfully renewed its South African Revolving Credit Facility (“RCF”) funding lines.
*The provision of funding support of AUD75 million to the Australasian businesses from WHL, in the form of a loan secured by a second lien. The funding support is conditional upon securing the suspension of covenant testing from the Australasian funders. Provision has also been made for further in-principle support to the business to the value of AUD25 million, to the extent that it may be required.
*Proactively seeking suspension of covenant testing for the Australasian funding – the COVID-19 impact and the challenging trading environment is expected to reduce headroom for the June and December covenant periods. The lending banks have granted the requisite suspension of covenant testing and the process with the bondholders has commenced and is expected to be concluded by the end of the financial year.
*A review of the capital structure of the Australasian entities has been initiated and will include the restructuring of its borrowings to ensure a more sustainable funding structure. UBS Australia has been appointed to support this process and will conduct a full review of options relating to the Australasian property portfolio. Any proceeds generated as a result of our capital management initiatives will be applied to the repayment and cancelation of debt facilities.
*Discussions with Australasian landlords are underway in relation to an accelerated restructure of the David Jones network of stores/locations and reduction in floor space.
*The board believes that it is in the best interest of the Company for distributions to WHL shareholders to be suspended until such time as the situation arising from COVID-19 stabilises. The board will consequently not declare a final FY20 dividend and will consider dividends thereafter in the context of the conditions prevailing at the time.

Conclusion
The Group expects to release a further trading update for the 52 weeks ended 28 June 2020 on SENS on or around 16 July 2020, ahead of the formal FY20 results on or around 27 August 2020.

Pepkor interim results March 2020

Revenue for the interim period increased by 6.5% to R37.552 billion (2019: R35.273 billion), gross profit rose 7% to R12.976 billion (2019: R12.129 billion), operating profit climbed by 14.5% to R3.902 billion (2019: R3.407 billion), while profit attributable to owners of the parent decreased 15.8% to R1.474 billion (2019: R1.751 billion). Furthermore, headline earnings per share from continuing operations contracted by 13.6% to 44.3 cents per share (2019: 51.2 cents per share).

Dividend

No interim dividend is declared as in prior interim periods. Based on heightened levels of prudence applied by the board and the focus on liquidity preservation and allocation of resources, it is not expected that a full year dividend will be declared for FY20.

Company outlook
The duration and evolution of the COVID-19 pandemic and the related impact on the Group’s trading in the near to medium term remains uncertain. It is expected that COVID-19 and the lockdown measures will severely impact the South African economy, the retail sector as a whole, and the Pepkor Group as consumers face increased unemployment and hardship.

Pepkor is confident that it is well positioned to gain market share in the post-COVID-19 ‘new economy’ with its defensive discount and value positioning being more resilient through its focus on babies’ and children’s clothing and large contribution of basic and replenishment products.

Webcast
A live webcast of the results presentation will be broadcast at 11:00 am (SAST) on 27 May 2020. A registration link for the webcast is available on the Company’s website: www.pepkor.co.za. The presentation will be made available on the Company’s website prior to the commencement of the webcast.

Massmart – results of annual general meeting

Shareholders are advised that the all ordinary and special resolutions (with the exception of ordinary resolution 10), as set out in the Notice convening the Annual General Meeting (“AGM”), were approved by the requisite majority of votes of shareholders who were either present on the electronic facility or represented by proxy at Massmart’s AGM held on Thursday, 21 May 2020 at 09h00.

The total number of shareholders (present either electronically or represented electronically by proxies) at the AGM was 91.00% of Massmart’s issued share capital as at Friday, 15 May 2020, being the Voting Record Date.

Shareholders are advised that due to ordinary resolution 10 regarding the non-binding advisory vote on the Remuneration Implementation Report being voted against by more than 25% of Massmart’s ordinary shareholders who were either present via the electronic facility or represented by proxy at the AGM, an invitation will be extended to such dissenting shareholders to engage with the Company. The manner and timing of such engagement is being finalised and the Company will issue a further announcement with more information

HomeChoice – board changes

Shareholders are advised that Stanley Portelli and Charles Rapa, both residents of Malta, have advised the HomeChoice board that they will resign as non-executive directors, with effect from 31 May 2020. Their resignations follow the successful redomiciliation of HomeChoice from the Republic of Malta to the Republic of Mauritius and will also allow for the appointment of additional Mauritian-based independent non- executive directors in due course.

Shareholders are further advised that the board has appointed Shirley Maltz as executive Chairman of the Group from 1 June 2020. The board has appointed Pierre Joubert as the Lead Independent Director with effect from 1 June 2020, and he will also assume the role of Chairman of the Audit and Risk Committee. The board will continue to comprise a majority of non-executive directors.

Following the redomiciliation of HomeChoice to Mauritius, George Said has resigned as Company Secretary, with effect from 20 May 2020. Sanlam Trustees International (Mauritius) has been appointed as Company Secretary to HomeChoice, with effect from 20 May 2020.

Did you know……..

Both Sides Now

Both the pencil skirt and the A-line skirt were designed by the same fashion designer: Christian Dior. He debuted the A-line skirt as part of his post-WWII “New Look” in the early 1950s. In 1954, he debuted the pencil skirt, then called “H-Line”, as the silhouette of the skirt was intended to create parallel lines to the floor

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