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                                                              Newsletter No. 02 / 29 January 2021                          

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Cotton: A golden opportunity for South Africa?

By – Cobus de Bruyn is Northern Divisional Manager for Agriculture at Nedbank.

Cotton is considered one of the world’s greatest poverty alleviating crops, with 150 million people worldwide relying on it for income. According to the International Cotton Advisory Committee (ICAC), this drought-resistant crop creates five jobs for every ton produced, thus having massive potential in South Africa and the rest of the continent.

A crop that thrives in conditions in which many others cannot, cotton can be stored for long periods without deteriorating and is hypoallergenic, biodegradable and carbon neutral.

Local is Lekker

In the 2018/19 production year, South Africa produced 51,000 tonnes of lint cotton, representing an 800% increase in the five years since the South Africa Cotton Cluster (SACC) was established. Due to capability and capacity limitations of local cotton spinning, weaving and knitting, 80% of the cotton lint is being exported for processing. Products in various tiers of the manufacturing process are then imported again.

This situation seems counter-intuitive, especially when one considers that the possible opportunity cost to the economy of sacrificing local beneficiation amounts to around R20bn, according to agritech company, IQ Logistica. This figure does not even take into consideration the potential employment and skills development opportunities that have also been lost.

Currently, local clothing retailers are using between 25% and 30% of locally produced cotton products in their ranges but, at Cotton SA’s Global World Cotton Day seminar held in October 2020, and in a recent article published in Business Insider, many pledged to increase their commitment towards localisation substantially.

This begs the question, though, that if retailer demand increases, what are the implications for the value chain? Can we produce enough cotton for an increase in local demand and, if not, how many more hectares need to be planted and harvested to address this demand?

Based on research and historical crop statistics there is sufficient land suitable for cotton production available in South Africa to meet this demand. The cotton ginning capacity has also been upgraded over the past two years, with more than R300 million invested by the private sector. The bottlenecks to fulfil the full value chain within South Africa, however, lie with the spinners, knitters, weavers, dyeing, finishing, and to a lesser extent, garment manufacturing.

The shortage of specific spinning capacity means that most of the lint cotton is exported for processing and manufacture. Establishing a cotton spinning mill is very capital intensive, costing in the region of R600 million to set up, and further investment is needed to grow and sustain the local value chain.

The changes in the government structures over the past two years brought a new strategic approach to the manufacturing industry, which led to the development of the Retail, Leather and Footwear Masterplan. The funding guidelines were changed and a second funding application, which the Cluster submitted to the Industrial Development Corporation in December 2018, was not successful.

The economic impact of Covid-19 has reduced budgets and new applications will be considered again only after April 2021. With the decrease in the budget and the greater demand for increasing upstream competitiveness in the textile manufacturing industry, the possibility of government funding towards the local cotton programme is at risk. However, some private sector stakeholders, such as the MRP Group and Woolworths, are committed to localising the cotton industry.

While much emphasis is currently placed on increasing the commitment towards local manufacturing, it, unfortunately, does not always include the use of local raw products.

Cotton goes way beyond clothing

Cotton is unique in that it is the only crop that is both a food and a fibre crop. A total of 60% of all textile and apparel products contain a cotton element, but cotton is so much more than the fibre we are so familiar with in our clothes, towels, bedding and linen – 100% of the plant can be used.

Linters – the short fuzz on the seed – offer cellulose that is used in plastics, explosives, high-quality paper products such as banknotes, batting for mattresses and furniture, computer chipboards and flat-screen TVs. The cottonseed is crushed to separate it into three products. The oil is used in margarine, cooking oil, salad dressing, cosmetics, soap, candles, detergents and many other commodities. The meal is used in livestock, poultry and fish feed, as well as fertiliser, and the hulls are used in fertiliser, fuel and packaging. What is left of the plant – the stalks and leaves – is used for pressed paper and cardboard or ploughed back into the soil to enrich it.

Are these sectors as committed as the textile and apparel industries to supporting the South African cotton sector? For example, what percentage of margarine, cooking oil, salad dressing, cosmetics, soap, candles, detergents, livestock, poultry and fish feed, fertiliser and explosives is derived from South African cotton? Are South African banknotes made from South African cotton? Are there strategies in place to increase the use of locally produced cotton, as there are in the apparel and textile sector?

The good, the bad and the solution

According to Cotton SA, major advancements in agricultural innovation and technology combined with better crop management have contributed towards the increase in South African cotton production. The organisation is also driving an extensive consumer awareness campaign to encourage a greater appetite for locally produced cotton, with a South African Cotton Mark showing support for local cotton farmers.

This growth cycle in fibre production has, over the past year, unfortunately, been impacted by external factors, such as access to new seed technology (cultivars), weather conditions and some industry constraints at ginner level. These have resulted in a decrease in volumes over the past season as well as a forecasted decrease for the coming season and increasing the yield volumes remains critical.

In our view as a financier close to the cotton sector, a multipronged approach is what is needed to nurture this sector to reach its full potential:

• Foster financing and skills transfer partnerships. While the SACC is all about partnerships – with all stakeholders throughout the value chain committed to developing the sector – it is clear that the focus should be on building capacity throughout the value chain, with specific emphasis on the spinning process and beyond. This would include the financing of spinning and manufacturing plants and upskilling of labour to power these facilities.

It is thus gratifying to see that The Foschini Group’s factories in Maitland and Caledon in the Western Cape are currently running at 100% capacity and that the group is looking to expand these facilities over the next five years. Similarly, Pep Clothing has four local factory divisions manufacturing basic school clothing, knitted underwear and, more recently, personal protective equipment. It is also important not only to focus on the local manufacturing of the products but also to ensure the vertical integration of the local natural fibres.

• Develop the smallholder farming sector to further increase production capability while creating job opportunities. This is an area close to our heart, and the wheels are in motion to explore a blended finance solution specifically for smallholder farmers, in partnership with Cotton SA and other stakeholders. The MRP Group has also focused much of its energy on assisting with financing in this area and is heartened to see a strong increase in women under the age of 35 becoming involved, thus contributing to gender and youth development.

Nedbank, for example, recently supported and sponsored the Agri Seta certificate award ceremony hosted by Cotton SA in Mpumalanga. Twenty-nine farmers from the Lebombo Agricultural Secondary Cooperative received their awards for completing the Agri Seta cotton training.

• Diversify the market for South African cotton. With the Green Deal that is driving economic recovery in Europe, Better Cotton Initiative (BCI)-compliant cotton will become more and more important in that market, and South African cotton is well placed to cash in on this demand.

While 44% of the past season of South Africa’s cotton crop is currently BCI-compliant, the global average of BCI-compliant cotton is just 22%. Cotton SA is the BCI implementing partner in South Africa, driving the process of making 100% of South African cotton BCI-compliant within the next three to five years, which we are also supporting in collaboration with ISEAL and Cotton SA.  Bizcommunity









Tribunal issues “order for interim arrangement”
in GovChat, WhatsApp and Facebook matter

The Tribunal has issued an order which regulates the arrangements between GovChat, WhatsApp and Facebook from now until the Tribunal issues its decision in GovChat’s interim relief application against WhatsApp and Facebook (“the interim period”).  
The Tribunal issued the order because the parties were unable to agree on arrangements amongst themselves during this interim period. The Tribunal order provides that:

  • WhatsApp and Facebook may not remove (“off-board”) GovChat from the WhatsApp platform;
  • WhatsApp and Facebook may not do anything to undermine GovChat’s relationship with its clients that would, in effect, off-board GovChat from the WhatsApp platform;  
  • GovChat may not add (“on-board”) any new clients or users to the WhatsApp Business Account; and
  • In relation to existing clients or users on the WhatsApp Business Account, GovChat will not be able to expand their current service offering.

GovChat and #Let’sTalk recently brought an urgent application to the Tribunal for interim relief against Facebook Inc., WhatsApp Inc., and Facebook South Africa (Pty) Ltd.
GovChat asked the Tribunal to interdict and restrain the respondents from removing (“off-boarding”) it from the WhatsApp platform pending either the outcome of the Competition Commission’s investigation into GovChat’s complaint against the respondents, or for a period of six months (whichever occurs first).
This followed threats by the respondents to remove GovChat from the WhatsApp platform due to an alleged violation of the contractual terms of use.

A virtual (online) hearing was held on 13 and 18 January 2021. The Tribunal’s order in relation to the interim relief application will be issued in due course.







Government to appeal Supreme Court of Appeal ruling, making the 2017 PPFA Regulations invalid.

Despite the fact that the Supreme Court of Appeal (SCA) has suspended its own judgment until November 2021, declaring the 2017 PPPFA Regulations invalid, Government has now given notice of application to appeal, the ruling.

If government were to win this Appeal, it will then be in a position to even further strengthen the current 2017 PPPFA Regulations and force organs of state to fully comply with it, in all future tenders.

It will also be further emboldened, to even create new and additional Regulations like enhanced levels of B-BBEE required to tender and sub-contracting, respectively.

It could also further increase the minimum of 30% sub-contracting, which is the norm under the current Regulations.

On the other, should government be unsuccessful in its appeal, it will still have the right to insist that organs of state apply the relatively unused “Objective Criteria”, which is allowed under the 2017 Regulations.

This is one of most under-utilised Regulations, since Treasury has never come out and explained clearly what the “Objective Criteria” is and how it should be applied in tenders.

According to Gerrit Davids, Lead Advisor at TaranisCo Advisory, a South African tendering agency, “Bidders should become more responsive to the demands of these Pre-Qualifying Criteria, since it will still be applicable until November 2021, as per the Court’s Ruling and any attempt to fight these Regulations, will now be an exercise in futility.”

“For that reason, bidders for government tenders will have to improve, not only their own knowledge around these Regulations, but also making sure that those doing tenders in their companies, are fully versed with the demands of these Regulations.”

“Irrespective, where one sits on this legal drama, currently unfolding, government will still have the last say, when it will eventually promulgate the new Procurement Bill, which in any case will contain the same Regulations, which have now been declared unconstitutional by the SCA.” 

For more information on how to align your tender with these Regulations contact: Gerrit Davids at: Cell: 082 496 1657 or Email: gerrit@taranisco.co.za     Published in Business, Economy, Finances, Banking and Insurance






Massmart -sales update for the 52 weeks

Sales update for the 52 weeks ended 27 December 2020
Further to the sales update for the 9 months ended 27 September 2020 released on SENS on 23 October 2020, Massmart hereby provides an update on sales for the 52 weeks ended 27 December 2020. Trading for the 4th quarter of 2020 saw many of the previously imposed Covid-19 related trading restrictions lifted, which allowed trading to resume in most categories. Liquor trading, however, continued to be impacted by limitations on trading hours as well as reinstated trading restrictions as announced by the Government in mid-December.

The economic impact of the pandemic on consumer spending was evidenced by a general reduction in foot traffic, particularly in regional shopping malls, impacting sales in many merchandise categories during the 4th quarter. Specifically, and aligned to what was seen throughout the sector, sales over the traditional November 2020 Black Friday trading period were softer than those seen in 2019. The Company’s extension of Black Friday promotions throughout the month of November did mitigate the impact of softer Black Friday weekend sales to some extent.

Foot traffic and sales remained muted in December, albeit with stronger sales performance in home improvement and DIY categories. Total 4th quarter sales of R25.6 billion represented a decrease of 4.1% over the same period last year, with comparable store sales decreasing by 3.6%. This represented a slight improvement in the trajectory of H2 sales, which ended with a decrease of 5.9% over the same period last year, with comparable store sales decreasing by 5.6%.

For the 52-week period, total sales amounted to R86.5 billion, representing a decrease of 7.7% over the same period last year, while comparable store sales decreased by 7.5%. Sales in our South African stores decreased by 7.9% (comparable stores decreased by 7.6%) while sales from our stores in the Rest of Africa decreased by 5.4% (comparable stores decreased by 6.6%). As previously announced, Massmart estimates lost sales as a result of Covid-19 trading restrictions, to be around R5.7 billion. Massmart will provide further detail on its sales performance as part of its annual results release on 8 March 2021. This sales update information has not been reviewed or reported on by the Company’s external auditors.

Management services agreement with Genpact covering financial transaction processing activities
In January 2020 Massmart announced a project to re-organise the Massmart Group into a leaner, more agile two business unit structure supported by shared Centres of Excellence. This initiative moved quickly and included the closure of Dion-Wired and outsourcing our SAP applications development and support to the Walmart India Development Centre. It also resulted in the successful centralisation of previously autonomous support functions into shared, group-wide, Centres of Excellence covering: Real Estate, Supply Chain, Information Technology, Goods Not for Resale procurement and Human Resources.

In a further development we now announce that Massmart has concluded a managed services agreement covering our financial transaction processing activities with Genpact, a strategic partner of Walmart Enterprise Business Services (“Walmart EBS”). Genpact is a leader in finance and accounting transformation, and manages operations for many Global Fortune 500 companies across several industries, including retail and consumer goods, which is its fastest growing business. Genpact is not a related party to Walmart or to Massmart. The managed services will affect Accounts Payable, Accounts Receivable, and defined activities in Financial Control, Tax, Treasury and FP&A transaction processing in the Massmart head office and our trading banner home offices. The agreement will become effective in March 2021.

In a separate agreement, Walmart, through Walmart EBS, will assist Massmart and Genpact with the managed services as EBS has executed multiple finance transformation programmes for Walmart in recent years across the United States, Canada, Latin America and other geographies (the “Transaction”). The Transaction agreement will be entered into, which will provide for, inter alia, the reimbursement of certain costs to be incurred by Walmart on behalf of Massmart. Further details regarding this transaction will be announced in due course once the agreement has been concluded.

Results for the 52 week ended 27 December 2020
The Massmart Group results for the 52 week ended 27 December 2020 will be released on Monday 8 March 2021 on SENS followed by a virtual results presentation.



Mr Price – trading update

During the third quarter (27 September 2020 to 26 December 2020) of the financial year ending 3 April 2021, the group continued its pursuit of further market share gains through its proven cash- based, fashion-value business model. This was achieved as market share grew 230 basis points in October and November 2020 combined, the latest period for which Retailers’ Liaison Committee (RLC) data is available. The group’s total market share during this period is the highest on record since the re- instatement of the RLC (back data to January 2017), with gains consecutively for the last six months. The group recorded growth in retail sales and other income (RSOI) of 5.0% to R7.8bn over the corresponding period in the prior year (Corresponding Period). Total retail sales of R7.5bn grew 5.8% and other income decreased 16.0% to R253m.

South African retail sales grew 5.4% to R6.9bn. Store sales were up 4.6% with the group’s online channel performing strongly, increasing 66.3% (Corresponding Period: 17.4%) over the Corresponding Period. Non-South African corporate-owned stores sales grew 10.2% to R552m. Group inflation of 6.8% was driven by price inflation of 3.8% (in line with CPI and lower than the deterioration in the foreign exchange rate) and by lower markdowns. Group GP margin of 42.5% was 50 basis points lower, as the positive gains from lower markdowns were offset by the foreign exchange impacts. Management is comfortable that it has successfully balanced its defence of key price points with its GP margin level remaining in the identified sustainable range.

Trading space increased 2.1% on a weighted average basis and 1.2% on a closing basis. The performance of the group’s diversified store footprint continues to favour convenient locations ahead of its large regional stores. Cash remains the preferred tender type of customers and the group’s private label product assortment and value price points supported cash sales growth of 8.2%, constituting 86.8% (Corresponding Period: 84.9%) of total sales. Credit sales decreased 7.6% and the group continued its conservative credit granting posture. Collections as a percentage of the debtors’ book were in line with the Corresponding Period. The additional tender type of lay-bys (introduced by Mr Price Apparel during FY2021) has been welcomed by customers, proving an attractive alternative to traditional credit and supporting the groups growth momentum.

In October 2020, group retail sales grew by double digits which continued into the first two weeks of November 2020. Economic assistance provided by the government and private sector from the start of the COVID-19 pandemic created temporary financial relief for households and supported consumer spend. Many of these support programs fell away at the end of October 2020 with the effect being felt in the latter half of November 2020. Combined retail sales in October and November 2020 grew 5.9%.

The retail sector was negatively affected in November 2020 by a weak Black Friday, with Bank Serv data reporting store card transactions declining 32.6% in volume and 51.5% in value. The COVID-19 compliance requirements, which constrained store capacity, were a leading contributor to this decrease. Bank Serv reported a significant shift to online, however this was inadequate in compensating for lost store sales. The group experienced similar trends to the market, exacerbated by its strong performance in the base. Despite this, the group outperformed the market in November 2020. During the Black Friday week all divisions gained market share and the group grew online sales 81.1%. December 2020 was affected by the emergence of a second wave of COVID-19, creating further uncertainty and cautious behavior by consumers, both in their activities and spending patterns. Additionally, a calendar shift to less school holidays prior to Christmas and ten days of power blackouts had an adverse effect on already depressed shopping centre foot traffic. Despite this, group sales grew 5.6% in December 2020 and positive basket size (units and value) growth was achieved compared to the Corresponding Period, which is anticipated to support favourable market share gains (RLC data available at the end of January 2021).

The apparel segment (retail sales contribution: 74.0%) grew 3.9% over the Corresponding Period, led by the group’s largest business, Mr Price Apparel. The division entered the period in an optimal stock position, supporting its pillars of category dominance and clarity of offer. The fresh summer merchandise assortment (including its newly launched categories) and commitment to limiting price inflation, provided strong value to its customers. This resulted in lower markdowns than the Corresponding Period and supported GP margins. Mr Price Sport and Miladys fared similarly to the performance trends previously communicated on 26 November 2020 at the group’s interim results presentation. The home segment (retail sales contribution: 23.7%) continued its positive performance, up 10.6% over the Corresponding Period, with growth momentum across all months in the period. This resulted in continued market share gains. Customer demand for household merchandise remains high as many employers encourage work from home practices. The group anticipates the home trend to continue to grow strongly.

Cellular handsets and accessories (retail sales contribution: 2.2%) are now available in 306 stores across the group. Sales grew 22.0% over the period and increased market share was achieved (according to GFK), at a higher GP% margin. This continues to be a strategic product offering and a driver of increased customer footfall into stores and online. The group closed December 2020 with clean inventory levels, which included the newly launched categories of mrpBaby, mrpSchoolgear and mrp&co. The positive trend of lower markdowns has continued in January to date. High cash generation continued through the period. The group’s healthy cash balance at the end of December 2020 puts it in a strong position to execute its stated capital allocation strategy.

The second wave of COVID-19 in South Africa is proving to be far more contagious and devastating than that first experienced in 2020. The regression into an adjusted level 3 lockdown from December 2020 has added further uncertainty and challenges to the country’s economic recovery. Households are likely to be cautious in their spending due to negative impacts on income and the cessation of government support initiatives affecting discretionary categories.

The group’s business model has proven resilient to date, underpinned by its differentiated fashion value offering and its strong fiscal position. Whilst management continues to maintain a cautious outlook, the group’s fundamentals will allow it to emerge from the pandemic conditioned to capture growth opportunities. For the first three weeks of Q4 FY 2021, not included in the analysis above, group retail sales grew 5.3%.

Management would like to acknowledge the effort of all its associates, particularly its store and supply chain staff, who through its busiest time of the year ensured that customers’ shopping experience was convenient and safe. It required commitment by each associate and a collective team effort which the group is extremely proud of. The above-mentioned figures and any information contained herein do not constitute an earnings forecast or estimate and have not been reviewed and reported on by the Company’s external auditors.



Woolworths – trading update

Group sales for the 26 weeks ended 27 December 2020 (‘current period’) increased by 5.3% compared to the 26 weeks ended 29 December 2019 (‘prior period’) and declined by 0.5% in constant currency terms. This reflects improved trading momentum across all businesses over the final six weeks of the reporting period versus the 20-week update published on the Stock Exchange News Service (‘SENS’) on 19 November 2020. Trading conditions across the Group continued to be impacted by Covid-19, with significantly reduced store footfall, particularly in larger shopping centres and CBD locations. Considered actions to stimulate trade, strengthen online capabilities, manage inventory levels and execute property sales, have resulted in positive cash flows and a continued reduction in net debt levels in both South Africa and Australia. As published on SENS on 21 December 2020, the sale of the David Jones Elizabeth Street property, to be recognised in the second half once final approvals have been obtained, will further strengthen the Group’s balance sheet and ensure a more sustainable capital structure of our Australian entities.

Southern Africa
South Africa’s weak macro and consumer confidence has been exacerbated by Covid-19. The country is in the midst of a second wave of the pandemic, placing further strain on discretionary spend. Woolworths Food remained resilient throughout the reporting period, growing sales over the last six weeks of the half by 12.0%, and delivering further market share gains. Sales over the 26-week period grew by 10.9% and by 9.4% in comparable stores, with net space growth of 0.4%. Online sales grew by 158.5%, contributing 2.2% to sales, with the expansion of the click and collect offering, and trial of an on-demand delivery service. Price movement was 7.1%, impacted by mix, while underlying product inflation averaged 4.8% over the period. Price investment across key product lines remains a strategic priority and is being well received by customers.

Woolworths Fashion, Beauty and Home (‘FBH’) continues to be affected by the constrained environment, a significant decrease in Black Friday spend across the sector, and the reduction in formalwear trade. Sales declined by 11.2% over the period, with comparable store sales 11.0% lower on a 2.4% price movement. Online sales grew by 118.8%, contributing 4.0% to South African sales. Net space reduced by 1.9%, which is in line with the focus on improving store operating efficiency. The Woolworths Financial Services (‘WFS’) book reflected year-on-year contraction of 2.2% at the end of December 2020. The annualised impairment rate for the six months ended 31 December 2020 was 4.1%, compared to 3.3% for the prior period. The focus on customer collections and payment relief initiatives and the timing thereof reflects in the shape of the book and the impairment rate for the period.
Australia and New Zealand
In Australia, while the 12-week lockdown in the State of Victoria negatively impacted sales for the half, the easing of Covid-19 restrictions, together with the extended JobKeeper relief, our successful Black Friday and Cyber Monday campaigns, and further growth in our online sales, contributed to an improved performance in the last six weeks of the reporting period. David Jones (‘DJ’) sales over the 26-week period declined by 8.8% and by 10.5% in comparable stores. Excluding Victorian stores, which traded significantly down on the prior period due to the extended lockdown in the State, the balance of the DJ business, including online, grew by 5.9%. Online sales increased by 55.5%, contributing 17.7% to total sales over the half. Country Road Group (‘CRG’) delivered strong sales growth of 6.7% in the last six weeks of the period, underpinned by new product ranges, particularly in the Country Road business. Sales over the half declined by 5.2% and by 2.4% in comparable stores, negatively impacted by the lockdown in Victoria. Excluding Victorian stores, the balance of the CRG business, including online, grew by 8.2%. Online sales increased by 52.5%, and contributed 31.6% to total sales for the period.

Trading statement
Shareholders are advised that earnings per share (‘EPS’), headline earnings per share (‘HEPS’) and adjusted diluted HEPS for the current period over the prior period are expected to be within the ranges reflected in the table below. These earnings are reported on an IFRS 16 basis.

The various earnings ranges have been impacted by the following transactions:
-The sale of the Bourke Street Mens property in David Jones was completed in the period, resulting in proceeds of A$121.0m and a profit on sale of approximately A$23.5m; and
-The renegotiation of various David Jones leases resulted in lease modification and cancellation gains under IFRS 16 of approximately R667 million (pre-tax), which were recognised in the period.

The EPS calculations include both of the above items; whereas HEPS excludes the profit arising on the property sale.

The adjusted diluted HEPS calculations exclude both of the above items. Furthermore, consistent with the prior year, where an adjustment was made for the non-recognition of deferred tax assets on assessed tax losses in David Jones, the taxation benefit arising on the partial utilisation of these tax losses in the current period is excluded in calculating the adjusted diluted HEPS.
December 2020 expected ranges
EPS: 70.0% to 80.0% increase, 279.0c to 295.4c
HEPS: 50.0% to 60.0% increase, 247.4c to 263.8c
Adjusted diluted HEPS: 17.0% to 22.0% increase, 189.8c to 197.9c

The Group’s interim financial results for the 26 weeks ended 27 December 2020 will be released on SENS on or about 25 February 2021.




Rex True – results of annual general meeting

Shareholders are advised that at the annual general meeting of shareholders held on Friday, 22 January 2021 (in terms of the notice dispatched on 22 December 2019) all the resolutions tabled thereat were passed (by way of a poll) by the requisite majority of Rex Trueform shareholders.

Details of the results of voting at the annual general meeting were as follows:
– total number of Rex Trueform ordinary and “N” ordinary shares (collectively, the “shares”) that could have been voted at the annual general meeting: 20,833,449, shares (being the aggregate amount of 2,905,805 ordinary shares and 17,927,644 “N” ordinary shares;
– total number of shares that were present/represented at the annual general meeting: 18,548,293 shares (being in aggregate, 89.03% of the total number of shares that could have been voted at the annual general meeting and constituting 89.03% of the aggregate voting rights that could have been exercised at the annual general meeting;
– total number of ordinary shares that were present/represented at the annual general meeting: 2.644,197 ordinary shares (being 91.00% of the total number of ordinary shares that could have been voted at the annual general meeting) with each ordinary share entitling the holder thereof to 200 votes; and
-total number of “N” ordinary shares that were present at the annual general meeting: 15,904,096 “N” ordinary shares (being 88.71% of the total number of “N” ordinary shares that could have been voted at the annual general meeting) with each “N” ordinary share entitling the holder thereof to 1 vote.



Pepkor – trading update

For the three months ended 31 December 2020 the group increased revenue from continuing operations by 7.7% to R20.3 billion from R18.9 billion in the comparable quarter.

Operating conditions during the first quarter of Pepkor’s 2021 financial year included restrictions imposed in South Africa to deal with the second wave of the Coronavirus pandemic (“COVID- 19”). The development of COVID-19 and the lockdown restrictions continue to weigh on unemployment and consumer spending which contributed to a constrained retail market.

Pepkor performed well in challenging conditions and continued to grow market share as its defensive market positioning continues to resonate with customers in search of value. According to the latest Retailers’ Liaison Committee (“RLC”) data to November 2020, the group expanded its market share by 270 basis points, indicating an acceleration from the 240 basis point gain reported to September 2020.

In most of the brands good sales momentum continued during the quarter, achieving growth on the comparable quarter last year which excluded any impact from COVID-19. Trading was very strong during the first six weeks of the quarter, weakened significantly towards the end of November and normalised in December.

Continuing operations

Clothing and general merchandise

The clothing and general merchandise segment increased revenue by 8.0% to R14.8 billion for the quarter.

The Pep and Ackermans brands in aggregate reported sales growth of 8.9% and like-for-like sales growth of 6.3%.

Retail selling price inflation in clothing, footwear and homeware (CFH) product categories approximated 5.0%, driven by fluctuations in exchange rates. Both Pep and Ackermans protected and entrenched their market positions as price leaders in the discount and value markets, continuing to expand market share according to RLC data.

Retail space in Pep and Ackermans increased by 2.1% year-on-year and included 38 new store openings during the quarter, reflecting a more conservative store expansion programme as planned.

Pep Africa, which contributed 2.6% to group revenue, reported constant currency sales growth of 3.8% and 7.3% on a like-for-like basis. Currency depreciation resulted in a sales reduction of 12.7% in rand terms. The closure of operations in Uganda, as announced in the group’s 2020 annual results, was completed in December 2020.

The Speciality division gained market share in all brands except Shoe City and reported strong sales growth of 10.2% with like-for-like sales increasing by 9.2%. The process to dispose of John Craig, as announced in the group’s 2020 annual results, is nearing completion.

The Tenacity credit book, which facilitates sales in Ackermans and Speciality, increased to R3.2 billion from R3.0 billion at 30 September 2020 (gross). Credit continues to be granted conservatively and collections were in line with pre-COVID-19 levels. The credit sales mix in Ackermans was maintained at the 17%-level.

Furniture, appliances and electronics

This segment reported revenue growth of 7.5% to R3.1 billion. The Abacus insurance business acquired in December 2019 contributed 1.7% to revenue growth.

JD Group increased retail sales by 9.3% while like-for-like sales increased by 10.8%. This was achieved notwithstanding trading space reducing by 11.0% year-on-year and prudent credit granting which resulted in the overall JD Group credit sales mix reducing to 10.3% compared to the comparable quarter last year of 17.5%. Black Friday promotions were extended over most of November and were successful with technology upgrades and work/school-from-home trends continuing to be key demand drivers.

The Connect credit book, which facilitates credit sales in the JD Group, was maintained at R1.6 billion (gross) since 30 September 2020 and although collections met targeted levels, reduced credit extension and lower interest rates weighed on revenue growth.


The Fintech segment reported revenue growth of 5.8%.

The Flash Group reported 15.7% growth in revenue during the quarter with performance supported by an increased basket of virtual products offered to consumers. The Flash Group continues to invest in new products, channels and geographies to widen and deepen the Flash Ecosystem as the growing trader base continues to be an attractive avenue for partners. Capfin’s performance was impacted as a result of curtailed credit granting and lower interest rates. The Capfin unsecured credit book was maintained at R1.9 billion (gross) since September 2020 and collections have been in line with pre-COVID-19 levels.

Discontinued operations – The Building Company

The Building Company reported an increase in sales and like-for-like sales of 7.1% and 9.3%, respectively. As reported in the group’s 2020 annual results, completion of the transaction to dispose of The Building Company is subject to the fulfillment of certain conditions precedent and remains on track to be concluded during the first half of the 2021 financial year.

Settlement of preference share funding maturing in 2022

Following the settlement of R4.0 billion in preference share funding during the 2020 financial year an additional R1.0 billion in preference share funding was settled in December 2020. Net debt (including discontinued operations) at 31 December 2020 reduced to R5.6 billion from R7.1 billion reported at 30 September 2020.

The remaining R1.0 billion in preference share funding will be settled by the end of January 2021, further reducing gearing levels and strengthening Pepkor’s balance sheet.


Volatile trading patterns are expected during the second quarter with the second wave of the COVID-19 pandemic and related restrictions continuing. The delayed start to the academic school year will have a major impact on “back to school” sales performance in January 2021, which is expected to shift to February 2021. Stores are ready to offer customers a full product range at market leading prices when schools reopen in February.

Pepkor’s business model and market positioning are expected to continue driving performance and market share gains in an environment where consumers need affordability, convenience and value.

Pro forma constant currency disclosure

The group discloses unaudited constant currency information to indicate Pep Africa’s performance in terms of sales growth, excluding the effect of foreign currency fluctuations. To present this information, current period turnover for Pep Africa reported in currencies other than ZAR are converted from local currency actuals into ZAR at the prior year’s actual average exchange rates. The table below sets out the percentage change in sales, based on the actual results for the three-month period, in reported currency and constant currency for the basket of currencies in which Pep Africa operates.

% change in sales compared to the prior three-month period, Reported currency and Constant currency

Pep Africa – (12.7%); 3.8%


Pepkor – resignation of director


The board of directors of the Company (“the Board”) advised that Mr Jayendra Naidoo has submitted his resignation as a non-executive director of Pepkor and as member of the relevant Board committees. The resignation of Mr Naidoo is effective from 1 February 2021.

In his letter of resignation Mr Naidoo states that the reason for his resignation is that the litigation between himself and Steinhoff, as the majority shareholder in Pepkor, has made his role as a board member untenable.

Mr Naidoo has been a non-executive director of Pepkor since listing in 2017 and he was chairman of the Company from 2017 to 2020.



Did you know……..


. “One in three young women, the biggest segment of consumers, consider garments worn once or twice to be old” (The Guardian, 2019)

As the industry of fast fashion grows, our ideas on what is fresh and socially acceptable to wear also face a massive transformation. Life in a world where our wardrobes can be upgraded with a couple of new pieces for the price of breakfast makes us neglect the terrible reality of fast fashion.


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