Bizcast

Thursday’s Markets

lindsay — Thu, 11 Mar 2010 16:51:08 +0000

Click here to listen (10:00)

Graeme Korner, portfolio manager at BOE Private Clients in Johannesburg looks at a raft of results from JSE listed companies including MTN, Basil Read, Old Mutual, and Sanlam, as well as casting an eye over the dealings on the markets.

The Big Picture

lindsay — Thu, 11 Mar 2010 16:48:39 +0000

Click here to listen (9:00)

Jeremy Gardiner, director of Investec Asset management in Cape Town talks of the NASDAQ peak anniversary, the performance of the US markets and economy, the mood in the UK, and the ongoing rand debate. Don’t miss Jeremy chatting to Lindsay Williams

SA economic data

lindsay — Thu, 11 Mar 2010 16:42:37 +0000

Click here to listen (7:00)

Annabel Bishop, economist at Investec in Johannesburg, analyses the latest manufacturing and mining production data from a recovering South African economy. In conversation with Lindsay Williams

DATA: SA Jan manufacturing output up 3.7% y/y

lindsay — Thu, 11 Mar 2010 11:32:53 +0000

Johannesburg, Mar 11 (I-Net Bridge) - The physical volume of manufacturing in South Africa in January 2010 rose 3.7% year-on-year (y/y) in January after an increase of 3.2% in December 2009, data released by stats SA Thursday showed.

This was the second month running that manufacturing output showed a positive reading.

Stats SA said the increase was mainly due to higher production in the motor vehicles, parts and accessories and other transport equipment division (34.2% and contributing 2.7 percentage points), the basic iron and steel, non-ferrous metal products, metal products and machinery division (13.1% and contributing 2.6 percentage points) and the furniture and ‘other’ manufacturing division (16.3% and contributing 0.8 of a percentage point).

However, these increases were partially counteracted by decreases in all seven remaining divisions where the biggest negative contributors were the textiles, clothing, leather and footwear division and the wood, paper, publishing and printing division (each contributing -0.6 of a percentage point), the glass and non-metallic mineral products division (contributing -0.5 of a percentage point) and the food and beverages division (contributing -0.4 of a percentage point).

Meanwhile, the seasonally adjusted manufacturing production for the three months ended January 2010 increased by 4.1% compared with the previous three months ended October 2009, better than the revised 3.4% quarter-on- quarter increase in December 2009.

Higher production levels were reported by eight of the ten manufacturing divisions during the latest three months.

The increase was driven mainly by higher production in the motor vehicles, parts and accessories and other transport equipment division (17.1% and contributing 1.6 percentage points), the basic iron and steel, non-ferrous

metal products, metal products and machinery division (5.5% and contributing 1.1 percentage points), the petroleum, chemical products, rubber and plastic products division (3.8% and contributing 0.9 of a percentage point), the furniture and ‘other’ manufacturing division (7.9% and contributing 0.4 of a percentage point), the textiles, clothing, leather and footwear division and the glass and non-metallic mineral products division (each contributing 0.1 of a percentage point).

Stats SA also reported that estimated total value of sales of manufactured products at current prices for the three months ended January 2010 increased by 5.0%, or 14.408 billion rand, after seasonal adjustment, compared with the previous three months ended October 2009.

Higher manufacturing sales were reported by nine of the ten manufacturing divisions during this period.

Large increases were mainly reported for the motor vehicles, parts and accessories and other transport equipment division (21.2% or 7.064 billion rand), the furniture and other manufacturing division (10.9% or 1.522 billion rand) and the petroleum, chemical products, rubber and plastic products division (5.5% or 3.717 billion rand).

I-Net Bridge, Tel: +27-11-280-0644, newsdesk@inet.co.za

SA Jan mining prod up 7.7% y/y vs Dec 2.3% fall(2)

lindsay — Thu, 11 Mar 2010 09:52:05 +0000

   Johannesburg, Mar 11 (I-Net Bridge) – South African gold production climbed by 7.7% year-on-year in January 2010 after decreases of 2.3% in December 2009 and 2.2% in November 2009.
    Stats SA said total mining production for the three months ended January 2010, after seasonal adjustment, increased by 3.3% compared with the previous three months.
    The production of platinum group metals (PGMs) was the main contributor, contributing 3.6 percentage points, while iron ore contributed 1.0 percentage point to the 3.3% increase.
    The actual estimated total mining production for the three months ended January 2010 increased by 0.6% compared with the three months ended January 2009.

    I-Net Bridge.
    Copyright 2010 I-Net Bridge. All rights reserved.

FOCUS: Old Mutual builds strategy to boost savings

lindsay — Thu, 11 Mar 2010 09:38:22 +0000

     Johannesburg, March 11 (I-Net Bridge) - International long-term wealth savings management group Old Mutual plc (OML) says it now has a clear strategy to build a cohesive long-term savings, protection and investment group by leveraging the strength of our capabilities in South Africa and around the world.
      During 2009 the group says its priority was to stabilise the business by addressing the issues in US Life and Bermuda and restoring the capital and liquidity positions of the group, while at the same time implementing more effective governance and controls.
    “With substantial improvements in place, we also started the process of simplifying our portfolio of businesses and improving our operational performance, while further examining the group to determine its optimal future shape,” says Old Mutual group CEO Julian Roberts.
     “We now have a clear strategy to build a cohesive long-term savings, protection and investment group by leveraging the strength of our capabilities in South Africa and around the world,” he adds.
     The strategy, he says, is designed to focus, drive and optimise the group’s businesses to enhance value for both its customers and shareholders.
     “It will increase our international cash earnings and overall return on equity. It will result in a rationalisation of our activities over time, reducing substantially the complexity of the group, and optimise our structure as we manage our businesses with a disciplined approach to risk management, governance and allocation of capital,” Roberts adds.
     “We will reduce our exposure to the US by exploring the disposal of US Life,” he says. “We anticipate the listing of a minority shareholding in US Asset Management. We will continue to sell or exit markets where we do not have scale, have no prospect of achieving satisfactory returns or where the operations are outside of our risk tolerance. We expect the proceeds from
this rationalisation and from retained earnings will be used to reduce debt by at least £1.5 billion and improve the quality of the Group’s balance sheet.
     “We will retain businesses which meet our capital and risk requirements, can achieve a 15% return on equity, add value to other parts of the Group, have scope for sustainable future growth and are capable of creating future shareholder value. We will be ruthless in our application of these criteria and our businesses will be subject to continual review. By
leveraging our core capabilities and maximising available synergies, we will deliver a good blend of profit growth, improved cash returns and generation of long-term embedded value. We will transfer technology and intellectual capital through shared skills and infrastructure, based on utilising our strong capabilities in South Africa and around the world to drive revenue
and cost improvements.
      “We will focus on developing our customer proposition which is relevant to their needs, backed up by good distribution, support and service. We aim to deliver high performance in each of our businesses by driving profitable growth and operational efficiency, optimising risk and return and aligning reward schemes to activities that deliver value, with
strengthened governance and control from the centre.
      “We have set specific targets of reducing costs by sterling 100 million by the end of 2012, including sterling 15 million of Group-wide corporate cost savings as the Group structure evolves. We have also set specific performance targets for our individual LTS businesses and for LTS as a whole,” Roberts points out.
     The group anticipates a partial IPO of its US Asset Management business in the next three years to create a more visible valuation for the business and to provide a mechanism for growth. It has set challenging performance targets over the next three years and strict criteria for businesses to remain part of the Group. These will be under continual review, and the
Group is already exploring the sale of its US Life business. The proceeds from disposals and from the Group’s retained earnings are expected to be used to pay down Group debt by at least £1.5 billion over the next three years.
    Central to the strategy is leveraging the excellent technology and product design capabilities in South Africa, as well as its low cost base. The Group is already designing products for its under-penetrated markets in India, China and Mexico, as well as for its UK platform business. It is also moving the IT and back office activities for its Retail Europe business
to Cape Town. This will result in increased jobs within Old Mutual South Africa. A number of new LTS appointments from within OMSA have also been made to help ensure delivery against its targets.
     Apropos the long-term savings (LTS) businesses, Old Mutual has set targets to deliver cost savings of sterling 75 million per annum and to improve overall return on equity from 14.9% (excluding US Life and reflecting the LTIR rate for Emerging Markets for 2010) as at 31 December 2009 to between 16%-18%, both by the end of 2012.
     “To achieve this, we have set specific return on equity and cost savings targets for each of our LTS businesses.
     “Over and above this, we have identified opportunities for further cost and revenue synergies in three principal areas: in IT, by extending outsourcing to a global level, rationalising technology platforms and sharing applications; in administration by taking advantage of the efficient cost base in South Africa; and in product development, through sharing
products and investment funds across our businesses,” Roberts says.
    In Emerging Markets, the group is already distributing products designed in South Africa into India and expect to do the same into the other large and under-penetrated markets such as China and Mexico.
    “South Africa has a well regulated long-term savings industry and a growing middle income and affluent market, which we are penetrating through our strong brand and powerful distribution platforms. We are therefore coordinating our Emerging Markets business, which includes our Africa operations, from OMSA. Having acquired the minorities in Mutual & Federal,
we are also developing Old Mutual branded short-term insurance products for the South African middle income market. We have set a cost reduction target for Emerging Markets of stlg 5 million per annum and a return on equity target of between 20%-25% by the end of 2012.
    “In Sweden, we already have a strong market share and are now broadening our product and service offering to the direct market through Skandiabanken, the region’s most successful internet bank. For example, through Skandia Investment Group (SIG) we have exported the highly successful Spectrum concept of risk-targeted funds from the UK to Sweden, and Skandia Nordic has developed its own supporting web-based advisory tools for its direct customers. For the Nordic business we have set a cost reduction target of £10 million per annum and a return on equity target of between 12%-15% by the end of 2012.
     “In Retail Europe, we are already making good progress in transferring IT and back office functions to South Africa, which will significantly improve margins. We will also broaden its product set, including introducing protection products. We have set a cost reduction target for Retail Europe of stlg 15 million per annum and return on equity target of 15%-18% by the
end of 2012,” Roberts states.
     On the group’s outlook, Roberts says: “We are determined that over the medium to long-term these measured and fully-funded actions will provide considerable value for shareholders. Together with further growth in assets under management as market conditions continue to improve, these actions will have a significantly positive impact on underlying operating
profitability and return on equity. Accordingly, the Board has every confidence in the Group’s prospects, as reflected by the resumption of a dividend.”

By Ray Faure
I-Net Bridge.
Copyright 2009 I-Net Bridge. All rights reserved

Exchange rates hurt MTN

lindsay — Thu, 11 Mar 2010 09:36:04 +0000

    Johannesburg, Mar 11 (I-Net Bridge) – South African telecommunications company MTN (MTN) on Thursday said that movements in exchange rates, mainly the rand and the Nigerian Naira, had a substantially negative impact on its results.
    The group reported a 16.6% decline in adjusted headline earnings per share to 754.3 cents for the year ended December 2009 from 904.4 cents a year ago. Basic HEPS declined to 803.2 cents from 836.5 cents a year ago. Excluding the impact of the functional currency losses, adjusted HEPS increased by 8.5% to 878.9 cents, it said.
   Revenue was up 9.2% to 111.9 billion rand as group subscribers grew 28% to 116 million, indicating a continuing demand for mobile services in countries where mobile penetration is still relatively low, the company said.
   “Had there been no change in currency rates during the year, reported revenues at year end would have been 11 percentage points higher, and EBITDA 12 percentage points above those reported,” it said.
    MTN noted that the rand closed 21% stronger at R7.39 to the US Dollar on 31 December 2009, compared to the closing rate of R9.35 in the previous year, R9.49 in March 2009 and R7.72 in June 2009.
    “Translation of earnings affected by movements in the various local currencies to the US dollar was compounded in the second half of the year by the strong rand,” it said.
    Net finance costs increased by 203% to 5.8 billion rand for the year. “This was mainly due to the rand/US dollar exchange rate which, significantly affects a large proportion of MTN’s assets and liabilities denominated in a currency other than the entities’ reporting currency,” MTN said.
    These foreign-denominated assets and liabilities resulted in a functional currency loss for the period of 3.2 billion rand compared to the 2.4 billion rand foreign currency gain at the end of December 2008 – a swing of 5.6 billion rand, the group said.
    “Much of the loss is attributable to foreign currency denominated loans, receivables and cash balances in Mauritius. In addition, the put option effect on the income statement was a credit of 701 million rand (June 2009: 1 billion rand credit and December 2008: 1.2 billion rand debit), mainly as a result of the depreciation in the NGN/US dollar exchange rate,” MTN
concluded.

I-Net Bridge.
Copyright 2010 I-Net Bridge. All rights reserved.

MTN leans on diversified presence in emerging mkts

lindsay — Thu, 11 Mar 2010 09:11:05 +0000

    Johannesburg, Mar 11 (I-Net Bridge) - Despite challenging economic conditions, mobile operator MTN Group (MTN) maintained or increased market share in most of its operations over the past year. And although its South African operation showed signs of difficulties, its diversified presence in emerging markets ensured that its group revenue growth was maintained,
growth partnership company Frost & Sullivan said on Thursday.
    MTN reported a 28% growth in its group subscriber numbers and a 9.2% increase in revenues to 111.9 billion rand in its results for the year-ended 31 December 2009. The group’s adjusted headline earnings per share were 16.6% lower at 754.3 cents, but this was due to significant movements in exchange rates. Without the substantial impact of functional currency
losses, adjusted headline earnings per share increased by 8.5% to 878.9 cents, F&S said.
    Subscriber numbers in South Africa decreased by 6.4%, while the region showed an EBITDA margin decline of 1.7% to 31.4%.
    “For the first time we have seen MTN really struggling with its operations in South Africa,” said Frost & Sullivan ICT industry analyst Spiwe Chireka. “Regulatory risks have been a key factor impacting the company’s performance. Interconnection fee cuts and subscriber registration have dampened both revenue and subscriber growth.”
    However, Chireka pointed to a recovery from the operator in the next 12 months. Frost & Sullivan’s global analysis indicates that mobile operators’ short term revenues tend to suffer following interconnection cuts, but they can make a full recovery through strategies such as increased subscription charges, lower subsidies and reduced incentives for distribution.
    Moreover, the FIFA World Cup is likely to boost revenues for MTN through airtime sales, roaming fees and match content delivery.
    F&S noted an encouraging performance in Nigeria, with 30% subscriber growth for the period. Revenue in local currency increased by 33%, but due to the strength of the South African currency, this translated into growth of just 5.6% in rand terms.
    EBITDA for the West and Central African region as a whole increased by 6.7%, while EBITDA in the Middle East and North Africa region showed the biggest improvement, growing by 24.2%.
    “In its favour, MTN has also formed relationships with some of the leading businesses in South Africa to become the telecoms partner of choice in their African expansions,” Chireka said. “This has been possible due to the group’s geographical presence advantage. It also has the money to lap up any non-cellular operators where it needs to, to ensure that it can deliver
additional services.”
    Chireka said that data services, in particular business data services, also made a noteworthy contribution to overall performance. MTN decided to directly take on Telkom Business, Neotel and Vodacom in the business services space.
    “Although a latecomer in this arena, the group has the deep pockets to make the necessary investments to ensure that it keeps up with the competition,” Chireka said. “Frost & Sullivan believes this will be the next big growth area on the continent.”
    Together with the current challenges that are affecting the mobile market in Africa, the opportunities in business data services may lead to a change in approach from MTN. Chireka said that the group may well focus its short term efforts on services that are non-mobile focussed.
    “Mobile voice is nearing critical mass, and while it makes sense to try and raise the average revenue per user (ARPU), the results of such activities can take time,” she said. “So rather than focussing only on mobile and trying to increase spending in that area, it may be time for MTN to move away from its comfort zone and move into the world of ICT as a whole.”
    Chireka highlighted MTN’s geographical spread to successfully service multinational corporations within and coming to Africa. The group would however need to build brand equity separate from its mobile communications operations, F&S concluded.

I-Net Bridge.
Copyright 2010 I-Net Bridge. All rights reserved.

RESULTS: Old Mutual

lindsay — Thu, 11 Mar 2010 07:51:10 +0000

Johannesburg, March 11 (I-Net Bridge) - International wealth savings group Old Mutual plc (OML) on Thursday reported a decline in adjusted operating earnings per share from 14.9 pence to 12.1 pence for the year ended December.

The adjusted operating profit before tax was sterling 1.170 billion versus stlg 1.136 billion rand.

The group declared a final dividend of 1.5 pence for the 12 months compared to no dividend last year.

Julian Roberts, Group Chief Executive, commented: “Our operating results for 2009 are ahead of the previous year despite the highly volatile markets over the period. We benefited from improved market conditions in the second half, which resulted in greater demand for equity-based products from our clients, but the improvement also reflects our aggressive expense management as part of our drive to improve business performance. In the fourth quarter we saw especially good sales growth, with the strongest LTS quarterly sales performance for two years.

“During 2009 our priority was to stabilise the business by addressing the issues in US Life and Bermuda and restoring the Group’s capital and liquidity positions, while implementing more effective governance and controls. With substantial improvements in place, we started the process of simplifying our portfolio of businesses and improving our operational performance, while further examining the Group to determine its optimal future shape. We are today setting out a clear strategy to build a cohesive long-term savings, protection and investment group by leveraging the strength of our capabilities in South Africa and around the world.

“We will rigorously drive performance improvement across all of our businesses and have introduced challenging three-year cost saving and return on equity targets. We have also identified specific synergy opportunities from our businesses working together. We anticipate further rationalisation of our activities and will exit markets where we do not have scale or our operations are not capable of achieving a return on equity of 15% over the next three years. We are exploring the disposal of US Life and anticipate a partial IPO of US Asset Management. However, we will only execute transactions when markets allow us to maximise value for shareholders.

“We are determined that over the medium to long-term these measured and fully-funded actions will provide considerable value for shareholders.

Together with further growth in assets under management as market conditions continue to improve, these actions are expected to have a significantly positive impact on underlying operating profitability and return on equity.

Accordingly, the Board has every confidence in the Group’s prospects, as reflected by the resumption of a dividend.”

The group reported an adjusted MCEV per share of 171p versus 117.6p in 2008, and an IFRS book value per share of 147p versus 134p previously.

Funds under management increased from stlg 265 billion to stlg 285 billion.

The group also reported a positive second half sales momentum with fourth quarter life APE sales up 29%, the strongest quarter for the long-term savings (LTS) business for at least 2 years.

“One of the strategic priorities announced in March last year was to strengthen and maintain our capital and liquidity position. I am pleased to report that we now have good balance sheet stability, as demonstrated by a doubling of our FGD surplus to stlg 1.5 billion as at 31 December 2009, from stlg 0.7 billion at the end of 2008, and total liquidity of stlg 1.2 billion. With the Group now in good financial health, we are able to turn our attention to the future,” Roberts said.

The group also reported a resilient performance in tough market conditions and improved capital strength at its banking susbsidiary Nedbank.

Among other highlights for the year, US Asset Management funds under management at 31 December 2009 were up 9% to US$261 billion.

RESULTS: MTN

lindsay — Thu, 11 Mar 2010 06:50:17 +0000

Johannesburg, Mar 11 (I-Net Bridge) - South African telecommunications company MTN on Thursday reported a 16.6% decline in adjusted headline earnings per share to 754.3 cents for the year ended December 2009 from 904.4 cents a year ago. Basic HEPS declined to 803.2 cents from 836.5 cents a year ago. Excluding the impact of the functional currency losses, adjusted HEPS increased by 8.5% to 878.9 cents, it said.

Revenue was up 9.2% to 111.9 billion rand as group subscribers grew 28% to 116 million, indicating a continuing demand for mobile services in countries where mobile penetration is still relatively low, the company said.

A dividend of 192 cents per share was declared.

Earnings before interest, tax and depreciation (EBITDA) rose by 6.7% to 46.1 billion rand based on a sound operational performance for the year.

MTN said that movements in exchange rates, mainly the rand and Nigerian Naira, had a substantially negative impact on the results.

Had there been no change in currency rates during the year, reported revenues at year end would have been 11 percentage points higher, and EBITDA 12 percentage points above those reported, it added.

It said the solid performance of MTN operations in most of the countries in which the group has a presence was achieved despite economic challenges, increased regulatory changes and growing competition.

“Continued delivery in accordance with an aggressive network rollout strategy remained key throughout 2009, enabling MTN to maintain or improve its market share in most of its operations. Better distribution and a focus on segmental product offerings were other contributory factors,” it said.

MTN’s extensive network expansion and investment strategy resulted in capital expenditure for the year of 31.2 billion rand - a 10.6% increase on 2008.

During the year, MTN Group concluded the acquisition of 100% of Verizon South Africa and 59% of iTalk Cellular, increased its stake in MTN Uganda from 95% to 97% and acquired a 20% stake in Belgacom International Carrier Services in exchange for selling 100% of its own international carrier service business.

It was announced recently that Phuthuma Nhleko will not be renewing his long term contract as President and CEO which ends in June 2010. He has, however, agreed to continue in his current role up to March 2011 focusing on certain key objectives including the seamless transition to a successor over this period. A board process is underway to appoint his successor.

Looking ahead, MTN said competition across MTN’s footprint is likely to continue to increase and while economies remain fragile, there are tentative signs of a recovery in economic activity.

MTN will remain focused on actively seeking value-accretive expansion opportunities in emerging markets to reduce concentration risk and leverage economies of scale, it said.

It will also monitor infrastructure investments to ensure appropriate levels of capacity and quality of service and remains focused on the continued investment in fibre and cable requirements to service evolving voice and data requirements.

It also remains focused on optimising efficiencies including infrastructure sharing, standardisation of systems and processes, rationalisation of suppliers, cost management and cash optimization and continued engagement with regulatory authorities in the development and refinement of the telecommunications sector, as well as the implementation of MTN’s BEE transaction, the group concluded.

I-Net Bridge, Tel: +27-11-280-0644, newsdesk@inet.co.za