Pepkor slumps on earnings decline. The retailer says one-off costs related to a third-party debt provision and

share dilution will leave full-year HEPS as much as 42% lower.

Pepkor fell over 11% at its worst yesterday after the retailer warned of a

sharp fall in full-year earnings and said it wouldn't exercise call options

giving it a stake in Shoprite.

In a trading statement, the company - formerly called Steinhoff Africa Retail

- said earnings and headline earnings per share (HEPS) for the year to end-

September would be between 32% and 42% down on last year. Its results were

affected by a 500 rand million provision made to cover a corporate guarantee and

associated loans. The one-off costs related to this would strip 14c per share

from its HEPS, while shares issued to buy Tekkie Town last year and for last

September's listing would reduce HEPS by a further 30c due to dilution.

The group said following discussions with the Public Investment Corporation

and Lancaster, and based on senior council advice, they had decided to

terminate call option agreements to acquire stakes in Shoprite. Call options

belonging to Christo Weise's Titan Group and Lavender Sky terminated earlier.

Had the transaction proceeded, it would have resulted in the combined parties

taking voting control of Shoprite with a 23.1% economic interest and 50.6%

voting control.

Pepkor's shares closed 6.4% down at 17.23 rand. Majority shareholder Steinhoff

International fell 7.6% to 1.83 rand.

Cryptocurrencies Falter as Bitcoin Tumbles Toward $5,000 Level. Bitcoin touched an October 2017 low and was trading at $5,235.17 at 8:50 a.m.

in London, according to consolidated Bloomberg pricing. Rival coins including

Ether and Litecoin also retreated, as the wider Bloomberg Galaxy Crypto Index

fell as much as 6.9 percent to a one year-low on a closing basis. XRP, the

token associated with Ripple, was the lone gainer among major digital

currencies. Volatility has returned to cryptocurrencies, with the largest

tokens shedding billions in market value since the hard fork of Bitcoin Cash

last week, after two software-development factions failed to agree on a way to

upgrade the offshoot of the original Bitcoin, leading to a computing power

arms race. Read about how the Bitcoin Cash clash is costing investors

billions. The cryptocurrency industry has now lost more than $660 billion in

value from a January peak, according to data from CoinMarketCap.com. Bitcoin

is down more than 70 percent from its December 2017 high, the data show.

Thomas J. Lee, managing partner at Fundstrat Global Advisors and a long-time

crypto bull, slashed his year-end price target for Bitcoin to $15,000 from

$25,000. The target is based on a fair value multiple of 2.2 times the

breakeven cost of mining, which the firm pegs at $7,000, according to a report

last week. "Crypto-specific events have led to greater uncertainty in the

crypto market, including the contentious hard fork for Bitcoin Cash," Lee said

in the note. Bitcoin's break below $6,000 "has lead to a renewed wave of

pessimism," he said. DM

ILLICIT FINANCIAL FLOWS: Trade misinvoicing costs South Africa $7.4bn in tax a

year. In a new report, Global Financial Integrity (GFI) estimates South Africa lost

$37-billion - $7.4-billion a year - in potential government revenue due to

trade misinvoicing between 2010 and 2014, denying the state resources to meet

its developmental goals. GFI has called illicit financial flows (IFFs) the

most damaging economic condition facing developing countries. The Washington-

based non-profit specialising in IFFs says trade misinvoicing accounts for the

majority of IFFs.It involves companies moving money illicitly across borders

by misrepresenting the value of a transaction and the report, titled South

Africa: Potential Revenue Losses Associated with Trade Misinvoicing , provides

an estimate of the total value misrepresented and calculates the tax lost.

"The practice of trade misinvoicing has become normalised in many categories

of international trade," reads the report. "GFI's very conservatively

estimated $37-billion in lost revenues over the last five years of available

data represents resources that could have made an immense difference in

housing, education, and health services and could have gone far in easing

poverty and inequality and accompanying social strains," it continued. Trade

misinvoicing occurs on both imports and exports. Companies can over-invoice

imports to shift money abroad or under-invoice imports to avoid customs duties

or VAT. They can under-invoice exports to shift money abroad and sometimes

over-invoice exports to claim rebates. The illicit practice, which essentially

involves companies lying about the value of their imports and exports to avoid

taxes, reduces government revenue, denying it custom duties, VAT, and other

taxes, as well as taking income and wealth out of the country, reducing

finances in the economy for domestic investment, consumption or savings. GFI

compared the latest available SARS data to information in the United Nations

Comtrade Database to find differences in import and export statistics between

2010 and 2014. The report says it conservatively estimates average annual

import under-invoicing to be at $16.3-billion and over-invoicing at

$9.8-billion. It estimates annual export under-invoicing at $11.6-billion and

over-invoicing at $8.6-billion. GFI then applied the relevant VAT, customs

duties, company income taxes and royalties to those figures to estimate that

the government is losing $7.4-billion in revenue a year due to trade

misinvoicing. The report looked specifically into export under-invoicing,

where companies misrepresent the value of the goods they bring into the

country to avoid taxes. Government is losing most on those taxes in the fields

of machinery, knitted apparel, and electrical machinery, it found. Issues of

illicit financial flows have gained prominence recently as government spending

is limited by the fiscally constrained environment as the economy remains weak

and SARS fails to meet its collection targets. There's also been a push to

hold corporates and high-income earners accountable. "Failure to address all

tax gaps in the absence of solid non-tax revenue indicates that it is workers

who will carry majority of the tax burden," said the EFF on IFFs in response

to the recent medium-term budget policy statement (MTBPS). "This all while

multinational companies enjoy the benefits of low tax rate and still

aggressively avoid tax and engage in profit shifting," the party continued.

The EFF has tabled a Private Members' Bill in Parliament to tackle IFFs, which

see billions transferred out of the country every year through illicit means.

Finance Minister Tito Mboweni didn't mention IFFs in his MTBPS, but delivering

the national Budget in Febuary 2018 former finance minister Malusi Gigaba said

Treasury, SARS, the Reserve Bank and Financial Intelligence Centre are

collaborating and will receive more resources to hold companies accountable.

Gigaba said international recommendations on transfer pricing and base erosion

are being implemented and that the global push for country-by-country company

reporting, where different revenue authorities will be able to compare

financial records in the various countries where countries operate, will help

ensure corporates pay their taxes. In May 2018, however, acting SARS

Commissioner Mark Kingon admitted that not enough has been done to tackle

IFFs. He said multi-agency teams were looking into nine cases involving more

than 9-billion rand. The severe reduction of staff at SARS, however, has

reportedly impacted on their investigations and without a more transparent

global financial system, which country-by-country reporting will help

introduce, it's too hard. GFI said South Africa can reduce revenue losses from

trade misinvoicing by tightening legislative and regulatory measures,

detecting misinvoicing while it happens and attempting to recover lost taxes

through audits and reviews. DM

Coronation sees more value in SA assets. Following their relative underperformance over the past year, the fund manager

says the major SA asset classes present opportunities to long-term, valuation-

driven investors.

Coronation Fund Managers says the major SA asset classes are presenting above-

average opportunities to long-term, valuation-driven investors, such as

itself. That's after a period of very disappointing returns, which reflect in

the asset manager's latest financial results. The outlook for global asset

classes is more mixed, it says, which has enabled it to construction

"differentiated portfolios".

While the JSE returned just 3.3% over the year to end-September and emerging

markets delivered a negative return of 0.8%, Coronation says developed markets

were up 9.8% on average. Over the same period, the rand weakened by 4.3%

against the US dollar.

Coronation's SA equity and Global Emerging Markets equity portfolios

underperformed over the year - although it says the long-term performance

across its fund range remains excellent. Other strategies, such as its Fixed

Interest and Frontier Markets portfolios did a lot better.

Institutional assets under management (AUM) fell 8% over the year to 346 rand

billion as local institutional portfolios recorded net outflows of 22.6 rand

billion. It says this outcome was significantly better than expected, given

that the local institutional savings market continues to see structural net

outflows and Coronation's SA Equity and Multi-Asset strategies only reopened

to new institutional clients in March 2017. Global client portfolios fell 14%

to 61 rand billion.

In its retail business, Coronation experienced net outflows of 4.1 rand billion,

compared to 6.9 rand billion a year earlier. Retail assets still grew 1.3% to 241 rand

billion.

Total AUM declined by 4.4% to 587 rand billion from a year earlier but were almost

unchanged from levels at the end of March. Although average AUM increased by

3.1% over the period, revenue declined by 1.8% to 3.8 rand billion for the year.

Headline earnings per share declined by 4% to 420.7c. It's paying a final

dividend of 197c, taking its total dividend for the year to 420c per share.

We remain optimistic that the current positioning of our strategies will

generate higher future returns for our clients," Coronation said. "Together

with our increased investment in our infrastructure, technology and people

over the past year to support the provision of world-class service to our

clients, we believe this will ensure the delivery of sustainable long-term

value for all stakeholders."

The fund manager's shares shed 1.4% to 44.26 rand yesterday.

> CML results put it on a DY of over 9%#JSE

>

> -- Simon Brown (@SimonPB) November 20, 2018

> Might come down to preference & risk appetite. Personally I like longer

track record of $JSECML. Yes @DrieksCombrinck, Global AM's were under pressure

in 2018. If you look at CML MktCap/AUM% relative to biggest AM's %, you will

note that CML became even cheaper. pic.twitter.com/sZsP7Y5Szr

>

> -- Schalk Louw (@SchalkLouw) November 20, 2018

EVITA'S FREE SPEECH: Ep. 169: Evita insists - Equality starts at home (Video).

Days of Zondo: Gordhan, Malema and evidence about Zuma will make for a potent

week at State Capture probe. On Sunday, EFF President Julius Malema announced that the party will protest

at the Zondo Commission of Inquiry, capping a sustained campaign by the party

against Gordhan's testimony, which was leaked two weeks ago. The party wants

Gordhan to resign on the same basis that it helped campaign for a resignation

by former Finance Minister Nhlanhla Nene who was found to have lied about how

many times he met the family at the core of South Africa's story of State

Capture.

Gordhan's leaked affidavit starts the section on the Gupta family by stating:

"I have never been to the Gupta family compound located in Saxonwold. I was

invited to the famous Gupta family wedding at Sun City, but declined the

invitation."

In his testimony, Gordhan says:

"I had forgotten of another instance where one of the Gupta brothers may have

been present at a meeting I had with billionaire businessman Anil Ambani of

the Reliance group of companies in or about June 2010."

Gordhan agreed to meet Ambani because he was a potential investor and his then

chief-of-staff Dondo Mogajane had reminded him that Rajesh "Tony" Gupta had

turned up at the meeting with Ambani.

In his testimony, Gordhan says the Guptas regularly wanted to meet him but

that he "refused to schedule a meeting with the Gupta family, whether at their

residence or anywhere else".

But the EFF says that Gordhan is lying because in a reply to a parliamentary

question he had said he had never met the family. Gordhan also says in his

testimony that he was once introduced to another Gupta brother, Ajay Gupta,

when he ran into him at the presidential guest house, Mahlamba Ndlopfu, when

he arrived for a meeting with Zuma.

Other than that, he says that he only saw one of the three Gupta brothers at a

cricket match and that they had often been at government functions as guests

of the president which were attended by Cabinet ministers.

The EFF has increased pressure on Gordhan ahead of his appearance before the

Zondo commission of inquiry. The party has alleged on public platforms that he

is running a parallel state and that he is part of an Indian cabal taking out

black executives such as former SARS commissioner Tom Moyane and former CEO of

Transnet Siyabonga Gama.

Gordhan was the least liked of all Cabinet members by the Gupta family who

cultivated close relationships with many of Zuma's ministers. The family's

network of automated social media bots targeted Gordhan for months at the

height of State Capture between 2015 and 2017.

The family also ran a campaign against Gordhan in its New Age newspaper and on

its then ANN7 television station because they believed that Gordhan did not

protect them from the banks which closed their accounts and because he

continually rebuffed their affections.

The family's South African CEO of their Oakbay Holdings, Nazeem Howa, upped

the ante with a political campaign to force Gordhan to force the banks to

reinstate their banking facilities. He refused and went to court to get a

declaratory order saying that he could not intervene in client-banker

relationships.

The closure of the family's accounts and their loss of their listing

sponsorship of Oakbay on the JSE was the beginning of the end of their

business life in South Africa.

The EFF enters the picture because it has gone into bat for Gama and Moyane,

whom they allege were fired because of Gordhan. Moyane was axed by President

Cyril Ramaphosa on the recommendation of Judge Robert Nugent who is heading an

inquiry into SARS. Gama was dismissed by the Transnet board which is chaired

by Popo Molefe; Transnet falls under the Department of Public Enterprises.

Tension between Malema and Gordhan goes back even further. In his first term

as finance minister, Gordhan was instrumental in putting the Limpopo treasury

into national administration because it was looted, partly by networks of

patronage businesses linked to Malema, who was then head of the ANC Youth

League.

Gordhan has faced the most targeted attack by online trolling armies in the

month ahead of his testimony which reveals how high the stakes are this week.

The trolls have raised the race narrative of an "Indian cabal" in charge of

the state.

By this weekend, Gordhan's spokesman Adrian Lackay had been drawn into the

campaign when his emails from his time as spokesperson at SARS were hacked and

leaked to resurrect the controversy over the alleged "rogue unit" at SARS.

While the Sunday Times has rescinded its series of over 30 articles on the

alleged "rogue unit" as untrue and returned all prizes and prize money awarded

for this and two other investigations, the EFF is resurrecting the idea of

such a unit in various communications.

On Friday, a little-known craft union called the Academic and Professional

Staff Association said that the Zondo commission of inquiry's evidence leader

Paul Pretorius should recuse himself from the commission because he had

allegedly provided pro bono services to Lackay when he was axed by SARS. DM

Steinhoff names new CEO as restructuring progresses. Commercial director Louis du Preez, who has been leading the restructuring

negotiations, will replace Danie van der Merwe, who steps down at the end of

the year.

Steinhoff has appointed commercial director Louis du Preez as its new

permanent CEO as it continues to restructure its business and deal with the

fallout after revealing massive accounting fraud close to a year ago. Du

Preez, who has been leading restructuring negotiations together with chief

financial officer Philip Dieperink, will replace Danie van der Merwe, who is

stepping down at the end of the year. Van der Merve replaced Markus Jooste,

who quit last December as new of the scandal broke.

In an update yesterday, Steinhoff said it was making good progress with the

restructuring. It planned to apply for a company voluntary arrangement (CVA)

for Steinhoff Europe and a consent solicitation process in respect of

Steinhoff Finance Holding's convertible bonds. It said these processes related

to the restructuring of the debt of the two units and were not expected to

have any impact on its operating business, their landlords or trade creditors.

Meanwhile, the US Bankruptcy Court approved the Chapter 11 bankruptcy plan of

US subsidiary Mattress Firm last Friday, it said.

Importantly, the implementation of these necessary measures to restructure our

debt, will enable management to focus fully on driving the performance of our

operating businesses," chairperson Heather Sonn said. "He (Du Preez) is the

ideal candidate to lead the Company through the final stages of the

restructuring and into the next phase of its development and his designation

as CEO will provide important continuity for the group and all of its

stakeholders."

The retailer is due to release its 2017 financial statements by the end of the

year, followed by its 2018 accounts in January. PwC is also expected to

release the findings of an investigation into the accounting irregularities

next month.

Steinhoff's shares rose as much as 17% yesterday before closing 8.2% higher at

1.98 rand.

Steinhoff has announced its commercial director Louis du Preez will take

over as the new CEO.

-- Open News (@OpenNewsSA) November 19, 2018

JSE All Share top gainer/loser for the day:

Steinhoff Internation +8.20%

Brait SE -5.95%

(Source: SS/Bloomberg)

-- Simonis Storm (@SimonisStorm) November 19, 2018

Naspers flags first-half earnings rise. Headline earnings and earnings per share increased considerably as a result of

its share of fair-value gains recognised by Tencent.

Naspers has forecast a strong rise in first-half earnings, boosted by changes

to its accounting policy.

In a trading statement yesterday, the Internet and media giant said core

headline earnings per share (HEPS_ for the six months to end-September would

be between 7% and 13% higher than a year ago. However, the group has amended

its calculation of core HEPS and restated last year's numbers. As a result, it

said core HEPS for the period are likely to be between 35% and 43% higher.

Core HEPS is the most accurate indicator of Naspers's operating performance.

On the same restated basis, earnings per share (EPS) for the period will be up

by between 210% and 217% due to the once-off gain recognised on the $2.2

billion disposal of its 11.2% interest in India, e-commerce retailer Flipkart

to Walmart.

Last week, Tencent, in which Naspers owns a 31% stake, reported better than

expected net income of 23.3 billion yuan for the three months to end-

September. The average estimate was for earnings of 18.4 billion yuan

Headline earnings and earnings per share increased considerably as a result of

the group's share of fair-value gains recognised by Tencent on certain of its

investments," Naspers said. "Possible future gains on disposal and fair-value

adjustments on investments are by nature unpredictable."

Naspers's results are due for release on 30 November. Its shares ended trade

1.7% higher at 2,825 rand.

Is there an EE black Friday sale? 2 for 1 on Naspers maybe?

-- Rob AF. (@RobForbesDJ) November 19, 2018

Is there an EE black Friday sale? 2 for 1 on Naspers maybe?

-- Rob AF. (@RobForbesDJ) November 19, 2018

UK exit boosts Netcare’s profit. The private hospitals group has declared a special dividend of 40c per share

following a detailed review of its portfolio, capital structure and capital

requirements.

Netcare has declared a special dividend of 40c per share following its

decision to exit its business in the UK. The private hospitals group has also

been buying back its own shares after a detailed review of its portfolio,

capital structure and capital requirements.

In March, it announced it was exiting the UK due to declining business from

the National Health Service and after it failed to conclude a commercially

viable rent reduction transaction for its BMI Healthcare subsidiary.

Reporting results for the year to end-September, Netcare said revenue from

continuing operations rose 8.4% to 20.7 rand billion in the year to end-September

and normalised operating profit increased by 4.7% to 3.49 rand billion. The

results include Akeso clinics, a network of 12 mental healthcare facilities

bought earlier in the year, while BMI has been deconsolidated and classified

as a discontinued operation.

The group swung to a profit of 4.74 rand billion from a 2.73 rand billion loss. That

included a 4.2 rand billion non-cash profit on the deconsolidation of BMI and a

1.32 rand billion impairment against the carrying value of the UK group's debt.

Adjusted headline earnings per share from continuing operations grew by 0.6%

to 171.6c. On top of the special dividend, it's raised its final dividend by

5.3% to 60c per share.

Netcare said patient days grew by 5.9% over the period, which comprises 1.7%

growth in acute hospital days, as well as the contribution from Akeso in the

second half. It doesn't expect to commission any new acute beds in the year

ahead, while 52 beds will be converted to higher demand disciplines.

Based on the performance of patient days over the last quarter of FY2018,

acute patient day growth is expected to remain under pressure in the near

term, while demand for mental health is expected to remain strong, further

benefiting from the inclusion of Akeso for a full 12 months," Netcare said.

Its shares gained 3.7% to 25.70 rand yesterday.

Netcare annual results: '5.9% increase in normalised Group EBITDA to

R4 209 million, '5.9% increase in patient days, '0.6% increase in adjusted

HEPS from continuing operations to 171.6 cents,'17.8% increase in cash

generated from SA operations to R4 305 million.

-- MoneyMarketingSA (@MMMagza) November 19, 2018

Pioneer faces pressure despite improvement. The branded food producer has reported a big improvement full-year earnings

but said pressure started to emerge in the second half.

Pioneer Foods has bounced back from a weak 2017 to report improved earnings.

That's despite weakening consumer demand and rising input costs due to a

softer rand.

The branded food producer says a much better maize harvest supported profit

growth in the year to end-September but the milling and baking segments of its

Essential Foods division came under pressure in the second half of the year

due to intensified competition and as consumers traded down to cheaper staple

products. This was specifically evident in maize meal during the final quarter

with White Star trading at an all-time high price premium to other brands in

the category. Its bakeries business benefited from improved operational

efficiencies and it said pasta, rice and legumes continued to make a growing

contribution to earnings.

Within its Groceries division, Pioneer grew volumes in its cereal and long-

life fit juice categories. Operating profit was also supported by baking and

spreads. However, lower volumes and profitability were reported by the

snacking category, including dried fruit and rusks. LiquiFruit, Ceres and

Fruitree all gained market share, while Weet-Bix maintained its share. It said

the integration of the former Heinz Foods SA portfolio was well advanced.

Internationally, exports into Africa continued to be subject to volatile

socio-economic conditions, while fruit exports benefited from improved local

fruit availability, strong global demand and high US dollar prices. It said

the recent acquisition of UK granola brand Lizi's had supported growth in its

international branded products business.

For the year, revenue rose 3% to 20.2 rand billion and adjusted operating profit

jumped 26% to 1.6 rand billion. Adjusted headline earnings per share rose 25% to

553c and its maintained its final dividend at 260c, taking its total dividend

for the year to 365c per share.

Pioneer said its Groceries and International divisions should be able to

improve their performance in the year ahead following a turnaround at Heinz,

an expected higher vine fruit crop and a more beneficial rand exchange rate

for exports.

Although demand for maize meal products should remain strong, given ample

local raw material supply and relative consumer value, down-trading within the

category is expected to continue," the person who said it here which is red

"The exceptional maize profit contribution reported in the first half of the

2018 financial year is not expected to be repeated in the next financial

year."

Its shares closed 1% higher at 78.29 rand yesterday.

Pioneer Food Group Earnings:

-FY REVENUE INCREASED BY 3% TO 20.2 rand BLN

-FY HEADLINE EARNINGS PER SHARE INCREASED BY 33% TO 545 CENTS PER SHARE

- A GROSS FINAL DIVIDEND OF 260 CENTS (2017: 260 CENTS) PER SHARE HAS BEEN

APPROVED

-- Nick Kunze (@NickKunze2) November 19, 2018