INCE|Connect News

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

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

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

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

Novus impacted by new Media24 contract. The print and packaging group has had to adjust after Media-24 renegotiated a

printing agreement on less favourable terms.

Novus Holdings has taken a big hit after Media24 renegotiated a printing

agreement on less favourable terms than before, resulting in less printing

work and reduced prices. The print and packaging group says this has led to a

14.1% decline in print revenue to 1.83 rand billion for the six months to end-

September, with operating profit down 38% to 212 rand million.

The group says its newspaper and magazine categories were affected by the

changed contract, exacerbated by consumers buying fewer magazines. Revenue

from its books and directories category was also lower after it held over a

portion of a workbook tender for the Department of Basic Education (DBE) for

the second half of the year. Last year, it printed the full DBE volumes in the

first half of the year. On the plus side, retail inserts and catalogue work,

which contributes just over a quarter of group revenue, increased by 5.5%

year-on-year. It credits internal organic growth, with existing customers

increasing their print volumes and marketing spend to counter declining

consumer spending.

Revenue generated by the group's packaging division increased significantly

following its acquisition of ITB Plastics a year ago, compensating for the

decline in the Print division but at lower margins. Tissue sales were also up

strongly, with the division close to break-even after measures were

implemented to reduce losses. While the group's preferred option for the

Tissue operation would be an exit on beneficial terms, it said it remained

committed to ensuring that its profitability continued to improve.

Group revenue rose marginally to 2.3 rand billion in the six months to end-

September. Operating profit dropped 31.4% to 228 rand million and headline

earnings per share fell 31.2% to 49.4c. Free cash flow improved by 162 rand

million to an outflow of 45 rand million from an outflow of 207 rand million in the

year-earlier period.

The first half of the year has witnessed the stabilisation of the print

segment with new bases having been set," Novus said. "The ITB Plastics

acquisition has been bedded down satisfactorily, however, the current results

have been below expectation."

Its shares closed unchanged at 4.36 rand on Friday.

May's Brexit Bombardment Wins Her Sympathy From Fatigued Public. Of the 20 or so people sharing their views in two Brexit-backing towns on the

outskirts of London, the vast majority thought May should be cut some slack.

They said the saga of leaving the European Union has become so protracted and

all-consuming that they just want it done. The common refrain was that May has

"the worst job in politics." Others said ministers should show some mettle

rather than quit. Those who voted to remain in the EU said she should call

another referendum, something she's ruled out. A few on both sides of the

Brexit argument wanted her to resign over her handling of the talks. One

retired woman said her Conservative Party should stand by her because nobody

else had her determination. "I thought that she was remarkably resilient and

persistent and tried her best to get something out of it, but she was on a

hiding to nothing from the start," said Martin Berry, a pensioner in

Sevenoaks, a Conservative stronghold 23 miles southeast of the U.K. capital.

He voted to stay in the EU. It's just a snapshot of the reaction to another 24

hours in the torturous world of Brexit, but the sympathy for May shows how

efforts to undermine her risk needling a fatigued public that still might have

to vote again this year depending on how the politics plays out. May, 62, is

fighting to keep her job against an emboldened opposition and a group of

rebels within her own ranks. The morning after the cabinet backed her Brexit

agreement, ministers began to resign within hours of each other, including her

secretary in charge of negotiations with the EU. Following months of veiled

threats, Brexit hard liners then began seeking a vote of no-confidence in the

prime minister to avoid what they see as a betrayal of what leaving the EU

should mean. The phalanx of lawmakers who want to defy Brexit, meanwhile, sees

opposition to the deal as a way of forcing a second referendum or a general

election, stretching the political process and the endgame further into the

future. In a more upbeat statement later on Thursday, May said she was

standing firm and vowed to see Brexit through. Read More: Is May's Time Now

Finally Up? "She has gone through hell and back," said Bernard Chapman, 83,

the owner of a flower shop on the main thoroughfare in Harlow, about 20 miles

north of where May was being quizzed for more than two hours in the House of

Commons. "I feel desperately sorry for Theresa May because she is trying so

hard, and you don't mind being stabbed in the back by the opposition, but not

when you are stabbed in the back by your own people." Indeed, the British like

nothing more than rooting for the underdog. As May was buffeted between

European summits and plots to undermine her at home, polls showed the public's

confidence in her ability to deliver a good Brexit deal also took a battering.

But, at least anecdotally, she won respect for trying to do an impossible job.

That thankless task resulted in her agreeing a Brexit deal that keeps Britain

attached to the EU for the foreseeable future and it's one that now might

spell the end of her. "I don't like her to be fair, but I feel like she is

under a lot of pressure so she shouldn't be hated on as much as she is," said

Lucy Rowe, 17, a politics student in Harlow, a new town developed after World

War II to house displaced Londoners and where an emphatic 68 percent of people

voted for Brexit. Rowe would have voted to stay in the EU had she been old

enough. The deal "is the best deal she could have gotten, but I still don't

think that we should leave," she said. Ever since May replaced David Cameron

in the wake of the 2016 referendum, she has lurched from crisis to crisis.

Some were of her own making, like calling an election that cost her

Conservatives a parliamentary majority. Others were simply a misreading of how

the European side would react. Alastair Young, a "leave" voter in the affluent

commuter town of Sevenoaks, said the problem is that there's a shortage of

capable politicians and that May was "out of her depth." But the ministers who

quit should have stayed to sort out her mess, he said. "It's highly unlikely

that anyone can read a 500-page document within a few hours and give a proper

opinion." DM

Group Five gets no relief from the courts. The High Court of Johannesburg said it was unable to interdict the

construction group's Ghanaian client from demanding penalties for project

delays.

Group Five has lost its court bid to halt the owners of the Kpone oil and gas

power plant in Ghana from demanding payment of the maximum penalty allowed for

continuous delays to the project. Cenpower, which commissioned Group Five to

build the plant is demanding $62.7 million from two of the bank guarantee

providers for the project.

The High Court of Johannesburg dismissed an application to interdict Cenpower

from demanding payment on the bonds, saying that the legal requirements in

terms of the bonds had to be separated from Group Five's contract to build the

plant. Group Five said it's failure to complete the project by last month, the

latest deadline, was due to contaminated fuel supplied by Cenpower. The plant

was supposed to be commissioned last year.

Other problems hindering the project included a change in Ghanaian law

affecting the clearing of goods arriving at the country's port and also due to

setbacks in seawater tunnelling. In the year to end-June, the engineering,

construction and infrastructure group recognised a loss of 1.3 rand billion on its

Kpone contract, resulting in an operating loss for the period. The Kpone

delays have also affected Group Five's cash position.

Group Five has also turned to arbiters for relief. It said it had made a

submission to the International Chamber of Commerce in Paris for claims

against the client and that it had been advised that its claims have merit.

In terms of the contract process, the group will continue to progress its

contractual rights and entitlements through the alternative dispute resolution

procedures, which includes the recovery of the payment of delay damages in

terms of the guarantees," Group Five said.

The company said a liquidity plan disclosed in its year-end results included

the impact of any potential delay-damages payment by Cenpower on the bank

guarantees in issue.

Its shares sank 30% to 70c on Friday. They've declined 95% this year.

Nintendo Bets New Hex-Nut Pokémon Will Boost Switch Sales. Let's Go Pikachu and Let's Go Eevee went on sale Friday globally, the first

titles from the popular series for Nintendo's newest console. Armed with

richer graphics, the games are designed to appeal to the 850 million fans who

have played Pokmon Go. Only those who buy the new Let's Go games can sync

their smartphones and Switch consoles through a bluetooth connection. Doing so

lets users transfer pocket monsters between the mobile app and Switch games,

and also unlock Meltan, the new character. Nintendo is aiming to boost Switch

sales during an otherwise lackluster year for software releases. Analysts

point to 2016 when Pokemon Go's debut reignited interest in buying 3DS

consoles to play more games in the series. They estimate Meltan can help sell

7.5 million units of the new titles by March, according to four analyst

projections compiled by Bloomberg. Meltan was trending among Pokemon social

media users within hours of the game's release. By comparison, the Pokmon

series have sold 101 million titles on Nintendo devices since 2004, second

only to the Super Mario franchise with 121 million, according to Nintendo's

data. "Pokmon Go had a significant positive impact on 3DS hardware and Pokmon

software sales, so I think the potential is there for a similar impact on

Switch," said Piers Harding-Rolls, head of games research at IHS Markit.

"Nintendo believes this will make a great gifting product over the holiday

sales season and is a key reason it hasn't dropped its Switch full year

shipment forecast." Nintendo needs to win the support of more gamers like

Christina Grybel, a lifelong Pokmon player in the U.S. who plans to buy a

Switch to collect the new pocket monster. "The main reason to get the Let's Go

game is for Meltan," she said in an interview. At the same time, the move to

link the new Switch game titles to Pokemon Go has alienated some members of

the Pokmon community, who say Meltan's introduction is a cheap move aimed at

fans who like to collect every available pocket monster. That, they say,

forces gamers to spend at least $360 to buy a Switch and a Let's Go game. As a

result, some say that Nintendo is making it very difficult for fans to achieve

the motto of the series, "Gotta Catch 'Em All." "Some people will never be

able to finish their collections in Pokmon Go, which is sad and against what

Pokmon stands for," said Lisa Zahn, a lifelong Pokmon gamer from Germany.

Other veteran players are also threatening to boycott purchases because they

say core features such as battles have been over-simplified to appeal to

smartphone gamers. Lackluster reviews aren't helping, with the new titles

receiving some of the lowest scores in the series. Nintendo declined to

comment. Pokemon Co. acknowledged that the Let's Go games and a Switch are

needed to obtain Meltan, but a company spokesman said even those without

Nintendo's console can do so during a promotional event this winter. Details

will be announced at a later date, he said. DM

Sibanye sparkles on dividend prospects as metals rise. As palladium rose to a record high, the company said it planned to resume

dividends in 2020.

Shares in Sibanye-Stillwater rose as much as 9.6% in heavy trade on Friday

after the price of palladium hit a record high and the company said it planned

to resume dividends within 18 months.

CEO Neal Froneman told Bloomberg that the group would start paying dividends

again once it had paid down its debt and would also consider buying more gold

assets in South Africa. The company halted dividend payments last year due

after a spate of acquisitions pushed debt higher.

Gold rose 1% on Friday and palladium hit a record level of $1,185.40. Gold was

boosted by dollar weakness after a US Federal Reserve said interest rates were

close to estimates of neutral, easing concerns about rapid interest rate

hikes. Concerns about the deficit of palladium in the market boosted the

metal, according to Reuters.

Sibanye-Stilwater is SA's biggest gold producer and the third largest producer

of palladium and platinum. More than three-quarters of its US production of

platinum group metals is palladium.

In July, the company entered a streaming agreement with Wheaton Precious

Metals which commits it to deliver a percentage of the gold and palladium it

produces in the US. It's already received the first upfront payment of $500

million. It said the deal would result in a big reduction in its leverage and

reduce financing costs.

Its shares closed 7.9% firmer on Friday at 9.24 rand.

Sibanye CEO sees dividends resumed by 2020 after paying down debt

-- Bull Street (@bullstreetco) November 16, 2018

BAT drags on Reinet. The investment group says it continues to take comfort in the tobacco giant's

underlying financial results despite a slide in its share price this year.

British American Tobacco has had a torrid time of late, which reflects in its

share price. So Reinet, which counts BAT as the largest part of its investment

portfolio and net asset value (NAV), has felt the aftershock.

Releasing interims results on Friday, the investment group reported a 5.6%

decline in its NAV to "4.8 billion for the six months to end-September, from

"5.13 billion in March. That's as BAT's shares declined to 35.85, from 41.31

six months earlier, valuing Reinet's stake at "2.74 billion. Following the

slide in BAT's share price, it now makes up 56.6% of Reinet's NAV from 62.4%

in September.

BAT's share price tumbled 11.3% to a four-year low on the JSE last Monday,

with news that the US may ban menthol cigarettes in a move that could affect

as much as a quarter of its profit.

The tobacco industry is currently impacted by the US Food and Drug

Administration's continued regulation efforts and the transformation

strategies of industry players seeking to enhance their new generation

products," the company said. "Reinet continues to take comfort from the

underlying financial results, strong dividends and future prospects of BAT,

including the investment in Reynolds American Inc., decreased US tax rates and

increased focus on next-generation products."

The slide in BAT's share price this year was cushioned by an increase in the

value of some of its other investments, as well as dividends. The value of its

holding in specialist UK insurer Pension Insurance Corporation rose by 9% to

"1.43 billion, while its investment on private equity and related partnerships

declined by 1.1% to "728 million, and its holding in Trilantic Capital

Partners various funds increased by 7.8% to "194 million. It received

dividends of "37 million from BAT for the period and paid its down dividends

of some "35 million or "0.18 per share.

Commitments totalling "107 million in respect of new and existing investments

were made, and a total of "146 million funded during the period.

Its shares closed 6.7% lower at 206.19 rand on Friday, taking its losses for the

year to 24.8%. BAT has declined 41.3% year to date.

End of week 16Nov18. FTSE/JSE Allshare Top5 oversold/overbought according to

14day $RSI indicator as follow:

Omnia 12

Rebosis 14

Reinet 21

BATS 21

Richemont 27

Altron A 80 (had some legs recently)

Datatec 71

Implats 71

Metair 70

Distell 67

Top5 last week as well

-- Schalk Louw (@SchalkLouw) November 17, 2018