Up until the mid-Nineties the JSE still had its very own clothing & textiles board with around 30 listings. In fact, investments in the sector were in the Sixties, Seventies and Eighties still very much in vogue…
Industries (now housed in Sabvest) and Rex Trueform (now revamped as a clothing retailer rather than manufacturer) only have indirect links with the JSE. The last new listing was AM Moolla in the late Nineties – a tenure that was short and bittersweet.
It wouldn’t be an exaggeration to say that a new clothing and textile listing – no matter how compelling the profit forecasts – would probably not elicit much attention from either professional investors or wide-eyed retail punters. The playing field is now so skewed in favour of cheaper imports from the Far East that only a precisely niched clothing or textiles business could even think of accommodating investors.
So if prospects for the sector are indeed so tattered and torn, why are savvy and street-smart empowerment investors such as Brimstone and HCI so determined to pull on the hair shirt that is SA’s clothing and textiles sector?
Both HCI and Brimstone are empowerment shareholders with impressive track records as regards creating value for shareholders and working deal flows. Both those attributes will come in handy in shaking up their respective investments in the sector.
Frater Asset Management’s Matthew Kreeve says the Seardel rescue deal is typical of the kind of deal an empowerment company like HCI can do. “It’s a deal that levers off their access to capital, managerial skill, substantial Government relationships and their patient approach. Find a cheap entry into a business that needs to be restructured and better run… a business that will benefit from improved interaction with Government agencies and unions.”
Kreeve says keeping stalwarts of the SA manufacturing industry intact is a coup – a development that makes the likelihood of an improved interface with Government going forward even more likely.
Achelon Investment Capital director Shawn Stockigt wonders if it would not be better over the longer term for Brimstone and HCI to unbundle the clothing manufacturing operations. “That way those who want exposure can invest directly in a business that may take a while to turn around and become competitive. That way the clothing manufacturing exposure won’t have an effect on other investments.”
Stockigt reckons the only way to make money in clothing manufacturing is to offer specialised clothing or materials (eg, fire resistant or parachute material). “The key would be to offer quality and service as well as have the capability of doing smaller personalised runs – something that’s helped KAP International’s Glodina business.”
Perhaps the most fascinating aspect of the empowerment initiative in the sector is that Brimstone