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…

Finweek English Edition - - Letters -

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

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.