SIMON BROWN: I’m chatting with Kobus Gertenbach, CEO of Premier Group. They’re going to be listing on the JSE shortly. Kobus, I respect the time in the present day. Let’s first take a look at that listing course of. Are you doing a conventional IPO? Is this going to be a non-public placement, a guide construct?
KOBUS GERTENBACH: That is appropriate, Simon. Yes. We have introduced our intention to drift on Monday [November 21], and that’s going to get adopted up by a roadshow [where] we might be seeing loads of the institutional traders in South Africa, the massive fund managers – the Allan Grays and the Sanlams and Old Mutuals of the world.
Once that’s full, we hope to truly be buying and selling on the JSE on Thursday, December 8.
SIMON BROWN: Okay. So that is fairly fast. There are numerous current shareholders – as a result of it’s after all popping out of Brait – who will stay in, most notably Christo Wiese, whom I feel many people will know. Are you floating a majority, or are the present shareholders going to be nearly all of the enterprise?
KOBUS GERTENBACH: At this time limit, Simon, we are attempting to lift about R3.5 billion in whole. The Christo Wiese funding car Titan might be investing R1.4 billion, and so the opposite R2.2 billion or so is successfully accessible to anyone that wishes to take up the supply for shares within the IPO. But we do imagine that loads of the present Brait shareholders would doubtlessly look to take part. To the extent that they do, there might be at the least some allocation for them.
SIMON BROWN: Got you. And then of us who’re , chat along with your stockbroker. Let’s speak to the enterprise. Quite a lot of of us won’t know the Premier Group, however I feel they most likely know a lot of your manufacturers. What are a number of the main retail client manufacturers within the steady?
KOBUS GERTENBACH: Well,we are literally one of many oldest corporations within the nation. We’ve been round for a really very long time. In truth we will most likely hint our oldest origins again to 1820, to a bakery in Cape Town. But we’re well-known in the present day for bread manufacturers that embody Blue Ribbon and BB within the KZN space, in addition to Star [Bakeries] within the Eastern Cape, And then in a number of different areas like Umtata, Mr Bread.
Then on the cake flour aspect, we’ve got the Snowflake model countrywide. On the maize meal aspect, we do Iwisa and Nyala within the KZN market, after which Super Sun extra within the northern elements of the nation.
Then there are a number of different manufacturers – the femcare model Lil-Lets and we do Dove cotton wool. An there are additionally a few candy manufacturers like Champion toffees and Manhattan marshmallows, gums and jellies.
SIMON BROWN: Okay. Champion toffees, greatest toffees ever – simply as an apart.
You’ve obtained pretty good market share. I used to be studying from the announcement that got here out from Brait. In bread, for instance, it’s 24%; in flour it’s 32%. You talked about female care, it’s 18%.
You’ve obtained a reasonably good market share. You’re mentioning a few of your manufacturers are proper up there when it comes to being primary or two of their class.
KOBUS GERTENBACH: Yes, positively. Snowflake is sort of an iconic model within the wheat flour area. On the bread aspect, as a result of we’ve got a number of manufacturers, none of our manufacturers is definitely the largest model available in the market. But by quantity we’re the biggest baker within the nation. Obviously we compete towards Tiger Brands with Albany and, particularly on the Pioneer [Foods] (PepsiCo) aspect, with the Sasko model.
SIMON BROWN: I used to be once more digging in. You talked about bread there. You ship to 45 000 clients each single day. Those after all usually are not the top customers. You’re going to supermarkets, to cafes and the like. In a way a big a part of your operation should then be logistics.
KOBUS GERTENBACH: It is a really large logistical operation.
We have round a thousand bread autos which might be locked and loaded each morning round three o’clock within the morning. And then at first mild, they set out and rush off into the market to do all of these deliveries. The common bread truck does round 100 deliveries, so it’s fairly an concerned logistical operation to try this countrywide.
SIMON BROWN: Do you outsource that, or is that insourced?
KOBUS GERTENBACH: Simon, we do loads of it ourselves, however we even have loads of unbiased distributors, hawkers, distributors. In numerous areas we’ve got very well-established owner-driver schemes. So it’s actually a combined bag of each single mannequin that you can imagine.
SIMON BROWN: [In] one other combined bag maybe, your goal LSM, a few of them I can see are aiming at decrease LSM, however some actually coming into greater LSM. Your flour goes to be throughout [all]. Are you extra concentrated in a specific LSM market, or is it broadly throughout the vary?
KOBUS GERTENBACH: Well, Simon, if one seems to be at it from a South African perspective, the massive a part of our inhabitants is by numbers within the decrease finish of the LSM spectrum, and that’s actually the place loads of our merchandise get consumed. If one seems to be on the bread market specifically – however [the same] is true for the flour and the maize aspect of the enterprise as nicely – we do roughly 70% of our quantity into the casual commerce. So it’s a really, very giant proportion going instantly or very near the decrease LSM-end customers.
SIMON BROWN: You talked about the areas internally to Africa that you simply’re working in. Do you may have any operations past our borders?
KOBUS GERTENBACH: Yes. We’ve obtained a milling and baking operation in Eswatini; a bakery operation in Lesotho; we’ve obtained one of many largest meals producers in Mozambique, positioned in Matola. And then we additionally do our femcare merchandise globally by way of an operation within the UK.
SIMON BROWN: Oh, okay, so far as the UK as nicely. [Coming] again to a number of the fundamentals, has the board sat and given thought to a dividend coverage when it comes to earnings going ahead?
KOBUS GERTENBACH: Yes.
We acknowledged in our pre-listing assertion that might be going out subsequent week, that we’re focusing on between a 30% and a 60% payout ratio.
We’ll most likely begin in direction of the decrease finish of that originally, after which work ourselves up as issues progress.
SIMON BROWN: Particularly in uncooked commodities we’ve seen large worth pressures. Are you seeing in, say, wheat and maize, worth pressures coming by way of? Are you in a position to move that on to your clients?
KOBUS GERTENBACH: Yes, Simon.
Certainly in my tenure in over greater than a decade at Premier, I’ve by no means skilled inflationary pressures at this degree. We’ve seen an enormous run-up in world grain costs, together with oil and gasoline and different commodities as nicely.
We’ve actually not been spared. Our margins are fairly skinny. We run very environment friendly operations and, we’ve been pressured within the final year-and-a-half to take fairly a big variety of worth will increase as we attempt to shield our enterprise and our margins. So I feel it has been a really tough surroundings, particularly for the extra weak customers in our society who’ve actually seen an enormous improve of their value of residing.
SIMON BROWN: I take your level. It’s throughout the board. It’s not simply you, it’s going to be the rivals, it’s going to be different client items on the similar time.
We’ll go away it there. That’s Kobus Gertenbach, CEO of Premier Group. If you have an interest, chat to your stockbroker. The IPO might be coming your manner quickly. Kobus, I respect the time.
Listen to the total MoneywebNOW podcast each weekday morning right here.
