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 The Sharenet Daily 
Tuesday, 29 October 2013 - 20:00
Top News
SA Business
Company News
Company Results
World Markets (Spot Prices)
JSE Today
JSE Trading Statistics
Major Moves
Index Summary
Latest Consensus Changes / Results Expected
Recent Dividends / Ex Div
Upcoming AGMs
Stock Exchange News Service (SENS)

Seed Weekly: Company Profits: Retain or Payout?

We recently looked at the history of payout ratio of all listed JSE companies over the last 50 years and is displayed in the chart below. The payout ratio is the percentage of company earnings that a company declares out as a dividend. This will naturally differ from industry to industry and then down to the specific company.

All things being equal, at the early phase of a business’s life it will tend to require higher levels of capital for growth and as it generates profit, management will want to accumulate that capital in order to invest back into the business for expansion.

As a business or the industry it is in matures, it will have a reduced requirement to reinvest retained profits and so be in a position to pay out a higher percentage of profits as a dividend.

Many investors have as their main focus the divided that they receive on an annual basis. But just as important, if not even more so, for investors are the retained earnings, which is that portion of the profit left after paying the dividend and forms part of the available capital. How a company puts this retained capital to work over the years will be a big factor in determining future profitability.

The portion of annual profits retained by a company each year and not paid out is essentially added to the capital of the company to be used for business expansion and therefore to generate higher profitability.

So, while there is always a focus on the earnings and dividends announced by a company each year, what is often of more importance is how adept is management at allocating the available capital at their disposal in order to generate future profit. In general, where a company has profitable opportunities to deploy available capital on which it can earn a superior return, it should be doing this as opposed to distributing too much of its profits to its shareholders.

Obviously it’s not always easy to compare one business with another. Some are more capital intensive and some far less capital intensive. Heavy industry type businesses, for example Sasol, normally require a much higher portion of yearly profits to be retained and invested into new plant in order to be able to grow future profits.

Other less capital intensive business such as Coronation, have the ability to pay out almost all of their annual earnings as dividend to shareholders and because they have low capital requirements, can still grow their annual earnings. In 2012 they had earnings per share of 217 cents and paid a dividend of 206 cents per share. This year are set to grow earnings by 100%.

A key factor that investors should look for, therefore, is how management have allocated capital and the returns that they have made. In many instances management have destroyed shareholder value by investing into sub optimal businesses. Conversely others like the management of Naspers have utilised the cash from their more mature businesses and invested it into other high growth businesses, earning a superior return on capital for the benefit of all shareholders.

Looking back at the overall payout ratio of all JSE companies then, while this ratio reduced in the 1960’s and 1970’s from above 50%, more recently that percentage has climbed from 35% to around 50%. It could be an indication that companies are finding less opportunities to which to allocate capital, which could in turn result in lower company profitability in the years to come. This is something that needs to be looked at very carefully on a company per company basis.

Kind regards,

Ian de Lange

021 914 4966

Tue, 29 Oct 2013
Top News
Local markets On Tuesday the JSE All Share closed 0.09% higher, with small gains across sectors. Investors traded 143,653,530 shares in 111743 deals today, to the value of R9,405,187,832.  Full story

South Africa's stuttering economy and frequent strikes may lead to further sovereign rating downgrades and the exclusion of the country's bond market from Citibank's global bond index, the Reserve Bank said on Tuesday. Foreign investors hold about 37 percent of government debt, the  Full story
China's leaders will hold a key meeting to discuss deepening financial reforms between Nov. 9 and Nov. 12, the official Xinhua news agency said, as the ruling Communist Party looks to set its economic agenda for the next decade.  Full story
Chinese authorities suspect what initially appeared to be a car crash at Tiananmen Square on Monday was a suicide attack carried out by three men from the restive Xinjiang region who drove a vehicle into a crowd of bystanders and set it on fire.  Full story
Chinese authorities suspect what initially appeared to be a car crash at Tiananmen Square on Monday was a suicide attack carried out by three men from the restive Xinjiang region who drove a vehicle into a crowd of bystanders and set it on fire.  Full story
Britain's top share index rose for a fourth straight session to a new five-month high on Tuesday, with a rally in energy stocks. . .  Full story
European shares rose modestly on Tuesday as estimate-beating results at BP and Saipem fuelled a surge in the oil sector, a major. . .  Full story
U.S. stock index futures were flat on Tuesday, suggesting the market's recent rally may have run out of steam with corporate earnings failing. . .  Full story
Gold edged lower on Tuesday as the dollar recovered, retreating from a five-week high as investors started to factor in expectations that the. . .  Full story

A rally in world equities and gold paused on Tuesday while the dollar inched up as investors positioned for widely expected confirmation from. . .  Full story
European shares edged higher early on Tuesday to keep within their recent, tight range as the banking sector slid after provisions for legal. . .  Full story
Hong Kong shares gained on Tuesday, thanks to a lift from banking shares after China's central bank injected cash into the country's. . .  Full story
China's key share indexes ended mixed on Tuesday, with financial shares gaining while investors continued to sell overbought small-cap stocks and counters linked to. . .  Full story
SA Business
The rand weakened against the dollar early on Tuesday but stayed within a recent range as investors waited for local data and looked towards the U.S. Federal Reserve's interest rate decision this week.. . .  Full story
South Africa's Association of Mineworkers and Construction Union said on Monday its members voted to strike at Impala Platinum, but it would not immediately give the company a 48-hour notice, suggesting a stoppage might still be averted.. . .  Full story

South Africa's Reserve Bank said on Tuesday closer monitoring of non-banking financial intermediaries was necessary to reflect the liquidity and credit. . .  Full story
Growth in credit demand from South Africa's private sector slowed to 7.55 percent year-on-year in September, from a revised 8.11 percent. . .  Full story
Africa, with its wealth of untapped natural resources, is the next frontier for Finland's Metso, as the engineering services and mining. . .  Full story
The following are the top stories in the Financial Times. Reuters has not verified these stories and does not vouch for their accuracy.. . .  Full story

The World Bank said on Monday that its scorecard on the ease of doing business around the world has spurred thousands of regulatory reforms in the past decade, pushing back against critics who argue the national rankings stigmatize rather than inspire.. . .  Full story
Company News
The board of directors of Erbacon notified its shareholders that Messrs MJ Lombard and RB Patmore have resigned as independent non-. . .  Full story
Shareholders are referred to the announcements released on SENS on 22 May 2013 and 3 September 2013. Capitalised terms used and. . .  Full story
Shareholders are referred to the declaration data announcement regarding the proposed rights offer released on SENS on 11 October 2013 as. . .  Full story
Seardel ordinary shareholders and N-ordinary shareholders (collectively "Seardel Shareholders") are advised that Seardel and the Southern African Clothing & Textile Workers. . .  Full story

Shareholders are advised that the Integrated Report for the year ended 30 June 2013 was posted to shareholders on Tuesday, 29. . .  Full story
Algold Resources Ltd. ("Algold") and Fiuranium announced that they entered into a definitive agreement (the "Agreement") pursuant to which Algold will. . .  Full story
Shareholders are advised that Lonfin's Annual Report for the year ended 30 June 2013 was posted on Monday, 28 October 2013. . .  Full story
Lewis has launched a R2 billion domestic medium-term note ("DMTN") programme. The group successfully raised R500 million in the first issuance. . .  Full story
Company Results
Revenue increased to R225.5 million (R168.6 million). Gross profit rose to R43.5 million (R41.6 million) and operating profit was higher at. . .  Full story
Revenue for the interim period increased to R561.5 million (2012: R530.6 million). Earnings before interest, taxation, depreciation and amortisation fell to. . .  Full story
Group revenue increased by 16% to R1.38 billion (2012: R1.18 billion) while gross profit jumped 19% to R582.5 million (2012: R490.8. . .  Full story
Investment gains for the interim period fell to EUR85 million (EUR110 million). Net attributable profit was lower at EUR93 million (EUR117. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0045443.8842.210.09%
JSE Top 4017:0040596.2440.960.10%
JSE Gold17:001367.062.880.21%
JSE Financial17:0033593.234.700.01%
JSE Industrial17:0059591.6066.570.11%
JSE Indust 2517:0052187.6968.850.13%
JSE Resource17:0051320.6765.260.13%
DJ Futures19:1415605.0091.000.59%
DJ Ind19:5815657.9689.030.57%
SP 50019:581769.247.130.40%
FTSE 10018:356774.7348.910.73%
All Ords07:515410.70-26.60-0.49%
NZSE 5006:504852.59-10.76-0.22%
NameTimeRPMove% Move
Gold $19:591345.70-6.81-0.50%
Gold R19:5813298.77-66.80-0.50%
Gold R/kg19:58427555-2148-0.50%
Silver $19:5922.4800-.0190-0.08%
Platinum $19:591460.50-8.50-0.58%
Palladium $19:59745.003.600.49%
Brent Crude19:58108.691.761.65%
Rand / Dollar19:599.88490.06210.63%
Rand / Pound19:5515.8103-0.0115-0.07%
Rand / Euro19:5513.57950.03660.27%
Rand / NZD28/108.15300.02280.00%
Rand / AUD19:559.3665-0.0392-0.42%
Yen / Dollar19:5998.18000.48700.50%
Euro / Dollar19:550.72720.00210.29%
Dollar / Euro19:591.3745-0.0041-0.30%
Pound / Dollar19:550.62330.00390.63%

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The JSE Today

Trading Statistics
* Includes all listed instruments on the JSE
Major Moves Up
SharenameSaleMove% MoveVolume
1 CENRAND  3755517.19.%8195
2 TRNSHEX  3553711.64.%1155387
3 LITHA  2852911.33.%296155
4 DIAMONDCP  1281311.30.%2500
5 SEARDEL  3203010.34.%35239
6 ROCKWELL  3753510.29.%344
7 WESCOAL  191169.14.%625266
8 OCTODEC  22101607.80.%683503
9 TRADEH  1050606.06.%83314
10 RANGOLD  228125.56.%2000
11 COMPCLEAR  379195.28.%2050
12 CIL  22401085.07.%1262831
13 S-OCEAN  16274.52.%29388
14 MSHolding  14964.20.%120379
15 ASCEN B  250104.17.%455998
16 METMAR  13853.76.%10000
17 SPANJRD  500153.09.%200
18 ALTRON  2448733.07.%7385
19 PREMIUM  1849553.07.%94988
20 NORTHAM  41981182.89.%406869

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Major Moves Down
SharenameSaleMove% MoveVolume
1 WCC  175-15-7.89.%39982
2 SANTOVA  102-6-5.56.%3002837
3 HULAMIN  550-26-4.51.%181151
4 ESORFRANK  145-5-3.33.%690965
5 FONEWORX  240-8-3.23.%1600
6 AVENG  3000-95-3.07.%343024
7 LEWIS  7096-204-2.79.%312071
8 AQUARIUS  664-19-2.78.%728161
9 CAT  1898-52-2.67.%114856
10 TORRE  183-5-2.66.%8995
11 CROOKES  6800-175-2.51.%213
12 KEATON   195-5-2.50.%48103
13 CADIZ  122-3-2.40.%37103
14 RIPLC  778-19-2.38.%3462101
15 ARM   19601-474-2.36.%237220
16 KGMEDIA  2775-65-2.28.%880
17 PERGRIN  1360-27-1.95.%54938
18 TRANSCAP  765-15-1.92.%28510
19 JDGROUP  3183-62-1.91.%131574
20 EQSTRA  830-16-1.89.%271450

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New Highs
SharenameSaleHighMove% MoveVolume
1 WESCOAL  191195169.14.%625266
2 TRADEH  10501120606.06.%83314
3 CIL  224022781085.07.%1262831
4 CITYLDG  13450135053002.28.%10172
5 ASPEN  27500277994881.81.%603868
6 AMECOR  25425541.60.%491827
7 EOH  807585001051.32.%289049
8 BIDVEST  26750268343251.23.%537845
9 NEDCOR  21750219252100.97.%1052147
10 MRHLD  30573088270.89.%668414
11 WBHO  16988170501480.88.%136903
12 LIFEHC  41854198250.60.%750094
13 MONDIPLCP  1753418044490.28.%346104
14 MVELASERV  91891910.11.%588923
15 FIRSTRAND  360036150.5037324
16 BEE-SASOL  37500377000.936
17 RMBH  49545000-6-0.12.%729225
18 INTUPROP  54985523-11-0.20.%1250627
19 PSG  82508500-30-0.36.%70183
20 CAT  18981979-52-2.67.%114856

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New Lows
SharenameSaleLowMove% MoveVolume
1 ARGENT  5405300.25826

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Index Summary
Index NameRPMove% Move
Top 4040,596.2440.960.10%
Mid Cap60,265.4713.360.02%
Small Cap50,106.9799.640.20%
Resource 2051,320.6765.260.13%
Industrial 2552,187.6968.850.13%
Financial 1512,739.84-4.06-0.03%
Financial & Ind. 3055,485.4147.260.09%
All Share45,443.8842.210.09%
Oil & Gas 38,391.97100.640.26%
Mining 30,959.0624.390.08%
Gold Mining1,367.062.880.21%
Platinum Mining49.67.010.02%
GENERAL MINING8,845.856.260.07%
Oil & Gas Producers 20,642.6654.120.26%
Basic Materials 27,498.9421.480.08%
Chemicals 23,699.35-31.66-0.13%
Forestry & Paper 28,739.8216.060.06%
Industrial Metals 23,279.3973.560.32%
Industrials 44,247.04211.110.48%
General Industrials 132.77.950.72%
Consumer Goods 55,379.27.470.00%
Automobiles & Parts 8,788.36-43.03-0.49%
Household Goods264.4110.39%
Health Care 77,486.94567.440.74%
Beverages 177.93.430.24%
Index NameRPMove% Move
Food Producers 71,487.46-143.49-0.20%
Personal Goods 1,023.23-1.90-0.19%
Consumer Services 10,450.264.530.04%
General Retailers 67,531.591.040.00%
Travel & Leisure 5,818.1421.210.37%
Media 204.02-.58-0.28%
Support Services 2,668.84-8.35-0.31%
Telecommunications 9,360.29-3.37-0.04%
Financials 33,593.234.700.01%
Banks 58,613.39260.550.45%
Non-life Insurance 49,324.22-188.86-0.38%
Life Insurance 32,193.62-43.01-0.13%
General Financial 3,076.91-30.18-0.97%
Technology 45,553.65275.270.61%
SHARIAH TOP40 3,812.7080.20%
FTSE/JSE SHARIAH ALL3,945.0360.15%
COAL MINING19,626.0900.00%
FTSE JSE Fledgling 6,128.4800.00%
FTSE/JSE Alt X 1,053.94-14-1.28%
RESOURCE 28,071.49310.11%
DIVIDEND PLUS220.53-1-0.24%
FTSE/JSE RAFI 408,982.0360.06%
Capped Top 4021,478.66220.10%
Capped All Share23,015.39210.09%
JSE TABACO 6,951.36-15-0.21%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
30/10/2013BUILDMXAugust 2013 (Interim)
30/10/2013CHEMSPECSeptember 2013 (Interim)
30/10/2013CHROMETCOAugust 2013 (Interim)
30/10/2013CILAugust 2013 (Final)
30/10/2013SANTOVAAugust 2013 (Interim)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
FAMBRANDS28/10/1329/11/1309/12/13ZAR 1.3000
CLICKS24/10/1317/01/1427/01/14ZAR 1.1950
NUWORLD24/10/1329/11/1309/12/13ZAR 0.5940
VIVIDEND23/10/1308/11/1318/11/13ZAR 0.2300
OCTODEC23/10/1308/11/1318/11/13ZAR 0.7890
Ex Div**
Share NameDec-DateLDTPay-DateAmount
NTC PREF01/10/1325/10/1304/11/13ZAR 3.5159
SBR00305/08/1325/10/1305/11/13ZAR 1.3700
FPT10/10/1325/10/1304/11/13ZAR 0.2389
DCENTRIX08/10/1325/10/1304/11/13ZAR 0.1232
BARWORLD6%P07/10/1325/10/1304/11/13ZAR 0.0600

Upcoming AGMs**
CodeCompany NameDateStatus
CLIClient?le Ltd.29/10/2013Confirmed
AVIAVI Ltd.30/10/2013Confirmed
AVIPAVI Ltd.30/10/2013Confirmed
JSCJasco Electronics Holdings Ltd.30/10/2013Confirmed
JSCPJasco Electronics Holdings Ltd.30/10/2013Confirmed

Stock Exchange News Service
29/10/201317:45CARGO CARRIERS LIMITED - Interim Condensed Consolidated Financial Statements for...
29/10/201317:30ERBACON INVESTMENT HOLDINGS LIMITED - Change to the board of directors
29/10/201317:03M & S HOLDINGS LIMITED - Deling by director
29/10/201317:00ANSYS LIMITED - Update on the Tedaka Technologies Transaction
29/10/201317:00TORRE INDUSTRIAL HOLDINGS LIMITED - Disclosure of acquisition of securities
29/10/201316:55CHEMICAL SPECIALITIES LIMITED - Update regarding the proposed rights offer
29/10/201316:30SEARDEL INVESTMENT CORPORATION LTD - The disposal by Seardel of its clothing man...
29/10/201316:00INFRASORS HOLDINGS LIMITED - Trading Statement
29/10/201316:00METMAR LIMITED - Unaudited Interim Financial Results For The Six Months Ended 31...
29/10/201315:47DISTRIB. AND WAREHOUSING NETWORK LD - No-change statement and notice of annual g...
29/10/201315:45KELLY GROUP LIMITED - Changes to the board of directors
29/10/201315:44CAPITEC BANK LIMITED - Interest Rate Reset-CBL09
29/10/201315:40TRANS HEX GROUP LIMITED - Acquisition update and withdrawal of cautionary
29/10/201314:40FIRST URANIUM CORPORATION - Algold announces friendly acquisition of First Urani...
29/10/201314:37LONDON FINANCE AND INVEST. GRP PLC - No change statement and notice of AGM
29/10/201314:05NEDBANK GROUP LIMITED - Dealings in Securities by a Non-Executive Director
29/10/201313:24LEWIS GROUP LIMITED - Lewis Group launches R2 billion bond programme
29/10/201312:54MAZOR GROUP LIMITED - Trading statement
29/10/201312:08SABVEST LIMITED - Dividend policy
29/10/201312:00TIMES MEDIA GROUP LIMITED - No Change Statement, Publication Of Integrated Annua...
29/10/201311:29AFROCENTRIC INVESTMENT CORP LIMITED - Notice of posting circular in terms of Sec...
29/10/201311:00AVI LIMITED - Directors' dealings in securities
29/10/201310:55DENEL SOC LIMITED - New Financial Instrument Listing Announcement DENG48
29/10/201310:20TRADEHOLD LIMITED - Director's Dealings In Securities By Executive Director
29/10/201310:00FIRESTONE ENERGY LIMITED - Notice of Annual General Meeting
29/10/201309:49INDWA INVESTMENTS LIMITED - New Instrument Listing- INA406
29/10/201309:40CLIENTELE LIMITED - Results of Annual General Meeting
29/10/201309:27AWETHU BREWERIES LIMITED - Further cautionary announcement
29/10/201309:22REDEFINE INTERNATIONAL PLC - Audited results for the year ended 31 August 2013
29/10/201309:20CADIZ HOLDINGS LIMITED - Trading Statement
29/10/201309:15SEARDEL INVESTMENT CORPORATION LTD - Trading Statement
29/10/201309:00ABSA BANK LIMITED - New Financial Instrument Listing - ABN90
29/10/201309:00ASSORE LIMITED - No change statement and notice of annual general meeting
29/10/201308:55FERRUM CRESCENT LIMITED - Ferrum - Notice of Annual General Meeting
29/10/201308:30DELTA PROPERTY FUND LIMITED - Unaudited condensed consolidated interim results f...
29/10/201308:00NEDBANK GROUP LIMITED - Pillar III Quarterly Report on Capital Adequacy at 30 Se...
29/10/201307:30CONSOLIDATED INFRASTRUCTURE GRP LTD - Reviewed provisional consolidated results ...
29/10/201307:05BRAIT SE - Unaudited interim results for the six months ended 30 September 2013
29/10/201307:05INVESTEC AUSTRALIA PROPERTY FUND - Announcement regarding secondary listing on t...
29/10/201307:05BRITISH AMERICAN TOBACCO PLC - Transaction in own shares

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