Seardel to unbundle non-media interests.

With the much-publicised boardroom battle involving Hosken Consolidated Investments (HCI) co-founders John Copelyn and Marcel Golding now history, HCI is moving ahead with its plans to turn its subsidiary Seardel into a fully focused media investment company.

Seardel, once better known as a textile and clothing manufacturer, plans to unbundle its non-media assets into a new company: Deneb Investments. This will be listed on the JSE on December 1 2014.

Seardel shareholders, which includes HCI with a 73.6% stake and various minorities, will receive 12.9 Deneb shares for every 100 Seardel shares that they own.

This will enable Seardel to focus its resources on growing its media businesses, notably e.tv, eSat.tv, YFM and Sasani Studios, which are held by Sabido Investments.

With HCI directing operations, Seardel acquired 63.9% of Sabido Investments in the 2014 financial year, in an inter-company debt and equity transaction worth R5.2 billion.

By unbundling the non-media assets, Seardel hopes to unlock value for shareholders as well as give them a choice of whether to maintain, increase or decrease their investment in Seardel’s media and non-media investment portfolios.

The Golding, HCI battle

Sabido recently came under the spotlight, as an internal boardroom battle for control of the media company exploded into the public domain. Following months of mounting tension and disagreements – allegedly including editorial policy – HCI directors Golding and Copelyn had attempted to go their own way with a semblance of amicability.

It emerged that attempts by Golding to swop his shares in HCI for control of Sabido was vetoed by trade union the Southern African Clothing and Textile Workers’ Union (SACTWU), which is a majority shareholder in HCI. Until recently Sabido was the top-performing company in the HCI stable. It has been overtaken by Tsogo Sun, in which HCI has a 41% interest.

After publically declaring that he had “lost” the battle, Golding walked away leaving control of the company to Copelyn and SACTWU. They appear now to be moving ahead with the original plans to build Sabido into a bigger media presence.

Sabido presses on

In the past 18 months Sabido has launched three new businesses: a free-to-air direct-to-home satellite platform under the brand name Openview HD, five new e.tv channels and the online news business enca.com. All three initiatives are in line with the group’s multi-channel, multi-platform and multi-territory strategy.

While e.tv exceeded its revenue targets in the year to March, free-to-air television advertising revenue is under pressure. The ongoing delay in the launch of digital terrestrial television (DTT) has resulted in a significant shift in audiences and advertising revenue to pay-TV as audiences seek out multi-channel offerings beyond the current four-channel analogue terrestrial offering.

Last week Communications Minister Faith Muthambi warned that South Africa would miss the June 17 2015 deadline for migrating its analogue TV broadcast system to digital. She also said that Cabinet would make a decision before year-end on the tricky issue of conditional access.

Sabido’s after tax profit in the year to March was R447 million, down from R499 million a year previously. If the impact of the expansion was excluded, the profit from continuing operations would have increased by 19% from R508 million to R604 million in March 2014.

Meanwhile Seardel has also been taking steps to build its non-media assets into something meaningful. The loss-making clothing manufacturing business was sold off to a SACTWU-related company in the 2014 financial year. This business recorded a R160 million loss in the year to March, which Seardel disclosed as a loss from discontinued operations.

With that business out of the way, Seardel’s other assets, of which Deneb will comprise, start to look a little more attractive.

There’s the industrial property portfolio, as well as its branded products business – which includes Prima Toys, The Empire Group, Seartec and Brand ID. The brands that these businesses supply include the 466/64 product line, Microsoft X-Box, Butterfly stationery, Sharp consumer electronics, Speedo and a variety of toys.

The textile business remains and is profitable. It includes Romatex, Frame Knitting Manufacturers, Berg River Textiles and Hextex.

The industrials division includes manufacturers of specialised industrial products for the building, automotive, paint and bedding industries. The businesses operating in this segment are Gold Reef Speciality Chemicals, Brits Automotive Systems, Brits Non-Woven and Frame Polypropylene.

Collectively these assets earned revenue of R2.2 billion in the year to March, up 17%. Gross margins have been improved and the combination of revenue growth and improved margins resulted in operating profit before interest improving by 98% to R215 million.

Results for the six months ended September 30 2014 will be released on November 21, along with a prelisting statement.

Source: Moneyweb – Sasha Planting