It has been a bittersweet year for apparel and textiles group Seardel Investment Corp. To be frank, more bitter than sweet.

The sweet part is its rise to the top spot in the Top Empowerment Companies (TEC) survey’s manufacturing ranking.

Seardel has been rising steadily in the TEC rankings over the past few years. It came in at 190 in 2007, moved to 108 in 2008 and has now rocketed up to 26. Not a bad performance for a company in a sector that has come in for much criticism for its lack of transformation.

Furniture company Steinhoff International Holdings is the only other business in the manufacturing sector that takes transformation seriously. It sits at 91 in the overall ranking, up five places from last year. Appliance distributors Amalgamated Appliances and Nu-World Holdings come in at third and fourth respectively on the manufacturing list but are not even ranked in the overall TEC list.

The rise in the ranking is the only thing Seardel can hold onto. Other than that, it has been a bitter 2008. It had to be refinanced by its shareholders, Hosken Consolidated Investments (HCI) and founder Aaron Searll to the tune of R300m through a rights issue. This follows Searll lending the group R98m to keep it going.

The refinancing came at a time when its losses for the year to end June increased to 198c/share from 55,8c/share. The group got knocked by “huge volumes” of clothing and textiles flooding into the country from competitors in the Far East.

China looms over Seardel. Its annual report points out that during the period January to March 2008, 179m garment units were imported, 77% of this volume came from China, a country that accounts for 42% of all clothing and textile imports into SA. Its losses were worsened by reducing values in its plant and equipment and adhering to new accounting standards. Prior to the rights issue, net finance charges rose to R81,6m and it had a bank overdraft of R147m.

The rights issue gives the black-owned HCI control of the group by increasing its stake to 70%. HCI took up about R200m of the issue and Searll took up R50m. HCI’s takeover is the main reason Seardel shot from 21 in the manufacturing ranking to top it.

Not only did that give HCI an empowerment shareholder, it also substantially boosted all its other TEC measurements.

To its credit, Seardel had done a lot on its own before HCI’s takeover. In the previous ranking it scored well in skills development and it was also noted that it had implemented an employee share incentive scheme. HCI’s takeover of Seardel is more than a touch ironic as HCI has SA Clothing & Textile Workers Union’s (Sactwu) investment arm as its major investor. Seardel’s employees effectively own the company, which is SA’s largest clothing manufacturer.

Along with the passing of control came the changing of the guard, with Searll leaving the position of CEO and being replaced by Walter Simeoni. In the group’s 2008 annual report, Searll looks back with fondness at what he built up over the past 40 years. “I acquired a small company in 1957… After five decades I have seen the business grow, employing 15 000 people and with turnover of R3,9bn.”

The business is in a bit of trouble now but Searll has few regrets. “I cannot imagine a finer career,” he says.

Source: Financial Mail – Larry Classen