Sea Harvest explains where the sardines have gone

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2:05Chenyana with Jimmy Moyarha, Jimmy appreciate the early morning time. You and I really have been through the the trials and tribulations of Sassal when it was a turn-round stock all the way down to a 50-round stock back to a 200-round stock. Operationly business-lap wise, it's looking a lot better. Oil is absolutely helping, but notwithstanding it is looking operationly better. Do you concur fish out on that? Good morning Simon, absolutely. The Sassal conversation has had many different shapes and forms over the years and I remember exactly the conversations you and I had when the share price did down to that 50-round level. Again, that oil conversation had a huge impact on that as well. But from an operational standpoint, to your point around how the business is doing much better. I think a very single standpoint that stands out around that is the late Charles project, the gas business. The chemical business Sassal has been struggling with that business for quite some time. We actually saw that the business this time around was able to contribute positively towards the balance sheet

3:10and towards the financial year end. Yes, the business has found a way to work around some of its challenges and to overcome its challenges more importantly. I think that you're going to start to see be reflected in how the share price is being seen. Yes, the share price at the moment is up off the back of the oil prices and where the oil price is at the moment. But overall, from a profitability perspective, from a balance sheet perspective, that business is doing much better than it has been in the last couple of years. Is that then the trick? Is that it is a... It's an oil play, it's a chemical play and yes, oil is doing good. Chemical store under pressure. And that perhaps is the risk to the business that they are price takers. At some point, hopefully we get peace in our time in Iran. And that price comes down and they back to price takers in two spaces. Well, I think from a societal perspective, it's more than just the oil and the chemicals business. I mean, they still, the gas conversation they recently got to that approval from Nursa around the maximum gas price that they applied for as well.

4:16So the business understands very much where it is that they play as an energy business. They're not under any illusions around that. And I think the market in the past may have been a bit too hard around those energy businesses. The same way the market was unforgiving of the PGM stocks when we went into our global transitions into electrified vehicles without thinking about the repercussions of how this would be implemented. I think the market was quick to react and is quick to punish companies that have such a significant concentration into one particular area. Now, for Cecil, at the moment, the oil price being elevated is a huge benefit for them. But I also think the other side of that is going forward. There's always a part of this conversation that doesn't actually go away. So even in a situation where life starts to normalize and we start to see a de-escalation of tensions, I don't think we go back to a world where the oil price goes back to $40, $50 about.

5:21I think the new normal is being established as it stands. And I think that new normal at the stage will now count in Cecil's favor. Now whether or not Cecil is able to leverage that or make the most of it is something that we'll have to see. But the other side that we need to remember from there is they have now taken over operational control of one of the oil refineries, if not the only refineries that's the existence of Africa, in the naturopher refineries. So they're now further entrenching themselves in the energy conversation and how that energy conversation affects South Africa. So Cecil from a South African perspective pretty much might be your only real or it might be your significant energy play in the market. And I think that in and of itself makes for a different business case to perhaps looking at other similar type of businesses that might operate in the same way. I got you 100% and the CEO of Saudi Aramco with results at a couple of weeks ago here he conquered with exactly your statement.

6:23He said oil dynamics in the global market on our game back to where they were pre the war will leave it there. Jimi Muiaha appreciate the early morning time. The stand up flexible income fund is designed for pre and post retirement income and capital preservation needs. Retire without regret with stand up asset management. Money web now on the money. I'm telling with Peter and I've worked CEO of shop right at the slow disclaimer I hold shop right shares results year ending June revenue up 7.1%. Dalued to helps up 12.2% dividend up 11.8%. Fun fact that dividend of 873 is a little more than the price I paid for my first shares but way back in the day Peter appreciate the time. You've got internal selling price inflation within your supermarkets RSA 0.8%. You say shop right and you say you actually seeing deflation who gets squeezed here do you take some margin hit do you speak to your suppliers how you able to do inflation will below what what what what is up there from step CSA.

7:27Yeah interesting point that you make it's it's a tough year for for the retailer in a deflation environment but great for customers. We had 11,000 items cheaper this year than last year. So that that also helped us to grow volume. If you grow volume it's good for the suppliers because that's actually only two a day have to reduce the costs. Because we all know the cost pressure at the bottom of the income statement. I mean our electricity water municipal charge up by 19% now to do business Africa is not cheap so I am just very grateful that I could contribute to helping them and therefore they have kept the prices lower. What goes with this is I mean what's the point in increasing your prices if you're not growing volume. Yeah yeah and we the only ones growing volume is the one.

8:29Yeah I get you actually so it is that I mean it's a cliche but it is the win win I want to touch then on 60 60. At 34.5% which is a big number particularly when you consider that that that accounts for 6.6 billion you know about 9% of all revenue is now 60 60. You must have some sense how many of the 60 60 clients are usual checkers shoppers who just saying hey convenience well how many are you getting who would not normally walk into a checker store but like that convenience if you got a sense of the difference between the two. Here are now interesting is that in the past year we served an additional 1.1 million customers every week and all four of them 546,000 our checkers customers that we haven't seen before. So in most of them don't only use one channel only they go to the store and they use the 60 60 it's not as if they say okay I don't like let's say I don't like checkers so I'm going to just use the 60 60.

9:39And they install spend there's actually more than what they spend on 60 60. So very valuable very valuable customers and that is what made this for us I've been asked before every time I say but 60 60 is usually profitable and then people argue with me but if you if it's an incremental sale it must be enhancing because you only have to cover the variable cost. So cover the fixed cost yeah yeah yeah yeah and it's been and there's so much more that we need to do and can do you know you probably saw that we started to add the giant bus drivers. Yeah also on to 60 60 now you can buy your pet your liquor your get your vitamins and you have a single check out and one delivery. But actually you're both from three different businesses and that brings me to my next question so you announced that you've done the deal with Vida you've announced the RNA cellular both post period and but still there and I got be thinking because as you point out you've got pets you've got clothing you've got outdoor you've got liquor you've got financial services QSR and so the list goes is almost a sense of if I run my eye down my credit card statement every month more and more of that spend is able to be done via the shop right group you better be able to do that.

10:59So you're the shop right group you're becoming almost the one stop for for almost everything and maybe in time absolutely everything you absolutely spot on what we really if I can sum it up on one sentence we really want to become your everyday store yeah because the easyness or the the convenience of that to have a single super app where you registered ones and have one password and you can do so many multiple things. Opposed to you know hundreds of apps and logins and passwords drives me crazy so we're really trying to achieve that and the second part of it is you know the economy is not really help us helping us and you can probably say to an extended you know these days we are mailing in each other's businesses. Delcos want to become insurers and retailers want to become bankers and so because we're all seeking growth so it's almost we say we have to create our own oxygen.

12:07Absolutely absolutely and to the point is an impact the numbers are set up front you revenue at 7.1 your your your diluted hepsit 12.2 you're still managing to even on a 274.8 billion revenue 170 plus thousand staff members able to find efficiencies within the business yes two things to note the one is the increase in the gross profit margin by 20 books yeah yeah yeah help and then very very solid cross control. We were the amicable settlement on our staff increases with the bargaining union. Was probably for the team shop right the best year for increases but we all have accepted the judge it is what it is I mean sometimes we all have to jump in to make sure that we keep the business alive.

13:07Yeah I love and thriving believe it there Peter in a book CEO shop right appreciate the time that support today on LinkedIn cafe you know we know that is the coffee stop what's the plan yeah is it own all your spend is it coffee while you shop is it the super app as Peter suggests there have your vote have you say LinkedIn let your money benefit from experience with stand lip asset management find out about stand lip global select fund which follows an investment discipline that is delivered really good. That is delivered results for three decades money web now on the money. I'm sure you know with the fixer tab years see harvest see you results six months ending June revenue of six percent I have some 14% and from different I think I made them in from dividend 24 cents feel except appreciate the early morning time I really tough six months and in terms of activity working actually fairly well in terms of profitability but a lot of headwinds at the border see harvest a group across all sorts of issues exchange rate.

14:15It's fuel price catch takes et cetera tough period it was it was Simon good morning to you and your listeners you 100% right. We started off with a cyclone in the nature is nature in in Australia we took out our entire operation in X mouth in Western Australia. Then we had the war in Iran where the fuel price close to tripled within three months and we use thirty five million liters of fuel it's up biggest cost item and into add to that the round was ten percent stronger to the U.S. dollar sixty four percent of our earnings of sure. So that was really tough and the in terms of what we call and show the catches industrial catches it was one of the worst seasons we ever had so if you look at those headwinds and we look at the result it's phenomenal we've actually had a record result in terms of you know if we look at the last five years in terms of all metrics I mean our. I think business really fired yeah yeah and you got some good price increases through which is obviously really help because you know revenues down and there's some moving parts in that but but notwithstanding significant challenges and I get the point you know diesel is a huge cost the boats run on diesel you manage to get those profits out part of it with some price increases that you are able to put it to put through that's quite right I mean at the end of the day we needed to protect the gross profit margin and the only controllable we've still got left is.

15:42It's price and we've got very very strong demand in international markets particularly other Europe people want to eat healthier they want to live longer and they're prepared to pay for for Hake in particular so we've seen seventeen percent price increases versus the same time last year on our products in in Europe and that's across all of Europe. Seen very very strong demand out of the UK and the US and that's particularly driven where. Cod species that they have in northern Europe you know they run a downturn so there's been a supply gap so we've seen that too that your traditional fish and ship shop type offering so very very strong demand on the pelagic side on the other hand we've seen a super al Nino hit you know the southern hemisphere yeah so you sing record prices for fish meal and fish and that's predominantly feed that goes into the market. To the farming of salmon Norwegian salmon that's predominantly our customers unfortunately we couldn't capitalize completely on that because we haven't had as much catches inside Africa on the pelagic fish but generally speaking the markets have been incredibly firm and hence the result because it's dropped down directly to the bottom line yeah absolutely and what is the international mix these days I mean I just well have a half of your of your businesses it not.

16:5764% of our business is euro and Aussie dollar weighted so it's incredibly strong I mean we are a round hedge yeah yeah and and predominantly in Europe Europe is because both our hate business and our pelagic business is is is very much weighted towards Europe and part of this is just you know I mean it's okay I used to be a fisherman although I there's a lot of heavy lifting when I say the fishing part I would stand in the shoreline and try and catch myself. I had some fish and it is just you know you're put your season was going really really strong and then disease puts a and into that and I think that's also the the sardines which I'm not seeing on shows anymore what is the status there what is your expectation how quickly does that resolve itself you know we had the last three years was really tough on sardines and all of a sudden this year rebounded beautifully we had nice sizes good catches we were canning locally and not having to import from Morocco Mexico and other places. But unfortunately you know and again nature strikes and we had all these sardines showing up dead on our coastline which was a shock only to find out that it's a it's a herpes virus which which was seen in Australia in the 90s and then you know now all of a sudden we have to take a precaution approach in terms of you know how much we extract because we don't know the effect of the virus on the animals and my personal view though it's not only the virus you you we seen a lot of environment.

18:26So I think it's a lot of mental changes. I mean in Cape Town July has been my best catching month in terms of eight because we've hardly had any rain. Beautiful weather so you're seeing very different environmental factors which probably stressed the fish out that was already sick so going forward I think it's going to be tough on the pelagic side I think that you know our sold on a brand that's on shelf you know everyone's going to struggle to get stuck I mean that that's the reality going forward on on the can side. The next side catches have been excellent and continues but you know Simon Hake is called 600 meters below the depth right at the bottom so so environmental factors affecting it it's very slow. I think that's at the end of the day it's it's very different that is way far down. Last question you sold a good dispose of ladies minister in the period proceeds to pay down dead you're dead down about a quarter balance sheet looking good I mean lots of difficulties out there but from an operational perspective and a balance sheet perspective looking strong we're in a good place I mean at the end of the day we've sold out both ladiesmith and another business called B.M. Foods we put close to a billion back and we we wanting to repay debt significantly the balance sheet looks much better and allows us the opportunity now to to reward a very patient share all this over the years.

19:46Actually as you point out my math was wrong you pay down a billion of debt from 2.6 to 1.6 believe it there that is a feeling to take his see harvest CEO appreciate the early morning. That said for today we're chatting with Craig baking yesterday he's from capital legacy talking about their state readiness index world is foundational but you stay too so much more than just that will we ask you is your state planning including a world all sorts of things. We've talked about 40% said yes very much so a third said mostly the rest said not at all have you vote have you say LinkedIn. Spotcasters brought to you by stand lip asset management invest in more certainty to navigate volatile market conditions. We live every week their morning the money web website in the app 630 a.m. podcast just after 7. Thanks to my team Eddie no more click the call to you for listening my guests for their time my name is Simon Brown this is money we have not which had again tomorrow motors and cashboard results.

20:52You've been listening to another money web now podcast posted every week day at 7 a.m. on money web dot CEO dot z. Money web now on the money.