Allec Hogg spoke to Jannie Mouton – executive chairman, PSG Group (18 April 2011)

Financial results and a look at the company's heavy exposure in Capitec.

ALEC HOGG: It’s Monday April 18 2011 and in this special podcast, we speak with the founder and chairman of the PSG Group, Jannie Mouton. Financial results out today for the year to end February 2011, Jannie and it’s interesting to look back, this is a company that was established in 1995, your sum of the parts valuation is about R8bn. But something that I picked up that was interesting to say, if you took all the underlying companies within the PSG Group, they’ve got a combined market capitalisation of R71bn. At any time did you regret actually selling off shares in these companies that you established or invested in?

JANNIE MOUTON: Alec, we built up investment, for instance, in the JSE, we had reason to sell that. For instance, Capitec, we unbundled to our shareholders and no shareholder is worse off. It’s an ongoing process, we’re an investment holding company and we must always look in the circumstances what’s the best for the shareholder.

ALEC HOGG: So, it is, it’s an investment company, it’s not an operating company and you will then find when certain of your assets are overvalued would you then put them on the block?

JANNIE MOUTON: Alec, I gave you [UNCLEAR1:22] my life, PSG is an investment holding company, not an operational company. Yes, the different companies that we invest in are operating companies but if you’re an investment holding company, you must make the right investment decisions over a lifetime.

ALEC HOGG: It’s very interesting then to, maybe, start unpacking some of them in a moment, as we will but the financial results are highlighted by an improvement of 76% in what you call, “The sum of the parts.” So, if one adds up all the values of the investments that you’ve made that’s an incredible increase. Where did it come from?

JANNIE MOUTON: Mostly Capitec. Capitec had a fantastic run the last year. You could see that over five years, they were the best performing company on total return index in South Africa . Yes, it helped us a fantastic lot but the other companies also did fairly well.

ALEC HOGG: It’s now nearly two thirds of your total asset base in Capitec, is that not a concern that it’s too heavily exposed?

JANNIE MOUTON: We will always have to think about that. It’s a matter of fact; we are glad that it’s two thirds – why – because it has grown, it’s grown fantastically. Something we have started ten, 12 yeas ago, first we had struggled and then we find the right management in the form of Riaan Stassen and his team. They really took it and built up a fantastic company.

ALEC HOGG: So, no concerns that it might be getting to an over-exposed position or even going ex-growth?

JANNIE MOUTON: You would always look at each and every investment, discuss it, think about it, scheme about it but at the current moment, our opinion is it’s a great company, we have followed our rights and there is still growth to come.

ALEC HOGG: That was also a very smart decision to follow your rights. Not that you would not have but just the investment that you made in Capitec in this financial year, by my calculations, you’ve already made a profit of R160m on it.

JANNIE MOUTON: Yes, your calculation is roughly right, yes.

ALEC HOGG: [Laughing] Those are big numbers, Jannie and it’s a big bet still, even though Capitec has run this hard. There are a lot of shareholders in Capitec who might be thinking, is it time to take profits? You said you’re obviously not.

JANNIE MOUTON: To talk about the future plans of Capitec, yes, they are ambitious, it’s a well managed company, there are opportunities and I think Capitec would be a winner in months and, maybe, years to come. But it could happen one day that the pace of growth could be a little bit softer but we will constantly think about…at the current moment we are happy with Capitec.

ALEC HOGG: The other thing that sticks out in the financial results this year, is your increase in your dividend. Now, you’ve got a policy of paying between three quarters and 100% of your free cash flow to shareholders. Last year it was 75%, this year you’re paying out a 100% of free cash flow. What changed that decision?

JANNIE MOUTON: Alec, you are the only man sharp enough to pick it up. Yes, you’re right, we increased the dividend payout ratio. We had a good look at the portfolio and what cash we needed in the next year or two and we are absolutely 100% satisfied that our resources funding is in place, so we can afford to lift it to 100% of free cash flow.

ALEC HOGG: Are you likely to keep it there?

JANNIE MOUTON: It would be fantastic, yes. I’m a shareholder and I’m a big shareholder and I also like the dividends.

ALEC HOGG: [Laughing] And the dividends that come out of this, I see your good friend and fellow shareholder, Markus Jooste was buying a lot of horses at the National Yearling Sale, maybe he knew that there was a big dividend coming.

JANNIE MOUTON: I think it would help him, as well but rather have an interview with him, I don’t want to discuss his personal…He’s big in horses but he sold also on the Yearling Sale, he also sold a number of horses.

ALEC HOGG: Yes, sure, it really was tongue in cheek. One of the things that you and Markus have both done extremely successfully is funded the businesses through perpetual prefs. It was interesting looking in the detail to your account, now you’re sitting on R1bn worth of funding at, fixed, around 8.5%. Jannie, that’s almost unbelievable that you can…and it’s long-term money, up to 2016 or 2020 that you could achieve that.

JANNIE MOUTON: Yes, okay, let’s start, perpetual prefs – we were the first non-banking company in South Africa that issued perpetual prefs. That is a wonderful mechanism to fund you because whenever there’s a crisis or not, it’s there. Right, then we took a decision, we debated should we try to hedge the interest and we did that. We thought South Africa is in a cycle of low interest rates and, maybe, if you take a five or a ten year view, it’s just prudent to fix that or hedge that for the next ten years. Yes, I think that’s the right decision.

ALEC HOGG: But who’s lending the money at those low rates?

JANNIE MOUTON: There’s a big demand amongst people that need income, they can’t actually invest in shares, growth shares, at a 2% dividend yield and things like that. So, they prefer to have a sure yearly income. There is definitely a big, big portion of money available for, I call it the “Old age and the cautious people.”

ALEC HOGG: So, the retirees, as it were, they can invest in these perpetual prefs and get an 8.5% return from your perspective, as the only non-banking company that can take advantage of it, it’s really cheap money.

JANNIE MOUTON: Yes and keep in mind, it’s tax free, as well. If you receive interest, it’s much lower than the 8.5% and you still have to pay tax.

ALEC HOGG: Well, it’s a fantastic vehicle and one that you have used to effect. Another thing that came out to me in these results though, was Zeder, if I were to make an investment of the shares that you own or the investments that you own, to take a tip from you, I’ve go to be looking carefully at Zeder and I’ve got to be looking carefully at Paladin. First of all, Zeder, because it’s about 13% of your sum of the parts, yet it’s contributing already 27% of your headline earnings. So, from that perspective, it looks a little undervalued.

JANNIE MOUTON: Okay, Zeder is an investment company in itself, investing in agri, food, beverages, preferably the unlisted market. Yes, our two big investments were in Kaap Agri and through Kaap Agri, we’re a big shareholder in Pioneer that’s listed. The same happened with KWV, we ended up in a listed share. We have to look at other opportunities the next year or two, interesting, unlisted opportunities in the agri sector, there are many opportunities. My view is, in 20, 30 years to come, food and agri will still be important in South Africa , as in the rest of the world.

ALEC HOGG: You’re not worried about political issues on the land front?

JANNIE MOUTON: There will always be political worries and issues but if you try to change your investment philosophy through worrying about political issues, then you can just as well close the company and distribute the cash. I can’t work, spend my time worrying about political issues.

ALEC HOGG: So, you deal with the facts that are on the table and you bought some more Zeder shares in this past year, R2.40, not as big a profit as Capitec but still R5m to the good already.

JANNIE MOUTON: Yes, we took a decision, whenever one of our underlying investments is trading at a substantial discount to the sum of the parts, then you buy it at a discount.

ALEC HOGG: My apologies, you bought at R1.95, it’s now R2.40. Would you still be buying at R2.40, Zeder shares?

JANNIE MOUTON: Yes, what we will do, we will look at our cash available at PSG Group level and we can buy Zeder, or even Paladin back, if they trade substantially under the sum of the parts valuation.

ALEC HOGG: Well, the Paladin is an interesting one, Jannie. You’ve been investing more in that share, R2.31, you put R20m into it. It’s not much higher at the moment, R2.47. So, it’s pretty much in the same level, where you’ve already been buying the stock. What is your…and you do appear to have made a few changes there because it did have a disappointing year.

JANNIE MOUTON: Yes, there’s no doubt about that, it had a disappointing year, yes. There were three investments, underlying investments, Paladin that was negatively affected by the economy that’s more in the building and construction sectors, Erbacon, GRW, Topfix. But our view is that we’re going to see better results from those investments. So, whenever things in the construction side, what we call cyclical stocks, turn a bit better, it’s there to take advantage.

ALEC HOGG: You’ve also got some unlisted stocks in, or unlisted investments, in Paladin, is that part of the strategy?

JANNIE MOUTON: An interesting one is Curro, we have spoken about that, it’s a long-term investment. Yes, it’s an exciting investment, it’s in private schools, I would say the conservative middle of the market, not the top end very, very, super expensive private schools. I think that in itself is for us a great opportunity for the future.

ALEC HOGG: So, if you had just R100.00 to invest and your options were Capitec, Zeder, Paladin or the underlying investments in Paladin or PSG itself at the current share prices, would I be 100 miles off the mark by saying, you’d probably go with Paladin right now?

JANNIE MOUTON: I would go for PSG.

ALEC HOGG: Why?

JANNIE MOUTON: You have a mixture of excitement, you have a mixture it’s also trading under in some of the parts and you have the benefits of Zeder, you have the benefits of Paladin with cyclical stocks improving and maybe the listing. We’re going to list Curro this year. So, it’s a mixture of opportunities.

ALEC HOGG: Jannie Mouton is the founder and chairman of the PSG Group.

Michael Goldman chats with Greg Garden - Group Brand Executive of Nedbank

Talks Nedbank sports sponsorship.

MICHAEL GOLDMAN: Welcome to another GIBS and Moneyweb Business of Sport podcast. We’re making things happen again today with Greg Garden, group brand executive of Nedbank. Greg we’ve spoken a few times about Nedbank’s sport sponsorship over the last few years and you’ve mentioned in the past, the role that Nedbank sees sports sponsorship as playing a kind of strategic role for the business, and within marketing. Still a strategic role as we head towards the middle of 2011?

GREG GARDEN: Indeed - a lot of interest in the back end of last year as some significant sponsors withdrew from sponsorship generally in sport in particular. That, needless to say, causes good strategic question of what you're doing, why you're doing it, how you're doing it, and what you're getting for it and we’re no different. But what I’m very pleased to be able to say is that our position is absolutely no different and we’re very committed to the properties that we are invested in.

MICHAEL GOLDMAN: You mention the past - a number of around 20% to 25% of your marketing mix - your marketing spend - focused on sponsorships … Given the tough trading conditions and also Nedbank’s recent results. Are you looking at the same kind of number going into 2011?

GREG GARDEN: Yes, it’s 20% more or less. We’ve not historically exceeded that by very much. Probably in the year that we brought on board the sponsorship with the PSL we might have gone marginally over that 20% threshold, but this year we’re sitting just comfortably underneath it and we do think that it is the right percentage in our overall mix. Let me be a bit provocative - personal view but one that I certainly think does have resonance here at Nedbank - is that sponsorships can so easily be the lazy money in a general marketing portfolio or a marketing spend portfolio. There are so many good examples around the world of brands or marketers leveraging sponsorship very effectively for the growth of their brand and for business acquisitions, business purposes, but unfortunately there are many more examples of it just being lazy awareness and experience impact type marketing without a real connection to the hard metrics of the business or an understanding of how that sponsorship money is going to sweat and give a return on that investment.

MICHAEL GOLDMAN: Yes, and when we spoke before you mentioned some of the metrics that are in place to make sure that the money is fully sweated and fully reported I guess especially to the financial people in the business so that they fully understand it.

GREG GARDEN: Yes and I’m pleased to say - and particularly in a bank - in a financial services environment where we have very smart financial people, very focused on the overall return on shareholders’ funds, return on equity, capital deployed and all those kinds of measures. So not surprisingly, marketing would come under even more intense scrutiny than maybe in some other businesses and I’m very pleased with the progress we’ve made with our financial people by being responsible and trying show the accountability for money and the connection of that money to hard business results. So our general measurement approach which we put in place about three years ago has proven so far to be quite robust and we’re committed to it, and stick with it.

MICHAEL GOLDMAN: You talk about the connection. Typically people look at the marketing expenditure of the main banks in South Africa and your bank crossed the R1billion marketing expenditure last year - so it’s a fair amount of money and some people would say well bank marketing is much the same and what can you really achieve in marketing and building a bank’s brand. How do you respond to some of those naysayers within the business or within the community?

GREG GARDEN: Firstly a billion rand is an awful lot of money - it’s huge, but it’s always relative. As a percentage of general sales we’re still sitting in a very comfortable 3% to 4% margin which probably half of what a fast moving consumer goods manufacturer would be spending, and certainly well within global international benchmarks for services brands or financial services brands. So it directionally would appear to be the right level of investment. Obviously it’s a very broad spectrum marketing approach. We are literally targeting pretty much the full population of South Africa, and within that corporates and investment analysts and unbanked people, first time bankers, youth - young children. Therefore reaching your target markets for a start is an expensive and quite broad spectrum business. But then of course there’s the internal ability to use data, to invest in relationship building, to try and secure client loyalty, share of wallet and those kinds of things and when you segment all of that activity out, it’s not surprising that there’s not a lot of huge investment in any particular element. The banks are in the top 20 above-the-line advertisers and I don’t think last year any of us were in the top five.

MICHAEL GOLDMAN: Sure, and I know some of your competitors in the market are trying to understand a little bit about how sports sponsorships might perform as one of those arrows in the marketing mix relative to some of the other ways that you could spend your money. How does Nedbank think about measuring the effectiveness of sport sponsorship relative perhaps to some of the other above-the-line or below-the-line type options that you have in terms of building your brand.

GREG GARDEN: Yes - we’ve settled on a standard three part scorecard - and when I say that one of the parts needs to have a clear and tangible link to probably the most controversial most debated part of sponsorships - but let me come to that at the end. First of all we try to measure the sponsorships brand impact and you’ve got to then have the appropriate tools and measures in place and ensure that the linkage between specific marketing activities, the sponsorship itself and the way that it is activated and leveraged, is linked to your own brand tracking, brand health, brand measurement scorecards, and we’ve put in place quite sophisticated and quite rigorous ways of doing that through our ongoing brand tracking studies, and then very specific sponsorship tracking studies and arising out of that, we try to show the direct correlation between the way in which the sponsorship is reinforcing our brand story, building the overall brand positioning, brand message and is aligning to an understanding of what the brand stands for. I think that there are too many sponsorships, particularly sports sponsorships in South Africa that create great experience - lots of awareness, lots of hype but that the story that the sponsorship is effectively projecting is not aligned or reinforcing the total brand story that is behind it. We’re very focused on trying to ensure that that is the case and if you take the Nedbank Cup by way of example, it’s all about making things happen. It’s about the fact that it’s the only competition that allows amateur clubs, underdogs to compete on the same field as the big guns, and maybe once in a while a Goliath gets slain by a David and the proof is what happened there, make it happen and we’ve certainly been able to show our own Exco and our marketing people very direct correlation - clear salience behind the messaging that is coming out of the Nedbank Cup Competition. Why would Nedbank support that type of soccer competition - what does it say about the type of brand we are - so brand sponsorship impact. The second one very obviously is the general level of media coverage - the awareness, the weight, the impact, the relevance and the salience of coverage that you're getting - relative to going out and buying that media - having total control of the message that you put into it. Here, you don’t have total control but you can manage it in a number of ways. What is the value of the overall media impact - track that through all the normal measures, come up with a scorecard for that. Then finally the whole experience - that would be - the Nedbank Golf Challenge would be a very good example of high quality VIP hospitality engagement, entertainment - a relatively small on-course public presence - I say that relatively - we’ve got 60,000 people over the course… but not big numbers compared to a single soccer match. But high quality, long hours and we literally go to the trouble of surveying the experience, the relevance of the experience, and the appropriateness of the experience for the brand that is bringing that experience to people. Then finally there is this interesting question of - can you actually sell product through a sport sponsorship. Here you're probably talking to a not very representative example - fast moving consume goods - personal goods, high volume repeat purchase goods, soft drinks, beers, ice creams - those sorts of things are a lot easier than a bank or a financial services brand. But having said that, we are not prepared to accept that a sponsorship is not able to at least create the environment for a sale to be effected, even if it is at a later point in time. So our activations are all about putting specific tangible offers in front of consumers - not getting in the way with the experience - you come to watch a football match, not to buy a savings account or a credit card but you should be able to see a linkage between the kind of experience that you’ve had and possibly the kind of experience you then have with the product and know how to go about getting that at a later stage with some kind of an incentive put against it. Over the last couple of seasons we’ve put together a promotional package of products that are branded Keona, the one, the Nedbank Cup that are researched in terms of market needs and the opportunity in those markets at those events, to maybe get some degree of penetration. And we’re learning - we’re learning all the way but I can share with you that the targets that we’ve set for the first three years, were internally regarded as rather challenging and caused quite a bit of nervousness - but each of the three years so far have been exceeded. So we’re learning all the time and we are selling products against sports sponsorship.

MICHAEL GOLDMAN: That’s brilliant. You mentioned earlier about lazy money and I guess you were suggesting that some of that you’ve learned through this process is a little bit of how to do it differently and how to make that sponsorship money to really work for the business. I guess it’s linked to some of the measures you’ve just mentioned, but what would be the two or three things that you would say Nedbank does differently in using the sponsorship to make it less lazy?

GREG GARDEN: It’s a great question and it’s not a formula or a very simple answer to give. This one again might be of interest to people and certainly I’m not going to suggest it’s not controversial, but there’s these rule of thumb statistics or empirics that get banded around how much you should spend on leveraging once you’ve got the rights to the sponsorship and in our experience, they are inflated and lead to a degree of laziness. One of the problems of investment in sport sponsorship recently has been that the sponsorships themselves have tended to out price themselves out of the market so some of the withdrawals are simply people saying this is too expensive. So the start is to negotiate the sponsorship package as comprehensively as possible and ensure that as much of the leverage and the activation is actually build into the sponsorship itself. We’ve successfully leveraged the Nedbank Golf Challenge over a 25 - 30 year period at a ratio of below one-on-one, but that’s because so much of the value is in the package itself. If you compared it with many others, you’d strip that out, call it leverage rather than package and then we’d be back closer to the empirics. Or you can build it in, or bake it in as I like to say. The more it’s already an integrated part of what is there. The second is then to recognise that free media publicity PR hangs around the quality of the event and the media event in it. The more you can do that well and generate media interest in the event, the less you have to spend on conventional advertising or other forms of marketing and leverages - so that helps get those costs down as well. The sports media are, I think, more open than any other media sector to getting behind things that the public are interested in - they’ve got a readership that wants their passion to come to life. So if you understand that and are able to create those connections, create the stories about the youngsters that have been discovered in the Nedbank Cup out of nowhere - like Andile Jali who played his first match for Bafana-Bafana at the World Cup having been discovered in an amateur side during a Nedbank Cup match. There’s a story that reinforces the Nedbank brand story that is of interest to soccer lovers - and Bafana-Bafana and the national story that has got attraction for the media to project it and tell it to their readers. There you find that connection, creating the synergies that give you the multiplier effect, and that leads to a stronger return on investment.

MICHAEL GOLDMAN: I guess one of those interesting stories that we’ve seen recently is Charl Schwartzel and the most amazing performance recently at the US Masters which I guess opens up lots of questions about the Nedbank Golf Challenge later this year. Any little titbits that you can share with us about things we can look forward to in December?

GREG GARDEN: Its early days - we’ve got a workshop coming up this following weekend. The golf calendar is ever more cluttered and the players are in ever greater demand. We’ve been back-to-back with the Tiger Woods Tournament for the last few years, and we are once again back-to-back with it. But this year we’re a lot more confident that many of the players that have stayed in America at the end of the year, will be available to us by virtue of first of all the cycle of tournaments in the East just before ours, which means from a travel point of view, they’ll be heading back via South Africa and could easily stop over. Secondly the Road to Dubai which takes place the week after the Nedbank Golf Challenge so many players may have a view to sojourning in South Africa before going up to Dubai. So it’s very early days - the field will only be announced in August this year but we’re more confident this year than we have been for the last three - that it maybe will have a few more Americans than usual and that the overall quality of the field will be very good.

MICHAEL GOLDMAN: And that adds to huge excitement I guess for the Nedbank brand heading into the end of the year.

GREG GARDEN: Exactly and to your point about Charl Schwartzel - it’s another one of those wonderful things when you take a youngster like him, see him coming through the ranks - and you know that we have one spot in the Nedbank Golf Challenge for the local Order of Merit winner and Charl Schwartzel played his first Nedbank Golf Challenge four years ago at the age of 22, being the South African champion, and it was the biggest tournament he’d ever played in, according to him. Trevor Immelman was exactly the same story before he went on and won the US Masters so the Nedbank Golf Challenge does also have that little element of blooding the local talent to go on to show what they can do on the world stage.

MICHAEL GOLDMAN: Best of luck for the rest of the year…

Alec Hogg talks to David Hathorn - CEO, Mondi (07 April 2011)

ALEC HOGG: The Mondi Group, born as the pulp and paper arm of Anglo American Corporation here in South Africa, today announced the spinning off of its local packaging operation. They are worth about R4bn and the business will be listed separately on the JSE.
I asked the chief executive, David Hathorn, whether this meant Mondi intends selling up in South Africa.
***
DAVID HATHORN: No, absolutely not, just the packaging assets. Our biggest business in South Africa is our big forestry, Richards Bay and Merebank Mill – those remain with us. This is purely the packaging assets, which is a fairly small part of the Mondi group. It is principally a South African integrated corrugating business and, more recently, a very nice developing position in the South African rigid plastics market.

ALEC HOGG: So under 10% of your global turnover but still in itself big enough to be separately listed – nearly R6bn worth of sales a year.

DAVID HATHORN: That’s right, so it is a … business, it’s a nice business, it’s got great market share, it’s got leadership. It’s a market leader in the corrugating game, it’s the market leader in each of its respective flexible packaging product lines. So it is really well positioned and has grown nicely over recent years and I think is well positioned to continue to do very nicely in the future. …
When we formed the South African packaging business, which is known as Mondi Packaging South Africa, in 2005, and we brought Shanduka in as a 40% shareholder at that stage, our stated intention was to allow it to grow beyond its current corrugating position and dilute Mondi over time. Its move into the rigids game was a first step in that direction. That business is now running a lot better, so they’re gaining confidence to want to make the next move in due course. We felt therefore it was time to separate them, strengthen their balance sheet, list them separately as a domestic industrial player in South Africa and let them pursue that broader based packaging strategy.

ALEC HOGG: Was there ever any thought of, perhaps, selling this part of the business off to an operation like Nampak?

DAVID HATHORN: One couldn’t is the simple answer. All the strategics here would have major anti-trust issues – the strategics that are big enough to contemplate buying it. So that’s not an option. Really, I think the only alternative is the listing option.
ALEC HOGG: What is the packaging market like in South Africa? Why I ask that is, is it sufficiently fragmented to give Mondi Packaging an opportunity to grow by acquisition?

DAVID HATHORN: Yes, there are still enough meaningful smaller players around to enable it to grow by acquisition and certainly it will also grow organically. …

ALEC HOGG: David, after this transaction, what percentage of Mondi Group’s assets will be in South Africa relative to other parts of the world?

DAVID HATHORN: 17%, about, will be in South Africa; Russia will be not a dissimilar amount, slightly smaller; Central Eastern Europe will be a lot bigger and then Western Europe is the remaining small part of it. We’ve got a bit elsewhere. But South Africa becomes, roughly, 17% of the total group.

ALEC HOGG: From what level at the moment?

DAVID HATHORN: They’re about 25%, 27% at the moment, 25% at the moment.

ALEC HOGG: So it’s quite a significant decline. Would it then no longer be the largest part of Mondi?

DAVID HATHORN: It would still be the single largest geographic location, if you take Poland as a stand-alone geographic location, etc. So it would still be the single largest but clearly much more evenly spread now between South Africa, Poland, Czechoslovakia and Russia. Those are the big geographic spots that we’re in.

ALEC HOGG: David Hathorn is the chief executive of Mondi.

This interview was broadcast on The SAfm Market Update with Moneyweb (SAfm 104-107fm, weekdays at 18:00 to 18:30)

Monyeweb interview with Sam Leon - CEO Investec Property Fund Ltd (06 April 2011)

ALEC HOGG: On wonders if it's a such a good place to be putting your money into property right now. I'm sure that Sam Leon, who’s the chief executive of Investec Property Fund Ltd would disagree with any questions on that front. But Sam, it's interesting to note from the outside that Old Mutual announced that it's going to be listing a R12bn property portfolio this year, and then today your company, Investec, said you also are going to be listing a property portfolio of R1.7bn. Now, the sceptic in me says the time the big companies take portfolios to the stock market to sell off into the public is the time you should be worried about valuations.

SAM LEON: Alec, I don’t think so. I talk in terms of our particular fund. We are coming to market with a relatively small fund, which is a platform for growth. Our forward yield is at around 9.5%, which is at a discount to the sector, and I think we are comfortable with our underlying portfolio and the solidity of the income stream. And in fact we are finding that the property fundamentals are improving. So I think the key question is: is there value to the investor?

ALEC HOGG: At 9.5% I am sure there aren't going to be too many people quibbling with that. You’ve got 29 properties in this portfolio – where are they, primarily?

SAM LEON: They are really primarily in Gauteng, some in the Western Cape and some in KZN.

ALEC HOGG: Would we recognise some if you told us the names?

SAM LEON: Of the real estates? I think in terms of high-profile properties, if you like, there is the Woolworths head office in Cape Town, that’s part of the portfolio, and the Investec building itself in Investec’s new regional office in Umhlanga Ridge. Those are a couple of the high-profile properties, and some very good-quality industrial properties…

ALEC HOGG: Will you be selling any units to the public…?

SAM LEON: The placing has already been completed and there’s a mix of institutional and private investors, mainly through various security companies.

ALEC HOGG: And it is ungeared? In other words, no borrowing?

SAM LEON: It is totally ungeared at day one.

ALEC HOGG: Dos that mean that you are going to be going out there and borrowing money to expand?

SAM LEON: I think it does give us the capacity to acquire and we’d have to look at the appropriate time. We are not going to grow at all costs; we are not going to be lazy but we are not going to grow at all costs. And I think at the appropriate time it’ll be a mix of equity and borrowing because we intend to limit our gearing to the 10, 30 and 40% as they are relatively conservative on that front.

ALEC HOGG: Sam Leon is the chief executive of Investec Property Fund.

This interview was broadcast on The SAfm Market Update with Moneyweb (SAfm 104-107fm, weekdays at 18:00 to 18:30)

Allec Hogg spoke to Raymond van Niekerk - head of global marketing at Investec (4 April 2011)

ALEC HOGG: If you’ve been also following the sporting front, be it horseracing, be it rugby, you will have noticed that Investec’s name is becoming well, better known around the world. Its head of global marketing, Raymond van Niekerk, joins us now. Raymond, you guys went on the strategy some time ago – I think rugby has been one of your focuses, horseracing as well. But what I found interesting today is that you're also not ignorant of what's happening in the new media space, and particularly the Times of London, on its app on my iPad – I see, lo and behold, there’s Investec as one of the early advertisers.

RAYMOND VAN NIEKERK: Ja, hi Alec. The Times application is quite interesting. I know that you live a very connected life because of the way you do your business – but The Times if very good for us. It's paid-for content. And if you deal with the media that does paid-for content, you are dealing with people who are actually pursuing whatever that content provider is selling, and that tends to be in certain categories more of a match with our target audience. I suppose as a fairly extreme digital user myself, and some of my colleagues, what was very striking is when you go into things like that, you are typically presented with what you could say is flat-art advertising. So non-dynamic stuff that you can’t interact with. We've got a pretty decent online team, and the guys came up with the idea that we should be making the advertising throughout far more interactive so people could, if they were interested, pursue far more of a search around what we do, what we stand for, what they are able to get out of us, where we operate and all sorts of things. So The Times is I think a bit of a ground-breaker in terms of interactive as for financial services, and time will tell whether we've got it right or not. So we’ll see how this one goes.

ALEC HOGG: What does it cost?

RAYMOND VAN NIEKERK: Oomph – look, if you are first to market, in terms of a new technique, quite often the content providers or the media owners will treat you quite favourably because what they want to do is use you as an example so that they can provide similar types of initiatives for other people. So we tend, as first-movers, to get their good pricing. But in the scheme of things, is it expensive? No, it's not expensive. It's actually very, very well priced. And of course what you get is real efficiency, because you can measure who is interacting, what they are looking at, what type of profile of person you are dealing with. And then afterwards you can say well, this thing worked or didn’t work, or we can improve here or things like that. It's a very useful media form.

ALEC HOGG: Fascinating. Raymond, I am sure there are a lot of people who are baffled that Investec – we see you as a South African bank still, although you are now international – that you would be sponsoring Australian and New Zealand rugby teams in the Super 15 against our guys.

RAYMOND VAN NIEKERK: It's a very interesting thing. You’ll see – if they are home rugby matches, for example in the Super Rugby series here in South Africa, you’ll see Investec’s advertising at Newlands and the Shark Tank and all sorts of places like that. You’ll see us present in a South African context. But what we've also found is if you have an international approach to your business, you can do multiple markets with one go. And because we are kind of an exploratory bunch of people, South Africans, and we've got some nice brands like Investec that are doing good business overseas, as a South African we figured if you are watching sport here, a South African brand in a foreign context, there’s a kind of a feel-good factor.
I take you back to personal experience when Lucas Radebe used to play for Leeds United many years ago, and I’d see that and say, “Hang on a second, that’s one of our guys and he’s playing seriously good stuff, he’s playing in the top league elsewhere” – and that affected our logic. And of course there’s simple economics. It's quite often more cost-efficient to do things offshore with the South African audience in mind than it is to do in South Africa with a South African audience in mind. So it's a mixture of motivations in there.

ALEC HOGG: I'm surprise you didn’t mention Steven Pienaar, because when they play in the champions league they carry Investec as well, don’t they?

RAYMOND VAN NIEKERK: And they are playing tonight! So let’s hope that they can get their way past Real Madrid.

ALEC HOGG: Raymond, it's been good talking with you, as always, and congratulations on the ground-breaking work that you’ve been doing at Investec. It's a fascinating South African company with South African roots that is developing, particularly focused on sports. Watch that game tonight, and you’ll see the Investec name from a little South African bank – or so it was some years ago – emblazoned on the Tottenham Hotspur football team. Fascinating stuff, isn't it?

This interview was broadcast on The SAfm Market Update with Moneyweb (SAfm 104-107fm, weekdays at 18:00 to 18:30)