FIFI PETERS: Today CA Sales became the 313th company listed on the Johannesburg Stock Exchange’s main board. It is a company that operates in the fast-moving consumer goods [FMCG]segment and provides a number of services for its clients including warehousing, distribution, marketing and selling. Its clients are actually widespread across the continent in quite a number of countries.
We have Duncan Lewis, the CEO of CA Sales on the Market Update for more. Duncan, I suppose congratulations are in order for your debut on the JSE. How would you describe the first day of trade and the market’s reception of your company?
DUNCAN LEWIS: Good evening, ma’am. Thank you very much. I’ve been behind closed doors so am really not sure what the market did today. Mid-afternoon I got the thumbs-up from a colleague. I’m assuming that we were well received, so I just hope that will continue.
FIFI PETERS: Some of the communication that you sent out before coming to market was the expectation of how the market would value you. We read reports that you were hoping for a valuation of around R2.2 billion in terms of your market valuation. I’m wondering if you were able to achieve that in today’s session – or [perhaps] you don’t know because, as you said, you’ve been behind closed doors.
DUNCAN LEWIS: Yes. I referred to the colleague earlier on and today it certainly ended up something north of R2.2 billion. What the final number is I’m not sure just yet.
FIFI PETERS: All right. You were on the Cape Town Stock Exchange, however, before that. Why the decision to move to the JSE?
DUNCAN LEWIS: We had a dual listing. We were first listed on the Botswana Stock Exchange, which we did in 2017. We had the secondary listing on the Cape Town Stock Exchange. It was always our ambition to list on the Johannesburg Stock Exchange but frankly we were too small. Now we have the scale and the size to list and fortunately that’s come to fruition.
FIFI PETERS: Give us a picture of CA Sales – just in terms of your ownership structure prior to listing, your major marketing investments firm, as well as yourself. Talk to us about how this listing changes the ownership structure right now. [Sound break]
DUNCAN LEWIS: I hope I’ve got the gist of it, because you went silent for about 10 seconds. So my apologies. If it was around the ownership structure, currently we have PSG Alpha, part of the PSG stable, owning about 48% of the shares, and the rest are around institutional investors as well as management.
FIFI PETERS: As you said, you were listed in Botswana before, and you’ve been in business for a long time. You’re still listed in Botswana. But what are your plans now that you are on the JSE’s main board?
DUNCAN LEWIS: Firstly yes, we were incorporated in 2011, but some of our businesses go back four and five decades, some back to the early seventies. But we are primarily a South African business. Our focus for geographical expansion would be toward East Africa. We are in Zambia and our intention is just expanding to other markets in East Africa, but also in our existing markets to expand with additional services and additional channels.
FIFI PETERS: What is the business case that is driving your expansion? You seem quite optimistic about the opportunities that lie ahead in the rest of the continent, and I guess we’re just trying to find out what those are.
DUNCAN LEWIS: Yes. I think that our business model lends itself to Africa and developing markets. If you look at the macro stuff, if you take Africa’s population going from a billion to two-and-a-half billion by 2050, you factor in rapid, rapid urbanisation – and rapid urbanisation is often a catalyst for formal retail. Our business model lends itself to that.
And then, albeit off a low base, we have a growing middle class in the region. Our business is around branded consumer goods, and I think those things bode well for us. Yes, it’s not without its challenges but I think by and large we are well placed.
FIFI PETERS: And how will this expansion be funded?
DUNCAN LEWIS: I think, if you listened, we said we are going to try and be a R20 billion business by 2026 – that is really the dream and it is ambitious. We can certainly fund the growth in the short to medium term internally. We do have further expansion plans – whether it’s other services, other geographies – and if need be we can raise capital on the markets.
FIFI PETERS: And when will you know where the need [is]. What point, what kind of scenario needs to be presented to you for you to know that it is the right time to look to the market and look to your shareholders to raise capital?
DUNCAN LEWIS: We are concerned about the cost of money. We are conservative by nature and by and large our strategy is a client-led expansion strategy – whether it’s new markets or new services. And if an acquisition comes along that we think is complementary to our existing business, that’ll be the time to decide how and where we raise capital if necessary.
FIFI PETERS: Can I ask who some of your clients are? I was looking at your website and it talks about some blue-chip clients, really important people in the FMCG sector. I didn’t really get [all the] names. I was just intrigued as to who some of your customers are.
DUNCAN LEWIS: As you know, we operate in a consumer package, a good space. Our clients specialise in home care, personal care, snacking, treating and food. The clients locally would be the likes of Tiger Brands, for example, Pioneer Foods, Premier Brands. But also we do global businesses, for example Colgate Palmolive, Kimberly Clark, Pfizer, Beiersdorf – who are brand owners of Nivea – we do Reckitt Benckiser, British American Tobacco, Coca-Cola, Diageo, AB InBev. So we are very privileged to represent these brand owners.
FIFI PETERS: Really blue chip. They’re really big names, local and global names that you’ve mentioned.
But Duncan, you mentioned your concerns around the cost of money right now, and you’re talking about interest rates that are going up – and are going up because inflation is really high in most parts of the world. I’d like to understand how you are dealing with the pressures of inflation of costs, particularly being a player that’s responsible for moving goods around the continent where we know that’s not always the easiest thing to do because the roads are not always in the best conditions, and other supporting infrastructure is not necessarily up to scratch.
DUNCAN LEWIS: Obviously we are concerned about inflation – how it impacts shoppers and consumers. But I think what are we doing to mitigate that [is] we focus on, first of all, capability-building and a large part of that capability-building exercise is around the investment in technology. That is around making sure that we are mining efficiencies so that we are reducing the fat in the business, mining the wide spaces. And we have several initiatives in place around resource to prominent……8:20 models around making sure that we are more efficient tomorrow than today. So just a continuous journey.
Our emphasis is around capability-building technology people to make sure that we mine the effectiveness and the efficiencies.
FIFI PETERS: Just lastly, what could your growth mean for jobs in South Africa and perhaps in the other markets in which you operate, just given that we know in most parts of South Africa as well as the rest of the continent it’s quite a sore issue right now?
DUNCAN LEWIS: Absolutely. I think the latest numbers of unemployment in South Africa are north of 45%, which is massively concerning. But we employ over 12 000 people in the eight countries where we operate and it stands to reason if we are able to grow our top line in a sustainable and profitable way naturally we [will be] employing more people. And so I think that our story is a good one as far as future employment is concerned. Our job is to make sure we just do the right things and, if we do the right things, it’ll manifest in the right results and the benefit of that is employing more people in these regions.
FIFI PETERS: All right, Duncan, thanks very much for your time and your patience with us. We are certainly looking forward to tracking your growth and engaging you along that journey. That was Duncan Lewis, the CEO of CA Sales, the latest member on the Johannesburg Stock Exchange main board today.