Bidvest and Steinhoff tell us why the time is not yet right to buy assets.

Clever Guys. What will P do??????

Why we are holding on to cash
Bidvest and Steinhoff tell us why the time is not yet right to buy assets.

Geoff Candy
03 March 2009 12:36

Prudence, and piles of cash is the name of the game at the moment as even blue chip stocks reassess dividends and where and how they spend money.

This was evident in the results of two of the country's major companies with operations in both South Africa and offshore.

Speaking to the SAFM Market update with Moneyweb Steinhoff CEO, Markus Jooste said, "Liquidity and cash flow I think at the moment for all companies is not negotiable, because none of us knows what this financial market is going to do.

"Our philosophy right now is to build our market share while the competition is weak. We are very fortunate that, in all the territories that we operate in, we are one of the leading players with a strong balance sheet, and we find it easier - I would like to use that word all the time - to outperform our competition.

Bidvest CEO Brian Joffe agrees that cash flow is a non-negotiable, "You have to, in today's world, have the wherewithal because one doesn't know, when the real issue at the end of the day is whether the banks will have the money to support an economic system, a financial system. And that is a risk. So we need to keep our powder dry."

Asked about the group's decision to trim the dividend, Joffe says, if it were just his company he would have paid no dividend at all.

"But I think we have to have a balance between shareholding interest and the company interest. If you had purely to look at the company's interests, it's not a question of whether the company is liquid or can afford it. It's an issue about being prudent in a very uncertain time."

He adds that in the UK at the moment the trend is to pay no dividend in order to preserve sustainability.

So what is next?

According to Jooste, there is no doubt that opportunities are already beginning to present themselves but that prices are going to continue downwards for sometime still.

"We are not in the frame of mind to consider major acquisitions or buying very cheap at the moment. I think as time goes on these things will get cheaper and cheaper, and I would rather concentrate in the next six to 12 months on building a war chest to be around when the real bargains are going to come... I think we have got enough on our plate and management is working very long days."

Joffe agrees, that the time is not yet right. "The uncertainties in relation to the banks - and we've had a reasonable time with South African banks, but that doesn't necessarily mean what we see is what we are going to get over a period of time - we just don't know. Banks and the banking system are such that it is uncertain as to what the real state of things is. I am not trying to be alarmist or anything like that, but from a prudence point of view we operate in other countries as well, and we obviously need to preserve our liquidity."

But he adds, when the opportunities do come, they will be big.

Listen and learn gentlemen .

Don't have to be a genius to give that advice.
The economy is going to get worse before it gets better.
If you own a business stay liquid,only buy stock which is easily saleable, COLLECT YOUR DEBTORS Do not borrow from the banks they have always been thieves but definately in the RSA.
Horse prices will be down at the National sale,Equimark next week will only be a pointer.
Small trainers will vanish and some owners will be cutting back.

Big owners are already cutting back . Small owners are already vanishing. The economy will get better around the latter part of the year and that's when you invest .

Lex read what happened so far to the directors who took futures on their share options mate..not everything goes well all the time.

Oscar but that's the risk we have to take. Theirs no guarantee on anything you do.