CET's 'not missing the party'

CET cited the upheaval in global markets, caused mainly by the subprime crisis in the West and the shortage of electricity in South Africa as a reason for this expectation.

But the company still expects the economy to grow and has therefore promised to continue with its acquisitive stance.

It has, however, changed its funding strategy.

Whereas CET has more than doubled the number of shares in issue in the past two years so as to fund its acquisitions, it said it would now use debt for acquisitions.

The company says it is now confident that its underlying assets can generate sufficient cash flow and can therefore accommodate more debt going forward.

So confident is CET of sustainable cash flows that it has declared a maiden dividend of 3 cents/share. "It has taken us a long time to get to a point where we can declare dividends and this is hopefully the start of annual dividends to be declared," says CET executive chairperson Shaun Rai. He says the aim is to declare 10% of cash flows as dividends annually.

"We've issued enough shares already: we'll now do cash," said Rai when asked about share issues at a recent meeting with Fin24.

Accordingly, CET borrowed approximately R375m to fund its acquisition of 23% of Ambit Properties and further shares in gaming investment holding company Grand Parade Investments (GPI) following the out of court settlement reached with GPI.

On the prowl

CET says it's on the prowl for more deals. Those would be mainly in the security industry, where it has already built itself a formidable presence but feels "there are very few large independent black-owned groups with a comprehensive security offering.

"It is for this reason that we are in an acquisition phase and we intend creating a large black-owned security group well positioned to service the growing number of SA companies with a need to procure services from black service providers," says CET.

The group owns a 24.4% interest in the only listed security services company, Command Holdings.

It has also increased its interest in Future Guarding and Alexandra Security to 90%. "We intend making this a focus point for the group and we anticipate that this sector will become a significant contributor to our cash flows over the next two years," says CET.

Does that mean there is a possibility it could merge the unlisted interests into Command?

"That could happen at some point in time, but for now we have to bed down on the recent acquisitions we have made," says Rai. He was referring to the Future Guarding acquisition by Alexander Security.

Regarding future acquisitions, Rai wouldn't give a target of total assets but said the current market conditions make it easier to make acquisitions at good value.

"Its not a question of financial value but looking for good assets and good managements," says Rai. "But we are not going to miss the party."

CET has grown the value of assets four-fold to over R1.2bn in the year to December 2007.

- Fin24