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FEATURE


takes shape SEARDEL’S TURNAROUND

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Seardel FEATURE

South Africa Magazine learns that Seardel continues to make further progress on its turnaround journey. By Ian Armitage

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eardel, the largest clothing and textile manufacturer in South Africa, is in the black for the first time since 2007. It is a great story and might well rank as one of the most impressive turnarounds of the past two decades. “Progress has been made,” says Brett Smart, head of Seardel’s clothing division. “The turnaround follows restructuring that began in 2008, when the business was rescued by Hosken Consolidated Investments (HCI). HCI brought a 71 percent stake in Seardel – secured by underwriting a R300 million rights issue that fended off some very concerned banks.” Seardel has made tough choices. It has closed divisions and retrenched jobs – it infamously axed Intimate Apparel, a division that made lingerie. “The consolidation process is continuing; it will be complete next year,” says Smart. “There is now a clear vision. Seardel never had a clear consolidated clothing strategy. It was previously run as a decentralised concern. We don’t want to be a jack-of-all-trades and master of none.” Despite vast improvements operationally, the clothing division remains a concern, under threat from customs fraud and competitors’ using non-compliant vendors in particular. It makes it difficult to compete, says Smart. The Seardel group reported an 11.7 percent rise in revenue to R2.4 billion in the year to March 2011. Attributable profit was R8.5 million from a previous loss of R203.4 million. The clothing division reported a loss. “One of the biggest factors weighing on the clothing operations is certainly customs fraud – goods either not declared or underdeclared,” says Smart. “Customs fraud is a massive problem as illegal imports set the benchmark price with our customers. “A 45 percent duty on imported garments exists to protect the local garment industry, but this protection is greatly diminished by www.southafricamag.com

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Seardel FEATURE

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the levels of garments that arrive in retail stores without duties having been paid at all or reduced duties through the underdeclaration of values. The result is the loss of many thousands of local jobs. I think more stringent policing and harsher penalties for breaking the rules are what’s needed.” The clothing division reported a R21 million operating loss in the year to March. It was a vast improvement on the previous R26 million loss, however. “We’ve introduced programmes to address as many shortcomings as we can, certainly that are under our control, including improving workflow processes to increase factory efficiency,” adds Smart. “But we need to see meaningful changes to external factors, otherwise the apparel manufacturing operations will always remain under pressure.”

We’ve introduced programmes to address as many shortcomings as we can

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It will deliver huge cost savings, Smart admits, believing it has long been a struggle for the South African clothing industry to produce goods and get those goods into stores at a price that is remotely competitive to the price of imports from China, India, or any other low-cost country. “We are fighting back as best we can and have streamlined operations, investing in the right areas, while making sure the business runs as well as possible. We are vertically integrated with closer ties now to other parts of the business and we also have the ability to manufacture from our own fabrics which allows us to specially design garments to meet the needs of the market. That is a differentiator. “I’ve been with the business 17 years and started with Prestige Lingerie in Durban; I worked in various positions until, 12 years ago, I was appointed a director of Dermar. That was the first company I took on. It just skyrocketed from there. Seardel has clothing companies in Cape Town and KwaZulu-Natal. I took on each in KwaZulu-Natal for an amount of time – Durban Clothing, and SACI, etc. They were all put under the Prestige Apparel umbrella and there has been significant consolidation of Seardel’s clothing companies, enabling


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Seardel FEATURE

the turnaround we have achieved, although there is still a way to go.” Seardel has invested smartly in areas that had been uncompetitive, Smart continues. “As a company moving forward, we will continue to invest and look to design and develop product for specific end uses… as a business I think we have got great opportunities. We believe in doing the right runs, niche markets, working with the right retailers and looking for areas where we can add real value.” Value comes from a high technical capability, vertical integration, the ability to perform quick turnarounds, and the number of different ranges, Smart says – Seardel Apparel has it all. “We are a one-stop shop, a major manufacturer of mens, ladies and childrenswear in South Africa and beyond. Our aim is to produce high quality garments at the right price.” In the past year, Seardel, through Brand ID, has launched Love SA, a range of casual wear, and 46664, is a lifestyle range. 46664 was former president Nelson Mandela’s prison number when he was incarcerated on Robben Island. The financial results speak for themselves, although there is obviously a lot more to do. END 6

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SEARDEL FEATURE