Bruce Whitfield:
Shaun Bruyns is our market commentator this evening from RMB Asset Management. And it was a terrifying number and I noticed you pursed your lips when we were talking earlier on about the crime situation in South Africa and Michael Broughton's figures; he said look at the crime situation in South Africa, you can actively quantify about R4.5-billion worth of direct costs of crime and defending companies against crime and that sort of thing. He said you can probably double it to R10-billion a year and it is an extraordinarily large number. Is it a number that you’d ever conceived of?

Shaun Bruyns:
Ten billion is a telephone book number, I never would have thought it was that big and you know just chatting to you in the interim, wouldn't it be nice if that R10-billion went to the fiscus and they could have spent it on health care or something like that instead of wasting it on crime prevention and or slippage that you've got in the system.

Bruce Whitfield:
Absolutely, I mean we could actually be using that R10-billion for constructive purposes rather than have people sit in our lounges keeping us safe at night. I mean yes, that person may be paying their taxes but for goodness sake there are better ways of spending these vast quantities of money and a huge misallocation of resources I think was the way you put it which was quite a nice way of summarising it.

We were talking about the retail sector and results yesterday from JD Group where David Sussman was talking about the R100-million cost to his company and also the results out of Ellerines yesterday. Your overall assessment?

Shaun Bruyns:
I think in the context of where they have come from over the last two or three years those numbers were entirely credible, obviously slightly faster growth from Ellerines for the full inclusion of Reliance for 12 months, the acquisition they made. But all in all pretty satisfactory given where we are in the retail cycle and you know I think the prospect comments were probably slightly less positive I think which after what we have had I think you know one shouldn't be too disappointed with that.

Bruce Whitfield:
You have a look at the sort of growth numbers that they were producing north of 20 percent, very very strong growth numbers. In mid-September you were here and I said to you: Where is the value in the retail sector at the moment and you said the furniture retailers. At the time JD Group was around R64 to R65 a share and then today if you look at it, it is R76. Are these shares approaching fair value in the context of yesterday's results announcements?

Shaun Bruyns:
You know Bruce I think if you look at the whole retail sector, and let’s talk about the credit retailers because I think those are the comparable ones. You know our assessment would be that profitability is quite high across the sector, whether it be furniture retailers or indeed clothing retailers.

So you know one has to be a bit cautious about where earnings are going on a forward bases. I think one thing that maybe the furniture retailers do have in their favour is that as far as we are concerned they have got quite lazy balance sheets, in other words, they have got these massive debtors books which in an ideal world are really banking operations and it should probably be backed by debt to give you better returns.

So there is a prospect we think that there could be some corporate activity and maybe the balance sheets of these businesses could be streamlined or enhanced if you want. Much like Edgars did a couple of years ago with its securitisation, I am not suggesting it is a securitisation but something along those lines.

Bruce Whitfield:
And also the private equity activity in this market has also helped buoy the retailers. We have seen certainly since the Edcon announcement came out we saw a lot of the retailers actually get wind in their sails of the back of that.

Shaun Bruyns:
Yes I think that is a natural reaction, I'm sure that people had a look at the retail sector again and if we needed a catalyst I suppose this is definitely one and you know private equity players really have to sharpen their pencils before they commit the kind of money they do so I think you know the whole sector rerated on the back of that.

Bruce Whitfield:
Because we also see fairly demanding price-earnings multiples at the moment, the retail sector, the market itself is fairly extended at the moment and you have got to have quite deep pockets to be able to come into a market like ours at the moment where you have got the JSE at record levels and take out performing companies.

Shaun Bruyns:
You know it might be a symptom of how much money there is out there chasing assets I guess. You know with money still being quite cheap I think this is what tends to happen. You know would we pay R38 a share for Edgars? The answer is emphatically no. However, you know you have got private equity players who sound like they won't even blink at that price.

Bruce Whitfield:
Shaun Bruyns, thank you very much indeed, from RMB Asset Management.