A really tough period for African Rainbow Minerals (JSE: ARI)
But why is the trading statement coming out the day before earnings?
African Rainbow Minerals released a trading statement dealing with the year ended June 2025. It’s been an ugly time for them, with HEPS down by between 45% and 55% vs. the prior year.
The problem is mainly the decrease in the average realised export USD iron ore price, along with increased mechanised development costs at Bokoni.
Full details will be available on 5th September – yes, the day after the trading statement was released. It’s really disappointing when companies release trading statements so close to the release of results. A trading statement is supposed to be an early warning system for moves of over 20%, not a “whoops we forgot” the day before.
Not good enough.
Anglo American is out of Valterra Platinum (JSE: AGL | JSE: VAL)
Such is the power of deep public markets
You’ll often hear about how small-caps (and even some mid-caps) struggle for liquidity in their stock, with thin trade (i.e. low volumes) and wide bid-offer spreads that can be very problematic to solve. At the other end of the spectrum, we find the largest companies on the market and the immensely deep capital markets that they enjoy.
Not there that was ever any doubt, but the results of the accelerated bookbuild involving Anglo American’s stake in Valterra Platinum shows us that Valterra is firmly in the latter bucket. Anglo hired several banks to make sure that the placement was a success and would attract the best pricing possible.
So, speaking of price, just how hard was Anglo American pushed by the investors? The answer is: fairly hard actually. Valterra Platinum closed at R895 on the day and Anglo sold its remaining 19.9% stake at R845 per share. That’s a 5.6% discount to the closing price on the day.
This raised R44.1 billion for Anglo American. To be clear, the deal may involve Valterra shares, but the proceeds from the sale don’t go to Valterra.
Ascendis released its first numbers as an investment holding company (JSE: ASC)
The share price is trading at a relative modest discount to NAV
After a lot of noise around the shareholder register and a potential take-private of Ascendis that didn’t happen in the end, the company has now released results for the year ended June 2025. They have changed their accounting approach to one of investment holding company accounting, which means they value the underlying portfolio of assets rather than produce consolidated accounts with all the individual line items in the income statement and balance sheet.
This severely limits comparability with the prior year’s numbers. So, we can focus instead on the the new line in the sand (tangible net asset value per share of 100 cents) and the management narrative. By the way, the share price is trading at R0.85, so that’s a discount to TNAV of only 15% – that’s small by investment holding company standards.
The Medical Devices business seems to be enjoying growth in demand, but they are struggling to get paid by some public hospitals. Surprise surprise. If there’s one thing government really hates doing, it’s paying on time. In the Consumer Health business, they get paid by their customers, but they don’t have enough customers thanks to macroeconomic pressures.
It’s clearly a grind at the moment, but they are grinding in the right direction overall. Such is life in South Africa.
Dipula taps the market for R500 million (JSE: DIB)
And so the capital raising trend continues
There’s been a clear uptick in the number of property funds raising equity capital. This makes sense, as valuations of these companies have moved higher in recent years (certainly vs. pandemic levels) and it is always better to raise capital from a strong market rather than a weak one.
I don’t believe we are there yet, but eventually we could reach a point where these raises are happening practically weekly in the sector. That’s when we’ve hit danger zone for valuations.
The latest raise is by Dipula for the sum of R500 million, which they will achieve through an accelerated bookbuild process.
The capital will be used for the acquisition of Protea Gardens Mall and other recently announced deals. This type of activity is precisely why property funds are listed, as the markets give them access to substantial capital.
Solid growth at Fortress Real Estate and expectations for it to continue (JSE: FFB)
The sector is enjoying stronger support from investors
As mentioned in the Dipula section above, the property sector is in a much better place this year and companies are raising capital accordingly. This sentiment comes through clearly in the Fortress Real Estate results for the year ended June 2025, where the total dividend per share was up 7.1%. Aside from growth in income from the properties to fund this dividend, Fortress enjoyed a 6.5% like-for-like increase in property valuations.
I’ll say it for the millionth time: there is no world in which I would own a buy-to-let investment with all its headaches instead of listed property shares. I would buy my forever home, but only so I can live in it. Property as an investment is a dish best served on public markets in my opinion.
Fortress has given guidance for the 2026 financial year that suggests more of the same returns to shareholders, with expected growth in distributable earnings per share of between 6.0% and 7.5%. Their balance sheet is in great shape heading into the new year, with a loan-to-value ratio of 39.1%.
One thing to note is that you must always look at earnings growth on a per-share basis, especially in a climate where many property funds are now issuing shares. The narrative will often be around “total earnings growth” rather than “total earnings per share growth” – and the former tends to be much higher than the latter in an environment of capital raising. For example, Fortress notes that the total distribution was up 9.4% for the year, but doing the maths on a per-share basis reveals growth of 7.1%.
Speaking of the dividend, shareholders have the choice to receive the dividend in cash or in the form of NEPI Rockcastle (JSE: NRP) shares, with Fortress still holding a substantial stake in the Central and Eastern European giant.
Pan African Resources worked out well this year in the end (JSE: PAN)
I bought the market panic in February and I’m glad I did
The market can sometimes throw you a Lululemon (IYKYK), while at other times it gives you a gift like the silly market response to Pan African Resources‘ interim earnings back in February. I was looking for a gold position and I jumped in at the time. I’m up 85% on that position, so that’s worked out well!
The thesis was that although Pan African had a disappointing interim period, they were looking to bounce back strongly in the second half. I’ll wait for full details in the earnings, but it looks as though they had a solid finish to the year. A trading statement dealing with the year ended June reflects a jump in revenue of 44.5% and in HEPS of between 37% and 47%.
The revenue growth was thanks to a 6.5% increase in gold sales and a 35.7% increase in the average USD gold price.
Importantly, the group’s legacy gold price hedges fully rolled off the book by the end of June, so they are now enjoying the full benefit of the gold price. That benefit isn’t in these numbers, but will come through in the next interim numbers.
I’m holding. I think it’s hard to justify having zero gold exposure in the current environment.
Strong underlying growth in Sanlam, but not at HEPS level (JSE: SLM)
The return on shareholders’ fund is a huge component of earnings
There’s an interesting shape to Sanlam’s earnings for the six months to June. The core business did well, with the net result from financial services up by 14%. Despite this, HEPS was actually down 2%. I’m not sure why, but Sanlam doesn’t make it obvious that this is HEPS from total operations, rather than continuing operations. You have to really dig to find that HEPS from continuing operations was up 1.3%.
That’s still obviously much lower than the result from financial services, with a few reasons for this including a substantial negative trend in the return on shareholders’ funds (the other major component of earnings for the insurance group).
There’s some very complex stuff that sits inside that move, including the “asset mismatch reserve” that I’m sure gives a few actuaries a daily headache. The point is that the return on shareholders’ funds won’t move in a straight line, as it reflects a huge number of global market factors.
To judge the maintainable performance of Sanlam, it’s helpful to look at the net result from financial services and its underlying drivers. For example, total new business volumes were up across all the major insurance offerings, although value of new business margins did come under pressure.
There were a few detractors from performance in the life insurance business, like changes made to Glacier and the cessation of the Capitec joint venture. Heading into the second half of the year, Sanlam is hoping that strategies like the Assupol integration will help close the gap.
As we saw when Santam (JSE: SNT) released results and certainly at its competitors as well, short-term insurance has been having a great time. This has also been reflected in Sanlam’s Pan-African and Asian short-term insurance businesses.
It’s great to see that net cash client inflows in the investment management business were positive, thanks to Satrix and the multi-management businesses.
Still, we can’t ignore the group trend, which was a significant dip in adjusted return on group equity value per share from 22.5% to 15.4%. Sanlam’s share price fell 3.5% on the day, taking the year-to-date drop to 4%.
More tough numbers at Trellidor, but the balance sheet looks much better (JSE: TRL)
There’s even a dividend!
Trellidor has had a really difficult few years. There are signs of recovery, with the share price up 27% year-to-date. The problem is that it all happened in February, with choppy sideways trading since then.
Life isn’t easy for small caps, especially those with a negative earnings trajectory. For the year ended June 2025, Trellidor suffered a drop in HEPS of 14% to 31.5 cents. The share price closed at R2.05 on Thursday, which means a Price/Earnings multiple of 6.5x – hardly a bargain when earnings are dropping.
What is the market seeing here that is supporting the share price? The answer can be found on the balance sheet, where net debt has been reduced by 38.4%. This drove a 30.3% reduction in finance costs. This was made possible by a 30.1% increase in cash generated from operations.
That’s all good and well, but the company is still suffering a demand problem. Right here in South Africa, revenue fell by 7.8%, with a particularly weak finish to the year. In the UK, due to the timing of a once-off project in the base, revenue was down 14.7%. If you exclude projects, revenue was up 55% on last year in the UK.
In a manufacturing business, when revenue drops, profits come under substantial pressure due to the presence of fixed costs in the manufacturing base. Or, put another way, operating leverage works against you.
Can they get things to head in the right direction? With the decision to sell Taylor and NMC to focus the group and unlock a further R51.9 million, they will be sitting on a balance sheet that should let them sleep peacefully at night – such is the brand promise of Trellidor’s products! But those products themselves are the worry these days, as they need to quickly change the trajectory of the business to avoid getting into trouble once more.
As a show of confidence, a dividend of 12 cents per share has been declared. I understand that they are trying to put on a brave face here about the underlying business, but I think that caution might still be the best approach when it comes to capital allocation. Once the dividend returns, investors expect to see it every year.
Nibbles:
- Director dealings:
- Blu Label (JSE: BLU) – note the new spelling and shortened name – released an update on the restructuring of Cell C. They’ve achieved a critical milestone in the form of the Competition Tribunal granting conditional approval for the acquisition by Blu Label’s subsidiary of a further 4.04% stake in Cell C. This takes the stake from 49.53% to 53.57%, which makes Blue Label the controlling shareholder. Importantly, the conditions that form the basis of the Competition Tribunal approval are acceptable to Blu Label.
- Texton (JSE: TEX) has previously taken the approach of investing excess capital in offshore funds rather than doing share buybacks, even when its stock has traded at a deep discount to net asset value. This has been going on since 2022. The company has made the decision to fully exit the offshore fund, which means R111 million will flow back to them. Adjusting for dividends and last year’s redemptions, the total return over 3 years is just over 30% – or below 10% a year on a compound basis. They refer to this as a “strong overall return profile” – I personally prefer to invest in management teams who don’t aim for government bond returns as “strong” uses of capital.
- Nampak (JSE: NPK) has announced that COO Andrew Hood, who was appointed earlier this year as part of a succession plan to replace Phil Roux as CEO, has resigned from the company for personal family reasons. This has led to the extension of Roux’s term as CEO (the announcement doesn’t specify to what extent), as the company now needs to start again with finding a suitable successor.
- Before you wonder where on earth a new company in your portfolio suddenly popped out from, Capital Appreciation Limited (JSE: CTA) will change its name to Araxi Limited with effect from 6 October. The new share code will be JSE: AXX.
- I’m not sure how much can be read into this from a succession planning perspective, but Bell Equipment (JSE: BEL) announced that Stephen Jones (business development and sales executive) has been appointed as alternative executive director to CEO Ashley Bell. Avishkar Goordeen is therefore no longer the alternate director to the CEO, but will be the alternate to the group finance director instead. The company says that the changes are to align the director positions with their areas of expertise and responsibility.
- Shuka Minerals (JSE: SKA) had to release a rather awkward announcement about the acquisition of Leopard Exploration and Mining and the Kabwe Zinc Mine in Zambia. The company announced on 1 July that the conditions to complete the acquisition had been met, leading to a notice to draw down funds from Gathoni Muchai Investments (GMI), the entity providing the $1.35 million in funding to complete the deal. GMI has now informed the company that the funds have been delayed due to administrative matters and regulatory clearances in Kenya. GMI hopes to solve this (with either the existing approach or a new one) within 10 business days. GMI has stressed that this is purely an admin thing, not a reflection of their capacity to meet their obligations. Separately, the company noted that it is still working on a sale of the 60,000 tonnes of fines that have been stockpiled at the Rukwa operation in Tanzania. So, lots of uncertainty and things going on here, as is pretty much always the case when it comes to mining in Africa.
