At Brait, Virgin Active’s EBITDA has gotten much closer to “maintainable EBITDA” (JSE: BAT)
And Premier is of course doing very well (JSE: PMR)
Summer bodies are warming up in South Africa and the beach is calling. In months gone by, the same was true in the Northern Hemisphere. With Brait reporting strong growth in revenue across the UK, South Africa, Italy and the APAC territories at Virgin Active, they are happy to assist you with those beach abs in many countries.
Jokes aside, these are encouraging numbers for both the business and the general health of humanity. South Africa led the way with revenue growth of 15% for the six months to September, with APAC up next at 13%. The UK grew by 12% and Italy by 7%. These numbers were good enough for EBITDA to grow to £112 million in the last twelve months.
Now here’s the interesting thing: Brait has been valuing its investment in Virgin Active based on maintainable EBITDA of £120 million and has left this unchanged despite the growth. That’s because EBITDA has now caught up (mostly) to the company’s view on maintainable EBITDA. This is encouraging, but the market still needs to stomach the forward EV/EBITDA multiple of 9.25x that Brait applies to the stock. This is a 15% discount to the peer average, but it still feels a bit spicy unless they can continue with these levels of growth.
As an aside, capex at Virgin Active jumped from £58 million in 2024 to £96 million in 2025. I am very sure that my local gym got just about none of that.
Premier (JSE: PMR) is separately listed these days and doing very well, so there’s no need to go into much detail there. Brait does of course reference Premier’s planned merger with RFG Holdings (JSE: RFG) and the resultant diversification of the product mix. As I’ll continue to point out (and as you’ll read further down), diversification is always good for portfolios and not always good for corporates.
At New Look in the UK, revenue is still hard to find. It fell 2% for the six months, while EBITDA increased by 34% to £21 million. They are assessing “strategic options” for the business.
Based on the latest valuations, Virgin Active is 62% of Brait’s total assets, while Premier is 32.3% and New Look is just 3%. The company’s latest indication is that Virgin Active will be separately listed by 2027, a delay of the previous guidance of late 2026.
The Cell C offer is officially open (JSE: CCD)
Blu Label has also released details on the Black Ownership plan (JSE: BLU)
In a year that has seen a resurgence in the telcos (thanks mostly to improved macroeconomics in Africa), Cell C is finally coming to market. This should lead to a much cleaner balance sheet for Blu Label that will be easier to understand.
The raising is expected to have gross proceeds of up to R6.5 billion, including an allocation of shares worth around R2.4 billion to an empowerment vehicle. They need to do a fair bit of structuring to make sure that they have at least 30% Black Ownership once they are separately listed. This includes the Blu Label subsidiary selling between 5% and 20% of the shares to the B-BBEE investment entity, with the price left on loan account and settled through dividends over time and the sale of shares. We’ve seen this type of structure a zillion times before in South Africa. If you want to dig into the full details of how it works, Blu Label released a separate announcement on it.
As I pointed out recently when Cell C released its intention to float announcement, the group is more than just the capital-light MVNO model that gets all the attention. They also have 7.57 million mobile subscribers, with prepaid customers making up 89% of that base. This is a core part of the business that doesn’t get much attention, as the market tends to focus on Cell C’s majority market share in the MVNO space (13 of the 23 in the country are Cell C clients).
On a pro-forma basis (i.e. with adjustments for the mix of businesses that will be in the standalone listed group), revenue for the year ended May was R13.7 billion and EBITDA was R3.7 billion. Capex intensity at 5.7% (capex divided by revenue) is certainly a leaner model than most telcos out there. But with a capital-light model comes a different set of risks: less control over the core enablers of the business.
Here’s an excerpt from the pre-listing statement (which is 464 pages long!) that sets out perhaps the biggest risk:
The pre-listing statement includes a detailed look at the risks and opportunities of the business. As with all things in life, there are pros and cons to every business model.
It’s great to see another listing on the JSE and I hope that it will be a success!
Italtile off to a tough start this year (JSE: ITE)
Weak demand and margin pressure have continued
At the AGM, Italtile gave an update on trade from July to October. They managed retail growth of just 2% in an environment of constrained consumer spending, although I must also note that we’ve seen some decent numbers from other consumer discretionary businesses. The issue seems to relate more to pricing than volumes, with deflationary pressures in an environment of oversupply in the market. This would explain why an uptick in demand isn’t translating into strong revenue growth.
Full credit to Italtile: they’ve been warning the market about the supply imbalance for as long as I can remember. It’s precisely why I prefer Cashbuild (JSE: CSB) in the sector at the moment, as they don’t have a manufacturing arm.
You see, the real issue is that the manufacturing business is highly dependent on achieving decent throughput (due to the high fixed costs), something that is hard to achieve when there is oversupply. With group systemwide turnover down 1% for the period and overall costs up 1%, the situation looks painful for profitability.
Premier and RFG Holdings release the joint circular for their merger (JSE: PMR | JSE: RFG)
I remain worried about this deal
Corporate mergers can be like romantic relationships: sometimes, two things simply don’t belong together, even if they are each lovely.
The FMCG sector is full of examples of consolidation plays that didn’t work out. The Kraft Heinz merger is widely regarded as Warren Buffett’s worst ever transaction. The playbook was to consolidate operations and cut costs. After all, if the underlying business focuses on food, then does it really matter which food? It turned out that yes, it does matter.
If you consider Premier and RFG, then you have one company with a focus on consumer staples and the other with a focus on consumer discretionary food. Not all food categories are created equal. Put differently: you need bread in your basket more than you need canned peaches.
They also have completely different supply and demand pressures. At Premier, it’s about being as efficient as possible to grind out better margins from products that are in hugely competitive environments. After all, can you think of anything more competitive than bread? At RFG, their numbers are impacted by exogenous factors like global supply of deciduous fruit. Their numbers are almost guaranteed to be more volatile.
Now, the rationale for putting these two companies together is based on increased scale, a more diversified offering and greater category reach for Premier. Sure, all of that may be true on paper, but Tiger Brands (JSE: TBS) tried a similar strategy and we know how that ended. The recent improvement at Tiger Brands has been based on their discipline in figuring out where they have a right to win and then selling everything else.
If the scheme of arrangement is successful and the deal goes ahead, then I hope it works out and they create a better group thanks to the merger. There’s a lot at stake here, particularly at Premier and the role it plays in delivering basic food to consumers.
The deal is structured as a share-for-share transaction based on 1 Premier share for every 7 RFG shares. The reference prices are R22 per RFG share and R154 per Premier share. This represents a premium of 37.5% to the 30-day VWAP of RFG shares (measured up to the date of release of the firm intention announcement).
In my opinion, RFG shareholders can consider themselves lucky here. The share price was washing away and the recent numbers didn’t look great. Conversely, Premier’s numbers have been excellent. In my view, the risk is to the existing Premier shareholders. The market seems to have a different view, as the Premier share price has only gone up and up since the deal was announced. This bucks the usual trend in the market, where the acquirer’s share price usually drops after announcing a deal.
Sanlam’s core business looks good (JSE: SLM)
There’s a big change to the accounting coming soon
Sanlam released an update for the nine months to September 2025. The metrics that are familiar to investors look good, like net results from financial services up 19% on a normalised basis. This has been boosted by 13% growth in normalised group new business volumes.
There are going to be significant changes to the metrics going forwards. From 1 January 2026, they will be focusing on operating profit and adjusted headline earnings. These are going to be more volatile than the current metrics as they include full investment market movements, not just Sanlam-specific shareholder fund adjustments. The accounting for insurance businesses is very complex.
If they apply the framework that is coming soon, then actual adjusted headline earnings dipped 6% and normalised adjusted headline earnings (sigh) increased 4% in this period.
The weirdness is a result of the realities of the business model. Sanlam has an operational business that delivers financial services to clients. They also have a complicated balance sheet that does all kinds of interesting things with the funds in the insurance float and otherwise.
From what I can see, most of the operational metrics look fine at Sanlam. There are of course some areas that require management focus, like a decrease of 10% in normalised value of new business (VNB) in South Africa.
On the corporate side, they are busy with the integration of Assupol and they sound happy with the progress made on it. The final regulatory approvals are being obtained for the South African leg of the Ninety One transaction.
Nibbles:
- Director dealings:
- An associate of the CEO of Grand Parade Investments (JSE: GPI) acquired shares worth R21k to add to his recent tally.
- ASP Isotopes (JSE: ISO) is a step closer to listing its subsidiary Quantum Leap Energy. They have submitted a draft registration statement to the SEC related to the proposed IPO. They haven’t yet determined the number of shares to be offered or the price, but the wheels are in motion.
- Brimstone (JSE: BRT | JSE: BRN) confirmed that the intrinsic NAV per share as at September 2025 is 859.8 cents, or 832.5 cents on a fully diluted basis. The current share price of R4.50 is a 45% discount to the fully diluted intrinsic NAV. This NAV has sadly decreased by 22.9% from December 2024 to September 2025 due mainly to pressure on the Oceana (JSE: OCE) share price, the largest investment at Brimstone.
- Curro (JSE: COH) is a step closer to achieving non-profit status through the Jannie Mouton Stigting transaction. The Botswana Competition and Consumer Authority has given the green light, leaving only the South African regulator to still approve the deal.
- Copper 360 (JSE: CPR) has confirmed that the circular for the capital raise will be released on Monday, 17 November. In the meantime, they’ve confirmed that the independent expert has opined that the debt conversion by related parties is fair to other shareholders. This opinion will of course be included in the circular.
- Numeral (JSE: XII) is taking the necessary step of a share consolidation before they try raise up to R100 million. How close they get remains to be seen, as the raise will be only partially underwritten (around R34.5 million) by Boundryless, an existing shareholder in the company. A 10:1 consolidation will give them a better chance of raising at a sensible pricing range, as the stock currently trades at R0.02 and hence a raise at a discount would have to be at a 50% discount. The only number lower than R0.02 is R0.01! Such is life as a penny stock in every sense of the word.
