Datatec concludes a bolt-on acquisition in Europe (JSE: DTC)

Slow and steady acquisitive growth is the right approach

In a world where executives love doing blockbuster deals and rolling the dice on a grand scale, it’s refreshing to see companies doing bolt-on deals that are so small that they only require a voluntary announcement.

It’s amazing how often you see this approach in a company where the founder still has a large equity stake, like Datatec. There’s a big difference between playing with Other People’s Money vs. your own money, as any banker knows.

Through its subsidiary Westcon-Comstor, Datatec has acquired REAL Security, a cybersecurity distributor in Slovenia. The idea is to get a foothold in the Balkans region, thereby expanding Westcon-Comstor’s European footprint.

As a good example of how sales strategies tend to play out in this space, REAL Security hosts an annual cybersecurity conference in the region. Acting as a thought leader in a particular market is a good indication of the quality of the underlying brand.

The acquisition was effective on 27 January and we won’t get any further details on it, as the deal is too small for there to be a full terms announcement. I see this as a positive thing. After all, a global success story like Bidcorp (JSE: BID) was built in much the same way (small bolt-on deals), albeit in the food service sector.

Mr Price grew sales at the end of 2025 – but not by much (JSE: MRP)

The base period was tough

Despite all the entirely self-inflicted noise around the NKD deal, Mr Price has a strong South African business. In fact, that’s precisely why there is so much frustration around the offshore push! This means that the performance of Mr Price is a decent barometer for the sector as a whole. We’ve already seen what a weak performance looks like, courtesy of Truworths (JSE: TRU). We now get to see what a stronger player was capable of achieving against a very tough base of two-pot withdrawals at the end of 2024.

The answer is: not much. Mr Price’s sales are in the green, but group sales were up just 3.6% for the quarter ended 27 December 2025. The base period was up 10.6%, so the two-year growth stack makes more sense (a two-year compound annual growth rate or CAGR of around 7%). Mr Price’s growth was ahead of the market in this period, so they are winning market share.

Unsurprisingly, Mr Price raises the concern around online betting. This is clearly a worry in the market and one that doesn’t seem to be going away. Overall consumer demand for apparel is weak at the moment, with total unit sales falling 1.5% in an environment where retail selling price inflation was 5.2%.

Mr Price is predominantly a cash retailer (90.9% of total sales), with cash sales up 3.7% vs. credit sales up 2.9% as the group took a cautious approach.

Another interesting element of the Mr Price model is that online sales aren’t growing faster than in-store sales. This is totally different to what we are seeing at players like The Foschini Group (JSE: TFG). Store sales at Mr Price were up 3.6% and online sales increased 3.5%. Trading space also increased by 3.5%.

As you read those numbers, alarm bells should be going off about comparable store sales. After all, the increase in trading space is remarkably similar to the comparable store sales growth. Did they actually grow in their existing space?

Sure enough, comparable store sales for apparel (83.1% of group sales) was up just 0.4%. That’s not enough to offset the inflationary impact of costs at store level.

Moving on to the performance of the brands acquired in recent years, Studio 88 is certainly one of the highlights in this story. It achieved growth of 7.7% during the period vs. a demanding base of 12.3%. Another absolute winner (in Homeware rather than Apparel) is Yuppiechef, up 10.1% this period vs. 26.5% in the base period. I’ll refrain from making bad puns about two-pot savings being spent at Yuppiechef.

The rest of the Homeware segment doesn’t have much to smile about. They actually lost market share, with management noting that they are trying to focus on profitability instead. Comparable store sales were up 1.7% in that segment. This tells us that consumer demand for homeware is stronger than apparel, albeit not by much.

The Telecoms segment, which contributes just 2.9% of group sales, increased sales by 11%. It also achieved better margins. People clearly need phones and airtime for all that online betting!

The sales growth, as light as it was, was only achieved at a lower gross profit margin. Margin fell by 20 basis points for the quarter, although management expects it to be flat for the full year ending March 2026. This will require a strong finish to avoid any stock write-downs, with Mr Price telling a positive story around stock levels.

In the first four weeks of January, sales growth was 4.2% vs. a demanding base of 16.0%. The full Q4 base is 7.6% as sales slowed down a lot at the start of the 2025 calendar year, so that should give them a year-on-year boost as the year comes to a close.

There’s nothing in this announcement to suggest that a bounce-back in apparel is likely this year.

Vukile’s Castellana offloads mature retail properties in Spain (JSE: VKE)

The idea is to reallocate capital to higher growth opportunities

Nostalgia has no place in business. When an asset has reached the point where it no longer meets the risk/reward framework applied by a company, then it’s time to go. This doesn’t mean that the journey was a failure. Quite the contrary – it often means that it was a success!

You see, there are different lenses applied to assets in terms of return requirements. This is especially true in the property game. Funds that actively manage their properties will look for opportunities to increase the value – the classic “fixer-upper” so to speak. Other funds that are just looking to allocate capital across a wide range of properties will look for opportunities that are unlikely to cause headaches. These are “mature” assets.

Vukile Property Fund is in the former bucket, as they are a REIT rather than an institutional investor like a pension fund or similar. This means that when properties have matured, they will look for opportunities to sell them at attractive prices.

This is why Vukile’s Spanish subsidiary, Castellana Properties, will be selling a portfolio of nine retail properties. This has nothing to do with a bearish view on Spain or a change in strategy. It’s merely a reflection of where these properties are in their lifecycle.

Interestingly, Castellana will provide asset and property management services for a period of 5 years and will receive market-standard fees for these services. This tells you a lot about how hands-off the acquirer plans to be – typical of mature assets.

The returns since the properties were acquired in 2017 haven’t exactly been inspiring. Thanks to numerous issues along the way (pandemic / geopolitical), the capital gain over the period has been a total of 13% despite net operating income growing by 26% over that period. It’s a disappointing outcome, but still a positive return despite all the challenges.

The selling price is €279 million at a disposal yield of 7.1% and a discount to the 30 September 2025 valuations of 2.5%. The effective date is 1 April 2026.

Once the deal is done and the money is in the bank, Vukile plans to deploy capital into various opportunities that they already have in the pipeline. They will target higher growth shopping centres that will be earnings accretive to Castellana and Vukile.

Nibbles:

• Director dealings:
  • Nictus (JSE: NCS) announced that directors and their associates bought shares worth just over R2.5 million.

• Independent directors churn all the time on the JSE, so I don’t mention appointments and resignations unless they reflect a change in strategic direction or relate to a change in the chair / lead independent director. At Purple Group (JSE: PPE), Happy Ntshingila has returned as chairperson after completing his pupillage and bar examinations.

• Trustco (JSE: TTO) is suspended from trading and continues to be deep in the “never a dull moment” bucket. A significant shareholder, Riskowitz Value Fund, is trying to get rid of the current board. The latest is that Trustco has now said that the Legal Shield Holdings transaction, which led to Riskowitz being issued 200 million Trustco shares, is invalid. If they can get that legal angle right, then it would rip away voting power from Riskowitz and make everything much harder in terms of the board changes. My money is nowhere near this thing and I plan to keep it that way.