AfroCentric’s earnings are under pressure (JSE: ACT)
Will Sanlam regret this one?
AfroCentric has released numbers for the year ended December 2025. They look bonkers at first blush, with revenue nearly doubling and HEPS coming in more than 3x higher. And yet if you look at the underlying management commentary, they talk about a challenging performance.
It took me a while to see why this is the case, but then I noticed that the comparable period is the six months ended December 2024. It’s therefore little wonder that 12-month numbers look so much bigger than 6-month numbers.
Having solved that mystery, it makes a lot more sense to look at the commentary and see them talking about a tough period. Revenue for the year was significantly lower than in the 12 months to June 2024 (the last 12-month period we have), with operating profit down considerably as well. Even cash generated from operations is lower than what we saw in that period. For me, it’s less about the percentages in this case, as we would be comparing to an old period. The more important point is that the direction of travel has been down.
One of the challenges has been the loss of important contracts. There’s much hope that the new relationship with Sanlam (JSE: SLM) as the controlling shareholder will help them turn the corner, but these things aren’t easy to implement.
AfroCentric notes that Fedhealth and Medshield won’t be amalgamating for actuarial reasons, showing how difficult it is to actually achieve scale in this space. This means that multi-scheme services are the way forward, while looking for ways to tap into the Sanlam ecosystem to find new product opportunities.
It also doesn’t help that Medscheme is fighting with Bonitas over the latter’s approach to finding a new services provider. When you have to go to court to try to retain your customers, you’re running a tough business.
Once you strip out the impairments and all the noise, you’re looking at a company that generated R117 million in headline earnings, or 13.92 cents in HEPS. The share price is just over the R1 mark. The low-single-digit Price/Earnings multiple reflects the complexity here, as well as the underlying risk with client contracts. And when you’re in the sub-R1 billion market cap category, results that are difficult to understand and interpret make things even harder.
At least going forward, the change in year-end is out of the system. This removes some of the compexity.
With Sanlam having acquired its controlling stake at much higher prices than the current AfroCentric share price, one wonders if the feelings of regret are kicking in.
Cashbuild’s margins look much better (JSE: CSB)
This is far more positive than sales growth suggested would be the case
Cashbuild has released results for the six months to 28 December 2025. I wasn’t expecting much, as the revenue updates have been timid. But there’s a positive surprise in these numbers for investors like me, as Cashbuild has managed to extract much better margins in a slow-growth environment.
Revenue increased 3%, with volumes doing almost all of the heavy lifting. With limited selling price inflation, it’s even more surprising that gross profit margin actually improved from 24.3% to 25.0%. This drove a 7% increase in gross profit.
With only a 6% increase in operating expenses (excluding the loss on disposal of the Malawi operation, a number that is excluded from HEPS anyway), the company pulled off an improvement in operating margin. By the time you get to HEPS, you find an increase of 18%.
Not convinced by this? Well, you could always follow the cash. With the dividend up 21%, Cashbuild is sending a far more bullish message than before. The market is listening, with the share price closing 4.5% higher on the day.
The revenue for the first 7 weeks of the new reporting period looks good, up 8% year-on-year. Will the share price keep clawing its way up based on these numbers?
Give me your thoughts in the poll below:
Labat Africa is acquiring a 20% take in a Mozambican AI business (JSE: LAB)
No, you aren’t hallucinating
Mozambique is known for many things. Beautiful beaches, R&R, rubies, civil unrest – but not AI. I have never in my life read anything about the technology sector in that country. There’s a first time for everything!
Labat Africa has announced the acquisition of a 20% interest in Mondau, LDA – a private company in Mozambique that is focused on generative AI and related products across Africa. Their specific expertise is in industrial AI applications.
This is part of Labat’s broader strategy to get closer to the AI-secured dollar cashless transactions market in sub-Saharan Africa. What does that have to do with industrial AI, you ask? I’m also not sure.
It gets even more fascinating when you see the pricing. Labat will acquire a 20% stake for R30 million, a price that is in line with the net asset value of R150 million. This is for a business that delivered pre-tax profit of $5 million (yes, around R80 million) in the 2025 financial year. The tax rate in Mozambique is 32%.
This means they are paying a single-digit Price/Earnings multiple for what is supposedly an AI company. One thing about Labat: it’s never boring.
Libstar goes on the charm offensive (JSE: LBR)
Life-after-cautionary includes a Capital Markets Day this month
Libstar has been on quite the rollercoaster ride. After trading under cautionary based on negotiations with potential acquirers, the company withdrew that cautionary based on their belief that the negotiations were undervaluing Libstar’s business.
We’ve seen this movie before on the local market. The new-defunct Murray & Roberts is surely the worst example, with the board snubbing an offer and the company heading into business rescue just a few years later. To be clear, that isn’t the trajectory that Libstar is on – the Murray & Roberts example is of the extreme variety. But the lesson for shareholders is that boards don’t always have the right view on the fair value of a company.
I’ll give credit to Libstar here: they are going to explain their view to the market. They’ve scheduled a Capital Markets Day for 31 March in Cape Town, with a site visit on 1 April. There’s also a link to join online for the presentations, should you so desire.
The recent performance has certainly been on the up, so it’s going to be interesting to understand the investment case from the board’s perspective.
Libstar’s share price is hanging in there for the time being, up 21% over 12 months and maintaining at least a portion of the gains that were triggered by the initial cautionary announcement. The management team is smart enough to realise that they need to do the work to keep it there.
Lighthouse’s earnings grow by 7.5% (JSE: LTE)
And that’s measured in euros
Lighthouse Properties released results for the year ended December 2025. This property fund is focused on western European cities, so the earnings are in euros.
Lighthouse has been pushing hard into Iberia, although there’s now too much money chasing too few deals in that market. Both Lighthouse and sector peer Vukile Property Fund (JSE: VKE) have flagged that the window for dealmaking is closing in Spain and Portugal. Capital discipline is key in this game, so it’s good to see this kind of commentary.
Shareholders won’t complain about Lighthouse’s 7.5% uplift in both distributable earnings per share and the distribution itself. The goal in property investing is to achieve a decent premium to inflation. Considering that this is a hard currency return, Lighthouse has achieved that goal.
The loan-to-value ratio has moved significantly higher, up from 25% to 35.5%. They’ve been very busy with acquisitions, but they expect the pace to slow down now. Near-term growth will instead be driven by redevelopments of existing properties. I must also note that 35.5% isn’t an unhealthy balance sheet.
The board is forecasting growth of 6.9% in FY26. If they get it right, that’s another decent year of returns for investors.
Quilter is managing to extract growth from the tough UK market (JSE: QLT)
The platform strategy is working
Quilter has released results for the year ended December 2025. With total assets under management and administration up by 18% year-on-year, their strategy to attract assets is working. Sure, market values helped the cause here, but they still achieved record flows – and that’s what management should really be measured on.
Revenue wasn’t quite as exciting unfortunately, up only 5% based mainly on management fee revenue. They managed to keep cost increases to just 4% though, so adjusted profit before tax was up 6%.
Adjusted diluted earnings per share increased 4%, impacted by a higher tax rate for the group. The dividend for the year increased by 7%. Shareholders can also look forward to a share buyback programme of £100 million this year.
Looking deeper, Quilter Advisor productivity (measured by channel sales per advisor) increased by 6%. The IFA channel was the biggest highlight though, with gross flows up by a whopping 40%.
The disappointment was in the high net-worth segment, where gross flows were slightly down. The UK government is doing an incredible job of chasing rich people away to other countries.
Sanlam to invest R3.2 billion in African Rainbow Capital Investments (JSE: SLM)
At least there’s a proper hurdle rate here for performance fees
Sanlam never sits still. I’ve said before that if you’re going to work in an internal corporate finance and strategy team, this is a company that should be at the top of your list. There’s always a deal on the table in Bellville.
The latest example is Sanlam Life acquiring a 25% economic interest in the diversified investments portfolio of the ARC Fund. This excludes the financial services investments in ARC. You basically need a full safari guide to navigate the ARC group structure and where everything sits.
Sanlam and ARC have a deeply entrenched relationship, not least of all because they share Ubuntu-Botho Investments as an empowerment partner. Sanlam Life has identified this as a way to increase their alternative asset exposure through a vehicle that they are familiar with.
For ARC, this brings them another R3.2 billion for investments, as Sanlam Life will be subscribing for new shares.
It’s amazing how the performance fees for this investment only apply if the general partner at ARC beats a hurdle rate of 23% per annum. When the broader ARC structure was listed on the JSE, the hurdle rate was a whole lot lower than that. This is the difference between negotiating with institutional investors vs. bringing something to the broader retail market.
Double-digit dividend growth at Woolworths (JSE: WHL)
But the rest of the numbers aren’t quite as exciting
Woolworths has released results for the 26 weeks to 28 December 2025. The retail market is extremely tough at the moment, but they are doing a decent job of taking the fight to major competitors in South Africa.
Group numbers include Australia, so they are usually not a reflection of how the underlying South African businesses are performing. As a brief summary, group revenue was up 5.4%, adjusted EBITDA increased 3.2% and HEPS was up 9.6%. The interim dividend is a juicy 10.3% higher. It’s worth noting that adjusted diluted HEPS was only 0.7% higher.
I prefer to look at the underlying segments to get a feel for performance. So, let’s go shopping.
At Woolworths South Africa, for example, turnover growth was 6.8%. A feature of these numbers is that both major underlying businesses were strong contributors.
In Woolworths Food, purveyors of the finest baby potato roasting kits (with garlic aioli and crispy onions), turnover was up 7.0% overall and 5.2% on a comparable store basis. This is the only grocery retailer in South Africa that is keeping Shoprite (JSE: SHP) on their toes in the premium segment. Woolworths continues to enjoy premium pricing power, with price movement of 4.6% at a time when Shoprite had almost no inflation at all.
Woolies Dash grew revenue by 23%, with that channel contributing 7.2% to Woolworths Food sales in South Africa. The omnichannel strategy requires more stores in order to be a success, with net trading space up 4.3%. They talk about the dilutionary impact of online sales though, contributing to a 10 basis points decline in gross margin to 24.8%.
Adjusted EBITDA was up by 7% in Woolworths Food, so we can put a tick in the box for this part of the business. And I strongly recommend that you try those potatoes.
Onwards to Fashion, Beauty and Home (FBH) – the part of the business that has been a lot shakier than Food. Things are looking much better now, with turnover up 6.2% overall and 6.4% on a comparable-store basis. Unlike in Woolworths Food, they are reducing their footprint here – net trading space was down by 1.9%. Being right around the corner from your customers is less important in clothing than in food.
Online contributed 6.2% to sales, which is less than in Woolworths Food these days. This just shows you how consumer habits have changed in recent years.
Price movement was 2.8% over the period, but this wasn’t enough to protect gross margin, which fell by 50 basis points to 45.8%.
Despite this, adjusted operating profit was up 1% and adjusted EBITDA increased 4.5%. They aren’t shooting the lights out, but that’s still a decent result in a very tough environment.
The other thing we have to focus on is Country Road Group, where sales were up by 2.3% overall and 2.5% on a comparable-store basis. Net trading space crept 0.2% higher, while the online contribution was unchanged at 27.2%.
Gross profit margin at Country Road Group didn’t fare so well though, down 100 basis points to 57.9%. Expenses were kept flat thanks to restructuring activities, so adjusted operating profit increased by 4.2%. By Aussie retail standards, that’s a very good result!
The Woolworths share price is down 2.5% over 12 months, which sounds horrible without context. But do yourself a favour and compare it to the other local retailers. You’ll quickly see that Woolworths has been one of the most resilient names in the sector, avoiding the absolute bloodbath further down the LSM curve.
Nibbles:
- Director dealings:
- AngloGold Ashanti (JSE: ANG) was a tad sneaky in a director dealings announcement, noting that a sale worth $525k was “in part to fund the tax liability” on a share-based award. Technically, that’s true, but someone skimming the announcement might think that only the taxable portion was sold. In reality, this particular director sold the entire award that vested.
- Having gone through the embarrassing process of significantly restating prior period earnings, South Ocean Holdings (JSE: SOH) has now followed it up with a trading statement that notes an expected drop in HEPS of 69.8%. They are essentially giving you the answer here, rather than a range, with HEPS coming in at 6.81 cents for the year ended December 2025. Let’s hope they are right this time about what the HEPS number should be.
- One of the things you don’t want as a listed company is to get a reputation for using SENS as a PR machine. SENS announcements should be used sparingly for anything that isn’t mandatory under the listings requirements (like results, or director dealings). Bell Equipment (JSE: BEL) hopefully won’t make a habit of releasing announcements like their latest one. They’ve noted a new collaboration agreement to supply CASE Construction Equipment motor graders to CNH for distribution in North America. The announcement is devoid of any financial information, with the only data point being that the first motor graders will be supplied in the second half of 2026. My view is that unless a company is willing to give an indication of financial effects, the announcement probably doesn’t belong on SENS.
- It probably won’t come as a surprise to you that the non-binding advisory vote on SPAR’s (JSE: SPP) remuneration policy was on the embarrassing side. A whopping 69.54% of votes were cast against it. Sadly, this is where “non-binding” becomes important – it’s little more than a form of protest.
- The RMB Holdings (JSE: RMH) AGM also dished up some spicy results, although that’s to be expected when there is so much animosity between shareholders with conflicting views. Certain director appointments were not approved, while the remuneration policy suffered 86.76% of votes cast against it.
