Congratulations to Forvis Mazars in South Africa, strong supporters of Ghost Mail, on their appointment as the auditors of SA Corporate Real Estate (JSE: SAC)!
Libstar is doing so much better than before (JSE: LBR)
Can they keep this up?
Libstar has been walking a difficult path. Normalised HEPS was 82.7 cents in 2019 before the pandemic, and 80.4 cents in 2021 as the pandemic started to subside. But then things went wrong, with normalised HEPS bottoming out at 53.4 cents in 2024.
The good news is that 2025 represents a return to growth, with normalised HEPS of 70.6 cents. They are still well off the 2021 numbers, but this is obviously a big improvement.
Return on Invested Capital (ROIC) of 10.9% in 2025 is better than anything we saw from 2022 to 2024, although it’s still below the 12.5% achieved in 2021. Pre-COVID levels were in the mid-teens, so there’s plenty of runway for further improvement.
The management team is backing themselves to do it, having walked away from negotiations with potential acquirers who they felt were undervaluing the company. Libstar will be hosting a capital markets day (CMD) on 1 April 2026 to explain the full opportunity to the market and why they believe that this isn’t the time to sell the company.
Words like “inflection point” feature in the results presentation and will no doubt be a focus at the CMD as well. The numbers support this narrative – revenue up 8.2%, with gross margin improving by 40 basis points to 22.0%. Normalised operating profit margin improved by 20 basis points to 5.9%. This is encouraging momentum.
Thanks to net finance costs dropping by 11.3% in a period where normalised operating profit increased by 11.0%, HEPS jumped by 21.7% on a normalised basis.
To add to the good news, working capital ratios also improved as inventory levels were reduced. The group is targeting further improvement in the net working capital ratio over the medium-term, which suggests that more cash can be unlocked.
Looking at the segmental split, we begin with Ambient Products (51% of group revenue). Revenue was up 7.4%, gross margin improved by 50 basis points and normalised EBITDA grew 3.1%. This means that they struggled with EBITDA margin pressure in this part of the business, so there is clearly room for improvement here.
In Perishable Products (48% of group revenue), revenue grew by 9.2%, gross margin was up 70 basis points and normalised EBITDA displayed healthy growth of 12.5%. This means that EBITDA margin improved slightly.
At the end of the day, it comes down to pricing power. Ambient Products could only achieve a 1.9% uplift in price and mix, with 5.5% coming from volumes. This immediately puts pressure on margins. Conversely, Perishable Products achieved price and mix increases of 9.1%, while volumes were up just 0.1%.
Guidance for the next 12 to 18 months is an EBITDA margin of 8.5% to 9.5%, vs. the current level of 8.7%. The medium-term target is 9.0% to 10.0%, driven by improvement across both segments.
As a final indication of the improved sentiment, dividend cover has been revised from 3x – 4x to a new target of 2x – 3x. Lower dividend cover means that a higher proportion of profits will be paid out as a dividend.
Mr Price gives more details on the NKD plans (JSE: MRP)
Despite a market presentation (or perhaps because of it?), the share price fell by 4%
Mr Price has been taking plenty of heat for the NKD deal. It’s rare to see such unanimous hatred for a transaction, with Mr Price executing a strategy that is straight outta the Lost Decade in South Africa. Times have changed and people aren’t interested in local management teams doing flashy offshore deals.
To try and explain themselves, Mr Price hosted an investor presentation. I’ll highlight a few of the points, but you should check out the entire deck here.
In 2024, NKD managed an EBIT margin of only 4%. The target by 2030 is to increase this to between 8% and 10%. That’s ambitious.
Combined with a 6.5% compound annual growth rate (CAGR) in net sales from 2024 to 2030, this margin uplift would drive a CAGR in EBIT of 15% to 20%. This would be lovely, obviously. It’s also not the first time that a South African retailer has promised the world to investors.
They expect like-for-like growth to be between 3% and 4% per annum. The rest of the growth would be achieved through store openings, particularly in Germany (around 40% of planned openings). NKD can self-fund this growth.
One of the irritations in the market is the funding of the deal, with net debt to EBITDA (excl. IFRS 16) expected to be 1.5x to 1.75x. There are layers of risks here.
A decrease in the share price of 4%, on a day where the All-Share Index closed 0.6% higher, tells you that the market is still unhappy.
My overall worry is that spicy targets tend to drive a higher valuation. Value creation for shareholders is achieved through paying less than a company is actually worth. With private equity as the sellers on the other side of this deal, I’m sure that much effort was put into convincing Mr Price that not only does NKD have a bright future, but that Mr Price should pay for it accordingly. Therein lies the potential problem.
Old Mutual reflects margin pressure in the life insurance industry (JSE: OMU)
But the real focus this year will be on the bank’s launch performance
Old Mutual reported results for the year ended December 2025. They make for interesting reading.
One of the themes in the life insurance space in the past year has been a change in product mix. Sales might be up, but the value of new business is being severely impacted by a shift in preferences around annuity products. Old Mutual is no exception, with Life APE sales up by 3%, yet value of new business is down by a nasty 52%. This puts the value of new business margin below the target range.
In the short-term book, margins went the other way. Net underwriting margin moved up by 60 basis points to 6.8%, a solid outcome when accompanied by a 7% increase in gross written premiums in that business.
Another highlight is improved inflows into local and offshore platforms.
Interestingly, loans and advances decreased by 4% as Old Mutual took steps to increase the quality of the book (including sales of non-performing loans). This improved the net lending margin by 250 basis points to 12.1%!
Results from operations increased by 13%. Thanks to elevated shareholder investment returns, adjusted headline earnings was up by a juicy 24%.
They flag the Malawian kwacha here, noting that a devaluation of that currency could’ve easily resulted in adjusted headline earnings being up by 11% – 16%. In other words: don’t latch onto the 24% growth and think that it reflects a sustainable rate.
Dividend growth is a useful anchor here, coming in at 8% for the year.
All eyes will be on the banking business. They’ve gone with a soft launch, with the expectation being that public marketing campaigns will kick off in Q2. We learnt from Discovery (JSE: DSY) that it takes a long time for a bank to reach profitability. It feels like the Discovery offering is differentiated in the market. But I’m not sure how Old Mutual will offer something that attracts people away from the numerous other options in this hotly-contested space.
To give you an idea of just how costly it is to launch a bank, return on net asset value was 15.2% including the bank, and would’ve been 18.8% excluding the bank. They are taking a significant risk on the success of this initiative.
What are your thoughts on Old Mutual launching a bank?
Primary Health Properties has grown the dividend by 3% (JSE: PHP)
Keep in mind that this is a hard currency return
Primary Health Properties released results for the year ended 31 December 2025. This was the period in which they merged with Assura to become a much larger healthcare REIT.
For the year ended December 2025, net rental income was up by 49% – but that’s clearly due to corporate activity, not sustainable underlying growth metrics. A good indication of growth would be to use adjusted earnings per share, up 4%. But the best lens of all is the cash quality of earnings, evidenced by a 3% increase in the dividend per share.
This is the company’s 30th anniversary of consecutive dividend growth!
The immediate target is to bring debt back down to more typical levels, as it is common for debt ratios to spike in the aftermath of a transaction. The loan-to-value ratio of 57% is considerably higher than the 48% we saw a year ago. The pressure is compounded by an increase in the average cost of debt, from 3.4% to 3.7%.
In positive news, they’ve delivered over 80% of the annualised transaction synergies. I suspect that the remaining 20% is much harder, though. Other positive corporate news includes progress in joint venture negotiations, including the injection of assets (by a partner) into a joint venture. This would help improve group leverage ratios.
SPAR has announced a voluntary severance programme (JSE: SPP)
I doubt they have much choice, really
When a company is busy with a turnaround, decisiveness is required. SPAR has a lot of work to do, particularly in terms of getting the basics right. And one of those basics, as yucky as it always feels, is to have the right cost base.
Inevitably, this means that people are impacted. The principle here is that it is better to prune the tree rather than watch the entire thing die.
The company hasn’t given any indication of the size of the voluntary severance programme (VSP) that they will be implementing. These programmes typically give people the option to accept a package and go away. If enough people take it, that’s usually the end of it. But if it fails to achieve enough traction, it can be a precursor to a much uglier process: retrenchments that aren’t of a voluntary nature.
May this be the start of better times at SPAR!
STADIO just keeps growing (JSE: SDO)
Here’s another 23% growth in HEPS for you to chew on
STADIO is an excellent local growth story. Demand for tertiary education is strong, as evidenced by results for the year ended December 2025.
Semester 1 saw an increase in student numbers of 9%, while Semester 2 was up by 7%. Together with price increases, this was good enough to boost revenue by 14%. Encouragingly, contact learning revenue grew 15%, and distance learning was up 14%, so the growth is across the board.
EBITDA increased by 21%. The group enjoyed an increase in the adjusted EBITDA margin to 30%. These are strong numbers.
This growth carried through to the bottom of the income statement, with HEPS up by 23%. Core HEPS, a slightly different lens on earnings, increased by 22%.
As always, it’s a good idea to see if the cash followed the earnings. Sure enough, the dividend per share increased by 22%. In addition to the dividend, the company repurchased R75.7 million worth of shares.
With 53,303 students in Semester 2, the group believes it is on track to reach the pre-listing ambition of 56,000 students in 2026. The longer-term goal is to reach 80,000 students by 2030.
That goal is helped by regulations that are paving the way for Private Higher Education institutions to call themselves universities, bridging the perceived quality gap between public and private institutions.
You can’t achieve this kind of growth without investment in the footprint, with the group making capital investments of R303 million during the year. Within that number, R205 million was allocated to the Durbanville campus.
During 2026, they expect to invest a further R294 million across the business. The Durbanville campus is expected to be R110 million of that number.
Interestingly, STADIO is now the official higher education partner to the Springboks. When our stars are done moering people on the field, STADIO is ready to help them dish out a similar performance in the boardroom.
Perhaps those student numbers need to be double-checked though – having met a few of the enormous Boks in the flesh, I wouldn’t blame STADIO if some of them counted as two students!
Woolworths acquires in2food from Old Mutual Private Equity (JSE: WHL)
This is a strong example of vertical integration
When I worked in corporate advisory a decade ago, Old Mutual Private Equity bought a minority stake in in2food. I’m not sure what their original intended holding period would’ve been, but I suspect that a decade is right on the edge of how long a private equity fund can hang around for. COVID no doubt threw a spanner in the works in terms of the exit plan!
The underlying business has a much longer track record than the Old Mutual ownership period, with in2food having supplied Woolworths Foods for over 30 years. In fact, Woolworths is the company’s largest customer.
Thus, it makes a lot of sense that a sale to Woolworths is the preferred exit strategy.
From a Woolworths perspective, this is a vertical integration play that gives them control over more than R5 billion in revenue. They will be the proud owners of eight manufacturing facilities of scale. Most importantly, it looks like the revenue is primarily in private label products (i.e. Woolworths Food house brands), so this gives Woolworths an important competitive edge in the market.
The existing food services and export markets will still be supported. After all, Woolworths is effectively paying for that revenue through this transaction and would be foolish to drop it. It’s also a handy source of diversification.
The price? We don’t know for sure. The deal is so small in the Woolworths context that the transaction isn’t categorisable under JSE rules, so the deal value hasn’t been announced.
But we can make an educated guess…
If I look at competing food businesses in the market, I would guess that in2food’s net profit is somewhere around the R200 million mark based on the indicated revenue of R5 billion. This suggests a likely valuation in the R1 billion to R1.6 billion range.
I must immediately point out that private equity deals are concluded on an EV/EBITDA multiple, not a P/E multiple, as there is usually debt involved. The numbers above are literally just a guess, as they could vary considerably based on the underlying debt (and profit margins, of course).
Woolworths has a market cap of R51 billion, so we know for sure that the deal has to be smaller than R2.55 billion (5% of the market cap), or it would be categorisable. This supports my estimated range.
Either way, it seems like a smart deal!
Nibbles:
- Director dealings:
- The CEO of Pan African Resources (JSE: PAN) sold shares worth R3.5 million. He entered into a collar transaction referencing R13.8 million worth of shares, and pledged them as security for a loan of R11.6 million. The collar is a derivative transaction that hedges the value of the shares that have been pledged to the lender.
- RMB Holdings (JSE: RMH) announced that AttBid has acquired more shares in the group. The concert parties (AttBid and Atterbury Property Fund) now have an aggregate holding of 41.24%.
- Labat Africa (JSE: LAB) announced a strategic supply agreement between subsidiary Ahnamu Investments (acquired at the end of February) and Shafi Inc FZCO, headquartered in Dubai. The announcement is filled with exciting language around AI and high-performance computing. Essentially, it gives Ahnamu an expanded footprint in international markets. Ahnamu currently makes a profit of R90 million a year and the board believes that this is a “meaningful” step for the company. But what will really count is the profits actually coming through. Good luck to them!
- Acsion Limited (JSE: ACS) announced that a wholly-owned subsidiary, Hey Joe, has increased a construction contract with a related party by R17.2 million. The related party (KAP – no relation to the listed company of the same name) is owned by the CEO of Acsion and his family. Merchantec has opined that the terms of this related party transaction are fair.
- Argent Industrial (JSE: ART) has been busy with share repurchases. They’ve repurchased nearly R12 million worth of shares between 23 February and 6 March at an average price of R33.44. This represents 0.66% of total shares in issue, so I expect to see far more repurchases coming through.
- Greencoat Renewables (JSE: GRP) is also busy with repurchases. In just one day, they repurchased shares worth €255k (around R4.9 million).
- Just to give some context of the size of the abovementioned repurchases, AB InBev (JSE: ANH) – which is obviously vastly bigger than Argent and Greencoat – repurchased $41 million worth of shares in the space of just one week. That’s over R680 million!
