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Ghost Bites (African Rainbow Minerals | Calgro | Caxton | City Lodge | Clientele | Momentum)

The Finance Ghost
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Ghost Bites (African Rainbow Minerals | Calgro | Caxton | City Lodge | Clientele | Momentum)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

African Rainbow Minerals has released full details on a difficult year (JSE: ARI)

The cycle hasn’t been kind here

When assessing the performance of a mining group, the most important thing is to understand the underlying commodity exposures. This table does a great job of showing not just the different segmental contributions at African Rainbow Minerals, but also the impact of a terrible year for the PGM industry:

With that level of exposure to PGMs, it’s little wonder that HEPS fell by 43% to R25.91 per share. The dividend is also down 43%, but at least there is still a dividend despite the challenges. This is thanks to the health of the balance sheet, with a net cash position of R7.2 billion, admittedly a fair bit down from R9.8 billion 12 months ago.

The PGM sector troubles continue, with the group taking steps like putting the Two Rivers Merensky project into care and maintenance from July 2024. Unsurprisingly, this comes with a substantial impairment of over R1 billion that is excluded from HEPS. Bokoni Mine is a cautious ramp-up strategy, with the board having now approved the construction of a chrome recovery plant.

There’s a lot of corporate activity around copper at the moment, with African Rainbow Minerals also getting in on the action. They took a 15% stake in Surge Copper Corp on 31 May. This is a Canadian group with resources of copper, molybdenum, gold and silver. 15% doesn’t exactly give them much influence there, but it’s a start.

Sudden management changes at Calgro (JSE: CGR)

The share price was surprisingly unresponsive to this

Calgro released a shock announcement that Wikus Lategan and Waldi Joubert will be leaving the group to pursue other interests. Wikus was the CEO and Waldi was very much his right-hand man and ex-CFO, running the Memorial Parks business. Thankfully, current CFO Sayuri Naicker isn’t going anywhere.

The change is with effect from 31 December 2024, so there isn’t a lot of time here for a handover. Ex-CEO Ben Malherbe will return to the CEO role. As one of the co-founders of Calgro, he certainly knows the business. The other change to the board is that Allistair Langson, Calgro M3 Developments Limited Managing Director, will be appointed to the group board as an executive director.

Caxton is on a treadmill at the moment (JSE: CAT)

Publishing and printing isn’t exactly a land of milk and honey at the moment

Caxton and CTP Publishers and Printers, or just Caxton for short, released results for the year ended June. Revenue fell 47% and operating profit after depreciation was down 11.4%, with the company buckling under the pressure of reduced printing throughputs and a decline in media advertising revenue from national retailers.

I still find it amazing that such a big piece of Caxton’s business is based on retailers being willing to print their specials for inclusion in community newspapers. That doesn’t sound sustainable to me. This division saw operating profit after depreciation fall by over 18%. It contributed 37% of group operating profit, down from 40% the year before.

In the packaging business, revenue at least managed to grow. Operating profit can’t say the same thing, dropping roughly 15% year-on-year. I’m not sure what’s worse: the revenue trajectory in the printing business or the margin trajectory in packaging!

Although Caxton did its best in containing costs like salaries, the reality is that this isn’t known as a bloated operation and they can’t just keep shrinking costs forever to try and address the revenue problem. These are band-aid strategies that don’t fix the underlying wound.

The drop in operating profits was largely offset by insurance proceeds received in this period as well as a sharp jump in net finance income thanks to the size of the group’s cash balance (R2.5 billion vs. R1.9 billion at the end of the comparable period).

These offsetting factors helped HEPS increase by 4% despite the rough operating performance. The dividend was flat at 60 cents per share. The lack of growth in the dividend tells us quite a bit about the underlying concerns in the business.

And yet, the market seems to think that something big is about to happen at Caxton, with a massive rally being driven by speculation that a major corporate action could be on the table. The source of that speculation? A SENS announcement on 3rd September that Peregrine Capital now holds 9.6% in the company. For the market, that’s enough to believe that a buyout offer could be coming, with the share price now looking like this:

City Lodge had a tougher second half (JSE: CLH)

The market didn’t like it, with a 5.5% drop on the day

The City Lodge share price is a volatile thing, with sharp moves that can make paupers and kings out of traders:

As you’ll see on the far right there, the correction after the release of annual earnings was significant. For the year ended June, City Lodge managed revenue growth of 13% and HEPS growth of 10% as reported or 37% on an adjusted basis. Those don’t exactly sound like bad numbers, do they?

Average group occupancy moved 200 basis points higher to 58%, so that’s also encouraging news. We can’t even say that the cash quality of earnings was poor, as the dividend increased by 15%.

Other important data points include the lack of debt on the balance sheet (and that’s a big deal), as well as the growth in food and beverage revenue of 22%. That revenue line now contributes 19% of total revenue, which is an impressive part of the investment case. It’s also great to see that gross margin in the food and beverage business moved 200 basis points higher to 60%.

Excluding foreign currency moves, adjusted EBITDAR margin improved from 30.1% to 30.4%. City Lodge increased room rates by 8%, helping to offset some major inflationary pressures in the cost base.

So, what didn’t the market like? The likeliest culprit seems to be the second half performance, which took the shine off a really good first half where occupancy was up around 800 basis points. Between November and June 2024, occupancy fell by 100 basis points, with the lack of consumer and business confidence in the run-up to elections no doubt playing a role.

The 2025 financial year hasn’t gotten off to a good start, with occupancy down by a most unfortunate 500 basis points year-on-year in July. The August drop was 600 basis points. Although the first week of September was thankfully in the green, that’s not really a long enough period to make a call.

Logically, in an environment with improved business confidence and activity, City Lodge should be a beneficiary. The company has been through so much and is now on the strongest footing I’ve seen, with a clean balance sheet and plenty of evidence that the food and beverage strategy is working. The valuation is a challenge though, with the Price/Earnings multiple at around 14.6x based on adjusted HEPS.

I’ve seen arguments in the market that the group should be valued based on the replacement cost of the hotels. I don’t agree with that approach. If the hotels can’t generate sufficient economic returns, they wouldn’t be built as hotels in the first place and won’t change hands at replacement cost. This is why I believe that it should always come back to earnings, with City Lodge’s current valuation looking a bit demanding for now.

IFRS17 contributes to a notable decline in earnings at Clientele (JSE: CLI)

Shareholders will have to be patient for all the details

Clientele has released a trading statement for the year ended June. It’s not good, with HEPS expected to drop by between 33% and 53%. Although they note that the application of IFRS 17 has a substantial impact, they go on to say that earnings on a like-for-like IFRS 17 restated basis will differ by at least 20% – but they don’t specify up or down vs. the comparative period! As HEPS was down by 35% for the interim period, I suspect that earnings are down regardless of how you apply the IFRS 17 lens.

Oddly, because of the way that IFRS 17 works, the group’s net asset value has actually moved higher to between R1.8 billion and R2.4 billion!

Full details will only become available when results are released on 18 September. The share price has had pretty serious volatility, with a 52-week low of R9.50 and a 52-week high of R12.98. At the current level of R11.77, the share price is practically flat over 12 months despite the volatility.

Momentum also has a great financial services story to tell (JSE: MTM)

As we’ve seen elsewhere in the sector, earnings growth looks strong

Momentum Group has released a trading statement for the year ended June. HEPS is up by between 41% and 46%, so there’s nothing wrong with that. Normalised HEPS is up by between 33% and 38%, which is still great. The normalisation adjustments mainly relate to the iSabelo Trust B-BBEE scheme.

Looking at the underlying drivers of this performance, there’s a positive story almost across the board. In both the long-term and short-term insurance operations, things have gone in the right direction. The higher interest rate environment was also good for investment income.

The downer was in the venture capital portfolio, where fair value losses were experienced. I’m really not sure that dabbling in that asset class is the right move for a group like Momentum.

Little Bites:

  • Director dealings:
    • A2 Investment Partners, which has board representation at Nampak (JSE: NPK) in the form of Andre van der Veen, bought another R39.3 million worth of shares. That’s a pretty big show of faith in the progress of that turnaround story.
    • The CEO of RCL Foods (JSE: RCL) bought shares in the company worth R3.34 million. There’s no stronger signal out there than an on-market purchase!
    • Speaking of on-market purchases, Des de Beer bought another R2 million worth of shares in Lighthouse Properties (JSE: LTE).
    • A director of a subsidiary of Capital Appreciation Limited (JSE: CTA) sold vested shares worth R1.11 million. It doesn’t specifically say that this was only the taxable portion, so I assume that it wasn’t.
    • Similarly, directors of Sasol (JSE: SOL) sold share awards worth R1.3 million. The announcement isn’t explicit on whether this is only the taxable portion.
    • A non-executive director of South32 (JSE: S32) bought shares worth roughly R870k.
    • A director of a major subsidiary of RFG Foods (JSE: RFG) sold shares worth R535k. Separately, associates of a different director of the subsidiary sold shares worth around R1.87 million.
    • A director of a major subsidiary of Sappi (JSE: SAP) bought shares worth R91k.
  • There’s yet more activity on the Quantum Foods (JSE: QFH) shareholder register. This time, Capitalworks Private Equity and Crown Chickens have taken an interest of 11.44% in Quantum. For a R1.5 billion group based in the little town of Wellington, there really is a lot going on.
  • Lesaka Technologies (JSE: LSK) has announced leadership changes, with current CFO Naeem Kola moving into the COO role, with particular focus on driving synergies across the fintech businesses. Dan Smith moves from investment director at Value Capital Partners (the largest shareholder in Lesaka) into the CFO role. He has loads of M&A experience. This makes a world of sense for an acquisition-focused strategy in fintech.

Know your worth: Julius Caesar and the Veblen Effect

Dominique Olivier
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Know your worth: Julius Caesar and the Veblen Effect

Most of us associate the Veblen Effect with luxury goods such as diamonds, premium alcohol and collectible watches. But as Julius Caesar proved during ransom negotiations with Cilician pirates in 75 BC, the effect is just as potent when applied to people. 

Here’s a little economic refresher before we dig into the history books: a Veblen good is something that people want more of as its price goes up. Named after Thorstein Veblen, a Norwegian-American economist who introduced the idea of “conspicuous consumption” (i.e. showing off wealth to boost social status), these goods behave differently from most things we buy. The law of demand dictates that when prices rise, demand drops. Veblen goods directly contradict this law. Higher prices make them more desirable because they signal status, which is what’s known as the Veblen Effect. On the flip side, if the price drops, these goods lose their luxury appeal and might still be out of reach for the average buyer.

You’ll typically find Veblen goods in the luxury market – think high-end designer brands, luxury cars, yachts, private jets, expensive jewellery, and top-tier fashion. These aren’t exactly the kinds of items you’d pick up at your average store (remember that article about Hermes and the Birkin bag?), and the back-room, preferred-customers-only approach 100% feeds into the appeal. The more expensive and unattainable Veblen goods are made, the more desirable they become – a concept that flies in the face of the ease of accessibility that is required to sell almost everything else. 

Now that we’re all clear on how to spot a Veblen good, see if some of the elements of the following story don’t sound a little familiar.

Julius who?

In the 1st century BCE, the Mediterranean Sea was plagued by pirates – and not the harmless-mischief-Jack-Sparrow sort either. These pirates were a serious problem that particularly affected the region of Cilicia Trachea, or Rough Cilicia, in southern Anatolia. This area soon became notorious for harbouring (wink wink) seafaring bandits who terrorised the Romans and disrupted trade across the sea.

One of the most famous encounters with these pirates occurred in 75 BCE, when a group of Cilician pirates captured a 25-year-old Roman nobleman en route to study oratory at Rhodes. To them, he was just another young lawyer whose family would no doubt pay a handsome ransom for his return. The name Julius Caesar meant nothing to them – nor would it, as the young Julius was decades away from becoming the Dictator Perpetuo who would be recognised and feared across the vast Roman empire. 

According to the historian Plutarch’s writings, this incident was merely a hiccup for Caesar, but turned out to be a catastrophic mistake for the pirates. From the outset, Caesar plainly refused to act like a captive. When the pirates demanded a ransom of 20 talents for his release, Caesar laughed and told them they had grossly underestimated his worth. He suggested they demand 50 talents instead, which they bemusedly agreed to. Caesar then sent his entourage to gather the money while he remained with the pirates, displaying an audacious level of confidence.

You can imagine how baffled these pirates must have been. Who ever heard of a hostage volunteering to increase his own ransom?

If Plutarch’s writings are to be believed, I can imagine that the pirates were soon ready to give him away for 10 talents, nevermind 20. For almost 40 days of his captivity, Caesar treated the situation as if he were an important guest rather than a prisoner. He ordered the pirates around their own ship and demanded silence when he wanted to sleep. He even sat them down to listen to speeches and poems he composed, brazenly berating them as uncultured when they didn’t respond with satisfactory levels of enthusiasm. He participated in the pirates’ games, but always as if he were the leader and they were his subordinates. Occasionally, he would nonchalantly mention that he would have them all crucified upon his release. The pirates found this amusing, assuming it was just a joke from their overconfident, eccentric captive.

But Caesar wasn’t joking. After 38 days the ransom was paid, and Caesar was released. Despite holding no public or military office, he almost immediately managed to gather a naval force in Miletus and set out to hunt down his captors. So sure were they that he was a nobody who couldn’t pose a threat to them, that he found them still camped at the same island where they had held him captive. He then went on to capture them without much resistance. When the governor of Asia hesitated to punish them, Caesar took matters into his own hands. He personally went to the prison where they were being held and ordered them all to be crucified, fulfilling the promise he had made during his captivity.

The art of self-promotion

Are you starting to see how the story of Caesar and the pirates relates to the Veblen Effect? Instead of panicking or trying to bargain his way out of a sticky situation at a lower price, Caesar did the exact opposite – he argued for the ransom to be raised. By doing so, he essentially turned himself into a Veblen good, not only in the eyes of the pirates, but in the consciousness of the broader Roman senate, through which he would later rise to the very top rank. 

We could argue that Caesar’s higher “price tag”, combined with his haughty attitude, made him seem more prestigious and powerful than he really was at that stage, which ultimately led to the pirates treating him with a mix of respect and bemusement. Just as with Veblen goods, where the allure lies in their exclusivity and high price, Caesar used the same principle to his advantage, turning what could have been a humiliating capture into a demonstration of dominance.

Editor’s note: there seem to be a lot of Caesar types on LinkedIn, which is why this ghost actively avoids that platform.

About the author: Dominique Olivier

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.

Focus on the Future: SARB’s Annual Report on Organisational Resilience

Jatin Kasan, Partner - Audit: Financial Services & Julian Davids, Director – Banking Risk & Regulation in Forvis Mazars in South Africa
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Focus on the Future: SARB’s Annual Report on Organisational Resilience

Within the banking sector, organisational resilience is becoming increasingly critical in South Africa, as highlighted in the SARB’s Annual Report.

The concept of organisational resilience encompasses a bank’s ability to withstand and adapt to internal and external disruptions while maintaining essential functions and safeguarding its reputation and long-term sustainability.

Moreover, the resilience of banks in South Africa is also being tested by regulatory changes, technological advancements, and shifts in consumer expectations towards ethical and transparent banking practices. As such, integrating organisational resilience into risk management frameworks becomes crucial for maintaining stability and competitiveness in the market. Banks that effectively navigate these challenges are better positioned to attract responsible investors, meet regulatory requirements, and build long-term value for shareholders and society.

These key trends align with the recently released report of the South African Reserve Bank (SARB) which highlighted focus areas for the coming year. As in previous years, the report issued by the Prudential Authority, the supervisory division of SARB, offers critical insights into the regulatory landscape.

It is crucial to dissect and understand this particular focus area, not only from the regulator’s perspective but also through the lens of our clients’ experiences.

From our interactions with clients, it is evident that many banks have been “thrown into the deep end” when dealing with sudden changes. These institutions often require substantial support to navigate these turbulent waters. The SARB’s feedback serves as both a warning and a guide, urging banks to adhere and to be ready for regulatory changes, to prioritise resilience and be prepared.

Our viewpoint aligns with this stance. We have observed that larger banks tend to have more sophisticated resilience mechanisms, while small to medium-sized banks often struggle with resource constraints. It is imperative for these smaller institutions to leverage technology and strategic partnerships to build their resilience. The role of foreign banks also cannot be ignored, although more reliance is placed at a group level, as they bring diverse perspectives and practices that can enhance local resilience strategies.

Our Banking team has been actively working with clients to navigate these complexities. We have found that banks that are forward looking proactively adopt organisational resilience practices often see long-term benefits, including improved risk management strategies, adherence to regulatory policies and procedures and enhanced reputation. However, the journey towards resilience is fraught with challenges, including the need for accurate, relevant and quality data, robust risk assessment models, and clear reporting standards.

While larger banks have well defined oversight structures, covering certain aspects of risk within the organisation, the challenge however remains to enhance organisational reliance by adequately mapping the interconnectedness and interdependencies with third party service providers. It is imperative that banks partner with service providers that have the capabilities and resources to assist with gathering quality and relative data used to inform principles, policies and procedures around organisational resilience.

Vulnerability of mutual banks

The Report highlights several critical concerns regarding mutual banks. It notes that many of these institutions fail to address organisational resilience in a comprehensive manner, leaving them vulnerable in various aspects of their operations. A significant issue identified is the inadequate management of third parties and supply chain risks. The resilience capabilities of these external partners are often not sufficiently integrated into their contractual agreements, leading to potential vulnerabilities.

Additionally, the report points out that mutual banks are lacking in their coverage of concentration risk, which could expose them to significant financial instability if not properly managed.

Market insight emphasised the need for continuous support and guidance. They noted that while the SARB’s report provides strategic direction, banks often require more detailed, practical advice to implement these strategies effectively. This underscores the importance of collaboration between regulators, banks, and advisory firms like ourselves.

As we move forward, commitment should be to helping banks interpret and implement the SARB’s recommendations.

The SARB’s 2023/24 report on organisational resilience provides a roadmap for banks to navigate the evolving regulatory landscape. By integrating resilience into their core operations, banks can better manage risks and contribute to a more resilient future. We are not only here to support our clients but we also challenge them every step of the way, helping them turn regulatory challenges into opportunities for growth and improvement.

Connect with Jatin Kasan on LinkedIn

Connect with Julian Davids on LinkedIn

Ghost Bites (Harmony Gold | Metair | Omnia | OUTsurance | Pan African Resources | Sanlam)

The Finance Ghost
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Ghost Bites (Harmony Gold | Metair | Omnia | OUTsurance | Pan African Resources | Sanlam)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Harmony Gold had a great year – but watch that guidance (JSE: HAR)

The next financial year may not be as delightful as this one

Harmony Gold has released results for the year to June 2024. It was a goodie, thanks to a higher gold price and a rough period for the company from which to recover. HEPS increased by 132% to R18.52, which means the share price is currently trading on a Price/Earnings multiple of 8.6x.

This period also saw record operating free cash flow of R12.7 billion, up by 111%. By all accounts, it was a strong year for Harmony and they took advantage of the gold price.

The concern (and perhaps the reason for a 3.5% drop in the share price) is actually around the guidance, with an expectation for FY25 of production of between 1,400,000 ounces and 1,500,000 ounces. They produced 1,561,815 ounces in FY24, so that’s an expected decrease. Then we get to All-In Sustaining Costs (AISC) of between R1,020,000/kg and R1,100,000/kg, which is well above R901,550 for this period. The drop in production would be a factor here in terms of efficiencies.

The group highlights that the FY24 performance benefitted from performance at certain mines that was well ahead of expectations in terms of recovered grades. This is the reason for what seems like conservative guidance. Either way, share prices are forward looking and the market didn’t love this guidance.

Metair’s balance sheet still needs loads of work (JSE: MTA)

I’m not convinced by the share price rally over the past three months

Metair is an incredibly unlucky company. Over the past couple of years, this group really has been through the most in both South Africa and Turkey. The market has jumped in recently, with the share price up by 38% in the past 90 days (but still down roughly 15% for the year). Based on the latest operational update, I’m not sure the GNU-phoria upswing is warranted for Metair.

For example, one of Metair’s key businesses is to supply the South African OEM vehicle production sector. Volumes for the first half of the year fell by 8%, with an expectation for volumes to only normalise in the final quarter of the year. That would be less of a big deal if Metair had a strong balance sheet, but alas the situation on the ground couldn’t be further from that. At the moment, Metair is focusing on bank covenants and a debt restructure plan, so there’s no room for error.

At least in the energy storage vertical, volumes in both Turkey and Romania improved considerably. The South African battery business experienced a dip in volumes, in line with the other businesses in the automotive components vertical.

Yes, there are green shoots, but goodness knows they need them. They need to refinance the South African balance sheet and “ensure a sustainable capital structure” – a process that is rarely painless for shareholders. The debt restructure programme is anticipated to launch in the fourth quarter and progress has already been made with raising bridging loans.

And if that isn’t enough of an overhang for you, Metair is also dealing with the European Commission and concerns around potential anti-trust violations by the Romanian business between 2004 and 2017.

Detailed results are due on 26 September, which will of course include an updated balance sheet and information on what earnings looked like for this period. That could lead to share price volatility, as there really is so much uncertainty here.

Omnia’s capital markets day shows the focus on the mining sector (JSE: OMN)

The contribution to group profits from this sector has increased drastically

A capital markets day is a great opportunity to learn about a listed company, especially when the full presentation has been made available -as is the case at Omnia. You’ll find it here.

It obviously goes into loads of detail about the broader group, with a key takeout being that the investment in the mining segment has been a huge focus area. The contribution to group earnings before interest and taxes (EBIT) from that segment increased from 30% to over 50% between FY18 and FY24.

As interesting as that is, I see we’ve now reached the point where local companies are again feeling brave enough to make reference to the traded multiples of global peers. There are many good reasons, theoretical and otherwise, why South African companies trade at a discount to global peers. And yet, here’s the slide:

It is completely correct by the way that the chart on the right shows that larger companies also trade at larger multiples. A size discount is a real thing, as smaller players are seen as risker and less resilient – and therefore less valuable per unit of profit generated. Omnia cannot make the argument that they should be trading at the same multiple as much larger global companies.

Still, the wind is clearly in the sails of South African management teams once more. That’s a good thing!

Solid double-digit growth at OUTsurance (JSE: OUT)

And the local businesses are where you’ll find the magic

OUTsurance Group is one of those companies that doesn’t seem to get much attention. I don’t think I’ve ever seen it mentioned as a stock pick, yet this is a R76 billion company that has delivered a 16% share price return this year. Not bad at all.

An interesting element of the group is that OUTsurance Group holds 90.5% in OUTsurance Holdings, with regular transactions to flip those minority shareholders up to the group company. It’s probably not a bad thing to have this structure though, as it incentivises those minority shareholders in the right place.

The local performance looks strong, assisted by a favourable claims experience in South Africa and macroeconomic elements like higher interest rates that boosted investment income. OUTsurance SA grew earnings by between 12% and 22%, coming in at nearly R1.9 billion. OUTsurance Life jumped by a lovely 38% to 58%, admittedly off a small base. That business generated R142 million in earnings.

Looking abroad, Youi Group (the Australian business) grew by between 8% and 18%, contributing R1.4 billion in earnings. This is a rare example of success in that market for a South African corporate, with the difference being that OUTsurance grew Youi Group organically from the ground up. This is a vastly better (but slower) approach than buying an existing business in that market and hoping for the best.

OUTsurance is doing it again, this time in Ireland. They are incurring startup losses at the moment, with a loss of R56 million for the period. A successful group like OUTsurance can easily incubate initiatives like these. Again, I far prefer seeing startup losses vs. large, risky transactions.

At overall group level, normalised earnings per share grew by between 15% and 25%. HEPS was up between 14% and 24%, so no concerns there in terms of the extent of normalisation adjustments. Detailed results are due on 17 September.

Pan African Resources has enjoyed the gold price (JSE: PAN)

This mining group has taken advantage of better commodity prices

If there’s one thing we’ve certainly learnt this year, it’s that gold miners don’t always do well when the gold price is up. Sadly, they inevitably all do badly when the price is down. This return profile is why some investors prefer buying the yellow stuff itself vs. the underlying miners.

Thankfully, with a year-to-date share price performance of around 68%, Pan African Resources sits on the right side of that analysis. HEPS will be up by between 27% and 37%, measured in dollars as the group’s presentation currency.

This was driven by a 16.8% increase in revenue, with volumes of gold sold up by 4.9% and the gold price up by 11.3%.

Sanlam signs off on an excellent interim period (JSE: SLM)

HEPS growth of 40% will do nicely

Sanlam has released results for the six months to June. The numbers look really strong, with the net result from financial services (the key measure) up by 14%. This is the best way to gauge performance at Sanlam, as it talks to the underlying businesses like insurance, investment management and structuring. There are a lot of encouraging signs in the numbers, like impressive new business volumes in life insurance and a significant jump in net client cash flows.

The next important measure on the income statement is net operational earnings, with the major difference being the inclusion of investment returns on shareholder capital. This is largely outside of the control of management, as this is where the macro factors like interest rates and equity markets start to affect the returns for financial services groups. The growth rate of 8% in net operational earnings reflects the lower (but still positive) investment returns this year vs. last year.

There are a lot of other complexities in the numbers, including the elements that are captured between net operational earnings and headline earnings. Thanks to higher underlying earnings and fewer shares in issue, HEPS increased by 40%.

Initially, the next bit of disclosure caught me out until I was kindly corrected on X, which is by far the best finance audience you’ll find online. Sanlam disclosed that the return on group equity value per share came in at 9.3%, or 10.7% on an adjusted basis. Their hurdle rate is disclosed as 7.5%, which seemed oddly low to me. I therefore expected to see the current share price of R85.44 representing a discount to the gross equity value per share of R73.41, but instead it trades at a premium. That’s when I should’ve clicked that the return hasn’t been annualised and neither has the hurdle rate, which is highly unusual.

If we just double them for simplicity, the hurdle rate is 15% (which makes far more sense) and Sanlam is achieving a return on group equity value per share that beats most of the banking groups. That’s a lot more believable.

Still, I’m always nervous of buying a financial services group at a premium to equity value. Sanlam is a great business for sure, but the market already knows that.

Little Bites:

  • Director dealings:
    • A director of a subsidiary of KAP (JSE: KAP) – PG Bison, for what it’s worth – sold shares worth R708k.
  • Something seems to be on the boil at Transaction Capital (JSE: TCP), with a cautionary announcement noting that the group has entered into a “series of negotiations” – with no further details given at this time. It’s surely more likely to be a disposal than an acquisition, but time will tell.
  • Metrofile (JSE: MFL) announced that Pfungwa Serima, the group CEO, will be stepping down with effect from 30 September 2024. He has been in the role since February 2016. Thabo Seopa, currently an independent non-executive director, will take over in the CEO role. It’s extremely unusual to see a non-executive taking the top job. Seopa does have loads of relevant experience though, so hopefully he will inject some more life into the digitalisation and evolution of the business.
  • Gemfields (JSE: GML) usually makes quite a song and dance of auction results, but the latest auction seems to have been a less important one as it focused on by-products of the mining process in the ruby business. Auction revenue came in at $2.3 million vs. $1.5 million for the comparable auction in the prior year. All the carets were sold, consisting of sapphire, corundum and a small amount of ruby.
  • Trustco (JSE: TTO) has issued shares to a public shareholder at 36 cents per share. The total raised was nearly R1.8 million, so it’s a modest issuance. The current share price is 40 cents.

Who’s doing what this week in the South African M&A space?

Marylou Greig
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Who’s doing what this week in the South African M&A space?

Exchange-Listed Companies

In May 2022 Sanlam and Allianz announced a joint venture (SanlamAllianz) to house the merger of their African operations – Sanlam’s South African and Namibian subsidiaries were excluded. Sanlam and Allianz agreed on an initial shareholding split of 60:40, subject to post-closing adjustments and the inclusion of the Namibian operations. Sanlam has now integrated its Namibian business into SanlamAllianz, as reported in its interim results released this week, at an initial valuation of R6,2 billion. To maintain the split following the incorporation of the Namibian operations, for which it will receive a cash consideration of R2,5 billion, Sanlam will subscribe for additional shares in the joint venture. Allianz retains the option to raise its stake in SanlamAllianz to 49% within six months of the completion of the Namibian transaction.

In another corporate action Sanlam subsidiary Sanlam Life will acquire a 25% interest in African Rainbow Capital Financial Services (ARC FSH) for a cash consideration of R2,41 billion. The deal with ARC FSH, the investment holding company for all the financial services investments of the Ubuntu-Botho Investments Group and Sanlam’s strategic empowerment partner, will see Sanlam Life dispose of its 25% interest in ARC Financial Services Investments in exchange for the issue by ARC FSH of shares to the value of R1,49 billion. Sanlam will subscribe for further ARC FSH shares valued at R92 million in cash making up the 25% stake. Sanlam will pay African Rainbow Capital an outperformance fee based on the extent to which the value of ARC FSH’s investment in Tyme Investments Pte (Asia), as at 30 June 2028, exceeds an annual hurdle rate of 14.64%. This is capped at R70 million.

Pepkor has entered into an agreement with Shoprite to acquire Shoprite’s furniture business operating more than 400 stores in South Africa, Botswana, Lesotho, Namibia, Eswatini and Zambia. The stores will be combined with Pepkor Lifestyle (previously JD Group) which operates 900 stores in the same countries (except Zambia). The proposed transaction includes the Shoprite Furniture credit loan book and related insurance cell captive agreements as well as the OK Furniture and House & Home retail brands. The deal will enable key synergies and efficiencies to be unlocked within the supply chain, logistics and financial services operations. The purchase consideration which will be determined at the close date of the transaction represents c. 4% (c.R3 billion) of Pepkor’s market capitalisation and will be settled in cash.

Earlier in March this year, Takealot, Naspers’ e-commerce business in South Africa, announced it was looking to offload its fashion retailer Superbalist amid growing concerns of increased competition from Shein and Temu. This week Takealot sold the business to a consortium of retail and private equity investors led by Blank Canvas Capital for an undisclosed sum. The deal will support Suberbalist’s ongoing growth while allowing the group to focus efforts on expanding Takealot and Mr D. Takealot will however, continue to provide warehousing and logistics services to Superbalist through a multi-year service agreement.

Burstone has entered a strategic partnership in Europe with Blackstone, an American alternative investment management company which will see a scaling of the group’s international fund and investment management strategy. Blackstone will acquire, at a 3.1% discount to gross asset value (11.7% discount to NAV), an 80% stake in Burstone’s pan-European Logistics platform for a €1,02 billion (R20 billion) purchase consideration. Burstone will reduce its stake by 63% (valued at €644m/R12,69 billion), retaining a 20% stake and will continue to manage the portfolio. The balance of 17% will be acquired from unrelated parties. Together the groups will expand the portfolio, targeting industrial and logistics properties across Europe. In addition, Burstone’s Australian Irongate joint venture has announced a new industrial joint venture in Queensland with a global alternative asset management firm (the name of which was not disclosed) backed by an initial A$200 million (R2,4 billion) equity commitment. Burstone is also currently negotiating to acquire a 25% co-investment stake in a €170 million (R3,4 billion) German light industrial platform. Post the successful implementation of these transactions, Burstone’s assets under management are expected to increase 32% and its loan-to-value ratio decrease 12.5% to 33.5%. Burstone will also increase its dividend payout ratio from 75% to between 85% and 90%.

The SPAR will exit the loss-making Polish business, the assets of which include 200 retail stores, three distribution centres and one production facility. The exit will be at great expense to the company, which will recapitalise operations at a cost of R2,7billion (c.12% of Spar’s current market capitalisation), the majority of which will be for the settling of funding debt. The buyer, Specjal, a Polish retailer is, according to the company statement, better placed to turn the business around and will pay Spar R185 million for the assets.

Nampak has disposed of the businesses of manufacturing, selling and supplying of plastic drums and of HDPE and PET bottles and jars. The disposal of the Drums Business and Liquid Business is in line with the implementation of Nampak’s asset disposal plan announced in August 2023. Financial details of the transactions were not disclosed.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Weekly corporate finance activity by SA exchange-listed companies

Marylou Greig
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Weekly corporate finance activity by SA exchange-listed companies

Trustco has issued 4,936,193 shares to an unnamed public shareholder at 36 cents per share – representing the 30-day VWAP of 6 August 2024. The shares, valued at R1,78 million, were issued under the general authority granted to the company by shareholders at the 2023 Annual General Meeting. Following the listing of the new shares Trustco has 992,174,774 shares in issue.

The week was all about the repurchase of shares:

During the period January to end-June 2024, Shoprite has repurchased 215,172 shares at an average price of R229.23 per share for an aggregate R49,5 million. Since the inception of the Group’s share buy-back programme in 2021, a total of 8,6 million shares have been repurchased to the value of R1,6 billion.

In line with its share buyback programme announced in March, British American Tobacco this week repurchased a further 433,413 shares at an average price of £28.48 per share for an aggregate £12,34 million.

In terms of its US$5 million general share repurchase programme announced in March 2024, Tharisa has repurchased a further 10,000 ordinary shares on the JSE at an average price of R19.41 per share and 136,570 ordinary shares on the LSE at an average price of 80.78 pence. The shares were repurchased during the period 26 – 30 August 2024.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 26 – 30 August 2024, a further 2,246,844 Prosus shares were repurchased for an aggregate €74,56 million and a further 188,720 Naspers shares for a total consideration of R687,18 million.

Two companies issued profit warnings this week: Truworths International and Sibanye Stillwater.

During the week, five companies issued cautionary notices: Finbond, Burstone, The Spar, Conduit Capital and Transaction Capital.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

En Commandite Partnerships: A vehicle worth considering?

James Moody and Mikayla Barker
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En Commandite Partnerships: A vehicle worth considering?

Structure Overview

South Africa is often referred to as the business gateway to the African continent due to its strategic location, advanced infrastructure, diverse economy, regulatory environment and skilled workforce. Parties looking to set up an investment structure in South Africa to tap into this market generally have a choice between: (i) incorporating a limited liability private company; or (ii) setting up a partnership, with the latter rising in prominence over the past decade.

The two main categories of partnerships are general (en nom collectif) and extraordinary partnerships. Extraordinary partnerships can further be divided into anonymous and en commandite partnerships (ECPs), with both sub-categories possessing unique characteristics, and catering to different business needs and strategic goals. This article will focus on the role ECPs can play in unlocking capital in South Africa for deployment into Africa.

En Commandite Partnerships

ECPs are carried on by two or more partners, comprising (i) a general or managing partner (GP) which is the named partner, responsible for the management of the partnership; and (ii) one or more limited partners (also known as commanditarian or en commandite partners), whose name(s) is/are not disclosed (LPs). LPs are, generally, silent partners who contribute a fixed sum of money to the partnership, on condition that they receive a share of the profit (to the extent that there is a profit); but in the event of loss, they are liable to their co-partners only to the extent of the fixed amount of their agreed capital contribution.

ECPs are widely used in South Africa, due to their unique ability to combine the expertise and management skill of GPs with the capital and limited liability of LPs. Entrepreneurs can utilise ECPs to attract passive investors looking to generate returns without being actively involved in the management of the business, and who wish to remain anonymous. In return for their investment, the passive investors can leverage off the expertise of the general or managing partner to help generate economic
returns.

Considerations before creating an ECP

While offering numerous benefits, ECPs also pose some potential drawbacks. Understanding these differentiators is crucial for investors when deciding on the appropriate structure to pursue. The table below highlights some of the benefits and potential drawbacks associated with ECPs.

Typical example of an ECP structure used for an investment fund

Each of the individual parties outlined in the diagram below play an integral part in the successful implementation of an ECP structure for a fund:

1.Fund set up as a limited liability partnership (ECP), but can also be set up as a trust.
2.GP Co sets up the fund (with GP Co having potential empowerment credentials if required to benefit using flow-through principle).
3.Manco appointed by the GP Co as the investment adviser to the Fund. LP appoints an investment committee (IC) to approve investment decisions.
4.Investors are LPs to the Fund. Investors contribute capital or assets to the Fund.
5.GP Co is the GP, and the vehicle earns the carried interest (which is essentially the profit share for the GP’s performance). The carried interest is then distributed to Manco, to the extent that Manco is a shareholder in GP Co.

ECPs play a key role in corporate finance by providing a flexible structure for capital raising, profit-sharing and risk management, with a reduced administrative burden.
In practice, it has been seen that some investors have recently favoured the conversion of partnerships into permanent capital vehicles (PCVs), allowing an unlimited time horizon for investment and realisation without pressure to realise assets within a certain period.

In the current landscape, LPs continue to benefit from tax efficiency, risk mitigation, and access to specialised expertise. This makes ECPs a valuable tool for businesses
seeking capital for strategic initiatives and growth.

By leveraging the advantages of ECPs effectively, businesses can navigate the complexities and demands of the modern business environment while generating value for various stakeholders.

A trusted advisor with relevant practical experience is a crucial link in helping entrepreneurs and investors navigate the permutations of an ECP structure to ultimately maximise utility for all parties involved.

1 Comprehensive Guide To Dividends Tax (Issue 4), p 50, SARS.

James Moody and Mikayla Barker are Corporate Financiers | PSG Capital

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication
www.dealmakersafrica.com

Sustainable development funding as a catalyst for future investments in South Africa

Thulisile Buthelezi and Ayavuya Madolo
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Sustainable development funding as a catalyst for future investments in South Africa

“The 2030 Agenda for Sustainable Development1, adopted by all United Nations (UN) Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries – developed and developing – in a global partnership. They recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.”

This is the opening paragraph about SDGs on the UN’s website. What captures one here is the fact that social welfare and looking after the environment can go hand in hand with economic growth, which is exactly why SDG funding might be the next frontier for merger and acquisition (M&A) financing in South Africa.

Let us look at some of the benefits of Sustainable Development Funding:

  1. Low interest rates
    Similar to an impact fund, a sustainable development fund’s mandate is to leave the world a better place; therefore, the interest asked on the capital deployed is very competitive – more than that of traditional banks and PE firms. Interest can be between five to 10 percent, with appetising incentives, such as the reduction of the interest when certain sustainable development goals are met.
  2. Longer payment holidays
    In the pursuit of reducing carbon emissions, projects usually targeted by sustainable development funds are often green energy projects. Most green energy projects are normally greenfield projects and, therefore, capital raised for these projects may enjoy longer payment holiday periods. The holiday ranges from 24 months to 60 months, depending on the project. This will assist the entity to invest their earnings back into the project, to improve the chances of success.
  3. Incentives for repaying the funds quickly
    Because sustainable development funds need to support as many projects as possible, recycling money as quickly as possible is imperative, which is why they offer an incentive to projects that can return the capital raised in a shorter period than agreed. Such incentives include reducing or removing the interest from the capital asked.

This type of funding removes the traditional capital raising barriers that banks and PE firms struggle with. With the Government of National Unity (GNU) now in place, it will be interesting to see how the Democratic Alliance (DA) will use this position to promote sustainable development goals without rattling the African National Congress (ANC)’s cage on redress policies such as Broad-Based Black Economic Empowerment (B-BBEE) and Affirmative Action. The DA has always hailed the narrative that sustainable development goals should replace redress policies, so perhaps the marriage between the two parties can produce a merged initiative to promote sustainable development goals and broad-based black economic empowerment alike.

Sustainable development funding can revolutionise the mergers and acquisitions landscape by aligning financial returns with positive social and environmental impacts. Integrating SDG funding into M&A strategies in South Africa can attract international investors seeking ethical investments, enhance corporate reputation, and foster long-term sustainability. Embracing SDG principles can drive innovation, create jobs, and build resilient communities, ultimately contributing to a more inclusive and prosperous economy.

1 https://sdgs.un.org/2030agenda

Thulisile Buthelezi serves as Secretary of the Policy & Research Committee and Provincial Chairperson (KZN) and Ayavuya Madolo is the National Deputy Chair | BMF Young Professionals.

This article first appeared in DealMakers, SA’s quarterly M&A publication.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Ghost Bites (Cashbuild | SPAR | Telkom | The Foschini Group | Woolworths)

The Finance Ghost
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Ghost Bites (Cashbuild | SPAR | Telkom | The Foschini Group | Woolworths)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

The worst should now be over at Cashbuild – I think (JSE: CSB)

I’m keeping my long position in the hope that interest rate cuts will be a further boost

After the market recently dished out an absolute gift in the form of a sell-off in Cashbuild down to R142 per share, it has recovered to trade at R160 per share. I bought that dip and I’m obviously thrilled with how it turned out, with the decision now being whether to hold on for more. I think that an easing of local interest rates will do wonders for Cashbuild’s business, with the numbers for the year ended June hopefully reflecting the end of the bad times for the group.

It was another tough period, with HEPS down 22% despite revenue growing by 5%. The final dividend fell by 29%, so that’s a nasty year-on-year trend.

Importantly, this is a 53-week result compared to a 52-week period. If the extra week is stripped out, revenue was up just 3% and HEPS fell by 38%. That’s the best way to look at this result.

Although sales volumes were up 3%, with a small boost from inflation to take like-for-like sales growth to 4%, this is again on a 53-week basis. With that stripped out, volumes would likely be slightly positive. My thesis is that lower inflation and hopefully a drop in rates will improve sales volumes.

Gross profit margin is a concern, having dropped from 25.4% to 24.7%. That trend needs to improve, obviously. The drop in margin is why operating profit fell by 16% (excluding impairments) despite operating expenses only increasing by 4%.

This is an important lesson in comparing the growth in operating expenses to the growth in revenue. The growth rates might look similar, but major changes in gross profit margin will have a big impact on operating profit.

Looking at the balance sheet, the 37% decrease in cash and cash equivalents is largely due to a cut-off issue, with June supplier payments reflecting in this period vs. the comparable period when the suppliers were paid after year-end. In retailers, cut-off is an important point that makes working capital ratios difficult to work with.

The group helpfully highlights that stock levels increased by 5%, which seems reasonable relative to revenue.

For the first six weeks of the new financial year, sales revenue is up by 5%. Although that may sound like there’s no real improvement vs. the full year, you have to remember that the 5% growth in FY24 included an extra week of trading. I’m therefore not unhappy with the recent growth rate, although it obviously needs to move higher for this investment to work out well.

Management’s narrative is one of caution, with an expectation for trading conditions to remain challenging.

SPAR finds a buyer for SPAR Poland – but it comes at a cost (JSE: SPP)

Add this one to the list of failed international moves by local retailers

When it comes to SPAR Poland, I guess it’s fair to say that they got unlucky with COVID. Although I don’t think many people would gush over the previous SPAR management team, it’s also true that a risky international deal becomes an impossible task when an unforeseeable pandemic arrives.

Thankfully, this nightmare is always over, thanks to the incredibly named Przedsiebiorstwo Produkcyjno Handlowo Uslugowe Specja Spólka z o.o. coming in as the acquirer of SPAR Poland. If it’s ok with you, I’ll just refer to that company as the buyer.

The buyer is Polish (in case that wasn’t super obvious) and has been in operation since 1990. They will need all that experience, since SPAR Poland lost R813 million in the six months to March and has a negative net asset value.

At first blush, it looks incredible that Spar managed to secure a wonderful price of R185 million for the business, though it does have the potential to be adjusted downwards if more partner stores leave the network. Then, as you read further, you get to the bad news: Spar first needs to recapitalise the company to bring the net asset value to zero, plus they must contribute well over R1 billion to cover expected operating losses.

In other words, they aren’t just giving it away – they are actually paying someone to take it! Incredible. The maximum exposure for SPAR is nearly R3.5 billion. The final amount will vary obviously depending on all sorts of things, with the plan being to bring nearly R2.0 billion of Polish debt back to South Africa and refinance it here (!) and for R566 million to be funded from existing sources into the Polish business.

Unsurprisingly, the share price took a knock of 6.8% on the day.

What. A. Disaster.

A step forward for Telkom’s disposal of Swiftnet (JSE: TKG)

The Competition Tribunal has given the green light

In corporate dealmaking, a deal is never done until the money changes hands. When conditions precedent are still outstanding, anything is still possible – especially when it comes to regulators, who can be unpredictable.

There would therefore have been a collective sigh of relief at the news that the Competition Tribunal has approved the disposal of Swiftnet. Telkom is selling the business to a consortium of an Actis infrastructure fund and Royal Bafokeng Holdings.

Although there are further remaining conditions, this is a big milestone for the deal.

The Foschini Group is fully focused on margins (JSE: TFG)

When capital is expensive, retailers tend to avoid chasing market share at all costs

The Foschini Group has released a trading update dealing with the 21 weeks to 24 August. When the highlights section talks about gross margin as the first few points and completely ignores sales growth, you know what’s coming.

Group sales fell by 3.5%, with TFG London as the major laggard with a 12.7% decline. TFG Australia fell 5.5% and TFG Africa was down 1%. Those percentages are based on the offshore businesses measured in rands. Bash was the sales highlight, with turnover up 42.7%.

That sounds poor of course, with the saving grace being that group gross margin expanded by over 100 basis points, with a 200 basis points expansion in TFG Africa and record gross profit in that business, up 4% on the prior period. Despite the sales pressure in TFG London and TFG Australia, they even managed to grow gross margin there.

To further explain the trend, the announcement notes that the base period included a major inventory clearance initiative. That would’ve boosted sales and impacted gross margin, so that explains some of the move in this financial year on both those lines.

We will have to wait until 8 November to get the detailed interim results. Given the gross profit performance and some of the expense control we’ve seen at other retailers, it probably won’t be a shocker at profit level. Still, this isn’t what shareholders want to see, as lack of sales growth is always a worry.

Woolworths Food is carrying the team (JSE: WHL)

After much initial progress, the rest of the business has stalled

The Woolworths share price is down more than 15% this year, a particularly unfortunate performance compared to how “SA Inc.” has performed in the new political landscape. Sentiment is great and everything, but a company needs to deliver growth in order to see the share price go the right way. With HEPS from continuing operations on a 52-week basis down by 16.8% and the dividend down 15.2%, growth isn’t the theme here. The increase in net debt from R2.5 billion to R5.6 billion isn’t good news either.

Ironically, more positive sentiment towards South Africa over the past decade or so might have saved Woolworths a lot of heartache in Australia and New Zealand. Just when investors thought the worst was over with David Jones out of the system once and for all, things have gotten bad for Country Road Group. This is the business that Woolworths deliberately held onto in the region, yet sales have dropped 8% for the year on a comparable 52-week basis. In comparable stores, sales fell by 13.1%. They point to the high base to help explain this, but the two-year growth stack is disappointing anyway. And on top of this, gross margin deteriorated by 230 basis points to 60.3%. Despite best efforts to control expenses, operating profit margin collapsed from 12.4% to 4.6% and profits were down 66%. Ouch.

Focusing now on the local businesses, it was Woolworths Food that tried to save the day. When you’re looking at the 11.2% growth in sales for Woolworths Food, remember that this includes the 53rd week of trading as well as the acquisition of Absolute Pets in the second half. On a 52-week basis, sales grew 9% overall and 6.9% in comparable stores. Price inflation was 7.9%, suggesting that volumes remained a struggle for the full year. Woolworths goes on to confirm that the volumes trend turned positive in the second half, so that’s encouraging at least. Another encouraging element is that Woolworths Dash grew 71.2%, so they are clawing back some lost ground in on-demand shopping. Perhaps more importantly, gross margin increased by 30 basis points to 24.7%, which I think is impressive given how much more competitive they have needed to become on price. Operating profit margin increased from 6.9% to 7.1% and adjusted operating profit grew by 12.3%.

We now arrive at Fashion, Beauty and Home (FBH), the part of the business that showed great promise under new leadership. Things have gone wrong with that recovery, with sales down 0.4% for the 52 weeks and 1.3% on a comparable store basis. With price inflation of 8.9%, this means that volumes were firmly in the red. They managed to maintain gross margin at 48.5% at least. They also kept expense growth to just 2.6%, but the reality is that a business cannot succeed through efficiencies alone. The lack of top line performance meant a 9.9% drop in adjusted operating profit, with operating profit down from 13.2% to 12.0%.

It’s a bit sad when one of the major highlights is Woolworths Financial Services, where profit after tax jumped by 69.3%. Although the book was a bit smaller, there was an improvement in the impairment rate.

Unfortunately, the outlook section of the announcement doesn’t suggest that a quick recovery is around the corner. By afternoon trade, Woolworths was down 4.7%.

Little Bites:

  • Director dealings:
    • Michael Georgiou of Accelerate Property Fund (JSE: APF) sold shares worth nearly R81 million in an off-market trade that was part of a lending arrangement. I suspect that hurts.
  • Titan Premier Investments (of the Christo Wiese stable) has unwound its collateral arrangement on certain funding positions and now has 5.34% in Pepkor (JSE: PPH) once more.

Ghost Wrap #79 (CA Sales Holdings | RCL Foods + Rainbow | Motus | Bidvest)

The Finance Ghost
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Ghost Wrap #79 (CA Sales Holdings | RCL Foods + Rainbow | Motus | Bidvest)

Listen to the show here:

The Ghost Wrap podcast is proudly brought to you by Forvis Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Forvis Mazars website for more information.

This episode covers:

  • CA Sales Holdings has a great business model that is still working beautifully.
  • RCL Foods and Rainbow Chicken have reported numbers together for the last time, which gives us an opportunity to reflect on exactly why the unbundling made sense.
  • Motus is struggling at the moment and the market doesn’t seem to be punishing the share price, presumably because of the expectation of interest rate cuts.
  • Bidvest reminds us of the value of diversification, with five out of seven divisions in the green and a reasonable overall result at group level.
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