At Brait, Virgin Active’s EBITDA has gotten much closer to “maintainable EBITDA” (JSE: BAT)
And Premier is of course doing very well (JSE: PMR)
Summer bodies are warming up in South Africa and the beach is calling. In months gone by, the same was true in the Northern Hemisphere. With Brait reporting strong growth in revenue across the UK, South Africa, Italy and the APAC territories at Virgin Active, they are happy to assist you with those beach abs in many countries.
Jokes aside, these are encouraging numbers for both the business and the general health of humanity. South Africa led the way with revenue growth of 15% for the six months to September, with APAC up next at 13%. The UK grew by 12% and Italy by 7%. These numbers were good enough for EBITDA to grow to £112 million in the last twelve months.
Now here’s the interesting thing: Brait has been valuing its investment in Virgin Active based on maintainable EBITDA of £120 million and has left this unchanged despite the growth. That’s because EBITDA has now caught up (mostly) to the company’s view on maintainable EBITDA. This is encouraging, but the market still needs to stomach the forward EV/EBITDA multiple of 9.25x that Brait applies to the stock. This is a 15% discount to the peer average, but it still feels a bit spicy unless they can continue with these levels of growth.
As an aside, capex at Virgin Active jumped from £58 million in 2024 to £96 million in 2025. I am very sure that my local gym got just about none of that.
Premier (JSE: PMR) is separately listed these days and doing very well, so there’s no need to go into much detail there. Brait does of course reference Premier’s planned merger with RFG Holdings (JSE: RFG) and the resultant diversification of the product mix. As I’ll continue to point out (and as you’ll read further down), diversification is always good for portfolios and not always good for corporates.
At New Look in the UK, revenue is still hard to find. It fell 2% for the six months, while EBITDA increased by 34% to £21 million. They are assessing “strategic options” for the business.
Based on the latest valuations, Virgin Active is 62% of Brait’s total assets, while Premier is 32.3% and New Look is just 3%. The company’s latest indication is that Virgin Active will be separately listed by 2027, a delay of the previous guidance of late 2026.
The Cell C offer is officially open (JSE: CCD)
Blu Label has also released details on the Black Ownership plan (JSE: BLU)
In a year that has seen a resurgence in the telcos (thanks mostly to improved macroeconomics in Africa), Cell C is finally coming to market. This should lead to a much cleaner balance sheet for Blu Label that will be easier to understand.
The raising is expected to have gross proceeds of up to R6.5 billion, including an allocation of shares worth around R2.4 billion to an empowerment vehicle. They need to do a fair bit of structuring to make sure that they have at least 30% Black Ownership once they are separately listed. This includes the Blu Label subsidiary selling between 5% and 20% of the shares to the B-BBEE investment entity, with the price left on loan account and settled through dividends over time and the sale of shares. We’ve seen this type of structure a zillion times before in South Africa. If you want to dig into the full details of how it works, Blu Label released a separate announcement on it.
As I pointed out recently when Cell C released its intention to float announcement, the group is more than just the capital-light MVNO model that gets all the attention. They also have 7.57 million mobile subscribers, with prepaid customers making up 89% of that base. This is a core part of the business that doesn’t get much attention, as the market tends to focus on Cell C’s majority market share in the MVNO space (13 of the 23 in the country are Cell C clients).
On a pro-forma basis (i.e. with adjustments for the mix of businesses that will be in the standalone listed group), revenue for the year ended May was R13.7 billion and EBITDA was R3.7 billion. Capex intensity at 5.7% (capex divided by revenue) is certainly a leaner model than most telcos out there. But with a capital-light model comes a different set of risks: less control over the core enablers of the business.
Here’s an excerpt from the pre-listing statement (which is 464 pages long!) that sets out perhaps the biggest risk:
The pre-listing statement includes a detailed look at the risks and opportunities of the business. As with all things in life, there are pros and cons to every business model.
It’s great to see another listing on the JSE and I hope that it will be a success!
Italtile off to a tough start this year (JSE: ITE)
Weak demand and marginpressure have continued
At the AGM, Italtile gave an update on trade from July to October. They managed retail growth of just 2% in an environment of constrained consumer spending, although I must also note that we’ve seen some decent numbers from other consumer discretionary businesses. The issue seems to relate more to pricing than volumes, with deflationary pressures in an environment of oversupply in the market. This would explain why an uptick in demand isn’t translating into strong revenue growth.
Full credit to Italtile: they’ve been warning the market about the supply imbalance for as long as I can remember. It’s precisely why I prefer Cashbuild (JSE: CSB) in the sector at the moment, as they don’t have a manufacturing arm.
You see, the real issue is that the manufacturing business is highly dependent on achieving decent throughput (due to the high fixed costs), something that is hard to achieve when there is oversupply. With group systemwide turnover down 1% for the period and overall costs up 1%, the situation looks painful for profitability.
Premier and RFG Holdings release the joint circular for their merger (JSE: PMR | JSE: RFG)
I remain worried about this deal
Corporate mergers can be like romantic relationships: sometimes, two things simply don’t belong together, even if they are each lovely.
The FMCG sector is full of examples of consolidation plays that didn’t work out. The Kraft Heinz merger is widely regarded as Warren Buffett’s worst ever transaction. The playbook was to consolidate operations and cut costs. After all, if the underlying business focuses on food, then does it really matter which food? It turned out that yes, it does matter.
If you consider Premier and RFG, then you have one company with a focus on consumer staples and the other with a focus on consumer discretionary food. Not all food categories are created equal. Put differently: you need bread in your basket more than you need canned peaches.
They also have completely different supply and demand pressures. At Premier, it’s about being as efficient as possible to grind out better margins from products that are in hugely competitive environments. After all, can you think of anything more competitive than bread? At RFG, their numbers are impacted by exogenous factors like global supply of deciduous fruit. Their numbers are almost guaranteed to be more volatile.
Now, the rationale for putting these two companies together is based on increased scale, a more diversified offering and greater category reach for Premier. Sure, all of that may be true on paper, but Tiger Brands (JSE: TBS) tried a similar strategy and we know how that ended. The recent improvement at Tiger Brands has been based on their discipline in figuring out where they have a right to win and then selling everything else.
If the scheme of arrangement is successful and the deal goes ahead, then I hope it works out and they create a better group thanks to the merger. There’s a lot at stake here, particularly at Premier and the role it plays in delivering basic food to consumers.
The deal is structured as a share-for-share transaction based on 1 Premier share for every 7 RFG shares. The reference prices are R22 per RFG share and R154 per Premier share. This represents a premium of 37.5% to the 30-day VWAP of RFG shares (measured up to the date of release of the firm intention announcement).
In my opinion, RFG shareholders can consider themselves lucky here. The share price was washing away and the recent numbers didn’t look great. Conversely, Premier’s numbers have been excellent. In my view, the risk is to the existing Premier shareholders. The market seems to have a different view, as the Premier share price has only gone up and up since the deal was announced. This bucks the usual trend in the market, where the acquirer’s share price usually drops after announcing a deal.
Sanlam’s core business looks good (JSE: SLM)
There’s a big change to the accounting coming soon
Sanlam released an update for the nine months to September 2025. The metrics that are familiar to investors look good, like net results from financial services up 19% on a normalised basis. This has been boosted by 13% growth in normalised group new business volumes.
There are going to be significant changes to the metrics going forwards. From 1 January 2026, they will be focusing on operating profit and adjusted headline earnings. These are going to be more volatile than the current metrics as they include full investment market movements, not just Sanlam-specific shareholder fund adjustments. The accounting for insurance businesses is very complex.
If they apply the framework that is coming soon, then actual adjusted headline earnings dipped 6% and normalised adjusted headline earnings (sigh) increased 4% in this period.
The weirdness is a result of the realities of the business model. Sanlam has an operational business that delivers financial services to clients. They also have a complicated balance sheet that does all kinds of interesting things with the funds in the insurance float and otherwise.
From what I can see, most of the operational metrics look fine at Sanlam. There are of course some areas that require management focus, like a decrease of 10% in normalised value of new business (VNB) in South Africa.
On the corporate side, they are busy with the integration of Assupol and they sound happy with the progress made on it. The final regulatory approvals are being obtained for the South African leg of the Ninety One transaction.
Nibbles:
Director dealings:
An associate of the CEO of Grand Parade Investments (JSE: GPI) acquired shares worth R21k to add to his recent tally.
ASP Isotopes (JSE: ISO) is a step closer to listing its subsidiary Quantum Leap Energy. They have submitted a draft registration statement to the SEC related to the proposed IPO. They haven’t yet determined the number of shares to be offered or the price, but the wheels are in motion.
Brimstone (JSE: BRT | JSE: BRN) confirmed that the intrinsic NAV per share as at September 2025 is 859.8 cents, or 832.5 cents on a fully diluted basis. The current share price of R4.50 is a 45% discount to the fully diluted intrinsic NAV. This NAV has sadly decreased by 22.9% from December 2024 to September 2025 due mainly to pressure on the Oceana (JSE: OCE) share price, the largest investment at Brimstone.
Curro (JSE: COH) is a step closer to achieving non-profit status through the Jannie Mouton Stigting transaction. The Botswana Competition and Consumer Authority has given the green light, leaving only the South African regulator to still approve the deal.
Copper 360 (JSE: CPR) has confirmed that the circular for the capital raise will be released on Monday, 17 November. In the meantime, they’ve confirmed that the independent expert has opined that the debt conversion by related parties is fair to other shareholders. This opinion will of course be included in the circular.
Numeral (JSE: XII) is taking the necessary step of a share consolidation before they try raise up to R100 million. How close they get remains to be seen, as the raise will be only partially underwritten (around R34.5 million) by Boundryless, an existing shareholder in the company. A 10:1 consolidation will give them a better chance of raising at a sensible pricing range, as the stock currently trades at R0.02 and hence a raise at a discount would have to be at a 50% discount. The only number lower than R0.02 is R0.01! Such is life as a penny stock in every sense of the word.
As we hurtle toward the end of the year, the familiar rush is on to get deals over the line. It’s never an easy task, and 2025 has been no exception — with geopolitical and economic headwinds, both at home and abroad, weighing heavily on investors’ confidence and sentiment.
Looking back at the period Q1 – Q3 2025, deal activity has remained relatively consistent, showing a gradual improvement year on year, when compared with the same period in 2023 and 2024. This year’s aggregate deal value of R1,62 trillion is, however, heavily skewed by the Anglo American | Teck Resources merger, valued at R1,05 trillion (US$60 billion). Excluding this outlier, total deal value comes to R571,89 billion, up from R477,28 billion in 2024 and R344,24 billion in 2023.
Conversely, BEE deal activity continues to decline, with many of the latest announcements representing extensions of existing, often underwater, structures – symptomatic of the framework’s ongoing struggle to deliver its intended economic outcomes. It will be interesting to see whether, under the current GNU dispensation, ongoing conversations about alternative empowerment mechanisms gain meaningful traction.
Excluding the five failed transactions, 268 deals were recorded during the period, of which 40 were announced by companies with secondary inward listings on one of South Africa’s exchanges. The R50 million – R200 million value bracket once again accounted for the most deals. Sectorally, real estate continues to dominate deal flow, followed by resources and technology. South African-domiciled, exchange-listed companies were involved in 44 cross-border transactions, with Africa (13 deals), Europe and the UK (8) the most active destinations – again led by real estate and resources activity.
Companies also continued to return value to shareholders through repurchase programmes. During the first three quarters of 2025, companies repurchased R285,88 billion in shares – nearly double the comparable 2024 period – with Prosus leading the charge. The largest General Corporate Finance transaction during this time was the unbundling by Anglo American of its stake in Anglo American Platinum, valued at R96 billion.
Source: DealMakers Online
Private equity continues to consolidate its presence in the dealmaking landscape. Over the past few years, the industry has had to adapt to higher capital costs, more challenging exits, and the growing influence of AI. This has prompted a strategic pivot toward private credit, as firms diversify their offerings to provide flexible financing solutions in a high-interest environment.
DealMakers Q1 – Q3 2025 League Table – M&A activity by the top South African advisory firms (in relation to exchange-listed companies).
DealMakers Q1 – Q3 2025 League Table – General Corporate Finance activity by the top South African advisory firms (in relation to exchange-listed companies).
DealMakers is SA’s M&A publication
The latest magazine can be accessed as a free-to-read publication on the DealMakers’ website www.dealmakerssouthafrica.com
As part of Cell C’s listing, Blu Label Unlimited has released further details on a proposed deal which will see a 30% stake in the telecom in the hands of BEE parties. The deal, which will be vendor-funded by subsidiary The Prepaid Company (TPC), will allocate up to c.68 million shares valued at R2,4 billion to the SPV known as Sisonke which will be owned by Fordside Enterprises, Sangrilor and Nubridge Capital. Sisonke will acquire a stake of between 5% and 20% of Cell C at the offer price which is set between R29.50 and R35.50 per share. The BEE parties will be subject to a lock-up of six years. For the first 12 months after the listing, which is set for 27 November 2025, no shares may be sold but for the remaining five years of lock-up 20% of their shareholdings may be sold but only to other BEE participants.
Supermarket Income REIT has completed £40,9 million in acquisitions across two transactions at an average net initial yield of 6.4%. The first, is the acquisition of Tesco omnichannel supermarket in Craigavon, Northern Ireland at a purchase price of £25,6 million. The second acquisition is that of a portfolio of 10 Sainsbury convenience stores at a purchase price of £15,3 million. The portfolio represents the company’s entry into convenience stores.
Tiger Brands has disposed of its 74.69% shareholding in Chocolaterie Confiserie Camerounaise (Chococam) to African-focused investment firm Minkama Capital and BGFIBank (BGFI), a financial services institution headquartered in Gabon. The deal is financed through a CFA46.676 billion syndicated loan arranged by BGFI.
Pembani Remgro (Remgro joint venture) has successfully exited its investment in South African company SolarSaver, a provider of customised rooftop solar photovoltaic solutions to corporate and industrial customers in Namibia and South Africa. New investment from Inspired Evolution’s Evolution III Fund, alongside global development finance intuition partners FMO, the Dutch Entrepreneurial Development Bank and Sweden’s Development Finance Institution Swedfund, will be used to accelerate the rollout of capex-free solar power solutions for businesses across SA, Namibia, Botswana and Zambia.
The ongoing talks between ArcelorMittal South Africa (AMSA) and the Industrial Development Corporation have been terminated. The deal which covered about R7 billion of loans and interest to AMSA was, according to reports, not considered sufficient by AMSA with the IDC not prepared to offer more.
In October 2021 Sibanye-Stillwater announced the proposed acquisition of 100% of both the Santa Rita nickel mine and the Serrote copper mine located in Brazil from affiliates of funds advised by Appian Capital Advisory. The deal was later terminated in January 2022 due to material and adverse conditions as a result of a geotechnical event. The parties have since been involved in a protracted legal dispute. A settlement agreement was announce this week with Sibanye paying US$215 million to Appian.
The RFG and Premier combined offer circular to RFG shareholders has been released. Shareholders will vote at the annual general meeting on 11 December 2025. If the scheme becomes unconditional, the trading of RFG shares will be suspended on 18 March 2026 with the delisting expected on 24 March 2026.
On 1 October 2025, the parties to the Barloworld transaction agreed to waive the Standby Offer Condition relating to the receipt of competition regulatory approval by COMESA. Shareholders had until 7 November 2025 to accept the offer. At close, NewCo had received valid acceptances of the Standby Offer in respect of 70.8% of shares in issue. This combined with the Consortium’s and Barloworld Foundation shares equates to 94.1% of the shares in issue. Upon completion of the Squeeze-Out, the shares will be suspended from trading on the JSE and A2X.
In an update on the offer to Curro shareholders by the Jannie Mouton Stigting, the deal has received unconditional approval from the Botswana Competition and Consumer Authorities. The transaction remains subject to the unconditional approval from the South African Competition Authorities.
Unlisted Companies
The South African Reserve Bank (SARB) has taken a 50% equity shareholding in PayInc, an automated clearing house and payments infrastructure company previously known as BankservAfrica. The SARB joins Absa, Access Bank, African Bank, Capitec, Citibank SA, FirstRand, Investec, Nedbank and Standard Bank as direct shareholders, establishing PayInc as the National Payment Utility.
Norfund, the Norwegian Investment Fund for developing countries, has invested US$75 million in Mulilo Energy, a South African developer of renewable energy projects and Independent Power Producer. The minority stake investment will support Mulilo’s ongoing transformation into a tier-one Independent Power Producer, with a robust near-term pipeline of 5.5 GW expected to reach final close before the end of 2027.
According to Cell C’s prelisting statement, c.53.8% of the shares in the telecom have been offered to a select institutional investors. The offer which opened on Thursday 13 November will close on 21 November 2025. 173,4 million shares are being offered together with 9,52 million overallotment shares at a price of between R29.50 and R35.50 per share, giving the company a potential market capitalisation on the JSE of between R10 billion and R12 billion when it lists on 27 November 2025. The offer includes an allocation of up to 68 million shares valued at R2,4 billion to a BEE SPV (Sisonke) which will acquire a stake of between 5% and 20% in Cell C. The gross proceeds from the offer and the sale of the offer shares, are expected to be up to R6,5 billion. The proceeds raised will be allocated towards the settling of certain of The Prepaid Company’s (Blu Label Unlimited) interest-bearing borrowings and other debt obligations. The listing will provide Cell C with access to capital markets, to support and develop further growth of the company and to finance acquisitions and investments in businesses, technologies, services, products, software, intellectual property rights, spectrum and other assets.
Africa Bitcoin has acquired a further 0.6833 BTC for a cash consideration of R1,22 million. The group now hold 3,1949 BTC with an aggregate value of R5,81 million. The R4,05 million raised from the recent placement was used to fund the acquisition.
Delta Property Fund has disposed of its entire stake of 14,869,210 ordinary shares in Grit Real Estate Income Group at 5.45 pence per share for an aggregate sale consideration of £810,371.95. The shares were sold to Peresec Prime Brokers. The disposal is a category 2 transaction and does not require shareholder approval.
Marshall Monteagle has successfully raised US$10,7 million from shareholders via a renounceable Rights Offer. A total of 8,964,377 Rights Offer shares were offered at an issue price of $1.20/R21,35 per share in the ratio of one Rights Offer share for every four Marshall shares.
Copper 360 will on 17 November distribute the circular with details of its proposed claw-back and rights offer. The company aims to offer 280 million shares in its claw-back offer of R140 million and up to 520 million new shares at 50 cents per share raising R260 million in a rights offer. The company has obtained a fairness opinion form an independent expert confirming that the related party conversions are fair to shareholders. Results of the offer will be published on 8 December 2025.
Numeral is proposing to consolidate the company’s issued shares on a 10 to 1 basis, subject to shareholder approval. The company will then undertake a private placement of shares for cash to raise up to R100 million of which US$2 million (c.R34,5 million) will be partly underwritten by Boundryless, an existing shareholder which is owned c.$4,6 million by Numeral.
Southern Palladium will no longer seek shareholder approval to change the company’s name to Southern Platinum. The name change was proposed to reflect the diversity of the metal resources within the company’s project portfolio. However, following feedback from major shareholders the Board has decided to retain the current name.
This week the following companies announced the repurchase of shares:
Premier intends to commence with a general share repurchase programme in terms of the general authority granted to it by shareholders. The rationale for the share repurchase is to ensure that the Group’s capital structure remains efficiently structured, before any effects of the RFG transaction. Shares will be repurchased at a price of up to R154 per share, being the reference price in the RFG transaction.
Woolworths has repurchased 6,9 million shares at an average price per share of R51.22 for an aggregate R353,4 million since the repurchase programme commenced in September 2025.
In October 2024, Anheuser-Busch InBev announced a US$2 billion share buy-back programme to be executed within the next 12 months which will result in the repurchase of c.31,7 million shares. The shares acquired will be kept as treasury shares to fulfil future share delivery commitments under the group’s stock ownership plans. During the period 3 to 7 November 2025, the group repurchased 1,150,019 shares for €62,01 million.
On 19 February 2025, Glencore announced the commencement of a new US$1 billion share buyback programme, with the intended completion by the time of the Group’s interim results announcement in August 2025. This week the company repurchased 6,400,000 shares at an average price per share of £3.58 for an aggregate £22,9 million.
South32 continued with its US$200 million repurchase programme announced in August 2024. The shares will be repurchased over the period 12 September 2025 to 11 September 2026. This week 375,391 shares were repurchased for an aggregate cost of A$1,22 million.
The purpose of Bytes Technology’s share repurchase programme, of up to a maximum aggregate consideration of £25 million, is to reduce Bytes’ share capital. This week 547,300 shares were repurchased at an average price per share of £3.60 for an aggregate £1,97 million.
In May 2025, British American Tobacco extended its share buyback programme by a further £200 million, taking the total amount to be repurchased by 31 December 2025 to £1,1 billion. The extended programme is being funded using the net proceeds of the block trade of shares in ITC to institutional investors. This week the company repurchased a further 550,000 shares at an average price of £41.93 per share for an aggregate £23,06 million.
During the period 3 to 7 November 2025, Prosus repurchased a further 902,724 Prosus shares for an aggregate €54,09 million and Naspers, a further 390,090 Naspers shares for a total consideration of R480,68 million.
Three companies issued a profit warning this week: Goldrush, RFG and RMH.
Two company issued or withdrew a cautionary notice: Hulamin and Copper 360.
The Fund for Export Development in Africa, the development equity impact investment arm of African Export-Import Bank (Afreximbank), announced a US$300 million strategic investment in the Africa Minerals and Metals Processing Platform (A2MP). A2MP, head-quartered in Dubai, has evolved into a diversified pan-African platform focused on mining and processing. The platform aims to unlock and scale minerals and metals value chains sustainably across the continent. The platform currently operates a pipeline of twelve mineral assets and four processing hubs, with a diversified portfolio spanning nine countries on the continent.
Nigerian Y Combinator-backed fintech, Moni, has rebranded as Rank, while also announcing two acquisitions. The company has rebranded to reflect its wider focus, with the aim of providing a broader range of services to its customers. It has also acquired AjoMoney, a leading provider of group savings solutions, and Zazzau MFB, a licensed microfinance bank that provides services such as savings, deposits and small business loans. Financial terms of the deals were not disclosed.
Tiger Brands is disposing of its majority stake in its Cameroonian subsidiary, Chococam, as part of a broader strategy to simplify its operations and focus on its core business. The company has signed a sale and purchase agreement with Minkama Capital Ltd. and anticipates the deal to be finalised in the second half of fiscal year 2026, pending regulatory approval.
Nairobi-based Afri Fund Capital has announced the signing of a debenture agreement with Cummins C&G Limited, to support the development of 3,000MW of energy capacity under the LAPSSET Corridor Programme. The agreement establishes a collaborative framework to deliver reliable, scalable, and sustainable energy infrastructure across key project sites, beginning with Lamu.
Sahara Impact Ventures has announced an undisclosed investment in Wahu Mobility, an e-mobility company headquartered in Ghana. Through this investment, Wahu will scale its operations, expand existing assembly capacity, and empower more riders, especially women to lead Africa’s clean-mobility revolution.
Zid, a Saudi-born commerce enablement platform, has entered Egypt through a strategic partnership that includes the acquisition of Zammit for an undisclosed sum. Under the agreement, Zammit will take full operational control of Zid Egypt, spanning domestic sales, merchant acquisition, technical support, and market expansion. Zid’s infrastructure and products will be transferred for formal adoption in Egypt across Zammit’s client base.
Groupe Holged, a private education group in Morocco, has acquired École La Prairie, a well-established private school located in central Casablanca. Financial terms were not disclosed.
African Export-import Bank (Afreximbank) has extended a US$36,4 million contract financing facility to Egypt’s SAMCO-National Construction Company (SAMCO) for the construction of the Akii Bua Olympic Stadium in Uganda. The Akii Bua Olympic Stadium, located in Lira, Uganda, is expected to host some of the 2027 Africa Cup of Nations (AFCON) games which Uganda is co-hosting with its East African neighbours Kenya and Tanzania in a joint bid. The facility, granted under Afreximbank’s Engineering, Procurement and Construction (EPC) programme, which supports African EPC companies to bid for large-scale contracts in African countries, is expected to be used to finance and support SAMCO in the design, construction and development of the stadium project and in the acquisition of essential components required for the successful execution of the project.
The Presco Plc Rights Issue of 166,666,667 ordinary shares at ₦1,420 per share, opened 12 November. The offer allows existing shareholders to purchase 1 new share for every 6 shares already held. Presco specialises in the cultivation of oil palm and in the extraction, refining and fractionation of crude palm oil into finished products. The proceeds will be used for industrial expansion and for completing the acquisition of several greenfield and brownfield projects.
For even the most casual of observers, it would be easy to believe that the South African equity capital markets are in a state of gradual and irreversible decline.
We have all seen headlines lamenting the seemingly inexorable wave of delistings (and the corresponding lack of new listings to fill the void), denouncing the penal costs of getting and then staying listed, and bemoaning the endless red tape that stymies corporate action within the listed environment.
While these headlines may be somewhat sensationalist by design, the claims are not completely lacking in substance. For example, since the end of 2018, Johannesburg Stock Exchange (JSE) data confirms that the number of companies listed on the Main Board of the JSE has reduced by almost a quarter, falling from 326 to 250, with blue chip names such as Imperial Logistics, Liberty, Massmart, Medi-Clinic and Distell among those that have departed.
Offsetting these debits, the credit column contains only two initial public offerings (IPOs) that have raised R1bn or more in that period – Premier Group and Boxer. And while markets such as the UK and US saw a wave of proactive, ‘safety first’ capital raisings in the midst of the COVID pandemic to insulate balance sheets against the unknown, many companies on the JSE sat tight, in no small part due to the fact that they would have needed to go through the lengthy process of seeking shareholder approval before being able to raise capital.
The net result is that since the beginning of 2018, we have had six of the seven quietest years of equity issuance in the last twenty years.
While the above does indeed paint a gloomy picture and lend support to the claims of a failing equity market, context is everything. The lack of capital raising activity, whether via IPO or follow-on activity, is far less of a surprise when assessed against the backdrop of the tepid economic growth that has characterised this period.
This can largely be attributed to various factors including, but not limited to, the slow pace of government reform, increased sovereign indebtedness, political instability, geopolitics, and signs that globalisation is being eschewed for more nationalistic foreign and economic policies.
It is this backdrop and the uncertain outlook it has created that has given listed corporates every encouragement to become more inwardly focused, driving efficiencies and cutting costs as a means of increasing net earnings, and deferring big capital expenditure projects (whether organic or inorganic) for as long as the returns profile of such initiatives remains difficult to forecast.
Similarly, it has given those unlisted companies who have the luxury of choice, good reason to shelve their IPO plans until they can show a stronger track record of growth and achieve a more attractive valuation upon listing.
To illustrate the impact this has had on South Africa’s equity capital markets, one only needs to look at how much growth capital has been raised on the JSE since 2018. According to Dealogic data, only six companies outside the real estate sector have raised R1bn or more to fund growth, and capital raised across all sectors for this purpose accounts for less than 20% of total issuance volumes for the period.
This suggests that the dearth of activity is as much a function of absent supply as it is a failing marketplace, and an analysis of the market’s response to the deal flow that has taken place of late appears to corroborate this conclusion.
In the last 12 months, we have seen four deals that have raised over R8bn – a notable pick-up in large cap issuance activity relative to the prior 60 months – and each of these transactions has generated healthy levels of oversubscription and delivered attractive pricing for the selling shareholders.
Perhaps most notable amongst those four transactions is the most recent – September’s R44bn placement of Anglo American’s residual 19.9% stake in Valterra Platinum – a deal on which Standard Bank acted as Joint Global Coordinator.
Despite being the largest ECM transaction ever executed on the JSE, it achieved substantial oversubscription, with orders exceeding R250bn generated during the two hours that the deal was live. The facts that the demand originated from over 150 individual investors from South Africa, the UK, the US and Continental Europe, and that the deal priced at a mere 0.5% discount to the 3-day pre-launch volume weighted average price (VWAP) both illustrate that institutional investors sit on bountiful liquidity, and that their appetite for (and willingness to pay for) high quality South African equity stories is nothing short of robust.
So wherein lies the truth? The fact is that equity markets are cyclical and, by extension, so are equity issuance volumes. While the most recent cyclical downturn has tested the patience of even the most hardened of ECM bankers, it remains just that: a downturn from which activity will recover.
With the market taking confidence from the incrementally improving political and economic backdrop at home, and adjusting to the seemingly new norm of a global backdrop characterised by ongoing geopolitical uncertainty and nationalistic policy, there are signs that confidence is slowly returning. With an IPO pipeline that appears busier than at any time since the advent of the COVID pandemic, and with selling shareholders having reminded C-suites across the country that the market is open and operating efficiently, there are signs that we may be coming to the end of this latest cyclical downturn, and able to look forward to a sustained recovery into 2026 and beyond.
Richard Stout is Head of Equity Capital Markets, South Africa & Sub-Saharan Africa | Standard Bank CIB
This article first appeared in DealMakers, SA’s quarterly M&A publication.
The investment landscape for South African solar has evolved dramatically over the past decade, necessitating a relook at where returns are possible for investors.
Tariff compression, grid congestion and policy changes have shifted the centre of gravity away from price and toward execution, requiring investors to navigate transmission queues and increasingly complex offtake structures. However, with installed capacity expected to reach 12.2 gigawatts (GW) by 2030, expanding at a compound annual growth rate (CAGR) of 10.6%10 from 2025, the market remains an appealing investment prospect for those who can cut through the noise.
A changing market landscape: a brief history
In the early 2010s, the path to returns was more straightforward. Early Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) rounds offered government-backed power purchase agreements (PPAs) at predictable tariffs through transparent auction processes, a structure robust enough to draw international capital. When Eskom stalled on signing Round 4 agreements in 2016, it exposed the vulnerability of the single-buyer model. Subsequent rounds became increasingly competitive, driving bid prices down from roughly R1,170 per megawatt-hour (MWh)2 in Round 3 to between R420 and R490 per MWh1 by Round 7. Margins tightened, and success began to favour players with strong balance sheets and proven execution track records.
Policy liberalisation then opened the door to private and industrial offtake models, introducing flexibility, but also greater investment complexity. Diverse business models emerged, along with structural market shifts. Grid constraints, market liberalisation, curtailment risk, storage economics, and the rise of distributed generation are redefining the investment logic of the sector. Add policy developments to that mix, and investors have their hands full trying to find their next investment.
1.Grid constraints determine growth Transmission bottlenecks determine which projects proceed, with connection queues, substation upgrades and node-specific constraints gating development. In Round 7, despite over 10.2GW of bids submitted3, only projects with credible grid access advanced, and the Minister of Electricity and Energy stated explicitly that the grid has become a binding concern.
Eskom’s transmission approval process averages 24 months for connection studies4, while its historical build rate of approximately 300 kilometres (km) of transmission lines per year5 falls short of the 2,500 km required annually to meet system needs9. The National Transmission Company of South Africa was established as a separate subsidiary with a R112bn capital plan over five years6, and a mandate to integrate about 56 GW of new capacity between 2025 and 2034. That requires roughly 14,500 km of new lines and 210 transformers6, representing a fivefold increase over the previous decade.
Execution risk remains material, but projects with early queue positions, credible substation upgrade plans, and the balance sheet to post guarantees have measurable advantage. Grid access has become a source of competitive differentiation.
2.Liberalisation opens the market to opportunities and complexity The removal of generation caps and the emergence of a wholesale market are changing contracting and trading dynamics, particularly in the Commercial and Industrial (C&I) segment, where monthly or pay-as-consumed structures are gaining ground. These models expand access and stimulate innovation in trading and retail, but they also shift risk allocation, and require more sophisticated diligence.
Eskom’s contested trading positions and evolving relationship with private generators add friction. While some curtailment protocols have been clarified, the interplay between transmission control, market participation and regulatory oversight creates ongoing complexity that investors must navigate carefully. Returns now accrue to platforms that can manage contracting risk, shape exposure operationally, and build portfolios across multiple offtake models.
3.Daytime oversupply compresses tariffs and elevates storage Rapid PV buildout has depressed midday prices in several regions, and curtailment (forced output reduction to protect grid stability) is being used to manage scarce transmission capacity. Revenue depends on shaping output to match demand curves and grid availability, not just contracted MWh pricing. REIPPPP Round 7 introduced a 10% curtailment cap4, replacing uncapped rights from earlier rounds, which creates bounded but material revenue risk that must be priced accurately.
Subsequently, batteries have become increasingly important. At grid scale, they stabilise supply and allow producers to dispatch when prices are higher, while in C&I installations, they mitigate curtailment exposure, optimise time-of-use tariffs, and provide backup during outages. Battery Energy Storage Round two showed 35% price compression versus Round 11, signalling both improving economics and rising competition.
Conservative models should assume realistic depth-of-discharge parameters, and account for augmentation typically required at year 8 to 10. Investors need to interrogate cycling regimes, degradation assumptions, augmentation plans, warranty coverage, and replacement cost pathways, because projects that treat storage as an afterthought carry downside risk.
4.Distributed generation remains a growth outlet Behind-the-meter solar expanded rapidly, with installed private capacity climbing from roughly 2.26GW in 2022 to about 7.3GW in 20247, a 220% increase over just two years.
Momentum slowed in 2024 as load-shedding eased and regulatory clarity lagged, with new project volumes down 60 to 80% year-on-year8.
Despite this slowdown, distributed generation remains compelling for equity because project cycles are short, exposure to Eskom’s grid congestion is limited, and customers value the resilience premium that reliable onsite power provides. Individual assets generate modest returns, but portfolio speed and efficient origination can deliver strong risk-adjusted outcomes.
Municipal feed-in tariffs, now active in roughly 80 to 100 of South Africa’s 257 municipalities8, allow surplus electricity to be sold back into the grid, creating an additional revenue stream that shortens payback periods and stabilises cash flow. Municipalities that formalise and standardise these tariffs represent the next frontier for scalable distributed portfolios.
Policy and market signals to watch
Supply and demand trends are not the only market forces at play here: investors must also take notice of the latest policy changes, which promise to impact the market even further.
Private transmission opening: Government has introduced Independent Transmission Projects to allow private participation in grid expansion. Seven pilot schemes, covering about 1,164 km in the Northern Cape, North West and Gauteng are planned, with pre-qualification expected by July 20259. If successful, this model could unlock stalled nodes and ease grid congestion; if not, grid scarcity will continue to limit new project growth.
Market design and regulatory reform: The Renewable Energy Masterplan is beginning to give South Africa’s power sector a clearer industrial and infrastructure direction. Efforts to formalise private participation and develop a wholesale electricity market could improve liquidity and project bankability over time. However, overlapping mandates and regulatory disputes show that reform remains uneven. Investors should structure deals to remain profitable under current rules, but flexible enough to benefit as reforms mature.
Municipal frameworks for distributed generation: Local regulation will be decisive for the growth of commercial and residential solar models, such as solar-as-a-service and rent-to-own. Standardised tariffs, streamlined approval processes, and stable wheeling frameworks are essential to attract private capital. While regulation is still fragmented, a growing number of municipalities are setting early examples of how coherent local policy can drive replicable and bankable investment opportunities.
What this means for capital allocation
Returns no longer flow from favourable tariffs or cheap capital. They now accumulate to platforms that have developed three specific capabilities: (1) securing early grid queue positions and maintaining relationships with Eskom and NTCSA to navigate transmission approvals, (2) managing battery dispatch optimisation and degradation across asset lifecycles, rather than treating storage as passive equipment, and (3) structuring portfolios across multiple offtake models while maintaining construction discipline when grid capacity constrains.
Most developers lack one or more of these capabilities. Grid queues are long because projects enter without credible substation upgrade plans or balance sheets to fund connection guarantees. Storage is being added to meet bankability requirements, but without in-house expertise to optimise dispatch strategies or manage augmentation economics. This capability gap creates genuine selection opportunity in what appears to be a crowded market.
For investors, this means evolving the diligence process. The critical questions become:
Does the target have existing queue positions at substations with identified upgrade pathways?
Have they successfully connected projects to constrained nodes before?
Do they have in-house storage expertise to optimise dispatch and manage degradation proactively?
Can they demonstrate discipline to slow deployment when grid capacity constrains?
Portfolio construction should favour concentrated positions in platforms with proven execution capability over diversified exposure across earlier-stage developers. Execution capability is now the dominant success factor, and it’s not evenly distributed.
Where returns live
South African solar is still investable, but it has become more selective. Returns are concentrated in platforms that can manage grid access, integrate storage effectively, and navigate contracting complexity.
The investors who will outperform are those who recognise that complexity creates advantage for platforms with genuine capability. Strong returns remain, but they belong to investors who can distinguish platforms that execute from those that merely promise to do so. That distinction requires rigorous operational diligence, and making that investment in due diligence capability creates an edge.
Willem Rautenbach is Vice-President and Lushano Le Roux is an Associate | Singular Advisory Africa
This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.
DealMakers is SA’s M&A publication. www.dealmakerssouthafrica.com
1. Solar Wins South Africa’s REIPPPP 7 Renewable Energy Auction, TaiyangNews
Bidcorp has increased margins in a relatively subdued environment (JSE: BID)
This is one of the best examples of a South African company achieving global success
The JSE is littered with the broken hearts and dreams of corporates who rolled the dice on international acquisitions and destroyed shareholder value in the process. But Bidcorp stands head and shoulders above the crowd, with a track record of organic and inorganic growth on the global stage. They even manage to make money in that most treacherous market of all: Australia! If you want to see a great example of a South African company finding success abroad, Bidcorp is a good place to look.
The company has given an update for the four months to October 2025. Revenue growth was 8% and trading profit growth was 8.6%, so they’ve managed to improve margins despite a difficult global operating environment. HEPS is up by 7.2% for the four months. The margin performance is made all the more impressive by a tricky inflation environment in which operating costs (like labour) are more inflationary than food prices.
Importantly, acquisitions contributed 1.4% growth in net revenue and product inflation was 2.0%. Like-for-like real organic growth (which I think is their way of saying “volumes”) was up 4%. The combination of bolt-on acquisitions and organic growth is a core feature of Bidcorp’s model, with four acquisitions year-to-date.
The constant currency numbers aren’t quite as good as the rand results noted above. The group has a mix of international businesses and they don’t operate in the US, so the rand strength against the US dollar actually doesn’t apply here. Instead, the rand’s relative weakness against a basket of other currencies has boosted the numbers.
If we look at the regional performance, Australasia grew trading profit slightly thanks to sales growth of 5%, with better momentum in margins towards the end of the period. In Europe, sales were up 9% in constant currency, but the company hasn’t indicated how margins behaved. The UK was up 5% in constant currency and trading profit growth was more than 8%, so they are doing well there in a market that has lost some of its shine. The emerging markets business has delivered year-to-date sales and trading profit growth of 7% in constant currencies.
Dipula Properties boosted by its retail portfolio (JSE: DIB)
A drop in funding costs also helped greatly
Dipula Properties released results for the year ended August. They grew net property income by 3% and distributable earnings per share by 5%. The net asset value (NAV) per share increased by 7.5%. Overall, that’s a decent set of numbers that has rewarded shareholders looking for growth in excess of inflation.
The dip in interest rates was particularly helpful here, with a 20 basis points reduction in the weighted average cost of debt for the group. This is why distributable earnings per share growth was higher than underlying property income growth.
From a NAV perspective, it was the retail portfolio that did the heavy lifting with a 10.1% uplift on a like-for-like basis. It contributes just over two-thirds of the portfolio at Dipula. Office dipped by 0.7% despite the discount rate actually dropping, so things are still tough in that part of the market. Dipula’s recent acquisition strategy reflects a strong bias for retail assets (as it should), as well as industrial plays.
The loan-to-value ratio improved from 35.7% to 34.9% over the past year. This doesn’t take into account the R559 million in equity raised in early September.
The fund has guided distributable earnings growth of 7% in 2026. Given the capital raising and acquisitive activity, one must be careful in assuming that the per-share increase will be similar.
Emira Property’s growth was hampered by the US exposure (JSE: EMI)
But at least they are in the green
Emira Property Fund released results for the six months to September. They aren’t great compared to most other property funds, with distributable income per share up by only 1.2%. The dividend per share has increased by 3.2%. Things are growing, but not by much. The NAV per share was only up by 1.4%, in line with the rather tepid performance seen in the other important numbers.
Emira is a rare breed on the JSE, as the fund includes material exposure to the US market (14% of the portfolio). Poland comprises 23% and the remaining 63% is in South Africa. Normally, the US exposure would be a lovely rand hedge. In recent times though, the rand has strengthened against the US dollar. When you combine this with the disposal of certain assets in the US, you end up with a significant decrease in earnings from that investment.
An interesting insight from the segmental view is that office vacancies improved to 8% from 8.4%. Although there is still oversupply in the market, Emira’s P- and A-grade portfolio is the best kind of office portfolio. The lower grade stuff in the market has been horrific.
As a reminder, Emira acquired shares in SA Corporate Real Estate (JSE: SAC) during and after the reporting period. They currently have an interest of 8.7% in the fund.
Gold Fields estimates operating cash flow of $20 billion over the next 5 years (JSE: GFI)
Sustaining capital and the base dividend will be similar in size
Gold Fields held a capital markets day on Wednesday. The presentation goes into much detail on the journey taken by the company over the years and what the mines look like today.
It also includes their base case financial plan for the next 5 years. This obviously depends greatly on gold prices, so you can’t treat this as much more than a best guess. The useful thing about it is it shows how the group is thinking about capital allocation:
As you can see, they are forecasting roughly $20 billion in cumulative operating cash flow from 2026 to 2030. They need to spend over $5 billion on sustaining capital, with the plan being to pay a fairly similar amount in base dividends. This leaves them with roughly half of the starting amount for use in capital projects and whatever else comes up along the way, like acquisitions or perhaps share buybacks and special dividends.
The thing with forecasts is that the numbers will almost certainly be wrong, but the underlying direction of travel and thinking along the way won’t be far off.
The gold price is doing all the work at Harmony Gold (JSE: HAR)
For various reasons, production is lower at exactly the wrong time
With the gold price shining brightly at the moment, gold miners are being measured on their ability to maximise production to respond to the opportunity. Some are doing precisely that, while others are suffering a drop in production based on various factors.
Harmony Gold finds itself in the latter category, with group production down by 8% for the first quarter of the financial year. This might be “planned” and “guided” but it’s still irritating for shareholders, as it means that the 34% increase in the average gold price translated into an increase in revenue of only 20%. The production pressure means that all-in sustaining costs (AISC) per kilogram increased by 15%. Cash operating costs per kilogram were up 14%. The profit performance clearly isn’t anywhere near as juicy as numbers we’ve seen elsewhere in the sector, like at AngloGold Ashanti (JSE: ANG) in the past week.
At a time when gold is doing so well, Harmony is allocating capital into copper as a source of diversification. The acquisition of MAC Copper was concluded in October.
Harmony has done well when viewed in isolation, but has severely underperformed its peers this year:
Growth – finally! – at PBT Holdings (JSE: PBT)
Is the painful sideways journey behind them?
PBT Group, at its core, is a management consulting company that experienced rapid growth during the pandemic. Companies needed help with their digital journeys and their data strategies, creating an excellent opportunity for this company (and global names like Accenture) to bulk up their teams and respond to demand.
But in the aftermath of the pandemic, it’s been hard to grow off that base. PBT has a solid market positioning in South Africa and an appealing spread of clients, so they were at least able to consolidate and navigate a sideways period.
It’s great to see that growth is back, albeit only modestly at revenue level (up by between 3% and 4% for the six months to September 2025). But here’s the kicker: the group has taken the necessary steps to become more efficient, driving an increase in HEPS of between 20% and 23.5%! Normalised HEPS is more modest at a range of 13.1% to 16.0%, but that’s still better than I think anyone was expecting.
Cash from operations is up by between 6.6% and 9.5%, so that will be worth digging into when full results become available on 28 November.
Purple Group is loving every minute of the J-curve (JSE: PPE)
I remain very happily long here
It’s always lovely seeing a platform business flourish up the J-curve. It’s like watching a flower blossom in the garden after putting work into the soil and remembering to water it. Purple Group is doing more than just blossom, with results for the year ended August reflecting revenue growth of 21.5% and HEPS growth of a whopping 143.3%!
This is the thing in a business like this: once all the infrastructure has been laid down, the incremental growth is highly profitable.
Importantly, the group continues to enjoy various growth flywheels. The number of active clients was up 15.7%, yet retail inflows increased by 48.2% as the group enjoyed the benefit of a client base built up over many years. The introduction of a recurring revenue model in the aftermath of the pandemic has also done wonders for the economics of the business.
I think this chart does a solid job of showing the growth not just in the core EasyEquities Retail business, but also the revenue streams that have been layered on top:
With an excellent foundation having been built in EasyEquities and the associated businesses, the future is all about how to take more financial products to that client base. There are so many options here, ranging from mortgages to crypto. There’s also the opportunity to take users up the curve in terms of sophistication and trade activity, with EasyTrader appealing to those who are looking for more than just the basic buy-and-hold platform.
The momentum in the business looks very strong, with record deposits in October. The share price might reflect a P/E multiple of 51.6x, but that could unwind quickly if they keep growing profits at this rate. My view is that there’s more than enough to believe in here, so I think the share price was justified in doubling year-to-date.
RFG Holdings suffers an earnings drop (JSE: RFG)
This comes after excellent numbers were released by Premier (JSE: PMR), the potential acquirer of the group
RFG Holdings has released a trading statement for the year ended September that shows just how much volatility they are having to deal with across their business. It makes for fascinating reading in the same week that Premier released such solid numbers. I’m still not sure why Premier wants to make its business riskier by taking on more discretionary categories like the ones you’ll find at RFG Holdings.
The food sector has many global examples of mergers and deals that should never have happened. In fact, Tiger Brands (JSE: TBS) is doing well at the moment because they are essentially unscrambling the egg by selling off things they should never have owned!
Anyway, we move on to the earnings guidance at RFG Holdings for the year. They expect HEPS to be between 8% and 13% lower, so that’s a disappointing outcome. The first negative factor is weakness in canned meat volumes, driven by inflationary pressures on the cost of the products and constrained demand. The second factor is lower demand in the international segment thanks to a global oversupply of deciduous fruit products and thus a dip in gross margins. And once you add in the effect of a stronger rand, the global numbers look even worse.
Like I said when I wrote about Premier earlier in the week, it feels like RFG Holdings is a structurally riskier business that will have more volatile earnings and thus a lower valuation multiple applied to those earnings. As the share price showed, Premier was doing far better than RFG before news of the deal sent the RFG share price much higher:
RMB Holdings has impaired the stake in Atterbury (JSE: RMH)
Like all impairments, this is related to the recoverable amount of the investment
RMB Holdings is one of several examples of a value unlock strategy being followed by a JSE-listed investment holding company. The thesis is usually along these lines: sell off all the assets in the group and return the capital to shareholders. The market usually responds like this: “Great, but until we see those assets turn into cash, you’re trading at a fat discount to net asset value (NAV) per share.”
And in practice, what tends to happen is that the easy assets get sold first and there’s good progress in returning capital to shareholders. But when it gets to the long tail of assets that are either poor performers or difficult to sell for some reason, then the wheels fall off.
At RMB Holdings, their stake in Atterbury is a difficult thing to sell based on its size and the shape of that shareholder register. It seems that this reality has found its way onto the balance sheet, with an impairment to the stake leading to an expected drop in the NAV for the year ended September 2025 of between 20% and 36%. This actually ties in with the typical marketability discounts that we’ve seen when investment holding companies are taken private.
The NAV range is 42.3 cents to 52.7 cents. The share price was trading at 45 cents before the announcement and subsequently fell to 40 cents.
Stefanutti Stocks flags a juicy jump in earnings (JSE: SSK)
The construction group has made a lot of progress
Stefanutti Stocks has had quite the journey in recent years. Just take a look at this share price chart:
When looking at the trading statement for the six months to August, you need to keep in mind that SS-Construções (Moçambique) Limitada and Stefanutti Stocks Construction Limited are held for sale. This means that there’s a big difference between earnings from total operations and earnings from continuing operations.
Continuing operations are what count. As the name suggests, these are the operations that shareholders are left with once the other deals close. HEPS from continuing operations will increase by between 45% and 65%. In case you’re wondering though, HEPS from total operations is up by between 150% and 170%.
Detailed results are expected to be made available on 25 November.
Woolworths paints a much better picture for their South African business (JSE: WHL)
Australia is still cause for concern
The apparel sector in South Africa just keeps dishing up fascinating announcements. The latest example is from Woolworths, a group that has a special place deep in the hearts of high income South African households – well, that’s true for the Woolworths Food business at least.
Fashion, Beauty and Home (FBH) has had a much tougher time of things, with only a few bright spots in areas like beauty. But for the first time in a long time, the performances across Food and FBH are of similar quality. I’m afraid that this makes things even worse for sentiment towards sector laggards Truworths (JSE: TRU) and The Foschini Group (JSE: TFG).
The Woolies update covers the 19 weeks to 9 November. As you compare it to other recent updates, just be aware of differences in trading periods and thus base periods as well.
Woolworths South Africa achieved sales growth of 7.4% for the period, with Food up 7.7% and FBH up 6.2%. If we look at comparable store growth, Food was up 6.0% and FBH managed 6.6%. The reason why FBH’s comparable store growth is higher than total growth is because they’ve been reducing trading space as part of becoming a more focused and stronger business.
Price movement at Woolworths Food was 4.8%, so even the organic what-whats that they sell aren’t experiencing runaway prices at the moment. Customers are also enjoying the convenience of Woolies Dash, with sales up 24.2%. Online is now 7.3% of SA Food sales.
At FBH, price movement was 3.3%. This means they achieved growth in volumes in the business, including in fashion where the trouble has been. The fashion business is still not the growth engine, as that recognition must go to beauty (up 9.6%) and home (up 13.8%). In case you’re wondering, online sales contribute 6% of FBH sales.
Sales were supported by a cautious approach to credit, with the Woolworths Financial Services book up 1.5% on an adjusted basis. The impairment rate is described as being sector leading, so that speaks to the caution as well.
We now reach the ongoing headache: Country Road Group. There’s a note around a “gradual improvement” in that market, with sales up 3.3% overall and 3.9% on a comparable store basis. They talk about net trading space being similar, so I’m not sure what is driving the significant difference between those two growth percentages. My worry is that they talk about the sector being “challenging” and “promotionally driven” – this speaks to pressure on margins and thus profitability.
The market liked it, with the share price closing 8.7% higher in response to the announcement.
Nibbles:
Director dealings:
A prescribed officer of ADvTECH (JSE: ADH) sold shares worth R1.2 million.
Tharisa (JSE: THA) has signed a new debt facility with Absa and Standard Bank that will help support its transition to underground mining. This is a four-year loan of $80 million (with an accordion of $20 million – just a fancy way of saying that there’s scope to increase it), as well as a revolving facility of $50 million (best thought of like an access bond for your house). The group also confirmed that the net cash position as at September 2025 was $68.6 million.
When you see unusual names pop up on a shareholder register with a holding of 5%, 10% or more (as increments of 5% must be announced), sometimes it’s something and sometimes it’s nothing. At Sephaku Holdings (JSE: SEP), they announced that David Fraser and concert parties now hold 10.02% in the company. If I Google the name, the top result is for the chairman of Peregrine Capital. I cannot be 100% sure if it’s the same David Fraser, but it seems very likely.
Universal Partners (JSE: UPL) released results for the quarter ended September 2025. Their NAV per share fell by 8.6% over 12 months. It was ever so slightly down over the past 3 months. There’s practically no liquidity in the stock, so I’m not going into details here. If you do fancy reading about one of the most diversified (and random) portfolios around – from dentistry roll-ups to credit lending – then go check them out.
Introducing Bootlegger co-founder and CEO Ricky Ruthenberg:
Ricky Ruthenberg has truly taken a ground-up approach to his career. Adapting to opportunities as they present themselves is clearly a powerful skill. From waiting tables at Col’Cacchio to helping launch the first Bootlegger in Sea Point, he’s gone on to build the team that runs a national chain of nearly 100 Bootlegger restaurants.
From espresso to enterprise, this is the story of building something from nothing. Hard work, perseverance and self-belief are the ingredients in this delicious recipe.
On episode 5 of The Finance Ghost Plugged in with Capitec, Ricky talks about what it takes to grow a local brand into a national success story.
Episode 5 covers:
The value of Capitec as a franchise funding partner
The hard work required when opening a restaurant and why owner involvement is critical in the early days
Building the Bootlegger brand and overcoming challenges along the way
Why the group runs a mix of corporate-owned and franchise stores and how that creates opportunity
The pros and cons of having master franchisees vs many individual franchisees
How the retail store model helps drive brand awareness and loyalty
How his role has evolved from cooking and closing up the first store to leading a national team as CEO
Managing coffee price volatility and the strategies behind it
How the Bootlegger survived COVID and thrived afterwards
The Finance Ghost plugged in with Capitec is made possible by the support of Capitec Business. All the entrepreneurs featured on this podcast are clients of Capitec. Capitec is an authorised Financial Services Provider, FSP number 46669.
Listen to the podcast here:
Read the transcript:
The Finance Ghost: Welcome to episode five of The Finance Ghost plugged in with Capitec. I am fighting with broken internet this morning, and some coffee managed to get me through some of that pain at least. My guest today is someone who is very well experienced at providing people with coffee to get them through their day. That is Ricky Ruthenberg and he is one of the founders at Bootlegger. That is certainly a brand that I think everyone knows by now, Ricky. So congratulations on that – what a cool thing to have been part of building what is basically now a household brand in South Africa! There really aren’t a lot of people who can say that. So welcome to the show.
Ricky Ruthenberg: Yeah, thanks so much. It’s an honour to be here. In the busy days nowadays, you’re just kind of moving through the day-to-day, and you don’t really get an opportunity to reflect on what you’re doing. So always nice to have a bit of a chat and discuss what’s up!
The Finance Ghost: Yeah, absolutely. Thank you for your time. You are a busy man, so let’s get the important one out the way first – just to show how busy you are, you are now in a position to answer this question: what keeps you up more at night – strong coffee, or a newborn? Which one?
Ricky Ruthenberg: At the moment, the newborn! But historically, it was a misplaced coffee in the afternoon when you’re losing track of the day. If you drink coffee after two, you don’t sleep. But at the moment, definitely the newborn. I’ve got a very, very rigid cycle where I just basically wake up at four and I don’t sleep till the next day at four.
The Finance Ghost: Incredible.
Ricky Ruthenberg: It flows quite nicely.
The Finance Ghost: Yes, that does sound fairly wild. Speaking of wild, and certainly the baby is one startup, Bootlegger has been another. Give us the backstory here. How did you get involved in building this business?
And I know from us chatting before the show that it was actually a case of you being an employee first, which is quite a nice nuanced story vs. the norm around these startups and business stories. Walk us through the backstory to your involvement there.
Ricky Ruthenberg: I got involved with the guys around 2012, I was working for a brand called Col’Cacchio. I was actually a waiter. Happened to move from the waitering role into a management role and I found myself in a Pieter Bloom store and he obviously owns it with some of the other shareholders. I was a manager in their store. I worked there for about a year. I didn’t really work too closely with Pieter, but after about a year working there, I started hearing murmurings from customers like, “Hey, I hear the store is sold.” And I was like, “No, there’s no way these guys have sold the store.” Anyways, I still phoned Pieter and said, “Listen, did you sell this business?” And he’s like, “No, no, no, no, we never sold it.”
You know, life goes on. Two to three days later, hear it again. And I’m like, no, man, this can’t be a coincidence. So I phoned him. I’m like, “You definitely sold it.” He’s like, “No, no, I didn’t, I didn’t.” “Okay, I trust you. You’re my boss.”
Then a couple of days later, he comes to the store. He’s like, “Okay, I lied. I did sell the store, but we’re starting something really cool.” And at that stage, he had already bought the coffee roaster, already just named the brand, and the original intention was to roast coffee and do wholesale coffee.
So in the transition out of the Col’Cacchio store, while the handover to the new owners was happening, we basically built out this entire Bootlegger concept. The original idea was to bring the coffee roaster, which recently been imported. It was sitting in at the Ou Meul up in Riviersonderend. The idea was to bring it down to Cape Town and find a house for the roaster itself. Peter happened to find a really nice location in Sea Point on the corner of Regent and Clarens. It was the ideal location for a cafe, even though the original idea was just the roast coffee. But we thought, if there’s going to be a coffee roaster and there’s a nice front shop, maybe we have a coffee bar?
That very, very quickly evolved into a 6am to midnight operation. Quite an interesting journey. It was completely unexpected – and I actually resigned two weeks before we opened! We had set up the entire restaurant from menus to drinks to crockery, cutlery, staffing, everything. It was a lot of work and I met Pieter two weeks before and I had just gotten a job offer. In my head, I just couldn’t turn it down. And I said to him, “I can’t do this with you.” He obviously didn’t take it very well and he said, “Listen, it’s not acceptable. I’ll see you Monday morning!” So I said, “okay,” rocked up on Monday and he gave me a contract. He put it in front of me. He said, “Write your own contract, whatever’s going to make you comfortable.” And I wrote it, he signed it, and we’ve never had any discussions from there on about that. And here we are.
The Finance Ghost: Amazing. I love that. Oh, my gosh.
Ricky Ruthenberg: Yeah.
The Finance Ghost: So were you an equity partner then from that point onwards, or how does it actually work that time?
Ricky Ruthenberg: No, no, no, I wasn’t. I was essentially – very, very complicated stories, but basically the three shareholders in total, so it’s Pieter, De Waal, and Antonie, and I was essentially the first employee. And I basically employed the whole team and built the whole store out. I’m incredibly ambitious so I kept nudging the guys to say, “Listen, I really want to be part of this. I want to be part of this!” And they said, “Well, you know, this is our little baby. What do you want to do?” So I said, “Okay, let me try something.”
So I hopped onto Alibaba and I found a cup manufacturer in China and I bought half a pallet of branded cups, essentially the first Bootlegger branded cups. I imported it, it landed, I showed the guys, and I was like, “Listen, this is what I want to do. I want to sell this, these cups to you.” And they’re like, “Okay, cool, let’s be partners.” So we started a business together, which was called Clarens Road Trading, because we were on Clarens, and we were selling, essentially importing cups and selling it to the stores.
And that lasted all of, like, two, three years and then eventually I just said to the guys, it doesn’t really make sense, we all kind of agree, it doesn’t make sense that I have a business that sells to the businesses. So they essentially bought that business out and we traded that for shares into the business.
The Finance Ghost: Okay. Wow!
Ricky Ruthenberg: Yeah. So quite an interesting little journey into the whole story.
The Finance Ghost: That is pretty interesting. They made you work for it. There was no “day one” equity partnership.
Ricky Ruthenberg: No, that wasn’t the end of it. It got a bit deeper. I’m also a franchisee at the moment, so I’ve got a bunch of franchise stores as well over time that I started with some partners. No, it’s been a very interesting journey, but, yeah, I guess all part of business.
The Finance Ghost: Yeah, it is. That’s the thing – it’s very rarely a linear process. Actually what you’ve talked to there is something that’s pretty common in business, which is this concept of: what are you bringing to this to be an equity partner? Which is not wrong, to be fair. And kudos to you for bringing them something to make you an equity partner. So well done.
Ricky Ruthenberg: Yeah, thanks.
The Finance Ghost: It sounds like an interesting backstory of note. Lots of complexities in it, so thank you for that candid answer. I think there’s far too much nonsense online of just everyone sits around and sings Kumbaya and becomes equal shareholders and everything works beautifully. I hate that kind of narrative. It’s very rarely how it works in practice.
Ricky Ruthenberg: Yeah, exactly.
The Finance Ghost: Speaking of things that are difficult: restaurants! When I hear you say things like “6am to midnight,” I just get tired thinking about it. I don’t know who you were selling coffee to at midnight. People are making bad choices out there in Sea Point. Anyway be that as it may, it is a late-night vibe, so I’m only kidding. If you can have a Red Bull alcohol drink at 2 in the morning, I think a coffee at 11pm is not the biggest sin you can commit against your sleep patterns in your 20s.
Ricky Ruthenberg: You’re making an interesting point there, I think, like I said – originally we were just going to do roasting coffee, just wholesale and then it kind of moved into coffee, croissants, lunch, sandwich. Then eventually it got to like, okay, but what do you do after work? You have a beer!
So we created a proper bar – that little Bootlegger store in Sea Point was a proper evening bar, which was confusing for the future of the brand because our logo had quite easily baked “Coffee Company” underneath the name. It was Bootlegger Coffee Company. But every time you drive past them at 10 at night in Sea Point, Monday to Sunday, there’s people just drinking beer and having a jol. And so it was quite confusing. The people in the area initially understood it, but as soon as we started branching out into the ‘burbs and to Joburg, people just didn’t really get it. Why are people drinking beer in a coffee shop?
The Finance Ghost: So what do you think is the secret? It’s amazing how you started with this idea of one thing, then it became another. Then it evolved again, then it grew out into a totally different thing really and now it’s a big franchise story. The end result is the dream, which is this big, national brand franchise chain. That’s what I think anyone starting this kind of restaurant would dream of. But the route to get there has obviously been absolutely crazy.
Ricky Ruthenberg: Yeah.
The Finance Ghost: And restaurants have a very high failure rate. They are notorious for it.
Ricky Ruthenberg: Yeah.
The Finance Ghost: I think everyone who likes food has at some point fantasised about the idea of a little space that becomes available at your local mall. And you think to yourself: “That could be my XYZ shop!” There are a lot of dreams that get broken and hearts that get broken along the way.
What attracted you into this industry other than, at the time, you were working in a very junior role? It’s actually quite fun, it’s not like you sat up and said, “Hey, I want to start a restaurant.” You were like, “Oh, I need to waiter somewhere.”
What attracted you to stay in this industry? And what do you think the secret is for anyone who actually really does want to make it work with a restaurant? Because a lot of people listening to this will be either current restaurant owners or aspiring restaurant owners who will look to the Bootlegger brand as a real success story.
Ricky Ruthenberg: Yeah, I think it’s an interesting question. When I finished school, it was the natural way to make some money. My siblings did it. They were waitering and managing in restaurants just while they were studying. And so for me, finished school, day one – I need to make some money, let’s go waiter! I kind of got sucked into that for the first year, and then I was really interested by it, but obviously it’s not very lucrative. I didn’t have any tertiary studies, so I was trying to find ways in the industry to make some extra bucks in it and essentially to grow. I evolved from waitering the first restaurant, then managing and then I went overseas. I worked on cruise ships and worked in some bars and eventually decided to come back. So I want to say I almost fell into it myself.
But when it comes to the secret, I want to say that the secret in that instance was just timing! But the reality is, if I could, maybe the secret is to not start. No, I’m kidding.
Restaurants – I almost want to say at the time we were building Bootlegger, we didn’t really know we were building. You had no idea. You kind of open up a coffee shop. I think from day one, we were seeing at that stage, within the first week, we were doing like a thousand coffees a day. You don’t know why people are coming in, what they’re doing, why they’re returning, and what you’re building. And you only kind of look back on it and then start trying to unpack what it was that you created and the community that you built, essentially. And now, obviously, we’re skipping 10, 12 years forward, you’re in franchising and you’re seeing all different types of approaches to restaurants.
In restaurants, I think presence, maybe even clarity, like, what are you doing? What are you selling? Who are you selling to? And then presence. Are you there? And I think a big, big part of the success of our early days was the fact that myself and Pieter were in that store open to close. Talk about long hours. For the first almost two years of that restaurant, we were there every day before 6, and we closed the store every day, 11, 12 on the weekend, sometimes 2, and then you back there the next morning, 5, 6. Like, it was incredibly hard environment.
But we were there. We got to see all the different parts of the business. We were involved. We made all the food, we made all the drinks. We literally made everything to the point we had a little joke about, like, a Sunday roast. Pieter would be off on a Sunday and I’d phone him in because we’re out of coffee. And he’d come literally roast coffee, barefoot, and we’d take it from the roaster and throw it into the hopper. I want to say the success is being there and speaking to your people and understanding and building something. And I can tell you, to this day, people still say, oh, I know Pieter, I know Ricky. They talk about it. And talking far removed, like 100 stores down the line, in the middle of Bloem, someone’s like, oh, I know Pieter Bloom. Yeah, that’s a coincidence.
But I think that builds a lot in the brand and it builds trust, and I think it builds authenticity. I don’t think there’s one secret. I think there’s many different formats of restaurants and different opportunities, but I think the location is key and being like, super clear on what you want to do and having the time to actually be there. Can’t just open a restaurant, employ people and expect people to understand your dream. You have to show them what you’re doing, right? So very difficult!
The Finance Ghost: Yes, you’ve touched on such great points there. So that initial – I mean, it’s the grind, right, coffee pun included?
Ricky Ruthenberg: Yeah.
The Finance Ghost: Being there for long, long hours. As you said, those are very long hours. And I think that is part of the mistake people make is they think: “Oh, I’ll open this thing, I’ll hire a manager.” As you say, it’s not going to work to get it off the ground, you need to go there and actually make the thing what you believe it needs to be. And then location, definitely, you’ve touched on that as well. When you’re talking about a thousand coffees a day, if you’re in the wrong place, I don’t care how cool your coffee is and how nice your place is, you’re not selling a thousand coffees a day.
Ricky Ruthenberg: Yeah, exactly.
The Finance Ghost: Location is critical. Right? Particularly on something like that.
Ricky Ruthenberg: Ghost, just to speak to being there. So over our tenure with the guys, we’ve built five different concepts. We’ve had different brands. You think you’ve built something cool and you feel like you know how to do it. You reflect back, trying to understand what you built and how you made a success. And then someone’s like, hey, let’s create a new brand. You’re like, yeah, sure, it’s easy. We know all the – it takes time, but it’s easy. Then you build out a new brand, you open a restaurant, and then it doesn’t work. And you might even be in a good location, you can’t understand why.
And I think a big part of that, is that presence. The restaurant or the new brand that you have, doesn’t have a lot of personality and you’re not physically there creating a name for yourself, you’re manager-run. It’s really, really, really difficult to do that. So think carefully before opening a new restaurant. But I obviously always encourage it. I love new little spots.
The Finance Ghost: Yeah, absolutely! And I think that’s a very, again, just very candid and fair answer. It’s a real-world look at what it’s going to take to make this thing work. And like you say, even with all the experience you have, sometimes you’ll try something and it still won’t work. That’s the failure rate that is so hard. And once you’re an established chain and you actually have some money to incubate a concept and roll the dice, that’s one thing. But when it’s someone piling their life savings into a dream and then it doesn’t work, it’s a catastrophe. I think that’s where it’s such a tough industry and breaks so many hearts along the way.
I guess the one good thing I’ll say is at least AI can’t replace it because we all need to eat and we all need to drink coffee, or at least we want to, most of us. So, you know, at least you’ve got that – you’re on the right side of AI, if nothing else.
Ricky Ruthenberg: Exactly! We’re safe for now, I think the more disconnected humans become, the more connected we want to become. And I think that’s what we’re seeing in our restaurants, that even though we’re that co-working space for a lot of people, people might walk into the spot, they sit down, open their laptop, put their headphones on, they don’t talk to anyone, but they still feel like that they’re part of a community and in a vibe, you can’t replace that by being at home. So I think it’s really, really important to keep building these little spots out, creating community.
The Finance Ghost: Yeah, you’re right. I make a point actually of walking every day. So I moved house recently and there’s this cute little deli down the road and I go and buy either a smoothie or something almost every day because (1) it gets me out the house because I work from home. But (2), if you don’t support these little businesses in your community, they fail. And then you end up losing such a core part of the DNA of where you live.
Ricky Ruthenberg: Yeah, 100%.
The Finance Ghost: And I get to walk there and so I’m very lucky, which is cool. You can’t walk everywhere in South Africa, but I can walk there.
Ricky Ruthenberg: Do they know your name?
The Finance Ghost: They do.
Ricky Ruthenberg: Do they call you Ghost?
The Finance Ghost: No, no, they don’t know my stage name. They know my actual name luckily. I try to be as normal as possible in my real life, Ricky. And it’s just nice to see the same faces and the same names.
I think it’s like some of that familiarity that you’ve bred in Bootlegger – you mentioned to me also when we were chatting before the podcast, just stuff like having the same Wi-Fi code across all your stores. Right? It just breeds familiarity.
Ricky Ruthenberg: Yeah, exactly. Yeah, it’s all intentional.
The Finance Ghost: Those are the tricks.
Ricky Ruthenberg: Don’t give them away.
The Finance Ghost: I think there are slightly more tricks than that. If it was as easy as a Wi-Fi code, there would be more national chains!
So that brings me to my next point, which is this is now a national brand. Having started down in Sea Point, it’s now gone all over the place, which is amazing. When I was growing up actually, Bootleggers – with an “s” – was the liquor store near my house, I remember it clearly. So I know there was a bit of head bumping along the way with that and maybe some brand confusion. Bootlegger has somewhat of an alcohol connotation, for want of a better description. How many times did you bump your head with this name along the way on the journey you’ve been on?
Ricky Ruthenberg: Yeah, probably a few times. I think Bootleggers in Joburg was probably the biggest one in terms of: what is Bootlegger? Funny thing is, when we started Bootlegger, everybody used to call it Bootleggers. And we spent years telling people: “It’s Bootlegger! We are not Bootleggers.”
And then you go to Joburg and I think our first store in Joburg was 2017, so four years after we opened – and then it’s like you start that cycle again of educating people: it’s Bootlegger, not Bootleggers. I think that was probably the biggest head bump, to be honest. There weren’t too many along the way.
I actually want to take even one step back. I think you build a brand in Cape Town – we built like 17-odd stores – and then you’re like, okay, cool, we’re ready now for the rest of the country. Let’s go to Joburg and let’s start in Sandton and let’s go all out. Let’s build a monster, so we built this massive restaurant in Sandton in the Marc, the old Village Walk. We’re like, okay, but people know us. We open the doors and people are like: “Bootlegger? Is this a liquor shop?” The entire time, even up until now, still people thought like, oh, you’re affiliated.
The Finance Ghost: Taking you back to your Sea Point roots.
Ricky Ruthenberg: Yeah, 100%.
The Finance Ghost: It was the liquor shop.
Ricky Ruthenberg: Yeah, exactly. As time went on, I guess we slowly started establishing our name a little bit more firmly. And I think the most confusing thing for people was essentially the “coffee company” and what we are. So you might have seen in our new branding, we’ve actually removed the coffee company. And a big part of that was just to tell people we’re a national brand. We’re not only coffee, because when people are like, why are you building a 500 square coffee shop in Sandton? You’re only selling coffee. We actually got an extensive food menu and you’ve got a massive team that’s focusing on our food offering and stuff.
So in terms of head bumping, not too much except for the invoices we got from Bootleggers’ distribution in Joburg and people mistakenly thought we were the liquor company occasionally.
The Finance Ghost: Amazing. Yeah. There’s always going to be these stories. I want to ask you more about the store mix just now, but I think let’s maybe touch on one more thing about the coffee because like you say, you’ve evolved from being a pure coffee company now into much more than that. But if I go to my local retail store, I can still buy Bootlegger beans and I’ve done so before several times.
I know that competitors like – I can say this to you, “competitors like” Famous Brands – it’s pretty cool to be able to come up in that kind of context! Competitors like them also do this. They will sell you their branded sauces etc. in the retailers and I’ve looked at the numbers before with the likes of Famous Brands and it’s not huge, it doesn’t appear to be much of a money spinner for them, to be honest. Although obviously their restaurant business is very big, so it dwarfs anything.
Ricky Ruthenberg: Yeah.
The Finance Ghost: So it strikes me as a bit of a hard way to make money. More of a brand recognition thing for the customer versus outright profits. Why do you guys stick with that route of having the beans in the stores? Is it kind of a take-my-brand-home, have-me-in-your-kitchen strategy?
Ricky Ruthenberg: Yeah. Essentially you want to be in people’s homes, but it’s just marketing, to be honest, I think you touched on a few of the points. It’s very, very thin margins. I think in some cases there’s almost no margin for us because you’re using essentially merchandisers to put your product on the shelves and they manage it and they pack the shelves and they take a big cut and so do the retailers.
So for us it’s a decision when you want to go into retail – we’ve had to work quite closely with the merchandisers to discuss which retail stores we want to go into – how aggressively do you want to go? Because if you’re not making money just to put all that stock into the stores, that’s extremely strenuous on your cash flow.
I think up until about a year ago, we were only in 50 retailers. Oh, and the other thing is that there’s obviously terms, up to 90 days on most of these guys. So that stock is literally just sitting.
But we’ve done some cool things with it. So we used to use it as a bit of a strategy. If you’re entering a new node, for example, when we went up to KZN, we signed a site probably 12 months before we went up and then we just made a decision to speak to the merchandiser and say, listen, activate us in as many retail stores in KZN as possible just to see if people just start getting familiar. Because like our previous lessons before, you go to Joburg, you think everyone knows you and 99% of the customers have no idea who you are. It’s quite shocking. At least now there’s a few touch points and one of them being in a retail store. So there’s definitely strategy.
Downside – they manage the price. They don’t only squeeze you on the purchase price, they squeeze you on the selling price, which is obviously where some head bumping with franchisees occurs. But we try our best to manage that, and ultimately we believe that the upside is better.
The Finance Ghost: I was going to say, that is definitely not the first story of someone going from Sea Point to Joburg and being humbled by the sheer size of that beast.
Ricky Ruthenberg: Yeah, exactly.
The Finance Ghost: This is a story as old as time.
Ricky Ruthenberg: Yeah, exactly. I found in Joburg the first three, four stores were doing okay, but as we started opening a lot of stores and having a big presence, we built a lot of trust with people. Driving down the highway and you’re seeing a Bootlegger sign: “What is that?” And you’re seeing it again and then you’re seeing it the third time, like, “Oh, I definitely should try that!” versus just driving past and seeing it as a once-off shop. So I think there’s a lot of value in expanding like that too.
The Finance Ghost: Yeah, absolutely, I would agree with that, actually. Even just as a consumer and from an economics perspective, I know that’s the case in terms of scale and everything else.
I mean, look at – now you are the CEO of this thing and you are not opening the store at 6am anymore and closing it at 12. Your role has changed dramatically.
Ricky Ruthenberg: Maybe I am!
The Finance Ghost: Maybe you are! Yeah, maybe. Maybe that’s still part of it. Let me actually ask you that – just listening to the backstory and everything, your role today is presumably so incredibly different from what it was back then. What does it look like now? What keeps you busy? Where is the focus area? Is it on finding sites? Is it on the menu?
I imagine you’ve got people doing all of this stuff and you’ve got to just now steer the ship like any CEO.
Ricky Ruthenberg: I haven’t necessarily got any formal experience in this, or training, so I learned it as we went. From day one, essentially my contract that I had way back when, never had a title on it. So now I’m just a manager. And then it’s like you’re a manager of two restaurants, then you’re a manager of five, and now all of a sudden you’re managing 20 restaurants and you’re just hiring people.
I still remember there was time where I needed to employ someone to do my job and I was like, that was so strange. So I went to the shareholders, “Listen, I’m going to change my job title from Operations Manager to Operations Director and then I’m going to employ another Operations Manager.” They’re like, “Okay, ja sure.” And their approach to me and kind of watching me grow was like, if he really believes in it and he’s going to own that title, he must do the work. And I think that’s pretty much how I got here today.
We kept advancing and I kept looking for gaps in the company, employing people to replace myself and essentially got myself to this role and now things look incredibly different.
Listen, I’ve got in theory 12 operational departments. My head office team’s about 70 odd people. There are obviously teams who manage teams, but I try and participate as much as possible. So we’ve got a new business team, we’ve got a project team and you got marketing, accounts and all the way through to manufacturing, which is our roastery and I’ve got quite a big bakery as well. And then you’ve got your restaurants division, your brand standards division. And then the ones that I essentially focus on mostly would be your support functions like your HR.
Finding people at this level is extremely important and making sure you’ve got the right people in the right place, like you say, steering the ship. I actually gave myself a title at the beginning of the year and I told the guys that this is my role for the year: I’m the Unblocker. I will make sure that I watch, I just watch everybody in the teams. It’s really, Ghost, I don’t know how to tell you…
The Finance Ghost: …Chief Unblocking Officer, man, that hasn’t made its way to VC land yet, let me tell you! That’s incredible.
Ricky Ruthenberg: Yeah, exactly. Well, the whole point is you want people to move forward and everybody has their own agenda. So you need to create a vision, create values, create objectives and try and get everybody on the same page. But not everybody understands it. They don’t understand exactly what you’re doing. They don’t know why you’re doing it. So you have to make sure you create the “why” – and then there are some people that are just stubborn and they just won’t do it. And you’ve got to find out who they are, coach them, send them on courses or essentially find other people to do those jobs.
So that’s the main focus.
I want to say, I’m sitting in my office now, it’s a glass office looking at the entire team in front of me – there are so many day-one employees here, which is super important. So many of my guys have been with us from like nine years. My actual first employee below me is sitting in my office now too.
The Finance Ghost: Yeah, that’s amazing.
Ricky Ruthenberg: So she runs a whole other division on our business. They focus on tenders and stuff like that. The upside is that they understand you, so you don’t have to give a lot of context. “I want to do X,” – they know how Ricky thinks, they know what he wants to do. They don’t need much more. Then you get a new person who’s essentially in a more senior role that’s three times more senior than that and they don’t understand you. You’ve got to spend a lot of time with them. So essentially the Master Unblocker. I look for the gaps and I see how I can help people move forward.
The Finance Ghost: Love it. It’s amazing. It’s also such a wholesome story. So because my background is very different, I’m a Chartered Accountant, a lot of my friends who went that route, those who have started businesses, they start at that like “CEO” level. They know exactly how to do that job and they struggle so much to understand the operational stuff. It’s almost like, “How do I hire someone to take this off my plate?” They are singularly bad at outsourcing. Whereas you’ve gone the other way around, which is actually to learn the nuts and bolts first and then say, okay, it’s time to replace me.
Ricky Ruthenberg: Yeah.
The Finance Ghost: Which is very cool!
Ricky Ruthenberg: That’s 100%.
The Finance Ghost: That’s a really good way to actually build a business.
Ricky Ruthenberg: Exactly, but you know from my side, like the operational side, you miss certain parts of it too.
The Finance Ghost: I’m sure not the 6am unlocking of the door. Surely?
Ricky Ruthenberg: Well it’s 4am now, so …..
The Finance Ghost: Oh my goodness. Actually, what was worse? Was it unlocking the door in Sea Point or was it chasing drunk people out at midnight? Which was more irritating?
Ricky Ruthenberg: It’s hard to answer that because I was one of the drunk people. No, I’m kidding. I’m just kidding! No, I’m an early guy. I think the nights are always harder. I love mornings. I’m a morning person and I get my day started early already.
The Finance Ghost: Oh really, okay but probably my worst nightmare would be to have to – well, I say that, but Ghost Mail I have to start early in the morning. At least I don’t have to be somewhere at six other than my office at home.
Ricky Ruthenberg: Yeah, exactly. And imagine what time the staff have to be at work, 5.30am.
The Finance Ghost: No it’s wild.
Ricky Ruthenberg: To get ready for the 6am coffee.
The Finance Ghost: People work hard hey, people do. They work. They hustle. Much respect for it.
So speaking of where people need to be, Bootlegger now is a hybrid franchise model. That means that your footprint is a mix of corporate owned and then franchise stores, which is very interesting. Pretty common approach.
I think the mix is very important and I’m keen to hear it in your own words, why this is a common approach. I obviously, from an investor perspective, I’ve read about it in all of the big global names, even the local equivalents. But I’m very keen to hear from you as an Operations CEO, why do you think that mix is important? And as you mentioned earlier, you’re also a franchisee, so you actually sit on both sides of it, which is extra interesting. So I think maybe walk us through elements of that. I’m just keen to learn some stuff from you on some of that.
Ricky Ruthenberg: I think first and foremost, we built up to, I think it was 16 or 17 stores before we decided to franchise. And we decided to franchise because the brand was gaining some traction and there were opportunities coming our way and when you’re building quite a few sites, cash flow is starting to get tight. You can’t take on all these opportunities on your own. We’ve got a really good team. We had training department, we had a menu department and we had operations. We thought, okay, we’ve got a big enough team to build out a franchise model. What does that entail? Do you get some consultants involved? Chat to them, you try and understand franchising, you build out the model and we were successful in doing that.
And then you build a few franchises. So the initial idea was one store and then we got to 20 stores and it was like, okay, cool, we got some traction, let’s build more. But we can’t necessarily do it all on our own cash flow wise. So that’s where the idea of franchising came. And then flash forward to now, the split is around, we’re almost on 100 sites and we opened number 94 yesterday in Knysna. I think our corporate sites are on 22 at the moment, and then the rest are all franchise.
Why it’s important is we are as affected as the franchisees in the ups and downs in the cost of the business and we need to make sure that the store is profitable. And I think it’s very, very difficult to do that if you’re not physically in it, you’re not physically feeling the profits. So it gives us a really, really good window into how all the stores are doing.
I can tell you the net profit off the top of my head, if I look at a store at their turnover, understand where they’re located, I can give you a very good idea of what that store’s making profit wise, can tell you if it’s losing money. And that’s all because I have an inbox full of income statements that we go through all the time. And I think a lot of people, it’s such an interesting thing when you get to scale, everybody wants to sell you a service because it’s like, oh, it’s only a R1,000 a month – times 100!
Restaurants, they constantly have these stacking costs. If you don’t own the restaurants yourself, from a franchisor perspective, do I want all those services? I want every single one of them, because it makes my life easier and it makes the franchisees life easier. Will the store make profit if you have all those stacked costs? No, it’ll make zero. So it’s important that we feel the pressure that the franchisees do. I’m not saying we’ll ever lose sight of that because we’re obviously pretty good entrepreneurs, or we believe we are, we believe we know what we’re doing. But I think the mix is important to feel it. So there’s another strategic point is like, if we’re opening stores, our corporate store cluster houses probably about 500 to 600 people in those stores. So let’s say I’m opening a new store in, I don’t know, Durbanville, I can just loan them staff. I can open that store in a month’s time. I can move staff from around Cape Town. We kind of use half-new, half-old, and I can shorten the time it takes to open the restaurant.
So there’s some strategy involved in that, in having corporate sites, and then obviously your franchisees and their staff can train in your stores and then it helps. We’re busy going through a revamp cycle now too. We’re obviously doing the viability of a revamp. It’s very easy to go to a designer or our design team and say, put together a new design and they’re going to come back and say, a revamp costs 3 million. It’s very easy to say 3 million and then kind of go to your franchisee and say, this is your revamp cost. When you’re spending the money yourself, you do learn how to cost engineer very, very quickly. There’s a lot of positives that we learn in corporate that we then roll out to our franchise group and systems and stuff.
And there’s also a balance, right? So owning five corporate stores, it’s one operator and maybe one person doing accounts. Owning 20+ is a beast. There’s a whole bunch of people on the back end in the office that work to support those stores. Plus because we’re not in the stores, we pay a little bit more for our operators. There’s a balance. If we had to offload, let’s say 10 or 11 corporate sites, then our corporate cluster comes under pressure. So there is a good balance to have.
The Finance Ghost: Yeah, it’s fantastic. It’s such a good answer. I mean, the one thing I just want to touch on there quickly is, it actually talks so brilliantly to the value creation process for any business. Because obviously as you are scaling the footprint, you need to add on some head office costs and then your profitability probably gets worse for a short while and then it starts to accelerate again. It’s that J-curve, and it’s a lot of little J-curves over and over again.
Ricky Ruthenberg: Yeah.
The Finance Ghost: And it’s so easy for financial professionals who have never actually run or started a business to look at this and say, “Oh, but your profit went down in the last year.” They don’t understand what it’s like to scale a thing. It’s hard and it’s constantly having to think about the costs that come on versus the sustainability of the business versus key person risk. I have nothing but respect for entrepreneurs have been through this journey. I think it’s fantastic.
Ricky Ruthenberg: Yeah. Thanks.
The Finance Ghost: I wanted to also mention, in your franchise network, do you have some master franchisees who own several stores? Do you allow people to come on now and get their first one, or do you try and stick to a smaller pool? I’m just wondering if anyone’s listening to this, thinking I’d actually love to own a Bootlegger.
Ricky Ruthenberg: Yeah.
The Finance Ghost: What does that look like?
Ricky Ruthenberg: We have got a mix. So a lot of it is location dependent. If you go to, let’s say a smaller town that there’s not an opportunity for 10 sites, you generally want a local operator. And also local is best, right? Ideally you want someone who’s involved in the nearby community, so someone who knows somebody at the schools and the churches and the malls and whatever the case may be. So that’s familiar.
But we do have some franchisees that have multiple stores. From ten and then some on five, a couple on four, lots of them on two, ready to expand. We’re constantly onboarding franchisees. I think this week we’re taking on a new one. Our site in Plett, Knysna our new franchisees. So it’s a mixed bag. I’ve got a whole team that can onboard them. It’s not too tedious for us to take on new franchisees.
But to be honest, what is the ultimate? Not entirely sure yet. I have to be extremely honest. We’ve got guys who want one store and they operate really well. There are some times where if a landlord, for example, owns a site and they want to own the store, we really like the location, we might not want to take on another franchisee, but you won’t get the location without the franchisee. You vet them, they turn out to be a good operator for us, and then they come on board and they have no ambition to open a new store and that’s fine.
But in an ideal world, you want clusters of five to ten because essentially then you have one conversation. Right now, if I’ve got five restaurants with five single owner-operators, those are five separate conversations you’ve got to have. Every time you’re rolling out a menu or a new procedure, there are five different lines of communication. Whereas if it’s a single store cluster, you’re speaking to potentially one person that understands it and can roll it out in their stores.
The Finance Ghost: So, Ricky, you’ve highlighted some of the major operational considerations there and I really do genuinely just find it fascinating. So thank you for leaning into some of this stuff. It’s really cool to understand what goes on in the background there and how difficult it must be. And of course, one of the other difficulties is one of your input costs is completely out of your control, which is coffee. And coffee is an international commodity, where the prices flap around all over the place.
I recently did some research. There’s a bit of a mega merger on the table at the moment. Keurig Dr. Pepper and JDE Peet’s overseas are looking at merging. Those names won’t mean much to South Africans, but they will know Jacobs and Douwe Egberts. If you buy instant coffee in your local retailer, which is nowhere near as good as Bootlegger coffee – you should not do that, you should go beans to cup and have less coffee every day – it will change your life, I can tell you from my own personal experience. But anyway, the point is that margins tend to be all over the place for coffee businesses and I think the volatile input costs are part of it.
That must be a reality for you guys all the time, especially on the retail business, where the margins are already thin. I guess in the restaurants, because you’ve become so much more than just coffee shop, you’ve got lots of different inputs there, lots of levers you can pull. Is that a major thing that you have to manage all the time?
Ricky Ruthenberg: There are a couple of elements to this answer. Firstly, we’re quite a big micro-roastery, or we considered ourselves quite big. We’re roasting up to 400 tons of coffee a year, obviously growing. And what that allows us to do is to import coffee directly from the origin that we source from. So we get most of our coffee from Guatemala, Tanzania, Costa Rica, a little bit from Brazil and some from Colombia.
There are agents involved but essentially we source from the farm. The downside of that is cash flow. So we have to put up the cash and the upside is that we essentially manage that chain. So if you’re a new coffee roaster and you’re starting out tomorrow, you’re going to phone up one or two of the importers and they’re going to give you today’s price on the coffee market, essentially. You’re going to be paying whatever the replacement cost is of that coffee today. With us, we procured all our coffee about a year in advance. You’re essentially hedging on the back of crops that are supposed to grow – go to the farm and say listen, I need 100 tons of X.
Essentially all the coffee we’re using today in October, we’ve known the price of this coffee that we’re selling since roughly June/July last year. I think with the volume and scale, one of the advantages is that you can at least manage your input cost to some degree. It does catch up with you at some point, but at least we can see a really big price issue coming a couple of months ahead of time. So that affects one big part of our business, which is the roastery.
We’ve got a full wholesale business that obviously supplies everybody from retail, we’ve got quite a few other big clients that sit outside the hospitality space and also in the hospitality space, and essentially that business is heavily affected. But on the restaurant side we can also manage the price. You’ve got quite a diverse offering, coffee in our businesses makes up – let’s thumbsuck a figure to not give away too much – coffee only makes up 30% to 40% of our sales. You could essentially then tweak some other items to offset the price of coffee or to ensure that you’re not going to charge too much for coffee and out price yourself in the market. So there are some advantages to where we are, but it’s a massive risk. We’ve got a little risk plan how to manage that as well because essentially, if coffee supply goes out of whack, then we’re essentially screwed.
But everybody in coffee in South Africa has the exact same problem. If the price of coffee goes to R60, we’re not going to be the only ones. We’re hoping that we’ll be on the safer side. So, positives.
And then sorry, I didn’t touch on one of the most important things. We’ve actually got an in-house Q Grader. His name is Tyron Bester and he’s been in the industry for years. He essentially gets his Q Grader qualification and that allows him to source coffee. You can go source coffee, check out the quality of it and he’s extremely good. I mean he literally watches the price of coffee and fixes containers every other day. It has helped.
It won’t help if the market goes sky high on a J-curve with no return…
The Finance Ghost: No, exactly.
Ricky Ruthenberg: …but he seems to watch the market closely enough to understand where the dips are coming and all of that. So it’s important to have those people in your team.
The Finance Ghost: Absolutely, right? This is the stuff that they don’t talk about at high school career day. It’s like, what could you be when you grow up? You could be a coffee expert who sources coffee. That’s what you could be. No one talks about this.
Ricky Ruthenberg: Yeah.
The Finance Ghost: That sounds very interesting. I want to start to bring this to a close, I’ve got two more questions for you Ricky, and then I’ll let you go and sell a lot of coffees to people.
So the first one, I’m going to try and avoid triggering any PTSD here for anyone. And we don’t need to go into it in much detail, but I think we have to accept that during the pandemic there were winners and losers. The tech industry was a big winner. There were a lot of winners. But one of the losers was undoubtedly face-to-face businesses, restaurants, hospitality, the whole story. I mean that must have been a super high stress time for the business.
Ricky Ruthenberg: Yeah.
The Finance Ghost: I guess the question I really wanted to ask you is, what do you think got Bootlegger through it? Was it just that you were big enough by that time? It must have been pretty wild.
Ricky Ruthenberg: Yeah, it was a really tough time. Interestingly enough I was in a restaurant the other day and one of the waitresses came up, (I was with one of my business partners), with like a mask on and he just said like “Geez, that instantly took me back to a really sad time in my life.” Tough time for everybody.
On Bootlegger’s side, we are self-funded so COVID was an extremely tough time. It’s not like we’ve got bags of cash to get us through. So the banks helped us a lot. TERS helped us a lot, the government fund, with staffing. And then on the expansion side, we had started franchising in 2017. In those three years we built out the franchise system and we started onboarding a lot of franchisees that have the bucks to open up restaurants. They were affected, but they weren’t necessarily the most affected. Not all of them, new franchisees, new people in the industry and a lot of people getting out of other industries trying to get into restaurants or entrepreneurship.
So we had a couple of strong franchisees going into COVID, obviously bit scared, but some were pretty excited to do business. And on the corporate side we still believed, I want to say six months into 2020, we still believed that things were going to be okay. We obviously saw the early coffee shops opening with the restrictions and they allowed us to sell coffee out of hatches. And the volume of coffee during that time was so big that we were like, no, man, this is definitely still going to be – there’s still something in this.
So what happened was, there were quite a few really good opportunities that came up. Obviously the landlords needed tenants and we had some franchisees that were ready to go. We were able to secure quite a few strategic sites. It didn’t come for free though.
In COVID, I remember my banker from Nedbank phoned me and she worked essentially opposite our Sandton store and she said “Ricky, Nedbank just got a work from home notice. It’s going to go on for at least two years. I’m just letting you know.” They were our biggest client.
And the back of that and some other insight, we decided to make a call. We closed that restaurant. So that was obviously not fun, but that was our first corporate restaurant outside of Cape Town and we essentially – yeah, we closed it. We shipped the equipment and furniture down and we found one or two other little smaller opportunities and repurposed everything. And so we continued the growth, but we really left Joburg with our tail between our legs because that was not fun. We closed about two other restaurants as well during that time. So it was tough.
We lost some sites that I think we probably wouldn’t have lost if it wasn’t for COVID. But on the upside, we were able to be agile enough to take on opportunity that was there.
The Finance Ghost: Ricky, that’s an incredible story of survival. I can imagine how tough that was. You’ve taken me back to my Sandton banking days at a very specific bank which you mentioned there, so nice that they had a Bootlegger even for a while. It is a beautiful office.
I think let’s talk about banking while we’re here. Obviously this series is powered by Capitec, they’re very keen to showcase some of the great entrepreneurs we have in this country, which I think is amazing. The story from your perspective is you work with Capitec, as I understand it, on a lot of the franchise funding.
Ricky Ruthenberg: Yes.
The Finance Ghost: So how does that actually work in practice and why are they your pick for that?
Ricky Ruthenberg: They’ve just made financing for franchising extremely easy and they’re really, really quick. I obviously developed quite quickly some good relationships within Capitec and it got to the point where we built a model that they understood our business, essentially a financial model. They understood how we operated. We found a very nice way to communicate with them and continuously update our numbers and just made financing for franchisees really easy. And their vetting process was really quick, which I think is not really common in the game of franchising. So it’s important to have a partner that understands the business.
And more importantly, speaking to the previous question of COVID, when there are opportunities that are like a month away, you need partners that can essentially help you act on it. And I think that’s where Capitec has been instrumental.
You need a loan approval within 10 days or whatever the case may be, I don’t want to speak to the current timelines, I’m not entirely sure, but at that point that’s what it was. Pick up the phone, phone someone say, “Listen guys, I need approval. We’re opening the site. Is everything on track?” And they would be good enough to say, “Yeah, I don’t see any issues with this. Proceed.” They financed a massive part of our franchise business.
The Finance Ghost: Well done, Capitec. They’ve clearly understood the business there and I think that’s what it comes down to with a banking partner. You’re just looking for a partner who actually takes the time to understand what you’re doing. And especially in something like franchise, you almost need to be able to offer it as a – it’s a product, come and open a Bootlegger. Here we go, here’s the pack.
Ricky Ruthenberg: Exactly.
The Finance Ghost: You need to sign up for the risk, sure.
Ricky Ruthenberg: Yeah.
The Finance Ghost: But bankers are ready to go, ops ready to go. Menu ready to go versus going and starting your own restaurant. That’s the decision, right? That’s the appeal.
Ricky Ruthenberg: Yeah, exactly. Well, I mean, they believed in us as well.
The Finance Ghost: 100%.
Ricky Ruthenberg: Very nice to have partners that understand that. Yeah.
The Finance Ghost: Final question, Ricky, and this is an interesting one because I think you have achieved so much already. I mean, you all have there at Bootlegger. It’s fantastic. So many wins under your belt.
I guess the question is, what keeps you motivated? What keeps you getting out of bed nice and early? Apart from the fact that you’re an insufferable morning person, obviously. What keeps you chasing the next milestone?
Ricky Ruthenberg: That’s a good question. I ask myself that question at least once a week, maybe more. At this level, business is extremely tough.
The Finance Ghost: I was going to say, only once a week is not bad. Once a week is not bad. If you’re not doing it every day, then you’re doing fine.
Ricky Ruthenberg: Yeah, listen, it’s a constant choice to keep going. I think that’s really important. Like, I really – we really really enjoy what we do. But there’s obviously been many moments and conversations – myself, shareholders – what’s next? What is the next plan? For me, personally, what keeps me going is obviously seeing growth, not just in the business, but people around us. And I think from a very young age, I’ve always enjoyed helping people push themselves and asking questions, understand what drives them. How can I help them reach the next level?
The motivation really comes from knowing that as we grow, we’re creating more opportunities, for myself, for other people.
And interestingly enough, I was recently reminded by one of my senior team members – she’s like, “Ricky, not everybody wants to grow. You think everybody wants to grow.” And I’m like, obviously! A very valuable lesson. It’s a very valuable lesson.
The Finance Ghost: It is.
Ricky Ruthenberg: There is a place for people who don’t want to, don’t necessarily want to grow too much. And there’s a place for those who do – and for those who do, I believe we’re building that playground.
The Finance Ghost: Yes, that’s one of the fundamental arguments for capitalism, right? It’s not everyone who actually wants to get to the top, and the people who do should be given the chance to do so.
Ricky Ruthenberg: Exactly.
The Finance Ghost: But, yeah, I can believe it, that just watching the people around you succeed is such a big driver of it. That’s fantastic.
Ricky Ruthenberg: Awesome.
The Finance Ghost: Ricky, this has been such a good chat. I really enjoyed getting to know you, getting to learn more about the business. It really is fascinating. And to the listeners, if you’ve enjoyed this go and support your local Bootlegger but I think more than that, go and support your local XYZ coffee shop as well, because I think everywhere out there, there are a lot of Rickys who are building these things and at the end of the day if we don’t have coffee shops, suburbs just aren’t the same.
So definitely support Bootlegger, but go and support these small businesses wherever you can, they are so often the DNA of the area that they are in. It’s certainly something that I try very hard to do. You can redirect some of your spend away from the national grocery chain to go and buy that little croissant somewhere small, it really is a valuable thing.
Ricky, thank you so much for your time, I really appreciate it. I really enjoyed this. Just all the best man, love watching the business grow.
Real stories and real people. Yours could be next plugged in with Capitec. Capitec is an authorized financial services provider FSP 46669.
AngloGold cashes in while the gold price is strong (JSE: ANG)
Free cash flow is almost 1.5x higher year-on-year
AngloGold Ashanti released earnings for the quarter and nine months ended September. It won’t surprise you that they are very good, as the talk of the town this year has been the gold sector. Still, these numbers are quite incredible to read!
Credit where credit is due: they aren’t just relying on the gold price here. The group increased gold production by 17% in Q3, so they are taking full advantage of a situation where the average gold price received jumped by 40% year-on-year. They’ve also achieved only an inflationary increase in costs, so they are running efficiently. Cash from operations was up 94% year-on-year for Q3 and free cash flow was up by a ridiculous 2.4x!
If you look over nine months, free cash flow increased 141% – or 1.4x, seeing as percentages of over 100% can be confusing. Cash is basically raining down on them at the moment.
What are they doing with that cash? Aside from dividends and the usual capex, they’ve been doing deals in the Beatty District in Nevada to consolidate their position in the US. In October, the deal to acquire Augusta Gold Corp. was concluded.
Based on these numbers, FY25 guidance has been affirmed. With the share price having more than tripled this year, investors will look for a strong finish to the year.
AVI is off to a strong start in the new financial year (JSE: AVI)
As usual, they are turning modest revenue into great profits
AVI has a great reputation for running a tight ship and delivering profit growth to shareholders that is as tasty as their Bakers biscuits. Yes, I do think that they desperately need to get rid of footwear and apparel, but overall it’s a solid group.
At the AGM held on Tuesday, the chairman gave attendees an update on trading conditions. The company also published the update on SENS. For the four months to October, group revenue increased by 4.3% and operating profit was up by 15.8%. Unsurprisingly, the market reacted positively and the share price closed over 6% higher.
Further details were given around where this performance is coming from, with Entyce and Snackworks achieving revenue growth, consistent gross profit margins and better operating profits. Over at I&J, the catch rates are better and there’s been a significant improvement in profitability despite challenges in parts of the business like abalone.
The footwear and apparel portfolio is the headache (as usual). There’s some positivity at SPITZ around sales volumes, but Indigo (personal care) is struggling with a drop in revenue. Given the strong performance that most retailers are reporting in categories like health and beauty, that’s a particularly weak message.
There’s all to play for during the festive season, with the group needing to maximise the upcoming Black Friday and Christmas season. They highlight improved footwear availability at SPITZ vs. the prior year, so perhaps that will help.
It’s been a rough year at Barloworld (JSE: BAW)
The acquiring consortium will need to play the long game here
As a cyclical business, Barloworld has good years and bad years. This depends largely on the mining sector in specific regions, along with the general levels of investment in infrastructure.
This is in all likelihood the last set of numbers we will see from Barloworld on the public stage, as the offer by the consortium has been highly successful. Barloworld isn’t going out on a high, with HEPS expected to drop by between 20.3% and 22.3%. They attribute this to lower trading activities in Vostochnaya Technica in Russia, along with demand pressure across parts of Southern Africa.
As I said at the time when the offer came through: if I had a horse in this race, I would’ve taken the money and run. As things turned out, most shareholders shared my views.
It’s a big month for Copper 360 (JSE: CPR)
The circular for the capital raise will be released soon
Sometimes junior mining goes well. Sometimes it doesn’t. Copper 360 is an example of the latter, with the share price down more than 70% year-to-date. The group ran out of capital and needs more of it, with an announcement in early September giving the market an idea of the terms under which the company will raise R1.15 billion.
To get this right, there’s a claw-back offer of R140 million and a rights offer of up to R260 million. There’s also a raise of R750 million to reduce the company’s debt, with an automatic conversion of debt to equity if the full amount isn’t raised. In summary, R400 million in fresh equity capital and the rest is a reshuffling of the balance sheet.
The circular is going to be complicated and interesting. They expect to distribute it on 17 November.
Premier Group is creating a strong foundation for their proposed RFG Holdings deal (JSE: PMR | JSE: RFG)
The shape of this income statement is exactly what you want to see
In the manufacturing game – whether you make bread, industrial components or “widgets” as they love in accounting tests at varsity – it’s all about manufacturing efficiencies and turning modest revenue growth into excellent profit growth. Of course, everyone prefers high revenue growth, but if you rely on it for success then you’re setting yourself up for a bad time.
At Premier, the results for the six months to September are a masterclass on the ideal shape of an income statement. Revenue was up by 6.4%, which was good enough for operating profit to increase by 17%. Thanks to net finance costs dropping by 28.7% due to reduced debt, HEPS then jumped by 27.9%. That’s a delightful example of operating and financial leverage in action.
The revenue growth may look tame, but it’s actually pretty good when you consider it in the context of deflation in global grain prices. As we saw in the recent numbers at Shoprite (JSE: SHP), inflation in basic foodstuffs is either non-existent or negative at the moment. That’s great news for consumers and tricky for FMCG companies that need to manage inflationary pressures on their costs.
The cash also looks great, with cash from operations up by 34.7%. The company has stepped outside of its usual dividend policy to declare an interim dividend of 159 cents per share. They usually only do final dividends, but they need to clear out cash before the proposed deal with RFG Holdings goes ahead.
Speaking of that deal, the circular can’t be too far away based on the firm intention announcement having been released in mid-October. I worry about whether Premier is doing the right thing here, as diversification can sometimes dilute the investment thesis. Premier and RFG Holdings are both good businesses, but for different reasons and with very different underlying profit profiles and external dependencies. If the deal goes ahead, current RFG Holdings shareholders will have 22.5% of the enlarged group and current Premier shareholders will have the rest.
The market doesn’t seem concerned about the deal, with Premier’s share price continuing to push higher. It’s up more than 30% year-to-date!
Santam’s solid run continues (JSE: SNT)
They’ve carried on where they left off in the interim period
Santam released an update for the nine months to September 2025. It’s important for you to have the context of just how good the first six months were, with HEPS up 19% for that interim period. The short-term insurance sector is having a fantastic run, although the share price has been volatile as investors tend to be cautious of how maintainable the earnings are.
This is because one of two things usually happens: (1) there are major loss events that bring underwriting profits back down to earth, or (2) there are no major loss events and the forces of competition create more aggressive pricing and thus lower underwriting profits anyway.
But for now at least, Santam is thoroughly enjoying life under that yellow umbrella. Underwriting margin remains above the upper end of the 5% to 10% range, with results further boosted by double-digit growth in gross written and net earned premiums. They describe net income growth as being in line with the first half of the year – and that’s good news! They are even outperforming when it comes to investment returns on insurance funds in the conventional insurance business.
There are obviously a few areas that were a drag on earnings, one of which is the investment return on the group’s capital portfolio (i.e. not the insurance funds). This is mainly due to the strengthening of the rand, as Santam has significant investments in other regions (like India). If a strong rand is your biggest headache in any given period, you’re doing fine.
Strategically, they are working on the launch of a Santam syndicate with the Lloyd’s Council. The key next milestone is “permission to underwrite” – something they hope to achieve before the end of 2025.
The company (and shareholders) will hope for no major loss events in the final quarter of the year. If that’s the case, it will cap off an excellent period for Santam and the broader industry as well.
No fireworks at Stor-Age – just as shareholders like it (JSE: SSS)
This is one of the most dependable cash flow profiles you’ll find
Stor-Age is an excellent business, even if finding growth isn’t always easy. They have no key customer dependencies, but rather many individual and business clients who rent small spaces from them. Thanks to the churn in the portfolio, they can reprice the storage in line with market trends and inflation on an ongoing basis. They have no specific sector exposure, nor do they care about stuff like work from home vs. return to the office.
The market knows this, which is why the fund trades at or close to its net asset value (NAV) per share. The results for the six months to September 2025 reflect a NAV per share of R17.77 vs. the share price at R17.65. This puts Stor-Age in a fascinating position where the risk for investors is less about the business and more about the valuation, as the upside potential vs. risk of disappointment isn’t a great trade-off at this price.
Thankfully, disappointment isn’t something that you’ll see too often at Stor-Age. Distributable income was up 4.5% year-on-year and the interim dividend followed suit. This is essentially a blend of rental growth across SA (9.8%) and the UK (2.5%). The growth in dividend was accompanied by a 6.9% uplift in NAV per share.
The group currently has 63 properties in SA and 46 in the UK. By 2030, they aim to be at 90 and 70 respectively. The UK is where they need to be careful I think, as a lot of the shine has come off the UK as an investment destination. This is coming through in their recent UK numbers and the cautious outlook.
Guidance for FY26 distributable income per share growth is 5% to 6%. The payout ratio is expected to remain at 90% of distributable income. They are assuming a 25 basis points reduction in interest rates in both SA and the UK though, so there’s macroeconomic risk in this forecast.
Nibbles:
Director dealings:
Some questions need to be asked at Impala Platinum (JSE: IMP) about their governance. A prescribed officer (in charge of corporate affairs, no less!) engaged in various trades in shares between December 2021 and October 2024 – and not the smallest numbers around either, with sales amounting to R14.5 million and one purchase of R600k. Clearly the trades weren’t announced when they were supposed to be. Clearance to deal also wasn’t obtained! The announcement doesn’t bother to give an explanation or even an apology. What is the point of having rules for listed companies if they aren’t followed?
Here’s a bullish signal from a director of Raubex (JSE: RBX): after the company released pretty ugly numbers, a director bought shares worth just over R1 million. The company’s narrative is one of a more positive outlook going forwards, so it’s good to see an insider putting money behind that story.
Despite Visual International (JSE: VIS) having recently raised capital in the market – without a working website, I might add – a director of the company sold shares worth R75k.
enX (JSE: ENX) did a solid job of making the market aware of the performance for the year ended August when they released a trading update on 4 November. The group has now released detailed numbers that have the same key message: in terms of continuing operations, the group is struggling in their business that was built to address demand for power solutions in a load shedding environment. This is why profit before tax from continuing operations fell by 32%. The headline loss from continuing operations was 1 cent, which is at least better than the loss of 8 cents in the comparable period. enX has been on a mission to sell non-core assets and return cash to shareholders, but this takes the cream off the top and leaves the group with the businesses that aren’t so appealing.
Here’s some good news at Mantengu (JSE: MTU): the company announced that Blue Ridge Platinum, a 70% subsidiary, entered into a chrome concentrate supply agreement with Monteagle International (UK). This relates to a minimum of 300,000 dry metric tonnes at a rate of 10,000 tonnes per month. The price per tonne at the time of the announcement is $280, but remember that commodity prices can vary significantly in either direction. Deliveries are expected to commence in the first half of calendar 2026 after a four-month capex programme for a new chrome plant.
In today’s edition of corporate miracles, Shuka Minerals (JSE: SKA) has finally received the initial tranche of $300,000 from GMI for the acquisition of Leopard Exploration and Mining Limited. I cannot imagine the sigh of relief from various parties! The remaining ~$950k needs to be received before the end of November 2025. Let’s hope that whatever the issue was has been sorted out.
I don’t think too many people will notice, but Deutsche Konsum (JSE: DKR) will be withdrawing its secondary listing from the JSE. If you can believe it, other than the scrip lender shareholder, they have one other shareholder on the JSE. One! That shareholder has 202 shares and has been unresponsive to attempted engagements by the company with an offer to buy the shares at a premium or transfer them to the Frankfurt Stock Exchange. There are provisions in the Financial Markets Act dealing with this, so the delisting will be executed in the public interest and the offer to the remaining shareholder will be open for 6 months.
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