In this edition of Ghost Bites:
- The market didn’t like the AECI results
- Jubilee Metals looks set to sell its Large Waste Project
- Lighthouse shines in a great interim period
- Merafe can thank chrome ore for saving the day
- Records tumble at Northam Platinum
- Powerfleet is still loss-making
- Sabvest announces a bolt-on deal at ITL
The market didn’t like the AECI results (JSE: AFE)
Was it the free cash outflow that spooked investors?
AECI has reported results for the six months to June 2026. It wasn’t an easy time, with revenue from continuing operations down by 4%. Despite this, profit from continuing operations jumped by 20%!
By the time you reach the bottom of the income statement, you find HEPS growth of 8%. The interim dividend was even better, up by 16%.
The confidence to increase the dividend payout ratio was no doubt boosted by the decrease in net debt of roughly 40%. In absolute terms, net debt decreased by R1.2 billion, partially due to proceeds received from divestments.
And just to add to the confusing shape of this result, free cash moved from an inflow of R251 million in the prior period to an outflow of R952 million in this period. This was driven by a 19% increase in capital expenditure to R417 million, as well as as almost R600 million tied up in incremental working capital.
So, what actually happened here?
Looking at the segmentals, AECI Mining had an improved operational performance, with both revenue and EBITDA up by 6%. EBITDA margin held steady at 15%, driven by product mix and cost management. Both Asia Pacific and Southern Africa have been noted as highlights.
The AECI Chemicals business is hard to compare to the previous year due to disposals. If we just focus on this year, then the business could only manage an EBITDA margin of 7% – in line with the previous year. But below the EBITDA line, we find an impairment of R320 million due to the ongoing losses at Schirm.
AECI actually splits this segment in two, with “Chemicals Core” growing EBITDA by 14%, while “Schirm and other” fell by 70%. You can immediately spot the problem.
AECI Chemicals also ate up the free cash flow, with an outflow of R537 million for the period vs. a R661 million inflow in the comparable period. They attribute this to “strategic investment in working capital”.
The company expects improved free cash flow in the second half of the year. After the share price fell by nearly 10% in response to these numbers (and then dipped again the next day), management will need to tell a better cash flow story to get the share price back on track.
Ghost Bite: AECI has been fighting a tough battle for the past few years. Schirm is currently the major headache, serving as a good reminder that offshore isn’t always better.
Jubilee Metals looks set to sell its Large Waste Project (JSE: JBL)
This will free up capital for investment in other copper assets in Zambia
Jubilee Metals has announced the receipt of two binding offers for its Large Waste Project – and at a “substantial premium” to what they originally paid for it. They haven’t owned it for very long, as Jubilee still owes the final $5 million to the original seller of the asset!
This disposal would free up capital that Jubilee can then apply to its other projects in Zambia. One such example is the on-site copper processing facility at the expanded Molefe Mine operations. The original seller has thankfully agreed to be paid the $5 million in Jubilee shares, so that improves the situation even further in terms of Jubilee keeping cash available for other projects.
Together with the remaining proceeds of the exit of South African assets, Jubilee has indicated a war chest of nearly $100 million to play with. Be careful of the cash flow timing though – the disposal of the Large Waste Project would be structured as a deal with instalments of up to 3 years. It’s extremely rare to get paid everything up-front in these deals. In fact, that’s exactly why Jubilee still owes $5 million to the original seller of the asset!
To get the disposal of this asset across the line, Jubilee must now choose which of the two potential partners to dance with. The goal is to move quickly here, with definitive transaction agreements set to be concluded within the next two weeks.
Ghost Bite: Stretching a balance sheet and trying to take on too many projects isn’t a smart approach. I far prefer seeing sensible decisions like these.
Lighthouse shines in a great interim period (JSE: LTE)
This is a perfect example of why I invest in property stocks and ETFs on the JSE
Lighthouse Properties released results for the six months to June 2026. This property fund is focused on Western Europe – specifically Spain, Portugal and France. It’s a strategy that has been working beautifully, evidenced by growth that is well ahead of inflation in all three markets.
The group has achieved growth in distributable earnings per share of 9.7%. When the underlying exposure is hard currency markets, that’s really impressive.
The direct property portfolio grew net property income by 4.5% on a like-for-like basis. Despite the ongoing adoption of online shopping, footfall increased by 3.0%.
France led the way with 6.6% like-for-like growth, followed by Spain at 5.8% and Portugal at only 1.7%. Around 28.1% of the direct portfolio is found in Portugal (measured by fair value), so it would be good to see that number increase. It’s unfortunate that France is only 12.8% of the portfolio, as that has been the star performer.
The loan-to-value ratio sits at a health 35.9%, similar to 36% a year ago.
The full year guidance has been revised upwards to growth in distributable income per share of between 6.9% and 8.7%. It might be even better than that if they can keep up the performance seen in the first half!
Ghost Bite: This is one of many excellent property funds on the JSE.
Merafe can thank chrome ore for saving the day (JSE: MRF)
There’s more to this business than just the smelters
Merafe has added its name to the long list of company releasing results for the six months to June 2026. Despite the ferrochrome smelter sector being in disarray (with a 75% drop in ferrochrome production), Merafe still managed to somehow grow profit from R233 million to R512 million!
The heavy lifting was done by chrome ore sales volumes (up 75%), accompanied by better commodity prices. This drove a 36% increase in revenue and a 60% jump in EBITDA. HEPS was up by 64% to 20.7 cents.
Perhaps most importantly, cash from operating activities swung wildly from an outflow of R175 million to an inflow of R976 million. This would’ve given the board the confidence required to increase the interim dividend from 4 cents per share to 16 cents per share!
Of course, the outlook for the rest of the year is much better, as the special tariffs from Eskom have changed the game for the smelters. They do note the risks of market oversupply and cheap imports, but at least the smelters actually have a chance.
Ghost Bite: Those who took a risk on Merafe have been richly rewarded this year, with the share price up 35% year-to-date. Will the lifeline from Eskom be enough for the smelters in the second half of the year?
Records tumble at Northam Platinum (JSE: NPH)
They are looking to ramp up production in the coming years
Northam Platinum released a trading statement for the year ended June 2026. It’s incredibly detailed, so this is far more than just a standard trading statement.
Total equivalent refined PGM produced from own operations increased by 4.4% to a record level. Chrome concentrate also achieved a new record, up 17.4%. You’ll find the word “record” in a bunch of other places as well, all adding up to a wonderful 64.1% increase in sales revenue.
The biggest driver of this increase was a 57.4% jumped in the rand 4E basket price, along with an 8.0% improvement in total sales.
With unit cash costs per ounce only up by 6.4%, it was a bonanza by the time we reach operating profit. A 293.8% increase is a reminder of how lucrative things can be when mining goes well.
Here comes that word again: record HEPS of between R30.06 and R30.82. Compared to ~R3.81 in the prior period, that’s an incredible jump.
Notably, the board has changed the dividend policy as well. It used to be a minimum of 25% of headline earnings. In practice, the company has been paying around 42% of headline earnings out as a dividend, so they’ve now raised the policy to a minimum of 40%. It probably won’t have much of a practical effect, but it does set a new floor.
I’m quite sure that this change in policy is also designed to give investors comfort around “Vision 2031” – Northam’s plan to invest in existing operations to increase production. Alongside the push for production from owned mines, they also expect to double metal purchases from third parties over the next five years. The market will want to see a balance between capex and dividends, hence the new policy.
Northam goes so far as to describe this capex plan as “bullet-proofing” the business. It tells you how much things have improved in this sector that management teams are even willing to say something like that.
Ghost Bite: Despite the wild growth in earnings, the share price is only up 24% over 12 months (and down 20% year-to-date). The market is always nervous of the good times continuing in PGMs.
Powerfleet is still loss-making (JSE: PWR)
You may recall that this is the company that swallowed up MiX Telematics
Powerfleet’s financial reporting isn’t easy for South Africans to work with, as the company is listed in the US and reports based on the SEC format. They unfortunately don’t include the management commentary in the SENS announcement, so you have to go hunting for it.
The telematics group grew total revenue by 6.4%. There’s quite a change in mix though, as Services increased by 9.1% and Products fell by 6.7%. This is because product shipments were delayed for the quarter.
The change in mix was good for gross profit at least, which increased from 54.2% to 55.2%. As is usually the case, a services business model is more lucrative than selling products.
Selling, general and administrative expenses increased by 5.3%. That’s slower than revenue growth, which of course is very good for margins. A further boost came from the reduction in research and development costs by 10.2%.
Despite all the positive underlying momentum in the business, the net loss attribute to common stockholders was still $8.4 million. That’s an improvement on the net loss of $10.2 million, but it means that the company is still reporting significant losses.
Like all good US tech companies though, adjusted EBITDA has gone the right way – up from $20.1 million to $21.5 million. As usual, one of the important adjustments is stock-based compensation (effectively share awards to staff), which jumped from $1.8 million to $3.1 million. IFRS reporting doesn’t allow companies to pretend that this isn’t an expense.
Ghost Bite: There’s not much trade in this stock, but it’s certainly been a volatile year with a 52-week low of R44.01 and a 52-week high of R100.00! The current price is R65.00.
Sabvest announces a bolt-on deal at ITL (JSE: SBP)
This is a great example of how the group executes its strategy
Sabvest is seen as the best of the local investment holding companies. Don’t just take my word for it – you can look at the Price/Book of 0.84x, or a discount of only 16% to the book value. Companies in this sector tend to trade at discounts of 40% or more!
The market supports the Sabvest story because of the underlying assets that are otherwise impossible to reach. Rather than being a collection of listed stakes, Sabvest has built an extensive portfolio of private companies. Sabvest can then support those companies with capital and networks to unlock growth.
One such example is ITL Group, an apparel labelling and supply chain management business in which Sabvest has a 34% stake. This is where the latest bolt-on deal is housed, with ITL set to acquire 100% of Rudholm Group International, a Swedish packaging and labelling company serving markets across Europe, Asia and North America.
It’s a part-cash, part-share deal that will see the current Rudholm shareholders take an 11% stake in the ITL-Rudholm group. This will dilute Sabvest’s stake down to 30.5%. The transaction is expected to be value-accretive to Sabvest shareholders.
A transaction value for the deal hasn’t been disclosed.
Ghost Bite: Bolt-on deals are almost always a better idea than swashbuckling M&A that bets the farm on one specific trade.
Nibbles:
- Spear REIT (JSE: SEA) has concluded an agreement with Mambos Storage & Home to develop their distribution centre in Cape Town. Mambos has grown to 22 stores nationwide and clearly has plans to grow further. This will add to Spear’s existing industrial property portfolio in the Western Cape. It’s not always easy to find good properties to acquire, so being able to do projects like these is important for Spear’s ongoing growth. The development cost is estimated to be R90 million, with work commencing in August 2026 and expected to conclude in mid-2027.
- There’s still almost no trade in Aimia’s (JSE: AII) shares on the JSE, so I’ll just give the results for the second quarter a passing mention down here. Aimia is cash flush after the disposal of Bozzetto, which generated $270m in net proceeds. They’ve been using this to get rid of debt (over $131m in senior notes) and repurchase around 10% of shares outstanding. A further share buyback programme is underway. The continuing operations (mainly Cortland International) saw revenue decline by 3.7% this quarter, while adjusted EBITDA fell by roughly 18%.
