Araxi (previously Capital Appreciation) has released interim results (JSE: AXX)
The Software business continues to drag everything down
Araxi’s results for the six months ended September 2025 have been impacted by accounting restatements. There are a number of restatements that ended up boosting earnings per share in the prior year without having much of an impact on the balance sheet or the cash flow statement. This means that the base period has created a much more demanding profit number off which to grow. Accounting restatements exist for a reason, as the idea is to improve comparability by ensuring that the policies are applied to both periods being presented.
Araxi is keen for you to use normalised earnings growth instead of reported earnings growth. In making these normalisation adjustments, they take out the recognition of a licence fee as well as the restructuring costs in the Software division. Normalised HEPS growth is a meaty 58%, while growth in HEPS as reported was just 1.8%. That’s a huge gap that would require high conviction to be okay with.
Group revenue was up by just 2.3%, so that’s the first concern in the context of this high normalised growth number. Group EBITDA was up just 0.4%. As final evidence, we can just look at the dividend growth – or lack thereof, in this case. The dividend is flat at 4.5 cents per share. As you can probably tell by now, I’m not sure that the normalised growth is any indication at all of “normal” growth in the business, but time will tell.
We can now dig into the segments. The Payments division is doing really well, with revenue up 23.2% and EBITDA up 33.1% to R184.3 million. Software continues to be a catastrophe, with revenue down 20.2% and EBITDA crashing 82.7% to just R6.9 million. The Payments division has an EBITDA margin of 47.6% and Software sits at 2.7%. The very best thing they could do is get rid of the Software business and focus on what investors are actually interested in: Payments.
There’s seems to be no desire to do this though, with management promising that the restructuring activities in Software will deliver annualised cost savings of R35 million to R40 million that weren’t visible in the first half because of once-off restructuring costs. Fair enough, we will wait and see what the second half looks like. But the underlying story is what it is – the Payments business is a lucrative, dependable asset and the Software business looks incapable of attracting a high valuation multiple.
The group is well known for having no debt. In fact, they have over R300 million available for growth. In the context of a market cap of R2.2 billion, that’s a significant cash pile.
Equites Property Fund raised over R700 million for local development opportunities (JSE: EQU)
The market seems unbothered by the slow exit from the UK
As I wrote about earlier this week, Equites announced what I think could be referred to as a “bland accelerated bookbuild” – a capital raise with few or no underlying details. Sure, they’ve given a general idea of the local development opportunities in a separate trading update, but they didn’t even tell the market how much they were planning to raise and which projects would be prioritised!
None of it seems to matter, as the sun is shining in the property sector and so institutional investors are literally falling over one other to throw capital at listed funds. Equites raised R712 million at a discount of just 1.32% to the 30-day VWAP.
The good times are here for the REITs. You can expect to see more and more bookbuilds. And somewhere in the next 12 – 24 months, it’s probably going to get silly enough that I will rotate my exposure away from the sector. You only have to look at the charts a decade ago to see how the cycle plays out.
Exxaro is likely to slightly miss their full-year guidance (JSE: EXX)
Local coal sales (excluding Eskom) were disappointing
Exxaro released a pre-close message for the year ending December 2025. With a significant decline in coal export prices having been suffered this year, it hasn’t been an easy year. Despite this, Exxaro reported strong earnings growth at the halfway mark in the year and the share price is up 8% year-to-date.
Total coal volumes are expected to be in line with the prior year, which means that they expect to miss guidance for the year by 3%. The biggest miss was in domestic coal sales other than to Eskom. Coal capex is expected to be around 3% higher than guidance, so the combined impact suggests that they will probably disappoint the market with full-year free cash flow numbers. It will of course depend on what the full-year costs look like.
In corporate news, the majority of the key suspensive conditions for the acquisition of manganese assets from Ntsimbintle Holdings and OMH Mauritius have been fulfilled. There are only a few conditions still to be met.
FirstRand’s guidance is intact – excluding the UK motor finance industry mess (JSE: FSR)
The battle with the UK regulatory is far from over
FirstRand released a voluntary trading update for the six months ending December 2025. They are performing in line with expectations, with the guidance of full-year growth of “high mid-teens” still intact. They also expect normalised ROE to move closer to the upper end of the stated range of 18% to 22%.
Although interest rates have come down, net interest income has grown thanks to the positive impact on margin from strategies to drive attractive growth in advances across South Africa, the rest of Africa and the UK. They expect to see improvement in absolute advances in the corporate business second half of the year, so this is mainly a margin story for now in that book. In the retail and commercial books, there has been an increase in activity.
Non-interest revenue, a key source of ROE, is up on the previous financial year and showing strong momentum in areas like insurance and global markets, boosted by private equity deals.
The credit quality looks solid, with the credit loss ratio at the bottom end of the through-the-cycle range.
In terms of expenses, growth is 2% to 3% above inflation. Aside from negotiated salary increases, my observation across the financial services names is that technology spend runs well above inflation.
All of this good news excludes the provision for the UK motor commission matter. The FCA’s final redress scheme is seen by FirstRand as going beyond what is fair. It sounds like the scheme would lead to the loss of more than the cumulative profits made over the period by the group.
In summary: FirstRand is doing well, but this irritating overhang isn’t going anywhere just yet.
Merafe moves ahead with closing the Wonderkop and Boshoek smelters (JSE: MRF)
Energy prices mean that these smelters just aren’t viable
Merafe has been working with Eskom to try and find a solution to the crisis facing the Boshoek and Wonderkop smelters. Although a proposal was received at the end of November, it just isn’t enough to save these operations. The silver lining is that it does create a future for the Lion smelter, so not all is lost.
This doesn’t help the employees of Boshoek and Wonderkop of course. The Merafe – Glencore (JSE: GLN) joint venture has issued retrenchment notices to the employees of these two smelters. They will both be placed on care and maintenance from 1 January 2026.
Resilient flags double-digit distribution growth (JSE: RES)
The positive sentiment in the property sector continues
Resilient REIT has released a pre-close update for the year ending December 2025. The expected growth in the distribution per share is at least 10%, so that’s a great data point to show just how strong this year has been for the property sector.
The focus on retail property has been valuable, with retail sales up 5.6% for the 10 months to October. Both renewals and new leases have shown positive reversions, coming in at a blended increase of 6.3%. Escalations on the leases are running between 5.4% and 5.7%, so that’s good inflation protection.
To add to the happy news, the extensive renewable energy installation programme has led to Resilient being able to generate 39.8% of its own energy requirements. Load shedding may feel like a bad nightmare now rather than a daily reality, but the benefit of this strategy goes well beyond energy security. Based on the cost of power from Eskom, there’s an attractive yield associated with these projects.
The European exposure – Spain / France and Lighthouse Properties (JSE: LTE) – is also performing well.
When you layer on the benefit of reducing interest rates, you find yourself having a particularly good time with a story like this. Double-digit growth in the distribution per share is really impressive!
London’s West End continues to perform for Shaftesbury (JSE: SHC)
Positive reversions are the order of the day
Shaftesbury released a trading update covering 1 July to 31 October. The fund is focused on London, so this represents the back-end of summer and then the pre-Black Friday and festive season period.
Leasing activity has been strong, with recent transactions running 4.3% ahead of the June 2025 estimated rental value (ERV) and 10% ahead of the previous passing rents. Occupancies are strong, with only 2.6% of the portfolio available to let.
There’s no shortage of asset management and refurbishment initiatives underway, with around 4.1% of the portfolio ERV currently being worked on. This is being supported by a balance sheet in great shape, with the loan-to-value at 17%.
Sibanye-Stillwater announces a three-year wage deal in the gold operations (JSE: SSW)
This is great news for the business
With the gold price continuing to do wonderful things for the industry and for our country, I’m pleased to see that Sibanye-Stillwater has reached a deal with AMCU, NUM, UASA and Solidarity regarding wages. The unions have a history of obliterating investor sentiment in the local mining industry, but those days are hopefully behind us now.
The agreement covers July 2025 to June 2028, with an increase that works out to roughly 5.4% per annum. The exact increase varies by category of employee.
This seems like a fair increase that is above the inflation band being targeted by the SARB. Now the gold price just needs to keep behaving itself!
Nibbles:
- Director dealings:
- A director of Impala Platinum (JSE: IMP) sold shares worth R11.8 million.
- A director of Momentum (JSE: MTM) bought shares worth R180k.
- An associate of a director of Spear REIT (JSE: SEA) bought shares worth R85k.
- An associate of a director of South Ocean Holdings (JSE: SOH) bought shares worth R11.5k.
- Paul Mann has recovered from what I’m sure was the world’s most frustrating post-op process of being unable to travel. This means that he has returned as Executive Chairman and CEO of ASP Isotopes (JSE: ISO). Robert Ainscow will return to the COO role. There’s a lot going on at the company and it’s good to see them back at full strength.
- Italtile (JSE: ITE) CEO Lance Foxcroft is stepping down from the role due to “increased family commitments” – interesting. He will instead run Ceramic Industries, the segment he previously ran. Given the huge supply and demand imbalance plaguing that manufacturing business, I can’t see it being a much less demanding job than group CEO. Brandon Wood, currently the Group COO, has been appointed as CEO Designate. He’s previously been the Group CFO as well, so there’s no shortage of bench strength here. He will formally take on the CEO position on 1 July 2026.
- Spear REIT (JSE: SEA) announced that the acquisition of Consani Industrial Park for R437.3 million has been implemented and the property transferred on 2 December. The loan-to-value ratio is between 26% and 27%. Spear’s gross portfolio asset value is now up to R6.8 billion.
- MTN Zakhele Futhi (JSE: MTNZF) has distributed the circular to shareholders that deals with the final steps in the dance to wind up the scheme and return the residual value to shareholders.
