Aspen wants you to treat the interim period as “transitional” (JSE: APN)
There’s a ~R700 million restructuring cost that ruined these numbers
If you’ve been following Aspen, then you’ll know that they suffered a hideous knock to the share price last year based on a manufacturing contract dispute related to mRNA. Aspen works with global pharmaceutical giants as a drug manufacturing and distribution group, so it hurts the business severely when a large contract with one of those pharma groups goes wrong.
To make the latest interim results even tougher, Aspen had a much stronger base in the first half of last year vs. the second half. H1’25 saw EBITDA of R5.8 billion vs. R3.8 billion in H2’25 because of the timing of the dispute.
The dispute was settled with a payment to Aspen of around R0.5 billion that has been recognised in the six months to December 2025 (H1’26). But compared to the EBITDA of R1.5 billion in the base period from that contract, it’s a year-on-year comparison that was always going to look awful. This is why they want you to see it as a “transitional” period rather than an indication of how the core business is doing.
Commercial Pharmaceuticals, the segment that wasn’t hurt by this contract, grew revenue by 4% and achieved double-digit normalised EBITDA growth (in constant exchange rates). Mounjaro demand in South Africa is a highlight, with profits on the way up in China as well. Reported performance will be impacted by the strength of the rand, though.
The Manufacturing segment (the problem child) reported a “positive EBITDA” that was “aided” by the insurance proceeds. They are “reshaping” their facilities, with cost benefits coming in the second half of 2026 and fully in 2027. Read into that what you will.
Major challenges aside, Aspen generated free cash flow in excess of R1.7 billion in this period and reduced net debt from R31.2 billion as at June 2025 to R28.6 billion as at December 2025. The sale of Aspen APAC for around R26.5 billion will do wonders for the balance sheet when that deal goes through. They hope to complete it by the end of May 2026.
HEPS as reported for the period will be down by between -38% and -33%. Normalised HEPS will drop by between -24% and -19%. It’s a good reminder of just how painful that loss of contract really was.
Guidance for the full year is unchanged. Among other things, this is based on normalised EBITDA in the problematic Manufacturing segment being in line with FY25 in constant currency, so you can see the impact of a much easier base period in the second half of the year.
Capitec has achieved another strong period of growth (JSE: CPI)
There are so many levers that they can pull on this journey
One of the underappreciated elements of the Capitec story is that the road to their current market position has been paved with relatively basic services and a focused offering. They’ve executed a strategy based on doing fewer things to a high standard vs. many things to an average standard. This is key to the success of any disruptor. It’s also a lesson that I’ve tried to apply in my own business!
This isn’t to say that they aren’t introducing additional services and expanding the offering over time. For example, Business Banking is an exciting growth engine that Capitec is putting plenty of energy into. I’ve seen this myself through working with that team on The Finance Ghost plugged in with Capitec – a podcast series that has been running for several months. I have a lot of off-air discussions with the guests and I can tell you that the feelings they have towards the bank are authentic. Capitec is resonating with business clients in the same way that they’ve resonated with Personal Banking clients.
When you are the best growth story in your industry, you can afford to keep piling on the pressure and making life even harder for competitors. This is no different to what Shoprite (JSE: SHP) is doing in retail, for example. Capitec is leveraging its efficient business model to keep fees as low as possible, which means they get to enjoy economies of scale and higher volumes. And so the flywheel keeps spinning.
Once you take into account the value-added services opportunity into this vast and growing client base, you’ll see the potential to drive return on equity through offerings like Capitec Connect (which gets the Cell C (JSE: CCD) fans excited – check out this podcast I did with Cell C CEO Jorge Mendes to learn more). Another very important angle is insurance, including in key South African focus areas like funeral cover.
In case you’re wondering whether all this growth has impacted the underlying quality of the book, here’s your answer: Capitec has actually seen improvements in the loan book, and the provision for expected credit loss coverage ratio has moved in line with this improvement.
The end result? An expectation for HEPS to increase by between 20% and 25% for the year ended February 2025. This is why the market is happily paying a P/E multiple of 34x for these shares.
Forex movements have offset earnings growth at City Lodge (JSE: CLH)
The underlying hotels are performing well though
If someone stopped you in the street and asked you about the risks at City Lodge, I doubt that forex volatility would’ve been top of mind. The operations in Botswana, Namibia and Mozambique represent roughly 5% of the group, so their African exposure is minimal. If you go back and look at the financials for the year ended June 2025, you’ll see that unrealised movements on foreign exchange aren’t exactly enormous. In that period for example, the movement was just R7.9 million vs. profit before tax of R311 million.
I was therefore surprised (and not in a good way) to see that City Lodge’s HEPS for the six months to December 2025 is expected to be between -4% lower and 2% higher than the comparable period. Adjusted HEPS, which reverses out the forex, will increase by between 29% and 36%.
I know we’ve seen significant rand volatility, but this is a huge difference. It seems as though we now need to treat City Lodge as a company with significant currency exposure!
I look forward to getting the full details here when the company releases results on 19 February.
A mixed first quarter for Nampak (JSE: NPK)
It looks good overall, but there’s one segmental headache to worry about
The largest segment at Nampak is Beverage SA, which generated EBITDA of R907 million in the year ended September 2025 vs. R360 million at Beverage Angola and R310 million at Diversified SA. This is important context for the business update for the first quarter of FY26 (i.e. for the three months to December 2025) that was provided at Nampak’s AGM.
In this update, Nampak confirmed that the beverage operations are doing well. Beverage South Africa is performing in line with expectations and Beverage Angola is actually ahead of expectations on volumes, revenue and profitability.
The same cannot be said for the Diversified SA segment, which has lost business for various reasons ranging from customer changes to imported alternatives. They also flag the timing of fish canning and the “fruit crop dynamics” in the first quarter.
This is a mixed bag, but at least the business is doing well across the biggest segments. This type of update is useful to keep the market informed, even if it sometimes creates more questions than answers!
How does a six-fold increase in earnings at Pan African Resources grab you? (JSE: PAN)
This is what happens when production increases at exactly the right time
We’ve seen a number of global gold miners coming through with updates about earnings doubling or even tripling. But you won’t see too many with an increase like this…
My pick in this sector last year was Pan African Resources, as they had the lovely combination of (1) increasing production, (2) a hedge rolling off the books and (3) exposure to an increasing gold price.
I certainly wasn’t disappointed. The share price is up 245% in the past year. That’ll do.
In terms of earnings for the six months to December 2025, the percentage move is much crazier than what we’ve seen in the share price. HEPS (in US dollars) is expected to jump by between 507% and 517%. Yes, that’s a six-fold increase in HEPS, from 1.20 US cents per share to between 7.28 US cents and 7.40 US cents per share. Incredible.
This is what happens when revenue increases by 157.3% in a company that has substantial fixed costs and thus operating leverage. The combination of a 61.6% increase in the average gold price and 51.5% in the amount of gold produced was responsible for this revenue growth.
And here’s the best part: thanks to the MTR expansion project and the Tennant Mines acquisition, group production is expected to increase even further during the second half of the year ending June 2026.
I’m long and I plan to stay that way.
Trustco’s Meya Mining secures a $25 million facility with Ecobank (JSE: TTO)
The bank clearly sees a future in diamond production
At a time when Anglo American (JSE: AGL) is reporting losses in De Beers and looking for a buyer for that asset, you wouldn’t expect there to be much bullishness around mined diamonds.
Nevertheless, Trustco has announced that Meya Mining (in which Trustco has an indirect equity interest) has secured a $25 million debt facility with Ecobank. There isn’t even an equity kicker or mezzanine layer here, with the announcement making it sound like this is pure debt. With the underlying asset being a 25-year exclusive diamond mining license in Sierra Leone’s Kono District, the bank is taking a brave punt here.
Meya is already more than $100 million deep in this project, so that gives you an idea of how much it costs to get something like this from dream to reality.
Importantly, Trustco’s $46 million loan to Meya is not subordinated to this loan, so that’s another way in which the bank is taking a significant risk here. It’s unusual to see banks put in a layer of finance that isn’t at the very top of the creditor pile i.e. the most senior debt.
Nibbles:
- Director dealings:
- Lesaka Technologies (JSE: LSK) Executive Chairman Ali Mazanderani has bought $399k worth of shares – or roughly another R6.3 million to add to his name. It’s always encouraging when insiders are buying shares in their companies. I recorded a podcast with Ali in November last year. If you haven’t checked it out, I suggest you do so here.
- Universal Partners (JSE: UPL) has limited liquidity in its stock, so I’ll just mention the latest quarterly results down here. For the period ended December 2025, the net asset value (NAV) per share (which is reported in pounds sterling) fell by 7.4% year-on-year, attributable mainly to the investment in dollar-denominated notes in SC Lowy. I’ll highlight the Workwell business here, which is growing despite all the jitters around AI, so we aren’t exactly seeing a global unemployment crisis just yet. Portman Dentex is running below expectations though, so people seem to be working instead of getting their teeth done at the European dental group. Another one to touch on is Xcede Group, a recruitment business that has been struggling with permanent placements. Employers might still be hiring, but not through traditional channels.
- I’m not familiar with the dynamics of the Nu-World (JSE: NWL) shareholder register, but it’s clear from the results of the AGM that there is minimal alignment. It’s rare to see resolutions for director appointments squeaking through with 55% approval.
- Sirius Real Estate (JSE: SRE) has added its name to the list of companies with interesting independent director appointments this week. Ian Watson, who has decades of experience in building, listing and selling property portfolios, has joined their board. I like it when industry experts are appointed as independent non-executive directors. If you’re keen to learn more about the company, I recorded a podcast with the CEO, CFO and CIO of Sirius in December 2025. Check it out here.
