Balwin’s second half was boosted by the rate cut in September 2024 (JSE: BWN)
But it wasn’t enough to save the full-year numbers
Balwin has released results for the year ended February 2025. Revenue fell 6% and HEPS came in 4% lower, so that’s not exactly great news. The company has focused its story around the momentum in the second half, with the wheels of commerce in the property sector greased by a 75 basis point cut in the interest rate.
Balwin banked 62% of its revenue and 67% of its profit in the second half, so the narrative isn’t wrong. If that continues into the new financial year – and if by some miracle we get another interest rate cut – then we should hopefully see better numbers in FY26.
The Balwin Annuity business gave some support to the numbers, with revenue growth of 33% and a contribution of 7.9% of group revenue. This also helped take gross profit margin up from 28% to 30%. Although this is a handy underpin, its importance is being flattered by just how weak the apartment sales have been.
A very encouraging sign is the 6% drop in operating costs. That’s the kind of discipline that you want to see from a company during a tricky year. The hope is that the same discipline would continue into a year of better revenue.
Speaking of discipline, there is no dividend as the board looks to focus on debt reduction. The loan-to-value ratio of 40.4% has shown practically no improvement from 40.5% a year ago, so it feels like they are on a treadmill at the moment.
At least they seem to be running at the same speed as the treadmill now, as opposed to falling and bumping their heads. The share price has come off hard since the GNU exuberance, now trading roughly in line with where it was a year ago (it can bounce around quite a bit per day, so the exact start date makes a big difference).
This is probably the closest I’ve ever been to thinking that Balwin might be a speculative buy.
Boxer’s growth whittled away by lease and tax charges (JSE: BOX)
You also have to work through the 53rd week complexity in these numbers
Boxer has released results for the 53 weeks to 2 March 2025. In retail reporting, the use of a 52-week calendar means that a day is lost each year (and two in leap years), leading to a 53rd week for reporting purposes every six years. This limits comparability, as it obviously flatters year-on-year growth when more trading days are included in a period.
Thankfully, this is why retailers report comparable earnings on a 52-week vs. 52-week basis, allowing investors to assess the trend. On that basis, Boxer grew turnover by 10.4%. Trading profit was 14.0% higher excluding the non-cash impact of a Pick n Pay financial guarantee in the prior year. I would suggest focusing on those two numbers and ignoring the noise.
Something that I wouldn’t ignore is the colossal increase in net finance charges of 46.2%, which is obviously much higher than trading profit growth and thus a drag on earnings. This is the foolishness of the accounting standard for leases, which puts the lease costs in as funding charges. Boxer actually has very little true funding costs in the way that any normal person would understand them i.e. in relation to external borrowings. But due to the extensive store rollout programme, the impact of leases comes through in the net finance charge line and takes profit before tax growth down to just 4.9%. The key takeaway here is that a store expansion programme doesn’t come cheap and Boxer is playing the long game here, hence investors would need to be in board for that journey.
And once you consider the increase in the effective tax rate, headline earnings came in 0.1% below the prior year. Then we reach HEPS, which is impacted by the number of shares in issue. Due to the IPO and a 13.4% increase in the weighted average number of shares in issue, HEPS actually declined by 11.8%!
It’s a messy set of numbers and FY26 won’t be a clean year either, as they anticipate another year-on-year HEPS decline as the increase in the number of shares from the IPO is fully baked into the numbers. The impact will be much worse in the first half, with Boxer warning of a drop in HEPS of more than 20% year-on-year.
I’m not sure that the share price is going to maintain its IPO price based on this update, especially as they’ve also indicated expected pressure in trading margin from these levels (and that’s before finance i.e. lease costs).
Calgro M3 disappoints the market (JSE: CGR)
This isn’t a great start to a new era at the company
Calgro M3 is under new management and is having a tough start to that journey, with disappointing results for the year ended February 2025 that sent the share price tumbling to a -10.7% move for the day. HEPS fell by 9.3% for the period, so the market response is in line with that.
The percentage moves further up the income statement were even more severe, with revenue down by 32.7%. There was an increase in gross margin to try and mitigate this impact, which appears to have largely been achieving through focusing on infrastructure installations (the accounting for these projects is complicated). Group gross margin was 29.43%.
Specifically in the residential construction business, which is still the biggest part of the business, gross profit margin was up by 103 basis points to 27.65% despite an 11.5% drop in revenue. It seems likely that margins will normalise once the mix of units vs. infrastructure developments normalises as well.
The concern here is that the reason why the group prioritised infrastructure development at its projects is because the market for residential units was soft. This is despite the recent interest rate relief. Calgro’s area of focus is lower income housing units, so this is supposed to be a resilient segment that reflects South Africans moving through the LSM brackets, a trend that has been a feature of our democracy. For whatever reason, that journey seems to have stalled recently. In the meantime, it makes sense for Calgro to have focused on getting infrastructure out of the way, leaving them free to respond to any uptick in demand.
The Memorial Parks business is now 8% of group revenue, up from 4% last year. Lay-by receipts were up 57.5%, which is a reminder that there are many South Africans who pay off a place of final rest over time. Gross profit margin increased from 42.45% to 50.09% in this segment.
After a JSE proactive monitoring review, there have been some changes to the timing of revenue recognition in the Memorial Parks business. The maintenance obligation of the parks is now being recognised as revenue with an associated cost of sales and the recognition of a provision for those costs. The old treatment was to defer the revenue into perpetuity. Another change is to the timing of burial right and burial service revenue, with revenue for the service itself now deferred to when the service takes place.
The group itself is in reasonable shape overall. This was hopefully just a blip along the way, with the market taking the share price back to where it was a year ago. If you can believe it, Calgro at R5 per share is trading on a P/E ratio of just 2.64x. They don’t pay much of a dividend, but at this point I think every spare cent should just be used for share buybacks.
A monster update at Lewis (JSE: LEW)
The strong performance in the interim period continued for the full year
When Lewis reported interim HEPS growth of 49.1% based on a revenue increase of 13.6%, they were sounding more like a growth stock than a value stock. A trading statement for the year ended March 2025 is even more astonishing, with expected HEPS growth of 55% to 65%.
The benefit of their share buyback strategy continues to come through here, as headline earnings itself will be 48% to 58% higher. The reduction in shares outstanding is good for 700 basis points in HEPS growth.
Aside from solid credit sales, they also managed to expand gross margin in the second half of the year while keeping expense growth below revenue growth. Credit quality also looks fine, with the company not raising any concerns around collection rates.
By late afternoon trade, Lewis was 16% higher, adding to a 12-month move of 49% coming into this update.
A first look at the “new Metair” (JSE: MTA)
The aftermarket parts era is here
Metair hosted an investor day at Autozone, the recently acquired aftermarket parts business that represents quite the strategic shift for the group. Apart from the very funny first page that includes a note to attendees about how to find the bathrooms (I’ve never seen this before in a capital markets presentation), it’s a good deck.
The group now arranges itself under two segments: Automotive Component Manufacturing (6 companies selling to OEMs) and Aftermarket Parts and Services (also 6 companies, including First Battery Centre and AutoZone amongst others). The revenue split is 74% – 26% in favour of Automotive Component Manufacturing, so they have a long way to go to derisk themselves from the OEMs.
In the same way that CMH complains about lack of growth in new cars, AutoZone benefits from an aging fleet of cars in South Africa. That’s an argument that I can get behind, although I do wonder about whether the influx of Chinese brands might change the way parts are bought once those vehicles are out of service plan. I’m merely flagging it as a risk, without any comment on whether AutoZone will be able to adapt to that changing mix.
The presentation also highlights the broader African opportunity, with a plan to develop routes to market on the continent. I think Metair should firmly be in the walk-before-we-run camp, particularly given how the other international opportunities have played out for them. Having said that, First Battery appears to have a decent presence in Africa, so perhaps this time will be different (as the saying goes).
Keeping in mind that AutoZone was acquired out of business rescue, it’s going to take a while for them to recover. The target is to be profitable in 2025, with 2026 – 2027 seen as recovery years.
Good luck to them. Metair really deserves a break.
Strong quarterly numbers at MTN – but the market was pricing them in (JSE: MTN)
The expectation is for ongoing good news
With a share price that is up nearly 30% year-to-date, the market is fully expecting MTN to deliver encouraging news on an ongoing basis. We got a strong preview of this in the African subsidiary results, where improved macroeconomics in Africa are working well for the group. With the release of group results for the first quarter, we can now see how it all rolls up to group level – and we can also see how things are going in South Africa.
The overall story is great, with service revenue up 10.4% (or 19.8% in constant currency) and EBITDA margin up by 530 basis points to 44.1%. Unsurprisingly, data and fintech revenue did the heavy lifting, up by 17.9% and 17.2% respectively – and that’s as reported, not in constant currency!
We already know that the African businesses did well. In South Africa, which is a far more mature market, service revenue was up 2.6%. Data revenue was up 3.9% and outgoing voice revenue fell by 3.2%, which isn’t a surprise. EBITDA in MTN South Africa decreased by 2.6%, so we are back to a world where the African businesses are driving the growth story. The group notes that if you exclude once-off items, EBITDA margin in South Africa increased by 40 basis points, even though revenue was up and adjusted EBITDA was down. No, I don’t understand that either.
Although HoldCo leverage has ticked up from 1.4x to 1.5x, they are still at healthy levels and they managed to move R1.9 billion worth of cash from operating companies to the holding company during the period. Currency issues in Africa mean that group level leverage ratios don’t tell the whole story. It’s about where the cash actually sits.
The share price closed ever so slightly higher on the day. This tells you that the African story is driving the share price (we knew about those results already), with the South African numbers being in line with market expectations. It’s also a function of a share price that has run very hard and is probably due a breather.
Not much growth at Redefine (JSE: RDF)
And yet the share price is up 15% in the past year
Like in all sectors, the valuation of a property group is a complicated thing. REITs are particularly exposed to prevailing bond yields in the market, as they are seen as a hybrid between pure equity and bonds. They are obviously also highly exposed to sentiment, as you can’t exactly pivot a model of properties in a particularly country into something else in response to economic changes.
This is why you can see a positive move of 15% in the Redefine share price in the past year despite distributable income per share up just 0.7% in the six months to February. They are quick to point out that total distributable income is up 3.6%, but the growth per share is what actually matters.
The full-year number isn’t expected to be much more exciting. Having just banked interim distributable income per share of 25.52 cents, they are guiding for a full-year performance of between 50 and 53 cents per share. FY24 was 50 cents per share, so the top-end of the guided range would reflect 6% growth. Low single digits (i.e. the mid-point of the range) is more likely.
With 73% of the South African portfolio in Gauteng and 34% of the South African portfolio in office properties, Redefine isn’t exactly sitting with a focused portfolio of crown jewels. Even with exposure to premium office properties, the group suffered negative rental reversions of 20.7% based on 6% of the GLA being renewed during the period. The troubles in the office property sector are far from over. Despite this, the group is still actively acquiring and developing office properties, so I guess they are playing the long game here.
At the mid-point of guidance for the distributable income per share and assuming an 85% payout ratio (also the mid-point of guidance), the group is trading on a forward yield of around 9.6%.
A modest uptick in recurring HEPS at Santova (JSE: SNV)
They are still in negotiations for an acquisition
Santova has released a voluntary trading statement dealing with the year ended February 2025. Ignoring both EPS and HEPS which were impacted by fair value changes in the comparable period, the guidance for recurring HEPS is growth of between 1.4% and 6.4%. It’s on the right side of zero, but not by much.
To inject some excitement into the story, Santova has renewed its cautionary announcement regarding a potential acquisition of a group of logistics companies in the UK and the Netherlands. This sounds like they are moving into a different part of the value chain, as they talk about fulfilment centres and related technologies.
This is part of a broader play in eCommerce, which is a trend that isn’t going away anytime soon. It seems like an interesting deal that they are looking to fund through existing cash and debt facilities.
The share price has had plenty of volatility in recent years, but no clear direction. Perhaps a shift in strategy will change that.
South32 has fished in the Anglo American pond for their next CEO (JSE: S32 | JSE: ANG)
The current CEO of South32 will step down in 2026
South32 has announced that Matthew Daley will join the company as Deputy CEO from 2 February 2026 and will take over from Graham Kerr as CEO later in 2026 when Kerr retires.
Daley is currently on the exco at Anglo American where he serves as Technical and Operations Director. He’s been with Anglo since 2017, prior to which he ran Glencore’s Canadian copper business. That’s a juicy mix of experience.
Daley is based in the UK and will relocate to Australia for the role. That’s a good reminder of just how global the mining sector on the JSE actually is.
Anglo has announced that Tom McCulley will replace Daley, while retaining his existing responsibility for Anglo’s crop nutrients business. There’s a transition period in coming months, after which Daley will leave Anglo and execute his move to South32.
The momentum continues at Tiger Brands (JSE: TBS)
Here’s another juicy jump in HEPS
With the share price up roughly 50% in the past year, Tiger Brands has been on a charge. Management’s initiatives to improve profitability in a tough market are clearly working, through a combination of focusing on supporting volumes and driving margins. They have also executed a number of changes to the overall portfolio, leading to a more focused business that isn’t trying to be on every shelf at your friendly local grocery store.
The results are clear: HEPS for the interim period is expected to be between 15% and 25% higher. It gets even better if you look at continuing operations, where HEPS is up between 30% and 40%. Results are due for release on 28 May, at which point shareholders will get all the details.
There’s also an update on the listeriosis class action, where Tiger’s lead reinsurer is essentially running the show in the legal defence. Settlement offers will be made to specific claimants who fall under certain classes based on exactly how they were impacted by listeriosis. The broader class action still in its first stage, with liability to be determined in court. The court process takes an incredibly long time. Tiger has adequate product liability insurance in place “for a group of its size” – which isn’t the same thing as saying they have adequate cover for any potential liability.
Nibbles:
- Director dealings:
- The former CFO of ADvTECH (JSE: ADH) has sold yet more shares, this time worth R1.2 million.
- Curro (JSE: COH) has refinanced its existing debt facilities of R2 billion. This was necessary as R800 million would be due under revolving credit facilities at the end of 2025 and the remaining R1.2 billion related to term facilities due in 2026. The new package is a four- and five-year term loan structure for R1.4 billion, along with revolvers of R1.0 billion, thereby increasing the total facility to R2.4 billion. A number of banks have gotten involved here, as is commonly the case. What Curro really needs to be doing is filling its schools rather than buying new ones, so hopefully the increased facility is purely for flexibility rather than intended use for expansion.
- Hammerson (JSE: HMN) has responded to press speculation by confirming that it is in process to acquire units in the abrdn UK Shopping Centre Trust that holds 59% in Brent Cross. This would be for a net investment of around £200 million and if I understand the announcement correctly, it would take Hammerson to an economic interest in Brent Cross of over 90%.
- Alphamin (JSE: APH) has updated the market on the operational restart over the past few weeks at the Bisie tin mine. Between 15 May and 11 April, they are achieving targeted processing recoveries. This was done through using run-of-mine ore stockpiles. Underground operations recommenced in the last week of April. Importantly, a truck with tin concentrate for export left the mine on 9 May. So far, so good. The share price has recovered strongly since the major sell-off in late March, but remains 16.5% down year-to-date.
- Trustco (JSE: TTO) has confirmed that they are busy with the Namibian audit for their FY24 financials while the “international processes” are all underway. There’s a delay in publishing the results, which Trustco attributes to various things all happening together (as though this is an acceptable excuse once they are on the US market). Anyway, they expect to publish financials by June 2025. I love that they think that US investors (if they attract any) will be fine with the casual missing of deadlines for financial statements just because the company is busy.
- Having served on the board for longer than 5 years, Phumzile Langeni will step down as chairman and non-executive director of Delta Property Fund (JSE: DLT) to focus on personal business interests. No replacement has been named at this stage.
