Remember when R53 per Bell Equipment share wasn’t good enough for activist minority shareholders? (JSE: BEL)
Now at R39 per share and with earnings plummeting, regret must be kicking in
Bell Equipment is a wonderful cautionary tale of how far you get in life by being too greedy. I always thought that R53 per share was a more than reasonable take-private offer, yet there were certain minority shareholders who blocked the deal from going ahead.
The share price closed at R39 per share on Monday after releasing a further trading statement for the six months to June that reflects a drop in HEPS of between 22% and 32%. Sure, the US tariffs are an issue that nobody saw coming at the time of the R53 offer, but the point here is that cyclical businesses are highly exposed to broader macroeconomic and geopolitical risks. We never know exactly what will go wrong, but we know that at some point, something in the world will go wrong.
Here’s the really bad news: the impact of tariffs wasn’t as bad as expected in this period, but management reckons the second half of the year will be worse. Yes, that means worse than the drop in earnings we’ve just witnessed.
A rare dip in earnings at Bidvest (JSE: BVT)
The market wasn’t happy with this
Bidvest fell 5.9% on Monday after releasing results for the year ended June 2025. This takes the year-to-date move to -15.6%, with the share price clinging to a support line that goes back to early 2023. Traders may want to keep an eye on this one to see what happens.
As for investors who have taken a long-term view on Bidvest, it’s not fun to see a drop in HEPS from continuing operations of 3%. Bidvest is one of the most impressive companies on the JSE, but they have extensive exposure to the “real economy” and general levels of industrial and consumer discretionary activity in South Africa. Against that backdrop, the modest drop in HEPS is actually pretty good in my view.
As always with Bidvest, the performance is best explained by digging into the underlying segments. I’ll start with the highlights package, being Services SA up 13.6%, Services International up 12.1% and Branded Products up 7.8%. Automotive managed to grow by 2.5%, boosted by a recent improvement in the car market. Alas, Freight had a rough time with a drop in earnings of 10% and Commercial Products got slaughtered, down 28.4%. Adcock Ingram was down 5.2% year-on-year after a much better second half helped mitigate the awful interim period.
It gives you an indication of the diversification in Bidvest when the note dealing with Services South Africa attributes the performance to airport lounge passenger volumes and an enhanced landscape offering. I’ve been to enough airport lounges to know that these are unrelated services.
You must be wondering how Commercial Products took such a knock. Bidvest talks about “lower profits from the majority of businesses” in that segment – yikes. There were some pockets of growth in that part of the business, but clearly nowhere near enough to make up for the problems.
The silver lining is cash generated from operations, which increased by 5.8% as the cash conversion ratio improved considerably. Despite this, acquisitions (including the large Citron deal) meant an increase in net debt to EBITDA from 2.0x to 2.2x.
Due to unfortunate timing of other capex, return on invested capital fell from 16.1% to 14.0%. That’s still well ahead of the weighted cost of capital, but investors will obviously want to see a quick improvement in that trajectory.
The final dividend was up 1%, a better outcome than HEPS that was likely made possible by the decent cash conversion – and the unwillingness of management teams to ever reduce a dividend. When varsity textbooks talk about dividends being sticky, they aren’t wrong.
Blue Label gives more details on the planned Cell C separation (JSE: BLU)
They make it clear that this isn’t yet an announcement of an intention to list Cell C
If you’ve ever thrown a number of small electronics and extension cords into the same box and then tried to untangle them some time later, you’ll have experienced the smallest taste of what it’s like for Blue Label Telecoms to figure out how to restructure Cell C to prepare it for listing. The company has announced details of a pre-listing restructuring that seeks to sort out a number of balances between Cell C and Blue Label entities, primarily The Prepaid Company (TPC).
As you’re probably aware, the current era of Cell C (and by far its most successful since inception) is focused on enabling mobile virtual network operators in South Africa. Capitec Connect is a perfect example, with the bank able to sell mobile network services like airtime to its customer base thanks to Cell C technology in the back-end.
The TL;DR of the Great Cord Untangling is that Blue Label will own a “significant majority” of the shares in Cell C after the listing, although that stake will subsequently reduce through a “sell down” process, which is a fancy way of saying that large institutional investors will be contacted to test their appetite to buy shares in Cell C from Blue Label. At this stage, Blue Label hasn’t indicated the price at which this will happen, but they have committed that at least 26% of the shares in Cell C will be sold through this process. It’s also worth noting that Cell C management will hold around 4.5% in the company to create alignment.
With an R11.7 billion market cap at Blue Label, the restructuring values are way in excess of the 30% threshold to trigger a Category 1 transaction circular. It looks like most of the value of the group is attributable to Cell C, so this separate listing (if it goes ahead) will be particularly interesting to follow in terms of how both stocks trade after the transaction. Growth investors will inevitably focus on Cell C and value investors will keep an eye on the “rump” that is Blue Label.
Ignore HEPS at Brimstone and focus on the metric that counts (JSE: BRT | JSE: BRN)
Intrinsic NAV is the right way to look at investment holding companies
Every single time Brimstone releases a financial update, I feel like I write the same plea for a shift in focus from HEPS to intrinsic net asset value (INAV) per share. This is certainly how the market looks at Brimstone and determines the share price, so why does management keep beating the HEPS horse to death?
In the six months ended June, Brimstone increased HEPS by 35%. Sounds amazing, right? But then why is the share price down 11% in the past 12 months?
As always, INAV has the answer. INAV per share has fallen by 22.1% in the past six months, now at 864.7 cents. The current share price is R4.77, so the traded discount to INAV is 45%. That’s pretty normal for the discount in this stock, which gives you further proof that the market literally couldn’t care less about HEPS here.
If you’re wondering where the pressure came from, then the main culprit is the stake in Oceana (JSE: OCE) where the share price has had a difficult time in 2025. Primary agriculture is a tough sector and when you add in the volatility of the ocean, expecting consistent performance is totally unrealistic.
Another period of growth for CA Sales Holdings (JSE: CAA)
The broader theme of FMCG growth in Africa remains relevant
CA Sales Holdings released numbers for the six months ended June 2025. The company has supported the Ghost Mail platform by including them here, so please do check out the official company narrative.
The company has such an interesting business model. If you believe in the rise of the middle class in Africa and the shift from informal to formal retail as part of urbanisation trends, then you’ll probably like the CA&S story. If you enjoy seeing earnings growth, then you’ll like it too. Revenue may have been up just 4% for the period, but that was good enough for operating profit growth of 9.6% and HEPS growth of 16.1%.
Having said that, the biggest risk facing the company is the exposure to the Botswana economy. The country is heavily exposed to the diamond industry and unless you’ve been living under a rock (of the non-shiny kind), you’ll know that lab-grown diamonds have caused a massive problem for De Beers and thus the fiscus in Botswana. For now at least, those impacts don’t seem to be hitting CA&S too hard, with only a slight dip in revenue and EBIT in Botswana. Still, as the largest country exposure (39% of group EBIT), this means that other countries are under more pressure to grow. If Botswana does experience a significant drop in profits, then we might see group earnings take a knock.
Only time will tell. All that CA&S can do in the meantime is develop as many other lucrative markets as possible, thereby reducing the relative exposure to Botswana over time. In terms of controlling the controllables, they are doing an excellent job in my view.
If you’re keen to hear the latest directly from management, then you can register for the next Unlock the Stock on 11 September at midday, featuring the CEO of CA&S. They are always so open to answering detailed questions about the business, so don’t miss this opportunity!
RCL Foods baked in solid growth (JSE: RCL)
There’s an impressive EBITDA margin trajectory at play here
RCL Foods released numbers for the year ended June 2025. The company has supported the Ghost Mail platform by including them here, so please do check out the official company narrative.
Now for my narrative, and I agree with the CEO’s comment about delivering “pleasing results” in this environment. Revenue from continuing operations may have been up by only 1.8%, but underlying EBITDA from continuing operations improved by an impressive 7.9%. Margins clearly went the right way.
When you reach HEPS, the benefit of leverage throughout the income statement is clear. HEPS from continuing operations increased by 28.6%, although the company would prefer you to look at underlying HEPS from continuing operations which increased by 14.4%. That’s a great outcome.
The dividend is the real highlight, up by a whopping 71%.
The Baking and Groceries segments did the heavy lifting here, while Sugar was down year-on-year due to a demanding base. In Baking, it’s all about converting modest growth in volumes into solid EBITDA growth, as that business has pretty serious operating leverage in it. In Groceries, the period has been one of margin mix improvement, with a higher focus on premium brands including in pet food. As for Sugar, the overall performance was strong, but was down vs. the prior year.
Despite this performance, the share price is almost perfectly flat year-to-date and hasn’t moved much over 12 months either. It trades at a modest mid-single digit Price/Earnings multiple.
Double-digit everything at Santam (JSE: SNT)
It’s been a great time for insurance companies
The local financial services companies that are heavily exposed to insurance have generally been having a grand old time recently. Santam is up more than 11% year-to-date and over 24% over 12 months. I don’t think people will complain too much about that, although Santam shareholders shouldn’t depress themselves by looking at the OUTsurance (JSE: OUT) chart with 58% growth over 12 months and 14% year-to-date.
For the six months to June 2025, Santam achieved 12% growth in group insurance revenue. HEPS jumped by 19%, so they are doing a good job of converting revenue growth into higher earnings growth. One of the key drivers here is conventional insurance net underwriting margin (essentially the profit they make on short-term insurance), which jumped from 6.5% to 11.3%.
Another point worth touching on is that the international businesses (India and Malaysia) saw earnings improve by 18%. Shriram in India has been the star contributor here. The broader Sanlam (JSE: SLM) / Santam stable is one of the few ways on the JSE to get exposure to the incredible economic story that is India.
The interim dividend was up 10.3%, so the payout ratio was lower than the prior period. Still, double-digit growth in the dividend is a solid outcome!
Sea Harvest has certainly been harvesting, with HEPS almost doubling year-on-year (JSE: SHG)
The group is heavily exposed to the hake industry
Sea Harvest released numbers for the six months ended June 2025. The company has supported the Ghost Mail platform by including them here, so please do check out the official company narrative.
From my perspective, it’s pretty hard to find fault in a result that saw revenue increase by 34% and headline earnings jump by a massive 120%. Due to an increase in the weighted average number of shares, HEPS was up by “only” 91% – an exceptional performance.
Interestingly, gross profit margin was actually down by roughly 100 basis points, so the magic really happened below that thanks to the high revenue growth and the knock-on benefit of operating leverage (the joy of having fixed costs at a time when revenue is flying high). Operating profit margin improved from 9% to 14%.
Debt ratios also look better after a result like this of course, with net debt to EBITDA improving from 2.7x to 2.1x.
Where did the revenue growth come from? It’s mainly about the hake business, with higher catch rates (up 15%) and better pricing (up 10%). Other areas of the business also contributed positively, other than abalone which had a really tough time with lower selling prices. The abalone business achieved a positive operating profit, but substantial fair value losses based on biological asset revaluations took that performance into the red in terms of segmental net profit.
Despite the name, there’s more to Sea Harvest than just the ocean. The Cape Harvest Foods segment includes various dairy businesses and things went very well there, with EBIT up by a delicious 71%.
It’s extremely difficult to predict how this group will perform, as there are just so many variables at play. Management is “cautiously optimistic” about the second half, with a number of factors that will impact global pricing for the various products.
The share price chart over 12 months looks like a topographic profile of the ocean floor:
Sun International is doing well under the circumstances (JSE: SUI)
Earnings are up and debt is down
The casino and gaming sector isn’t a particularly fun place to be right now. Online sports betting has proven to be quite the disruptor. Casinos are large and expensive assets to own if they are underutilised. And to make things more difficult, competition authorities in South Africa aren’t keen on consolidation, as evidenced by the approach taken towards the Sun International – Peermont deal.
Sun International terminated that deal in the end, incurring R11 million in costs along the way. That’s small compared to some of the other major adjustments in the latest earnings.
We don’t have full details yet, but a trading statement for the six months to June 2025 has indicated adjusted HEPS growth of between 5.6% and 7.4%, which is pretty good under the circumstances. Encouragingly, debt (excluding IFRS 16 leases) is down from R5.2 billion as at December 2024 to R5.0 billion as at June 2025.
Without adjustments, HEPS is up by between 56.8% and 61.6%. The put option liability related to SunWest seems to be the biggest cause of the difference between adjusted and unadjusted HEPS.
Results are expected to be released on 8th September.
Nibbles:
- Director dealings:
- Orion Minerals (JSE: ORN) issued shares worth A$508k to an associate of a director in settlement of a loan facility. The company also issued shares worth A$42.5k in lieu of director fees. That works out to around R6.4 million worth of shares.
- Des de Beer bought another R5 million worth of shares in Lighthouse (JSE: LTE).
- It looks like there was a trade between directors of Visual International (JSE: VIS), with one director selling shares worth R1 million to another director.
- An associate of the CEO of Spear REIT (JSE: SEA) sold shares worth R950k. This is most unusual, as the CEO and his associates are almost always buyers rather than sellers. The announcement notes that the sale is for “restructuring the investment portfolio and complying with certain commitments” – and importantly, it’s only a small portion of the overall shareholding. Still, a sale is a sale.
- An associate of a director of KAP (JSE: KAP) bought shares worth R500k.
- An associate of the CEO of Acsion (JSE: ACS) bought shares worth R224k.
- A director and associate of that director bought shares in Finbond (JSE: FGL) to the value of R89k.
- The CEO of Vunani (JSE: VUN) is still mopping up the limited liquidity in the market, with a purchase of shares to the value of R6k.
- As a very important step for Harmony Gold’s (JSE: HAR) strategy, shareholders of MAC Copper approved the transaction that will see Harmony acquire the company. There are still some conditions precedent to get through, but some of the biggest ones are already out of the way. Harmony expects the deal to close by the end of October.
- Merafe (JSE: MRF) is facing difficult times in the ferrochrome market, with the smelting operations at Boshoek and Wonderkop having been suspended back in May this year as part of a business review process. They also temporarily suspended operations at the Lion smelter for maintenance and rebuilds during the weak market conditions. Things don’t seem to be improving out there, with Merafe taking the tough decision to commence s189 proceedings (i.e. retrenchments) for the Boshoek and Wonderkop smelters, with the Lion smelter currently being evaluated as well.
- Gemfields (JSE: GML) shareholders will surely be pleased to learn that the disposal of Fabergé has been completed. It may be a glamorous asset, but it certainly isn’t a good asset. This was the right move by Gemfields.
- AfroCentric (JSE: ACT) is a left-field name on the JSE, so their trading statement only gets a mention down here on an otherwise busy day of earnings. For the six months to June 2025, HEPS dropped by between 36.5% and 40.5% year-on-year. The Retail Cluster is where the pressure is, with the loss of contracts and lower margins from pharmaceutical products. Although that sounds bleak, earnings are at least much higher than in the second half of 2024, so there’s some positive momentum.
- Huge Group (JSE: HUG) has been on a cost savings drive, which includes retrenchments of employees across various group companies. They will save R16 million in the next 12 months (net of separation costs) and R32 million annually thereafter. The savings in the first year are always much lower because of retrenchment packages. There have also been various changes to management structures. Huge included a brief update in the announcement on Huge Distribution, where the revenue run-rate has been R8 million per month for the first five months of the new financial year vs. R54 million annual revenue in FY25. They’ve also noted that Huge NXTGN is now generating revenue thanks to securing various clients.
- Things still aren’t good at Nutun (JSE: NTU), which you may remember as the charred remains of Transaction Capital. GCR Ratings has affirmed Nutun’s credit ratings, but the outlook has been revised to Negative. And yes, it’s pretty ironic that this has happened to a company that specialises in buying distressed debt. Their credit rating is still good, but that outlook is a concern, particularly as GCR Ratings has attributed the revision to a lack of sustainable improvement in the competitive position of the business.
- The CFO of Novus Holdings (JSE: NVS) has resigned with effect from December 2025. Kim Julies will step into the role, having been with the group since 2017. It’s always great seeing an internal appointment.
Note: Ghost Bites is my journal of each day’s news on SENS. It reflects my own opinions and analysis and should only be one part of your research process. Nothing you read here is financial advice. E&OE. Disclaimer.
