Ghost Bites (Exxaro | Grindrod | Lighthouse Properties | OUTsurance | Sanlam | STADIO | Sun International | Trellidor)

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Exxaro’s earnings dropped in 2023 (JSE: EXX)

Lower export sales prices hurt the business

Exxaro is a coal operation that for some reason also owns a wind energy business. I’m not kidding. Sadly, improved wind conditions in 2023 (no, really) couldn’t offset the knock taken by the coal business, so earnings are down for the year.

The major challenge was in export sales prices, which couldn’t be fully offset by improved domestic prices and the weaker rand. The net result is that EBITDA is expected to be between 23% and 37% lower for the year.

At HEPS level, the expected drop is 16% to 30%.

A year to remember for Grindrod (JSE: GND)

The core business is flying

Grindrod has released its results for the year ended December 2023 and they look great. The core business could only grow revenue by 1%, but EBITDA jumped by 16% and headline earnings from this part of the group grew by 29%.

Talk about doing a lot with a little.

In case you’re wondering, the revenue issue was because of reduced value added services mineral export sales and charters. Within the broader business, an operation like the port in Maputo did exceptionally well (record volumes up by 28% vs. the prior period).

The non-core business is far less positive, with fair value losses on the private equity portfolio and and property loans in KZN.

At group level, HEPS was up 18%. The full year dividend was up by a whopping 84% for the year.

Lighthouse Properties acquires a mall in Spain (JSE: LTE)

The deal is worth EUR 121 million

Lighthouse has been telling the market that the focus is on direct property acquisitions. They haven’t wasted any time, entering into an agreement to acquire Centro Comercial H2O in Spain for EUR 121 million.

This mall is in Madrid and opened in 2007. It has a strong offering of tenants, which is probably why bank debt of EUR 61.5 million is available to support the deal. The purchase price is a net initial yield of 7.5% and the forecast distributable profit for the 12 months ending December 2025 is EUR 5.233 million.

This increases Lighthouse’s exposure to Spain, with the Iberian portfolio now constituting 66% of the value of Lighthouse’s directly held properties.

OUTsurance had a wild ride at segmental level (JSE: OUT)

At group level, it’s a sideways story

OUTsurance released a voluntary trading update for the six months ended December 2023. It’s voluntary because group earnings won’t differ by more than 20%. As for segmentals, buckle up.

OUTsurance Ireland is rather funny, with the R2 million loss in the prior worsening by 2,800%. You read that correctly. Of course, the percentage is nonsensical. The story here is that they are setting up the Irish business and incurring start-up losses.

The South African short-term business expects normalised earnings to be between -8% and 2% different to the comparable period. That suggests a negative mid-point.

Youi Group in Australia is expected to be down by between -20% and -10%, reflecting higher “natural perils” claims particularly in Australia. I presume this excludes all the spiders and snakes.

The highlight is the life insurance business, which casually grew earnings by 400% off a low base. I warned you that the segmentals are a bit wild.

With all said and done, group normalised earnings will be between -5% and 5% different to the comparable year. In other words, a mid-point of flat earnings. HEPS is expected to be a -6% to 4% difference.

Sanlam had a great time in 2023 (JSE: SLM)

The dividend for the year grew 11%

Sanlam enjoyed a significant improvement in its fortunes in 2023. There are many numbers you could look at here, but the cash net result from financial services (up 18%) is one of the better choices. You could also consider HEPS being 48% higher as a solid indication of how the year went.

Perhaps the best indication of all is the growth in the full year dividend per share, which was 11%.

Some of the major drivers of this performance include the better life insurance risk experience, improved investment market levels and general growth in the books at Sanlam. They also highlight the credit business in India as a useful contributor.

There’s a lot of positive sentiment towards India at the moment as growth comes under pressure in China. Sanlam seems to be well positioned for that.

Earnings growth continues at STADIO (JSE: SDO)

Tertiary education is a lucrative business

For the year ended December 2023, STADIO achieved a set of numbers that shareholders won’t be upset about. At a time when most South African companies are treading water in terms of earnings growth, STADIO achieved an increase in HEPS of between 17.6% and 27.6%. Core HEPS was between 14.1% and 24.1% higher.

Whichever way you cut it, that’s good.

Adjusted HEPS is up slightly at Sun International (JSE: SUI)

Some parts of the business are doing better than others

Sun International has released a trading statement dealing with the year ended December 2023. It’s a mixed bag at divisional level, with only some commentary to go on at the moment rather than actual numbers. SunBet is achieving record income, the resorts and hotels had an “exceptional year” and the urban casinos and Sun Slots “demonstrated resilience” – so there were clearly pressures there.

Overall, adjusted HEPS for the year is expected to come in between 4% and 9% higher. This implies a level of between 456 cents and 478 cents per share.

If we look at HEPS without adjustments, there’s a wild swing that sees an increase of between 82% and 92%. This is due to adjustments related to a put option liability, transaction costs on the Peermont acquisition and the devaluation of the naira. Perhaps the range is more important than the percentage here, as HEPS would be between 412 cents and 434 cents per share.

Importantly, South African debt has reduced from R5.9 billion to R5.7 billion, despite the company paying R985 million in dividends. South African debt to adjusted EBITDA is 1.7 times.

Things seem to be improving at Trellidor (JSE: TRL)

HEPS is down but so is net debt

Trellidor has been through a really tough time. It’s good to see that they are making progress on two major initiatives: international revenue (now 28.2% of the group total) and reduction of net debt (down from R140.3 million to R116.8 million).

Profitability is still a challenge, with HEPS dropping by 16.1% despite group revenue increasing by 6.9%. This is because borrowing costs are putting the group under pressure, which is why there is still no dividend as the group prioritises the reduction of debt.

Little Bites:

• Director dealings:
  • The CEO of Bidcorp (JSE: BID) has sold shares in the company worth R11.7 million. This time around, the announcement specifies that this is to settle tax obligations.
  • The CEO Designate of Primary Health Properties (JSE: PMP) has bought shares worth £92.4k.

• Nobody knows what the cluck is going on at Quantum Foods (JSE: QFH), with the share price closing 73% higher today on big volumes. The only announcement in the market was that Astral Foods (JSE: ARL) has sold its 9.77% stake in the company.

• Curro (JSE: COH) has repurchased shares worth R211 million between 15 June 2023 and 6 March 2024. The average price paid is R9.96, which compares favourably to the current market price of R11.35.

• Heriot REIT (JSE: HET) has acquired shares in Safari Investments (JSE: SAR) from Reya Gola Investments, a related party, to the value of R4.5 million. The purchase price is R5.60 per share which is in line with the current market price. Reya Gola is an entity related to Steven Herring.

• Hillie Meyer just can’t get enough of Momentum Metropolitan (JSE: MTM) and they can’t get enough of him. He was CEO from 1996 to 2005. Then he was CEO once more from 2018 to 2023. He has now been appointed as a non-executive director of the group.

• After the resignation of the CFO at Texton (JSE: TEX) announced all the way back in December 2022, the group has appointed the CEO of Texton as part-time Financial Director until a permanent appointment is made. If the capital allocation policy of the company isn’t enough to worry you, perhaps the governance is.

• Labat Africa (JSE: LAB) announced the resignation of its financial director with effect from 31 March 2024. The company still hasn’t appointed an auditor but has received proposals from a number of audit firms. The audit committee is due to consider the appointment of an auditor this month.

• Mantengu Mining (JSE: MTU) has issued shares to settle creditors with total debt of R7.45 million. The creditors were willing to accept shares at a price of R1.50 per share, which is much higher than the current price of R0.85.

• Astoria Investments (JSE: ARA) has renewed the cautionary announcement that was first issued in July 2023. Negotiations are still ongoing in respect of a potential acquisition.

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