The jewel in Growthpoint’s crown is still the V&A Waterfront (JSE: GRT)
They have plenty to think about elsewhere
Growthpoint has released results for the year ended June 2025. The company is an excellent barometer for the property sector at large, such is the sheer size and reach of their portfolio. But even within that extensive exposure, there’s a small area at the tip of Africa that shines the brightest.
Like-for-like net property income at the V&A Waterfront increased by 12.7%, driven mainly by tourism. It’s an indication of what can actually be achieved in this country when our beautiful natural scenery is accompanied by better governance and private investment. In this particular period, Growthpoint’s 50% share of distributable income from the iconic property increased by only 4.5%, as there were significant external borrowings that drove higher net finance costs. It’s important to remember that the balance sheet / funding strategy for a property is distinct from how the underlying property is performing.
Unlike at the V&A, the overall approach in the group is one of debt reduction. The group loan-to-value improved from 42.3% to 40.1%, with the proceeds of various disposals (including Capital & Regional) used to reduce debt.
The second part of loan-to-value is of course the value, at which point we find some pressure from asset write-downs at Growthpoint Properties Australia. I don’t know what it is about that country, but South African businesses should just stay away. The Melbourne office portfolio is suffering, driving a decrease in Growthpoint’s net asset value per share of 1.6% to R19.88.
This is a timely reminder that simpler exposure is better, particularly in markets that are easier to understand. Growthpoint has reached this conclusion themselves and they are selling non-core assets in South Africa, with 24 properties sold this year. They still have a long way to go, with 40% of the domestic portfolio exposed to the office sector. It takes a very long time to change this, as the exposure was 46% all the way back in FY15 when Sandton was the most exciting place to work in the country. In case you’re curious, retail has remained at 39% over the past decade and the industrial and logistics portfolio has increased from 15% to 20%.
It’s not just a shift in exposure by type of property. Growthpoint is now focusing their capital expenditure and development on the Western Cape, which has much better property fundamentals than any other province. I’ll say it again: if you want to see fixed capital formation, you need good governance that supports a long-term view.
Another interesting shift is offshore vs. local, with Growthpoint earning 28.7% of distributable income per share from offshore sources this period. That’s down from 32.4% in the prior year as they shift the mix back towards South Africa.
Clearly, there’s a lot going on at Growthpoint. The net result is that distributable income per share increased by 3.1% for the year to June 2025, while the dividend per share increased by 6.1% as the payout ratio moved higher.
Looking ahead, Growthpoint’s office exposure remains a serious headache, particularly in Gauteng. The overall group story is a mixed bag, yet they expect distributable income per share to grow by between 3% and 5% for FY26, with the distribution per share up by between 6% and 8%. In other words, they are guiding for a further increase in the payout ratio.
Metair is fighting hard for a turnaround (JSE: MTA)
This is a particularly difficult sector
Metair released results for the six months to June 2025 that are filled with things that distort the trend, like the consolidation of Hesto and the addition of AutoZone. You can therefore safely ignore the revenue increase of 53%, as this is no indication at all of how the underlying business is performing.
They don’t make it simple to find the information you need to judge that performance, let me tell you. Deep in the management commentary, you can eventually find nuggets like a note that revenue from vehicle OEMs (Metair supplies parts to local manufacturers) increased by 8% if you adjust for Hesto, with EBIT margins from 5% to 6.6%. That’s a good story, so why is it as hard to find as your keys when you drop them between the front seats?
AutoZone is still a loss-making business as expected, with negative EBIT of R24 million for the six months. This is why revenue in the aftermarket parts and retail segment grew by 33%, but EBIT fell by 32%. If you exclude AutoZone, the segment achieved an EBIT margin of 6.1%, which is in line with management expectations.
So, the underlying theme here is one of resilience. Despite the US tariffs and all the other reasons why the local OEMs should be performing terribly, they’ve actually been decent. This is great news for Metair and the entire value chain. Notably, group HEPS from continuing operations was down 8% to 71 cents, so things are still tough out there.
On the balance sheet, the consolidation of Hesto’s debt and working capital requirements, as well as an overall reduction in cash, led to group net debt jumping from R2.7 billion to R5.1 billion. All covenants on the debt restructuring were met in this period, with the group taking a highly conservative approach to capital expenditure while they look to further improve the balance sheet.
Metair also included this rather juicy nugget about ArcelorMittal (JSE: ACL): “ArcelorMittal South Africa announced at the end of August that they will be closing their long steel business at the end of September 2025. Despite commitments made to produce the steel orders that we required for the remainder of the year, this did not happen. Metair is working closely with our customers on the alternative steel supplier that we have been engaging with for some time to ensure our supply commitments are met.”
It’s pretty disappointing to read this in the context of the amount of money that was thrown at the ArcelorMittal Longs business to try and save it.
FY26 is going to bring further challenges, like changes to the model ranges at major customers. Metair is such a difficult business to run, as they are largely beholder to the decisions made by the OEMs who manufacture vehicles here. This is exactly why they’ve taken steps like the AutoZone deal, as they want to have more control over their own destiny.
And there’s still the overhang of the European Competition Commission’s investigation into European automotive battery manufactures, including Metair’s business Rombat…
Old Mutual is further proof that short-term insurance was the rising tide for all boats in this period (JSE: OMU)
The “right to win” for the bank is one of four strategic priorities
Old Mutual has released results for the six months to June 2025. The company needs to close the long-term performance gap to arch-rival Sanlam (JSE: SLM), with Old Mutual’s share price having made a sharp move upwards in recent months:
This rally has been driven by the market’s expectations and now confirmed knowledge of Old Mutual’s recent performance, with results for the six months to June reflecting adjusted headline earnings growth of 29%. As we’ve seen across the sector, the positive underwriting performance (margin up 270 basis points to 7.1%) in Old Mutual Insure was a substantial boost.
To bring that growth down to earth, the interim dividend was up 9%. Still strong, but certainly not 29%. They have announced a substantial share buyback programme as well.
In case you’re wondering about the adjustment to headline earnings, look no further than Zimbabwe. The transition of the functional currency from Zimbabwe Gold to the US Dollar actually took group headline earnings lower, so the adjustment makes a huge difference here.
The life insurance business also has plenty of work to do, with life sales up just 1% and the present value of new business premiums down 7%. The past year was very much a story of short-term insurance, not life insurance.
Another issue is net client cash flows. Although Old Mutual is quick to point out the 7% increase in gross flows, you have to read through the detail to find that net outflows more than doubled year-on-year. Ouch.
I remain very skeptical of the plan to establish a bank. It’s an incredibly tough space and I don’t really see what Old Mutual is going to do differently, with most of their strategic messaging being around their distribution potential through existing Old Mutual branches and financial advisors. I’ve gotta tell you, all the legacy banks have a branch network, so what exactly is the key differentiator here? Even with all its strategic differentiation and the strength of Vitality, it took Discovery (JSE: DSY) ages to finally break even in their bank in recent months.
Perhaps Old Mutual will surprise me.
MTR drives record production at Pan African Resources (JSE: PAN)
And there is more growth in production to come
Pan African Resources has been very good to me this year. As I’ve written a few times, I took advantage of the market panic in early February and loaded up on gold exposure, as it looked to me as though the market was overreacting to a disappointing interim period.
It’s hard to pick the absolute winner in any given sector, but I’m certainly not upset that my capital has more than doubled since then. Shiny indeed!
Thanks to the Mogale Tailings Retreatment (MTR) operation, Pan African Resources achieved record production in the year ended June 2025. There’s more to come, with Tennant Mines achieving its inaugural gold pour in May 2025. If gold prices remain favourable, Pan African Resources should keep glowing. The bulk of the production uplift is expected to happen in the second half next year, will full-year guidance of 275,000 ounces to 292,000 ounces vs. 196,527 ounces in the year just ended.
It was by no means a perfect year for Pan African though. All-in sustaining costs (AISC) came in at $1,600/oz, up 18% year-on-year and above the upper end of guidance of $1,575/oz. The increased production next year is expected to improve unit costs, with guidance for AISC of between $1,525/oz and $1,575/oz in FY26.
With all said and done, revenue was up 44.5% for the year and HEPS increased by 46.7%. It certainly would’ve been nice to see some margin expansion on the HEPS line, but hopefully that will come through in the next financial year. Notably, although net debt jumped from $106.4 million to $150.5 million over 12 months based on expansion, it’s actually down dramatically from $228.5 million at the half-year thanks to cash generation in the second half.
The group expects to be fully degeared from a net debt perspective in the next financial year. They’ve also approved a share buyback programme in anticipation of having more flexibility on the balance sheet.
I remain a happy shareholder and I look forward to my record final dividend of 37 cents per share, up 68% year-on-year.
As a final comment, I appreciated this statement from CEO Cobus Loots as the very first sentence in the CEO narrative: “I believe any chief executive officer’s report in our sector at present has to start with some commentary on the
gold price.”
There are far too many mining execs who try and take credit for a year in which the main thing that went right is the commodity price. The price is completely out of their hands and it’s great to see acknowledgement of the role that luck plays alongside the decisions taken by management.
Remgro’s HEPS is much better (JSE: REM)
This relates to the scheme of arrangement at R75 per share
When it comes to investment holding companies, HEPS is problematic. The reason is that the way you account for stakes of different sizes (e.g. control vs. significant minority vs. less than 20%) differs considerably. When you move through any of these thresholds, it causes all kinds of accounting complications. Try as it might, the concept of headline earnings cannot catch all the distortions.
It’s far more sensible to use net asset value (NAV) per share, with the management building up trust in the market over time by being consistent in how they value the underlying assets (in theory, at least).
Have you ever heard anyone talk about the Price/Earnings ratio at the likes of Remgro, or do they focus on the discount to NAV? My case rests.
Despite this, there are still a couple of investment holding companies that insist on using HEPS as the basis for a trading statement. Remgro is one of them, with the company guiding that HEPS for the year ended June will be up by between 33% and 43%.
Directionally, it tells us that NAV probably did good things. The market liked it, with the share price up 2.3% on the day. But it would be so much more useful if they gave a range for NAV instead.
We just have to be patient until 23 September.
Nibbles:
- Director dealings:
- There’s been a transfer of Goldrush (JSE: GRSP) shares worth R10.7 million among associate entities of directors. Through this process, two directors of Goldrush have increased their effective stake in the group.
- There’s yet more buying of Sabvest Capital (JSE: SBP) shares by the group CFO, this time to the value of R908k.
- The CEO of RCL Foods (JSE: RCL) bought shares worth R474k.
- Universal Partners (JSE: UPL) has very little liquidity in its stock, so I’ll just give the results for the year ended June 2025 a passing mention in the Nibbles. For those who love to live under the illusion that the grass is always greener on the other side, I must point out that the underlying businesses in the UK are struggling with a weak environment. It’s a pretty scrappy portfolio of businesses and most of them are having a tough time, hence why the NAV per share fell by 9%.
- Here’s something interesting: the founding CEO and chairman of Copper 360 (JSE: CPR), Jan Nelson, has resigned from the board. Graham Briggs was already announced as his successor in the CEO role several months ago, but Nelson has now left the board entirely. Copper 360 has unfortunately not been a success, with the company now going through a capital raise that includes a conversion of various debt instruments to equity.
- Based on Altvest’s (JSE: ALV) recent announcement of a rebranding and a shift to being a bitcoin treasury company, it’s not a surprise that the company has appointed Stafford Masie (the current independent chairman and in-house bitcoin champion) to the role of executive chairman. The idea here is to give him the ability to drive the execution of the bitcoin treasury strategy. He certainly brings tons of technology experience to the role. As the company now has an executive chairman, they need a lead independent director. Norma Sephuma has been appointed to that role. And in case you’re wondering, the vote to change the name was a resounding success, with literally unanimous approval from those in attendance at the meeting. It’s either going to be the best or the worst decision they ever made. I don’t think there’s much of a middleground here!
- Richemont (JSE: CFR) has confirmed both the exchange rate and the tax position regarding its dividend. For shareholders who aren’t exempt from South African tax, the net dividend is R39.50 per share. This is after a 5% withholding tax in South Africa and a 35% withholding tax in Switzerland.
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.
