Ghost Bites (Quilter | The Foschini Group)

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Quilter’s strategy to attract client flows is working (JSE: QLT)

Distribution is so important in the asset and wealth management industry

Quilter has released a trading update for the fourth quarter of 2023. It’s got a lot of good news in it, like Assets under Management and Administration increasing by 5% between September and December. An increase in asset prices certainly helped, but so did core business net inflows of £175 million. This is below the £242 million achieved in the comparable period, but it’s still a solid outcome.

Through Quilter’s own channel, full year net inflows as a percentage of opening assets came in at 15% in the High Net Worth segment and 10% in the Affluent segment. On the Platform channel, independent financial advisor gross inflows were up 44% in the fourth quarter and 7% on a full year basis. This led to a net inflow situation in that part of the business, although High Net Worth clients were a considerable source of outflows based on portfolio repositioning.

Fourth quarter non-core net outflows of £119 million were consistent with levels seen in the third quarter.

Another important metric is productivity, with gross sales per Quilter Adviser (as they define the term) up 21% in the fourth quarter.

The Quilter share price is up 20% in the past 12 months.

The Foschini Group’s share price rally looks too optimistic based on results (JSE: TFG)

Was there a short squeeze in the morning? Or did the market get very excited about gross margin?

When The Foschini Group released released its third quarter trading update, the share price shot up around 8%. It then washed away over the course of the day, closing 3.3% higher. The results themselves weren’t fantastic, so it’s possible that some short positions were squeezed in the morning i.e. had to be closed out. Alternatively, the market got very excited about the comments on gross margin and glossed over the rest. I’m genuinely not sure though. Markets don’t always make sense.

For the quarter ended 30 December 2023 (well, the 13-week period to be exact), group turnover was up 4.5% year-on-year. Over the nine months year-to-date, group turnover was 9.0% higher. That’s a significant deceleration in the third quarter.

TFG Africa (which includes South Africa) was up 5.1% for the quarter, with a strong finish to the year of 11.8% growth in December. Like-for-like turnover growth was just 0.7% for the quarter and 6.1% for December. The market would’ve appreciated the comment that December was the highest full-price contribution thus far in this financial year, which means the best gross margin. Further down in the announcement, there’s another comment that talks to a recovery in gross margin.

The trend highlighted earlier in the week by Attacq about a relatively disappointing Black Friday was echoed by TFG Africa, noting that Stage 6 load shedding was implemented over that weekend. Load shedding was relatively better in December 2024 vs. December 2023, so a lot of trade seems to have shifted from November to December.

TFG Africa’s cash turnover grew 6.6% in the quarter and now comprises 75.8% of TFG Africa turnover. Credit turnover only grew by 0.7% in the quarter, with conservative average acceptance rates to reflect the macroeconomic pressures.

For all the investment made in the Homeware category by TFG Africa, it could only grow by 0.9%. The best result was in Clothing (up 6.4% for the quarter), which also happens to be the biggest part of the local business (75.4% of turnover).

TFG London was up against a tough base, with turnover falling 3.0% in GBP in the third quarter. TFG Australia was even worse, down 7.3% for the quarter in AUD. The weak rand worked wonders on both those results, reported as positive growth of 9.0% in TFG London and -0.8% in TFG Australia when expressed in rands.

Looking at online turnover, this grew by 29.2% for the quarter. TFG Africa’s online turnover was up 44.8%, now contributing 4.2% of TFG Africa turnover. The consolidation of the brands on the Bash platform seems to be working well. TFG London’s online turnover grew 8.4% in the quarter and contributed 44.5% of sales. TFG Australia’s online turnover fell 1.4%, contributing 6.2% to TFG Australia turnover.

Looking ahead to the fourth quarter, TFG expects turnover to be higher than a year ago because the base period had substantial load shedding. Of course, we don’t know yet what load shedding will be in the first few months of this year, but my view is you can expect our government to do everything possible to keep the lights on ahead of elections.

Little Bites:

• Director dealings:
  • An executive director of Richemont (JSE: CFR) has sold shares worth around R6.8 million.
  • Sean Riskowitz has bought more shares in Finbond (JSE: FGL) through Protea Asset Management, this time to the value of R208k.

• MC Mining (JSE: MCZ) updated the market on the takeover offer (or lack thereof) by the consortium that includes Senosi Group and Dendocept. A Bidder’s Statement (this is an official term) was expected to be lodged in the first week of January 2024. The consortium has been delayed for some reason and hasn’t given a revised timetable, but it has reconfirmed its intention to make a takeover offer. The independent board committee has reiterated its “take no action” recommendation at this stage. MC Mining is registered in Australia, which is why you’ll see some takeover law language that you may not otherwise recognise.

• The financial director of Rebosis (JSE: REA | JSE: REB), Asathi Magwentshu, has resigned from the board. The company is still in business rescue, so her replacement will be walking into a tricky role!

• Kibo Energy (JSE: KBO) has sold shares in Mast Energy Developments worth £120k. The proceeds will be used for ongoing working capital requirements and to reduce the balance on the bridge loan facility with RiverFort Global Opportunities to meet monthly payments and avoid equity dilution.

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