Great news for Attacq shareholders (JSE: ATT)
The market response on Thursday morning should be interesting
Attacq released a trading statement and updated its market guidance on Wednesday. If you’re wondering why the share price barely moved, that’s because the announcement only came out after the close of trade. Look out for the market reaction on Thursday morning, which I’m quite sure will be strongly positive.
For the six months to December 2024, Attacq expects to see its distribution per share jump by 46.7% to 44 cents. This is thanks to a lovely jump in distributable income per share.
After such a great start to the year, they also have better expectations than before for full-year earnings. The updated guidance shows growth in full year distributable income per share of 24% to 27%.
Cashbuild’s gross margin is a disappointment (JSE: CSB)
This isn’t what I was hoping to see
Regular readers will know that I took advantage of a tactical entry point in Cashbuild late last year. Although it worked beautifully, I’m starting to wonder about my plans to keep it. The share price has been one-way traffic this year and not towards the top right of the page.
Some momentum in revenue has been the good news up until now. Alas, we’ve now seen the margins for the interim period and they aren’t strong. With gross profit margin down 40 basis points on revenue growth of just 5%, HEPS could only manage 1% growth thanks to inflationary pressure on costs. That’s better than it being down, but not by much.
At least working capital has become more efficient, with 88 days of stock instead of 90 days. This boosted cash and cash equivalents by 20%, showing you once again how small changes in retail can have a large impact.
Although revenue in the first 7 weeks of the year increased by 6%, I now have to wonder about the underlying margins being achieved in 2025. Revenue growth doesn’t mean much for investors if the dividend is flat.
The share price closed 3% lower on the news, taking the drop this year to 19.4%. The fact that I’m still way up in this position tells you how daft the market was last year when it created that surprising entry point in August.
Curro needs more kids, but earnings are up at least (JSE: COH)
How much more can be squeezed out of parents?
Curro has a pricing vs. volumes problem. It’s clear as can be. Weighted average learner numbers were up just 1% for 2024, yet tuition fee revenue was 7%. I don’t need to sit in one of the maths classes to know that the difference has to be fee increases.
Now, if the schools are sitting with extra capacity (and they certainly are), then why such high fee increases? Surely it’s better to have a few years of below-inflation increases to try and improve capacity utilisation?
In the absence of that strategy, I can only assume that many of the schools are in areas where there simply aren’t enough kids anyway. The birth rate is a known issue and so is emigration. If that’s the situation, then fee increases are unfortunately the only option available to Curro.
We will have to see how this plays out in years to come. For now, the group managed recurring HEPS growth of 13% for the year ended December 2024. They are still investing in new campuses, despite the difficulties in filling the ones they already have.
Schools built before 2009 are only running at 74.7% capacity. Acquired schools are running at an average of 72.7%. Although there are clearly regional nuances, is the reality that South Africa simply has too many private schools?
Emira’s subsidiary is selling a large residential portfolio (JSE: EMI)
The announcement is frustratingly missing one key metric
Right at the beginning of 2024, Emira Property Fund concluded the acquisition of Transcend Property Fund. The idea of buying the entire fund was to get the portfolio at a discount, with the ability to dispose of assets piecemeal to unlock value.
So, for Emira shareholders, it’s encouraging to see news of a substantial disposal by Transcend, which is a wholly-owned subsidiary of Emira after that deal. The total price is R530 million, so this is a substantial deal covering literally hundreds of sectional title residential units.
At this point, you must be itching to know how the price compares to the value on the Emira balance sheet. That makes two of us. Alas, Emira decided that this wasn’t worth including in the announcement. The only thing we know is that the price was “fair market value” – according to the directors of Emira, that is. Very helpful.
The net operating income for the six months to September 2024 was R25.3 million. If we annualise this, the yield is 9.6%. That does sound like a reasonable yield, so in reality they properly did get this disposal done at a premium to what they originally paid for the portfolio.
But why not explicitly say that?
Growthpoint’s earnings are inching higher (JSE: GRT)
At least the direction of travel is up, if not by much
Growthpoint released a trading update for the six months to December 2024. It’s a voluntary update, mainly because Growthpoint’s growth rate is in a different postal code to the level that would trigger a trading statement.
For the interim period, distributable income per share is expected to grow by between 3% and 4%. Talk about a game of inches! This is actually better than they expected, so full-year guidance has been increased to growth of between 1% and 3%. The market appreciated this news, sending the share price 3.5% higher.
Old Mutual’s operating profit seemed to disappoint the market (JSE: OMU)
At least returns on shareholder funds gave HEPS a boost
We’ve been seeing some pretty impressive numbers coming out of the insurance industry lately. The market didn’t appreciate what it saw at Old Mutual though, sending it more than 5% lower based on the release of a trading statement.
“Results from operations” is the primary measure of operating performance and unfortunately it wasn’t great, with a range of -6% to 14%. The mid-point of that range is in the low-to-mid-single digits. That’s not exciting.
The per share numbers are better thanks to share repurchases. Combined with the benefit of investment returns on shareholder funds, HEPS is up by between 13% and 33%. They also give a range of adjusted HEPS of 7% to 27%.
Returns on shareholder funds aren’t strong every year as they depend on the whims of the market. This is why investors tend to put more weight on the operating earnings.
The share price is now slightly down over 12 months, which is quite extraordinary when viewed in the context of Sanlam up 14%.
Double-digit growth in the Quilter dividend (JSE: QLT)
And the market celebrated
Quilter is a great example of the power of building distribution in financial services. Their efforts in the UK market have been excellent, with total assets under management and administration up 12% and boosted by core net inflows of 5% of the opening value. They also had great momentum in net inflows during the year, with the fourth quarter being the strongest.
So, for the year ended December 2024, they managed to grow revenue by 7% and keep operating expenses under control, with an increase of just 3%. This is why adjusted diluted earnings per share rose by 13%. On an unadjusted basis, HEPS actually swung sharply negative. Given the underlying growth here and the 13% increase in the dividend as well, I’m inclined to go with their adjusted view here.
Across both the Quilter and IFA channels, gross flows were strongly up on the prior year. Although there are obviously many nuances within the business, the direction of travel is clearly up.
Spur still gives you wings (JSE: SUR)
But be careful of the impact of Doppio Zero
If you have small children, you fully understand the importance of the Spur business model. For many parents, it’s a place of safety and sanctity while their offspring go and rip up the play area instead of the house. I’m convinced that the best restaurant model of all is the one that includes a play area. Customers are infinitely more forgiving of the food if there’s a safe place for the kids.
This is certainly reflected in Spur’s numbers for the six months to December, where franchised restaurant turnovers are up 10% and revenue increased 13.8%. Group HEPS increased by 11.8% and the interim dividend per share followed a similar path, up 11.6%.
It’s important to note that roughly 6% of restaurant sales came from Doppio Zero, which was acquired with an effective date of 1 December 2023. This means that it was hardly in the comparable period, so the double-digit group sales growth is largely thanks to acquired revenue. If you look at group revenue instead of restaurant turnovers, you’ll find growth of 7.6% excluding Doppio. Decent for sure, but not as exciting as the numbers would initially suggest.
The cash story is great, with cash generated from operations up by 79%. This gives the group plenty of firepower and of course it makes capital allocation discipline very important.
STADIO’s growth story continues (JSE: SDO)
Tertiary education is an exciting industry in South Africa
STADIO has a reputation for being one of the better growth companies on the JSE. The share price has been doing plenty of growing lately, up 47% over 12 months!
There’s a good reason for this, with HEPS up by between 23.3% and 33.1% for the year ended December 2024. If you prefer to use core HEPS, you’ll find an almost identical growth percentage.
When local investors love a company, it can easily trade at a P/E in the 20s. STADIO is in that club, with the midpoint of the latest earnings guidance suggesting a P/E of 22.6x. If growth remains strong, then local market trends suggest that the P/E can stay there. In a consistent multiple situation, shareholder returns will then be similar to underlying earnings growth. Of course, if the multiple unwinds in a case where growth is disappointing, those returns can wash away very quickly.
For now at least, STADIO is getting full marks from the market.
Trellidor’s earnings are so much better (JSE: TRL)
But there’s still no dividend
Trellidor’s recovery story is proving to be as challenging as trying to break through one of their famous products! If you backed them 12 months ago, you would certainly be smiling now with a 77% increase in the value of your investment. If you’ve been there for three years, you would still be down a third. This company has had quite an adventure.
Revenue for the six months to December 2024 was up just 4.1%, so the recovery isn’t being driven by top-line fireworks. HEPS was much stronger, up 38.3% to 26.6 cents. An improvement in operating profit margin from 12.3% to 14.7% did wonders here.
The group remains in a situation where its core Trellidor business is underperforming in South Africa and doing well in the UK. I think market saturation is the real issue here, along with the ongoing shift towards living in complexes. People are trading security bars and gates for guards in a complex. This is forcing Trellidor to become more efficient in the business, which perhaps isn’t the worst thing.
Cash generated from operations is important to keep an eye on. It was actually slightly down for the year, despite the improvement in profits and a useful decrease in finance costs as well. A quick look at the balance sheet reveals the culprit: a substantial jump in trade and other receivables.
Although they don’t say it, I suspect that working capital pressures were one of the reasons why there’s no interim dividend.
Woolworths continues to slide (JSE: WHL)
The fashion businesses really are a drag
Woolworths closed 6.3% lower after releasing interim results. This takes the year-to-date drop to nearly 14%. Ouch.
Let’s start with the highlight: Woolworths Food. Turnover was up 11.4% overall and 7.3% on a comparable store basis. The Absolute Pets acquisition is skewing this performance, with sales up 9% excluding that deal. Still, with that kind of revenue growth and an increase in gross margin of 30 basis points, South African shoppers still love getting their Woolies Food fix. Expenses jumped by 15.2% though, so Woolworths shareholders have only seen an increase of 7.8% in adjusted operating profit. One thing that they can’t afford right now is pressure on margins in the only part of the business that is really working.
This brings us to Fashion, Beauty and Home. It just wouldn’t be a Woolworths result without some kind of excuse about inventory availability, with new processes and systems at the distribution centre to blame this time. They also put the blame on late supplier deliveries. Considering the number of people I’ve seen online complaining about Woolworths clothing quality (along with my own experience of it), I suggest they use one of the many mirrors in the store and look at themselves for this performance instead of hunting around for others to blame. Turnover was up just 2.5%, gross profit fell by 170 basis points and adjusted operating profit declined 17.7%. Frankly, it’s time for proper accountability here.
Over at Country Road Group, the challenges of retail in Australia (and New Zealand) continue. Sales fell 6.2%, gross margins took a 320 basis points knock and adjusted operating profit tanked by 71.7%.
Clearly, everything other than Food (and pockets of good stuff elsewhere, like Beauty) sucks right now. The group result therefore makes for painful reading, with the interim dividend down 27.7%. I genuinely don’t understand how the narrative in the apparel business can still be so focused on blaming external factors, or why large shareholders are letting the group get away with that.
Director dealings:
- Director dealings:
- A director of NEPI Rockcastle (JSE: NRP) bought shares worth around R300k. In a completely unrelated situation, the company also realised that an associate of a different director opted to receive a scrip dividend instead of a cash dividend. This wasn’t known at the time.
- Vukile (JSE: VKE) is still serious about the acquisition of Bonaire Shopping Centre in Spain. This is the property that was damaged by flooding in October 2024. The property has been repaired and has reopened, with trading having commenced in mid-February. Vukile’s subsidiary Castellana still has exclusivity over the property and the parties are busy negotiating. Hence, Vukile has renewed the cautionary announcement.
- Invicta (JSE: IVT) has been busy with quite the repurchase programme in the past few months, buying 5.08% of its shares in issue in on-market trades. They still have a general authority in place for another 14.92%, although they don’t indicate in the announcement whether they will get there.
- For those following Metrofile (JSE: MFL) in detail, or Sabvest (JSE: SBP) for that matter, you’ll be interested to know that Afropulse Group and Sabvest Investments extended the put-call period over the 21 million Metrofile shares by 12 months to November 2026. Afropulse holds the call option and Sabvest holds the put.
- Those who were too stubborn to listen to actual experts when SAB Zenzele Kabili (JSE: SZK) listed are still licking their wounds. The share price is down at R36, at one point trading as high as R180 when it somehow became a local example of a meme stock. The AB InBev (JSE: ANH) share price hasn’t done well, hence the B-BBEE structure has reported a terrible drop in net asset value per share of between 55% and 59% for 2024. The expected FY24 range is R26.91 to R29.67, so it’s still trading at a premium!
