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Thorts – Lessons learnt from dealmaking during COVID-19

Justine Krige
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Thorts – Lessons learnt from dealmaking during COVID-19

COVID-19 and the various levels of lockdown had an unprecedented impact on dealmaking, both in South Africa and beyond its borders. When the national lockdown commenced in South Africa on 26 March 2020, many transactions were in the midst of being finally negotiated or signed. Some were successfully closed; others subsequently collapsed. What set apart those transactions that made it across the finish line from those that failed?

We examine some of the lessons learnt from dealmaking during COVID-19.

As a starting point, COVID-19 had a significant practical impact on business operations which, in turn, impacted profitability, long-term sustainability and, ultimately, dealmaking. Some of the most significant challenges faced by businesses were the following:

• Lockdowns: Many countries requested or enforced social isolation, curfews or lockdowns to a varying degree to mitigate and suppress the spread of the virus. It had a disastrous impact on many sectors of the economy.

• Compliance: The cost and practical challenges associated with ensuring compliance with COVID-19 protocols and regulations to protect employees and customers were crippling for many businesses.

• Valuation: COVID-19 caused a reduction in the share value of many companies.

These unforeseen circumstances had an immediate impact on dealmakers, who now needed to navigate dealmaking during a global pandemic – ranging from binding offers being terminated and purchase prices being renegotiated, to supervening impossibility arguments being invoked, force majeure events being declared, and profitability warranties and indemnities being reconsidered.

Many lessons can be learnt from successful deals during this period:

• Pre-contract/offer stage: Give careful consideration to what is agreed to in the initial stages of the transaction (for example, whether an offer is binding or non-binding, or whether only parts of it are binding).

• Amendments to transaction agreements: COVID-19 had a significant (often negative) impact on transactions which were already in the implementation phase; in particular, as regards interim period undertakings, material adverse change provisions, and representations and warranties which could no longer be honoured. Many deals, although signed, were ultimately successful as they were renegotiated, following an approach which was fair and balanced to both parties, rather than cancelled in their entirety.

• Force majeure: COVID-19 and the national lockdown highlighted the importance of force majeure clauses in agreements. The advantage of a force majeure clause is certainty in relation to rules regarding notices, timelines and events constituting a force majeure, rather than relying on the general provisions in the common law.

• Disclosure against representations and warranties: Many agreements included the ability for sellers to make disclosures against representations and warranties right up to closing, which provided sellers with a degree of greater control in otherwise largely economically uncertain times. Some agreements went even further to include a “COVID-19” action list, allowing sellers to record actions that would be taken to mitigate against the operational and business risks of the pandemic.

• “Ordinary course of business” warranties / undertakings: A seller of shares or a business would typically undertake to the purchaser that in the interim period between signature and closing, the business of the company would be run in the normal or ordinary course. During the pandemic, exceptional, yet reasonable (in the circumstances), measures were forced to be taken by many sellers. The question is whether such measures, brought about by circumstances beyond the seller’s control, trigger a breach of contract – does one assess “ordinary course” in a purely objective light, or do subjective factors have a role to play? The answer was not always clear and should rather be dealt with carefully in the drafting. Going forward, ordinary-course-of-business provisions will, no doubt, receive greater scrutiny.

• W&I insurance: The economic uncertainty faced by many sellers, who were required to provide extensive representations and warranties, fuelled a significant rise in the popularity of warranty and indemnity (WI) insurance.

• Electronic signatures: COVID-19 and the lockdown spurred creativity when buyers and sellers were forced to sign agreements, against the challenges of meeting in person. We have since witnessed a rise in the use of advanced electronic signatures, facilitated by applications such as “DocuSign”. Although a welcome development, it is important that we also recognise the limitations of electronically generated agreements; specifically, the signature thereof, and the limitations imposed by legislation such as the Electronic Communications and Transactions Act and the Alienation of Land Act.

• Closing mechanics: The advantages of “remote” working and virtual meeting applications came to the aid of many deal teams during COVID-19 and lockdown. Many deal teams opted for virtual closing meetings, which allowed them to continue, notwithstanding the difficulties associated with meeting physically.

• Partial impossibility: COVID-19 and lockdown reminded us that there may be transactions in which certain obligations can still be performed. If these obligations are divisible from the rest of the agreement, then those will remain whilst the rest of the agreement is discharged. For example, where a landlord leases out premises on which both essential and non-essential business services are carried out by a tenant in separate sections of the premises, during a lockdown, the landlord is able to still provide possession and occupation of the essential section and (at the risk of oversimplification of the myriad contract law issues here) the tenant can and should still pay its pro rata rental in respect thereof. Absent express clauses, however, it is not always obvious whether the agreement is indeed divisible.

• The importance of an experienced client deal team: Having a strong, experienced client deal team, in addition to the legal team, will assist in navigating unforeseen legal and practical deal-making challenges.

Always be prepared for any eventuality; creativity and adaptability in times of economic uncertainty may ultimately be the key to success.

Justine Krige is a Director in Corporate & Commercial | Cliffe Dekker Hofmeyr

This article first appeared in DealMakers, SA’s quarterly M&A publication

DealMakers is SA’s M&A publication
www.dealmakerssouthafrica.com

Ghost Bites Vol 66 (22)

The Finance Ghost
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Ghost Bites Vol 66 (22)

If you enjoy Ghost Bites, then make sure you’re on the mailing list for a daily dose of market insights in Ghost Mail. It’s free! SIGN UP >>>

Corporate finance corner (M&A / capital raises)

  • This is big news: shareholders have approved the PSG restructuring transaction that will see the holding company unbundle most of its assets and disappear from the JSE. 95% of votes at the meeting were cast in favour of the transaction. Unsurprisingly, two shareholders have delivered notices of objection under s164 of the Companies Act, known as Appraisal Rights. This is a technical section of the Companies Act that allows shareholders to follow a clearly-defined (and expensive) legal process to obtain what they believe is fair value for the shares. There are certain players in the market who are taking advantage of this legal mechanism by acquiring shares after the announcement of a transaction and then exercising the s164 rights, attempting to lock in a profit along the way. Whilst I personally think that s164 should only apply to shareholders in the register on the date of the announcement, the law is the law and this “loophole” currently exists. The PSG announcement makes some noise about how this process could scupper the entire restructuring, which I’m certain is nonsense. There’s no chance of the entire PSG restructure falling over because of two s164 demands. I suspect that the board will push on with the deal and will see those shareholders in court.
  • Renergen has announced the successful completion of the Central Energy Fund due diligence related to a R1 billion investment for a 10% ownership stake in the Virginia Gas Project. This is important for the Phase Two operations at Virginia, with Phase One about to be commissioned. There have been some delays in flicking the big switch for Phase One, with CEO Stefano Marani commenting that the delays are immaterial in the context of the next 20 years and that they would rather do things carefully vs. rushing it and introducing risk. I can’t argue with that logic!
  • Novus Holdings has renewed its cautionary announcement regarding a “potential acquisition” – the market hasn’t been made aware of what the acquisition is. Shareholders are advised to exercise caution until more details can be announced, which would only happen if final terms can be successfully negotiated.
  • Deutsche Konsum is a specialist REIT focused on German neighbourhood retail properties. Sadly, there is literally no liquidity on the JSE, so you can’t easily buy or sell shares in the company even if you wanted to. Still, I report on the updates for those who may already have shares or who are interested in the German property market. The latest news is the acquisition of three properties on acquisition yields of between 7.8% and 8.2%. In this financial year, Deutsche Konsum has acquired 24 mainly food-anchored retail properties on an average initial yield of 8.2%. The vacancy rate is around 6%. The fund will own 184 properties once all deals close.
  • An obscure American investment company now holds 8.45% in Conduit Capital. Whilst I can’t be sure, I suspect that this is part of Sean Riskowitz unbundling his stakes to the investors in his fund. You may recall an odd scenario where the Massachusetts Institute of Technology suddenly became a shareholder in Calgro M3. That was also a result of a Riskowitz unbundling.

Financial updates

  • Nedbank released its interim results for the six months to June 2022. They look excellent, with a 26% increase in HEPS and an 81% increase in the interim dividend per share, which means the payout ratio has increased and management is clearly feeling confident. Impressively, the credit loss ratio has stayed consistent at 85 basis points and Nedbank has clearly managed its expenses carefully, driving an improvement in the cost-to-income ratio. The net asset value per share is R209.64 and the share price is trading slightly higher at around R215. For more details, please refer to this article from Nedbank that includes the full result.
  • Sabvest Capital has released results for the six months ended June 2022. There are good reasons why this investment holding company is so widely respected in the market. With the Seabrooke family sitting behind this vehicle, it now holds twelve unlisted and three listed investments. The focus on unlisted investments plays a major role in minimising the discount to net asset value (NAV) that plagues so many investment holding companies. If you can’t get the assets anywhere else, you’re likely to be willing to pay more for that exposure. The NAV per share has increased by 26.1% year-on-year, an excellent performance. The dividend per share is 50% higher at 30 cents per share. In case you need further convincing of the track record, the 15-year compound annual growth rate (CAGR) in NAV per share is a rather spectacular 16.9%, without reinvesting dividends. The NAV per share is R103.88 and the share price is R72.01 – a discount of just over 30%. The share price has increased more than 50% in the past year.
  • MiX Telematics has reported results for the first quarter of the 2023 financial year. Subscription revenue was slightly down year-on-year because of currency impacts, with 6.3% growth on a constant currency basis. Total revenue was up 7.3% on that basis. Gross profit margin fell from 65.5% to 62.0%, leading to lower gross profit overall. Due to increased sales and marketing costs, operating income margin took a significant knock from 12.4% to 6.9%. Although profitability has clearly gone in the wrong direction, the group still has $24.6 million in cash and so the balance sheet is able to support the strategy. The share price is down nearly 34% this year, so the market isn’t enjoying the numbers coming out of this group.
  • Libstar Holdings released a trading statement for the six months ended June 2022. Revenue increased 9.6%, boosted by volume growth of 6.9%. Gross profit margins were maintained in line with the comparable period, which is impressive in the context of raw material and energy cost inflation. Normalised HEPS is up by between 11.5% and 16.7%. Because of the craziness of the comparable period, reported HEPS from all operations is expected to be 95.7% to 106.3% higher. Libstar still classifies the Household and Personal Care divisions as held for sale, despite a previous deal falling through. These divisions have reported a reduced operating loss in this period. The company has also announced the acquisition of Cape Foods, a manufacturer of branded and private label herbs and spices. This seems like a very sensible step for Libstar as part of its strategy to invest in non-commoditised food businesses. The deal is small, so no further details have been disclosed.
  • Quilter Plc has released results for the six months ended June 2022. Although Assets under Management and Administration fell by 12% since December 2021, the group still managed to grow adjusted profit before tax by 9%. The drop in assets is attributable to adverse market movements, with underlying flows still positive in most of the platforms and at a group level overall. Due to a non-recurring tax credit in the comparable period, adjusted diluted earnings per share fell by 5%. South African investors are more accustomed to HEPS as a measure of profitability, with that metric increasing sharply from 4.5 pence in the comparable period to 11.7 pence in this one. I felt that this quote from the CEO was worthy of inclusion:

“Global equity markets have experienced one of the worst periods of negative performance in recent years and traditional 60:40 multi-asset portfolios have had their largest negative year-to-date return on record.”

Quilter CEO Paul Feeney
  • Technology group 4Sight Holdings has released results for the six months ended June 2022. Revenue is up 13.1% and HEPS jumped by a whopping 136.2%. Weirdly, the company talks about a “decrease in cash balances during difficult trading conditions by 9.1%” – not something you expect to see with a profit result like that. The debt:equity ratio also increased, another odd outcome when profits are up. I dug deeper into the result and found that the debtors balance is a whopping R132 million (before credit loss allowances) vs. interim revenue of R329 million. Operating profit of R12.1 million has only translated into cash from operations of R1.67 million, so cash quality of earnings is low to say the least. When in doubt, follow the cash.
  • Montauk Renewables has filed its Form 10-Q with the SEC. If you’ve ever wondered what a quarterly report on the US market looks like, you’ll find it at this link. The company has swung into the green, with basic earnings per share of $0.14 in this quarter vs. a loss of $0.03 in the comparable quarter.

Operational updates

  • Royal Bafokeng Platinum has a deal with a subsidiary of Anglo American Platinum that was implemented in July 2018, itself a renewal of a longstanding relationship between the parties. Under this agreement, the Anglo Plats subsidiary purchases all the PGM concentrate produced by the Royal Bafokeng subsidiary. The termination date for a portion of the concentrate is August 2024, provided notice is given by August 2022. As Royal Bafokeng is currently under mandatory offer by Impala Platinum, the parties have agreed to extend the deadline for the termination notice to February 2023. If notice is given by then, the termination of either 17% or 50% of the concentrate will be effective in August 2024. Yes, the agreement is specific on those two percentages.
  • Jubilee Metals Group has given an update on its operations and projects for the six months to June 2022. The major achievement during the period was the conclusion of the R1.2 billion investment programme in South Africa and Zambia. This programme has expanded production across PGMs, chrome, copper and cobalt. The early results from the new Inyoni operations have outperformed expectations, achieving a 34% decrease in PGM unit cost. There’s also good news in the copper business, with Zambian copper production up 14%. Thanks to these major operational improvements, profit per PGM ounce and copper tonne are up 12% and 9% respectively vs. the preceding six months, despite a drop in commodity prices. Net revenue in South Africa was up 21% and operational earnings grew by 23%. In Zambia, revenue increased by 16% and earnings increased by 30%. Despite these numbers, Jubilee’s share price is down more than 16% this year. Admittedly, it’s up more than 430% in the past 3 years!
  • Globe Trade Centre has traded on the JSE literally a handful of times in the past few years. There is zero liquidity. The company has announced strategic expansion of its investment portfolio beyond traditional real estate in its current markets. This includes innovation and technology parks (business parks with tech and pharma tenants), renewable energy facilities and investment in private rented sector property.

Share buybacks and dividends

  • Argent Industrial was given authority at its 2021 AGM to repurchase up to 20% of issued shares. Since then, the company has only managed to mop up 1.77% of issued shares at an average price of R12.80 per share. This isn’t the most liquid stock around, which makes it tricky to execute large buyback programmes. The current share price is R13.90.
  • Industrials REIT is repurchasing shares to mitigate the dilutive effect of the scrip dividend. The latest repurchase is 50,000 shares at 171 pence per share (a total of around £85.5k)
  • Sirius Real Estate has confirmed the outcome of the scrip dividend alternative. Of a total dividend of €27.656 million, only €1.456 million is being settled through the issue of new shares. The rest is a cash dividend. This doesn’t exactly give a feeling of confidence from existing shareholders in the attractiveness of the current share price, as the vast majority chose to receive cash rather than more shares.

Notable shuffling of (expensive) chairs

  • None!

Director dealings

  • Several directors of Vodacom subsidiaries have sold shares to settle the tax on employee share option schemes. I usually ignore these announcements but felt I should mention it here to explain why. As the value received is taxable, executives often sell enough shares to free up cash to pay the tax. This is a cash flow issue rather than a view on Vodacom’s prospects.

Unusual things

  • The soap opera at Nutritional Holdings continues, with a former shareholder and director having taken steps to liquidate the company. Here’s the shocker: the provisional liquidation has been granted! Certain shareholders are now lodging an intervening application. One of the arguments being made is that the notice was served at a vacant office that had been burnt and vacated, despite still being the registered address of the company. Yikes! A far better defence is that there may have been breaches of the JSE Listings Requirements and/or Companies Act when previous directors seem to have granted themselves security over their loan. If that is true, then the security won’t stack up in court. Either way, it remains a complete mess.

South African M&A Analysis H1 2022

Marylou Greig
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South African M&A Analysis H1 2022

The total value of M&A activity for the period H1 2022 (including failed deals, of which there were three) was R306,2bn from 174 deals. While the deal value was up significantly on H1 2021’s R216,7bn, the number of deals was down 25% on those recorded in H1 2021. To a degree, the increase in the aggregate value of M&A transactions can be attributed to the two largest deals by value for this period – Gold Fields’ acquisition of Yamana Gold, valued at R103,85bn (US$6,7bn) and Sanlam’s African joint venture with Allianz SE, valued at R33bn (€2bn). Two significant BEE deals were reported in the period – by Shoprite, valued at R8,89bn, and by Old Mutual, valued at R2,8bn.

Of the 174 deals executed in H1 by companies listed on one of the local exchanges, 142 of these involved companies with primary listings. Of these, 34 were cross border transactions by SA domiciled companies, with Africa and the UK being the top two destinations. Drilling down further, the targets across Africa were, in the main, insurance, resources and financial services; while in the UK, real estate dominated the deals.

View this in further detail here

While capital markets remain volatile and unattractive for new listings, more and more corporates with primary listing on the JSE are taking secondary listings on A2X. Share buy-backs by corporates continued and, during the period, a total of R71,64bn was returned to shareholders – up significantly from the R24,13bn returned in H1 2021. Shareholders also received R28,1bn in the form of special dividends, up significantly from R5,2bn in the comparable period in 2021.

Download this latest issue of DealMakers here

DealMakers H1 League Table – M&A activity by the top South African advisory firms (in relation to exchange-listed companies).

DealMakers H1 League Table – General Corporate Finance activity by the top South African advisory firms (in relation to exchange-listed companies).

Included in this issue is the second edition of Women of SA’s M&A and Financial Markets Industry and, for the first time, Women of SA’s Private Equity and Venture Capital Markets, which forms part of this issue of Catalyst. The stories of the women who grace these pages offer inspiration and words of courage, and are examples of how hard work, resolve and sheer determination have seen their aspirations become reality.

The latest magazine can be accessed as a free-to-read publication at www.dealmakersdigital.co.za

DealMakers is SA’s M&A publication
www.dealmakerssouthafrica.com

2022 Nedbank Group Limited Unaudited Interim Results

Sponsored Content
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2022 Nedbank Group Limited Unaudited Interim Results

With an increase in its share price of over 20% this year, Nedbank has rewarded investors at a time when the market has dished out a lot of punishment

Note from The Finance Ghost – I’ve written several times about the favourable environment for banks, with demand for credit and higher prevailing interest rates.

Even when the broader economy is on your side, you still have to deliver results. The latest earnings from Nedbank tell a story of delivery, with HEPS up 26% and the interim dividend up 81%, a strong signal from management that the balance sheet is in great shape and able to support dividends to shareholders. Remember, when the dividend has grown by a higher rate than earnings, this is an increase in the payout ratio. A higher payout ratio is a sign of confidence.

I found it particularly impressive that the credit loss ratio is still 85 basis points (identical to the comparable period) and that the cost-to-income ratio has improved despite cost pressures in the market.

Nedbank places strong value on its wide investor base and now brings its interim results to you as a Ghost Mail reader.

You can zoom in on the window below to read them, or follow the link further down to access the results on the website.

Nedbank Group Interim Results AdvertDOWNLOAD THE RESULTS

VISIT THE NEDBANK GROUP WEBSITE FOR THE FULL SUITE OF THE 2022 INTERIM RESULTS >>

Ghost Stories Ep3: Carel Nolte (EasyEquities)

The Finance Ghost
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Ghost Stories Ep3: Carel Nolte (EasyEquities)

Carel Nolte and Charles Savage met at school, yet it was many years later at the finish line of the Comrades Marathon (of all places) that the two bumped into each other again. Charles pitched the idea of EasyEquities to Carel and the rest is history, with the two embarking on a journey that probably made the Comrades seem simple.

In this episode of Ghost Stories, we delve into the data around the behaviour of investors on the EasyEquities platform. We look at concepts like popular stocks, the use of offshore accounts and the amount of brokerage that EasyEquities has helped these investors save.

Along the way, we discussed various listed companies and how important ETFs are for any investment portfolio.

Get ready for an insightful and fun episode with a guest who has been instrumental in the success of the EasyEquities platform. Listen to it using the podcast player below:

DISCLAIMER: EasyEquities is a product of First World Trader (Pty) Ltd t/a EasyEquities which is an authorised Financial Services Provider. FSP number: 22588. This material is not intended as and does not constitute financial advice or any other advice and is neither exhaustive nor prescriptive. The views expressed by the contributor are his or her own (as an independently registered financial services provider, financial adviser or other independent capacity), and not necessarily endorsed by EasyEquities (as a separate financial services provider).

Ghost Bites Vol 65 (22)

The Finance Ghost
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0
Ghost Bites Vol 65 (22)

If you enjoy Ghost Bites, then make sure you’re on the mailing list for a daily dose of market insights in Ghost Mail. It’s free! SIGN UP >>>

Corporate finance corner (M&A / capital raises)

  • BHP Group has announced a non-binding indicative proposal to acquire OZ Minerals Limited, which trades under the ticker OZL on the Australian Stock Exchange. This is going to be a fun one to follow, as the proposal was sent to the board of OZ for them to consider a scheme of arrangement for 100% of the share capital. The board was quick to kick that offer to touch, saying that it “significantly undervalues” the company. OZL’s share price had been hammered in recent times based on recessionary fears, as the company is primarily engaged in copper mining. Copper gets hit the hardest in anticipation of a recession. Of course, a proposal of A$25 per share from BHP was quick to repair the share price, with a rally of 35% in one day that would’ve killed anyone sitting with a short position as a play on copper. The big question is: will BHP turn up the heat and possibly take the route of a hostile takeover? There are some clues in the announcement, like BHP pointing out how the A$25 per share proposal represents a “compelling value proposition” for OZ shareholders, representing a premium of 41.4% to the 30-day VWAP. BHP goes on to remind OZ shareholders that they face a “deteriorating external environment” and “increased operational and growth related funding challenges” – in other words, BHP wants them to believe that this is their only way out of this mess. I love these boardroom battles, as they inevitably drive huge share price action. Here’s the chart of OZL, showing how the drop in the copper price murdered the share price until BHP’s opportunistic offer:
  • Datatec has announced that its subsidiary Logicalis has acquired Q Associates, which sounds like a consultancy to James Bond and the rest of MI5. Alas, the real story isn’t quite as exciting. Q Associates is described as one of the UK’s leading providers of IT consultancy and advisory services around data management, data protection, compliance and information security. If you keep reading the announcement though, you discover that Government Security Services is listed as one of the client categories. Perhaps Bond is involved after all? This is clearly a small transaction as no price has been given.
  • Alexander Forbes has announced the results of the partial offer by New Veld, LLC. The new investor had previously acquired 14.83% in the group from Mercer Africa Limited and wished to increase this to a maximum of 33% in Alexander Forbes through a partial offer. This was a successful piece of corporate finance, with “excess tenders” making sure that the investor reached the target. This has nothing to do with the ANC and everything to do with offer strategies, allowing investors to accept the partial offer and put forward the rest of their shares for inclusion in the pot, making up for investors who don’t want to accept the offer. Due to more shares being in the pot than required, those who offered their shares in excess of the partial offer will sell 93.08724% of them at R5.05 per share. The share price closed 6.9% higher at R4.99.
  • Sun International has announced the disposal of a portion of a property in Menlyn, Pretoria as well as the acquisition of an interest in Time Square. Effectively, Sun International is increasing its equity position in Time Square and is selling vacant land next to the property that will become a mixed-use development. Servitudes will be granted over certain parking bays at Sun Time Square. Sun International unlocks a net cash inflow here, as the land is being sold for R198 million and the stake in Time Square is being acquired for R125 million (subject to adjustments). This is a Category 2 Transaction that doesn’t require shareholder approval.
  • Buffalo Coal has announced the completion of the transfer of shares from Resource Capital Fund to Belvedere Resources. This means that Belvedere is now the majority shareholder in this coal business that has two operations in South Africa. There is almost no liquidity whatsoever in this company, with a share that looks like it traded on just a couple of days in the past six months.
  • British American Tobacco has released a supplementary prospectus for its £25 billion Euro Medium Term Note Programme. Effectively, the interim results have now been incorporated in the prospectus. If you’re curious about the underlying documents in a debt capital raise. I’m including this here because it is easy to forget that corporates also use public markets to raise debt, not just equity. This is generally reserved for institutional investors only, as the amounts involved are enormous.

Financial updates

  • Mpact released its results for the six months ended June 2022 and the share price ended the day where it started. Liquidity has become an issue for this stock, despite having a market cap of around R4.3 billion. The results themselves were strong, with underlying operating profit up by 21.5% and headline earnings per share (HEPS) up by 31.1% to 142 cents. Return on Capital Employed (ROCE) increased from 15.4% to 18%. The interim dividend is back, with the board declaring a 40 cents per share dividend. Mpact has diverse operations, which usually results in a mixed bag of results when you drill down to segmental level. For example, the containerboard and cartonboard businesses saw strong local demand and higher selling prices that mitigated input cost inflation. In contrast, fruit packaging was hit by uncertainties around the Russia-Ukraine conflict, as fruit producers have delayed decisions on harvesting until they have clarity on export markets. Adverse weather and port constraints haven’t helped. It’s encouraging to see that the quick-service restaurant customer base showed strong volume growth, as South Africans returned to old habits of eating out or getting takeaways. Other challenges have included cost and availability of raw materials (putting pressure on working capital) and delays in the arrival of capital equipment (impacting important projects and production of bins and crates in the plastics business). It’s also worth noting the 20.5% increase in net finance costs as a result of higher average net debt over the period. The outlook seems positive overall, though each underlying business faces different market conditions. This is part of what makes it difficult to anticipate Mpact’s performance. The share price is down nearly 14% this year.
  • OneLogix has released a trading statement for the year ended May 2022. It’s been a horrible period for the logistics company, facing everything from civil unrest and attacks on Transnet’s operations through to floods in KZN. To add insult (and even more injury) to those injuries, OneLogix suffered a R25 million knock from hailstorm damage to passenger vehicles that were being processed by the company. This was the amount net of insurance proceeds. HEPS has fallen by between 55% and 75%, though it is worth noting that the company has still made a profit and is projected to meet loan covenants. The share price closed 7.7% higher on the day. Back in December, the management was considering a buyout and delisting at R3.30 per share. Many months later, the company is still trading under cautionary and no formal offer has been made. The share price closed at R2.80 on Monday.

Operational updates

  • None – come back tomorrow!

Share buybacks and dividends

  • In the past week, Naspers repurchased shares worth nearly R1.6 billion and Prosus repurchased shares worth $250 million.

Notable shuffling of (expensive) chairs

  • A non-executive director of Trustco has resigned after a relatively short stint on the board. He was appointed to the board in March 2021. For much juicier news on Trustco, make sure you read to the bottom of Ghost Bites today.

Director dealings

  • A director of a subsidiary of Vodacom South Africa has sold shares worth R1.3 million. These were issued to the director as part of the company’s forfeitable share plan. I generally don’t read anything into dealings like these.
  • Europa Metals has settled £33k worth of director fees through the issuance of shares. The outgoing CEO isn’t receiving any of these shares due to his resignation.

Unusual things

  • There’s an interesting corporate governance tussle underway at Richemont. The A shares are the ones that us plebs can own, with the B shares held by the Rupert family. The Depository Receipts that trade on the JSE are linked to the A shares, with 10 Depository Receipts equivalent to one A share. Bluebell Capital Partners is an institutional investor that is pushing for board representation for the A shareholders. The board has recommended to shareholders that they do not vote in favour of this proposal, instead voting for the appointment of an independent director put forward by the board as a representative of the holders of A shares. The board will give its reasons for the recommendation in the letter to shareholders at the AGM. In reality, any changes to the articles of incorporation would need to be supported by the Rupert family, so the recommendation to shareholders is just for optics. Still, it’s interesting to see some activism around governance at Richemont.
  • Trustco released an update on Monday in the midst of the closing auction, causing the share price to close 35.6% higher. Admittedly, this was based on such tiny value traded that it wouldn’t even cover monthly school fees for most kids. In a very interesting court victory for Trustco, the High Court granted an urgent interdict to stop the JSE suspending Trustco’s listing. It’s hilarious reading the JSE’s announcement vs Trustco’s announcement, with the former providing a formal overview of what happened and the latter adding some flowery language to drive the points home. For example, Trustco points out that the “Honourable Judge dismissed each and every argument the JSE made” – the company also couldn’t resist pointing out that this is the second urgent application won against the JSE in the High Court. What actually matters is the Review Application set down for 5 September 2022, as all that Trustco has achieved here is the avoidance of a suspension until that process is concluded. I must quote this section from the Trustco announcement, as the directors better hope that they win against the JSE when it really counts:

“Shareholders are referred to the announcement published on SENS on 8 December 2021, in terms whereof 98.08% of minority shareholders in a non-binding vote indicated that the parties responsible for shareholders’ value destruction be held accountable”

Trustco SENS, 8 August 2022

Ghost Global (Berkshire Hathaway | Tesla | Beyond Meat | Alibaba | Amazon)

Jordan Theron
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Ghost Global (Berkshire Hathaway | Tesla | Beyond Meat | Alibaba | Amazon)

Ghost Grad Jordan Theron brings us Ghost Global this week, featuring updates ranging from the Oracle of Omaha through to meat-free burgers and Amazon’s foray into robotic vacuum cleaners.

Berkshire bites the bullet

Even the Oracle of Omaha himself, Warren Buffett, isn’t immune to the market going against him. The company reported a 38.8% increase in operating earnings, though the number that shareholders will focus on is a $53 billion loss in investments.

Berkshire Hathaway is concentrated in five stocks: Apple 38.2%, Bank of America 9.8%, Coca Cola 7.7%, Chevron 7.2% and American Express 6.4%. There have been sharp declines in Apple and the two financial services companies.

Of course, these are just paper losses. They aren’t realised unless the positions are sold. The same is true on the way up when valuation gains are reported.

In case you’re wondering, the growth in operating earnings is attributed to the core business operations including insurance, railroads and utilities.

The share price is down 2.4% this year, significantly outperforming the S&P500 with a drop of 13% year-to-date.

Tesla tricks

The Ghost’s favourite stock (ahem) achieved shareholder support for a 3-for-1 stock split. This will take the number of shares in issue from 2 billion to 6 billion.

In a stock split, as the name suggests, the number of shares in issue increases but the value of the underlying company is unchanged. The pie has simply been cut into more pieces.

In a world of fractional share ownership, it has become less important to execute stock splits to make each share more affordable. In a 3-for-1 split, a share that was trading at $900 would now be worth $300.

The company’s stated rationale for the split is to give employees “more flexibility in managing their equity” in addition to making the stock more accessible for retail investors. The main motivation seems to be to recruit and retain top talent through rewarding employees with equity.

In theory, this increases employee satisfaction. Of course, that only applies if the stock goes up. The employees at a company like Shopify aren’t very satisfied with the shares received.

Beyond Meat leaves a bitter taste

With climate change at the top of the agenda since President Biden took office, it’s no surprise that Beyond Meat has been a popular stock among thematic investors. The food may be plant-based but the business is anything but firmly planted, with a net loss of $97.1 million vs. a net loss of $19.7 million in the comparable quarter last year. Net revenue declined by 1.6%. It’s ugly.

The poor performance has been attributed to a slowdown in sales with franchise partners like McDonald’s, as well as consumer pressures that have driven a return to cheaper, animal-based products. There has also been a lack of coherent, concise advertising to the mass market about the benefits of plant-based products.

Beyond Meat is now down 37% this year despite a 28% rally this month. The company announced layoffs of staff and the market responded positively, perhaps believing that executives of growth stocks are finally starting to manage the income statement below the revenue line.

Alibaba beats estimates but nobody cares

Alibaba beat revenue and earnings expectations in its first quarter. Despite challenges in China during a period of Covid-related lockdowns, the house that Jack built persevered and overcame these issues.

Around 70% of revenue is generated in China and those sales grew by 8% year-on-year. This has supported an increase in the share buyback programme from $15 billion to $25 billion, taking advantage of a highly depressed share price.

The Ghost knows all about that, having lost over half the value of his Alibaba position. On an earnings beat, the share price should be up. Instead, it’s down over 22% this month after concerns about the future of the listing on the US market. On the other end of the world, there’s always the threat of regulatory attacks from the CCP (Chinese Communist Party).

Amazon sucks

Amazon made its 4th largest acquisition in its history this week when it purchased iRobot for $1.7 billion. This company is known for making the robotic vacuum cleaner called the Roomba. The idea is to strengthen Amazon’s presence in consumer robotics, complementing Ring doorbells and smart home devices like Alexa.

The three largest acquisitions in Amazon’s history are Whole Foods ($13.7bn), MGM Studios ($8.45bn) and One Medical ($3.9bn).

iRobot was founded in 1990 by a group of MIT (Massachusetts Institute of Technology) roboticists and the autonomous vacuum cleaner has been their claim to fame. Robotic mops and pool cleaners have also been introduced.

iRobot was a pandemic darling, when consumers were stuck at home and spent their money on useless things (be honest – we all made one of those purchases). Now that Covid has faded and been replaced by heavy inflation, revenues have taken a 30% hit and 10% of the workforce has been cut amid rising costs and declining revenue.

Amazon has a huge balance sheet, so it doesn’t care about silly things like operating losses. The deal will require regulatory approval before it can go ahead.

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SA retail spending at risk

Chris Gilmour
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SA retail spending at risk

As interest rate hikes bite and high fuel and food inflation persists, South African retail spending is at risk of slowing down significantly. Chris Gilmour explores this issue.

The recent global trend of rising interest rates and higher inflation is being felt in South Africa, where the repo rate was increased in July by 75 basis points and now stands at 5.5%, with the prime rate at 9%. South Africa may still be regarded by many people as a commodity-based economy but in reality it is very much a consumer-based economy, with over 60% of its GDP coming from consumer spending. Within this broad category of consumer spending, it is estimated that around 20% of GDP comes specifically from retail sales.

Stagflation is an ugly word

The combined impact of substantially higher inflation and interest rates is probably going to result in “stagflation”– low to negative economic growth coupled with higher inflation. And there are other factors that are causing consumer spending to slow down or decrease, notably the chronically high rate of unemployment. South Africa’s unemployment rate is the highest in the world and there are no signs of it abating.

Anecdotal evidence also suggests that conditions among the very poorly-paid domestic workers have deteriorated in the past couple of years since the coronavirus pandemic. It appears that many South Africans have decided to dispense with the services of their domestic workers as they have a) got used to working from home and have become more adept at cleaning themselves and/or b) they have discovered that jettisoning a domestic worker is one of the easiest ways of saving money. Whatever the reason, it appears that around a quarter of SA’s domestic workers may have lost their jobs since the pandemic started, according to a recent survey by domestic worker labour broking organisation Sweep South. This organisation estimates that approximately 125 000 domestic workers (mostly female) lost their jobs in the past year. Main reasons given were unaffordability and employers “semigrating” or emigrating.

Another factor contributing to cost-push inflation in SA is the gradual return to the office for a great many workers who have largely enjoyed the benefits of working from home until now. Resuming a daily commute, even if it is for substantially less than the traditional five-day working week, will undoubtedly result in an extra cost burden for many people. Higher fuel costs compound the misery.

Although the huge spike in March 2021 masks the exercise to an extent, there is a good visual inverse correlation between retail sales growth and the prime rate, as shown in the graphic below. As interest rates fall, retail sales growth improves and vice-versa:

The one factor that could have conceivably offered a degree of relief to cash-strapped consumers is increased use of credit. Household debt to disposable income has been declining for some time now as consumers became very debt-averse over the past few years and as affordability criteria by banks and retailers were tightened.

But in an increasing interest rate environment coupled with a moribund economy, the credit taps are highly unlikely to be turned on again, for fear of a massive bad debt situation materialising.

In fact, as the following graph from the National Credit Regulator (NCR) illustrates, the percentage of rejected credit applications has been steadily increasing over the past five years. And this graph is only up until the end of the first quarter this year, before the full impact of the last two SARB/MPC rate hikes came about:

Source www.ncr.org.za

So the bottom line is that the retail market generally is likely to remain under considerable strain for the foreseeable future. Non-discretionary retailers such as the food and drug retailers (Pick n Pay, Shoprite, Spar, Clicks and Dischem) should fare better than discretionary retailers such as Truworths, Mr Price, TFG, Woolworths, Massmart and Lewis.  

However, this assumes a level playing field. In reality, certain retailers are going to do much better than others. In the non-discretionary space, Shoprite and Pick n Pay are showing signs via positive recent trading updates that they are coping well with the flagging SA economy. Woolies Food, conversely, is making heavy weather of it and is struggling to maintain market share.

In the clothing space, too, there are two players in the form of Mr Price and TFG that are likely to take market share away from the likes of Truworths and Woolworths.

For more granular detail on SA retail sales analysis, go to www.gilmour-research.co.za.

A closer look at Vukile

Kreeti Panday
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A closer look at Vukile

Vukile Property Fund has an interesting portfolio, with exposure to township and rural properties in South Africa and a retail property strategy in Spain. That’s certainly an unusual combination. With a recent debt roadshow presentation released to the market, the fund caught Ghost Grad Kreeti Panday’s eye.

Vukile is a REIT that describes itself as a “high-quality, low-risk, retail REIT operating in South Africa and Spain.” It has been listed on the JSE since 2004 and the Namibian Stock Exchange since 2007. It holds a controlling stake in Spanish subsidiary Castellana Property Socimi, which is listed on the BME Growth market, a Spanish sub-market on which SMEs are traded.

Vukile was the first property fund to be awarded REIT status by the JSE on 1st April 2013. Whilst some property companies have seemed like April Fool’s jokes, Vukile isn’t one of them.

Vukile owns around 52 retail properties in South Africa and Spain, including Pine Crest in Pinetown, Gugulethu Square in Cape Town and Dobsonville Mall in Soweto.

South African strategy

The group concentrates its efforts in townships and rural markets, seeking out properties that are occupied by tenants such as Pick ‘n Pay, Pepkor and Foschini. These are “blue chip” tenants because they theoretically provide steady income. One has to be careful though, as Edcon would’ve been considered a blue chip at some point in its life.

A third of the company’s rental income comes from essential service providers such as supermarkets, pharmacies and banking. Around 44% of the company’s rental income comes from its top 10 tenants, which include the retailers mentioned above and the likes of Mr Price, Spar and Massmart. It’s worth highlighting that Massmart is really struggling at the moment and particularly in the Game format, which is probably the division that Vukile is most exposed to within Massmart.

The group’s Weighted Average Lease Expiry (an indicator of when the landlord-tenant dynamics will play out in negotiations) is currently at 3.4 years based on GLA (Gross Lettable Area). The group has achieved a tenant retention rate of 93%, which makes sense as township malls of sufficient quality for leading retailers are thin on the ground. In many cases, it’s likely that Vukile owns the only mall servicing a particular catchment area with formal retail operations. As this is an important market, retailers aren’t likely to walk away from these malls.

Spanish strategy

Vukile’s portfolio exposure means that Spain is (slightly) more important than South Africa, with 54% exposure to the land of raging bulls and great sporting talent. Vukile owns 86.9% in Castellana and intends to increase its share for as long as the price remains favourable, given that Vukile is currently purchasing shares at approximately a 48% discount to EPRA NTA (Net Tangible Assets).

Managing risks

Naturally, inflation is both a risk and an opportunity for REITs. They are often seen as inflation hedges, so leases that allow for CPI-linked increases are critical in this space.

The South African operations are exposed to the realities of our country, with six of Vukile’s retail properties damaged in the 2021 July civil unrest. The group’s SASRIA cover prevented it from incurring material losses in this regard.

Interest rate risk is perhaps the biggest risk of all for REITs, as they all run high levels of gearing to help drive return on equity. Although macroeconomic factors drive the interest rate in the market, the fund can control how much debt it takes on and how much of it gets hedged. Vukile has a policy of hedging at least 75% of interest-bearing loans through fixed interest rates or interest rate swaps. The group predicts impending interest rate hikes, citing that the South African interest rate hiking cycle lasts an average of 2-3 years with interest rates rising between 200 and 400 basis points.

Looking deeper, 89% of Castellana’s debt has been hedged and 59% of South African debts have been hedged. The combined hedged is 75.5% of group debt.

Hedging doesn’t happen for free, with financial institutions making sure they earn a spread on any hedges. This is why REITs strive for a balance, hedging enough risk to give comfort to shareholders and leaving some risk on the table to avoid incurring hedging costs to such an extent that it becomes unattractive.

Hitting the green

When it comes to green financing, Vukile is taking advantage of a market that wants to lend money for renewable energy projects. Vukile has procured a 5-year R200 million green loan from Nedbank for the development of 19 solar projects.

83% of the group’s retail properties in Spain are now running entirely on solar energy and the group intends to increase this to 100% of retail properties in Spain.

Looking at other ESG topics, the group has provided 66 bursaries to students in property-related courses and is also rolling out the Vukile Retail Academy, which is targeted at advancing emerging retailers from disadvantaged communities.

Looking ahead

Vukile is still investing in South Africa, with a recently announced transaction to acquire the Pan Africa Shopping Centre that services Alexandra township in Johannesburg. This is a two-phase transaction in which Vukile will buy the existing property for R415 million and a phase 2 development (once completed) for R254 million.

Profit increased sharply in FY22, which is to be expected vs. a Covid-impacted base. The removal of all Covid restrictions should drive traffic to malls, though the outrageous petrol price may force people to stay home anyway.

The share price is up 13.5% this year and more than 24% over the past 12 months. With a market cap of R13.9 billion, this is a substantial REIT that boasts a unique portfolio exposure of Spanish and South African assets. The trailing dividend yield is around 7.5%.

Are you a shareholder in Vukile? Is there a particular reason why you wouldn’t invest? Let us know in the comments!

Ghost Bites Vol 64 (22)

The Finance Ghost
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Ghost Bites Vol 64 (22)

If you enjoy Ghost Bites, then make sure you’re on the mailing list for a daily dose of market insights in Ghost Mail. It’s free! SIGN UP >>>

Corporate finance corner (M&A / capital raises)

  • Datatec has released the circular related to the category 1 transaction to sell Analysys Mason to Bridgepoint Development Capital. The shareholder meeting will be held on 2nd September. Datatec holds 71.2% in Analysys Mason (after the dilutionary impact of share incentive schemes in the business) and plans to sell the entire stake. The minority shareholders are also looking to sell their shares, so Bridgepoint is acquiring 100% of the company. Those who don’t want to sell would in any event be subjected to drag-along provisions, which can force minority shareholders to sell in a situation where the controlling shareholders are selling. Without these provisions, minority shareholders can end up blocking a deal. Datatec will receive around £128 million in cash and £7.1 million in deferred loan notes if the deal closes. An earn-out of up to £10 million is applicable to the deal, so Datatec would receive 71.2% of any such payment. You’ll find the circular at this link.
  • The offer from Raubex Group to shareholders of Bauba Resources has achieved another important milestone, with the TRP issuing a compliance certificate in respect of the offer. This allows Raubex to proceed with settlement to those who accepted the offer. Bauba shareholders approved the delisting of the company and Bauba will disappear from our market on 23rd August. Bauba shareholders who don’t accept the offer will hold shares in an unlisted company, which is almost never a good idea.
  • Delta Property Fund has agreed to sell four of its properties to various parties. The most important of these properties is Fort Drury in Bloemfontein for R51.5 million. WB Centre in Kimberley is being sold for R31 million. There are two smaller buildings in Bloemfontein that are being sold, with an aggregate value of R16.3 million. These buildings are a mess I’m afraid. WB Centre is being sold at a discount to book value because Woolworths has vacated the building, taking vacancies to 47.2%. The two smaller Bloemfontein buildings are completely vacant. After this disposal, Delta’s loan-to-value (LTV) ratio will reduce by 50 basis points. The announcement neglects to give the actual LTV ratio, which was 57% as at February 2022. I would also avoid reminding the market of a number like that.
  • Motus Holdings has renewed its cautionary announcement, as the company is still in discussions regarding a possible acquisition of 100% of an aftermarket parts business.
  • Conduit Capital is facing a significant challenge with one of the insurance businesses placed under provisional curatorship. A lot has gone wrong for Sean Riskowitz in recent years. His investment fund Protea Asset Management LLC has sold down shares in Conduit and now holds only 2.7% of the company.
  • Finbond has renewed its cautionary status based on a potential acquisition in Mexico. Considering this country has tastes ranging from avocado to tequila, anything is possible here and caution probably is warranted.
  • African Equity Empowerment Investments (AEEI) issued a cautionary announcement that it is considering a potential disposal of an asset. At the same time, AYO Technology (also linked to Iqbal Surve) released a cautionary that it is considering a potential acquisition. Whilst we can’t be sure that the companies are negotiating with each other, it seems likely that AEEI is looking to sell something to AYO.

Financial updates

  • AngloGold Ashanti has released its interim results for the six months to June 2022. The company has scored some own goals in recent times, so a 3% increase in production is at least heading in the right direction. The cadence is promising, with the second quarter reflecting a 10% increase in production. Total cash costs grew by 6% to $1,068/oz, driven by inflationary pressures and higher royalty payments. Earnings are lower year-on-year, with adjusted EBITDA of $864 million (down 1.4%) and headline earnings of $0.71 per share (down 18.4%). The cash flow picture is a lot prettier, with free cash flow of $471 million vs. an outflow of $25 million in the comparable period. This was made possible by a $549 million receipt from the Kibali gold mine in the DRC. AngloGold completed the acquisition of Corvus Gold for $365 million in January 2022 and the balance sheet is in a strong position despite funding that deal and paying the 2021 final dividend, with adjusted net debt down 13% year-on-year. An interim dividend of R4.93 per share has been declared. The gold companies have modest dividend yields compared to the more cyclical mining houses. On an annualised basis, this interim dividend is a yield of 4%.
  • Impala Platinum released a production update and trading statement for the year ended June 2022. Gross concentrate volumes fell by 3.6%, comprising a 4.3% drop from managed operations and a 2.1% decrease from joint ventures. Concentrate receipts from third parties declined by 1.8%. Gross refined volumes fell by 5.6%. Revenue per ounce has fallen by 4.5% based on dollar pricing for the primary products. To make it worse, unit cost per ounce jumped by 17% because of inflationary pressures and lower overall volumes. HEPS is expected to be between 13% and 21% lower than the comparable period. The share price is down 16.8% this year.
  • Master Drilling has released a trading statement for the six months ended June 2022. HEPS will jump by between 45.5% and 65.5%, which is great news for shareholders. The share price closed 7.7% higher on the day and is now 22% up year-to-date. This is about as close to “selling shovels in a gold rush” as you can get these days.
  • CA Sales Holdings (known as CA&S) is a consumer goods company that recently moved its listing to the JSE in preparation for the proposed collapse of the PSG Group’s listed structure. CA&S is one of the assets that would be unbundled to shareholders. Earnings momentum is exactly what the market wants to see from a new listing, with HEPS for the six months to June 2022 expected to be between 39% and 49% higher. Part of this jump is the impact of Covid on the base period, particularly regarding restrictions on liquor sales.
  • Alviva Holdings released a trading statement for the year ended June 2022. HEPS is expected to be up by a spectacular 85% to 94%. There is a potential buyout on the cards for Alviva, with a non-binding expression of interest received from a consortium of investors and announced on 30 June. The envisaged price is R25 per share but no formal offer has been made yet. Alviva is trading at R23.89 which is very close to an offer price that hasn’t even been confirmed yet. Alviva was trading below R20 per share before the potential buyout was announced.
  • Cognition Holdings has released a trading statement for the year ended June 2022. Things have gone in the wrong direction, with HEPS expected to be between 56% and 66% lower than in the prior year. Although HEPS is positive, the company will report a loss per share because of impairments of goodwill and intangible assets. Remember, HEPS ignores these non-cash losses. Cognition released a cautionary announcement earlier in the week noting the potential disposal of 50.01% in the Private Property business.

Operational updates

  • Nothing new in this category!

Share buybacks and dividends

Notable shuffling of (expensive) chairs

  • The Chairman of Raubex, Freddie Kenney, has decided not to stand for re-election, bringing to an end his affiliation with the company that has spanned nearly 20 years. The reason given is that he has suffered two major personal tragedies and needs personal time. It’s always horrible to read stuff like this and I certainly wish him the best under these circumstances.
  • Alok Joshi has joined the board of Buffalo Coal as a non-executive director and as the representative of new shareholder Belvedere Resources. He is the Finance Director of Belvedere and is based in Dubai.

Director dealings

  • A director of a major subsidiary of PBT Group has sold shares in the company worth R1.32 million.
  • A director of a major subsidiary of Stefanutti Stocks has bought shares in the company worth R78k.
  • An entity linked to the CEO of Invicta Holdings has bought shares in the company worth R68k.
  • The CEO of Purple Group’s wife has sold shares in the company worth nearly R103k.

Unusual things

  • The sad story of Luxe Holdings continues. This is the carcass of what was once Taste Holdings, a successful local pizza business that got stars in its eyes and tried to build Domino’s Pizza in South Africa as well as Starbucks. Domino’s has been liquidated and Starbucks was sold. The company should’ve stuck to rolling dough rather than rolling out restaurants. Luxe holds the jewellery assets that were inside Taste and even that isn’t going well, with many director changes in recent times. The latest mess is that the shares have been suspended from trading by the JSE because the annual report for the year ended February 2022 hasn’t been published. There is an extraordinarily long list of prior period accounting errors that the company has uncovered, ranging from technical IFRS stuff through to basic mistakes. This has resulted in delays to the report. One can perhaps take some comfort from the current management team being willing to identify and sort out these issues.
  • Afristrat Investment Holdings has been suspended from trading by the JSE as the provisional report for the year ended March 2022 has not been published within the prescribed period.
  • We usually see a “no change statement” when a company gives notice of its AGM and distributes its annual financial statements. This means there were no changes since the financial results were announced on SENS. Primeserv Group released a “change statement” which means there were differences between the announced results and the final audited results. They weren’t material though, with a difference of a few million bucks in cost of sales, other income and expenses. I decided to mention it here to show you that a “change statement” does happen on rare occasions!
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