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PODCAST: Global economy: Recession or recovery?

Investec No Ordinary Wednesday
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PODCAST: Global economy: Recession or recovery?

Listen to the podcast here:

Recession risks, inflation pressures, and trade tensions – how is the global economy shaping up in 2025? Investec’s Chief Economists, Phil Shaw (UK) and Annabel Bishop (SA), take stock of the latest trends in No Ordinary Wednesday. From global growth forecasts to the economic outlook for Europe and South Africa, they break down what lies ahead.

Hosted by seasoned broadcaster, Jeremy Maggs, the No Ordinary Wednesday podcast unpacks the latest economic, business and political news in South Africa, with an all-star cast of investment and wealth managers, economists and financial planners from Investec. Listen in every second Wednesday for an in-depth look at what’s moving markets, shaping the economy, and changing the game for your wallet and your business.

Also on Spotify and Apple Podcasts:

Sweat Equity: legally toned and ready to flex

Vivien Chaplin and Phetha Mchunu
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Sweat Equity: legally toned and ready to flex

The amendments to the South African Companies Act, which came into effect in December 2024, include a long-awaited amendment to sections 40(5) and 40(6), which clarify the requirements in relation to structuring transactions using a version of prospective “sweat equity”, whereby future non-financial contributions, such as skills, expertise and time, may be exchanged for upfront equity.

“Sweat Equity” arrangements have long been used in global transactions, particularly in start-ups, where individuals and companies may be issued equity shares in a company based on their future non-financial contributions (such as time, expertise and effort) to the growth and success of the business. Unlike traditional equity arrangements that rely on financial investment, this mechanism recognises and rewards the value that people bring to a company through their hard work and skills. In the South African context, particularly in relation to black economic empowerment transactions, sweat equity is also an innovative way to enable individuals, especially historically disadvantaged individuals who may not have access to cash, to participate meaningfully in equity transactions, without requiring upfront financial investment.

It is a fundamental principle in South African company law that shares may only be issued against payment of “adequate consideration”. However, in cognisance of the benefits of the sweat equity concept, the 2008 Companies Act included sections 40(5) and 40(6), which provided that shares could be issued for future benefits, future services or future payment, but that if the consideration was in the form of an instrument such that the value cannot immediately be realised by the company, or in the form of an agreement for future services, benefit or payment, then such “consideration” would only be deemed received when the value is actually realised / payment received. In the interim, the equity must be issued and then transferred to a third party, “to be held in trust and later transferred to the subscribing party in accordance with a trust agreement.” Although the inclusion of these sections was considered to be quite far-reaching and innovative at the time, the concept was not clearly captured.

The phrase “in trust” initially caused confusion in the South African market, given that this wording could lead to an interpretation that such arrangement required the establishment of a formal trust in terms of the Trust Property Control Act 57 of 1988 (TPCA), along with all the legal formalities and governance requirements required for trusts under the TPCA.

However, over the years, lawyers and transaction advisors came to the conventional and common sense view that this did not require a formal trust as contemplated in the TPCA. Some interpretations in the market likened the trust construct under section 40(5) to a debenture trust, which has been held in case law not to be registrable under the TPCA (Conze v Masterbond Participation Trust Managers (Pty) Ltd [1996] SA 786 (C)). Essentially, the market view became that section 40(5)(b)(ii) of the Act requires nothing more than that the shares be transferred to a third party other than the company or the subscriber, and the words “held in trust” are simply used to describe the nature of the holding of the shares in escrow.

The 2024 amendments to the Companies Act have given effect to this long held market view and now provide that such shares could be held in terms of a type of escrow arrangement by a “stakeholder”, to be held in terms of a stakeholder agreement and later transferred to the subscribing party in accordance with the stakeholder agreement. This welcome amendment now unequivocally confirms that, in terms of the TPCA, no formal trust is required to be formed in terms of this section. The amendment goes on to provide that a “stakeholder” means an “independent third party who has no interest in the company or the subscribing party, who may be in the form of an attorney, notary public or escrow agent;” and the “stakeholder agreement” means a written contract between the stakeholder and the company.’’ That said, it must be noted that these amendments to Section 40(5) are not available for JSE-listed companies as the JSE listing rules require shares to be fully paid up.

However, for private companies, replacing “trust” with “stakeholder” provides a significant and very welcome clarification, which may be very useful – particularly for the structuring of Black Economic Empowerment Transactions (although these will still require careful structuring in order to ensure compliance with economic interest and voting rights requirements).

In addition, although this amendment paves the way for more flexible sweat equity arrangements, prudent structuring will still be required; for example, to avoid insolvency risks, the parties must ensure that the stakeholder is a financial institution, trust company or attorneys’ firm, properly governed by laws that expressly require and regulate that such shares are held in escrow and are excluded from their personal estates. Furthermore, valuation will remain another key consideration. Sweat equity, by its nature, involves contributions that are often intangible, such as time, skills and intellectual property. While these contributions are valuable, assigning a monetary value to them can be complex.

All in all, this amendment creates additional flexibility for companies to drive transformation while unlocking new opportunities for collaboration and growth. By valuing contributions beyond financial investment, South Africa is paving the way for a more inclusive and innovative economy. The task now is to turn this vision into reality, ensuring that sweat equity becomes not just a tool for empowerment, but a cornerstone of sustainable business success.

Vivien Chaplin is a Director and Phetha Mchunu an Associate in Corporate & Commercial | CDH

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

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

Bridging the valuation gap: A new era in private equity partnerships

Ndima Marutha
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Bridging the valuation gap: A new era in private equity partnerships

The post-pandemic landscape has transformed the relationship between private equity firms and business owners.

Gone are the days of inflated valuations. Instead, a more measured approach has emerged, focusing on businesses with robust fundamentals: sustainable earnings, healthy capital structures, and minimal capital expenditure requirements. This shift represents not just a temporary adjustment, but a structural change in how private equity evaluates and approaches potential investments.

Understanding the valuation disconnect

Private equity firms evaluate businesses through various distinctive measurable factors, seeking companies capable of achieving EBITDA growth while managing debt obligations. However, South African businesses face unique challenges: escalating fuel costs, persistent inflation, low economic growth, and policy uncertainty—all of which impact EBITDA, cash generation and, ultimately, valuations.

When evaluating their businesses, many owners integrate qualitative elements in addition to quantitative factors, which may include their company’s historical resilience through various business cycles, years of personal sacrifice, and emotional investment in building their enterprise. This divergence in valuation approaches often creates a valuation gap between buyer and seller expectations. Understanding this disconnect is crucial for both parties to reach mutually beneficial agreements.

The current market reality

The elevated cost of capital and subdued economic growth have led to more conservative valuations. Private equity firms thoroughly examine historical performance, customer relationships, management capabilities and growth forecasts, and they assess market position, operational efficiency and technology infrastructure as key value drivers. The lingering effects of COVID-19 have complicated valuations further, leading firms to apply lower perpetual growth rates to account for increased risk.

Risk assessment and mitigation

Today’s private equity investments require a nuanced understanding of multiple risk factors. Economic risks include interest rate volatility, currency fluctuations, and inflation impact on margins. Operational risks encompass supply chain disruptions and labour market challenges, while strategic risks consider competitive landscape changes and technology disruption potential. Successful firms develop comprehensive strategies to address these risks while maintaining return expectations.

Bridging the valuation gap through innovative structures

While independent valuation experts can assist, their assessments can vary due to underlying assumptions underpinning the valuation. This has led to the increasing use of innovative pricing mechanisms. Earnout structures or “agterskot payments”, including performance-based payments and milestone-linked considerations, help align interests.

The new partnership paradigm

Modern business owners seek more than just capital from private equity partners. They value cultural alignment, sector expertise, and strong B-BBEE credentials. Financial acumen and strategic input remain crucial, but equally important are the track records of successful partnerships and exits, as well as access to strategic relationships. Governance expertise and commitment to transformation have also become key differentiators in partner selection.

Future trends and considerations

The private equity industry continues to evolve, with increasing emphasis on ESG integration, digital transformation, and market consolidation opportunities. Environmental impact, social responsibility and governance structures have become integral to investment decisions, and technology adoption and innovation potential significantly influence valuations and partnership decisions.

The South African private equity landscape remains promising despite current challenges. Success requires a balanced approach that considers both quantitative metrics and qualitative factors, supported by innovative deal structures and a clear focus on value creation. Those who successfully navigate these challenges while building trust and alignment between parties will be best positioned to capitalise on the opportunities ahead.

By acknowledging and addressing the valuation gap while focusing on shared long-term objectives, both parties can create partnerships that unlock sustainable value and drive business growth. The future of private equity in South Africa depends on the industry’s ability to adapt to changing market conditions while maintaining its focus on creating sustainable value through genuine partnerships.

Ndima Marutha is an Associate | Agile Capital

This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.

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

GHOST BITES (African Rainbow Capital | Bytes | Libstar | Master Drilling | Old Mutual | Remgro | Resilient | Schroder European Real Estate | Super Group)

The Finance Ghost
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GHOST BITES (African Rainbow Capital | Bytes | Libstar | Master Drilling | Old Mutual | Remgro | Resilient | Schroder European Real Estate | Super Group)

African Rainbow Capital pulls the trigger on the delisting offer (JSE: AIL)

They’ve been talking about this for a while

Aah, what could’ve been. With all the excitement around the Tyme Group, I imagined a world where African Rainbow Capital (ARC) stayed listed and Tyme was one day unbundled and separately listed as a lovely growth asset on the JSE. I was clearly dreaming, or just confused for a moment about the difference between the local market and the US market.

Alas, what will happen instead is that shareholders will now have to contemplate an offer of R9.75 per share, which is a 21.0% premium to the 30-day VWAP and a 22.8% discount to the net asset value (NAV) per share that ARC just announced in its interim earnings.

As an aside, they are also looking to move the structure away from Mauritius. Many South African companies went and put holding company structures in place in Mauritius in the hope of getting some protection from South African risks, while being in a jurisdiction where it is easier to do business. In fact, Mauritius usually ranks top of the list on that “ease of doing business” index. It’s just a pity that the ocean around the island is a lot deeper than the capital pools, with ARC noting that absolutely no international funding was raised as a result of the Mauritian structure. In fact, they are now sitting with tax inefficiencies, so it really hasn’t worked out for them.

The ownership structure of ARC is a web that any spider would be immensely proud of. The TL;DR is that Ubunto-Botho Investments (UBI) controls 60.51% of the shares in ARC, so the offer to delist ARC is being made to the remaining ~40%.

Although the performance got very little attention in comparison to the news of the offer, ARC also released its interim results for the six months to December. The intrinsic NAV per share increased by 3.2% over six months. There were substantial net fair value gains, including in the financial services portfolio (Tyme Group Asia / Alexforbes / Sanlam Third Party Asset Management) and the diversified investment portfolio (Rain / ARC Investments / BlueSpec / Acorn Agri / Linebooker). As has been the recent trend, Kropz required more capital and saw a decrease in fair value of R229 million.

Rain may be the largest investment in ARC Fund, but I still think TymeBank is the most interesting. ARC actually took up proportionally more shares in TymeBank SA than in Tyme Global, so they are still keen for an SA growth story here. And why not? Deposits grew from R6.3 billion to R6.9 billion over just six months, while net advances increased from R1.9 billion to R2.3 billion. It’s a very impressive story. Despite this, the fair value of TymeBank actually decreased over the period, while the value of Tyme Global went up.

Perhaps shareholders shouldn’t be too irritated about losing out here. Tyme Group may be 16.3% of ARC Fund’s value, but problem child Kropz Plc is 12.7% of the value and therefore almost as important as Tyme. Cash flow shortfalls continue at Elandsfontein, with ARC having to chip in more capital during the period.

The ARC share price has doubled in the past year, driven by factors like excitement around some of the underlying assets (especially Tyme), improved SA sentiment under the GNU and perhaps most of all, the knowledge in the market that this delisting offer has been waiting in the wings for a while.

Will appraisal rights turn out to be the Achilles’ heel here? When the board has put out the NAV and the offeror has made an offer that is well below that number, I’m not sure how it can be argued in an appraisal rights scenario that the NAV isn’t the fair value that shareholders should be paid. There are some strong activist investors in the local market who have a deep understanding of how this works. Let’s see how it all plays out.

More double-digit growth at Bytes Technology Group (JSE: BYI)

The market absolutely loved this

Bytes Technology Group has had a tough year in its share price. At least the 12-month move is now a drop of only 10%, thanks to a strong rally of almost 13% in response to the release of a trading update.

Bytes is one of the UK and Ireland’s leading technology companies, so all the numbers are reported in GBP. Keep that in mind when you consider how impressive it is to have achieved double-digit growth in not just gross invoiced income, but also gross profit and operating profit.

One of the concerns at Bytes has been margins, which you can assess based on the difference in growth rate between gross invoiced income and gross profit. This is a challenge faced by IT businesses that are often resellers of products – it can become a race to the bottom for margins. I think it made a big difference to the market response to this announcement that the company included a note that gross profit growth was strong in the second half, putting some of the margin concerns to bed. Cash conversion was also solid, so that would’ve added to the positive sentiment around this announcement.

Finally, the company is telling a positive story around its growth prospects, including in an environment of a new Microsoft incentive plan. Full year results are due for release in May, so the market can chew on this narrative for a good few weeks until then.

Very little for Libstar investors to get excited about (JSE: LBR)

There’s very generic disclosure about “unlocking value”

Libstar already alerted the market to its troubles in a previous update, so the release of results for the year ended December 2024 simply confirms what the market already knew.

It’s very much a tale of two segments, with Ambient Products growing revenue by 5.4%, experiencing a decrease in gross margin of 10 basis points (not too bad) and seeing normalised EBITDA growth of 12.2%. Over at Perishable Products, revenue growth was 1.2%, gross profit margins fell from 16.7% to 16.1% and normalised EBITDA was 13.7% lower. Perishable, indeed.

It’s therefore clear to see that Perishable Products is where the damage was done. In case you missed it the first time when Libstar told the market about the problems, the major issue relates to a food service customer who was buying beef from Finlar Fine Foods, one of the many businesses within Libstar. This drove a huge impairment of R400 million in that business as well as a negative impact on cash profit generation.

The net result is that on a normalised basis, Libstar had a pretty flat year. Normalised EBITDA was almost identical to the prior year and normalised HEPS fell 6.5%. The dividend was maintained at 15 cents per share, with the group trying hard to give some support to a share price that is down over 18% this year. Remember, these normalised numbers exclude the impact of the impairment. You’ll see that come through in earnings per share, which swung sharply into a loss-making position.

One of the biggest concerns for me is that expenses were up 7%, which they attribute to consulting fees, the launch of a culture program and fees for divestment advisors. Libstar is clearly spending a lot of money on external help, which tells me that the management team is spending more time deciding where to place the various Lego blocks than actually driving growth within the business units. There’s more of this to come, with further restructuring activities within the group to shuffle the chairs.

There’s a chance of something big being announced, as Libstar has included some generic commentary around unlocking stakeholder value and potential strategic options that are being assessed. Could this mean a delisting? Or major disposals? Either way, the consultants certainly aren’t being paid with cheese. Cold, hard cash is leaving the group while they figure out what to do here.

Honestly, it’s anyone’s guess what could be coming. And the market doesn’t love guessing.

Master Drilling has flagged interesting numbers (JSE: MDI)

Impairments are a worry

Master Drilling released a trading statement for the year ended December 2024. On a HEPS basis, which excludes impairments, they look great! Reported in ZAR, HEPS will be between 16.4% and 26.4%. Master Drilling also includes USD earnings, in which case HEPS is up by between 17.2% and 27.2%. Either way, those are strong growth rates.

You may then wonder why the share price is up just 9.5% in the past 12 months. Aside from the negative impact of low liquidity in the share price, I think the market is concerned about the impairments due to expensive equipment not being used due to market dynamics. This is why earnings per share (which is net of impairments) has moved between 10.5% and 20.5% lower in ZAR. The Reverse Circulation equipment in the American business and the Mobile Tunnelboring Machine have both suffered impairments.

Detailed results are due for release on 25 March.

No real excitement at Old Mutual (JSE: OMU)

The underperformance vs. rivals like Sanlam continues

Old Mutual’s annual results announcement starts off with a “reflection on shareholder value creation” since 2018 – a surefire sign that the latest growth isn’t exciting, hence they need to remind you of the journey they’ve been on. The share price chart always does the best job of summarising the journey, with Old Mutual up 6% over five years (i.e. since COVID lows) and rival Sanlam up 60%. That’s 10x outperformance by their rival!

Old Mutual’s results from operations increased by 4%. Take out the “new growth initiatives” and the increase is 10%, so they are investing heavily in the business and it is impacting profits. I still cannot really understand why they are starting a bank, or what exactly it is going to do differently in South Africa.

It’s interesting to note that two-pot withdrawals were R3.4 billion and that net client cash outflows were R21.5 billion. Africa and Corporate saw much larger client withdrawals, a handy reminder of how important the big clients are vs. lots of small ones.

Sure, there are some pockets of growth, like funds under management up 10% and gross written premiums up 7%. It’s just clear that Old Mutual’s underlying exposure isn’t working as well as its rivals. With the bank only expected to break even in 2028, I can’t see a catalyst for this share price to close the gap to Sanlam.

CEO Iain Williamson is taking early retirement after five years in the top job and a career of 32 years with the group. By the time this bank breaks even, he would’ve made a great deal of progress on his golf – or whatever else tickles his fancy.

Remgro’s direction of travel is up (JSE: REM)

And if they would use a more helpful metric for trading statements, we would really know by how much

I really wish that Remgro would stop using HEPS for trading statement purposes. They are clearly an investment holding company at heart, so why not use NAV per share?

Shock and horror, there’s a huge move in HEPS (which always flaps around in investment holding companies that take this route) for the six months ended December 2024, impacted to some extent by significant corporate actions in the comparative period. It doesn’t really tell us much that HEPS is up by between 33% and 43% vs. the restated number for the comparative period. All it tells us is that NAV per share (the metric people actually use) probably went up as well, since the underlying businesses are clearly having a better time of things.

The restatement of the base period was significant by the way, driven by an error in how TotalEnergies South Africa was accounting for its investment in Natref. Remgro’s comparable HEPS has been restated from 381 cents to 485 cents. Again, none of this is actually very helpful for investors, other than to figure out that the direction of travel is up.

Resilient is living up to its name (JSE: RES)

Mid-single digit growth is the expectation

Resilient REIT released results for the year ended December 2024. With the total dividend for the year up by 8.4%, it was a very decent year for the group. As a reminder, Resilient holds a direct portfolio in South Africa and Europe, as well as a 30.4% stake in Lighthouse after supporting a recent equity raise and electing a scrip dividend.

The South African portfolio grew net property income by 7.5%, benefitting from the energy investment strategy that has helped keep energy cost inflation below in-force escalations on leases. The offshore investments contributed to growth, with forward exchange contracts helping to turn the Lighthouse Properties dividend from a 4.9% decline in euros into a 4.1% increase in rand. The French portfolio did the real heavy lifting in the offshore portfolio though, with net property income growth of 14.3%.

The South African retail portfolio increased sales by 3.5% for the year, an uninspiring result that was negatively impacted by the performance of the mining industry and the impact this had on some of the small town malls. Resilient’s portfolio is focused on lower income areas, which is a decent growth area when viewed over multiple years. This doesn’t make it immune to a slow year or two. Notably, the last quarter of the year saw an increase in retail sales of 5.5%, boosted by two-pot withdrawals.

The French portfolio was a story of vacancy reduction rather than underlying growth in sales. Comparable sales increased by just 1.8%, but a reduction in vacancies from 7.9% to 5.8% worked wonders. In contrast, the portfolio in Spain achieved comparable sales growth of 12.8% and had a vacancy rate of just 0.1%, so you can see why property funds are pushing into Iberia.

Looking ahead to 2025, the board is expecting growth in the distribution of 5.5%. As inflation protection goes, Resilient is doing a solid job.

Schroder European Real Estate’s valuations are still under pressure (JSE: SCD)

And no provision has been raised for the tax fight in France

Schroder European Real Estate has released its net asset value and dividend for the quarter ended December 2024. The financial year-end is September, so this is the first quarter of the new year. Alas, it’s not off to a great start, with the NAV down 0.6% for the quarter and up just 1.3% over 12 months.

The NAV decrease was driven by a 0.9% dip in the direct property portfolio valuation. I had to laugh at them referring to this as a “marginal” decrease – a 0.9% reduction in value over just 3 months in Europe is anything but marginal on an annualised basis!

They also aren’t applying any caution at all with respect to the French Tax Authority claim, with no provision raised – not even a small one. Maybe things are different in Europe, but tax disputes usually end in a settlement rather than absolutely no outflow. Schroder believes that an outflow is not probably and hence no provision has been raised.

At least the balance sheet is healthy, with the loan-to-value down from 25% to around 20% thanks to disposals.

Super Group expects to see improvement, but there are no guarantees (JSE: SPG)

The underlying exposures make it tough to judge where this one is going

Super Group has released results for the six months to December 2024. It wasn’t a happy time for them, with revenue down 7.6% and EBITDA down 5.2%. By the time you reach HEPS, the drop was a nasty 24.2%.

The underlying exposures are problematic. The supply chain business in South Africa is vulnerable to issues like border and port delays, as well as the state of the mining industry. It saw operating profit fall by 10.7% for the period. Supply chain in Europe was much worse, with terrible automotive production levels in the UK and a swing from an operating profit to an operating loss – luckily, a small one. If you can believe it, automotive production levels in the UK are now in line with 1956 levels. Astonishing.

The dealerships business in South Africa saw operating profit fall by 4% as the Chinese brands caused disruption. Super Group at least has some Chinese brand dealerships now, but probably not enough of them. Dealerships UK was a disaster, swinging into a horrible loss thanks to pressure on Ford, Hyundai and Kia. I’ll say it for the zillionth time: the Chinese are changing everything.

The only highlight in this period was the fleet business in Africa, growing operating profit by 8.7%.

They are hoping to have a better end to the year than we saw in this interim period. The underlying Super Group portfolio just doesn’t seem to be well positioned in the current market.

Nibbles:

  • Director dealings:
    • Acting through Titan Premier Investments, Christo Wiese executed a substantial purchase of R42.6 million worth of Brait (JSE: BAT) shares.
    • Des de Beer has his finger firmly on the buy button, picking up another R5.6 million worth of shares in Lighthouse Properties (JSE: LTE).
    • The chairman of NEPI Rockcastle (JSE: NRP) bought shares worth R583k.
    • The CEO of RCL Foods (JSE: RCL) bought shares worth R208k.
    • The CEO of Frontier Transport Holdings (JSE: FTH) bought shares worth R75k.
  • Here’s some good news: Grindrod (JSE: GND) announced that the deal to dispose of the North Coast Property Loans and Investments for R500 million to African Bank has met all conditions and will close on 20 March. That’s both a clean-up for Grindrod and a boost to the scale ambitions of African Bank.
  • Ethos Capital (JSE: EPE) released a presentation on its Optasia investment. This is a fintech company with a particularly strong footprint in Africa. It’s not the simplest business to understand, with the presentation available here if you would like to dig in.
  • Numeral Ltd (JSE: XII), one of the most obscure listings on the JSE, has appointed a non-executive director who brings significant experience in the corporate finance industry. Will we see some dealmaking here? On a market cap of R12.4 million, even acquiring your favourite local restaurant would probably be a categorisable transaction!

GHOST BITES (Absa – Standard Bank | Hulamin | MTN | RFG Holdings | Thungela)

The Finance Ghost
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GHOST BITES (Absa – Standard Bank | Hulamin | MTN | RFG Holdings | Thungela)

Another banking exec crosses the floor (JSE: SBK | JSE: ABG)

This time, Absa gets a new CEO at the expense of Standard Bank

The banking industry seems to be playing quite the game of musical chairs at the moment! Fairly recently, we saw Absa lose Jason Quinn to Nedbank as he switched out his red tie for a green one. Now, Kenny Fihla will pack away his blue tie and get a red one out, as he leaves the role of Deputy Chief Executive of Standard Bank Group (and Chief Executive of Standard Bank SA) to take the role of CEO of Absa Group.

This comes after 18 years of service to Standard Bank, so that’s a massive amount of institutional knowledge that is being lost by Standard Bank. This is quite the coup for Absa and pretty much every comment I saw online was very complimentary of Fihla.

As Standard Bank now looks for a replacement, we have to wonder whether the other banks should make sure they lock their doors at night! Internal succession planning seems to have fallen by the wayside in this industry.

Hulamin signs off on a rough year (JSE: HLM)

The share price is down over 22% in the past year

Hulamin has released results for the year ended December 2024. Rolled Products volumes were up just 2% and they had a fire that impacted higher margin export products, so that sets the scene for a period in which normalised EBITDA fell by 12%.

If you want to see a particularly shocking number, then take a look at cash flow from operating activities. It fell from R363 million to R46 million. Free cash flow (i.e. after capex) was much more frightening, coming in at negative R512 million. Net debt ballooned from R867 million to R1.35 billion.

The debt : equity ratio has increased from 24.5% to 35.6% and this is definitely worth keeping an eye on. I know it was a tough year, but operating cash flow of R46 million vs. stay-in-business capex of R274 million isn’t what you want to see. At least growth capex of R295 million is a strategic decision that can be tweaked. The same can’t be said for the other type of capex.

The constant currency vs. reported earnings gap at MTN remains huge (JSE: MTN)

Will the macro story ever improve?

When Standard Bank released earnings recently, they talked about an expectation for the African currency situation to improve in 2025. MTN shareholders will certainly hope that this plays out, as the gap between constant currency and reported earnings really does make for painful reading.

Simply, it doesn’t help much if you achieve a high growth rate in a country with a rapidly depreciating currency. Sure, the percentage looks fantastic expressed in local currency, but it doesn’t equate to much once you report it in a stable currency.

To give you an idea of the difference, MTN group service revenue was up 13.8% in constant currency, yet it fell 15.4% on a reported basis. To show you the difference, fintech revenue (which is still growing quickly in the stable economies, not just the problematic ones like Nigeria) was up 28.5% in constant currency and 11% in reported currency. You can therefore see how the more traditional telecom services suffer even more than the new-age stuff. This is a direct result of the product mix across the different markets.

With all said and done, EBITDA margin fell 890 basis points to 32% on a reported basis. It was only 80 basis points lower year-on-year on a constant currency basis, coming in at 38.2%. Again, the more difficult economies offer structurally higher margins.

By now, you get the idea of the theme here. HEPS fell by 68.9% to 98 cents, so shareholders have seen things go the wrong way thanks to the macroeconomic realities in Africa. The highlight is the ordinary dividend, up from 330 cents to 345 cents. This has been supported by a number of corporate actions at group level that have improved the balance sheet.

There has also been a process of localisation in the African subsidiaries in which in-country shareholders are brought onto the register. For what it’s worth, I think localisation is the right strategy in these countries as it creates a shared outcome rather than an “us and them” situation.

As a final comment, it’s not just the macroeconomic picture that is hurting them. Conflict in Sudan also had an impact on earnings, albeit to a far lesser extent than the currency issues in Nigeria.

RFG Holdings hurt by international markets (JSE: RFG)

Pain and pineapples (or lack thereof)

RFG Holdings released a trading update dealing with the five months to February 2025. The regional (i.e. local) segment did pretty well, with revenue up 5.6% thanks to an 8.7% increase in volumes that more than offset pricing and mix pressures. Alas, the international segment can’t say the same thing.

Due to volatile offshore markets, a number of deciduous fruit contracts were not honoured by customers. This forced RFG to redirect them to other markets, which had a negative impact on pricing and sales volumes due to delayed shipments. Even more irritatingly for investors, volumes were further impacted by lower pineapple volumes based on drought conditions in the prior year. The net result is a 19.1% decrease in revenue in the international segment, with price down 1.5% and volumes down a nasty 15.4%. Even forex misbehaved, contributing a 2.1% decline.

This certainly took the shine off the regional result, leading to group revenue being 2.1% higher for the five months. At least the international segment is much smaller than the regional segment – and certainly a lot smaller than it was before.

Sadly, due to the pressure in the international segment, the group doesn’t expect to meet its operating profit margin target for the interim period. Looking ahead, they expect momentum to continue in the regional segment (with a strong caveat around consumer spending pressure) and revenue in the international segment to start recovering from March onwards. This implies a recovery in volumes, with inventory levels expected to normalise by the end of the year as they catch up on missed shipments.

Interim results are due for release on 21 May.

Thungela: dividends, buybacks and deals (JSE: TGA)

This is a great way to learn about capital allocation

Thungela has been keeping SENS pretty busy lately, with deals announced to get the other investors in Ensham (the Australian coal business) out of that structure. They had to do it at two levels, as there were minorities directly in Ensham as well as in Thungela’s Australian subsidiary.

Now, the company has released results for the year ended December 2024. It wasn’t a pleasant year in the cycle, with revenue up 16% and yet HEPS down 27%. This is because prices came down year-on-year, so they had to work much harder to achieve that revenue and the margin impact is clear to see.

It’s incredible that on this chart, you can barely see the year-on-year impact, such was the peak in prices during the pandemic:

From a cash generation perspective, the downturn in profits obviously had an impact on cash coming into the group. Net cash from operating activities came in at R5.3 billion, well down from R8.5 billion in the prior year. Capex was R4.6 billion, so the difference between cash from operating activities and capex (i.e. free cash flow) wasn’t enough to offset the impact of paying dividends and executing buybacks during the year. The net cash balance therefore ended at R8.7 billion vs. R10.2 billion the prior year.

This won’t stop them from further dividends (the full year dividend is R13 per share, of which the final dividend is R11 per share) or share buybacks for that matter, with a programme of up to R300 million announced. This is in addition to the Ensham deals and other major capex projects.

Looking ahead, the numbers will be positively impacted by a higher proportion of Ensham being attributable to investors in Thungela. Although Ensham runs at a considerably higher cost per export tonne, it is also in a far more dependable country (the trains actually work in Australia) and has better proximity to key Asian markets. The benchmark export prices are very different, making up for a chunk of the gap in costs of production across the two markets.

Nibbles:

  • Director dealings:
    • You guessed it – another purchase by Des de Beer of shares in Lighthouse Properties (JSE: LTE), this time to the value of R2.86 million.
    • A director of the South African subsidiary of Sappi (JSE: SPP) bought shares worth R190k.
  • Montauk Renewables (JSE: MKR) is pretty light on liquidity, so it’s not uncommon to see large moves in the share price on a single day. While a 17.9% drop on the day of earnings looks like a clear message from the market, it actually happened in the morning and results were released in the afternoon! The numbers weren’t pretty though, with revenue only up 0.5% for the year to December 2024 and HEPS down by 27%.
  • For the budding geologists among you, AngloGold Ashanti (JSE: ANG) released a presentation that was delivered at a recent site visit to the Obuasi mine in Ghana. It focuses on the pathway to 400koz in annual production and is full of some very impressive graphics that will mean absolutely nothing to you unless you have mining experience. If that sounds like you, then enjoy it here.
  • Emira Property Fund (JSE: EMI) announced that its shareholders approved the proposed transaction that sees Emira subscribe for further shares and notes in DL Invest, increasing its stake to 45%. There are call options running around in this structure as well. This is also of relevance to Castleview Property Fund (JSE: CVW) shareholders, as Emira is a 57.88%-owned subsidiary of Castleview.
  • Anglo American Platinum (JSE: AMS) announced that three non-executive directors have stepped down from the board. Before you panic, this is related to the planned demerger from Anglo American (JSE: AGL) and the need to have an independent governance structure.
  • Here’s something you won’t see every day: Pepkor (JSE: PPH) announced that the SARB has blocked any trade in the shares held by Ainsley Holdings. That name probably won’t mean anything to you. How about Ibex? How about Steinhoff? Makes more sense now, doesn’t it? The 13.7% in Pepkor that is held by Ainsley is the legacy investment of Steinhoff (now held by a structure called Ibex) and the authorities are continuing with their investigations. Pepkor just happens to be caught up in this, as Pepkor shares are the asset in question. This doesn’t impact Pepkor itself.

GHOST BITES (ArcelorMittal | Choppies | Libstar | OUTsurance | Renergen | SA Corporate | Thungela | York Timbers)

The Finance Ghost
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GHOST BITES (ArcelorMittal | Choppies | Libstar | OUTsurance | Renergen | SA Corporate | Thungela | York Timbers)

ArcelorMittal has sold a large property (JSE: ACL)

The underlying details are a little odd

As you probably know, ArcelorMittal is in all kinds of trouble. It’s therefore entirely logical for the group to sell off any non-core assets, as every step they can take to improve the balance sheet is a step worth taking. The sale of two properties in Saldanha in the Western Cape for R134 million feels like good news, particularly as the net asset value is also R134 million and hence the properties were sold at book.

Here’s the weird thing though: although this is described as a rental enterprise, the attributable income from the portfolio is disclosed in the announcement as being zero. As rental enterprises go, this one clearly isn’t very enterprising.

The buyers are VDM Group and Blue Jo, in case that means anything to you. A cash deposit of R10 million needs to be paid and the rest will be payable on transfer.

Choppies flags an increase in earnings (JSE: CHP)

The group looks better off without the Zimbabwe business

Choppies sold the assets of its Zimbabwean segment in December 2024. In presenting the numbers for the six months to December 2024, this makes it important to distinguish between total operations and continuing operations. It’s also worth highlighting that results are reported in thebe rather than rand, as the company is based in Botswana.

HEPS is expected to improve by between 14% and 23% for total operations, or by between 27% and 38% for continuing operations. If we look at EPS, which doesn’t reverse out some of the typical distortions, we see total operations down by between -12% and -2%, while continuing operations were up 6% to 16%.

Whichever way you cut it, they seem to be better off without the business in Zimbabwe. The Kamoso business was a discontinued operation in the base period, so that’s also impacting the numbers. Investors will have to wait for 24 March for full details.

Libstar’s growth perished thanks to perishables (JSE: LBR)

Customer concentration risk is visible here

Libstar released a trading statement dealing with the year ended December 2024. Earnings have dropped, with the major issue being the loss of production volumes related to an unnamed food service customer in the perishable products category. They are trying to downplay it by pointing out that good strategic progress has been made elsewhere.

With a share price that has shed two-thirds of its value since 2018, the market isn’t terribly interested in the narrative. They just want to see earnings heading in the right direction, evidenced by market apathy that saw such weak volumes on the day of release of a trading statement.

The impairments section gives some additional information around the customer that hurt them. It seems to be in beef volumes, leading to a vast impairment of R400 million being recognised in Finlar Fine Foods. The problem at Libstar (and many other businesses) is the level of customer concentration risk, particularly once you drill down into the various business units. They also raised an impairment of R10.5 million in the ambient products segment based on an assessment of customer relationships, so they must be worried about something else on that side as well.

HEPS for the 2024 financial year will be down by between 9.2% and 14.3%. If you prefer looking at normalised HEPS from continuing operations, which excludes insurance proceeds received in the prior period (remember the Denny Mushrooms fire?), it’s down by between 4.9% and 8.1%. Either way, the direction of travel is clear.

At least the balance sheet has met the leverage target thanks to a period of decent cash conversion and the sale of the Chet Chemicals business for R53 million.

The juice never seems to be worth the squeeze on this one. The market has largely lost interest in Libstar and results like these obviously don’t help. Ask any small business owner about what keeps them up at night and you’ll find that customer concentration risk is right up there. For many listed companies, it’s no different.

OUTsurance signs off on a great period (JSE: OUT)

The insurance industry has been having a lovely time recently

It’s hard not to be impressed by OUTsurance’s numbers. HEPS increased by a whopping 45.5% for the six months to December 2024, driven by excellent numbers like 16.9% growth in insurance revenue and 18.6% growth in net investment income. Although there are areas where they need to invest heavily to achieve this, like 36.4% growth in marketing and admin expenses, it’s clear that the business is flying.

Before we get too carried away in praising the group, it’s also worth remembering that there are positive factors outside of their control. One of the drivers of earnings was a substantial reduction in natural peril claims. Logically, if you’re paying an insurance company to take on your risks in exchange for a monthly premium, then the extent of actual losses will make a substantial difference to the insurer’s profits.

Special mention must go to Youi Group, with OUTsurance demonstrating that it’s actually possible to make money in Australia. The trick seems to be to build a business up from zero, rather than going off and acquiring one. Earnings more than doubled in that business.

They will hope to replicate that success in Ireland, where they are currently incurring start-up losses. There’s certainly nothing wrong with incubating a new business, particularly given the track record of success at OUTsurance.

The share price is up 56% over the past year. The market is a big fan of this business.

Renergen short-sellers got murdered in the last week (JSE: REN)

The share price has almost doubled over 7 days

I’m not one to make this point lightly, but the Renergen share price ran really hard before this announcement came out. One can only speculate that news of a helium container being filled with liquid made its way out into the market before the official SENS announcement went out. The problem here is that Renergen’s entire investment case rests on getting helium to customers, so a basic commercial process like making a sale ends up being price-sensitive information.

The regulators will hopefully take a good look at whether anyone traded on information that they shouldn’t have, even though the enforcement track record for this issue is anything but impressive. For context, Renergen closed 37% up on Friday after the announcement came out, but is up 95% for the week! It’s a very difficult thing to prove in practice and there are so many ways in which information can get out there, particularly when the information is something as operational as filling a container. That’s not exactly a deal being negotiated behind boardroom doors with a fancy project name!

Fair play to CEO Stefano Marani: the announcement talks about “rebuilding the trust placed in us” – a reference to how the company fell out of favour with the market after missing so many promises about the helium. The market wants results, not promises. With Renergen having successfully filled a container (albeit a smaller one) for customer collection, there’s evidence of monetisable helium.

Despite the incredible run in the past week, the share price is now only flat year-to-date!

SA Corporate Real Estate is making progress on the non-core residential portfolio (JSE: SAC)

And there was growth in the distribution, too

SA Corporate Real Estate announced results for the year ended December 2024. Distributable income increased by 5.1% and so did the distribution per share, with the fund doing a good job of giving investors both a dependable yield and growth to offset inflation.

After the acquisition of Indluplace, there has been much focus on selling off the non-core residential portfolio. The trick here is that they got Indluplace at a discount to net asset value, so value is being created through subsequently selling the properties at a much better price.

The surprise for me is that they are managing to sell apartments on an exit yield of around 8%. That feels like an incredibly good price. For context, SA Corporate Real Estate is trading at 9.3%, so they are selling apartments piecemeal for a more lucrative price than the market is putting on the entire fund. Remember, a lower yield means a higher price.

With a net asset value (NAV) per share of 443 cents and a share price of 291 cents, the fund is trading on a discount to NAV of 34.4%. The share price has increased 22% in the past 12 months.

Thungela is buying out its co-investors in Australia (JSE: TGA)

They are very keen on the Australian strategy

Credit where it’s due to Thungela: they have stuck to their guns when it comes to Australia, following the route of diversification despite pressure from some investors to rather pay higher dividends. The market tends to be nervous of heavy reinvestment by mining companies, so this strategy was a risk.

At the end of 2024, Thungela announced a deal that would see its Australian subsidiary (Sungela Holdings) acquire the remaining 15% in the Ensham Business. This took the holding in Ensham to 100%, leaving Thungela with only the minority shareholders in Sungela.

They’ve now announced that those minorities will be bought out as well, taking Thungela from 73.5% to 100% in Sungela and thus in Ensham as well. There are two co-investors being bought out and Thungela has the right to cancel either one of the deals if the other doesn’t go through.

The bulk of the purchase price is linked to settlement of the mezzanine loans that Thungela provided to the co-investors. These loans have grown from the initial amount of $66.8 million to a current balance of almost $82 million. In addition to settling the debt, there’s a cash payment of $862.5k. The announcement isn’t crystal clear on whether that cash amount is payable to each of the co-investors or whether that’s the total amount.

There’s also a deferred consideration of up to $7.8 million, linked to a mining license and related environmental approvals for the Ensham Life of Mine extension project. If it becomes payable, it must be settled over 6 years, with other terms related to how dividends would be used to help pay for it and how coal prices would inform the exact calculation of how much is payable.

The impact of this transaction is that attributable earnings will increase, as the minority interest in Australia is being taken out of the system. The market didn’t give this news much of a response, although the announcement did come out at 4:30pm on a Friday.

York’s earnings are erratic, but at least they generated cash (JSE: YRK)

At core EPS level though, they are still loss-making

York Timbers is required to account for its biological assets (i.e. plantations) at fair value. The movement in the value can be pretty dramatic in any given period, particularly when compared to the level of profitability. As the fair value movements are recognised in earnings, this leads to wild swings in earnings.

For the six months to December 2024, we saw a major increase in HEPS from 4.67 cents to between 14.22 cents and 14.45 cents. That sounds incredible of course, but the better metric to look at is arguably core EPS (which strips out the fair value adjustment on biological assets). Core EPS improved substantially from a loss of 10.06 cents to a loss of between 0.07 cents and 0.12 cents. The trajectory is lovely, but it’s still a loss.

Looking at cash is always important. In the comparable period, cash from operations was negative R7.8 million. They expect an improvement of between 687% and 692% in that number, so that’s another major positive swing.

To properly understand the numbers, shareholders will have to wait for the full release on 31 March.

Nibbles:

  • Director dealings:
    • As a reminder of how leveraged the holdings of many property execs are, Spear REIT (JSE: SEA) announced that an entity associated with the CEO refinanced an Investec facility that references shares worth R75.7 million as security.
    • Des de Beer is back at it with Lighthouse Properties (JSE: LTE) shares, buying up over R6.8 million worth of them!
    • A non-executive director of KAL Group (JSE: KAL) bought shares worth R1.05 million.
    • A director of Frontier Transport Holdings (JSE: FTH) bought shares worth R20k.
  • MC Mining (JSE: MCZ) fell 32% after the release of results for the six months to December 2024. Losses increased, with the headline loss per share deteriorating by 26% to 1.83 US cents. This was driven by a 67% drop in revenue, mitigated to some extent by lower expenses. The focus is firmly on the future, with Kinetic Development Group having subscribed for shares worth $20 million. The IDC has extended the date of loan repayment to June 2025. The appeal is the development of the Makhado Project, rather than the other mines that are currently operational.
  • Investment holding company Astoria (JSE: ARA) released a trading statement for the year ended December 2024. It was a period in which the net asset value (NAV) went the wrong way, down between 20% and 25% measured in USD and down between 17.4% and 22.6% measured in ZAR. The share price is 12% lower in the past year. Detailed results are due for release on 24 March.
  • MTN’s (JSE: MTN) subsidiary in Rwanda released results for the year ended December 2024. Actually trying to find the results on the website is borderline impossible. This definitely isn’t one of the good news stories for the telecoms giant, with a loss in that subsidiary and a substantial deterioration in EBITDA margin. It always seems to be an extreme result when you look at the African subsidiaries at MTN – they are either making a ton of money or dealing with massive issues. It’s never just a “boring” and dependable result.
  • With reference to the acquisition of the remaining 35% interest in Terminal De Carvao Da Matola Limitada, Grindrod (JSE: GND) announced that approval from the Mozambican competition authorities has not yet been obtained and the bank guarantee also hasn’t been finalised. It sounds like the bank guarantee is really just a formality. The same can’t be said for regulatory approval. The parties have thus extended the long-stop date to 19 May.
  • Here’s another deal that has been delayed: the Vodacom (JSE: VOD) – Remgro (JSE: REM) fibre transaction. There’s at least some progress in terms of dates, with the Competition Appeal Court setting hearing dates for the transaction for 22 to 24 July 2025. The Competition Tribunal has still not published the reasons for prohibiting the merger, which makes it impossible for the parties to go ahead with the appeal. Interestingly, despite the hearing being set down for July, the parties have only agreed at this stage to extend the long-stop date to 30 April. They seem to be keeping their options open.
  • Deal extensions seem to be the theme of this edition of Ghost Bites, with Assura (JSE: AGR) announcing an that the Put Up or Shut Up (PUSU) deadline has been pushed out. For such an aggressively named concept, I’ve seen many extensions in UK-based deals where this legislation is applicable. The consortium of KKR and Stonepeak Partners now has until 11 April to either announce a firm intention to make an offer, or confirm that they do not intend to make an offer.
  • Not a deal delay, but still a delay – Orion Minerals (JSE: ORN) has announced that the release of the definitive feasibility study (DFS) for the Flat Mines Project at the Okiep Copper Project has been delayed to the last week of March 2025. It will be released at the same time as the Prieska Copper Zinc Mine DFS.
  • Hulamin (JSE: HLM) announced that independent non-executive chairman Thabo Leeuw will retire from 31 August 2025. He’s been on the board since 207, so that’s a long innings! Paul Baloyi has been appointed as an independent non-executive director and he will take the chairman role from 1 September. He brings decades of banking and financial experience to the role.
  • Deutsche Konsum (JSE: DKR) is trying to create a sustainable balance sheet. When you see property funds putting bridge financing deals in place, you know they are under pressure. They are hoping to negotiate debt restructuring terms with creditors where liabilities are maturing this year. The board has also proposed a new chairman for election at the AGM on 1 April 2025.

Ozone: how a hole taught humanity to collaborate

Dominique Olivier
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Ozone: how a hole taught humanity to collaborate

These days, it feels like every headline is a battleground. Left versus right, life versus choice, vax versus anti-vax – every issue seems to split us into opposing camps, each side shouting past the other. Some days, it’s hard to imagine humanity agreeing on anything ever again. So, consider this a palate cleanser. This week’s column is about something rare: a moment when the world didn’t just come together, but actually got it right. A global effort so successful, so decisive, that it stands as one of the greatest acts of collaboration in human history.

As a child growing up in the 90s, I was very stressed about the hole in the ozone layer. I’m not sure if the trigger for this stress was my anxiety-inclined personality (very likely) or the fact that I kept seeing posters of a sad-looking cartoon globe covered in plasters on the walls of my local library.

The message was clear: people had broken the planet, and now it was hurt. And, from what I understood at the time (I think I was 6), there wasn’t much we could do to fix it.

For a while, the ozone hole felt like an imminent, looming catastrophe. I remember looking up at the sky, half-expecting to see a gaping wound in the atmosphere, and wondering what would happen if it got bigger. Would the air get too hot? Would the sun burn us all? Would we have to live underground?

And then, at some point, the posters disappeared. The cartoon globe with its sad little bandages stopped staring at me from the library walls. The adults around me stopped talking about it. The world moved on, and so did I.

It wasn’t until recently that I found myself wondering: whatever happened to the ozone hole, and why haven’t I heard about it for the better part of a decade? Was this an example of scientists overreacting, or did we actually solve the problem? I did the research, and for once, I was very happily surprised by what I found. 

The great big hole in the sky

In the late 1970s, Jonathan Shanklin, a meteorologist with the British Antarctic Survey, was buried in data. While the rest of the world was busy embracing disco and bell-bottoms, he was holed up in a Cambridge office, sorting through decades’ worth of atmospheric readings from Antarctica. The British Antarctic Survey had been tracking ozone levels there since the 1950s, but for years, it all looked pretty uneventful; just a bunch of steady numbers that no one thought too hard about.

That is, until the numbers started changing.

Shanklin’s job was to digitise old paper records and crunch values from Dobson spectrophotometers (devices that measure atmospheric ozone). For nearly 20 years, the data had been rock solid, but in the late ‘70s, something shifted. Ozone levels started dropping, and not just by a little.

Shanklin flagged it, but his bosses weren’t convinced. Maybe it was an error. Maybe it was an anomaly. Maybe he was just being dramatic. Shanklin was frustrated by this response, but fortunately for us all, he wasn’t the only one raising alarm bells. Over in the US, two scientists – Mario Molina and F. Sherwood Rowland – had already published a 1974 paper suggesting that chlorofluorocarbons (CFCs), a group of chemicals widely used in refrigerators, air conditioners, and aerosol cans at the time, were quietly dismantling the Earth’s ozone layer.

At the time, CFCs were thought to be totally safe, and as you can probably imagine, a few big industries weren’t exactly thrilled about a couple of chemists suggesting otherwise. Molina and Rowland’s findings were met with all kinds of pushback: companies called them alarmists, other scientists were skeptical, and even worst-case predictions suggested only a minor impact, maybe a 2-4% decrease in ozone over the span of centuries.

Fast forward a decade, and reality was painting a much bleaker picture.

In 1985, Shanklin and his colleagues Joe Farman and Brian Gardiner published their findings, backed by credible data: the ozone over Antarctica had thinned dramatically, losing a third of its thickness over Halley Bay in just a few decades. Worse still, this wasn’t some far-off, slow-motion crisis. That infamous “minor depletion” that some scientists had predicted turned out to be a gaping hole in the sky, and it was getting bigger by the day. Satellite monitoring confirmed ozone depletion extended over a region of 20 million square kilometers.

Shanklin’s team had confirmed what Molina and Rowland had been warning about all along: CFCs were wreaking havoc on the atmosphere. The discovery was a wake-up call, forcing the world to face the fact that its obsession with convenient cooling and aerosol sprays had a serious downside. A decade later, Molina and Rowland got their well-deserved redemption (and a Nobel Prize in Chemistry).

As for Big Cooling – it was their turn to face the music. The world’s relationship with CFCs was about to change forever.

From panic stations to action plans

At first, world leaders weren’t exactly sprinting to tackle ozone depletion. Since the initial assumption was that any damage would be minimal and take centuries to unfold, their approach was cautious – maybe too cautious. In 1977, they put together a global action plan that mostly focused on gathering data: tracking ozone levels, studying the effects on people and ecosystems, and weighing the costs of actually doing something about it. The result was a lot of monitoring and not much action.

Sounds a bit like our current approach to climate change concerns, doesn’t it?

Then came the 1985 Vienna Convention. It was a step forward, sure, but it stopped short of enforcing any actual CFC cuts, which left many frustrated. A few months later, when the British Antarctic Survey confirmed that the ozone wasn’t just thinning but had a full-blown hole in it, those cautious early steps suddenly looked wildly inadequate. Cue the scramble.

Governments poured money into research, industries were forced to overhaul their reliance on CFCs, and against the odds, the world pulled off a rare act of unity. In 1987, the Montreal Protocol was signed, marking one of the greatest successes in international environmental cooperation to date. It remains the only treaty ever to be universally ratified, with every country on Earth committing to phasing out the chemicals responsible for ozone depletion.

But this was more than just a diplomatic victory. It was a masterclass in how global action should work. The treaty acknowledged “common but differentiated responsibilities”, ensuring that while developed nations led the charge with stricter deadlines, developing countries were given more time, backed by financial and technical assistance through a multilateral fund. This structure made compliance possible for all, setting a precedent that later climate agreements have struggled to match.

See what happens when we work together?

By the 1990s and early 2000s, the production and consumption of CFCs had been virtually eliminated. By 2009, 98% of the ozone-depleting chemicals targeted by the treaty were gone. Built to evolve, the Montreal Protocol has since undergone six amendments, tightening restrictions on replacement chemicals like HCFCs and HFCs as new science emerged. The most recent, the 2016 Kigali Amendment, will limit HFCs (which are potent greenhouse gases) and is projected to prevent up to 0.5°C of global warming by 2100.

The treaty’s impact has gone far beyond the ozone layer. The emissions reductions achieved by the Montreal Protocol were between 9.7 to 12.5 gigatons of CO₂ equivalent in 2010 alone. For context, that’s five to six times the target of the Kyoto Protocol, the landmark 1997 climate agreement. It’s easy to see why some argue that the Montreal Protocol has been the most effective piece of climate legislation ever implemented.

The public health benefits have been equally profound. By protecting the ozone layer, the treaty has helped prevent up to two million cases of skin cancer every year and has avoided millions of cataract cases worldwide. Had the world failed to ban CFCs, we’d be facing a very different reality today. Scientists estimate that by 2050, ozone hole-like conditions would have spread across the entire planet, exposing humans, animals, and ecosystems to unfiltered UV radiation at dangerous levels. The world as we know it would have been uninhabitable.

Instead, the Montreal Protocol gave us a fighting chance. Today, the ozone hole still forms over Antarctica every spring, but it closes up again over the summer as stratospheric air from lower latitudes drifts in, temporarily patching it up. And now, for the first time, there’s evidence of real recovery. The ozone layer is healing, more or less as expected. Scientific assessments predict that by the middle of this century, it will return to pre-1980 levels.

But healing takes time. Ozone-depleting chemicals are stubborn, some lingering in the atmosphere for 50 to 150 years before breaking down completely. And despite the Montreal Protocol’s success, there have been setbacks. In 2018, scientists noticed that levels of CFC-11, a chemical banned since 2010, weren’t dropping as quickly as expected. That meant someone, somewhere, was still producing it. An investigation led to illegal factories in China, where CFC-11 was being used in insulation foam. Once the findings became public, the Chinese government cracked down swiftly, shutting down the illicit production. Scientists say we are now back on track, but this example serves as a reminder that vigilance is key, even when a global treaty is in place.

We did it once before

The story of the ozone hole could have ended very differently. If world leaders had ignored the warnings, if industries had resisted change, or if the public had dismissed the science, we’d be living in a vastly different world; a world where stepping outside meant near-instant sunburns, where skin cancer rates had skyrocketed, and where entire ecosystems struggled under relentless UV radiation.

Instead, we got something rare: a success story. A moment in history where the world didn’t just talk about a crisis but acted decisively, collectively, and effectively. The Montreal Protocol is proof that when the stakes are high, collaboration can win over division. That science, when taken seriously, can guide policy. That global problems require global solutions, and that those solutions are possible.

We face enormous challenges today, each of them complex, each of them urgent. But if the ozone hole taught us anything, it’s that even the biggest crises aren’t insurmountable. When we work together and commit to real action, we can change the course of history. After all, we’ve done it before. 

About the author: Dominique Olivier

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting. She now also writes a regular column for Daily Maverick.

Dominique can be reached on LinkedIn here.

GHOST BITES (ADvTECH | Alphamin | Exxaro | Hyprop | Montauk Renewables | Standard Bank)

The Finance Ghost
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GHOST BITES (ADvTECH | Alphamin | Exxaro | Hyprop | Montauk Renewables | Standard Bank)

ADvTECH is having no trouble with enrolments (JSE: ADH)

This is where you want to be in the private school market

ADvTECH released a trading statement for the year ended December 2024. After the sobering reality painted by Curro around its enrolment trend, it’s good to see that ADvTECH is having no such issues. This is the benefit of being among the top private schools, rather than the difficult middle-ground that Curro finds itself in.

ADvTECH expects HEPS (and normalised earnings, for that matter) to increase by between 13% and 18% for the 2024 period. Looking ahead to 2025, it’s encouraging that enrolments across both the schools and tertiary divisions are in line with targets and growing.

No word on the resourcing division, which I really wish they would just dispose of. People are buying ADvTECH for the education story.

There’s very bad news from Alphamin (JSE: APH)

The risks of doing business in frontier markets – and especially Africa – are clearly visible here

Alphamin’s tin operations are located in the Democratic Republic of Congo. Sadly, this region is dealing with conflict at the moment, which means there was risk of operations being affected. This is exactly what has happened.

The company has decided to cease operations at the Bisie tin mine after insurgent military groups advanced in the direction of the mine’s location in the DRC. The company cannot guarantee the safety of its employees and contractors, which means they are evacuating the mine site.

There are peace talks scheduled for March 18th, so perhaps some relief is just around the corner. The company is also lobbying the US to get involved here, as US entities actually represent the majority of shareholders in Alphamin.

Results were due for release on March 14th and the company isn’t in a position to do this anymore, so uncertainty is now the order of the day. The share price absolutely tanked in response, down 20% at the close.

Revenue growth at Exxaro just wasn’t enough to save the earnings performance (JSE: EXX)

At least there were signs of life at Transnet Freight Rail

Exxaro has released results for the year ended December. When you see a HEPS decrease of 36%, you would assume that a drop in revenue was to blame. In this case, coal revenue was actually up by 6%! In the context of the HEPS drop, I can’t decide if that’s good news or bad news.

Overall coal production volumes (excluding buy-ins) decreased by 7% and coal sales volumes were down 3%. Eskom demand was to blame here, as export sales actually jumped by 37% thanks to improved performance at Transnet Freight Rail towards the end of the year and the use of alternative distribution channels.

Export prices fell by 13%, so its just as well that sales volumes were so strong. Combined with better pricing for local coal than before, they managed to get revenue growth into the green.

Alas, it was nowhere near enough. Coal EBITDA fell by 16%. To add to the pain, equity-accounted income from associates fell by 47%. This led to the nasty decrease in HEPS.

There was some relief on the balance sheet at least, with capex down 8%. It could’ve been worse. The net cash position improved by 10% year-on-year, allowing them to move forward with a share repurchase programme in addition to the dividend. With the share price down 12% in the past year, share buybacks into a weak market will probably be useful over the long-term.

In separate news, the shareholders of Eyesizwe have signed an undertaking to retain their 30.81% stake in Exxaro until 2027. This obviously gives Exxaro (and its shareholders) certainty around B-BBEE status for the next couple of years.

And in yet more separate news, Exxaro announced that Ben Magara is the incoming CEO, with an effective date of 1 April 2025. He replaces acting CEO Riaan Koppeschaar who will continue in his role as Finance Director. Magara comes with loads of industry experience, including some really difficult roles. His appointment comes after the suspension and then resignation of the previous CEO, so investors will no doubt appreciate the certainty here. As part of taking up the role, Magara has resigned from the board of Grindrod.

Hyprop has a positive story to tell from the interim period (JSE: HYP)

The interim dividend is based on the South African portfolio performance

Hyprop has released results for the six months to December 2024. Distributable income per share increased by 14.4% to 201.4 cents, so that’s clearly positive. The interim dividend is 113.43 cents. Goodness knows that’s much better than the comparative period (where the interim dividend was precisely nil), but it’s still a modest payout ratio.

Hyprop’s interim dividend references distributable earnings in the South African portfolio based on a 95% payout ratio. The final dividend then brings the overall payout ratio to acceptable levels (80% – up from 75% previously) based on group earnings. Fair enough, then. We will be patient.

In the South African portfolio, tenant turnover was up 4.9% and trading density increased by 4.4%. The weighted average rent reversion was positive 4.4%, which is decent. Over in Eastern Europe, tenant turnover was up 8.8% and trading density increased 7.1% – a good reminder of why that region is attractive. The Sub-Saharan Africa portfolio has been restructured, with the direct property exposure sold in exchange for shares in Lango Real Estate. The critical point is that this releases Hyprop from all guarantees and commitments to lenders in that portfolio.

The net asset value per share increased by 1.7% to R59.67. Hyprop is trading at around R42.50 per share, so there’s quite the discount there. This is common on the JSE.

Looking ahead, Hyprop is on track to meet the upper end of guidance for the full year. The share price is up 34% in the past 12 months and has taken a 10% knock year-to-date.

Montauk’s earnings are down – and so is the share price (JSE: MKR)

The revenue outlook for 2025 doesn’t look exciting, either

Montauk Renewables released results for the year ended December 2024. Revenue was flat, while operating and maintenance expenses for the RNG facilities increased by 5.5% – so, no prizes for guessing what the bottom of the income statement looks like.

Operating income decreased by 31.3% and net income fell 34.9%. Of course, like all good US-listed companies, there’s also an adjusted EBITDA number, which only fell by 8.3% year-on-year.

In terms of the 2025 outlook, total revenue (RNG and renewable electricity) is expected to be between $167 million and $198 million. This compares to $175.7 million in 2024, so the mid-point of that guidance doesn’t suggest that there is exciting growth ahead.

The share price closed 20% lower on the day.

Standard Bank impacted by African currency weakness (JSE: SBK)

This is like reading about a telecoms company

Standard Bank has released results for the year ended December 2024. With HEPS up just 4%, there’s some growth at least – just not very much of it. The constant currency story is completely different, which is why these results have a similar flavour to what we normally see from local telcos with businesses in Africa.

As we’ve seen at peers, the credit environment improved at the end of last year and hence earnings were given a boost. The South African business managed double-digit earnings growth. The Africa regions achieved 22% growth in earnings in local currency. Alas, currency headwinds took the African regions into a negative growth position, which means they offset much of the benefit in South Africa as well. Standard Bank’s Africa regions are core to the group, contributing 41% to group headline earnings for the year.

On the plus side, return on equity (ROE) is still really high in Africa and certainly accretive to the group. The group ROE was 18.5% and Africa managed over 28%, so you can see how Africa makes a difference here.

Encouragingly (and not just for Standard Bank), the group expects currencies to be more stable in 2025. If that turns out to be the case, it should be a much better year for the various South African groups that have deep exposure to Africa. Of course, in the risk-off environment we seem to find ourselves in right now thanks to geopolitical uncertainty, that outcome is anything but guaranteed.

Standard Bank has given new medium-term targets that reflect HEPS growth of between 8% and 12%, as well as a ROE target range of 18% to 22%.

Nibbles:

  • Director dealings:
    • An associate of a director of Woolworths (JSE: WHL) bought shares worth R592k.
  • Here’s something unusual for you: Anglo American Platinum (JSE: AMS) announced that its Mogalakwena Mine has achieved an IRMA 50 level of performance, which is basically an achievement based on responsible mining standards. This was the last of the four owned mines at Anglo American Platinum to complete an IRMA audit. Now, if PGM prices would just behave themselves!
  • Randgold & Exploration Co (JSE: RNG), one of the smallest companies on the JSE, released a trading statement for the year ended December 2024. The headline loss per share has improved by between 42.25% and 52.25% to between -18.48 and -15.28 cents. This is due to less legal expenditure incurred.

Who’s doing what this week in the South African M&A space?

Marylou Greig
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Who’s doing what this week in the South African M&A space?

Exchange-Listed Companies

After several delays due to the damages caused by the 2024 flash floods in Spain’s Valencia Region, Vukile Property Fund has, via its subsidiary Castellana Properties, concluded an agreement to acquire Bonaire Shopping Centre. The deal with the subsidiaries of French multinational Unibail-Rodamco-Westfield, is for the largest shopping centre in the Valencia area for a purchase consideration of €305 million.

The owner and operator of business and industrial parks in Germany and the UK, Sirius Real Estate, has disposed of its BizSpace Tyseley Business Park in Brimingham for £6,7 million, reflecting a 20% premium to its September 2024 book value. The asset was acquired by Sirius in November 2021 for £5,1 million. In another transaction announced this week, Sirius has agreed to acquire Chalcroft Business Park for £36,5 million, representing a net initial yield of 5.5%, as well as an adjoining 4.5 acre piece of development land for £4 million.

SuperMarket Income REIT acquired a further nine omnichannel Carrefour supermarkets in France via a sale and leaseback with Carrefour. The purchase price of €36,7 million reflects a net initial yield of 6.8% and a weighted average lease term of 12 years.

Assura plc, the UK healthcare REIT, which took an inward listing on the JSE in November 2024 has received a second non-binding proposal from KKR and Stonepeak Partners regarding a possible cash offer for the company at 49.4 pence per share. In terms of this proposal, shareholders would retain the declared quarterly dividend of 0.84 pence per share and receive a cash consideration of 48.56 pence per share. This represents a 2.9% increase on KKR’s previous indicative non-binding proposal of 48 pence per share. Assura confirmed that it had also received a non-binding proposal from Primary Health Properties plc regarding a possible all-share combination with an implied value of 43 pence per Assura share which the Board rejected. Primary Health Properties took a secondary listing on the JSE in October 2023.

The Competition Commission has approved the acquisition by Remgro’s 57%-held subsidiary Vumatel of the remaining 52% shareholding in Herotel. Vumatel first acquired a non-controlling stake in Herotel in 2022.

Unlisted Companies

The Climate Investment Fund, managed by Norfund, is partnering with Nedbank to invest R575 million into Pele Green Energy, a South African BEE infrastructure and development company founded in 2009. The investment was made into the newly established Pele Energy Fund 1 with Nedbank and Norfund as limited partners. The capital raise will provide the flexibility to accelerate project development, scale impact and secure new opportunities.

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

Weekly corporate finance activity by SA exchange-listed companies

Marylou Greig
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Weekly corporate finance activity by SA exchange-listed companies

Following the receipt of proceeds of R287,9 million from the sale of its shareholdings in Centlube, Ingwe Lubricants and Zestcor Eleven, enX has resolved to declare a gross special distribution of R1.55 to enX shareholders. The distribution will be made to shareholders on 7 April 2025.

The JSE has approved the transfer of the listing of Gemfields to the General Segment of Main Board with effect from commencement of trade on 11 March 2025. The listing requirements in this segment are less onerous for the smaller cap firms.

On 11 March 2025, the board of directors of Exxaro Resources approved a share repurchase programme to the value of R1.2 billion, subject to prevailing market conditions.

This week the following companies repurchased shares:

On March 6, 2025, Ninety One plc announced that it would undertake a repurchase programme of up to £30 million. The shares will be purchased in the open market and cancelled to reduce the Company’s ordinary share capital. This week the company repurchased 230,149 of its ordinary shares at an average price of 144 pence.

In its annual financial statements released in August 2024, South32 announced that it would increase its capital management programme by US$200 million, to be returned via an on-market share buy-back. This week 1,955,017 shares were repurchased at an aggregate cost of A$7,05 million.

On 19 February 2025, the Glencore plc announced the commencement of a new US$1 billion share buyback programme, with the intended completion by the time of the Group’s interim results announcement in August 2025. This week the company repurchased 14,750,000 shares at an average price per share of £3.19.

Schroder European Real Estate Trust plc acquired a further 118,800 shares this week at a price of 66 pence per share for an aggregate £78,368. The shares will be held in Treasury.

In October 2024, Anheuser-Busch InBev announced a US$2 billion share buy-back programme to be executed within the next 12 months which will result in the repurchase of c.31,7 million shares. The shares acquired will be kept as treasury shares to fulfil future share delivery commitments under the group’s stock ownership plans. During the period 3 – 7 March 2025, the group repurchased 829,197 shares for €47,97 million.

Hammerson plc continued with its programme to purchase its ordinary shares up to a maximum consideration of £140 million. The sole purpose of the buyback programme is to reduce the company’s share capital. This week the company repurchased 420,105 shares at an average price per share of 256 pence.

In line with its share buyback programme announced in March 2024, British American Tobacco plc this week repurchased a further 551,358 shares at an average price of £31.34 per share for an aggregate £17,28 million.

During the period February 24 – 28 2025, Prosus repurchased a further 7,522,387 Prosus shares for an aggregate €328,99 million and Naspers, a further 490,812 Naspers shares for a total consideration of R2,33 billion.

Five companies issued profit warnings this week: Exxaro Resources, South Ocean, Insimbi Industrial, Hulamin and Randgold & Exploration.

During the week two companies issued cautionary notices: Trustco and Vukile Property Fund.

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

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