We must invest to ride the wave that is transforming global auditing.
When it comes to technology, the early bird often misses out on the juiciest worm. Take the way in which Africa’s comically dire communications infrastructure, plagued by decades of non-investment, positioned it to leapfrog straight to mobile, unhampered by legacy investments in copper cabling that needed to be sweated.
While one wouldn’t recommend this as a strategy, a similar kind of serendipity gives the continent another opportunity to leverage the experience and insights of the developed world when it comes to using artificial intelligence (AI) in auditing.
At present, Africa’s auditing profession is immature when it comes to technology. One factor is that skilled human resources are typically cheaper relative than in more advanced economies, so it can seem to make sense to keep on with manual processes.
A second factor is the expense of investing in the new technologies – African auditors typically do not have the large IT budgets that their global peers do.
In truth, though, there is no option. As auditing globally becomes more proficient at using AI, and as AI itself approaches the Holy Grail of artificial generative intelligence (AGI, or AI that more closely resembles human intelligence), African auditors will have to follow suit. Their clients will demand it.
In addition, by using AI, auditors can do more with fewer people. AI enables even a small audit firm to process all the available data and to automate much of the work.
There is a lot of hype about AI in the business community, and it’s clear that companies see AI as a game changer. AI is thus receiving an increasing proportion of companies’ ICT spend, and this trend is particularly evident when it comes to the finance department. Gartner research shows that CFOs are planning to increase their technology spend largely thanks to the demand for AI. Ninety percent of respondents projected higher budgets, and none planned a reduction. They are particularly enthused about generative AI, which more closely mimics human intelligence.
IBM research indicates that CFOs are looking to AI to help them turn data into actionable insights, and help the finance workforce work more productively.
In tandem with these developments, it follows that CFOs and CEOs will increasingly expect their auditors to use AI effectively to deliver better value for money. Key expectations include audits that are more efficient, using fewer man hours and more accurate, and audits that do not just look backwards but that can predict trends.
While AI is by no means routinely used even in the developed world, but it is definitely being piloted by the majority of them. The Big Four auditors are already making massive AI investments, and the rest of the industry is following suit.
It’s a way off, but AI is on track to become as common as Excel spreadsheets in the finance world as a whole, including auditing. The revolution has already begun with Microsoft’s innovation of embedding its CoPilot AI app into Power BI. Now, finance teams will be able to summarise and identify trends in financial data using simple prompts.
African companies, and international companies with African offices, will come to insist that they get the same level of auditing excellence via AI as their competitors elsewhere in the globe.
Understanding the challenges
In short, the writing is on the wall. For African audit firms, the first step is to understand what their challenges are, and then to begin finding ways of overcoming them.
Budget. New technology is expensive, as a rule, exacerbated by the relative weakness of African currencies. For example, the inclusion of Copilot in most Microsoft applications makes better analysis of data much easier, but it costs around $30 per user per month. Similarly, workflow automation software can cost around €3,000 per licence. On the positive side, by keeping tabs on how global peers do it, African audit firms can avoid misallocating budgets to technologies that will ultimately prove to be disappointing.
Overall, African auditors should see AI as a long-term investment that will result in substantial savings and enhance their competitiveness.
Security. Large amounts of data will inevitably contain a great deal of sensitive data. Audit clients will rely on their auditors to have the right security protocols in place – another significant cost. Exposing sensitive client or company data on public AI platforms, for example, is a massive risk.
Skills shortages. While African talent will remain relatively less expensive than equivalent talent in the developed world, the specific skills needed for a more data-intensive, automated audit environment are in short supply everywhere. African audit firms will have to invest in growing their own timber.
For example, Forvis Mazars South Africa has invested in a data school that trains new graduates in software development and no/ low-code software, as well as the automation of continuous auditing.
Many of the bigger audit firms are undertaking similar initiatives, which will see more of these rare skills coming onto the market – a benefit to the industry and the ecosystems in which these firms operate. In fact, one could see potential for smaller firms to enter into formal agreements with the larger firms with their own training establishments.
There is a clear and present need to invest in AI but, as noted above, African firms can proceed cautiously with one eye on the experiences of more advanced companies outside of the continent. And, despite being competitors, there is a good argument to be made for the African auditing industry – or perhaps “ecosystem” would be a better term – to collaborate in the drive to build a bigger talent pool.
We became the mobile-first continent by accident; could we become the AI-first continent by design?
The Ghost Wrap podcast is proudly brought to you by Forvis Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Forvis Mazars website for more information.
This episode covers:
Nampak and a pretty heroic turnaround for the balance sheet.
Spar’s troubles, including Switzerland as what could easily be the next major headache.
Metair’s balance sheet pressures and the need for the Turkish disposal to go through quickly.
Transaction Capital and the plan to focus on Nutun going forward, with the controlling stake in Mobalyz (SA Taxi) being sold.
Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:
ADvTECH is building a new university in Sandton (JSE: ADH)
Private tertiary education is growing at pace in South Africa
ADvTECH has announced some exciting news for its tertiary education division. The company has purchased a training and conference centre from FNB and will use the site to build a new university campus. The IIE’s Varsity College Sandton and Vega Bordeaux will relocate to the new campus ahead of the 2026 academic year, so they have a busy year ahead to get it ready.
There’s plenty of money earmarked for this, with a plan to invest R419 million over two years. The business case is that it will double student capacity from the current Varsity College and Vega campuses, with an offering spanning undergraduate to postgraduate qualifications.
Remember all those #FeesMustFall protests and how they severely disrupted the academic year for so many students? Like it or not, that’s one of the reasons why the private sector has a gap here. Parents aren’t so keen to pay for easily disrupted years and neither are students taking out student loans for their studies.
Extraordinary growth at Capitec (JSE: CPI)
How does a growth rate of 36% sound to you?
For a group the size of Capitec to be achieving growth in HEPS and the interim dividend of 36% is incredible. Return on equity has jumped from 24% to 29%, which means they are running at roughly double the level of some competitors.
The one metric that has worried me a bit is the cost-to-income ratio, which has moved from 38% to 41%. The trajectory needs to be managed carefully for Capitec to avoid becoming a lumbering giant like competitors, but 41% is still a great level. As a reminder, lower is better on that ratio. Operating expenses excluding the impact of the AvaFin acquisition grew by 24%, not least of all because of staff incentives to reward success. There are other major areas of investment, like a 36% increase in IT costs.
The major driver of this performance wasn’t just the net interest income growth of 20%, but also the 15% decrease in credit impairments. The net effect was a 72% jump in net interest income after credit impairments. Add on 22% growth in non-interest income (an excellent result in and of itself) and you end up with operating profit up by 41%.
On the business banking side, customer numbers increased by 31% over 12 months. They seem to be doing an excellent job of taking the lessons from the retail bank and rolling them out there, even if headline earnings in that segment fell by 12% as Capitec takes an aggressive approach to fees and winning market share. Here’s another data point for you: after launching a life cover product in June 2024, it contributed R8 million to the insurance result by the end of August.
Here’s a little reminder of what the best business success story of democratic South Africa looks like on a chart:
As a final point, the share price only closed 1.3% higher for the day despite this incredible set of numbers. Although Capitec had previously indicated that the numbers would be strong, it still tells you a lot about just how much is being priced in here.
Unsurprisingly, Kibo Energy is partially settling Riverfort with the shares in MED (JSE: KBO)
The mezzanine funding structure was always going to end like this
At some point, I remember writing that Kibo shareholders should be aware that the value in the group (what little there is) was heading directly to Riverfort as the mezzanine finance provider into the structure. The process has been accelerated by the planned reverse listing of assets into Kibo, with part of the outstanding balance of £463k to Riverfort being settled by the sale of Kibo’s remaining 19.25% interest in Mast Energy Developments (MED).
This takes the loan down to £343k, with the balance attracting interest at 10% per annum. It will be payable on the earlier of the listing suspension being lifted, completion of the reverse takeover or 31 March 2025. Kibo has the choice to settle the remainder in cash or shares.
All the value going forward is going to be in the new assets coming into the structure.
Trencor is looking at winding up during 2025 – if all goes well (JSE: TRE)
The cash shell has received dispensation to remain listed until 31 December 2025
Trencor is nothing more than a legal entity with a bunch of cash on the balance sheet and various legal relationships that need to run their course before the cash becomes available for distribution to shareholders.
The company expects to commence the winding up process as soon as practically possible after 31 December 2024. To buy time for this, they had to get a dispensation from the JSE to remain listed until 31 December 2025. This is not necessarily a guarantee that the winding up will be completed by then, so be cautious with that.
Nibbles:
Director dealings:
An associate of Christo Wiese loaded up on Brait (JSE: BAT) convertible bonds with a purchase price of £2.6 million (around R60 million).
A director of a major subsidiary of Oceana Holdings (JSE: OCE) has sold shares worth R688k.
Buried deep down in a Santam (JSE: SNT) announcement about share awards, we find a note that a director acquired shares worth R645k in an on-market trade (i.e. unrelated to the awards).
Pick n Pay (JSE: PIK) achieved all the shareholder approvals required to separately list Boxer on the JSE later this year. It remains a great pity that they intend to exclude retail investors from that opportunity, with only institutional investors able to participate in the placement at what will likely be an appealing price.
Vukile (JSE: VKE) has already announced the transaction that will see Castellana Properties acquire three shopping centre assets in Portugal. To make the deal happen, Vukile is lending €108 million to its subsidiary in two tranches. The tranche intended to be converted to equity is priced at 5.5% and the rest is at 7.75%. Both loans should be sorted out by the time that RMB Investments and Advisory becomes a 20% shareholder in the entity making the acquisition.
African Dawn Capital (JSE: ADW), which is currently suspended, announced that subsidiary Elite Group has attracted investment of R5 million from EXG Partners, as well as R15 million in the form of a long-term commercial loan. They aim to “revolutionise the credit industry” – I’m not sure how much of the revolution there will be with that balance sheet.
Pan African Resources (JSE: PAN) announced that Marileen Kok has been appointed as the Financial Director of the company. She has been with the company since January 2020, so this is an internal appointment which is always great to see.
Europa Metals (JSE: EMI) has scheduled the general meeting of shareholders for 25 October. This will be for the vote for the sale of the subsidiary EMI to Denarius Metals Corp.
OUTsurance Group (JSE: OUT) has received approval from the SARB for the special dividend of 40 cents per share.
Wesizwe Platinum (JSE: WEZ) advised that its financials are late but will be published before 14 October, so luckily they are only a couple of weeks off.
Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:
Ethos Capital’s year was heavily impacted by Brait (JSE: EPE)
And not in a good way
Ethos Capital has reported a 17.9% decline in group net asset value per share for the year ended June. That’s a nasty outcome, with the precipitous decline in the Brait share price of 73% as the major driver of the problem. The Brait hot potato was subsequently passed to shareholders in the form of an unbundling, but the damage was done in the FY24 results.
At least the unlisted portfolio put in a better performance, with revenue growth of 12% and EBITDA growth of 18% when viewed overall. Optasia is the biggest investment in the group and achieved EBITDA growth of 10% in USD. The valuation has unfortunately been impacted by the Nigerian currency issues.
There were various sales of underlying assets in the year under review. The disposals were achieved at a premium to carrying values, so that does give some support to the director’s valuations of the assets.
The net asset value per share at the end of June was R7.03. Adjusting for the Brait unbundling, it would drop to R6.58. The current share price is R5.00, so the discount to net asset value has reduced considerably.
MC Mining focuses on the future with Kinetic Development Group (JSE: MCZ)
The numbers for the year ended June show why this capital raise is necessary
MC Mining has attracted investment from Kinetic Development Group, a company listed in Hong Kong. When all is said and done and assuming all approvals are obtained, Kinetic will hold 51% in the company. The appeal is definitely the underlying mining assets and what they could achieve in future rather than what they are achieving today.
This is confirmed by the loss after tax of $14.6 million in the year ended June, of which non-cash charges were $5.9 million. If you can believe it, revenue was $36.7 million and cost of sales was $36.5 million. It’s not every day that you’ll a company that is barely break even at gross profit level!
Going forward, it’s all about the Makhado Project and what can be achieved with the substantial foreign investment.
Nampak has successfully refinanced its group (JSE: NPK)
This is a major achievement after plenty of hard work and asset disposals
Blood, sweat and more tears than usual – that’s surely been the story of Nampak’s journey to refinance the balance sheet. Lenders required the company to repay R720 million in net debt by the end of September 2024 and this was achieved through various asset disposals. The disposal of the Nigerian Beverage business is still underway and wasn’t required to achieve that specific debt milestone. There are still other assets classified as discontinued operations as well.
Thanks to these heroics, Nampak has managed to conclude the refinancing of the group with a simplified funding structure that has only a small foreign debt element to it. Standard Bank has financed it in full, but Nampak has the option to include other lenders in the structure by 25 March 2025. Debt covenants have also been reset.
Results for the year ended September are due for release on 2 December.
Netcare is on track to meet full-year guidance (JSE: NTC)
This income statement shape looks encouraging
Netcare has released a voluntary update on how things looked for the year ended September. Overall, it sounds pretty decent, with the group believing that full-year guidance was met and strategic project goals were achieved.
Group revenue is expected to have increased by between 5.5% and 6%, while normalised EBITDA margin should be up by between 25 and 60 basis points thanks to a decent effort on costs and the level of investment in new projects. It also helped that diesel costs more than halved year-on-year thanks to reduced load shedding. Total capex of R1.4 billion is expected to be in line with guidance.
This implies an encouraging shape to the income statement, with margins up and cash flows hopefully following suit. To add to what should be a good outcome for HEPS, the group repurchased 60 million shares during the year. Since September 2023, they have repurchased 5.9% of total shares in issue at an average price of R12.27 per share (well below the current price of R 15.35).
As has been the recent theme, growth in the mental health business has been stronger than in the acute hospital business. As another sign of the times, the trend of declining maternity cases is continuing.
On the topic of NHI, government has requested Business Unity South Africa to put forward specific proposals on issues of concern. There’s still much uncertainty in this sector going forward.
GNU-related benefits are taking their sweet time to get to PPC (JSE: PPC)
The recent months have been disappointing and the outlook doesn’t sound very bullish
PPC is a name that came up pretty often on stock picking lists for an environment of improved South African sentiment. Alas, the share price is actually flat for the year, although it did indeed get quite the bump in the aftermath of elections:
The earnings haven’t caught up to the recent exuberance in the slightest. In fact, for the four months to July, group revenue fell by 2.1%! SA and Botswana were down 1% and Zimbabwe fell 4.5%. Zimbabwe is an important part of the group with a 30% revenue contribution over the four months, so the dip there is a worry. Remember that PPC recently sold the business in Rwanda, hence why you won’t see any further references to that country.
Cement contributes 90% of group revenue at PPC, so that is clearly the key product. Although selling prices increased, sales volumes were 5.3% lower than the comparable period. In South Africa and Botswana, cement volumes were down 4.6% and selling prices increased 5.5%, so revenue was up 1.6%. In Zimbabwe, cement volumes were down 10.9% and prices increased 4% in dollars, helping to mitigate the pain in revenue.
Remember that South Africa and Botswana saw a revenue decrease of 1% overall, so this tells you that the materials business (which includes the readymix products) had a tough period.
At least the materials business managed to improve its EBITDA to be slightly positive vs, slightly negative in the base period. That trajectory is more than we can say for cement, where EBITDA declined by 10.4%, with EBITDA margin down from 11.6% to 10.3%. The South African cement business is the focus of turnaround efforts. As for Zimbabwe, EBITDA margin fell from 29.8% to 29.0%.
Due to these underlying pressures, group EBITDA margin declined from 15.9% in the comparable period to 13.7% in this period. This means that EBITDA has fallen year-on-year. Despite this, cash generation increased from R129 million to R192 million as working capital improved, particularly on the inventory line. This helped group cash balances increase despite the payment of an ordinary dividend in this period. Group debt sits at R775 million and cash is at R969 million.
Zimbabwe is an important part of the group with a 30% revenue contribution over the four months, so the dip there is a worry. A $4 million dividend has been declared by the Zimbabwe business in September 2024, so cash is still making its way to the mothership.
The outlook section isn’t hugely comforting, with PPC noting that there is “still no clear evidence of large-scale infrastructure or retail developments” – these things take time, but it would be nice to see momentum. The overall outlook for South Africa and Botswana is described as subdued, while Zimbabwe’s outlook is positive only thanks to cost containment, with volumes under pressure there due to imports.
A bright Rainbow indeed (JSE: RBO)
Full details of a strong turnaround year are now available
Rainbow Chicken has released results for the year ended June 2024. Although revenue was only up 7.9%, it was enough to help them move through the inflection point at earnings level. For example, EBITDA increased by R599.9 million to R629.7 million! When people talk about revenue “dropping to the bottom line” in a business with high fixed costs and low variable costs, this is what they mean.
We’ve seen these numbers before, as they were included in the RCL Foods earnings release because Rainbow was still part of RCL as at the reporting date. To give shareholders more information and to make sure the performance is clear, Rainbow has now released its own set of financials that are effectively an extract from the RCL results. You’ll find them here.
There really aren’t many highlights at Spar (JSE: SPP)
The Switzerland business is looking like the next headache in line after Poland
As you may recall from recent announcements, Spar is literally paying to get rid of its business in Poland. That’s not something you’ll see too often, with the group having to raise debt facilities just to be able to get out of there! It’s a proper mess.
With the business in Switzerland reporting a 5.8% decrease in turnover in local currency for the 47 weeks to 23 August, I’m starting to wonder if that might be next on the list of problems. People in Switzerland literally travel across the border to buy groceries because it’s a cheaper option. That doesn’t sound like a great business, with Spar “assessing” the business and deciding what to do next.
At least BWG Group in Ireland and South West England was up, with turnover growth of 2.6% in EUR and 7.0% in ZAR. The business in England suffered a decline in volumes.
This leaves us with the South African business as the only other potential source of good news. There are a couple of highlights, like pharmaceutical business S Buys up 14.9% and liquor sales up 10.5%. Thanks to Build it managing just 1.2% growth and core grocery putting in a pretty soft performance, total sales in South Africa only increased by 3.5%.
Overall, this is a slowdown from the numbers we saw for the first half of the year. They have a lot of work to do to sort the business out. Prepare yourself for more IT drama, as they are planning their rollout of SAP at the remaining distribution centres. Somehow, I’m not confident that it will go well after the catastrophe in KZN.
York’s numbers are all over the place (JSE: YRK)
Revenue up, adjusted EBITDA and cash flows down, yet there’s a swing into headline profits
The first thing to understand about York Timber is that the accounting rules for biological asset valuations lead to some pretty huge swings. For example, the fair value adjustments on those assets was positive R250 million in the year ended June vs. negative R386 million in the comparable year. That’s a casual swing of over R630 million!
In the context of a net profit for the year of R136 million this year vs. a loss of R313 million in the prior year, you’re hopefully starting to see the problem here in terms of earnings consistency. The biggest driver by far is the underlying valuation of the plantations, which in turn is impacted by various economic factors.
This is why I tend to look at metrics like revenue (up 5%), adjusted EBITDA before the fair value movements (down 17.9%) and cash generated from operations (down by a nasty 78%). I find that more useful than getting excited about a move from a headline loss per share of 75.89 cents to HEPS of 30.11 cents that was mainly driven by fair value moves.
Nibbles:
Director dealings:
The group COO of Woolworths (JSE: WHL) sold shares worth a whopping R38 million. The group company secretary sold shares worth R3.9 million and directors of major subsidiaries sold shares worth R12.6 million. I’ve excluded the one sale in the batch that was related to tax obligations.
The CFO as well as a prescribed officer of WBHO (JSE: WBO) sold shares worth a total of R7.3 million.
A director of Sun International (JSE: SUI) sold shares worth nearly R4.5 million.
A director of Anglo American (JSE: AGL) bought shares in the company worth around R2.6 million.
Directors of Goldrush Holdings (JSE: GRSP) participated in the swap to receive Astoria (JSE: ARA) shares in exchange for Goldrush shares to the value of R1.4 million. Over half of that amount relates to directors who are also on the board of Astoria and so there is a director dealings announcement for both companies.
A non-executive director of Metrofile (JSE: MFL) has added to the recent buying of shares by directors at the company, this time to the value of R335k.
MultiChoice (JSE: MCG) announced that the merger control filing for the Canal+ deal has been submitted on a joint basis to the Competition Commission. They are also engaging with ICASA and other relevant regulatory authorities.
Burstone (JSE: BTN) has released the circular dealing with the proposed sale of a majority stake in the Pan-European Logistics portfolio to Blackstone. Support from holders of 50.27% of shares in issue has already been received. Burstone incurred a massive R159 million in transaction costs, with the overseas advisors charging an absolute fortune. The circular is available here.
In other circular news, Metair (JSE: MTA) released the circular dealing with the disposal of the shareholding in the Turkish business. The bill there is R55.4 million, with RMB getting the lion’s share with a R25.4 million fee. You’ll find the circular here.
Renergen (JSE: REN) released a quarterly update that doesn’t have much in the way of fireworks. The focus now is on achieving stable LNG and helium production over a meaningful time period. Annual maintenance was completed in September and the key will be to avoid any production issues. The company also spent R8.3 million on drilling two high helium concentration wells in the Free State.
TeleMasters (JSE: TLM) is a step closer to potentially being the subject of a mandatory offer. In a previous announcement, they noted that the two largest shareholders had been approached by a B-BBEE investor to sell their shares. If they do, it’s big enough to trigger a mandatory offer for the rest of the shares by that investor. The legal and financial due diligence is done and the investor has submitted a funding application to a financial institution. If that goes well, then there could be an offer on the table. There are absolutely no guarantees of this.
Insimbi Industrial Holdings (JSE: ISB) reminded the market that earnings for the six months to August are expected to decrease by at least 20%. The company has been negatively impacted by difficult local and international trading conditions.
Mantengu Mining (JSE: MTU) announced that subsidiary Meerust Chrome has installed and dry commissioned its JIG plant that is expected to produce 7,500 tonnes per month of chrome chips. They are aiming to complete the cold and hot commissioning within 45 and 60 days respectively. This coincides with various upgrades to the existing chrome beneficiation plant.
Junior mining group Southern Palladium (JSE: SDL) is busy with completing a pre-feasibility study for the Bengwenyama PGM project. This means that their annual financials at the moment are all about cash burn, as there is no revenue. The operating loss for the year was A$6.7 million, which is below A$7.2 million in the prior year. The group has cash of A$5.4 million.
Sasfin’s (JSE: SFN) results are delayed due to the audit not being finalised in time. The annual financials for the year ended June are expected to be released by 14 October.
In great news, the suspension of the listing of Efora Energy (JSE: EEL) was lifted today, so trade can finally take place in the shares once more. From time to time, companies do make it back from being suspended.
Here’s a perfect example of a company that is struggling to get its listing back on track: PSV Holdings (JSE: PSV) has been suspended for ages and has renewed its cautionary regarding negotiations with DNG Energy and a potential recapitalisation of the company. I can never find PSV’s website, which tells you how long this suspension has been going on for.
Chrometco (JSE: CMO) is getting closer to getting its suspension lifted at least, with the audits of 2022 to 2024 underway. The group also noted that the business rescue practitioner for subsidiary Black Chrome Mine is following a Mine Restart and Trade Out Plan approach, with that mine being restructured into an integrated chrome producer and processor with a low risk strategy.
In the fourth and final example for the day of a suspended company, Conduit Capital (JSE: CND) noted that work is underway on the accounts for the six months to December 2022. Thanks to the mess around its subsidiaries, they really are that far behind. There are a bunch of moving parts, ranging from attempted sales of underlying businesses through to efforts to enforce an award of R50 million that was made in favour of the company against a business in the Trustco group.
Unlock the Stock is a platform designed to let retail investors experience life as a sell-side analyst. Corporate management teams give a presentation and then we open the floor to an interactive Q&A session, facilitated by the hosts.
In the 42nd edition of Unlock the Stock, CA Sales Holdings returned to the platform to update the market on recent numbers and the strategy going forward. The Finance Ghost co-hosted this event with Mark Tobin of Coffee Microcaps and the team from Keyter Rech Investor Solutions.
Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:
Gemfields is walking a risky path – but there’s no reward without risk (JSE: GML)
The group is investing heavily in expansion at a time when the market seems to have cooled
Trying to balance capital expenditure against the various stages in the cycle is nothing new for mining companies. They often end up in situations where the capex bill is highest when revenue is under pressure, requiring some bravery to see through the cycle.
Gemfields is experiencing this now, with revenue having decreased from $154 million to $128 million for the six months to June 2024 and EBITDA down from $73 million to just below $50 million. Goodness knows they are still profitable, except the cash situation tells a different story. Thanks to extensive investment in the underlying operations (capex of $34.6 million for the period) and a challenging working capital situation as well (inventory and trade receivables moved much higher), they are now sitting in a net debt position of $44 million vs. net cash of $62 million in the comparable period.
Inflationary pressures on costs were significant in this period, particularly in labour and fuel costs. Although expenses look lower year-on-year, it’s because of the expenses that were capitalised to intangible assets. If we just focus on the cash expenses rather than whether they landed on the income statement or the balance sheet, there’s clearly pressure there.
Particularly after the disappointing results of the recent auction (which happened after the end of this reporting period), there are some nerves around whether the market will stay strong enough to support the capital expenditure programme without Gemfields having to make some tough decisions. The share price is down 16% in the past 12 months, which tells you how the market feels about the risks.
Momentum’s earnings are much higher, but the dividend growth is modest (JSE: MTM)
IFRS 17 makes this a far more complicated result than usual
As I’ve mentioned a few times in Ghost Bites this year, IFRS 17 has had a significant impact on the insurance industry and the comparability of recent results to the prior year. This encourages me to look at simple metrics like growth in the dividend per share, although Momentum would probably prefer me to look elsewhere as the dividend is only 4% higher for the year ended June 2024. This is despite a 32% increase in normalised HEPS.
The company has a dividend policy of paying 33% to 50% of normalised HEPS as a dividend. With such a wide range, you can see these kind of dislocations between dividend growth and earnings growth. The payout ratio for this financial year was 40%, which is below the mid-point of the guided range. The good news is that a R500 million share buyback programme was completed this year, with shares repurchased at a 43% discount to the embedded value per share. It’s important to look at share buybacks alongside dividend decisions.
There are various highlights of course, like the claims ratio in Momentum Insure improving from 77% to 67%. Still, the overall story is one of new business profitability being below desired levels, so that’s an important thing to watch going forward. Value of new business margin deteriorated from 0.9% to 0.7%. This margin is a function of actuarial assumptions and the pricing achieved on new business being written.
Other interesting nuggets include fair value losses in venture capital funds, as well as a nasty increase in the operating loss in India from R223 million to R275 million. I think India is an exciting market, but this shows the risks and difficulties. There are new regulations coming in for pricing lags on products like health insurance. This should improve the story in India.
NEPI Rockcastle makes another major acquisition in Poland (JSE: NRP)
This is the largest single asset shopping centre deal in the region since 2022
NEPI Rockcastle continues its conquest of high growth markets around Europe, with a deal to acquire Magnolia Park in Wroclaw (the third largest city in Poland by population) for €373 million. That’s a substantial transaction.
Wroclaw has a growing population and average spending power per citizen that is well ahead of the national average in Poland. I haven’t travelled to Poland yet myself, but I’ve seen the value of these modern centres in high growth areas in Europe. Even without getting your passport stamped, you can see the value of this strategy in NEPI Rockcastle’s recent results.
NEPI Rockcastle will fund the transaction from its existing cash resources and debt facilities. There are no conditions to the deal other than payment, so it is expected to close on 1 October.
With expected net operating income at the property of €26.9 million after some savings from integration with NEPI Rockcastle, the purchase yield is 7.2%. For reference, the Poland 10-year government bond is currently trading at 5.28%, so that sounds decent to me.
PSG Financial Services’ model shines once more (JSE: KST)
A strong distribution business seems to be the way to win in this sector
PSG Financial Services isn’t just focused on managing money. No, they also happen to be very good at going out there and finding the money to manage thanks to an army of advisors. This is the right strategy, as sitting back and hoping for advisors to bring you assets feels less lucrative to me based on the recent performance of both types of strategies.
For the six months to August, PSG Financial Services expects HEPS to be up by between 27% and 30%. They also expect recurring HEPS to be between 25% and 28% higher. Either way, that’s excellent.
Detailed results are expected to be released on 17 October.
Transaction Capital will focus on Nutun going forward (JSE: TCP)
It’s still incredible to think how exciting the SA Taxi story used to be
Before Transaction Capital made that great acquisition of WeBuyCars, everyone talked about how great SA Taxi was. Nutun (or Transaction Capital Risk Services as it was then known) didn’t get tons of attention. Today, WeBuyCars is separately listed, Nutun is the future of Transaction Capital and SA Taxi (now called Mobalyz) will no longer be controlled by the group.
Instead, Transaction Capital will hang onto a non-controlling stake in Mobalyz. They will sell 64.5% in the Mobalyz holding company to a combination of Mobalyz management and the Oberholster Family Trust, with a substantial portion being warehoused for the time being while a suitable third party shareholder is identified. This takes the Transaction Capital portion down to 35.5% in Mobalyz Holdings and thus 26.6% on a look-through basis into Mobalyz, as SANTACO will still hold 25% in Mobalyz.
In other words, the direct shareholding into SA Taxi is no different. It’s still a combination of Mabalyz Holdings and SANTACO. The action is happening further up.
There’s still one more round of financial pain coming, as Transaction Capital needs to make a final financial commitment to SA Taxi as part of this. No amount has been given yet, but they will need to fund it with debt. This is the definition of throwing good money after bad, but they need to do something to bring the nightmare to a close.
As part of the overall deal, there’s also a piece dealing with the disposal of Road Cover to SA Taxi for R160 million. The amount will be left on loan account and will be interest free. This is a business focused on membership-based services for Road Accident Fund claims. It therefore makes sense that it belongs in the Mobalyz stable rather than what is left of Transaction Capital.
Speaking of which, the only thing left (apart from a minority stake in Mobalyz when all is said and done) is Nutun. The business is raising R1 billion in funding, of which R700 million has been secured. It’s a really good business that has been made better by recent disposals of certain divisions. Nutun has two primary business lines: debt collection (on a primary and agency basis) and business process outsourcing.
As Nutun is firmly the focus going forward, Transaction Capital intends to change its name to Nutun Limited. There will also be major changes to the board, with the Transaction Capital founders moving back to non-executive board positions after being dragged out of retirement to help fix the mess. There are various other changes as well, including the current CFO of Nutun (Rob Huddy) being appointed as CFO of the group.
The share price closed 3.9% higher on the news.
Trellidor’s numbers are much better, but still no dividend (JSE: TRL)
The focus is on reducing debt
The good news at Trellidor is that HEPS has jumped from 4.2 cents in the prior period to 36.1 cents in the year ended June. For reference, 2021 was the last good year before things went terribly wrong, with HEPS of 40.8 cents in that period. Although they’ve gotten a lot closer to those levels than before, they are still running well behind them and the past couple of years created quite the hole in the balance sheet.
This hole is why shareholders still aren’t getting a dividend. Net debt has been reduced from R146.7 million to R115.7 million, but that’s still far too high for a group making consolidated EBITDA of R84 million. Trellidor operates in a tough market and the scars of 2023 (operating profit of R22 million that only just covered finance costs of R18.2 million) are still fresh for management.
Hopefully they can keep hammering that debt lower, with net cash from operations of R51.1 million having worked wonders in the 2024 financial year. Another year like that and the balance sheet will look a lot better. After breaching covenants in 2023 and getting a lifeline from lenders, Trellidor has now met its covenants.
Looking deeper, it was Trellidor itself that did well, oddly enough thanks to the UK market! I bet you weren’t expecting that. Demand in South Africa was actually rather weak, perhaps because more people are living in security complexes and thus feel that they don’t need an unattractive security gate? Whatever the reason, this segment grew revenue by 22.6% to R329.6 million and saw operating profit jump from R15.9 million to R57.8 million.
In Taylor, which is focused on much prettier upmarket products, revenue fell by 5% to R133.2 million and operating profit was just R2.5 million. That’s the kind of profit margin that a poultry business would be familiar with!
NMC is the smallest segment, with revenue down 11.1% to R29.7 million and operating profit down from R3.3 million to R0.9 million. Again, really marginal stuff.
The group definitely made progress in the last 12 months, but the modest Price/Earnings multiple of 5.8x is probably deserved based on how easily some of those profits could swing into losses. Still, if you fancy a speculative play, this could be an interesting one over the next year. Generating cash from operations of R51 million on a market cap of R200 million is interesting.
Nibbles:
Director dealings:
The CEO of Sirius Real Estate (JSE: SRE) sold a large chunk of shares worth over R85 million.
A director of a subsidiary of Growthpoint (JSE: GRT) sold shares worth R1.2 million.
A non-executive director of Discovery (JSE: DSY) sold shares worth R433k.
Rex Trueform (JSE: RTO) had a period to forget, with HEPS for the year ended June down by 90.6%. This was driven by a 1% decrease in revenue, a deterioration in gross profit margin from 49.9% to 46.2% and a substantial jump in operating expenses to add insult to injury. Parent company African & Overseas Enterprises (JSE: AOO) saw HEPS decline by 85.4%. There’s just about no liquidity in either stock anyway.
Goldrush (JSE: GRSP) didn’t take long to place its Astoria (JSE: ARA) shares in the market, with strong applications from shareholders who were happy to take Astoria shares in exchange for their Goldrush preference shares at an appealing price. This removes the legacy cross-holding between the companies once and for all. The placement was oversubscribed, with applicants receiving a pro-rate allocation of 19.7% of the Astoria shares applied for.
As is common for large funds with various types of debt in the market, Hammerson (JSE: HMN) has launched a tender offer in respect of three types of bonds. Simply, this means that the company is looking to reduce debt and is inviting holders of the debt to sell it back to the company. The focus is on 2026 and 2028 bonds, with some capacity for 2025 bonds as well if they meet the full intended amount on the longer-dated bonds. They are doing some work to reshape the balance sheet as well, with a separate announcement noting that a new Sterling-denominated issuance of bonds is being considered. Although retail investors can’t invest in any of this stuff, it’s good to keep an eye on what companies are doing with their balance sheets.
By the time you read this, dear reader, I would have been wandering around the Accademia and Uffizi galleries in Florence, seeing artworks that I have admired on pages and screens for the majority of my life. At the time of writing this article, however, I find myself in transit between two cities. Ahead lies an appointment with Michaelangelo’s David. Behind, two days of travel through the buoyant city of Venice, spiderwebbed with its canals and bridges.
There is much to say about Venice, and a lot of it you have probably already heard or read a hundred times. The city’s beauty is not overrated – as canals wane in the distance and the graffitied concrete maze of Mestre zooms past my train window, I am reminded just how much of an otherworldly place Venice really is. When something as pedestrian as a streetlamp is given the full filigree-and-curlicue treatment, not once but a hundred times across the city, then you know that you are dealing with a population that has made a conscious commitment to beautiful things. In this city, form comes first, then follows function.
It is almost hard to believe that people live here permanently, when the whole place feels like an elaborate theme park, sans rollercoasters. You are never more than 50 metres away from a restaurant that serves either pizza or gelato (or both). Souvenir shops selling masks, glass artworks from Murano and an assortment of other touristy tidbits are everywhere. I saw one pharmacy and zero grocery stores, despite travelling across half the city on foot.
Mattia’s story
Venetian children have no bicycles, my gondolier tells me. Instead, they are given rowboats. “And after the rowboat, a gondola?” I enquire. No, he assures me – the gondola is at the very top of the pyramid, due to how difficult it is to steer.
The gondolier is a young man in his early twenties named Mattia. As we travel down the grand canal by night, his oar disturbs the reflections of a hundred bright hotel windows in the dark water. Research before my trip revealed that Italy has more hotels than any other European country. Venice alone welcomed 5.7 million tourists in 2023 – 19 times more than its population of just under 300,000. For a bit of local context, Cape Town, which is undeniably South Africa’s tourism capital, received just over 405,000 tourists in 2024 – less than a tenth of its population of 4.9 million.
You would think that the massive demand for gondola rides from this seemingly never-ending influx of tourists would lead to an overabundance of gondoliers who want to service the market. But becoming a gondolier in Venice isn’t just about steering a boat; it’s a tightly regulated profession overseen by a guild. They issue only around 400 licences, and getting one is no easy task. Aspiring gondoliers have to complete 400 hours of training over six months, followed by an apprenticeship. Then, there’s an exam that tests everything from their knowledge of Venetian history and landmarks to their ability to speak foreign languages and, of course, their gondola-handling skills. Mattia tells me that he has only fallen off his gondola once, so clearly he knows his stuff.
When I boarded the gondola at the dock, Mattia was waiting there with an older gentleman who I initially assumed was his father. Along the way, he explains that this is simply a senior gondolier. Do they work together? Yes, says Mattia. He takes the gondola out when the old man is too tired. Steering the gondola through the maze of canals is hard on the body, so much so that even a young man like Mattia doesn’t work every day. Once, he worked seven 15-hour days in a row, but that was in the high tourist season, he explains. The average gondolier can earn up to 134,000 euros per year, but most of this income is dependent on a good tourist season. When the weather turns cold and the tourists go home, there’s not much for a gondolier to do but wait for their return.
Legacies and repurposes
I’ve written about succession in family businesses before, as you might recall from this article about the Zildjian brand. Gondoliering, as it turns out, is not much different. Mattia’s father is a gondolier, as was his grandfather, and his grandfather’s father. His father is currently upgrading to a bigger gondola, after which his old gondola will pass down to Mattia.
Mattia entertains me with trivia throughout the trip, pointing out buildings left and right. “You see this building behind me here?” he asks, crouching down so that I have a better view over his shoulder. I see an impressive marble façade, gothic windows and a row of statues looking down from a flat roof. “It is a fancy post office”, says Mattia. Another building – this time a palace – is owned by a famous football coach, who left it to his daughter. The outsides of these buildings may be frozen in time, but inside they are clearly given new and modern lives.
“All these bridges were built by Napoleon, who wanted the city to be more walkable”, says Mattia, not without the slightest hint of disdain. “But Venice was meant to be navigated by water, not on land. Did you ever get lost in there?” he asks, pointing into the dark warren of interlacing streets on the other side of the canal. In fact, I have gotten lost multiple times, finding it impossible to distinguish one narrow alley from another. This isn’t helped by the fact that the only street signs you will encounter in Venice are either to the Rialto bridge or San Marco square. If you aren’t going to one of those two places (or something close to them), then you are on your own.
Yesterday, today, tomorrow
Gentrification comes to every city eventually, and Venice is no exception. While an absolutely mammoth effort has been made to preserve the authenticity of the city, gentrification is starting to slip through the cracks like weeds through concrete. Before departing on my trip, I was warned that “real” Italian pizza would not be what I was used to at home; that toppings were kept simple and basically limited to cheese, basil and truffle oil. Yet in more than one canal-side pizzeria, I find such oddities as sweetcorn and pineapple presented as pizza toppings. In gelato shops, bright blue tubs of “unicorn” flavoured gelato are wedged between stalwarts like vanilla and stracciatella. Restaurants close to the water offer an Aperol spritz “on the go”, poured over crushed ice in a plastic cup with a lid, like a slushie at the movies. Before you think of me as stuck in my ways, let me assure you that I am not against innovation or improvement. A spritz in a to-go cup is a clever solution that appeals to many a tourist, who may want to spend more time walking the city than sitting in its restaurants. I suppose my concern is with the traditions that get lost in the pursuit of efficiency and ease.
As the city has had to be modified to accommodate more and more people, choices have been made that have strayed from its aesthetic traditions. As an example, many of the bridges on the outer edges of the city have had ramps added to them in order to accommodate prams and wheelchairs. These thoroughly modern metal structures with their straight bannisters look oddly out of place next to the cobbles and carvings of the stone bridges that they now inhabit. The facades of buildings, proudly displaying the sections of exposed brick and well-weathered paint that give the city its distinctive “old” feeling, now also house lengths of ethernet cabling and electricity boxes. Next to a little shop offering hand-embroidered aprons in the market square, a discount store sells a variety of novelties that look as though they were imported from China. Some of these things are modern necessities, and there is no way that the city could continue to exist and function well in this age without certain modifications. But there remains a part of me that wishes it was possible to stop the march of time and preserve this place and the traditions that make it so special, with ramps for wheelchair access as the exception!
Once upon a time, a gondola was one of the only ways to navigate Venice. Today, these centuries-old canals are trafficked by speedboats, water taxis and even construction cranes. The gondolas persist as an attraction, a legacy passed down through multiple generations and now kept alive by tourists just like me. When my gondola ride is over, I am dropped off at the same stop from which I departed. On reflection, I realise that the gondola is more of a time-machine than a mode of transportation: I have travelled to the past and been brought back to the same square metre of the city that I left from, just as Mattia’s family has done for generations.
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.
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Burstone expects interim results in line with guidance (JSE: BTN)
The deal with Blackstone is an exciting story going forward
Burstone Group is a property fund with around 65% of the portfolio sitting in Australia and Western Europe. There’s a big push into managing third-party properties as well as Burstone’s own properties, as this is a potentially strong boost to return on equity. Like in the hotel industry and as we are also seeing in the self-storage industry, return on equity really benefits from generating returns through helping someone else manage their assets. It’s quite simple: this approach doesn’t require any additional equity, so the numerator (the return) is going up and the denominator (equity) stays the same.
Through a transaction with Blackstone, Burstone will receive net proceeds of R5 billion through selling most of its stake in the Pan-European Logistics portfolio. They will continue generating returns through not just the remaining 20% stake, but also management fees on the entire thing. Although shareholders still need to approve the deal in late October, I can’t see why they won’t.
A similar approach to property asset management is already underway in Burstone’s Australian business. In South Africa, they are looking to do much the same thing.
If the Blackstone deal goes ahead, group loan-to-value will drop to 33.5% and the dividend payout ratio should increase to between 85% and 90% thanks to the leaner and meaner balance sheet.
For now, the interim results aren’t nearly as interesting as what the future could hold. Distributable income per share is expected to be in line with guidance, which means a decrease of 2% to 4%.
Barloworld is having a tough year (JSE: BAW)
The mining sector has cooled off considerably
Barloworld has released an update for the 11 months to August. They have a number of headaches, including the pressure in the local mining sector and of course the ongoing issues faced by the Russian subsidiary. They recently announced a voluntary disclosure to the US Department of Commerce, Bureau of Industry and Security (BIS) regarding potential export control violations at the Russian subsidiary, leading to a nasty drop in the share price.
At group level, Barloworld’s revenue declined by 7.4% and EBITDA fell by 14.3%, with operating leverage working against Barloworld in a period where revenue dipped. EBITDA margin contracted from 12% to 11.1% and operating margin fell from 9.4% to 8.0%. The silver lining is that net debt has reduced from R6.3 billion to R3.5 billion.
In Equipment Southern Africa, they actually managed to achieve some margin expansion despite revenue going the wrong way. Revenue was down 13% but EBITDA ended up flat, with EBITDA margin up from 10.6% to 11.8%. The firm order book sits at R2.4 billion vs. R2.9 billion in the comparable period.
In Equipment Eurasia, the business in Mongolia is doing the heavy lifting with growth in revenue of 61%. The business is doing so well that they are likely to meet earn-out thresholds, triggering a provision of $10 million for additional payments to the sellers of the business. As a reminder, Barloworld acquired it back in 2020. As for VT, the Russian business, revenue fell by 25% and $30 million was raised as a provision for inventory obsolescence. Operating profit was slightly up vs. the previous period without the provisions, but fell to $49.1 million vs. $84.4 million after taking them into account. The firm order book is vastly higher than before though, thanks to the business in Mongolia.
Moving on to Ingrain, the consumer business, we find a dip in sales volumes of 2.5% and a flat revenue performance. EBITDA fell 4.1% despite several turnaround efforts, some of which perhaps need to be given more time to succeed.
Results for the full year are due for release on 25 November.
CMH hits the brakes (JSE: CMH)
This is what I’ve been warning about
I’ve written in a few places recently about the disruption to the car dealership business model. With a combination of high interest rates and the onslaught of Chinese brands in the South African market, CMH’s diversified dealership base looks vulnerable.
Sure enough, for the six months to August, HEPS will be between 25% and 35% lower. The share price has run extremely hard this year and I would be very careful here:
Emira’s local portfolio has some worries (JSE: EMI)
The company has released a pre-close update covering the five months to August
Emira’s reporting is a bit unusual in this sector, mainly because they have a significant residential property portfolio as well. This means they bundle retail, office and industrial as the “commercial portfolio” and give an overview of that collective, like negative reversions of -3.1% (ever so slightly better than in the year ended March at -3.3%).
Thankfully, they do give more detailed breakdowns, like the office portfolio still in trouble with negative reversions of -10.7%. That’s worse than FY24 at -6.3%. The retail portfolio is particularly worrying, with negative reversions of -5.7% vs. -0.5% in FY24. Thank goodness for the industrial portfolio at positive 4.4% vs. -4.8% in FY24.
Through a complicated deal structure, Emira has gained exposure to the Polish economy through an investment in DL Invest Group. This has led to the loan-to-value ratio moving higher from 41.2% to 43.4%. Certain properties are in the process of being disposed of and these deals will lead to a reduction in the debt ratio once they are completed.
Overall, with those negative reversions in the local portfolio, I can’t help but wonder if an investment in Poland is that last thing that they should be focusing on.
FirstRand is absorbing the HSBC South Africa branch (JSE: FSR)
This is a win for the local bank’s corporate and investment banking unit
HSBC seems to be leaving South Africa. To ensure that its largely multinational client base is adequately looked after (as those client accounts are worth a fortune overseas), HSBC is transferring the clients and its staff to FirstRand. Operationally, they will land in RMB as FirstRand’s corporate and investment banking division.
The transfer is expected to be completed in the fourth quarter of 2025. It takes a long time!
Metair: working hard every day for the bankers (JSE: MTA)
The disposalof the Turkish business needs to close as quickly as possible
Metair has been having an extremely difficult time of things. Right now, they are just keeping their heads above water in terms of servicing financing costs, as evidenced by a quick look at the income statement:
Revenue for the six months to June was just 4% higher, while operating profit fell by a nasty 59%. The EBITDA story is less severe but in such a capital-intensive business, I would caution against using EBITDA as it doesn’t take into account depreciation.
One of the major pressure points has been the local vehicle industry, as Metair is a supplier to major OEMs operating in South Africa. There have been other issues, like a knock to Toyota’s ability to export vehicles to Europe due to a certification issue on their engines. The challenge for Metair is that they are impacted by many factors that are way outside of their control.
Net debt has increased from R2.8 billion to R3.4 billion, with the business in Turkey as a major drain on the balance sheet. With the disposal of that operation recently announced, this should reduce pressure on debt. It can’t come a minute too soon, as net debt to EBITDA of 3.5x is danger zone stuff. Only the bankers are getting any value out of Metair right now, with HEPS plummeting from 41 cents to a loss of 3 cents per share.
Old Mutual managed mid-single digit growth (JSE: OMU)
This result is far less exciting than what we’ve recently seen at other life insurance houses
When making an equity investment, your first hope is to at least beat inflation. Over and above that, the idea is to earn a return that is at least equal to the cost of equity, which in South Africa is typically in the mid-teens depending on the business you’re looking at. With growth in the Old Mutual dividend of just 6% for the full year, the group has barely managed to achieve inflationary returns for investors.
Return on net asset value was 70 basis points higher at 12.6%, which is below the cost of equity in my view. They try make it sound better by disclosing return on net asset value excluding growth initiatives, which comes in at 15.5%. I would ignore that number.
The whole “excluding growth engines” theme comes through a lot in the disclosure. I’m really not sure why any investor would be happy to look at a company on the basis of ignoring the costs of initiatives that could achieve growth in the future. With return on embedded value of 12.5%, the story at Old Mutual is one of slow growth and performance below the cost of equity. This explains why the share price has severely underperformed Sanlam this year:
Watch out for the change in reporting period at Safari (JSE: SAR)
You have to read this one carefully
Safari Investments is a property fund that recently changed its year-end from March to June, so the latest period is a 15-month period rather than a 12-month period. Going forward, they will report on a 12-month basis as usual. This limits comparability of this period to the previous period of course, so be careful when you read these numbers.
For example, although the fair value of investment properties was up by 8.7%, that covers 15 months worth of growth. Thankfully they do give us some numbers to work with on a like-for-like basis i.e. on a 12 month basis, with operating profit up by 15.9% through that lens.
The loan-to-value ratio decreased from 35% to 33% and the net asset value per share increased from R9.15 to R10.06. The share price is only R5.70, so the market prices Safari at a deep discount.
Nibbles:
Director dealings:
A member of the founding family of Famous Brands (JSE: FBR) sold shares in the company worth nearly R12 million.
Gary Bell (obviously part of the Bell family) has sold shares in Bell Equipment (JSE: BEL) to the value of R8.87 million at a weighted average price of R43.54. If there is a better offer coming for this company, the family is doing an excellent job of hiding it.
The buying of Metrofile (JSE: MFL) shares continues, with a non-executive director buying nearly R1.8 million in shares. Keep an eye on this one.
An associate of Carl Neethling bought shares in Ascendis (JSE: ASC) worth R1.1 million.
An entity related to the Christo Wiese stable (but not the usual Titan Premier Investments) has bought shares in Brait (JSE: BAT) worth R920k.
A director of Kumba Iron Ore (JSE: KIO) sold shares worth R841k.
Showmax, the streaming initiative at MultiChoice (JSE: MCG), is a cash-hungry beast. This is no different to what we’ve seen at streamers elsewhere in the world. If I understand the announcement correctly, it looks as though Showmax in its current form (i.e. as a venture in which Comcast is the 30% partner) has swallowed $284 million in equity funding. MultiChoice and Comcast have injected that funding in line with their respective 70-30 holdings.
NEPI Rockcastle (JSE: NRP) has priced its green bond offering. €500 worth of green bonds at a 4.25% fixed coupon were priced at 99.124%. Simply, this means that the market was happy to pay very close to par value, which would yield 4.25%. In other words, the market priced NEPI’s debt as slightly more expensive than the rate that NEPI hoped to achieve. The book was many times oversubscribed, peaking at over €3 billion.
Property group Putprop (JSE: PPR) is disposing of an industrial property in Gauteng for R42 million. The property is a logistics hub in Soweto for Putco buses. The property was independently valued at R47.5 million, so they are letting it go at quite a discount. The property’s profit after tax in the last financial year was R10.3 million. That’s a huge yield and presumably for very good reasons.
Goldrush (JSE: GRSP) is removing the last of its cross-holding with Astoria (JSE: ARA) by looking to place its Astoria shares in the market in exchange for Goldrush preference shares. The trade is on a 1-for-1 basis, with Astoria trading at R9.00 and Goldrush at R7.06. This is to entice Goldrush shareholders to part with a preference share in exchange for an Astoria share.
Rex Trueform (JSE: RTO) released a trading statement noting that HEPS is down by a huge 90.6% to 37.4 cents. No further details have been given at this point but earnings are due for release this week, so they really waited until minute 99 to release the trading statement. African and Overseas Enterprises (JSE: AOO) is part of the same group and reported a drop in HEPS of 85.4%.
I’m not going to go into this deal in huge detail, as Kibo Energy (JSE: KBO) is such a small and thinly traded company, but shareholders should be aware that the notice for the general meeting to approve what is effectively a reverse listing of a portfolio of renewable assets has now been sent to shareholders.
Andrew Hannington is resigning as CEO of enX Group (JSE: ENX). Robert Lumb is being promoted from CFO to CEO, having been with the company as CFO for over 4 years and having worked with Hannington throughout that period. Jessica Dawson is the new CFO as an internal promotion. That’s a pretty good succession story all round!
London Finance & Investment Group (JSE: LNF) has practically zero liquidity, so the results get only a passing mention here. Net assets per share increased from 59.2p per share to 71.6p. The dividend for the full year was 1.2p.
African Dawn Capital (JSE: ADW), which is suspended from trading, is in discussions with a third party regarding a possible subscription for shares in a subsidiary of the company.
FirstRand will take transfer of the clients, the banking assets and liabilities and the employees of HSBC South Africa. The clients of HSBC in South Africa which are mainly subsidiaries of multinationals operating in SA and some large domestic corporates, will be housed in FirstRand’s corporate and investment banking arm Rand Merchant Bank. The transaction is expected to be completed in the fourth quarter of 2025.
The board of directors of Capital & Regional (C&R) have accepted the £147 million offer of cash and shares from NewRiver REIT. Growthpoint Properties which holds a 69% stake in Capital & Regional (C&R) valued at £101,4 million, will receive £50,7 million in cash and 67,4 million NewRiver REIT shares, representing c.14% stake in the enlarged combined group. Under the terms of the offer, C&R shareholders will receive 31.25 pence in cash and 0.41946 NewRiver REIT shares for each C&R share held. Growthpoint has undertaken not to sell any NewRiver shares issued under the transaction for a period of five months without prior approval from NewRiver and a further four months without giving reasonable written notice of the sale. Following the successful completion of the transaction, C&R will delist from the JSE. The disposal is a category 2 transaction for Growthpoint so does not require shareholder approval.
BHP has announced it will negotiate exclusively with ASX-listed Cobre, an exploration and development company focused on copper and base metals exploration in Botswana and Western Australia, for a material earn-in joint venture agreement. The agreement is over Cobre’s Kitlanya West and East Copper Projects, located on the northern and southern basin margins of the Kalahari Copper Belt in Botswana. The proposed transaction excludes Cobre’s ownership of Ngami and Okavango Copper Projects.
African Dawn Capital has entered into discussions with an investor who will contribute R5 million in the form of a subscription for 50% of the share capital in Elite Group and a R15 million long term loan (with a repayment starting in seven years). The contract expires if not signed by the directors of African Dawn Capital Limited before 30 September 2024.
Putprop has concluded an agreement with Global Tank Worx, a subsidiary of Sky-Way, a company headquartered in the Netherlands. Putprop will dispose of the properties situated at 3 and 7 New Canada Road, Putcoton for R42 million. The Soweto properties, provide a logistics hub for 300 to 400 Putco buses which provide transport to over 20,000 commuters daily. The disposal is classified as a Category 2 transaction.
Unlisted Companies
Vantage Capital, an Africa-focused fund manager based in Johannesburg, has closed a €14 million mezzanine investment in Société de Production Maraîchère Samir (SPMS). Headquartered in Morocco, SPMS specialises in cherry tomato production and red fruits, managing a planted area of 101 hectares. The investment by Vantage Capital will be used to finance its development strategy to increase its cultivated area to 300+ hectares.
Irvine’s Group, a Johannesburg-headquartered poultry business with operations in Zimbabwe, Tanzania, Mozambique, Kenya and Botswana, has signed a US$18 million financing agreement with the Norwegian development finance institution Norfund, to expand operations in sub-Saharan Africa. As part of the agreement, Irvine’s in a joint venture with long-time partner Cobb, will establish an ultra-modern facility in Tanzania which will breed parent stock and help reduce the timeline and logistical challenges of importation, thereby strengthening the reliability of the supply chain throughout the continent. Chicken and eggs are the most affordable animal-based protein source and investments such as this provide accessible, high-quality protein while empowering local businesses.
Goldrush (previously known as RECM and Calibre) is to dispose of its remaining stake in Astoria Investments via an accelerated placement. The 505,358 Astoria shares will be exchanged for Goldrush participating preference shares on a 1-for-1 basis. The successful implementation of the placement will benefit the per-share Net Asset Value of Goldrush and remove the final crossholding between the two companies.
Orion Minerals has issued 768,115 new ordinary shares at an issue price of A$0.0138 per share in lieu of a cash payment for services provided which includes Orion’s placement announced in July 2024. The shares are being issued to Australian firm Cabarate.
This week the following companies repurchased shares:
South32 announced in its annual financial statements released in August that it would increase its capital management programme by US$200 million, to be returned via an on-market share buy-back. This week 465,819 shares were repurchased for an aggregate cost of A$1,54 million.
In line with its share buyback programme announced in March, British American Tobacco this week repurchased a further 162,236 shares at an average price of £28.36 per share for an aggregate £4,6 million.
Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 16 – 20 September 2024, a further 2,583,532 Prosus shares were repurchased for an aggregate €85,77 million and a further 191,854 Naspers shares for a total consideration of R684,9 million.
Five companies issued profit warnings this week: Clientèle, Gemfields, Combined Motor Holdings, Rex Trueform and African and Overseas Enterprises.
During the week, two companies issued cautionary notices: Cilo Cybin and African Dawn Capital
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