This week, shareholders of Barloworld made known their feelings of the proposed buyout of the company by the current CEO and the Zahid Group and the perceived governance issues surrounding the takeover process, by failing to pass a number of special resolutions necessary in order to approve the scheme. The company needed the support of 75% of shareholders to push the deal through but managed to garner just 36.63%. This has triggered the standby offer as per the company’s circular released in January. The company will issue the timetable applicable to the standby offer in the next few days.
Old Mutual Infrastructure Investment Trust Fund (Malawi) is to acquire a 25% stake in Golomoti JCM Solar Corporation from the Private infrastructure Development Group’s InfraCo Africa. Financial details were not disclosed.
Prosus has made an offer to Just Eat Takeaway.com shareholders to acquire 100% of the leading on-line delivery company for an all-cash offer of €20.30 per share, valuing the company at €4,1 billion. The offer represents a premium of 63% to the company’s closing share price of 21 February 2025, and a 49% premium over the three-month VWAP. The offer consideration will be funded through cash resources.
The Programmatic JV – a joint venture between Irongate (in which Burstone has a 50% shareholding) and TP Angelo Gordon, has concluded the acquisition of A$280 million of Australian industrial logistics assets in New South Wales and Queensland for an equity tag of A$133 million for the four assets. The parties committed A$200 million to the joint venture with the aim to upsize upon successful deployment.
Sibanye-Stillwater has updated shareholders that it has made the decision not to proceed with the Rhyolite Ridge Lithium-Boron Project under the joint venture with ioneer. The establishment of the joint venture announced in September 2021 was subject to various conditions precedent. Following a due diligence by Sibanye on the technical summary and updated reports, the project did not meet its investment hurdle rates.
Cilo Cybin (CC) has been granted a time extension of 7 April 2025 for the distribution of the circular to shareholders. In December 2024, CC announced the proposed acquisition of Cilo Cybin Pharmaceutical. The acquisition constitutes an acquisition of assets, a related party transaction and a reverse takeover for the company.
Unlisted Companies
Clearwater Capital, a private equity firm based in KwaZulu-Natal, has acquired SnoLink Logistics from Etlin International’s storage and logistics arm. Clearwater Capital aims to expand the logistics provider’s national footprint. SnoLink specialises in solutions for frozen, chilled and ambient temperature-controlled product warehousing, port-clearing services and long-haul distribution to retailers.
Local venture capital group Havaíc has exited its investment in emergency services technology provider RapidDeploy. The investment, which was first made in 2022, was followed by further investments in 2023 and 2024. The exit, the value of which is undisclosed, is to NYSE-listed US technology group Motorola Solutions.
In a move to increase its exposure to SA Corporate Real Estate (SAC), Castleview Property Fund acquired 48,681,480 SAC shares at an average purchase price of R2.85 per share for an aggregate consideration of R138,88 million. The purchase was executed by way of on-market block trades on the JSE.
Mantengu Mining has issued and will list, 24,881,093 shares on the JSE in terms of its R500 million drawdown facility announced in April 2024.
In November 2024 London Finance & Investment Group plc announced the sale of its liquid investments and that it proposed to cease activities in early 2025 by way of returning capital to shareholders and delisting the company from the LSE and JSE. The company has now confirmed shareholders will receive an estimated 71 pence in cash for each ordinary share held. The company has 31,287,479 shares in issue of which 80,000 are not listed. It is expected that the company’s listings will be terminated in early May 2025.
On 26 February the JSE notified Ayo Technology shareholders that it had suspended the company’s listing with immediate effect following the failure, as per the JSE Listing Requirements, to publish its annual report for the year-end August 2024 within the prescribed period.
This week the following companies repurchased shares:
Netcare concluded an intra-group repurchase with subsidiary Netcare Hospital Group in terms of which Netcare acquired 25,082,254 ordinary shares at a price of R13.46 per share.
Transpaco has repurchased one million shares, representing 3.47% of the company’s issued share capital. The shares were repurchased at an average of R37.00 per share, funded from cash resources. The shares will be delisted and cancelled.
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 324,074 shares were repurchased at an aggregate cost of A$1,18 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 21,500,000 shares at an average price per share of £3.26.
Schroder European Real Estate Trust plc acquired a further 85,200 shares this week at a price of 66 pence per share for an aggregate £56,232. 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 17 – 21 February 2025, the group repurchased 348,000 shares for €17,71 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 334,920 shares at an average price per share of 287 pence.
In line with its share buyback programme announced in March 2024, British American Tobacco plc this week repurchased a further 572,899 shares at an average price of £30.15 per share for an aggregate £17,28 million.
During the period February 17 – 21 2025, Prosus repurchased a further 5,826,415 Prosus shares for an aggregate €262,35 million and Naspers, a further 450,990 Naspers shares for a total consideration of R2,18 billion.
Five companies issued a profit warning this week: Grindrod, African Rainbow Minerals, Oceana, Afrocentric Investment and MTN.
During the week, two companies issued cautionaries: Choppies Enterprises and Conduit Capital.
Visa, the German development finance institution DEG, and existing investors, Speedinvest and Cathay AfricInvest Innovation Fund have invested in Ghana’s Oze, a provider of AI-powered digital lending solutions for financial institutions and SMEs. The financial terms of the investment were not disclosed, but the funding will be used to scale the fintech’s Lending Management System. Oze currently operates in Ghana, Nigeria, Guinea, Benin, Rwanda, Madagascar, Zimbabwe and Lesotho.
UK development finance institute, British International Investment, has announced a US$100 million Tier 2 capital facility to KCB Bank Kenya to increase lending capacity to climate-related projects and women-led SMEs.
Pelangio Exploration has announced a strategic agreement with FJ Minerals to acquire up to an 83% interest in the Nkosuo Project in Ghana’s Ashanti Region. The project is situated adjacent to Pelengio’s Manfo Project and the agreement stipulates that upon transferring a 17% stake in in Manfao to FJ, a JV will be formed which includes both projects. Palangio will hold an 83% stake and FJ, a 17% stake. The option must be exercised by 15 December 2025.
Alterra Capital Partners has acquired a majority stake in ARP Travel Africa Ltd from the founding Moledina Family. The destination management company, headquartered in the UK, specialises in tailored travel experiences in East Africa. Founded in Tanzania in 1978, the company has established partnerships with travel agents in 50 countries, spanning five continents, catering to international travellers looking to experience the East Africa region. Financial terms were not disclosed.
Fawry, the largest e-payment platform in Egypt, has announced three strategic investments in the Egyptian fintech space. The company has acquired a 51% stake Dirac Systems; a 56.6% stake in Virtual CFO and a 51% stake in Code Zone for a total of US$1,6 million.
The Private Infrastructure Development Group (PIDG) and EDFI Management Company, through the Electrification Financing Initiative (ElectriFI), have invested a total of €4 million in Zambia’s Supamoto. The investment will enable Supamoto to increase pellet production at its facility in the city of Ndola as well as allow the company to expand its logistics and distribution infrastructure to meet growing demand. The transaction will finance 14,800 new fuel-efficient cookstoves which are anticipated to deliver cost and time savings for up to 74,000 people.
Gozem, a super app that operates across Francophone West and Central Africa, has secured US$30 million in Series B funding – $15 million in equity and $15 million in debt — led by SAS Shipping Agencies Services and Al Mada Ventures. The company operates in Togo, Benin, Burkina Faso, Cameroon, Ivory Coast, Gabon, Mali and Senegal.
Artificial intelligence (AI) and open-source software (OSS) have become critical components of modern business, making their evaluation a key aspect of merger and acquisition transactions (M&A transactions).
While these technologies drive innovation and reduce costs, they also introduce unique risks, particularly around intellectual property, compliance and integration. Proper due diligence is essential to ensure that these assets add value, rather than liability, in M&A transactions.
A primary consideration is the ownership and licensing of AI technologies. Target companies relying on AI systems should be able to demonstrate clear ownership of their proprietary algorithms and models or, alternatively, that such target company is licenced to use the same. This includes assessing whether the data used to train these models is proprietary, licensed, or sourced from publicly available datasets, as this impacts data privacy and intellectual property considerations.
It is also crucial to understand whether the target company has either developed or procured the AI system. Depending on the scope of deployment of AI systems, these systems may be at different stages of the AI lifecycle. The acquiring company should consider raising some of the following questions with the target company:
Where do ownership rights in the AI model, training and testing data, and inputs and outputs reside?
Does the target company have mechanisms, such as policies and training, in place to regulate internal usage of the AI systems and to protect the integrity of confidential information, personal information, and sensitive proprietary or corporate information?
Have the relevant AI Terms and Conditions been vetted?
Has an Ethical Impact Assessment been conducted on the AI system?
Has a Privacy Impact Assessment been conducted on the AI system?
Generally, does the AI system comply with applicable laws and internationally accepted standards for the ethical and responsible use of AI?
Will or has the AI system impacted on any jobs and, if so, have the relevant labour law requirements been complied with?
Has the deployment of AI resulted in any tension between job losses and automation and, if so, what reputational impact has this had on the target company?
How is AI governance treated by the target company?
Does the board of directors of the target company have full line-of-sight as to how AI is being deployed and governed?
Some other important AI considerations include: (i) whether the target company has implemented processes to monitor and mitigate data and algorithmic bias; (ii) whether the AI system is actively monitored for cybersecurity risks; and (iii) whether the AI system has been properly audited and accurate audit logs maintained.
Based on the risks identified in the target company’s use of AI systems, the acquiring company should consider including AI-specific representations, warranties and indemnities to bring the identified risk level within the acquiring company’s risk appetite.
While the risks around AI can be mitigated through representations and warranties insurance, the question for acquiring companies always remains whether the acquirer is in the business of purchasing insurance or whether they seek to purchase a company with a functioning AI system.
Understanding the target company’s use of OSS is equally critical. Open-source components often form the backbone of IT systems, but their use is usually governed by various licensing terms, such as General Public Licence (GPL), Apache, or MIT. These terms commonly address, inter alia, patent use, source disclosure, licence and copyright notice, liability, warranties, and trademark use. Non-compliance with such licence terms can lead to legal claims, including requirements to open-source your proprietary code or to renegotiate licensing agreements. Therefore, it is important to understand whether the target company has utilised any OSS software and, if so, whether it has complied with software security and licensing requirements. Identifying and addressing these issues early in M&A transactions is vital to avoid incurring unanticipated costs, either during or post completion of the transaction.
OSS dependencies also introduce operational risks. Acquiring companies should evaluate whether the target company has a clear process for tracking, updating and managing OSS components, such as whether the target company has implemented and maintained an up-to-date Technology Stack List (also referred to as a Software Bill of Materials), documenting which OSS and other technologies have been used or incorporated into other software or systems, and what the applicable licencing terms are.
From a cybersecurity perspective, use of outdated or unsupported open-source libraries can expose the company to security vulnerabilities, allowing hackers to gain unauthorised access to corporate systems or data. Acquiring companies should consider sunsetting any OSS software which is outdated, or mitigating to newer OSS to avoid the cybersecurity vulnerabilities and risks introduced by outdated or unsupported OSS.
Finally, the integration of AI and OSS into the acquirer’s IT infrastructure poses strategic and technical challenges. Differences between the target company and acquiring company’s technology stacks, licensing models and/or licence compliance practices can complicate post-transaction integration. A clear roadmap for harmonising these systems will realise the acquirer’s strategic vision as envisioned by the M&A transaction. Additionally, acquirers should consider how AI and OSS assets align with their broader business strategy to ensure that they deliver long-term value.
AI and OSS introduce both opportunities and risks to M&A transactions and are key components of any credible IT environment. Conducting a comprehensive due diligence on the ownership, licensing, cybersecurity and operational management of AI and OSS technologies, and the extent of their use within the target company, is critical to mitigating risks and maximising the value that can be harnessed by these technologies post transaction completion.
Ridwaan Boda is an Executive and Head of Department and Alexander Powell a Candidate Legal Practitioner in Technology, Media and Telecommunications | ENS.
This article first appeared in DealMakers, SA’s quarterly M&A publication.
As the new year unfolds, the private equity (PE) landscape in South Africa is marked by both opportunities and challenges shaped by economic conditions, geopolitical shifts, regulatory changes and other factors. Despite such complexities, PE, known for its resilience, remains a significant asset class and should continue to attract investment.
According to the 2024 Private Equity Industry Survey conducted by the South African Venture Capital and Private Equity Association (SAVCA), 62% of PE firms expect high deal flow in Southern Africa in 2025.1
Several trends are expected to drive growth and shape South African PE in 2025, with the deal value in the local PE market expected to increase by 6.51% to US$62,12m in 2025.2 This article considers some of the trends which are likely to influence the South African PE market this year.
There is notable optimism among local PE firms compared with their global counterparts in relation to exit activity. The African Venture Capital Association reported that the volume of exits in the first half of 2024 surpassed that of the same period in 2023.3 It appears that this will be a continuing trend in 2025. According to the abovementioned 2024 SAVCA survey, PE firms in Southern Africa are more optimistic about an increase in exit activity than their global peers.
Furthermore, as managers seek new capital sources and investors aim to reduce fees, co-investments are becoming increasingly prevalent. Offering co-investment opportunities to limited partners (LPs) has proven advantageous and is expected to remain a key strategy for improved fundraising, increased deal flow and risk mitigation.
Macroeconomic factors
The macroeconomic environment, including inflation and interest rate trends, will significantly influence PE activity in 2025. Several major economies, most notably the United States, have begun cutting interest rates and several African countries, including South Africa, have followed suit. Lower interest rates can stimulate investment activity by reducing the cost of borrowing, allowing PE firms to finance acquisitions and expand their portfolios.
Additionally, political stability will be crucial for investor confidence and market growth. Following the recent elections in South Africa and the subsequent transition to a Government of National Unity (GNU), there are promising signs of progress in addressing structural obstacles to economic growth. This has prompted both local and international investors to reassess their perspectives on South Africa as an investment destination.
However, much depends on the GNU’s ability to create and foster a more business and investor friendly environment.
LPs will seek managers capable of delivering strong performance at the microeconomic level despite macroeconomic challenges, which is essential for achieving successful exits and delivering distributions.
ESG | Impact investing
There is a growing shift towards sustainable and impact investing driven by increased awareness of environmental, social and governance (ESG) factors. As part of integrated ESG and impact investing, there is also a rise of impact orientated strategies such as gender-lens investing, which entails investing in women-owned or women-led businesses, climate action, and inclusive development. These trends are expected to continue gaining traction as investors increasingly seek to align their financial returns with positive and sustainable outcomes.
In addition, these trends are reshaping the competitive landscape, influencing capital allocation decisions across various sectors and prompting a re-evaluation of traditional investment strategies. As a result, ESG criteria and impact initiatives will be integrated into investment strategies, recognising the potential for long-term value creation.
South Africa’s historical context underscores the critical need for investments that address social disparities, driving PE firms to prioritise businesses that foster job creation and empowerment. This focus aligns with regulatory frameworks such as Broad-Based Black Economic Empowerment.
Sector specific opportunities
Attracting private capital to generalist funds is becoming increasingly challenging, compared to funds with specific strategies that align with the objectives of investors interested in particular sectors. Consequently, targeted investment and specialist funds which focus on specific industries are expected to continue receiving favourable attention.
Technology, Fintech and Innovation Investment in the technology sector is anticipated to increase, driven by the imperative for digital transformation across various industries. This trend is bolstered by the growing need for internet services, mobile technology, and digital finance solutions, particularly in underserved populations across the country. The fintech sector provides significant opportunities to scale financial inclusion in South Africa.
PE firms are likely to pursue opportunities in innovative, AI and machine learning companies. South Africa’s tech industry is emerging as a significant growth driver, with the country being positioned as a hub for innovation and digital transformation on the African continent. The government has also expressed a commitment to foster a business environment that encourages entrepreneurship and innovation.
Infrastructure Development and Renewable Energy South Africa’s logistics and industrial real estate sectors are notably robust, driven by increasing demand for warehousing and distribution centres to support e-commerce growth and telecommunication infrastructure development.
There is a growing demand for economic and social infrastructure projects in South Africa. The government has plans to improve its infrastructure, particularly in energy, healthcare, transportation, and water management. Furthermore, the government has opened up power generation to independent power producers, which have become key players in developing renewable energy projects. This presents collaboration opportunities through public-private partnerships and PE involvement in such projects.
The renewable energy sector in South Africa, particularly solar, wind and nuclear energy, presents one of the most promising investment opportunities. The country’s integration of renewable energy sources is not only a strategic response to climate change, but also a critical necessity due to the country’s ongoing energy crises, specifically in electricity generation.
According to the South African Institute of International Affairs, South Africa is one of the African countries with the highest share of renewables on the continent.4 This positions the nation as a key player in the continent’s transition to sustainable energy solutions, offering significant potential for PE investments.
Conclusion
The South African PE market in 2025 stands at a pivotal juncture, offering exciting opportunities despite the challenges. As one of Africa’s most developed economies, South Africa presents a diverse array of investment prospects across various sectors. By adeptly navigating the key trends within the PE market, investors can identify where growth opportunities lie and strategically position themselves to capitalise on such opportunities.
Alcoholic beverage volumes are dropping at AB InBev (JSE: ANH)
Sober curiosity is a global trend that isn’t great for these companies
I recently wrote a piece in my Financial Mail column that considered whether alcohol could go the way of smoking and eventually become taboo. Even if that is where we end up, I think we are still a long way off that state. Still, the trajectory is a concern for investors in this sector.
AB InBev and its peers have been having a tough time in their share prices. The market seemed to love this week’s update though, with the price closing 7.9% higher. This is despite yet another drop in beer volumes. In fact, the Q4 drop was even worse than the full-year drop. For example, own beer volumes were down 2.1% in Q4 and 2.0% for the year.
The group is therefore focused on pricing increases and manufacturing efficiencies. This is the bit that the market liked, with revenue per hl growth of 5.5% in Q4 vs. 4.3% for FY24. This led to revenue growth of 3.4% in Q4 in constant currency, or 2.5% as reported. The full-year growth was 2.7% in constant currency and 0.7% as reported. Despite such little growth, normalised EBITDA was up 10.1% for Q4 and 8.2% for FY24.
This means that there was normalised EBITDA margin expansion, which shareholders are always thrilled to see. The other cause for celebration was an improvement in the net debt to normalised EBITDA ratio from 3.38x as at December 2023 to 2.89x as at December 2024.
The improvement to the balance sheet was enough for the board to be comfortable with a dividend of €1.00 per share. Thanks to the added benefit of recent share buybacks, that’s a substantial 22% jump vs. the previous year. The underlying growth in HEPS was just 4.2%, so I wouldn’t treat the dividend as an indication of sustainable growth.
The market is backing AECI’s outlook (JSE: AFE)
The recovery momentum in the share price is strong
Before we even get into the latest financial results, just take a look at this AECI chart after the release of earnings:
Based on this, you might be expecting to see excellent numbers in the latest release. This couldn’t be further from the truth, as revenue from continuing operations fell 3.8% and EBITDA was down 12.7%.
In fact, HEPS tanked by 36%. How on earth does a share move like this happen in response?
It’s all about understanding the outlook going forwards vs. what the market was expecting. As you can see, the stock is still well off mid-2024 levels. It had suffered a precipitous drop in late 2024. This is a case of a turnaround strategy that the market has finally latched onto.
Usually, a turnaround includes a year of particularly poor numbers in which the kitchen sink is thrown at the financials. All the tough decisions around disposals and impairments tend to happen quickly, giving the company one really bad year as the new base off which to improve. The narrative in the AECI results is that the bottom is in and that things will get better from here.
If we look at the underlying segments, we find that AECI Mining saw profit fall by 24.8% in a weak demand year that was further compounded by planned statutory shutdowns. They had a strong Q4 though, which would’ve added to the share price rally. Over at AECI Chemicals, profit from operations jumped by 30% thanks to efficiencies and cost management, so that’s a good news story.
There’s still a long way to go in cleaning up the group, with six businesses identified for sale and sale agreements in place for only two of them. They are all profitable except AECI Schirm, which was so loss-making that it put the entire discontinued segment into a loss of R383 million.
I must note that the tax expense is an effective tax rate of 71%. That’s obviously not the norm and they are working on ways to reduce it. Some of the reasons for the high rate appear to be non-recurring in nature, while others are not.
Net debt reduced to R3.7 billion, helped by a significant increase in cash and cash equivalents. Net debt to EBITDA at 1.2x is in line with the prior period. Working capital improvements in AECI Mining also helped them here, as did a substantial decrease in capex.
The management team has a big year ahead of them. They need to sell the remaining businesses earmarked for sale and they need to drive improvements in the continuing operations. Against this backdrop, I was pretty surprised to see a decent dividend of 219 cents per share based on HEPS of 755 cents per share. It shows you that dividends are a powerful way to send a message to the market. If you’re interested in learning more about that topic, you’ll enjoy my latest Moneyweb podcast about the stickiness of dividends.
Barloworld shareholders shunned the scheme (JSE: BAW)
And by a far greater percentage than I think anyone expected
At the recent Barloworld AGM, directors only narrowly survived the re-election vote. They received support of roughly 57%, which is abysmal. The market was sending a key message about its views on how the conflicted position of CEO Dominic Sewela was handled.
When I saw that outcome, I figured that the scheme would be a close-run thing and that some other shareholders might join UK-based Silchester in saying no to the R120/share price on the table. I just didn’t expect the scheme to fail so spectacularly, with support from only 36.6% of shareholders present at the meeting.
Although attendance at the meetings might not have been identical, we can safely assume that roughly 20% of shareholders were happy to keep the board but reject the offer. That feels like an odd position for someone to reach. If you hated the scheme, surely you would want a new board as well?
In the past 5 years, the highest price we’ve seen Barloworld trade at was nearly R130. Bearing in mind that this is a cyclical group and that they’ve suffered the destruction of value in the Russian business, an offer price of R120/share is pretty close to that level. It didn’t look terrible to me, but clearly investors wanted more.
Sector peer Bell Equipment is a useful case study here. The share price is currently R37, so one wonders how the investors who said no to the R53 per share scheme feel at the moment.
In the case of Barloworld, the 36.6% who agreed to the scheme can still go ahead and accept the standby offer if they want to get paid out. In some respects, I think the standby offer sent a message that the price was on the light side. It’s like saying: “I’m willing to pay this for a 100% stake, but come to think of it, I’ll take what I can get at this price as well.”
The bigger question for me is around the future for the management team. Rightly or wrongly, Dominic Sewela isn’t on many Christmas card lists for institutional shareholders on the register. On the flip side, if he’s willing to be part of a consortium buying at R120 per share, institutions should welcome a CEO who is aligned with them at a price way above the current R105 per share!
For further insights into the standby offer and for the full statement by the board regarding their handling of the corporate governance situation, Barloworld has placed this article in Ghost Mail for my readers. It doesn’t reflect any of my opinions, but I think it gives great additional information around the situation and is well worth a read.
Onwards and upwards for Bidcorp (JSE: BID)
Even though the rand turned out to be the wrong flavour in this period
Food services group Bidcorp is one of South Africa’s very best business stories. They’ve genuinely built a global giant (operations in 33 countries), with consistent bolt-on acquisitions and organic growth to support the story. Of course, when the rand gets weaker, this makes the reported numbers look even better due to the global exposure. When the rand gets stronger, the opposite happens.
This is why you see a situation in which revenue for the interim period increased by 3.6% as reported, yet it was up 7.1% in constant currency. That theme continues in trading profit, up 6.8% as reported and 10.7% in constant currency. HEPS is much the same recipe, up 6% as reported and 10.0% in constant currency.
Cash generated from operations is always a very important metric here, as this is a working capital intensive group that has to manage its cash carefully to support growth. With a 17.6% jump in that metric, I think we can tick that off as a success.
The interim dividend is 6.7% higher at 560 cents per share. They have a modest payout ratio due to the level of reinvestment in the group. The context here is that HEPS was 1,221.6 cents.
In case you’re wondering, the United Kingdom saw the strongest constant currency growth among the segments. It was up 7.2% in revenue and 30.4% in trading profit. I’ll resist the temptation at this point to make any baked-beans-and-beige-food jokes.
Earnings down and dividends up at Hammerson (JSE: HMN)
The share price fell 6% on the day of release of results
Hammerson released its full-year 2024 results, capping off what they describe as a “transformative and successful” year for the group. This is a fancy way of saying that they sold a lot of assets in an effort to improve the balance sheet. There are some other positives, like a strong increase in rental rates and an uptick in occupancy.
Still, for all the fanfare, sales growth at tenants was 5% in the UK and 3% in France. Western Europe is by no means a high-growth area, but those are still unexciting numbers. This is reflected in valuation growth of 4.2% in the UK and 1.5% in France. Alas, valuations in Ireland fell by 13%. As all South Africans know, the Irish just can’t win when it really counts!
Adjusted earnings per share fell from 23.4p to 19.9p and an IFRS loss was reported due to impairments and revaluation losses. The continuing portfolio might be putting out decent numbers, but they had to take some pain to sell certain properties.
The benefit of that pain was felt in net debt, which fell by a substantial 40% year-on-year. Of course, that’s also because the balance sheet shrank due to disposals, so the right metric to consider is loan-to-value (LTV). This improved from 34% to 30%.
The full-year dividend of 15.63p is up 4% despite the pressure on earnings. That looks like a fair reflection of the underlying portfolio performance.
There’s yet more momentum at Momentum (JSE: MTM)
The stock has had a great few years
Momentum released a trading statement for the six months to December 2024 that shows why the share price has been on a charge over the past year (or three). Normalised HEPS is up by between 43% and 48%, so there’s much to celebrate.
This performance was driven by a number of supportive factors, ranging from persistency in life insurance through to underwriting margins and favourable weather conditions in the short-term book. Market returns also helped, as large insurance houses benefit from the returns earned on their reserves.
Detailed results are due for release on 20 March.
Oceana’s earnings are well off the previous interim period (JSE: OCE)
The disappointing end to the previous financial year has continued
Oceana had a truly spectacular interim period last year. Daybrook posted a record-breaking performance in an environment of record fish oil prices. Alas, those days are firmly behind Oceana, with a tough second half in the last financial year and now an interim period that needs to be compared to such a high base.
It’s therefore not surprising to see that interim earnings are lower year-on-year. The expected decline in HEPS is at least 40%, with one of the major factors being that fish oil prices have fallen off.
Although the share price is only down 13% over 12 months, it’s worth noting that this announcement came out after the market close. There’s therefore a chance of more pain in the share price when markets open on Thursday.
Detailed results are due on 9th June.
Nibbles:
Director dealings:
A director of Altron (JSE: AEL) sold shares worth R1.2 million. This should be seen in the context of a 12-month share price performance of 118%!
To add to the purchase earlier in the week, a trust associated with the CEO of Tiger Brands (JSE: TBS) bought shares worth R493k.
Acting through Titan Premier Investments, Christo Wiese has bought R190k worth of Brait ordinary shares (JSE: BAT).
Sibanye-Stillwater (JSE: SSW) is taking a cautious approach to its capital allocation strategy, as evidenced by its decision not to proceed with the Rhyolite Ridge Lithium-Boron Project. This is part of a proposed joint venture agreement with ioneer Ltd, who I’m sure were less than thrilled to receive this news. In October 2024, Sibanye received updated project and technical information that didn’t fill them with confidence, as the project doesn’t meet Sibanye’s investment hurdle rates (required rate of return) based on conservative pricing assumptions. The company makes it clear that they are still committed to both the US market and the battery metals strategy, so this is a project-specific decision.
Cilo Cybin (JSE: CCC) has received a dispensation from the JSE in terms of the timing of distribution of its circular related to the proposed acquisition of Cilo Cybin Pharmaceutical as a viable asset under SPAC rules. The circular is now expected to be distributed by 7 April.
Choppies (JSE: CHP) has renewed the cautionary announcement that was first released on 16 January. They give no further details unfortunately, so this is as bland as a bland cautionary can get!
There’s more sad news from Harmony (JSE: HAR), as one of the employees injured in the Mponeng accident on 20 February has lost his life. My understanding is therefore that two employees passed away from this accident, which is exactly two too many. Mining remains a dangerous way to make a living.
The listing of AYO Technology Solutions (JSE: AYO) has now been suspended due to the company failing to publish its annual report for the year ended August 2024 within the prescribed period. Sigh.
Note: this release has been provided by Barloworld to the readers of Ghost Mail and does not reflect any opinions of The Finance Ghost.
As a result of the resolutions tabled at today’s EGM not being passed by the requisite majority of Barloworld Ordinary shareholders present and entitled to vote, the Standby Offer has been triggered, as contemplated in section 7 of the Circular in respect of the proposed transaction.
The timeline applicable to the Standby Offer, will be announced on SENS and A2X in the coming days. The procedure for acceptance of the Standby Offer is outlined on page 37 (section 7.5) of the Scheme Circular, available on the Company’s website.
The Standby Offer
The Standby Offer is now open for acceptance by Barloworld shareholders at ZAR 120.00 per share in cash, maintaining the same value as proposed in the scheme of arrangement. The total value unlock of the offer continues to represent a significant premium of 87% to Barloworld’s 30-day VWAP as at 12 April 2024, being the last trading day prior to the first transaction-related cautionary announcement, with the total transaction value remaining at ZAR 23 billion.
The period for which the Standby Offer will remain open for acceptance and the detailed acceptance procedures are set out in the Circular.
Implementation mechanics
The Standby Offer is conditional on its acceptance by Barloworld shareholders holding at least 90% of Barloworld ordinary shares (excluding shares held before the Newco Offer by Newco, ZTHM, Entsha, and their respective related or inter-related persons, persons acting in concert, nominees or subsidiaries).
Shareholders are reminded that Newco has the right to waive this 90% condition at its sole discretion. This means that Newco could elect, at its own discretion, to acquire a lower percentage from shareholders who wish to tender their shares. In such an instance, and should the Standby Offer become unconditional (following the fulfilment of all other conditions precedent that it is subject to), Barloworld would remain listed on the JSE and the shareholders who have not accepted the Standby Offer would remain shareholders in Barloworld.
Process and timelines
It is anticipated that the Standby Offer announcement (Standby Offer Announcement) will be published in the coming days and will contain a detailed indicative timetable in relation to the Standby Offer.
Not later than 16:30 South African time on the 45th business day after the Standby Offer Opening Date, Barloworld and Newco will release an announcement on SENS confirming whether the Standby Offer condition as to acceptances (requiring 90% of Barloworld Ordinary shareholders, excluding members of the Consortium, accepting the Standby Offer) is fulfilled or waived, and whether the Standby Offer is terminated or will proceed.
The Longstop Date for fulfilment of all the conditions precedent to the transaction is 11 September 2025.
The Longstop Date will be automatically extended by 3 months if any regulatory approval has not been obtained by 11 September 2025.
The Standby Offer will be open for acceptances by Barloworld ordinary shareholders for a further 10 business days after the fulfilment or waiver of all the conditions precedent to the Standby Offer has been announced (Standby Offer Closing Date).
Path forward
The Standby Offer is now open and a Standby Announcement will be published containing a detailed indicative timetable in relation to the Standby Offer. Detailed information about the procedures to accept the Standby Offer is set out in the Circular. The timing for the implementation of the transaction will depend on acceptance levels of the Standby Offer and receipt of the required regulatory approvals. The business will continue to operate as usual throughout this process.
Response from Barloworld Board regarding Governance
The Barloworld Board has taken note of market commentary, particularly related to the alleged lack of transparency in relation to the process as well as the board’s handling of the conflicts of interest in relation to the Barloworld CEO.
The Barloworld Board wishes to provide further clarity in this regard.
As Barloworld is a “regulated company” as defined in section 117(1)(i) of the South African Companies Act, an offer such as the one brought forward by the Consortium is regulated by chapter 5 of the Companies Act read with chapter 5 of the Companies Regulations, 2011 (the “Takeover Regulations”).
In accordance with section 119 of the Companies Act, the Takeover Regulation Panel (“TRP”) is the primary regulator in respect of transactions of this nature. Given Barloworld’s JSE listing, the JSE also acts as a secondary regulator, enforcing applicable rules set out in the JSE Listings Requirements.
In accordance with section 95 of the Takeover Regulations, all negotiations between the Independent Board and the offeror must be kept strictly confidential and any communication with the market needs to be pre-approved by the regulator as set out in s117 of the Takeover Regulations before publication. Further, if a leak of price sensitive information occurs, or there is a reasonable suspicion of such a leak, the Company must immediately release a cautionary announcement disclosing that information to shareholders.
From the onset, the Independent Board has abided by the regulations governing this transaction and has accordingly, timeously issued communication to the market.
From the time the Consortium approached the Company with a non-binding indicative offer, the composition of the Consortium and the nature of the Group Chief Executive’s involvement was fully disclosed to the Board and the resultant conflict of interest was declared. The Group Chief Executive was immediately recused from Board discussions related to the proposed transaction. In line with the Board’s statutory and fiduciary duties, the Board sought legal advice and implemented strict governance measures, based on global transaction precedent and best practice, to ensure a thorough and unbiased evaluation of the offer in the best interests of the company and its shareholders. The Independent Board has duly discharged its duties in this regard.
The Independent Board reiterates that management led buy-out transactions, are not unusual in capital markets. Whilst recognising that such transactions do present an opportunity for conflicts of interest in relation to the management members involved, the Independent Board also recognises that if properly managed, they could result in positive outcomes for shareholders of the Company.
Further, in such instances it is the Independent Board’s responsibility to institute robust governance processes whilst ensuring minimal disruptions to the day to day running of the business. The board has to consider the merits of the transaction including, as per the TRP requirements, obtaining external advice from an independent expert on the fairness and reasonableness of the offer. In this instance, the Independent Board appointed Rothschild. Finally, if appropriate, the board has the duty to not to frustrate the process of bringing a fair and reasonable offer to shareholders, for shareholders’ consideration.
It should also be noted that it is not market practice, nor a regulatory requirement to place conflicted members of management on long-term gardening leave during a management buy-out process.
The Board continues to engage openly with its key stakeholders on matters of governance. To this end, it has recently concluded its governance roadshows where it has engaged with key shareholders on matters of concern to them.
The Independent Board remains committed to ensuring that the Standby Offer strictly follows the regulatory process and is managed and governed transparently, in the best interest of all stakeholders.
Responsibility Statement
The Independent Board (to the extent that the information relates to Barloworld), individually and collectively, accepts responsibility for the information contained in this statement and certifies, to the best of its knowledge and belief, that the information contained in this announcement is true and that this announcement does not omit anything that is likely to affect the importance of the information included.
Note: in case you missed it right at the top, this release has been provided by Barloworld to the readers of Ghost Mail and does not reflect any opinions of The Finance Ghost.
There’s nothing bright and cheerful about African Rainbow Minerals (JSE: ARI)
The iron ore cycle can be cruel
African Rainbow Minerals released a trading statement for the six months to December 2024. HEPS is expected to be down between 45% and 55%, so earnings have halved at the midpoint of that guidance. Interestingly, the share price is only 18% lower over 12 months.
The main reason for the decline is exactly what you would expect: a significant drop in iron ore prices. Average realised US dollar prices fell 22%. To add to this pain, iron ore and manganese ore sales volumes were lower, there were higher cash costs and the currency went the wrong way for them. The only offsetting factor was PGM ounce production.
Of course, when the cycle is more favourable, there is indeed a pot of gold (or iron ore?) to be found at the end of this rainbow.
Anglo American and the Botswana government have locked in further diamond partnership agreements (JSE: AGL)
Will people still be buying mined diamonds 10 years from now?
Anglo American announced that De Beers and the Botswana government have signed new formal agreements for a 10-year sales agreement (with a possible extension of 5 years) and a 25 year extension of the mining licences out to 2054. That’s all good and well, but of course it does nothing to address the real risks to the sector.
At least one of the risks is off the table, giving De Beers the best possible chance to carve out a sustainable model for mined diamonds. It’s amazing how at one point, Anglo shareholders would’ve pointed to the relationship with the Botswana government as perhaps the biggest risk and key dependency. These days, lab-grown diamonds are the problem!
Curro is struggling to get those schools filled (JSE: COH)
But at least earnings are up
Curro has released a trading statement dealing with the year ended December 2024. Although it might sound impossible to you if you’ve ever fought for a place in a school for your kid (perhaps this is mainly a Cape Town problem?), the reality is that Curro has a large footprint of schools and not all of them are full. In fact, if you look at the capacity utilisation stats across the group, filling these schools is a challenge.
Affordability is one problem. The other has been emigration of the South African middle class, creating constant churn in the schools. Curro is still managing to grow, as evidenced by recurring HEPS growth of between 9.3% and 17.5%, but it’s not easy. Share repurchases to the value of R120 million during the year helped boost HEPS.
In case you’re wondering why a trading statement was triggered, earnings per share (EPS) will be up by between 117.1% and 217.1%. This is heavily impacted by impairments, which is why the market focuses on HEPS.
Speaking of impairments, the 2024 year saw impairments of R340 million to R380 million. Around two-thirds of this impairment is attributed to eight schools that had already been impaired in the prior year due to slower than expected growth. A further major problem is the two schools impacted by the closure of steel manufacturing operations. You don’t have to be an award-winning detective to guess that this relates to ArcelorMittal. In small towns, when a big local employer is in trouble, things can deteriorate rapidly. Ghost Mail is cool; ghost towns are not.
Overall, Curro had 72,109 registered learners in early February. That’s below the 72,553 they had in November 2024. With numbers going the wrong way, the share price followed suit. Curro closed 4.3% lower. The share price is up 14% in the past year, which is in line with the midpoint of HEPS growth guidance.
Grindrod’s earnings are down – yes, even their core earnings (JSE: GND)
The logistics industry isn’t straightforward
Grindrod released a trading statement dealing with the year ended December 2024. From core operations, they expect HEPS to be down by between 25% and 28%, so that’s not good news.
The issues were related to Grindrod’s terminals, where export volumes were down from 17.3 mtpa to 16.5 mtpa. Performance was impacted by lower commodity prices, disruptions at the border and low container handling throughput. They reckon that just the border disruptions cost them between R180 million and R200 million in headline earnings – the risk of doing business in frontier markets!
The group is looking to the future, with plans to deploy billions in capital into the rail network. I think the entire market appreciates how focused Grindrod is these days, although it took a lot of work to get to that point by getting out of assets like the North Coast properties.
From a total group perspective, which includes fair value and expected credit losses linked to disposals to finish cleaning up the group, HEPS will be down by between 67% and 71%.
NEPI Rockcastle had a strong year – but watch those per-share metrics (JSE: NRP)
The balance sheet is also in great shape
NEPI Rockcastle achieved 11.8% growth in distributable earnings for the year ended December 2024. That sounds really strong on paper, until you see that distributable earnings per share only increased by 5.6%. This is because of the large number of additional shares in issue.
Now, this disconnect shouldn’t happen every year. Although NEPI (and its peers) enjoy doing regular scrip dividend alternatives where shares are issued in lieu of cash dividends, this shouldn’t lead to such a gap each time. Instead, it’s activity like large bookbuilds (equity capital raisings) that is to blame. Assuming they don’t do them on an ongoing basis, the strong performance in the underlying portfolio should translate into higher per-share growth as freshly raised capital is deployed into income earning assets. Notably, net operating income grew by 13.2% last year, so there’s no shortage of growth in the portfolio.
Still, the per-share jump isn’t expected to happen in the 2025 financial year either, with an expectation for distributable earnings per share to be just 1.5% higher.
The loan-to-value ratio ended the year at 32.1%, which means the the balance sheet is in great health. Property funds need to operate in the right window for debt, as too little is problematic for returns and too much is problematic for ongoing existence!
Redefine’s renewal success rates are up – but at the cost of negative reversions (JSE: RDF)
A pre-close update makes for interesting reading
Redefine Properties released a pre-close update presentation for the six months ending 28 February 2025. Once you’ve worked through all the usual corporate gumph in the opening slides, you’ll find a lot of useful numbers.
Compared to the end of the 2024 financial year, occupancies increased from 93.2% to 94.2%. The renewal success rate also jumped considerably. This comes at a cost though, with rental reversions deteriorating from -5.9% to -8.5%. The office portfolio was still to blame, with an ugly negative reversion of -17.2%!
At least retail has a far better story to tell, with reversions of positive 0.6%. Although there seems to be some pressure on tenant turnover growth, the renewal success rate has increased. Also, space taken back from Ster Kinekor and Pick n Pay has been partially relet.
The highlight seems to be the industrial portfolio, with positive reversions of 4.5% and a strong renewal success rate.
The group also has exposure to Poland and the story in that country continues to be positive, with solid demand in the retail sector. There was a dip in footfall though in 2024, so that’s something to keep an eye on.
Happily, the group weighted average cost of debt fell by 30 basis points to 7.2% thanks to rate decreases in Europe over the period. The see-through loan-to-value is 47.5%, which is roughly in line with the last couple of years.
Guidance for FY25 of distributable income per share of between 50 cents and 53 cents has been maintained.
Nibbles:
Director dealings:
The operations director of the main operating subsidiary of Lewis Group (JSE: LEW) sold shares worth R2.75 million.
A trust associated with the CEO of Tiger Brands (JSE: TBS) bought shares worth R1.2 million.
Acting through Titan Premier Investments, Christo Wiese bought another R523k worth of Brait ordinary shares (JSE: BAT).
Super Group (JSE: SPG) shareholders gave their resounding support to the proposed disposal of the stake in SG Fleet. in Australia. The transaction was approved by holders of 98.54% of shares represented at the meeting. This is only one of the approvals required for the deal, as shareholders in SG Fleet need to also approve the scheme. Super Group only has 53.584% in that company, so there are many other shareholders who need to agree to go along with the plan. They expect to release the results of that meeting on 8th April and they hope to implement the transaction by the end of April.
Putprop (JSE: PPR) is one of the smallest property funds on the JSE, with a market cap of just R150 million. The company released a trading statement dealing with the six months to December 2024 in which they note an expected increase in HEPS of between 16.7% and 36.7%.
Things are still far from easy at Accelerate Property Fund (JSE: APF), with GCR Ratings downgrading the credit ratings of the fund and keeping it on Rating Watch Negative. The increasing risk of a near-term default or distressed debt exchange has driven this decision. Accelerate is working with funding partners to extend current loan term facilities and maturities. R1 billion is maturing at the end of February 2025 (now, basically!) and R1.4 billion at the end of March 2025. The fund believes that improved performance at Fourways Mall, combined with the asset disposal plan, gives it a good shot at concluding the refinancing.
Old Mutual (JSE: OMU) announced that Nomkhita Nqweni is resigning as an independent non-executive director of Old Mutual in order to take up the role as Chairman of the Old Mutual Bank Limited board. It’s worth highlighting that the Prudential Authority at the SARB has approved the Old Mutual Bank board and the key executives.
Some very interesting and frankly quite worrying precedent has been set by the Takeover Regulation Panel (TRP) in respect of the Mustek (JSE: MST) mandatory offer by Novus (JSE: NVS). The TRP ruled that DK Trust became a concert party to the deal by virtue of giving Novus a written undertaking that the trust would not accept the mandatory offer. There are other factors at play as well, but that’s going to set a few hares running among corporate lawyers. More worrying, the Takeover Special Committee is not currently constituted, so any appeal or review needs to go through the High Court. This kind of thing isn’t exactly encouraging for dealmaking.
Continuing operations at Altron are on the up (JSE: AEL)
Discontinued operations made a loss, though
Altron’s share price has more than doubled in the past year, so the market got behind this turnaround story in a big way. The focus is clearly on the growth in continuing operations, along with a view on how quickly the management team can navigate their way out of discontinued operations.
Starting with the former, HEPS from continuing operations is expected to be 40% higher for the year ended February 2025. Revenue growth was only in the low single digits, while EBITDA was up double digits.
Netstar is one of the obvious highlights here, achieving double-digit growth in EBITDA. South Africa is by far the better story here, with a solid performance from the business that looks even better in the context of Netstar’s Australian operations being loss-making. The other two businesses in the broader Platforms segment also put in solid results, with Altron FinTech and Altron HealthTech both up double digits in EBITDA.
The IT services segment is also part of continuing operations and is more of a mixed bag. Although Altron Security is slightly up on the EBITDA line, revenue in that business has dipped. In Altron Digital Business, revenue is flat and profits are down. Altron Document Solutions has been re-integrated into continuing operations and grew its EBITDA despite flat revenue.
The final part of continuing operations is Altron Arrow in the distribution segment. This is a story of weaker revenue and maintained profit margins. Remember, constant margins at lower revenue means that profits fell by the same percentage as revenue.
In discontinued operations, Altron Nexus is still on the chopping board. Despite year-to-date improvement in the business, it remains a loss-making business. Altron is trying to sell the thing, noting that there are advanced discussions with a potential buyer.
As you can see, it’s still pretty messy. The share price growth in the context of these numbers shows you just how bad things were!
Burstone is deploying capital into Australian industrial assets (JSE: BTN)
They also get exposure through asset management activities
Burstone Group has a 50% interest in the Irongate Group. In turn, Irongate has established a joint venture with TPG Angelo Gordon that they call the Programmatic JV. This JV has A$200 million to invest in industrial assets in Australia and this amount could increase as capital is deployed.
Burstone’s exposure to this is two-fold: it has a minority co-investment in the JV through Irongate and it benefits from Irongate providing the investment and asset management functions.
The focus is on industrial and logistics assets on the eastern seaboard of Australia. The JV as concluded the acquisition of A$280 million of industrial logistics assets, with the equity cheque being A$133 million and the rest presumably being funded with debt.
The targeted returns at JV level are 15%. If they can get that right, that’s a solid hard currency return.
A slight uptick in earnings at Cashbuild (JSE: CSB)
Perhaps slow and steady will win this race
Cashbuild’s share price has suffered the same sell-off this year that many consumer-facing groups on the JSE have experienced. A deterioration in sentiment isn’t kind to share prices and I’m now concerned about the impact of loadshedding as well.
Still, it’s up 34% over 12 months and I’m not cashing in my profits yet. I’m still optimistic about the benefit of lower interest rates working their way through the system. Most of all, I’m hoping that this recent weirdness at Eskom is an anomaly rather than a sign of things to come.
The release of a trading statement is triggered by a move of at least 20% in earnings. Alas, such a move only applied to Earnings Per Share (EPS) at Cashbuild, which more than doubled due to impairments in the base year. The metric that the market cares about is Headline Earnings Per Share (HEPS), which ignores impairments. HEPS only increased by between 0% and 5%, so Cashbuild is slowly inching its way higher.
2025 will need to reflect significantly better growth than this.
Gemfields is catching up on lost sales in emeralds (JSE: GML)
The share price has had a great week
Gemfields recently announced that the ridiculous export duty on emeralds has been suspended once more by the Zambian government. That was very good news, as it really called into question how sustainable the business model would be. The share price being up 15% in the past week tells you how worried the market was about this.
With the export duty out of the way (for now at least), Gemfields felt inspired to catch up on some lost auction revenues. Market prices are still well off their highs, but at least bids were higher than at the last auction. You need to be careful when comparing different auctions, as the quality of the underlying emeralds will vary from one auction to the next. With 10 out of 13 lots sold and auction revenues of $4.8 million raised in the process, at least there’s positive momentum at Gemfields once more.
Sadly, this doesn’t offset the immense business risks and the extensive capex in the business. Here’s the 5-year chart that really puts this latest share price bump into perspective:
Prosus is acquiring Just Eat – and the market seems nervous (JSE: PRX | JSE: NPN)
New CEO Fabricio Bloisi might be more focused on profits than his predecessor, but he still has a growth mandate
If you’re hoping that Prosus – Naspers will sell off the Tencent stake and do share buybacks into perpetuity, then you’ve missed the point about why a CEO like Fabricio Bloisi has been appointed to the group. Although they are certainly more aware of profitability and capital allocation after the headaches that previous management caused, it’s also unrealistic to think that they won’t be making any acquisitions along the way. Bloisi is a founder and operator of businesses and these type of people don’t sit still.
With a 5.8% drop in the Naspers price and a 6% drop in the Prosus price on the day, the market conveyed its displeasure at the announcement of an offer by Prosus to Just Eat Takeaway.com shareholders of €20.30 per share. This is a €4.1 billion transaction, so it’s material to the group. Still, they aren’t exactly betting the farm, as the Prosus market cap is €103 billion.
Bloisi has a lot of personal experience in the food delivery space, albeit in South America rather than in Europe where Just Eat operates. Although on paper it looks as though he’s really paying up here with a 63% premium to the closing share price, take a look at this 5-year chart of Just Eat for context:
Unlike the deals done during the pandemic, this isn’t exactly an acquisition at the top of the cycle.
Food delivery isn’t my favourite vertical, although I do have a long position in Uber. It can work well as part of a broader tech play (as is the case at Uber), with Prosus looking to “create a European tech champion” in this space. Platform businesses are certainly capable of generating immense wealth if things go well.
Unfortunately, they are also capable of losing a fortune while scaling a business model with unappealing economics. Just Eat has been around since 2000 and they reported attributable losses of €1.6 billion in the year ended December 2024, or €490 million excluding Grubhub, the US business that Just Eat recently sold. There will need to be a substantial focus on getting the unit economics right.
The board of Just Eat has unanimously recommended that shareholders accept the offer. The CEO and other board members hold 8.1% of the shares in aggregate and they will tender them in the offer. In order for the offer to go through, Prosus requires a minimum acceptance threshold of 95%. They do have a plan in place to make it work based on 80% acceptance. They could technically waive the threshold to 67%, but I doubt that would happen in practice.
With the disposal by Just Eat of Grubhub out of the way, Prosus is swooping in on a depressed share price. They see this as a European opportunity where they can take the learnings from iFood and apply them to a new region. It shows you how bruised the market is from the previous management team that the immediate response was to hit the sell button.
I continue to believe in the opportunities that Prosus has under new management and I’ll be keeping my shares.
Also, based on the percentage drop in the Prosus share price and comparing it to the market cap, the market has basically assumed that all the money being spent on this acquisition (and more) will instantly be worthless.
Overreaction, much?
An even larger pot of gold at the end of Rainbow Chicken (JSE: RBO)
The year-on-year improvement is even better than they thought
Things in the poultry industry are certainly looking far more favourable these days. We’ve seen this narrative from other companies in the sector and now Rainbow Chicken has added its name to the list.
The market already knew that the year-on-year improvement was huge, with a trading statement on 28 January reflecting an expecting for HEPS to improve by at least 1,100% for the six months to 29 December 2024. Obviously, a percentage increase like that isn’t helpful, so it’s better to look at the actual numbers involved. In this case, the expectation was for interim HEPS of at least 28.35 cents.
Shareholders will be thrilled to learn that the words “at least” were working hard here, as the improvement in HEPS has actually taken it into a range of between 35.40 cents and 35.89 cents. You can safely ignore the year-on-year percentage move as a useless metric. Instead, I must highlight that the midpoint of this range is a full 25.7% higher than the guidance of 28.35 cents given in the January trading statement.
You can safely expect to see some fireworks in the share price on Tuesday morning, as this announcement came out after the close on Monday.
At least cash generation improved at Sasol (JSE: SOL)
But free cash flow still came in negative
Sasol has released earnings for the six months to December. With a 13% drop in the average rand price of Brent Crude and pressure on refining margins, it wasn’t a happy time. To add to the difficulties, there was a 5% decrease in sales volumes due to lower production.
Revenue came in 10% lower year-on-year, while adjusted EBITDA fell by 15% as operating leverage worked against the company. That impact would’ve been a lot worse in not for cost control measures.
As you work down the income statement, you eventually reach a drop in HEPS of 31% to R14.13 per share. The Sasol share price is just below R87, so that’s a P/E multiple of 6.15x.
None of this sounds great, obviously. There is a highlight of sorts at least, which you’ll find in the statement of cash flows. Cash generated from operating activities jumped by 20% as Sasol unlocked working capital. Capital expenditure was 6% lower. The combination led to a much better period from a free cash flow perspective, albeit still in the red with an outflow of R1 billion That’s much better than the outflow of R6.5 billion in the comparable period.
This isn’t a good enough improvement to support the payment of a dividend. Sasol is happy to pay 30% of free cash flow as a dividend provided that net debt is below $4 billion. With net debt currently at $4.3 billion and free cash flow in a deficit position, they clearly haven’t met the requirements.
Sasol’s share price is down 40% over the past 12 months.
Sasol values Ghost Mail readers and has placed the full results in your favourite financial publication at this link. Go check it out for the story directly from the company and use it to help you form your own view!
Rentals and occupancies are mostly up at Stor-Age (JSE: SSS)
UK occupancies are the only blemish in this update
Stor-Age has released a trading update for the four months to January 2025. It’s generally positive, particularly in South Africa where the owned portfolio increased occupancy by 1.5%. The way they measure this is based on the quantum of occupied square metres as at the end of January 2025 vs. September 2024, rather than the occupancy rate. They do provide the occupancy rate as well at least, coming in at 93.5% as at 31 January 2025 in the South African owned portfolio. I just wish they included the comparable occupancy rate in the announcement as well, as working off the total number of square metres tells you nothing about like-for-like performance.
These occupancies are being achieved despite the average rental rate being up 7.8% year-on-year, so that’s very encouraging for the local numbers. To add to this, the occupied square metres in the joint venture portfolio in South Africa increased by 22.8%, so they are still expanding the business locally. They are particularly busy in Cape Town, taking advantage of the growth up the West Coast towards Melkbosstrand. If you’ve ever driven through Sunningdale, you’ll know how rapid the growth there is.
The UK doesn’t tell such a great story in this period, with occupied square metres down 1.1% over four months. Stor-Age points out that this is a seasonally weak period in the UK business, so this is the problem with looking at this metric over four months rather than on a year-on-year basis. At least average rental rates were up 4.1%, so that’s encouraging.
Stor-Age is looking to drive return on equity through third-party management deals. This is common practice in the hotel industry and it makes sense in storage as well. Essentially, you do wonders for return on equity if you can generate more returns without using up more equity! By managing facilities on behalf of property owners, Stor-Age can receive fees from the properties without having to lay out the capital to build them. There’s a development pipeline of six such properties in the UK market, adding to the three which closed in May 2024.
Nibbles:
Director dealings:
As part of the increased Black Ownership that Spear REIT (JSE: SEA) was instructed by the Competition Commission to achieve to get the Emira portfolio acquisition approved, an associate of a director of Spear has bought shares worth R3 million in on-market trades and has pledged them to Nedbank as part of the larger financing deal worth R30 million.
The spouse of a non-executive director of The Foschini Group (JSE: TFG) bought shares worth R337.5k.
In an example of one of his smaller purchases, Christo Wiese (acting through Titan Fincap Solutions) bought R26.6k worth of Brait Exchangeable Bonds (JSE: BIHLEB).
Family members of the CEO of Altvest (JSE: ALV) bought shares worth R4k.
An associate of a director of 4Sight Holdings (JSE: 4SI) sold shares worth R1.8k.
Castleview Property Fund (JSE: CVW) seems to have its eye on SA Corporate Real Estate (JSE: SAC). We just don’t know yet whether an initial investment might turn into something bigger. For now, Castleview has acquired a stake to the value of R139 million in SA Corporate. That’s a chunky amount of money, but it’s worth noting that SA Corporate’s market cap is R7.2 billion and so this is still firmly a minority stake.
Not only does it rain at Anglo American Platinum (JSE: AMS), but it pours as well. Luck really isn’t on the side of the PGM sector at the moment, with the latest challenge being widespread flooding in the northern part of South Africa. Anglo American Platinum has indicated that operations at the Amandelbult Complex were impacted. All operations have been reinstated except for the Tumela Mine. Tumela contributes around 10% to monthly metal-in-concentrate production. At this stage, the group does not expect 2025 production guidance to be impacted.
Metrofile (JSE: MFL) announced that Bradley Swanepoel will be talking over as CFO of the group. He’s an external appointment, with his current role being Chief Risk Officer at MTN South Africa. His exact start date will depend on the negotiations around his notice period. Metrofile could really do with some new growth ideas, so hopefully this will help going forward.
Supermarket Income REIT (JSE: SRI) is still struggling for liquidity on the local market. This is an example of a very large UK-based property company that added a JSE listing to its capital structure. The company gave the market an update on progress made in its portfolio. This included the sale of a retail property to Tesco for £63.5 million, which is a 7.4% premium to the June 2024 valuation. The fund also renewed three Tesco leases at a 13% premium to what the valuer assumed the rental value would be, so that’s likely to lead to an uptick in capital values on the balance sheet. Finally, the company stepped across the Channel and acquired a portfolio of nine Carrefour supermarkets in France for a total of €36.7 million. The acquisition was priced at a net initial yield of 6.8% and the Carrefour stores represent 5% of the fund’s assets.
After all the recent mining updates from the big names in the sector, you may well be sick of them by now. In case you aren’t, BHP (JSE: BHG) has released the presentation from the BMO Global Metals, Mining and Critical Minerals Conference. You’ll find it here.
As part of the drawdown on the R500 million facility, Mantengu Mining (JSE: MTU) has listed another 24.9 million shares. To give context to this dilution, the company has 286 million shares in issue.
Although I don’t normally make note of institutional shareholding changes in Ghost Bites, it’s unusual to see large hedge fund changes. Trencor (JSE: TRE) announced that All Weather Capital has decreased its stake from 13.29% to 3.22% and that African Phoenix Investments has decreased from 15.15% to 4.89%. This comes after the company paid out most of its value as a special dividend.
This results summary is brought to you by Sasol and does not include any opinions or editorial by The Finance Ghost.
Sasol’s financial performance for the six months ended 31 December 2024 was impacted by a challenging macroeconomic and operating environment. However, stringent cost and efficient capital management helped to offset the impact and improve free cash flow generation compared to the previous corresponding period.
Revenue of R122,1 billion is 10% lower than the prior period, mainly due to a 13% decline in the average Rand per barrel Brent crude oil price and a significant decline in refining margins and fuel price differentials, as well as a 5% decrease in sales volumes as a result of lower production and lower market demand. This was detailed in the Production and Sales Metrics published on 23 January 2025.
Adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA) of R23,9 billion is 15% lower mainly as a result of the aforementioned lower revenue with stringent cost management implemented in response helping to mitigate the impact. The relative contribution from International Chemicals increased from 6% to 13%.
Earnings before interest and tax (EBIT) is 40% lower to R9,5 billion. This was impacted by non-cash adjustments including:
A net loss of R6,2 billion from remeasurement items compared to a net loss of R5,8 billion in the prior period, mainly due to further impairments of the Secunda liquid fuels refinery cash generating unit (CGU) of R5,0 billion and the Sasolburg liquid fuels refinery CGU of R0,6 billion. Both CGUs remain fully impaired, resulting in amounts capitalised during the current period being impaired.
Unrealised losses of R0,1 billion on the translation of monetary assets and liabilities, and valuation of financial instruments and derivative contracts compared to unrealised gains of R2,7 billion in the prior period.
As a result of the above, basic earnings per share (EPS) decreased by 52% to R7,22 per share and Headline earnings per share (HEPS) decreased by 31% to R14,13 per share compared to the prior period.
Cash generated by operating activities increased by 20% to R17,6 billion compared to the prior period mainly due to changes in working capital. Capital expenditure, excluding movement in capital project related payables, amounted to R15,0 billion, 6% lower than the prior period.
At 31 December 2024, our total debt was R116,9 billion (US$6,2 billion) compared to R117,7 billion (US$6,5 billion) at 30 June 2024. Sasol deposited R5,4 billion (US$0,3 billion) on the Revolving credit facility during the current period. Our net debt (excluding leases) was R81,8 billion (US$4,3 billion) compared to R73,7 billion (US$4,1 billion) at 30 June 2024 with the increase due to the aforementioned negative free cash flow.
Dividend
The Company’s dividend policy is based on 30% of free cash flow generated provided that net debt (excluding leases) is sustainably below US$4 billion on a sustained basis. Free cash flow is a deficit of R1,1 billion and the net debt at 31 December 2024 of US$4,3 billion exceeds the net debt trigger, therefore no interim dividend was declared by the Sasol Limited board of directors (the Board).
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