Sirius Real Estate has undertaken a non-pre-emptive placing of new ordinary shares to raise gross proceeds of £146,6 million. The company issued 170,417,384 new shares at an offer price of 86 pence, representing a discount of c. 5.9% to the closing price on 17 November 2023. The capital raise will provide the company with the flexibility to pursue attractive acquisition opportunities which, it says, exist in Germany and the UK.
African Rainbow Capital Investments will undertake, a fully committed and underwritten, pro rata non-renounceable Rights Offer of R750 million. The company will offer 150 million ordinary shares at R5.00 per rights offer share in the ratio of 11.06579 rights offer shares for every 100 existing ordinary shares held. The rights offer price represents a 7.3% discount to the 30-day VWAP price as at 10 November 2023. The funds raised will be used to meet the medium-term funding requirements of the ARC Fund. Shareholders holding an aggregate 65% stake in ARC Investments have committed to subscribe with the balance of the offer fully underwritten by ARC.
The results of Sable Exploration and Mining’s Rights Offer, which was first announced in February, was all but ignored by shareholders with an uptake of just 1.38% of the rights shares offered. Fortunately, the capital raise was fully underwritten by various parties with the company raising the R52,2 million sought.
Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 13 – 17 November 2023, a further 5,793,624 Prosus shares were repurchased for an aggregate €174,97 million and a further 429,582 Naspers shares for a total consideration of R1,44 billion.
Following the announcement in October of its share buy-back programme, AB InBev has repurchased 1,570,232 shares at an average price of €56.26 per share for an aggregate €88,34 million. The shares were repurchased in the period 13 to 23 November 2023.
Glencore intends to complete its programme to repurchase the company’s ordinary shares on the open market for an aggregate value of US$1,2 billion by February 2024. This week the company repurchased a further 9,470,000 shares for a total consideration of £43,62 million.
WG Wearne will have its listing removed from the JSE from the commencement of business on 28 November 2023. The company’s listing was suspended in July 2018 for failure to submit its provisional report. Since its suspension, WG Wearne has failed to remedy the various non-compliances and did not appeal the removal decision by the JSE.
Steinhoff Investments, subject to shareholder approval, is proposing to change the company’s name to Ibex Investment Holdings to align with similar changes implemented through its holding structure. The company will remain listed in the ‘Preference Shares’ subsector of the main board of the JSE.
Four companies issued profit warnings this week: Stefanutti Stocks, Deneb Investments, The Spar Group and Mantengu Mining.
Three companies issued or withdrew a cautionary notice: Salungano, Telkom and Tongaat Hulett.
Nigerian Breweries has issued a circular to shareholders to approve the acquisition of an 80% stake in Distell Wines and Spirits Nigeria and 100% of Heineken Beverages (Holdings) import business in Nigeria for ₦7,01 billion. The deal follows the successful acquisition by Heineken of South Africa’s Distell Group.
Oriole Resources and Ghana-based BCM International have entered into two heads of terms (HoT) agreements to fast-track the development of the Bibemi and Mbe gold projects in Cameroon. The HoT for Bibemi is an earn-in of up to 50% by BCM for a US$500,000 cash payment and $4 million exploration expenditure, whilst the Mbe HoT is an earn-in of 50% for a cash payment of $1 million and $4 million exploration expenditure.
Ed Partners Africa, a Kenyan non-banking financial institution, has received commitment for a US$10 million loan guarantee facility from the United States’ Development Finance Corporation (DFC).
Nigerian online grocery store, Pricepally, has raised US$1,3 million in seed funding from Samurai Incubate, SOSV, ELEA, Hi2 Global, Chui Ventures and David Mureithi to expand within Nigeria.
Aquarech, a Kenyan fish farming startup founded in 2019, has raised US$1,7 million in equity funding to support small-scale farmers through its mobile app platform. Aqua-Spark led the investment and was joined by Acumen, Katapult and Mercy Corps ventures.
Nigerian fintech, FrontEdge, has raised US$10 million in a debt and equity round led by TLG Capital, which also included Flexport. FrontEdge provides SME exporters and importers with the working capital and software tools needed to facilitate their cross-border and international transactions.
Morocco’s B2B e-commerce and fintech startup Chari, has announced an undisclosed investment from Mohammed IV Polytechnic University’s investment fund, UM6P. This is the fourth investment announcement this year. In February, Orange Ventures invested US$1 million. In May, Plug and Play made an undisclosed follow-on investment and in June, Verod-Kepple Africa Ventures invested $1,5 million.
MMG Africa Ventures (Hong-Kong listed MMG Limited) has reached agreement with Cupric Canyon Capital, The Ferreira Family Trust, Resources Capital Fund VII and the Missouri Local Government Employees’ Retirement System to acquires all their shares in the target company that indirectly wholly owns the Khoemacau copper and silver mine in Botswana, for US$1,9 billion.
Egyptian sports equipment and apparel marketplace, WayUp Sports has raised an undisclosed seed round led by Beltone Venture Capital and Index Sports Fund. Other strategic angel investors also participated.
Africa Healthcare Network has raised US$20 million in debt and equity funding from Africa50, AfricInvest and Ohara Pharmaceuticals Co to accelerate its growth.
In a rapidly evolving digital world, corporate finance is witnessing the dawn of a transformative era, with artificial intelligence (AI) at the helm. No longer are decisions exclusively grounded in Excel analyses and instinct. Today, AI offers a fresh lens, redefining how we pinpoint corporate finance transactions and assess them within the context of shifting economic and geopolitical landscapes.
A Testimony to AI’s Growing Role
A recent EY study of 1,200 CEOs unveiled some interesting trends. CEOs overwhelmingly (65%) view AI as a force for good, attributing its potential to both enhance business efficiency and foster societal improvements, such as healthcare advancements. More than a quarter (27%) of respondents are already harnessing the power of AI in their mergers and acquisitions (M&A) processes.
However, this optimism is tempered by concerns. The majority of CEOs believe that more work is needed to mitigate the social, ethical and criminal challenges that AI might introduce, from cyber threats to the spread of deepfakes. Yet, despite these apprehensions, business leaders remain positive.
Ask the Right Questions: The Art of Prompt Engineering – The better the question, the better the answer, the better the world works.
While AI’s prowess in data analysis is widely celebrated, the essence of obtaining actionable insights lies in asking the right questions. This is where prompt engineering, our ability to articulate the question in a manner that is understandable to the AI model, becomes invaluable. By finely tuning our queries and prompts, we can guide AI systems to extract precise, valuable insights from heaps of data.
From Vast Data to Valuable Insights: AI in Action
The real-world applications of AI, particularly when paired with adept prompt engineering, are vast. Machine learning algorithms and natural language processing enable rapid identification of investment opportunities, risk assessments and market trend analysis.
Target Identification Consider an investment bank using AI to screen global news and financial reports. By engineering the right prompts, the system can not only flag potential merger candidates, but also assess how these targets align with larger strategic goals or macroeconomic indicators. Refinitiv, a global provider of financial market data, has developed a quantitative prediction of M&A targets by analysing text, patent and fundamental content.
AI can also be used to evaluate the cultural compatibility of merging entities. Salesforce’s acquisition of Slack is a great instance of aligning culture and product offerings. Tools like CultureX, an AI platform backed by MIT, provides insights into company culture using employee reviews on platforms like Glassdoor.
Due Diligence and Valuation AI expedites and enhances due diligence processes by rapidly analysing data sets, ensuring comprehensive risk identifi-cation and offering dynamic, real-time valuations of target companies. Tradition-ally, transaction professionals grappled with vast amounts of siloed data manually. EY’s “Diligence Edge”, powered by AI, is revolutionising this approach. By harnes-sing the capabilities of IBM Watson’s Knowledge Studio and Discovery, EY Diligence Edge offers a panoramic view of target companies and their competitors.
The AI-driven “smart data room”, within and powered by Watson, streamlines data ingestion and analysis, allowing profes-sionals to swiftly identify and analyse pertinent information. The final layer of this tech stack is its presentation capabilities, which allow findings to be showcased in intuitive, interactive dashboards.
Predictive Analytics and Financial Modelling AI models optimise capital allocation by predicting high-return investments and forecasting market trends, guiding financial decisions. BlackRock leverages Aladdin, an AI system, to analyse risks and make investment decisions. The platform provides an end-to-end picture of portfolios, assisting in capital allocation.
Real-time Monitoring
AI continuously monitors stock markets and other financial indicators, alerting businesses to potential acquisition targets or market shifts that align with predefined criteria. Goldman Sachs uses its Marcus platform, which incorporates AI, to continually monitor financial markets and offer real-time insights. Such platforms can be tailored to identify potential M&A targets based on predefined criteria and real-time market dynamics. Cisco, when it acquires companies, uses AI and machine learning tools to help integrate the acquired company’s products, technology and team, ensuring a smooth transition.
Regulatory & Contractual Oversight AI tools ensure compliance with evolving international business laws during cross-border M&A deals, and assist in analysing contracts for potential risks and obligations. EY uses Kira, an AI-powered contract analysis tool, to assist in identifying and extracting regulatory clauses and requirements from legal documents.
Risks to Consider: The Other Side of the AI Coin
The marriage of AI and prompt engineering in corporate finance promises efficiency, precision, depth of insight, and evolving accuracy. But as with all powerful tools, it must be wielded with care, understanding both its potential and its pitfalls.
As promising as AI is in reshaping corpor-ate finance, it is not without its challenges:
Data Quality AI models are only as good as the data fed into them. Inaccurate or biased data can lead to flawed insights, potentially causing significant financial repercussions.
Over-reliance An over-dependence on AI without human oversight can be risky. It is essential to strike a balance between automated insights and human judgement.
Security Concerns AI systems, like any digital platform, can be vulnerable to cyberattacks. Ensuring robust cybersecurity measures is paramount.
Ethical Implications From data privacy issues to the potential biases in AI algorithms, there are several ethical considerations to be addressed.
Regulatory Challenges As AI becomes more prevalent, regulatory bodies worldwide are grappling with creating frameworks to govern its use, which could impact its application in corporate finance.
Closing Thoughts
The potential of AI to reshape corporate finance is evident. As the tools become more sophisticated, so does the importance of crafting the right questions. In a domain where strategic decisions have monumental consequences, the synergy of AI and adept prompt engineering can be the much-needed ace up the corporate finance professional’s sleeve.
Brian Vaddan is an Associate Director in the EY Strategy and Transactions Team, focusing on Financial Modelling and Data Analytics.
This article first appeared in DealMakers, SA’s quarterly M&A publication.
Since gaining independence in 1963, Kenya has evolved to become a major economic force in East and Central Africa, so much so that it has been compared to Singapore’s extraordinary rise in Asia.
Like Kenya, in the 1960s, Singapore was a nascent state grappling with its newfound independence and the various challenges that it presented. But fast forward to today, and Singapore is a beacon of economic prosperity – its transition from a humble port city to a universally acclaimed financial nucleus is a compelling tale of transformation.
Singapore’s success story, underpinned by strategic positioning, stalwart legislation and a pro-business environment, offers a replicable model for burgeoning economies. It is in this proven blueprint that Kenya – with its robust policies; booming fintech, ICT and renewables sectors; young and capable workforce; and strategic geographic location – can find inspiration, and how it could well become Africa’s own version of Singapore.
FROM GOOD TO GREAT
Kenya’s thriving economic climate is testament to the strength of its 2010 Constitution, effective legislative frameworks and forward-looking regulatory policies – all contributing to a competitive business landscape that propels economic development.
According to the World Bank, Kenya’s economy achieved broad-based growth averaging 4.8% per year between 2015 and 2019, significantly reducing poverty from 36.5% in 2005 to 27.2% in 2019.
Real GDP is anticipated to rise to 5% in 2023 and 5.2% on average in 2024 and 2025. Moreover, the World Bank’s Ease of Doing Business index placed Kenya 56th out of 190 economies in 2020, a substantial climb from its 113th rank in 2013.
That said, there is room for improvement.
98% of all Kenyan businesses are small and medium enterprises (SMEs). Given that these SMEs provide livelihoods for the majority of Kenya’s working populace, any policy modification bolstering this sector’s growth promises profound economic dividends. For example, adjusting antitrust and competition regulations by tweaking the thresholds for compulsory reporting or approvals could reduce investment barriers and benefit smaller ventures.
The pursuit of inclusive growth is also key. While the country’s constitution advocates fairness and inclusivity, corruption is an issue. Transparency International’s 2022 Corruption Perceptions Index ranks Kenya at 123 out of 180 countries, which highlights the need to rein in corruption.
Kenya must also scrutinise its constitutional expenses. A rationalised approach to expenditure would contribute to fiscal prudence and further solidify the country’s economic health.
An evaluation of Kenya’s existing legal framework reveals the need to revise and update certain laws. By doing so, inconsistencies that pose potential hurdles to investors can be mitigated. This would involve investing in capacity building for legal and regulatory bodies. Strengthening these institutions is a key step towards ensuring the uniform resolution of complex legal issues and fostering consistency in decision-making. In addition, there is a real opportunity for Kenya to further the development of an independent and competent judiciary.
Although already on the path to digitise government services and registries, a sharp focus on completing the digitisation of lands and business related registries will increase efficiencies.
The role of public-private partnerships (PPPs) in infrastructure development is also pivotal. To reap the full benefits of PPPs, however, Kenya should revisit the current legal framework governing these partnerships. Simplifying processes and enabling swift project implementation would make PPPs more attractive, fuelling infrastructure growth.
On the human side, investment in education and vocational training is key. Kenya’s public universities need to offer modern and fit-for-purpose curricula. Vocational training in sectors such as healthcare, tourism and manufacturing will make the human capital in Kenya even more competitive, and attract more investment into the country.
Finally, a significant aspect of Kenya’s path forward involves reforming its complex and aggressive tax laws. A clear and equitable tax structure would expand the tax net, foster a conducive business environment, and amplify Kenya’s appeal to local and foreign investors.
LOOKING FORWARD
Kenya has positioned itself at the forefront of green growth in Africa. 93% of the country’s electricity generation capacity in 2020 hinged on renewable energy. However, like other developing nations, the financing of green initiatives presents a challenge that needs to be confronted.
Kenya’s blossoming technology industry also requires a supportive legislative environment. An astute ‘light-touch’ regulatory approach would enable industry growth while ensuring regulatory compliance.
The African Continental Free Trade Area (AfCFTA) offers the prospect of pan-African economic integration. To capitalise on this opportunity, Kenya needs to harmonise its national legislation with AfCFTA provisions. With approximately 40% of the East African Community’s GDP credited to it, as well as its experience fostering regional integration within the East African Community, Kenya is well positioned to shepherd the AfCFTA agenda.
Kenya’s quest for success hinges on steadfast action and unwavering commitment to economic competitiveness, inclusive growth, sustainability and regional integration. The challenges are daunting, but not insurmountable. The Government has demonstrated a readiness to confront these hurdles head-on, laying a robust foundation for the country’s future.
The road ahead for Kenya is illuminated with promise. With sustained efforts and strategic interventions, Kenya’s vision of replicating Singapore’s success story on African soil is within reach.
Paras Shah is the Managing Partner | Bowmans Kenya
This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication. DealMakers AFRICA is a quarterly M&A publication. www.dealmakersafrica.com
There are various complexities inherent in the sale and acquisition of businesses, which, if not properly managed, can often lead to missed opportunities on either the sell or the buy side.
Accordingly, the processes involved in the disposal of a business must be appropriately attended to, to ensure that the maximum potential value is realised.
One of the most important aspects of the disposal of a business is the accompanying due diligence that the acquirer must undertake. The due diligence process has multiple purposes, but is primarily focused on determining the inherent risks for the acquirer, which may impact the purchase consideration. Typically, the due diligence process is handled by creating virtual data rooms (DD rooms), where the seller provides the acquirer with relevant information about the business. However, key information is also often shared outside of the DD room, either in ad hoc email correspondence or desig-nated meetings. From the seller’s perspective, it is prudent to ensure that the ad hoc correspondence is transferred to the virtual data room. This can be done, for example, by ensuring that all the acquirer’s ad hoc questions are encapsulated in a single document, with the corresponding responses from the seller.
The DD room is also critical to the disclosures of the purchase agreement. To this end, the seller would want the DD room to be annexed to the disclosure clauses as part of the purchase agreement. This practice aims to prevent unnecessary warranty and indemnity claims for the seller as a result of non-disclosure. In such a case, the buyer would need to be confident in their due diligence process, to ensure that the relevant risks are identified and adequately addressed as part of the purchase agreement.
From a buyer’s perspective, one protection measure that could be implemented is a holdback on the purchase consideration until certain perceived risks have lapsed; i.e., the buyer would withhold the payment of a portion of the purchase consideration until holdback provisions have been satisfied. These holdback provisions can be either suspensive or resolutive. In certain instances, a seller may request that the cash portion subject to the holdback be placed in an escrow account; however, using an escrow account does result in the unproductive use of funds for both parties.
To avoid unproductive cashflow consequences, the parties could consider obtaining warranty and indemnity insurance, should certain hold-back provisions not be met. The downside of such a solution is that it is typically quite costly for both parties. Alternatively, where the seller does not outrightly divest from the business, and therefore maintains an interest in it, a portion of the shares that it maintains in the business could be offered as security for any warranty and indemnity claims.
The disposal or acquisition of a business interest can be notoriously complex, particularly when there is an air of scepticism amongst the parties, which typically leads to extensive due diligence processes and complex warranty and indemnity provisions. These complexities can be overcome by finding nuanced solutions to satisfy the needs of both parties. Ultimately, no two merger and acquisition processes are alike, and understanding the options that are available to solve these potential deadlock situations is the key to concluding a successful transaction.
Bobby Wessels is a Manager: Corporate and International Tax, and De Wet de Villiers a Director: Private Clients | AJM.
This article first appeared in DealMakers, SA’s quarterly M&A publication.
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Irongate launches its Australian industrial fund (JSE: BTN)
Burstone Group is providing 20% of the equity investment
The Irongate joint venture in Australia has announced its first industrial acquisition, being a A$57.25 million property in Sydney with a vacancy rate of just 0.2%. This deal effectively seeds the new Australian Industrial Property Fund.
At this stage, that fund is unlisted. Burstone Group (which was Investec Property Fund) will take 20% of the equity in this investment, coming in alongside Phoenix Property Investors with 80%. The Irongate joint venture (in which Burstone is a partner) will provide the fund and asset management services.
Overall, the benefit to Burstone is that the Irongate joint venture is a platform to grow its capital-light revenue and capabilities, with the underlying fund giving Burstone the ability to participate directly in the property equity as well.
Growthpoint gives a detailed quarterly update (JSE: GRT)
The South African portfolio is showing signs of life
It’s always a big deal when Growthpoint releases an update, as this is the best way to see broad performance in the property sector.
Looking at the South African portfolio, the lease renewal rate of 78.2% this quarter is a big jump from 64.9% for FY23. Not only are vacancies down from 9.4% to 9.1%, but the average period on renewals is higher too. Escalations on renewal increased from 6.8% to 7.3%, so the pain of higher costs and funding rates is starting to be passed on to tenants. But replacement leases in the case of a tenant moving out are still coming in with negative reversions (i.e. cheaper than the lease being replaced), although -7.5% is a lot better than -12.9% previously.
Overall, there’s improvement in the retail and industrial sector along with gradual progress in the recovery of the office sector. Office vacancies are still a big headache, coming in at 18.9% with a renewal success rate of just 51.8%. It’s incredible to compare the Western Cape (single-digit vacancy rate) to Sandton (27.7%).
Growthpoint is only recovering 12.1% of its diesel costs from retail tenants. They hope to increase this to 30% in FY24, so that’s not good for food inflation. Lease addendums will seek to recover actual diesel consumption, not a fixed levy.
As usual, the jewel in the local crown is the V&A Waterfront, with a 32% increase in international air passengers into Cape Town driving a 9% increase in earnings before interest and tax.
Looking at the specific investment funds, Growthpoint Healthcare REIT has a loan-to-value of 14.8% and is busy with the acquisition of the Johannesburg Eye Hospital, but higher arrears mean that no growth is expected in distributable income per share in FY24. The Growthpoint Student Accommodation REIT has a vacancy rate of just 8%, with a few developments underway, but the expiry of a rent guarantee will significantly impact distributions. The portfolio in Nigeria isn’t appealing either, with a loan-to-value of 41% and some headaches on financing costs over the next couple of years.
If we shift our focus abroad, the notable update is that Growthpoint has increased its stake in Capital & Regional from 62.4% to 68.1% as part of supporting the acquisition of The Gyle Shopping Centre in Edinburgh.
The group balance sheet reflects a weighted average interest rate of 9.6%, or 7.0% after interest rate swaps and foreign-denominated loans are included. There was no significant refinancing activity in this period.
Finally, there’s a fascinating update around green energy. Known as a “wheeling agreement”, solar power from the Constantia Village shopping centre was injected into the city’s grid for use at Growthpoint’s office building in the foreshore. This is literally an exchange of energy between two Growthpoint-owned properties.
I try to temper my enthusiasm as a very happy semigrator to Cape Town, but it’s tough sometimes to be objective. It’s just great to read stuff like that.
Back to Growthpoint’s numbers, distributable income per share guidance for FY24 is unchanged, which means shareholders are still in for a tough time overall.
Heavy client cash outflows at Old Mutual (JSE: OMU)
A third quarter update gives us a good view on year-to-date performance
Old Mutual is a giant of an organisation, so you can expect to see varying levels of performance at segmental level. By the time you see this as a group number, the outcome is usually a lot smoother due to offsetting effects of strong and weak segmental performance.
A third quarter update means we now have a view on the nine-month performance this year.
Life APE sales only increased by 4%, but that was because of a product in China that was in the base period and subsequently discontinued. Excluding China, it was up 13%.
Gross flows grew 8%, driven mainly by the businesses in the rest of Africa. There were also premium increases elsewhere in the business that brought cash in.
Net client cash flow is an ugly number though, showing an outflow of R10.8 billion vs. an outflow of R1.2 billion in the prior period. Cash is being pulled out from Old Mutual Investments as clients face economic difficulties and need to dig into savings. There were also some rotations from large offshore players that impacted this number. The highlight is that Old Mutual raised R8.4 billion in the Alternatives business, which is a higher margin operation.
The loans and advances book grew by 2%, a function of Old Mutual’s cautious lending strategy in this environment.
Finally, gross written premiums grew by 11% excluding the acquisition of Genric Insurance Company. With that acquisition included, they grew 15%.
CFO Casper Troskie is due fore retirement in April 2024. To help with IFRS 17, he’s sticking around for another year.
Pan African Resources is making more gold at just the right time (JSE: PAN)
With the gold price doing well at the moment, this is what investors want to see
Pan African Resources has released a production update for the six months ending December. Yes, they’ve gotten the crystal ball out to give production guidance.
Gold production is expected to be between 2% and 6% higher. If we look ahead to the full financial year, there’s a small uptick in the lower range of production guidance. The group now expects to get between 180,000oz and 190,000oz of the yellow stuff out the ground vs. 175,209oz in the base period.
Looking even further ahead, completion of the MTR plant at Mogale is expected in the second half of the 2024 financial year. This project is expected to add around 25% a year in annual production!
If the gold price can sustain these levels, this is a great example of peaking at the right time.
Primeserv’s numbers went the right way (JSE: PMV)
Here’s the income statement shape you want to see
With a market cap of around R160 million, Primeserv sits firmly in the small cap bucket on the local market. The company has released results for the six months to September and the year-on-year picture tells a good story.
Revenue increased by 15% and operating profit by 21%, so there’s an improvement in operating margin. Headline earnings per share also moved higher by 21%, which tells you that there aren’t any funnies in the numbers in terms of once-offs.
The interim dividend is up 25% to 2.50 cents per share.
In terms of sector split, the company earns 30% of its revenue from engineering and mining project support services and 46% from the logistics industry.
Mid-teen growth at Reunert (JSE: RLO)
Unsurprisingly, the renewables space is becoming highly competitive
Reunert announced results for the year ended September 2023 and they reflect a 24% increase in revenue. Growth of 16% in HEPS is nothing to get upset about, but it’s well below the HEPS increase. The final dividend is 11% higher.
The group has been investing in its ICT segment, with two acquisitions in 2023. I think they need to be careful here, as the ICT sector is incredibly good at dishing up margin compression because of high levels of competition and largely homogenous product offerings. Indeed, segment revenue was up 18% and operating profit could only manage 2% growth in this period.
Another major focus area is the renewable energy market, helped along by Eskom. Large-scale containerised storage solutions will be the underpin of the business going forward, with the group noting that competition is really heating up across the solar space. The solar operations form just one part of the Applied Electronics segment, which grew revenue by 51% and operating profit by 163%.
The Electrical Engineering segment is strategically important because this is one of the areas where the group can grow internationally. Segmental revenue increased by 14% and operating profit was up 27%. As we’ve seen in so many companies that supply US-based firms, customer destocking in the US led to reduced volumes in that export market for the first three quarters of the year.
Overall, it’s a solid result for Reunert with decent growth drivers going into the new year. The share price is up 18% this year, so this is a good example of a relatively off-the-radar company (at least for retail investors) doing well.
RFG Holdings says thanks to the rand (JSE: RFG)
And to demand for pies!
RFG Holdings is on the right side of both revenue growth and margin expansion. With results now available for the year ended 1 October 2023, we see that revenue was up 8.7% and group operating margin expanded by 170 basis points to 9.6%.
It gets even better as you move further down the income statement, with diluted HEPS up 35.4% and the dividend following suit with a consistent payout ratio. Cash generated from operations jumped by 59.8%, so these are high quality earnings from a cash perspective.
And on top of all of this good news, return on equity improved from 12.5% to 14.9%.
It’s not all roses and sunshine. RFG only grew because of pricing increases, as group volumes fell by 8.3%. Also take note that foreign exchange gains contributed 340 basis points of revenue growth and the acquisition of Today was good for another 90 basis points. If you look even deeper, you’ll see that local volumes were down 6.6% and international volumes fell 13.6%, so the weak rand did wonders for the group level result.
It says a lot about consumer pressures that areas of strength include long-life products (less wastage) and demand for pies (a cheaper way to fill tummies). The canned fruit and vegetable categories struggled as consumers buckled under price increases in that aisle.
No additional suitors were found for Textainer (JSE: TXT)
The “go-shop” opportunity has now ended
Textainer is due to be acquired by Stonepeak, an alternative investment firm focused on infrastructure and so-called real assets. The deal price is $50 per share, putting an enterprise value of $7.4 billion on the group.
The interesting thing with this deal is that it included a go-shop clause, which gave Textainer and its advisors a 30-day window period in which to try solicit a better offer. There was no luck in terms of finding a better or even alternative proposal, so Stonepeak is the only bidder in town.
Assuming Textainer shareholders say yes to this offer, the deal is expected to close in the first quarter of 2024.
Little Bites:
Director dealings:
A non-executive director of Richemont (JSE: CFR) has bought shares worth around R8.5 million. Separately, a non-executive director bought shares worth R55.5k.
Mark Olivier seems to be the new Des de Beer, buying another R1.16 million worth of shares in Lighthouse Properties (JSE: LTE).
There’s a very unusual appointment in the banking industry, with Jason Quinn announced as CEO-designate of Nedbank (JSE: NED). Now, if that name seems familiar, it’s because Quinn was the interim CEO of Absa (JSE: ABG) from April 2021 to March 2022 and is currently the Financial Director of that group. He will join Nedbank from 31 May when Mike Brown steps down as CEO, bringing with him a deep understanding of one of Nedbank’s biggest competitors. This is quite the coup for Nedbank! Quinn has stepped down from the Absa board with immediate effect for obvious reasons. Chris Snyman moves into the Interim Group Financial Director role to replace him.
The CEO of Aveng (JSE: AEG) is retiring from the top job with effect from 1 March 2024. His replacement is Scott Cummins, the current CEO of McConnell Dowell, which is Aveng’s largest subsidiary. Rather than Scott moving to South Africa, the current CFO Adrian Macartney will be taking advantage of the opportunity to move from Joburg to Melbourne. I’m sure he can’t buy his ticket quickly enough! On a serious note, the epicentre of the group is moving to Australia, so that’s an important strategic point.
The formal documentation for the MiX Telematics (JSE: MIX) – PowerFleet proposed merger has been delayed. The intention was to distribute the circular and prospectus by 5 December, but there are various regulatory approvals that are needed and the documents should ideally be issued simultaneously. On this basis, the Takeover Regulation Panel (TRP) has granted an extension for the issuance of the scheme circular to no later than 31 January 2024.
Sibanye-Stillwater (JSE: SSW) announced the reference price for the $500 million raise of convertible bonds. In case you missed the news yesterday, they can be converted at a premium of 32.5% to the 30-day VWAP. That conversion price has now been announced as $1.3367 per share. The rand price based on which this was calculated is R18.55. Note that the dollar price is now locked in.
Sable Exploration and Mining (JSE: SXM) executed a rights offer that could barely have been more ignored by shareholders. Minority shareholders took up just 0.59% of the shares offered to the market. As underwriter, PBNJ trading and Consulting picked up 89.04% of the raise. This was very much the intention behind this capital raise of R52 million.
Steinhoff Investment Holdings (JSE: SHFF), which is the issuer of preference shares in the group, will change its name to Ibex Investment Holdings.
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African Rainbow Capital keeps hurting shareholders (JSE: AIL)
I would rather invest in a dying parrot than in this company– at least it would entertain me on the way out
We’ve just seen Sibanye with a major capital raise and Sirius raising money at the net asset value per share. In both cases, I can understand why this is happening.
We then have African Rainbow Capital, where the only pot of gold at the end of the rainbow has been for the insiders. In five years, the share price has lost 11% of its value. The management team, on the other hand, has done just fine thank you.
After a recent move to make the management fees more palatable, investors thought that perhaps the group had turned a corner in terms of making money at the expense of shareholders. But alas, we now have a rights offer at a large discount to net asset value and on the basis where letters of allocation can’t be sold. In other words, you either follow your rights or you get diluted. Excess applications also aren’t allowed.
And of course, in a shock to exactly nobody, the rights offer is underwritten by African Rainbow Capital (Pty) Ltd. I’m finding it hard not to view this as a shameless attempt to dilute minority shareholders in favour of African Rainbow Capital. The only good news is that no underwriting fees are payable, so at least they stopped one level short of what could’ve happened.
The capital raise of R750 million will be used to fund market expansion for Rain Group, ongoing opportunities at Tyme and investment strategies of various portfolio companies like Autoboys, Linebooker and Appolo. These are venture-style opportunities in many respects, with the hope that the “combined portfolio is expected to become more cash generative during the next twelve months.”
The offer price is R5.00, which is a 7.3% discount to the 30-day VWAP. The intrinsic net asset value per share (i.e. what management tells us they are worth) is R11.41.
My money will never go anywhere near this thing.
Argent Industrial: the right side of operating leverage (JSE: ART)
This is what you want to see on an income statement
Operating leverage is the way in which a percentage move in revenue translates into a percentage move in operating profit. The reason for this phenomenon is the presence of fixed costs which grow by inflation rather than in line with revenue. This creates a cost underpin that enables profits to move by a higher percentage than revenue.
It can work for or against you. At Argent Industrial, it’s working for you at the moment.
Revenue for the six months to September is up by 8.6%. Operating profit is up 20.7%. HEPS is up 22.9%. A high single digit move at the top of the income statement is very exciting by the time we reach the bottom.
The other important thing to always look for is growth in the dividend relative to HEPS. If the earnings are of high quality, then a consistent payout ratio should be visible. That box has also been ticked here, with the dividend up by 22.2% to 55 cents.
Interim HEPS of 222.7 cents can be compared to the closing share price of R14.99. The share price has been on an incredible run over 5 years (i.e. vs. pre-Covid), but has consolidated this year.
Coronation signs off on the SARS-ruined year (JSE: CML)
Even without the catax-trophe, earnings would be slightly lower
Coronation has released results for the year ended September 2023. This will always go down as the year that SARS destroyed for Coronation shareholders, with headline earnings per share down 50% and the dividend down 57% because the money went to the tax authorities instead of shareholders.
If we try and look past that issue to consider the underlying performance in the business, we find revenue down 2% and fund management earnings per share down by 4% excluding SARS. Net outflows for the period were 10% of average assets under management, so it hasn’t exactly been a great performance even without the tax problem, especially when total operating expenses increased by 8% year-on-year.
The critical final point here is that the Constitutional Court will hear the Coronation case, with an outcome expected in the second half of the 2024 calendar year. This is a landmark case for South African corporates with offshore operations, so there will be many eyes on this.
Deneb’s HEPS has increased sharply – but only with an adjustment (JSE: DNB)
In this case, the adjustment is warranted
Deneb Investments has released a trading statement for the six months to September. It reflects an expected drop in HEPS of between 26% and 46%. This doesn’t tell the story of the underlying business at all, as the base period included the receive of a substantial insurance claim for business interruption. That’s clearly a non-recurring item that needs to be adjusted for.
Stripping that out of the base period shows HEPS growth of between 59% and 79%. What I can’t understand is that in the calculation, HEPS for the current period is also different, despite no obvious explanation for this.
It’s perhaps best to wait for the release of detailed results.
There’s good momentum at Momentum (JSE: MTM)
Including in the short-term insurance business, where they got on the right side of claims inflation
Momentum Metropolitan has released an update for the three months to September. It’s important to recognise that this covers only one quarter, so that’s not the same as considering a longer period at its competitors. In a volatile environment, you always need to be conscious of the time period you’re looking at.
An important metric is growth in the present value of new business premiums. There’s a lot of actuarial work that goes into this, along with many rules under IFRS 17. There have been recent changes to the accounting rules and Momentum acknowledges this as one of the drivers of 18% growth in this metric.
Still, if I read through the announcement, the broad narrative is mostly positive. Recurring premiums fell 25% due to a large deal in the base, but single premiums grew by 31%. Another important metric is assets under management on the Momentum Wealth platform, which grew 14%.
I found the productivity stat rather interesting as well. In the Life business, tied agents are averaging 2.9 policies per week.
A somewhat depressing stat is that membership in the Momentum Medical scheme and corporate market segment declined, with the company attributing this to economic conditions leading to a drop on employment numbers within the corporate client base.
In Momentum Insure, the short-term business, premium growth was 9% and the claims ratio improved markedly from 69.8% to 65.9%. The company notes that persistency (people hanging onto their policies) was acceptable despite the increase in pricing to improve the claims ratio. There’s no doubt that our short-term insurance industry is going to keep putting pressure on household budgets, sadly out of necessity.
The market hated the Sibanye news (JSE: SSW)
If you hold Sibanye shares, you’ve had a bad time
Sibanye’s share price has been causing many headaches over the past year. There’s now a kick somewhere painful to go along with the headache, as the share price got smashed by well over 20% when the company announced the launch of $500 million senior unsecured guaranteed convertible bonds due 2028.
That’s a mouthful, isn’t it?
Basically, the company needs to raise capital. We are in a “lower commodity price environment” according to Sibanye, which means the balance sheet needs some love. There’s also the acquisition of Reldan to consider, which was announced earlier in November.
The market doesn’t like it because of the potential dilution that these convertible instruments bring. The initial pricing guidance was for a coupon of between 4.0% and 4.5% per annum, and remember that this is in dollars. The price was announced in the afternoon as being 4.25%, so it came in squarely in the middle of guidance. The conversion price is only 32.5% above the current price on the market, so there doesn’t need to be much upside from the current depressed level of the share price before these instruments are in the money. There are mechanisms that allow the conversion element of the bonds to be settled in cash. Either way, the bonds are being issued at a time when the price has lost a lot of value and the fairly modest conversion price relative to the current level means that this is expensive funding for Sibanye.
Still, it seems like quite the overreaction to me. We are talking about a market cap of R66.5 billion before this drop. Does it make sense to have shed over R16.5 billion in market cap based on a convertible debt issuance of around R9.2 billion?
The issuance was multiple times oversubscribed, so there was no shortage of demand in the market for these instruments.
This is the danger of negative sentiment around a share price. It’s tough to recover and it’s easy to drop further. Still, I think we might be nearing the bottom here.
Sirius managed to raise capital at the 30-day VWAP (JSE: SRE)
This is strong support from the market
As noted in yesterday’s Ghost Bites, Sirius Real Estate decided to tap the market in what is called an accelerated bookbuild. Essentially, the bookrunners get out their little black books and phone selected institutional investors to secure their participation in the raise.
The goal was to raise £145 million and it was no problem at all, with £146.6 million raised in the space of one day. Welcome to what public markets are actually supposed to achieve. The shares to be issued represent 14.5% of existing share capital.
The offer price of 86 pence was a 5.9% discount to the price on 17 November and a 2.3% discount to the intraday price at the time at which the offer price was agreed. But in reality, it’s a discount of just 0.1% to the 30-day volume weighted average price (VWAP). If you know anything about capital raises, you’ll know that this was a very decent outcome, especially in this market.
It sounds like some new shareholders were welcomed onto the register as part of the process. The allocation of shares is an important strategic decision, with institutional relationships to look after. Speaking of the allocation, something I found interesting is that directors and other insiders participated to the value of £180k. Although this is a very small percentage of the total capital raise, I’m not sure how I feel about insiders participating in an accelerated bookbuild. It’s all good and well when capital is raised at a modest (or no) discount, but what about in a significantly discounted bookbuild? We would then be incentivising directors to raise capital and participate in a discounted raise.
Of course, the counter to this argument is that insider buying is a good thing in terms of alignment with shareholders. Given the price at which this capital was raised, I would buy that argument in this case.
Either way, it’s a successful raise for Sirius and it’s good to see some positive activity on the market.
Southern Sun: occupancy and pricing both work their magic (JSE: SSU)
Consumers will pay up for leisure travel
Throughout the post-pandemic period, I’ve been pointing out the importance of the distinction between leisure and business travel. One is far less price sensitive than the other. Business travel can be replaced with a Teams or Zoom call. Leisure travel can’t. This is why I’m naturally more bullish on a group like Southern Sun vs. City Lodge, despite the impressive steps taken by City Lodge management.
There’s nothing in the latest numbers from Southern Sun to change my mind. In the six months to September 2023, occupancy jumped from 46.0% to 56.3%. Average room rate increased by 11.4%. With strong growth in occupancy and pricing, there’s only one direction of travel for earnings and that is firmly in the right direction.
For a through-the-cycle view, average room rate is 25.2% higher than the comparable six-month period in 2019. Again, this type of travel can withstand inflationary increases. Occupancy is now only slightly below the 59.1% achieved in 2019.
It also comes as absolutely no surprise to me to read that the Western Cape is a hotbed of activity for the group.
Now here’s the funny thing: HEPS is down 21%. That’s not a typo. You should be very suspicious by now based on everything I’ve told you, and those suspicions would be warranted. The base period included a R313 million post-tax separation payment. If we adjust for that, then adjusted HEPS is up by 1,400%!
HEPS for this period was 18 cents and the share price is R4.80.
Telkom has pulled off much better numbers (JSE: TKG)
Plus, there’s a preferred bidder for Swiftnet!
I’ll start with the Swiftnet news, which is the towers business owned by Telkom that has been on the chopping block for a while now. Telkom has been in a competitive disposal process to pass this asset onto someone else, as the towers tend to be more like property assets than anything else. This means they chew up capital and don’t offer returns that are good enough for an operating company like Telkom.
There is a preferred bidder that sees value in the towers. Although the names aren’t given, this is a consortium of equity investors (including a B-BBEE partner), led and managed by a private equity firm. I’m quite surprised to see private equity at the table given the fairly modest returns that property-style investments can give, but all will be revealed if there’s a deal on the table. At this stage, there’s no guarantee of anything happening, but discussions are clearly at an advanced stage.
Separately, Telkom released numbers for the six months to September. Revenue is up 2.5% and EBITDA is up 1.7%. That’s not exciting, I know, but headline earnings per share is up by a far more interesting 46.7%. The most exciting jump is in free cash flow, up 130.4%!
Telkom always talks about next-generation revenue, which is the stuff that literally everyone else realises is actually current generation. I guess that compared to old school home phone lines, anything is high tech. Anyway, that revenue grew by 6.9%, so the ongoing fall in the legacy business obviously mitigated a big chunk of that growth to give us the group number of 2.5%. Copper-based voice services now contribute 4.5% of revenue, down from 6.2% in the previous year.
Interestingly, Openserve has the highest fibre connectivity rate in the market at 46.8%, with a 22.4% increase in the number of homes with connections. EBITDA margin in this business moved higher to 31.8%, helped by the use of sustainable energy to partially offset the impact of load shedding.
Speaking of data, Telkom Mobile grew external revenue by 4.1%, driven by demand for data jumping by 22.9%. There is absolutely no doubt that consumers are far more interested in data than voice services.
I’ll also give BCX a mention, where revenue was up just 0.7% as that part of the businesses continued to run on the difficult treadmill of legacy vs. new revenue sources.
Swiftnet achieved growth in revenue from continuing customers of 6.8%. Sadly, “continuing customers” is a metric before terminations. Total revenue was only up by 1.2%, so the sooner Telkom can sell this part of the group, the better.
It’s likely that there will be other deals on the table after Swiftnet. The company is looking at options related to minority partnerships in Openserve and a strategic equity partner for BCX. There are some executive changes as well, with Telkom talking about positioning itself strategically as an InfraCo. I would’ve thought that masts and towers are also infrastructure, but clearly not.
The share price was around 7% higher by late afternoon trade. It’s still sharply down this year and in the red over pretty much any other time period as well.
Little Bites:
Director dealings:
The company secretary of Datatec (JSE: DTC) has sold shares worth nearly R5 million.
There’s another purchase of shares in Lighthouse Properties (JSE: LTE) and once again it isn’t by Des de Beer. Instead, Mark Olivier has loaded up another R804k worth of shares.
Premier Group (JSE: PMR) has done some kind of transaction that has seen directors of a major subsidiary buy unlisted A ordinary shares in the group holding company from that subsidiary. The deal value is almost R610k.
Aside from the various insiders at Sirius Real Estate (JSE: SRE) who participated in the accelerated bookbuild to the value of £180k, a non-executive director also bought shares worth nearly £20k.
Associates of the CEO of Spear REIT (JSE: SEA) bought shares worth R67k.
AB InBev (JSE: ANH) has given an update on progress made in the share buyback programme. Since it was announced on 31 October, repurchases to the value of $95 million have been made. The programme is for $1 billion in repurchases over 12 months.
Woolworths (JSE: WHL) announced that Zaid Manjra has been permanently appointed as the Group Finance Director. He’s been acting in the role since July.
It’s interesting to note that Hyprop (JSE: HYP) amended a special resolution due for adoption at the AGM. Shareholders clearly had some frank conversations around this matter, leading to the resolution for the repurchase of shares being amended to reflect a maximum premium of 5% rather than 10%. This premium is calculated with reference to the 5-day VWAP.
Castleview Property Fund (JSE: CVW) has now declared the interim dividend of 10.676 cents per share.
Although the deal hasn’t closed yet, it sounds like the secured lender group at Tongaat (JSE: TON) are still selling their lender claims to Terris Sugar, Guma, Remoggo and Almoiz.
The story of how one forgotten wallet in 1949 led to the invention of the credit card – and the global debt crisis that followed.
When’s the last time you carried cash anywhere? Unless you’re regularly using public transport, it’s probably been a while, right?
If you want a good insight into humanity’s spending habits right now, all you have to do is go shopping for a new wallet. Now, notice how many of those new wallets on the shelf have simply done away with the little pocket that we used to keep coins in. If you’re lucky, you may still find a wallet that has a compartment for you to keep notes. Far more often, you’ll open a wallet and find only rows and rows of card slots inside.
I think that says a lot about our relationship with money. Like so many things in our lives, our currency has become digital – the texture of a coin or a crumpled paper note replaced by digital placeholders on our banking apps.
The best thing about digital money is that it never really runs out. When the cash in your wallet is used up, there’s literally nothing left in there for you to spend. On a banking app, however, you’re always two clicks away from accessing more – whether in the form of an overdraft, credit card or a microloan. In some instances, your bank may even use your spending data to pre-approve you for loans you never applied for (and then they’ll pepper you with messages and notifications telling you that this money is available to you).
In addition to our need for instant gratification, we’ve become accustomed to the idea of buying now and paying later. Could it be that the best thing about digital currency is also the worst thing about it?
The dawn of debt
Once upon a time back in 1949, a man named Frank McNamara received the bill after eating at a New York restaurant, and was horrified to realise that he had forgotten his wallet at home. Fortunately, his wife was able to come to his rescue, but this was a humiliating experience that Frank would struggle to forget. That seed of discomfort wedged itself into his brain until it grew into an idea.
“Why carry cash around at all?” Frank questioned. Why couldn’t every restaurant that he ate at send him the bill at the end of the month, and then he would pay them all together? Wouldn’t it be a much more pleasant experience for diners to sit down, enjoy themselves and then leave at the end of their meal without having to make a fuss about payment then and there?
Frank McNamara didn’t invent the idea of credit – that existed long before – but until the 1960s, it was never implemented on a significant scale.
The notion of credit traces its roots to ancient Mesopotamia, with evidence dating back at least 5,000 years. Inscriptions found on clay tablets from that era depict transactions between Mesopotamian traders and merchants from Harappa. They serve as some of the earliest documented instances of agreements to purchase goods immediately with a commitment to pay at a later time.
My guess is that for as long as we’ve been able to buy things, we’ve wanted to negotiate to buy things we couldn’t afford. What Frank and his partner Ralph Schneider did was to make it easy for everyday people to get used to the idea of paying for things without using cash. They invented the Diners Club.
In the beginning, Diners Club members would carry little cardboard cards around in their wallets as a show of faith – an IOU, if you will. In its first year of business, Diners Club had partnered with 28 restaurants and two hotels, all of which were prepared to accept monthly billing in respect of this select clientele. By 1960, the cardboard card was replaced by a more familiar-looking plastic version.
Before long, the Diners Club phenomenon shifted beyond the New York elite set, and everyone was showing their cards and getting their bills at home. This, of course, raised the attention of competitors in the field.
Swipe it like it’s hot
One of the first to jump on the credit track was American Express. To some degree, personal credit was a natural shift up the vertical: they already had a lucrative money order and travellers check business, which provided a safe replacement for travellers carrying large sums of cash. All they had to do now was to convince people to use a card for their everyday purchases instead of using money.
Here’s something from my research that truly astonished me. In 1958 – the same year that American Express launched their cards – California-based Bank of America dropped 60 000 paper BankAmericards with a pre-approved limit of $300 into mailboxes around the city of Fresno, California. Imagine 60 000 Americans waking up one morning to a letter in their mailboxes saying “Here’s $300. Go spend it and pay us back later.”
For context, in today’s money, that $300 equals more or less $3 000, or around R55 000.
As you can probably guess, giving unsolicited credit to random people without checking them for creditworthiness beforehand ended very badly, with that first attempt ending in delinquency rates of 20% and multiple instances of fraud. This didn’t stop more of these “drops” from happening though.
Suddenly, without any forewarning, credit appeared as if delivered from the heavens. As an American at that time, you could go to sleep with no cash in your wallet and wake up with $300 that you didn’t ask for in your mailbox. In the subsequent 12 years that it took to prohibit these kinds of mass card mailings, banks across America would inundate the country with 100 million unsolicited credit cards of various kinds.
Built on a bad foundation
In case you’re wondering whatever happened to the good old Diners Club, the simple answer is that they’re still around. In a classic case of second mover advantage, DCs innovative idea of allowing customers to pay with a card instead of cash was quickly snapped up, improved and rolled out by other businesses, making Diners Club a mostly irrelevant afterthought in the process. After all, who would choose a card that you could only use at restaurants when you could have a card that could swipe, well, everywhere?
To their credit (and probably to their own detriment), Diners Club stuck to their guns and held relatively fast to their original concept for as long as they could. In 2016, they finally caved and released a credit card. By that time, they had well and truly been overtaken by all those that came after them, to a degree that they will probably never catch up on. Had you heard of the Diners Club credit card before now? My point exactly.
The Diners Club business (in my opinion at least) may be fading into irrelevance. But the legacy of their idea has left an indelible mark on human history and behaviour.
I’m drawing on statistics from the United States on purpose here, because I think it’s worthwhile surveying the effect of the credit card in its country of origin. That doesn’t mean that we should assume that South Africans are in a much better position when it comes to credit card debt. We all know that we aren’t.
With statistics like these painting a dire picture, and warnings of a credit crunch sounded since April of this year, I can’t help but to think back to that morning in 1958, when residents of Fresno woke up to find those magical cards in their mailboxes. Did they have any way of knowing what a sticky trap waited on the other end of the swipe? Could they possibly have imagined the kind of world where we own nothing because we choose to owe everything?
I don’t know about you, but I think I need a new wallet. This time, I’m looking for one that has space for cash.
About the author:
Dominique Olivier is a fine arts graduate who recently learnt what HEPS means.Although she’s really enjoying learning about the markets, she still doesn’t regret studying art instead.
She brings her love of storytelling and trivia to Ghost Mail, with The Finance Ghost adding a sprinkling of investment knowledge to her work.
Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:
The poultry industry isn’t for chickens (JSE: ARL)
I promise that’s my only pun about these results from Astral Foods
The chicken business is so tough that all of the listed companies in this space have “Foods” in their name rather than chicken, in the hope that perhaps you won’t notice what they do. Jokes aside, it’s often because of a desire to diversify beyond chicken, with RCL having made the biggest strides in that regard.
The focus here is on Astral Foods, which has released results for the year to September. It was a truly terrible period, with flat revenue and a complete collapse in profitability. Between load shedding and bird flu, this was a perfect storm.
Off the back of the first financial loss in the group’s 23-year history, the overdraft ended the period at R1 billion. A full R600 million was drawn over this period, with R398 million in capital expenditure focused on electricity and water services. In other words, the failings of government are hitting Astral squarely between the eyes.
The poultry game is so tough that a backlog in slaughtering can cause a serious problem for profits. Bluntly, a chicken that is past its ideal weight is now a financial liability that needs to still eat. This leads to older birds that are heavier than they should be. The chickens probably appreciate that, but shareholders don’t. When feed costs are 70% of the cost of raising a broiler and those prices increased 15.4% even before the load shedding-driven backlog, Astral never really stood a chance in this period.
The poultry division swung from an operating profit of R802 million to an operating loss of R1.38 billion. Bird flu was a R400 million hit, which really puts the estimated cost of load shedding (R1.6 billion) into perspective.
The feed division offered a modest silver lining, with revenue up 11.9% in response to higher selling prices. Volumes increased by 1.1%, not least of all thanks to the too-fat internal chickens. External sales volumes fell 10.9% as the pig and table egg sectors took strain. There really is nowhere to hide at the breakfast table. The feed division managed to increase operating profit by 21.5%, but much of the gain here was simply a loss in the poultry division.
There are a number of strategic initiatives underway to try and improve the situation and repair the balance sheet. The stark reality is that government needs to keep the lights on, otherwise South Africa’s staple protein is going to need to become more expensive.
Barloworld keeps grinding higher (JSE: BAW)
Key metrics have gone the right way
The highlights reel of this Barloworld result shows a group that is getting things right. Revenue is up 14% for the year ended September and EBITDA is up by 15%. Group net debt has come down drastically by 86% thanks to the unbundling of Zeda and a period of strong free cash flow generation.
It’s important to consider continuing vs. discontinued operations, as Barloworld unbundled Avis Car Rental and Leasing (now separately listed as Zeda) in December 2022 and sold the Supply Chain Solutions business in March 2023. The right thing to focus on is continuing operations.
If we look deeper, the largest segment is Equipment southern Africa and it grew revenue by 35%, so that’s rather helpful. Equipment Russia saw revenue decrease by 40% for obvious reasons. Equipment Mongolia was up 59%. Ingrain, the consumer industries business, grew revenue by 11%.
Operating profit tells a different story though. Equipment southern Africa was up 19%, so there’s some margin pressure there. Equipment Mongolia had beautiful operating leverage, with profit up 179%. Fascinatingly, Equipment Russia only saw profit fall by 15%, whereas Ingrain was down by 17% despite growing revenue!
The cost of money can never be ignored, with net finance costs up by 52%. Most of this is because of the increased cost of funding, though some of it is due to higher financing needs overall.
I love a good waterfall chart, so I’ll show the HEPS from continuing operations slide in all its glory. HEPS from continuing operations (the only one you should be looking at) increased by 5.5%, with the movements in Russia and Mongolia offsetting each other:
Brikor shows what an inflection point for profits looks like (JSE: BIK)
When the base period is break-even or close to it, modest revenue growth can cause fireworks
Brikor is currently under offer from Nikkel Trading, with the circular delayed because of a rather interesting turn of events that has seen the CEO of Brikor being unwilling to renew his irrevocable undertaking to not sell his shares.
Looking at the latest numbers, revenue for the six months to August has increased by 13.4%. That’s solid but not spectacular, until you see that revenue in the base period was only good enough for a break-even result. When you grow off that base, the impact on profit is huge.
EBITDA is more than 5x higher at R40.4 million vs. R7.3 million in the base period. Headline earnings per share moved from nil to 2.7 cents, with the share price currently at 17 cents. The tangible net asset value was 28.6% higher at 12.6 cents, so the current price is a significant premium to that metric.
The bricks segment achieved EBITDA of R17.1 million and the Coal segment was good for R9.8 million. In both cases, gross profit margin moved much higher than in the comparable period.
FirstRand reiterates guidance for the new financial year (JSE: FSR)
The financial services released a voluntary trading update
FirstRand has a June year-end. The guidance for results for the year ending June 2024 has been affirmed, but to be fair that guidance was given in September 2023 so there’s hardly been much time since then. The group is looking for earnings growth of real GDP plus CPI plus between 0% and 3%. ROE is expected to remain at the upper end of the targeted range of 18% to 22%, which is why FirstRand maintains a premium valuation vs. its peers.
The most interesting update is that the credit loss ratio is lower than initial guidance. It is not expected to even reach the midpoint of the through-the-cycle range, which shows how conservative the origination strategy has been. I must point out that a credit loss ratio can also be too low, leaving a bank exposed to losing market share. After all, the entire point of a bank is to lend out money.
Much of the current FirstRand performance is being achieved on the deposit side, with the bank continuing to execute a strategy of having a low funding cost relative to peers. This enables it to achieve a stronger net interest margin, particularly net of credit losses when being more selective about lending. Again, there are balancing arguments here.
FirstRand has cautioned the market that its interim results for the six months ending December won’t be in line with what the full-year results should look like, as there are importance once-offs in the interim base. Costs are also higher for this period, with expected normalisation in the second half.
Naspers and Prosus talk to “accelerated profitability” (JSE: NPN | JSE: PRX)
I think what they meant to say is “lower losses” in the portfolio beyond Tencent
Using the term “accelerated profitability” means that there is profitability to start with. Unless something drastic has changed since the last time I looked, the portfolio of businesses beyond Tencent is still firmly in cash burn stage. I accept that losses might have decreased year-on-year, but to describe this as accelerated profitability is a serious stretch.
After the exit of the OLX Auto business, the comparable numbers have been restated so that the group can report based on continuing and total operations.
If you look at HEPS from continuing operations, then Naspers jumped from 28 US cents to 282 – 284 US cents based on continuing operations. For total operations, HEPS showed a similar outcome by increasing from 24 US cents to 286 – 288 US cents.
At Prosus, which has more footnotes than anyone wants to deal with because of the effect of the cross-holding transaction, HEPS increased from 7 US cents to between 46 and 48 US cents.
A comment in the Prosus announcement should temper any enthusiasm about the portfolio. The company talks about how there were lower impairment losses of $0.5 billion in this period vs. $1.5 billion last year. This spike in profitability is because things are less bad, not because they are good.
Netcare posts a significant year-on-year recovery (JSE: NTC)
There’s still a long way to go to pre-pandemic levels
Netcare has released numbers for the year ended September. The year-on-year numbers look super strong, with revenue up 9.5%, EBITDA up 14.5% and HEPS up 36.5%. The dividend per share is up 30%, so the cash has mostly followed the earnings.
Before you rush to buy Netcare in the hope that you’re buying a high growth stock, here’s a chart that includes pre-pandemic earnings:
There’s clearly some way to go. It’s also worth noting that return on invested capital (ROIC) has increased from 8.8% to 10.8%. In an environment where the prime rate is 11.75%, a return of 10.8% is far from exciting.
As I’ve shared in Ghost Mail before, I generally don’t see the appeal of hospital groups. They inevitably generate sub-par returns on capital.
I do always look in the detailed numbers for stats that give you an indication of the times that we live in. Maternity cases declined, which is a broader sector trend. The other very unfortunate trend is a sharp increase in mental health days. This is a focus area for Netcare because demand is so high, with mental health occupancy as the highest in the group.
The outlook for 2024 is revenue growth of between 7.5% and 9.5%, along with further EBITDA margin expansion and a higher ROIC.
The share price closed 6% higher on the day. It has lost nearly half its value over five years.
Omnia’s Chemicals business dished out the most pain (JSE: OMN)
The only bright spot in these numbers was the Mining business
For the six months to September, Omnia wrote a lot of pretty things about resilience while posting revenue down 14%. If we exclude the Zimbabwe operations due to hyperinflation, we find operating profit down 34% and adjusted HEPS down 28%. If we include Zimbabwe, HEPS fell by 4%.
The segmental piece tells the most important story. The Agriculture business saw revenue drop by 13% and operating profit fall by 47%, with slower purchases from two major customers. They expect a better performance in the second half of the year. Mining revenue decreased 6%, but operating profit increased by 26% thanks to the performance of the international business and cost benefits in the local business.
But the Chemicals segment is where the wheels really fell off, with revenue down 24% and operating profit collapsing by 95% to just R5 million off a revenue base of R1.09 billion. There’s a demand problem here which is cyclical, but there are also supply chain and manufacturing challenges that the company needs to overcome.
Omnia is still fighting with SARS over the tax assessments for 2014 to 2016. The process has reached the stage where the parties will go for Alternative Dispute Resolution.
PPC is focusing on southern Africa (JSE: PPC)
Will it be the right decision to concentrate on a low growth region?
PPC has released results for the six months to September. This is hot on the heels of the news of a disposal of CIMERWA in Rwanda, which the market liked when that deal was announced at a premium to the value at which the business was recognised in PPC’s books.
It may derisk things to turn a business into cash, but will it be the right long-term decision? After all, the decision to focus on southern Africa is a combination of PPC Zimbabwe (a good business in a volatile economy) and PPC South Africa (a business with excess capacity in a lame duck economy). We shouldn’t forget PPC Botswana as well, which gets lumped in with PPC South Africa for reporting purposes.
CEO Roland van Wijnen has done well during his tenure and this was his final strategic move, so I have no doubt it was well considered. His successor Matias Cardarelli won’t be taking many flights to East Africa, it seems.
The results from continuing operations are the ones to focus on, showing revenue up 20.9% and EBITDA up by a meaty 46.8%, as EBITDA margin moved 400 basis points higher. HEPS has moved strongly into the green at 26 cents vs. a loss of 5 cents in the comparable period.
The SA and Botswana businesses increased revenue by just 2%, hence my lame duck comment. Cement volumes fell 4.7%, mainly in the coastal regions (due to cheap imports) and in Botswana. At least EBITDA margins increased from 12.2% to 12.6%. PPC Zimbabwe grew revenue by 104% and saw EBITDA margins jump from 17.3% to 24.6%. A dividend of $4 million was paid and a further dividend of $7 million was declared in November.
Although the business in Rwanda is on its way out, it’s worth noting that revenue was up 14.5% but EBITDA margins decreased from 32.3% to 29.4%. Perhaps it’s the right time to sell, after all.
As a sign of how well PPC has done to repair the balance sheet, finance costs actually fell slightly year-on-year, despite the jump in interest rates. That’s a direct result of the reduction in gross debt.
Sirius taps the market for £145 million (JSE: SRE)
In an accelerated bookbuild structure, retail investors don’t get the chance to participate
Sirius had a busy day. The company released results for the six months to September and looked to raise £145 million on the market. In an accelerated bookbuild approach, the bookrunners get on the phone to institutional investors to offer them shares and find out how many they want. By “building the book” in this fashion, they basically keep going until the entire capital raise has been filled. If there is sufficient demand, the quantum of the raise can be increased.
The final pricing of the capital raise will depend on the level of institutional demand and at what price. Retail investors sit on the sidelines in this process. If the raise is at a discount (and it usually is), then there’s effectively dilution that cannot be avoided. We will have to wait for the results of the bookbuild to see what happened.
The intention behind the bookbuild was to raise money for potential acquisitions in the UK and Germany. The German assets are typically under-rented opportunities with a site value of €10-50 million. There is limited competition among buyers for these properties. In the UK, they also look for assets with asset management potential, usually with a site value range of £5-25 million. The group has identified eight properties that it wishes to acquire, of which four are in the Germany with a total value of €85 million and four are in the UK with a total value of £45 million. The bookbuild would also strengthen the balance sheet, taking the loan-to-value to below 35%, which is well below the group target of 40%.
Alongside the bookbuild, Sirius announced results for the six months to September. Funds from operations per share increased by 9.4%, with this metric seen by many property investors as being the most important one to focus on. Goodness knows that the dividend matters as well, up by 11.1%.
97% of group debt is at fixed interest rates for the next 2.5 years. The loan-to-value is 40.8%, which shows why the bookbuild is important for further acquisitions.
The net asset value per share is 102.65c. This is in euros, with a current conversion putting it at around R20.50. The current share price is R20.25, so hopefully the bookbuild was completed at or close to book value.
Smaller losses at Stefanutti Stocks (JSE: SSK)
But a loss is still a loss
Stefanutti Stocks released a trading statement for the six months to August. The split between continuing and total operations is important because the group is busy with a restructuring plan and related disposals. From continuing operations, the headline loss per share will be between -10.13 cents and -5.07 cents, which is at least a significant improvement vs. -25.33 cents in the comparable period.
For total operations, the headline loss per share is between -25.02 cents and -20.02 cents vs. -25.02 cents in the comparable period, so the discontinued operations are the problem. Disposals are expected to be concluded within the next 12 months.
Little Bites:
Director dealings:
A director of Investec Bank Limited, which is a major subsidiary of Investec (JSE: INL | JSE: INP), has sold shares worth R2.5 million.
The spouse of the CEO of WBHO (JSE: WBO) has sold shares worth nearly R1.7 million.
The Mouton family (through various vehicles) has bought shares in Curro (JSE: COH) worth a total of R1.6 million.
Two independent directors have resigned from the board of Spar (JSE: SPP) just 10 days before full-year results will be released.
Castleview Property Fund (JSE: CVW) announced that the expected dividend per share for the six months to September will be 10.676 cents per share. Interim results are expected to be released on 30 November. The current share price is R8.50.
Grand Parade Investments (JSE: GPL) has declared a cash dividend of 10 cents per share in respect of the year ended June 2023.
Sasol (JSE: SOL) shareholders voted in favour of the special resolution that would allow the company to issue shares to holders of convertible bonds who exercise their rights. This is dilutive for shareholders who don’t have these bonds i.e. most of them.
Salungano (JSE: SLG) renewed the cautionary announcement related to the voluntary business rescue process at subsidiary Wescoal Mining.
In case something went terribly wrong in your life and you are stuck with Go Life International (JSE: GLI) in your portfolio, then I guess you’ll want to know that results for the three months to May were released. The company doesn’t make any revenue. The operating loss is $43k and the net asset value per share is still negative. Good luck to you.
Listen to the latest episode of Ghost Wrap here, brought to you by Mazars:
More liquidity at Afine’s petrol pumps than in the stock (JSE: ANI)
This makes it difficult for the market to respond to earnings
Afine owns fuel filling stations with long term leases escalating at fixed rates. The company looks to add between one and two suitable properties per year.
Revenue for the six months ended August was 9.8% higher, while profit from operating activities increased by 2.7%. Despite this, distributable earnings fell 6.8%. The interim dividend is 20.60 cents per share, with the share price currently at R4.00 for reference.
There is very little liquidity in this stock, which probably explains why the share price is higher than the net asset value per share of R3.62.
The ongoing listing of AH-Vest remains a mystery (JSE: AHL)
The business is sub-scale and heading in the wrong direction
Being listed is expensive. Considering that AH-Vest has generated total profit of R3.5 million in the past two years, which is less than a modest restaurant should achieve, I really can’t understand why it remains listed.
The All-Joy brand (and a few others I’ve never heard of) would be a good fit in a food business that is currently light on sauces. They do have some resonance with customers, otherwise R211 million in revenue wouldn’t be possible. With gross profit margin down 310 basis points to 34.9% in the year ended June 2023, the company would probably benefit from some production scale as well.
Load shedding has obviously been a big problem here. The lesson is that you can’t respond to problems if you are up against some really big hitters in the same market. If you’re doing the corporate equivalent of taking a knife to a gun fight, there’s only one outcome.
With a market cap of just R16 million, it’s time for an industry player to come squeeze the last bit of sauce out of this one.
Alphamin released detailed third quarter and nine-month results, reflecting tin production in line with Q2 and EBITDA up 8.6% quarter-on-quarter. The average tin price received was 4% higher but all-in sustaining costs came in 5% higher, both of those being Q3 vs. Q2 numbers.
The company is very focused on the Mpama South project, where development is running in line with the updated two-year underground plan. They are looking to achieve the expanded production from FY24.
Of course, there’s never a dull moment when mining in emerging markets. A bridge on the primary export / import route in the DRC was damaged in September, driving longer transit times and delays in revenue receipts. Ongoing heavy rains in October and November caused the roads to deteriorate further. This is putting the balance sheet under strain, as revenue is being delayed further. The company raised an additional $10 million in senior debt finance and this facility was drawn down in November.
If you’ve ever wondered what the costs of running a mine tend to look like, wonder no more. Here’s the cost of sales breakdown at Alphamin:
Note the footnote regarding royalties. This is why mining is so important to governments in resource-rich countries.
As noted, that breakdown was of cost of sales. There are many other operating costs of course. Here’s what they look like:
Interesting, isn’t it? Now when mines talk about inflationary pressures on costs, you have a better idea of where the toughest areas might be.
Frontier Transport Holdings shows a big jump in HEPS (JSE: FTH)
This company owns Golden Arrow Bus Services and a few other transport businesses
The six months to September 2023 have been a much happier time for Frontier Transport Holdings. I would imagine that high levels of inflation are encouraging more consumers to use busses rather than taxis, although of course this isn’t always possible.
When full results come out next week, I’m sure we will get all the details. In the meantime, we know that HEPS is up by between 60% and 71%, coming in at a range of 57 cents to 61 cents for the interim period. The share price closed 4.3% higher at R5.89.
MiX Telematics presents the Powerfleet deal to the market (JSE: MIX)
Shareholders need to be convinced that this transaction is a great idea
Landmark mergers are difficult things to execute and investors know this, which is why corporate management teams have to put in the work to convince shareholders that a proposed merger is going to buck the trend and be successful. Sadly, most mergers end up being a disappointment.
The MiX Telematics – Powerfleet deal has one of the better deal rationales that I’ve seen before, namely being the achievement of scale. Two sub-scale players can genuinely create value by combining efforts and becoming stronger as a result.
I do however get nervous when I see companies talking about a Rule of 40 performance, which is a silly rule of thumb from venture capital land that talks to growth and usually adjusted EBITDA margin. I don’t know too many local investors who care much about the Rule of 40. Around here, we care about free cash flow.
For those of you who like tech and fancy slides, check this one out:
If you are a MiX shareholder, or you are just curious about this space, then you’ll find the presentation here.
MTN reduced its non-rand debt (JSE: MTN)
In this case, a tender offer has nothing to do with something you say to your romantic partner
The near-term stress for MTN is the same as it’s been for a while: the balance sheet. Forex is a nightmare for African businesses and the difficulties in repatriating cash from countries like Nigeria have given MTN many headaches. It’s also given MTN a rather ugly share price chart, with a 52-week high of R149 and a current price of under R94.
To try and improve the balance sheet, MTN is focused on reducing non-rand debt. In other words, US$-denominated debt. To this end, MTN invited noteholders of the $750 million 4.755% notes due November 2024 to tender them for an early redemption. Tenders of $353.1 million were received, so that’s an early reduction of debt.
Although the total level of holding company leverage is relatively unchanged at 1.5x after this early settlement, non-rand debt as a percentage of total debt is now down from 37% to 24%.
PPC has decided to sell the Rwandan business (JSE: PPC)
The group is focusing on its southern African markets
PPC has agreed to sell its entire shareholding in CIMERWA PLC in Rwanda to National Cement Holding Limited. This is a cash deal worth $42.5 million. PPC has held a 51% interest in the company since 2013, with the other 49% listed on the Rwanda Stock Exchange.
The purchaser is a private company that is part of the Devki group, one of the largest manufacturers of clinker and cement in East Africa. The buyer also has operations in Kenya and Uganda.
It’s not difficult to see how CIMERWA fits into the buyer’s strategy. For PPC, this allows the company to unlock a lot of cash and focus on the southern African markets.
It also helps that at March 2023, PPC’s accounts reflected a book value for this investment of $38.5 million. This is therefore a disposal above book value. This is a Category 2 transaction and hence shareholders won’t be asked to vote on it, but a 6.5% increase in the share price gives us a clue as to what the market’s opinion of the deal is.
Sanlam shows improved life insurance margins (JSE: SLM)
There’s also solid growth in volumes
Sanlam released an operational update for the nine months to September 2023 and all looks good, although the share price closing nearly 1% down on the day suggests that the growth has already been priced in.
As we already know from the recent Santam update, the short-term game is difficult at the moment. Margins have been below target because of significant loss events and related underpricing of risk, with strong investment return on insurance funds as the saving grace in that business.
The situation is thankfully very different in life insurance, with value of new life insurance business up 28% and margin improving to 2.90% from 2.46% in 2022. South Africa came in at 2.53% and emerging markets at 5.01%.
There’s more to Sanlam than just life insurance. There are credit and structuring businesses, as well as investment management businesses. The net result from financial services increased by 19%, with the credit and structuring business as the star with 28% growth.
This helped drive a group result that showed net operational earnings up by 35%. A major underlying driver was growth in new business volumes of 13%. The other difference between operational earnings and the financial services result is the investment return on the shareholder capital portfolio, which was much improved in this period thanks to market performance.
As a reminder, the Absa LISP transaction closed on 1 November 2023, adding R66 billion of assets under administration to the Glacier platform in the retail affluent category. Another major move was the Capital Legacy transaction, which closed in August with a cash outflow of R904 million. The group also bought the funding instrument in the B-BBEE vehicle from Standard Bank at a price of R2.4 billion. A special dividend from Santam of R1.2 billion helped pay some of these major amounts, but there’s still a sharp decrease in discretionary capital from R3.2 billion to R1.1 billion.
The other major corporate action was the Sanlam Allianz joint venture, which started operations in September. It will be reported in Sanlam’s accounts from 1 October.
Looking ahead, the group expects performance in the final quarter to result in the second half of the year being similar to the first half. The results are sensitive to movements in global investment market levels, so don’t expect great numbers out of Sanlam if broader markets don’t do well.
Little Bites:
Director dealings:
The chairman of WBHO (JSE: WBO) is “restructuring his retirement portfolio” with a sale of R12.5 million worth of shares.
An executive at Investec (JSE: INL | JSE: INP) sold shares worth £307k.
There’s another purchase of Lighthouse Properties (JSE: LTE) shares by a trust linked to Mark Olivier. Perhaps Des de Beer is on holiday. Either way, the purchase is worth over R5.7 million.
A prescribed officer of ADvTECH (JSE: ADH) sold shares worth R2.4 million.
An associate of the company secretary of Stor-Age (JSE: SSS) has bought shares worth around R620k.
The company secretary of Growthpoint (JSE: GRT) has sold shares worth R273k. Although these relate to scheme options vested, the announcement doesn’t make it explicit that this is only the taxable portion, so I’m assuming it’s a full sale.
An associate of a director of Wesizwe Platinum (JSE: WEZ) is still selling shares, this time to the value of around R210k.
An associate of Christo Wiese bought shares in Collins Property Group (JSE: CPP) worth R220k.
Value Capital Partners is an institutional investor that has director representation on its portfolio companies, like Altron (JSE: AEL). Any further purchases of shares are therefore classified as purchases by an associate of directors. Although the messaging is similar, the quantum isn’t a fair comparison to other director dealings as this is an institutional shareholder. Hopefully you’ll agree with my view when I point out that the latest purchase of shares is to the value of R23.9 million.
Brikor (JSE: BIK) is currently under offer. This doesn’t change the requirement for the company to announce earnings updates. In a trading update, HEPS for the six months ended August has been indicated at between 2.4 cents and 2.9 cents. The prior period was break-even, so the percentage increase isn’t meaningful.
I think that shareholders at Ethos Capital Partners (JSE: EPE) are a little bit gatvol of the discount in the share price, voting down a resolution related to a general authority to issue shares for cash.
In case you missed it on the news, climate protestors disrupted the Sasol (JSE: SOL) AGM to the point where it has to be reconvened. The Chairman invited the protestors to meetings with representatives of the board, which they declined. In other important news, CEO Fleetwood Grobler’s replacement has been announced as Simon Baloyi, who will move into the role on 1 April 2024. Grobler will stick around in an advisory role until 31 December 2024. This is an internal promotion, as Baloyi is currently Executive Vice President, Energy Operations and Technology. Incredibly, Grobler is celebrating 40 years with the company in various roles and Baloyi has been there since 2002!
If you are interested in learning more about Jubilee Metals (JSE: JBL), then you’ll be pleased to learn that there’s a brand new corporate presentation available on the website. You’ll find it here.
As a reminder of the ongoing dilution that comes with being an investor in a junior mining company, Orion Minerals (JSE: ORN) issued $2.27 million worth of shares to an option holder who acquired those options as part of the capital raise earlier this year.
CAFCA Limited (JSE: CAC) is the company that you can be more than slightly forgiven for never having heard of. It is completely illiquid and couldn’t be more obscure. Nonetheless, I like to include everything on SENS, so the update here is that a dividend of 7.90 US cents has been declared as part of the release of financial results. The results are in Zimbabwean dollars, so there are some very large numbers as that currency is worth so little.
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