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Ghost Bites (Anglo American | Astral | Ellies | EOH | Hyprop | Impala Platinum)

The Finance Ghost
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Ghost Bites (Anglo American | Astral | Ellies | EOH | Hyprop | Impala Platinum)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Anglo American flags better diamond conditions at De Beers (JSE: AGL)

Things got shiny in the US over the holiday season

2023 was the year in which lab-grown diamonds really became a talking point. This impacted the De Beers business (part of Anglo American), with a significant drop in rough diamond prices and worries around demand.

The first sales cycle of 2024 seems to be back on track, with sales of $370 million. Although that’s down on $454 million in the first cycle of 2023, it’s a significant improvement from sales of $137 million in the final cycle of 2023.

The company attributes this to consumer demand in the US over the holiday season, as well as the restart of rough diamond imports into India. The company still believes that it will take some time for rough diamond demand to fully recover.

Astral Foods swoops back into decent profitability (JSE: ARL)

The “big bird era” is behind us – no, really!

Astral Foods had a truly horrible time in the year ended September 2023. Basically everything that possibly could go wrong, did in fact go wrong. The previous period had everything from load shedding agony through to the horrors of bird flu. The company uses words like “devastating” and “decimating” and the colourful language is entirely warranted.

Thankfully, things have improved substantially. Load shedding has decreased, which means lower diesel expenses than anticipated. Due to a normalisation of broiler age and live weight, the feed conversion rate is better. The company literally describes this as being a better environment after the “big bird era” – when the slaughtering programme was so negatively impacted by load shedding etc. that birds were bigger than they should be and thus more expensive to feed.

The company avoided chicken shortages by importing broiler hatching eggs during bird flu. The International Trade Administration Commission recommended an import tariff rebate based on shortages, despite Astral noting that there weren’t any shortages!

Excitingly, the poultry division has posted a marginal level of profitability in the first quarter of 2024. Group HEPS is expected to be between 647 cents and 654 cents for the interim period, a wonderful improvement from HEPS of 163 cents in the comparable period. The balance sheet is also in good shape, with debt trending lower.

The dream is over at Ellies (JSE: ELI)

The company couldn’t get the funding for the Bundu Power deal

I’ve written a few times before that the proposed acquisition of solar business Bundu Power was at a lofty multiple. With Ellies needing to raise debt for the deal (and with the rest of the Ellies business on fire), it was always going to be a long shot. Sadly, the company’s dream hasn’t worked out and the outcome is particularly painful, with Ellies now entering voluntary business rescue.

The share price closed 60% lower at R0.02 per share. This is a perfect example of what happens when a company takes too long to move with the times. A sad day for a household name.

EOH: sideways and disappointing for investors (JSE: EOH)

I really struggle to see a reason to be bullish here

EOH’s rollercoaster ride has been well documented. At some point, the company became a little bit boring. It did a rights issue at R1.30 and then had to knuckle down and find ways to grow. A year later, the share price is at R1.32. You don’t need to get the calculator out to figure out that your money was better off elsewhere.

There’s absolutely nothing in the “operating context” section of the pre-close update that will inspire bullishness in shareholders. The whole thing is just a reminder of how much the local economy sucks. The knock-on effect is pressure on IT budgets, particularly in the public sector where EOH is still playing. Large corporate IT investments are being spread out or delayed entirely.

The first quarter of this financial year saw the worrying trend in revenue continue. Things got better in the second quarter, although we have no idea by how much. There are also some vague comments around the company hoping for “some” revenue growth relative to the second half of the previous year. This implies that they might be lower year-on-year i.e. vs. the first half of the previous year.

At least gross margin is stable, even if revenue is struggling. Things could be worse. They are also working hard to save on overheads. Naturally, the interest charge comes down substantially thanks to the R600 million equity capital raise and the decrease in debt.

There are still a couple of legacy issues that the company is dealing with, including a PAYE dispute with SARS in one of the subsidiaries.

EOH hopes to make a living from public sector and large corporate head office IT work. In a country with almost no economic growth, I’m afraid that there is nothing to get excited about in that business model.

Hyprop had a merry Christmas across most metrics (JSE: HYP)

But as we’ve seen elsewhere, Black Friday was less inspiring in 2023

Hyprop (owner of various important malls in South Africa and elsewhere) released an operational trading update dealing with the festive season. The company says that retailers and shoppers have become “savvier” about Black Friday deals, which is a nice way of saying that Black Friday sucked in 2023. Thankfully, people spent that money in December instead.

In the South African portfolio, tenant turnover was up only 3.2% year-on-year in November, whereas the December growth rate was 8.1%. Trading density grew 3.0% and 7.5% for the two months respectively. Foot count was surprisingly consistent, coming in at 4.0% and 4.1%. Going to the mall and whipping out the credit card clearly isn’t the same thing.

In Eastern Europe, the properties are on the right side of an economic growth story. Turnover grew 16.8% and 15.2% in November and December respectively – measured in euros! This is despite foot count being up 2.7% and down 2.6% for those months respectively.

Moving on to Ghana where Hyprop has three centres, much of the focus has been on replacing Game as a tenant. Turnover measured in US dollars increased by 7.7% in October and 4.7% in November. Your eyes aren’t deceiving you – no December numbers have been given as they aren’t ready yet. Financial reporting clearly moves a bit slower in Ghana!

Overall, that’s a decent set of numbers for the property fund.

Impala Platinum somehow grew production on a like-for-like basis (JSE: IMP)

This is despite the absolute tragedy in November that claimed 13 lives

Sadly, fatal accidents in the mining sector are still a reality. Usually, it’s a case of one or two incidents every few months, leading to the tragic loss of life of someone who simply arrived for work that day. That’s already unacceptable. What happened at Impala Platinum in November was so much worse, with 13 employees losing their lives and another 73 employees injured in a single accident.

Of course, a number of formal processes are underway in relation to that incident, including internal processes and investigations by the Department of Mineral Resources and Energy (DMRE). This is going to carry on for a while.

Repair work to the shaft at Impala Rustenburg has been making progress and the DMRE gave permission to use the rock winder on Tuesday 9 January. This allows a ramp-up in mined volumes to around 60% of production capacity in the coming weeks.

Despite all of this, the production loss associated with this catastrophe was only 30,000 ounces, with the loss of a further 30,000 ounces expected for the second half of the financial year. For the first half, Impala group managed to grow production by 18% to 1.9 million ounces. On a like-for-like basis, production increased by 2%. The difference between the two numbers is of course the acquisition of Royal Bafokeng, now called Impala Bafokeng.

Sales volumes were up 12% overall. They were down by 2% on a like-for-like basis. This isn’t helpful when PGM prices came off significantly for the period under review, with the group achieving revenue of R25,795 per 6E ounce sold. Irritatingly, they didn’t give the amount for the comparable period in the announcement, so I had to go dig it out. They achieved revenue per 6E ounce sold of R38,117 in the comparable period. I guess that’s why it was left out.

Group unit costs per 6E ounce are up 5% to R20,350. This doesn’t bode well for profitability, which is why HEPS is expected to be “at least” 20% lower than the comparable period. I suspect that it will be a lot lower than that. “At least 20%” is the minimum guidance required under JSE rules.

Little Bites:

  • Director dealings:
    • The Saltzman family has pulled off one of the biggest off-market trades you’ll ever see in this country, selling over R1.51 billion worth of shares in Dis-Chem (JSE: DCP) to Coronation. This takes Coronation’s stake to 29.83%, which is similar in size to what the Saltzmans still hold.
    • A prescribed officer of Acsion Limited (JSE: ACS) has bought shares in the company worth R26.5k.
    • The COO of Kibo Energy (JSE: KBO) has sold more shares, this time to the value of R486k.
    • The independent non-executive chairperson of RFG Holdings (JSE: RFG) has acquired shares worth R31.4k.
  • I have bad news for you if you are a Basil Read (JSE: BSR) shareholder. The company has been in business rescue since June 2018 and has been focused on completing construction contracts and pursuing contract claims. The business rescue practitioners believe that the business will not be compliant with JSE Listings requirements once the plan is fully implemented, so the company is engaging with the JSE regarding a potential termination of the listing. It hardly matters for shareholders, as there isn’t any residual value envisaged after creditors are settled.
  • As a reminder of just how far the PPC balance sheet has come (JSE: PPC), the company has repurchased shares to the value of R143 million between 6 September 2023 and 29 January 2024.
  • Resilient REIT (JSE: RES) and Lighthouse Properties (JSE: LTE) announced that the acquisition by affiliate Salera Properties of Salera Centro Comercial in Spain has now been completed. In good news, this is a month ahead of expectations.
  • Harmony Gold (JSE: HAR) has achieved strong shareholder support for the proposed B-BBEE transactions involving employee and community trusts.
  • MC Mining (JSE: MCZ) released an activities report for the quarter ended 31 December 2023. Run-of-mine production at Uitkomst was 31% higher year-on-year and sales were much higher. No lower grade coal was sold. Thermal coal prices have come down severely year-on-year, but premium steelmaking hard coking coal is trading well above the levels a year ago. The company is still waiting for Senosi and Dendocept to lodge their bidder’s statement for the A$0.16 per share offer.
  • Orion Minerals (JSE: ORN) has released a quarterly activities report for the three months to December 2023. As you might expect from a junior mining house, many of the points are highly technical in nature and relate to operational steps needed to make progress on the development of the three base metal hubs in South Africa. Having raised funding in 2023, the company is busy with trial mining at the Prieska Copper Zinc Mine. The feasibility study is being completed at the Okiep Copper Project. The Jacomynspan Nickel-Copper-Cobalt-PGE Project (a name that doesn’t exactly roll off the tongue) has been the subject of laboratory scale test work.
  • In case you follow African Equity Empowerment Investments (JSE: AEE) in detail, you may want to know that the audited financials have some differences to the reviewed results previously released. Among other issues, the changes include certain balances with AYO Technology (JSE: AYO). AYO also released a SENS announcement related to a few of these changes. Most of all, you’ll want to check out the circular dealing with an offer by African Equity Empowerment Investments to its shareholders (excluding Sekunjalo and certain directors) at a price of R1.15 per share. This includes a proposed delisting of the company.
  • There might be a sting in the tail for Tongaat (JSE: TON), with a company trading as Powertrans having launched an urgent application in the High Court in Durban to interdict the business rescue practitioners and the Vision consortium from going ahead with the implementation of the business plan that creditors approved. Powertrans has also applied for the business rescue plan to be set aside. Unsurprisingly, Tongaat, the business rescue practitioners and the Vision consortium will oppose the application.
  • Efora Energy (JSE: EEL) seems to be getting closer to rectifying its current status as a company that is suspended from trading on the JSE. They are currently working on 2023 interim results, having achieved a significant catch up. Operationally, the Alrode Depot is fully operational and they are selling diesel and other fuel products to bulk customers in various industries. The company has exercised its right under the lease agreement for that property to purchase the depot for R3.8 million.

Ghost Bites (Argent Industrial | MiX Telematics | Pepkor | Shoprite | Transaction Capital)

The Finance Ghost
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Ghost Bites (Argent Industrial | MiX Telematics | Pepkor | Shoprite | Transaction Capital)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

A sale and leaseback at Argent Industrial (JSE: ART)

This is a handy way to unlock funding

There’s always a lot of debate around whether operating companies should own the properties they operate from. It usually comes down to how strategic the property is, as it is certainly easier to move an office full of people than it is to move specialised industrial equipment.

Like most industrial groups, Argent Industrial has a property portfolio. This is a source of potential funding, particularly through sale and leaseback transactions. In these deals, investors are found who want to buy properties and lease them back to the company.

Argent Industrial will execute such a transaction on the Phoenix Steel properties in Gauteng, unlocking R45.4 million in the process. The proceeds will be used to settle debt on the properties and the rest will be used for share buybacks. That sounds like a good application of the money to me!

MiX Telematics and PowerFleet release their circular and prospectus (JSE: MIX)

This is a great opportunity to learn more about corporate finance

As we’ve known for a while now, MiX Telematics and US-based PowerFleet are looking to implement a merger. The structure is that PowerFleet would acquire all the shares in MiX Telematics in exchange for shares in PowerFleet. The merged entity would then be listed on the JSE under the PowerFleet name.

This means that MiX Telematics needed to release a circular to shareholders to approve the deal. Separately, PowerFleet needed to release a prospectus giving full details of the merged entity. Go check out the two documents to learn more about corporate finance transactions like these.

The rationale for the deal is that both businesses are sub-scale, so combining their efforts will build a larger telematics and Internet-of-Things business. The companies are obviously hopeful that they might get more attention on the Nasdaq as well.

The deal certainly isn’t cheap to implement, with the prospectus noting astronomical fees of $16.6 million!

Annoyingly, due to the timing of the publication vs. financial disclosure, the last available numbers in the prospectus are for the year ended December 2022. That now feels very old. Perhaps it doesn’t matter, as PowerFleet is consistently loss-making:

Those advisory fees look even more gigantic once you’ve seen this income statement, don’t they? This is typical tech start-up kind of stuff, which works a lot better on the Nasdaq than on the JSE.

Pepkor’s core business put in a solid performance (JSE: PPH)

It’s also really good to see strong growth in Avenida

Before we delve into this, it’s time to draw a 12-month chart for this sector:

The reality is that Truworths is the only one you really wanted to own over the past year. The rest have ranged from bleh to bliksem.

Pepkor has reported decent numbers for the end of 2023. If nothing else, at least Ackermans seemed to turn the quarter with a gain in market share in December. It’s been on quite the downward trajectory, so it’s good to see the inventory strategy coming right there and a recovery underway.

Speaking of inventory, the group highlights port disruptions as a problem for stock inflows. This is a risk facing all local retailers to some extent.

Pepkor didn’t let that get them down though, with growth of 7.2% in revenue from continuing operations for the three months ended 31 December 2023. Like-for-like sales were up 4.1% for the quarter, with PEP Africa (17.9%) and Avenida (10.8%) doing particularly well – noting that those growth rates are on a constant currency basis. Core operation Pep only managed 3.3% like-for-like growth. The Building Company suffered a 0.7% decline, in line with the pressures we’ve seen across that sector.

The pressure on volumes (inflation was 6.5% in PEP, Ackermans and Speciality and like-for-like sales came in below that) means that store growth really helped to pull the result higher, taking group merchandise sales growth to 5.5%.

Things have improved in January with the back-to-school season. Like-for-like sales are up 7.8% in PEP and 8.7% in Ackermans.

And in case you needed any more evidence that local consumers are under huge pressure, group cash sales increased by 2.4% and credit sales were up 35.2%. Group credit sales as a percentage of total sales increased from 9% to 12%. The credit strategy comes through strongly in the Fintech segment in businesses like Tenacity and Capfin. This segment also houses the Flash business that serves the informal market, which achieved revenue growth of 16.8%. Flash contributes 66% to the Fintech segment. Total Fintech segment revenue was up 20.7%

There’s no stopping Shoprite (JSE: SHP)

This marks 58 consecutive months of market share gains!

Over five years, the Shoprite share price is up 65%. Pick n Pay is down 66% and SPAR lost 43% of its value. This has to be one of the very best examples of where stock picking within a specific sector can be profitable.

Supporting that share price move is 58 consecutive months of market share gains in Shoprite’s core local supermarkets business. This is an extraordinary achievement. If you can believe it, sales growth accelerated in the three months to December (the second quarter of the financial year) vs. the immediately preceding quarter. Q2 sales growth from continuing operations was 14.6% vs. 13.2% in Q1. Supermarkets RSA is driving the performance, up 15.8% in Q2 to take the six-month performance to growth of 14.6%. This dwarfs Supermarkets Non-RSA (up 6.2%) and Furniture (up 1.7%). Other operating segments jumped by 23.1%.

To get a better sense of performance, it’s useful to adjust for the impact of the stores that were acquired from Massmart. Taking those out of the mix shows Supermarkets RSA sales growth of 11.2% – still very good.

As we’ve become accustomed to, the stores resonate at all income levels. Checkers and Checkers Hyper grew 13.7% (with a shout-out of appreciation to Checkers Sixty60’s growth of 63.1%). Shoprite and Usave grew 13.1%. LiquorShop increased sales by 25.2%. Even OK Franchise within the Other segment is doing well, with group sales to franchisees up by 25%.

The big question is going to be around profitability. The group has given some clues here that the sales story is going to be the highlight and that the market should temper its enthusiasm around profits. The comparable period included non-recurring income of R244 million as a loss of profit insurance claim. They suffered R500 million in diesel costs in this half because of load shedding. They have also incurred a “notable” increase in finance charges due to higher interest rates.

Interim results are due on 5th March, at which point we will see how the sales growth is translating into growth in profits.

Transaction Capital to unbundle WeBuyCars (JSE: TCP)

Here’s the first major step in trying to rescue some value from this broken growth story

As a look at my brokerage account will quickly confirm, the fall from grace of Transaction Capital was rather hideous. What went up certainly came down. The company is now trying to engineer the best possible outcome, which is a bit like trying to sculpt a turd into something beautiful.

Deep within the excrement, we find WeBuyCars. I like this business and the way it put a liquidity floor into a used car market that was crying out for exactly that, with other dealers enjoying easy money for far too long. The market is cyclical of course, but the underlying business is solid in my opinion.

At this stage, the board of Transaction Capital has in principle resolved to unbundle the entire stake in WeBuyCars, which means a 74.9% shareholding. This is good news for market participants in general, as it means there’s a pure-play look at WeBuyCars.

Although WeBuyCars has been legally isolated from the impact of SA Taxi’s restructuring, the reality is that perceived group contagion is an issue that needs to be addressed. Unbundling the company and letting it build a profile away from Transaction Capital is the way to do it. Including the potential future financial obligation to SANTACO of R285 million, Transaction Capital’s net debt was R1.4 billion at 30 September 2023 and subsequently reduced to around R1.2 billion as per the integrated annual report. There’s a long road ahead and it would be better for WeBuyCars not to be caught up in that.

Importantly, the annual report notes that Transaction Capital has no intention of pursuing a rights issue. I suspect that the share price will show some love to the news of the WeBuyCars unbundling.

Little Bites:

  • Director dealings:
    • Aside from various management transactions related to share option schemes, there was also a disposal of shares by an executive of Richemont (JSE: CFR) to the value of R18.2 million.
    • Heriot REIT (JSE: HET), acting through a subsidiary, bought R22.8 million worth of shares in Safari Investments (JSE: SAR). Heriot Properties is an associate of a non-executive director of Safari. Heriot and its concert parties hold 58.8% of Safari shares after this trade.
    • The company secretary of Datatec (JSE: DTC) has sold shares worth R454k.
    • The Praesidium partnership, an associate of a director of Huge Group (JSE: HUG) that regularly buys shares in the company, has bought another R2k worth of shares.
  • Cash shell Trencor Limited (JSE: TRE) released a trading statement for the year ended December 2023. As a cash shell, it’s really about forex and other movements. HEPS will be between 71.4 and 71.7 cents.
  • Conduit Capital (JSE: CND) has renewed its cautionary announcement related to the provisional liquidation of CICL, the company’s main subsidiary.

Ghost Bites (ArcelorMittal | Gemfields | MAS | Truworths | York Timber)

The Finance Ghost
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Ghost Bites (ArcelorMittal | Gemfields | MAS | Truworths | York Timber)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

ArcelorMittal’s profitability has been smashed (JSE: ACL)

This really isn’t the business model you want to be operating in South Africa

Before diving into the latest trading statement from ArcelorMittal, it’s worth looking at the share price chart:

Quite the rollercoaster, isn’t it?

It’s not getting any better, either. HEPS for the year ended December 2023 has fallen from R2.34 in 2022 to a headline loss per share of between -R1.55 and -R1.85. Ouch!

Headline earnings excludes the substantial impairment that has been recognised on the company’s Longs steel business. In November 2023, the company announced that this business would potentially be wound down. Extensive engagement followed, including with government stakeholders. Sadly, there are structural reasons why this business is failing, ranging from an environment of low demand through to governmental own-goals like logistics infrastructure. Another issue is the advantage that scrap has over iron ore.

Although the discussions have been positive, there are no quick solutions. It seems like a bit of a coin toss at the moment whether the company will keep the Longs business alive. It will take a significant effort from all stakeholders involved. In the meantime, the company has recognised an impairment charge of R2.1 billion against the assets of the business. This doesn’t include closure or retrenchment costs.

What hasn’t helped at all is that the second half of 2023 was poor for steel demand. Slow growth in China is a major factor here. Local demand is weak, with low to no growth. You can once again thank government (and specifically Eskom) for that. To make it even worse, Chinese manufacturers are dumping their steel in the South African and African markets as they don’t have sufficient domestic demand. It’s just a mess.

Despite everything, the company describes its debt as being at “tolerable levels” – for now, at least.

Gemfields sings a bullish tune (JSE: GML)

Emeralds and rubies continue to shine

At a time when diamonds are struggling, the more colourful stones are doing just fine thanks. Gemfields has released an update for the six months to December 2023 and it tells a good story, with auction revenues and pricing continuing to be positive.

2023 was the second highest year of auction revenues in Gemfields’ history, despite the withdrawal of November 2023’s auction of higher quality emeralds. The next auctions planned include a commercial quality emerald auction in Q1 2024 and a higher quality emerald auction and mixed quality ruby auction in Q2 2024.

Net cash at 31 December 2023 was $11.1 million, excluding auction receivables of $38.9 million.

MAS with a display of capital maturity (JSE: MAS)

The property fund is being extremely pro-active in managing the balance sheet

I was pleased to see the release of an investor presentation by MAS, the Eastern European real estate fund that gave the market a bit of a shock when it suspended its dividend. The suspension wasn’t due to an immediate problem. Instead, the company is looking ahead to 2026 and planning accordingly.

This perhaps came as a shock to South African investors, who are far more accustomed to management teams who collect bonuses right up until a company falls off the end of a cliff, at which point they blame “market conditions” for a highly dilutive rights issue before re-pricing share options and promising a lucrative “turnaround” strategy. Of course, they earn bonuses during the turnaround as well.

If that sounded like it was dripping with sarcasm and annoyance, then you got the right idea.

Full credit must therefore go to the MAS management team for showing the maturity to take the pain now in pursuit of a sustainable balance sheet. After the share price had an initial heart attack, things have improved:

In this presentation from the investor day, the company notes that the pressure comes down to one thing: bonds maturing in 2026 and the likely capital raising environment for MAS at that point in time. The overall fund does not have an investment grade credit rating, so conditions need to be highly favourable towards emerging markets and “risky assets” for a raise to be successful at decent rates. To get ahead of this problem, MAS is retaining its earnings from operations and is raising secured debt on unencumbered properties.

This point is worth explaining in more detail. You see, a property fund can either raise money at property level (like getting a mortgage on your house) or at portfolio level (like getting debt from the bank to go and buy various properties). The former is secured by a specific property. The latter is either unsecured, or is secured by the overall number of properties in the group. The problem for lenders at portfolio level is that they are second in the queue behind lenders who hold specific properties as security.

The lower the risk, the lower the cost of debt. This is why raising debt against specific properties is a cost effective way of raising capital to replace the bonds at portfolio level.

If you want to see what a mature approach to capital structure looks like, I highly recommend reading the presentation. This table should be stuck on the wall of every listed company executive in South Africa, especially in the property sector:

Truworths: now we know where the market share was lost (JSE: TRU)

Look no further than Truworths to see where Mr Price and The Foschini Group won back sales

Truworths shareholders may never have believed this day would come, but they can thank their lucky stars for the UK business. Without it, this would’ve been an ugly trading update.

For the 26 weeks to 31 December 2023, Truworths Africa experienced a 0.3% decrease in sales. Office (the UK business) was up 15.6% in GBP, so the group result was growth of 8.2% in rands. Guidance for HEPS growth is 0% to 4%, so the growth in sales doesn’t seem to have translated into an exciting increase in profits.

The Truworths Africa performance was impacted by a high base effect, the exact opposite of what we saw at Mr Price (which probably isn’t a coincidence). It’s not like there are suddenly loads of extra shoppers running around, so one store’s gain is a relative loss for another. Where Mr Price and The Foschini Group reported excellent sales in this period, Woolworths was disappointing and now we know that Truworths also lost out. Like-for-like store sales at Truworths fell by 3.3%. Trading space increased by 0.9% and is expected to be 1% higher for 2024, so they are still investing. Product inflation was 8.4% in this period, which is a lot more palatable than 13.3% in the comparable period.

After growing 13.4% in the comparable period, the two-year growth stack isn’t too bad for Truworths at all. Still, there are worrying signs here, as credit sales were flat year-on-year because credit scorecards deteriorated and thus credit extension declined. Overdue balances as a percentage of gross trade receivables deteriorated from 11% to 12%.

This means that Truworths had to rely on growth in cash sales, which wasn’t forthcoming. Cash sales fell by 0.9%. I must also point out that only 30% of Truworths Africa’s sales are cash sales.

The problem got worse towards the end of the period, with retail sales down 1.6% for the last 9 weeks of the period.

The silver lining in the local business is online sales, which increased by 41% to contribute 4.2% of Truworths Africa’s retail sales. That’s quite similar to what we’ve seen at competitors.

Looking at the UK, sales were up 15.6% in GBP and 33.1% in our beloved rands. That’s big growth in local currency (i.e. GBP – whenever people talk about local currency, they mean where the business is based rather than the head office) that is made even better by the trajectory of our currency.

Online sales in the UK grew even faster, with the contribution increasing from 44% of sales to 47% of sales. It’s a good reminder of how early the South African online story is in its journey.

Growth did slow down towards the end of the year, coming in at 11.6% in GBP in the last 9 weeks.

Interestingly, trading space in Office decreased by 2.8% for this period but is expected to increase by 12% for 2024, with the business looking to invest in new stores and renovations.

York acquires land (and trees) from Sappi (JSE: YRK | JSE: SAP)

And this deal isn’t just about the timber

York Timber (JSE: YRK) has acquired the Pine-valley Farms (yes, they use the hyphen) from Sappi for R65.4 million. The value is exactly in line with an independent valuation performed on the farms in March 2023.

The deal includes the commercial timber currently on the land, which York will harvest over time. This reduces York’s dependency on third-party lumber purchases.

Interestingly, the opportunity also brings 300 hectares of arable land for the expansion of York’s avocado and soft citrus farming operations. It’s debatable whether the market will love the risk of fruit farming on top of the existing lumber operations, but time will tell. To add to the risks, the deal is being funded through debt.

This is a Category 2 transaction, so shareholders won’t be asked to vote on it anyway.

Little Bites:

  • Director dealings:
    • The CEO of Marshall Monteagle (JSE: MMP) bought shares in the company worth R11.7 million in an off-market trade.
    • An associate of the CEO of Acsion Limited (JSE: ACS) has bought shares worth R9.5 million in an off-market trade.
    • An associate of directors of Argent Industrial (JSE: ART) has sold shares worth R1.1 million. We’ve seen sales by this associate before, with the rationale being that there’s an ex-director involved in that entity that is looking to cash out. I do see this as being different to existing directors looking to take money off the table, which is exactly why the company provides this explanation.
    • An executive director of Afrimat (JSE: AFT) has sold shares worth R645k.
    • At Finbond (JSE: FGL), Sean Riskowitz (acting through Protea Asset Management) has acquired shares worth R25k and an independent non-executive director has bought shares worth nearly R30k.
  • Adcorp (JSE: ADR) has announced an odd-lot offer to clean up the shareholder register and reduce costs. Amazingly, 79.24% of total shareholders fall into the category of holding fewer than 100 shares. At the current share price, that means holdings worth R380 and less! These shares cumulatively represent 0.07% of total shares in issue. You can immediately see the administrative burden and why Adcorp is happy to clean this up at a 5% premium to the 30-day volume weighted average price.
  • Southern Palladium (JSE: SDL) released a quarterly activities report for the three months ended December 2023. This quarter will be remembered for an increase in the Indicated Mineral Resource and the receipt of formal notification from the Department of Mineral and Resources and Energy that the Mining Right application was accepted. Southern Palladium held $8.34 million in cash at the end of December, down from $9.98 million at the end of September. This excludes cash held by 70% subsidiary Miracle Upon Miracle Investments, surely one of the most aptly named mining businesses on the JSE. It takes a whole lot of miracles for junior mining to make it in this country’s conditions!
  • Mondi’s (JSE: MNP) share consolidation to offset the impact on its share price of a special dividend has become effective.
  • Labat Africa (JSE: LAB) has withdrawn the cautionary announcement that was first issued in October. This officially means that caution is no longer needed when trading in this shares. Considering that the shares are suspended from trading and Labat is frequently a subject of unusual announcements, I would unofficially suggest that caution is shown whether suspended or otherwise!

Why are we losing our minds over Stanley cups?

Dominique Olivier
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Why are we losing our minds over Stanley cups?

You’ve heard of an emotional support animal, sure. But why are people all around North America suddenly talking about an “emotional support water bottle”? Is the Stanley cup really the last word in personal hydration – or is this just a sippy cup for adults?

TikTokkers. Momfluencers. Gym bunnies. Corporate girlies. They all have one thing in common: their absolute devotion to the Stanley cup. Even if you’ve never seen a Stanley in person, you’ve no doubt seen at least one video about it online – whether it was an influencer raving over the new colour range that dropped at her local store, or a video of some dad making fun of his wife’s obsession with her oversized water bottle.

@hellokittyloverr26

New pink stanleys are out at @target 🩷🥰🫶🏼 #stanley #stanleycup #stanleytumbler #pinkstanley #pinkstanleytarget #pinkstanleytumbler #pink #pinklover #pinktok #pinkaesthetic #pinkgirl #girlythings #girlytok #girlygirl #girly #viral #viralvideo #viraltiktok #fypシ゚viral #fypシ #fyp #fy #foryoupage #foryou #foru

♬ original sound – valeravixen

I don’t use the word “obsession” here lightly either. Some members of the church of Stanley are so dedicated to these products that they are erecting “Stanley displays” in their kitchens to show off their collections. Right at the start of the year, a 23-year-old woman in the US was arrested for allegedly stealing 65 Stanley cups worth a total of about $2300. Following her arrest, the police issued a plea to the public: “While Stanley Quenchers are all the rage, we strongly advise against turning to crime to fulfil your hydration habits.”

So, why are we so thirsty for Stanley cups all of a sudden?

@lukecharleshammer

the Stanley cup craze is something else 😂 although i do love them 🤷🏼 we stan @stanleybrand in our house #marriedlife #stanleycup 🎥 inspo: @www.janky.com

♬ Blue Blood – Heinz Kiessling

A short trip down memory lane

It’s hard to keep a good brand down, and the clever folks at Stanley know this. Having celebrated its 110th anniversary in 2023, this old dog learned a new trick just in time to meet an upsurge in demand for health-focused products post-pandemic.

The brand’s founder, welder William Stanley Jr., was somewhat of a pioneer amongst blue collar workers when he invented his “Unbreakable Stanley Bottle” in 1913. Back then, most insulated bottles and flasks had a glass lining, meaning that one accidental knock on a factory floor, workroom or construction site would render a bottle obsolete. Stanley’s bottles featured a stainless steel lining, which not only made them tougher, but paved the way to more hygienic drink consumption.

Stanley remained popular with factory and construction workers, and eventually managed a seamless transition into the camping trend, which unlocked the leisure side of the market. But it’s the way that they captured the attention of social media influencers that will probably go down in history as a business masterclass.

Back with a bang

The sudden surge in the popularity of the Stanley cup can be attributed to the efforts of Ashlee LeSueur, Taylor Cannon, and Linley Hutchinson. This trio of close friends serve as the masterminds behind The Buy Guide, an e-commerce blog offering product recommendations for various aspects of the modern woman’s life.

The Stanley cup was among the initial recommendations on their site and gained traction within their modest following. However, in 2019, Stanley announced that they would discontinue the Quencher cup – the same product that The Buy Guide had been promoting. Since Stanley was inactive on social media at that stage, they were completely unaware of the renewed interest in the Quencher until the girls from The Buy Guide reached out to them, begging them to keep the product alive.

The turning point came when a new mom and influencer, who had previously purchased the cup through The Buy Guide, shared a photo on her Instagram story. She praised the cup for its utility in staying hydrated during childbirth and while caring for her baby.

This endorsement breathed new life into the Stanley Quencher and proved beneficial for the Stanley company at large. Recognising the untapped potential in Instagram marketing, Stanley collaborated with The Buy Guide in 2020. The strategic alliance aimed to leverage the product’s appeal among women in particular. As The Buy Guide team stated, “We knew if women could sell this cup to women, it would be a winner.”

Their intuition proved correct. Stanley redesigned their Quencher cup in a series of candy colours and successfully reached the female market, even dedicating a section on the front page of their website to the Stanley Quencher.

Now everybody wants a sip

Just like the latest skincare crazes that have every pre-teen buzzing, the Stanley cup has become the “must-have” item for everybody from moms to college students to young girls. TikTok is flooded with videos of 11-year-olds shedding happy tears on Christmas morning as they unwrap this prized possession. Having a Stanley instantly upgrades your cool factor – an unexpected outcome for what is basically a fancy water bottle.

All of this is great for Stanley, of course, and they’ve certainly leaned into their success. Their Quencher comes in 11 standard colours, with an array of occasional limited-edition releases that help to drive hype. Priced between $20 and $45 each (size dependent), they aren’t exactly cheap – but that hasn’t stopped fans from stocking up on multiple colours and sizes and even buying keychain-like accessories to glam up their bottles.

Of course the proof is in the profit, where the effect of Stanleymania is clear to see. Next time you wonder if influencer marketing is effective, remind yourself that Stanley’s annual sales reportedly jumped from $75 million to $750 million in 2023 alone.

How long can it stay hot?

One of the selling points of the Stanley Quencher is that it can keep beverages hot for 7 hours. How long will they be able to do the same for demand?

At present, about 110 000 people are signed up to Stanley’s restock notification list for out-of-stock products. As anybody with experience in the markets will tell you: it’s simply impossible for that demand to last. At some point, the bubble will burst, and the same stores that are seeing moshpits erupt around their new Stanley stock drops will be selling surplus stock out of bargain bins.

@iamrayysyymone

#greenscreenvideo #target #stanleycup #valentines #fyp

♬ original sound – Rayy Syymone

Perhaps it is a mark of the human condition, our herd mentality and our fear of missing out that drives us to hype products like the Stanley cup into these dizzying heights. Stanley isn’t a listed company (imagine what that chart would look like if it was!) but if it was, I reckon this would be the time when investment analysts would start looking at it with a sceptical eye. Will the comedown be a gradual taper as people lose interest and influencers move on to fresher pastures, or will it be a sudden drop on the heels of some scandal? Only time will tell.

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.

Dominique is a freelance writer at Wordy Girl Writes and can be reached on LinkedIn here.

Ghost Bites (Alphamin | BHP | Grindrod Shipping | Lewis | Novus | Sea Harvest – Brimstone)

The Finance Ghost
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Ghost Bites (Alphamin | BHP | Grindrod Shipping | Lewis | Novus | Sea Harvest – Brimstone)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Alphamin was negatively impacted by heavy rainfall (JSE: APH)

Sales volumes were far below production volumes, but it’s a temporary problem

Alphamin produces tin in the Democratic Republic of Congo. With the release of fourth quarter results, we now know that 2023 was a record year of tin production. Sadly, heavy rainfall towards the end of the caused a lot of problems for road haulage, so sales volumes fell far below production volumes in the final quarter (2,046 tonnes and 3,126 tonnes respectively).

The good news is that this is a temporary issue as the rainfall has subsided. Alphamin expects to catch up the sales shortfall in the first quarter of the new financial year.

The full year result was a 1% increase in contained tin produced and an 11% drop in contained tin sold. Average tin prices fell by 15%. Combined with the drop in sales, it’s therefore not surprising to see EBITDA falling by 39%. The company did as much as it could to mitigate the impact of falling prices and sales volumes, with all-in sustaining cost flat year-on-year.

To help investors understand the impact of the sales issue in the fourth quarter, Alphamin notes that this had a negative impact of $14 million on EBITDA. To give context to this, 2023 EBITDA was around $136 million.

Looking at the balance sheet, the company highlights a four-year extension to the off-take agreement with the Gerald Group, which includes a tin prepayment arrangement of up to $50 million. The interest rate is floating and works out to 10.3% currently. There is also a reduced marketing commission under this arrangement.

Thanks to Mpama South coming on stream in the first quarter of 2024, tin production guidance for 2024 is between 17,000 and 18,000 tonnes. That’s a big jump from 12,568 tonnes in 2023. The company estimates that the Mpama South capital expenditure cost will be 10% above budget due to weather and other logistical challenges.

Is BHP’s provision for Samarco high enough? (JSE: BHG)

Media speculation in Brazil suggests that it may not be

The Fundão tailings damn failed in November 2015. It was an absolute disaster. BHP holds a 50% stake in Samarco, the operator of the dam. The other 50% is held by Vale.

As you might expect, the period since the failure has been one of legal action and reparations, with the corporates having to play a delicate game of trying to do the right thing and not being on the receiving end of an outsized financial claim.

BHP’s provision for the failure was $3.7 billion as at 30 June 2023. If Brazilian media speculation is to be believed, it may not be enough.

The Brazilian media is reporting that the Federal Court of Brazil has quantified collective moral damages as $9.7 billion. The original claim was for $43 billion in reparation, compensation and collective moral damages. I’m certainly no expert in this stuff but if just the moral damages are $9.7 billion and BHP is on the hook for half of that, then the provision of $3.7 billion is inadequate.

BHP responded to the media speculation by releasing a SENS announcement noting that the company hasn’t been served with a decision by the court. We therefore don’t know if that amount is correct or not. It would also potentially be open to appeal.

Shipping rates increased at the end of 2023 for Grindrod Shipping (JSE: GSH)

We need to wait for more detailed disclosure to get a proper view on things

Grindrod Shipping is 82.23% held by Taylor Maritime. As Taylor is also listed and releases quarterly updates, Grindrod Shipping always alerts investors to any such updates.

One needs to be careful, as Taylor’s disclosure covers both the Taylor and Grindrod Shipping fleets. At best, we can use this disclosure a rough directional guide. According to Taylor, its net time charter equivalent (TCE) rate increased 15% over the three months ended December. We will need to wait for Grindrod Shipping to release its quarterly results so that a proper year-on-year comparison can be made. That’s the real story, as one would reasonably expect rates in the December quarter to be higher than the September quarter due to retail seasonality.

Separately, Grindrod Shipping also released an announcement dealing with ship sales and purchases. Unless you’re following the company in immense detail, the only relevance of this announcement is the insight that these companies are constantly right-sizing their fleets based on demand. They also do all kinds of interesting transactions, like charter deals rather than outright sales or purchases.

Lewis shareholders suffer an unpleasant UFO sighting (JSE: LEW)

Cash sales have been abducted and credit sales are keeping things going

Lewis is generally seen as a dependable group that manages to push forward in a tough environment, while using clever share buybacks to give shareholders a return that otherwise isn’t available in the furniture industry. This strategy won’t work forever, as conditions in this market need to improve at some point.

In a trading update for the nine months to December 2023, Lewis notes revenue growth of 8.7%. The star here was other revenue, which includes things like interest income and insurance revenue. Thanks to strong credit sales growth in the past two years, this source of income was up 15.2% for the nine months.

That’s just as well, because group merchandise sales were only up by 4.2%. The traditional business (Lewis, Beares and Best Home & Electric) grew 6.6% and UFO fell by 14.5%. The key difference is that UFO is a cash sales business, whereas the rest of the group is dependent on credit sales.

Comparable store sales were just 1.5% at group level over the nine months. For the traditional business, comparable stores sales came in at 3.2%.

As you perhaps already knew, furniture at this end of the market is only a profitable model because of the ability to sell on credit. This means that collection rates are critical to the business performance. The collection rate was 80.7% in this period, down from 82.0% in the comparable period. It also costs a lot of money to manage a debtor book, with those costs up by 59.8% for the nine months.

Lewis continues to find ways to compete in this market, with shareholders rewarded by a high dividend yield along with share price growth over time. The pressure on South African consumers only seems to be getting worse though, so watch that collection rate.

Novus declares a special dividend (JSE: NVS)

Remember this when looking at share price charts in future

When a company is in “value unlock” mode, there are often special dividends along the way. This is typically just a way to return cash to shareholders from sources other than profits. A special dividend is often the outcome of a sale of a division, for example, or some other major strategic change.

Novus has declared a special dividend of 50 cents per share. The source of cash is the sale of property and the reduction of working capital in the print division. On a share price of R4.75, that’s a meaty dividend.

The payment date is 19 February.

When you look at share price charts in future, remember that you need to add back the special dividend to see the true return to shareholders. This is also true for ordinary dividends if you want to consider a total return vs. a share price return. The difference with a special dividend is that it has the effect of causing a substantial drop in the share price because the company is deliberately making itself smaller. The impact on share price return vs. total return is thus more pronounced.

Sea Harvest and Brimstone release the circulars for the Terrasan deal (JSE: SHG | JSE: BRT)

And no, this isn’t a combined circular

You may recall that Sea Harvest recently released the most overcomplicated SENS announcement I’ve ever seen. For whatever reason, it detailed every restructuring step taking place at Terrasan as a pre-cursor to the Sea Harvest deal. The net result is that barely anyone in the market actually understood the transaction.

The circulars have now been released for the deal. There are two of them, as Brimstone as the controlling shareholder of Sea Harvest (with a 53.37% stake) needs to release its own circular to shareholders.

The simple version of this story is that Sea Harvest will acquire 100% of certain Terrasan subsidiaries that catch, process and sell pelagic fish, as well as 63.07% of Terrasan’s businesses that farm, process and sell abalone. The combined purchase price is R965 million. R365 million will be settled in cash and the rest through the issuance of Sea Harvest shares at R10 per share. The current Sea Harvest share price is just below R9.

There are also two deferred consideration payments based on financial targets for the year ended December 2023 and ending December 2024. The maximum possible payments are R98.5 million and R157.5 million.

The pelagic business that is the target of the acquisition is known as Saldanha. It operates on the West Coast of South Africa and employs over 600 people. Its 15-year fishing rights were recently renewed. Sea Harvest has just 0.6% of the anchovy quota and 2.7% of the pilchard quote, whereas Saldanha holds 11.51% and 5.05% respectively. This acquisition therefore give Sea Harvest much higher overall fishing rights.

The abalone business is called Aqunion and it has farms in Hermanus and Gansbaai. It employs 430 people. Sea Harvest is acquiring 63.07% of this business and the remaining 36.93% will be held by Agri-Vie.

Overall, these transactions help Sea Harvest improve its scale and diversification. Terrasan has held these investments for a long time and is looking for a liquidity event.

The pro-forma impact on Sea Harvest from this transaction is a 37% increase in diluted HEPS. That shouldn’t come as a surprise when big chunk of the deal is funded in cash – they are literally buying earnings. The net asset value per share is a useful metric here as well, with that due to decrease by 3%. Of course, the bigger focus will be on strategic benefits going forward.

Sea Harvest doesn’t seem to have used much in the way of corporate finance advice here, but the lawyers (in this case Webber Wentzel) did very nicely with a R8.8 million fee just on the legal advice and drafting. Total transaction costs of R15.6 million really aren’t bad for a deal this size.

From a Brimstone perspective, the important thing here is that the group will be losing control of Sea Harvest as part of this transaction. This is because Sea Harvest has to issue many new shares, so Brimstone will only have a 47.5% stake after the deal. The intrinsic net asset value (INAV) per Brimstone share doesn’t change as a result of this transaction. This is because Brimstone values the stake based on the listed share price and hasn’t taken into account a control premium. The counterargument is that even if a premium had been recognised, it would probably still be there as a 47.5% stake is as good as a 53% stake in practice, as shareholder meetings never have a 100% attendance rate.

And yes, in case you are wondering, shareholders of both Sea Harvest and Brimstone need to approve the deal for it to go through.

Little Bites:

  • Director dealings:
    • Executives at Spear REIT (JSE: SEA) are buying shares in the company, with the CEO buying shares worth R28.8k and the CFO buying shares worth R209k.
    • The CEO of Santova (JSE: SNV) now holds more than 5% in the company. I find it odd that the announcement says that this was due to an acquisition of shares, as I couldn’t see a director dealings announcement. I think it’s more likely that the wrong template was used for this announcement and that the 5% threshold has been reached due to share buybacks and there being fewer shares in issue.
  • The SARB approval for Frontier Transport’s (JSE: FTH) special dividend has been obtained. The payment date for the dividend of 137.38 cents per share is 12 February.

Ghost Bites (Dis-Chem | Harmony | Mr Price | PPC | Sasol)

The Finance Ghost
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Ghost Bites (Dis-Chem | Harmony | Mr Price | PPC | Sasol)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Dis-Chem buys the Midrand DC from directors (JSE: DCP)

This is part of the ongoing efforts to clean up related party arrangements

When entering the listed space, Dis-Chem carried certain elements of typical family businesses with it. One such element is that several properties were owned by the founding directors rather than the company, with leases in place to govern that relationship. This isn’t an ideal situation, especially for core properties.

Having been under pressure to sort this out, there have been a few transactions over the years to bring core properties into the group. The latest such example should also be the last one. In a deal to buy the Midrand distribution centre and head office for R478.6 million, Dis-Chem will now own all core distribution centres and its head office.

There are various directors who have a financial interest in this deal i.e. not just the Saltzman family. This makes it a related party transaction. As it is only a small related party transaction (because Dis-Chem has a large market cap), the deal can go ahead provided an independent expert opines that the transaction is fair. BDO Corporate Finance has done just that.

Harmony has released excellent numbers (JSE: HAR)

Production was strong and costs came in well below guidance

The gold sector is on a charge at the moment, with Harmony Gold up more than 80% over the past 12 months. When things go well for mining houses, they go extremely well. The converse sadly applies as well.

For now at least, Harmony is having its day in the sun. Gold production for the six months to 31 December 2023 was between 820,000 and 835,000 ounces, an increase of between 12% and 14% year-on-year. Thanks to the economies of scale that come with this kind of performance, all-in sustaining costs (AISC) for the first half of the year will be between R830,000/kg and R855,000/kg, which is way below the previous guidance of R975,000/kg.

This excellent performance was driven by good news in both the South African and Papua New Guinea operations.

The management team is taking a cautious approach here, with full-year guidance unchanged at the upper end of 1,380,000 to 1,480,000 ounces. The all-in sustaining cost guidance is still R975,00/kg. Although this certainly looks conservative, it’s also true that a lot can change in mining – and quickly.

Mr Price gets the market even more excited about clothing (JSE: MRP)

Coming out the day after the TFG announcement, the rally in the sector continued

Mr Price has released a trading update for the 13 weeks ended 30 December. Retail sales grew by 9.9% and that was enough to get the market excited, even though the base period was really rough for Mr Price as they had been woefully underprepared for load shedding.

Comparable store sales were up 4.1% in this period. This means that new stores made a big difference to the total growth rate as well. Of course, recent acquisitions are part of that story. Things improved dramatically in December (comparable store sales growth of 8%), as October and November combined only saw comparable growth of 0.8%.

Group selling price inflation was 4.9%. Although unit sales increased 5.0%, my interpretation is that this includes new stores and acquisitions. With comparable store sales only up 4.1%, it sounds like comparable volumes are 0.8% lower. Happy to be corrected on this if I’ve gotten it wrong.

The apparel segment did the heavy lifting, with sales growth of 11.7%. Mr Price gained market share for five consecutive months in apparel, with Mr Price Kids as a real highlight. Home could only manage 0.9%, with Yuppiechef as the highlight with double digit sales growth. Telecoms was up 9% but is a really small part of the group.

Interestingly, online sales growth was very limited. Online sales only grew 2.9%, contributing 1.8% to retail sales.

The market would’ve liked the comment about how sales were achieved at a higher gross margin than last year. TFG also teased a good gross margin story in its update. Closing inventory was 1.9% lower than the corresponding period, so efficiencies in that space are clear to see.

In terms of the recent acquisitions, Power Fashion is performing ahead of the market with double-digit growth, achieving its highest market share on record in December. Studio 88 managed growth of high single digits against a strong base.

Looking ahead, shareholders will want to take note that the group’s shipping rates are contracted until June. If rates are still elevated by that stage due to Red Sea (or other) issues, then there will be an impact on supply chain costs.

PPC is cash positive after the disposal of Cimerwa (JSE: PPC)

The proceeds from this disposal have been banked

It’s incredible to think about how far PPC has come from a balance sheet perspective. After a great deal of effort, the company was put on a sustainable footing – something that is highly necessary when competing in a market as tough as cement in Southern Africa. We are light on infrastructure investment and heavy on cement imports.

It may therefore come as a surprise that PPC is focusing on the markets closer to home, choosing to exit the business in Rwanda. The sale proceeds of $42.5 million have now been banked, with PPC Group now in a cash positive position.

It’s interesting to note that the COMESA Competition Commission approval is not a condition precedent for the disposal. That approval is expected to be received within 120 days. I’m no expert in that space at all, but I suspect that things get a bit awkward rather quickly if the approval isn’t obtained as expected.

PPC is now fully focused on the Southern Africa market.

Sasol continues to be dragged down by chemicals (JSE: SOL)

The share price has halved over the past 12 months

Sasol shareholders are starting to look like they went a few rounds with Dricus. When a price halves over a year, it’s ugly. The Sasol share price detached from the oil price a while ago, which suggests that the chemicals side of the business is causing the pain.

Indeed, in the overview section of the latest quarterly update, Sasol notes that the first half of the financial year has been hit by an average sales basket price for chemicals that is 24% lower year-on-year. This is a result of customer destocking and lower energy prices. Although pricing was slightly better in Q2 than in Q1 of the current financial year, the reality is that profitability is under pressure.

On the energy side, production performance has improved year-on-year but the rand oil price has negatively impacted the business, as have inflationary pressures on costs.

The outlook isn’t much better, with global petrochemical markets remaining uncertain. South African customers are facing the challenges of Eskom and Transnet, so that isn’t doing Sasol any favours either.

The previous guidance for FY24 production and sales volumes has been affirmed for all segments except for one of the fuel operations.

Little Bites:

  • Director dealings:
    • The CFO of Afrimat (JSE: AFT) has sold shares worth R1.24 million.
    • Praesidium SA, the fund linked to a director of Huge Group (JSE: HUG), has bought shares worth R34.4k.
  • Astoria Investments (JSE: ARA) has renewed its cautionary announcement related to a potential acquisition.
  • Conduit Capital (JSE: CND) is still in the process of disposing of CRIH and CLL. The approval from the Prudential Authority is taking longer than expected to come through. There have been several extensions to the date required for the fulfilment of conditions. There is now yet another extension, this time to 29 February 2024.

Ghost Bites (Quilter | The Foschini Group)

The Finance Ghost
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Ghost Bites (Quilter | The Foschini Group)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Quilter’s strategy to attract client flows is working (JSE: QLT)

Distribution is so important in the asset and wealth management industry

Quilter has released a trading update for the fourth quarter of 2023. It’s got a lot of good news in it, like Assets under Management and Administration increasing by 5% between September and December. An increase in asset prices certainly helped, but so did core business net inflows of £175 million. This is below the £242 million achieved in the comparable period, but it’s still a solid outcome.

Through Quilter’s own channel, full year net inflows as a percentage of opening assets came in at 15% in the High Net Worth segment and 10% in the Affluent segment. On the Platform channel, independent financial advisor gross inflows were up 44% in the fourth quarter and 7% on a full year basis. This led to a net inflow situation in that part of the business, although High Net Worth clients were a considerable source of outflows based on portfolio repositioning.

Fourth quarter non-core net outflows of £119 million were consistent with levels seen in the third quarter.

Another important metric is productivity, with gross sales per Quilter Adviser (as they define the term) up 21% in the fourth quarter.

The Quilter share price is up 20% in the past 12 months.

The Foschini Group’s share price rally looks too optimistic based on results (JSE: TFG)

Was there a short squeeze in the morning? Or did the market get very excited about gross margin?

When The Foschini Group released released its third quarter trading update, the share price shot up around 8%. It then washed away over the course of the day, closing 3.3% higher. The results themselves weren’t fantastic, so it’s possible that some short positions were squeezed in the morning i.e. had to be closed out. Alternatively, the market got very excited about the comments on gross margin and glossed over the rest. I’m genuinely not sure though. Markets don’t always make sense.

For the quarter ended 30 December 2023 (well, the 13-week period to be exact), group turnover was up 4.5% year-on-year. Over the nine months year-to-date, group turnover was 9.0% higher. That’s a significant deceleration in the third quarter.

TFG Africa (which includes South Africa) was up 5.1% for the quarter, with a strong finish to the year of 11.8% growth in December. Like-for-like turnover growth was just 0.7% for the quarter and 6.1% for December. The market would’ve appreciated the comment that December was the highest full-price contribution thus far in this financial year, which means the best gross margin. Further down in the announcement, there’s another comment that talks to a recovery in gross margin.

The trend highlighted earlier in the week by Attacq about a relatively disappointing Black Friday was echoed by TFG Africa, noting that Stage 6 load shedding was implemented over that weekend. Load shedding was relatively better in December 2024 vs. December 2023, so a lot of trade seems to have shifted from November to December.

TFG Africa’s cash turnover grew 6.6% in the quarter and now comprises 75.8% of TFG Africa turnover. Credit turnover only grew by 0.7% in the quarter, with conservative average acceptance rates to reflect the macroeconomic pressures.

For all the investment made in the Homeware category by TFG Africa, it could only grow by 0.9%. The best result was in Clothing (up 6.4% for the quarter), which also happens to be the biggest part of the local business (75.4% of turnover).

TFG London was up against a tough base, with turnover falling 3.0% in GBP in the third quarter. TFG Australia was even worse, down 7.3% for the quarter in AUD. The weak rand worked wonders on both those results, reported as positive growth of 9.0% in TFG London and -0.8% in TFG Australia when expressed in rands.

Looking at online turnover, this grew by 29.2% for the quarter. TFG Africa’s online turnover was up 44.8%, now contributing 4.2% of TFG Africa turnover. The consolidation of the brands on the Bash platform seems to be working well. TFG London’s online turnover grew 8.4% in the quarter and contributed 44.5% of sales. TFG Australia’s online turnover fell 1.4%, contributing 6.2% to TFG Australia turnover.

Looking ahead to the fourth quarter, TFG expects turnover to be higher than a year ago because the base period had substantial load shedding. Of course, we don’t know yet what load shedding will be in the first few months of this year, but my view is you can expect our government to do everything possible to keep the lights on ahead of elections.

Little Bites:

  • Director dealings:
    • An executive director of Richemont (JSE: CFR) has sold shares worth around R6.8 million.
    • Sean Riskowitz has bought more shares in Finbond (JSE: FGL) through Protea Asset Management, this time to the value of R208k.
  • MC Mining (JSE: MCZ) updated the market on the takeover offer (or lack thereof) by the consortium that includes Senosi Group and Dendocept. A Bidder’s Statement (this is an official term) was expected to be lodged in the first week of January 2024. The consortium has been delayed for some reason and hasn’t given a revised timetable, but it has reconfirmed its intention to make a takeover offer. The independent board committee has reiterated its “take no action” recommendation at this stage. MC Mining is registered in Australia, which is why you’ll see some takeover law language that you may not otherwise recognise.
  • The financial director of Rebosis (JSE: REA | JSE: REB), Asathi Magwentshu, has resigned from the board. The company is still in business rescue, so her replacement will be walking into a tricky role!
  • Kibo Energy (JSE: KBO) has sold shares in Mast Energy Developments worth £120k. The proceeds will be used for ongoing working capital requirements and to reduce the balance on the bridge loan facility with RiverFort Global Opportunities to meet monthly payments and avoid equity dilution.

Ghost Wrap #60 (Motus | Attacq | Clicks | Woolworths)

The Finance Ghost
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Ghost Wrap #60 (Motus | Attacq | Clicks | Woolworths)

The Ghost Wrap podcast is proudly brought to you by Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Mazars website for more information.

In this episode of Ghost Wrap, I covered these important stories on the local market:

  • Motus is a great example of how cyclical the used car industry is, with the additional challenge of having costly debt.
  • Attacq’s turnover and footfall update for November and December hass some real nuggets for those interested in the retail sector.
  • Clicks achieved solid retail sales, but the wholesale side of the business had a wobbly.
  • Woolworths is struggling with consumer affordability, as sales volumes dropped and so did headline earnings from continuing operations. 

Ghost Bites (AVI | Bowler Metcalf | Cashbuild | Clicks | Jubilee Metals | Karooooo | Woolworths)

The Finance Ghost
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Ghost Bites (AVI | Bowler Metcalf | Cashbuild | Clicks | Jubilee Metals | Karooooo | Woolworths)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

AVI proves that we keep eating our stress away (JSE: AVI)

The biscuit and snacking business has improved its margins

When it comes to consumer goods, my theory is that the most defensive branded products are the ones that we turn to in a time of need. In other words: the naughty treats. When it’s time to throw calories at our problems, we want the branded stuff with a taste we trust. Private label will do for day-to-day things, but not for that skelm snack just before bed.

In AVI’s trading update for the six months to 31 December 2023, Snackworks reported revenue growth of 9.8%. That’s not the most impressive growth in the group, with that honour going to Entyce Beverages with growth of 16%. The difference is that Entyce couldn’t fully recover cost pressures through pricing, as consumers are price sensitive on drinks. Instead, that business managed to protect margins by increasing volumes and achieving manufacturing efficiencies. Snackworks, in contrast, was able to recover input cost pressures thanks to consumers being less price sensitive, improving margins in the process.

Within the group revenue growth performance of 7.1%, the important laggard was I&J. Fish sales volumes fell 17.1% due to poor catch rates, aggressive competition and inefficiencies at Cape Town’s port. The taxi strike also didn’t help. Combined with the costs of a new B-BBEE structure, I&J’s operating profit is “materially lower” year-on-year.

Thankfully, the rest of the group pulled through and delivered HEPS growth of between 16% and 18%. That’s a strong performance, which is why the share price was trading 6% higher in late afternoon trade.

Bowler Metcalf: hold on to your hats (JSE: BCF)

The packaging and plastics company has delivered a big jump in earnings

Bowler Metcalf has a black hat as its corporate logo and possibly the worst website on the JSE. The share price has been volatile and isn’t the most liquid thing around either, but there’s little doubt that the market will appreciate the latest trading statement.

Thanks to higher sales in the packaging segment and resultant benefits of economies of scale, HEPS for the six months to 31 December 2023 is expected to be between 68.8 cents and 73.3 cents. That’s an increase of between 42.1% and 61.9%!

There’s very little growth happening at Cashbuild (JSE: CSB)

But at least the second quarter was better than the first quarter

Cashbuild released an operational update dealing with the second quarter of the year, which ended on 24 December 2023. This also gives us sales data for the first half of the year.

The second quarter was certainly a lot better than the first quarter, coming in at 5% growth in revenue. Like-for-like revenue growth was 3% and new stores contributed 2%. When combined with the first quarter to give the half-year result, we find growth of just 2%.

Selling price inflation was 3.2% as at the end of December. Transaction volumes were down 1% in existing stores over the period.

P&L Hardware is still going backwards, with a drop in revenue of 5% in the second quarter.

A strong retail performance at Clicks (JSE: CLS)

A drop in wholesale turnover blunted the overall turnover growth – but still a good set of numbers

The health and beauty market in South Africa seems to never stop growing. Attacq gave us a pretty good clue in the update on Monday and Clicks confirmed it at a much more macro level on Tuesday by releasing a trading update for the 20 weeks to 14 January 2024.

Retail turnover is up 11.8%, with Clicks having achieved its highest ever daily sales on Friday 22 December. People were clearly getting those headache pills ready in anticipation of a big Christmas weekend! Selling price inflation was 7.5% and sales in comparable stores increased by 8.4%, so Clicks achieved volume growth.

Clicks achieved market share gains across all core product categories in the first quarter of the financial year, which is genuinely impressive.

Moving on from Clicks retail, recently acquired chain Sorbet grew franchise and corporate sales by 12.3%. Franchise sales aren’t reported as part of Clicks’ sales, but the company earns royalties etc. on them.

The wholesale business didn’t do so well, with UPD’s total managed turnover declining by 6.3%. Wholesale turnover was down 0.8% due to a systems transition at UPD’s main distribution centre. Many a consumer goods business has been impacted by changes in systems and Clicks is no exception. As systems stabilised, wholesale turnover improved significantly, coming in at 6.9% for the six weeks to 14 January. This was hopefully just a bump in the road. It’s also worth noting that UPD has been strategically letting go of lower margin clients.

Unsurprisingly, the market gave this announcement a positive reaction.

Record quarterly chrome production at Jubilee (JSE: JBL)

The group is on track to deliver production guidance for FY24

Jubilee Metals released a production update for the second quarter of the 2024 financial year. This quarter covers the three months to the end of December. The good news is that FY24 production guidance has been affirmed thanks to a strong quarter.

Chrome production increased by 13.2% quarter-on-quarter, setting a new quarterly record in the process. PGM production was maintained at very similar levels to the first quarter, with no third-party production in the period. Copper production at Roan fell vs. the first quarter but the upgrade project is going to drive a strong second half of the year. It’s a pity that a delay at the Roan project has been experienced based on difficulties in sourcing certain electrical components.

Karooooo is still growing, but at a slower rate (JSE: KRO)

A deceleration in growth isn’t what the market likes seeing

Karoooooo is the owner of Cartrack (and a couple of other businesses – but that’s the main one). Cartrack is all about signing up new subscribers and increasing the base of recurring revenue. Investors have high expectations for growth, with the share price having been largely range-bound since mid-2022 as the company tries to grow into its valuation.

The good news is that the business is still growing, with Cartrack subscribers up by 14% year-on-year in the third quarter. The bad news is that the rate of growth has slower, with fewer net new subscribers in this quarter than a year ago.

Total revenue is up 16% as reported or 14% on a constant currency basis. Subscription revenue increased by 17% as reported and 14% on a constant currency basis, so there’s your proof that most of the revenue is recurring in nature. Importantly, Cartrack is growing in every region in which it operates.

Cash generated from operations is an important measure for the group and it increased by 55%.

The sooner the pain in Carzuka ends, the better. The failed attempt at entering the used car market lost R28 million this quarter. It lost R15 million in the comparable quarter. They are winding it down, which is why cost of sales was larger than revenue. Stock needs to be cleared.

Karooooo Logistics is telling a far better story, with adjusted EBITDA jumping from R2.6 million to R7.9 million. It’s still small (and particularly tiny vs. adjusted EBITDA of R447 million at Cartrack), but isn’t a drag on group earnings.

Woolworths is treading water (JSE: WHL)

The recovery has suffered a significant wobbly

After a few periods in which the apparel side of the business at Woolworths was starting to tell a better story than Woolworths Food, the organic yoghurts fought back and delivered the best numbers in the group. Sadly, this is less to do with brilliance at Woolworths Food and more to do with a poor result in Fashion Beauty and Home.

The group numbers need to exclude David Jones to be comparable, as that disaster is finally out of the group in this period but was still there in the base. With that adjustment in place, sales increased by 5.4% as reported or 4.4% in constant currency terms for the 26 weeks to 24 December 2023. Woolworths is quick to point out that the base period was strong and that makes the comparison tougher, but the reality is that this wasn’t a good performance.

If there is a silver lining, it’s that sales growth accelerated to 7.2% in the last six weeks of the period. Those Woolworths mince pies are working hard here.

Speaking of the Christmas goodies, Woolworths Food grew turnover by 8.4% overall and 7.2% on a comparable store basis. Underlying product inflation was 9.1%, which means volumes growth was negative i.e. consumers pulled back. This is despite price increases at Woolworths being below headline food inflation, which remains one of my key concerns about the group. The pricing power enjoyed a few years ago doesn’t seem to be present anymore.

I have an overall fear that the South African upper middle class is simply becoming too poor for the Woolworths Food model to show strong growth. Just look around you at the relative explosion of Chinese cars on the road vs. the German models that were everywhere 10 or 15 years ago. The overall level of wealth is dropping.

At least we are still happy to spend over Dezemba, with sales in Woolworths Food up 8.6% in the last six weeks of the period at a time when inflation was up 7.9%. This means positive volume growth!

Space grew 3.3% over the period, so Woolworths is still investing. Online sales were up 46.6%, contributing 5.1% of South African sales.

Moving on to Fashion Beauty and Home, sales for the 26-week period were hit by poor availability of stock. The summer range was delayed at the ports. Turnover grew by a paltry 2.2% and comparable store sales were up just 1.5%. That’s a pretty horrible outcome when price movement was 11.4%, as it means that volumes were sharply negative. The last six weeks of the period weren’t much better, up 3.8%. Trading space was up 0.3% and online sales grew 26.9%, contributing 5.4% of South African sales.

This means that we are nearly at the point where online sales penetration in Woolworths Food will exceed penetration in Fashion Beauty and Home. I firmly believe that Checkers can be thanked for that, with other retailers benefitting from market acceptance.

Woolworths Financial Services grew the book by 4.9%. The annualised impairment rate increased from 5.5% to 6.3%, reflecting the strain on consumers. Importantly, it’s lower than at the end of the previous year.

Moving across the pond, Country Road Group saw sales fall by 5.0% overall and 9.5% in comparable stores. The company had a very strong base to contend with, as Australians in particular emerged from post-Covid lockdowns to dodge spiders and snakes on their way to the shops. Sales growth in the last six weeks moved slightly positive, up 1.3%.

Despite the performance in Australia, trading space increased by 6.6% in this period. Woolworths is clearly looking through the cycle here and investing. It’s also worth noting that online sales increased marginally to 26.8% of total sales, so that gives you an idea of how underdeveloped online shopping still is in South Africa.

With all said and done, HEPS from continuing operations will be down by between 5% and 10%. Including David Jones in the base leads to a HEPS drop of 25% to 35%, but that’s not a fair comparison.

Little Bites:

  • Director dealings:
    • The CEO of RH Bophelo (JSE: RHB) bought shares worth R790k.
    • Acting through Protea Asset Management, Finbond (JSE: FGL) director Sean Riskowitz has bought shares worth R68k.
  • Reinet (JSE: RNI) confirmed that its net asset value (NAV) per share increased by 2.1% between September 2023 and December 2023. The company has achieved a compound annual growth rate (including dividends) of 8.5% since March 2009, measured in euros.
  • Coronation Fund Managers (JSE: CML) announced its total assets under management as at 31 December 2023. The number came in at R629 billion. They never bother to include the comparative number, forcing me to go digging for old SENS announcements. The number as at 31 December 2022 was R602 billion. This means they grew assets under management by 4.5% in the past 12 months.
  • The CEO of Eastern Platinum (JSE: EPS) wrote a letter to shareholders in which he reminded them of the significant expected change in production mix from 2023 to 2026. Chrome production made up most of the mix in 2023, yet PGMs will be 80% of 2024 revenue and the split will then move to 65% – 35% in favour of PGMs in 2025 – 2026. Although PGM prices are under a lot of pressure currently, the hope is obviously that they improve significantly by the time Eastern Platinum is producing a material amount of PGMs. It also helps matters that the whistleblower allegations of related party transactions were found to be unsubstantiated. For the work required to get the PGM operations going, the company has funding from the rights offer completed in May 2023 and an Investec pipeline finance facility.
  • Orion Minerals (JSE: ORN) has acquired important surface rights at its New Okiep Mining Project, clearing the way for more drilling. The company says that this clears up any conflicting land use interests, which previously prevented Orion from accessing the surface area to conduct validation work.
  • In its share buyback programme that started in November 2023, AB InBev (JSE: ANH) has repurchased 0.51% of total shares outstanding. This is an investment of $647 million in its own shares.
  • Since the general authority was given in July 2023, Santova (JSE: SNV) has repurchased 3.1% of its shares for R30.8 million. The average price paid was around R7.50 per share, which is slightly below the current market price.

UFC: The business of bliksem

Dominique Olivier
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UFC: The business of bliksem

They say there’s no better prize than winning in the name of your country. While that’s certainly a sweet sentiment, I’m willing to bet that Dricus du Plessis is equally happy about the reported $1 million that he just won in his fight against Sean Strickland.

The majority of us probably had no exposure to the UFC before we sat on our couches at 05:00 on Sunday morning, bleary-eyed but totally ready to watch two half-clad men beat each other up in the name of national pride. For the sake of transparency, I’ll make no secret of the fact that I knew nothing about the UFC (or MMA as a whole, for that matter) until the swelling chorus of support around Dricus “Stillknocks” du Plessis and his quest for the world championship caught my attention.

With the fight won (well done Dricus!) and my curiosity piqued, I set out on a little Sunday-afternoon research expedition, which then turned into a full-on dive down the rabbit hole that is competitive fighting.

Here’s what I learned:

There’s a market for combat

For as long as human beings have existed, we’ve wanted to fight each other. And practically for as long as we’ve wanted to fight each other, we’ve also enjoyed watching other people fight. Thus, we not only invented things like boxing, wrestling, karate and jiu-jitsu for self defence, but also, to some degree, for showmanship.

In the early 1990s, a man named Art Davie decided that he wanted to monetise this showmanship in a new way. Now, charging an audience a fee to watch a fight was not a new idea by a long shot. But usually when people fought in the ring, fight organisers would do their best to make sure that the opponents were evenly matched in terms of their size and skill. Art Davie reckoned the only way to inject some real excitement into competitive fighting was to turn that tradition on its head.

Art was fascinated by the “Gracies in Action” videos that he had seen. This was a video-series, produced by the Gracie family of Brazil, which featured Gracie jiu-jitsu students defeating martial artists of various disciplines such as karate, kung fu, and kickboxing in unarmed, full-contact matches. With this seed planted in his brain, Art approached director and producer John Milius and jiu-jitsu master Rorian Gracie with the idea to host an eight-man single-elimination tournament called “War of the Worlds”. The competition would showcase martial artists from diverse disciplines engaging in unrestricted combat, with the goal of determining the superior martial art.

In other words: a classically trained boxer could take on a karate master in the ring, with no weight classes separating them. Obviously, there was massive entertainment potential here. Davie spearheaded the business plan, and a group of 28 investors chipped in the startup cash for WOW Promotions, all geared up to turn the tournament into a television sensation under John Milius’ direction. Fast forward to 1993, and WOW Promotions was on the hunt for a TV partner, which they found in Semaphore Entertainment Group (SEG).

Reading through anecdotes of how that first WOW event came together really gives you a taste of how unrestricted the 1990s were. For starters, the event was marketed to both investors and potential audiences as “a real-life version of Street Fighter or Mortal Kombat”. And then there’s the creation of the signature Octagon, which came about because organisers Davie and Gracie were unhappy with the idea of a traditional roped ring.

Claiming that a roped ring would give fighters too many opportunities to “escape” their opponents, they instead suggested such alternatives as 1) a moat full of alligators, 2) a razor-wire barrier, 3) a line of men in togas or 4) an electric fence. While all of these sound like they have spectacular viewing potential, it is perhaps best for all fighters involved that set designer Jason Cusson came up with the much tamer chain-link Octagon, which is the shape still associated with the sport today.

The moer the merrier

This inaugural WOW match – which was retrospectively dubbed UFC 1 – was met with massive amounts of enthusiasm and almost equal amounts of criticism. In 1996, US Senator John McCain was appalled when he saw a tape of an earlier UFC fight. He thought it was abhorrent and decided to lead a campaign to ban the UFC and what he called “human cockfighting.”

McCain went all out, sending letters to the governors of all 50 U.S. states, urging them to hop on the ban(d)wagon. 36 states heard the call and enacted laws banning the “no-holds-barred” action, with New York dropping the ban hammer right before UFC 12, forcing the UFC to pack its bags and relocate to Dothan, Alabama. But still the show went on, airing on DirecTV PPV, even though it was playing to a more intimate crowd compared to the cable pay-per-view giants of the time.

While UFC 1 was promoted under the tagline “There are no rules”, a slew of injuries led to the introduction of new rules after practically every UFC event. In the face of constant criticism, the UFC decided to play nice and teamed up with state athletic commissions, making a few tweaks to its rulebook to keep things classy while holding onto the essence of striking and grappling.

By UFC 12, weight classes were in and fish-hooking (the practice of sticking fingers in an opponent’s mouth or nostrils and pulling outwards) was out. Fast forward to UFC 14, and gloves became a must-have, while kicking someone’s head when they’re down became a must-not. After UFC 15, some limits were put on hair pulling, as well as on strikes to the back of the neck and head, headbutting, small-joint manipulations, and groin strikes.

For the UFC and their TV partner SEG, it was a long and arduous battle to transform from a spectacle to a full-fledged sport, all without losing the interest of a rabid fanbase that wanted nothing more than the no-holds-barred violence they had been promised. After doing the hard yards to get sanctioning, SEG found themselves teetering on the edge of financial ruin.

Then, in 2000, the dynamic trio of Station Casinos bigwigs Frank and Lorenzo Fertitta, along with their business partner Dana White, swooped in with a proposition to buy the UFC. Fast forward a month to January 2001, and voila! The Fertittas sealed the deal, purchasing the UFC for a cool $2 million and giving birth to Zuffa, LLC, the proud parent company overseeing the UFC.

Nowhere to go but up

Fast forward past many, many milestones – including a merger with World Extreme Cagefighting in 2010, a seven-year broadcast deal signed with Fox Sports in 2011, the signing of Ronda Rousey (the first female UFC champion) in 2012, the 2016 sale to WME-IMG for $4.025 billion and the subsequent 2021 buyout of Zuffa by Endeavour – and it looks as though the history of the UFC is as nailbiting as the final round in a championship fight.

On September 12, 2023, Endeavor and WWE decided to join forces. They fused into a brand-new, stock-market-hyped company under the symbol “TKO,” with Endeavor’s CEO, Ari Emanuel, calling the shots. WWE’s shareholders snagged a 49% slice of the action, and Vince McMahon was named executive chairman. The UFC was valued at a whopping $12.1 billion at the time of the merger.

Not bad for a business that was built on bloodlust and tamed by sanctions, wouldn’t you say?

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.

Dominique is a freelance writer at Wordy Girl Writes and can be reached on LinkedIn here.

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