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Mr Price’s Battle with Load Shedding: A Revenue Setback of R1 Billion

Trive South Africa
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Mr Price’s Battle with Load Shedding: A Revenue Setback of R1 Billion

Mr Price (JSE: MRP) recently announced that South Africa’s energy crisis and associated load shedding wreaked havoc on its financial performance, resulting in a staggering revenue loss of approximately R1 billion for the full financial year ended on 1 April 2023.

The retailer’s core trading divisions suffered a severe blow in the financial year’s second half, particularly during the festive season when load shedding struck with unprecedented intensity, resulting in an annual loss of 318,000 trading hours.

Being a local value retailer, Mr Price had exercised caution when investing in backup power, as historical experiences with load shedding had been somewhat manageable. However, the dire situation took an alarming turn after September 2022, with power outages escalating to unparalleled levels, eclipsing the cumulative quantum of the previous 15 years.

South Africa’s heightened energy crisis and inadequate alternative energy sources resulted in an estimated loss of 318,000 trading hours, equivalent to roughly R1 billion in revenue.

With only 37% of Mr Price’s core business possessing backup power utilities by the end of September 2022, the heightened levels of rolling blackouts took a significant chunk out of the retailer’s top line, paving the path for implementing energy continuity plans. Indirectly, the repercussions of load shedding extended to customer behaviour, leading to diminished consumer confidence and a pressing need to reduce unsold stock levels, further curtailing the company’s top and bottom-line figures.
 
Despite load shedding ticking down throughout the winter period, much to the surprise of many local consumers, the power crisis is far from over. To combat this dire energy situation, Mr Price has implemented energy continuity roll-out plans and a substantial investment of R220 million in backup power systems. 

Fundamental Analysis

  • Despite the adversity caused by loadshedding, Mr Price achieved a commendable revenue growth of 17% year-over-year, amounting to R32.85 billion for the financial year ending 1 April 2023. Notably, this figure includes the acquisition of a 70% stake in the Studio 88 Group in October 2022. Despite robust revenue growth amidst a period rife with extensive power disruptions, the effects of load shedding during the festive period resulted in a modest 5.4% year-over-year increase in the retailer’s annual EBITDA, coming in at R7.2 billion for the latest financial year. Furthermore, the group’s headline earnings per share (HEPS) figure declined by 6% year-over-year, reaching 1,205.70 cents, down from 1,282.10 cents for the prior year. Moreover, basic earnings per share (EPS) declined by 6.8% year-over-year, arriving at 1,210.70 cents, down from 1,298.60 cents. 
  • Headline earnings per share (HEPS) increased from 1,100.10 cents for the 2018 fiscal year to 1,205.70 cents for the 2023 fiscal year, translating to a five-year compound annual growth rate of approximately 1.9%. Dividends per share (DPS) increased from 693.10 cents in 2018 to 759.60 cents in 2023, implying a five-year compound annual growth rate of 1.8%. Over the same time horizon, from 2018 to 2023, Mr Price has maintained the same dividend payout ratio of 63%, excluding the 2020 financial year, where it decreased its payout ratio to 29.7%. Despite retaining the same payout ratio, the group reported a 5.9% year-over-year dividend per share (DPS) decline from 2022 to 2023. 
  • Notably, the retailer’s profitability and gearing ratios – return on net worth, return on average equity, return on capital employed and return on operating assets – all sit at their lowest levels when analysing the time horizon spanning from 2018 to 2023. 
  • The group’s return on net worth currently sits at 23.9%, down from 27.8% in 2022, while its return on average equity sits at 24.8%, down from 29.2% in 2022. Moreover, the retailer’s return on capital employed comes in at 23.1% for the latest fiscal year, lower than the 27.3% reported in 2022. Return on operating assets comes in at 51% for the 2023 financial year, significantly down from the 74.6% reported for the 2022 fiscal year. 
  • Over the same period, Mr Price reported their weakest current and quick ratios, with the former coming in at 1.6x for the 2023 financial year, significantly down from 3.1x reported in 2018 and 2.5x reported in 2022. The group posted a quick ratio of 0.6x for the latest financial year, significantly down from 2.2x in 2018 and 1.6x in 2022. Amidst South Africa’s dire energy situation, suppressed consumer sentiment, and rising interest rates curtailing customer spending, the retailer’s inventory turnover ratio comes in at 3.4x for the 2023 financial year, the lowest reading in over five years. Mr Price reported a total liabilities to total shareholder equity ratio of 1.1 for the 2023 fiscal year, significantly higher than the 2018 reading of 0.4 and the 2022 reading of 0.9. When looking at the six years spanning from 2018 to 2023, the 2023 reading of 1.1 is the highest across all six years, implying a significant reduction in solvency. The gradual weakening of the group’s current and quick ratios over the period spanning from 2018 to 2023 indicates an overall decrease in liquidity levels. 
  • Delving into the group’s cash flow statements, net cash inflows from operating activities surged by an impressive 23.6% year-over-year, coming in at R5.94 billion for the financial year ending 1 April 2023, up from R4.81 billion in the prior fiscal year. Cash generated from operations increased by 9.7% year-over-year, coming in at R6.26 billion for the 2023 financial year. 
  • Looking ahead, Mr Price anticipates continued challenges in the trading environment for the first six months of the 2024 fiscal year. While consumer price inflation (CPI) decreased slightly from 6.8% in April to 6.3% in May, the group emphasises that subsequent interest rate hikes have not significantly curbed inflation. As a result, consumers are shifting their spending toward non-discretionary items.

Comparative Analysis of Share Prices: Mr Price, Truworths, and The Foschini Group

  • Over the past five years, Mr Price (JSE: MRP) and The Foschini Group (JSE: TFG) have seen their share prices underperform relative to Truworths (JSE: TRU).
  • The price chart below displays the dismal five-year share price performance of Mr Price (green line) and The Foschini Group (orange line), returning -27% and -28% to shareholders, respectively. Over the same period, Truworths (blue line) has produced a measly 6% to shareholders. 

Technical Analysis

  • Looking at the daily price chart of Mr Price, the price action has been under bearish pressure, trading lower in a descending channel since April 2022. Despite testing the primary support level at R124 per share (red line) towards the end of May 2023, the price action increased toward higher levels, testing the R149 per share (green line) resistance level in June but failing to break above that level. 
  • The bulls will look for the share price to break above the R149 resistance level, a share level towards the R166 per share (horizontal black dotted line) resistance level, which could prevail as a level of interest for bullish investors and traders alike. The bears will look for the share price to decline toward the primary support level at R124 per share, which could be in play if negative sentiment persists or macroeconomic headwinds worsen. 

Sources: Business Tech, Koyfin, Moneyweb, Mr Price Financial Statements, Trading View

Ghost Wrap #32 (Spear REIT | Attacq | AngloGold | Brikor | Mondi | Sappi | Telkom | RCL Foods)

The Finance Ghost
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Ghost Wrap #32 (Spear REIT | Attacq | AngloGold | Brikor | Mondi | Sappi | Telkom | RCL Foods)

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.

  • Spear REIT released encouraging first quarter metrics overall, but the company certainly isn’t immune from the broader macroeconomic challenges despite being focused on the Western Cape.
  • Attacq has agreed terms with the Government Employees’ Pension Fund (GEPF) for the acquisition of a 30% stake in Attacq’s Waterfall portfolio.
  • AngloGold’s restructure into a NYSE-listed group doesn’t come cheap, with advisory fees of over R1.1 billion!
  • Brikor has decided to focus on its core brickmaking business, with TCQ Mining taking responsibility for the coal operations and giving Brikor a more stable return on them.
  • Mondi is a step closer to getting out of Russia, with the Gotek Group deal completed and the sale of Syktyvkar still needing to be achieved.
  • Sappi is discussing the future of the Stockstadt Mill with various stakeholders in Germany, as the company doesn’t believe that the facility can be sold as a going concern.
  • Telkom’s board has rejected the proposal from Afrifund, Axian and the PIC – the consortium led by ex-CEO Sipho Maseko.
  • RCL Foods has suffered a R234 million knock from a special levy by the South African Sugar Association, a direct result of Tongaat Hulett not paying its levies anymore. 

Listen to the podcast below:

CNBC Africa interview: retail stocks

The Finance Ghost
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CNBC Africa interview: retail stocks

Tania Habimana invited me to CNBC Africa for a detailed discussion on local retailers and whether I would buy any of them.

I thoroughly enjoy live TV interviews, not least of all because I get a kick from seeing the purple ghost logo on the screen on shows that I watched long before becoming a ghost. CNBC Africa is a great example of this, with a recent chat with excellent host Tania Habimana on local retailers.

It’s rough out there for South African consumers and we are seeing this come through in the numbers and the share price performance of the local retailers.

The full interview is well worth a watch:

Ghost Bites (AngloGold | Choppies | Eastern Platinum | Nedbank | Telkom)

The Finance Ghost
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Ghost Bites (AngloGold | Choppies | Eastern Platinum | Nedbank | Telkom)

AngloGold’s corporate restructure costs $60 million (JSE: ANG)

Yes, that is well over R1 billion to restructure the group!

AngloGold Ashanti has a market cap of R160 billion. This makes it a meaty group that corporate advisors saw coming from a mile away, with costs of the intended restructure coming in at a truly spectacular $60 million. Here’s how that money gets spent:

This table comes from the pre-listing statement that has been released as the next major step in the corporate reorganisation. When all is said and done, AngloGold will have its primary listing on the NYSE and inward listings on the JSE and A2X, as well as a secondary listing on the Ghana Stock Exchange.

This entire gedoente is to convince the market that AngloGold is an international gold group rather than a South African company, which should hopefully drive a higher valuation multiple over time. It also gets the company a lot closer to North American investors, which isn’t a bad thing as that is the deepest pool of capital on the planet.

Choppies is still looking at Kamoso Group (JSE: CHP)

The cautionary announcement has been renewed once more

Botswana retail group Choppies has been figuring out a potential acquisition of the Kamoso Group for several months now, with the first cautionary announcement having been released in January 2023. The intended deal is an acquisition of a 76% controlling stake in the FMCG (fast-moving consumer goods) business.

Choppies has already received conditional approval from the Botswana Competition and Consumer Authority, even though there’s a long way to go in finalising the terms of any deal.

Eastern Platinum is being dragged to court (JSE: EPS)

The company is fighting with ABT Toda over a construction agreement

Eastern Platinum announced that its South African subsidiary, Barplats, is being taken to the High Court by ABT Toda, which is the intended nominee of Advanced Beneficiation Technologies (ABT) to hold its interest in a joint venture between Barplats and ABT.

That joint venture clearly hasn’t gone the way the parties intended. Barplats and ABT are in an arbitration process to deal with a dispute over the development and construction of a modular plant to process PGMs at the Crocodile River Mine. Various milestones needed to be met and weren’t, but that hasn’t stopped an escalation of this matter by ABT.

Shouting by Nedbank shareholders, but no substance (JSE: NED)

A strange habit has developed in the market around voting on remuneration policies

These days, you just aren’t a good corporate citizen unless you vote against remuneration policies at corporates. It almost doesn’t matter whether the policy is fair or not, as some players in the market just can’t bring themselves to vote in favour at any company.

Embarrassingly for those 25.24% of Nedbank shareholders at the AGM who voted against the remuneration policy, not a single one sent through questions or comments to Nedbank to engage on elements of the report. Not one.

If this isn’t the greatest example of the classic “Karen” complaining on Facebook about something ridiculous that can’t be backed up, then I don’t know what is.

Telkom’s board says no to Afrifund / Axian / the PIC (JSE: TKG)

The board thinks that the current Telkom strategy will create more value for shareholders

When a potential suitor comes to the table, the board needs to consider whether it will take the deal to shareholders. If they don’t, then there’s a chance that it goes hostile in the form of an offer directly to shareholders. This seldom happens because the deal risk (and costs) go through the roof.

The Afrifund consortium (consisting of ex-CEO Sipho Maseko, international partner Axian Telecoms and most recently the PIC) will now need to decide whether to sweeten the existing offer to the Telkom board or take it directly to shareholders. This is because the board has decided that the proposal isn’t in the best interests of shareholders, with the current Telkom strategy believed to be generating a better outcome for shareholders.

Here’s a chart of how the current strategy is performing:

Little Bites:

  • Director dealings:
    • A director of Dipula Income Fund (JSE: DIB) has bought shares worth R664k.
    • A director of Adcorp (JSE: ADR) bought shares worth R384k.
    • An associate of a director of Acsion (JSE: ACS) has bought shares worth R292k.
  • I usually ignore independent director appointments in Ghost Bites as they don’t really tell you much about the company. Occasionally, something catches my eye. The Foschini Group (JSE: TFG) has made two major appointments, with Jan Potgieter (ex-CEO of Italtile) and Nkululeko Sowazi (co-founder of Tiso Investment Holdings) both joining the board as independent non-executive directors.

Power Battle: How SA’s Retail Giants Spent Billions to Defeat Loadshedding’s Wrath

Trive South Africa
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Power Battle: How SA’s Retail Giants Spent Billions to Defeat Loadshedding’s Wrath

South Africa’s retail giants have spared no expense, shelling out a staggering R2.4 billion to battle the disruptive force of loadshedding.

This phenomenon, characterised by sporadic power outages, has plagued the nation for several months, reaching unprecedented intensity levels, curtailing productivity, cutting retailers’ profits, and depressing market sentiment.
 
The repercussions of heightened power outages, which intensified in the latter half of 2022, have been dire for retailers nationwide. The mounting costs incurred range from diesel purchases to keeping generators running to substantial investments in backup power systems.

Take Food Lover’s Market, for example, which poured R50 million into securing reliable backup power systems within the past six months.

Acknowledging that these costs, particularly for food retailers, are ultimately transferred to the consumers is crucial.

South Africans are feeling the weight of this predicament as the prices of everyday goods continue to surge.

  • Despite annual consumer price inflation (CPI) ticking down somewhat, arriving at 6.3% in May 2023, down from 6.8% in April 2023, food and non-alcoholic beverages remain a primary catalyst in keeping prices higher for longer.
  • The most significant contributor to May’s 6.3% annual inflation rate was food and non-alcoholic beverages, which increased by 11.8% year-on-year, contributing 2.1 percentage points to the annual rate.
  • Food prices surged 12% year-on-year in May, with vegetable prices rising by an eye-watering 20.8% year-on-year, while bread and cereals experienced an annual price increase of 18.1%, with milk, eggs and cheese increasing by 14.2% year-on-year.
  • Non-alcoholic beverages experienced an annual price increase of 10%.

When analysing the contributions of different groups to the annual percentage change in headline inflation, food and non-alcoholic beverages remained the most significant contributor to the all-items index.

In April, food and non-alcoholic beverages contributed 2.4 percentage points to the headline figure of 6.8%, while, in May, the line item contributed 2.1 percentage points. This trend highlights the significant impact that loadshedding has had on keeping food prices elevated, subsequently contributing to the sticky headline inflation figure.

Peaking at 7.8% in July 2022, headline CPI has ticked down somewhat, coming in at 6.9% in January 2023, rising slightly higher in February and March, and lowering to 6.3% in May, down from 6.8% in April. Interestingly, annual headline inflation increased steadily in February and March when loadshedding was especially rife and power disruptions intensified to unparalleled levels, which implies that loadshedding is a direct catalyst towards sticky inflation in South Africa. 

South Africa’s most prominent food retailers – Spar (JSE: SPP), Shoprite (JSE: SHP), Pick ‘n Pay (JSE: PIK) and Woolworths (JSE: WHL) – collectively splurged an astronomical R1.87 billion on direct costs associated with load shedding.

Between December 2022 and March 2023, Spar spent R700 million on direct costs associated with loadshedding, while Shoprite, Pick ‘n Pay and Woolworths, spent R560 million, R522 million and R90 million, respectively, to combat the devastating effects associated with constant power outages.

Across four food retailers, the cumulative direct costs associated with load shedding totalled R1.87 billion between December 2022 and March 2023, where headline inflation ticked up. This trend implies the possibility of a relatively strong correlation between loadshedding concerning the costs involved in mitigating the energy crisis and price levels, specifically food and non-alcoholic prices. 

While backup power solutions like solar energy have helped alleviate the impact of load shedding, they come with their exorbitant costs for retailers. Despite some relief from power disruptions this winter, Shoprite anticipates that diesel prices will remain steep throughout 2023. While loadshedding has been less severe in June, one cannot discount the distinct possibility of its intensification beyond stage 6 as winter progresses. 

Analysing Share Price Performance: Comparing South African Food Retailers 

  • Over the most recent five-year time horizon, Woolworths (JSE: WHL) has prevailed as the winner in share price performance, returning close to 60% to shareholders (yellow line), with Shoprite (JSE: SHP) returning a cumulative return of just over 15% to shareholders (orange line) over the same five-year period.
  • On the other hand, Spar (JSE: SPP) and Pick ‘n Pay (JSE: PIK) have prevailed as the ultimate losers concerning cumulative five-year share price performance, returning -32% (green line) and -38% (blue line) to shareholders, respectively. 

Over the most recent twelve-month period, Woolworths has returned close to 42% to shareholders (yellow line), with Shoprite returning just under 16% to shareholders (orange line). Spar and Pick ‘n Pay have returned -21% (green line) and -28% (blue line) to shareholders over the last year. 

Sources: Bloomberg, Business Tech, Stats SA, Trading View

Ghost Bites (Attacq | Invicta | RMB Holdings | Sappi | Wesizwe)

The Finance Ghost
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Ghost Bites (Attacq | Invicta | RMB Holdings | Sappi | Wesizwe)

Attacq’s deal with the GEPF has been agreed (JSE: ATT)

This is great news for shareholders – like me!

In February 2023, Attacq announced that the Government Employees’ Pension Fund (GEPF), represented by the PIC, had reached a non-binding agreement with Attacq to take a 30% stake in Attacq Waterfall Investment Company.

A deal isn’t a deal until it’s actually a deal. Thankfully, this is now a deal, with a binding term sheet now agreed.

The GEPF will acquire 30% of the shares and shareholder loans in the Attacq Waterfall portfolio from Attacq for R2.388 billion in cash. The price has been calculated with reference to NAV and some adjustments, with a 15% discount then applied. That’s still a lot less than the traded discount in most property funds, which is why the Attacq share price benefitted from this.

Additionally, the GEPF will inject R300 million into Attacq Waterfall as a shareholder loan. Attacq will put another R700 million into Attacq Waterfall to keep the loans in line with relative shareholdings.

Attacq will retain 70% in Attacq Waterfall and will continue to provide asset, property, development and fund management services to the business at market-related fees. That’s good news for return on equity, as asset-light income is the holy grail in property funds.

There will be a substantial decrease in group gearing from 38% to 26.3%. The hope is to negotiate with debt providers to refinance the remaining debt in the group on more beneficial terms.

This is a Category 1 transaction, so a circular will be released to shareholders and they will be asked to vote.

For more from Attacq, be sure to watch the recent recording of the Unlock the Stock event that featured Attacq and Tharisa.

Invicta’s shareholders approve the odd-lot offer (JSE: IVT)

This can be an opportunity for retail investors, but probably not this time

An odd-lot offer can give retail investors an arbitrage opportunity. Once the price is set, then buying up 99 shares in the market (to be safe) at anything less than that price gives you a risk-free profit. Obviously, the difference between the market price and the odd-lot price needs to be big enough to justify (1) the trading costs and (2) the time.

As an odd-lot offer is always based on fewer than 100 shares, the share price is what determines the opportunity. Although Invicta Holdings shareholders have approved an odd-lot offer at 5% premium to the 30-day VWAP calculated on 24 July, the problem is that the current share price is only R28.80.

This gives you a value of R2,880 on which to earn an arbitrage profit, which probably won’t even buy you anything interesting at McDonald’s.

RMB Holdings and Atterbury are still fighting (JSE: RMH)

Arbitration isn’t the way forward, apparently

This is starting to sound a bit like a bad divorce. Efforts to resolve the impasse between RMB Holdings and key investment Atterbury have been unsuccessful. The parties agreed in principle to arbitrate, but couldn’t agree on the terms of the arbitration.

That’s like agreeing to go to a seafood restaurant, then arguing about the fact that fish is on the menu.

The problem is that Atterbury is expected to issue a conversion notice to RMB (the bank – nothing to do with the legacy RMB Holdings vehicle anymore) that would see RMB Holdings’ stake in Atterbury be diluted. The key is that RMB Holdings has the right to decline the conversion notice being issued, so the impasse continues.

The parties have been trying to sort this out over the past six months. Like in basically every important soccer game ever, perhaps they should try a penalty shootout?

Sappi is talking to the Wirtschaftsausschuss (JSE: SAP)

Time to brush up on your German

In April 2023, Sappi announced that negotiations to sell three mills, including the Stockstadt Mill in Germany, had fallen through. Sappi is hanging onto the other two mills and needs to take action on the Stockstadt Mill, as it is unlikely to be sold as a going concern.

Sappi is consulting on the future of the mill with relevant parties, including the Wirtschaftsausschuss. As your curiosity must be peaking by now, that’s the Economic Works Council. And since this is Germany, it probably does work.

It looks like the mill will close and the site will be sold, so the pulp mill and paper machine will close. This pulp was being used in the production of woodfree paper for the European print market. These decisions are part of Sappi’s strategic shift in Europe.

What’s up at Wesizwe? (JSE: WEZ)

Hot commissioning is getting people hot under the collar

Wesizwe Platinum is trying to get to a point where it can commission the concentrator plant at the Bakubung Platinum Mine. But alas, there have been “several defects” during the testing process, ranging from lube systems to hydraulic failures. These are being resolved as quickly as possible.

This also isn’t exactly the best timing for a director to have resigned, even if it is only a non-executive director.

Little Bites:

  • Director dealings:
    • A director of a major subsidiary of PSG Konsult (JSE: KST) has sold shares worth R5.28 million.
    • An associate of a director of Afrimat (JSE: AFT) has sold shares worth R1.4 million.
    • In a whoopsie, a director dealings announcement hadn’t been released by Orion Minerals (JSE: ORN) in relation to a further acquisition of shares in the company by Clover Alloys Copper Investments. The director in question is a director of both Orion and Clover Alloys. This isn’t a director dealing in its purest form, but the important point is that Clover Alloys is increasing its stake.
    • While we are dealing with companies increasing their stakes, the news from Heriot REIT (JSE: HET) is that the company has acquired more shares in Safari Investments (JSE: SAR). Along with its concert parties (Reya Gola Investments and Heriot Investments), the stake has increased from 56.8% to 57.0%. It’s a small move, but the focus here is that the stake is being increased.
  • In case you wondered whether the Bob and Basil show at Naspers / Prosus (JSE: NPN / JSE: PRX) has calmed down in terms of how much money they are making, here’s confirmation that it hasn’t:
  • Investec Property Fund (JSE: IPF) has completed the transaction to internalise its management company (ManCo), a deal that is great news for the ManCo and very expensive for shareholders.
  • The game of musical chairs continues at the nightmare that is Pembury Lifestyle Group (JSE: PEM), with the announcement of multiple changes to the board of directors, including the resignation of the chairman and the company secretary.

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

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

Exchange-Listed Companies

AVI subsidiary Irvin & Johnson has announced a new B-BBEE transaction following the maturation on 1 July 2023 of its 2004 deal with Main Street 198. In terms of the new deal, Twincitiesworld, a 100% black-owned company will acquire 18.75% of the issued share capital in Irvin & Johnson. I&J employees currently own 6.25%. Following the transaction, 25% of the issued share capital of I&J will be owned by previously disadvantaged shareholders. The new deal is not a categorised transaction in terms of the Listing Requirements of the JSE.

In February, Attacq informed the market that it was in discussions to dispose of a 30% stake in Attacq Waterfall Investment Company (AWIC) to the Government Employees Pension Fund (GEPF) represented by the Public Investment Corporation. This week the company announced it had concluded binding agreements and would, following shareholder approval, implement the transaction in exchange for R2,388 billion in cash. In addition, the GEPF will inject a further R300 million into AWIC as a shareholder loan. Attacq will retain control of AWIC and continue to provide asset management and administration services to AWIC at market-related fees.

Following the implementation of the Distell transaction in April 2023 and further subsequent off-market transactions, Remgro has informed shareholders that its final shareholding position in Heineken Beverages and Capevin is 18.80% and 55.93% respectively.

De Beers, 85% held by Anglo American, has negotiated a new 10-year diamond sales agreement with the Botswana government. Previously De Beers kept 75% of the diamonds mined through Debswana, a joint venture held equally with the state. Under the terms of the new agreement, Botswana will receive 30% of diamonds mined from the four mines, increasing to a maximum of 50% in the next decade. The parties have also agreed to extend the mining licenses (up for renewal in 2029) for a further 25 years to 2054.

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

Weekly corporate finance activity by SA exchange-listed companies

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

As part of its capital optimisation strategy, Investec Ltd acquired on the open market a further 1,097,217 Investec Plc shares at an average price of 435.9 pence per share (LSE and BATS Europe) and 472,489 Investec Plc shares at an average price of R103.58 per share (JSE).

Choppies Enterprises has successfully raised P300 million (R429 million) in a rights offer. Shareholders subscribed for 267,5 million shares representing 51.36% of the offer shares with the remaining shares taken up by Ivygrove [196,1m shares (37.65%)] and Export Marketing [57,2m shares (10.98%)] as partial underwriters to the offer.

Remgro has disclosed its final shareholding in Heineken Beverages and Capevin following the implementation of the Distell transaction (first announced in November 2021) and subsequent off-market transactions. Prior to the deal, Remgro held 15.5% stake in Heineken Beverages. In a series of off-market transactions this stake was increased to 18.80% – 13,218,475 shares were acquired for an aggregate R926 million. Remgro’s shareholding in Capevin comprises a 31.36% stake in Capevin ordinary shares with a voting interest of 20.13% and a 35.8% voting interest in Capevin’s B shares, translating into an aggregate voting interest in Capevin of 55.93%

PBT Group has declared a capital reduction distribution to shareholders of R0.165 per share for an aggregate R17,26 million.

Nedbank has repurchased 2,723,917 Nedbank Group shares in terms of its odd-lot offer. The repurchased shares, which represent 0.55% of the total issued ordinary share capital of company were repurchased for a total consideration of R637,58 million.

Heriot REIT through its subsidiary Heriot Properties has disposed of 1,571,645 Safari Investments RSA shares, on market, to majority shareholder Heriot Investments at a disposal price of R5.60 for an aggregate R8,8 million. In a separate on-market block trade, Heriot REIT acquired an additional 385,237 Safari shares at a purchase price per share of R5.75 for an aggregate R2,22 million.

The JSE has flagged the following companies for late submission of their Annual Financial Statements: Acsion, African Dawn Capital and Copper 360. Companies need to submit their annual reports on or before 31 July 2023, or face possible suspension.

A number of companies listed on one of South Africa’s Stock Exchanges have initiated share buyback programmes and each week update shareholders. They are:

Investec’s share repurchase programme has been renewed and commenced on May 30. The programme will end on or before September 29. Over the period 26-30 June 2023, 341,049 shares were repurchased at an average price per share of R103.22. Since November 21 ,2022, the company has repurchased 12,244,378 shares at a cost of R1,31 billion.

This week Glencore repurchased a further 11,220,000 shares for a total consideration of £51,06 million. The share repurchases form part of the second phase of the company’s existing buy-back programme.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 26-30 June 2023, a further 1,961,211 Prosus shares were repurchased for an aggregate €130,4 million and a further 515,464 Naspers shares for a total consideration of R1,69 billion.

One company issued a profit warning this week: RCL Foods.

Five companies issued or withdrew a cautionary notice: Ayo Technologies, Tongaat Hulett, RMB Holdings, Conduit Capital and Attacq.

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

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

Vanessa Aitken
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Who’s doing what in the African M&A space?

DealMakers AFRICA

In Kenya, online retail distribution specialist, Kyosk has acquired KwikBasket for an undisclosed sum. The digital platform raised an undisclosed amount of funding from Japan’s Mitsui & Co earlier this year.

Verod-Kepple Africa Ventures has invested US$1,5 million in Morocco’s Chari. The B2B e-commerce startup for FMCG products, will use the funding to support its growth plans.

Fintech startup Masroofi has raised $1,5 million from undisclosed investors. Founded in 2022, the Egyptian startup provides electronic payment services for children, including a bank card system.

Morocco’s first online real estate estimation platform, Agenz.ma has raised MAD13 million (US$1,3 million) in a pre-Series A financing round. Investors in the round included among others, Azur Innovation Fund, Maroc Numeric Fund II and Beenok.

Nuru, a DRC renewable energy-powered metrogrid company, has closed a US$40 million Series B equity funding round to enable it to start construction on 13,7 MWp of projects. Investors included the IFC, the Global Energy Alliance for People and Planet, the Renewable Energy Performance Platform, Proparco, E3 Capital, Voltalia, the Schmidt Family Foundation, GAIA Impact Fund and the Jospeh Family Foundation.

TLG Capital has led a US$4,58 million funding round into Nigeria’s invoice financing startup, Zuvy Technologies. The funding was split between $4 million in debt in $580,000 in equity.

Kenya’s Revivo raised US$635,000 to expand operations from Raba Partnership, Village Global, Musha Ventures, Satgana and strategic business angels. Founded in 2022, Revivo provides a B2B marketplace for electronic repairs.

This week marked the signing of subscription agreements and letters of intent by African and global institutional investors in preparation for the first close of the Africa50 Infrastructure Acceleration Fund, a 23-year close ended private equity fund. The fund has been set up to catalyse further investment flows in the development of critical infrastructure across the continent.

DealMakers AFRICA is the Continent’s M&A publication.
www.dealmakersafrica.com

Ghost Global: the dark side of consistency

The Finance Ghost
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Ghost Global: the dark side of consistency

More of the same. It can be good. It can be bad. Using examples from the Magic Markets Premium research library, I explain this further.

Imagine this: you visit a new coffee shop for the first time and have the best cappuccino of your entire life. The next day, you revisit the coffee shop, hoping for a similarly good experience, only to find that the entire menu has been changed.

“Keep on keeping on”: a business strategy 

The cappuccino is still there and is just as good, but now it’s called an “extra-tall espresso with foam” and it costs R1 more than before. Alright, you might think, it’s a little strange but at least the product is still good.

You return the next day to find that all of the waiters have been replaced by AI-enhanced serving trolleys. The coffee is still excellent though, so you come back on the fourth day, only to discover that the coffee shop is now a mobile cart and they only accept payment in Bitcoin. 

Would you go back to see what surprises await you on the fifth day?

Running a business means eternally see-sawing between keeping your customer base engaged and interested, and offering something that they can rely on. Consistency is more than a buzzword here: it’s one of the most basic things that your business needs to master in order to gain the trust of its customers (not to mention investors and shareholders). Nobody likes a rollercoaster. Well, except swing traders.

Does that mean that consistency is the opposite of innovation? It doesn’t have to be. As with all things in business, success is often found in those tricky grey areas between two extremes. 

Our Magic Markets Premium research library is full of examples of businesses that have innovated themselves out of the game – but there are also those who have stagnated beyond relevance. Consistency is as important to a business as water is to human being’s survival.

Just remember that too much water can still drown you. 

If it ain’t broke, don’t fix it

One example of consistency done right comes from our very recent recap report on Visa. 

Visa goes beyond being just a card in your pocket. Behind the scenes, it operates a massive global payments network, enabling the card to function worldwide. The farther the money travels, the more revenue the network generates. This is why Visa benefits greatly from cross-border travel and has been likened to having a royalty on global trade.

Its robust business model is widely recognised, and its valuation reflects that strength.

Here a strong case is made for consistency. Visa has a focused management team, a strong brand and most importantly, a product that addresses a need that consumers will always have. So while innovations are coming down the pipeline – think AI and the clever Visa+ concept – there’s really not that much left for the Visa team to do other than to keep this ship on course. This is what they do best, unlike Hasbro (covered in the same recap show) that is in the midst of a turnaround strategy.

The dangers of falling asleep at the wheel

Of course, there’s always the danger of being too consistent, as illustrated particularly well by our recent report on Tupperware.

The ultimate irony is that it is the longevity of the Tupperware brand that is working against it here. The older a company gets, the more challenging it becomes to think creatively and adapt. Keeping up with the changing times requires constant innovation, and once a company falls behind the curve, it seems almost impossible that they will catch up. 

The pandemic presented a prime opportunity for Tupperware to innovate. Its traditional distribution model – those iconic Tupperware parties – came to an abrupt halt, as even the most determined sales representatives would struggle to get people to attend socially distanced Tupperware parties while wearing masks. The brand needed to embrace digital platforms swiftly, a move that should have been made at least a decade ago. 

And that is exactly the point where the slow-acting chickens came home to roost. 

The brand’s failure to innovate earlier has left it struggling to navigate the digital landscape and compete effectively with newer, more agile companies. Tupperware’s longevity and adherence to its traditional methods have become significant obstacles in an era where rapid change and innovation are key.

To regain relevance and capture new markets, Tupperware must now make a concerted effort to overhaul its business model. This means leveraging digital platforms, investing in e-commerce capabilities, and adopting a more dynamic approach to marketing and sales.

Sadly, it also means hiring advisors to help it survive. The brand is good. The business model isn’t.

With well over 80 research reports on global stocks available in the library, a subscription to Magic Markets Premium for just R99/month gives you access to an exceptional knowledge base that has been built since we launched in 2021. Now that’s what we call the right kind of consistency!

There is no minimum monthly commitment and you can choose to access the reports in written or podcast format – whatever floats your boat. Sign up here and get ready to learn about global companies>>> 

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