ADvTECH had a great year in 2024 (JSE: ADH)
Enrolments are driving excellent results
ADvTECH is seeing strong growth at the moment, with results for the year ended December reflecting 16% growth in the full year dividend. Return on funds employed has moved up to 21.4%, having increased every year since the pandemic year.
Importantly, all the education businesses are growing. Schools in South Africa grew revenue by 11% and operating profit by 12%, so they aren’t dealing with the same issues that Curro is facing with its mid-market model. ADvTECH schools are more upmarket and the strategy works, with 83% utilisation of current capacity. Schools in the Rest of Africa grew operating profit by 28% and are now running at a spectacular operating margin of 32.4%, showing how lucrative that business is. The Tertiary segment grew operating profit by 15% and is also running at a juicy margin.
Unsurprisingly, the ugly duckling is the Resourcing business. Revenue fell 8% and operating profit was down 4%. They really, really need to get rid of that business. It continues to drag down the group performance and there’s no logical reason why that situation will change.
Despite such strong numbers, the share price is up just 7.5% over 12 months. This shows you that the market already prices in a solid performance from the group, evidenced by the Price/Earnings multiple in the mid-teens.
Ascendis Health’s numbers will be hard to interpret this financial year (JSE: ASC)
The change to investment entity accounting is a major shift
At one point, it seemed that there were headlines about Ascendis Health on almost a daily basis. After the potential take-private deal eventually collapsed, the news simmered down. Of course, the show goes on at Ascendis and management needs to achieve growth in the business.
This growth will be measured differently going forwards, with Ascendis taking the route of investment entity accounting. This means carrying its investments at fair value, rather than consolidating its subsidiaries. Metrics like net asset value (NAV) per share will therefore be the focus area rather than headline earnings per share (HEPS). To add to the complexities here, they’ve restated December earnings based on the technical accounting treatment of Surgical Innovations. This is another good reason why the NAV is the right thing to look at, rather than earnings.
The trading statement dealing with the six months to December indicates that growth in the tangible NAV per share was between 8.2% and 27.1% year-on-year. That’s a wide range. It looks like the Medical portfolio did the heavy lifting here, consisting of five investee entities. Other than Surgical Innovations which is out of business rescue but still under pressure, the rest did well. The Consumer portfolio had a pretty flat period, with subdued demand and little ability to increase prices.
Despite the shift to investment entity accounting, the narrative around the outlook focuses more on organic growth opportunities in the existing businesses rather than a desire to execute acquisitions.
The share price of 82 cents is actually above the 80 cents per share offer that was on the table in late 2023. The tangible NAV per share is between 101.7 cents and 119.4 cents, so it’s still trading at a significant discount to those levels.
Astral Foods is a reminder that the only certainty in the chicken business is uncertainty (JSE: ARL)
And you can now add cybersecurity to the list of risks they face
The poultry industry always feels like it is standing near the edge of a cliff. In a period where there are no major problems, it can be quite lucrative. As soon as something goes wrong, those thin margins come into play and earnings take a gentle stroll right over the edge.
In a trading statement dealing with the six months ending March 2025, Astral Foods has alerted the market to an expected drop in HEPS of up to 60%. This implies HEPS of at least 354 cents for the interim period vs. 884 cents in the comparable period.
The share price is actually 12% higher over the past 12 months, so the P/E multiple at this company is more volatile than a South American football stadium during a penalty shootout.
What were the reasons for the drop? Aside from pressure on selling prices for frozen chicken thanks to consumers who continue to struggle to make ends meet, Astral had to contend with the usual suspects of higher feed input costs and maize prices. Remember what I said about thin margins that are vulnerable?
The unusual issue faced in this period is a cybersecurity incident that took place on 16 March. The related disruption to group systems has cost them R20 million in profits, measured based on lost revenue and the costs to catch up on the production backlog.
There’s truly never a dull moment in this sector.
Burstone’s fee income is up, but the same can’t be said for overall earnings (JSE: BTN)
A pre-close call has the details
Burstone has released a pre-close update for the year ending March 2025. Through various corporate actions, the group has gotten to the point where fee income is now 11% of earnings. That’s way up on 7.3% in the comparable year, achieved through significant growth in third-party assets under management. A perfect example of the strategy to grow this source of revenue can be found in the recent Blackstone deal, in which Burstone retained 20% of the Pan European Logistics portfolio and will continue to manage it. There are similar strategies being implemented in their Australian business at the moment.
Burstone also hopes to build a South African platform along similar lines, with due diligence completed by a cornerstone investor. The deal is now going through various investment approval processes. The idea is to seed the platform with existing South African assets in Burstone, with the proportional interest reducing over time as Burstone focuses on managing the platform and earning fees.
Over time, you can see that Burstone is slowly moving more towards an asset management model rather than a property ownership model. Make no mistake though, they are still firmly a property company at the moment, evidenced by metrics like the loan-to-value ratio being between 34% and 36% for FY25.
In line with guidance, distributable income per share is expected to be 2% to 4% lower than the comparable year. The announcement could certainly be a lot clearer and simpler in terms of the drivers of underlying performance. If you read through all the details, it looks like the South African portfolio is struggling compared to Europe and Australia. Notably, the office sector is still dealing with large negative reversions and vacancies. Reversions were also negative in the industrial sector.
The release of year-end results is scheduled for 28 May.
Gold Fields wants to buy Gold Road (JSE: GFI)
These gold companies need to get more creative with their names
Gold Fields has put in a non-binding, indicative proposal to the board of Gold Road. They want to buy 100% of the group via a scheme of arrangement, with a proposed price of A$3.05 per share. This would be structured as a fixed portion of A$2.27 per share, plus a variable portion linked to De Grey Mining, which is already the subject of a potential acquisition by Northern Star Resources that Gold Fields would want to support.
The companies already know each other, as Gold Fields operates the Gruyere Mine in Western Australia and Gold Road has a non-operating joint venture interest in that mine. Familiarity doesn’t appear to have helped here, as the Gold Road board told Gold Fields to get lost. It’s pretty funny that the response included a counter proposal to buy Gold Fields out of the Gruyere Mine, funded by a combination of cash and other sources. Returning the favour, Gold Fields also told them to get lost!
So it’s going well, then.
Gold Fields isn’t giving up. The announcement notes the benefits to Gold Road shareholders of a potential deal, including the desire to support the Northern Star Resources deal related to De Grey, as well as the 44% premium to the see-through valuation for Gold Road after adjusting for the value of the De Grey shares held by Gold Road.
I thoroughly enjoyed a comment in the announcement that another benefit of the deal would be to “eliminate dis-synergies” in the joint venture as opposed to delivering on synergies. The PR people really had fun here.
At this point, Gold Fields must be hoping that large shareholders will put pressure on the Gold Road board to take the proposal more seriously. At an extreme, they might even go hostile with an offer directly to shareholders. We aren’t at that point yet, though.
Grand Parade impacted by its gaming exposure (JSE: GPL)
Being a pure-play gaming business ain’t what it used to be
Regular readers who have been following the results of the major gaming groups will know that all isn’t well in that sector. Online alternatives like sports betting are disrupting this space, with casinos in particular losing their shine.
Grand Parade Investments always seems to be on the wrong side of the trend. No sooner had they disposed of their non-gaming assets (like in the food sector) than disruption came through. Grand Parade now finds itself with a share price down 14% this year and a set of numbers for the six months to December 2025 that reflect a drop in HEPS of 9.2%.
Interestingly, the SunWest business (GrandWest Casino as its main asset) was actually 4% up in terms of headline earnings, with Cape Town therefore bucking the national trend. Sun Slots fell 16% and Worcester Casino was still loss making, so don’t get too excited.
They will need to do something here, as I can’t see the situation improving in the gaming sector.
An excellent financial year at Premier (JSE: PMR)
Here’s a good example of how to make shareholders happy
When you hear about a company growing its revenue by mid-single digits, you wouldn’t expect to then see a spectacular increase in HEPS. Some companies are especially good at translating fairly modest revenue growth into excellent shareholder returns. It seems that Premier is firmly part of that crew.
The growth in HEPS of between 20% and 30% for the year ended March 2025 is thanks to a strong focus on margins and costs, which of course is the only way to leverage that revenue growth up into much more exciting profit growth.
For whatever reason, it seems as though the FMCG sector in South Africa has perfected the art of extracting value from revenue growth that is barely ahead of inflation. Perhaps it’s time to put an FMCG executive in the role of finance minister?
Another strong period for Raubex (JSE: RBX)
This group consistently delivers
Raubex has released a trading statement dealing with the year ended February 2025. With HEPS up by between 15% and 25%, this is yet another another strong performance by the group. When you consider the nature of the business that Raubex is in and how cyclical it should probably be, it’s quite remarkable how they just keep growing.
They are doing a great job of winning SANRAL projects, with the Roads and Earthworks Division also working on diversifying its customer base, just in case.
Over in Construction Materials, the asphalt business was ahead of expectations, with supply to major projects like the N3 and N2 running smoothly. Within that segment, the commercial quarry operations got off to a slow start, but have picked up recently.
In the Infrastructure Division, some substantial renewable energy projects have been helpful sources of revenue. They are also involved in projects like wastewater treatment and affordable housing, as well as the upgrade of the parliament buildings in Cape Town! And unlike so many other companies, they are even making solid projects in Western Australia. In fact, the business in Australia is 19% of the group’s operating profit.
The Materials Handling and Mining Division is the only division that went backwards this year. The deterioration of the chrome price in the second half was the major issue. This segment is a bit of a strange fit in the group from a strategic perspective, introducing a completely different set of risks of what you’ll see elsewhere in the group.
Although Raubex hasn’t been immune to the local market pressure this year with a 12.5% decline, the share price remains 44% higher over 12 months. It’s a solid business.
Southern Sun is shining (JSE: SSU)
Occupancy and pricing both headed in the right direction
Southern Sun has released a trading update for the year ending March 2025. It’s been a goodie, with occupancy for the 11 months to February up by 240 basis points to 60.7%, while the average room rate has increased by 5.1%. When both volumes and pricing move higher, it’s likely that earnings will do well. Indeed, HEPS is expected to be at least 20% higher for the year.
HEPS was 35% higher in the interim period, so it’s likely that the full year will be much better than 20% higher. This is where the words “at least” are really important, with the minimum required disclosure under JSE rules being an indication of “at least 20% higher” – even where a stronger move is possible.
Unsurprisingly, the Western Cape has had a positive impact on the numbers. Thanks to refurbishments in Gauteng, growth in this period was solid vs. a low base. Unfortunately, the same happy tune isn’t being sung by the KZN business, mainly due to a lack of demand for events at the Durban International Convention Centre. The Mozambique business has also had a tough time, impacted by political unrest.
You win some, you lose some. Overall, they are winning where it counts. At group level, the strong performance and associated cash flows led to a reduction in interest bearing debt. Along with the impact of the share buyback, this has boosted HEPS.
Detailed results are due for release on 21 May.
STADIO pulled off pretty spectacular growth (JSE: SDO)
This tertiary education model is working beautifully
STADIO has released results for the year ended December 2024. The company was previously spun out of Curro and the results couldn’t be more different if they tried. This share price chart looks like the two of them had a fight and deleted each other off Facebook:
It’s even worse over 5 years, with Curro up 52% from the pandemic lows and STADIO up a massive 481%. It’s not hard to spot which business model is more lucrative.
For the year ended December, STADIO grew revenue by 14%. This was supported by fee increases and an uptick in student numbers of 10% in Semester 1 and 8% in Semester 2. This drove EBITDA growth of 17%, which in turn led to core headline earnings increasing by 28%. The icing on the cake is that the dividend came in 51% higher!
The growth is set to continue. Having achieved the milestone of 50,000 students in Semester 2, the group believes it can reach its original pre-listing forecast of 56,000 students by 2026. They expect to grow to 80,000 students by 2030. The targeted mix is 80% distance learning and 20% contact learning.
And in case you’re wondering, the new Durbanville Campus is scheduled to open in January 2026. With 7 faculties and even some sports facilities as well, this is a major step into private university education in a way that could really disrupt traditional universities. Watch this space.
Nibbles:
- Director dealings:
- An executive (but not a director) at Richemont (JSE: CFR) sold shares worth R13.5 million.
- Des de Beer bought more shares in Lighthouse Properties (JSE: LTE), this time to the value of R3.97 million.
- A non-executive director of Glencore (JSE: GLN) bought shares worth R3.5 million.
- Various associates related to directors of Brimstone (JSE: BRN) bought N ordinary shares worth a total of R1.06 million.
- A director of Libstar (JSE: LBR) bought shares worth R185k. Given the recent direction of travel in the share price after the release of poor numbers, that’s an interesting message to the market.
- Sun International (JSE: SUI) announced that CEO Anthony Leeming will retire with effect from 31 December 2025. He’s been with the group since 1999 and was CFO from 2013 until his appointment as CEO in 2017. His replacement is Ulrik Bengtsson, a Swedish executive with deep experience in the gaming sector. This includes experience in online gaming, which is proving to be quite a disruptive force in this sector. The changing of the guard at CEO level takes place in July this year, with Leeming sticking around until December to help with the transition.
- Fairvest (JSE: FTA | JSE: FTB) is about to demonstrate just how deep the JSE capital pools are, particularly for property funds. An accelerated book build process will look to raise R400 million through the issue of new Fairvest B shares. I can almost guarantee that an announcement will come out early on Tuesday morning to say that the raise was completed and was oversubscribed. In fact, they may even increase the size of the raise if demand is strong enough.
- Kore Potash (JSE: KP2) is looking to raise a meaty $10.6 million to help things move forward with the all-important Kola project. They need to pay PowerChina $800k for the optimisation work in 2022 and 2023, as well as $5 million under the early works agreement. There are various other requirements for capital, including general corporate purposes. Once the company exits the closed period, the chairman plans to subscribe for $0.5 million in shares. Another existing investor will put in $0.3 million. The two largest existing shareholders have been asked whether they wish to subscribe for shares and an answer is due within 20 business days. Any such subscription would be subject to shareholder approval. In case you’re wondering, the Summit Consortium has committed to deliver a non-binding financing term sheet by 31 March. This will be subject to finalisation of legal documentation, so there needs to be a capital raise in the meantime to tide the group over. Although they have appointed a South African broker to be involved in the raise, it looks as though the main bookrunners are focused on the UK market.
- Prosus (JSE: PRX) gave an update to the market on the timing of the Just Eat Takeaway.com offer. There are obviously some major regulatory hoops that they need to jump through, with the offer memorandum in the approval process before it can be issued to the market. They expect the offer to commence in the second quarter of 2025 and to be concluded by the end of the year. This is of importance to Naspers (JSE: NPN) shareholders as well.
- Anglo American Platinum (JSE: AMS) released a capital markets day presentation to the market. It’s a detailed document that gives a great overview of the business and the key drivers of performance. You won’t be surprised to learn that the presentation makes the point that demand for electric vehicles hasn’t met expectations, suggesting better demand dynamics for PGMs going forwards. Check out the full presentation
- Datatec (JSE: DTC) has also made an investor conference presentation available, so investors have been given quite a bit to chew on recently as the company also recently did a roadshow related to its Logicalis International business. If you would like to learn more about the group as a whole, you’ll find the presentation here>>>
- Telkom (JSE: TKG) announced that the disposal of Swiftnet to a consortium of Actis and Royal Bafokeng Holdings has met all the suspensive conditions required for the closing process to begin. This is good news, as it means that there are no further potential hiccups in getting the deal finalised.
- You won’t see AGM votes that are this close all too often, but then again Quantum Foods (JSE: QFH) doesn’t exactly have a normal relationship between the board and the shareholders on the register. With plenty of corporate activity and possible permutations of what could happen there, the directors narrowly survived the AGM with most votes ending up at just 51% in favour of appointments.
- Sygnia (JSE: SYG) released the results of the odd-lot offer. They repurchased 0.03% of total shares in issue for R1.05 million. In the process, they got 2,887 shareholders off the register, significantly reducing the admin burden along the way.
- Tiny AH-Vest (JSE: AHL – with a market cap of just R14.3 million!) released a trading statement for the six months ended December 2024. HEPS collapsed to just 0.17 cents, a drop of 93.4% year-on-year.
