AVI flags difficult trading conditions (JSE: AVI)
Consumers still aren’t out of the woods
As we hope for a strong peak season for retailers in South Africa, AVI has given a sobering update on sales for the four months to October. Interest rates and other issues like unemployment remain a problem despite all the GNU excitement.
For the four months, revenue was 3.4% higher year-on-year. That suggests little or no growth in volumes, with the group focusing instead on gross profit margin and other initiatives to extract as much value as possible from the difficult sales environment. This is something that AVI is particularly good at.
I&J remains under pressure from low fishing catch rates. The abalone business is also being impacted by lower prices in Asian markets.
There’s all to play for as we head into December.
Bidcorp impacted by the strong rand (JSE: BID)
The underlying business remains solid
Bidcorp is one of the best rand hedges on the JSE, boasting an exceptional international business. When the rand strengthens, this impacts the translation of the international earnings into rands. Thankfully for Bidcorp shareholders, the rand doesn’t strengthen very often.
For the four months to October, the constant currency results at Bidcorp show 10% growth in trading profit, which is solid. Constant currency HEPS is up 8%, a particularly strong result in a period when inflation has been only 2% for the group. They reckon the stronger rand has had a negative impact of 300 basis points on the numbers, so HEPS as reported would be more like 5% growth.
This growth has been achieved at a time when consumers are still quite weak, with retailers enjoying a period in which consumers are eating more at home and less at restaurants. Bidcorp is focused on the restaurant and hospitality sector, so that makes things harder for them.
Despite major weather and other disruptions, Europe (up 10% constant currency) and the UK (up 8% on the same basis) were the main winners. Emerging markets grew 5%, with South Africa noted as a performance highlight – perhaps a surprising outcome given some of the other comments around consumers by South African companies. Australasia grew revenue by only 3%.
Margins are a concern, as inflationary pressures on costs exceed the underlying inflation in food i.e. the basis on which Bidcorp can increase prices. EBITDA margin is slightly higher year-on-year, driven by better gross profit margin that more than offset the operating cost pressure.
And of course, Bidcorp is never far from a bolt-on acquisition. They’ve already completed three this year with an aggregate value of R1.2 billion.
This remains an exceptional business.
Mantengu Mining swings into the green (JSE: MTU)
The ramp-up in production shows what’s possible
Mantengu Mining has released results for the six months to August. The year-on-year moves will make you dizzy, with revenue up from R13.1 million to R115.9 million as production was ramped up. Gross profit jumped from R1.5 million to R53 million and as you can imagine, this did wonderful things for profitability. HEPS came in at 2 cents per share vs. a loss of 10 cents per share in the prior period.
Notably, there’s still no dividend here as the company is in an expansionary capex phase. They are also busy with acquisitions, like Blue Ridge Platinum and Sublime Technologies, while looking for other opportunities in the mining, mining services and energy sectors.
Although the balance sheet is extremely light on cash as at the reporting date, they have access to various funding lines including a share subscription facility agreement with GEM Global Yield.
And yes, I’m still scratching my head about the $100k acquisition price for Sublime Technologies despite the financials of that business. It makes absolutely no sense to me.
Metair is closer to breathing a sigh of relief (JSE: MTA)
Turkish competition approval is out of the way
Metair is in the process of disposing of its business in Turkey. If you’ve been following the company’s fortunes, you’ll know that this disposal is absolutely critical in their lives.
Thankfully, the Turkish Competition Board has confirmed that its consent is not needed for the deal, so that’s essentially a deemed approval for legal purposes.
This means the remaining condition relates to a financing agreement. If that can be achieved, Metair will unlock capital to fix its balance sheet that has suffered terribly from recent performance.
MultiChoice is losing subscribers at a rapid rate (JSE: MCG)
I’m really not sure how this ends if the Canal+ deal doesn’t go through
MultiChoice has released results for the six months to September. Having suffered through an unwatchable feed of the Springboks game on my DStv Stream TV app, I’m afraid that my sympathy is low. They lost a spectacular 1.8 million subscribers in the past year, or 11% of their base.
They lost 5% of their subscribers in South Africa and 15% in the Rest of Africa. Considering the sheer amount of money that Rest of Africa has swallowed up, it’s particularly worrying that they are losing subscribers at such a rate there. If there’s any silver lining, it’s that Showmax grew 30% year-on-year.
Despite shedding subscribers at this pace, revenue was up 4% excluding forex and M&A impacts. Revenue was down 10% on a reported basis, with forex pressures playing an important role here. You can’t ignore the forex issues here, so focus on the reported numbers without forex adjustments, like the 46% decline in trading profit.
The cash cows in the group (South Africa and Irdeto) generated cash flow of R3.3 billion. The group invested R1.8 billion into Showmax and experienced a R0.9 billion outflow in the rest of Africa.
MultiChoice now has a negative equity position of R2.7 billion. They generated adjusted core headline earnings of just R7 million (yes, with an “m” not a “b”) for this period.
At this point in time, I struggle to see any positive outcomes unless the Canal+ deal goes through. Engagements with regulatory authorities are underway.
Powerfleet is growing faster in the lower margin side of the business (JSE: PWR)
But major cost savings more than made up for it
Powerfleet (which acquired MiX Telematics) has released results for the first half of the 2025 financial year. This means there are two quarters worth of results that include the MiX numbers.
The year-on-year stuff is therefore not hugely useful, but I will highlight that product revenue was up 13% and service revenue was just 5% higher. Considering that product revenue adjusted gross margin is 35% vs. 63.7% in services, investors will want to see those growth rates swap around over time.
The group has already realised $13.5 million in annual cost synergies from the MiX deal, so they are halfway to the two-year target. This led to adjusted operating expenses decreasing by 5%. In turn, this drove a 41% increase in adjusted EBITDA.
The MiX deal is actually old news for the company, with the focus now on the Fleet Complete acquisition and generating growth from the acquired relationships as soon as possible.
Premier turns modest revenue growth into juicy profits (JSE: PMR)
This is the shape you want to see on an income statement
For the six months to September, revenue at Premier Group only increased by 3.7%. That’s not exciting at all, yet HEPS grew by 32.4%! How does a shape like this happen?
It all comes down to operating leverage, which talks to the extent of fixed costs in the cost base. Even small increases in revenue can lead to large increases in profits when there are many fixed costs. Notably, a decrease in revenue therefore also drives a much larger drop in profits, so these business models can be volatile.
When they work, they work really well though. At Millbake for example, revenue was up 2.6% and EBITDA was up 15.8%. This was strong enough to improve group EBITDA by 100 basis points to 11.9%, despite the International business seeing EBITDA decline 2.1% even though revenue was up 9.7%.
Thanks to repayments on debt, the EBITDA increase translated into an even better HEPS increase because net finance costs were down 18.2%. Remember, finance costs are shown below EBITDA, which stands for Earning Before Interest, Tax, Depreciation and Amortisation.
Cash generated from operations increased by 13.5%, exactly in line with EBITDA growth. This talks to strong cash quality of earnings.
The group intends to declare a dividend when full-year results are released in June 2025.
A Quantum leap in earnings (JSE: QFH)
A further trading statement has tightened the range
Quantum Foods has released a further trading statement for the year ended September. Things are way better in the poultry industry, as evidenced by these numbers.
They expect to swing from a headline loss of 17.4 cents to HEPS of between 78.7 cents and 82.1 cents. Detailed results are expected to be released on 29 November.
It sounds like things are good at Santam (JSE: SNT)
There’s decent growth and underwriting results within target range
Santam has released an operational update for the nine months to September 2024. The important point to highlight is that underwriting results were within the 5% to 10% target range, despite all the competition in this space and the usual major weather events.
The conventional insurance business achieved net earned premium growth of 8%. Due to underlying performance in the various insurance lines, the impact of R960 million (net of reinsurance) from weather-related and other significant losses was offset.
Another important point to highlight is that the investment return on the group’s capital portfolios were ahead of expectations. These returns are an important component of overall returns to shareholders in insurance companies.
With much progress having been made on the risks in the property book, Santam is painting a bullish picture.
Nibbles:
- Director dealings:
- MTN (JSE: MTN) and MTN Zakhele Futhi (JSE: MTNZF) announced that all conditions for the extension of the MTN Zakhele Futhi scheme have been fulfilled. The scheme will now mature on 23 November 2027, giving the MTN share price time to (hopefully) improve.
- Hot on the heels of a capital markets day for debt investors, Discovery (JSE: DSY) appears to have hosted a day for institutional equity investors as well. The entire presentation (all 177 pages of it) is available here. And no, I don’t think you earn any Vitality points for reading it.
- Just when you thought things couldn’t possibly get any spicier at Trustco (JSE: TTO), the company has decided to upgrade its American Depositary Receipts program to a full Nasdaq listing. This is the same company that had plenty to say about how painful the JSE regulations are. The US is even stricter and vastly more expensive in terms of professional fees like lawyers. Trustco plans to move its primary listing to the Nasdaq, so they will be fully regulated by US requirements – including quarterly reporting etc. Interesting.
- Sable Exploration and Mining (JSE: SXM) released a trading statement dealing with the period ended August. They expect a headline loss per share of between 8 and 9.7 cents, which is much better than the comparable headline loss per share of 72.65 cents.
- Zeder (JSE: ZED) recently announced a 20 cents per share special dividend. In an early update during the day, they noted that approval by the SARB had not yet been obtained. Later in the day, they got the approval, so the payment date for the dividend is 25 November.
- In case you are a shareholder in Visual International (JSE: VIS), be aware that the circular convening the general meeting for the specific issue of shares for cash has been sent out.
