Corporate finance corner (M&A / capital raises)
- We’ve had such a busy run of deals on the JSE recently that I was surprised to see no announcements that fall into this category.
Financial updates
- Pan African Resources has been the shiniest of the local gold miners, with the latest update being record production for the year ended June 2022. This has helped the company significantly reduce its debt. I dedicated a feature article to this update that you can read here.
- Coronation Fund Managers has updated the market on total assets under management (AUM) as at 30 June 2022. Irritatingly, the announcements never give the comparative AUM, so I always have to go digging. The bear market has really hurt Coronation this year. AUM at 31 December 2021 was R662 billion. By the end of March it had dropped to R625 billion and now it sits at R580 billion.
- Steinhoff’s pan-European discount retail subsidiary Pepco Group has released an update for the third quarter ended 30 June 2022. Like-for-like revenue growth was 4.9% vs. Q3’21 and total revenue growth in constant currency was 17.1%. On a year-to-date basis, revenue is up 17.4% in constant currency. This has been driven by a decent like-for-like growth and a rapid increase in the store footprint. In a time of high inflation, the group says that it is committed to maintaining its price leadership in the market. Here’s a nugget that I felt was worth repeating in full:
“Furthermore, against this backdrop, we are encouraged that the discount market across Europe is now much larger than at the time of the previous financial crisis in 2007-08 which means that a much larger customer base is more familiar with and more frequently shops across this channel.”
Pepco Group Q3 trading announcement
- Schroder European REIT has announced an update on the independent valuation of the property portfolio and rent collection as at 30 June 2022. The portfolio valuation of €218.4 million is a -0.4% decrease vs. the preceding quarter. Negative drivers were increased vacancy assumptions in an office investment in Paris and higher capital expenditure provisions for upgrading of heating, aircon and renewable energy at an industrial investment in the Netherlands. There was good news in Germany, with a five-year lease extension for a Stuttgart office offsetting some of the negative impact. Schroder has reminded the market that 100% of the portfolio leases are subject to indexation, so rising inflation is starting to contribute to rental growth.
- It’s interesting to note that Metrofile has appointed BDO South Africa as its next auditor, after the mandatory audit firm rotation that will see Deloitte bid goodbye to Metrofile. We are firmly in a “Big 5” audit firm environment these days, not just Big 4.
- Sebata Holdings still hasn’t released results for the year ended March 2022 and has had to announce another delay, with results now expected on 18th July.
Operational updates
- Anglo American has partnered with Nippon Steel Corporation to work together towards lower carbon steelmaking. This relationship is based on the premium physical qualities of Anglo’s iron ore and it helps that the companies have a working relationship spanning over five decades. Most of Anglo’s Scope 3 emissions are linked to materials sold to the steelmaking industry. By developing high-quality products and more carbon-efficient steelmaking methods with Nippon Steel, there are clear benefits to both companies (and all of us).
- Kibo Energy’s 10-year take-or-pay power purchase agreement for a 2.7MW plastic-to-syngas power plant in Gauteng has been extended to 20 years. This project is the company’s first under its Sustineri Energy joint venture, in which Kibo Energy holds 65% and Industrial Green Energy Solutions (Pty) Ltd holds the other 35%. This improves the projected internal rate of return (IRR) range from 11% – 14% to 15% – 18%. Construction is scheduled to begin in Q1 2023 and project commissioning should be 11 to 14 months thereafter.
- African Equity Empowerment Investments (AEEI) is still in dispute with British Telecommunications South Africa regarding whether the call option was validly exercised. The company has renewed its cautionary announcement in this regard.
Share buybacks and dividends
- As there were no other buybacks or dividends, I may as well remind you that British American Tobacco and Glencore are buying back shares on a daily basis.
Notable shuffling of (expensive) chairs
- Jubilee Metals has announced an impressive board appointment. Tracey Kerr has been appointed as an independent non-executive director. Ms Kerr was previously the Group Head of Sustainable Development at Anglo American Plc, so this is yet another example of positive momentum at Jubilee.
- Interestingly, Dis-Chem co-founder Lynette Saltzman has resigned as a director so that she can focus on her operational role within the beauty category in the business. Dealing with governance matters really isn’t fun, particularly when you built a business from the ground up. I think it’s great to see Ms Saltzman focusing on where the real business is done. Hint: that’s not the boardroom.
Director dealings
- Nothing to report today!
Unusual things
- Trustco is one of those companies that is never far away from drama. The company has been fighting with the JSE over its listing. Trustco doesn’t like being listed on the JSE (and has made that fact known to anyone willing to listen), yet the company is also fighting in court to avoid suspension. In February this year, Trustco applied to the Financial Services Tribunal for a reconsideration of the JSE’s suspension decision. Also in February, Trustco launched an urgent application in the High Court for an interim interdict against the suspension. On 13 July, the Tribunal dismissed Trustco’s application, leaving the company with one week to take any steps it deems necessary. This now sits with the court as an urgent application, with the JSE agreeing to postpone the suspension until the court has ruled. Trustco has lost nearly 90% of its value in the past three years, so I won’t cry any tears if this one disappears from the market.
Dear Ghost
Reinet owns a block of British American Tobacco shares.
BTI are doing buybacks.
What effect has this on Reinet.
Keep safe and thank you for a great daily read.
Hi there Rob. It’s good news for Reinet, as the buybacks are the right strategy because British American Tobacco trades at a modest valuable multiple. For those holding these shares, the buybacks are a big part of the investment thesis.
A very informative read. The updated structure of the article is even better.