20 Oct 2020

PEPKOR EXPECTS EARNINGS SLUMP


Pepkor provided a trading update in the expectation that its earnings per share and headline earnings per share for the year ending 30 September 2020 will be down at least 20% compared to the prior period. The group attributes the expected decrease to accounting changes as well as the impact of Covid-19 on operations. In an earlier trading update this year, Pepkor said that lost sales in April were estimated at around R5 billion across the group, with trading rebounding in the subsequent months as restrictions eased.


Pepkor also said that its liquidity position is improving, having been able to both settle debt early and refinance and extend some of its debt. The drive to deleverage has been helped by an accelerated bookbuild completed in June that raised R1.9 billion, as well as expense management. Pepkor is also in the middle of selling one of its subsidiaries, The Building Company, for a proposed consideration of around R1 billion with the proceeds to go towards reducing debt further.

12 Oct 2020

SPUR LACKS TASTE FOR DIVIDEND


Spur Corporation has seen a steady improvement in trading conditions as restrictions on operations have eased in the jurisdictions it operates in.


There has been an uptick in turnover over the last few months, with turnover of Spur’s South African restaurants for September 2020 at around 74% of the comparable period last year. The brands under the group’s umbrella who have recovered the most from the pandemic-induced restrictions include The Hussar Grill and RocoMamas. As at the end of September 2020, 600 of Spur’s 631 restaurants had resumed trading.


Earlier this year, Spur had deferred payment of its 2020 interim dividend to October 2020 in order to conserve cash. With the possible reinstatement of strict trading restrictions if Covid-19 infections increase, Spur has opted to defer the interim dividend again to maintain a sufficient cash position. A further announcement on when the dividend will be paid is only likely next year when the group releases its 2021 interim results.


There have also been several changes to the Spur Corporation board, with new appointments being made across the executive team including the chief executive officer, chief financial officer and chief operations officer.

05 Oct 2020

SASOL DIVESTS STAKE IN LAKE CHARLES

South African petrochemicals firm Sasol announced its planned 50% divestment from its Lake Charles Chemicals Project. The company will enter into a joint venture as it seeks to refocus the business to focus on specialty chemicals.


Sasol will sell the stake for a consideration of $2 billion provided conditions, which include shareholder approval, are met. Proceeds from the sale will be used to reduce the groups gearing, with net debt expected to reduce to $8 billion. With the deal expected to be completed before the end of 2020, the company is also eyeing a rights offer in 2021 which would further strengthen its balance sheet.


The company’s plan to ensure that it will be sustainably profitable in a low oil-price environment comes at a time when the Covid-19 pandemic resulted in a drop in commodity prices and suppressed demand for Sasol’s products. In the results for the financial year ended 30 June 2020, the company outlined significant impairments related to a lower long-term oil-price outlook, which contributed to a loss for the year.

29 Sep 2020

SWEET DEAL FOR TONGAAT


Tongaat Hulett hope to finalise a deal to sell its starch business for R5.35 billion after a dispute between the group and the potential buyer, Barloworld subsidiary, KKL Group.  The disagreement surrounding the deal stemmed from KLL’s contention that the onset of the global pandemic would materially affect the starch business, putting the deal in jeopardy.


An independent expert recently ruled in favour of Tongaat, paving the way for Tongaat to go through with the sale and continue its turnaround strategy. Tongaat has been embarking on asset disposals to reduce its debt.

In addition to having a pesky debt problem, the group is recovering from a turbulent few years which has included a voluntary suspension of trading in its shares on the JSE as well as the uncovering of accounting irregularities perpetrated by senior management. In November 2019, a PricewaterhouseCoopers report commissioned by the board revealed overstated profits and assets, leaving Tongaat in the not-so-pleasant company of some other South African firms involved in accounting scandals in the past few years.


However, the turnaround strategy to turn Tongaat into a low-cost sugar producer and agri-business is progressing. Last month, the group reported improved performance for the year ending 31 March 2020, including increases in revenue, headline earnings per share and operating cash flows.

21 Sep 2020

COMAIR BUSINESS RESCUE PLAN TAKES FLIGHT


Comair announced that its business rescue plan has been adopted, setting the stage for the business to recover and get back to the skies.


The plan will see a recapitalisation of the business through equity from an investment consortium and additional debt funding, while the company will be delisted from the JSE. Employees will also be affected with the aim of reducing the headcount from 2200 to 1800 as Comair looks to reduce operating costs and grow ancillary revenue.


The company’s woes have been increasing over the last few years. Rising debt levels, the grounding of Boeing 737-MAX aircraft and non-payment from SAA concerning a dispute between the two companies all contributed to Comair’s financial distress. The lockdowns imposed around the world in response to the global pandemic was the frosting on the cake, with revenues decimated.


The airline plans to return to service from December 2020.

15 Sep 2020

TRANSACTION CAPITAL WANTS TO BUY CARS

Transaction Capital last week announced its intention to buy a non-controlling 49.9% interest in WeBuyCars, the buyer and seller of used vehicles.

The Group already operates in the vehicle space through its subsidiary S.A Taxi, a vertically integrated financial services business offering vehicle financing and insurance to the taxi industry, in addition to procuring and selling new and used minibus taxis.


On the face of it, there seem to be potential synergies. A core part of S.A Taxi’s business model is its data and telematics capabilities, which gives them a cutting edge in lending and insurance risk management. WeBuyCars is also technology-driven, combining its sales database with artificial technology to optimise the price of vehicles they sell. The proposed deal would give Transaction Capital exposure to the personal vehicle market and the group believes it’s the right shareholder to take WeBuyCars forward.


Having been able to manage the business through the Covid-19 pandemic, Transaction Capital is keen to take advantage of soft markets and is looking to buy the proposed stake for a maximum of R1.84 billion when all is said and done. Of course, T’s and C’s apply, and the deal is subject to certain conditions being met.


In the announcement, Transaction Capital also said it will potentially raise capital in the future to take advantage of further organic growth opportunities.

08 Sep 2020

CLEARER CONDITIONS AHEAD FOR SUN INTERNATIONAL?

The group reported that income was down 56% to R3.7 billion for the interim period as the group feels the impact of the Covid-19 pandemic. Back in March, operations in both Chile and South Africa were closed, with restrictions on the sale and distribution of alcohol further impacting bars and restaurants in its South African casinos.


To shore up the balance sheet and ensure the business can ride the proverbial Covid-19 tide, the group successfully raised R1.2 billion in capital from a rights issue. The group also decided to exit and realise its investment in its Sun Dreams subsidiary in Chile for a potential consideration of $160 million. Proceeds from the disposal will be used to settle the group’s offshore debt, with the balance returning to South Africa. Furthermore, the group is also looking at possible retrenchments at some of its non-profitable operations.


With a more favourable outlook as a result of the measures it took and the easing of restrictions, the group is looking toward future opportunities such as accelerating its entry into online gaming.

01 Sep 2020

MASSMART SEES A LOSS

Massmart, the owner of retail brands such as Game and Makro, reported a decline in performance for the first half of the year.


The group reported a net loss of R1.2 billion for the first half of the year compared to the same period in 2019. Sales also decreased by 9.7% with the company’s General Merchandise, Home Improvement, and Liquor and tobacco segments being heavily impacted by the harsh restrictions imposed under level 5 lockdown in South Africa. Food and Liquor sales were down 7.2%, a result of the combination of trading restrictions and changing consumer patterns during the pandemic.


Under the new Walmart-deployed CEO, the group is implementing a turnaround plan which has already seen the closure of 23 Dion Wired stores and the reorganization of its portfolio into Retail and Wholesale Business Units. The group is focusing on cost-savings and in July informed shareholders that it is commencing consultations with stakeholders in respect of its Game Stores in South Africa that may potentially affect 1800 employees.


In light of the loss and a need to preserve cash, the group elected not to declare an interim dividend.

24 Aug 2020

DSTV PUTS THE ‘CHOICE’ IN MULTICHOICE

DStv (a MultiChoice company) this week made announcements of changes coming to their service, with a range of new products and services being added to their offering.


With the release earlier this year of MultiChoice’s first full results since its listing, the group announced the signing of distribution agreements with two major international video-on-demand providers, which were rumoured to be Netflix and Amazon at the time. Among the announcements during a showcase event this week, were three new ways of viewing DStv content, including a new flagship DStv Explora Ultra decoder, an option to stream across 4 devices and a Streama decoder. The Streama decoder is particularly interesting, as DStv announced that it will include the usual DStv content as well as shows from third-party streaming services, with no clunky satellite dish required.


In July, MultiChoice announced a partnership with The Walt Disney Company Africa to bring two 24-hour ESPN channels to DStv viewers, who can watch the NBA, NFL, MLB and more. Their Showmax streaming service will also have a new subscription-based service called ShowmaxPro that bundles the existing content with live sports, news and music while SuperSport channels are getting a revamp.


MultiChoice’s focus on being a one-stop-shop for local, international and sports content is likely part of a strategy to maintain its position, amidst the rise of streaming services such as Netflix, Amazon and HBO Max.

17 Aug 2020

NO RELIEF FOR ABSA

A weakened economy and lower interest rates driven by the backdrop of a global pandemic has affected Absa’s first-half performance.



Absa Group advised shareholders in a Trading Statement update that headline earnings per share and earnings per share for the six months ended 30 June 2020 were expected to be between 92% to 97% lower than the prior comparable period.


Banks are particularly affected by the global pandemic, having to provide payment relief to customers struggling due to Covid-19 related challenges. Absa’s Retail and Business Bank in South Africa launched its payment relief plan in March and in May reported that substantial uptake had resulted in R8 billion of payment relief over a period of three months.


Back in May, the group expected credit impairments to increase and net interest margins to decline on the back of interest rate cuts. These concerns materialised, with the group recently reporting that credit impairments were four times higher in the first half of the financial year, relative to the prior comparable period.  The group maintains, however, that its balance sheet remains resilient with good liquidity and expects credit impairments to slow in the second half of the year.


The group will announce interim results on 24 August 2020.

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