| Tuesday 22 February 2022 Good morning Voornaam,
Capitec has updated the market on the pending specific issue of shares under an employee B-BBEE scheme. There's been a change to the structure that will require Capitec to fund a greater amount up-front (including the tax liability for employees related to the discounted portion of the subscription price), with a saving on tax for employees at the end of the lock-up period. I also realised that I missed a trick with the HEPS update from the company on Friday, which didn't seem to be impacted by the share issue. In retrospect, that makes sense as the share issuance is only planned to happen this week, so it barely affects the weighted average number of shares in issue for the HEPS calculation for the year ended February 2022.
Although City Lodge is still loss-making, the extent of the losses has diminished. For the six months ended December 2021, the group expects a headline loss of between 5.3 cents and 6.5 cents per share. T hat's a whole lot better than the comparative period with a headline loss of 60.1 cents per share (restated for the rights offer). The detailed results are due on 25 February. City Lodge's share price has increased by over 32% in the past six months as Covid has abated.
Momentum Metropolitan Holdings issued a trading statement for the six months to December 2021 which reflects an increase of between 40% and 60% in normalised HEPS. This has been driven by improvements in new business revenue and investment returns, as well as a less severe net mortality impact from Covid-19 vs. the prior period. The EPS number is very different (down between 15% and 35%) due to a write-off of the goodwill of Momentum Insure, which was acquired from Alexander Forbes in 2019. This is a face-to-face sales force, which hasn't been a great business when those faces have been forced to wear masks.
Anglo American has restarted its Grosvenor metallurgical coal operation in Australia after a gas incident all the way back in May 2020. Safety incidents are taken incredibly seriously in this industry (and rightly so). Other than the obvious and far more important human cost, there is a real financial cost to the mining houses when operations need to be shut following an incident. It took longer than expected to restart this operation, so production will be towards the lower end of the guided range. This also drives an unpleasant increase in unit cost guidance for 2022 to USD85/tonne (vs. previous guidance of USD80/tonne and 2021 unit costs of USD105/tonne).
The Investec dual-listed company structure is complicated, so the group has had to pay some smart people to figure out the optimal tax structure for the distribution of a 15% stake in Ninety One, the asset management business previously spun out of Investec. Investec plc will retain a 10% stake in Ninety One.
It s eems there has been press speculation overseas regarding property fund Hammerson and a potential disposal of two shopping centres. It turns out that the speculation isn't far off the mark, with Hammerson confirming that a price of GBP120 million is being considered, although there is no guarantee of a transaction taking place.
Retailer Choppies has released results for the six months ended December 2021. Operating margin has expanded by 53 basis points to 5.6% and HEPS is up 93% in local currency (the company is in Botswana and reports in Pula).
Trustco is still fighting against the JSE's attempts to suspend the listing. The company notes that it "remains committed to operate in a listed environment" which I found interesting, as much of the recent narrative has been a direct attack on the JSE regulations and how business-unfriendly they are. While the elephants keep fighting, the grass (shareholders) gets trampl ed. Trustco's share price has lost nearly half its value over the past year despite a significant rally yesterday.
Please note that today's Sasol article is from the company itself as an update to stakeholders. I think it gives a fair summary of the result. Sasol is being prudent with its capital, which certainly isn't a bad thing based on its prior experiences in offshore expansion. The share price fell 3.4% yesterday as the market expressed some disappointment at the lack of a dividend.
My feature articles are on Aveng's interim results, Libst ar's disposal of its household and personal care business and Anglo American Platinum's exceptional results for 2021.
Have a terrific Tuesday!
The Finance Ghost
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