Spar franchisees just got on with it

After all that board-level drama in recent months, the good ship Spar finally seems to be on an even keel. In the 18 weeks to 28 January, the friendly local grocer grew sales by 7.4%. This modest growth was driven by the grocery wholesale business, which saw sales increase by 9.7%. This likely reflects only modest volume increases, as inflation was high during this period.

When liquor restrictions were relaxed towards the end of 2021, people raised a glass to celebrate. And then another glass. And another one. In the latest period, they were consistent rather than more festive, with Tops only growing sales by 1.6%.

The international business was a mixed bag, with Switzerland as the negative story reporting a 3.8% drop in revenue. There’s a good explanation, though: Spar sold a group of corporate stores to independent retailers.

The share price is up 32% this year, because the market has jumped in to ride the wave of new management. The convenient locations are also helping, as Spar was always built to be the place to stop between home and the office or school, positioned on busy routes. With people back in the office, that strategy is paying off again.

Telkom swings the axe

A cursory look at Telkom’s results for the quarter ended December is enough to remind anyone of that ominous musical theme from Jaws. While revenue was up just 2.3%, Ebitda was down 13.5%. This is owing in part to the substantial pressure placed on costs from blackouts, which I have been highlighting in my thoughts on the telecommunications companies.

The fixed-line business in Telkom is less Jaws, more Jurassic Park. This dinosaur is dying out quickly and revenue is shrinking to a level where Telkom needs to adjust the cost base. Facing free cash-flow pressure, the losers in all of this are the employees. A 15% cut to the workforce is on the cards.

Life Healthcare has a strong pulse

As it turns out, all Life Healthcare really needs to keep its monitors a-beeping is some sunshine and a few generators. The company’s early investment in solar means even consistent Eskom blackouts are having a minimal impact on overall costs.

In the four months ended January, there was a solid uptick in occupancies in the South African business, from 55% in 2021 to 62% in this period. This was driven by strong growth in paid patient days, which increased by double digits year on year. Don’t expect this again in February and March, as a much stronger base period means that year-on-year growth will be muted in comparison.

Overall, this was a solid period for Life Healthcare. Revenue was up 10% and ­Ebitda 16%, so margins moved in the right direction.

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An encore for Glencore

Glencore has been an exceptional investment over the past three years, with the company’s share price increasing more than 140%. This has been primarily owing to Glencore’s strong position in the commodities markets, with the company benefiting from record coal prices and other energy price increases.

For reference, miner South32 is up 120% over that period, and Anglo American could only manage 74%, as the non-coal side of the latter faltered.

Glencore’s balance sheet looks ready to withstand cyclical pressures, with net debt down to just $0.1-billion after allowing for $7.1-billion in shareholder returns. This has included a $5.1-billion cash distribution, a further $0.5-billion as a special divi­dend, and a $1.5-billion share buyback.

Although the economic outlook in general isn’t fantastic, the company thinks that China’s reopening will support continued demand for Glencore’s products. With the world shunning any investment in fossil fuels, those that have these commodities are smiling. Keep an eye on coal prices.

Attacq seals the deal

The sale of a 30% stake in the Waterfall City portfolio to the Government Employees Pension Fund (GEPF) is big news for Attacq, especially with pricing of only a 10% discount to the net asset value. This is a far lower discount than listed property companies usually trade at, which explains why the share price jumped more than 26% based on this news.

I am a shareholder in Attacq based on the quality of the portfolio and the positioning of the Waterfall assets, located midway between Johannesburg and Pretoria. This deal is great news, bringing Attacq a long-term investment partner that will provide it with the stability it needs to continue growing its portfolio and delivering quality projects.

The sale of the 30% stake is worth R2.5-billion and the GEPF will inject another R300-million in the form of a shareholder loan. The net impact is a reduction in Attacq’s gearing from 37.2% to 24.0%. The market’s response says it all.

Italtile: cracks are showing

Italtile makes money when people feel good about investing in their homes. There’s the first problem. With consumer confidence in the doldrums and most people saving for solar rather than new bathrooms, demand is under pressure. In the six months ended December, system-wide turnover fell by 3%.

The second problem is that rolling blackouts and other input cost pressures are hurting margins, as Italtile also has manufacturing operations. With a 160 basis point decline in gross margin to add to the difficulties of lower revenue, trading profit slipped by 9%.

Heps fell by 6% and the ordinary dividend was down by the same percentage as the payout ratio was kept consistent. The company has chosen not to give any earnings guidance for the remainder of the year. It’s difficult to see why the second half would be any better. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.