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The Finance Ghost: Woolworths goes back to basics

The Finance Ghost: Woolworths goes back to basics
From left: (Photo: Gallo Images / Jacques Stander) | (Photo: Gallo Images / Fani Mahuntsi) | (Photo: Gallo Images / Luba Lesolle)

Tell your parents they were right – there is value to be found in focusing on what you’re good at.

Woolworths is reaping the rewards of its decision to get back to basics in the core business.

In the 26 weeks to 25 December, turnover was up 15%, with headline earnings per share (Heps) jumping 75.1% and the interim dividend per share nearly doubling (+96.9%).

The decision to part with straggler David Jones and focus on the favourite Australian child Country Road instead has been met with jubilation by the market and an uptick in confidence from management.

The higher payout ratio for the dividend is a great sign for the group, signalling that the balance sheet worries linked to the David Jones acquisition are well and truly behind Woolworths.

Free cash flow per share was up 29.3%, a strong result but not as impressive as growth in profitability, as some of the cash got sucked into the business.

The market also expressed some nervousness about the costs of maintaining what isn’t just a cold chain, but practically an ice chain. Rolling blackouts cannot be an easy thing to navigate for a retailer whose claim to fame in the food business is the quality of its cold chain.

Sky’s the limit for MultiChoice

DStv dishes are becoming a more unusual sight in high-income households in South Africa. As these customers tap into the world of uncapped broadband internet, streaming is the clear favourite.

As great as SuperSport is, MultiChoice needs to adapt to survive over the long term, as DStv is headed for a future of being on the roofs of lower-income households only.

Having incubated Showmax as a streaming channel showing much the same content as DStv, the full extent of the plan has been unveiled. Through a partnership with Nasdaq-listed Comcast, MultiChoice will use NBCUniversal’s Peacock technology to deliver a proper streaming offering on the African continent under the Showmax brand.

With access to live English Premier League games and plenty of other content, MultiChoice will retain 70% in a streaming platform that has all the potential to succeed.

Still, at a buyout that is about 14% of the fund’s market cap, perhaps the winds of change will finally blow.

Cashbuild is in a world of pain

Riots, a pandemic and months of relentless consumer pressure – it really must look like the apocalypse is dawning outside for those inside the boardroom at Cashbuild headquarters.

With a drop in the share price of more than 30% in the past year and a 32% decrease in the interim dividend, it seems like only a plague of locusts could make things any worse.

Not only is there no sign of improvement in macroeconomic conditions, but things also seem to be getting worse: after revenue fell by 4% in the six months to December, the first six weeks of the 2023 calendar year saw revenue down 8%.

Perhaps it’s time for Cashsolar instead? That seems to be the only DIY or building project that most consumers are undertaking at the moment.

Clientele: Dube’s dividends

Well, well, well, if it isn’t the star of daytime infomercials! Despite brand ambassador Desmond Dube’s best efforts, Clientele remains one of those companies that investors tend to overlook. And in this case, that’s a shame.

Trading at a trailing dividend yield of roughly 11.5%, Clientele offers a dividend yield that is significantly higher than that of most property companies.

Remember, dividends from a real estate investment trust are taxed at your full tax rate, whereas a dividend from Clientele is taxed at the much lower dividend withholding tax rate. In other words, the Clientele yield is particularly juicy.

This hasn’t necessarily made Clientele a winner for investors, as the share price hasn’t got back to pre-pandemic levels yet. The company is also dealing with higher-than-expected policyholder withdrawals as lower-income consumers face economic pressures.

But with growth in Heps in the six months to December of 14% and that gorgeous trailing dividend yield, it may be worth a look. DM168

After years in investment banking by The Finance Ghost, his mother’s dire predictions came true: he became a ghost.

This story first appeared in our weekly DM168 newspaper, which is available countrywide for R25.

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