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The Finance Ghost: Pain for Transaction Capital and Quantum shareholders; TFG reports retail turnover growth

The Finance Ghost: Pain for Transaction Capital and Quantum shareholders; TFG reports retail turnover growth
From left: Taxis in Johannesburg. (Photo: Gallo Images / Fani Mahuntsi) | The Foschini Grouphead office in Cape Town. (Photo: Gallo Images / Jacques Stander) | Unsplash

Check in on your friends who hold Transaction Capital positions. They are possibly not okay, with a loss of 183.3 cents per share vs earnings of 71.9 cents per share in the comparable period.

In the latest innovation from Transaction Capital, you can now experience all the anxiety of being in the passenger seat of a taxi without so much as leaving the comfort of your couch. Just hold shares in the company and watch it tank by 35% in a single day.

There’s not much else to joke about in the latest set of results from Transaction Capital. Although there was a slight bounce as news came through of more buying by key insiders (in this case Sabvest Capital), about a third of the remaining value was slashed when results for the six months to March were released. In case you need a reminder, the 52-week high on this stock is R47.71 and the 52-week low is an extraordinarily bad R7.05.

Check in on your friends who hold Transaction Capital positions. They are possibly not okay, with a loss of 183.3 cents per share vs earnings of 71.9 cents per share in the comparable period. As the company threw the kitchen sink at the provisions for SA Taxi (now being rebranded as Mobalyz), the return on equity fell to 7.3%.

With a difficult balance sheet to understand, the market is clutching on to two things right now. The first is management’s assertion that there are no cross-default or guarantee clauses, so SA Taxi/Mobalyz is an island of pain rather than a potential extinction event for the group.

The second is insider buying, so look out for more of that. The founders have already lost a third of their value after the recent dip-buying exercise. If they liked it at over R11, they should love it below R8. 

TFG just grateful internet still works

The Foschini Group (TFG) reported retail turnover growth of 14.3% in the fourth quarter of 2023. Compared with other retailers, that sounds like a land of milk and honey. But dig a little deeper into the numbers, and you’ll find that South African turnover growth was only 6%, if you exclude Tapestry Home Brands. There’s nothing quite like an acquisition to do great things to the top-line numbers. On growth of 6% without the acquisition, we can safely assume that volumes went backwards.

Running a business during load shedding is like trying to run a marathon on the potholed Joburg roads. Even when stores have backup power, the broader impact on consumer confidence and logistical challenges around transport tend to result in a drop in sales when load shedding picks up. The current crisis really kicked off during festive season trading, leading to unfortunate product markdowns that caused a 2.1% drop in gross margins in TFG Africa.

At least cellphones are still working, so TFG’s push to consolidate its stable of brands under the online banner of Bash seems to be paying off. If I were Superbalist, I’d be getting nervous right now. TFG Africa generated 4% of its revenue online in the latest quarter vs. 3.2% in the comparable quarter. Online shopping still has a long way to go to catch up to international benchmarks, with TFG London generating 49.6% of sales online and TFG Australia achieving 6.4% of its sales online.

Shopping by smartphone is infinitely more fun than shopping by the light of a smartphone.

The slaughter continues at Quantum Foods

It’s arguably more rewarding to be a Lemoenkloof chicken than to be a shareholder in Quantum Foods or the broader poultry industry. At least for the chicken, the ending is swift. Shareholders are set to suffer for much longer.

In February, Quantum Foods released a trading statement that reflected an expected decrease in headline earnings per share (Heps) of at least 100% for the six months ending March. That’s a nice way of saying that profitability is gone. A more recent trading statement wasn’t quite that bad, giving us an updated range that sees Heps drop by between 76% and 87%.

Just when management thought that the worst was over, highly pathogenic avian influenza was found at the Lemoenkloof layer farm in the Western Cape, and 420,000 layers were culled at a cost of R34-million. Neigh­bouring farms have also been affected.

Capetonians who love having four eggs for breakfast: you better start saving. That City Bowl eggs Benedict is going to stretch your budget. 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 Daily Maverick 168 newspaper, which is available countrywide for R29.

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