Barclays PLC has agreed to sell a 7.4% stake in Absa (around half of its remaining shareholding in the local bank) at a price of R164 per share through an accelerated bookbuild placing (an invitation to institutional investors to buy the shares). This is a cute discount to the prior day's closing price of R177 per share, which is what entices investors to take up the shares. Absa's share price closed at R168.45 per share yesterday, down 4.8% on the day.
The sale will raise over R10.3 billion for Barclays, improving its tier 1 equity ratio by 10 basis points and driving a loss on sale of GBP43 million through the income statement. Barclays took a controlling stake in Absa in the mid-2000s, a time when the South African economy was booming. With this sale, there's not much of that stake left. Although Barclays does need to focus its attenti on elsewhere, this isn't exactly a show of faith in our local economy.
Mining house BHP Group released an operational review for the nine months ended March 2022. Production guidance for the full year is unchanged for iron ore, metallurgical coal and energy coal. Guidance for copper and nickel production has been lowered, as labour has been impacted by COVID-19 (a gift that truly keeps on giving). Although there are always deals being done in this vast mining portfolio, the market is keeping an eye on the merger of BHP's oil and gas portfolio with Aussie giant Woodside, which is targeted for 1 June 2022 subject to various conditions precedent. The announcement is exceptionally detailed, so BHP shareholders should refer to it for more information.
Steinhoff subsidiary Pepco Group has released a pre-close trading update for the first half of the financial year. Revenue for the period is up by a substantial 17.5% ye ar-on-year, with the PEPCO format delivering 28.9% growth. Cadence is very strong, which means the second quarter was a lot better than the first quarter. For example, like-for-like revenue growth (i.e. existing stores only) was 5.3% for the six month period and 12.1% in the second quarter. PEPCO achieved record net new store openings and the group is on track to meet guidance for the full year. Steinhoff closed 1.4% higher yesterday but is still down more than 40% in 2022, a nasty reminder that speculative plays are, well, speculative.
Sappi has released an update on the impact of the flooding in KZN on its business. The good news for shareholders is that there is no material damage to any of the plants, with the immediate focus on reinstating supply chains for raw materials and finished goods. It's not all butterflies and roses though, with an anticipated insurance claim for around USD28 million for losses incurred through business interruption (23, 000 tons of lost production, mainly of dissolving pulp) and damage to 45,000 tons of inventory in the warehouses. Although Sappi's mills are operating again, exports are expected to be negatively impacted for a few weeks due to a backlog at the Port of Durban.
Long4Life released a trading statement related to the year ended February 2022. HEPS is expected to increase by between 92% and 105%, coming in at between 61.3 cents and 65.5 cents. The company is in the process of delisting at a price of R6.20 per share, so such strong results hardly matter for existing shareholders. The new owners (subject to remaining regulatory conditions), Old Mutual Private Equity, will be pleased with this.
Astoria Investments has released its quarterly results for the period ended March 2022. The net asset value per share increased by 12.6% quarter-on-quarter and 52.4% year-on-year, in both cases measured in USD. Astoria also announced th at its shareholding in Trans Hex has reduced from 35.7% to 25.1% through a sale to a fellow Trans Hex shareholder. Along with the receipt of a dividend from Trans Hex, this has raised sufficient proceeds to allow Astoria to consider a 25.1% investment in marine diamond mining business International Mining and Dredging Holdings. Astoria is now trading under a cautionary announcement as negotiations for this USD5.5 million investment are ongoing. If a deal goes ahead, it would be expected to close during the second quarter of the year and would be a Category 2 transaction, so no shareholder vote would be needed. Astoria closed 12.75% higher at R5.75, reflecting a discount of nearly 50% to the net asset value per share.
Labat Africa is simplifying its corporate life from a financial reporting perspective. The financial year end is being moved from 31 August to 31 May, which brings it in line with the various subsidiaries acquired over the past two years. There will also be one audit firm appointed to audit all the group companies, which is a more efficient approach than having various audit firms that need to rely on one another's work.
In today's feature article, I look at a spectacular example of commentator's curse. After I wrote yesterday about Mark Cutifani leaving
Anglo American on a high note, the latest quarterly update reflects a sharp drop in production at Anglo group companies. The rand had a terrible day against the dollar yesterday and I wouldn't be surprised if this was a major contributor to the weakness, as mining exports have kept the currency afloat.
Read about the production pressures at this link.
With that, I wish you an excellent weekend!
The Finance Ghost
