Woolworths upward share blip surprises
The Woolworths share price shot up to R67.70 in early trade after an upbeat presentation of a downbeat set of results for the six months to end-December. But later on Thursday the market seemed to have had second thoughts and the share shed some of its gains, closing 1.85% up at R65.40.
By any measure they were a poor set of results and the R6.9bn write-off on David Jones was the ugly icing on a generally unappetising cake.
One analyst said the results were pretty much in line with the grim expectations analysts had been fed by the company in January and was surprised at any positive price response.
Country Road margins were a little better than expected, which was encouraging as it suggested management’s corrective action was bearing fruit.
But while Country Road was looking stronger it was still too early to assume the expensive Australian David Jones adventure was on the right course and no further write-downs would be needed.
The share is on a forward price:earnings rating of 16.2 and a forward dividend yield of 4.3%, which would have looked like a bargain in 2017, but now looks a little expensive.
The good news is that CEO Ian Moir has made it clear that the executives will not benefit from the R6.9bn write-off. He assured analysts at Thursday’s presentation that all the executive remuneration calculations would be adjusted to take the write-off into consideration.
In 2017 the group’s remuneration policy was changed to provide for a 30% weighting for return on capital employed. At the same time the weighting for total shareholder return was reduced from 50% to 20%. Without any adjustment the David Jones write-off would enrich executives.
Rolfes, the 45.8% blackempowered chemicals group, says it has resolved legacy issues after it restated its 2016 results to correct “material errors”.
The group, a supplier of silica, chemicals and pigments products, recently reminded shareholders that its financial 2017 interim results were also restated and that full-year results to June 2017 contained numerous once-off charges.
Rolfe’s products target food security, clean water and manufacturing. The financial 2018 interims have also been negatively affected by once-off legacy issues – that it says have now finally been resolved – as well as a poor first quarter.
A silica mine is in the final stage of being sold. This means the group is continuing to reconcile earnings against those still held for sale. In this regard, in its interim results ended December 2017 revenue from continuing operations slipped 7.8% to R734m, even as gross margins from these operations rose to 22.7% from 21.6% from the same period previously.
The resurgence in minerals and agricultural commodities post-drought should bode well for future earnings, apart from the water crisis in the Western Cape, which has hit the company’s agricultural division. But manufacturing still has some way to go before it gets out of the doldrums after many years of poor economic growth in SA.
Spending on new water projects has been affected by strapped government finances, as existing water infrastructure maintenance has languished. This means Rolfe’s water treatment business needs to derive materially renewed energy from Cyril Ramaphosa’s ascension to the presidency.