Daily Maverick



Cheese and peaches

Here’s a fun fact about Greece: the country is the largest exporter of canned peaches. Last year’s crop failed, opening the door for RFG Holdings to enjoy excellent internatio­nal demand for its canned peaches.

However, input cost pressures on basic commoditie­s are making each can more expensive. Food producers are struggling to maintain margins.

RFG Holdings achieved revenue growth of 21.2% for the 11 months to August. The shares closed 8.4% higher on the day.

Moving on to Libstar, the star of the show in that business is Lancewood. In the six months to June, group revenue was up by 9.6% and the perishable­s category by 14.6%. The hard cheese products in the Lancewood stable displayed the operating margin expansion that shareholde­rs just love to see, with earnings before interest, taxes, depreciati­on and amortisati­on (ebitda) up by 27.8% against growth in revenue of 14.6%.

The groceries division had a tougher time of things, showing that the pressure on food producers is significan­t in most categories. Revenue was only 2.2% higher and ebitda plummeted by 17.7%, mainly due to supply chain pressures.

Another feature of this operating environmen­t is pressure on working capital. We can see this in Libstar’s numbers, where cash generated from operations (net of working capital) fell by a spectacula­r 69.9%.

As severe as this drop is, we are seeing it in many companies and industries both locally and abroad.

Part of it is a base effect, of course, because of Covid. The economy has reopened and companies have stocked up to make sure they can meet demand.

Andries van Rensburg is stepping down as CEO, after cofounding the company back in 2005. Current CFO Charl de Villiers will be taking over as the big cheese.

Motus tells us a little more

We still don’t know which business Motus is buying. What we do know is that it is an offshore aftermarke­t parts business with an assetlight business model. This is part of Motus’s strategy to diversify, as car dealership­s are cyclical whereas parts are not.

With a market cap of around R23billion for Motus, an acquisitio­n of between R3.7billion and R3.9billion is going to have an impact. The company is paying an ebitda multiple of between 6.5x and 6.9x, which is reasonable for a deal of this size. To justify that valuation, the target will need to have solid growth prospects.

From Sandton to semigratio­n

“Property” as an umbrella term can be dangerous. There are many property companies on the JSE and they tend to face different market pressures at different times.

For example, Balwin booked 8% more units in its revenue for the six months to August. It notes that semigratio­n has been helpful, driving demand for properties in the Western Cape and even KwaZuluNat­al, despite the province’s recent challenges.

The macroecono­mic picture is sending warning signals, though, with higher interest rates as an obvious problem for affordabil­ity.

Growthpoin­t is the gorilla in the industry and is facing a massive problem in Sandton in particular, with an oversupply of office space and a world that has clearly moved towards hybrid working arrangemen­ts. Vacancies in the office portfolio now sit at 20.7%! They deteriorat­ed in the last period, so the trajectory doesn’t look great either.

 ?? ?? Charl de Villiers.
Charl de Villiers.

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