Perking up with AVI coffee
Iwas not really surprised to see classy consumer brands conglomerate AVI reporting that coffee revenue was up a vibrant 18.8% in the six months to endDecember (compared with the previous interim period).
I have been smashing way too many cups of coffee of late, struggling to maintain an intermittent fasting regime, and sometimes reaching double-cup figures before noon. I keep a wide-ranging portfolio of coffees in the larder, and one of those brands (House of Coffees, if you must know) is owned by AVI.
I opt for variety, on the slim chance I will happen upon that perfect cup that brings a heightened bliss and easy enlightenment. The last time I had a perfect cup was in the late 1990s. I bought it from a little takeaway coffee shop in Church Street in the Cape Town CBD. I think the name of the shop was Mark’s, or the proprietor a man who understood the inner workings of a milky cup of coffee was called Mark.
The late (great) Christo Volschenk and I would do coffee relays as we ran up to meet the late-afternoon deadlines for the fledgling Business Report.
In any event, AVI reported higher sales in the Ciro out-of-home coffee business and an improved instant coffee performance. Maybe I can claim to have driven sales in even the smallest of measures. I’ll certainly keep trying.
What is interesting is that Ciro’s performance was helped by higher selling prices and, predictably, a boost in demand from hospitality, leisure and corporate customers after the Covid convalescence. This segment read so much better than AVI’s I&J fishing business.
With a huge cut of the frozen hake market, I&J has found load-shedding challenging, as the business needs to cook and freeze its mainstay brand. That said, there were some problems for the coffee segment such as trying to pass on higher raw material costs to frazzled consumers. But AVI’s coffee hub reinforced its margin, and delivered higher operating profit. One would not expect less from AVI, master of holding market share without retreating from viable price points. I’m certain this performance will muzzle whisperings that AVI might sell selected bits of its coffee segment (Ciro has been previously cited) or all of it.
Big numbers
Speaking of perking up, shares in Rupert family-controlled international investment entity Reinet have charged 13% higher in recent weeks. Yes, the weaker rand would certainly have helped, but developments at Reinet’s biggest investment, UKbased pension scheme insurer Pension Insurance Corp (PensCorp), might also be dictating sentiment.
Reinet has not as much as uttered a word, but the PensCorp website details a major buy-in involving two pension schemes aligned to Canadian insurance and property giant Intact Financial Corp. According to PensCorp this is the largest bulk annuity transaction transferring risks from pension schemes to an insurer covering 40,000 members and about £6.5bn in liabilities.
The deal comes not long after pension funds and providers of liability-driven investment strategies were rattled in a frightening market crisis triggered by the infamous September mini-budget in the UK. The Intact deal also follows hard on the heels of PensCorp concluding a third buyin with the trustee of the British American Tobacco (BAT) UK Pension Fund to insure about £250m of liabilities.
This means PensCorp has now insured all £4.1bn of the BAT fund’s liabilities. There have been numerous questions about Reinet’s valuation of its controlling stake in PensCorp which is clearly reflected in the discount the market applies to the latest intrinsic value number. PensCorp’s website does, though, present ample (and useful) financial information for anyone keen on number crunching to test Reinet’s value assessment.
The most recent trading statement released in November, I note, proclaimed: “PensCorp sees pension risk transfer market of £30bn over the next year.”
Clearly, PensCorp is going to get a lot larger in Reinet’s life. Whether this is problematic in terms of risk profile given that Reinet already has a value concentration in PensCorp and BAT remains to be seen.
While on the subject of significant numbers, I see Andrew Naudé, the former boss of mining services specialist DRA Global, putting in a not insubstantial claim of A$9m for loss of present and future income. That is nearly 10% of the group’s market value, so quite understandably DRA in which Sabvest-aligned Apex Partners is now a significant shareholder will be defending the claims.
This is not a great development for DRA shareholders, who might have hoped recent corporate controversies were behind the group and that digging sustainable profits lay ahead. At the time of writing, DRA’s share price had curiously rallied over 7%, to shift close to R24. Don’t you just love the small-cap sector?