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Taking stock

A look at Steinhoff’s interims, Tongaat’s debt, Massmart’s kindly parent, Shoprite director’s share pledge outcome, and the non-exec turned consultant at Tiger Brands.
A September 2019 pledge of Shoprite shares worth just over R33m terminated earlier this month, at which point the shares were worth R39.8m. Image: Dario Pignatelli/Bloomberg

It’s truly amazing how well the businesses in Steinhoff are holding up. For the six months to end-March 2021 total revenue from continuing operations edged up 4% and core earnings increased 7%.

Investor response to the results, which were announced last week, was what you might call muted. After an initial spike to R2.10 the share price pulled back and ended the day unchanged at R1.98. Perhaps the early enthusiasm was dulled by the 5% increase in total group debt to €10.4 billion; not an encouraging development from a conglomeration of cash-generative businesses.

According to management, in local currencies revenue at Pepco was up 9%; at Pepkor Africa it was up 8%; at Greenlit Brands it was up 28%; and Mattress Firm increased revenue 28%.

Of course it’s not the operations that determine investor interest in this stock; the prospect of settling the multi-billion euro claims against it is the real decider.

The current Steinhoff share price indicates investors aren’t too hopeful for an early settlement.

But on the matter of the actual operations, it’s impossible to know if the resilient results reflect an outstanding performance from a head office populated by committed and capable executives who are not only able to run a series of mind-numbingly complex legal cases, deal with the ongoing pressure of restructuring while also directing a major retail businesses.

Or if, like abandoned children, the heads of the various operations have learnt to get on with life as best they can on their own.

Tongaat

Another company struggling to get out of the critical care unit is Tongaat. Last week’s news that it would have to delay the release of its financial results – for the year to end-March – by two weeks was taken reasonably well by the market.

The share price recovered part of the initial knock to close the week just 5% lower at R7.60.

The announcement was the third since April reminding investors of the group’s precarious debt situation. Despite the multi-billion-rand sale of its starch business to Barloworld earlier this year, Tongaat seems unable to get ahead of its debt restructuring plans, and tough trading conditions are certainly not helping.

The group seems to lurch from one agonisingly renegotiated debt reduction deadline to the next.

In late April Tongaat told shareholders: “In order to prevent an event of default, THL and the South African lenders amended the milestone measurement date from 31 March 2021 to 30 April 2021.” It was also trying to get agreement for an amendment of the amount by which the debt had to be reduced – to R6.4 billion from R8.1 billion.

Last week Tongaat shareholders were told that while the negotiations are well advanced, they are not yet finalised. Not a good sign.

Massmart

Massmart is of course not in need of critical care, largely because it has a powerful big parent who has not abandoned it.

But it is worrying that parent Walmart felt the need to help out its ailing African business with a $13.36 million upfront cash payment to finance the recently concluded managed services agreement with Genpact.

Surely $13.36 million isn’t too much of burden for a huge cash generating business like Massmart?

And then there’s the inclusion of Walmart’s wholly-owned Irish subsidiary – the three-year-old Dublin-based Newgrange Platinum Services – to assist with the cash payment. No doubt inclusion of an Irish company ensures maximum efficiency for the transaction.

Shoprite

Turning to a significantly better quality of retailer, Shoprite director Ram Harisunker might have had a few sleepless nights last year during the darkest period of the Covid-induced lockdown.

The Shoprite share price briefly touched a low of R99 at the time, given the pervasive sense of gloom many thought they were looking at the beginning of a share market wipeout. Fortunately things turned quite dramatically.

A Sens announcement released by Shoprite last week reveals that in September 2019 Harisunker pledged 255 518 of his Shoprite shares for a R11 million loan.

At the time Shoprite was trading around R130 making the pledged shares worth just over R33 million.

The pledge arrangement was terminated earlier this month at which time the pledged shares were worth R39.8 million.

Shoprite share over five years

Tiger Brands

Finally, an interesting move at Tiger Brands where non-executive director Ian Burton resigned with immediate effect last week.

Burton, who is described as a “seasoned FMCG [fast moving consumer goods] business leader”, was appointed to the Tiger board only last August.

He heads up his own consultancy firm IB Consultants International, which has entered into an agreement to provide consulting services to Tiger.

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Thank you Ann – telling it as it is without bias

Great wrap up

Thanks Ann – that was a good read.

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