The Finance Ghost: Impala falls, Vodacom waits, Spur sizzles

13 Aug 2023

Impala Platinum has been all over the headlines for a while now in its battle to take control of Royal Bafokeng Platinum and see off Northam Platinum. It really was law-of-the-jungle stuff in the end, with an ugly skirmish that was eventually resolved in Impala’s favour. Northam will tell you that it was the winner for not getting the asset, based on where we are in the cycle.

Impala has had its time as the predator. Reverting to its namesake, the company now needs to avoid being eaten by the cycle, something that is a feature of investing in mining. With at least a 20% nosedive in Heps for the year ended June and probably more, those who bought mining stocks for the first time during the pandemic are about to experience life as an antelope on the African plains.

A move of 20% is the minimum requirement to trigger a trading statement. When you see a company flag a range of “at least 20%” then you need to realise that it could be a lot more than that.

Group production may have gone up by a modest 2%, but that’s where the good news ends. This increase is despite Eskom playing hide-and-seek with everyone’s electricity, and cable theft also being a problem, with power problems hitting Impala’s operations in both South Africa and Zimbabwe.

Sales volumes have taken a 6% drop and the price achieved per ounce dipped 4% in rands, even with a 16% currency depreciation against the almighty dollar. To make it worse, inflation is really hitting the cost of production, so this Impala is getting squeezed like the unfortunate star of a documentary on African pythons.

Based on last year’s numbers and the guidance given for this year, it looks as if profit per ounce has dropped by roughly 20%, from R20,339 per ounce to R16,280. Now combine this with a drop in sales volumes of 6% and just imagine what that operating profit line looks like.

Brace yourself for a drop of far more than 20% in Heps. The cash flow situation is also likely to be unpleasant, with capital expenditure up from R9.1-billion to R11.5-billion.

Dark days, not Dark Fibre

The Competition Commission is raining all over Vodacom’s parade right now.

In a telecoms industry currently lacking fireworks for shareholders, the biggest players need to find additional revenue streams. In case you haven’t noticed, you’re getting far more from your cellphone contract than ever before. Price deflation in data and other services is great for consumers and not good for telecoms groups.

Seeking fresh revenue streams, many companies are eyeing the fibre sector. Vodacom already plays in this space and wants to combine its efforts with Vumatel and Dark Fibre Africa, taking a 30% stake in the merged entity.

Icasa, the telecoms regulator, gave the green light. The Competition Commission had other ideas, recommending to the Competition Tribunal that the deal be prohibited. This is despite the parties submitting information on how they would tackle competition concerns.

This tango isn’t over yet. The tribunal still needs to nod or shake its head. If things go badly there for Vodacom (and Remgro on the other side of the deal), there’s still the Competition Appeal Court waiting in the wings.

At the heart of the deal’s appeal is Vodacom’s hefty promise to invest R60-billion into South Africa over five years. This is over and above the R13-billion that Vodacom would invest in the merged entity.

Spur is sizzling

Rolling blackouts persist, interest rates are high and inflation is bad — but when the Boks are playing, you can bet your last few cents that you won’t get a table at your local Spur.

As long as kids like ice creams shaped like clowns and parents like a warm meal when the lights are off at home, Spur will have a business. Its recent performance dazzles with impressive strides. Adding to the positive momentum is Spur’s recent acquisition of a 60% stake in the Doppio Group, generating positive buzz across social platforms.

A healthy, growing business needs strong revenue. There’s no shortage of that at Spur, with sales up by 22.5% in South Africa for the year ended June. It’s worth noting that the second half was a lot slower than the first half, with 14.4% growth versus 31.3%.

During this period, fish-out-of-water John Dory’s faced a setback, suffering a 1% decline in the latter half — a stark contrast to the better 4.7% growth of RocoMamas. Panarotti’s managed a commendable 9.6%.

Spur emerged as the frontrunner, achieving an impressive 16.9% growth amid the challenges of load shedding.

Despite being a smaller segment, Speciality Brands flourished, boasting a substantial 42.2% growth for the full year. The latter half maintained a solid momentum with 27.2% growth, reinforcing the notion that, even when times are tight, we all still have a Taste for Life. Or, at least, a taste for a glass of wine in the dark. DM

After years in investment banking by The Finance Ghost, his mother’s dire predictions came true: he became a ghost.

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.

This story has been corrected to reflect the total amount of Vodacom's potential investment in Vumatel and Dark Fibre Africa.

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Business Maverick

Dark days, not Dark Fibre

Spur is sizzling