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We have updated our Consumer Wallet model, which measures growth in consumer spending power and serves as a proxy for the likely level of retail sales growth this year. We cut our job growth forecast for 2025 from 3.1% y-y to 0.5% y-y, which could result in 82 000 new jobs. This is due to weak momentum in the latest Labour Force Survey (LFS). However, the Quarterly Employment Survey (QES) shows robust wage hikes, and we raise our average wage increase forecast from 5.0% y-y to 6.0% y-y. National Treasury is targeting a rise in personal tax collections of 8.6% y-y in 2025, which could increase the tax burden on consumers. However, consumers stand to benefit from lower debt repayments and lower transport costs. Based on the latest estimates, consumer spending power in 2025 may be lower than our initial forecast, with a 7.0% y-y increase in funds available for retail and discretionary spending (previously 9.6% y-y). We also expect drawdowns from the Two-Pot retirement system to be lower in 2025, and Consumer Wallet growth adjusted for this impact could be 6.5% y-y. Our sensitivity analysis indicates the potential for decent Consumer Wallet expansion despite low job growth, due to stronger wage increases, lower debt repayments and reduced transport costs

Key points from Hudaco's (HDC) 1H25 results presentation

Diluted HEPS of 916cps (1H24: 771cps). Turnover decreased by 2.4% y-y to R3 886m. GPM increased by 80bps to 37.8%. OPM increased by 130bps to 11.5%. Total expenses decreased by 4.1% y-y to R1 029m, while expense-to-sales decreased from 26.9% to 26.5%. Dividend of 350cps (1H24: 325cps). Cash generated from operating activities decreased from R461m to R299m. Gross debt down 13.0% y-y to R1 000m, with net cash decreasing to R43m. Hudaco’s potential depends heavily on the country’s broader economic landscape for business growth. The company continues to face headwinds such as policy and governance challenges.

What occurred in FY25, is VKE has allocated its cash, sold LAR and redeployed that cash into new properties. From a DCF perspective the excess cash and investments in associates were added to the equity value at FV, now the income from the new investments has been added to cash flows. As the incremental yield on new investments is lower than the cost of equity, the DCF value of VKE technically declines. FFO does go up, and as can be seen in the table above our forecasted DIPs growth is slightly higher than management’s estimates, and we forecast future growth in mid to high single digits. As property is a long-term investment, we acknowledge that in the short term the capital allocation appears to destroy value, and to account for this we have blended the DCF with our dividend discount model. The issue is VKE has diluted the value through the prior equity raises, and the current share price is pricing in that high growth. While we are confident of the high FFO growth in FY26, as the newly purchased centres come into the financials for a full year, we are less confident VKE can sustain that growth. Also, when looking at Castellana’s consolidated AFS it paints a very different picture of performance in Spain and Portugal.

PPC had another mixed year in FY25. While revenue declined, profitability and earnings experienced a step change due to management’s turnaround plan yielding results sooner than expected. Management identified key areas of focus and has done well to reduce logistics, energy and clinker costs, which drove increases in the contribution margin in each of its businesses. An important recovery came from the SA & Botswana cement division, which was able to increase sales volumes in H2 and improve the contribution margin by 4%. While stronger improvements in contribution margin came from Zimbabwe, it was impacted by a higher number of kiln shutdowns, which impacted sales volumes and topline growth. However, with the kiln now fully operational and a normalised maintenance schedule going forward, we expect a much improved result in FY26. Conditions in SA remain tough. Building activity has slowed and material volumes continue to decline. PPC has faced a backlash from buying groups and continues to lose market share at some of the big retailers. However, management is not affected by this as it is singularly focused on making the business more sustainable before chasing volumes and regaining market share. We remain concerned about the threat that imports from Mozambique could pose for the SA market as import volumes have accelerated. While it is still a small amount at this stage, Mozambique is now the fourth largest source of imported cement, and Chinese companies continue to make inroads into the SA market. Despite these factors, our outlook for FY26 is positive. While we do not expect significant topline growth, we believe that PPC should be able to maintain its profitability. A key focus will be on cash generation as group debt will be increasing significantly over the next two years.

The Retailer Liaison Committee (RLC) released its Market Sales Report for May 2025. Its members’ sales accounted for 58.7% of total SA clothing sales. Apparel, Homeware and Beauty sales grew 18.0% y-y in May (April: 6.3% y-y), with a 6-month rolling growth of 7.2% y-y and a 12-month rolling growth of 7.2% y-y. Apparel and Beauty categories achieved strong double-digit sales growth during May, with Womenswear up 18.0% y-y, Menswear up 19.4% y-y, Kids & Baby up 20.8% y-y and Beauty up 10.7% y-y. Homeware sales grew 13.5% y-y in May (April: +9.8% y-y). While this category has performed strongly, sales growth in May was driven by price inflation (8.4%) as volumes continue to slow in this category. Total RLC volumes grew 12.2% y-y in May (April: 2.8% y-y). Product inflation continues to tick up, with inflation in May at 5.1% (April: 3.4%). The average unit price for the RLC was 76 in May (compared to R127.25 in May 2024).

MRP delivered strong FY25 results, and the early momentum in FY26 is encouraging (albeit on a soft base). Our analysis shows that some of the traditional chains have an improved top-line growth trajectory, following an almost decade-long decline in trading densities. We calculate that the traditional chains’ operating margins may have increased slightly, but they remain well below historical margins. The acquired chains are the main drivers of turnover growth, and this is largely due to aggressive space expansion. We note that Power Fashion’s strong 14.1% CAGR in sales over the past four years was outpaced by its space expansion (17.6% CAGR), resulting in declining trading densities. The momentum in Studio 88's top-line growth seems to be slowing, and we think it could be showing signs of a mature growth phase.  However, the buy-out price of the minority stakes implies that Studio 88’s EBITDA increased by a strong 13.3% y-y in FY25. It also means the residual businesses in MRP increased their EBITDA by a modest 6.8% y-y. MRP’s cash rose to R4.1bn in FY25, but taking into account the earlier year-end cut-off, the adjusted balance after month-end creditor payments would be c. R3.2bn, on our estimates. MRP will acquire the next tranche minority interest of 9% for R770m in FY26, and we estimate the final stake of 15% (to be acquired in FY27) could cost R1.4bn. The total cost of the 30% minority stake could be around R2.6bn, compared to the R3.6bn paid for the 70% stake in FY23.

Raubex delivered a mixed performance in FY25. While it produced double-digit topline growth for the fourth year in a row, margins weakened as a result of setbacks at Bauba. The chrome operations were negatively impacted by a sharp reduction in the chrome price and a weaker dollar. Despite significant losses at Bauba, the remaining operations reported a stellar performance, delivering double-digit revenue growth and improved margins. Standout performances came from Construction Materials, which increased volumes to levels not seen since FY18, and Roads and Earthworks, which capitalised on its strong order book and improved project execution. Other positives were the continued strong performance on the Namdeb project and increased activity in the private renewable energy space. The only blemish for the year was the operating loss incurred at Bauba, but the outlook for the chrome miner is much more positive for FY26. Raubex has improved yields to target levels during 1H26 and the newly commissioned PGM plant is expected to make a solid contribution in FY26, with the majority of that revenue expected to go to the bottom line. Besides the expected recovery at Bauba, Raubex continues to reduce costs and push margins. Margin expansion is expected from Roads and Earthworks and any increases in Construction Materials volumes will provide a kicker to profitability. While we are wary of the chrome price falling to $200/t again or lower, the positive impact of PGMs and the continued cost rationalisation at Bauba give us confidence in a recovery in FY26.

Key points from Vukile (VKE) FY25 results presentation

Lewis delivered excellent results in FY25, with strong top-line growth driven by increased credit sales and the addition of the Real Beds acquisition. While some headwinds persisted in the macroeconomic environment, LEW’s gross profit margins benefited from the stronger rand, lower shipping costs and the normalisation of rail transportation. The Traditional brand segment performed well, aided by aggressive footprint expansion, which exceeded the number of stores guided by management. This translated into space growth of c. 1.9% y-y, with trading densities continuing their strong momentum, rising c. 10.8% y-y off a high base. The newly formed Speciality segment performed well, boosted by the addition of Bedzone and Real Beds. UFO is also showing signs of a recovery, turning a small profit in FY25. The debtor book remains healthy, despite a slight increase in bad debts and a marginal decline in collection rates. The response has been to slow the process of application approvals. However, the book’s quality is highlighted by both non-performing loans and arrears as a percentage of the gross debtor book, which declined in FY25. We think LEW’s decision to cut the impairment provision was made primarily because bad debts as a percentage of the gross book fell to just 11.6%, with management satisfied that these metrics provide LEW with sufficient headroom to continue investing in the book. The repurchase programme, which has been successful in delivering returns to shareholders, will remain on hold as management believes the shares are not liquid enough to continue at this stage, despite their receiving permission at the previous AGM to continue repurchases. We believe this does provide LEW with the opportunity to shift capital allocations to store rollouts and refurbishments, while also potentially returning cash to shareholders through increased dividends.

TFG’s FY25 results reflected soft top-line growth with solid GPM improvement. TFG Africa’s weak turnover expansion suggests flat volumes, and we think it reflects a return to normalised growth following several acquisitions in recent years. The margin enhancements reverse longer-term declines and reduce the operational risk of the division. TFG Credit recorded good EBIT growth in FY25, but declining interest rates could reduce the yield on the book in FY26. TFG London sales were boosted by the White Stuff acquisition, but the underlying business is still struggling. We analyse the historical performance of White Stuff and find a business with an inconsistent and unimpressive performance. Turnover growth over the past seven years has been largely flat, and the 20% y-y surge in sales following TFG’s acquisition is surprising. We think the surge may be promotionally driven and might not be sustainable. White Stuff is shifting to more concession stores, contrasting TFG London's strategy of reducing its reliance on department stores. We were surprised that the CEO and CFO of White Stuff both resigned in May 2025, only seven months after TFG acquired the business. We would have expected a lock-in of key management, and the management changes could increase the acquisition’s risk, in our view. We doubt that White Stuff will be the catalyst to improve the performance of TFG London. We find that TFG Australia may be losing market share despite expanding its store footprint. We think management should slow store rollouts and trim the store base to improve its average sales per store.

SA like-for-like NOI growth 6.4%. SA vacancies improved from 2.7% to 1.7%. Castellana NOI growth 6.4%. Castellana vacancies increased from 1.1% to 1.6%. FFO per share increased 3% y-y to 158.84c. DPS increased by 6% to 131.72c. SA REIT LTV ratio increased from 39.9% to 40.2%. NAV per share increased from R21.55 to R22.39 y-y. What is notable is there were another 12.7% more shares (FY24 also 12.7% more shares) in issue and operating cash flow per share (less finance costs) decreased 0.4% (FY24 decreased 13.8%).