To all our shareholders and friends
To calculate the net asset value, we mark Beagle’s listed assets to market at prevailing market prices as at our year-end, being 31 March. The unlisted assets are valued internally, on a consistently conservative basis, at year-end and also at the interim stage.
At year-end, Beagle’s net asset value (“NAV”) per share increased by 3.3%, from R6 121 per share at the end of March 2024 to R6 323 per share. Including dividends, the growth rate was 4.1%. Over the same period, the FTSE/JSE All-Share Total Return Index increased by 20.4%. Beagle also paid a dividend of R1.9mn or R100 per share.
Last year was the first time that Beagle underperformed the All-Share Index.
Since inception, Beagle has compounded its NAV per share at 25,6% p.a. compared to the 8,1% delivered by the JSE All Share Index (with dividends reinvested). Beagle has generated this level of outperformance over the long term due to certain structural advantages. These are:
- It is a privately owned business, not subject to the ebbs and flows of public opinion.
- It has a solid base of long-term oriented shareholders.
- It has access to cheap, non-recourse leverage due to its BEE status.
- It has permanent capital, allowing it to invest in illiquid situations when they are favourably priced.
- Due to its access to permanent capital, it will never be a forced seller of undervalued assets.
You might notice that “the brilliance of Beagle’s management” is not listed as an advantage. In managing Beagle, our most important job is to sit on our hands and watch its investments compound their value due to underlying business growth magnified by leverage. Inactivity is well rewarded, and we love our job.
Beagle now controls assets of almost R150mn.
The table below shows the progression of our NAV per share since 2010, compared to the JSE All Share (Total Return) Index.
(Note – this table has been recalculated, as some index numbers have changed. I have also added back the dividends paid to the Beagle NAV)
Our portfolio
During the past financial year, Beagle made one new investment—we acquired shares in a portfolio of undervalued small-cap South African shares. The vehicle into which we invested is called “GoedeHoop.” Beagle invested R12mn in this vehicle and borrowed R10mn to do so. At year-end, it showed a marginal decline in its asset value.
Our biggest investment, Reef, now stands at R90mn, representing 61% of our asset base. Beagle has a 4% direct interest in the Reef group, which owns Reef Switchboards, Victoria Engineering, and UCP Holdings. Beagle also has separate stakes in all three of these companies. The group enjoyed a small valuation uplift, reflecting the less-than-buoyant economy. Valuation multiples have remained unchanged.
Goldrush had a tough year. Its EBITDA decreased by 6%, leading to a commensurate reduction in its valuation. Online gaming has hurt its land-based operations. Fortunately, Goldrush’s growing online business has mitigated this effect to some extent. After the year-end, it was announced that the Sizekhaya consortium won the right to run the National Lottery. Goldrush is a major shareholder in this consortium.
Beaprop showed growth of 44% over the past year, with its only investment, Spear REIT, doing well. Spear REIT grew its NAV per share by 2,8% and its distribution per share by 3.8%. It has narrowed the discount to the NAV at which it trades. Spear REIT exclusively owns property in the Western Cape, for which prospects remain promising.
Our listed assets fared poorly last year, suffering from significant selling pressure towards the year-end. IFRS says we must mark them at the exact year-end price, not at some average, which – in this case – would probably be fairer. For instance, the share price of Phuthuma Nathi was marked down to R40 per share on the 31st of March from R92 the previous day. On 1 April, it immediately traded back up to R69 per share. We have marked it at R40 for these accounts.
YeboYethu (YY) – Vodacom’s BEE shareholder – saw its market price decline by 41% to R20 per share at year-end. However, it has returned to R33 per share since then. At the current price of Vodacom, I believe its NAV is north of R100.
As mentioned above, the market price of Phuthuma Nathi (PN) – the BEE shareholder of MultiChoice South Africa – declined by 59%. The main reason for the decline was the news that PN would cut its dividend substantially. Last year, Beagle earned R1.7mn in dividends from PN. This year, I expect that dividend to decline to around R500,000. I believe the highly indebted nature of its holding company has led their bankers to force it to retain as much cash as possible. Once (if?) Canal+ is successful with its acquisition of the business, the dividend policy might be revisited.
The market price of SOLBE1 – an empowerment structure related to Sasol – declined by 58% to R50.50 per share. A SOLBE1 share has the same economic and voting rights as Sasol ordinary shares, which are trading at R96 per share.
The market price of MTN Zakhele Futhi (MTNZF) – the BEE shareholder of MTN South Africa – declined sharply by 40% to R8.82 per share. After year-end, MTN announced the winding up of its scheme, which should put R20 per share in the hands of MTNZF shareholders. It is currently trading at R17 per share after the announcement.
The “other” line includes our investment in TIPone, which is listed on the Cape Town Stock Exchange and is essentially an open-ended BEE investment vehicle where management intends to acquire tranches of BEE shares in selected companies over time. This is not a material investment for Beagle.
Cashflow and balance sheet
In the year to March 2025, Beagle received dividends and interest of R7.6 million. It had operating expenses of R1.8 million, paid interest of R700 000, and paid taxes of R100 000. It also paid a dividend of R1.9 million. In addition to the Goedehoop investment, it made net new investments of R2.5 million. It paid off R1 million of the R10 million loan from Merchant West. Beagle ended the year with cash of R4.2 million.
Regarding debt, Beagle has an interest-free loan of R1.4mn from Reef as part of its CSI program and a R11mn loan from Merchant West. It also has a deferred tax liability, representing the capital gains tax that Beagle would have to pay if it sold all its investments today.
Below is a summary of Beagle’s investment portfolio:
Dividend Declaration
Under normal circumstances, Beagle would retain and reinvest all its income, as investment opportunities in the BEE space remain compelling. However, its biggest Black shareholder, the RECM Foundation, is building a program in Early Childhood Development. A regular dividend stream, which supplements its lumpy stream of donations, makes all the difference to the Foundation in making the program sustainable and making a permanent and lasting impact on the lives of the youngsters involved.
Beagle has a dividend policy of paying out up to half of the dividends it receives after deducting the costs of running the business and interest payments. This year’s dividend amounts to R125 per share, a 25% increase over last year’s dividend. This means the Foundation will have at least R500,000 to spend this year. We aim to steadily grow this dividend over time so the Foundation can fulfil its mission sustainably.
If you can help in any way to source donations for the good work the Foundation is doing, it would be greatly appreciated. You will also make a real difference to the lives of many deserving youngsters very efficiently. You can learn more about the Foundation at https://recm.co.za/recm-foundation/.
Some administration
For those interested, I will be available to discuss the results online on Wednesday, 23 July, at 14h00. If you wish, you can also attend the discussion in person at the RECM offices. Please let Yolanda Bowers (Yolanda.bowers@recm.co.za) at RECM know if you want to attend online (or in person). She will send you a meeting link. (We do have good coffee here in the office, so if you attend in person be sure to ask for a cup!)
The full set of annual financial statements is also available to all shareholders upon request. Please let me know if you require a copy.
Releasing these results also provides us with our regular semi-annual liquidity window. Please let me know if anyone wants to sell any of their shares. And if there are any buyers, you know where to find me. Unfortunately, we cannot guarantee that you will be able to buy or sell any shares – that depends on the willingness of other shareholders to transact. Transactions have traditionally happened at the audited NAV per share. As usual, we will pay the dividend on 1 August and use the NAV after this payment for transactional purposes.
Beagle has enjoyed very good returns over the years, and the directors of Beagle are comfortable with the current investment portfolio. However, do not extrapolate this history into the future as you plan your financial affairs. Beagle is an investment company with a highly concentrated, illiquid, leveraged portfolio. The directors of Beagle will continue to do their best to ensure a positive outcome, but this cannot be guaranteed. Also, an investment in Beagle cannot easily be realised, so you should never invest with money you might need urgently at some point.
Thank you for joining us on the Beagle’s voyage, and best wishes for the rest of the year!