Readers of IM will be familiar with its consistent recommendation of route-to-market FMCG counter CA & Sales (CAA), which operates in Southern Africa and has recently moved into East Africa.
IM first recommended CAA after it was unbundled from majority shareholder PSG Group in October 2022 at 545c, and since then every price target set has been attained and exceeded. As IM writes this update, CAA — which released its year-end results to December 2024 on March 27 — is at a record high of R17.50, giving a one-year gain of 53%.
This analyst recently met with CAA management. I have known the team and business since their previous incarnation, CIC Holdings, which was sold to Imperial in 2010. The team are experts in their field and the ability to build a successful second business empire is impressive, all done with humility and little fanfare.
With a major global confectionery brand and other new products being added in financial 2024, alongside new business retail channels such as Lucky Star in Eswatini and KFC in Namibia, it was yet another robust revenue and earnings period.
CAA traditionally has a better second half, given the pull of stock-building demand for the festive trading period. First half 2024 growth was 19.2% to 43.45c a share. A stronger H2 saw management deliver year-end growth up 25.3% at 122.71c a share. A final dividend of 24.44c a share (+25%) was declared.
The strongest revenue growth in the period came from South Africa, up 18.6% at R1.82bn, followed by Eswatini, up 10.4% at R1.87bn. The largest business segment, Botswana, which represents 50% of group sales, recorded 9.2% growth to R6.23bn. The best operating profit growth — 64% — came from South Africa, whose operating profit of R246m was second to Botswana’s R299m (+11%). Namibia, a fast-growing revenue market after the Taeuber & Corssen (T&C) consolidation, had a 76% slump in profit to R44m as CAA repositions the portfolio and product mix. IM predicts a rebound into financial 2025.
CAA has delivered a consistent growth story with headline earnings per share on a five-year basis increasing 139%. There is no reason to doubt current trends will not continue. CAA has set an ambitious R20bn revenue target with much of this push coming from the expansion into Kenya and East Africa.
Domestic expenditure may become constrained as exports are affected and need to be redirected
The company has undertaken three acquisitions to bolster its growth targets in the past two years. It mostly partners with owner-entrepreneurs, which reduces risk execution. In Namibia, buying T&C — the country’s second-largest FMCG distribution business — added 50% to its Namibian revenue. The mineral-rich country, which also has rich oil and gas potential, accounted for the second-largest revenue split at 18% after Botswana (50%).
CAA acquired a 49% stake in Roots Trading in March 2024, gaining access to 8,000 outlets across South Africa. Roots primarily serves the liquor market via brands within the Pernod Ricard portfolio. CAA aims for aggressive growth, especially within the grocery range, in Roots’s mainly rural client base.
In February 2025, CAA took a 49% stake in Tradco Group, which brings in R1bn of additional revenue. Tradco is active in the Kenyan and regional FMCG market and principally merchandises local brands; CAA saw an opportunity to add its basket of 200 multinational suppliers into the mix and offer these products into the growing East African market of 180-million people. IM predicts further bolt-on transactions within the region.
IM is conscious that the trade tariffs introduced by US President Donald Trump may be bad for many of the African countries where CAA operates. Domestic expenditure may become constrained as exports are affected and need to be redirected.
Further consideration needs to be given to Botswana, which accounts for 38% of operating profit. The economy is dominated by diamonds, which have lost much of their sparkle, and this is one reason CAA diversified its country risk exposure. CAA has a firm footprint in the country and IM is watching developments closely.
CAA will benefit from new regional expansion and, as management states, “taking more products to more places”. CAA is confident that broadening its business channels and gaining market share will lead to growth. Earnings growth may be constrained by the tariff disruptions, but IM believes CAA’s new market opportunities offer enough impetus and growth potential to continue its compound annual growth rate of nearly 20% over the past five years.
With the share having performed strongly and the p:e at 14.3, IM maintains its standing R20 target price (+14%) and thus maintains a hold on CAA.
* Clark owns shares in CA & Sales
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