TFG: revenue up 7.1% but profit down 58.7% – margin halved

TFG has released its FY 2026 results. Revenue grew 7.1% year-on-year, but EBITDA fell 19.9% and net profit collapsed 58.7%. The EBITDA margin declined to 7.6% from 10.1%, and the net margin to 2.1% from 5.5%. At the current price, the shares look unattractive: profit is falling, debt is moderate, but the 4.9% dividend yield does not compensate for the risks, and the portal's model points to no upside.

Key takeaways

— Revenue grew 7.1% but EBITDA fell 19.9% – growth is not converting into profit

— EBITDA margin compressed to 7.6% from 10.1% – cost pressure

— Net profit collapsed 58.7%, net margin at 2.1% vs 5.5% a year earlier

— Debt load at 1.69x EBITDA LTM is moderate, but debt rose by ZAR 1.2bn over 12 months

— Dividend yield of 4.9% is above the key rate, but payout may decline due to falling profit

— Valuation: P/E LTM 13.2, EV/EBITDA LTM 5.36 – not cheap given falling profit

— Portal model indicates no upside – fair value at the lower bound

Attractiveness

Key figures, ZAR bn

Revenue grew 7.1% but EBITDA fell 19.9% – growth is not converting into profit

TFG's revenue for FY 2026 increased by 7.1% year-on-year. However, EBITDA declined by 19.9%, and net profit fell by 58.7%. This means that sales growth is not accompanied by improved operational efficiency: costs are rising faster than revenue.

The decline in EBITDA despite revenue growth points to pressure on cost of goods sold or operating expenses. Without a breakdown by line item from the provided data, it is impossible to pinpoint the exact driver, but the scale of the EBITDA drop (–19.9%) against 7.1% revenue growth indicates a significant deterioration in profitability.

EBITDA margin compressed to 7.6% from 10.1% – cost pressure

The EBITDA margin in FY 2026 was 7.6% versus 10.1% a year earlier. A decline of 2.5 percentage points reflects costs growing faster than revenue.

The net margin also contracted – to 2.1% from 5.5%. This means each unit of revenue brings significantly less profit. The margin decline could be due to rising costs, including staff, rent, or logistics, but the exact cause is not disclosed in the provided data.

Net profit collapsed 58.7%, net margin at 2.1% vs 5.5% a year earlier

TFG's net profit for FY 2026 fell by 58.7% year-on-year. The net margin was 2.1% versus 5.5% a year earlier. This is a significant deterioration in profitability.

Such a sharp drop in net profit, with EBITDA down 19.9%, points to factors below the operating line – possibly higher interest expenses or one-off write-offs. However, the provided data lacks a breakdown, so the exact cause is not established.

Debt load at 1.69x EBITDA LTM is moderate, but debt rose by ZAR 1.2bn over 12 months

TFG's net debt at the latest reporting date was ZAR 7,962m. The net debt to EBITDA LTM ratio is 1.69. This is a moderate level that does not raise immediate concerns.

Over 12 months, net debt increased by ZAR 1.2bn, while compared to the previous reporting date it decreased by ZAR 2.1bn. The annual increase in debt amid falling EBITDA could limit financial flexibility, but the current leverage level remains acceptable.

Dividend yield of 4.9% is above the key rate, but payout may decline due to falling profit

TFG's dividend yield over the trailing 12 months is 4.9%. This is above the key rate, making the stock attractive for income-oriented investors.

However, net profit fell by 58.7%, creating a risk of lower dividend payments. If the payout ratio remains unchanged, the dividend could be significantly cut. Our forecast for the current year's dividend depends on the company's ability to maintain profit, but if the current trend persists, the payout may be reduced.

Valuation: P/E LTM 13.2, EV/EBITDA LTM 5.36 – not cheap given falling profit

TFG's P/E LTM is 13.2, EV/EBITDA LTM is 5.36. These multiples do not look low given the fall in profit and EBITDA. With net profit down 58.7%, the current P/E may be overstated relative to future earnings.

Comparison with the company's own history of multiples is not possible due to the lack of 3-year average data. However, a P/E above 13 with falling profit does not provide a margin of safety.

Portal model indicates no upside – fair value at the lower bound

According to the portal's model, the upside potential of TFG shares to fair value is -100%. This means the model estimates fair value below the current market price, and the value is at the lower bound of the model.

This result is based on the EBITDA growth model with a target multiple. Given the current dynamics of profit and margin, the model sees no prerequisites for market capitalisation growth.

Valuation on the latest reported figures

Bottom line

TFG's revenue grew 7.1%, but this did not help profit: EBITDA fell 19.9%, net profit – 58.7%. The margin halved. Debt load is moderate (1.69x EBITDA LTM), but debt is rising. The dividend yield of 4.9% looks attractive, but the payout is at risk due to falling profit. Valuation is not cheap: P/E 13.2 with falling profit. The portal model sees no upside. Verdict: the share is unattractive at the current level.