TFG: H1 profit fell 12.4% on flat revenue – the share has little room left

On 25 November TFG reported results for the first half of its 2026 financial year: revenue ZAR 29,044.0m, operating profit ZAR 2,143.0m, net profit ZAR 827.0m. Revenue fell 0.4% year on year, net profit 12.4%, and the net margin narrowed to 2.8% from 3.2%. LTM net debt/EBITDA stands at 2.09 and the trailing 12-month dividend yield at 4.93%. Our conclusion: fairly valued – the portal model implies only -5% to fair value. Our view: the share is fairly valued; upside on the portal model -5%.

Our view: is there upside

Our view in numbers

Key takeaways

— Revenue was almost flat in the half – down 0.4% year on year to ZAR 29,044.0m

— Net profit fell 12.4% and the margin narrowed to 2.8% from 3.2% – costs ate into almost flat revenue

— Operating profit of ZAR 2,143.0m on revenue of ZAR 29,044.0m is a 7.4% margin, not enough to hold net profit

— Leverage at 2.09x LTM EBITDA is moderate, but net debt rose from ZAR 8.0bn on 31 March to ZAR 9.1bn

— The 4.93% trailing dividend yield beats the key rate, but the payout rests on falling profit

— On the portal model the share is 5% above fair value – almost no room left

Key figures, ZAR bn

Revenue was almost flat in the half – down 0.4% year on year to ZAR 29,044.0m

Revenue for the first half of the 2026 financial year was ZAR 29,044.0m against the comparable period a year earlier – a decline of 0.4%. That is within statistical noise: the company is neither growing nor shrinking.

For an apparel retailer this means like-for-like sales are not offsetting weakness in one of the segments. The report gives no segment breakdown, so the source of the weakness cannot be named – only the total is visible.

Flat revenue with rising costs is the main reason profit fell. When the top line stands still, any increase in rent, logistics or staff costs hits the margin immediately.

Net profit fell 12.4% and the margin narrowed to 2.8% from 3.2% – costs ate into almost flat revenue

Net profit for the half was ZAR 827.0m, 12.4% less than a year earlier. On revenue of ZAR 29,044.0m that gives a margin of 2.8% against 3.2% in the comparable period.

A 0.4 percentage point squeeze in the margin on almost unchanged revenue means costs grew faster than income. Operating profit of ZAR 2,143.0m corresponds to a 7.4% margin – not enough to hold net profit at the previous level.

The report does not single out one-off items that would explain the fall. The pressure on profit is therefore operational, not driven by accounting write-offs.

Operating profit of ZAR 2,143.0m on revenue of ZAR 29,044.0m is a 7.4% margin, not enough to hold net profit

Operating profit for the half was ZAR 2,143.0m. On revenue of ZAR 29,044.0m that is a 7.4% margin – a thin buffer for a retailer with debt.

Interest on debt and taxes are deducted from that, leaving ZAR 827.0m of net profit. The gap between operating and net profit – ZAR 1,316.0m – shows how heavy the financial costs are.

A 7.4% margin means even a small drop in revenue or rise in costs quickly pushes the company towards a loss. The cushion in operating profit is thin.

Leverage at 2.09x LTM EBITDA is moderate, but net debt rose from ZAR 8.0bn on 31 March to ZAR 9.1bn

Net debt at 30 September 2026 was ZAR 9,138.0m. The ratio of net debt to LTM EBITDA is 2.09, moderate for a retailer.

Since 31 March 2026 net debt has risen from ZAR 8.0bn to ZAR 9.1bn – up ZAR 1.2bn. Over the 12 months to 30 September it fell from ZAR 10.1bn to ZAR 9.1bn – down ZAR 0.9bn.

Operating cash flow for the half was ZAR 2,286.0m and capital expenditure ZAR 672.0m. Free cash flow after investment stays positive, but not enough to cover both the rise in debt and the dividend.

The 4.93% trailing dividend yield beats the key rate, but the payout rests on falling profit

The trailing 12-month dividend yield is 4.93% on the current price. That is above the key rate, making the share interesting for income investors.

The payout, however, rests on profit that fell 12.4% in the half to ZAR 827.0m. If margin pressure persists, the dividend will have to be cut or funded with debt.

Our estimate: at the current yield the payout stays around 4.9%, but its sustainability depends on profit recovering in the second half. The risk of a cut is real if the margin does not recover.

On the portal model the share is 5% above fair value – almost no room left

Our valuation model, based on EBITDA growth and a target multiple, puts fair value 5% below the current price. That means the market has already priced in the current results.

The LTM EV/EBITDA multiple is 5.77 and P/E 14.46. For a company with falling profit and flat revenue these levels do not look cheap.

Return on equity is 6.61%, below the cost of capital for most emerging markets. That is another argument against significant upside.

Valuation on the latest reported figures

Bottom line

The strengths of the report are moderate leverage at 2.09x LTM EBITDA and positive operating cash flow of ZAR 2,286.0m. But revenue is barely growing, net profit fell 12.4% and the margin narrowed to 2.8%. The 4.93% dividend yield looks attractive, but it rests on falling profit. On the portal model the share is 5% above fair value. Our conclusion: fairly valued – almost no room left. Our view: the share is fairly valued; upside on the portal model -5%.