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Money makes the world go round

Tongaat’s winners (no spoiler alert needed), Lewis’s share buyback hopes, Stefanutti Stocks’s share issue challenges, and Mr Price’s long-serving Mr Johnston re-elected to the board – the week that was.
Shareholders may have a voice, but they also have a lot to keep track of. Image: Moneyweb

A lot of the shine came off Tongaat CEO Gavin Hudson’s image as a knight in shining armour last week with the release of details of the hefty remuneration packages awarded to him and two or three of his top executives.

Some of the more cynical Tongaat shareholders who have suffered a near-obliteration of their investment value might feel it’s a little too soon for multi-million rand rewards. The latest results certainly don’t suggest a company that is well on its way to recovery, and that’s without taking into consideration the very big question mark over the proposed sale of Tongaat’s starch business.

But the group’s remuneration committee and consultants have been hard at work and have included a list of “milestones of the turnaround incentives” in the remuneration report. The complex list appears designed to silence the more outspoken cynics, but the mind-numbing details and footnotes in the report aimed at justifying the generous awards might not do the trick for shareholders focused on the lack of any signs of recovery in the share price.

As with all these corporate disasters it seems everyone – except the shareholders and lower level employees – is in line for a slice of the diminished pie.

At the end of June the JSE announced that it had lobbed a R5 million fine on Tongaat for non-compliance with its listing requirements; last week, not to be outdone, the Financial Sector Conduct Authority (FSCA) announced a R20 million fine for contraventions of the Financial Markets Act.

Read:

Of course that’s just petty cash compared to the hundreds of millions being paid out in “professional fees” to advisors who are helping with this yet-to-be-seen recovery.

Lewis

Last week’s announcement by furniture retailer Lewis that it would ask shareholders for permission to purchase 10% of its shares came at a great time for the directors who (also last week) sold a portion of their just-vested shares to settle tax liabilities relating to the vested shares.

The share repurchase announcement, indicating there might be a firm buyer in the market, was followed by a spike in the share price.

Of course not everyone believes using up much needed cash resources to buy back shares, and thereby shrink the equity base, is a vote of confidence in the company.

Stefanutti Stocks

Last week’s announcement from construction company Stefanutti Stocks highlights the challenges facing any company intending to use the JSE’s dispensation that allows companies to issue shares for cash without holding a shareholders’ meeting.

Read: Stefanutti Stocks reports more than R1bn loss

If there is to be no meeting then shareholders have to approve the necessary resolution in writing and, critically, 75% of shareholders have to support the resolution.

In terms of the new dispensation shareholders are given 20 business days to vote on the resolution and up to 30% additional shares could be issued. The JSE believed this would help companies to raise cash “in a more expeditious manner”.

However it seemed not to take into consideration the high levels of apathy among JSE investors as well as the difficulty in actually contacting shareholders.

Given this apathy and difficulty, Stefanutti did well to get 52% of shareholders to support a written resolution to authorise financial assistance. But 52% is not enough, so the company has had to abandon the written route and intends seeking shareholder approval for the same resolution at its upcoming AGM.

Mr Price

Mr Price Group might have set a Covid-19 record last week with an AGM that was over within 12 minutes. It helped that they wrapped 10 of the resolutions into one prompt for shareholders to vote; this meant they didn’t have to read out 10 separate resolutions and must have saved them at least 10 minutes.

Long-serving non-executive director Bobby Johnston announced his retirement after the AGM “notwithstanding his re-election by rotation at the AGM”, said the company.

Remarkably, Johnston, who has been a director since 1998, continued to be described by the board of Mr Price as independent up to the very end. For 14 of those 22 years he was lead independent director.

Johnston was comfortably re-elected to the board but his election to the audit and compliance committee was opposed by a hefty 33% of ordinary shareholders.

The ordinary shareholders were also not too impressed with the group’s remuneration policy; 27% voted against the remuneration policy and 27% against the remuneration implementation report.

Mind you this year’s backing is a significant improvement on 2019, when over 50% of ordinary shareholders voted against the remuneration policy, and appears to have been the result of intense engagement with shareholders.

Listen to Friday’s MoneywebNOW podcast by Simon Brown: 

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