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Did Tiger CEO retire or was he pushed?

Profit warning shocker suggests it was the latter…

The public explanation for the sudden “retirement” of Tiger Brands CEO Lawrence Mac Dougall on 31 January – announced two days earlier – just does not water. The board claims that “having reached the company’s mandatory retirement age of 63”, he had “decided” to retire.

But, as the excellent Rob Rose writes, Tiger chairman Khotso Mokhele’s platitudes cannot be taken seriously. Speaking to the Financial Mail, Mokhele asserts that “MacDougall was ‘fluid about when he wanted to leave’”.

“The retirement policy of the company is triggered the year you turn 63, so this has been in the making from the time he joined. Lawrence knew he was never going to be the long-term CEO,” he told the FM. This is downright disingenuous.

Upon appointment in 2016, then-chairman André Parker said the “board is confident that under the leadership of Lawrence Mac Dougall, the new management team will effect the requisite turnaround that will position the group to successfully compete in its markets”.

He noted that the executive search was a “rigorous five-month process” and highlighted Mac Dougall’s “over 25 years’ FMCG experience across Africa, the Middle East, Eastern Europe and Russia.”

“Lawrence brings sound commercial and strategic acumen, a proven ability to lead extensive growth and turnaround strategies and the leadership skills to develop strong integrated teams that deliver sustainable performance”.

In November 2019 – just months ago – Mac Dougall himself wrote in the group’s annual report “I believe that the strength of our heritage brands, the diversity of our product portfolio across a range of income groups, our long-standing distribution networks and customer relationships, and our strong balance sheet, will enable us to absorb potential future headwinds. I am also confident that we have the right strategy in place to respond to these difficult and dynamic market conditions and ensure our long-term growth”.

At the group’s results presentation in November, he gave no indication that he was about to retire. Instead, he reportedly answered criticism from one shareholder thus: “Whether I’m the right person or not is something the board needs to deliberate. Please feel free to give them a call.”

And, at no point in the past four years has Tiger indicated that Mac Dougall’s appointment would only be until he reached retirement age. If this was the plan “all along” as intimated by Mokhele, surely it would’ve been disclosed?

Mac Dougall has been credited with “steering” Tiger through the damaging listeriosis crisis in 2018. Quite whether this should’ve been allowed to happen at all while he led the company is another question altogether. Executives have fallen on their swords for far less (even at Tiger!).

He will also be credited – as he should be – for clearing up former CEO Peter Matlare’s failed African expansion strategy. Almost everything has been sold or closed and the costly distractions are no more.

But the numbers across Mac Dougall’s four years at Tiger Brands are hardly good.

A three-year comparison (end-FY 2016 to end-FY 2019) is useful as Mac Dougall would’ve been able to do precious little to influence matters between his first day on the job (10 May) and the end of its financial year, 30 September 2016.

Revenue is down 5% (aside from the Africa asset sales, volumes in its home market are depressed). And while operating profit (excluding the shuttered/sold African operations) is up 17% over three years, headline earnings per share have nearly halved to just R13.22. Dividends are under pressure too.

Mac Dougall’s tenure, then, was something of a classic “restructuring” exercise: sell or shut under-performing divisions, implement a (bland) new strategy (Tiger’s is premised on four pillars: “Drive growth, Be efficient, Great people, Sustainable future”) and reduce staff numbers (down 1700, or 15%).

Instantly, certain operating metrics will start looking better. Revenue per employee is up 10%. But margin pressures persist and operating profit per employee is down 36% over the same period.

 

FY 2016

FY 2019

Revenue

R30.588bn

R29.233bn

Operating profit after tax (from continuing operations)

R3.269bn

R3.943bn

HEPS

R21.27

R13.22

Dividends per share

R10.65

R6.27

Operating margin

13.4%

9%

Return on equity

23.4%

14.1%

Return on average net assets

30.4%

21.6%

Long-term borrowings

R1.069bn

Current ratio

1.7

2.0

Revenue per employee

R2.391m

R2.633m

Operating profit per employee

R321 000

R236 000

Share price (year-end)

R380.24

R210.56

Market capitalisation

R73.033bn

R39.968bn

 

A company worth R73 billion on 30 September 2016 was worth just R40 billion in September last year. Tiger’s share price is down 40.9% during Mac Dougall’s stay in the top job.

Then, Wednesday’s shocking profit warning sent shares down another 8% to R184.

Read: Tiger Brands says interim profit could fall 36%

Revenue for Q1 is flat year-on-year, with inflation of 4% being offset by further volume declines of 4%. The group expects headline earnings per share (for continuing operations) to be down between 29% and 36% for the first six months of the year. There will likely be more pain later in the year as the new CEO Noel Doyle takes charge.

The board would’ve had sight of these numbers last month, before the wholly unexpected ‘retirement” of Mac Dougall.

The food producer has taken the unusual step of hosting an afternoon investor call following Wednesday morning’s trading update. Shareholders will be looking for a lot more than vague promises, a management-textbook strategy and platitudes from Doyle. Usefully, he knows the business inside out.

One wonders why he was passed over for the top job in the first place…

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Must have been the size 11 in the rear!

Personally i never liked the fellow after what he did to me and others 20 years ago at Cadbury. The way directors and CEO’s treat third parties who build their business is shocking and unappreciative! Indicative of the FMCG industry!

Sound like sour grapes?

Probably is, but as the age old adage goes:

“What goes around comes around”

For goodness sake Hilton, does it matter? It’s obvious he was pushed. But same difference.

What you should be writing about is how his exit package will be hidden from the remuneration report as he will no longer be a director. The shareholders won’t know how much it cost to get rid of him.

Same for all fired CEO’s. Shocking that rem stops as soon as they leave the Board, even though the money continues to flow.

It should be asked at the AGM. The answer would be interesting.

Now that would make a good story.

His pay including any cost to terminate will be disclosed in the 2020 annual report (typically published in November or December).

Thanks to your caring ANC Government and regulation 28 many SA pensioners will share handsomely in another JSE TOP 40 success story.

Imagine how bad it would have been if the old CEO, who decided to buy into Dangote Flour.

Well, to be honest, show me the local company that shot out the lights (perhaps platinum/palladium miners, but nothing in the FMCG sector, or for that matter anywhere else). Just look around… everything is going to the dogs. The state is bleeding us dry. Nobody has money. Debt is at all time highs. Where must business come from? Who has money to spend? Sometimes a CEO must ensure the continued existence of the company through a bad period, rather than try to maximize profits (with the inherent risks it carries). A board of directors should recognise this and act accordingly. I don’t think they did, unless there are other issues we don’t know about. Regardless, I’d like to know what else the ones standing on the sidelines would have done differently. Be that as it may, the trigger has been pulled. Let’s see what Noel conjures up under these trying times.

To be fair to MacDougall, the rot within Tiger was well set-in before his arrival. A somnolent board and a wrecking ball CEO, Matlare , saw to that. He came just in time for the SA economy to start flatlining, so really didn’t stand much of a chance. I am sure that he and everyone else had been hoping that he would have had a much longer stay at the helm. But such is life.

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