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Lots of year-end cheer for our corporate executives

But a court ruling deals a blow to SAB’s hopes for a jolly holiday season after a miserable year.
It seems this is a good time for remuneration committees to ladle out generous year-end rewards to executives who earlier promised to share the Covid pain. Image: Izumi T, Getty Images

Most share prices have already bounced back from the chillingly low levels to which they plunged in the uncertain chaos of the early Covid-19 days – but on even a moderately upbeat three-year outlook, there’s likely to be considerable scope for further recovery.

So now, it appears, is a good time for remuneration committees to ladle out generous year-end rewards to executives who had earlier promised to share the Covid pain and take a salary sacrifice.

Sasol

Over at Sasol, whose Covid-19 experience was just one part of a truly nightmarish 2020, the share price has already made reasonable progress back from the all-time low of R20.77 reached earlier this year. But at its current R140.79 it is still priced for almost nothing going right from here on. There is of course a chance that nothing will go right for Sasol from here.

Its relatively new leadership may not be able to achieve the significant progress needed on the debt front, oil prices and exchange rates might threaten its bottom line, and the inevitably growing pressure from environmentalists will force management to take costly measures to curb its world-record-beating emissions.

All of this means there’s no guarantee of a substantial recovery from the current level. But based on an historical perspective, there is a good chance of one. And so, the hefty chunk of share awards made to Sasol’s executive directors and prescribed officers last week are likely to generate attractive returns for those lucky individuals over the next three to five years.

The price per share of the awards was R129.58, which means they’re already showing a little profit.

CEO Fleetwood Grobler’s 145 855 shares were valued at R18.9 million on the date of the award; they are currently valued at R20.5 million. There are performance conditions attached to 65% of the shares, if achieved the shares will vest with Grobler in three to five years’ time. The only condition attached to the remaining 35% is that Grobler is still around in five years. Given Sasol’s recent turmoil, that’s not inevitable.

But if Grobler can steady this enormous polluting ship, a share price of R300 wouldn’t be unreasonable, which would make this particular award worth around R44 million. And shareholders would be grateful.

Tongaat

Over at Tongaat, shareholders didn’t seem at all grateful last week when management reported better-than-expected results for the six months to end-September.

Not only was there a return to profit but the sugar group’s efforts to reduce its debt through asset sales looks to be progressing well. As if that weren’t enough, last week KKL, a wholly-owned subsidiary of Barloworld, confirmed it will top up its R5 billion payment for the group’s starch business by R274 million.

Investors’ response to all this good news was to knock the share price by 12% on Friday to a close of R10.35.

Perhaps they felt they’d overdone the enthusiasm during the previous two weeks’ trading when the share price shot up from R7.60 to R12.20. Or perhaps they’re concerned the group has had to give up too much to get to where it is.

PPC

Good news also from lime and cement producer PPC, which says improved earnings and good cash generation during the six months to end-September could mean it doesn’t have to proceed with a rights issue.

Arrowhead

Not such good news from real estate investment trust Arrowhead, where management heaped generous rewards upon itself despite notching up a loss of R844.5 million for the year to end-September.

And proving just how much we are not all in this together there are also the loans dished out to the top executives to fund share purchases. The loans, which date back to 2013, now stand at R180 million.

Given the performance of both the A and B shares since then, a good chunk of this might have to be written off.

Life Healthcare

In what world does aligning executive interests with those of shareholders involve the gifting of R3 million shares for every R1 million the executive purchases?

How can anybody believe that such a ‘buy one, get three free’ offer represents an alignment of interests?

But that remarkable offer is what the remuneration committee at Life Healthcare, the country’s second largest private hospital group, reckons passes for alignment.

Is it any wonder the share price was way off its five-year high even before it was hit by Covid-19 back in March?

Share buybacks

Caxton, Long4Life and Zeder are the latest names to join the long list of companies that have decided to use current share market weakness as an opportunity to buy back shares.

Distell

Distell has certainly dealt a blow to South African Breweries’ hopes for a jolly festive year-end holiday season.

The Cape Town High Court has ordered SAB to remove or withdraw all marketing and advertising relating to its Brutal Fruit products which “convey in any manner that the Brutal Fruit products are alcoholic fruit beverages and not ales”.

This must be done with immediate effect and no later than December 18. It marks the end of a truly miserable year for the beer producer.

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Seems like these exec’s are all on a “get rich quick crusade” remarkable similarities to the ANC cadres

For most company execs the more they have the more they want. Greed and callous indifference to the many that have lost out due to no fault of their own, excluding of course the usual “entitled takers” !

How about a conference on executive remuneration, Ann Crotty/ Moneyweb..? It seems as though we just cant get it right in SA..? I for one, think that the example of Tongaat is one where share options would be suitable way of rewarding the new executive for averting a crisis and all but turning a company around. However, if we had seen huge retrenchments and massive cost cutting with everything except executive remuneration, that would surely have been a problem..? Except, it probably would not have been because shareholders and institutions are apathetic at best and (dare I say it..?) complicit at worst…

It seems a relatively simple thing to fix. Employee morale as measured by staff turnover should be one of the criteria to reward executives. I am sure that by putting some heads together, one could come up with a proper set of criteria to rate performance and determine proper remuneration practices? In our incredibly unequal society, we should do everything in our power to avoid situations where the CEO earns more in a couple of hours, then a worker earns for the whole year – especially when you are talking of state owned enterprises, Government departments and municipalities.

I am all for rewarding a CEO who turns a company around or makes money for shareholders, but not one of these guys does it without a team which almost always includes employees. And it should not be done at the expense of employees.

The JSE should play its part as well. Time for shareholders to become active in ensuring that their interests and ’employee’ interests are protected..

This is an excellent idea and we’ll certainly look into it. Thanks!

End of comments.

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