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Some business battles are won, and some are lost

Zeder, Shoprite and FirstRand: a company in its death throes, a retailer with a good year under its belt, and a bank that’s made an interesting move in remuneration.
Good move: one of the first things the new chair of Tongaat did was take a 50% cut in fees. FirstRand has now appointed him to chair its remuneration committee. Image: Shutterstock

Now we know what was behind the remarkable behaviour at Zeder’s AGM back in early July – the company was in its death throes.

“If a person or animal is in their death throes, they are dying and making violent, uncontrolled movements, usually because they are suffering great pain,” explains Collins Dictionary. It is now evident that the company was in so much pain it was unable even to organise an AGM effectively enough for all the shareholders to attend or, for those who attended to ask questions.

Similarly, perhaps the directors didn’t answer questions because they were traumatised by the pending demise of the company. Or maybe they thought ‘What’s the point?’.

The Zeder share price had its best one-day performance in over a year following last week’s announcement about further asset sales and the departure of CEO Norman Celliers. That must have been a little embarrassing for Celliers, although generously-paid CEOs tend not to embarrass easily and are adept at explaining things to themselves.

Independent small-cap analyst Anthony Clark has long argued that following the sale of Pioneer Foods and Quantum, Zeder had no reason to exist and that “the farm should be sold”.

If done well this could generate at least 370c a share. That carve-up valuation is worth considerably more than the 250c to which the share sprinted on last week’s news.

Zeder share price

Shoprite

On a more upbeat note, the enormous challenges of dealing with Covid-19 and the lockdown don’t seem to have distressed Shoprite CEO Pieter Engelbrecht too much.

At last week’s presentation of the financial 2020 results he seemed more upbeat than usual. It’s no doubt partly because his employees had put in such a remarkable effort throughout the year, and particularly during the last four months of the year, that the group is in strong shape. Engelbrecht’s upbeat mood might also have been helped by the absence of the usual predatory army of analysts and journalists that physically populate the live results presentations. This year they were all tucked safely behind internet screens.

The retail giant turned in a remarkable performance, essentially addressing all of the issues that had hit its 2019 results so badly.

A year ago, an evidently stressed Engelbrecht tried to put some context on the 19.6% slump in headline earnings. The market was not pleased; the share price plunged 9.25% to a three-year low of R126.86.

Last week the group announced a 16.6% increase in earnings for financial 2020, prompting a share price surge of 11%.

By the end of the week it was trading at a 12-month high of just under R150.

Not only did Covid-19 and the lockdown not slow Shoprite down, its ability to respond remarkably speedily to extreme circumstances saw it gaining market share.

Read: Checkers rewards programme attracts over 4.7m customers

And the pandemic did not deter management from dealing with the issues of 2019. The sale of its fleets as well as the sale and lease-back of distribution centres contributed to the significant decline in debt. In addition, the steady withdrawal from the more difficult trading regions of Africa has been a relief. As Sasfin senior equity analyst Alec Abraham notes, the necessary and perhaps inevitable withdrawal from Nigeria and Angola (pending) must be a major disappointment, given the considerable excitement around those two markets just a few years ago.

Of course it wasn’t just Africa, debt levels and labour issues that Engelbrecht had to contend with a year ago – there was also the boardroom upheaval. Well, it was really only ‘upheaval’ in the context of a board that had carefully hand-selected all of its members for the full 40 years of its existence.

“I’m not saying it’s wrong, but it’s just not the way it’s done,” said chair Christo Wiese about the unexpected and ultimately unsuccessful attempt by shareholders to appoint an ‘outsider’ to the board at last year’s AGM.

Read: Shoprite investor seeks to curb chairman power with new director

And all of this was unwinding less than three years after Engelbrecht had taken over from the daunting force that was Whitey Basson.

Shoprite share price

FirstRand

Former long-serving Absa director Louis von Zeuner has been appointed to chair FirstRand’s remuneration committee (Remco) after being appointed to the board for the first time in February last year.

That appointment followed him taking up a position at troubled Tongaat in December 2018. The moves may, or may not, have been connected to the large stake FirstRand inherited in Tongaat as a result of its funding the sugar group’s BEE structure, which collapsed when the Tongaat share price fell in a heap.

One of the first things Von Zeuner did after being appointed to chair the Tongaat board was take a 50% cut in fees.

As new chair of the FirstRand Remco he might be inclined to take similar tough but necessary action.

The banking group’s just-released results reveal it has not been able to cover its cost of capital this year.

Of course FirstRand isn’t the only bank to report grim results; given the enormous provisions they’ve all had to take, it’s encouraging they were still able to make profits.

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Zeder issued at R2.00 in, I think,2010.
I sold in disgust 3 years later.
The only rason for Zeders’ existence was the huge ‘management fees’ paid to PSG.

End of comments.

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