Sugar and property group Tongaat Hulett is expecting to hear from the National Prosecuting Authority (NPA) within six months, on whether it will prosecute the group’s former executives implicated in alleged accounting fraud.
Billions of rands was wiped off its market cap last year after the accounting scandal rocked the group last year.
Speaking to Moneyweb on Friday, following the release of the group’s annual results for the year ending March 31 2020, CEO Gavin Hudson said Tongaat Hulett is still pursuing both civil and criminal action, the latter being now driven by the NPA.
Several directors from the group’s previous executive leadership, including long-time former CEO Peter Staude and CFO Murray Monroe, are facing the action. Former executives within its Zimbabwean operations are also facing such action in that country.
“We are in touch with the NPA and are supporting their investigation as much as we can,” said Hudson, who was appointed in February last year to lead the turnaround and clean-out of the group. “We expect to hear from them [in] the next three to six months and are positive the matter will be finalised during this time.”
Asked about the civil action to recoup bonuses and incentives paid to the implicated former executives, Hudson said it is premature to comment in detail.
“We are still at the onset of our civil action. As we progress, a lot more detail will come out … I cannot divulge the quantum of funds we hope to recoup at this point.”
Staude and the affected former executives have kept a low profile since the accounting scandal broke last year.
However, in a brief response to a Moneyweb query in July last year, Staude said that around 65% of his bonuses and incentives went into a share scheme in the group. More than 80% of this value has been lost due to the plunge in the share price.
Moneyweb reported at the time that company records showed Staude received a total remuneration package of just less than R176.4 million between 2008 and 2018 when he retired. Around R38.8 million of that was in the form of cash bonuses (between 2008 and 2017) and R55.8 million in long-term incentives, while the balance was made up of his salary and retirement and medical aid benefits.
Turnaround on track
Speaking during Tongaat Hulett’s annual results presentation webcast on Friday, Hudson said the group’s “turnaround is well on track”.
The encouraging full-year performance by the KwaZulu-Natal-based group saw a 9% surge in its share price on the day, closing at R5.45.
The group noted in a Sens results statement that its headline loss per share from continuing operations improved by 83% to 211 cents. This is compared with a headline loss per share of 1 226 cents for the corresponding financial year (to March 2019).
“[The] recovery in financial results indicates substantial progress in the execution of the turnaround strategy, as well as hyperinflationary effects in Zimbabwe,” the group said, adding that it has seen “significant improvement at all sugar operations”.
Tongaat Hulett also pointed to “a solid performance” in its starch and glucose division, in addition to “continued land sales” within its property division.
The group reported an operating profit of R3.3 billion for the year, compared with R551 million for the previous year. It said that revenue increased 18% to R15.4 billion, from R13.1 billion previously.
“Significant progress has been made, but much more remains to be done,” Hudson noted during the presentation.
He told Moneyweb: “The turnaround operationally is no doubt well on track.… However, our biggest challenge or ‘Achilles’ heel’ is our huge debt burden.”
The group’s debt stands at around R11 billion. Its net asset value, however, has improved to -R1.6 billion, compared with -R3 billion at the end of its 2019 financial year.
This improvement comes in the wake of a massive restructuring, which has seen the group cut its workforce by more than 10 000, in addition to several disposals including its Namibian and eSwatini assets.
The group announced a R5.3 billion deal to dispose its starch business to JSE-listed Barloworld earlier this year; however, a dispute has arisen, with Barloworld trying to get out of the deal due to the impact of Covid-19.
Hudson pointed out to Moneyweb that only around 2 000 staff were cut in South Africa, with the balance of the cutbacks being largely within the group’s Mozambique and Zimbabwe businesses. He said only around 40% of the 10 200 staff who have left the company could be referred to as retrenchments.
“Most of them took voluntary exit packages and many of them were close to retirement age. Worth also noting is that of the around 4 000 staff that were actually retrenched, many of them have been reemployed with the Unzinzo transformation initiative [as part of Tongaat Hulett’s exit from actual sugar farming and focusing largely on milling and sugar sales],” he said.
Hudson added that the restructure of the group has allowed Tongaat Hulett “to enter Covid-19 as a leaner, fit-for-purpose organisation better able to weather the pandemic” and other challenges.
“The financial mismanagement uncovered in early 2019 was devastating for Tongaat, and affected every aspect of our business.
“To get Tongaat back to operating efficiently, strategically and profitably required nothing short of a fundamental restructuring of our business,” he said.
“We executed this swiftly and also undertook a sweeping review of our policies, procedures and processes as well as every aspect of our governance
“Given the challenges we have faced, I am exceptionally proud of these results for the 2020 financial year. We have emerged as a better managed, better controlled and more resilient business with a much healthier culture.”