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Tongaat Hulett’s former CEO poorer after share price dive

Forensic investigation looking into the group’s accounting practices.

Peter Staude, former CEO of beleaguered sugar and property giant Tongaat Hulett, will have lost millions due to the group’s share price rout following revelations of accounting irregularities that have forced the group to restate its financial results.

Staude retired late last year, having spent four decades with Tongaat Hulett, more than 16 years of which he was CEO.

Moneyweb contacted Staude for comment on the group’s accounting anomalies under his watch and the calls for him to pay back the more than R94 million in bonuses and incentives he received in his last 10 years as CEO.

Read: The corporate scandals keep on coming

In a messaged response regarding the bonuses, he said: “65% of my Tongaat Hulett bonuses went into a scheme that facilitated me buying shares … None of which I have sold.” He declined to comment further.

According to company records, 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.

Tongaat Hulett’s latest shareholder register (to June 2019) shows that Staude owns just over 402 000 shares, currently valued at more than R5.3 million.

Staude has kept a low profile since retiring and since Tongaat, under new CEO Gavin Hudson, announced in May that the group would have to restate its financial results with an expected reduction in its equity “by between R3.5 billion to R4.5 billion”.

It has tasked auditing firm PwC with undertaking a forensic investigation into the group’s accounting practices. This saw it suspend its shares from trade on the JSE on June 10, and its already pressured share price fell further.

More than 75% of Tongaat’s value has been wiped out since the beginning of the year. This is less than a tenth of its value compared to the end of January 2017, when the share price stood at over R133.

Chris Logan of Opportune Investments, a former minority shareholder in Tongaat Hulett and a vocal critic of the company in recent years, says Tongaat was mismanaged under Staude, especially in his last few years. “Besides the accounting irregularities that are now coming to light, there has been capital misallocation, poor cost controls and misaligned incentives at Tongaat.”

However, he says that despite the dire situation the company now finds itself in, he believes “it can be saved” under new CEO Hudson.

Mass exits

Tongaat Hulett has seen a rash of resignations since late last year, including its long-time CFO Murray Munro. Company records show that Munro received a total remuneration package of R97.6 million for the 10-year period until his departure in 2018. This included almost R19 million in bonuses and R30.5 million in incentives.

Hudson, a former SABMiller boss in Turkey, took over as Tongaat CEO in February, while Rob Aitken was appointed new CFO in March.

Read: Tongaat Hulett: Developments division under scrutiny  

Michael Deighton, head of the group’s property and land conversion division, resigned in May, and last month Nonhlanhla Mjoli-Mncube, a non-executive director who has served on the board for more than nine years, joined the long list of exits.

A criminal case has been opened against an unidentified former executive at Tongaat, which the group says is being investigated by the South African Police Service. While Moneyweb is aware of who the executive might be, Tongaat would not verify this information and declined to comment further.

Restructuring and jobs cuts

Tongaat Hulett has confirmed that, as part of the turnaround plan currently being implemented, it is “reviewing a number of its assets, some of which may be sold, and others restructured or retained”.

The company says “the exact figure of how many people will be impacted by the headcount reduction will only be known once the restructuring process is further progressed”.

In the face of its financial woes and increased debt, Tongaat has sent out Section 189 notices to some 5 000 employees across its operations in the SADC (Southern African Development Community) region.

The group reportedly aims to cut its costs by R1 billion.

“Meaningful progress has been made and details of the turnaround plan, together with information on the cost savings initiatives, will be presented to shareholders in due course,” the group’s head of investor relations told Moneyweb.

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This is what happens when investors just think things go up and up. Tongaat is now a property company with a sugar business. In that light, it’s share price is not doing too badly compared to the other property companies on the JSE. The valuations may have been aggressive but that is hardly a sin. Valuations are guesstimates anyway. Staude didn’t cash in most of his shares and that means something. Leave the man alone and let’s hope for the best with the turnaround.

By going after Staube, you’re barking up the wrong tree. The people who benefitted most are the connected investors who had prior knowledge of the realities and sold out at the top to willing buyers who knew nothing of the bad news about to come. One institution particularly did quite well out of their 10% holding in Tongaat whilst others took the fall and passed the losses back to their clients.
The worst Staub did was turn a blind eye to the Auditors manipulation of the bad news in the financials and hope for the best…. he did not orchestrate Tongaat demise for his own personal gain. In my opinion.

Unfortunately…like most economic and political failures in this country – the innocent investor and taxpayer will pay the price whilst the perpetrators get off Scott free – like the Kirkness, Zuptas, Kebbles, Joostes etc
Don’t be fooled by the Porrit/ Tigon court fiasco …it’s just a blind to make us believe that Justice still works in this country…it doesn’t when the chips are down.
But like I said, in my opinion.

I agree – real perpetrators get off – – SA prosecuting authority has far to go and political will not present

His loss is chickenfeed given the enormous bonuses he got, undeserved.

If 65% went into the share scheme because 35% went to Tom Moyane, then his bonus IS now chicken feed. And it was undeserved because what?

Amended comment…

By going after Staude, you are barking up the wrong tree.
The people who benefitted most are the connected investors who had prior knowledge of the realities and sold out at the top to willing buyers who knew nothing of the bad news about to come.
One institution particularly did quite well out of their 10% holding in Tongaat whilst others took the fall and passed the loses back to their clients.
The worst that Staude did ( in my opinion) was turn a blind eye to Auditors manipulation of the bad news in the financials and hope for the best….he did not orchestrate Tongaat demise for his own personal gain…as others have or tried to, in the past.

Mac, you are misinformed. The Auditors had nothing to do with the manipulation of the Annual Financial Statements – management did.

Valuations of the property were very optimistic under current economic circumstances. Revenue and profit recognition was also skewed, overestimated and fraudulently recorded. This is a fact!

If I as a dumb accountant without inside knowledge spotted it already three years ago with a simple Du Pont analysis, less than four hours work, then any analyst worth his salt would have spotted it too, (and some did only to be silenced) and the auditors too. However, when fraud is committed, in this case the premature recognition of income, this becomes hard to detect.

What was telling, even with the fraudulent entries, were the gearing ratios and cash flows. They told a different story. And don’t tell me that the three top honchos were not aware of the cooking of the books – they, in all probability, ordered it.

We suffer from a disease in this country – that of placing executives on pedestals thinking that they are infallible. Greed, pride and the invincibility syndrome are symptomatic of top management in South Africa. Mainly these egomaniacal executives are not accustomed to being questioned and when panicked they dream up schemes to maintain momentum and spin a good story whilst hoping that circumstances will turn around in the short term and they will be able to recover. It never happens.

However when negative economic conditions persist, then the opportunity to recover disappears and the fudging continues in order to spin a positive story. Auditors audit, they don’t prepare financial statements – that is the role of management. Management take full responsibility for the reported results. Auditors only report on the fairness of the financial statements.

Staude, Munro and Deighton; the top honchos resigned when the news broke – just like Markus Jooste of Steinhoff, Bernard Swanepoel of Harmony and many others have. These egomaniacal freaks were caught out and resignation was the only way out for them – bunch of cowards who could not stand the heat. They have mismanaged the company to extinction. So what that Staude did not sell his shares? It only goes to show the delusion he is under … he refuses to accept the truth. Perhaps he over delegated and spent more time on the golf course that in the board room. In that case is incompetence shines through.

What we need in this country is increased shareholder activism and proper financial analysis. We lack both. And when decent analysts speak out, the old boys club silence them.

Are you a member of the old boys club?

Another case of incompetence by executives and a board. They should all pay back and report to Sonderwater where they should meet the Steinhoff and Brait guys as well as Zuma and his thugs! A disgrace that they are allowed to walk free

Poor Staude??

What about all the TH pensioners that he and his Board stole from and are now worse off …

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