Pick n Pay
1-year return: -9.5%
The money quote: “We would like to thank Nick Badminton, our outgoing CEO, for the integral role he played in transforming the business” – Results statement year-end February 2012
Grade: F for fail
Retail stocks have been flying but Pick n Pay has been grounded; having lost Nick Badminton as CEO in February it will be a full year until they finally get a new CEO – ex-Tesco CEO Richard Brasher.
Brasher didn’t exactly leave Tesco in a blaze of glory after he failed to revive the company’s UK sales and at the time of his departure they had their lowest market share since 2005.
Pick n Pay’s Australian adventure took management attention as they got it horribly wrong, and while they were learning Aussie rules they lost local market share and were years late to central distribution. Their trading margins are hovering around 1% while Shoprite is some five times better off at 5.64%.
Bottom line is that Shoprite’s been eating Pick n Pay’s lunch for years.
This once bluest of blue chips has totally lost its way and it really is time for the Ackerman family to unwind the controlling structure and let the cards fall where they may.
1-year return: 22.7%
His challenge: "Gotta keep ’em separated…"
Sifiso Dabengwa, MTN’s rather well-compensated CEO, gets a “C for competent”. Admittedly, it has been a challenging year for Africa’s biggest mobile operator, as it fends off a $4.2bn lawsuit filed by Turkish operator Turkcell.
Yet instead of taking a bold stance and confidently reassuring shareholders of MTN’s innocence, Dabengwa got his PR lackeys to issue a few stiffly-worded press releases.
To add to the funny-smelling odour hanging over the operator and its chief, the Shanduka Group recently acquired a minority stake in MTN Nigeria. Why does this smell like sardines?
Because not only does local politician and millionaire Cyril Ramaphosa sit on both of these companies’ boards, but Dabengwa is in aromantic relationship with Phuti Mahanyele, Shanduka’s CEO. If all this doesn’t reek of multiple conflicts of interest, then nothing will.
Apart from the potential skullduggery, however, we have to give Dabengwa credit for keeping MTN on track in a highly competitive and over-saturated local environment. The group grew its subscriber numbers by 6.9% to 175.9 million from December 2011, with revenue increasing by 17.5%.
Perhaps helped along more by momentum than by magnificent leadership, MTN continues to be a top pick for local investors. In June 2012, the group declared a dividend per share of 321 cents, with a 72% payout ratio.
1-year return: 76.72%
The money quote: “We might be conservative in our values but we’re very ambitious in our dreams.” – Finweek cover October 18
Invicta Holdings has been one of those companies that flies beneath the radar. And for years management has been content with that state of affairs. However, all that changed on October 15 when the company announced plans to buy Singapore’s Kian Ann Engineering in a cash and share deal worth about R1.36bn.
Besides giving Invicta a platform to expand in the high-growth Asian market, the deal is also expected to boost group revenue by around 20%. That’s a considerable number for a local industrial group whose revenue reached R5.59bn in fiscal 2012, up almost 24% from the R4.53bn in the previous financial year.
The Kian Ann deal is part of a broader plan by chief executive officer Arnold Goldstone and controlling shareholder Christo Wiese to diversify Invicta’s revenue streams and reduce its reliance on the SA market.
While smaller rival Hudaco Industries plans to begin making greater forays into Africa to boost growth, Invicta’s ambitions have become decidedly more global in scope. Goldstone told Finweek earlier this year that until a few years ago management was adamant that it didn’t want to grow outside SA.
However, economic realities have changed and for shareholders it should be a positive that management’s thinking has evolved in response. Diversifying on a global scale will help reduce the geographic and political risk of being overly reliant on Africa, a booming, although comparatively still tiny, market.
That’s not to say Invicta is turning its back on SA. On the contrary, management intends to continue making smaller acquisitions in SA and there are also plans to expand the Tiletoria subsidiary into a fully-fledged building materials business.
While Invicta does have a fairly large exposure to the volatile agricultural sector, over the longer term this is likely to be a solid revenue earner given the projections for food price inflation.
That’s not to say Invicta hasn’t delivered in the short term. Over the past year, the share has rallied 65% and is up almost threefold when viewed over a five-year period. In a tough market, we’d say that earns Goldstone an A. CEO:
1-year return: 40.83%
The money quote: “The game of business is really the game of people” – Finweek cover story August 16
How do you fault someone who has delivered average compound annual revenue growth of 45.2% for 14 consecutive years? The answer is you don’t. You simply figure out how you are going to scrounge together the money to purchase enough shares in his company for your retirement.
The man in question is Asher Bohbot, chief executive officer of EOH, whose share price has surged 70-fold since it listed on 14 August 1998. Revenue has also grown from R33m in July 1999 to R3.64bn for the year ended July 31 2012, which incidentally was up 50% from the previous fiscal year.
Such a phenomenal track record means the perennial question that Bohbot faces is whether EOH can continue to deliver.
“That’s what they asked us last year, and the year before that,” Bohbot told Finweek when we asked him the same question just prior to the company’s last set of financials.
A few months later at its results presentation he unveiled that EOH is targeting revenue of between R4.5bn and R5bn in the next fiscal year, or just over 37% more than that achieved in 2011/2012.
“It’s definitely in the psyche of the business,” he said when asked whether the 40-odd percent revenue growth achieved over the last decade-and-a-half had become an unofficial target.
EOH’s share of the roughly R150bn a year market for IT, business process outsourcing and intelligent infrastructure is only between 3% and 4% currently, so winning further market share is not out of reach for the Bedfordview-based company.
However, EOH is not just about making money. By the time you read this the company would have already spent about R16m training 620 graduates and school leavers in its year-long job creation initiative. That means more than 13% of EOH’s 4 700 workers are effectively interns.
If every company in SA showed the same commitment to skills development, the nation’s unemployment crisis would be considerably alleviated.
Maria RamosCompany: Absa
1-year return: 16.46%
The money quote: “I think I’m pretty tough. I have very high expectations of the people I work with." - City Press
Upped from an E at the last minute by a face-saving deal that, if approved by minorities, will make Absa the continent’s biggest bank. Returns from Absa since Ramos’ appointment as group CEO have been clunky. To be fair, so have Standard Bank’s and both FirstRand and to a lesser extent Nedbank have been recovery tales.
But Absa has had a particularly unspectacular year marred by an unsettling profit warning related to write-offs in its legal mortgage book that the market did not see coming.
The group’s 2012 full-year results showed headline earnings per share just 4% ahead of where they had been in the heady days of 2007. Return on equity, at 16.4%, is way below the previous highs.
The environment in which Absa operates has not been supportive. Banks have become considerably more risk averse in an environment that has been better leveraged in the retail sector, which has seen key players consistently growing earnings in the region of 20% despite similar drivers affecting them and retail banking.
Perhaps more damaging than the first-half profit warning has been the massive outflow of executive talent, either by accident or design. It does not make for great continuity for investors.
The group this month saw the departure of the last of the old guard of Absa managers, Louis von Zeuner, who stays on in a non-executive role but is no longer involved on a daily basis.
For staff, 2012 has been unsettling courtesy of the hashed messaging from the group, which earlier this year seemed confounded by its own people strategy. While rumours circulated about Barclays-driven mass layoffs, the group appeared unable to calm the waters.
None of this was helped by the arrival of the Red Ants at Absa HQ one afternoon to collect furniture as part of a court case the bank was involved in. The furniture was returned; however, it did a bruised image little good.
1-year return: 29%
The money quote: “MTN is an amazing competitor but I would say we are more exposed to SA.” – Moneyweb, May 21 2012
The last three years were busy ones for Vodacom, to say the least. The group saw a major shift in shareholding that brought it the under control of the UK’s Vodafone, entered the JSE as a listed entity, and rebranded for the first time in its history.
All this while fending off upstart competitors, dealing with dwindling per user revenues and the other challenges that come with the telecoms industry. The man who steered Vodacom past massive milestones along rocky roads was Pieter Uys, and it’s hard to imagine how he could have done any better, all things considered.
With a calm demeanour, Uys transformed Vodacom from a stodgy corporate to a more unconstrained operator and gave the group what it needed for its first few years under public listing.
His most recent trick was the flawless succession to new CEO Shameel Joosub – a transition that went as smoothly as the R200m rebranding Uys pulled off last year. His A-grade performance at Vodacom will see him join investment holding giant Remgro in April 2013.
So long Pieter and thanks for all the returns.
1-year return: 59.9%
The money quote: “... people who have subsequently joined me [at Famous Brands] there from SAB can say we can smell a sniff of SAB here...”
You might not be a particular fan of Mugg & Bean’s new breakfast sausage but there are enough South Africans prepared to shell out hard-earned cash to consume Famous Brands fare for you to own the shares without setting foot over the threshold of any one of the group’s nearly 20 brands.
Famous Brands has spent about R90m on acquisitions this year. It is now a substantial shareholder in Coega Dairy, which means it has a stake in its own cheese and long-life milk supplier while it is also now one of the country’s biggest coffee roasters since acquiring a 60% controlling stake in Java Lava.
The strategy of owning the supply chain and producing much of what its customers consume, itself, is one of the key features of a company that operates multiple brands from a single platform.
Hedderwick’s success is underpinned by the fact that the business has more than doubled revenues and earnings through the recessionary environment sparked by the 2008 financial crisis.
Through a mixture of organic growth and strategic acquisitions, revenues have more than doubled to over R2bn, profits have risen by the same quantum while dividends have more than tripled to 200c. The share price has grown from 1 624c in 2008 to current levels higher than 7 000c.
The chink in the Famous Brands armour remains its failure to break into the chicken business. By far the biggest single QSR category in South Africa is chicken, dominated by KFC and Nando’s.
If Hedderwick can crack that beyond what’s a poor showing so far from Giramundo, that will be the next shape-shifting move the group requires to keep it in the A-stream.
1-year return: –15.03%
The money quote: “Mining is in my blood. And SA is in my soul.”
As CEO of one of SA’s best known corporate brands, Carroll may find her last few months as Anglo’s head will require her most portentous decision-making to date: how to restructure the struggling assets of its listed subsidiary, Amplats.
It was as disgruntlement morphed into violent protest at Amplats’ mines this year that Anglo’s shareholders called time on Carroll. Reluctantly, one suspects, Anglo’s board accepted her resignation; after all, Carroll did much to alter the DNA of Anglo’s culture.
A bossy American, and a woman to boot, Carroll vigorously applied the hook to anyone who challenged her, most famously the two Amplats CEOs who failed to deliver safety and cost performances. Safety was Carroll’s clarion call and her bugbear.
It may also prove her legacy insofar as she helped improve standards. In the end, however, pressures elsewhere in the business mounted.
None more so than at Minas Rio, the iron ore project in Brazil where costs ballooned taking total investment in the mine to an unforgivably high $14bn. Carroll gave Anglo a human visage, especially to SA’s government, which remembers how it prospered during apartheid.
But international shareholders wanted more. Anglo wasn’t alone in failing to produce mines on time, on budget, or in even buying badly, but when the sword of shareholder judgment fell, it was swift and final.