HOW­DEN Share price: R29,75 JSE code: HWN

Financial Mail - Investors Monthly - - Opening Bell - Shaun Harris Rob Rose

SELL

THE BE­HAV­IOUR OF

How­den’s share price, down 30,8% over the past year, reads like a Charles Dick­ens novel: it was the best of times, it was the worst of times.

The best was seen on June 23 when the price jumped up by 12,6% to R33. But less than a month ear­lier, on June 1, How­den led the de­clin­ers on the Alsi af­ter it came off by 12%.

The rea­son was an an­nounce­ment by the com­pany that it would halt cash div­i­dends.

That alone is a rea­son to sell the share. Share­hold­ers have not sniffed a div­i­dend since Au­gust 2013. Now it seems they will not see a div­i­dend for some time to come.

The div­i­dend an­nounce­ment came on June 1. Be­cause of what it called mar­ket im­per­a­tives and the need for strate­gic flex­i­bil­ity and vi­sion, “the pay­ment of or­di­nary cash div­i­dends [will] be dis­con­tin­ued for the fore­see­able fu­ture”.

Strate­gic flex­i­bil­ity, says CE Thomas Bär­wald, could be BEE trans­for­ma­tion or a sim­i­lar trans­ac­tion, share buy-backs, or ac­qui­si­tions and in­vest­ments.

The cold re­al­ity, though, seems to be that How­den just can’t af­ford to pay div­i­dends.

There should be some sym­pa­thy for the devil in the in­ter­ims (to end-June).

Rev­enue and prof­its were gassed out be­cause How­den sup­plies in­dus­tries such as power gen­er­a­tion, min­ing and con­struc­tion.

There’s not much to get ex­cited about in these in­dus­tries at present, and nei­ther is there in How­den’s share. ega deals from com­pany di­rec­tors were few and far be­tween last month, but there was some fancy foot­work from Wool­worths’ top brass, with the re­tailer’s share price touch­ing record highs.

The shares of the com­pany, whose food stores in par­tic­u­lar have be­come a sta­ple of well-heeled South Africans, have soared 34% in the past year to around R100/share as it re­vi­talises David Jones, the depart­ment store it bought in Aus­tralia for R23,3bn last year.

Four Wool­worths di­rec­tors qual­i­fied for share awards un­der its long-term in­cen­tive scheme, so they then sold part of their stock to pay the tax on these shares.

CEO Ian Moir qual­i­fied for R11,18m worth of shares, newly ap­pointed South African CEO Zyda Ry­lands qual­i­fied for R4,49m. Sam Ngu­meni got stock worth R3,4m and Thobeka Sishuba-Mashego qual­i­fied for R2,95m worth.

Moir also bought shares worth R17,9m he was awarded un­der the re­stricted share plan.

Then, Moir sold shares worth R4,6m to set­tle his tax obli­ga­tions, Ry­lands sold stock worth R6,6m for the same rea­son, Sishuba-Mashego sold shares worth R3,1m and Ngu­meni sold stock worth R1,97m.

If Woolies’ stock con­tin­ues to do as well as it has in the past three years it’ll prove to be a savvy move for the bosses to have hiked their ex­po­sure to the re­tailer.

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