Dawn chiefs made to #Paybackthebonus
CAPE TOWN — Two top directors of building materials conglomerate Distribution and Warehousing Network (Dawn) have heeded shareholders’ calls to “pay back the money”, a precedent-setting move, as high executive remuneration remains contentious.
Yesterday, Dawn confirmed that R7m would be refunded by CEO Derek Tod and chief financial officer Dries Ferreira.
Bonuses were paid in 2014 after the sale of assets into Luxembourg-based firm Grohe to form the Grohe Watertech venture. The bonuses were listed as facilitation fees, but market watchers yesterday said facilitating deals should be part of executives’ normal responsibilities.
It is not the first time Dawn was in the spotlight for controversial bonus payments. Shareholders earlier queried a R10m fee paid to the company’s chief operating officer Collin Bishop “for corporate finance advisory work” on the Grohe deal.
Mr Bishop has since resigned and has not repaid the money, which was paid to a private company controlled by the executive. But it was not until mid-September that shareholders uncovered additional bonus payments to the CEO and the chief financial officer in the annual report.
The official word on the payback from Dawn was that the
company had not performed according to expectations for the financial year to March this year, and it was deemed appropriate to reverse the bonuses paid to Mr Tod and Mr Ferreira.
The payment was uncovered by shareholder activist Chris Logan, and Business Day understands that huge pressure was brought on the Dawn board for the refund by major shareholders Imperial Holdings and Coronation Fund Managers. Recently appointed Dawn chairman Diederik Fouché stressed that management’s approach and positive attitude in repaying the bonuses were commendable and underlined its commitment to the company.
Mr Logan, who was also prominent in querying performance bonuses paid to directors of poultry firm Sovereign earlier this year, said the payback by directors had set a huge precedent.
“This goes a long way to aligning the interests of management and shareholders. The directors did the right thing and should be commended,” Mr Logan said.
He also praised Mr Fouché. “The new chairman has been a breath of fresh air. He had this issue resolved within a few days of taking up his position.”
He said the payback was only the first step in unlocking value at Dawn, which released much improved interim results to the end of September yesterday.
Headline earnings swung back from a loss of 27.8c per share to a profit of 29.8c per share, and the operating margin looked stouter at 3.5%. Mr Tod said despite the achievements in the first half, there were areas of the business that still required attention.
The most important was a further R100m to be realised in working capital improvements with a strong focus on improved stock management and cash extraction.
Mr Tod said there was also a strong focus on margins.
Mr Logan believed that if Dawn could achieve its medium margin target of 5% the company could generate around 100c per share in earnings.