Did Joffe know the extent of Adcock problems?

ADCOCK INGRAM Well you don’t get much for R91-million these days. That was Adcock’s share of the costs incurred in the prolonged-butnever-materialised CFR bid.

One thing you certainly don’t get is a forecast of financial information that bears any relationship to reality.

It is surprising that none of the shareholders or analysts who correctly expressed such shock at the considerably worse-than-expected interim results from Adcock asked how management got it so wrong.

As CFR rides off into the sunset with Abbott Pharmaceuticals, its bid for Adcock might just seem like a bad dream to Adcock shareholders, who feel they’ve lost out so badly.

But before it’s completely forgotten, it might be worth trawling through some of the reams of information that were generated in the process.

It is worth looking at page 189 of the circular sent out to Adcock shareholders in November. That’s where the forecast for the two years to end-September 2015 rests.

For the 12 months to September, the projections were for revenue of R6.4-billion, operating expenses of R1.7-billion and earnings before interest and tax of just over R1-billion. The ebit forecast represented a 15% rise on financial 2013’s.

Well, so much for forecasts. Even allowing for some “loss padding” by the new CEO, there’s no way it is going to turn an interim operating loss of R37.9-million into a full-year profit of R1-billion in 2014. And then there’s the ebit forecast of R1.4 billion for 2015. Unless Brian Joffe can perform some magic, it’s hard to see anything like that figure being realised.

While it’s understandable that a certain amount of wishful thinking goes into these forecasts, how is it possible that Adcock management got it so wrong? And then there was the independent assurance report done by someone from Ernst & Young, which reckoned that these incredible figures were actually reasonable.

Perhaps by January, CFR had a more realistic view of things at Adcock — having been camped there for several months — and decided to just walk away without ever actually putting an offer to Adcock shareholders. This left Bidvest and the PIC holding the baby.

The big question now is whether Joffe had any idea of the extent of the problems — it’s not like him to be caught out.

But would he have paid such a high price if he had?

Of course, one advantage of such grim figures is that getting control of Adcock now looks like something of a rescue operation. That might help Bidvest’s case before the competition authorities. Until and unless they give their approval, Joffe will not be able to get involved in the management of a company that desperately needs it. SAA So Telkom’s Sipho Maseko has finished his corporate governance classes — almost a month before the June 29 deadline set by the Companies and Intellectual Property Commission (CIPC). Wouldn’t you love to have been sitting in on those history-making classes?

On the issue of the CIPC and its compliance notices, can it be much longer before the SAA board and its executive management team are also required to attend corporate governance classes? It seems the CIPC has, like all of us, been watching the bizarre developments at our national carrier.

It has indicated it might contact the shareholder — Public Enterprises Minister Lynne Brown — and/or the company for clarity on some of the issues. Before deciding whether there’s a role for it, the CIPC has to establish whether there’s been a contravention of the Companies Act or if there’s been an “irregularity”.

Now those are the classes where we would love to be a fly on the wall. AMPLATS Amplats issued an interesting SENS announcement last week that managed to remain under the radar. It related to yet more “dealings in securities”, but this time on behalf of its workers rather than its executives.

In the context of a five-month strike that has crippled the group’s Rustenburg operations, the objectives in establishing the Kotula Trust sound remarkably old-fashioned. The trust was established in 2008 “in order to incentivise all its employees and align their interest with those of shareholders in achieving growth in the company’s value”.

The scheme’s beneficiaries comprise an estimated 43 373 employees. Each one of them, assuming they were all still employed by Amplats on March 31, stands to get a share of the R139-million the trust made on last week’s sale of just under 300 000 Amplats shares.

The payout to the workers is about R3 000 pretax.

This is not a life-changing amount of money, even for miners desperate to secure a R12 500 minimum wage, but it might help buy some food and pay off a few microlenders.

The question is how will management get the cash to workers?