New Dawn as brass pay back bonus

DAWN CEO: Derek Tod FINANCIAL OFFICER: Dries Ferreira TWO executive directors of building material group Distribution and Warehousing Network, or Dawn, have made corporate history by agreeing to pay back some of the multimillion-rand bonuses they were given.

The two directors, CEO Derek Tod and chief financial officer Dries Ferreira, have also lost out on potentially valuable share options awarded to them in 2012.

A tightening up of the group’s lax remuneration policy has resulted in these share options being cancelled. The cancellation was due to the slump in the group’s performance in the past few years.

Recently appointed chairman Diederik Fouché said the previous remuneration policy considered the performance of the executives, not the group. “Now the group’s performance has to be considered before there’s an entitlement to a bonus,” said Fouché.

Shareholder activist Theo Botha, a frequent critic of executive remuneration, welcomed the move. “It’s extremely important that remuneration can be clawed back from executives when it becomes apparent it was excessive, but it has never happened . . . until now,” he said.

Botha said if asset managers were doing their jobs properly, excess remuneration and clawbacks would not happen. “This move might shake them up a bit but I’m not very optimistic.”

Dawn’s major shareholders, Imperial Holdings and Coronation Fund Managers, were prompted to take action after shareholder Chris Logan raised the issue in the media earlier this year.

Their lack of attention is puzzling given the group’s recent torrid performance. Its operating profit margin declined from 10.4% in 2008 to 2.4% in the 12 months to June 2014. In the nine months to end-May this year, that margin drifted into negative territory.

However, an encouraging sign that change is on the horizon came in the form of last week’s results for the six months to September (the group has changed its yearend to March). The latest results show operating margins up to 3.5%, which is close to the recently set 5% target.

Dawn management also fumbled a highprofile and ill-considered attempt to buy back 78 million shares held by its BEE shareholder, Ukhamba Holdings, at the end of last year.

The slump in the share price meant that by the time this buy-back deal was announced, the agreed buy-back price of 850c was significantly above the 640c market price.

In February, with the share getting steadily weaker, the board announced it was abandoning the R664-million buy-back plan.

In June, it emerged that the group’s chief operating officer, Collin Bishop, was paid R10-million for his role in the creation of the Grohe Watertech venture, which is expected to be a big money spinner for a reinvigorated Dawn. The amount was agreed in 2008 before Bishop became a full-time employee and would not be clawed back, Fouché said.