Investors pounce on Tiger’s strategy

Dangote ditched but solid results at home

TIGER Brands’ leadership addressed a packed and rather illtempered gathering of shareholders at the JSE this week to announce the company’s fullyear results to end-September.

The source of frustration was an announcement this week that brought the curtain down on the company’s dalliance with Africa’s richest man, Aliko Dangote, in its ill-fated Tiger Branded Consumer Goods division.

Tiger bought two-thirds of Dangote Flour Mills, renamed Tiger Branded Consumer Goods, for R1.6-billion in 2012, while Dangote Industries retained 10%.

The Tiger Brands board this week stopped funding the lossmaking entity and has now listed it — after the close of its financial year — as a discontinued operation after writing down R1.7-billion in impairments this year. Dangote and three other Nigerian directors stepped down this week.

Funke Ighodaro, Tiger’s chief financial officer, said that after tackling fraud at its Kenyan Haco subsidiary and having its exports to Mozambique hit by a distributor’s collapse, group pre-tax earnings had risen to a mere R3.7-billion, from R3.6-billion in 2014.

Despite a solid performance in South Africa, reaffirming its leading position in the bread market and churning out strong showings from its operations across groceries, grains and home and personal care ranges, management’s missteps elsewhere in Africa dominated shareholders’ concerns.

The Tiger Brands board has not decided what to do with its Nigerian assets, but has ruled out a recapitalisation. It has considered an outright sale, a partnership or a joint venture.

Responding to a rumour that FALLING ON HIS SWORD: Tiger Brands CEO Peter Matlare Dangote and the other minority shareholders had been unwilling or unable to stump up cash to recapitalise the unit, delaying the cash injection, CEO Peter Matlare denied there was any bad blood on the board.

“The Nigerian currency started experiencing turbulence, so in that case when do you recapitalise? If you do it too early you could take a hit — that was one of the key issues we had to consider.

Most importantly, we had to make sure that if we did recapitalise the business, it would have to deliver the kind of returns the board and shareholders were expecting.”

While Tiger Brands continued to pour in loans to “fix the platform” in case a proper recapitalisation was deemed appropriate, Matlare said that ultimately the board concluded the returns could not justify it.

He said it was too early to comment on potential suitors.

Investec Asset Management analyst John Thompson said listing Tiger Branded Consumer Goods as a discontinued operation would give shareholders R2, or 10%, more earnings per share.

On misrepresentation at Haco in Kenya, Matlare said the company had taken action in the first half that led to the subsidiary producing a profit in the second half, but “not sufficient to offset the loss experienced in the first half”. Haco made a loss of R29-million for the year.

Matlare said Tiger Brands now had “no known residual exposure” to the Tiger Branded Consumer Goods business and its debt, and would retain its presence in Nigeria through its stakes in UAC and Deli Foods.

But the game is up for Matlare, who will step down at the end of the year in a display of taking responsibility for transactions in Africa.

Some shareholders reacted indignantly to Matlare’s statement that the company continued to look for accretive acquisitions in Africa.

Damon Buss, industrial analyst at Electus Fund Managers, said that given Tiger Brands’ market capitalisation of R65-billion, Tiger Branded Consumer Goods was not a huge matter. “The issue has been one of shareholder sentiment.”

Buss said the search for a new CEO — which the company said would be complete by the end of next month — was all-important in addressing that sentiment.

Abandoning Tiger Branded Consumer Goods will allow chief operating officer Noel Doyle, who steps into Matlare’s shoes as interim CEO, to focus more on the domestic business, but Buss said perhaps a brand expert was what was needed.

“I think Doyle is a very good COO, but they need a good brand manager to come in . . . and leverage the power of the core brands they have.”

Thompson said Doyle had the capabilities to take over permanently, but AVI CEO Simon Crutchley might be a target.