Inside Oceana’s hush-hush AGM

Investors’ bid to question execs on controversial Daybrook deal shut down

Shareholders in fishing company Oceana might have braced for a stormy AGM last week.

The company was only recently cleared by forensic auditors of allegations pertaining mainly to US subsidiary Daybrook.

But shareholder tensions didn’t really bubble to the surface, largely because there was no real shareholder interaction at the meeting.

Instead, Oceana directors dashed off prepared answers to probing questions around Daybrook and associate Westbank, controlled by former group CEO Francois Kuttel.

Longtime shareholder Des Mayers, a senior analyst at

Afrifocus Securities, says Oceana “cherry-picked” some of his questions at the meeting.

Ahead of the session, Mayers had issued scathing observations on executive and nonexecutive pay (in relation to a lower dividend in the last financial year).

But Oceana maintains that all shareholders were given the opportunity to ask questions.

Mayers calculated that Oceana’s two former top executives had been paid about R212m between 2014 and 2021, while shareholders suffered years without any payouts.

Oceana’s response is that the group’s remuneration policies received 81% approval by shareholders.

Then there’s the concern over Oceana’s purchase of fisheries business Daybrook for $383m (R6.2bn) in 2015.

It also snapped up Westbank, which operates the vessels that catch the fish sold to Daybrook.

The American Fisheries Act says only companies with 75% US ownership qualify for fishing rights, so Oceana ran a “bidding process” to find someone to take 75% of Westbank.

And this was none other than Oceana’s then CEO, Kuttel, a US citizen.

The US operation was recently at the centre of a corporate storm that delayed the release of Oceana’s results for the year to end-September until late March.

But chair Mustaq Brey said at the AGM: “There is no evidence of fraud, misappropriation or loss of funds or management override of controls at the group.”

Oceana has been almost totally controversy-free since listing on the JSE in 1947, but uncertainty over Daybrook has caused its share price, bobbing around R74 in June last year, to plunge as low as R48.

Though cleared of any wrongdoing after a lengthy internal and external investigation, the share price still reflects jittery sentiment.

Some of the more serious allegations included the recoverability of $3.5m (R56.7m) in receivables, and the accounting treatment of Westbank as an associate company.

There were also allegations of a “gentleman’s agreement” between Oceana and Kuttel.

Though no fraudulent activities were picked up by ENSafrica, there was fallout in the sudden resignation of Oceana CEO Imraan Soomra in midFebruary and the suspension of CFO Hajra Karrim a week earlier.

Mayers remains concerned about the inconsistent performance of Daybrook.

Central to his worries is Daybrook’s profit performance.

In its first year of operation, Daybrook produced a reassuring operating profit of R668m. But this sank to as low as R237m last year.

Brey counters that Daybrook has been earnings accretive despite weather-related challenges and Covid disruptions. On paper, Brey might have a point.

Since Oceana bought it, Daybrook has produced almost R2.5bn in operating profit.

The catch is that Oceana raised debt alongside a rights issue when it acquired Daybrook.

That debt has weighed heavily on returns in recent years, though it would be unfair not to credit Oceana’s executives for working to bring that down.

In 2016, Oceana managed after-interest profit of R283m, but this fell to R18m in 2017 and R45m last year (when the interest bill hit R192m).

The three years from 2018 to the end of 2020 were also modest, with operating profit collectively totalling R256m (after interest). Arguably, Oceana shareholders

In total, Oceana has paid almost might have been better R1.9bn in interest over six off without Daybrook — at years. least in terms of dividends.

Oceana argues not all interest What may help soothe paid by Oceana is attributed shareholder jitters is a more to the Daybrook acquisition. convincing profit performance

“Oceana also acquired from Daybrook in the financial Foodcorp in 2014 for an effective year ahead and a further R315m. culling of debt.

“A portion of Oceana’s interest In terms of performance for bill is attributable to funding the half-year to end-March, due its working capital, in particular for publication shortly, Brey indicated the Lucky Star supply that the new fishing chain of frozen fish. season for Daybrook got off to

“Based on our calculation, at a brisk start with catches above least R490m interest over the the five-, 10- and 20-year average. period is attributable to these two factors.” Mayers admits 2022 could

Oceana estimates Daybrook be a good year for Daybrook. had contributed after-interest “If the good weather continues, earnings over the period (including Daybrook could well be a the 2015 earnings contribution game changer for Oceana this of R180m) of R1.3bn. year.”