Questions about the identity of the joint venture partner were raised four times during the annual general meeting (AGM) on Thursday, but Sovereign directors not only appeared determined to ignore the inquiry, but offered no reasons why the information could not be provided.
Shareholder activist Chris Logan queried the company’s annual financial statements reflecting the factory shop joint venture — in which Sovereign holds a 35% stake — as a related party transaction.
The venture, which Sovereign paid no money to participate in, received goods and services to the value of R58.6m in the year to end February. Although this is small compared with Sovereign’s mainstay poultry business, the company’s share of this venture’s net income was R1.64m. The roughly 8% net margin achieved by the joint venture is considerably fatter than the margins managed by Sovereign’s poultry production business.
Sovereign chief financial officer Grant Coley said the factory shop was a joint venture with one of the company’s customers. "The customer has extensive retail experience, which we don’t have, and that’s why it was structured in that manner." The reason it was disclosed as a related party item was that Sovereign owned 35% of the joint venture.
Logan asked four times for the identity of the co-investing customer — each time prompting consultation among the Sovereign directors. Eventually, Sovereign chairman Tom Pritchard, who indicated that he had consulted with the company’s legal representatives, snuffed out further inquiries. "We have answered your question. Can we move on?"
Sovereign shareholder Albie Cilliers reminded the meeting that at the 2015 AGM, former Sovereign chairman Charles Davies had promised more transparency and better engagement. "But things have gone from bad to worse. Why would a small shareholder want to buy into your company. You don’t answer questions.... why don’t you get your legal department to answer questions?"
Pritchard countered that Sovereign had communicated more with shareholders over the past year than ever before, judging by the number of Sens announcements issued. Cilliers suggested Sovereign engaged only with larger shareholders.
Marthinus Stander, CEO of Country Bird Holdings, which holds just over 25% of Sovereign, also had little luck in engaging directors. He asked for a view on trading in the next six to 12 months, but Sovereign CEO Chris Coombes said he could not make profit forecasts. Disclosure would be done in terms of JSE listing requirements.
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