Allan Gray delivers Group Five shake-up

© Leon Swart – 123RF.com

Monday's historic meeting marks the first time a shareholder of a large listed company has successfully used the new Companies Act to replace all the non-executive directors on a board. Foord Asset Managers attempted to reconstitute the PPC board in 2014 but was outmanoeuvred by the incumbent board members.

On Monday morning, just hours before the controversial meeting was due to start, the company released a trading update advising shareholders it would report a loss of at least 590c a share for the year.

The drastic turnaround from 335c headline earnings a share reported for financial 2016 reflected a combination of the deteriorating operating environment, the R255m socioeconomic contribution to accelerate transformation it was required to pay following the competition authorities' findings and the recognition of the final settlement of a contract, which reduced operating profit by R244m.

The entirely new slate of non-executive directors contains only one individual who has Group Five board experience, Michael Upton, who was CEO from 2007 to 2014.

A further concern is that the CEO is relatively new to the board. Thembe Mosai was appointed in May. He has been with the group for 13 years.

All of the former non-executive board members were forced to resign as a result of fund manager Allan Gray's bid to reconstitute the board in terms of section 61 of the Companies Act. Allan Gray, which did not respond to requests for comment on the outcome of the meeting, said it had pushed for the extraordinary meeting because it had lost faith in Group Five's board. After several high profile resignations earlier in 2017, the fund manager, which holds 25% of Group Five, said that it did not believe the board would act in the best interests of all stakeholders.

Monday's meeting dragged on for three hours as the Public Investment Corporation (PIC), which holds just more than 20% of Group Five, decided to withdraw its proxy votes and vote anew at the meeting.

Each of the eight candidates who were nominated by the shareholders secured more than the minimum 50% votes needed to be appointed to the board. Five of the eight - Jackie Huntley, Nazeem Martin, Nonyameko Mandindi, John Job and Upton - were nominated by Allan Gray. Huntley received support from 99.3% of shareholders; Martin received 66.7%; Mandindi 97.7%; Job 74.4%; and Upton just 61.2%.

Upton's relatively low backing was attributed to his involvement in the company during the confrontations with the competition authorities.

Cora Fernandez with 65.1% backing and Thabo Kgogo with 95.7%, who were nominated by the PIC, were also voted onto the board. The eighth nominee to secure a board position was Edward Williams, with just 57.7%. He was put forward by Mazi Capital. A ninth candidate, Keneilwe Moloko, also nominated by Mazi Capital, withdrew her name last week.

Allan Gray said its nominees would ensure a more transformed board that had relevant expertise, industry experience and institutional memory.

It said the board would also be sensitive to historical industry behaviour. "It is our opinion that a new non-executive board will be able to propel the company forward and ensure Group Five continues to play an important role in the future of SA."

Source: Business Day