Activist Botha ruffles Tsogo Sun's feathers

YOU could have cut the atmosphere with a chainsaw this week at Tsogo Sun's annual general meeting as Theo Botha, shareholder activist and perennial thorn in the side of many JSE-listed giants, got under the skin of chairman Johnny Copelyn.

YOU could have cut the atmosphere with a chainsaw this week at Tsogo Sun's annual general meeting as Theo Botha, shareholder activist and perennial thorn in the side of many JSE-listed giants, got under the skin of chairman Johnny Copelyn.

Tsogo's AGM - which started almost half an hour late - was the first since SABMiller in July disinvested its R7.6-billion stake in the hotel and entertainment group, which owns blue-chip assets including the Sandton Convention Centre, Gold Reef City, Montecasino and 90 hotels.

It was also the first since Tsogo took the controversial step of granting a R200-million interest-free "loan" to five executives so they could buy shares in Tsogo, a plan trade unions condemned as empowerment for the rich.

Botha soon launched into full mode attack, raising his major gripe that the directors had offered themselves huge salary increases while the gambling company performed below par over the past three years.

Tsogo Sun's operating profit growth over the past three years has averaged about 7% - but when inflation is factored in this amounted to negative growth.

Cash flow from operations fell 1% last year to R3.7-billion and free cash flow dropped 6%.

Botha argued that in this context the executives had been rewarded "excessively".

In particular, CEO Marcel von Aulock was paid R14.1-million, including a R5.3-million bonus equal to 110% of his gross salary. The year before, his bonus of R5.5-million was equal to 120% of his basic pay.

"I just don't understand how he can get such high bonuses when the group has not done well."

The head of Tsogo's remuneration committee is Yunis Shaik, a highly rated lawyer and brother of Jacob Zuma's former financial adviser, Schabir Shaik, and former intelligence boss, Mo Shaik.

Shaik said Tsogo's pay policy was transparent enough for investors to make their own decisions as to whether the bosses were overpaid or not.

Then Copelyn, a former trade unionist and MP who now runs Tsogo's largest shareholder, the 47% owner Hosken Consolidated Investments (HCI), stepped in.

He said Botha's questioning was creating a "feeling of unease", and that Tsogo had actually outperformed its rivals.

"The group is probably in the top half among its peers and competitors - it aims to be that. It is a group with a strong financial base. It is a company that has a great track record on growth and profit," he said.

Copelyn said the remuneration structure was rigorous, a legacy of the influence of former SABMiller CEO Graham Mackay.

Later, Copelyn said that while he wasn't "offended" by the questions, it was wrong to suggest that the bonuses were unrelated to the direction of the profit.

Von Aulock said that earnings per share had grown more than 10% a year over the past three years, and Tsogo was buying companies across the continent and building new casinos in a tough environment.

Botha's point that Tsogo's performance was "not exceptional" is underscored by the share price, which has fallen 2.6% this year compared with the 23% increase of rival Sun International.

But at the same time Tsogo hiked its dividend payout 19% this year following a 25% hike last year - money which Botha said was most likely to be coming from reserves.

Still, analysts seem convinced that Tsogo remains a good bet. Four out of five analysts rate it a buy and say its share price could rise up to 25% higher than its current level of R26 a share.