I chatted the other day about how good Tiger Brands had been as an investment, and one of our favourite readers returned this comment:
The big thing about Tiger Brands is they are today a branded food company with nett profit to turnover of approximately 13% vs. 5-6% of the usual food manufacturing outfit (Kraft Foods - also mainly brands 7,5%). TBS achieved this by unbundling its low margin businesses Astral & Spar. With Adcock, TBS retained some of the high margin products and the rest of Adcock has struggled to increase profitability meaningfully.
And then he said something interesting:
The increase in share price during 2011 was mainly due to an overseas buyer acquiring a meaningful stake through the market. Whether it will continue to accumulate or make a bid or take its profits and exit remains to be seen.
Interesting. I should have pressed harder at the time, to see who he thought it could possibly be, but I did not. He then continued and said that their aggressive empowerment policy had seen some top talent leave, and remember the various scandals around price fixing, bread specifically here:
The resignation of Nick Dennis was totally unnecessary - with their decentralised corporate culture there was no way he could have known what was going on in the operating companies on a detailed basis, but the problem was used to push him out. Having grown eps at 25% pa for 25 years from 1969 - 1994, its heps over the last 4 years after all the unbundlings has been essentially flat. So the potential is there, but I wonder if the current executives will be able to realise it.
So there you go. And if I am not mistaken, this reader has actually owned this stock for about all of that time. That is always the trick you see. The fantastic achievements of the past, are they able to replicate that. I said, I thought not over the next 18 months, but I said that I thought maybe thereafter.