Saturday, August 13, 2022

The boom and doom of two British companies operating in Botswana….

In football, there is a high correlation between the effectiveness of the head coach and the team’s success. The same statement is applicable to companies and their Chief Executive Officers.

That top pro sports coaches and teams have much to teach the business world is a truism, at this point ÔÇö and trotted out recently by two English companies operating in Botswana.

The companies, G4S Botswana and Barclays Bank Botswana, have for a very long time maintained top spots in their respective field of play. Lately though, the duo seems to be tumbling down. They have lost the spark they used to have.

Slowly they are being relegated to lower levels despite their dominance in their respective markets over the several years.

Surely executives of these two companies should be aware of a simple global practice that, in any given football league, when it comes to ranking of teams, no position is coveted more than number one. All season long, teams battle to improve, or in the number one team’s case, maintain their rankings.

The same set up is or should be true for companies, more especially which are publicly listed.
G4S and Barclays should battle to retain their championship if indeed their shareholders are to get value for their money. Prospective investors are also watching with keen interest. Perhaps figures from the capital markets tell the story better.

The two companies have been punching bags at the Botswana Stock Exchange for quite some time now.
Perhaps before going any further, it is worth noting that this week’s business commentary was motivated by these two British companies’ gloom, boom and doom days…currently at doom.

Financial analysts have repeatedly linked the absence of critical personnel at both companies as key contributors to their poor performance both at operational level and the capital markets.

The role of both the managing director and finance director are integral to the success of a company and its stock. Perhaps that explains the poor performance of the stocks of both G4S Botswana and Barclays at the Botswana Stock Exchange which is way below par.

G4S Botswana, what happened to, “If you can’t beat them, buy them”?

At some point, a few years back, when the grass was still green, G4S Botswana became one of the few companies that performed a share split. The transaction came as a result of a desirable growth of its stock at the Botswana Stock exchange that made its share price look like it’s overpriced.

The then management settled for a subdivision of shares to improve affordability by small investors.
The transaction was declared a good move by local stock analysts and brokers. Before the split, the G4S shares were illiquid, with very little transferability due to the high share price.

It was after the share split that G4S Botswana jumped up by 88.1 percent to end the year 2011 at 600 thebe. G4S, previously regarded as a defensive stock on the local market, had an impressive performance during the year 2011 after the share split.

The bank even had aspirations of swallowing small players in the industry, so we hear. Whatever happened to the aspirations is known only by the company.

What the market knows though is the fact that for its full year ending December 2013, G4S posted a decline in profit after taxation. It’s worth highlighting that it is the second consecutive decline. Its revenues are almost flat at P188 million while operating profit came down by 18 percent.

At the same time, the company’s total assets declined by 9.8 percent, the profit before tax decreased by 37.8 percent resulting in a reduction in Earnings per share to about 6.03thebe
G4S shareholders need to be told that, in just under three years, their company continues to publish disappointing numbers which have since caused its P/E multiple to elevate to levels of 46.4, making it unattractive at current levels.

The new managing director, Michael Kampani, knows very well that shareholders are keenly watching him, to see if he will succeed in turning around the fortunes of their company.

Barclays: Bad behaviour will always come back to haunt you

Although still among the top four, it is important to note that Barclays has long lost its much cherished position to South Africa’s FNBB. Obviously made worse by uncertainty arising from absence of a substantive managing director for close to 48 months, the bank’s stocks also continues to perform below par on the domestic market, as reflected by its current share price which is at record lows of 381 thebe.

Given the measure that the bank prefers for assessing its progress, it is clear that a decline in its net interest income is a result of diversification in consumer lending portfolio from a predominantly unsecured base to more secured lending.

At the same time, it is quite clear that Barclay’s stock at BSE is still struggling to gain ground. This week, conversely Barclays plunged by 16thebe to trade at 381thebe as investors continue to punish the country’s largest bank for its full year results where they posted a 34 percent decline in profit after taxation.

Investors are also worried about Barclays’s huge increase of impairments which went up by over 50 percent. It is quite clear that the recent downtrend of Barclay’s stock has led to its P/E going down to just below the market average.

The bank only appointed a new manager by the end of 2013, almost two years to the day since Wilfred Mpai left under a cloud.

Worst still, the board’s choice of Mpai’s replacement is a new comer to the local unit of the bank.
Reinette van de Merwe, a South African national was appointed in November last year taking over from Aupa Monyatsi who acted for close to 48 months. The expectation was that the appointment of a new boss would incite excitement but that has not been the case.

With negative figures coming from the stock exchange week in and week out, De Merwe surely is aware that she has a huge task ahead of her. The main one being to help the bank achieves its turnaround in the shortest possible time.


Read this week's paper