SHARES in DRA Global registered a fresh low this week with the mining engineering company now just 51% its value since listing a year ago.
The underperformance is a consequence of a botched internationalisation strategy which attracted headlines in Australia where it has a primary listing.
So what happened for the South African company to have lost more than R1bn in market capitalisation so quickly, especially as mining projects are in short supply amid heightened demand for new minerals globally?
The short version is that in February, about six months after listing, three of DRA’s senior managers, and a fourth former employee with shares in the company, secretly plotted a takeover, returning board control to South Africa, aptly titled “Project Boomerang”. They proposed the removal of CEO Andrew Naude and group chair Peter Mansell, to be replaced with their own appointments.
The notice was subsequently withdrawn after DRA’s board reached agreement with the rebels behind closed doors, but a month later head of corporate affairs Haydn von Maltitz reported the circumstances to Australia’s Takeovers Panel.
According to him, the rebel managers — Alistair Hodgkinson, Darren Naylor and James Smith — had been working in concert with former executive Brian Dowding. The four controlled about 11% of DRA’s stock, but spoke for as much as 42% of total shares. Von Maltitz’s contention is that their co-operation breached Australia’s Corporations Act because it hadn’t been disclosed and prejudiced non-associated shareholders.
The panel agreed. It slapped DRA with a costs order of A$76,000 before goods and services tax related to Von Maltitz’s application, half for DRA’s account and — somewhat painfully, one guesses — half for the rebel managers, one of whom, Smith, is now the interim CEO.
It’s rare for the Takeovers Panel to award costs in this way, and particularly unwelcome for DRA as in May it detracted from its otherwise impressive maiden results, issued just two months before, with a profit warning it said related to an impairment, the underrecovery of a contract and losses on residual fixed-price construction work. Notably, no mention was made of the role of the internal turmoil.
Hodgkinson, presenting at the Junior Indaba conference in Joburg, declined to comment. He promised more disclosure in time, but a DRA spokesperson said in a statement largely drawn from chair Mansell’s comments at DRA’s AGM in May that the company “underestimated the impact on leadership and culture of the listing — exacerbated by the stresses of Covid”.
“The rapid introduction of new systems and processes, coupled with our physical separation, caused divisions to emerge and placed a strain on leadership at many levels,” the spokesperson said. “With the benefit of hindsight, there is little doubt that our change management could have been done better.”
“There is a question of credibility. How do you expect to attract a quality CEO and CFO in these circumstances?” a DRA manager told the Financial Mail which reported the matter this week. There’s also a question mark over whether DRA remains listed. “The current board is not equipped to objectively take things forward from here,” he says. “All shareholders were prejudiced and minorities have been thrown under a bus.”