I was disappointed to miss the Bowler Metcalf AGM this week. It’s the perennially profitable packaging group’s 50th year in business and its 35th as a listed counter (which roughly overlaps my career in financial journalism). That’s something to celebrate. But Monday mornings are not great in terms of FM deadlines.
I started covering Bowcalf in 1991 when I absconded from Business Day’s Diagonal Street office to join the Cape Argus business section. The Argus was an afternoon paper, which put its small business section at a huge disadvantage in terms of covering company results and corporate announcements (lapped up by the Cape Times business writers).
So, we had to look a little harder for angles. One way of doing this was by attending company AGMs, which were (and still are) valuable opportunities for a novice business writer to build long-lasting contacts.
The informal milling about around the tea table allowed interaction with executives but, more importantly, a chance to speak to shareholders (who, of course, are your readers).
The first Bowler Metcalf AGM I attended — overseen by the legendary founder Horst Sass — was held on the factory floor with a couple of chairs arranged for the few shareholders in attendance.
Despite its success, Bowcalf continued to host AGMs at its Ottery factory. I found this hugely reassuring because the spartan culture of the group was plain to see.
The first Bowler Metcalf AGM I attended — overseen by the legendary founder Horst Sass — was held on the factory floor with a couple of chairs arranged for the few shareholders in attendance
No marble-swathed foyer, sprawling corporate art collection or swanky office suites. In short, the surroundings stated: “Here is a company that values and respects shareholder capital and will expend all its efforts on eking out the best return possible for investors”.
That is evident in Bowcalf’s 35-year history of solid profitability — an achievement that is even more impressive when measured against its larger and more illustrious peers. So it’s a pity, I suppose, that the latest AGM was hosted at the nearby Royal Cape Golf Club. I might be prejudiced because Royal Cape was the one course where I could never break 80 during my golfing days. But I assume the more verdant venue is to cater for a larger group of shareholders.
Bowcalf does not carry the same market mystique as a Naspers, Investec or a Bidvest. But consider this: in 1992, it traded between 48c and 70c on the JSE. In 2021, the dividend was 51c a share, and for the past five years the collective tally is 226c, excluding the 305c special dividend in 2019 after the company’s niche soft-drink bottling interests were sold.
That’s a helluva return in distributions alone for the longer-term investor, remembering that as recently as 2017 you could have picked up Bowcalf at around 650c.
Not many companies can maintain an enduringly successful focus like Bowcalf has in its plastic packaging niche. Inevitably, there is the temptation of acquisitions for diversity, scale and growth. Inevitably, there is debt drag, overpaying for poor operational assets and management upheaval.
Good on Bowcalf. I wish we could see more such small enterprises on the JSE, though that is unlikely considering the blanket of scepticism that is still tossed over the small cap sector. If we had a dozen more counters like Bowcalf, there might be a change in sentiment.
Off the sauce
Speaking of singular focus (which, by the way, I sorely lacked during this weekend’s tennis club championship opening match), condiments and sauces maker AH-Vest posted year to end-June results that were not terribly appetising.
The company — a genuine microcap with a market value of R40m — specialises in All Joy sauces and condiments but should perhaps push for a broader basket of products to de-risk the business.
Turnover was up 14% to R206m but margins were gnawed by higher shipping and fuel costs to leave the bottom line down 80% to R2m. AH-Vest issued just 63,397 shares for cash in its bid to cull its debt. I can’t see too many small cap investors enthusiastically pitching in cash with input costs pressuring margins.
That said, last year’s earnings topped 10c a share, so investors will have to decide whether this year’s fractional dividend of 0.2c a share was an act of confidence or desperate reassurance.
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