I’m not really regretting some awful capital allocation at the weekend. I flipped a few rands at England beating the Springboks at Ellis Park. Not even the handicap bets — including +20.5 points to England — could compensate. I banked on history, remembering an underdog England rugby side had twice before (in 1972 and 1994) beaten a strong Bok team on the highveld. I also hedged my heart against rugby’s enfant terrible, Henry Pollock, getting my pulse rate up and my whisky stocks down with his galling antics. Money well spent, then.
So, what to do for the upcoming match against Scotland, who looked a composed and classy outfit against Los Pumas last Saturday evening? Perhaps a small flutter on Scotland edging a complacent Boks team? Some more adventurous wagers on the handicap scoring? Perhaps I should rather take a lesson in capital allocation from the masters: industrial equipment conglomerate Hudaco Industries.
Speaking at the interim results presentation, CEO Graham Dunford was not boasting (well, maybe a little) when he remarked that Hudaco had acquired 30 businesses since 2010 — and most of these had been (earnings) accretive. Dunford was, in fact, setting the scene for addressing two small bad marks on Hudaco’s report card, a pair of discontinued operations in the broader alternative energy market.
Dunford was refreshingly frank: “These two [acquisitions] have not worked out. We recognised that. We’re sorry for that and we are moving on.” Better to grasp the nettle, I say, than sustain costly hopes about fluctuating fortunes in a market that has changed fundamentally. I liked Hudaco’s presentation slide, which, for me, reflected a reassuring (and rare) pragmatism when dealing with problematic acquisitions.
The group explained: “In 2022 and 2023 we capitalised on the load-shedding period and stocked up for a bumper 2024. In March 2024, when load-shedding ended unexpectedly, we were overstocked, but we believed there was still a place for Hudaco in alternative energy to meet demand for green energy and to provide an alternative to Eskom’s increasing electricity prices. We got this wrong — the market has become commoditised and is now a high-volume, low-margin market; base prices have fallen dramatically.”
That said, these relatively small setbacks in the alternative energy sector have not caused a dramatic strategic rethink at Hudaco. Dunford reiterated that acquisitions remain central to the business model. He declared Hudaco “ready to give it horns in the second half”, with strong cash flows allowing for investment in higher-growth businesses as well as the opportunity to make selected acquisitions. While there is nothing imminent, at least nothing Dunford believes the group can close by year-end, it’s probably telling that Hudaco has taken on a “new acquisitions guy” to help future dealmaking.
Perhaps a small flutter on Scotland edging a complacent Boks team?
In the meantime, Hudaco has the luxury of paying down its debt and/or repurchasing shares that reflect a slightly jaundiced market view on an earnings multiple of eight and a dividend yield of 6%. Maybe the market has more cosmic conglomerates to peruse these days, but I myself — and I’m not one with a penchant for local industrial companies — appreciate Hudaco’s commanding and well-reinforced market position.
The group (as pointed out last month by colleague Jeandré Pike) is steeped in reliable product delivery, carrying inventories of more than R2.4bn in more than 230,000 line items from as many as 800 international suppliers in 31 warehouses and 150 branches. Customers, and Hudaco has 30,000 active clients, will most of the time get their widgets sans delay. With such a sprawling customer base, Hudaco also has no customer concentration risk. The business certainly does not lean heavily on a handful of big clients. There is also, hearteningly, a low level of tender or contract business.
Moving to another industrial counter, board changes at aluminium products business Hulamin — perpetually at a delicate juncture — will normally be intensely scrutinised by market watchers, including myself (as a very small shareholder). With Hulamin hinting at wooing a strategic equity partner, any board changes might be open to interpretation (particularly by we excitable small-cap punters). Judging by the number of WhatsApp messages I received on Monday evening, more than a few market watchers raised a quizzical eyebrow at the sudden “removal” of Hulamin nonexecutive chair Paul Baloyi.
Baloyi is a fairly big hitter, having served as MD of Nedbank and CEO of the Development Bank of Southern Africa (DBSA). I thought Baloyi chaired an engaging AGM at Hulamin earlier this year, speaking enthusiastically about the group’s longer-term prospects. I used the word “removal” because it’s clear Baloyi did not resign. Hulamin’s board “resolved” that Baloyi “will cease to hold the office of chairperson” with immediate effect. While Baloyi steps down as Hulamin chair, he does remain a “duly appointed independent nonexecutive director” but is no longer chairing the nominations and governance committee.
What does strike me is the precise wording of the Sens announcement, with Hulamin indicating: “The board has taken this decision within the scope of its fiduciary duties and duty of care and skill, having regard to the best interests of the company.” Yet the board is happy to retain Baloyi, appointed as Hulamin chair only in March last year, as a nonexecutive director. Some cynics might see a glitch in corporate governance logic here. Interestingly, Baloyi has stepped down from three other listed company boards in the past year and a bit.
In June 2025 he stepped off the board of industrial company enX Group, and in November resigned with immediate effect from life assurance group Momentum. In January Baloyi resigned from the board of tin mining group Alphamin Resources, where he was the appointee for the DBSA. In each instance, it appears as if the resignation was sudden and unexpected … and no reason was given for the decision to step away. Baloyi’s remaining directorships appear to include Bidcorp Group, Discovery Bank and Peermont Global.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.