The Boss report: 2006 | 2005
Gildan Activewear Inc. (TSX: GIL)
Date of birth: April 19, 1949
Years at company: 6
Last position: Senior VP of Finance and Corporate Development, Wajax Ltd.
Education: MA, Oxford University
Making a profit in T-shirt manufacturing can be a tight fit. Margins are miniscule, the competition is fierce, and China is exporting larger numbers of textiles since WTO quotas were lifted in January. Considering the effect cheap Chinese labour has had on a range of global businesses–depressing prices and squeezing profits–you might think its appearance in the rag trade would be hard on western players.
Gildan Activewear, however, is more than holding its own. The Montreal-based company, founded by brothers Glenn and Greg Chamandy, in 1984, is the market leader in screen printing, where blank shirts are sold through wholesalers to companies who then put logos on them. It's a labour-intensive, high-volume business, perfectly suited to Chinese manufacturers. But the threat isn't registering in Gildan's numbers. In fact, its shares recently closed above $55, a new high, and the company even raised its guidance on its second-quarter financial results, the first with Chinese quota-free textiles. It's a Montreal manufacturing miracle–one deftly orchestrated by Laurence Sellyn, Gildan's CFO.
Sellyn came to Gildan in 1998. He arrived to find a family business with good products that was growing out of control, and paying up to 13% on its borrowed funds. His first task was to restructure high-interest debt, and then to get a handle on capital spending. Finally, he had to line up a sustainable financing program for growth. Before Sellyn, says Chris Fernyc, an analyst with Bissett Investment Management in Calgary, “there was little in the way of capital discipline. This company was going to be insolvent if they didn't get their growth under control financially, and damn quickly. Laurence did that.” Sellyn, he adds, is now spending more expansionary capital than ever, “yet it's all being funded internally while keeping the balance sheet debt-free.” A new US$70-million fabric facility in the Dominican Republic didn't even make a dent in Gildan's exceptionally clean balance sheet. “Even after that, we still had free cash flow of $100 million,” says Sellyn.
Sellyn has also helped Gildan make the transition from a family-owned organization to a large publicly traded company by putting in financial control systems–not particularly sexy, but necessary. The company has also made good use of tax treaties and economic incentive programs to lower Gildan's realized tax rate to about 6%, which likely allowed Gildan to keep the shirt on its back. “It's a very difficult industry, and he's done an extremely good job,” says Fernyc of Sellyn. “The brothers get credit for the big plan, but the CFO made it happen.”
Perhaps Sellyn's greatest impact has been in promoting governance reforms. Gildan's seven-person board now boasts six completely independent directors, and the Chamandys were convinced to dismantle the dual-class share structure without paying them any special breakup fee, says Fernyc. That's been rewarding for everyone. Gildan's market cap has grown to $1.6 billion from $70 million at its IPO, while its share price has risen to its current heights from an initial $3.50 (adjusted for splits). Average EPS growth and return on equity has been an impressive 28% during Sellyn's tenure. And the show isn't over yet: Gildan's CFO says the plan is to move into the retail market, selling T-shirts directly to consumers. “The exciting part is still to come,” says Sellyn. As if the past five years haven't been exciting enough. J.S.
Manulife Financial Corp. (TSX: MFC)
Date of birth: January 18, 1947
Years at company: 11
Last position: President, Laurentian Bank of Canada
Education: B.Sc., Loyola College
This past winter, investors watched in horror as Portus Alternative Asset Management Inc. slid into receivership, and hundreds of millions of the firm's assets disappeared while the twentysomething president fled to Israel. Portus–Latin for “refuge”–became synonymous with financial fraud. Investors who'd had the hedge fund recommended to them by investment advisers were rightly furious. So when the good name of Manulife Financial began turning up on front pages because it had a referral relationship with Portus, the mega-insurer's reputation was suddenly in doubt.
But not for long. Manulife CEO Dominic D'Alessandro quickly steered the company onto the high road, publicly assuring clients that any money they had with Portus would be covered–something competitors have yet to do. Within days, he took Manulife from being branded “possible accomplice” and repositioned it as “outraged victim.” Crisis averted, it seems. Just another feather in D'Alessandro's cap during his remarkable tenure at Manulife, a company that under his leadership has rapidly become one of Canada's foremost contributions to global business.
A year ago, the diminutive CEO chalked up his sweetest victory: the $15-billion acquisition of U.S. insurer John Hancock Financial Services. The largest cross-border deal in history by a Canadian company, it makes Manulife the biggest corporation in Canada by market cap ($44.7 billion) and the fifth-largest insurer in the world. Operations now span 19 countries, with more than 21,000 employees and $347.7 billion in funds under management (up from $154.5 billion at December 2003).
It's a big job keeping it all in line, but D'Alessandro has performed ably. A $100 investment in Manulife's 1999 IPO, had you reinvested dividends, is worth $325 today (a similar investment in the S&P/TSX composite index over the same period would have yielded just $119), while the company has preserved one of the best credit ratings in the industry. No wonder a recent Ipsos-Reid poll of Canadian CEOs found D'Alessandro to be the most esteemed of his peer group. And that recent trip along the high road? Just further proof of his steady leadership. J.S.
Toromont Industries Ltd. (TSX: TIH)
Date of birth: May 29, 1945
Years at company: 20
Last position: Chairman and CEO, Toromont
Education: B.Comm, Mount Allison University
You'd never know it by looking at Robert Ogilvie's relatively modest $2.4-million annual compensation, but for the past decade the executive chairman of Toromont Industries has been quietly managing one of the country's best-performing companies. Investors love the Concord, Ont.-based operator of a string of successful Caterpillar heavy-equipment dealerships, as well as a thriving compression business that has supplied rink-making machines to the National Hockey League and the Calgary Winter Olympics. And why wouldn't they? Over the past five years, Toromont stock has more than doubled. Meanwhile, the company has increased the size of its dividend annually for the past 15 years.
Ogilvie handed day-to-day responsibilities for the company to Hugo Sørensen, who was appointed CEO in 2002. But neither man can take all the credit for Toromont's low-profile success. That goes to the actual operators of the businesses, who are given a large degree of autonomy by head office, says Ogilvie. “We do not run the individual business units; they are run by the individual presidents,” he says. “Our job is to choose which businesses to invest in and set the culture and framework to motivate those guys.”
That's not as easy as it sounds. Shortly after joining Toromont, Ogilvie decided to overhaul its old bonus system and strip out things like stock performance and other criteria that employees couldn't control and that often resulted in no bonuses being awarded. Now, he says, “We measure and reward employees on the basis of absolute performance. If our profits go up, the bonuses go up, too.” How egalitarian. J.G.