Maynhardt family to buy out smaller shareholders
Furniture retailer, Furnmart, which is owned by John Maynhardt and his family, has commenced plans to delist its shares from the Botswana Stock Exchange (BSE), the company announced this week.
Furnmart this week released an announcement to its shareholders of its intent to hold an Extraordinary General Meeting (EGM) on the 4th of December. On the agenda of the EGM is the proposal to delist the issued shares of the company and offer qualifying shareholders who choose to participate in the share buyback by the company a consideration of 65 thebe per share.
Furnmart has been trading in the 54-55 thebe range for the whole year, with the stock only managing to reach 55 thebe in September. According to brokerage firm Motswedi Securities, demand for the stock has also been muted with very little trading happening for the stock.
“We expect the company’s reasons for opting to delisting to be set out in a circular which has not been released or made public yet,” said Garry Juma, Head of Research at Motswedi Securities.
Furnmart omitted to reveal the reasons behind the delisting.
In the case of a voluntary delisting, experts say that firms face an increase in direct and/or indirect listing costs and decide to opt out of the stock exchange in order to avoid these costs.
In addition, the decision to go private seems to be connected with low growth prospects for the firm. Furthermore, if firms identify no more obvious listing benefits compared with incurred costs, they may decide to go private. It is the case when firms cannot attract an adequate level of investor interest and recognition.
This week, the furniture company released their audited financial statements for its year ended 31 July, 2018. The company’s profit before tax jumped up 52.2 percent to P148.4 million, primarily supported by the closure of the non performing operations (i.e. the Zambia operations) which had hampered the previous year’s performance. Earnings Per Share accordingly, rose by 67.1 percent to 17.80 thebe. Meanwhile a final gross dividend of 2.49 thebe has been declared and is payable from the 30th of November, 2018 for those shareholders registered in the company’s books by the 16th November, 2018. The company has expressed difficulty with the trading environment in the remaining countries in which they operate, specifically in Namibia where the economy has contracted for the ninth consecutive quarter. Meanwhile, in South Africa, the National Credit Amendment Bill (when and if it gets approved) is expected to directly impact majority of the Group’s target market.
The Group experienced a marked downturn in trading since early 2018. As a result, the second half of the year was much less buoyant than the first six months. Revenue of P1.25 billion for the year ended July 2018, was P72.0m (6.1%) higher than the prior year. On a comparable basis, revenue increased by 11.3%, as the prior year included revenue from some of the non-performing business units that were closed.
The company said trading during the first couple of months of the new financial year has been sluggish. Namibia in particular is finding trading conditions difficult and achieving real sales growth remains a challenge. The Namibian economy has contracted on the back of the Government’s austerity measures. The Group’s remaining non-performing stores will continue to attract further focus from management in an attempt to turn them around. In addition, management will put emphasis on the respective business models and specifically on sales growth, gross margin maintenance, expense control, productivity and debtor’s management.
The impact of the draft National Credit Amendment Bill in South Africa, which proposes that all or part of the debt under certain qualifying credit agreements can be extinguished, is likely to have far reaching consequences for credit providers. This amendment bill is of great concern as most of the Group’s South African customers fall in the income bracket that this legislation is targeting. The furniture retail market in Botswana and Namibia remains overtraded and imminent sweeping regulatory changes, in these markets, may present future headwinds. Given the concerns as highlighted above, the Group’s strategy is to be cautious with new store openings particularly in South Africa.