Kenya’s Capital Markets Authority has confirmed lifting of the now 18-month ban on share trading of beleaguered Coopers Motors Corporation Holdings Ltd (CMC) on Nairobi Securities Exchange will highly hinge on the success of next month’s annual general meeting.
The May 24 AGM will chart the new course in funding the struggling company’s capex programme, mainly to invest in new showrooms and upgrade existing ones along Lusaka Road.
Failure to hold a shareholders’ meeting since the last one in March 2011 has jeopardised key investment decisions.
Initially, board chairman Joel Kibe had indicated in March last year that the company would retain up to Sh4 billion in its annual earnings to September, last year.
This plan was however jolted after its profits stopped at Sh105.35 million ($1.2 million) from a loss of Sh181.14 million ($2.1 million) a year earlier, while turnover remained flat,dipping by a marginal 0.56 percent to Sh11.73 billion ($138 million) from Sh11.8 billion ($139 million).
The under-dealings by some of the directors that led to a protracted board tussle allegedly cost CMC Sh1.5 billion ($18 million) as per the probe by a South African firm, Webber Wentzel, in March 2012.
It’s this corporate governance malpractice that plunged the publicly traded company into trouble with the regulator that swiftly moved to stop trading in its shares.
The ban first imposed on the listed motor dealer on September 16, 2011 has been extended for another 53 trading days to June 14-the seventh straight time its lifting has been deferred.
After the initial freeze of 14 days, the CMA stretched it by 90 trading days on September 27 and then by a further 21 days on January 25, 2012.
Later on March 5, the ban was stayed up to May 31 upon which an additional 85 days was slapped on CMC shares taking it to the September 28.
Upon expiry of that date, the company was not yet out of woods prompting a further 60-day extension to December 27, last year.
There was to be another stay that was communicated on January 10, this year.
“After carefully considering all relevant factors, CMA has extended the suspension of trading in CMC Holdings shares listed at the NSE for a further period of 65 trading days from December 27, 2012 to March 30 2013 as part of its mandate of protecting investors,” CMA said in an emailed statement last Thursday.
The latest extension has nonetheless been reached on the request of the company’s directors who committed to a Deed of Settlement of all dragging issues on February 28.
“The CMA has today further extended the suspension from trading of shares of CMC Holdings Ltd’s shares for further 53 trading days from 30 March 2013 to 14 June 2013 on request of the Company,” read a statement from the regulator.
The CMA however indicated that positive progress has been including execution of a Settlement Agreement amongst major shareholders “to protect the best interests of the company and its minority shareholders.”
The new development takes the next review date to June 14 which will be 21 months after the initial ban.
The review will however be highly dependent on full disclosure on the company’s outlook to shareholders during the AGM.
“It is in the public interests for the suspension to be maintained pending the above disclosures being made to the shareholders and the public to inform prudent investor decision making,” the CMA clarified.
The revelations of malpractice coupled with “little investment” in marketing has put the company on the chopping board of its suppliers.
The directors of the companies are said to be re-strategising after losing a legal battle to retain an exclusive JLR franchise — Jaguar, Range Rover and Land Rover Defender brands—which accounted for 30 percent of its average annual unit sales.
The JLR deal was officially transferred to RMA Motors Kenya Ltd last week, a move that has jolted CMC’s business.
A source close to ongoing discussions among directors said they are working on revamping CMC’s entire business structure following the loss of JLR.
Top on the cards is retention of Volkswagen and Ford brands that are reportedly also not happy with the company’s little investment in marketing their brands in the region, particularly in Kenya.
Ford is understood to have issued an ultimatum to CMC to upgrade its Lusaka road-based showroom and build a separate unit dedicated to its brands or face a possible divorce.
This has understandably given the caretaker board and management sleepless nights because it’s the same proposition that led to JLR transferring its exclusive deal to a CMC rival, RMA.
Volkwagen, on the other hand, has long been calling for the suspended publicly traded motor dealer to build a clean, state of the art showroom and workshop.
This, the German car maker believes, will better position its brand in the market where it sees a lot of potential for growth in terms of sales volume and new brands.
