Jamaica Gleaner / Shareholders of distribution and retail conglomerate Derrimon Trading will be asked to consider increasing the authorised share capital of the company at a March 6, 2018 extraordinary general meeting.
Derrimon is listed on the junior market of the Jamaica Stock Exchange with 273,336,067 units in authorised shares. Shareholders will be asked to vote on a resolution for the creation of an additional 400 million shares.
In addition, shareholders will be asked to designate the newly-created shares as redeemable preference shares and granting the board the authority to issue those shares from time to time.
The company’s 125 million preference shares fall due on March 12, 2018. The three-year redeemable shares were authorized at an extraordinary general meeting on February 4, 2015. Derrimon effectively wants to roll over the preference shares by using the new issue to pay out those that fall due.
The rollover is one of two options available to the company regarding redemption. The other would have been to pay from profits, according to a letter from Chairman and CEO, Derrick Cotterell. He maintains that redemption with a new issue is the most cost-effective method since local interest rates have fallen steadily over the past 12 months.
The Bank of Jamaica recently signalled the market by shaving 25 basis points off its policy rate bringing it to low of three per cent. Cotterell also argued that there was no capital redemption account; which at any rate would have had the effect of sterilising cash up to the amount to be redeemed. In addition the Chairman is telling shareholders that the rollover frees up cash within the company for capital investment and continued growth.
At the end of 2016, revenue at Derrimon fell from $6.29 billion to $6.18 billion. But gross profit rose 12 per cent from $833 million to $934 million. The company also undertook a debt restructuring exercise in 2017 which saw savings going to the bottom line The March 6 meeting takes place at the Knutsford Court Hotel, New Kingston.