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It’s still a mis­sion to get fi­nan­cial data on small, un­listed com­pa­nies

Finweek English Edition - - Companies & markets - MARC HASENFUSS

HOLD­ING A PO­SI­TION in un­listed shares is­sued by small, start-up com­pa­nies can be a test­ing af­fair, with in­vestors not al­ways privy to a sur­feit of key fi­nan­cial in­for­ma­tion. All the es­tab­lished un­listed com­pa­nies put out in­terim and fi­nal re­sults timeously (Grand Pa­rade In­vest­ments, KWV Ltd, Pi­o­neer, Clover) and keep share­hold­ers abreast – usu­ally via a web­site – of key cor­po­rate de­vel­op­ments. tor­ing, with press re­leases sug­gest­ing ma­jor wind­falls from con­tracts and new prod­uct de­vel­op­ments. Spin is one thing, but turn­ing the hype into mil­lions on the in­come state­ments is quite an­other.

Fin­week de­cided to see how easy (or dif­fi­cult) it was to ob­tain key fi­nan­cial in­for­ma­tion from the four com­pa­nies. The re­sults of our en­deav­ours were most in­ter­est­ing. We couldn’t ob­tain in­terim re­sults from APMI. StratCorp CEO and APMI di­rec­tor David Har­ing­ton pointed out that be­cause the com­pany wasn’t a listed en­tity on the JSE, it wasn’t re­quired to pub­lish in­terim re­ports.

APMI CEO Gus­tav Lotz reck­ons that the 2006 au­dited fi­nan­cial state­ments for APMI are nearly fi­nalised. “We un­der­take to for­ward you a copy of the an­nual re­port at the same time as we send it to the com­pany’s share­hold­ers.”

While ap­pre­ci­at­ing Lotz’s ges­ture, we can’t help won­der­ing why ex­tra ef­fort isn’t made to fur­nish share­hold­ers with in­terim re­ports – which, af­ter all, are es­sen­tial up­dates on a com­pany’s progress (es­pe­cially at start-up stage).

It does seem re­gret­table that the fact that APMI (which has hinted hard at list­ing) uses the ex­cuse that it’s cur­rently un­listed not to pub­lish in­terim re­sults – an ex­er­cise un­der­taken by most ma­jor un­listed com­pa­nies.

The latest fi­nan­cial state­ments for “lo­cal tequila” pro­ducer Agave Dis­tillers were also not read­ily avail­able – which is very dis­ap­point­ing af­ter all its hoo-ha con­cern­ing se­cur­ing ma­jor ex­port con­tracts last year.

What has tran­spired (see Open­ers for more de­tail) is that there’s been a change of con­trol at Agave, which has ap­par­ently de­layed the au­dit process. Fig­ures should be re­leased within weeks and an AGM is sched­uled for next month.

What’s ap­par­ent is that or­di­nary share-

The same – gen­er­ally speak­ing – isn’t true for the smaller, un­listed ven­tures (start-up ven­tures, if you will) that some­times seem to go out of their way to en­sure there’s a paucity of fi­nan­cial de­tail in cir­cu­la­tion. Ob­vi­ously, when fore­casts aren’t met and projects fail to come on stream as pre­dicted, com­pa­nies don’t ex­actly want to trum­pet the news.

Last year, Fin­week and sis­ter medium iden­ti­fied four small, un­listed projects – APMI Hold­ings (Pool­cop), Laze­ron, Vin­guard and Agave Dis­tillers – as the shares that would carry the rep­u­ta­tion of an in­dus­try that has for the best part of a decade been scant in terms of re­turns to in­vestors.

None of them pro­vide any rel­e­vant fi­nan­cial in­for­ma­tion on their re­spec­tive web­sites, which are crammed with mainly tech­ni­cal or prod­uct in­for­ma­tion.

Yet all of them have done some spin-doc- hold­ers were not privy to the change of con­trol, a de­vel­op­ment that would rank as ma­jor news for a listed cor­po­rate. That again ques­tions whether small, un­listed com­pa­nies are com­mu­ni­cat­ing ef­fec­tively with their share­hold­ers.

How­ever, we were suc­cess­ful in track­ing down fi­nan­cial state­ments for pe­ri­ods end­ing June 2006 for Vin­guard and Laze­ron.

To be per­fectly frank, the fig­ures pre­sented in both an­nual re­ports don’t make easy read­ing (both com­pa­nies gen­er­ate small turnovers and have their bot­tom lines sit­ting in the red). But at least share­hold­ers (and prospec­tive in­vestors) can scan the pages to gauge whether the fledg­ling busi­nesses could hold po­ten­tial over the longer term.

Per­haps the fact that both Laze­ron and Vin­guard have JSE-listed John Daniel Hold­ings (JDH) as a ma­jor share­holder helps en­sure share­hold­ers are pro­vided with rel­e­vant fi­nan­cial in­for­ma­tion.

JDH CEO Harry Min­nie says: “JDH has al­ways prided it­self on pre­sent­ing fi­nan­cials on time to share­hold­ers – even when we were an un­listed com­pany. The same goes for Laze­ron and Vin­guard…”

The is­sue of con­sis­tently pre­sent­ing share­hold­ers with fresh fi­nan­cial in­for­ma­tion is one of the big­gest blem­ishes in the un­listed share in­dus­try.

With com­pa­nies such as Garek and Ubambo re­luc­tant to ad­here to me­dia re­quests to re­lease fi­nan­cial state­ments, and oth­ers sim­ply not both­er­ing to pro­vide share­hold­ers timeously with an­nual re­ports, there’s bound to be a veil of scep­ti­cism cast over smaller, un­listed shares.

Most small un­listed con­tenders moot a fu­ture JSE list­ing in their mo­ti­va­tions for rais­ing funds from the pub­lic. Such com­pa­nies should then be acutely aware of JSE re­quire­ments to re­port in­terim and fi­nal re­sults timeously to share­hold­ers.

Any de­par­ture from that should rightly be viewed with some dis­dain by share­hold­ers, though the com­pa­nies will no doubt cry foul con­cern­ing the ef­fort and cost of pub­lish­ing fi­nan­cials twice a year.

“Not re­quired to pub­lish in­terim re­sults.” David Har­ing­ton

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