Calgro M3 censured by JSE over cancelled share scheme
Calgro accepts the censure despite it taking action that was to its own detriment so as not to breach any debt covenants
Property group Calgro M3, whose share price has lost almost three quarters of its value so far in 2019, has been publicly censured by the JSE for failing to alert shareholders regarding dealings with its directors.
Calgro announced in September 2018 that it had cancelled the executive share incentive scheme, which also entailed it buying back shares originally issued to directors. The company had failed to get shareholder approval, and failed to alert shareholders via the JSE’s news service (Sens), the JSE said in a statement.
Calgro could be fined up to R7.5m per transgression, although it may appeal.
Calgro said in a statement on Tuesday that it had accepted the censure, although it had genuinely believed, including after seeking third-party advice, that it was complying with all JSE requirements.
At the time, the company was close to breaching net debt-to-equity ratios, and the cancellation of the scheme had the effect of reversing a share-based payment reserve to retained earnings.
“The perilous economic environment that prevailed at the relevant time had an adverse effect on the construction sector and this, combined with the implementation of International Financial Reporting Standards (IFRS) 15 and IFRS 9, both of which had to be implemented for the first time, had a significantly negative effect on the company’s retained earnings, which was immensely exacerbated by the 2015 scheme,” Calgro said.
An urgent audit committee and board meeting was called for August 30 2018. “The company had to find an immediate solution either to reduce debt, increase cash on hand, or increase retained earnings so as to avoid the potential breach and the negative consequences associated therewith, especially in view thereof that the half-year reporting was on hand,” it said.
The public, shareholders and participants had complete access to all the information related to the cancellation of the scheme, details of which were included in, among other places, its interim results to end August 2018, it said.
“Furthermore, executive representatives of the company had numerous direct engagements with major stakeholders during the periods [cited] to ensure they were fully informed,” Calgro said.
“In light of the above, and while the company accepts the JSE censure, the actions of the company were at all times directed towards protecting the interests of the company, its shareholders and stakeholders, and for absolutely no other reason.”
CEO Wikus Lategan said it was unfortunate that the JSE had censured Calgro but he believed he and the rest of his executives had done all they could for the good of shareholders.
“I think it’s very unfortunate that the JSE took this action but it is now in the past and we are continuing to focus on building affordable houses and making profits for our shareholders,” said Lategan.
“It’s sad that we get a slap, while we took action that was to our own detriment. This was as we wanted to make sure that no debt covenants were breached and that value was preserved.”
Calgro’s share price was up 1.05% to R2.88 on Tuesday, having lost 72.55% so far in 2019. The company is seeking to slow down development, and has been under pressure due to site invasions by squatters, construction delays, and water and electricity shortages at its developments.
With Alistair Anderson