Are investors waiting to react to the shock announcement of dividend cancellation by equipment finance provider Axsesstoday Limited?
Well the answer seems to be pretty much yes! Currently the securities of Axsesstoday Limited are voluntarily suspended from trading on ASX because of which investors are forced to holdback their sentiments on six-month dividend reversal.
Today, in an announcement to ASX, Axsesstoday Limited revokes the dividend of $0.029 per share, announced on 27 August 2018 pursuant to six month ended 30 June 2018. The dividend had been offering 100% franking credits to its investors while the payment was due to be made on 18 October 2018 to shareholders registered on 20 September 2018.
The Board landed up on this decision despite posting 94% increase in NPAT to $7.0 million for fiscal year 2018. It is in comparison to prior corresponding period profit of $3.6 million. As per the FY18 results release, EBITDA was up by 130% to $26.3 million and EBIT grew by 129% to $26.0 million. But still the company has planned to axe the final dividend of $0.029 per share. The decision has come as a bombshell to investors’ expectation of earning 5.8 cents total dividend for the full year ended 30 June 2018.
But why did the company decide to repeal the final dividend?
The Board claimed that their focus on strengthening company’s capital has made them to call on this revocation. They stated that instead of announcing dividend distribution, now on the company will focus on accumulating capital to support the debt facilities.
This comes amid their detailed review of the business strategy pending the completion of which the shares of AXL have gone into the voluntary suspension. The suspension from official quotation was first announced on 14 September 2018 which was later extended on 24 September 2018.
Along with the request for suspension extension, Axsesstoday has then released the interim update on company’s business activities and the on-going strategic review. The release read that in assistance with Deloitte, the company is assessing the impact of the previously disclosed change in the arrears reporting methodology on its covenant reporting obligations to its lending partners.
The assessment has brought many breaches into light. The breach of financial agreements with its senior bank lenders rolled the headline. It includes the corporate restructure of the company by forming new entities within the group without taking prior approval of the senior banks and funding. As per the terms of debt facility if the securities of the company are suspended for more than five consecutive business days, the senior bank lenders may exercise an option to review the facility.
The defalcation is such that lenders are on the verge of either terminating the contract with Axsesstoday Limited or introduce amendments to the terms of debt facility following the review. However, the management informed that they are closely working with senior bank lenders to re-negotiate the covenant thresholds and to obtain the waiver for the above stated breaches.
Further, the company is said to be in search of its new leader as CEO Joe Flanagan has agreed to resign from the role of company’s chief, at board’s request. In the middle of ongoing management changes the company has recently requested Mr. Flanagan to retire from the role of Axsesstoday’s Chief Executive Officer and continue as Chief Financial Officer and Company Secretary of Axsesstoday Ltd.
The voluntary suspension of AXL’s securities is expected to remain in place until the earlier of 22 October 2018 or the release of pending announcement in relation to strategy review and management changes.
AXL last traded at $1.625.
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