A Deacons' Truworths store. The retailer’s directors have approved the planned listing of the company’s shares on the Nairobi Securities Exchange. Photo/File
The directors of clothes retailing firm Deacons Kenya have approved the planned listing of the company’s shares on the Nairobi Securities Exchange (NSE) by introduction.
Deacons announced the approval in a statement after a board meeting held on Friday.
The listing is, however, still subject to Capital Markets Authority (CMA) and shareholders’ approval.
The board also approved creation of an additional 29.3 million shares to facilitate a bonus issue of one share for every one held as at June 15.
“The increase of capital, bonus issue, share split and listing will be subject to the company receiving all requisite approvals including approvals from the Capital Markets Authority under the Capital Markets (Securities) (Public Offers, Listing and Disclosure) regulations,” said Deacons in the statement.
A listing by introduction means that Deacons will not be selling any shares to the public.
Standard Investment Bank is the lead advisor for the transaction, while Kestrel Capital is the sponsoring broker.
The retailer said the board of directors had resolved to increase its share capital to Sh309 million from Sh162.5 million through creation of an additional 29.3 million shares of Sh5 par value each.
A share split of two for every one, which will halve the par value to Sh2.50, is also to be effected.
The resolutions are to be approved by shareholders at an annual general meeting (AGM) scheduled for June 28.
If listed by the end of this year, Deacons Kenya could become the third company to join the NSE in 2012, after the expected listing of Longhorn Kenya and CIC Insurance whose-- shares are expected to begin trading on Wednesday and on June 19 respectively.
Analysts said that Deacons Kenya’s listing will put the management under pressure to grow the business, which like other retailers is vulnerable to the vagaries of inflation.
Johnson Nderi, a research analyst at Suntra Investment Bank, said majority of Deacons’ client base can shrug off effects of inflation and cushion the retailer’s earnings.
“They have shoppers from the low end of the market who shop once in a while and high income earners who are regular shoppers,” said Mr Nderi.
Mr Nderi said the middle income earners are also driving growth of consumer shops such as Java and Savannah coffee chains, especially in Nairobi.
Emerging Capital Partners, an American based private equity firm, announced on Friday that it had bought a stake in the Java House coffee chain.
Deacons’ board of directors however tempered expectations about growth of the firm.
“The directors remain cautiously optimistic about future performance of the business albeit this will largely depend on improvement of the prevailing macro- economic and political environment in order to spur increased consumer confidence,” said the firm’s annual statement.
Deacons’ net profits for last year increased by four per cent to Sh112.6 million from Sh108 million in 2010, but turnover grew by 36 per cent to Sh2.4 billion from Sh1.78 billion.
A survey released by Ipsos-Synovate also found that two thirds of Kenyans are unhappy with the current economic situation, with a significant number; 42 per cent, and 31 per cent describing the situation as very bad and somewhat bad respectively.
Deacons Kenya has said it will push its regional expansion plans, and is at an advanced stage to launch additional stores in Kampala.
But it also announced that it had exited the Tanzanian market, which was making losses.
