JSE suspends MFS from trading over late financials
MFS Capital Partners Limited has become the fifth company to be suspended from trading by the Jamaica Stock Exchange (JSE) over late financials in 2024 and sixth company this year to be suspended over breaches of the JSE’s rules.
The company was effectively suspended on December 31, the last trading day in 2024. This was due to the company’s June 2024 audited financial statements being overdue by 93 days as at December 30, 2024 and its first quarter report for the July to September 2024 period being overdue by 46 days.
As a publicly listed company, MFS must meet certain reporting requirements in order for its ordinary shares to continue trading on the JSE. It must submit a quarterly report 45 days after its most recent quarter ends. Based on the reporting period chosen by MFS, its fourth quarter report was published on August 26, 12 days later than the original submission date, which allowed for it to submit its audited financial statements by September 28.
However, the audited financials have yet to be submitted along with the Q1 report which was due on November 14. MFS provided a delay notice on Friday where it indicated that the delay in publishing its audited financials was due to the need to finalise its audit with its auditors Baker Tilly. It noted that it expects to publish its audited financials by January 10 but provided no timeline on the first quarter report publication.
That is a problem for MFS shareholders since the company must publish both its audited financials and quarterly report for the JSE to consider readmitting its ordinary shares to trading. For the duration of the suspension, investors cannot trade the company’s shares and will have to wait on the company to resolve any and all breaches with the JSE.
While this is MFS Capital’s first suspension under its current name, SSL Venture Capital Limited (SSLVC) voluntarily applied for a suspension between June – August 2019 to address breaches related to its 2019 audited financials where there was no audit opinion expressed by its auditor, a breach of the JSE rules. SSLVC was originally listed as C2W Music Limited in May 2012.
This is another issue for MFS’ shareholders who have seen the company’s stock price drop from $1.94 to $0.52 in 2024, a 73 per cent erosion of value. This is a far cry from the $4.95 intraday peak MFS achieved in July 2022 where it also closed at an all-time high of $4.42.
The drop in MFS’ stock price has made it the second worst-performing stock in 2024 just behind EduFocal Limited, which was down 76.80 per cent up to Monday. EduFocal was suspended by the JSE earlier this year for being late with its audited financials. EquityLine Mortgage Investment Corporation, IronRock Insurance Company Limited and Productive Business Solutions Limited (PBS) were all suspended by the JSE for late audited financials. Kintyre Holdings (JA) Limited (formerly iCreate Limited) was suspended for five months during 2024 for different breaches of JSE rules.
Apart from IronRock and EquityLine, nearly every company suspended by the JSE has seen a decline in the price of their ordinary and preference shares. EquityLine was delisted by the JSE in October for a litany of breaches while IronRock was up 54 per cent as of Monday to make it the second-best performing stock on the Junior Market and amongst the best-performing stock in 2024.
MFS changes
MFS completed its first acquisition under its new owners at the end of March 2024 when it acquired 100 per cent of Micro-financing Solutions Limited (MFS Limited) for $500 million or its effective book value.
The company had originally published its unaudited third quarter financials in May with the initial consolidation of MFS Limited. However, the company published revised numbers some months later with the revision notes listing 10 items of correction which even included treatment with the appropriate accounting principles.
MFS Capital then released its unaudited fourth quarter report where it reported consolidated revenue of $32.46 million but recorded a consolidated net loss of $10.55 million. For the overall unaudited 12 months, MFS’ a 124 per cent rise in consolidated revenue to $36.54 million, but generated a consolidated net loss of $44.68 million compared to an unaudited net profit of $9.58 million. The company’s 2023 audited financials showed that it had no consolidated revenue but had $32.90 million in other operating income and a $8.74 million consolidated net profit.
Due to the acquisition of MFS Limited, MFS’ asset base grew from $65.64 million to $752.66 million. However, its consolidated debt load rose to $437.02 million when accounting for the mixture of long-term debt and related party debt. The company also moved from a shareholder deficit of $39.91 million to consolidated shareholder’s equity of $173.31 million. That was due to the company issuing 260.4 million new ordinary shares with a face value of $244.76 million.
According to the company’s shareholder holdings report, MFS Acquisition added 261.54 million ordinary shares to its position during the fourth quarter which moved its interest in the company from 53.52 per cent to 72.02 per cent. A subsequent market disclosure noted that MFS Acquisition sold 84,166,667 shares on August 19 pursuant to a resolution approved at the company’s February 2024 annual general meeting (AGM). MFS shareholders also approved the ability for MFS Capital Partners to issue up to 380 million new ordinary shares in a renounceable rights issue.
The company informed the market on Friday that its chief financial officer (CFO), Dr Kesha Christie, had resigned on June 30, a year after she took up the role. Robert Barnes, MFS’ chief operating officer (COO), was stated to take over the CFO responsibilities.