BUSINESS REPORTER
Consumer staples concern, Innscor Africa Limited, says it is migrating to the Victoria Falls Stock Exchange (VFEX) to get better access to United States dollar equity capital required to support its capital expenditure.
The Zimbabwe Stock Exchange listed concern has announced plans to migrate to VFEX from the local currency only bourse. Estimated completion of Innscor VFEX listing is February 24.
“In future, Innscor will assume a greater ability to raise equity capital in foreign currency to support the Group’s capital expenditure, working capital requirements and regional expansion requirements. The VFEX’s potential to become a regional exchange enhances Innscor’s opportunity to draw in a wider investor pool,” Innscor said in a circular to shareholders published yesterday.
“Furthermore, a VFEX listing requires US$ financial reporting, which contributes to a lower risk perception of Innscor and an enhanced understanding of the Company’s financial position. This will provide the company with increased leverage to access other forms of finance at favourable terms.”
Innscor said it has also been lured by the lower trading costs on VFEX which allows shareholders to retain more of their capital and potentially stimulating the liquidity of Innscor shares. The VFEX trading costs at 2.12% are lower than the 4.63% prevailing on the ZSE.
It said listing on the dollar only bourse gives the firm access to offshore settlement which allows for efficient dividend repatriation for foreign shareholders.
Innscor said VFEX offers tax incentives for shareholders which include a 5% withholding tax on dividends for foreign investors compared to a withholding tax of 10% for non-resident shareholders on the ZSE.
“…while capital gains at a rate of 40% apply on the ZSE, on the VFEX, no capital gains tax on share disposal is charged, thus providing optimised earnings for Innscor shareholders on the VFEX compared to the ZSE,” the consumer staples concern said.
It said the migration to the dollar only bourse enhances regional profile and commercial standing, thereby creating pathways to the group’s local and regional prospects.
Innscor said a VFEX listing reduces valuation volatility caused by currency translation.
“The provision of a de facto third-party USD valuation of the company enables Innscor’s existing shareholders to realise the true value of their holdings and provide a more accurate benchmark of the stock’s performance while mitigating valuation volatility,” it said.
Innscor said listing on the VFEX provides more proficient financial reporting for its consolidated financial statements as entities on the bourse are required to report in US$, “resulting in more effective reporting as the “true value” of the business would be conveyed through the financial statements, thus providing shareholders with an “enhanced capacity” for decision making.
