Retailer Smiths City to shore up falling share price with buy back

Tuesday, 16 January 2018

The Smiths City share price has fallen recently.

Christchurch-based furniture and appliance retailer Smiths City has set up a share buyback scheme to help shore up its share price.

The price has fallen from 75 cents a share a year ago to 58c after the company shelved a special payout to shareholders and reported soft trading before Christmas.

The buy back may be a defensive move against a cheap takeover by two investment companies associated with Sir Ron Brierley which have a 19.9 per cent stake in Smiths.

Hamilton Hindin Greene investment advisor Grant Daviessaid the company would need to take care it did not reduce the number of shares on issue to the extent it would lift the Brierley group's percentage and trigger the stock exchange's 20 per cent compulsory takeover rule.

* Smiths City hit by softer trading, defers shareholder payout**

Davies said the shares in Smiths were not heavily traded which meant the price could be easily affected if a few people sold at low prices.

The buy back arrangement would be restricted to 5 per cent of the company's shares, Smiths chairman Craig Boyce said in a statement to the New Zealand Stock Exchange,

'Directors have agreed to a limited programme of tactical buybacks aimed at overcoming the short-term share price distortions caused by low-volume trades in the company's shares,' he said.

The programme would be managed to ensure that Smiths City's major shareholders did not inadvertently breach the takeovers code threshold, Boyce said.

The actual number of shares that would be bought back was likely to be considerably lower than 5 per cent, he said.

The buy back was 'part of Smiths ongoing commitment to ensure shareholders benefit from the group's underlying performance improvements', Boyce said.

'Smiths City is in a strong financial position. At the end of October 2017, the company had cash and cash equivalents of $9.9 million on hand and $55.9m of borrowings, all of which were held against Smiths City Finance receivables.

'Meanwhile, the transformation programme initiated three and a half years ago is steadily making Smiths City a more resilient business. The share buyback facility gives us another tool to ensure that shareholders benefit from the progress we have made.' Boyce said.