THE directors of National Tyre Services (NTS) are asking shareholders to remove limits on their borrowing authority to avoid prejudicing the company.
At the company’s upcoming 59th annual general meeting scheduled for September 30, shareholders will decide on an amendment of section 87 of the company’s articles of association, which limits unsanctioned borrowings to the nominal value of capital raised from the issue of shares combined with all free reserves on the company’s books at any given point.
“Article 87… is not flexible enough to empower directors to timeously react to a changing business operating environment.
“This situation may result in directors not being able to raise or borrow or secure funding in excess of limits stipulated in Article 87 when it becomes necessary to do so to fund urgent critical company projects and operations,” the NTS board said last week in a circular to shareholders.
If the amendment passes, directors would gain authority to borrow “any sum… at their discretion” and secure the repayment of such debts upon any terms “as they think fit”.
As of March 31, 2021, NTS’ borrowings amounted to $78 million against a shareholders’ equity balance of $239 million.
The company recorded an eight percent increase in sales during the year, which board chairman James Moyo attributed to product mix optimisation.
In a statement accompanying results for the 12-month period, the chairman said the company remains optimistic of a continued uptrend in sales on account of its confidence in ongoing strategy reviews, which would also benefit from additional borrowing space.
The company is also optimistic that it will achieve its targets this year, but says the availability of foreign currency to import stock will be a key factor in this regard.
“Effective containment of the Covid-19 pandemic will also provide a conducive operating environment to promote volume growth, going forward,” the company said in a recent trading update.
NTS is the largest retailer of new tyres and tubes in Zimbabwe. It is also in the business of retreading agriculture and earth moving tyres.
The company has 14 retail outlets throughout the country. The origins of NTS dates back to 1926. The company was listed on the Zimbabwe Stock Exchange in 1963.