Company will engage shareholders further on selective capital reduction at a later engagement dialogue arranged by Sias

 

DISGRUNTLED shareholders of beauty product distributor Best World International : CGN 0% raised questions over the lack of dividend payouts and the compensation of directors at the company&rsquo s first in-person annual general meeting (AGM) in five years.

 

Questions were also raised over the mainboard-listed company&rsquo s decision to delist via a selective capital reduction at the AGM. The company has proposed to offer S$2.50 per share.

 

The meeting, which was held at Mapletree Business City on Friday (Apr 26) morning, ran for about two hours and was followed by a separate one-hour session to address concerns specifically on the exit offer.

 

About 50 people attended the AGM, and approximately 20 stayed on for the extended session.

 

The extended session was held after a group of shareholders, in a letter to Best World dated Mar 21, sought to requisition an extraordinary general meeting (EGM), or for certain resolutions to be considered at the AGM. They subsequently withdrew the requisition letter while reserving their rights to issue the requisitions again in future.

 

Lack of dividends

During the AGM, several shareholders asked if they could expect dividends in view of the delisting, following a lack of dividend payouts in previous years.

The company has not paid its shareholders a dividend since FY2019 when it disbursed an interim dividend.

 

In its latest annual report for FY2023, the mainboard-listed company said that it would not declare a dividend given the &ldquo uncertain business climate&rdquo as well as &ldquo working capital requirements and corporate actions capital needs&rdquo .

 

Huang Ban Chin, the executive director and chief operating officer of the company, said that the company has set aside S$375.5 million for the exit offer.

 

He said that there would not be a dividend payout as the company had to conserve cash.

 

Financial institutions were only willing to finance the delisting deal if they could see that the company was able to pay them back immediately, he said.

 

&ldquo If we actually sign a deal with (the banks), the amount of cash that we see sitting in Singapore, earmarked for this purpose, has to be transferred to their account before the exercise is complete. That&rsquo s the harsh reality of it,&rdquo said Huang.

 

Director salaries

Early in the meeting, shareholders asked how the pay for the company&rsquo s executive directors was determined, with one shareholder describing it as &ldquo quite high&rdquo and on a par with the chief executive officers of bigger companies.

 

According to Best World&rsquo s latest annual report, group chief executive officer Dora Hoan and president Doreen Tan both draw a salary within the band of S$10.8 million to S$11 million while Huang&rsquo s salary is within the range of S$6.5 million to S$6.8 million.

 

Adrian Chan, an independent director and chairman of Best World&rsquo s remuneration committee, said that the company relied on advisory consultancy HRGuru to benchmark their salaries in line with industry and market norms.

 

Chiming in, Kevin Goh, a consultant with HRGuru, said that their pay was based on a profit-sharing scheme, where 17 per cent of the profit goes into their pay. About 30 per cent of listcos in Singapore paid more than 17 per cent, said the consultant.

 

When asked by a shareholder if the salary formula remained relevant, Chan said that it was &ldquo not appropriate&rdquo to review the remuneration formula while the delisting exercise was ongoing as the company had to retain stability.

 

&ldquo But it&rsquo s certainly something that the remuneration committee can consider moving forward if this delisting fails,&rdquo he added.

 

Decision to delist

Amid questions posed by shareholders on the need to delist and if other options had been considered, Hoan said that short-selling of the stock and the increasing risk of operating in the China market had led the company to decide on delisting.

 

The exit offer will provide shareholders with a way out, she added.

 

Huang said that if the exit offer is not accepted by shareholders, the company will make extra effort to &ldquo beef up&rdquo the offer, although this process would take another year as repatriation of Best World&rsquo s retained earnings take place yearly.

 

The company is set to engage shareholders further on the selective capital reduction at an engagement dialogue arranged by the Securities Investors Association (Singapore) at a date to be fixed.

 

It also intends to obtain approval for the selective capital reduction at an EGM.