Investors bank on dividends. Failure to pay a dividend can cause all kinds of consternation, especially for those relying on dependable income flows.
In early 2009 mining giant Anglo American earned the ire of shareholders when it skipped its final dividend to preserve its balance sheet because resource prices were under pressure following the global financial crisis. Shareholders were aghast that a diversified resources behemoth and bellwether stock would unceremoniously halt distributions.
Skipping a dividend is one thing. But it’s quite another matter when a company declares a dividend and subsequently delays payment for an unforeseen period. That will really get shareholders’ hackles up.
One of the JSE’s smallest counters, technology group Labat Africa, has done the unthinkable and now needs to urgently explain why a declared dividend has not been paid on the designated date. Its failure to deliver the dividend prompted the JSE to suspend trading in Labat’s shares last week, while miffed investors are now rallying support for a special meeting of shareholders to call directors to account.
The developments have puzzled even the oldest market watchers, who cannot recall a company ever reneging on or even delaying payment of a declared dividend (unless a public holiday got in the way).
It all started on June 23 when Labat’s board advised shareholders that “following a period of significant operational progress and value creation across the group”, the company declared a maiden cash dividend of 1c a share.
Labat was listed in the late 1990s as an empowerment vehicle and has endured many (mostly unsuccessful) iterations — including stints in furniture retailing, microchip manufacturing, logistics, fuel services, cannabis … and, most recently, technology. In the past couple of years Labat has executed a string of small technology company acquisitions, mostly funding these deals with scrip.
The last set of results — the unaudited interims to end-November 2025 — reflected earnings of 3.64c a share and NAV of 25c a share. A trading update for the year to end-May this year, released in April, pencilled in headline earnings of 11.15c a share and NAV of 34.4c a share.
Based on these numbers, a 1c a share dividend declaration would not seem out of the ordinary. But Labat’s share price was trading at between 3c and 5c, reflecting scepticism about the companies it had acquired, which were not well-known in the tech sector. Some of the companies did not have the reassuring online presence that investors would usually associate with a technology services company.
The dividend declaration, however, suggested that Labat’s profitability and cash flows were intact. In fact, the board believed the dividend “milestone” reflected the continued execution of the group’s strategic objectives and the growing contribution of its investments and operating businesses, including Classic and Ahnamu.
The board added, for good measure: “The declaration of this dividend is both a recognition of the progress achieved by the group and a demonstration of the board’s commitment to delivering tangible value to shareholders.”
On July 30, a day after the last day to register (LDR) for the dividend, Labat issued a statement on Sens that pushed out the implementation timetable of the maiden dividend. This purportedly followed consultations between the board, management and the company’s external auditors. While the timetable was extended, Labat has still not provided a new timeframe for the dividend payment.
What Labat’s board did say was that aligning implementation of the dividend with the publication of audited annual financial statements was in the best interests of the company and its shareholders.
Curiously, the Labat board felt this approach would be useful in ensuring shareholders had access to the company’s latest audited financial information prior to implementation of the dividend.
The issue now is that Labat’s year-to-end-May audited financials missed the deadline of Monday August 31, and are still outstanding. Labat company secretary Alred van Rooyen tells the FM the board is engaging with the relevant stakeholders regarding the finalisation and publication of the annual financial statements. But he adds: “At this stage, I am not in a position to confirm that the results will be published [on September 1] or provide a definitive alternative date. We will communicate the anticipated publication date to the market through Sens once sufficiently confirmed.”
Labat has issued assurances that the dividend will still be 1c a share and that the board will be “pleased to be implementing the company’s maiden dividend once the revised timetable has been approved”.
Van Rooyen reiterates the commitment to the dividend previously declared. “As communicated previously, the dividend payment will take place once the annual financial statements have been published and the necessary processes have been completed.”
He says Labat appreciates the importance of providing the market with clear and accurate information, particularly given the current circumstances. “We will ensure that material information is communicated through the appropriate channels.”
For now, shareholders might consider the JSE’s actions as an ominous portent. The exchange, which has often been chided for being slow to act in matters that might prejudice shareholders, suspended Labat’s shares last week after engaging Labat about the failed dividend payment.
The JSE made a point of explaining that the suspension decision was taken after hearing Labat’s submissions and its objection to the suspension.
What might snuff out any slim hopes the dividend might still be paid at all was the JSE’s admission that it had considered information provided by Labat regarding alternative arrangements for settlement of the dividend obligation. Worryingly, the bourse noted: “Based on the information provided by the company, uncertainty remains regarding the settlement of the declared dividend.”
What is important for shareholders is that the JSE has clearly instructed Labat to publish an announcement containing further information relating to the dividend matter. Nothing has yet been issued by Labat, and it seems unclear whether the JSE can take further action in this regard.
One shareholder, who asked not to be named, believes the JSE needs to reverse the share trading transactions that took place between the dividend declaration date and the LDR. That would mean investors that bought on the dividend announcement are not prejudiced by the dividend delay, and shareholders that sold on the dividend news are not unfairly advantaged.
Andre Visser, director of issuer regulation at the JSE, says that under the circumstances, it would not be appropriate for the JSE to comment further.
Asked if the JSE is still engaging with Labat about the issue, Visser cites section 73 of the Financial Markets Act, which bars the exchange from disclosing confidential information obtained in the performance of its regulatory functions. “The information sought in your inquiry falls within the ambit of such confidential information and the JSE is therefore unable to comment further on the matter.”
The FM understands that Labat has disputed the JSE’s contention that it did not make alternative arrangements to transfer the full dividend amount due to shareholders to Strate (the JSE’s central securities depository), as required by the JSE. Labat apparently proposed paying 30% of the declared dividend on September 4, another 30% on September 25 and the remaining 40% at a later date. Such a staggered dividend payment would also be a first for local investors.
It’s not only the dividend delay that has alarmed shareholders but also the lack of information about a share buyback exercise announced in February. The stipulated share buyback period was set to stretch from mid-February to the end of May — but no details of the buyback have been announced.
Van Rooyen tells the FM he is still obtaining confirmation of the latest position and the number of shares acquired under the buyback programme. “I will revert with the confirmed information rather than provide you with an unverified figure.”
A spokesperson for the shareholder activist group that is pushing for a special meeting stresses the aim is not to remove and replace directors but to hear a detailed explanation of recent developments. “I don’t think anyone wants to be dropped into this mess. But shareholders do want to get to the bottom of this dividend debacle.”
