Polaris plans to cancel its share capital by $393.6 million to reflect accumulated losses incurred from a series of impairments, allowances and operational losses.
By doing so, the company hopes to “rationalise” its balance sheet, so as to better reflect the value of its underlying assets and financial position.
Polaris now has an issued and paid-up capital of $402.8 million, with a total share base of nearly 17.1 billion shares.
The capital reduction, which would require approval from shareholders at an EGM to be called, can also help facilitate future equity-related fund-raising exercises to recapitalise its balance sheet.
“The company would also be in a better position to retain profits and enhance its ability to pay future dividends, when appropriate, if the accumulated losses are written off,” says the company on July 2.
Polaris used to run a retail business selling Apple products and is also a customer service agent for Dyson.
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However, in recent years, the bulk of its turnover came from its 51% stake in a second-hand luxury goods business in the US, Marque Luxury America.
The joint venture partner is one Quentin Philip Caruana, who holds the remaining 49% of the shares.
For FY2022 ended Dec 31 2022, Polaris 5BI ’ revenue increased by 31.1% to $70 million, led by its second-hand luxury goods sales, which contributed nearly $50.1 million of the revenue, up from $33.1 million in the preceding FY2021.
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However, total losses widened from $394,000 to $3.7 million in the same period.
Polaris attributed the losses to MLA, which “expanded operations rapidly while not attaining its ambitious growth targets,” states the company on March 1.
“The pre-owned luxury goods space, in which the company’s pre-owned luxury goods 'recommerce' business operates, has seen lower ticket items becoming more popular as the outlook for the economy has remained uncertain,” explains Polaris in its earnings commentary.
Back in Feb 2022, the company said it has entered into a subscription agreement to raise US$10 million from an unnamed investor in exchange for 60.8% of the shares in MLA.
Upon completion of the new funds, Polaris' effective interest will be reduced from 51% to 19.99%.
However, in its March 1 earnings announcement, Polaris says it has yet to receive the US$10 million from the investor. Polaris says it is in talks with this investor on the next steps.
In its March 10 announcement this year, Polaris announced that Caruana, who runs MLA as its president, has resigned on Feb 27.
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According to Polaris, it has on March 8 "swiftly" engaged Kroll to review and manage the finances of MLA.
Polaris is closely held. It is controlled by executive director and chairman Sugiono Wiyono Sugialam. As at March 29, he held 63.30% of the shares, as listed in its annual report. Standard Chartered Private Equity is the second largest shareholder with a stake of 23.84%.
Polaris shares last traded at 0.1 cent.
