NATIONAL Tyre Services (NTS) recently issued a cautionary statement on October 10 announcing that its Board had approved the termination of the company’s listing on the Zimbabwe Stock Exchange (ZSE).
The company indicated that further details will be communicated once all regulatory processes have been finalised. This announcement follows closely on the heels of the release of NTS’s FY25 financial results in September.
The results paint a sobering picture of the group’s financial health and raise important questions about the timing and strategic rationale behind this decision to delist.
Results reveal deep strain
For the year ended March 31, 2025, NTS reported a net loss of approximately US$3,5 million. Even more concerning, the company’s current liabilities exceeded current assets by circa US$1,6 million, signalling significant liquidity pressures and casting doubt on its ability to continue as a going concern.
These figures underscore the magnitude of operational and financial headwinds the tyre distributor is facing amid a challenging macroeconomic environment characterised by constrained access to foreign currency through formal channels.
The company’s adverse audit opinion further complicates the outlook. The auditors flagged non-compliance with IAS 21 (The Effects of Changes in Foreign Exchange Rates), questioning the appropriateness of the functional currency applied in the preparation of the financial statements.
Additionally, they raised concerns regarding the fair valuation of investment property, implying that NTS’s balance sheet may not accurately reflect the true economic value of its assets.
- Inaugural Zim investor indaba highlights
- Stop clinging to decaying state firms
- ZB explores options to tackle inflation
- Zim operations drive FMB Capital
Keep Reading
Taken together, these issues highlight a level of accounting uncertainty that could directly influence how investors and regulators view the company’s fair value during any delisting or exit process.
Rationale behind delisting
Given the company’s precarious financial position, market observers are debating whether the decision to delist represents a strategic pivot aimed at enabling a leaner, more flexible operating environment or whether it is simply a defensive move to shield the company from the transparency and compliance obligations of public market scrutiny.
From a strategic perspective, delisting can provide management breathing room to restructure operations and recapitalise away from the short-term expectations of public investors.
NTS’s current losses, liquidity pressures and audit qualifications would likely make it difficult to raise additional equity on the Zimbabwe Stock Exchange (ZSE) without significant dilution or a major investor injection.
By moving to an unlisted environment, the board may be seeking to pursue private recapitalisation options, debt restructuring or asset rationalisation initiatives that could be executed more efficiently outside the regulatory constraints of the exchange.
However, the timing of this decision, immediately following the release of adverse financial results, could also be read as a signal of distress, suggesting that the company may be struggling to comply with ongoing listing requirements, particularly those relating to solvency and audit quality.
If the delisting process is not accompanied by a credible turnaround plan, the market could interpret it as a step towards eventual restructuring or even liquidation rather than renewal.
Shareholders: Implications
One of the most critical considerations in any voluntary delisting process is the treatment of minority shareholders. The ZSE’s regulatory framework requires that a company proposing to delist must offer an exit option to remaining investors at a fair valuation. Yet, in NTS’s case, determining a fair value could prove challenging.
The adverse audit opinion introduces significant uncertainty into any valuation model. Questions about the functional currency, asset valuations and going concern status will likely depress the assessed value of the company.
Investors will naturally demand a risk premium to compensate for the opacity of financial disclosures and the uncertain prospects of the business.
As a result, the exit price offered to minority shareholders could be materially below what historical trading prices might suggest.
Market analysts will be watching closely to see how regulators, independent valuers, and the board navigate this process, particularly whether any major shareholder or strategic investor is positioned to acquire the remaining free float as part of a buyout or restructuring deal.
Is turnaround feasible?
In his chairperson’s statement, NTS outlined a strategy aimed at restoring profitability through cost reduction, operational efficiency, and branch network optimisation.
The company also highlighted persistent challenges such as rising input costs, supply constraints and foreign currency shortages. While these initiatives are sensible, executing them effectively will require both liquidity and management agility.
Operating in a private environment could, in theory, allow management to focus on operational turnaround without the pressure of reporting or investor sentiment.
The company might also be able to negotiate supplier and financing terms more flexibly. However, the absence of market scrutiny could also reduce accountability, and without new capital injection, the underlying solvency risk remains unresolved. Simply delisting does not fix the balance sheet.
Going forward, analysts and creditors will expect to see clear, measurable steps from NTS to address its going concern risks. These might include debt restructuring, asset rationalisation, cost optimisation, operational realignment and governance and financial improvements.
Taimo is an investment analyst with a talent for writing about equities and addressing topical issues in local capital markets. He holds a First Class Degree in Finance and Banking from the University of Zimbabwe. He is an active member of the Investment Professionals of Zimbabwe community, pursuing the Chartered Financial Analyst charter designation.
