Isetan to pay out $1.50 a share to use tax credits

RETAILER Isetan (Singapore) yesterday showed that it was not deaf to minority shareholders' plea by announcing that it will pay dividends of $1.50 per share to use up some of its tax credits.

The payout is less than the around $7 a share Isetan's Section 44 tax credits of under $60 million can translate to, but may go some way to break the 'dividend deadlock' with disgruntled minority shareholders.

These investors have been clamouring for Isetan to use up its tax credits by paying dividends before they expire at the end of this year.

About 200 minority shareholders tried, but failed, to oust the retailer's independent shareholders last year.

Their drastic action prompted Isetan to look into the matter, together with controlling shareholder Isetan Japan.

Yesterday, the retailer said it had initiated but abandoned plans for a rights issue exercise as its parent is, 'for its own reasons, not able to support a proposed rights issue exercise'.

Instead it will pay the $1.50 cash dividend as a final and special dividend for the year ended Dec 31.

'The company has always maintained that the board is supportive of an effort to return to shareholders its available Section 44 tax credits as far as it is able, given business and financial constraints,' it added.

The Singapore-listed company has been in active discussions with professionals, it said. Isetan Japan has also been in consultation with its own advisers in Tokyo over the proposed rights issue.

Isetan Singapore has even written to the Inland Revenue Authority of Singapore, obtaining a favourable ruling on the tax treatment of a proposed dividend payment and rights issue. Under this proposal, shareholders would have been paid a cash dividend, with the option of using this to subscribe for the rights.

However, despite its 'strenuous efforts and serious discussions' with its parent, it was recently informed of Isetan Japan's decision not to support the rights issue.

Section 44 tax credits allow investors whose tax rate is lower than the corporate rate to get a refund on the tax they incurred on dividends. Companies were given until the end of this year to make use of the tax credits they chalked up under the old tax system, after the new one-tier system came into effect at the start of 2003.

Isetan also announced a 48.3 per cent jump in net profits for the year ended Dec 31, to $14.4 million yesterday.

Sales rose 7.6 per cent to $309.2 million. Earnings per share rose from 23.5 cents to 34.8 cents. Net asset value rose from $4.71 to $4.87.

Isetan shares yesterday closed unchanged at $6.