BUSINESS REPORTER
BridgeFort Capital Limited is considering delisting from the Zimbabwe Stock Exchange and migrate to the Victoria Falls Stock Exchange (VFEX), becoming the latest firm to be lured by incentives on the dollar-denominated bourse.
“The company remains focused on the conclusion of acquisitions that are in the works whilst considering a migration to the VFEX at the appropriate time,” BridgeFort Capital CEO Vernon Lapham said in a trading update for the quarter ended March 31, 2023.
He said BridgeFort Capital continues to pursue transactions to broaden its investment portfolio, and shareholders will be updated on any further developments in due course.
The Class A portfolio primarily includes 50.1% of Zvemvura Trading (Private) Limited, trading as MedTech Distribution, and Chicago Cosmetics (Private) Limited, a 51% subsidiary of MedTech Distribution.
During the first quarter of this year sales volumes were lower than Q1 2022 by 31% although the product mix changed significantly – especially for products manufactured locally by the business.
In US$ equivalent value terms, as used for internal reporting, sales increased by 7.7% for the quarter to US$1.07m as compared to Q1 2022.
This was, however, a decline from U$1.42m in sales for Q4 2022 and Q1 is typically slower than Q4 hence this result is in line with expectations.
The MedTech Businesses are significantly exposed to the devaluation of the Zimbabwe dollar due to ZWL being held for auction bidding purposes, where allocations are typically a lot less than the foreign currency applied for, he said.
In addition, the bulk of sales is to supermarkets in local currency which take extended periods to pay, further exposing the businesses to devaluation risk.
Borrowings are typically secured to mitigate this risk but with the high interest rates the level of borrowings has been inadequate to hedge the ZWL exposure.
While a transaction is pursued, the Class B portfolio comprises an effective 50.1% of a stand registered in the name of MedTech Distribution.
The board is exploring opportunities to develop this property and to include it in a REIT to be listed later this year, Lapham said.
This property was last valued at US$200,000 in 2021 giving the BridgeFort Class B Preferred shares an underlying asset value of US$102,000 or US$0.08 per share.
Over the past six weeks or so, the parallel market rate has moved considerably.
“This movement is particularly painful for the formal sector which is obliged to accept ZWL and is even worse for credit suppliers to supermarkets such as MedTech Distribution.
“As the only ones who are required to embrace it, the formal enterprises are the last line of defence for the ZWL$, while the informal sector has rejected it,” Lapham said.
In the outlook, the company is pessimistic about the future as the country draws closer to elections as the operating environment becomes more uncertain.
