Listed clothing retailer Edgars Stores Limited has extended by three weeks the ZWL$70m cash call deadline following the suspension of trading on the Zimbabwe Stock Exchange (ZSE).
Edgars wants existing shareholders to inject ZWL$70m into the business as it moves to intensify productivity of existing footprint and deepen the product portfolio offered by the group’s credit and financial services.
In a notice to shareholders, Edgars said the board had decided to extend the rights offer period by an additional three weeks and the Rights Offer closure date has been revised to 7 August from July 17.
“Additionally, stakeholders should be advised that Letters of Allocation will be tradeable once the ZSE re-opens,” Edgars said.
Last month, Edgars’ shareholders approved the raising of additional capital
by way of a rights offer of 274,745,630 ordinary shares of a nominal value of ZWL$0.01 (1 ZWL cent) each, at a rights offer price of ZWL$0.2548
(25.48 ZWL cents) per share.
It will come on the basis of five new ordinary shares for every six ordinary shares in issue as at the record date.
The rights offer shares represent 45.66% of the company’s enlarged ordinary share capital post the proposed rights offer.
Edgars said the injection of new capital into the business will ensure sufficient depth and breadth of inventories, productivity improvements through digitisation, and refurbishment initiatives at stores and extend the geographical footprint through the commissioning of new sites.
The clothing retailer said if the capital raising initiative is not implemented, Edgars will be unable to effectively compete in the market.
The company will face significant capital expenditure constraints, high finance costs, and unmet working capital requirements, it warned.
It said the failure to inject capital into the business will limit its capacity to write new business under Edgars Financial Services and will continue to experience operating inefficiencies from inefficient and unproductive methods.
Edgars said failure to inject capital will leave the company with higher than desired leverage, thereby affecting profitability.
Of the money raised from shareholders, ZWL$$66,310,000 will be deployed towards working capital and capital expenditure while the remainder
(ZWL$3,690,000) will be channelled towards estimated expenses of the cash call.
In its financial results for the 52 weeks ended January 5, 2020, Edgars’ revenues fell 5% to ZWL$595.2m from ZWL$629m reported in the prior comparable year due to tumbling consumer spending in a challenging operating environment.
Profit for the year plummeted 81% to ZWL$18m from ZWL$92m in the previous year.
The Edgars chain recorded a turnover of ZWL$390m from ZWL$368m out of its 26 stores, reflecting a 6% increase.
Sales volumes went down 19% to 1.399m from 1.736m in the prior year. Profit to sales ratio declined to 24.1% from 27.3% in the prior year.
Total turnover for Jet chain was ZWL$218.7m from ZWL$245.2m out of 27
stores, which was a decrease of 10.8%. Volumes declined by 27.6%. The chain’s profit to sales ratio declined 19.6% from 22.8% in the prior year.
The factory made an operating profit of ZZWL$12.6m from a ZWL$12. 8m loss recorded in the previous year. About 6% of sales were exports while 94% were made to Edgar’s and Jet chains.
The microfinance business revenue declined marginally to ZWL$12.4m from ZWL$12.8m. Profit after tax stood at ZWL$924 000 from ZWL$5.2m reported in the prior year. Loans to customers declined to ZWL$6.5m from ZWL$27.1m after an allowance for credit losses of pZWL$0.05m.
Total assets for the group were 27% up to ZWL$580m from ZWL$456m. Total liabilities went up 68% to ZWL$181m from ZWL$108m.
The underwriter for the transaction is Annunaki Investments (Pvt) Limited, a Zimbabwean registered 100% owned subsidiary of SSCG Africa Holdings. SSCG is the 100% effective beneficial owner of Bellfield Limited which has an effective 40.63% interest in Edgars. A rights offer is the cheapest way to raise money as shareholders subscribe to new shares.