BUSINESS REPORTER
Listed clothing retailer Edgars Stores Limited has asked shareholders for a
ZWL$70m cash injection into the business as it moves to intensify productivity of existing footprint and deepen product portfolio
offered by the group’s credit and financial services.
The capital raise will be done through a renounceable rights offer to recapitalise Edgars 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. The transaction has
to be approved by shareholders at an extraordinary general meeting of shareholders on June 16. In an abridged circular to shareholders,
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
ZWL$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.
