A SENIOR Zimbabwe Stock Exchange (ZSE) official has indicated that buildings material group, PG Industries, will only resume trading on the bourse once its proposed scheme of arrangement has been approved by the High Court. The group was suspended from the ZSE on December 31 2013.
The ZSE official said the stock market, in accordance with the provisions of Section 1.7 of the Stock Exchange Listings Requirements, would not lift the suspension until the plans under consideration have been finalised and approved by shareholders. Market watchers said PG had failed to attract capital from potential investors due to lack of confidence on its turnaround plan.
The group is currently considering a scheme of arrangement which was unanimously approved by shareholders in March. The scheme, however, still awaits approval by the High Court. The company is heavily undercapitalised and needs massive cash injection to ensure its equity position moves from negative to positive. The company is currently technically insolvent.
Acting chairman Francis Dzanya said the company was banking on the High Court to approve its scheme of arrangement in order to restructure its balance sheet and get new capital. During the interim period to June 30, 2014, interest bearing borrowings, which have been the source of much of the group’s problems, reduced by US$5,5 million to US$13,6 million. This resulted in a reduction of interest costs from US$1 389 484 to US$170 808.
The group is seeking to raise close to US$4 million through a rights issue. The funds raised from a rights issue would be used to strengthen the working capital position by purchasing additional stock. At present, the group’s stock mix is currently sub-optimal and characterised by a number of slow moving lines. The funds will be used to reconstitute this stock mix in a bid to enhance stock turnover.
Analysts said a turnaround would require PG to also embark on debt restructuring and cost structure rationalisation. The group said it had concluded a number of stock supply arrangements which would result in delivery of significant volumes of products and would have impact in the second half of the year.
PG has over the years been struggling to fund working capital overheads in spite of previous capital raising initiatives. The group has been haemorrhaging for the past five years. The group’s main shareholders, TA Holdings and ABC Holdings, wrote off their investments in the company to avoid the exposure on their earnings. The group’s net sales declined by 39 percent to US$10,3 million for the half year to June 2014 from US$16,9 million during the same period the previous year. — Staff Reporter
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