Interfresh seeks approval to recapitalise

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LISTED agro-industrial concern, Interfresh is seeking shareholder approval to raise $3 million through a rights offer, as part of plans to recapitalise and retire short-term borrowings.

REPORT BY GAMMA MUDARIKIRI

In an abridged circular sent to shareholders yesterday, Interfresh said it was seeking approval to consolidate the authorisation and issue of ordinary shares by a factor of 10.

The company said if the deal is approved by shareholders at an extraordinary general meeting (EGM) scheduled for July 22, it will reduce authorisation and issue of shares by a tenth to 60 million and 48,7 million from 600 million and 487 million, respectively.

“Subject to shareholder approval by members at the EGM, members of the board of directors wish to raise $3 million through a rights offer,” part of the statement reads.

A right offer involves the issue of rights to a company’s existing shareholders that entitles them to buy additional shares directly from the entity in proportion to their existing holdings, within a fixed period.

The company said 150 million new ordinary shares will be offered to existing shareholders for subscription at a cash price of $0,02 each, payable in full acceptance on the basis of 3,08 for every single ordinary share.

According to the company, the shareholder consolidation is intended to rationalise the number of authorised and issued shares to create sufficient headroom for issuing new ordinary shares for the proposed recapitalisation plan.

Since dollarisation in 2009, Interfresh has not had any capital injection and instead has been relying on debt to finance its operations.

The company said the cost of short-term debt was high and unsustainable.

Interfresh secured a $5 million loan in May 2011 to fund capital projects and had to dispose its Graniteside complex to retire short-term debt and provide working capital relief.

However, in 2012 the company had severe working capital constraints and secured another $1,25 million short-term bridging loan from Icejay Investments (Pvt) Limited.

Interfresh early this year warned of a 30% slump in revenue after the government acquired a 1 600ha portion of its citrus estate, blighting the company’s hopes of returning to profitability.

The company said the consequent revenue and asset impairment had left the balance sheet in need of restructuring through increased equity funding.

The issue and allotment of new shares in pursuance of the proposed rights offer is expected to raise equity capital to retire bridging short-term debts and finance working capital requirements, while it will also allow for the restructuring of the balance sheet by reducing debt.

Disapproval of the transaction by shareholders will mean that the company will fail to fund its operations.

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1 COMMENT

  1. This is a development that should have long been implemented when this company was still on its feet. Its sad that Interfresh has been run down and as usual no one wants to admit their incompetence but always blame other factors including liquidity etc. Shareholders in Zimbabwe are taken for a ride I bet. If one was to look at this company soon after dollarization they will realize that the balance sheet has continued to shrink. The question is it all about the need for cash or its about how this business is being managed. The then board in its wisdom found it fit to dispose the building in Graniteside under the guise of raising funds to retire expensive debt, and working capital. The building was sold, but the company’s performance still has not improved but if anything it has gotten worse. The question is what guarantees other than the erosion of shareholder value does one hope for by participating in this rights offer. Its very sad a lot of people have been laid off in this company due to what I consider incompetence. How on earth the board accepts such poor performance baffles any same investor. Anyone who is going to participate in this event must look at the factors above and start to ask themselves whether its not about time to evaluate whether the investment is a viable one and if it is ask if its about money or management competency. Revisit what management and the board promised when the building was sold and ascertain why things didnt go according to plan. Its about time management and Boards in Zimbabwe are taken to task. Shareholders should wake up and ensure that they do not cover management incompetence by raising cash resources which couldn’t have been the case should responsible and competent people have been in those positions of authority. The question that I would want every investor to ask themselves is:

    a. Since dollarisation has the company’s balance sheet grown or shrunk, and why. Accept no flimsy excuses, because that is the role of management to come up with strategies to preserve value. What are they being paid to do if they cant do that
    b. A building which was a symbol of this company which could have been better utilised had capital been raised to increase capacity at that point was sold with the Board and management promising a turnaround. Did this happen and if not why. People must be held to account
    c.If USD3million is invested what should shareholders expect in return. Interfresh share price has actually lost value post dollarisation, and the company has been posting a string of loses. So the question is what should an investor expect if there is no return from a share price growth perspective or dividend
    d. Does the company have the right management. Is the structure right. Isn’t this company being run like a personal fiefdom

    Food for thought for investors

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