- This was narrowed from a loss of ZWL3 billion
- However, losses for class A more than doubled
- About Bridgefort
Harare- Bridgefort Capital Limited, a diversified entity listed on the Zimbabwe Stock Exchange (ZSE) has managed to reduce its losses for the six-month period ended 30 June 2023. The company reported a loss of ZWL302 million, a significant improvement compared to the ZWL3 billion loss recorded during the same period in 2022.
The company is involved in manufacturing, retail, distribution, and services. It operates within three distinct market segments, namely fast-moving consumer goods (FMCG), medical supplies, and the manufacturing of light industrial products. Within the FMCG division, BridgeFort Capital Limited engages in the production and marketing of personal care products. This includes items such as cosmetics, toiletries. In the medical division, the company focuses on the manufacturing of pharmaceutical products. It is further involved in the manufacturing of light industrial products. This implies the production of a range of goods that are typically used in various industries, such as machinery parts, components, tools, or equipment.
However, the Class A portfolio, the flagship which includes MedTech Distribution and its subsidiary Chicago Cosmetics, incurred a loss after tax of ZWL108 million, with ZWL104 million attributed to Class A. This business faced a significant foreign exchange loss of ZWL2.7 billion due to legacy creditors and credit extended by foreign suppliers. Though turnover slightly increased to US$2.4 million, gross profit dropped to US$603,000.
In June 2022, the company underwent a rebranding process and transformed into a private equity firm, making it the first company listed on ZSE to adopt this business model. In 2018, it achieved a profit of US$1 million, marking a recovery from a loss of US$479 thousand incurred in 2017. However, in 2019, the company experienced a significant setback, recording a loss of 40 million Zimbabwe dollars. The shift in the company's financial performance reflects the challenges and fluctuations faced by businesses in Zimbabwe during the period of transitioning from a multi-currency system to a local currency.
Due to the impact of the COVID-19 pandemic, the company experienced a recovery and achieved a profit in the first half of 2020 (HY2020), primarily driven by the performance of its pharmaceutical business.
However, it is important to note that the reported half-year profits were mostly influenced by the revaluation of assets and monetary gains. This implies that the profit was not derived solely from operational activities but also included non-operational factors.
Revaluation of assets refers to the reassessment of the value of the company's assets, such as property, equipment, or investments, based on their current market worth. Monetary gains may include foreign exchange gains or gains resulting from favourable changes in currency exchange rates. These factors can contribute to an increase in reported profits, but they may not necessarily reflect the company's core operational performance.
Despite the pressing need for management with fresh ideas to address the manahgement crisis, and the rapid devaluation of the Zimbabwe dollar due to a decaying economic environment, the company also faced challenges related to legacy debts and delays in foreign exchange (forex) allocation through the auction market by the Reserve Bank of Zimbabwe (RBZ).
Legacy debts refer to outstanding financial obligations that have accumulated over time and poses a significant burden on a company's financial health.
Despite RBZ’s claim that companies are failing to exhaust US$20 million per week offered on auction, the company has reported challenges in settling its obligations. As of June 30, 2023, the company has stated that an outstanding amount of US$159,000 from auction funds allocated by the RBZ remained unpaid. This delay in receiving the allocated funds has created a strain on the company's working capital.
Also, the company did not receive any payments from the Reserve Bank towards the outstanding legacy debts balance, which amounted to USD681,000. However, it is worth noting that in July, the company did receive a payment of USD170,000 towards these legacy debts.
The existence of significant legacy debts can strain relationships with suppliers as the company may struggle to fulfil its financial obligations in a timely manner. Suppliers may become reluctant to extend credit or may prioritize other customers with better payment records, which can result in delays or disruptions in the supply of goods to the company.
Timely and consistent payment to suppliers is crucial for maintaining a healthy business ecosystem and ensuring the smooth flow of goods and services.
Equity Axis News
