- Loss after tax widened from ZWL2 million to ZWL1.4 billion
- Group’s share price on ZSE YTD has declined by 91%
- Class A portfolio recorded a 48% decline in volumes
Harare- Embattled diversified ZSE-listed Group, Bridgefort Capital Limited has capped the full year ended 31 December 2022 with a tremendous loss after widening the after-tax loss to ZWL1.4 billion from ZWL2 million in the prior year. The total comprehensive loss was almost entirely made up of fair value losses due to the reduction in the real values of the class A and B shares on the Zimbabwe Stock Exchange (ZSE).
The Group’s share price on ZSE, year to date has depreciated by 91% signifying the woes it is facing on the Zimbabwe Stock Exchange including tough regulations implemented last year and lack of value keeping.
The Class A portfolio primarily includes 50.1% of Zvemvura Trading (Private) Limited, trading as MedTech Distribution, and Chicago Cosmetics (Private) Limited, a 51% subsidiary of MedTech Distribution while the Class B portfolio comprises an effective 50.1% of the land registered in the name of MedTech Distribution which was last valued at USD200,000.
The Group operates in three market segments: fast-moving consumer goods (FMCG), medical supplies and manufacturing of light industrial products. The FMCG division manufactures and markets personal care products, and the medical division produces pharmaceutical products for wholesale distribution to retail pharmacies. It also supplies products for laboratories and services for education and healthcare institutions. MedTech has local retail outlets with a manufacturing plant that produces petroleum jelly and glycerin, health, beauty and personal hygiene products and over-the-counter pharmaceutical products for the local Zimbabwe market as well as for export to Mozambique and Zambia through its subsidiary Baines Imaging Group.
Besides capping the year with a great loss of over 1000%, the Group further started its new fiscal year in 2023 with dampened demand which is a concerning start to the year. Since April 2022 to date, the Group’s share price has declined from 1760 cents to 920 cents. The Class A Portfolio, which is the flagship asset of the Group recorded a sales volume decline of 48% for January and February 2023 as compared to 2022, signifying a grounded fiscal year carpeted by pessimism. The Group has a market capitalisation of ZWL110.5 million.
The Group rebranded from MedTech Holdings as it repositioned itself to become private equity. By becoming an equity firm, it was seeking to attract additional funding for its operations.
The Group lastly tasted the nectar of profits in 2020, courtesy of the COVID-19 pandemic which spiked the demand for pharmaceutical products. However, post the COVID-19 pandemic, the industry has been hostile to the Group recording loss after loss with another full-year loss already looming. The Group paired losses for FY2021 and FY2022 respectively while FY2023 commenced with a dampened performance.
“The operating environment has deteriorated and becomes more unpredictable since the year-end with doing business becoming more difficult,” the Group said in a statement accompanying the FY2022 results.
It is cognisant that the Group is operating in a turmoil economic environment where consumer spending is dampened by record interest rates and a tight monetary policy which is reducing ZWL liquidity and recurrent. The Group further grieved the continued reduction of fair value on shares listed on the ZSE. However, the same economic environment in which the Bridgefort is operating in is the same various profit-making small cap and medium cap companies are operating.
For the group, there is a need for a strong cost-cutting strategy, especially production and distribution costs. The Group should minimise costs by producing what accommodates the demand.
Secondly, the Group should further reconsider benefits and cons of a possible offloading of a stake to investors so that it concentrates on core business and reduces strains on capital investments. Diversification is one of the best ways to increase profitability. However, if the capital is strained, there is a need to concentrate the funds available on the limited sectors that are viable.
The Group should also capitalise more on its foreign markets. This will aid it to offset exchange losses due to the rapid depreciation of the Zimbabwe dollar. In its latest financial results, Axia Limited offset the exchange losses with its export trade to record a profit. Costs incurred in the export market pay more than costs in local investments where uncertainty is high.
De-listing on the Zimbabwe Stock Exchange and listing on the US Dollar denominated bourse, Victoria Falls Stock Exchange is another option that can be assesed by the Group. There are a number of benefits that may flow from listing as companies will be able to raise capital in hard currency. In addition, potential issuers can use different securities to raise capital, that is, debt, equity, Depository Receipts, ETF and REIT units. VFEX has the merit of keeping value for investors though currently, it is suffering from a liquidity crisis.
Despite woes from the operating environment and management strategies, Bridgefort is further being crippled by legacy debts amounting to ZAR9.8 million. In 2022, the Group received payments from the Reserve Bank for legacy debts of ZAR3 million, which provided some much-needed relief for MedTech and its suppliers. When pending payments are secured too, that will bring relief to the Group.
Equity Axis News
