CLOTHING retailer Truworths is hoping to turn around its business prospects after shareholders approved the company’s capital-raising initiative to beef up its balance sheet.
Faced with growing competition and battling a weakening economy, the apparel retailer —which also has famous brands such as Topics and Number 1 stores — has been scaling down on operations by closing some branches to stay afloat.
In its latest financial report for the half-year ended 3 January 2023, Truworths raised concerns over the continuity of the business in the face of the diminishing economy.
The transaction was proposed to sustain the viability of the business, raise additional capital, at a sustainable cost in light of the high interest rate environment.
The company issued a renounceable rights offer of 384 067 512 ordinary shares at a price of ZW$5.80 per rights offer share in a bid to raise US$2.2 million for working capital.
Themba Ndebele, Truworths chief executive, told The NewsHawks that the shareholders had an extraordinary general meeting on 4 July to discuss the resolution of the rights offer.
“We had our extraordinary general meeting for the capital raise by way of a renounceable rights offer on 4 July. The shareholders approved the rights offer and the rights offer opens on Friday 14 July,” he said.
He said the offer was supported by three major shareholders and underwritten by one of the major shareholders. Renounceable rights are rights to purchase a set number of shares in a company at a discounted price, offered to existing shareholders when a company wants to raise more capital.
This offer usually coincides with the company’s decision to issue a new round of stock, which would dilute the shareholders’ equity in the company. In a circular to its shareholders, the company stressed the necessity of implementing the rights offer because it was the last hope for its sustainability.
“If the renounceable rights offer is not implemented as outlined in this circular, the company will be unable to effectively sustain its operations and growth. The company will face severe cash flow constraints, high finance costs, and reduced working capital,” said the retailer.
The informal sector has posed threats to the continuity of the company, as the cross-border runners have flooded the market eating into Truworths market share.
These cross-border runners hold an unfair competitive position due to the low prices that they offer compared to the prices offered at Truworths.
There have been allegations that Truworths has been failing to pay its employees’ salaries for the past five months.
However, Ndebele dismissed the claims, saying he is not aware of non-payment of salaries.