CFI battling with legacy rot

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Kudzanai Sharara
Zimbabwe Stock Exchange-listed entity CFI Holdings Limited, says the company has been “damaged to its knees” by the previous senior management and boards and the newly appointed board and senior management has been tasked by the major shareholders to rebuild the company.

The diversified conglomerate, predominantly involved in agro-industrial processing, has been struggling for profitability since dollarisation, making accumulative losses of more than $36 million by FY17. This resulted in shareholder squabbles between businessmen Nick van Hoogstraten and other shareholders Stalap and NSSA.

The company is currently suspended from trading on the ZSE pending further investigations into irregularities in the agro-industrial group.

Van Hoogstraten, however, seems to have won the shareholder war and has since “forceably removed” Stalap-linked shareholders replacing them with a new board led by acting chairperson, Itai Pasi.

According to Pasi, the newly appointed board and senior management “has been tasked by our major shareholders to rebuild your company after the damage caused, over several years, by the previous senior management and boards that were responsible for bringing your company to its knees.”

Issues highlighted by Pasi included “historic fraudulent and corrupt arrangements entered into by the former retired CEO with other parties with whom we are now in litigation.” The alleged fraud involves $5 million.

Pasi said the Group is also “in the process of verifying the remaining borrowings given certain irregularities and conflict of interest on the part of the lender and a former director, which came to our attention.”

“Legal proceedings to reverse the illegal Langford Estates transaction have now commenced and updates will be provided in due course,” Pasi said.

In a statement accompanying the results, Pasi said group turnover for the half-year increased by 34 percent to $33,0 million compared to $24,6 million achieved in the prior period. Of the total, retail operations contributed 95,4 percent while farming operations contributed 4,6 percent.”

The retail operation, trading as Farm and City had achieved turnover of $31,5 million, up 34 percent than the comparable period, whilst margins improved by 6 percent largely as a result of better trading terms with a growing and confident supplier base, after the entity cleared most of its legacy debts during the period.

The farming operations under Glenara Estates, however, made a marginal loss in the first half of the year due to the unfavourable equipment hire charges and joint venture arrangements with a company connected to a former director.

“The Estate is now projected to be profitable going forward assisted by the favourable impact of the Estate’s $1 million re-capitalisation,” Pasi said. The $1 million was used to buy new farming equipment and machinery.

The group earnings before interest, taxes, depreciation and amortization (EBITDA) for the period improved by 80 percent to $3,7 million against $2,0 million in the prior period.

The improvement was on the back of increased volumes, enhanced cost containment efforts and improvement in margins. Financing costs for the period increased by a marginal $33 000 to $221 000. Consequently, the group registered a 109 percent growth in profit before tax at $3,2 million compared to $1,5 million achieved in the prior period.

The group remains seized with strengthening Farm and City’s operations; and ensuring horticultural and cropping projects at Glenara Estates trade profitably after the business’ recent re-capitalisation.

The group will be engaging creditors and lenders for entities under Judicial Management in order to conclude Schemes of Arrangement to enable the entities to trade sustainably. The Group notes that the group’s brands retain significant equity value as evidenced by resurging market confidence after partial resumption of operations by the two entities Victoria Foods and Agrifoods.

The group is considering recapitalisation options, including a rights issue.
The board continues to work closely with the Judicial Manager and hopes to have Victoria Foods and Crest Poultry Group out of Judicial Management as soon as the Group has agreed a way forward with the creditors. Effective December 2017, Victoria Foods entered into a six months toll milling arrangement.

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