South African retailer TFG said on Thursday it plans to raise R3.95 billion ($229.66 million) through a rights offer to lower debt and protect its balance sheet, as profits fell by 1.1% in the year to March 31.
TFG, which also operates in Australia and Britain, said the proposed rights offer is fully underwritten by a syndicate of banks comprising three of its largest lenders and its major shareholders have shown support.
“The intention really is to put us in a position to insulate the balance sheet against any shocks,” TFG group CEO Anthony Thunström said at the firm’s results presentation.
He also announced the company would axe its dividend to shareholders this year. As a result of an uncertain economic outlook, several South African companies have either slashed, postponed or axed dividends.
“There is a lot of uncertainty going forward. We’re confident that the sizing of this capital raise covers us for pretty much anything that is foreseeable in our scenario planning,” Thunström said.
The proceeds from the rights issue will also be used to invest in the business, with particular focus areas being in e-commerce and the firm’s local manufacturing “vertical integration,” Thunström said, adding that the money might also be used for any attractive acquisitions.
He quashed speculation that the clothing and homeware retailer was interested in rival Edcon, which is in bankruptcy protection and is up for sale.
“We have no interest in any of those businesses. They don’t fit strategically with us,” he said.
Its headline earnings per share – the main profit measure in South Africa – stood at 1,174.4 cents ($0.6845) per share during the period, versus a restated figure of 1,187.9 cents a year earlier.
Read the full Sens announcement here.