Financially troubled clothing and apparel retailer Truworths Zimbabwe has filed for corporate rescue while trade in its shares continue to be suspended from the Harare bourse.
The JSE-listed Truworths holds about 34% of Truworths Zimbabwe. In March this year, Truworths said it was different from the Zimbabwean entity in which it, however, also had a board representation.
Now, Truworths Zimbabwe has entered into corporate rescue as it tries to wriggle out of its financial troubles. It has been facing major risks and threats to its going concern and viability status over the past few months.
“This notice serves to advise that with effect from the 7th of August 2024, Truworths Limited and its subsidiaries, namely, Topic Stores and Bravette Manufacturing Company were placed under corporate rescue,” said accountancy and tax firm Crowe on Friday.
In March, Truworths Zimbabwe voluntarily suspended trade in its shares on the Zimbabwe Stock Exchange.
The JSE-listed Truworths has explained that its 34% investment in Truworths Zimbabwe, held since 2002, had been acquired at a non-material cost and had been fully impaired by the group in prior years.
The group had not made an financial assistance, whether in the form of loans, guarantees or otherwise, to Truworths Zimbabwe while it also does not have any operational involvement in the Harare-listed company.
After filing for corporate rescue, Truworths Zimbabwe will remain listed on the Zimbabwe Stock Exchange, although it will be “under voluntary suspension” until it exits from corporate rescue.
Filing for corporate rescue ensures that no legal proceeding, including enforcement action, can be undertaken against the company. Additionally, no legal proceedings can be taken against Truworths Zimbabwe or in relation to any property belonging to the company or lawfully in its possession without the authority of the corporate rescue practitioner.
The first meeting of creditors and members of Truworths Zimbabwe has been set for August 28 in Harare. The meeting will make provision of an overview of corporate rescue proceedings, issue a statement by the Master of the High Court about reasonable prospect of rescuing the company, proof of claims, and appointment of a committee of creditors.
Zimbabwean retailers have been struggling in an increasingly informal market. Retailers in the southern African country have complained of higher taxation and the effect of cheaply imported textiles products as having a toll on their earnings potential.
For Truworths Zimbabwe, these challenges have resulted in the company shutting down branches. The company had anticipated the outlook period to be “uncertain, unstable” and complex, especially after the suspension of its shares from the Zimbabwe Stock Exchange.
To return to sustainable profitability, Truworths Zimbabwe needs “to offer credit in a stable currency and access long-term funding at affordable” interest rates.
“Regrettably these conditions do not currently exist in the Zimbabwean economy,” the company said recently. However, it remains “hopeful that currency reforms will lead to stability and improved liquidity” on the market.
The company’s debtors book has plunged after it stopped Zimbabwe dollar credit sales in July 2022 “due to the increase in the prime interest rate to 200% per annum which made credit sales unviable” for the business.
However, Truworths Zimbabwe resumed credit sales in February 2023 but only in US dollar terms. Units sold over the full-year period to July 2023 were negatively affected by “informalisation of the economy which resulted in cheap and fake imports selling at below local and international manufacturing costs”, the company said.
The business could not viably compete against these imports, it added.
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