Ariston restructure ahead of shareholder deal

Ariston restructure ahead of shareholder deal

Ariston’s full year results demonstrated it had started laying the ground work ahead of the transaction, announcing the closure of its key trading unit, FAVCO and switching distribution channels for certain products.

ONE of the country’s largest horticultural outfits, Ariston Holdings Limited’s board has closed a loss-making unit ahead of a deal with key shareholders, which is seen as critical in turning around the company’s fortunes.
Two days before announcing full-year results for the period ended September 30, 2015, which showed continuing operations had posted a US$1,7 million post tax losses from a US$1,5 million profit during the prior comparative period the previous year, the listed horticultural dealer said on Tuesday last week that it had an impending transaction with Origin Limited, the 68 percent shareholder.
Origin could convert its debt into equity if the deal goes through, according to market watchers.
In a cautionary, Ariston announced: “Further to the cautionary announcement published on 11 December 2015, the directors of Ariston Holdings Limited wish to advise shareholders that Ariston Holdings Limited is negotiating a transaction, which if successfully concluded, may have a material impact on the company’s share price, capital structure and in turn the shareholding structure of the company. The transaction involves a proposal received by the board from the major shareholder of the company, Origin Global Holdings which is undergoing the normal Zimbabwe Stock Exchange listing requirements and other regulatory requirements, and shareholders will be provided with more details in due course.”
And Ariston’s full year results demonstrated it had started laying the ground work ahead of the transaction, announcing the closure of its key trading unit, FAVCO and switching distribution channels for certain products.
A new fisheries operation has kicked off with high expectations of a quick turn to profits, unprecedented in cash-starved Zimbabwe.
In a commentary, chairman, Robbie Mupawose, was happy ahead of the deal.
“The major shareholder’s financial support has been unwavering, the proposed conversion of the Afrifresh debt into equity being the latest example of this commitment,” Mupawose said as he unveiled projects seen as key to returning Ariston to profit.
“Nyanga Trout Farming, a joint venture initiative with Three Streams Holdings, formed to expand trout production at the Claremont Trout Farm, began operating in earnest at the beginning of the current financial year. This business is expected to start generating profits in the season ahead. In the half year report we mentioned the intention to discontinue FAVCO operations. Accordingly, June 2015 was the last trading month for FAVCO. As a result, cash outflows are significantly reduced. Farming operations have been able to secure off take agreements with other parties.
Thus overall, this development has been very positive for the group. The distribution of the blended teas was transferred from FAVOC to Brands Africa in April 2015. This has proved to be a very positive development with sales holding their own despite a difficult environment,” said Mupawose.
It was not clear how much of the debt was under consideration.
The deal that is currently under discussion would allow for funding of crucial working capital.
FAVCO, one of the biggest traders in fresh produce, had been hamstrung by losses since 2009 when the country switched to the multi-currency system, with write-downs reaching a cumulative US$72 million between 2009 and June 2015, as a volatile climate precipitated by falling commodity prices on the international markets leaned heavily against operations.
In addition, a shrinking domestic economy, and high interest rates, have piled pressure on the group’s working capital, which remained at a negative of about US$2 million during the year ended September 30, 2014 and 2015.
Mupawose said the working capital strain “has at times been critical”, and was compounded by long term debts, which shot to US$10 million during the review period, from about US$3 million during the same period in 2014, piling up finance costs that climbed by US$2,2 million.
FAVCO was one of the five units operated by Ariston.
The other four included Macadamia and tea, horticulture, summer crops and poultry.
During the review period, revenue from continuing operations slowed by six percent to US$11,8 million from US$12,4 million during the same period the previous year.

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