Foschini considers rights offer of up to R3.95 billion to strengthen balance sheet

The Foschini Group says it is looking at a new rights offer.
The Foschini Group says it is looking at a new rights offer.

Fashion retailer The Foschini Group [JSE:TFG] says it will be asking its shareholders for the go-ahead to raise up to R3.95 billion in a rights offer to strengthen its balance sheet and prepare for potential future shocks caused by the coronavirus pandemic. 

The group, which owns Foschini, TotalSports and Fabiani, said is prudent and necessary to reduce its debt to help insulate its balance sheet against the potential future shocks the virus might cause. Less debt would also put the retailer in a better position to grow and access opportunities, it said in a statement during the announcement of its financial results. The rights offer will be fully underwritten by RMB, Standard Bank and Absa, it said. 

Shareholders are expected to vote on the proposed rights offer at a meeting to be held on July 16.

"We don't have a crystal ball; we don't know how long this crisis is going to last. How deep the economic impact is going to be. The only thing we are fairly certain about is that the next 12 and 24 months are likely to be tougher than the last 12. So, our first priority is to be looking after our balance sheet," said TFG CEO, Anthony Thunström, during the results presentation.

If shareholders approve the offer, the R3.95 billion will also be used to help TFG’s existing brands to gain market share and grow the company's retail and e-commerce offerings. While acquisitions are not out of question if good opportunities come TFG's way, Thunström said the group has no interest in buying any of Edcon's businesses because they have no strategic fit with the retailer. 

TFG said trading conditions remain materially uncertain in all its markets. The group has over 4 000 stores in SA, six other African countries, the UK and Australasia.  

Because of Covid-19 lockdowns which began at different times in March in all jurisdictions, its stores only reopened in May, but not at full capacity. While all TFG Africa and TFG Australia stores have been open for some time, TFG London outlets only began reopening in a phased manner from mid-June. 

Despite these temporary store closures and the loss of end-of-season sales, TFG retail turnover for the 12 months to March 2020 grew by 3.6% to R35.3 billion, with cash sales increasing by 5.9%. The impact of the disruptions was, however, reflected in operating profit which shrank 4.1% and in basic earnings per share, which were down 7.6%.

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