Israeli mens fashion company Bagir Group Ltd. (AIM: BAGR), which held its IPO in April 2014, has lost almost all of its value. Over the past week, the share price has fallen to an all-time low of £0.0475, 92% less than its IPO price of £0.56. The current market cap of the company, which made its offering under two successful Israeli entrepreneurs, Ishay Davidi (through FIMI Opportunity Funds) and Zvika Barinboim, is only $3.7 million.
The share price began its descent shortly after the company's IPO. One week after the offering, the company announced a reduction in its orders from its largest customer, British marketing chain Marks and Spencer. This development caused Bagir to lower its forecasts for that year, ask its creditors to forego the requirements of the covenants it had agreed to, and begin restructuring aimed at cutting expenses. In response, the share lost 70% of its value within a few minutes.
Bagir reported $97 million in revenue in 2014, compared with $99.5 million in 2013. Its operating profit was only $500,000, compared with $3.6 million in 2013, while its pro forma earnings before taxes, interest, depreciation, and amortization (EBITDA) totaled $3.8 million, compared with $6.1 million in 2013.
In its 2014 report, the company said its restructuring would take two years, and that it had reached agreements with its financing banks on new covenants requirements that it would have to meet during the current and next year.
During the crisis, Bagir acquired a 50% stake in a production facility in Ethiopia for $1.5 million. This plant was supposed to focus on production of pants and jackets, and help the company through customs duties-exempt exports to the euro bloc and the US.
"The company still expects to grow through existing and new customers in the UK and US, despite the decline in orders from Marks and Spencer," the company wrote in its reports. "When the restructuring plan is carried out, it will cut operating costs and improve operational efficiency," The share's behavior indicates that the market does not really believe in these promises by Bagir.
Bagir specializes in the production of suits (mainly for men), which it markets to retail chains, not independently. The company issued 60% of its shares last year to UK investors in order to raise capital, after surviving an earlier difficult crisis, also caused by a drop in orders from Marks and Spencer.
The largest shareholders in Bagir are FIMI (17.4%) and SG Textile (16%), which shared full ownership of the company until the company's offering. The company raised $30 million in last year's offering (net of expenses), of which $11.4 million was left as of December 2014. The company's net debt totals $12.5 million, compared with $50.3 million in 2013, after its offering and the conversion of capital notes and owners' loans into equity holdings.
Published by Globes [online], Israel business news - www.globes-online.com - on August 12, 2015
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