ZIMBABWE Stock Exchange (ZSE)-listed medical goods dealer, Medtech Holdings Limited (MHL) intends to transform into an investment company under a plan announced on Monday, as directors unveiled plans to snatch a minority stake in an undisclosed outfit.
BY TATIRA ZWINOIRA
Medtech did not disclose why it was venturing into the investment terrain.
Because Zimbabwe is currently battling to overcome a two-decade economic crisis punctuated by foreign currency and fuel shortages, as well as a biting energy problem, these drawbacks have forced firms to review operations and find strategies that keep them relevant in a dynamic and uncertain climate.
In a cautionary statement, MHL said under the restructuring plan, the firm would separate investments or portfolios of investments belonging to shareholders of different classes of shares.
“Shareholders are advised that discussions which involve a potential series of transactions at holding company level to transform Medtech into an investment holding company with the economic rights to separate investments or portfolios of investments belonging to the owners of different classes of shares are ongoing,” MHL said.
“The company is also involved in discussions to purchase a minority stake in a private company, the economic rights to which would belong to a separate class of shares and which would constitute a category 1 transaction in terms of SI 134 of 2019 (of the ZSE listing rules),” the statement said.
“These transactions, if successfully concluded may have a material impact on the price of the company’s shares.”
The MHL share price has been rocketing this year, rising by 418,42 % between January and Friday last week.
But the firm was negatively affected by liquidity challenges and working capital constraints, as well as a debt overhang.
“Of the debts, ZAR25,8 million had been validated while appeals have been lodged for ZAR2,1 million. At this stage, the group is unsure when payments will be made for the debts validated and when a response will be received for appeals lodged,” said MHL chairperson Rose Mazula in a commentary to the firm’s half year report to June 30, 2020.
“Delays in the payment of legacy debts have resulted in cuts in supply and stockouts, which are some of the contributing factors to the decreased sales volumes,” Mazula said.
MHL said there had not been an improvement to the trading environment during the period under review.
It said factors affecting operations included liquidity constraints, subdued demand, fuel shortages, constant increases in the cost of electricity, foreign currency shortages and continued devaluation of the Zimbabwe dollar.
This has led to increased costs of imports.
“These factors continued to hamper productivity and depress economic growth. The hyperinflationary environment has reduced consumers’ disposable income, and this resulted in decreased demand, decreased real sales values and decreased sales volumes,” Mazula said.
Group revenues decreased by 22% to $75,1 million, from $96,9 million during the same period in 2019.MHL posted a profit after tax of $1,51 million after net financing costs declined by 15,43%.
The group reported a net monetary gain of nearly $62 million.The firm posted a loss in 2019.
Mazula said uncertainty related to the payment of legacy debts would continue to present challenges to the firm.
“The group is hopeful that the current economic policies and measures being implemented which have brought some price stability over the past few weeks will improve the economic environment going forward,” she said in her commentary.
“The hope is that increased participation in the foreign currency auction system will boost economic confidence. We will continue to do our best to maintain our market share and sales volumes and keep up strict cost control measures,” she added.