Bagir warns on profits, optimistic despite production delays
Tailoring group Bagir is continuing its turnaround but progress isn’t as fast as it had hoped. That was the message from its first-half trading update Tuesday as the company said development of new production lines at its facilities in Vietnam and Ethiopia is behind schedule.
The company said the development would help it fulfil larger volume orders and that it has “moved forward” but is behind the original timetable, “which has hurt the company's ability to secure these orders.”
A few months ago, the Israeli company, which is listed on the London Stock Exchange, had reported that it swung back into profit last year, repaid all its borrowings and cut costs.
And on Tuesday it added that it has continued to implement its restructuring programme but the delay on the production front means it now expects revenue and profit for the second half of this financial year to be “materially lower than market expectations.”
That’s no surprise looking at the revenue figures for the first half. H1 revenues dropped to $28 million from $33.5 million a year ago and adjusted Ebitda was flat at $0.8 million (excluding a one-off capital gain of $1 million). That said, profit on an Ebitda basis should still be positive in H2.
The company said its strategy remains to focus on new orders which will generate an acceptable level of return and, against that backdrop, it “achieved important client wins during the period and secured orders from a number of well known customers in France, South Africa and Australia.”
Also, last month it completed its acquisition of the remaining 50% shareholding in Nazareth Garments, the joint venture owner of its manufacturing site in Ethiopia, for $1.9 million. It said this site combines tariff-free trade and low production costs with good connectivity for onward distribution.
Ethiopia is actually very important for the firm. Going into the second half of 2017 and into 2018, Bagir views its “first mover advantage in [the country] as potentially transformative to its medium-to-long term prospects.” As mentioned, it’s currently developing production lines so it can produce larger volume orders and this should be operational with the next 12 months.
The firm also said that new product development has been an area of strength with it developing platforms to support made-to-measure and personalised garments. In April, six new concepts were released including The Transit Suit, City Traveller, Pack Away, Shaper Pants, 0.755 Suit, and the Heater Body Suit. Initial orders have already been taken for some of these lines.
CEO Eran Itzhak said: "Bagir is a stable business with no bank debt and remains well placed. It is frustrating that the delays that we have experienced in the development of our manufacturing facilities have prevented us securing certain larger volume orders in the current financial year. However, we remain confident of our strategic plan and our ability in time to substantially increase our customer base."
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