adminthe hyperinflationary environment.
In this new dollarised environment, companies need to deal with their legacy issues so that they start working on a business model that can reward the owners of the company.
As long as companies neglect these historical issues, we are going to witness a bigger league of companies, which continue to be in loss-making positions in the years to come.
Debt and blotted structures are some of the major issues chewing into company profits and the only way to deal with this cancer as a company, the debt has to be paid and the company has to be restructured to come up with lean structures to suit the business environment.
A number of corporates are being haunted by debt and most of those that have released their results indicated that they are finding it difficult to clear their long-term debt.
Those that have made headway have managed to clear their debt and they have structured short-term debt. The cost of funding is high in Zimbabwe and companies resorted to expensive money which becomes a burden for corporates if they carry them over into the new-year given the high cost of maintaining debt.
Companies also need to deal decisively with their cost structure with the new structures retaining value on the business.
However, to realign businesses there has to be a number of casualties and this is one bad side companies are avoiding.
What most companies have managed to do is to offload loss-making entities and non-performing operations.
More than 75 percent of the listed companies have managed to streamline their operations, which had grown big during the hyperinflationary environment.
These entities were used for speculative reasons and in the dollarised economy, shareholders have failed to support their assets.
Some companies offloaded non-performing operations as a way of fund-raising for working capital and to retire expensive debt.
The sale of assets became an option when companies failed to carry rights issues to raise funding. Very few companies opted for private placements in fear of dilution.
African Sun, starafrica, OK Zimbabwe and Fidelity Life are some of the few companies that managed private placements, preferring a dilution.
Going forward, if companies act on some of these issues, performance is expected to be on the upside and improve value of stocks on the local bourse.
Printing company Celsys Limited released its numbers for the year ended August 31, 2011, this week and it was a disappointing set of results. Turnover for the group was down 7 percent to US$1,9 million. Celsys continued in losses resulting in a worse shareholder funds position of negative US$2,4 million. The business had negative cash from operations and financing costs are a stunning 19,1 percent of revenue.
Celsys has lost 92 percent value since dollarisation and 20 percent in the past 30 days.
At a market capitalisation of only US$640 000, dull financial performance raises questions as to why some companies are still listed on the exchange.
Group chairman David Lenigas told shareholders that as a direct result of the company’s strategic review of its operations to focus on growth opportunities, the business decided to close down Celsys Comms.
Celsys Comms was a division wholly owned by the group dealing with airtime vouchers – the business closed in March this year.
Celsys says it is now concentrating on two core divisions being the commercial and security printing and the technical service divisions.
Mr Lenigas said the company continues to operate under challeng- ing conditions as the economy recovers.
Online Reporter