Bagir in H1 loss, is upbeat for US growth after Shandong Ruyi investment
London-listed tailoring specialist Bagir Group on Friday reported lower revenues for the six months to June 30 and said that it swung to a loss as higher production costs hit its bottom line.
Its revenues dropped to US$24.8 million, in line with management expectations, from $28.1 million. Its adjusted Ebitda loss was $1.7 million, after it made a profit of $1.1 million a year earlier. Meanwhile, the gross margin of 6.7% plunged from 16.4% a year earlier.
But the company is working hard to improve its operations and, apart from its recently-announced plan to sell a majority stake to Shandong Ruyi for $16.5 million, it has “identified and commenced a rationalisation of operations, focusing on fewer production sites and a reduction in the operational cost base,” that should save $5 million a year.
CEO Eran Itzhak said: “Alongside our trading performance which reflects the investment we have been making in expanding our Ethiopian production capacity, we have made significant progress since the year end with the strategic partnership with Shandong Ruyi. [This will] support the growth of the business, in particular the expansion of the Ethiopian manufacturing site. This investment together with being in partnership with Shandong Ruyi will undoubtedly be transformative for Bagir.”
But what exactly happened in H1? The company “had a positive sales performance in line with management's expectations.” But the group “has continued to experience operational delays and increased production costs which have reduced profitability and gross margin,” it said.
Looking ahead, it expects “an increased focus on the US market, due to the large order sizes and the existing competitive advantage of the group's manufacturing locations as a result of being able to export goods into the US duty free.”
It’s now waiting for shareholder approval of the Shandong Ruyi takeover at an Extraordinary General Meeting on October 9 and said “the investment, combined with the reorganised operations and production sites, should create a platform from which Bagir has the potential to become a significant player in our market of apparel manufacturing.”
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