starafrica in positive outlook

starafrica in positive outlook
Published: 06 July 2017
THE Joe Mutizwa-led board of starafricacorporation (starafrica) appears to be finally turning the corner in its quest to transform the fortunes of the beleaguered business, which has reported significant losses in the last seven years.

Financial results for the year to March 31, 2017 released last week indicate that the company has managed to reduce its after tax loss to $5,9 million, from a net loss for the year to March 31, 2016 of $10,2 million. The prior year's loss amounted to $7,2 million.

During the year under review, the company achieved its first positive earnings before interest, tax, depreciation and amortisation (EDITDA) of $1,6 million since the country adopted a hard currency regime in 2009. Last year, EDITDA was at -$4 million.

Nonetheless, the company still has to contend with the cumulative losses of the past, which have ruined the balance sheet and created a mess for management.

At the time of Mutizwa's appointment announced on July 21, 2012, the conglomerate seemed to be on the road to an inexorable demise: Liabilities had escalated far beyond what assets could match, and the firm was essentially heading towards insolvency.

The expectation was therefore that he would influence a quick turnaround of StarAfrica's fortunes and save it from collapse.

He has so far managed to accomplish the latter, but the corporation's fortunes remain dire, except it is now on a positive trajectory.

Revenue for the year to March 31, 2017 increased by 75 percent to $32,6 million, from $18,7 million the previous year.

But the road ahead is still difficult. During the review period, the company's total liabilities still exceeded total assets by $41 million (2016: $40 million). Although this has been an improvement from two years ago, when total liabilities exceeded total assets by $52,2 million, the position remains worrisome, given that the company had a secondary scheme of creditors during the previous year which was expected to have significantly reduced this position.

The scheme had provided for deferment of settlement of amounts which were already due. In that respect, the deal pre-empted any threat of liquidation.

In his statement accompanying financial results, Mutizwa said barring the effects of legacy liabilities, StarAfrica could now deliver operating profits to shareholders.

He said the secondary creditors' scheme and various initiatives taken by the company "have set the base for even stronger performance in the ensuing year".

- fingaz
Tags: starafrica,


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