South Africa's TFG in talks on $134 mln loan, cuts capex forecast

  • Reuters
  • Stock Market News
South Africa's TFG in talks on $134 mln loan, cuts capex forecast
Credit: © Reuters.

JOHANNESBURG, May 15 (Reuters) - South African clothing retailer TFG TFGJ.J is in advanced talks with its lenders to secure an additional 2.5 billion rand ($134.81 million) loan facility and has cut its 2020/21 capital expenditure forecast, it said on Friday.

TFG, which also operates in Australia and Britain, said in addition it has concluded discussions with its lenders to extend the deadline to March 2021 from September for a debt covenant test that checks a company's ability to pay back money to its lenders.

The retailer is placing new projects and developments on hold, which has reduced its 2020/21 capital expenditure by 1 billion rand. It will, however, prioritise investments to grow its e-commerce platforms and digital initiatives, it said.

TFG will also freeze salary increases for the new financial year and has cut board fees and salaries temporarily to preserve cash, while also negotiating lower rental, cancellation or the delay of merchandise orders to prevent inventory build-up.

"The measures outlined above will contribute to our ability to generate and secure cash resources and liquidity in the current uncertain environment," the company said, referring to the impact of the coronavirus pandemic.

As the novel coronavirus spread across the world, bricks and mortar retail companies were among the hardest hit because of a sudden drop in customer footfalls and store closures, even as fixed costs, such as rentals, salaries and inventory management, stacked up.

TFG said demand is recovering slowly as stores begin to re-open.

In South Africa it re-opened its stores on May 1 following a five-week lockdown, while stores in Britain have been closed since March 23, except for online shopping. In Australia, TFG will re-open all stores by the end of May.

In March, TFG Africa, which contributes 63.8% to group turnover, saw strong sales growth in early March before lockdowns, with double-digit turnover growth in the first week of March and same store sales growth of 9.9%.

The impact of the coronavirus was significant in the second half the month, with turnover falling 34.2% between March 15 and March 28, TFG said.

Turnover in TFG London and TFG Australia in the same period, was lower. Overall group sales for the year ended March 31 rose 3.6%.

On Friday, TFG's shares were up 4.42% versus a 1.05% rise of the Johannesburg All-Share index .JALSH , as the easing of lockdown restrictions in South Africa boosted sentiment.

($1 = 18.5443 rand)

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