Bagir goes to court as Shandong Ruyi deal still not complete, but says order pipeline is strong
It seems that Bagir Group is finally losing patience. The London-listed tailoring specialist has been waiting for several years now for an investment by Shandong Ruyi to complete and with no sign of that on the horizon, it's taking legal action for breach of contract.
The transaction had originally been announced on November 23 2017 and while most conditions have completed, the final stage has hit a stumbling block.
Shandong Ruyi's remaining cash payment of $13.2m and the completion date had been shifted to March 31 this year, the latest in a series of extensions. But Bagir said this extension was conditional on “Shandong Ruyi providing suit jacket manufacturing equipment, with an estimated market value of approximately $1.3 million, for nil consideration, for use in Bagir's Ethiopian manufacturing facility, by the end of September 2019”.
That manufacturing equipment has still not been delivered, which Bagir claims “constitutes a material breach of the terms of the contract”. Shandong Ruyi, which also controls SMCP, Bally and Aquascutum, hasn’t commented so far and it looks like we’ll have to wait a while to hear the outcome of this latest development.
But for now, Bagir also issued a trading update and said that while “trading conditions have remained challenging, the company continued to generate good sales growth for the 12 months to 31 December 2019”.
Sales rose 9% to $59.4 million and it expects to deliver a return to positive adjusted EBITDA after a loss on that basis of $1 million for 2018. This was helped by further cuts in its operational costs that completed during H2 2019.
Looking ahead, the business is finalising a plan to establish a new production line in Ethiopia to manufacture suit jackets that requires an additional investment of around $0.5 million. The new line will be capable of producing 250 suit jackets a day.
It added that a trial order for a large UK retail client will be completed and delivered during March with a $0.85 million suit order for this year already secured from that customer. In addition, “there are good prospects for winning further orders from new customers during the current year”.
The board said this all means that the firm “has resources to support its current day-to-day activities and will continue to act in order to secure future growth through commercial contracts with customers and additional funding to support the group's plans".
CEO Micha Ronen said: “It is disappointing to announce our decision to have to take legal action against the Shandong Ruyi Group but we have been left with no alternative. This will, however, mean our operational focus can now be solely focused on Bagir and making innovative, modern, design-led tailored garments for the world's leading retailers.”
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