This is my first annual report as chairman of the Group. I hope in future to be able to routinely report on the fact that the Group is in a profitable state, but clearly that is some way off from my present report. The Group as been through a wall of fire over the last year and came perilously lose to being closed down altogether. While the Group has always had strong balance sheet with a significantly positive net asset value per share way in excess of its market capitalisation, the size of the cash losses realised by the Group in its trading over the last year or two created unmanageable pressures on its level of debt. Group debt rose well in excess of its banking facilities and it was not able to increase them in the ordinary course of its banking relationships.

 

This obliged the Group to seek out fresh capital of some R306m. In light of the severe difficulties in which the Group found itself and further in light of the general view in the market that manufacturing clothing and textiles might not be profitable into the future, the Group was unable to find support for such capital raising among its then existing shareholders. It did, however, find support from a ‘white knight’ in the form of Hosken Consolidated Investments Limited (“HCI”) acting with strong assistance of the trade union representing Seardel’s employees, namely the Southern African Clothing and Textile Workers Union. Essentially this allowed the Group to be stabilised at the cost of issuing some 612m new shares (over and above the then existing 92m shares). The consequence is that HCI has become the new controlling shareholder of the Group, holding some 71% of the Group’s equity via a subsidiary.