LONDON (Alliance News) - Formal clothing tailoring company Bagir Group Ltd Thursday said its losses moved several sizes larger in the first half of 2014, after a significant reduction in orders from its largest customer left it with a big drop in revenue.
The company said that with first half results in line with its expectations, it is still expecting generate between USD100 million and USD102 million in revenue for 2014, with earnings before interest, taxes, depreciation and amortisation in the region of USD4 million to USD5 million.
Earlier this year, the company's shares were rocked, after it said there had been an unexpected reduction in orders from its largest customer, which it didn't name. At the time of its IPO in April, Bagir had said its largest UK customer was Marks & Spencer Group PLC, but a Bagir spokesman declined in May to provide Alliance News with the identity of the customer that reduced its orders.
Bagir on Thursday posted a pretax loss of USD2.4 million for the six months to June 30, compared with a USD380,000 loss in the first half of 2013, as revenue fell to USD48.0 million, down from USD51.2 million last year. The company said the fall in revenue was due mainly to two large projects that were completed during the first half of 2013, which did not continue into 2014.
"This reduction is due to the expected decline in revenue compared to the first half of the previous year, associated with the two large programs, which had higher gross margin than on average, as well as the increase in operating costs," the company said in a statement.
Bagir said that following the reduction in sales from its largest customer, its looking to develop its offering with new and other existing customers in the UK, the US and Australia and improve sales from these customers going forward.
The group said an operational review is currently underway to help identify cost savings and efficiency measures which, once implemented, should help improve profitability, sales and marketing performance.
"The board has commenced a review of its operating processes which we expect will bring improvements to our profitability. Positive signals from the company's other customers in the UK are expected to help partially mitigate the reduction of sales from our largest customer," said Chief Executive Danny Taragan in a statement.
Bagir also said it has signed a conditional agreement to invest in a production facility in Ethiopia. Once completed, the agreement will see Bagir purchase a 50% stake in Nazareth Garments Share Co, an Ethiopian company which owns and operates a garment factory in Ethiopia, for a total consideration of USD1.5 million.
"Given the duty-free export environment from Ethiopia to the EU and US, the competitive costs, and the strong Ethiopian government support for the textile industry, Bagir anticipates this investment in Ethiopia will help create a stronger competitive advantage for the company," said Taragan.
Bagir shares were trading 2.6% lower Thursday morning at 11.45 pence per share.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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