Bagir upbeat on outlook as it decides to sue Shandong Ruyi
By Josh White
Date: Friday 21 Feb 2020
(Sharecast News) - Tailoring company Bagir confirmed on Friday that it has decided to take legal action against the Shandong Ruyi Group, alleging breach of contract.
The AIM-traded firm had announced last June, with regard to Shandong Ruyi's remaining cash payment of $13.2m, that it had agreed to a further extension of the unconditional completion date to 31 March 2020.
It had first announced the transaction on 23 November 2017.
On Friday, it said the extension of the unconditional completion date to 31 March 2020 was conditional on Shandong Ruyi providing suit jacket manufacturing equipment, with an estimated market value of around $1.3m, for nil consideration, for use in Bagir's Ethiopian manufacturing facility by the end of September 2019.
The manufacturing equipment had not been delivered, Bagir said, adding that the "further failure" by Shandong Ruyi constituted a material breach of the terms of the contract.
Looking at its broader trading, Bagir said that while conditions had remained challenging, the company continued to generate "good" sales growth for the 12 months ended 31 December, up 9% to $59.4m, adding that it expected to deliver a return to positive adjusted EBITDA.
That improvement in earnings was assisted by a further reduction of operational costs during the second half, the board said.
Looking ahead, the company said it was finalising a plan to establish a new production line in Ethiopia to manufacture suit jackets, which would require an additional investment of around $0.5m.
The new line would be capable of producing 250 suit jackets per day.
Bagir said the trial order for an unnamed large UK retail client was set to be completed and delivered during March, with a $0.85m suit order for 2020 already secured from the customer.
In addition, based on its new business pipeline, Bagir said there were "good prospects" for winning further orders from new customers during the current year.
As a result, the board said it believed the company had the resources to support its current day-to-day activities, and would continue to act in order to secure future growth through commercial contracts with customers and additional funding to support its plans.
"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," said chief executive officer Micha Ronen.
"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."
At 1140 GMT, shares in Bagir Group were down 8.67% at 0.55p.
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