HomeBusiness DigestFate of DWTL in the Balance Ahead of EGM

Fate of DWTL in the Balance Ahead of EGM

INTERESTED parties in David Whitehead Ltd Textiles (DWTL) differ on how to rescue the country’s largest textile firm ahead of an extraordinary general meeting to be held in two weeks’ time.

Executive director Andrew Toendepi is proposing that the textile company raise capital through disposal of some assets to fund operations and retrenchments as the company was failing to borrow money on the market.

Ex-judicial manager Cecil Madondo however said it was not proper for Toendepi to liquidate “a public company of national strategic importance without a High Court order”.

He said there was no production at the company because the “company was heavily undercapitalised and does not have any working capital.”

“What is required are people well versed in the textile industry to run the company. A credible investor with at least 51% controlling stake to recapitalise the business, establish effective corporate governance structure and appoint a competent and qualified board of directors and the company will roar back to life”.

He said when the company went into judicial management it was operating at 10% of its full capacity and when the company was removed from judicial management capacity production levels had increased to about 55% of its full potential.

“DWTL capacity utilisation levels and volumes of sales during the period of judicial management managed to sustain this staff compliment of 1 769 workers, a big variance to the mere 600 they are now proposing to retain,” Madondo said.

“This shows that there has been declining business and deteriorating financial performance by the company after the judicial management period, a sign of gross mismanagement and misapplication of financial resources by the executive directors,” he said.

The textile company which was formed in 1950 is headquartered in Harare and has bases in Kadoma (spinning), Gweru (hosiery) and Chegutu (weaving and finishing) manufactures clothing that include uniforms, work-wear mainly from cotton.

Toendepi said DWTL, which resumed operations last week agreed retrenchments terms with workers and is now seeking government approval.

The company which employs about 1 400 people, wants to halve its workforce.

He said an unsustainable wage bill, which was above revenue, resulted in the company’s directors applying to the High Court for liquidation.

A former director at DWTL, Edwin Chimanye, however holds a different view, arguing that the problems at the textile firm were deeper than mere financials.

He said it was important that qualified personnel run the business as it “was not an ordinary company”.

Chimanye has also questioned the wisdom of disposing assets to raise capital saying that should this fail, then the shareholders would hold the current management responsible.

He added that disposing of assets would only improve the balance sheet in the short term, but the problems could not be wished away.

Chimanye drew comparisons with the false start when the textile firm went under judicial manager only to slide into the murky waters again barely a year after the judicial management order was cancelled.

Critics however said DWLT’s operations were better under Madondo as its asset increased faster than liabilities and managed to avoid liquidation during the judicial period.

DWTL directors are seeking approval to de-list the textile giant shares from the Zimbabwe Stock Exchange at the extra-ordinary general meeting.

The move to de-list the company from the bourse will be among four resolutions on the agenda of the EGM set for December 31.

The directors will also be seeking shareholders’ approval to pass a special resolution giving directors authority to restructure the company’s balance sheet and to change the company’s reporting year end from September 30 to December 31. Should shareholders pass the resolutions to de-list DWTL shares from the equities market, the company should revert to private hands effective from January 1 2010.

Trading of DWTL shares was suspended in April 2005 after the company failed to produce audited financial statements. This was in addition to the firm’s failure to release its results inside the regulated period.

At that time, DWTL had also failed to regularise its shareholding in compliance with the  the ZSE requirements. In May 2006, the company was placed under judicial management on the grounds of insolvency.

DWTL was placed under judicial management by the High Court of Zimbabwe on May 26 2006 after experiencing a severe liquidity crises which were precipitated by undercapitalisation and corporate governance shortcomings.

 

Paul Nyakazeya

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