TFG looks to raise R3.95bn to reduce debt while laying off staff
JOHANNESBURG – The Foschini Group (TFG) is looking to raise up to R3.95 billion through a rights offer and has notified employees it was in the process of laying off some staff to cut its debt as the retailer faces headwinds in its core markets.
The group said it opted for the rights offer to reduce its indebtedness.
It said it had invited employees to apply for voluntary severance packages as part of a cost-cutting exercise to mitigate the impact of the economic fallout from the Covid-19 pandemic.
TFG – whose 29 brands include Markham, Foschini, American Swiss and Totalsports – told Business Report yesterday that the voluntary retrenchment process would ascertain the number of employees who would be affected.
Group human resource director Senta Morley said the company had initiated many cost-containment initiatives to cut expenses in response to the Covid-19 pandemic.
“From February, we froze vacancies, and we continue to aggressively manage all costs in the business,” Morley said. “We have started a voluntary retrenchment process where we have invited employees to apply for voluntary separation.”
Morley said the retrenchment process followed last year’s launch of a business programme focused on optimising many functions in the business and reducing head office costs.
“This is a considered restructure and building of new capacity to ensure we have a sustainable future-fit business,” said Morley.
The SA Commercial, Catering and Allied Workers’ Union’s (Saccawu’s) national co-ordinator, Mike Sikani, said the union had not been informed of the planned retrenchments.
“There is absolutely nothing in terms of talks. We are the majority union; what they were supposed to do was to consult with us, unless the retrenchments are in the non-bargaining category. Within the level of our constituency, there has been no communication to that effect,” said Sikani.
The retrenchments come after the group reported on Monday that its turnover had declined 43 percent during the three months to the end of June due to lockdown regulations in South Africa, the UK and Australia.
TFG also announced that it had set its sights on acquiring 371 Jet stores from Edcon for R481 million.
TFG said Edcon’s business rescue practitioners had accepted the terms of the conditional offer to acquire certain commercially viable stores and selected assets of the Jet stores for R480m.
This acquisition came as a major surprise, as the group led the market to believe it was not interested in acquiring Edcon, or any part of it.
Lulama Qongqo, an investment analyst at Mergence Investment Managers, said TFG had to prove it could manage Jet.
“I have doubts about whether TFG had the managerial capacity to decouple Jet from Edcon, fix it up and integrate it into their portfolio in a cost-effective manner, because they still have the UK acquisitions to bed down, a pandemic to navigate, and a relatively vulnerable balance sheet to protect. If their business was simpler, I might have said otherwise,” Qongqo said, adding that the transaction gave TFG an entry into value fashion.
Sikani said the union had hoped that the TFG acquisition signalled job security for Jet employees.
“Saccawu is encouraged that TFG has declared interest to take over certain Jet stores. This is news that we need to welcome. We knew 466 stores of Edcon are viable that can be saved and continue to operate.
“We know of 53 worst-performing Edcon stores. The offer for 371 stores should be seen in the light of ensuring job security,” said Sikani.
Unum Capital’s joint head of trading, Michael Porte, said the TFG plans came as no surprise, because there was always speculation that one of the retailers would try to pick up Jet under Edcon’s distressed environment.
“This now gives TFG an opportunity to acquire Jet without taking any ‘bad businesses’ with it out of the Edcon group,” Porter said.
TFG shares rose 2.26 percent on the JSE on Tuesday to close at R69.36.