| Tue 28 May 2002, 0:00 | | Mccarthy Limited - Further Cautionary Announcement |
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McCarthy Limited - Further cautionary announcement
McCARTHY LIMITED
(Incorporated in the Republic of South Africa)
(Formerly McCarthy Retail Limited)
(Registration No 1991/003245/06)
("McCarthy")
Ordinary shares: JSE code: MCC ISIN: ZAE000034823
Preference shares: JSE code: MCCP ISIN: ZAE000034831
Debentures: JSE code: MCCD ISIN: ZAE000034849
Further cautionary announcement
Holders of McCarthy securities ("security holders") are referred to the
cautionary announcement released on 21 May 2002, where the disposal of RAG
was discussed. The negotiations have not resulted in a transaction
acceptable to the funders of RAG. As a result, an order placing RAG into
provisional liquidation is expected later today.
Although the investment in ordinary shares in RAG has been written down to
R1 and a R70 million provision has been made against the secured debentures,
the exact impact on McCarthy is difficult to quantify at this time as the
liquidation dividend cannot be predicted with certainty.
Shareholders are advised to continue to exercise caution until further
information is available.
Durban
28 May 2002
Sponsor
RMB
Date: 28/05/2002 08:37:04 AM Produced by the SENS Department
Mccarthy Press Release
MCCARTHY ADVISES SHAREHOLDERS
Johannesburg ..May, 2002 - McCarthy shareholders are being advised that the
directors of Retail Apparel Group Limited (RAG), in which McCarthy holds 96%
of the equity, have applied for liquidation. A depressed credit sales
environment and increased debt repayment pressures being experienced by
customers in lower income categories, continued to erode confidence in the
viability of its business model which resulted in a recent reduction in
RAG`s bank funding facilities. The combined effect of these developments
and serious concern about RAG`s future prospects in this over-traded segment
of the market, made liquidation unavoidable.
Brand Pretorius, McCarthy Limited CEO and non-executive chairman of RAG,
expressed deep regret that this drastic step had become necessary :
"Notwithstanding major improvements in RAG`s business model, the
effectiveness of its credit controls and a much reduced expense structure,
its turn around strategy has not worked fast enough to save it from the
effects of deteriorating demand and negative sentiment in its sector of the
market."
As stated in the cautionary announcement of 21 May, various negotiations
took place during the past few weeks with parties interested in buying the
business. Pretorius notes: "These have not yielded positive results to date
and, in the face of funding constraints and the changed circumstances, there
was no option but to apply for liquidation".
RAG performed poorly over the financial years 2000 and 2001, with losses
exceeding R500 million. A further substantial loss is forecast for the
current year to 30 June following the loss of R29,7 million declared at the
half year mark. As McCarthy is cost accounting RAG, this anticipated loss
will not affect its earnings.
Although McCarthy`s investment in RAG`s ordinary shares has been written
down to R1, it still has an exposure through its investment in the secured
debentures. The convertible debentures have a carrying value of
R130 million, following a recent write-down of R70 million. Pretorius
expects that the proceeds of the liquidation will enable McCarthy to
preserve some of this value : "Our capital structure can accommodate this
potential write-off because of our recent R1,1 billion recapitalisation. In
addition, we anticipate that the three remaining operating divisions,
namely, McCarthy Motor Holdings, McCarthy Financial Services and McCarthy On-
Line will all make better than expected profits for the financial year to 30
June 2002."
At the time of the financial restructuring of McCarthy`s last year, the
Group had hoped the RAG business could be turned around, but this had only
happened to a limited degree. As disappointing and as costly as it might
be, the liquidation of RAG does mean, however, that McCarthy will no longer
have interests in any of the divisions which were incorporated into the
Group when McCarthy and Prefcor merged in 1992. McCarthy will now be able
to focus exclusively on its long established core business as the country`s
pre-eminent motor retailer.
For further information please contact :
Brand Pretorius Eugene Roden
Chief Executive Officer Financial Director
Telephone no. 031-2689200 031-2689261
Cell no. 082-4552020 082-4503293
ENDS
Date: 28/05/2002 09:06:05 AM Produced by the SENS Department
