Dear Shareholder,
As we navigate the dynamic landscape of the business environment, I would like to bring to your attention some pivotal developments that warrant careful consideration for the future of Edgars Stores Limited. Historically, the Edgars business has heavily relied on ZWL transactions; however, recent times have witnessed a notable surge in foreign currency transactions, a trend mirrored across the broader economy. Moreover, the Government's extension of the multi-currency regime until 2030 underscores the growing necessity for USD capital within our Company.
The performance of Edgars in the past year has been subject to exchange rate volatility and market liquidity fluctuations in both ZWL and foreign currency. However, management remains optimistic, steering the business towards expanding its physical and online presence, coupled with strategic merchandise procurement initiatives reliant on USD access. Consequently, the Board has proactively explored various avenues to secure access to USD to drive the business. Our commitment to this pursuit continues as we explore options to fortify the business's access to USD capital and consider migrating to USD reporting, ultimately enhancing sustainability and Shareholder value.
To bolster our growth momentum and safeguard Shareholder value, the Board is proposing the migration of the Company's share capital from the Zimbabwe Stock Exchange to the Victoria Falls Stock Exchange. This strategic move is anticipated to unlock several advantages, including:
- Access to USD Capital for expansion initiatives, driving business performance, and ultimately enhancing Company and Shareholder value.
- The enabling of free dividend and share disposal proceeds repatriation to foreign Shareholders.
- Favourable tax incentives, including zero capital gains tax and a 5% withholding tax for foreign investors, thereby boosting Shareholder returns.
- Reporting financial performance in USD providing stability and mitigating complexity associated with hyperinflation adjusted ZWL reporting.
- Minimised exchange risk for Shareholders due to local currency depreciation by providing an accurate USD-based benchmark of the Company's value.
- Mandated USD dividends and the receipt of USD as compared to ZWL on share liquidation, enabling the Shareholders to receive the true value of their holdings.
- Lower trading costs of 2.31% compared to 4.63% on the ZSE which enable the Shareholders to retain more of their value when they exit or enter their trading positions.
In light of these compelling reasons, the Board supports the migration of Edgars from the ZSE to the VFEX. This move aligns with our commitment to fostering sustained growth, maximizing Shareholder value, and positioning the Company for success in an evolving economic landscape.
Friday, 1 March 2024
[Signed on Original]
T.N. Sibanda
Chairman of the Board of Directors
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