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Vertice sells fashion retail business to founder for RM32.6m

KUALA LUMPUR (Dec 14): Vertice Bhd is planning to divest a 60% equity interest in its fashion retail business to its founder and executive deputy chairman Seow Khim Soon for RM32.62 million.

Under the agreement signed yesterday, Seow will be relinquishing his directorship in the group to concentrate his efforts on managing the fashion retailing business parked under Kumpulan Voir Sdn Bhd, and to absolve from any potential conflict of interests.

Upon completion of the disposal, which will see Kumpulan Voir becoming its 40% associated company, Vertice will continue to provide corporate guarantee to the banking facilities procured by Kumpulan Voir, said Vertice in a stock exchange filing.

The group said the disposal is a “strategic move” as it allows the reallocation of financial resources to fund its construction division, while continuing to participate in Kumpulan Voir’s business via its remaining 40% equity interest.

It added that its fashion retailing business has been challenging due to stiff competition from local and international brands and soft consumer sentiment in Malaysia, resulting in the closure of at least seven non-profitable outlets in 2017.

“The proposed 60% stake disposal in Kumpulan Voir is in line with the group’s business strategy to focus on building and expanding our construction division that has huge potential and better prospects,” the board of Vertice commented in a separate statement.

“Since we diversified into the construction business, we have grown by leaps and bounds, and have bagged several major infrastructure projects, notably the Penang Mega Infrastructure Package 2 project worth RM815 million.

“With a strong order book in hand and net cash position status, we are optimistic of the growth prospects in the future and is well poised to bid for valuable projects that will provide more earnings visibility in the coming years,” it added.

Incorporated in 1988, Vertice is primarily involved in property, investment holdings, designing, branding, ladies’ apparel, footwear and accessories. Its original cost of investment in the Kumpulan Voir’s 60% equity interest was RM22.28 million.

In the financial year ended Dec 31, 2017, it contributed approximately 85% to the group’s overall revenue, and registered a net profit of RM1.71 million.

The deal is expected to be completed in the first quarter of next year.

Shares in Vertice settled unchanged yesterday at 90 sen, for a market capitalisation of RM168.22 million.

This article first appeared in The Edge Financial Daily, on Dec 14, 2018.

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