Firm financial perfomance prior to delisting: a case study of intefresh holdings limited and the Zimbabwe stock exchange

This paper seeks to establish whether Interfresh Holding’s financials were relevant in signalling there being a probability of delisting prior to management’s decision at an Extra-Ordinary general meeting. The study makes use of the published financials from as far back as 2009 up to those published a year before the decision to delist. Key financial and performance indicators are analysed and the trend noted and contrasted to other findings in different economic set-ups. In the last two years of operation as a listed entity, Altman’s z-score is applied to the company’s financials to establish whether there were any signs of distress. This is done to establish the relevance of such findings in an environment such as Zimbabwe. Key findings suggest an increase in interest bearing debt to total shareholders funds from 21% in 2009 to 179% in 2012. Working capital indicators were signalling some stress as pronounced by the current and acid test ratios. The ability of the entity to raise equity capital through a rights issue was bound to be difficult given that the auditors in 2012 cast a slight doubt on the going concern probability. The capital structure was found to be past the optimal levels in 2012 which hence had an implication on the ability to raise equity through a rights offer.