Bagir Group soars as revenue climbs despite 'challenging' conditions

Bagir Group's shares soared on Thursday after new client wins and increased purchase orders from existing customers helped the company sew up a revenue increase despite "a challenging market environment".

The tailoring outfit scored revenue of £56.4m for 2018, an increase of 10% compared to the year before, after the new contract wins, although profitability in the period declined as a result of transitional costs incurred during the first half due to the investment in expanding the production lines in Ethiopia.

Consequently, loss before tax expanded from £2.9m to £5.8m as cost of sales increased by 17% to £50.9m.

Eran Itzhak, chief executive of Bagir, said: "We have begun this year well with sales of $16.3m already recorded for the first 3 months, a 46% increase compared to the prior year. This, together with the benefits coming through from the cost reductions made last year and the $30.6m backlog of orders, means the company is well placed for 2019."

The AIM traded company said that its cost reduction program has successfully saved $2.7m of annualized fixed costs as it reduced the number of production sites from six to five, with plans to reduce to four sites by the third quarter of the current year.

At the end of the year, cash and cash equivalents stood at £3.1m, up from £2.6m at the same point the year before.

A statement from Bagir said: "2018 was undoubtedly a strategically important year for the business with significant progress being made rationalising the business operations. Looking ahead for 2019, trading conditions are likely to be similar to those experienced in 2018, however the board believes that Bagir is well placed given the operational cost base reduction completed in 2018 and its strong order backlog."

Bagir Group's shares were up 20.83% at 1.45p as of 1327 BST.