With Israeli tailor Bagir's (BAGR:AIM) recovery plan bearing fruit under new leadership, the shares are back in fashion, bid up 25% (1p) to 5p-a-pop.

Confidence in the micro cap has returned following a major refinancing that has transformed the balance sheet and represents the biggest milestone in the turnaround to date.

Formed in 1961 and floated on AIM in April 2014, Bagir has been in recovery mode since May 2014 when it announced the loss of a substantial proportion of sales from its then biggest customer Marks & Spencer (MKS).

However investors are buying into Bagir, which makes suits, jackets and trousers under retail private labels and under world-renowned brands such as Jay Godfrey and AR-RED, on the back of a successful restructuring and evidence it is winning new customers.

Man dinner jacket bow-tie

Bagir yesterday announced a £6.4 million refinancing at 3.5p per share; the proceeds will be used to repay lenders Bank Leumi and Discount Bank and support the working capital needs of Bagir, whose interims revealed a pleasing swing from a negative to a positive EBITDA performance.

Broker N+1 Singer says the refinancing takes Bagir from a net debt to a net cash position and provides flexibility for the AIM minnow to move back into a profitable growth phase under new management led by Eran Itzhak, CEO and himself a backer of the funding.

Itzhak says 'this fundraising gives the company the ability to complete the restructuring agreement with the Lenders and, in so doing, to clear all outstanding bank debt (approximately $21 million) and is the most significant stage of our turnaround plan to date.'

He adds: 'Going forward, our balance sheet is strengthened considerably and this enables us to look to the future with confidence as we seek to grow the company.'

Existing shareholders including Hargreave Hale and Miton Asset Management participated in the refinancing, raising their stakes in Bagir from 17.31% and 14.94% to 20.26% and 18% respectively.

Web chart - BAGIR - Sep 16

Bagir has refocused its manufacturing base to sites in Ethiopia, Egypt and Vietnam, countries offering duty free export status for sales to both the EU and US, competitive production costs and local governmental support for the textile industry.

N+1 Singer's Matthew McEachran writes: With a very clear growth strategy underpinned by these changes, Bagir aims to grow the number of customers in the US, UK, Europe, Australia and South Africa, and also to shift the mix within the UK office to larger volume orders. Discussions are advancing and early signs are promising with several recent wins e.g. Woolworth, Haggar, DXL and Affinity Apparel.'

Issue Date: 16 Sep 2016