JD Group Plans Rights Issue as Soaring Bad Loans Lead to Losses

JD Group Ltd. (JDG), a South African furniture retailer and provider of unsecured loans, will sell shares worth as much as 1.5 billion rand ($136 million) as it increased provisions against bad debt and said it would report a loss for the fiscal first half.

JD Group plans a rights issue of 1.3 billion rand to 1.5 billion rand in order to enhance its prospects for profitable growth from a strengthened capital base, the Braamfontein-based company said in a statement today. The stock fell to the lowest in more than five years.

“The company adopted a more conservative provisioning methodology as a result of the deteriorating credit quality in both the secured and unsecured lending market,” JD Group said in the statement. “Consequently, the impairment provision was increased by 602 million rand to to 1.56 billion rand.”

JD Group shares fell 6.3 percent to 25.40 rand at the market close in Johannesburg, the lowest since October 2008. South African retailers have been struggling over the past year as high unemployment and slower economic growth hurt consumer spending.

Earnings per share for the six months through December will be a loss of 65 to 70 cents per share, compared with a profit of 232.6 cents per share in the same period in 2012, JD Group said. Furniture sales also declined, it said. The rights issue will be underwritten by Steinhoff International Holdings Ltd. (SHF), the Johannesburg-based owner of France’s Conforama furniture chain.

To contact the reporter on this story: John Bowker in Johannesburg at jbowker2@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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