Truworths suffers $1m loss as demand weakens
HARARE – Traditionally, the December peak season drives Truworths first half performance, which would eventually have a bearing on the group’s profitability at year end. The last period was however more broadly characterized by salary reduction, delayed monthly payments – which resulted in subdued trading conditions.
According to the company’s results for the half year ended 08 January 2017, merchandise sales were 40.8% lower, at $6.53 mln, compared to $11.03 mln same period in the year prior.
Consequently, group revenues also declined 35.89%, to $7.78 mln, from $12.14 mln in 2016, as virtually all operating units recorded declines in sales.
Chief executive officer, Temba Ndebele, in a statement accompanying the results, said trading conditions are expected to remain extremely difficult, adding that the business will have to reduce trading space in line with the trading densities.
“With the decline in aggregate demand, gross margins will remain under pressure. In addition, the shortage of foreign currency will negatively impact product availability and pricing,” he said.
Sales at Truworths in the 26 weeks were down 40.3% compared to a 1.9% increase in 2016, while Topics was down 43% compared a12.6% increase in prior year. Number 1’s sales went further down 31.7% from 4.3% in prior year.
Due to the decline in sales, gross profit margin decreased to 38.1% compared to 46.3% for the same period in the prior year. Ndebele said the, during the period, the group discounted products to stimulate sales in a market witnessing general low aggregate demand.
Trading expenses, excluding trade receivables, decreased 17.2%. On credit management, the number of active accounts increased 0.1% to 86,356. Some 12,403 of these were on the Instore Credit Card at period end.
Ndebele said trade receivables declined by 2,7% mainly as a result of reduced sales on credit. A 36.8 percent increase in the number of accounts opting for 12 month credit reduced the impact of the decline.
On other hand, he said the net bad debt experience was worse than prior year with write offs increasing 225% and recoveries reducing 58.6%. “All write offs had been adequately provided for,” he said.
The doubtful debt allowance, as a percentage of gross trade receivables, increased to 8%. Ndebele said, in monetary terms, the doubtful debt allowance was 23.1% higher than at prior period end. At period end, 79.3% of the group’s account holders were able to make purchases.
|Consolidated Income Statement|
|Profit/Loss before Tax||1,317,578||444,046||196.72%|
|Profit for the period||-986,888||327,876||-400.99%|
|Basic Earnings per Share||0.26||0.09||188.89%|
|Consolidated Statement of Financial Position|
|Net Asset Value per share (cents)||1.02||1.63|
|Statement of Cash Flows|
|Cash Flow from Operating Activities||1,477,140||-863,875||-270.99%|
|Cash Flow from Investing Activities||-8,773||-92,301||-90.50%|
|Cash Flow from Financing Activities||-1,129,900||600,250||-288.24%|
|Closing Cash and Cash Equivalents||817,817||648,764||26.06%|