Truworths final results June 2019
Revenue for the year increased by 1.7% to R19.6 billion (2018: R19.3 billion), gross profit was 1.7% higher at R9.3 billion (2018: R9.2 billion) whilst operating profit dropped by 58.1% to R1.7 billion (2018: R3.9 billion). Profit for the period attributable to equity holders of the company was recorded at R872 million (2018: R2.6 billion). Furthermore, headline earnings per share decreased by 8.6% to 562.8 cents per share (2018: 615.7 cents per share).
The directors of the company have resolved to declare a final gross cash dividend from retained earnings in respect of the 52-week period ended 30 June 2019 in the amount of 135 South African cents (2018: 159 South African cents) per ordinary share to shareholders reflected in the company's register on the record date, being Friday, 13 September 2019.
Consumer spending in South Africa is expected to remain under pressure in the short term owing to the effects of the prolonged economic downturn and renewed demands on disposable income. The labour market continues to weaken with unemployment at a 15-year high level. However, consumer confidence has stabilised following the country’s national elections in May 2019 and the improvement in the power supply in recent months, while consumer inflation remains steady.
The stronger retail sales growth trend reported by Truworths in the second half of the 2019 financial period is promising and sales momentum is expected to be driven by the expanding e-commerce offering, the layby payment option and customer response to new store concepts, including ID Kids and Context.
Truworths’ medium-term prospects will be supported by the health of the account portfolio, continued investment for growth, robust cash flows and strong balance sheet. Truworths’ retail sales for the first six weeks of the 2020 reporting period increased 1.2% compared to the first six weeks of the prior period.
Trading conditions and consumer confidence remain under intense pressure ahead of the end-October 2019 Brexit deadline, and it is expected that the retail sector will remain constrained in the medium term.
Management has over the past few months implemented several turnaround initiatives across the areas of trading (buying and planning), cost control, capital expenditure and brands and marketing and these are all progressing according to plan despite the difficult trading conditions. Inventory management remains a significant focus area to arrest gross profit margin decline and release working capital. Management is critically evaluating the real estate portfolio with a view to closing loss-making stores as leases come to an end.
Based on an in-depth assessment by advisers, a major financial restructure of Office is not being contemplated given its current profitability, liquidity and cash position.
Office’s retail sales for the first six weeks of the 2020 reporting period increased 3.0% in Sterling compared to the first six weeks of the prior period.
Group: Capital expenditure and trading space
Capital expenditure of R581 million (Truworths R537 million and Office GBP2.5 million) has been committed for the 2020 reporting period. Trading space is expected to increase by 0.6% (Truworths increase 0.7% and Office decrease 3.0%).