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TRUWORTHS INTERNATIONAL LIMITED - Business update and trading statement

Release Date: 25/05/2020 17:02
Code(s): TRU     PDF:  
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Business update and trading statement

(Incorporated in the Republic of South Africa)
(Registration number 1944/017491/06)
JSE code: TRU; NSX code: TRW
ISIN: ZAE000028296
(“Truworths International” or “the Group”)


The outbreak of the COVID-19 virus and its declaration as a worldwide
pandemic has had a significant impact on the businesses which the Group
operates, especially the requirement to close all retail store premises in all
countries of operation during lockdown periods, some of which remain in

Management of the Group has been actively engaged in executing
operational steps and various strategic responses to best mitigate the impacts
of this unprecedented and continuously evolving situation.

With Group revenues reduced materially whilst stores were required to remain
closed, the Group’s primary financial objective has been to curtail expenditure
and preserve cash.

The COVID-19 lockdown has materially affected both the Truworths business,
being the Group’s fashion retailing business in South Africa, and the United
Kingdom based Office footwear business, which had for many months prior to
the lockdown been contending with negative consumer sentiment and Brexit-
related uncertainty.

As a result of the consequential impact on the profitability and liquidity of the
Office business, the Truworths International board is considering all
possibilities for Office, including various restructuring options, and the Group
has engaged advisers to assist with this process.

In light of these developments, an impairment of the Group’s carrying value of
the Office trademarks and right-of-use assets relating to store leases will be
required during the 52-week financial period ending on 28 June 2020 (“the
period”). Such impairments, which are yet to be quantified, would impact the
Group’s basic earnings per share (“EPS”), but would be excluded from the
calculation of headline earnings per share (“HEPS”) and would not have cash
flow consequences.

The unprecedented economic crisis caused primarily by the severe negative
impact of the ongoing COVID-19 pandemic has resulted in diminished
revenue, reduced collections and an increase in the doubtful debt provision in
respect of the debtors book in the Truworths business.

Based on various scenarios, including the impact of the lockdown on trading
and the performance of the debtors book up to the end of the period, as well
as the duration of the lockdown in South Africa and the United Kingdom, the
board currently anticipates that the Group will record a reduction of at least
30% (174 cents) in HEPS* for the period, when compared to the prior period
reported HEPS* of 580 cents.

As regards the impairments of the Office trademarks and right-of-use assets,
the Group has considered various scenarios and their impact on the Group’s
EPS for the period. Based on the outcomes of these scenarios, the Group will
record a decline, and possibly a loss, in EPS for the period when compared to
the prior period reported EPS* of 145 cents. Given the current uncertainties in
quantifying the impairments, it is not possible to provide an indication of the
percentage decline in EPS* with reasonable certainty at this stage.

The board will provide the anticipated range of the decrease in HEPS and
EPS for the period when it has reasonable certainty in this regard, in a further
trading statement.

The board further advises that, having regard for the Group’s currently
projected financial performance and position in the short to medium term, it is
unlikely that a final dividend for the period will be declared.

The continued uncertainty resulting from the COVID-19 pandemic and the
lockdown resulted in trading levels of the Truworths business in South Africa,
since stores re-opened on 1 May 2020, increasing in the first week, but
thereafter declining following the initial surge in demand, when compared to
the prior corresponding period.

The board is able to advise that the Truworths business has successfully
extended the term of its borrowing facilities and thus has access to liquidity in
the medium term. Management is committed to the execution of various
strategies aimed at managing inventory, the account portfolio and expenses
prudently during this time.

Shareholders are advised that this trading statement does not constitute an
earnings forecast, and that the financial information provided herein is the
responsibility of the directors and has not been reviewed or reported on by the
Group's external auditor Ernst & Young Inc.

* As restated (on adoption of IFRS 16: Leases) in the interim results for the
period ended 29 December 2019.

Cape Town
25 May 2020

Sponsor in South Africa
One Capital

Sponsor in Namibia
Merchantec Capital

Date: 25-05-2020 05:02:00
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