adminTruworths will continue to focus on the management of trade receivables to ensure improvement and enhance quality of the book and cash flows as the consumer and credit environment continues to deteriorate, chief executive Temba Ndebele told an analyst briefing last week.
Group merchandise sales for the 53 weeks to 12 July 2015 were down 3,6 percent to $21,19 million compared with $21,97 million achieved in the 52 weeks ending 6 July 2014. On a comparable 52-week period, sales declined 5,2 percent.
However, it was a tale of two halves; strong sales growth was recorded in the second half at 19,2 percent while first half sales were down 18,6 percent. The group achieved stronger sales growth in the second half of the year largely due to delayed bonuses which came after December and the introduction of the home-ware range which had a significant contribution to turnover. In terms of individual chain stores performance, Truworths sales were down 2,9 percent ($7,66 million), Number 1 stores 22,9 million ($2,23 million) while Topics was up marginally by 0,9 percent ($11,31 million).
“Topics Stores second half turnover was bigger than the first half. Topics is a middle market store dominated mostly by civil servants, so we have bigger turnover in dollar terms in the second half because of those delayed payments, which simply says if people have got money they will spend,” he noted.
The gross profit margin decreased to 47,2 percent from 50,5 percent as a result of the introduction of the new home-ware range which carries a lower margin.
In terms of group sales participation, 76,7 percent of sales were on credit, 19,4 percent on cash and 3,9 percent on the laybye scheme. Cash sales were mostly from Number 1 stores which contributed 67 percent, while credit sales were higher in Truworths and Topics at 79 percent and 91 percent respectively as they offer credit. In terms of overall sales participation by chain, Truworths contributed 36,1 percent, Topics 53,4 percent and Number 1 stores 10,5 percent.
Trading expenses decreased by 6,7 percent to $10,38 million, excluding trade receivables costs, expenses decreased by 8,7 percent. Depreciation and amortisation declined 23,2 percent due to the change in useful lives of leasehold improvements and furniture and fittings. Employment costs also decreased by 8,3 percent as average staff numbers reduced.
The doubtful debt allowance increased from 4,6 percent last year to 6 percent of gross trade receivables, in line with the deteriorating macro-economic environment. Profitability was strong in the second half, though this was negated by the increase in debtors’ costs.
Overall net bad debt was down 29.6 percent as a result of improved recoveries, despite a 3 percent increase in bad debts written off. Interest earned on the book went up by 2,9 percent from the prior period. At the end of the period 45,9 percent of the book was interest bearing (24 percent — arrear accounts and 21,4 percent – 12 month account) compared to 30.9 percent in the prior period which consisted of arrear accounts.
“Overall allowances for bad debts had increased by 67 percent, while provisions in Topics where much higher as it is the middle market which is very sensitive,” he said. The in-store credit card from CABS was performing well and stood at $10m as at the end of June. Overdue amounts were under 1 percent.
In terms of profitability, the company made a retail trading loss of $320 000 compared with a profit of $50 000 the previous period. Consequently the trading margin was a negative 1,5 percent compared with a positive 0,3 percent the previous period. — Wires.
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