Truworths builds on bumper 2002.

Posted On Monday, 03 March 2003 10:01 Published by
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TRUWORTHS International Ltd has followed up its bumper 2002 financial year with a 23,5% increase in merchandise sales, a 37,5% rise in headline earnings per share and a 44% improvement in the dividend for the 26 weeks to December.
TRUWORTHS International Ltd has followed up its bumper 2002 financial year with a 23,5% increase in merchandise sales, a 37,5% rise in headline earnings per share and a 44% improvement in the dividend for the 26 weeks to December.

Sales, including franchise sales, for the first half of the new financial year totalled R1 194,9 million (R967,9 million). Headline earnings per share rose to 39,6c from 28,8c. An interim dividend of 13c (9c) a share was declared.

Executive chairman Michael Mark said buoyant trading activity, productivity gains in terms of sales per square metre and per full-time employee, higher interest received, and a continued focus on operating costs resulted in an improvement in operating margins from 20,4% to 22,7%. Operating profits before finance costs, taxation and exceptional items increased by 37,3% to R 270,8 million (R197.3 million). Net profit attributable to shareholders rose by 35,7% from R133.2 million to R180.8 million. Headline earnings improved by 35,5% to R180 million (R132.8 million).

Mark said positive economic growth and the effects of a relaxation in personal income taxation buoyed consumer sentiment and spending. Higher interest rates and double digit inflation did not impact performance. All merchandise departments exceeded expectations, with particularly encouraging performances from Truworths Man, Daniel Hechter, LTD, Identity and Elements.

Sales growth including like for like sales growth of 19,8%, was well ahead of the estimated average of 13,2% for the clothing, footwear and textiles sector. Internal inflation in the group for the 26-week period averaged in the mid teens.

Trading space increased by 4,1% over the comparable figure in 2001 following the opening of two Truworths stores and the roll out of nine new Identity stores as well as other format and store expansions. The small decline in the gross margin resulted mainly from the higher contribution to sales by the lower margin Identity and cosmetics concepts. Expenses, inclusive of foreign exchange losses, for the period increased by 16,2%. However, if these effects, which arose from the strengthening of the Rand, were to be excluded, expenses reflected an increase of 10,9%.

Mark said the group’s debtor book increased by 24,9% to R753,9 million, whereas credit sales growth was lower at 21,6%. Improvements in the health of the debtor book were reflected in a lower percentage of arrear accounts and a further reduction in net bad debt as a percentage of credit sales when compared to the previous year. Credit sales represented 72% of total sales compared to 73% last year.

Attributable cash flow per share increased to 66,1c from 28,3c. Greater profitability, tight inventory management, increased creditor funding and improved collections contributed to a substantial increase in cash generated from operations. The ability to generate healthy cash flows is reflected in the increase in cash and cash equivalents of R236 million to R365,6 million, since June 2002.

Marks said the SA Revenue Service had advised that the company‘s objections to additional tax assessments received in the 2002 financial year, relating to transfer pricing adjustments in respect of the 1996 to 1999 years, had been allowed in full.

“As a result management expects that an amount of R18,7 million, comprising normal tax, secondary tax on companies and interest, will be refunded. The amount is to be credited against the group’s tax expense in the second half of the 2003 financial year.”

Looking ahead, Mark said sales growth over the first eight weeks since December 31 has been similar to that for the period under review.

“Management however believes it may be difficult to sustain this high level of growth given the challenging sales base established in previous years, the continuing inflationary pressures and still high interest rates.“
Publisher: Cape Business News
Source: Cape Business News

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