Alan Schlesinger, the chief executive of Relyant, said overhead controls and a reduction in interest-bearing borrowings, which were slashed to R383 million from R601.6 million, contributed to the group's continued turnaround.

Relyant was recapitalised in July 2002 with a cash injection of R792 million.

Despite the jump in attributable earnings, earnings a share were limited to a 23.6 percent increase to 12.6c because of the higher number of weighted shares in issue. The group achieved a trading profit of R154 million on R1.516 billion revenue, representing an operating margin of 10.2 percent, compared with the 9 percent operating margin on the R1.463 billion revenue during the comparable period.

Schlesinger said the results were the first small step in the right direction but the first half was always better than the second, because of the seasonal nature of the furniture retailing business.

Lavan Gopaul, a portfolio manager at BP Bernstein, said the consumer market had witnessed record spending as a result of lower interest rates and cheaper fuel prices.

But looking ahead, Gopaul said investors were advised to be cautious when trading stocks with a credit edge, interest rate edge to property edge.

This was because the consensus from analysts indicated that interest rates were ready to rise in the third and fourth quarters. 

During the second half of the year to June the group made an attributable loss of R23 million.

But Schlesinger said Relyant was committed to improving its operating performance during the financial year, when lower inflation and interest rates should continue to drive the recovery in consumer spending on household durables.

Business fundamentals made a strong showing, with gearing dropping to 30 percent from 50 percent during the same period last year and from 39 percent for the year to June.

Cash generated from operations rose to R152.2 million from R31 million because of the almost R100 million improvement in working capital.

Total cash sales increased to R499 million from R486 million, while credit sales rose to R583 million from R564 million.

While reductions in inflation and interest rates boosted trading, Schlesinger said, Relyant's strict credit granting policies had restricted sales growth in the credit chains, which grew comparable sales by 9 percent.

Relyant's brands include Beares, Dial-a-Bed, Furniture City, Geen & Richards, Glicks, Lubners, Mattress Factory, Savells Fairdeal and Early Bird Services.

The group sources its products from 760 suppliers and its first choice is to buy from local manufacturers.

It had not yet joined the Proudly South African campaign, as not all the products it sold were available locally, Gopaul said.
Relyant's shares rose 9c to R1.30 in Johannesburg yesterday.