Tough times hit Truworths profits
Truworths has lowered its dividend by 9c to 261c per share, as a result of persisting tough trading conditions in SA and the UK in the six months to December.
With a dual listing on the Johannesburg and Namibian stock exchanges, the company has a presence in Germany, Ireland and some sub-Saharan African countries.
Retail sales proved challenging in 2017, affected by low economic growth, high levels of unemployment and soft real growth in household income.
The group’s operating profit fell 3% to R2.4bn and dil-uted headline earnings per share were 3% lower at 379.3c.
Retail sales increased 1% to R10.30bn, with Truworths contributing R7.4bn and UK-based Office R2.8bn.
Cash from operations totalled R1.8bn and was used to fund dividend payments of R790m. During the six months to December Truworths opened 25 stores across all brands, while the acquisition of Loads of Living added a further 13 stores. At the end of the period the group had 977 stores, up from 939 in 2016.
CEO Michael Mark said despite the difficult period, the quality of the Truworths debtors portfolio was improving.
Improved collections contributed to the overall debtors book declining to R6.3bn from R6.4bn in the six months.
Opened accounts as a percentage of applications increased to 24% compared to the prior period’s 22%.
The group’s active account base declined 1% to 2.6-million accounts during the period.
Truworths said this continued decline was a consequence of the “onerous administrative burden introduced by the credit affordability assessment regulations”, which came into effect in September 2015 and require customers to produce documentary evidence of income.
Truworths said SA’s economic prospects were looking favourable, partially due to the recent political changes.
However, the recessionary environment continued to put pressure on the disposable income of consumers, which would be exacerbated by the hike in value-added tax to 15%.
In the UK, the trading environment remained tough and interest rates were expected to rise and there was a “degree” of political uncertainty, it said.