Truworths maintains dividend in tough environment


Truworths maintains dividend in tough environment

Published Date: 2020-02-21 | Source: Stephen Gunnion | Author: Stephen Gunnion

Truworths maintains dividend in tough environment

The retailer has been affected by difficult trading conditions including weak economic growth, load shedding and Brexit uncertainty in the UK.

Truworths has maintained its interim dividend after a tough first half as challenging trading conditions in SA and the UK weighed on sales. At home, weak growth, high unemployment and load shedding were among the factors that constrained sales growth, while its Office chain of shoe shops in the UK continued to feel the fallout of Brexit uncertainty.

Truworths Africa, which includes its SA stores as well as those in the rest of Africa, increased sales by 2.7% to R7.8 billion in the 26 weeks to 29 December. However, sales at its UK-based Office segment fell by 3.3% to £151 million and were 2.6% lower in rand terms at R2.8 billion. That averaged out at a 1.3% increase in group sales to R10.6 billion, while operating profit declined by 2.3% R2.3 billion. Earnings per share (EPS) increased by 0.4% and headline EPS were up 0.5%. It maintained its interim dividend at 249c per share.

In the UK, Office cut trading space by 7.4% as it opened one store and closed 22 others, including 18 concession stores across House of Fraser and Topshop/Topman. It expects to reduce trading space by about 6% for the 2020 financial year as a whole. Online sales contributed about 34% of retail sales. Truworths Africa also cut back its store count as it opened 21 but closed 31.

The group's net asset value per share decreased by 14% to R21.52. That's after last year's non-cash impairment charge of £97 million (R1.9 billion) against its investment in Office following a reassessment of the chain's assets. It has faced a challenging operating environment the UK due to Brexit, as well as the shift to online shopping. Following debt restructuring talks, it reached a deal with Standard Bank in September to refinance the chain.

The restructuring of Office's debt resulted in a decrease in interest-bearing borrowings to R1.1 billion.

The retailer said retail sales for the first seven weeks of the new reporting period increased by 11.9% from the prior corresponding period mainly as a result of the a change in the timing of its end-of-season sale. It expects the local trading environment to remain constrained in the short to medium term. Office's retail sales for the first seven weeks decreased 14.4% due to less sale activity as a result of lower carry-over inventory and fewer launches of new 'in-demand' styles of major brands last month.

Truworths' shares closed 3.6% higher at R45.64 yesterday.

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