weeks of local sales due to the Covid-19 lockdown and hefty impairments. In an update in May, Truworths said a final dividend was unlikely.
The retailer said at the height of the lockdown it earned no revenue from merchandise sales and accounting collections were significantly reduced due to the impact on customers’ income as well as the fact that most of them pay their accounts in store. While Office’s stores in the UK were closed from 24 March to 14 June, it was allowed to continued trading online, benefitting from its strong e-commerce presence.
Despite measures taken to cut costs, conserve cash, manage inventory and access available government support schemes, Truworths said the pandemic had a severe impact on its performance, most notably on revenue generation, debtors’ provisioning levels and the recoverable value of goodwill, intangible and right-of-use assets.
The continuing tough trading environment in the UK, aggravated by Covid-19, resulted in it raising a further non-cash impairment charge of £118 million against Office’s intangible assets, as well as a £14 million impairment of its right-of-use assets and property, plant and equipment. In Truworths Africa, the YDE goodwill balance was impaired in full by R52 million, while right-of-use assets in respect of leased retail premises were impaired by R95 million.
Truworths Africa’s sales fell 8.7% to R12.3 billion, with sales down 23.5% in the second half of the year. Office’s sales declined by 16.4% to £233 million, dragged down by a 34% decline in sales in the second six-month period.
Group revenue declined by 8.1% to R18 billion for the year to 28-June and retail sales were down 9.2% to R16.9 billion. It reported a net loss for the year of R330 million, down from a R360 million profit previously. Earnings per share (EPS) slumped 192% to a loss of 133c while adjusted EPS came in 32.5% lower. Excluding the non-cash impairment charges, headline EPS were down 28.2%. It has declared a final dividend of 31c per share, taking its total payout for the year to 280c, 27% below last year.
Truworths said it had considered various options for Office and had decided to advance funding of £6.5 million from its existing cash reserves over the next 15 months. The funding would be in the form of a secured revolving credit facility on appropriate terms.
While the trading environment in the UK remains uncertain in light of the Covid-19 pandemic, the Brexit transition and the migration to digital retail, the Group is committed to the turnaround and success of Office and is working closely with Office management and other stakeholders on the ongoing restructuring process,” Truworths said.
The retailer said all its directors, divisional directors and some senior management of the company and its subsidiaries offered to sacrifice up to a third of their remuneration over three months to end-June to an internal fund to assist those staff in critical need during the pandemic.
Its share closed 0.9% down at R30.48 yesterday. The results were released just after the close of trade.
Main Image; The Africa Report
