Rex Trueform ‘may restructure, shed remaining factory'

The company, which owns the Queenspark chain of clothing stores, has only one factory, in Atlantis, after closing the men's suit factory in Salt River, Cape Town, some time ago. However, this factory has not performed as well as the clothing chain.

The company said last month revenue growth of 15.8% and headline earnings per share growth of 20.9% in the six months to December was due solely to Queenspark as the manufacturing division posted a loss due to lower volumes at the factory.

The division had a R766,000 loss, and the loss was likely to rise over the year with further reductions in orders expected.

CEO Catherine Radowsky said last year the “socioeconomic environment in this area remains problematic with unacceptable levels of absenteeism and an unstable workforce”.

“The interventions which were made last year with regard to absenteeism have not been successful in that this remains at an unacceptably high level,” she said in the company's report for the past financial year.

Absa Investments analyst Chris Gilmour said last week the group would benefit from focusing on its retail outlets and closing the factory, especially as consumers would start opening their wallets again towards year-end.

Rex Trueform achieved a huge comeback from when it was focused on manufacturing.

“The company has reinvented itself,” said Gilmour. The manufacturing division faced cost pressures, and was not globally competitive, which led to losses.

Syd Vianello, an analyst with Nedcor Securities, said the company would benefit from a streamlined structure that did not have several different types of shares.

The company had a holding company and an operating company, which complicated matters.

Vianello said the company was expected to close the Salt River factory if it did not improve performance within a year. Disposal of the Salt River factory would be a “move in the right direction”.

The company had also shed its 25% stake in the Australian operations, he said.

“They have started cleaning up the structure. They will end up with only Queenspark, and could likely change the name.”

Source: Business Day

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