Seardel FY adj headline loss R45.0m vs R24.8m loss

The company said the main reason for the deterioration was the poor performance of the Seardel apparel division.

"The competition that this business unit faces from both imports out of lower wage paying countries and manufacturers within our own borders that do not pay the prescribed minimum wages meant that rising input costs could not be recovered in higher prices for products supplied.

"In order to fill its production capacity, margin needed to be sacrificed to retain volumes. The resultant losses were of such a magnitude that it unfortunately left no alternative but to rationalise the business unit," it said.

No dividend was declared.

Although turnover was up 6% to R2.5 billion, tough trading conditions saw gross margins decline to 19.3% from 22.7% in the previous year.

The group reported income attributable to ordinary shareholders of R136.9 million and total comprehensive income of R163.5 million for the year ended March.

Margins, particularly within the company's textile businesses, were further affected by movements in raw material prices.

"We mentioned in the previous year's report that the dramatic increases in cotton prices may have an effect on volumes and margins in this year. What transpired is that cotton prices have steadily declined over the course of this financial year which resulted in inventory holdings usually being held at prices above spot and thus resulted in lower margins being achieved," Seardel said.

In the group's textiles segment, turnover was up 3.8% to R1.05 billion, but margin pressure saw operating profit before finance costs from continuing operations fall to R38.3 million in the current period down from R56.2 million in the prior period.

In its clothing segment, a combination of lower turnover, reduced margins and the costs associated with restructuring resulted in this segment reporting an operating loss before finance costs from continuing operations of R125.8 million compared to the R13.2 million loss recorded in the prior period.

In Seardel's property segment, revenue remained relatively flat at R66.6 million but of significance is that revenue from external tenants increased by 223% to R24.5 million. Operating profit before finance costs declined by 28.1% to R44.6 million from R62.0 million in the prior period.

"The performance of all toy, stationery and electronics segment businesses delivered excellent results. Revenue was up 25% to R565.7 million whilst operating profit, with some assistance from foreign exchange gains, was up 46.2% to R56.6 million," the company said.

"The current year's results were overwhelmingly influenced by the settlement of the various litigation proceedings with former directors and officers of the group, with income of R191.8 million relating to a portion of that settlement having been recognised in the period," it added.