Truworths to contain credit risks

 

HARARE - Apparel retailer Truworths Zimbabwe (Truworths) says it will focus on effective management of credit risk to minimise trade receivable costs and improve cash flows.

This comes as the country’s moribund economy is eating into corporates’ profits as a result of debt-laden consumers, already battling high unemployment and spending warily while the majority are failing to services their debts.

Truworths chief executive Bekithemba Ndebele yesterday said in the face of expected Job losses in the formal sector that will result in depressing aggregate demand, the clothes retailer will continuously re-align costs with trading densities.

“The business will focus on continuously offering a wider range of merchandise at appropriate price points to improve customer affordability and convenience,” he said.

In the full year to July 2015, Truworths recorded $23,1 million turnover, which was 3,6 percent lower than $23,8 million achieved in the prior year. The resultant operating margin was at 0,7 percent compared to 2,2 percent in the prior year.

“Trade receivables increased by 32 percent on the back of increased sales in the second half of the financial year and the introduction of 12 months credit which at year end stood at 21,4 percent of the book,” Ndebele said.

He noted that during the financial year debtors values in arrears, hence interest bearing, were little changed from the prior period, resulting in only a 2,9 percent increase in debtor’s interest receivable.

Truworths — one of Zimbabwe’s biggest fashion retailers — said trading conditions in the country were tough and are expected to remain so for rest of the year, although it expects to report satisfactory growth in the current financial period.

“Trading conditions are expected to remain difficult with the added problem of shortage of power,” Ndebele said.

Zimbabwean retailers have been struggling to maintain profit growth, competing with second-hand imports which are flourishing despite a government ban as well as reduced household spending.

Truworths, the holding company for Truworths Man, Topics and Number 1 chains, did not declare a dividend in the period under review.

“Given the difficulties in the trading environment, the board considered it prudent not to declare a dividend for the financial year ended July 12, 2015,” the company said.

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