Amap focusing on brands

Johannesburg - Consumer goods company Amalgamated Appliance Holdings (Amap) on Monday reported a headline loss per share of 23.7c for the six months ended December 2008 compared with a loss of 6.7c a year earlier.

The group said the trading environment in the consumer goods sector during the reporting period was characterised by fierce competition between distributors for a share of the smaller market and tight stock controls exercised by retailers.

The combined effect resulted in sales in the fourth quarter of the calendar year being below expectations.

Group revenue for the period was 33% lower at R612.5m compared to the prior year, primarily as a result of lower television and audio sales. Gross margins were lower due to the write down of the power inverter stock by an additional R74.5m and the clearing out of excess audio and television stock.

Restructuring costs incurred amounted to R5.6m.

Notwithstanding the poor trading results, Amap generated cash from operations for the period of R72.1m, driven by targeted restructuring initiatives and improved debtor and inventory management resulting in net cash on hand of R42.7m.

The loss for the period from continuing and discontinuing operations amounted to R50.5m after a loss of R13.1m before.

The company said the decision at the beginning of 2008 to rationalise and restructure the organisation is proving to be beneficial.

Russell Hobbs continued to increase its market share and the group's strategy of having a bouquet of offerings through Salton, Pineware and George Foreman was successful with revenue from these goods increasing compared to the previous period.

The decision to narrow the range of electronic goods and only trade in products that achieve required returns resulted in a significant drop in television and audio revenue.

Furthermore, the discontinuation of load shedding and extremely low sales compelled the board to write down the group's power inverter stock to net realisable value.

From December 1 2008, the statutory legal entities within the group were combined so that all trading now takes place through one company, namely Tedelex Trading. The benefits of this reorganisation will be derived in the second half of the current financial year, it said.

Looking ahead, the group said in line with its strategy to focus on the marketing of branded products, exploratory discussions have been entered into for the sale of its Atlantis manufacturing operation.

Furthermore, an agreement has also been reached relating to the sale of the Atlantis Manufacturing property. The sale of the property will generate a significant cash inflow and further reduce the group's working capital requirements.

The economic climate suggests that trading conditions will not improve in the short term. Consequently Amap will remain focused on cost reductions, cash management and maintaining its relatively ungeared balance sheet.

Amap believes that by continuing to focus and invest in its brands as well as delivering superior service to its customers, it will be well placed to face challenges and return to profitability in the near future.

- I-Net Bridge