Cape Town - Struggling clothing and textile conglomerate Seardel [JSE:SER], which is controlled by HCI, weaved a few threads of hope into its results for the year to end-February 2010.
Gross profit of R612m was generated from turnover of R2.6bn, and continuing operations showed a small profit of R2m.
While the comparative nine month period for 2009 makes a direct comparison difficult, Seardel did show a marked improvement in gross margins form 19.8% in the nine months to end-March 2009 to around 24% for the 12 months to end-March 2010.
Most encouraging, though, was the swing in net cash flow generated by operations from an outflow of over R160m at the end of March 2009 to an inflow of almost R150m.
Seardel CEO Stuart Queen said a strong focus on cash generation in the year meant that net interest-bearing borrowings declined by R156m. This improved the company's gearing by 9% to 24%.
Queen said Seardel was "far advanced" in its negotiations with banks, which have combined facilities in excess of R750m, to retain funding facilities.
He stressed that Seardel was projected to only need R450m for the financial year ahead.
Queen believed Seardel, which two years ago needed a rights issue of R300m to keep the banks at bay, was at a point where the major reorganisational initiatives had largely been completed.
He said this would allow management to focus on improving the performance of the individual business units.
"We believe that the business has come through its crises stage and large parts of the business are standing on far more solid foundations than was the case 17 months ago."
He added that Seardel had significantly reduced the fixed cost base of most of the businesses, reduced gearing, improved efficiencies and released additional capacity.
"We have continued to invest in the businesses where justified and have spent over R50m on new plant and equipment."
Regarding Seardel's divisonal performance there was good news and bad news.
The continuing textile operations shrugged off a 3% decline in 'annualised' turnover tom post operating profit before interest of R18m.
However, the performance from the clothing division was tatty.
Queen noted that although improvements had been made, the performance of the clothing operations remained disappointing. The clothing segment recorded an operating loss of R55m.
Although there were costs savings of some R25m on the clothing side, Queen explained that these benefits had been offset by declining volumes (turnover was down 14% on an annualised basis).
He said a focus area in the year ahead for the clothing segement would be to "better leverage" off branded apparel opportunities.
He pointed out that existing licensed and proprietary brands like Speedo and Brooksfield would receive renewed focus. "We also secured some new licences for international brands which we intend launching into the local market".
- Fin24.com