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Cape Town - Bankers to Seardel have agreed to maintain existing loan facilities until June 2010, in spite of the troubled clothing and textile group notching up an interim loss of R183m.
On Thursday afternoon Seardel - now 70.2% controlled by empowerment giant Hosken Consolidated Investments (HCI) - reported results that showed the core clothing and textile operations were deep in the red.
The group's R2bn in revenue was transformed into a R90m operating loss, with the clothing and textile arms losing R49m and R70m respectively.
The Prima Toy division was the star performer with R18m in profits off R178m in turnover. The Sharp consumer electronics division managed a R6m profit from turnover of R167.5m.
CEO Walter Simeoni said the textile division's gross margins were eroded as its input costs are mainly dollar denominated. This meant the weaker rand severely hampered profitability.
"Whilst input costs continue to rise, retailers are demanding price decreases which obviously places great strain on margins despite the company's efforts to reduce costs through efficiency gains."
Seardel's losses deepened to R128m after impairments of R26m and retrenchment/restructuring costs of R18m. Seardel's bottom line losses topped R180m after finance expenses of R60m were taken into account.
While the recent R300m rights issue has relieved some balance sheet pressure, there still might be some cause for concern because Seardel remained tightly geared with worrying levels of cash flow.
The company's bank overdraft was still a fairly hefty R307m at the end of December, while operational cash flow was negative to the tune of R232m for that period.
Seardel directors, however, reassured shareholders that the lenders to the group - Absa Bank, Standard Bank, Nedbank, Investec Bank and State Bank of India - had undertaken to maintain the existing facilities until at least June 30 2010.
This was done on the basis that most of the group's assets were secured in their favour in various ways.
The directors indicated the security has been provided to a special purpose company - Seardel Security (Pty) Ltd - which had guaranteed the obligations of the group companies in favour of the lenders.
Seardel's balance sheet showed a tangible net asset value of 211c/share, which equates to a value of about R1.5bn.
CEO-designate Stuart Queen said that since HCI had taken control of Seardel, the company had started an extensive restructuring programme.
"It is recognised that there are no quick fixes to a group of this size and that losses are anticipated until the benefits of turnaround come to fruition."
Unlocking new markets
He said the main thrusts of the turnaround included moving from a decentralised strategy to a more centralised approach, and unlocking economies of scale through factory consolidations.
He pointed out that the textile division had realigned itself around product clusters and work was being done to consolidate the company's lingerie and swimwear divisions into one facility.
Queen said other initiatives would see Seardel increasing production flexibility to enable quicker turnaround times and shorter runs. This, he reckoned, could unlock new markets for Seardel.
He said HCI would also ensure that Seardel's assets generated satisfactory long-term returns and that future capital was only allocated to projects "where there is a high degree of confidence in the expected returns".
- Fin24.com