Seardel picking up stitches

Johannesburg - Clothing and textile conglomerate Seardel [JSE:SER] appears to be gaining traction in its strenuous turnaround effort.

A trading update released on Thursday suggested that Seardel, which is now controlled by empowerment giant HCI, has shifted close to a break-even position in its continuing operations.

The trading statement - covering the 12 months ending March 2009 - pencilled in a bottom line range of between 3c/share and a loss of 2c/share.

Headline earnings from continuing operations were estimated at between 0/c share and –2c/share. This is a marked improvement on the nine-month period to end March 2009 when Seardel notched up a loss of 28c/share and headline loss of 19c/share.

The nine month performance in 2009 was used as a comparative trading because Seardel changed its year-end to align it with parent company, HCI.

The improvement is significant because it lend credence to HCI's confidence in turning around the struggling Seardel operations.

In November last year – at the release of interim results to end September 2009 – Seardel predicted an improved performance in results for the 6 months to  March 31 2010.

What is more encouraging is that the improvement came despite a continued strengthening of the rand in the trading period under review. While the operating operating improvement was encouraging market watchers stressed that it would also be important to gauge the condition of Seardel’s balance sheet when the full results were published.

Two years ago HCI rode to the rescue of Seardel, which was struggling to fend of banks after its borrowings swelled to dangerous levels. The company gained some relief from balance sheet pressures when HCI underwrote a R300m rights issue.

At the end of September, Seardel's balance sheet showed an overdraft of R250m and interest bearing liabilities of R190m.