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33
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46

Truworths sinks deeper into the red

BUSINESS REPORTER

 

Clothing retailer, Truworths Limited, will turn to shareholders to raise fresh capital after reporting a negative working capital for the six months to January 8, 2023, creating uncertainty in its ability as a going concern.

It its latest financial results for the period under review, Truworths’ current liabilities, which totalled ZWL$974.97m, far outstripped current assets by ZWL$491.88, meaning that the company may not be able to meet its current liabilities as they fall due.

Total assets stood at ZWL$483.09m.

Truworths attributed its woes to harsh economic conditions characterised by high interest rates, volatile exchange rate, and price controls enforced by the Financial Intelligence Unit.

“These conditions may give rise to a material uncertainty which may cast doubt on the company’s ability to continue operating as a going concern and to realise its assets and discharge its obligations,” Truworths said.

To deal with the problem, Truworths said it plans a rights offer to raise capital.

“The group is engaged in discussions in a transaction that involves raising capital for the group’s working capital requirements and expansion initiatives through the issuance of shares by way of a rights offer,” Truworths said.

Revenue for the group increased to ZWL$577.79m in the period under review from ZWL$427m reported in the prior comparative period.

But, the retailer suffered a ZWL$572m loss in the period under review compared to a profit of ZWL$366.51 reported in the same period the previous year.

Units sold by Truworths declined by 45% due to the suspension of credit from July 1, 2022.

Truworths’ debtors book declined as credit sales were stopped in July 2022.

This was due to the increase in the prime interest rate to 200% per annum which made credit sales unviable for the business.

“It was not affordable for our customers to service their account obligations at rates over 200% per annum,” Truworths said.

Truworths said sales value performance was negatively affected by the price controls enforced by the Financial Intelligence Unit through the use of the official exchange rate in the sale of merchandise.

The business maintained a competitive US$ price to be able to compete on a US$ basis, translating the US$ price to ZWL $price at the auction rate resulted in the uneconomic ZWL$ prices and loss of value.

The company expects trading conditions to remain difficult as a result of the existence of multiple devaluing exchange rates and the controls on the formal retail sector.

High-cost interest rates limit the business’ ability to lend in ZWL$ during the period under review.

With the economy dollarising the business introduced US$ credit with effect from April 1, 2023.

The company said this should see an improvement in sales and together with the recapitalisation proposal the balance sheet is expected to strengthen and sustain the underwriting of US$ credit.

 

 


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