Rank: Elder Joined: 5/25/2012 Posts: 4,105 Location: 08c
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Quote:Commentary of the Performance
The Board of Directors of Deacons (East Africa) Plc hereby announces the unaudited results of the Group for the six months period ended June 30, 2018. Following the sale of the Mr Price (MRP) Franchised Business, the net sales for the Group decreased by 20.7% for the remaining business while the overall decrease (factoring in discontinued operations) was 65%.
The overall retail trading environment during the period under review was characterized by extraordinary and exceptional events that adversely affected the business, key among them being as follows:
(i) Loss of revenue from discontinued operations (MRP) amounting to Kshs 529 M, which formed over 50% of the business. This was compounded by the slow economic start in 2018 as the Country recovered from the 2017 election cycle.
(ii) Performance was largely affected by cash constraints leading to a drop in stock levels across most stores. This resulted in suppressed margins and reduced newness of product.
(iii) The retail space reduced from 190,341 square feet in 2017 to 69,614
in 2018 because of MRP discontinued operations and closure of non performing units.
(iv) The non-performance of major anchor tenants reduced traffic into the
malls with 98% of our stores operating in malls whose anchor tenants are experiencing stocking challenges.
(v) Aggressive sale offers in Q2 reduced the average gross margins to 25% but enabled the business to flush out stock and improve liquidity.
The F & F brand has, however, continued to register very encouraging results indicating that its value proposition was well received and has great potential to grow into a chain of stores.
The total operating expenses went down by 84% in line with the downsized business and the cost rationalization program that was implemented in May 2017. Despite this, the Group registered a Loss After Tax of Kshs 229.5 M compared to a loss of Kshs180.4 M recorded in a similar period of the prior year. Pesa Nane plans to be shilingi when he grows up.
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