MERGERS, ACQUISITIONS AND FINANCIAL RESULTS

Tough Market Forces South Africa’s APH Into Restructuring

Consumer electronics group Amalgamated Appliance Holdings (APH) said that it had been forced to embark on a major restructuring of its businesses to survive a turbulent trading environment in which it recorded its worst operating results in the year to June for more than a decade.

Group CEO Alan Coward said yesterday rising inflation and interest rates, tighter credit lending conditions by banks, and high food and fuel prices had depressed consumer demand for the group's products. "Trading conditions have been really tough and at the moment consumer spend is down, especially on big luxury items," he said.

Coward said his assessment showed that there would be no let-up to depressed spending in the coming months. "I am not an economist but all indications show that we will see consumer spending very flat for the coming months. We see no change at all," Coward said. Economists say economic conditions are not favourable to retailers, especially those who depend on credit sales, which have been suppressed due to the National Credit Act.

Coward said in remarks accompanying the group's results that as a result of the worsening economic environment, APH had experienced its toughest trading environment and poorest operating results since its listing more than 11 years ago.

Revenue fell 16% to R1.66bn and operating profit plummeted 107% from R130.25m to a loss of R9.23m, while headline earnings per share fell by 121% to a loss of 7.7c .

He said once the severity of trading conditions became apparent, management had swiftly embarked on a number of measures to strengthen the business.

These included reducing the head-count from 1200 last year to 765, restructuring management and sales representatives' incentives in its electronics business, and reducing inventory levels by 13% from R419m as of December last year to R365m in the period under review.

The group had also closed its mobile business and converted fixed overheads into viable costs through the outsourcing of its electronics service function. "We will consolidate these initiatives and our objective is to bed down the changes we have made to generate real positive cash flow and better results," he said. Coward said the group planned to implement further restructuring this year.

Business Day

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