Ndebele says his company was considering returning the cash to shareholders or expanding operations, depending on the economic environment.
“Customers have been increasing with each month since the beginning of the year. At the current trend we would have achieved about 80% of profit that was recorded in the last 12 months,” Ndebele said.
“Depending on suppliers, we are expecting borrowings to peak at levels of about US$6,2 million next month or January 2011,” he said.
Truworths’ revenue rose from US$1,4 million in July 2009 to US$13,4million July 2010 due to a significant increase in retail merchandise. Sales rose from US$1,4 million last year to US$13,2 million this year. Activity was driven up by return of credit with the number of accounts rising from 24 881 in December 2009 to 38 260 on July 4 2010.
Profit before tax was at US$774 599 from a loss of US$448 465 last year.
The highest contribution to pre-tax profit came from Topics at 50%, Truworths contributed 40% and Number 1 Stores contributed 10% of total revenue. Profit for the period was US$714 487 against a loss of US$439 888 last year.
The group says it plans to continue with its credit facility and was adding 2000 new accounts per month.
“Thrust will be placed on strict credit-granting criteria to reduce probable defaults, Cost containment is another strategy the company will employ in the coming year,” Truworths said..
“There has been an improvement in gross margins to 51,7% during the second half of the year from 49% during the same period last year,” Ndebele said.
“ A total of US$97 367 had been written off in the period while a provision had been made for US$137 894 with arrears running behind by 90 days or more,” Ndebele said.
Going forward, Ndebele said the emphasis would be on productivity and the company had paid 30% of its 2011 summer requirements and for most of its winter needs.
The company said it expected the growth in accounts to slow down dramatically in 2011 because it was worried about the quality of clients outside of the formal sector.
“We don’t give accounts to the informal sector. It is effectively lending money without any security,” said Ndebele.