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Alert Steel losses increase as difficult trading conditions persist

31st March 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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AltX-listed steel retailer Alert Steel on Monday reported a 14.7% increase in its headline loss, for the six months ended December 31, to R31.8-million as difficult trading conditions persisted.

This translated into an 11.6% increase in the loss a share from 62.1c previously to 69.3c in the period under review.

“The trading for the six months under review continued to be challenging. The difficult trading conditions experienced in the first half of the calendar year in Limpopo, where the group has a significant presence, continued in the second half of the calendar year,” Alert Steel said.

It added that the group’s split between cash business and credit continued to grow with the cash business having increased to more than 65% of the group’s R404.9-million
revenue. 

A slowdown in Alert Steel’s contracting and credit business had been observed during the period as a result of tighter credit control.

Further, Alert Steel had changed its focus from rolling out containers to concentrating on the opening of express stores to accommodate the reintroduction of hardware and building supplies into the group.

During the period under review, Alert Steel introduced hardware and building supplies together with steel and steel-related products to offer customers a complete range of products required for the building industry.

In line with this decision to expand the product range, the group acquired all the trading stock from building and hardware supplies retailer Build Kwik Wholesalers to the value of R23.6-million during December 2013.

The full benefit of these additional stores was expected to come to fruition during the next six months.

This acquisition also resulted in an increase in the group's inventory holding to R143.6-million, Alert Steel noted, adding that it had also acquired certain fixed assets from Build Kwik amounting to R6.1-million.

Other additions to property, plant and equipment amounted to R23-million and included relocating the company’s distribution centre to accommodate the increase in stockholding, refitting most of its major stores with new shelving to accommodate the new product ranges, as well as the opening of new stores.

Meanwhile, sales, distribution and administration costs increased by 19% to R115.6-million during the period under review, including a R5.7-million impairment of goodwill, R2.3-million in retrenchment costs, R1.6-million in professional fees – relating to corporate actions – and increased depreciation on property, plant and equipment of R2.3-million.

“The [reduction of] monthly overhead costs continue to be a key focus area to ensure that Alert Steel becomes the lowest-cost supplier in the industry,” the company said.

Further, Alert Steel stated that, by April 2015, it intended to develop a further 28 stores in the greater Johannesburg and Pretoria areas.

“These areas have an added benefit of limiting distribution costs as they are very close to the distribution centre in Pretoria. The result is that these additional stores will have a positive effect on the financial position of the company,” Alert Steel stated.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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