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May 26, 2020

Office-owner exploring all options for chain

The South African-owner of footwear chain Office, Truworths International, has said it is exploring all options for the future of the business, following the "significant impact" of the coronavirus outbreak on the group's results.

By Hannah Abdulla

The South African-owner of footwear chain Office, Truworths International, has said it is exploring all options for the future of the business, following the “significant impact” of the coronavirus outbreak on the group’s results.

The announcement came amid a profit warning in which the group said it was expecting full-year headline earnings per share (HEPS) to fall by 30% year on year, to ZAR174 (US$9.97) from ZAR580. 

It said it is “actively engaged” in executing operational steps and various strategic responses to best mitigate the impacts of this “unprecedented and continuously evolving situation”.

Group revenues, it said, have been reduced materially since stores were forced to shut and the group’s primary financial objective has been to curtail spending and preserve cash.

“The Covid-19 lockdown has materially affected both the Truworths business, being the group’s fashion retailing business in South Africa, and the United Kingdom-based Office footwear business, which had for many months prior to the lockdown been contending with negative consumer sentiment and Brexit-related uncertainty.

“As a result of the consequential impact on the profitability and liquidity of the Office business, the Truworths International board is considering all possibilities for Office, including various restructuring options, and the Group has engaged advisers to assist with this process.

“In light of these developments, an impairment of the group’s carrying value of the Office trademarks and right-of-use assets relating to store leases will be required during the 52-week financial period ending on 28 June 2020. Such impairments, which are yet to be quantified, would impact the group’s basic earnings per share (EPS), but would be excluded from the calculation of headline earnings per share (HEPS) and would not have cash flow consequences.”

Speculation Truworths was mulling a sale of Office began last month, with reports suggesting professional services firm Alvarez & Marsal (A&M) had been appointed to explore a sale of the 130-strong retail store chain.

Last July, Office confirmed it had entered into debt restructuring talks with lenders to explore options for the business. 

At the time Truworths International, which acquired the chain in 2015, said Office has around GBP45m (US$56m) worth of debt, a significant portion of which will be settled through a lump sum payment maturing in December 2020.

Truworths operates out of more than 700 locations in South Africa.

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