Randalls short of forecast profit

Randalls Holdings, which was floated last year with the company forecasting a pre-tax profit of $54.6 million based on assumptions that inflation would average 16 percent, the Zimbabwe dollar would decline slowly, interest rates would be marginally above the rate of inflation, the country would have an average agricultural season and there would be continued investment in mining and construction, ended up more than $20 million short because of the economic and social turbulence that characterised its financial year ending March.

The company, however, achieved the forecast turnover of $408 million, but profitability was seriously affected by exchange rate losses, industrial unrest, inflation and high interest rates. Unacceptably high levels of stock and debtors forced the group to borrow with its borrowings peaking at $47 million in February. But the group says that by May net short-term borrowings were down to $34 million.

Although the company had an operating profit of $39.4 million, its pre-tax profit was reduced to $31.9 million after payment of $7.4 million in interest charges. After tax profit ended at $22.4 million against a forecast $33 million. The company, however, says its balance sheet is still strong with net assets of $173.6 million and gearing is 25 percent.

A breakdown of the group's operations shows that Randalls Distribution exceeded both forecast turnover and profit. Its turnover was $30.3 million against a forecast of $29.6 million but profit clocked $1.3 million against a forecast of $765 000. This was despite an exchange loss of $1.04 million.

This division has, however, been disbanded following the massive restructuring of the group which became operative in April. The restructuring saw the number of operating units reporting to the managing director reduced from 11 to three.

Bearings and Equipment which was purchased with some of the proceeds from the floatation exceeded its forecast turnover by $2 million but its profit was also $2 million below forecast. The company is said to have suffered exchange losses of $4.3 million. Its turnover was $58.2 million and profit $4.7 million.

Hardware chain, Champions, exceeded both forecast profit and turnover. Turnover was $41.1 million and profit $3.1 million against a forecast turnover of $36.3 million and profit of $1.8 million.

Petroleum Services was below forecast with turnover at $41.9 million and profit $1 million instead of the forecast $45.2 million and $3.1 million, respectively. The division suffered a loss of $943 000 through industrial unrest and exchange losses.

Randalls Plastics did much better. Turnover was $40.1 million from a forecast of $38.6 million and profit was $2 million above forecast at $9.8 million.

Fredk Sage suffered from the downturn in the construction industry with turnover up from a forecast $75.4 million to $90.9 million but profits down from a forecast $16.1 million to $10.3 million. It, however, has local contracts amounting to $60 million which will be completed in the next two years and is pursuing regional contracts worth $70 million.

Ceilings and Walls, one of the smallest operations was also affected by the slump in the construction industry. It only recorded turnover of $5.8 million against a forecast of $9.8 million and profits were down $995 000 against a forecast $1.8 million.

But G Sepe was worse. It suffered a loss of $126 000 instead of a profit of $2.3 million. Turnover was $12.2 million down from a forecast $18.6 million.

Mitchell Cotts Engineering also did not do well with turnover at $38.2 million instead of $54 million and profit a mere $286 000 against a forecast $5.6 million.

Byco, on the other hand fared better exceeding forecast turnover by $5 million to $49.6 million but profit was $1 million less at $7.8 million.

Having undertaken a $3 million restructuring, it will be interesting to see, in September, if this has paid off. The group though is very cautious. It says because of the uncertain economic environment it is impossible to forecast the improvement in profits the restructuring will bring.

But, it adds: "the group is now better positioned to take advantage of opportunities for development and growth should the economy improve."

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