Consumer Industries Editor

THE appreciation of the rand was encouraging huge apparel, yarn and textile imports into SA while putting export margins under pressure, Seardel chairman Aaron Searll said on Friday.

He cited statistics showing that between January and May this year, apparel imports rose 6% to R844m, which is substantially more than a 6% rise in volume terms.

Imported yarns and fabrics amounted to R1,4bn, slightly below the same period last year but up 31% in volume terms.

Releasing the group's annual results, he said trading in the next six months would be difficult and should be viewed with caution.

The group's revenue for the first two months of the next financial year was R631m, 9% lower than it was a year ago.

Seardel and its subsidiary, Frame Textiles, are SA's biggest clothing and textile exporters.

Searll said that in the past year Seardel exported R391m of apparel, which is 22,7% of its apparel business, approaching the group's target of 25%.

Frame Textile exported R106m of textile products directly and an estimated R185m indirectly (by supplying other South African companies that use the fabric to make a finished item for export).

The group exceeded the R4bn turnover mark for the first time by lifting revenue 13% to R4,03bn for the year to June compared with last year.

Gross profit margins were 22,5% against 24,1% a year ago but net finance charges eased to R97m from R112m as a result of debt repayment.

The necessity of revaluing open forward exchange contracts, in line with relatively new accounting standards, created a negative item of R26m against R4,9m a year ago. Searll said this accounting standard created "unnecessary volatility" in the group's earnings.

Excluding this adjustment, headline earnings would have risen 5,9% to 83,8c but with the forex adjustment they dropped to 68,5c a share from 75,9c previously.

The number of shares in issue increased after an empowerment consortium exercised an option to acquire 27-million "N" ordinary shares earlier this year.

The increase in issued share capital also explains the reduction in net asset value to 837c a share from 955c previously.

Seardel's shares are trading at a substantial discount to net asset value; on Friday they were bid at 272c but untraded. Their last trade was at 325c.

Owing to the higher cash flow and reduced borrowings, a dividend of 14c (15c) a share was declared.

Sep 29 2003 07:30:42:000AM Charlotte Mathews Business Day 1st Edition