AMAP's improvement hopes deferred

However, the group reported diluted headline earnings per share of 19 cents for the year ended June 2010, from a previous loss of 30.9 cents.

It also reported diluted headline earnings of 18.6 cents from a prior loss of 33.1 cents.

Revenue declined to R759 million from R1.044 billion and the group recorded an operating profit of R57 million from a loss of R73.8 million previously.

Amalgamated Appliance Holdings is a focused group specialising in the sales and marketing of branded household durables.

Sales model changed

The group said it had changed its sales model from one where products are procured and warehoused based on market research or demand, to one where orders were now placed on a "back-to-back" basis.

"This change resulted in substantial staff retrenchments and much reduced inventories and overheads, leading to a sustained improvement in margins," AMAP said.

It highlighted encouraging sales in the categories of small domestic appliances and sewing machines.

"It said that while year-on-year revenue in these categories was marginally higher, it continued to make market share gains in key product categories, and margins improved somewhat on the previous year.

"A year ago the economic commentators were calling an end to the deep recession caused by the sharp collapse in commodity prices in late 2008. Yet the long-awaited recovery has not materialised and we see no evidence of employment growth and increased consumer spending," AMAP said.

Cautious approach

The group pointed to a few "snippets" of economic hope including a decline in consumer inflation within the Reserve Bank's target range of 3% to 6%; robust month-on-month consumer spending leading up to the World Cup 2010; a gentle lift in the national business psyche; and interest rates at historically low levels.

"While we take hope from these glimpses of optimism, our trading experience over the last financial year reminds us that recessionary conditions still persist," it said.

AMAP said it continued to focus and invest in its trusted brands through above and below the line advertising and promotion.

"This resulted in the group increasing its market share in most categories. Revenue and stock levels were in line with the group's targets," it said.

"We continue to feel the impact of the National Credit Act introduced in 2008, in that spending patterns have shifted from credit-driven furniture chains, where the group has traditionally dominated, to the mass discounters and independent specialists. We expect consumer demand to remain weak so long as employment numbers across the economy diminish," AMAP said.

Africa growth strategy on track

Looking ahead the group said it expects retail sales to remain flat in the categories in which it trades for the coming financial year, with hopes of improvement now deferred till 2012.

"Bottom line profit improvement must therefore come from a relentless pursuit of cost savings, efficiency gains and excellent management of our brand portfolio," it said.

AMAP said it continues to make inroads into new product categories. "Given the strong statement of financial position we are currently investigating a number of suitable acquisitions, but only if they follow our overall business vision to be Africa's top distributor of branded consumer merchandise.

"Our Africa growth strategy is on track and we are excited by the opportunities that await us to the north.

"In light of the above, the group expects to improve operational performance in the new financial year," it concluded.

The AMAP board recommended that shareholders approve a distribution to shareholders by way of a capital distribution out of share premium of 8 cents per share.