Steinhoff sees reduced turnover due to cornavirus pandemic

Measures implemented in various countries to try and combat the spreading of the coronavirus pandemic have resulted in reduced turnover for Steinhoff International Holdings [JSE:SNH], the group said in a note to shareholders on Friday.

The global holding company has investments in a diverse range of retailers.

It said governments' measures to deal with the pandemic resulted in significant restrictions on movement and public gatherings, and the closure of many commercial facilities. It resulted in the partial or full closure of a number of the group's general merchandise stores, or restrictions on trading hours, in a number of European markets including France, Spain, Poland and the Czech Republic.

Turnover has, therefore, reduced, particularly in general merchandise, and the group foresees this will continue while restrictions remain in place.

The performance of group's fast-moving consumer goods businesses has, however, been more resilient, partially offsetting the impact.

The group expects that trade restrictions resulting from the pandemic will have a negative impact on its overall turnover and the underlying business performance for the 2020 financial year.

"The extent and duration of the current restrictions on trade remain uncertain and it is too early to determine the exact impact of the pandemic on the performance of the group," it said.

The group added that it is confident that actions it is taking to address the impacts of the coronavirus pandemic are appropriate and timely, constantly reviewed and updates provided to shareholders where appropriate.

"It is clear, however, that operating companies are implementing plans to strengthen their cashflows through both proactive management of their forward purchase order commitments and, where appropriate, by the use of flexible working contracts," according to the statement.

"The inherent strength and flexibility of the group's sourcing arrangements is also providing important additional support. Management is continuing to take an active approach, implementing a range of mitigating strategies to protect profitability and cashflow."

Steps being implemented to reduce costs and optimise liquidity include reducing operating expenditures, reducing stock of goods impacted by the trading restrictions, actions to optimise working capital, stopping all but essential capital expenditure, and making use of tax payment and other government relief measures where available.

According to the group, closer to the beginning of the coronavirus outbreak in February, attention was focused on efforts to mitigate disruption in the supply chain and in finding alternative sourcing. This is because many of the businesses in the group source products from various countries in Asia and some factory supply was negatively impacted by the outbreak and spread of the coronavirus. More recently, affected factories have reopened and are rebuilding capacity.

Shipments of goods from Asian ports were also restricted once production was re-established but proactive management of stock in the supply chain, including swift utilisation of capacity freed up by order cancellations elsewhere, helped reduce the impact. According to the group, the situation has continued to improve as port operation returns to normal.

"Overall, while we are still experiencing some delays in sourcing product, these are now reducing and we continue to offset the impact through mitigation strategies," it said.

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