August 15, 2019 / 4:25 PM / 6 days ago

UPDATE 2-Truworths looks to close loss-making stores of UK-based Office chain

* Evaluating store closures as leases come to an end

* Takes impairment charge for Office of $117 mln

* FY profit before tax falls 57.5% due to impairment

* Major financial restructure of Office is not being contemplated (Recasts with possibility of Office store closures)

By Nqobile Dludla

JOHANNESBURG, Aug 15 (Reuters) - South Africa’s Truworths International Ltd is considering closing loss-making stores of its UK-based shoe chain Office, joining the growing ranks of retailers to be hit by Britain’s gloomy trading environment.

Office is battling tough conditions in Britain due to uncertainty over Brexit, plus pressures on store-based retailers as shoppers move online.

This resulted in the South African-listed clothing, shoes, jewellery and homeware retailer booking a non-cash impairment charge of 97 million pounds ($117.44 million) against Office’s assets.

The writedown saw Truworths profit before tax for the full-year ended June 30 falling 57.5% to 1.56 billion rand ($102.30 million) from 3.69 billion rand.

“Management is critically evaluating the real estate portfolio with a view to closing loss-making stores as leases come to an end,” Truworths said, referring to Office.

As of 1 July 2018, Office had 156 stores and concessions in the UK, Germany and the Republic of Ireland. In the year to end-June 2019 it closed 17 stores, of which 16 were concession stores across House of Fraser and Topshop/Topman.

Retail sales for Office decreased in sterling terms by 0.9%, while in rand terms, however, retail sales rose by 5.3%.

Last month the retailer said Office had entered into debt restructuring talks with its lenders. Net debt in the period to June 30 amounted to 418 million rand.

“Based on an in-depth assessment by advisers, a major financial restructure of Office is not being contemplated given its current profitability, liquidity and cash position.”

“Negotiations with lenders have progressed constructively and management believes that they will be concluded satisfactorily,” it said in its result statement.

Sales of Truworths Africa rose by 3.1%, boosted by an improved second-half and group retail sales grew 3.7% to 18.6 billion rand.

Consumers in South Africa are reeling from low economic growth, high unemployment, modest increases in negotiated wages and higher average fuel and utility prices, which have constrained spending. ($1 = 0.8260 pounds) ($1 = 15.2488 rand) (Reporting by Nqobile Dludla Editing by Alexandra Hudson and David Evans)

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