Connection Group has reported an increase in profits for the six months to November 2001, despite challenging trading conditions.
"In this environment, if you can still grow earnings, you`re doing all right," says CEO Pierre Joubert, who is forecasting "acceptable real earnings growth" for the full year.
He says the retail business was operating in a period marked by negative conditions in the supply chain - most notably the closure of Siltek - the rand`s fall against the dollar, and lower confidence levels as a result of the September US terrorist attacks and their aftermath.
"That made things pretty challenging," he comments.
However, retailer Incredible Connection, the mainstay of the group`s business, performed strongly. A 5.9% increase in turnover was largely due to additional Incredible Connection outlets trading for the entire period and improved sales at Ultimate Connection.
Incredible Connection is to open at least two new outlets, including a new store in Gaborone in March, its first retail store outside SA.
Joubert says the impact of Siltek`s closure on Incredible Connection was kept to a minimum, as the group did have alternatives in place.
Christmas sales at Incredible Connection were well up on last year, which Joubert attributes partly to anticipation of price increases owing to the rand`s weakness.
"The problem with accelerated purchases is that a slowdown has to come later on. It hasn`t come yet, but it would be na"ive to believe it won`t happen."
While the retailer`s pre-Christmas stock was purchased at old prices, the group does anticipate price increases as a result of the currency fluctuations, but Joubert says attempts will be made to keep these at a minimum at consumer level.
He adds that underlying demand for the group`s products is strong, and it is expecting to report earnings growth at the year-end.
The good performance at Incredible Connection and Ultimate Connection offset a disappointing set of figures from Enterprise Connection.
A slowdown in the corporate IT infrastructure market saw customers deferring orders for services and equipment, as well as fierce competition for available business. That resulted in a loss of R2.3-million at the division.
Joubert says conditions in that sector are not expected to change in the near future, so the group has reduced the division`s cost base to a level "more appropriate" for its turnover.
He expects Enterprise Connection to return to profitability in the second half of the financial year.
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