Loss in Revenue, Cash Constraints Force Deacons East Africa to Issue Profit Warning

Nairobi Bourse Extends Trading Suspension of Deacons East Africa

East Africa’s leading apparel and household goods retailers, Deacons (East Africa) Plc (NSE: DCON) has issued a profit warning for Full Year results in 2018.

The Board states that this is based on “The preliminary assessment of unaudited financial statements of the Group for the half year period ended 30 June 2018 and the forecast to 31 December 2018.”

“The projected earnings of the Group for the current financial year are expected to potentially decrease by at least 25 percent compared to the financial year ended 31 December 2017.”

This is attributed to slow economic start in 2018 from the 2017 electioneering year, operational costs and loss of revenue from the discontinued Mr Price operations amounting to Ksh 529 million, suppressed margins and reduced newness of product and non-performance of major anchor tenants reduced traffic into the malls.

“98 percent of our stores operate in malls whose anchor tenants are experiencing stocking challenges.”

In 2017, the company posted a net loss after tax of KSh 180.4 million for its first half of 2017 from KSh 52.6 million compared to 2016.
The same year, it sold the Mr Price (MRP) franchise to the Mr Price Group Limited with its net sales decreasing by 20 percent for the remaining business.

Deacons Plc now operates all the 11 Mr. Price Home and Mr. Price apparel stores in Kenya.

Deacons have franchises for a number of South African brands, including Truworths, Woolworths, Identity, Sheet Street, 4u2, BabyShop, Angelo, Reebok, Addidas, Lifeftness, and Bossini.

The Board says it has launched a mid-term turnaround strategy geared to advancing the Group’s performance.

“This will be achieved through the restructuring of the Capital base of the company with the support of majority shareholders in order to grow the Deacon’s house brand, optimise the company’s successful brands and reduce operational expenditure.”

The fashion retailer listed at the Nairobi Securities Exchange (NSE) in August 2016 listing 123,558,228 shares at Ksh 15 per share by way of introduction on the AIM segment of the exchange.

Deacons opened its first store in 1958 when it was the franchise holder for the Marks & Spencer brand.