G&K cuts margins to move apparel

G&K Exclusive Fashions (EXF) reported lower sales and profits as it was forced to slash margins in order to maintain clients and move apparel in a highly competitive environment with Far Eastern players seen playing havoc with future profits.

The company admitted that it had to cut prices in order to maintain Marks & Spencer as its client, and despite an increase in volume of trade, actual sales fell to CYP 4.74 mln in the first half of 2005 from CYP 4.78 mln before.

Gross profit margin was stable at 27.5% of sales, but a sharp increase in overheads by 8% to CYP 996.071 from CYP 922.057 forced operating profits lower by CYP 100.000 to CYP 319.760.

After accounting for increased finance costs, net after tax profits attributable to shareholders nose dived 47% to CYP 235.010 for the first half of 2005 compared to net profits of CYP 441.257 a year ago in the same period. Earnings per share fell to 0.88 cent from 1.65 cent previously.

In the balance sheet, shareholders funds actually fell to CYP 3.33 mln as the first half profits were not enough to cover the dividend payment with book value per share declining to 12.44 cent, just a notch above the CSE traded price of 12 cent.